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Thursday, 28 February 2013

RBS: Exaggerating the fair value of its own b*llsh*t

Let's face the facts.  RBS is a crap bank.  So is NatWest. Always have been and always will be., but have never let the fact that they are chock full of ineptitude from trying to pretend to be "investment bankers", whatever that devalued term means.

Of course to the staff of RBS, being "investment bankers" means bonuses, but the truth is that yet again they have done nothing to deserve a bonus, having collectively booked a £5 billion loss.

Oh but no, say the would be bonus recipients, that £ 5 billion underwaterness has after all sorts of retail PPI and Libor fines, nothing to do with us and anyway, the loss items were all extraordinaries and not part of the operating profit.

Up to a point Lord Copper.  The few billion of LIBOR fines and PPI misselling penalties were actually dwarved by the loss on the "fair value of own debt", which as readers of this blog will recall is a function of prevailing interest rates.  When the yield curve falls generally, then the fair value of the fixed rate borrowings made by the bank will rise, so they will owe more and the bank makes a loss because it is mnarking its debt to market.

But as I have said before, this mark to market is happening on their funding for their operations, so why is it not included in their operating profit.  Add this number into their operating profit and they are already underwater om their operating profit (i.e. no bonus due), but by treating this annually recurring line as extraordinary (last year they booked a profit), they get to boost their operating profit.  But this year, to make matters worse they changed their accounting policy so that some of their hedging losses are included in this fair value, artificially boosting their pre-bonus operating profits.

Shonky accounting for a shonky bank.

Sunday, 17 February 2013

IDS: Epic fail

I always have a downer on stupid elected politicians.  Not just the truly imbecilic ones (yes, you Prescott, Skinner and countless buffoons from the shires who represent no-one but their own pomposity), but those, and that is most of them, who don't really deserve to be in parliament because they aren't fit to debate the legislation that they are imposing on the rest of us.  And in the last few days we have had 3 prime examples.

First of all we have George Osborne and the other finance ministers thereatening to "crack down" on multinationals undertaking tax avoidance.  Well as a policy it isn't a bad idea, but if tax avoidance was such a bad thing, it is something that should have been tackled long ago.  But of course the politicians, or more specifically, the legislators, are the people who are responsible for the fact that companies are able to avoid taxes.  Not that the blame for that can all be laid at the door of Mr Osborne, but to pretend that the gaps in international tax rules is the fault of anyone other than the people who draft and vote on the legislation is pure delusion.

As bad is the ruling by the Home Secretary about judges who she says ignore the will of parliament in their judgements over the deportation of foreign criminals.  The judges aren't supposed to operate according to the "will of parliament" (actually the executive), but according to the legislation that they pass, including the treaties to which they susbscribe. If the meaning of the legislation is unclear then the judges may have regard to the debate in parliament to understand the intent of the legislation, but every other pronouncement by the executive has no meaning in law unless it is covered by primary or secondary legislation, meaning that the judges will quite rightly ignore it.  If ministers don't understand how their powers are given effect in law, then they shouldn't be in their jobs.

But the worst klutz on the government benches is the intellectually retarded former leader of the Conservative Party Iain Duncan Smith (remember that horror story).  Not over the "bedroom tax" which is probably the right thing to do, albeit very tricky, but his criticism of people "who think they're too good" to stack supermarket shelves on back-to-work government schemes. On the BBC's Andrew Marr Show, Iain Duncan Smith suggested that many "smart people" overlooked the importance of effective shelf-stacking. A geology graduate recently won a legal victory over the back-to-work scheme.

But Mr Duncan Smith warned against assuming that geology was more important than supermarket work. Geology graduate Cait Reilly, 24, argued at the Appeal Court that her unpaid work placement at Poundland, which she had been required to undertake in return for continued benefits payments, breached laws on forced labour. Commenting on the case, Mr Duncan Smith said: "I understand she said she wasn't paid. She was paid jobseeker's allowance, by the taxpayer, to do this. I'm sorry, but there is a group of people out there who think they're too good for this kind of stuff."

Now I have no great knowledge of the details of Ms Reilly's case, but I would imagine that she would have spent at least 3 years at one of our leading state owned academic institutions.  I also imagine that she spent several years at one of our state funded schools being prepared for the examonations to get into a university, and more importantly while she was at university a state fund was extending her copious credit both to live and to pay her tuition fees, so having taken vast gobs of cash of the poor young woman on the back of selling her some qualification, it is quite galling for a so-called senior member of the government to expect her to stack shelves at a supermarket for no more cash than she would have got if she was on the dole.    Such an attitude might be acceptable for someone who left school at sixteen and spent the next 3 years on the dole, but to behave that way towards someone who spent at least 5 years after the age of 16 studying, and paying vastly for the privilege is beyond contemt, but just when you think it can't get any worse IDS makes it so.

"Let me remind you that [former Tesco chief executive] Terry Leahy started his life stacking shelves.", said the former Guards officer who was kicked out of the army, and then out of a series of jobs before being voted out of the leadership of the Conservative Party in 2003.

Which of course misses the point. Terry Leahy rose to be shelf-stacker-in-chief when he ran Tescos. but not everybody wants to be a shelf stacker. Some people want to be archaeologists and study hard (and pay) to do so, not that IDS understands academic study. If he had been able to say that Sir Arthur Evans, Richard Leakey, the Earl of Carnarvon and Gertrude Bell had started out stacking shelves, he might have had a point. But he didn't, and as a result he looks a complete twit, or as one might say, a failure at school, funker in the army, short term stayer at GEC, kicked out of a property firm, loser at Janes and failed Conservative Party leader.

Thursday, 7 February 2013

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