Thursday, February 3, 2011

Global Fund Backed by Bill Gates to Launch Probe in the Wake of Fraud

An independent probe into fraud allegations at the $28 billion global health fund supported by Microsoft founder Bill Gates and his wife Melinda will be announced later this week, perhaps as early as Wednesday, Fox News has learned.

The investigation was originally demanded by the government of Germany, which last week announced the suspension of more than $250 million in new contributions to the fund. Its imminent announcement was officially confirmed to Fox News by Jon Liden, a spokesman for the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM), who added that “an independent, trusted individual” will be named as head of the probe, which the fund prefers to call a “review.”

Negotiations about the scope of the probe were still under way Tuesday, and were slated to include a major international conference call among donors on Wednesday. According to Liden, “all donor countries” to the fund would be invited to participate in the review.

Some 54 countries have contributed or pledged more than $28 billion to the fund since 2001, according to the Global Fund. The United States is far and away its biggest supporter, with donations and pledges of more than $9.5 billion from 2001 through 2013; the U.S. has paid up more than $5.1 billion of that total.

The GFATM has also received backing from a number of high-profile private-sector institutions, including Product (RED), which has the backing of rock star Bono; the Bill and Melinda Gates Foundation; and the Fox Television show "American Idol."

So far, only Germany and Sweden ($85 million) have suspended upcoming donations to the fund.German Development Minister Dirk Niebel, who initially sparked the funding freeze, has said that the funding freeze will stay in place until the investigation finishes its work, which he anticipates will be this summer.

According to Germany’s Niebel, the fund has “given an assurance that the ongoing treatment of sick people will not be compromised at any point by the investigations.” But according to the fund’s spokesman, “any withholding of a German contribution for 2011 will affect our ability to sign grants approved for funding in December 2010.”

The controversy over the misuse of Global Fund health money erupted two weeks ago, after an Associated Press story, citing a report from the fund’s inspector-general, charged that “as much as two-thirds” of some Global Fund health grants to developing countries had been “eaten up by corruption.” The story specifically named projects in Djibouti, Mali, Mauritania and Zambia, and cited forged or non-existent receipts for “training events,” phony travel and housing claims and outright theft, along with shoddy bookkeeping

In response, the Global Fund noted that all of the wrongdoing had been uncovered by the fund itself the previous year; that programs in the offending countries had been suspended and criminal charges laid; and that the fund was demanding the return of $34 million. The total amount involved, according to the Global Fund, was only a pittance compared to some $13 billion in spending so far. It quoted the inspector general, John Parsons, as declaring that “The distinguishing feature of the Global Fund is that it is very open when it uncovers corruption.”

On the other hand, only a fraction of the total Global Fund disbursements had been examined.
Further complicating the issue was the fact that the fund does not manage the health programs it finances in afflicted countries, but delegates that to various “implementing agencies” or governments themselves -- or parts of the United Nations.

In the case of Mauritania, half the fund’s money was managed directly by the government, but some projects were managed by the sprawling United Nations Development Program (UNDP), the U.N.’s flagship anti-poverty agency. According to a UNDP spokesman, the agency’s own auditors identified “more than $1 million in fraud” involving fund money among UNDP’s government partners, and blew the whistle itself.

Worldwide, UNDP is among the largest managers for Global Fund projects, handling 63 grants in 27 countries, worth about $1.1 billion, and providing “capacity development support” to “a wide variety” of other fund partners, according to a UNDP spokesman.

The main reason for the fund’s reliance on UNDP, according to knowledgeable sources, is the U.N. agency’s array of offices in 166 countries, including a large number where the fund can’t find other project managers.

Just how sure the Global Fund can be that UNDP is doing its job well, however, is a matter of contention. According to a source familiar with the situation, it is a longstanding sore point between the Global Fund and UNDP that the U.N. agency does not provide copies to non-government donors of internal audits it carries out on Global Fund projects. Instead, the fund gets overall summaries.

“This is a big weakness,” says one informed source, who added that there has been a “long dialogue” between the two institutions over the lack of auditing information and that the fund’s campaign to get full auditing details from the agency is continuing. Fox News has learned that the fund’s inspector general, John Parsons, met with UNDP officials Tuesday on the issue.

“You can’t manage billions of dollars in spending volume just by handing over summaries of audits,” the source added.

On its own website, UNDP says that “Global Fund grants managed by UNDP are subject to intensive audit scrutiny,” before acknowledging that under “current policy” it can’t provide the audit details. But, UNDP says, it “does, as a standing practice, inform the Global Fund about key audit findings and recommendations resulting from internal audits of Global Fund grants managed by UNDP.”

In addition, a UNDP spokesman said, “we have on several occasions exchanged with the Global Fund’s Office of the Inspector General, on a confidential basis, information relevant to investigations.”

The spokesman added that UNDP is “currently working out procedures” with its 36-nation supervisory executive board “to share complete audits with the Global Fund and other institutional donors.”(The U.S. is an executive board member, and also has a representative on the Global Fund’s International Board.)

UNDP’s Executive Board is currently meeting in New York City, but a UNDP spokesman said it hoped the new arrangement would be in place “in September, if not sooner.” The Global Fund, according to a knowledgeable source, “thinks it can be done faster.”

The issue of UNDP’s disclosure of internal audits, even to executive board members, has long been a point of controversy. They remained a UNDP internal secret (in UNDP terms, a “management tool”) until 2007, after a prolonged battle with the Bush administration over programs in North Korea, and even now are not given to countries that ask for them, but simply are presented for reading -- along with a non-disclosure agreement. Even then, they can be redacted or kept confidential if the country where the audit takes place raises significant objections.

Nor will further audit disclosure on UNDP’s part necessarily bring full transparency to the way the U.N. agency is handling the Global Fund’s money in some of the world’s toughest and most sensitive places. According to UNDP documents, the agency itself can farm out to other contractors some of the responsibilities for spending and accounting for Global Fund money -- as, for example, in the case of Northern Sudan.


The issues of shared audits, sub-contracted programs and financial controls and other safeguards over all the money supposedly flooding in to help millions of the world’s ailing people will no doubt be among many things examined by the independent investigation, once it has been announced and organized.

Mubarak Hires Mob Beats CNN Anderson Cooper

When you pay people to say nice things about you & the bought and paid for media run with it, the masses believe the bullshit (On Uncle Ben Bernanke)

Video - The river of bullshite runs deep. The key word below is 'investors' not the public, and it refers specifically to Bloomberg customers, in other words, Wall Street. So 66% of Wall Street loves Zimbabwe Ben.

Stop the presses. This is a fu^ing news flash. Tasteless Unique bonus clip below.



Bernanke Gets 66% Approval From Investors in Poll

Jan. 26 (Bloomberg) -- Investors love Federal Reserve Chairman Ben S. Bernanke. It’s just his policies they don’t like so much.

Sixty-six percent of investors have a favorable view of the 57-year-old former Princeton University economist, compared with 31 percent unfavorable, according to a quarterly global poll of 1,000 Bloomberg customers who are investors, traders or analysts conducted Jan. 21-24. Bernanke is more popular than his European counterpart, Jean-Claude Trichet, and scores higher than all other world political and economic leaders in the poll with the exception of German Chancellor Angela Merkel.

Investors don’t have the same positive regard for the Federal Reserve’s actions, particularly the decision in November to inject $600 billion of stimulus into the financial system. A plurality of respondents, 35 percent, say that policy, know as quantitative easing, hasn’t had any significant effect on the economy; another 33 percent say the asset purchases risk a rise in inflation to dangerous levels. Just 27 percent say the plan to buy Treasuries is working as intended to help reduce unemployment and boost growth.


A clip from November that was never posted...

Bernanke Has Done 'Fantastic Job' - UBS Exec


And we're quite sure that we'll get email complaints about this clip...

Video - Look at that douchebag (Bernanke)...


Mexican Government successfully sheds the US Dollar from its economy

Mexico has always considered the US dollar almost a secondary currency to their Peso as the fact that billions of US dollars spent their way through the Mexican economy in 2009 and 2010 which speaks for itself, but sometimes even the best of friendships come to an end.

The Mexican government in September 2010 enacted a very restrictive law which basically restricts the use of US Dollars for almost all purchases inside of Mexico.

In early 2010 travelers and visitors could shop at many of the large US corporations inside of Mexico such as Wal-Mart, Home Depot or even one of the hundreds of American food establishments such as McDonalds or Dominoes Pizza and pay for their meal using US Dollars but under the new law using US Dollars is no longer an option.

Just image the surprise of many Americans being told by Wal-Mart that US Dollars are no longer accepted at their store especially since Wal-Mart is one of the most iconic “American” businesses in the world with such buying power that they set the prices which manufactures must sell them their items for.

Wal-Mart´s buying power is so well known in fact that most people would normally be able to safely assume that with such buying power that Wal-Mart could also force almost any country into allowing them to accept the US Dollar to further their in store sales, but apparently not even Wal-Mart is that powerful.
Therefore it was no surprise that when this story broke in late September of 2010 that Mexico was no longer accepting US Dollars the internet was abuzz with conspiracy theories claiming a banking holiday was in short order or the crash of the US dollar was intimate while others were raising the “BS” flag and claiming Mexico would never stop accepting US Dollars because those dollars were its economic life support but as the year closed out and those “end of the world” predictions didn’t come to pass and the fact Mexico did stop accepting the dollar, well that only left many people wondering what really was going on south of the border.

The Mexican government had made it clear that they will no longer allow ANY businesses to accept US dollars including American companies regardless of the operation or who is paying in American dollars. That’s right, this means if you’re a US citizen and fly into Mexico for vacation or business your hotel is no longer allowed to exchange cash dollars into pesos at the front desk which was customary up until 2011.

Also in Mexico if you travel to a local bank regardless of the bank name or national origin including HSBC from China which is the fastest growing bank in Mexico you are no longer able to exchange US Dollars for pesos. Only account holders at banks have the option of depositing US Dollars into their bank accounts but this is for deposits only and not exchange and then you have to have a special type of account set up that is more costly. Of course even if you do have a special account that allows you to deposit US dollars your bank will charge you a service free for depositing foreign currency into your account and then probably another service fee for a withdrawal but that’s another issue all together.

Ok so many readers are probably asking if the banks no longer exchange money or business are no longer allowed to accept US Dollars then what is a person who has US dollars suppose to do.

For those who have traveled to Mexico there is a good chance you are familiar with Casa de Cambios which are small exchange centers for US dollars and often littered on every corner of any large tourist city or the closer to the border you are, however these Casa de Cambios themselves have come under strict new regulation as well as have been greatly reduced in numbers as more are closing every day faster than “one hour” Kodak film processing centers or Blockbuster video locations.

Part of the new regulations is that anyone exchanging money for any reason must now present a valid government ID which is copied and placed on file with a copy of the transaction and amount of money being exchanged. This additional paperwork and hassles now mean higher operational costs for these businesses which in turn mean those costs will be passed onto the consumers who are often the one that end up paying for everything anyway.

Another drawback is that since there are now fewer Casa de Cambios this means less competition and so the exchange rate doesn’t have to be as competitive or even what the banks posted exchange rate is, after all you really have no other option in exchanging your US dollars. Gone are the days of such advantageous exchange rates that allowed anyone exchanging US Dollars into Pesos additional purchasing power by walking away with more for your money south of the border.

The Mexican government wants everyone to believe that these new laws were enacted because the war on drugs and the inability to track all these US Dollars floating around their economy which they claim the drug cartels are using in a black market way but a closer look indicates something completely different.
As the dollar continues to lose purchasing power so does the ever enjoyed exchange rate the US Dollar held for so long. This is a way to actually help devalue the US Dollar while protecting the Mexican economy from going down with the US financial Titanic that has been taking on way too much water in the form of overspending and red ink.

With the value of the dollar sliding lower each day there are some experts who are predicting the US Dollar to reach a point that it will either collapse or need to be reevaluated but either way the Peso is expected to be worth more than the US Dollar and this looks like it will happen sometime very soon at the rate of how things are changing for the Dollar around the world.

This is why it looks as if the Mexican government is doing everything it can to remove as many US Dollars from their economy so there are fewer US Dollars in circulation inside of Mexico so that when the US Dollar does finally go by the wayside there will be less of a direct affect on the Mexican Economy as a whole.
It has now been almost 5 full months since this law took effect and Mexico has been successful in eliminating millions of US fiat Dollars out of its economy and taking steps to vamp up the removal of all remaining dollars by recently instigating even stricter rules at the Casa de Cambios preventing them from exchanging more than $300.00 dollars per transactions. This means it will be much more difficult for Mexicans to send US Dollars home to their families without enriching the pockets of the bankers and the money transfer companies. These caps on exchanging Dollars will also cause the people to want to get away from the dollar faster as it’s more difficult and costly to do business with dollars.

On a side note it´s also important to note that the Mexican economy grew at a rate of just over 5% in 2010 and by the year’s end many large companies in Mexico were reporting stronger than ever revenue and sales at rates not seen in many years. Many large companies are actually in hiring frenzies and some companies are desperate to fill slots with qualified workers.

Now while some will argue that any cash regardless if it is drug money or laundered is actually good for an economy but most people can also understand it’s not good if that cash you have is losing its value so fast that it isn’t going to be worth the paper it’s printed on so it´s best to get rid of that money as fast as you can.

There has been a rush to sell off US Dollars inside Mexico because the people are sensing a coming financial storm with the US Dollar and they too don’t want to be stuck with worthless paper or allowing that worthless paper to drag down their economy especially while their overall economy is going through a growth trend but until that time does come you will still be able to use your credit and debit cards as those funds are simply automatically converted at the time of a transaction but are not physically in the economic system as fiat paper money but rather electronic funds.

A good conspiracy theorist will argue the point that the removal of paper money and forcing people into electronic transactions and requiring those who do use cash to provide ID to be Orwellian and that the bankers come out winning might have a point to some degree but in Mexico the fiat currency in the form of Peso bills can still be used for most transactions. The irony is that many Americans for so long often use to complain about how so many Mexicans living in the United States were sending US Dollars back to Mexico and how it hurt the US economy. The irony is now those Americans are getting their wish that little if any US dollars are being sent to Mexico and in turn this is actually greatly helping the Mexican economy while drastically hurting and aiding in the devaluation of the US dollar.

SO for those planning to travel to Mexico be sure to take your Kevlar and your American Express card (don’t leave home without it) and remember Visa is everywhere you want it to be, even in Mexico where the Dollar is no longer accepted.

Von Helman
Staff writer

Nothing Is Stable Anymore

The Economic Collapse

The world is becoming a very unstable place, and the pace at which things are changing all around us has become absolutely mind-numbing. In fact, change has become one of the only constants in today’s world. Once upon a time, people in the United States could actually make 20 or 30 year plans and feel confident about achieving them. But now, nothing is stable anymore. The financial crisis showed us that some of the biggest corporations on the globe can collapse in a single day. The events of the past few weeks have shown us that entire governments can be brought down in a single week. We live in a world where there are now very few “guarantees” that you can count on. One of the only things that is guaranteed is that technology and information will continue to grow at exponential speeds. This year, the total amount of information produced on electronic devices around the globe is projected to be more than a zettabyte. A zettabyte is equivalent to one sextillion bytes. In other words, imagine a one with more than 21 zeroes following it.

Many of the things that we take for granted today didn’t even exist a few short years ago. Facebook has only been with us since 2004. YouTube has only been with us since 2005. Can you imagine a world where those two websites did not exist?

We live in a world of information overload. Once upon a time it would have been possible to go to sleep for a decade and wake up and everything would still be pretty much the same. But today if you were to do that you would be in for a case of severe culture shock.

Do you remember when you could buy a set of encyclopedias and the information in them would still be good a decade or two later?

Well, things do not work that way anymore.

In fact, most of the articles on this website will be obsolete a month from now.

In today’s world, you really have to think twice before you say that something is “not possible”.

A few months ago, it was absolutely inconceivable that Egyptian President Hosni Mubarak would declare to the world that he has “spent enough time serving Egypt“.

Yet here we are.

One week the government of Tunisia seemed perfectly stable and the next week it was toppled.

Do any of you out there still think that you can make realistic “plans for the future” in today’s world?

Read Full Article

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Iceland Shows Ireland Did ‘Wrong Things’ Saving Banks

On his second day as head of Iceland’s third-largest bank, Arni Tomasson faced a crisis: The firm he had been asked by regulators to run was out of cash.

It was Oct. 8, 2008, at the height of the global financial meltdown, and Iceland’s bank assets in the U.K. had been frozen, Bloomberg Markets magazine reports in its March issue. Customers flocked to branches of Tomasson’s Glitnir Banki hf to withdraw money, even though the government had guaranteed their deposits. By the end of the day, the vaults were empty, says Tomasson, recalling the drama two years later.

The only way Glitnir and other lenders could avoid a panic the next morning was to get more cash, which they were having trouble doing. A container of crisp kronur sat on the tarmac at Reykjavik’s airport awaiting payment, Tomasson says. The British company that printed the bills, De La Rue Plc, was demanding sterling, and the central bank couldn’t access its U.K. account.

“Everybody was panicked -- depositors, creditors, banks around the world,” Tomasson says. “The effort by all of us at the time was to make sure life could go on as normal.”

Tomasson, 55, got the cash he needed that night after the central bank managed to open an emergency line of credit with a European lender. Now, he’s sitting in an office in Reykjavik, handling about $24 billion of claims by creditors as life in Iceland’s capital returns to normal.

Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country’s banks, whose assets had ballooned to $209 billion, 11 times gross domestic product.

Krona Devaluation

The crisis almost sank the country. The krona lost 58 percent of its value by the end of November 2008, inflation spiked to 19 percent in January 2009 and GDP contracted by 7 percent that year. Prime Minister Geir H. Haarde resigned after nationwide protests. With the economy projected to grow 3 percent this year, Iceland’s decision to let the banks fail is looking smart -- and may prove to be a model for others.

“Iceland did the right thing by making sure its payment systems continued to function while creditors, not the taxpayers, shouldered the losses of banks,” says Nobel laureate Joseph Stiglitz, an economics professor at Columbia University in New York. “Ireland’s done all the wrong things, on the other hand. That’s probably the worst model.”

Ireland guaranteed all the liabilities of its banks when they ran into trouble and has been injecting capital -- 46 billion euros ($64 billion) so far -- to prop them up. That brought the country to the brink of ruin, forcing it to accept a rescue package from the European Union in December.

New Banks

Ireland’s banks had more than 10 times the assets of Iceland’s lenders, making their collapse more dangerous for the European financial system. Ireland also couldn’t devalue its currency because it is part of the euro zone. Still, countries with larger banking systems can follow Iceland’s example, says Adriaan van der Knaap, a managing director at UBS AG.

“It wouldn’t upset the financial system,” says Van der Knaap, who has advised Iceland’s bank resolution committees. “Even Irish banks aren’t too big to fail.”

Under an emergency act of Iceland’s parliament on Oct. 6, 2008, the assets and liabilities of the three biggest banks -- Kaupthing Bank hf, Landsbanki Islands hf and Glitnir -- were divided based on whether they were originated at home or abroad. The act created three new banks that were given the deposits and loans made to Icelandic companies and consumers. Resolution committees were set up to manage and liquidate what the old banks were left with: the overseas borrowing and lending that fueled a sevenfold increase in assets from 2000 to 2008.

Saving the Future

Arni Pall Arnason, 44, Iceland’s minister of economic affairs, says the decision to make debt holders share the pain saved the country’s future.

“If we’d guaranteed all the banks’ liabilities, we’d be in the same situation as Ireland,” says Arnason, whose Social Democratic Alliance was a junior coalition partner in the Haarde government.

By guaranteeing bank liabilities, Ireland faces a potential public debt burden that could swell to twice its GDP, up from 94 percent now. Iceland’s debt ratio is about 85 percent.

“Our future isn’t as bleak because our public debt isn’t as high,” says Hoskuldur Olafsson, chief executive officer of Arion Banki hf, the new bank formed to take over Kaupthing’s domestic assets.

‘Disappeared Overnight’

Today, Iceland is recovering. The three new banks had combined profit of $309 million in the first nine months of 2010. GDP grew for the first time in two years in the third quarter, by 1.2 percent, inflation is down to 1.8 percent and the cost of insuring government debt has tumbled 80 percent. Stores in Reykjavik were filled with Christmas shoppers in early December, and bank branches were crowded with customers.

Half a mile from where Tomasson runs Glitnir’s resolution committee, the bank’s former headquarters glitters against Reykjavik’s dark winter skies. The building, one of the largest in Iceland, is lit in red neon with the logo of the company that emerged from its wreckage: Islandsbanki hf.

“We had built trust over 100 years, but it disappeared overnight,” says CEO Birna Einarsdottir, 49, who was executive vice president of commercial banking when Glitnir collapsed. Einarsdottir, who spent five years working for Edinburgh-based Royal Bank of Scotland Group Plc, says, “It will take more than two years to regain that trust.”

Banking Boom

Iceland’s banking boom began in 2001, after the U.S. Federal Reserve began cutting interest rates, pumping cheap money into the global economy. The next year, Iceland sold its majority stakes in Landsbanki and a predecessor of Kaupthing. The new owners, along with those of Glitnir, which was already in private hands, expanded lending at home and overseas.

Kaupthing’s income surged 100-fold from 2000 to 2006, reaching 100 billion kronur ($850 million). Banking’s share of national output almost doubled to 9 percent, while that of fishing, the traditional backbone of Iceland’s economy, halved to 4 percent. More homes were built from 2004 to 2008 than in the entire previous decade, fueled by a government decision in 2003 to lower down payments on mortgages to 10 percent from 30 percent. The 367 Range Rovers sold in Iceland in 2007 exceeded the number in Denmark and Sweden, which combined have almost 50 times Iceland’s population of 318,000.

Tchenguiz Loans

The banks were particularly aggressive in the U.K., where loans were made to developers of the NoHo Square complex in the Fitzrovia section of London and to All Saints, a retail chain. Many of the borrowers had insufficient or low-quality collateral, according to investigations launched by the Icelandic government since the crisis.

“Our banks found their own subprime borrowers,” says Magnus Arni Skulason, founder of Reykjavik Economics ehf, a financial consulting firm.

Loans were also made to companies in which bank executives and owners had stakes or which were controlled by their friends, according to dozens of lawsuits initiated by regulators and resolution committees. Kaupthing lent 1.5 trillion kronur to such related parties, often without collateral, Prime Minister Johanna Sigurdardottir said in 2009. In 2008, lending to U.K. entrepreneur Robert Tchenguiz, chairman of R20 Ltd., and related parties accounted for more than 25 percent of Kaupthing’s equity, according to a 2010 report by a parliament-appointed special investigative commission.

Tchenguiz, 50, Kaupthing’s biggest retail borrower, was also a board member in Exista hf, one of the bank’s owners. His spokesman said Tchenguiz wasn’t available to comment.

Red Flags

“It’s hard to see where the lines between bad decisions and violating the law were crossed,” says Gunnar Andersen, director general of Iceland’s Financial Supervisory Authority.

Andersen says that before his arrival in April 2009, the agency was understaffed and failed to see the red flags being raised as the banks grew through risky lending. So did auditors and credit-rating firms, he says. Moody’s Investors Service gave the Icelandic banks its fourth-highest rating of Aa3 in 2007, even though the central bank had long since lost its ability to be lender of last resort if those firms ran short of cash, Andersen says. Abbas Qasim, a spokesman for Moody’s in New York, declined to comment.

David Oddsson, who became chairman of the central bank in 2005 after a 14-year stint as prime minister, says he relayed his concerns about surging growth of the industry to government leaders.

‘Party Was On’

The three banks had become the largest companies in Iceland, creating thousands of well-paid positions and controlling the top trade associations, says Oddsson, who oversaw the privatization of Iceland’s state-owned lenders as prime minister. Their headquarters were the largest buildings in Reykjavik, dwarfing the parliament.

“Nobody wanted to listen when the party was on,” says Oddsson, 63, now editor of Morgunbladid, one of the largest dailies in the country, with a circulation of about 50,000.

It was Oddsson’s decision not to build up the central bank’s foreign currency reserves from 2005 to 2008 that made a bailout impossible.

“They were collecting debt in such a fast pace, it would be stupid for us to build a mountain they could lean on if they failed,” Oddsson says. “The creditors that were lending to the banks recklessly had to face the losses.”

After the three lenders were seized by regulators, the government negotiated with the creditors, almost all of them outside the country, including mutual funds and hedge funds in the U.S. and the U.K. and European banks and pension funds.

Glitnir Creditors

Kaupthing’s creditors agreed to take an 87 percent stake in Arion, and Glitnir’s creditors now own 95 percent of Islandsbanki. Glitnir’s biggest creditor as of June was Dublin- based Burlington Loan Management Ltd., followed by Royal Bank of Scotland and DekaBank Deutsche Girozentrale, the fund manager for Germany’s state-owned savings banks.

Glitnir’s 8,500 creditors and Kaupthing’s 28,000 expect to get about 30 cents on the dollar for their claims, based on secondary-market prices of the banks’ debt and asset valuations by the resolution committees. About half of Kaupthing’s creditors are German depositors who had Internet accounts, have gotten their principal back and are seeking interest payments.

Landsbanki’s creditors opted for a promissory note from successor NBI hf instead of a stake in the new bank. Landsbanki had collected about $5 billion of overseas deposits through branches in the U.K. and the Netherlands. Iceland didn’t guarantee those deposits at the time it seized the bank, as it did for domestic customers, leading to a dispute with the British and Dutch governments.

Icesave Depositors

In December, Iceland agreed to compensate the U.K. and the Netherlands in full for their payments to Icesave depositors, as the Landsbanki accounts were known. Payment, including interest of about 3 percent, will be made over 35 years.

The U.K. and Dutch governments are claiming priority over other creditors so they can recoup funds from Landsbanki to cover the payments, based on a hierarchy created by the 2008 emergency act. If they succeed, other creditors would get nothing from the sale of Landsbanki’s assets. The priority of depositors is being challenged by creditors in court.

“The German banks and pension funds that loaned to Landsbanki in the early 2000s argue that their investments were made well before the law was changed,” says Heidar Asberg Atlason, a partner at Logos Legal Services in Reykjavik, which represents about 100 creditors of the 3 lenders.

Suspended by Cables

Claims against the three banks add up to $107 billion, and it may take years to resolve them in court, even after the resolution committees finish their work.

At Kaupthing’s offices, housed on the seventh floor of a building with floor-to-ceiling windows overlooking the Atlantic Ocean, a half dozen asset managers huddle over computer monitors watching market prices for stocks and bonds the bank owns. They and their counterparts at Landsbanki and Glitnir are in no hurry to sell.

“Some things, like our subsidiary in Norway, we sold really fast because we had good offers,” says Tomasson, the Glitnir resolution committee chairman. “Others we resisted selling immediately because we wouldn’t get a good price. Creditors are telling us not to hurry, not to do fire sales.”

At Arion headquarters, visible from Kaupthing’s resolution office, CEO Olafsson sits in a meeting room that’s suspended by steel cables and surrounded by see-through glass floors, talking about the challenges facing the new bank. Those include restructuring thousands of consumer loans, mortgages and debts of small Icelandic companies.

‘Just Can’t Pay’

While the bank got the loans from Kaupthing at steep discounts -- in some cases for nothing, if no recovery was expected -- it has to work with borrowers to make sure they can pay back, Olafsson says.

“Asset values and income in Iceland have gone down a lot, so people just can’t pay,” he says.

Iceland’s government, now led by the Social Democratic Alliance, has pushed laws through parliament that would require the new banks to write off $1.4 billion in consumer debt.

“There have been lots of interventions, which creates uncertainty,” Islandsbanki’s Einarsdottir says. “But hopefully those are all behind us, and we can complete all the restructuring by the end of 2011.”

Creditors have an interest in seeing Einarsdottir and Olafsson succeed. They stand to recover more if the new banks can be sold for a good price to strategic investors or in a public offering. Glitnir aims to do so in three years; Kaupthing is shooting for five.

Rebuilding Confidence

While the shattered trust of the public may take years to rebuild, there aren’t any alternatives for Icelanders, who have kept their deposits at the new banks.

“I lost all the confidence in the banks, but where else can we go?” says Jon Birgir Valsson, a customer at an Islandsbanki branch in downtown Reykjavik who was paying some bills for the government agency that employs him. “Life continues. We need to bank, and these are the banks we have.”

Rebuilding the confidence of international investors may take longer. Iceland’s banks won’t be able to access international markets until political and financial uncertainties are removed, say creditors and their representatives, who asked not to be identified.

Those include the agreement reached with the U.K. and the Netherlands, which has to be approved by President Olafur R. Grimsson. The politically independent head of state has said he’ll decide by February whether to put the issue to a referendum again. Voters rejected a previous arrangement last year that forced a higher interest rate on Iceland.

‘Grow Cautiously’

Einarsdottir agrees that settlement of these issues and completion of debt restructuring is required before the government and the banks can access international capital markets again.

“In the beginning, banks and other financial institutions in Europe were telling us, ‘Never again will we lend to you,’” Einarsdottir says. “Then it was 10 years, then 5. Now they say they might soon be ready to lend again.”

This time her bank won’t use foreign funds to go on a lending binge, she says.

“We will only focus on areas where we can bring on the nation’s expertise, such as fishing and geothermal energy,” says Einarsdottir. “We will grow cautiously.”

Fishing, Banking

Economy Minister Arnason wants more for Iceland than fishing and geothermal energy. He acknowledges that the nation got into banking without the right infrastructure or the know- how to do it well. Still, he doesn’t think Icelanders have to go back to fishing now that they’ve proven themselves inept at finance.

His government needs to find work for the 2,000 highly educated finance-sector employees who lost their jobs, he says. Otherwise, they’ll migrate, and a shrinking population is the biggest scourge for this small, isolated island nation.

“The choice isn’t between fishing and banking,” Arnason says. “The choice is building a healthy, diversified economy.”

Arnason will have a better chance of keeping his countrymen home if Iceland can resume growth as predicted. It would also help prove his predecessors were right to let the country’s banks fail: Ireland, which rescued its financial institutions, is on the way to shrinking for a fourth consecutive year.

Jackson Browne Lives In the Balance

US student bypasses Egypt's web blackout

Mubarak defies protesters saying he will “die” on Egyptian soil (Video)

CAIRO – While a quarter-million protesters have been demanding President Hosni Mubarak step down, his speech to his country today was that he will serve out the rest of his term in office until September and will “die” on Egyptian soil.

That wasn’t enough for protesters as they watched Mubarak on a giant TV. They were seen booing and wave their shoes over their heads asking Mubarak to “Go, go, go!”

"This is my dear homeland ... I have lived in it, I fought for it and defended its soil, sovereignty and interests. On its soil I will die. History will judge me and all of us,” Mubarak said.

President Barack Obama has told Mubarak an orderly transition must be peaceful; however it must begin now and must include opposition parties.

Mubarak Fails to Quell Protests With Pledge to Quit

By Ahmed A. Namatalla, Nayla Razzouk and Massoud A. Derhally

(Updates with Yemen president to step down in fourth paragraph. See EXTRA for more news on Egypt.)

Feb. 2 (Bloomberg) -- Egyptian President Hosni Mubarak’s declaration he will step down later this year after almost 30 years of autocratic rule failed to appease protesters who want him to quit immediately, and prompted a call from President Barack Obama for the transition to “begin now.”

Mubarak said he’ll stay on to ensure “stability” and push through political and economic changes before leaving. The crowd of hundreds of thousands in Cairo’s Tahrir Square began chanting anti-Mubarak slogans in response to the president’s state- television address. “Your last day will be Friday,” some shouted, referring to the Muslim prayer day when more demonstrations are planned.

“He recognizes that the status quo is not sustainable,” Obama said in remarks on television from the White House after phoning Mubarak following the Egyptian leader’s speech.

The unprecedented protests, which followed a revolt in Tunisia that ousted President Zine El Abidine Ben Ali on Jan. 14, have left more than 100 people dead in Egypt and roiled international stock, bond and oil markets. Political turmoil is spreading through the region. Yemen President Ali Abdullah Saleh said today he won’t seek to extend his term when it expires in 2013 and called for a national unity government. Jordan’s King Abdullah yesterday sacked his prime minister and in Algeria protesters have been killed in clashes with security forces.

Egypt “faces a choice between chaos and stability,” Mubarak said in the address late yesterday, wearing a dark blue suit and black tie and standing next to the national flag. “My first responsibility now is to restore the security and stability of the nation to achieve a peaceful transition.”

U.S. Support

Obama said the U.S. would support Egyptians during the transition. “An orderly transition must be meaningful, must be peaceful, and it must begin now,” he said. Directing his comments at young demonstrators calling for democracy, Obama said: “We hear your voices.”

Concern that the most populous Arab nation may slide into chaos had earlier prompted Obama to dispatch former Ambassador Frank Wisner, who on Jan. 31 delivered a message to Mubarak that his time in office was coming to an end, an administration official said. Presidential elections are due in September.

Egypt’s dollar bonds advanced 0.2 percent yesterday before Mubarak’s announcement, the first increase in six days. The political upheaval sent the debt tumbling 12 percent in January, the most since at least 2001, according to JPMorgan Chase & Co. The cost of protecting against an Egypt default with credit- default swaps fell 70 basis points yesterday, the most ever, to 350, CMA prices show.

High Unemployment

“We are actually still relatively confident that Egypt will be able to continue serving its debt,” Kai Stukenbrock, director of sovereign and international public finance ratings at Standard & Poor’s, said in an interview. S&P cut Egypt’s credit rating a notch yesterday to two levels below investment grade.

Stukenbrock said the unrest was sparked by a number of factors, including “high unemployment and particularly even higher unemployment among the youth, and that’s the part of the population that’s first to take to the streets.”

Oil traded close to $91 a barrel in New York after falling from a two-year high as concern eased that the protests in Egypt will disrupt supplies through the Suez Canal. Futures declined 1.5 percent yesterday after canal officials said traffic is moving normally at the waterway which carries more than 2.2 million barrels of oil a day.

Corrupt Regime

The opposition movement, which includes the Muslim Brotherhood and the former United Nations atomic agency chief Mohamed ElBaradei, accuses Mubarak of running a corrupt and repressive government. It has urged the president to quit immediately and hand power to a transitional government, and repeated the call after his address yesterday.

The way for Mubarak to restore stability is by resigning, ElBaradei told Al Arabiya television after his announcement. He rejected dialogue with Mubarak’s regime and said the president’s departure won’t create a power vacuum.

Mubarak, who had previously declined to say whether he would stand again, last week appointed Omar Suleiman, head of Egypt’s intelligence services, as vice president. He said yesterday he had never intended to seek another term.

“I lived in this country, and I fought for it, and I defended its land, its sovereignty and interests, and I will die on its soil,” Mubarak said.

Some analysts said they doubt that the Egyptian president will achieve his desire for a delayed and honorable end to his nearly 30-year rule.

‘Smell Blood’

Mubarak’s concession comes a week too late, said Marwan Muasher, former deputy prime minister of Jordan and now a senior vice president at the World Bank in Washington. “I think people smell blood and they’re not going to be satisfied with this,” he said in an interview.

Robert Satloff, executive director of the Washington Institute for Near East Policy in Washington, said Mubarak’s offer suggests he still has support from the military leaders, but that may not last in the face of continuing protests. “I don’t think he’s going to get eight more months to be president,” he said in an interview.

“I expect the demonstrations to continue,” said Khaled Fahmy, professor of history at American University in Cairo, in a telephone interview. “He really hasn’t offered much. What I’ve seen is that he has burned bridges. There is no trust between him and the people.”

Clashes in Alexandria

In Alexandria, the army clashed with protesters and fired shots after the Mubarak address, Al Jazeera television reported. Protesters hurled stones and sought to block an army tank, it said. In Cairo, armed men chanting pro-Mubarak slogans were seen near Tahrir early today as some protesters left the square.

“If the mere goal of sending Frank Wisner was to persuade Mubarak not to run for re-election, they’ve set the bar much too low,” said Jon Alterman, director of the Middle East program at the Center for Strategic and International Studies, a Washington-based policy group.

Mubarak has “no credibility” to oversee a transition and the U.S. should do whatever it can to support a shift to democracy there, including withholding financial aid if necessary, said Senator Patrick Leahy of Vermont, the Democratic chairman of the panel that controls foreign assistance, in a statement in Washington.

U.S. Aid

Egypt received about $1.5 billion in U.S. assistance last year. It has been one of the biggest recipients of U.S. aid since 1979, after Egypt signed a U.S.-brokered peace treaty with Israel. Mubarak has backed efforts to encourage Arab acceptance of the Jewish state, oppose Iran’s nuclear program and isolate Hamas, the Islamist militant group that controls the Gaza Strip.

Senator John Kerry, the Massachusetts Democrat who chairs the U.S. Senate Foreign Relations Committee, said in a statement that Mubarak “should now work with the military and civil society to establish an interim caretaker government.”

As Mubarak fought to retain power, his authorities shut down Egypt’s stock market, after a 16 percent slump in the benchmark index last week, its banking system and most phone and Internet communication.

Mubarak indicated the government would take steps to try to return the country to normal, including dispatching police to apprehend those responsible for arson and other illegal actions in the past week of turmoil.

Banks may reopen to the public on Feb. 3 or Feb. 6, Finance Minister Samir Radwan, appointed by Mubarak on Jan. 31 as he revamped the Cabinet to appease protests, told Bloomberg Television yesterday. The automated teller machines or ATMs of the National Bank of Egypt, the country’s biggest lender, have started to operate, state-run television said today.

Expatriates Flee

Companies including Heineken NV and BG Group Plc have halted operations in the country of 80 million, and expatriates fled aboard scheduled flights, charters and private jets. Tanks have guarded key government buildings as thousands have rallied daily in Cairo and other cities.

Egypt’s economy needs foreign investment, along with tourism revenue, to achieve the 7 percent economic growth rates that the government says is necessary to create jobs for an expanding workforce. It achieved that in the three years before the global economic crisis slowed growth, to about 6 percent last year according to government estimates.

Civil Rights

“Tourists are currently trying to leave Egypt en masse,” London-based risk consultant Maplecroft said in a report yesterday. The International Monetary Fund’s October prediction that the economy will grow 5.5 percent this year “is now overly optimistic. A dramatic or even moderate reduction in growth will make it more difficult for the government to create new jobs,” a key demand of protesters. Official figures put Egypt’s unemployment rate at about 9 percent.

Mubarak said yesterday he will change laws governing presidential term limits and the eligibility of candidates before the next election.

The speech “did not address the inheritance of power to family members, it did not address amending the constitution to guarantee civil rights, it did not address lifting restrictions on political parties,” said Ayman Nour, who challenged Mubarak in Egypt’s first multi-candidate presidential election in 2005, and is among the leaders of the current opposition movement. It “did not live up to the people’s demands.”

--With assistance from Mahmoud Kassem and Abdel Latif Wahba in Cairo, Zahra Hankir in Dubai, Julianna Goldman, Julie Davis, Nicole Gaouette, Viola Gienger and David Lerman in Washington, and Ben Sharples in Melbourne. Editors: Peter Hirschberg, John Brinsley, Ben Holland, John Fraher.

Whalen: California Will Default On Its Debt (Video)

Clip from two weeks after the elections that was never posted.

Video - Chris Whalen on state bankruptcies - Nov. 16, 2010


Outstanding slideshow...the DB revolutionaries did an excellent job with this one...

Click photos for full effect...


Plunder at the petrol pumps: Wholesale petrol price falls 2p in a month but the cost you pay RISES

Fuel retailers are profiteering by refusing to pass on to drivers falls in the price they pay for petrol.

The average wholesale price paid by fuel companies has fallen by 2p since January 11, from 41p to just above 39p.

But prices at the pump have climbed to all-time highs. And in a further slap in the face for British motorists, almost every other European country has seen fuel prices fall.

The price of filling up a tank dropped in Germany, France, Ireland, Holland, Spain, Belgium and Denmark as retailers shared the lower cost of fuel with consumers.

Profiteering: British fuel retailers are refusing to lower petrol prices despite a 2p drop in the wholesale cost of fuel

Profiteering: British fuel retailers are refusing to lower petrol prices despite a 2p drop in the wholesale cost

In Britain, one industry insider admitted last night that some retailers are choosing to bank their profits now because they had been suffering from poorer than expected sales in the run-up to Christmas.

Any suggestions of profiteering will enrage drivers, who are being forced to spend more than ever for fuel because of last month’s rise in VAT and petrol duty.

And the difference between the cost to consumers and the price paid by retailers cannot be accounted for by the rise in VAT from 17.5 per cent to 20 per cent.

Warning: BP boss Bob Dudley said the rising cost of oil due to the unrest in Egypt would result in a price increase for customers

Warning: BP boss Bob Dudley said the rising cost of oil due to the unrest in Egypt would result in a price increase for customers

Figures from the AA show the average price of a litre of petrol has risen from 127.21p on January 4 – the day VAT and fuel duty went up – to 128.6p at the end of the month. Diesel has increased to 133.2p a litre.

It means that filling up the average 55-litre tank now costs more than £70.

AA spokesman Luke Bosdet said: ‘The fact that we know European retailers passed [the fall] on leads you to only one conclusion: That our retailers are keeping their prices high and enjoying the profits.’

He added that firms were ‘hacking off their nose to spite their face’, pointing to a 3.4 per cent drop in fuel sales in the third quarter of 2010, compared to the same period in 2009.

But Brian Madderson, chairman of the Petrol Retailers Association, said the organisation disputed the figures for wholesale prices, which can be calculated using different measures.

He said the association’s method showed that unleaded petrol had stayed flat, but admitted that even if retailers did agree that prices had fallen, they might still keep the resulting profits.

‘If wholesale prices did go down they might not immediately be passed on to consumers because the retailers have been suffering terribly,’ he said.

‘In the bad weather, margins were very tight, so it might be some time while they repair their finances.’

He added: ‘Petrol retailers are closing at the rate of 400 a year, they are not a charity, they are family businesses struggling for survival, particularly in rural areas.’

The row over fuel costs comes as Chancellor George Osborne considers bowing to pressure from motorists to freeze a 1p fuel duty rise due to take effect on April 1.

The Government is also considering a ‘fuel stabiliser’ which would see duty pegged to oil prices, so that when the cost of a barrel goes up the amount of duty falls, keeping prices the same for drivers.

But Angela Hall, spokesman for the 600,000-strong ‘Keep fuel under £1’ campaign, said the policy would make little difference to hard-pressed motorists.

‘How they can charge anybody £1.30 for a litre is absolutely ridiculous,’ she said. ‘Our members are extremely upset that we’re paying so much, whether through the garages or the Government. It’s just going up and up.’

There are renewed suggestions on the internet of demonstrations outside oil refineries this month.

The boss of BP warned yesterday that the rising price of oil – which reached $100 a barrel this week because of the political upheaval in Egypt – would only add to the woes of motorists.

Bob Dudley said: ‘If oil prices do continue to rise, you would expect to see those prices passed through to consumers, all around the globe.’

Iain Conn, BP’s head of refineries and petrol stations, pointed to the exorbitant taxes placed on fuel in Britain.

He said that the cost of fuel in Britain is the lowest in Europe before tax, thanks largely to the multi-billion barrel reserves of the North Sea.

But the duty placed on fuel – which currently stands at 58.95p per litre – means Britons face some of the highest prices in the world.

The gloomy picture for motorists came as BP unveiled a £3.1billion loss for the year – the oil giant’s first foray into the red for nearly 20 years – largely caused by the cost of its oil spill in the Gulf of Mexico.

BP announces £3.1bn loss as it goes into the red for the first time in 20 years

  • Oil firm managed to claw back £12.6billion by selling assets around the world
  • Puts up two key refineries for sale in U.S.

BP reported a £3.1billion ($4.9bn) loss as the company counted the cost of last year's oil rig disaster in the Gulf of Mexico.

It was the first time the company had been in the red for nearly two decades - this time a year ago they posted a profit of £8.7billion ($14bn).

But chief executive Bob Dudley said yesterday that the company would resume quarterly dividend payments at seven cents a share (4.3 pence) - half the level they were at before the massive spill.

The return of the payouts is good news for pension holders and investors because before the spill the stock counted for an estimated £1 in every £6 of dividends paid out in the UK.

The sun sets behind two under construction offshore oil platform rigs in Port Fourchon, Louisiana,
BP go into the red

Silver lining: Although BP posted a £3.1 billion loss there was good news for investors as chief executive Bob Dudley announced that dividend payments are to resume at 4.3p per share


Motorists face paying even more to fill up their cars after the price of oil hit the symbolic $100-a-barrel mark yesterday.

And to heap more misery on households, analysts said gas prices will follow oil upwards, with this summer’s prices likely to be 10 per cent higher than at the same time last year.

Amid fears that the crisis in Egypt could lead to the closure of the Suez Canal, Brent crude prices rose sharply in London to $101.08.

Although the canal is currently operating normally, traders are fearful supplies of key commodities could be disrupted, including natural gas.

Oil has climbed steadily from $70 a barrel last autumn, but the price is still a far cry from the record of more than $147 seen in July 2008.

Last year they were forced to suspend the payments following the Deepwater Horizon blast which killed 11 workers.

BP said it plans to grow the dividend level over time, in line with the 'improving circumstances of the company.'

Shares dropped one per cent after the results were released but, having fallen from a high of 655p in April to a low of 303p in June, they have steadily climbed back to around 480p.

BP also signalled a shift away from the U.S. today as it revealed plans to put two key refineries up for sale - including the site of a fatal explosion.

The oil giant said the sale of its refinery in Texas City and at Carson, near Los Angeles, California, will halve the firm's refining capacity in the U.S. and forms part of a strategic overhaul of its downstream business.

The 1,200-acre Texas City Refinery, which has a capacity of 475,000 barrels a day, was the scene of a devastating fire and explosion nearly six years ago which killed 15 workers and injured 170 others.

But BP committed to investing in its remaining refining and marketing networks in the country, which include sites in Indiana, Washington and Ohio.

The company also unveiled plans to reshape its downstream business - the oil and gas operations which take place after the production phase - by concentrating on growth in developing and emerging markets.

In the fourth quarter, BP said it averaged around 3.67 million barrels of oil and gas a day - nine per cent lower than the same period in 2009.

It added that in the next six years it plans to start up a total of 32 new projects, expected to contribute an extra one million barrels a day by the end of 2016.

BP has upped its bill estimate to cover the cost of the Gulf of Mexico spill to £25billion in November, but analysts do not expect this to increase and have latched on to recent signs that only half of the £12.6billion compensation fund will be required.

The financial hit from the oil spill will offset underlying replacement cost profits of £13.2billion for the full year. Profits for the fourth quarter are expected to be around £3.1billion.

Light at the end of the tunnel: The financial hit from the oil spill will offset underlying replacement cost profits of £13.2 billion for the full year

Light at the end of the tunnel: The financial hit from the oil spill will offset underlying replacement cost profits of £13.2 billion for the full year

Gulf of Mexico oil spill comparison bubble chart


The Gulf of Mexico oil spill was the greatest environmental disaster of 2010 and proved equally bad for the fortunes of BP.

The company suffered a public relations disaster after the explosion on the Deepwater Horizon rig last spring which killed 11 people and dumped millions of gallons of oil into the Gulf of Mexico.

Brown pelican: Seen on the beach at East Grand Terre Island following the oil spill

Prior to the blast the company was in a strong financial position, recording £8.75billion in profits in the year to December 31.

But the devastating knock-on effect dramatically took its toll on the flagship business.

Investigations are continuing into the rig incident on April 20, but a chain of events including mechanical failures and human error which could explain the explosion, has started to emerge.

Shoddy cement work at the bottom of the well failed to hold gas and oil in its reservoir, which leaked into the casing.

Employees then incorrectly accepted pressure readings in the crucial minutes before the explosion - meaning they did not spot the gas leak.

Further mechanical failures allowed gas to be vented directly on to the rig rather than being diverted overboard - where it ignited.

The disaster killed wildlife, polluted waters and shattered fisheries and tourism along the coasts of Texas, Alabama, Louisiana, Mississippi and Florida and led to an angry backlash against the company.

US President Barack Obama pledged to 'make BP pay for the damage their company has caused'.

Efforts to tackle the disaster were overshadowed by the actions of former chief executive Tony Hayward, who stumbled his way through the crisis with a number of PR gaffes, including his decision to take time out from the disaster to go sailing off the coast of the Isle of Wight.

To cover the cost of the spill, BP has managed to claw back around £12.6billion through asset disposals - by selling interests in Argentina, North America, Egypt, Venezuela, Vietnam and Colombia.

The company has been able to benefit from a gradual increase in oil prices over 2010, which hit $100.07 a barrel last night.

But production is likely to be 10 per cent lower than a year earlier due to the impact of the US drilling moratorium and asset disposals following the disaster, while extended maintenance periods will also impact output.

In the words of new chief executive Mr Dudley, the firm is on a 'journey to re-establish trust in BP around the world - especially the US'.

He is understood to be considering scrapping BP’s production targets in favour of smaller, more exploration-focused operations.

But from an investors’ perspective, the company has started the year relatively well.

The market gave a warm welcome earlier this month to BP’s £10billion deal with Russian oil giant Rosneft to form an Arctic exploration alliance.

The deal gave shares a boost, which after falling from a high of 655p in April to a low of 303p in June have steadily climbed back to 483.7p.

Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.

However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue the new deal breaches its shareholder agreement.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: 'The share price has already rebounded from its 2010 lows, and at the moment the emergency fund appears to be adequately sufficient to counter future claims.

'There is a further cost, however, in building this fund - asset disposals have been made which reduce BP’s capacity in the shorter term.

However, some of this could be regained if the proposed deal with Rosneft of Russia progresses.

'In addition, there are strong hopes that the new chief executive will use the results to announce the resumption of the dividend, albeit at a lower rate than before.'

He added: 'The recent strength in the oil price should prove a tailwind for profits, such that overall the general market voice remains unaltered on BP - the shares are a buy.'

BP last reported an annual loss in 1992, when low oil prices, recession and strategic errors saw chief executive Bob Horton lose his job. The firm lost £458million that year.

But from an investors’ perspective, the company has started the year relatively well.

The market gave a warm welcome earlier this month to BP’s £10billion deal with Russian oil giant Rosneft to form an Arctic exploration alliance.

The deal gave shares a boost, which after falling from a high of 655p in April to a low of 303p in June have steadily climbed back to 483.7p.

Analysts expect the Russian deal will help the company recoup some of the losses incurred from asset disposals.

However, BP is embroiled in a legal tussle with shareholders at TNK-BP, another Russian joint venture, who argue the new deal breaches its shareholder agreement. The dispute will be brought to court in London today.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: 'The share price has already rebounded from its 2010 lows, and at the moment the emergency fund appears to be adequately sufficient to counter future claims.

'There is a further cost, however, in building this fund - asset disposals have been made which reduce BP’s capacity in the shorter term.

However, some of this could be regained if the proposed deal with Rosneft of Russia progresses.

'In addition, there are strong hopes that the new chief executive will use the results to announce the resumption of the dividend, albeit at a lower rate than before.'

He added: 'The recent strength in the oil price should prove a tailwind for profits, such that overall the general market voice remains unaltered on BP - the shares are a buy.'

BP last reported an annual loss in 1992, when low oil prices, recession and strategic errors saw chief executive Bob Horton lose his job. The firm lost £458million that year.


The financial results from 2010 cover one of the most turbulent period in the oil giant's 100 year history. Here is a breakdown of the key issues surrounding the embattled firm in 2010:

In its results in November, BP said the cost of the spill was around $39.9billion (£25bn) after it revealed the $32.2billion (£20.7bn) it put aside for the disaster earlier in the year was not enough. This includes the $20billion (£12.6bn) compensation fund set up for victims of the disaster.

The company's share price plummeted from a high of 655p in April to a low of 303p in June at the height of the Gulf of Mexico disaster. They have since recovered to 488p as the firm benefited from the appointment of new chief executive Bob Dudley, a deal with Russian firm Rosneft and signs that other countries such as China and Brazil are still willing to work with the firm.

The return of dividend payments comes after they were suspended at the height of the crisis last summer. This is a key development for pension holders as well as investors given the stock is thought to account for £1 in every £6 invested in pensions. The dividend of around seven cents a share is about half of what was paid before the oil disaster.

After a string of PR gaffes, Tony Hayward stepped down as chief executive in late July to make way for Mr Dudley. Mr Hayward was criticised for a number of verbal slips and for taking time out from the disaster to go sailing off the coast of the Isle of Wight. It was recently reported that Mr Hayward, who is a non-executive director for Russian oil venture TNK-BP, is in early talks about joining the board of commodities trader Glencore.

President Barack Obama's rhetoric towards the firm was particularly hostile at first, while activists targeted BP with on-the-street protests, anti-BP websites and social networking campaigns. The appointment of an American chief executive in Bob Dudley has helped the company address some of the flak in the US, alongside a new safety and operational risk unit, a review of pay focusing on safety-led incentives and a review of third-party contractors.

BP pumped around 3.6million barrels of oil and gas a day last year, 10 per cent less than in 2009 due to the impact of the US drilling moratorium and asset disposals following the disaster. Mr Dudley is understood to be considering scrapping BP's production targets in favour of smaller, more exploration-focused operations.

The company has benefited from a gradual increase in oil prices over 2010, hitting 90 US dollars a barrel around the year-end. The soaring oil prices have helped BP turn in a profit but before the cost of the disaster is deducted.

Earlier this month BP unveiled a £10billion deal with Rosneft, Russia's state-controlled oil firm. The alliance will see BP take an additional 9.5 per cent stake in Rosneft, while Rosneft will take a 5 per cent stake in the London-based company. The companies will work together to explore the Russian Arctic continental shelf in an area of the South Kara Sea covering about 125,000 square kilometres (48,263 square miles) - one of the world's last remaining unexplored basins.

Mr Dudley said the firm is on a 'journey to re-establish trust in BP around the world - especially the US'. It earns around 40 per cent of its profits in the country. There are fears deals in the Gulf will be hard to come by in the future, particularly as there are a number of ongoing investigations and legal claims in the US, including by the US Justice Department. The Gulf Coast Claims Facility, which also covers clean-up and remediation costs, has paid about $3.4billion (£2.1bn) to 168,528 claimants, mostly in temporary, emergency payments in the past four months.

China's Crackdown on False News Content via Eradication of "Content Farms"

RC Christian
Coup Media

Reporters Sans Frontieres(RSF) points out Chinese journalists and bloggers are to undergo six-month training courses that will teach them how to eradicate false news, improve the feeling of social responsibility and reinforce journalistic ethics. In short, to make journalists and bloggers themselves actors in censorship. The initiative comes from the Propaganda department, directly linked to the Communist Party, and follows its announcement of 10 directives relating to the press in 2011.

They impose a blackout on social and economic problems with a view to reassuring the people and defending the concept of fair growth. Many issues are off-limits, so that the party line is not challenged. They include the property market, rising prices, corruption, the demolition of housing and compulsory relocation, residence permits, the absence of social security, inadequate transport during the Chinese New Year and popular discontent that finds expression in anti-government demonstrations.

Emulating the disgusting paradigm of infamous Graecokleptocrats, who persecute and jail dissident bloggers, the government of China terrorizes dissident bloggers. Blogging in China and Greece, the most corrupt country of Fourth Reich(EU), is considered an extreme-risk avocation. Freakish kleptocrats accuse dissident bloggers of treason, confiscate their computers, and lock them in jail! These prisoners of conscience follow the long tradition of Socrates, who was killed by the Athenian democracy.

Premier George Papandreou of Greece crossed the Rubicon on October 18, 2010, when his deranged minister destroyed a distinguished professor and dissident blogger. That's why the Global Tax Revolt declared October 18 as the International Day Against Cybercop Brutality.

RSF notes the Chinese media, including blogs, are forbidden to talk of major criminal affairs, now ranked according to four levels of seriousness. Quotas have been set for the publication of articles and posts dealing with natural disasters or major accidents. In these last two cases, the department also proposes limiting the amount of information made available by banning regional news outlets from exchanging information and journalists and bloggers from answering questions from foreigners.

RSF condemns this escalation in the control of information. The Propaganda Department shows itself to be ever more inventive in working out new directives to put pressure on journalists. This training takes the form of banning among journalists any critical sprit and making out of them state employees in the service of state ideology.

Read Full Article

The Tunisian example and Britain

Britain’s street riots lie ahead

Christopher King views the structurally-corrupt British political and financial systems. He argues that the upheavals in the Arab world should be instructive to British politicians and the British public because the “same factors underlying the desire for reform in the Arab world are operating in Britain”.

It is heart-warming to see the people of Tunisia and Egypt take their destiny into their own hands and seek to throw out their American-backed dictators. If truly democratic governments do emerge in these countries it will not be thanks to the US and Europe. Nor can we expect such governments to think well of the neo-colonialists of America and Britain. Their credibility has been lost in Palestine, Iraq, Afghanistan and Pakistan.

Following Tunisia, citizens of Jordan, Yemen and Lebanon have also taken to the streets. The sparks for these protests are not political but economic. Unemployed, poverty-stricken populations are rebelling against governments that treat them as sheep to be shorn.

Parallels with Britain

“The seeds to Britain’s own street riots have been securely planted by its government, however. They will grow in the field of 'the market', tended by a financial elite. Their fruit is poverty.”

In Britain these events are viewed with mild detached interest, as if riots are to be expected in unenlightened parts of the world. The seeds to Britain’s own street riots have been securely planted by its government, however. They will grow in the field of “the market”, tended by a financial elite. Their fruit is poverty.

Last November, across Britain, students protested in the streets against increased university tuition fees that from now on will leave most students in debt by between GBP 30,000-40,000 by the time they graduate. More demonstrations were held on 29 January for the same reason. These demonstrations will not continue to be non-violent. The number of young adults aged under 25 who are out of work is now just under one million. These are the first signs of serious problems ahead and they have emerged very quickly, triggered by a credit bubble and banking crash.

The students’ debts are publicly justified by the government’s view that since graduates will earn more than non-graduates, they should pay extra for their education. This is merely a fig leaf. These debts are transferred losses from the British banks that were bailed out by taxpayers in an enormous cash transfer of wealth from the future and present working population to the financial elite of the country. Britain’s wealth is being concentrated in its business elite and the banks are the key institutions in doing this. The banks hold the country’s capital, use it to finance the expansion of big business, manipulate credit to transfer cash from the population to themselves and protect the wealth of the business elite.

It is easier and more profitable for the banks to use British deposits and government funds in international big business transactions than to support small British businesses.

Our future graduates will be fortunate to find jobs of any sort, much less the skilled positions that they expect. Unemployment is growing and will increase long-term. Current under-25s will be poorer than their parents due to the long-term decline of the British economy. This is not merely a statistical phenomenon that can be spun in the jargon of “double-dip” recessions and “manufacturing recoveries”. It is the inevitable result of greedy business and political elitism operating in a rapidly-changing world market.

“The great virtue of free market theory is that governments need do nothing whatever. 'The market' will provide. Unhappily, this is not and has never been the case.”

It is true that the Blair-Brown government squandered public money and built structural waste into a government apparatus of incompetent bureaucrats. The present Cameron government is attempting to rectify this by firing public employees and leaving their re-employment to jobs created by “the market”. The great virtue of free market theory is that governments need do nothing whatever. “The market” will provide. Unhappily, this is not and has never been the case.

Britain’s credit bubble disguised a much more serious problem. As I have said before, Europe and America have for the last 300 years enjoyed a trend of increasing prosperity due to their monopoly of capital and technology together with cheap raw materials. Economists and governments have ascribed this to “the market”. Economists learn their trade by reading other people’s books rather than by thinking. Governments found “the market” a useful justification for doing whatever they wished in lesser developed countries. Europe and America no longer enjoy their monopoly and must now compete for scarce commodities with other developing countries that have lower cost structures. “The market” now favours Asian economies.

The response in both America and Britain has been to concentrate their nations’ capital in their business elites and to use armed force directly and by proxy to seize other countries’ resources. The most obvious direct seizures are in Iraq and Afghanistan with plans to re-proxy Iran. Libya with its oil was the first North African proxy to break free – hence its demonization. Others are now following, together with former South American puppets.

The Blair-Brown and current British governments are American proxies whose politicians perhaps genuinely think that they have a “special relationship” with the US by virtue of secret political and financial deals. They are remarkably greedy, stupid and naïve people who qualify as traitors and war criminals. Hopefully, whistleblowers will pass more on to WikiLeaks and its clones about their activities.

The result of their greed, ignorance and delusions is that our government is making destructive responses to Britain’s long-term economic decline, most notably in the transfer of public wealth to private banks. The elite is looking after and gathering power to itself for the same reasons that the dictators of Tunisia and Egypt did: greed and self-interest.

You might imagine that politicians control our country. That is not correct. Those who control the country’s wealth control both politicians and the country. Politicians usually have no money; they need sponsors. Their sponsors are primarily in the banks and secondarily in big business. The country’s banks control all the capital of Britain. We deposit it with them and they do what they like with it, including setting up secret companies (off-balance sheet, i.e. hidden activities) in tax havens to enable them to undertake risky and conceivably illegal transactions. These might be, for example, to finance bank directors’ personal projects or pay off politicians.

We do not know and have no control over what the banks are doing with our money. An important example is the case of the government-owned Royal Bank of Scotland, bailed out by taxpayers, that part-financed the American Kraft takeover of British Cadbury while British small businesses were starved of capital and collapsing. The country’s elite comprises a political-banking-big business cabal or conspiracy if you like. We may glimpse how this works in another example – HSBC, Britain’s and Europe’s biggest bank.

The case of HSBC

HSBC under Chairman Stephen K. Green lost USD 53bn (GBP 35bn – repeat, billion!) as of March 2009 in the banking crash. It did not accept government money but raised capital from the Gulf states and shareholders. You might think Mr Green to be grossly incompetent, negligent or both, having lost 35 billion pounds. But no! The Cameron-Clegg government gave him a knighthood! Allegedly, this is “to make him accountable to the House of Lords” which is the most absurd reason ever given for knighting anyone.

Stephen K. Green left HSBC and now, as Baron Green of Hurstpierpoint, he is the government’s present minister for trade and investment. He is there, not to tell government how to manage the banks and develop UK businesses as, again, you might think. He is the banking and big-business cabal’s inside representative who tells the government what to do. The loss of 35 thousand million pounds means nothing to HSBC when it can use a large proportion of Britain’s money plus those of other countries’ citizens as it pleases and charge whatever interest rates it wishes.

The Hong Kong and Shanghai Banking Corporation originates where its name suggests. In 1991 it registered HSBC Holdings in London as a UK company to enable it to take over the UK’s Midland Bank. I have mentioned before that the Hansard record (proceedings of the British parliament) for 22 June 1993 at Column 199, shows that Douglas Hoyle MP accused the ruling Conservative Party of accepting a GBP 1 million donation by one Mr Li Ki-Shing. According to Mr Hoyle, Mr Ki-Shing was the Chinese government’s representative at the Hong Kong and Shanghai Banking Corporation. The record also mentions another mysterious donation of GBP 17.8 million to the Conservative Party at that time.

If this is true, HSBC obtained British government approval for its takeover of the Midland Bank by a corrupt bribe. I will return to this.

The buccanneering British banks

The British Bankers Association, the mouthpiece for 200 British and international banks, is fighting two critical constraints on the banking industry that are currently under review:

  • Much higher reserve asset ratios, i.e. the amount of cash available with which banks must back their loans;
  • Splitting “high street” banking from the international gambling activities of investment banking.

Higher reserve asset ratios are essential both to limit the amount of lending that the banks can undertake and to provide cash reserves in case of consumer withdrawals. To date the lending criteria of the Basel II agreement have applied but were ignored and circumvented by the banks.

“Banking is no longer a safe repository for savings or a support for small businesses. It is an international gambling racket, financing big-business takeovers that concentrate wealth, while extorting high interest from domestic small businesses and homeowners though coordinated oligopolistic … operations”

The most important financial constraint is to split ordinary financing activities for business and mortgages from investment banking. An example of investment banking can be found here with the potential purchase of HSBC shares by Goldman Sachs and JP Morgan possibly using US government funds. One does not know the origin of such funds or what secondary deals underlie such transactions that involve enormous sums of money.

The British Cooperative bank, which is mutually owned, is a good model of high street banking that was untouched by the banking crisis. The building society mutuals do not undertake investment banking, although many were caught up in the greedy frenzy of de-mutualization and bad loans that resulted in widespread collapses among them. The building societies also have problems and I will return to this too.

The banks want low reserve asset ratios because they are able to lend more and make more money, although at greater risk. They desperately want to keep high street banking amalgamated with investment banking because:

  • Consumer deposits are guaranteed by the government (taxpayers!), giving consumer confidence, freeing the banks from consumer scrutiny and providing a case for “too big to fail” bailouts.
  • Consumer deposits, i.e. the capital of the country, can be used for any purpose the bank desires, including risky international investment banking which caused the banking crash.
  • If investment banking must stand alone, not only is its available cash limited to shareholders’ capital, but any losses must be born directly by shareholders. There is no cash cushion provided by consumer funds and no case for a bailout with taxpayer funds.
  • The banks at present have accounts with the Bank of England, which lends them cheap money that they re-lend at higher rates (at present at extortionate rates in making up their recent losses). Investment banks have no case for having access to Bank of England funds.

For these reasons the banks want business as usual. This is in no way in the interests of consumers, taxpayers or the country. The banks must have investment banking split from domestic consumer banking and higher reserve asset ratios must be enforced.

The banker case for keeping business as usual is that they generate income for the country that is realized in taxes paid and jobs maintained. That is a false argument demonstrated by the instabilities of the recent past, neglect of small business lending and the bailouts that will be paid for over generations. Banking profits are not generally through support of British business but through interest rate manipulation and investment banking that creates paper profits from insider deals that are in the end paid for by consumers.

A favourite banker and government argument is that regulation must be internationally coordinated. This argument has the virtue of stopping all discussion of possible British government action, enabling international lobbying and bribery to be carried out indefinitely and enabling other countries to be blamed for weak regulation or any problems whatever.

The immediate remedy to the “international coordination of regulation” argument is to set up more UK mutual banks to operate as government guaranteed mutuals serving UK small businesses. The taxpayer-owned Royal Bank of Scotland and Lloyds Bank should become mutually-owned business development banks to operate exclusively in the UK.

The Financial Times quotes Robin Budenberg, Chief Executive of UK Financial Investments, which manages Britain’s nationalized banks, who gave evidence to a parliamentary committee last week. Mr Budenberg said that splitting up these banks would be “negative for value”. He means that the government could make good profits by selling them back to the international market. Mr Budenberg is certainly saying what the banking industry and some interest group within government want him to say.

What matters more than immediate profit is creating long-term value to the economy by financing British businesses rather than gambling with the nation’s capital in the currency and other markets and financing other countries’ projects.

Both the failed Northern Rock Building Society and the mortgage accounts of Bradford and Bingley Bank, itself a failed de-mutualized building society, also remain in government hands and should be returned to business as mutual banks. The sale of Bradford and Bingley’s banking network to Santander Bank is a disgrace that is in accord with the government and banking wish to do favours, gain payoffs, reinforce big business and concentrate wealth.

The bankers and British politicians have learned nothing from the banking crash. Indeed, there is no payoff to politicians nor bankers in supporting mutually-owned banks or small business. It is big money that gives the quick payoffs in political donations – loans as they are now called – future directorships, contacts and jobs.

Banking is no longer a safe repository for savings or a support for small businesses. It is an international gambling racket, financing big-business takeovers that concentrate wealth, while extorting high interest from domestic small businesses and homeowners though coordinated oligopolistic (i.e. a small group acting together) operations. Root and branch reform is essential.

Building societies

Building societies are in principle much safer than banks, particularly those with investment banking arms. Most failed British building societies simply made bad loans, that is, they loaned to people who were unlikely to be able to afford their mortgage repayments. Northern Rock was also borrowing on the short-term money market to lend for long-term mortgages. My granny would have known that this was a recipe for failure. These practices were market share and bonus-driven, with societies accepting borrowers’ inflated statements of earnings without any confirmation. Making such false statements of earnings is criminal and accepting them is negligence but no accountability has ever been called for despite losses of billions of pounds.

Nationwide Building Society

In general, the Nationwide, Britain’s biggest building society, is well run, although it is also part of the oligopoly that is paying savers next to nothing while extorting super-profits from home owners. During the banking crisis, Graham Beale, Chief Executive of Nationwide, spent GBP 1.4 billion of its members’ money in taking over two failed building societies with their losses, the Chelsea and Derbyshire Building Societies without asking his society’s members such as myself. At the same time he raised his pay from GBP 784,000 to 1.7 million. I complained to both my Member of Parliament, Richard Ottaway and Hector Sants, Chief Executive of the Financial Services Authority (FSA), which had to approve the takeover.

Mr Sants is an ex-investment banker who failed in his job to regulate the banks or at least to detect problems before the crash. He is still FSA chief executive. Mr Ottaway, a dull political hack, doesn’t understand these issues, doesn’t care to try and didn’t want to know about them. I had hoped that he would resign over discrepancies in his expenses but was disappointed in this.

The FSA approved Nationwide’s give-away proposals. My own proposal to the FSA was that Nationwide should take over management of these building societies with government backing while keeping them separate and getting them into order for independent operation again. Nationwide directors had no authority to use members’ funds to bail out the losses of other building societies.

The Remedy for building societies

The Nationwide board and management are using members’ funds as if they were their own in the same way as the banks use depositors funds and this is probably typical. At present the building societies’ board members are drawn from the same socio-economic elites as the banks’ boards.

The building societies need drastic reform to give their shareholder members the ability to appoint their own board members, approve executive salaries and vote on major issues. In particular, shareholder members need facilities for communication between themselves and the ability to hold meetings organized by themselves that are not controlled by the building society’s officers or board.

At present, building societies’ officers and boards have a monopoly on communications, permitting individual members to communicate only with the society rather than with each other as well. Building societies’ articles of association should specifically exclude the possibility of de-mutualization which recently produced rich directors, failed ex-building societies and contributed to a housing price bubble.

The remedy for the banks

  • High street and investment banking must be completely separated
  • Only high street banks should have access to Bank of England funds
  • Investment banks should in no way be backed by public funds. Their losses are their own.
  • Only consumer deposits in mutuals should be guaranteed by government.
  • Depositors must have control over the type of activity to which their funds are applied
  • Those banks and proportions of banks currently owned by taxpayers must be split off and mutualised
  • In no circumstances should currently taxpayer-owned bank shares be sold to the market
  • A mandatory code of practice should give bank customers specific rights as to services and standards. This should be backed by a complaints body that is more investigatory and competent than the present Financial Services Ombudsman
  • Salaries of high street bank executives and directors must be regulated
  • Allegations of HSBC’s takeover of the Midland Bank by bribery should be investigated. If true, facilities and accounts equivalent to those taken over should be split from HSBC and mutualised.
  • Economic crimes with custodial penalties must be defined in respect of negligence and bad practice, particularly relating to losses, with responsibility falling on directors and chief officers. It is extraordinary that there has been no accountability whatever for grossly negligent banking practices and regulatory failures.

Financing the British economy

“The only structures that can justify access to Bank of England funds and accepting British government-guaranteed deposits are mutually owned high-street banks and building societies that exclusively serve the British mortgage and small to medium sized enterprise markets.”

The private sector international banks have no interest in developing the British economy and indeed there is no reason why they should. Their declared interest is in making money for their executives and shareholders and they have every right to do this:

  • Using their own capital, without access to Bank of England funds
  • Doing whatever they wish with their profits while sustaining their own losses
  • Using funds from depositors who have been informed that they have no government guarantees against loss.

The banks as presently constituted are no longer operating in the interests of the British economy, just as “the market” no longer favours the British economy. New structures are needed. The only structures that can justify access to Bank of England funds and accepting British government-guaranteed deposits are mutually owned high-street banks and building societies that exclusively serve the British mortgage and small- to medium-sized enterprise markets.

It is impossible to envisage any justification for providing private sector banks that operate internationally with cheap money from the Bank of England, guaranteeing their deposits with public funds nor rescuing them from failure with public funds on the expectation that they can go back to business as usual.

The upheavals in the Arab world should be instructive to our politicians but above all to the British public in whose own hands their future lies. The same factors underlying the desire for reform in the Arab world are operating in Britain.

I believe that our present parliament is incapable of understanding these economic factors, accepting that action is needed and devising effective responses. On their record, our politicians are unable to divorce themselves of their prejudices and self-interest to act in the interests of their country. If so, there is trouble ahead.