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Who’s next?

It’s been a strange week, which is why I’ve only been intermittently blogging.  For example, a visit to the countryside proved a challenge.  There I was in a small village in Suffolk, with only one internet access point: the Library.  And the library would not accept any USB stick usage, so the post I’d written couldn’t be loaded.

Mind you, it’s been a good thing to take a little breather as the markets are crazy with banks in their worst case scenario in America.  After Lehman Brothers, Merrill Lynch and HBOS last week, we now live in a world where everyone keeps asking, "Who’s next?"

This is wrong, and has made the banking markets weird with investors losing confidence everywhere.  For example, Bradford & Bingley (B&B) has lost most of its value this year, with over 90% reduction in their share price and a £455 million rights issue that was messed up badly during the summer.

As a result, I was interviewed by the BBC this week about B&B and said it’s a good news, bad news story. 

The good news is that, with a 9.9% Tier 1 Capital ratio and £52 billion in assets, you would think they would be OK. 

However, they have £40 billion in mortgages, 85% of which are self-certification or buy-to-let.  With the forecast of UK house prices tanking to a trough that is 30% down on the peak prices of a year ago, some folks reckon 2 out of 5 mortgage borrowers with B&B will be in negative equity or default.  Not good.

Meantime, in a similar situation, Washington Mutual, WaMu, filed for bankruptcy yesterday and is acquired by Bank of America for $1.9 billion (a snip) and everyone in the States is also asking "Who’s next?"

Wachovia and National City appear to be the next.  Both banks have lost huge amounts of investor confidence – with share prices down 27 percent and 26 percent yesterday (about $10 billion  of lost capital) – and George W can’t even convince his own party to back a bailout plan.

I’ll post a lot more on this tomorrow.

Meanwhile, I just love the transparency of the internet and our digital age, as demonstrated by YouTube’s stored records. 

For example, watch George W’s speech on the bailout:

and then this one from 2002:

Now, I’m not one to judge, as I’ve been as much a part of this as anyone, e.g. I am a homeowner and I have invested in property as an asset rather than as a home, but anyone could see there’s a problem here.  For example, I posted this one last year:

Speaks for itself.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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