Dunfermline BS Stability

baby_boomer

FT - Good deal for Nationwide

"....What is clear is that in carving up Dunfermline, Nationwide is getting the best deal: £1.3bn of sound assets, £2.8bn of liabilities, mainly in the form of retail deposits, and a cheque for the difference. The government even threw in an extra £68m, partly to cover the costs of servicing those mortgage assets – that’s how keenly priced the loans must have been.

What a difference six months make. When Bradford & Bingley went down, the government was able to charge Santander a decent sum for taking the bank’s deposits, because the Spaniards wanted to get their hands on a cheaper funding source, together with a big customer base. Nationwide had no obvious need for either...."

Count_Dante

Read some of the utterly delusional and ignorant rants on the comments page here:
http://www.scotsman.com/latestnews/Taxpayer-foots-16-billion-bill.5122378.jp
Many people apparently believe this is some plot to 'asset strip' Scotland and deprive it of it's financial infrastructure. They are simply mad.

I am enraged at the management of this BS. They marketed the BS as a very safe institution when they would have known this was not the case - in fact, were it not for the implicit government guarantee, a random junky would have been a better credit risk.

baby_boomer

The Scots think the English are asset stripping them.

The English think the Scots are milking the English taxpayer.

Politics is much more interesting in the post-Blair, credit crunch era!

Scotsman - Terry Murden's Blog about the English v Scottish debate over Dunfermline

baby_boomer

Independent Comment - Pathetic bleatings of flawed Dunfermline

"Have you ever heard anything quite so preposterous as the chairman of the Dunfermline Building Society's fulminations against the Treasury for failing to bail him out with wads of taxpayers' money? Perhaps he thought that with the billions that have been sunk into Royal Bank of Scotland and Halifax Bank of Scotland, all financial institutions north of the border have a God-given right to funds from Westminster. Or maybe it was just that with fellow Scots ruling the roost at both No 10 and No 11, he expected special treatment.......

......As for Mr Faulds, remember what he said as his society was merrily buying up the sub-prime lending portfolios of Lehman Brothers and GMAC. "Our society has no exposure to sub-prime lending." It's hard to have any sympathy for his present bleatings."

Herald - Treasury Committee Chairman blames Dunfermline's chairman and board

## - The London Labour Scots are singing from one hymn sheet to undermine the SNP .

Times - Scots desperately looking for someone to blame

“It's like losing the Royal Bank of Scotland all over again. Scotland doesn't have many great institutions and they are part of who we are,” said Mrs Trim. “To lose them dents the national psyche.”

The Indy article also explains the Maths of who pays what

".......Nationwide takes on the liabilities (the deposits and wholesale funding) and the assets of the residential mortgage book. The shortfall is covered by a £1.6bn cash payment by the Treasury. Most of this ought to be recouped by selling off the residual commercial lending and social housing portfolio. To the extent that it isn't, the industry-funded Financial Services Compensation Scheme (FSCS) will pick up the tab up to a maximum exposure of £50,000 per depositor. Assuming the eventual losses on commercial lending are no more than the FSA's estimate of £100m to £150m, that would leave the taxpayer with only a small, residual liability of no more than £15m.

Why didn't the Government fall back entirely on the FSCS to pick up the tab? After all, that's what it is there for. The answer is that the financial system is judged still to be too fragile to allow for any losses by depositors whatsoever. The FSCS picks up only the first £50,000 of each depositors' loss. Both the Prime Minister and the Chancellor have said that no depositor will lose a penny as a result of the banking crisis. They must honour their pledge....."

baby_boomer

A light-hearted comment from the Indy's credit crisis diary

Dunfermline manager back in the wilderness

"Three years ago, Peter Weanie was feeling pretty smug. The Dunfermline Building Society manager had built the group's corporate loans team from scratch, for which he was feted by management and the press. He even talked bullishly about taking on ever bigger loans in a 2006 interview, the same day he was recovering from a certain charity walk. Three years on from completing the Great Wilderness Challenge, Mr Weanie's division has led the entire group to a similar challenge, but this time the charity comes from the taxpayer, as its loan book needed bailing out at the weekend. He said in 2006, the next project would be a skydive – customers didn't expect the group to follow him down." :rotfl:

baby_boomer

Guardian - Unanswered questions

Why the risky lending?
"It is hard to find a motivation for this behaviour - at least not in Dunfermline's report and accounts. The remuneration report reveals no evidence that the management was driven by incentive schemes that would pay out megabucks if the high-risk bets succeeded. We must assume that Dunfermline's bosses were simply infected by the spirit of the age."

## - Bizarre, if true.

What was the FSA doing?
The FSA appears to have been wholly untroubled by the thought that Dunfermline, making profits of £5m-£6m a year, could pitch itself into commercial property lending, an area outside its core expertise, to the tune of £650m. The FSA needs to provide a proper explanation of what went wrong.

## - Vince Cable is rightly pursuing this line of attack.

FT - FSA faces the heat over Dunfermline

baby_boomer

Did Nationwide come in with the highest bid? (given that we're paying it not the other way round!)

Or was it chosen by the government on the basis of other criteria?

Were each of the bidders all given the same criteria or did they have to imagine what the government wanted?

The UK taxpayer has a right to know.

The Times provides a hint - but we still await a proper answer

Job guarantees swung the bid

"A promise to guarantee the jobs of about 300 branch staff at Dunfermline Building Society was key to swinging a sweetheart deal for Nationwide Building Society to take on the viable parts of the business.....

.....Sources close to the negotiations said a pledge to keep branch staff in jobs for at least three years was critical for the Government. The news will reignite claims that Mr Brown is prepared to intervene aggressively to protect Scottish jobs at the expense of British taxpayers...."

[There was a clause in the Lloyds takeover of HBOS which referred to Scottish jobs but not Yorkshire jobs in Halifax.]

We still need a proper response from government. Perhaps the Scottish Parliament's investigation could look at this aspect on behalf of English savers and taxpayers

baby_boomer

What about the wider picture?

Guardian - Dunfermline collapse casts shadow over the building society sector

"Adrian Coles, of the Building Societies Association, insisted last night that he knew of no other society in the same mess as Dunfermline

[## - That'll be the same Adrian Coles that said that the entire BS sector was safe back in November . His job and massive defined benefit pension, at savers' expense, depend on selling the sector to the public. ]

When Moody's rating agency carried out a health test of the sector in January, Dunfermline was one of the worst ranked, but it also raised concerns about Newcastle, Nottingham, Principality, Scarborough (defunct yesterday) and West Bromwich.

## - And the Dunfermline crisis shows that Nationwide won't necessarily step in. The four remaining societies in bold are either as big or bigger than Dunfermline.

"[Nationwide] can't be the lender of last resort," said Andy Golding, chief executive of Saffron building society. "Graham Beale [chief executive] has a commercial business to run for the benefit of his own membership."

## We live in interesting times.

My Finances - Loads of other building societies claim that Dunfermline is a one off

Count_Dante

From Faulds in The Herald:
"A number of people are saying today I am blaming everyone but myself. The buck stops with me. I take full responsibility. I am sorry and sad about what happened. No-one worked harder than I did to try and maintain our independence."

ha ha ha ha - this does not tally with his statements on Sunday, which pinned more blame on creatures in faraway galaxies than on himself. The man is an @rse.

baby_boomer

Jim_Faulds wrote:

No-one worked harder than I did to try and maintain our independence.

A pity he didn't "work harder" to stop the rot when he became chairman in April 2007 :rolleyes:

By 2009 it was too late. He's like a spoiled kid who does no work for his A-Level for 2 years, tries to cram in the last month and blames his teachers, parents and examiners for his D grade.