Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

RBS Fake Internal Bad Bank For Engineering Artificial Profits Bonuses on Asset Writedown's and Privatisation

Companies / Banksters Nov 01, 2013 - 03:36 PM GMT

By: Nadeem_Walayat

Companies

Today's announcement by the Royal Bank of Scotland (RBS) that has seen its senior staff apparently been sat twiddling their thumbs for the past 5 years whilst collecting bonuses on the basis of fictitious profits are finally to get around to dealing with the banks bad debts by ring fence its worst performing assets / bad debts amounting to £38 billion in an INTERNAL bad bank which on face value goes against the wishes of last governor of the Bank of England who just wanted ALL of the bad toxic sludge to be dumped onto tax payers.


12 Mar 2013 - Bank of England Governor's Last Cunning Plan to Transfer RBS Bad Debts onto Tax Payers

“I think that the whole idea of a bank that is 82pc-owned by the taxpayer but run at arms-length from the Government is a nonsense. It can not make any sense. ”

“I do not believe its beyond the wit of man to devise a plan to restructure RBS [and] divide it into a healthy well-capitalised bank capable of lending to the UK economy... It does mean accepting there are activities that are likely to generate continued losses... In that sense it would a be a good bank bad bank split.”

However today's announcement amounts to a mere smokes and mirrors exercise, much as has been the propaganda that RBS would soon be returning to profits which clearly it is not given the fact that it continues to pay out compensation claims and fines for a litany of past frauds perpetuated on its customers, hence the large Q3 pre-tax loss of £634mln against expectations for a £500mln profit, which comes just as signs of another mega-fraud is breaking as today RBS suspends two of its forex traders as part of investigations into manipulation of the $5 trillion daily foreign exchange markets.

The truth is that RBS remains bankrupt that only continues to exist as a consequence of artificial profitable cannot lose on revenues as a consequence of the tax payer bailouts and the ongoing Bank of England QE money printing programme that currently extends to well over £500 billion without which RBS and many other banks would have ceased to exist some 5 years ago.

Apparently the internal split will magically free up some £10 billion of capital, what smoke and mirrors would allow that to happen if all of the bad assets still remain within RBS itself ?

The answer is that the bad bank will NOT be internal but SEPERATE, where in the first instance that is how the regulators will look on it as two banks and thus allowing RBS to free up capital. Longer term the plan is for an actual separation between RBS Bank and the internal RBS Toxic bad debts Sludge bank that just as was the case with the Northern Rock bank sale to Virgin Money, at the point of privatisation / sale will have become SEPERATED from RBS and likely its assets sold at near 1/5th of that which RBS values the assets on its balance sheets.

In reality we are likely to see large chunks of the soon to be created internal bad bank systemically broken off and sold to the highest bidders so that it virtually ceases to exist as the political plan is clearly towards engineering the privatisation of RBS before the next election that the creation of an internal bad bank plays a critical role towards achieving.

Again RBS's senior staff should have spent the past 5 years of artificial QE money printing profits writing down the bad assets but instead been paying themselves billions in bonuses!

I fear that the internal RBS bad bank will further the fraud on tax payers as assets transferred to the bad bank could be heavily marked down in value which could then be sold at a profit and thus result in further massive bonuses for RBS staff, whilst obviously a heavy loss has been sustained on the GOOD bank! Which means that the Bad bank could out perform the Good bank, in terms of profits! Yes, given RBS and the big banks track record this is likely how the next fraud on tax payers will play out during 2014.

The bottom line is that the tax payers through direct bailouts and the money printing inflation stealth tax consequences continue to pump artificial profits into banks such as RBS. However with the formation of an internal bad bank (some 5years late!) as the bad assets evaporate (get sold off) then the Bank of England will likely reduce its funding of bank profits and thus RBS's revenues will shrink, which means that RBS will also continue to shrink in size long after it has been privatised, so it does not look like a good long-term investment proposition.

Source and Comments: http://www.marketoracle.co.uk/Article42939.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 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 focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 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.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules