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5 "Tells" that the Stock Markets Are About to Reverse

Lloyds TSB £1.6 Billion Tax Payer Funded Profits

Companies / Credit Crisis 2010 Aug 04, 2010 - 07:14 PM GMT

By: Nadeem_Walayat

Companies

Eric Daniel's and the rest of the management at Lloyds TSB are patting themselves on the back for having turned last years £4 billion loss into a £1.6 billion profit for the first half of this year. However the whole of LLoyds profits and that of the other reporting banks such as RBS, and Northern Rock are as a consequence of the tax payer bailouts without who's continuing support Lloyds TSB and the other banks would still be bankrupt today.


So all that is happening is that the Bank of England is funneling tax payer cash onto the balance sheet of banks that remain bankrupt as illustrated by the fact that Lloyds TSB had to write off a further £6.6 billion of bad debts. However as I have stated these past 3 years now that the banks are sitting on huge losses that they are only gradually revealing to the market place, hoping for tax payer funded revenues to clear losses. How much more losses are Lloyds sitting on ? Difficult to say, could be anywhere from £15 billion to £50 billion, which suggests that tax payer support is not going to end anytime soon. Perhaps Lloyds should have declared a smaller profit and therefore allowed for more bad debt provisions, but then off course LLoyds won't be able to pay out big bonuses all courtesy of the tax payer.

The ways and means by which these fictitious profits are being being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.4% well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.

Virtually ALL of the banks are still bankrupt because they are reliant on an estimated £1 trillion of tax payer backed loans, and guarantees to prevent them from going bust. However the banks instead of honouring promises to increase lending to small business in exchange for saving their worthless hides, the banks have responded by throwing up smoke screens to give the illusion of following promises such as Lloyds statements of increasing lending to small business by £24 billion, whilst hoping that people will ignore the fact that there has been NO increase in NET lending i.e. new lending is offset by repayments from businesses.

The banks remain hell bent on using fictitious tax payer funded profits to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watching on as they intend to return to commercial banking so as to have their turn at getting a piece of the tax payer funded bailout pie.

The only solution to Britains banking crisis remains that weak banks must be allowed to fold in an orderly manner by means of weaning them off of tax payer funds, the incompetent should not be allowed to continue in business at tax payer cost. It was wrong for British Leyland in the 1970's and so it is today for Lloyds TSB and RBS, if they cannot stand on their own two feet then they must FOLD, and let others more competent at banking to come in and fill the vacuum. Instead tax payers, savers, workers and retail customers are paying the price for an artificial banking system that exists purely to funnel cash onto the balance sheets of bankrupt banks until most of the bad losses have been wiped clean, whilst the rest of the population pays the price as government austerity measures loom over the horizon.

Comments and Source: http://www.marketoracle.co.uk/Article21640.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Comments

wintermute
05 Aug 10, 04:28
Media should be reporting this too

Fantastic summary Nadeem.

The financial media are simply not reporting this properly.

Lloyds should be forced to report a loss of £5bn to the media (bad debt write-offs minus profits).


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