The big elephant in the room, however, is derivatives exposure. The total value of derivatives outstanding is greater than the total GDP of the whole world, several times the size of the US stock market and many times greater than US treasuries. Over 90% of derivatives are non-exchange traded and are subject to no regulation. If credit markets are bust, so are their derivatives. This is the big shoe, which nobody dare acknowledge. Markets cannot afford to test the solvency of counterparties. That is what lies behind the massive injection of funds by central banks. Simply, they are monetising worthless paper.

This logic goes right up the tree. The guys at the top get huge bonuses, of course. None of this is designed to secure the long-term future of the financial institutions involved. That is why an institution like Bear Stearns can go bust overnight (of course, it wouldn’t have been overnight if the auditors had done thier jobs). But, again, look at these big US banks; top managers still got their huge bucks.

Of course, systemic crises are rare. On that basis, most of the time, you can happily manage for the short-term.

Always remember, people, if you eat like an elephant, you’re not going to sh*t like a sparrow.

Oh, as to why some banks are going for rights issues. Easy, they’re insolvent if they marked assets to market.

change

%

52 wk-h 455.00

52 wk-l 112.00

As most of B&B’s Client bank is self cert and BTL they are going to struggle in this market.

The FSA regulates the whole of the Financial Services industry and is charged with doing so both competently and with efficiently.

Were the FSA were to live up to these basic expectations then all companies in the Financial Services sector would be run in such a way as to not only protect the customer but also to make sure that the company was also safe and secure in both its business model and the way in which it runs its business.

Given this, it is not a big leap to suggest that buying shares in a Financial Services company should mean investing in a ’strongly regulated industry’ where integrity and sensible business practices are overseen by a powerful regulator. Therefore shares in such companies should be MORE secure than investing in an ‘unregulated industry’.
The shenanigans at the FSA have worked in the opposite direction and have just exacerbated the problems. Not only that the FSA then tries to offload any responsibility and when that fails it appoints an INTERNAL team to look at its own failings. The need for such an investigation begs the question as to ‘what on earth were the management doing?’ Not their jobs obviously!

Being a ‘one man band’ mortgage broker I have been interested to see the jobs advertised with the FSA for Small Mortgage Broker Supervisors. Basic salary £55k + benefits (Possibility of a premium for specific qualifications or experience)
Looking further I found that the FSA was looking for bureaucrats, not for anybody with experience of small brokerages. How does the FSA expect to regulate businesses that it knows nothing about and patently is not even looking to understand.
Small brokers should look at the ’six TCF consumer outcomes’ on the FSA website, together with the relevant links and examples, then apply them to their past experience and see if there is any way in which they can be totally compliant.

In relation to TCF I have recently had occasion to ask a lender if they would allow my purchaser to REDUCE the amount to be borrowed, due to the possibility of negotiating a reduction in the purchase price of the property he was buying. The answer was yes, but ONLY at a rate of nearly 1.0% above the rate in the existing offer letter.
While it is a bit more complicated than this the net result would have been that it would actually have cost my client more in the first year than the reduced purchase price would have saved. Then 1% pa more on the interest rate for the duration of the mortgage. I cannot see how this can possibly square with TCF. But hey the lenders do what they like and the FSA has no interest in the client being screwed. I advised the client to complete at the original price.