Millionaires & Food banks

This evening I got a tweet from Barclays Wealth Managemen with this picture saying "Our latest #ProsperityMap finds that the UK millionaire population grew by 7.6% year-on-year, up to 625,000".

I replied "and 8% of UK adults don't have enough money for food. What a disgrace" and linked to this article below on UK food banks.

"Newham declines FOI request for LOBO replacement loan rate"

This is really disappointing news. We are being ripped off by the Banks over our LOBO loans left, right and centre.  This is a national issue not only a Newham issue.

Last night the BBC televised allegations that the Bank of England had been involved in manipulating the Libor rate, which would have impacted negatively on many Newham LOBOS.

Perhaps we should be suing the Bank of England? I don't know to be honest but I do know that we need to find out what is actually going with these loans, be open and transparent and then find a solution.

BY COLIN MARRS
IN 151 NEWS · TREASURY
— 5 APR, 2017

A London council has refused to reveal the rate it is paying on £248.5m of fixed rate borrowing which it has converted from Lender Option Borrower Option (LOBO) loans.

Councillors at London Borough of Newham made a freedom of information request following the council’s announcement in February that it had renegotiated the terms of the LOBOs. The council said that it has saved £94m on interest rates which would otherwise have been payable on the loans. 

But it has rejected a call for clarity on the new fixed rate it will pay. In its response to the FOI request, the council said: “The information requested relates to the specific rate of interest which was negotiated in securing this new financial arrangement.

“Having consulted with the relevant financial institution we consider that in disclosing the fixed interest rate agreed, would be likely to weaken Newham’s bargaining position during future financial and contractual negotiations.

“This could potentially affect the council’s income and budget and essentially, the availability of financial resources for residents and in the delivery of Newham’s services.”

Barclays’ bargaining power on similar or related restructuring processes could also be weakened, the council said.

Newham recognised the public interest in promoting transparency, but said that maintaining the exemption outweighed the public interest in disclosure.

Councillor John Whitworth, which helped submit the FOI request, told Room151: “The executive is being secretive, as it is in all things. It is very difficult for backbench councillors to get information.”

However, he said that disgruntled councillors will continue the fight for information on the financial arrangements relating to the renegotiated LOBOs.

The FOI revealed that the councils were advised by treasury advisers Sector and Butlers on its LOBO loans portfolio.

It also said that Allen & Overy had provided legal advice while JC Rathbone & Associates and Ernst & Young had provided independent financial advice on the deal.

No fees were paid to brokers carrying out the LOBO deals, according to the council’s response.

Nick Dunbar, founder and editor of the Risky Finance website, was sceptical about the latest deal. He said: “Given that most of Newham’s Barclays LOBOs were of the highly complex ‘range LOBO’ variety with rates currently as high as 7.6%, it might have been a more fruitful strategy for the council to have disputed the entire break cost on the grounds that the products were mis-sold.

“Instead, the council has seemingly absolved Barclays of legal risk while committing to paying crippling interest rates for 50 years or more.”

Newham ditches LOBOs pledging £94m in savings

This has been one of the most popular stories on the Local Government finance website Room 151 recently. By Colin Marrs. LOBOS is the Spanish name for wolf. 

"Newham Council has agreed a deal with Barclays to switch almost half of its Lender Option Borrower Option (LOBO) loans into fixed rate loans.

The council — which had the biggest LOBO portfolio of any council in the UK — has come under intense pressure from campaigners and featured prominently in a Channel 4 Dispatches programme last year which sought to highlight the cost of LOBOs to the public purse.

Room151 understands the council has now fixed the rate on £248m of its £563m portfolio, following lengthy negotiations between senior officials at the council and the bank.

Lester Hudson, cabinet member for finance, and commercial opportunities, said: “We took out these types of LOBOs as they represented the best deal for the council at the time and (they) have saved us millions of pounds in interest payments.

“They were part of our balanced and award winning strategy which includes a balanced approach to risk.

“As a council, and in line with good stewardship, we are always working to reduce the cost of our borrowing. We have taken independent legal and financial advice on this agreement and it is now the right time for us to restructure these loans.”

In a statement, Newham said it would save £94m in interest payments that it would otherwise have paid on the LOBOs over their remaining life.

This figure was reached by multiplying the current annual interest payments by 60 years — the average term length of the loans.

However, when approached by Room151, the council was unable to confirm the rate agreed on the new loan.

Last year, Barclays announced it would waive its lender option on its £5bn LOBO loan book with local authorities and reduce break costs. It is unclear whether the deal announced by Newham differs from the details in that announcement.

In Newham’s 2015/16 annual accounts, the fair value of the council’s LOBO portfolio was recorded as £1.3bn.

Newham councillor John Gray, who has been critical of the LOBO programme, welcomed the authority’s announcement.

He said: “Previously, the LOBOs skewed the council investment strategy because the council has to have bags of reserves available at each of the options dates.

“We had to have all this money on deposit, in case the bank decided to exercise its option to request a rise in the rate we pay.”

But he added that the “devil will be in the detail”, and questioned whether the renegotiated loans include “inverse” LOBOs, on which the council currently pays its highest rates.

Gray said: “We are asking councillors for further information but I suspect they will try to use commercial confidentiality to prevent us finding out more.”

Newham council said that the new deal would improve its credit position, reducing the cost of future borrowing.

“Moreover, it will further stabilise the council’s future debt costs helping to safeguard council tax from future increases and protecting council services,” it added"

£238 million reasons to stop Barclays Bank LOBO cheats ripping off Newham Residents

This was the written question I put to the Newham Deputy Mayor and Cabinet member for Finance, Lester Hudson, at the Full Council meeting last week

To the Executive Advisor on Finance, Cllr Lester Hudson

"Last week 3 more employees of Barclays Bank were found guilty in Court of criminally conspiring to rig the Libor interest rate downwards between 2005 and 2008.

This was precisely the same time that Barclays sold £238m of so called “range lobos” loans to Newham Council. The interest repayment cost of these loans goes up if base interest rates and LIBOR go down.

So we had on the one hand, an arm of Barclays making huge amounts of money for themselves and the Bank from driving interest rates down and profiting from these moves, when another part of the bank was earning huge amounts of money from selling us loans that would cost more in interest if rates go down. This cannot be right.

In the light of these and other recent court convictions for conspiracy and fines for interest rate rigging will the Executive member please reconsider his decision not to take legal action against Barclays for fraud and damages and for us to recover the millions of pounds that Barclays and other banks have cheated from Newham residents and stop them cheating them further in the future.

 John Gray. West Ham Ward Councillor.

Cllr Hudson responded by saying that the impact of the Libor fraud was relatively minor and that it was too expensive for Newham to take on Barclays Banks by itself but he would be interested in taking part in some collective class action led by the Local Government Association.

I had the right to ask a verbal supplementary question, so I asked why hasn't he taken up the offer given by Cllr Fiaz, who shares my concerns about Banks cheating and robbing residents over LOBO to actually meet some of the experts who think Newham has a legal case against them? Especially since now it seems that there could be a "no win, no fee" deal on offer to get our money back?

He replied that he was suspicious of "no win, no fee" lawyers since there was no such thing as a free lunch.

I argued back "just meet them" for "one hour" and find out!

The Newham Recorder covered the issue here, where I expressed my disappointment at the lack of progress but the pressure group, Debt Resistance, who were also at the meeting think that the Executive have moved their position in favour of "considering" at least some sort of collective class action.

We have to move this issue on. It just makes me sick in the stomach that the Council have had savage cuts in our budget at the same time we have been ripped off by the Banks for millions and millions of pounds. Many of these loans are 70 years long!!!

Select Committee Investigation into Councils and LOBOs: Monday 20 July

In this session the Communities and Local Government Committee will examine the evidence presented on the Channel 4 Dispatches programme of Monday 6 July 2015 regarding local councils and lender option, borrower option loans.

• Inquiry: Local Councils and Lender Option, Borrower Option loans
• Communities and Local Government Committee

The Committee will be questioning the people involved in the making of the programme. The Committee is expected to explore how Councils have allegedly ended up with £15 billion in complex bank loans with high interest rates and difficult exit clauses.
The meeting will be webcast on Parliamentlive.tv.

Witnesses

Monday 20 July 2015
At  4.00pm

• Mr Antony Barnett, Reporter, Channel 4 News and Current Affairs
• Mr Abhishek Sachdev, CEO, Vedanta Hedging Ltd
• Mr Rob Carver, Former Derivatives Trader, Barclays Capital

Background

On 6 July 2015, a Channel 4 Dispatches programme revealed that many Local Authorities had taken out loans from banks for which Councils were paying high interest rates and which many Councils were locked into because of expensive “break” clauses.

The report suggested that up to one fifth of Council borrowing was taken out under such Lender Option, Borrower Option loans for which interest rates were over 7% in some cases. Most of these loans were taken out between 2003 and 2011 when Councils believed interest rates would remain high. The Dispatches programme estimated that banks made more than £1bn in upfront profits on local authority loans.

Further information

• Channel Four Press Release relating to Dispatches programme (external)
• Parliament topics: Housing and planning
• Parliament topics: Communities and families

My First Boris Bike Ride

Off message but today I finally did it - and after months of faffing around I bought a helmet and cycle clips then hired a Barclay (Boris) bike and rode from Holborn to London Liverpool Street station.

This is the London cycle sharing scheme. 

Of course they should be called "Ken's Bikes" since it was actually the idea of London Labour Mayor Ken Livingstone in 2007. Like a lot of Ken's ideas - Boris nicked them.

It took me about 20 minutes to work out how to log in and release a bike. The instructions on docking stations for first time users are pretty rubbish. Luckily for me some helpful staff were about relocating bikes. You have to set up a charge with your credit card and get a receipt then you have to reinsert your credit card to get a slip with an unlocking code. Once you know what you are doing then it is quite simple.You can order a key online to make things quicker.

The bike itself is pretty easy to ride and feels surprisingly light considering it is quite a big bike. The gears need a little getting use to but it is stable and being high off the ground gives you confidence. The front carrier basket is rather small but its better to store stuff here rather than a rucssack on your back. If you are not use to cycling in London it would be best for you to try out in quiet streets and at quiet times to get use to the bike before hitting the high road in peak traffic. 

I was on the whole, well impressed and will definitely give this mode of transport a try in coming months. Tomorrow I will be going to Mordon and may be able to cycle some of the way back to Islington.

"Barclay pay AGM vote round-up"

Hat -tip Tom at "Labour & Capital"

"Being the sad man that I am, I've been collecting asset manager voting decisions on Barclays' remuneration report at this year's AGM.

Here are the scores on the doors so far -

FOR - Goldman Sachs, Standard Life
ABSTAIN -
OPPOSE - Aberdeen, AXA, F&C, Investec, JP Morgan, Jupiter, Kames, Legal & General, M&G, Royal London, Scottish Widows

Will update when I get more data. Interesting thing to note is that some hefty UK institutions voted against. So where did all those votes in favour come from?"

(grayee comment: Goldman Sachs Yeah but Wtf is Standard Life doing voting to reward shareholders being ripped off?

Why the financial services industry can be so corrupt (and yet so smug?)

Amidst the current media fury about the Barclays Bank LIBOR fiddle and the latest miss- selling scandal to small businesses, the only thing that really astonishes me is the shock and horror about what has gone on?

Already we have excuses that this was a “one off” or “all the fault of the last government” as well as it’s just a few “rogue traders”.   Rubbish. It is not.

Does everyone forget already that we are in the worse recession for 60 years due to either fraudulent or at best reckless behaviour by Banks and financial institutions?

Barclays Bank has been ripping off its customers for years, it not for decades. Does no-one remember the Personal Pension scandal during the 1980’s and 1990’s? When Barclays (and practically all the other Banks and life assurance companies) persuaded its loyal and but completely naive customers to  come out of their guaranteed Company defined benefit pension schemes and buy their expensive personal pensions? When people wanting short term saving plans were sold 25 year life insurance endowment bonds?

When, very like the current debacle over small business interest hedges,  the Banks instructed all their retail staff that they had to make so many sales a week of these products or they were in trouble. All senior management knew exactly what was going on since it made no financial sense whatsoever for anyone to leave their company pension scheme.  But they did nothing to protect their customers nor ultimately their shareholders who had to pick up the bill for compensation. These corrupt practices are due to widespread bad company and industry wide governance.

Yet time after time, whenever I go to governance conferences and meetings, we are told how wonderful UK governance is especially compared to the rest of the world (Which is probably true but if so, then God help the rest of the world). When sensible proposals are made to improve corporate behaviour and governance such as the compulsory publication of Company AGM voting by fund managers or putting employee representatives on remuneration committees then they are too often simply dismissed - often sneeringly.  

This frankly smug and self satisfied attitude has change.  The UK financial services is very, very important to the UK economy. We can argue that maybe it is too important which is another matter. But at the moment it is responsible for 10% of our tax take, employs hundreds of thousands of workers and is the main source of finance for our economy.

While there is some very good people work in finance there is not enough of them to stop us, the principles who own assets (such shareholders in pension and insurance funds) being robbed off by the agents, we employ to look after our assts. 

Cosy crony remuneration committees must stop. Shareholder votes on pay at company AGM’s should be binding and compulsory. Retail and investment banks should be separated to stop casino capitalism.  The Government should retain a significant shareholding in the Banks we own at the moment and we should buy shares in those we do not own.  Better regulation is not enough we need a state holding not to run the Banks but to try and make sure that they are run by grownups who will act in the long term interests of shareholders and customers not the selfish short termism driven by Bollinger Champagne dudes.

The massive life insurance funds and Mastertrust pension schemes which have no beneficiary governance at all should have a trustee structure set up to ensure that they are not being robbed either.  Doing so would help put UK PLC in order as well. 

Finally fraudsters should be brought to book and locked up as well as those higher up who turn a blind eye to matters in order to ensure their own well paid positions and bonuses. Anyone making a deception in order to gain a pecuniary advantage is guilty of a serious criminal offence while aiding and abetting any criminal offence is a crime as well.  These people must be dealt with in the same way we treat rioters.

Rant over. Hat tip great cartoon by Steve Bell from The Guardian