Financial Market Mayhem

[Guest David Guyatt]

Rumours are circulating in the financial markets that a bunch of Hedge Funds are about to go belly up after losing between 50-75% of their assets.

What a delight it would be to see the greediest and most ruthless beggars in the known universe crumble like a house of cards. Highly significant is the fact debtors no longer are happy with pledged US Treasury securities as collateral.

Danger beckons...

More here:

http://www.smartbrief.com/news/cfa/videos....t%3D8%26wpid%3D

AND

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Hedge Funds Reel From Margin Calls Even on Treasuries (Update1)

By Tom Cahill and Katherine Burton

March 10 (Bloomberg) -- The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.

Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral.

While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world's safest securities, because of the price fluctuations in the bond market.

``If you have leverage, you're stuffed,'' said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.

The lending crackdown is the worst to hit the $1.9 trillion hedge-fund industry since Russia's debt default in 1998 roiled global credit markets and required the U.S. Federal Reserve to pressure the securities industry to arrange a $3.6 billion bailout of Greenwich, Connecticut-based Long-Term Capital Management LP. Today, hedge funds are being forced to sell assets to meet banks' margin calls, resulting in the dissolution of the funds.

``There has to be more in the next weeks,'' Allen said. ``There are people who have been hanging on by their fingernails who can't hold on much, much longer.''

`Mercy of Counterparties'

Ivan Ross, founder of Westport, Connecticut-based hedge fund Tequesta Capital Advisors, received a call from his bankers on Feb. 22 demanding he put up more money or risk losing his loans. Ross was unable to meet the margin call as the market for mortgage- backed debt seized up, preventing him from selling securities to raise the cash. Four days later, lenders liquidated his $150 million fund.

``Because it's impossible in this environment to move among dealers, you're at the mercy of counterparties,'' said the 45-year- old Ross, who has managed hedge funds for 13 years, including a stint handling mortgage-backed debt for billionaire George Soros. ``To the extent they want to shut you down, they can.''

The demise of Tequesta revealed the deathtrap for hedge funds caught in the credit maelstrom of banks selling mortgage-backed bonds as fast as they can while demanding more collateral from clients who use the securities to back loans.

Carlyle Fund

On Feb. 24, London-based Peloton Partners LLP gave up a ``night and day'' effort to stave off demands from banks, including Goldman Sachs Group Inc. and UBS AG, for as much as 25 percent collateral for securities that once required 10 percent, according to investors in the fund. Peloton, run by former Goldman partners Ron Beller and Geoff Grant, liquidated the $1.8 billion ABS Fund, its largest.

The same day, about 5,000 miles (7,770 kilometers) away in Santa Fe, New Mexico, JPMorgan Chase & Co. told Thornburg Mortgage Inc. that it had defaulted on a $320 million loan because it couldn't meet a $28 million margin call, according to U.S. regulatory filings.

Thornburg, the home lender that lost 93 percent of its market value in the past year, was near collapse March 7 after it failed to meet $610 million of margin calls. Chief Executive Officer Larry Goldstone said in a statement the company fell victim to a ``panic that has gripped the mortgage financing industry.''

Repo Agreements

Carlyle Capital Corp., the debt-investment fund started by private-equity firm Carlyle Group of Washington, was suspended from trading in Amsterdam on March 7 after it couldn't meet margin calls, and its banks seized and sold assets.

``Banks are reducing exposure anywhere they can and the shortest way to do that is to cut leverage,'' said John Godden, chief executive officer of London-based hedge-fund consultant IGS AIS LLP.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

The managers that trade fixed-income securities generally borrow money through repurchase agreements, or repos. In a repo, the security itself is used as collateral, just as a homeowner puts up the house as collateral for a mortgage.

Collateral `Haircuts'

Banks usually limit their risk on repos by lending less than the value of the securities used as collateral. Tequesta was able to borrow $95 on $100 worth of AAA rated jumbo prime mortgages in early 2007, meaning the bank took a $5, or 5 percent so-called haircut. By last month, the amount required had risen to as much as 30 percent, Ross said. Jumbo mortgages are loans of more than $417,000, typically used to finance more expensive homes.

The losses started in mid-2007, when prices of subprime loans, those to homeowners with bad credit histories, started tumbling because of a surge in delinquencies. The contagion spread to other credit markets, including bonds backed by student loans and credit cards and now mortgages backed by federal agencies, which have an implied guarantee from the U.S. government.

Prices keep falling, with yields on mortgage-backed debt issued by agencies such as Fannie Mae rising last week to the highest level relative to U.S. Treasuries since 1986. Costs to protect corporate bonds from default are close to a record high.

Under such circumstances, lenders have no choice but to ask clients to put up more cash. For AAA rated residential mortgage backed securities, banks have raised haircuts 10-fold in the past year to 20 percent, according to estimates from Citigroup credit analyst Hans Peter Lorenzen in London.

Treasury Swings

On AAA asset-backed securities, banks are demanding a 15 percent haircut, up from 3 percent last summer. Corporate bond haircuts have gone to 10 percent from 5 percent, bankers said.

At least one bank has raised Treasury haircuts, which range from 0.25 percent to 3 percent, depending on the length of the loan and the creditworthiness of the borrower, said bankers, who declined to be identified. They said they wouldn't be surprised if the practice becomes more widespread, not because they expect the U.S. government to default, but rather because there have been bigger price swings in the Treasury market, which affects value.

Some banks may have been late to raise haircuts for their biggest hedge funds because they are lucrative clients, said Jochen Felsenheimer, head of credit strategy at Milan-based UniCredit SpA, Italy's biggest bank.

``Until now, hedge funds have been the big winners of the crisis and this could be as well due to banks not having yet drawn down their margin,'' Felsenheimer said.

Survival of Fittest

Carlyle said in a March 6 statement that margin prices requested for securities weren't ``representative of the underlying recoverable value'' of its securities. Lenders started to liquidate its portfolio of $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac.

``It's not a question of prime brokers deciding which firms live and which don't,'' said Odi Lahav, head of the European Alternate Investment Group at Moody's Investors Service in London. ``They're trying to manage their own risk. There's a Darwinian aspect to survivorship in this industry.''

Some managers set themselves up for a stumble by taking on too much leverage and not anticipating that terms could change, said Christopher Cruden, CEO of Lugano, Switzerland-based Insch Capital Management, which oversees $150 million for clients.

``If you're going to dance with the devil, there comes a time when your toes are going to be stepped on,'' Cruden said. ``Prime brokers are there to do business, not be your friend.''

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net

Last Updated: March 10, 2008 05:47 EDT

[Guest David Guyatt]

Carlyle Capital Corp (CCC), the embattled hedge fund is on the brink of bankruptcy. It's parent Carlye Group, currently one of the largest private equity companies in the world, has apparently washed its hands of its subsidiary, saying it's a separate legal entity. Carlyle Group pumped approx. $150 million into CCC in recent days to help it pay increasing margin calls on its $16.6 billion debt.

CCC had leveraged borrowing of 31:1 -- in other words for every $1 it owned, it had borrowed $30. Large leverage entities in he past included the collapsed Long Term Capital Managment (LTCM) that ramped up a leverage ration in excess of 500:1.

Carlyle is sometimes known as the "Ex-Presidents Club" to reflect the power, clout and connections of its Board. Carlyle has a glittering array of ex-politicians and big league bankers on its board. Former secretary of state James Baker is managing director while ex-secretary of defence Frank Carlucci is chairman. George Bush senior is an adviser. John Major heads up its European operations. To give the conspiracy theorists plenty of ammunition, US newspapers have also highlighted the fact that current Defense Secretary Donald Rumsfeld was a wrestling partner of Carlucci's at Princeton and the two have remained close friends ever since. Add to this that former US President Poppy Bush is a Senior Advisor. Former Philippines president Fidel Ramos is an adviser, as is former Thai premier Anand Panyarachun - as well as former Bundesbank president Karl Otto Pohl, and Arthur Levitt, former chairman of the SEC, the US stock market regulator.

See for more:

http://www.reuters.com/article/wtMostRead/...350338420080313

and

http://www.guardian.co.uk/world/2001/oct/31/september11.usa4

The cynic in me considers that providing support of $150 million for its troubled subsidiary is little more than a token action directed towards maintaining its PR image and was not realistically a move to save the subsidiary from extinction. As Carlyle Group is privately owned it is difficult to judge the profits its subsidiary has generated for the parent over its life. All that need be said is that the parent owned 99.5% of the subsidiary.

There is a sense that hat we are seeing in the collapse of the leveraged market, is the end-game of a historic pump and dump play spanning the last decade (perhaps longer still). The pending collapse is now beginning to be likened by market commentators to the 1930's Wal Street Crash.

But where the are losers there are winners. And where there is a massive loss there is a massive gain.

[Guest David Guyatt]

A major Wall Street investment bank, Baer Stearns is floundering:

http://ap.google.com/article/ALeqM5hiVtV2z...SfPTRgD8VD8TAG0

Dollar Drops on Trouble at Bear Stearns

5 hours ago

BERLIN (AP) — Another stunner from Wall Street on Friday sent the dollar to a record low as a major U.S. banker, Bear Stearns Cos., acknowledged it was in dire financial straits.

The euro traded for an all-time high $1.5657 surpassing a previous peak of $1.5625 that it hit on Wednesday.

A slight retrenchment by the dollar after a report showed that euro-zone inflation reached a hefty 3.3 percent in February was lost on the news from Bear Stearns.

The U.S. government and JPMorgan Chase & Co. bailed out Bear Stearns Cos. Friday, a last-ditch effort to save the investment bank after a week of denials that it was in trouble. JPMorgan Chase is providing secured funding to Bear for 28 days, backstopped by the Federal Reserve Bank of New York.

Bear Stearns lost half of its value within 30 minutes of the market open.

This week the dollar has repeatedly hit record lows against the euro, dropped below 100 yen for the first time in 12 years, and on Friday, the dollar fell below the Swiss franc for the first time ever.

The dollar is currently valued at 0.9996 francs on the Zurich exchange. In 1971, the U.S. dollar was worth four francs.

Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York, pointed to "speculation that the world's major central banks will mount coordinated intervention to stabilize the rout of the dollar."

"Considerable talk of possible coordinated intervention ... is making the market somewhat jittery about putting on additional short dollar trades" versus other major currencies, said Greg Anderson, currency strategist at ABN Amro in Chicago.

The dollar, which on Thursday fell below 100 Japanese yen for the first time since late 1995, again dipped as low as 99.85 yen Friday, but clawed back some ground and traded at 100.11 before noon.

The British pound rose to $2.0344 from the $2.0292 it bought in New York late Thursday.

The dollar has been weighed down by worries about the outlook for the U.S. economy, which in turn have fed expectations that the Federal Reserve will continue to lower interest rates.

Lower interest rates can jump-start a nation's economy, but can also weigh on its currency as traders transfer funds to countries where they can earn higher returns.

The European Central Bank has taken a tough anti-inflation stance and has shown no inclination so far to cut rates for the 15-nation euro zone.

[Guest David Guyatt]

A word to the wise --- major British banks have placed an across the board ban on corporate lending and are looking for customer deposits. Interbank lending has effectively ceased because the cost of borrowing is too prohibitive. Anyone with liquidity problems is going down unless the government/Old Lady steps in with direct support.

I hope everyone with savings and investments is with one of the top three or four UK banks, because below the top tier is now dodge city.

[Maggie Hansen]

A word to the wise --- major British banks have placed an across the board ban on corporate lending and are looking for customer deposits. Interbank lending has effectively ceased because the cost of borrowing is too prohibitive. Anyone with liquidity problems is going down unless the government/Old Lady steps in with direct support.

I hope everyone with savings and investments is with one of the top three or four UK banks, because below the top tier is now dodge city.

I don't have any money anywhere so I suppose I'll be safe, hey, David?

[Guest David Guyatt]

A word to the wise --- major British banks have placed an across the board ban on corporate lending and are looking for customer deposits. Interbank lending has effectively ceased because the cost of borrowing is too prohibitive. Anyone with liquidity problems is going down unless the government/Old Lady steps in with direct support.

I hope everyone with savings and investments is with one of the top three or four UK banks, because below the top tier is now dodge city.

I don't have any money anywhere so I suppose I'll be safe, hey, David?

Me too. No money, no worries.

But there are people out there, not wealthy by any means, who may be facing problems in the near future. I also have concerns for my family, of course, because a general collapse will be disastrous for the ordinary people while the very wealthy will just trot over to Antigua etc and weather the storm in luxury.

[Maggie Hansen]

The $200 billion bail-out for predator banks and Spitzer charges are intimately linked

by Greg Palast

Global Research, March 14, 2008

GregPalast.com

While New York Governor Eliot Spitzer was paying an "escort" $4,300 in a hotel room in Washington, just down the road, George Bush's new Federal Reserve Board Chairman, Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank industry speculators.

Both acts were wanton, wicked and lewd. But there's a BIG difference. The Governor was using his own checkbook. Bush's man Bernanke was using ours.

This week, Bernanke's Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion dollars to guarantee these banks' mortgage-backed junk bonds. The deluge of public loot was an eye-popping windfall to the very banking predators who have brought two million families to the brink of foreclosure.

Up until Wednesday, there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers' bordello: Eliot Spitzer.

Who are they kidding? Spitzer's lynching and the bankers' enriching are intimately tied.

How? Follow the money.

The press has swallowed Wall Street's line that millions of US families are about to lose their homes because they bought homes they couldn't afford or took loans too big for their wallets. Ba-LON-ey. That's blaming the victim.

Here's what happened. Since the Bush regime came to power, a new species of loan became the norm, the "sub-prime" mortgage and it's variants including loans with teeny "introductory" interest rates. From out of nowhere, a company called "Countrywide" became America's top mortgage lender, accounting for one in five home loans, a large chuck of these "sub-prime."

Here's how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month payment is 25% of their income. No problem. Their banker promises them a new mortgage, again at the cheap rate, in two years. But in two years, the promise ain't worth a can of spam and the Grinnings are told to scram - because their house is now worth less than the mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the "discount" they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. Grinnings move into their Toyota.

Now, what kind of American is "sub-prime." Guess. No peeking. Here's a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of similar-income Whites. Dark-skinned borrowers aren't stupid - they had no choice. They were "steered" as it's called in the mortgage sharking business.

"Steering," sub-prime loans with usurious kickers, fake inducements to over-borrow, called "fraudulent conveyance" or "predatory lending" under US law, were almost completely forbidden in the olden days (Clinton Administration and earlier) by federal regulators and state laws as nothing more than fancy loan-sharking.

But when the Bush regime took over, Countrywide and its banking brethren were told to party hardy - it was OK now to steer'm, fake'm, charge'm and take'm.

But there was this annoying party-pooper. The Attorney General of New York, Eliot Spitzer, who sued these guys to a fare-thee-well. Or tried to.

Instead of regulating the banks that had run amok, Bush's regulators went on the warpath against Spitzer and states attempting to stop predatory practices. Making an unprecedented use of the legal power of "federal pre-emption," Bush-bots ordered the states to NOT enforce their consumer protection laws.

Indeed, the feds actually filed a lawsuit to block Spitzer's investigation of ugly racial mortgage steering. Bush's banking buddies were especially steamed that Spitzer hammered bank practices across the nation using New York State laws.

Spitzer not only took on Countrywide, he took on their predatory enablers in the investment banking community. Behind Countrywide was the Mother Shark, its funder and now owner, Bank of America. Others joined the sharkfest: Goldman Sachs, Merrill Lynch and Citigroup's Citibank made mortgage usury their major profit centers. They did this through a bit of financial legerdemain called "securitization."

What that means is that they took a bunch of junk mortgages, like the Grinnings, loans about to go down the toilet and re-packaged them into "tranches" of bonds which were stamped "AAA" - top grade - by bond rating agencies. These gold-painted turds were sold as sparkling safe investments to US school district pension funds and town governments in Finland (really).

When the housing bubble burst and the paint flaked off, investors were left with the poop and the bankers were left with bonuses. Countrywide's top man, Angelo Mozilo, will "earn" a $77 million buy-out bonus this year on top of the $656 million - over half a billion dollars - he pulled in from 1998 through 2007.

But there were rumblings that the party would soon be over. Angry regulators, burned investors and the weight of millions of homes about to be boarded up were causing the sharks to sink. Countrywide's stock was down 50%, and Citigroup was off 38%, not pleasing to the Gulf sheiks who now control its biggest share blocks.

Then, on Wednesday of this week, the unthinkable happened. Carlyle Capital went bankrupt. Who? That's Carlyle as in Carlyle Group. James Baker, Senior Counsel. Notable partners, former and past: George Bush, the Bin Laden family and more dictators, potentates, pirates and presidents than you can count.

The Fed had to act. Bernanke opened the vault and dumped $200 billion on the poor little suffering bankers. They got the public treasure - and got to keep the Grinning's house. There was no "quid" of a foreclosure moratorium for the "pro quo" of public bail-out. Not one family was saved - but not one banker was left behind.

Every mortgage sharking operation shot up in value. Mozilo's Countrywide stock rose 17% in one day. The Citi sheiks saw their company's stock rise $10 billion in an afternoon.

And that very same day the bail-out was decided - what a coinkydink! - the man called, "The Sheriff of Wall Street" was cuffed. Spitzer was silenced.

Do I believe the banks called Justice and said, "Take him down today!" Naw, that's not how the system works. But the big players knew that unless Spitzer was taken out, he would create enough ruckus to spoil the party. Headlines in the financial press - one was "Wall Street Declares War on Spitzer" - made clear to Bush's enforcers at Justice who their number one target should be. And it wasn't Bin Laden.

It was the night of February 13 when Spitzer made the bone-headed choice to order take-out in his Washington Hotel room. He had just finished signing these words for the Washington Post about predatory loans:

"Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which he federal government was turning a blind eye."

Bush, said Spitzer right in the headline, was the "Predator Lenders" Partner in Crime." The President, said Spitzer, was a fugitive from justice. And Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet.

Spitzer wrote, "When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably."

But now, the Administration can rest assured that this love story - of Bush and his bankers - will not be told by history at all - now that the Sheriff of Wall Street has fallen on his own gun.

A note on "Prosecutorial Indiscretion."

Back in the day when I was an investigator of racketeers for government, the federal prosecutor I was assisting was deciding whether to launch a case based on his negotiations for airtime with 60 Minutes. I'm not allowed to tell you the prosecutor's name, but I want to mention he was recently seen shouting, "Florida is Rudi country! Florida is Rudi country!"

Not all crimes lead to federal bust or even public exposure. It's up to something called "prosecutorial discretion."

Funny thing, this "discretion." For example, Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him diapers (ewww!), yet the Senator was not exposed by the US prosecutors busting the pimp-ring that pampered him.

Naming and shaming and ruining Spitzer - rarely done in these cases - was made at the "discretion" of Bush's Justice Department.

Or maybe we should say, 'indiscretion.'

Greg Palast, former investigator of financial fraud, is the author of the New York Times bestsellers Armed Madhouse and The Best Democracy Money Can Buy.

Fascinating. Interesting that it was a bank watching his financial transactions and thinking them odd that put him in to the authorities. Pity they didn't pay as much attention to the other odd transactions taking place around them.

As to the whole sub-prime thing why don't they let the market sort this out? So what if a few banks go under? Let the strong survive. Let those that can't compete go the way of the dinosaur. The system will be better for it. Isn't that how it works? Never again can the government say that there is not enough money for anything else like education, health, environment if they are prepared to throw billions/trillions into this black hole.

[Guest David Guyatt]

After the UK government baled out Northern Rock to the tune of almost £60 billion, they set out to enact legislation to "rescue" other banks in trouble in secret -- thus avoiding the public interest from watching their hard earned tax pounds being pumped into the coffers of the already wealthy.

This is how the system works. That is why we have the sham of democracy. To make it seem that we are being served when, in reality, we are being raped.

It thought Pallast bang on when he said that:

Quote:

The press has swallowed Wall Street's line that millions of US families are about to lose their homes because they bought homes they couldn't afford or took loans too big for their wallets. Ba-LON-ey. That's blaming the victim.

Unquote

Blaming the victim. Ergo, the prisons of the US and Uk are overflowing with drug users and those bust for drug related crimes --- but the global narcotics industry remains in superb fettle. As always. That's punishing the victim. And this formulae can be see in action across the board.

[Maggie Hansen]

Ergo, the prisons of the US and Uk are overflowing with drug users and those bust for drug related crimes --- but the global narcotics industry remains in superb fettle. As always. That's punishing the victim. And this formulae can be see in action across the board.

Please move if off topic but what ever happened to the legal heroin available by prescription in the UK at one time? Or is it no longer available? What about the status other drugs - cocaine, amphetamines etc?

[Mark Stapleton]

Me too. No money, no worries.

But there are people out there, not wealthy by any means, who may be facing problems in the near future. I also have concerns for my family, of course, because a general collapse will be disastrous for the ordinary people while the very wealthy will just trot over to Antigua etc and weather the storm in luxury.

Maybe we should just trot over there and bring them home on the business end of a pitchfork. I'm up for it.

Edited March 16, 2008 by Mark Stapleton

[Guest David Guyatt]

Manipulating the market is what the market is really all about.

It has happened with such regularity that we should no longer be shocked or surprised when our pockets are picked.

But we are.

[Guest David Guyatt]

Very interesting.

It strikes me that those entities who own and run a "dark pool" may well be the main beneficiaries because they are in an excellent position to gather very valuable intelligence about newly forming market trends - rather like watching a cloud being seeded and knowing where there is going to be a deluge or a drought.

[Guest David Guyatt]

I thought a sine qua non of global free markets was total TRANSPARENCY.

Um, not in Brown's Britain. This is a banker's coup and it's a disgrace that it's being aided and abetted by a supposedly Labour government:

Bank bail-outs to be kept secret

Dan Atkinson, Simon Watkins, Mail on Sunday

The Bank of England has imposed a permanent news blackout on its £50bn-plus plan to ease the credit crunch.

Ferocious and unprecedented secrecy means taxpayers will never know the names of the banks that have been supported through the special liquidity scheme, which was unveiled by Bank Governor Mervyn King last week.

Requests under the Freedom of Information Act are to be denied. Details will be kept secret even after 30 years - the period after which all but the most sensitive state documents are released.

Any Bank of England employee leaking the names of institutions involved will face court action for breach of contract.

Even a figure for the overall amount advanced will not be published until October. Meanwhile the Bank is expected to issue at least £50bn of Treasury bills to banks in exchange for their mortgages - entirely in secret.

This hypersensitive official stance is thought to be a response to the events of last year when a huge stigma was attached to any lender suspected of going to the Bank for cash help.

The scheme is intended to steady the markets, but it is feared that reports of banks making widespread use of the facility could trigger further instability.

Barclays and HBoS have both confirmed they will use the Bank of England scheme. 'We welcome the Bank facility and we will participate in it,' confirmed Andy Hornby, chief executive of HBoS.

Other banks declined to comment, but it is expected that this week all of the leading banks, with the exception of Lloyds TSB, will tender some of their mortgages to the Bank of England.

HBoS confirmed last week it had packaged up £9bn of mortgages ready either for securitisation - in effect, selling them on in the wholesale financial markets - or to be offered to the Bank in return for Treasury bills.

The scheme, drawn up by King and approved by Chancellor Alistair Darling, aims to improve banks' liquidity by temporarily swapping bundles of mortgages and credit card debt for Treasury bills, which are short-dated Government debt that matures within nine months.

The scheme will run for three years so these bills will be replaced by new ones when required.

Under the plan, bills will be exchanged only for securities rated triple-A - the highest possible grade of security - by at least two of the three big ratings agencies, Fitch, Moody's and Standard & Poor's.

It would not normally be considered acceptable for big companies to arrange billions of pounds of financial support without telling their shareholders.

I've never quite believed that the words "transparency" and "financial markets" have been comfortable bed fellows. Reagan's introduction of the so called "Plunge Protection Team", after the dramatic crash of October 1987, indicated to me that the financial markets had become far too important for western democratic stability to allow them any longer to perform as a free market vehicle. Thereafter they would always be rigged. What we are seeing today is the predictable outcome of such intervention --- secrecy by the government, for the government and of the government.

[Guest David Guyatt]

He was speaking amid signs of some banks creating low-rated assets specifically so they can be traded for treasuries at the European Central Bank.

It had to happen, didn't it. Politicians like Brown are treated like simple children in the hands of the banking band of brothers -- who see every angle to turn an extra buck.

I can almost hear the quiet sniggering going on...

[Guest David Guyatt]

He was speaking amid signs of some banks creating low-rated assets specifically so they can be traded for treasuries at the European Central Bank.

It had to happen, didn't it. Politicians like Brown are treated like simple children in the hands of the banking band of brothers -- who see every angle to turn an extra buck.

I can almost hear the quiet sniggering going on...

Goldman Sachs are still advising Brown, and the Dear Leader doubtless thinks their advice is entirely objective and in the best interests of the Labour government and the country.

Brown is an intellectual fool who sold his (and the Labour Party's) soul to unregulated global free markets. The blowback will destroy him, his party and, quite possibly, the lives of hundreds of thousands of ordinary Brits....

Agreed Jan. Bush has also done the same in the US which, being the case, clearly suggests cross-continental planning and coordination rather than foolishness and cock-up.