From Our Cork Correspondent

Back in Cork as planned: and the view out of my quayside bedroom window is of the tallest (sic) building in the Republic, the loftily-named and loftily-conceived Elysian, Japanese garden and all. It was built, as these edifices often are, just as the property boom had peaked. And as my taxi-driver said:

"will yer look at dat, sorr - it's ballaxed ! ... yer not in foinance, are yer ? - dere's a fierce anger here against bankers"

But of course I am not in finance, no no no, and so we sailed on. It's more than half empty, naturally. The locals call it the Idle Tower, which probably has nothing to do with our blogger-friend: some attribute it to a pun on a nearby pub, the Idle Hour - but I'd say that a certain Parisian landmark may equally have suggested the moniker.

Everyone here is nursing Big negative equity. And a pint of stout. Murphy's, of course, in these parts.

ND


photo (c) Nick Drew 2010

"US bank to fail"...UK banks too?

Credit market turmoil has driven the U.S. into a recession and may topple some of the nation's biggest banks, said Kenneth Rogoff, former chief economist at the International Monetary Fund

This is the latest news to hit the US markets. Of course Bear Stearns has already been palmed off to JP Morgan. In the UK we have had Northern Rock and Alliance and Leicester has an emergency sale of itself to Santander to prevent collapse - just today it has acknowleged that in effect it cannot survive if the sale falls through.

Bradford and Bingley is also only fit to prepare itself for a fire sale.

This is not a good run of events and clearly the weak are already fallen. Now what is being discussed is some of the larger beasts also succumbing to what is effectively financial gout; Bursting with debt and greed they can only stagger to a final fall.

In the US Lehman Brothers was considered just a few weeks ago as in a serious state. It has just put up a big part of its business for sale, scotching the current view that the driving down of its share price was all just speculation.

In the UK the main banks have fallen again today - but could one of the big ones collapse? It is still a distinct possibility. With no more access to the capital markets, the government spent out on Northern Wreck and high costs for bond issuance the banks are very much stuck.

HBOS, RBS, Barclays and Lloyds in that order are under threat. HSBC seems too big to fail but its frankly unfeasible scale of CDO's and other toxic mess could even hurt the biggest beast of all.

But will it happen - I am not sure. What I can see is a third leg to the credit crunch, with a consequent retrenchment from the gains of recent months and so another 'test' for our financial institutions. More will be found wanting if this occurs.

Are Barclay's playing the hiding game?

I have no info but am surprised, as are most analysts (of which I am not btw), that barclays is able to declare all its nasty leveraged loans as non-toxic and requiring minimal write-down. In addition its UK write-downs on cards etc are very low.

My hunch, based on instinct and no data, is that there is some arbitrage going on here. Whilst Barclay's maintains this position it can borrow and lend in better circumstances than its UK rivals, HBOS and RBS. As such it is hoovering up mortgage share of the market by way of example.

If and when it 'comes' clean, then it will have bolstered itself at a time when the opposition was caught low. This is a dangerous game if that is what is being played.

Otherwise they are just really lucky the ego's of their management team last year lost out to RBS, sparing shareholders the denoument of acquiring ABN and then writing off most of its value within months....