RBS rights issue march 2009

bubblesmoney

kennyboy66 wrote: »

Common G. you know full well that the real reason they do it this way is in order to comply with the Companies Act 1985 - and quite right too.

Imagine the furore if the Government just took shares in companies without other shareholders enjoying the same rights. Free marketeers would be apoplectic and comparing the UK to Russia's casino capitalism.

the first time around when the govt bailed out the banks they got prefffered shares and didnt have to do the present dancing routine to buy the shares at 25% inflated prices. the companies act didnt prevent the issue of preffered share allotments. now this method is just an excuse to buy ordinary shares at inflated prices. if the govt is spending money anyway then why not buy preffered shares as before and get rid of the rights issue expenses on top of it. the companies act shouldnt prevent the issue of preffered shares as has been proved on the previous occassion. if capitalising the banks is what is being done then why the dance just put the money in, get preffered share status, throw out tainted management without pensions and stop crazy bonuses for bailed out banks. after all they are basically govt employees now so they shouldnt expect anything more than govt payscales and only below inflation or at par pay rises and no bonuses till the banks get privatised again. they should apply this rule to all bailed out institutions and maybe they can do the 90% tax for bonuses they deem cant be defaulted on. surely the govt can bring in legislation like in usa now that tax bonuses in bailed out institutions at 90%. that would surely give any bank an incentive not to screw up if they want bonuses for top employees. surely they can do the same for the pensions of the bailed out bank executives like goodwin where above a certain level say 250k like in usa all bonuses get taxed 90%. that would put the fear of god (or loss of bonuses) in them and make them work honestly without trying to swindle taxpayers and anyone they can lay their eyes on via fancy 'investment schemes' they cook up in their head like CDS etc.

Thrugelmir

bubblesmoney wrote: »

lets say something is worth 1million pounds and they have 1million issued shares. lets say they make a loss of 1million and potentially are insolvent but creative accounting in the form of level 3 'assets' and govt encourages this screwing of the tax payers by this creative accounting.

obviously no one is buying into the level 3 mark to model value of these so called assets. if indeed they were valued nearly as much as what the level 3 assets are valued at (by mark to model method) then many people would have been falling over each other to buy them at a discount of 10% even during a credit crunch or atleast the other banks not up the creek could make cheaper aquisitions by buying other banks with these assets. the fact that these assets havent yet found a buyer means that these banks are still not cleaned from the toxic stuff. plus now there will be more share holders for the same amount of assets. so my guess is the share price will fall.

doesnt the share price usually fall after most rights issues? there will be a point when one can invest in banks but right now is risky and just gambling and not investing.

Very plausible. However the banks aren't able to rely on "creative accounting" as other businesses are able to. Assets are required to be written down to firesale values as opposed to the value which the asset will ulimately realise ( as yet undeterminable). Banking in its simplest form is a profitable business (certainly not exciting any longer). So although there may be a long road ahead buying now may be the oportune moment. As if nothing else the headcount employed by RBS will significantly over the next 2/3 years.

bubblesmoney

Thrugelmir wrote: »

Very plausible. However the banks aren't able to rely on "creative accounting" as other businesses are able to. Assets are required to be written down to firesale values as opposed to the value which the asset will ulimately realise ( as yet undeterminable). Banking in its simplest form is a profitable business (certainly not exciting any longer). So although there may be a long road ahead buying now may be the oportune moment. As if nothing else the headcount employed by RBS will significantly over the next 2/3 years.

if you see the video of the 'tresury select committee hearing' where the FSA was being grilled, you will see the FSA chief acknowledging the presence of these toxic assets on the banks books, he did explain why level 2-3 assets were being marked to model in that deposition. he got grilled a lot during that session. so the banks still have toxic assets on their books marked to model as they dont have any market value on the open market presently. the FSA even did say that it might take a long time to sell these things and some of it might not be sold how ever long they keep it on the books.

they were discussing barclays assets during that discussion.

the video of the hearing might still be available on the treasury select committee website.