Tag Archives: Richard Branson

Virgin on the Ridiculous.

“Bend over, George”

A huge slice of the financial services industry is under taxpayer control – or so we all thought. The truth is that a phrase such as “owned by the taxpayer” is a nonsesnse.

“Bailed-out with taxpayer cash” is the only truth.

The Royal Bank of Scotland, Lloyds Bank, as well as Bradford and Bingley have been bailed-out using taxpayer money but in truth, there is nothing that we, the taxpayers can do , even if the Treasury decides to sell all of the the taxpayer bank holdings to say, Poundstretcher –  for a pound.

The Eurozone is about to go “pop” so it must be a good idea for the government to take steps to remove the taxpayer from what promises to be a bloodbath and to put all the bailed-out banks back into private hands – at the same time remembering that demutualisation and placing bank ownership into private hands is what caused the problem in the first place.

The Chancellors USP appears to be that the sale of the good part of Northern Rock to the Virgin Group will inject much needed new competition into the banking sector.

No it won’t.

If Branson has any sense (which he undoubtedly has), the new Virgin Bank will be tarted-up and floated within a few years. No matter what Branson does, the fact remains that “the taxpayer” has been royally screwed to the tune of of up to £700 million. Once again, an example of professionals negotiating with politicians and Civil Servants.

As far as “injecting competition into the High Street” is concerned – that is no more than a tacit admission by the government of its failure to control the banks during their 20-year gorge-fest. Even now, banks continue to profit while economies “tank”  and they do it with taxpayer money PLUS a government guarantee! The classic  “We win, you lose because we cannot lose” scenario.

The remaining piece of Northern Rock – the quaintly-named Northern Rock Asset Management (NRAM) is still “owned” by the taxpayer. The pattern is as follows:

The Treasury gives away the profit-making bits and is forced to keep the remaining dross, ultimately taking yet another “hit”. Companies  such as NRAM, Bradford and Bingley with their very poor mortgage books will deteriorate and become moribund as a result of their customers’ increasing unemployment and the consequent accelerating mortgage delinquencies.  A classic “lose lose” situation.

Here’s something to spell out to all governments:  There is no such thing as a profitable exit from taxpayer-funded government  interventions in the financial sector. (As the Eurozone is beginning to find out.)

Politicians don’t “do” profit. Otherwise they wouldn’t be politicians. Ask Gordon Brown and his gold sale.

The Chancellor is patting himself on the back that (subject to FSA approval)  he has managed to extract £747 from Virgin and that, in addition,  he appears to have been paid 90% of the book value of Northern Rock (the bank’s assets minus its debts). Once the ink has dried on the contract, just watch Virgin Money revalue those assets – if they haven’t done so already!!

There are supposed to be a few additional payments to the government from Virgin. For instance – another £50 million by the middle of 2012 and a similar amount if the company is sold-on within five years. Best keep an eye on that!

Northern Rock used to be a great Newcastle-based  Building Society – so it is a great shame to see yet another former fat northern lass stripped and screwed in such an undignified way.

Not-0nly has the Government lost at least £400 million on the deal (that’s in less than three years) but the mortgage delinquencies within the remaining piece of our former Geordie Giant will ensure further mega-losses for the hapless taxpayer.

No doubt, the government will soon want to do some more “businessing”.

For instance, our 83% stake in RBS plus our 40% stake in Lloyds  add up to a cool £40 billion.

(Lloyds is currently the MOST likely bank to experience something akin to the 2007 run on the Northern Rock – especially as it is increasingly reliant on the rapidly seizing-up wholesale money markets. Its share price has dropped by over 15% in the fortnight since its CEO,  Horta-Osório took stress-related sick leave. One to watch closely!).

It is only a matter of time before the Chancellor will appear on our screens to tell us that his sale of RBS and Lloyds at a £20 billion loss was a “good deal” for the taxpayer.

Just watch.

Spygun Snippets from an Island

Civil Servants will be striking on June 30th. Glad that they publicised the date, otherwise some of us may not have noticed the difference.

Good to hear that because Libya is a member of the International Olympic Committee, it has been allocated tickets to the London 2012 Games. However, there is now a bit of a panic  but we have had confirmation that Gaddafi will definitely NOT be attending. But it all depends on whether or not his status changes from Leader to Collateral Damage or, as we say in the trade – dead.

Rumours over here that  Alex McLeish has resigned as manager of Birmingham and will soon be taking over at Tripoli Nomads.

Kudos to the British Coalition government. May 2011 unemployment has fallen by 88,000. In Spain, which has a similar economy but with added Sangria, Siestas and Sun, the May unemployment fell by 80,000. Coincidence?

The “streaming ” debate has started. Clever children are clever and thick children are thick. If you think back to your own schooldays, you will recall that the thick child which you met at the age of five or six, continued to be relatively thick, despite a dozen years of education, targets and assessments.  The most reliable prediction of OUTPUT is input. Relative abilities of children do NOT change. Remember that bright kid who was good at everything? Do you think that he or she deserved to be taught alongside the droolers. Mind you, nowadays, the morons have as much chance of going to university as those who deserve further education. Sorry, but it’s true. Educational equality is a myth. The educational system has learned that the only thing which “false distribution” achieved was a general dumbing-down and an increasing university drop-out rate.(Which incidentally, is one of those stats which is rarely spoken of). Lack of intellectual ability should not be treated as a disease, because very often it correlates to practical or entrepreneurial ability. Not going to university should NOT be considered as some sort of failure. Look at Alan Sugar and Richard Branson. Then look at all those Oxbridge graduates doing either stand-up or unemployment.

If the Chancellor uses macho management words such as “ringfencing”, the banks have (quite rightly) won the argument. The solution to the Banking Conundrum lies in legislation which prevents banks from making unacceptably risky investment decisions. However, if a bank should choose to continue excessive speculation and throws our money into say, debt-based Derivatives, the government should withdraw all or some of its financial support an/or guarantees. Plus, banks should be given a minimum target for investment in safe Fixed Interest Securities (Gilts). Ringfencing is  no more than a crude accounting exercise which will involve system changes which will cost MILLIONS. Bank customers will have to pick up THAT tab as well. The banks continue to run rings round a naive government. The ONLY way to prevent banks from going bust is to LEGISLATE and not through rearranging the furniture………and if another idiot says “FIREWALL” I shall scream.  However, leave banking reorganisation to the bankers. Meanwhile let’s enjoy the Chancellor’s Mansion House posturing. <Moves Radio Dial from HILVERSUM to WORLD SERVICE>

Twitter: Am NOT being rude – I cannot see you.