Reith Lecture: It is Society that is broken - not just the economy

StevieJ

Kennyboy66 wrote: »

I think the point is, that Barclays raised money from Gulf investors and ignored existing shareholders (who after all are only the owners) pre-emption rights.

This was inherently more expensive that the offer that would have been available from the UK government.

So we need to ask ourselves, was it in shareholders best interests to raise money this way - or was it in the managements best interests (allowing them to pay unlimited bonuses without government interference).

Increasingly it seems that company boards have hi-jacked companies and are happy to loot them for as such as they can get while shareholders can swivel.

This in extremis is the Xstrata / Glencore merger but goes all the way down to small companies where chief executives are taking 1% per year of a market capitalisation in renumeration of a company for mediocre performance or worse.

I agree with your main thrust re corporate governance but the fact that the Barclays share price has well outperformed the likes of RBS and Lloyds (post bailouts) suggests that taking the Queens shilling may not have been the most productive route for Barclays shareholders. I do however think that a rights issue should have been considered, but this may have been deemed unlikely to succeed with Barclays on the edge of a precipice.

John_Pierpoint

Barclays actually did what Niall Ferguson is proposing:
It turned to its lender of last resort (somewhere in the Gulf of Arabia) and borrowed at an eye watering rate of interest in double figures.
It then used some of that money to relieve the Americans of some of the embarrassment of Leman Bros. - The casino bit?
Since then the high earners at Barclays have become the higher earners, I'm not sure if the Gulf has swapped to shares yet or is still enjoying its double digit interest ? Probably the latter, though a dribble of money is getting through to the original share holders again now.

So Barclays has survived the banking crash by fighting on but with an increased cost base and could be taken over and broken up if it cannot satisfy its shareholders? As should apply to all the other banks that are on a life support system from the government. [Sorry Lloyds shareholders your board of directors made a disastrous decision, when it decided to help bail out Halifax/BoS. Similarly Barclays owes a big vote of thanks to the Shareholders of Royal Bank of Scotland for buying all those toxic ABN AMRO shares, pledged to Barclays].

Now all we need is for legal proceedings against any fraudsters identified at Barclays - there is no need to be vindictive, I would simply publish their names and addresses, strip them of their ill-gotten gains plus a fine (the system used for tax fraud) and reduce them to a delayed bankruptcy along the lines of the settlement with the Lloyds names.
The scheme that was in part administered in part by the fragrant wife of the novelist Jeffrey Archer.

Some of these people are very talented and need to be kept working to repay their debt to society.

Just a reminder for those who have missed the second lecture, "The Darwinian Economy"; it is repeated today:
19:05 BBC World Service
22:15 BBC Radio 4
[It appears that the World Service offers an extra 10 minutes - some extra questions?]

grizzly1911

StevieJ wrote: »

Then again the share price was around 50 pence when financing was raised (I know, I took advantage) and even after recent corrections it is now £1.70, some dilution that

I did the same but mainly to redress the some of fall from ~ £7:eek:
It is still (well was till this week) making operating profits (pre extraordinary items) despite these financing costs too.

CLAPTON

whilst it is so the Barclays was nationalsised like Lloyds and RBS it nevertherless took advantage of real money from the taxpayers and the by then implicit government guarentee that no lerge banks could fail

from Wikipeadia:

Financing
On 30 August 2007, Barclays was forced to borrow £1.6 billion (US$3.2 billion) from the Bank of England sterling standby facility. This is made available as a last-resort when banks are unable to settle their debts to other banks at the end of daily trading.[40] Despite rumours about liquidity at Barclays, the loan was necessary due to a technical problem with their computerised settlement network. A Barclays spokesman was quoted as saying "There are no liquidity issues in the U.K markets. Barclays itself is flush with liquidity."[41]
On 9 November 2007, Barclays shares dropped 9% and were even temporarily suspended for a short period of time, due to rumours of a £4.8 billion (US$10 billion) exposure to bad debts in the US. However, a Barclays spokesman denied the rumours.[42] Subsequent write-downs at the bank were announced to be £1 billion (US$1.9 billion), much less than feared.
In July 2008, Barclays attempted to raise £4.5 billion through a non-traditional rights issue to shore up its weakened Tier 1 capital ratio, which involved a rights offer to existing shareholders and the sale of a stake to Sumitomo Mitsui Banking Corporation. Only 19% of shareholders took up their rights leaving investors China Development Bank and Qatar Investment Authority with increased holdings in the bank.[43]
In 2008, Barclays bought the credit card brand Goldfish for US$70 million gaining 1.7 million customers, and US$3.9 billion in receivables.[44] Barclays

zagubov

CLAPTON wrote: »

whilst it is so the Barclays was nationalsised like Lloyds and RBS it nevertherless took advantage of real money from the taxpayers and the by then implicit government guarentee that no lerge banks could fail

from Wikipeadia:

Financing
On 30 August 2007, Barclays was forced to borrow £1.6 billion (US$3.2 billion) from the Bank of England sterling standby facility. This is made available as a last-resort when banks are unable to settle their debts to other banks at the end of daily trading.[40] Despite rumours about liquidity at Barclays, the loan was necessary due to a technical problem with their computerised settlement network. A Barclays spokesman was quoted as saying "There are no liquidity issues in the U.K markets. Barclays itself is flush with liquidity."[41]
On 9 November 2007, Barclays shares dropped 9% and were even temporarily suspended for a short period of time, due to rumours of a £4.8 billion (US$10 billion) exposure to bad debts in the US. However, a Barclays spokesman denied the rumours.[42] Subsequent write-downs at the bank were announced to be £1 billion (US$1.9 billion), much less than feared.
In July 2008, Barclays attempted to raise £4.5 billion through a non-traditional rights issue to shore up its weakened Tier 1 capital ratio, which involved a rights offer to existing shareholders and the sale of a stake to Sumitomo Mitsui Banking Corporation. Only 19% of shareholders took up their rights leaving investors China Development Bank and Qatar Investment Authority with increased holdings in the bank.[43]
In 2008, Barclays bought the credit card brand Goldfish for US$70 million gaining 1.7 million customers, and US$3.9 billion in receivables.[44] Barclays

So are some of our banks almost becoming nationalised by foreign governments. The irony!

sabretoothtigger

Wookster wrote: »

Missed this earlier and trying to listen now but for some reason iPlayer doesn't seem to be working

First the economy, then society now iPlayer itself is breaking down.
Truly this is end of days :eek:

Kennyboy66 wrote: »

So we need to ask ourselves, was it in shareholders best interests to raise money this way - or was it in the managements best interests (allowing them to pay unlimited bonuses without government interference).

Both. Government subsidy was penalised by the EU due to competition laws. It was far a better idea and justified to finance the Lehmans and other deals privately

Im not a fan of lawsuits every time the share price drops or a disagreement with management especially retrospectively. Vote it down or dont, usually small holders are observers, tough luck

Kennyboy66 wrote: »

This in extremis is the Xstrata / Glencore merger but goes all the way down to small companies where chief executives are taking 1% per year of a market capitalisation in renumeration of a company for mediocre performance or worse.

The big holders like insurance have been much more vocal recently. Xstrata is to be paid in shares only which I totally agree with, ideally they should only get a good bonus if the share price rises.
Especially with banks, the bonus shares should be five year options.

If Goodwin had received his 'guaranteed' pension in shares, it would be 20k a year now

I was looking at BARC on friday and Im not convinced it will stay much stronger then its pre close price of 162.
Generally if people dont believe it will rise, it tends to fall as speculators fail to soak up excess shares. 165 to 140 should be good support in theory and the yield isnt so bad I guess

John_Pierpoint

Niall Ferguson gets challenged for his views in the light of current events.

Four more repeats on the schedule: BST: 13:05, 16:05, 20:05 and for night owls 02:05.
if you have a digital service or any time for those listening on the interweb.

He has a pop at the English attitude towards controversial Scots.

[So who has been sending him hate mail?:D]