Ramanisblog

Tag: Treasury

  • Downgrading US by S&P,Revenge? Really?

    Seal of the United States Department of the Tr...
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    There are whispers going around that Standard and Poor have  avenged US Administration by down grading US rating to AA+.

    Spokesperson of the US Treasury has also questioned the Data on which the rating is based.

    ( A look at US Finance  will tell a different story; in fact, Down grading is over due)

    The Rating of these Agencies are the Bench mark when they rate countries other than US,say Argentina 0r Venezuela.

    People forget that Keynesian Economics is a Fraud and illusory.

    Most of the parameters are notional and do not stand up to Factual verification.

    Both the Government and the Rating Agency are whistling in the dark and pat each other when it is convenient for them.

    Ordinary Joe remains the same,paying more taxes and listening to all this non sense.

    THE credit rating agencies are taking advantage of the country’s financial problems to increase their own political power. They want to ensure that regulators do not reduce their autonomy and influence.

    Their strategy is brilliant. They are not piling on all at once by downgrading the United States in concert. Standard & Poor’s is the bad cop for now, taking the first swipe at the United States last Friday, and seeing its influence confirmed by the stock market’s dramatic reaction. Moody’s and Fitch are playing the good cop — exercising restraint about a potential downgrade, yet still flexing their muscles by criticizing the government both publicly and behind the scenes.

    The rating agencies have the federal government over a barrel. If politicians ignore rating agencies’ warnings, they risk a withering assault of additional downgrades that could undercut confidence in the government and inflict soaring interest rates. The good-cop, bad-cop routine is especially potent because a downgrade by two of the three major rating agencies could lead to negative consequences, such as requiring some bond issuers to secure additional collateral.

    Since the 1970s, federal statutes and regulations have mandated that debt issuers obtain ratings as evidence of creditworthiness. An oligopoly of rating agencies used this authority to effectively control access to the financial system.  Even a threat of a downgrade from a rating agency could cause credit to dry up, and few inside or outside of Washington dared to challenge their dominance.

    http://www.nytimes.com/2011/08/10/opinion/the-revenge-of-the-rating-agencies.html?_r=1

  • HBOS and RBS received secret bank rescue loans-BBC.

    Atrocious.Whose money is this for politicians to dole out without debate and arrange it secretly?
    How much more money has been paid or being to whom?What has the Treasury auditor’s doing?
    Banks are operated for share holders for profits?Why should public money be paid to them for their mess?They know how to blackmail , stating that ‘investor confidence shall melt?’
    The Mafia of Banks and politicians is far more dangerous than Drug cartels.
    Incidentally which party and politician has received how much?

    The Bank of England has revealed for the first time that it lent Royal Bank of Scotland (RBS) and HBOS £61.6bn in emergency funding last autumn.
    Bank governor Mervyn King told a committee of MPs it “was to prevent a loss of confidence spreading through the financial system as a whole”.
    The money was repaid in full by January this year, he added.
    A spokesman for the prime minister said it was “a powerful reminder” of how the banking system had nearly collapsed.

    It was also revealed that Chancellor Alistair Darling had agreed to underwrite any losses which the Bank may have made on the loans.
    The Liberal Democrats have called on Mr Darling to explain to the House of Commons why the Treasury guarantees were kept secret.
    Vince Cable, the party’s Treasury spokesman, called it a “shocking cover-up”.
    Shadow Chancellor George Osborne said the revelations about the secret loans showed the need to reform the system of banking regulation.
    “The scale of these loans raises the question of how Labour’s tripartite regulatory structure allowed these banks to come so close to collapse in the first place, and underlines the need for fundamental reform to put the Bank of England back in charge,” he said.
    Secrecy
    It is the first time that the central bank has detailed this support for the two institutions.

    We may feel numbed these days when there is talk of the hundreds of billions of pounds in taxpayer support to the banks.
    Even so, the revelation of these secret emergency loans to RBS and HBOS a year ago is breath-taking.
    The Bank of England only felt it was safe to reveal this covert support now, once the ink was dry on longer-term bailout deals agreed with the banks a couple of weeks ago.
    Lloyds shareholders were being asked to approve the takeover of HBOS. Yet they were not told about a Northern Rock-style cash bailout of HBOS.
    The authorities argue that disclosing the loans would have caused greater disturbance to the whole system. But bank shareholders might well see it differently.
    Mervyn King said the Bank was acting in its capacity as the lender of last resort.
    The loans, which were given in October and November of 2008, were in addition to other financial support measures extended to the banks by the government.
    The chairman of the Treasury Committee, John McFall, said that when he saw the amount there had been “a little bit of an intake of breath thinking how many universities, how many colleges, how many jobs you could support with this”.
    The Bank of England said it had carefully considered the public interest case for disclosure but decided that the assistance should only be revealed “once the Bank considers that the need for secrecy has ceased”.
    RBS has since signed up for the government’s Asset Protection Scheme while Lloyds Banking Group – which took over HBOS – has announced plans to raise capital from its shareholders.
    The BBC’s chief economics correspondent Hugh Pym said that the £62bn of emergency loans were agreed just as shareholders were being asked to approve the takeover of HBOS. He suggested that shareholders might be unhappy at not being told earlier.
    Profound challenges

    In his parliamentary testimony Mr King also discussed the wider UK economy, reiterating his view that the recovery was still in the early stages.
    He told the Treasury Committee that the economy still faced “profound challenges”.
    Regarding the Bank’s policy of quantitative easing – pumping money into the economy to try to boost lending by the commercial banks – Adam Posen, one of Mr King’s colleagues on the Bank’s Monetary Policy Committee (MPC), said he hoped the initiative was “coming to an end”.
    Last month, the MPC voted to increase its quantitative easing programme by a further £25bn to £200bn.
    However, minutes released subsequently showed a three-way split on the decision, with seven of the nine MPC members voting for it, one wanting a larger increase in the scheme, and one calling for no additional spending.
    Mr King also told MPs that he did not think there was any “immediate risk” of the UK having a credit downgrade.
    http://news.bbc.co.uk/2/hi/business/8375969.stm