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Her Majesty's Treasury Risks Independence Singularity
What might we discover in an audit of the Federal Reserve? Well, let's ask Her Majesty's Treasury, which, imagine this, actually released details of the assets dumped from the holding tanks of Royal Bank of Scotland into the cesspool of the United Kingdom's "Asset Protection Scheme." As a bit of background, perhaps you might frame things thus: RBS is to APS as Citi is to TARP. (That would make Lloyds Goldman we suppose). Specifically:
The Government has concluded discussions with Lloyds Banking Group (Lloyds) and Royal Bank of Scotland (RBS) regarding their participation in the Government’s Asset Protection Scheme (APS). As a result of improved market conditions and following extensive due diligence announced in February, the Government can announce that:
- Lloyds will not participate in the APS and instead will raise additional private sector capital and pay a fee to the taxpayer for the implicit protection provided to date. This will reduce the risk borne by the taxpayer, improving value for money.
- RBS will participate in the APS under revised terms that improve incentives and deliver better risk-sharing with the private sector.
Then follows a rather amazing bit of prose.
On the 7 December, the government published further details on the APS, including:
Detailed information about the Asset Protection Scheme (APS), including a list of assets protected under the scheme and a framework for the Asset Protection Agency (PDF 4MB);
Wow.
An auditor's report it isn't, but after 100 pages or so, you certainly have quite a picture of what RBS thought it might be up to. This is one of our favorites:
GBP 30 billion in swaps and other derivatives. What could go wrong?
Oddly, given what the Fed tells us about the dangers of disclosure, the entire United Kingdom did not find itself sucked into an independence singularity immediately after the release. Really. See for yourself.
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They kept the CDS as a hedge position on their failure.
More seriously, if naked exposure is to UK banks then there is a clear case for conflict of interest, no?
Everyone knows (I'm sure someone will show up to remind us) that IRS are the financial equivalent of fluffy kitties. Nothing to see here, move along. I didn't think you were even allowed to use the words "Interest Rate Swap" and "exposure" in the same sentence.
Well, at least in the Ex-Great Britain they are not opposed to using the word Scheme!
In the UK, the word "scheme" does not have the negative implications that it does in the Colonies.
do you think CITI would have done something just like it?
JFYI for some reason the news section is not updating ...
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"The delta derivatives portfolio contains £30.6bln of assets" (This is how much your exposure has increased since the last time you looked.)
"The largest derivative product exposures are to interest rate swaps and credit default swaps." (We also shorted gold out the ass but thanks to last Friday, we haven't received any margin calls, yet)
"Credit derivatative product company exposures and potential future exposures on certain other derivataves were excluded when the cover amount was decreased." (Since Dubai went tits up we may as well try to make you feel better about the gold exposure.)
"Lloyds will...pay a fee to the taxpayer for the implicit protection provided to date. This will reduce the risk borne by the taxpayer, improving value for money."
Compare and contrast. At least the Brits make someone pay for protection and it's only the implicit protection. Can you imagine if we did that here?
http://www.bloomberg.com/apps/news?pid=20601102&sid=aIw1ip3RmwwE
Dec. 8 (Bloomberg) -- U.K. taxpayers are insuring more than 167 billion pounds ($273 billion) of Royal Bank of Scotland Group Plc’s risky assets outside the U.K., 59 percent of the total covered by the government’s Asset Protection Scheme.
U.S. GDP is about 5.5 times that of the U.K., so this guarantee is roughly the equivalent of U.S. taxpayers backing $1.5 trillion of toxic assets for Citigroup. The assets of the largest European banks are enormous relative to the size of their home economies.
http://www.reuters.com/article/idUSGEE5B715420091208
LONDON, Dec 8 (Reuters) - Weak industrial output data, a pessimistic outlook from manufacturers and a slowdown in retail sales growth have cast doubt over the strength of any recovery in Britain's economy.
Official data on Tuesday showed industrial output failed to grow in October, disappointing expectations for a modest rise, and suggesting the sector made a weak start to the fourth quarter. And a separate survey from the Confederation of British Industry showed firms expect output to slide in the next three months, even though orders fell at their slowest pace in a year.
There was more bad news in a survey from the British Retail Consortium, which showed annual growth in retail sales values slowed to 1.8 percent in November, a 3-month low.
Here is what is encouraging:
England's central bank is not a regulator as well (thats my best understanding of it). This program for them is a part of Treasury and is not using the BoE as a SIV. And the disclosure, while not full is light years ahead of what we could expect here. Yet they've not imploded. Also the UK said eff y'all banksters and is asserting their authority over bonus pools in bailed out banks. So for all the folk's fighting the US implementing those policies, we have a great example of how the sky has not fallen.
Here is what sucks:
England is still in deep shit and is utterly and hopelessly doomed. I would like to believe that if we took any one of those steps above it would bring us closer to sanity and a point where we can actually rebuild all that is broken here. But if its not going to forestall doom in the UK, why not just ask for my stimulus check, take out a zero down mortgage on the FHA and default on my credit cards?
Arbol que crece torsido jamas su tronco se enderesa. - A tree that grows crooked will never straighten its trunk.