I am sorry, so sorry that it happened that way, despite the fact that I have done nothing wrong. The mortgage meltdown in the USA is responsible for all the troubles of RBS. I am sorry it happened. The takeover of ABN-AMRO was a mistake, but not due to any wrong decision, but because later the markets collapsed.
This is a summary of the response of Sir Goodwin, former manager of RBS, as to what he thinks about the reasons for crisis, in front of the Treasury committee. RBS has grown with aggressive takeovers to become one of the leading players in world financial markets. Their last big takeover was a purchase of ABN-AMRO just before the collapse. It is now owned by the UK government (it has a stake of 58% with options for up to 70%), without whose help it would have collapsed entirely.
The responses of other banking representatives were strikingly similar. It even went so far that the president of the committee asked them if they are sorry because they feel that way, or because their PR managers have suggested that. They all have emphasised that all of their bonuses are invested in the stocks of the banks and that they are one of the biggest victims of the meltdown.
The highest unemployment in the last 10 years
Credit crunch in the UK is getting stronger and stronger. At the end of December, there were 1,97 million unemployed people. The number of unemployed is increasing rapidly and it is quite possible that it has breached 2 million already. Almost daily, we can see reports of new lay-offs, so we expect the number to grow. It might even reach 3 million people.
Ed Balls, former adviser to Gordon Brown has said that the depression is the worst in the last 100 years, and that it will be deeper than the Great Depression of the 30’s.
On Wednesday, British statistical office has, controversially, for the first time in its history published that the number of foreign born workers is increasing while the number of local workers is falling. This has added fuel to the protectionists which demand from Gordon Brown to fulfil his pledge “British Jobs for British People”.
The negative attitude towards foreigners is increasing, especially in the industrial north, where there are currently quite a few ongoing strikes against foreign labour on British construction sites and oil fields. We can only hope that those responsible will manage to calm the situation before it explodes.
Fortis shareholders have said NIET!
Fortis shareholders have, by a slim majority, rejected the sale of Fortis, which was published in September. This is a big win for the shareholders, who were long fighting against the decision of the state. The assembly was called after Brussels appeals court ruled that Belgian government had no authority to sell the bank without consulting the shareholders, despite the fact that without that intervention, the bank would no longer exist.
This decision is very important from the point of view of protection of shareholder rights and the rule of law. If investors believe that they will be able to influence the company, they will invest. If state can at any point take their stake away, or diminish, or sell key elements of the company without their approval, the investors will stay well clear of such investments and investment climate.
When we look back in a few years, we will say that this small, unnoticed event was one of the key building blocks that returned the investor confidence and brought recovery.
Sarkozy earns EU disapproval
French assistance for carmakers has caused laud protests from representatives of other EU countries, as well as the EU commission, when the word leaked out that there is a clause that the carmakers must use only French components, when possible, and that there was a hint that it might be beneficial for future access to aid if they moved their factories back from Slovakia and Czech republic to France.
EU competition spokesman Jonathan Todd has clarified that state aid must be compatible with the EU competition and state aid policy, and that, if the aforementioned clauses are present, it would not be compatible. Current EU president, Mirek Topolanek was much more direct when he said that responses of Eurozone countries to the crisis have done much more damage to the Euro than anything else.
Way out …
All this sends us a mixed message of the current EU situation. In many countries we have truly farcical apologies and claims “it’s not my fault, really”, while economic growth and employment continue to slide. Protectionists impulses are growing stronger and stronger, not only towards third countries, also towards other countries within the EU. There is only a small step from here to the protection of residents in one region from the residents in the other region within the same country (England vs. Scotland) and omnipresent fall in commerce and economic activity.
Luckily, all is not black. The decision of Belgian court to demand assembly regarding the sale of banks proves that the EU is still the zone of Rule of Law and that investors have to mind operations risk, but need not worry about political risk.
When this word spreads, and it is confirmed a few more times by the court rulings, investors will feel safer and will start buying the banks and financial institutions , aggressively sell their bad debts, unclog the banking system and earn a fortune in the process.
You can read more about the topic in the book “Saving the Sun” from Gillian Tett, describing the sanation of Long Term Credit Bank and change to Shinsei.
This is an English translation of an article by Mitja Sadar that was published, in Slovenian, in the leading SlovenianInvestment Magazine KAPITAL, on 15.02.2009. Original article is available at the following URL: http://www.revijakapital.com/kapital/poslovnefinance.php?idclanka=6482
