From an article here in today's Observer:
The author of the piece, Will Hutton, is a socialist. So his conclusions and spin should be viewed in that light. But as a statement of fact, if such it is, the above may help explain the drop in Barclay's share price.
Barclays, for example, is in a position analogous to Citigroup and Bank of America. In 2007 close to half its profits came from "investment banking", now so perilous for its American counterparts. Barclays is the leader in so-called corporate "synthetic" structured investment vehicles - complex and even more dodgy than the securities that have brought low Citigroup and Bank of America. On Friday credit-rating agency Moodys announced new and more demanding criteria for how "synthetics" will be valued in future - implying that bank guarantors will need to find billions extra in capital to support them. Barclays could have to raise up to another £10bn capital to support its investment bank operation; impossible, except from the taxpayer. With the ban on short selling lifted on Friday - an asinine genuflection to the interests of hedge funds - it was an obvious target. The bank rushed out a statement late in the evening declaring good 2008 profits and solid capital ratios. But the issue is 2009, given the new rules. A taxpayer bail-out for Barclays - a view shared by a growing number of officials, if not all - is close to inevitable.
The prime minister is incandescent; the bank has not been straight with either the government or its shareholders about its balance-sheet risks. It did not share in the first round of bank recapitalisation, instead raising cripplingly expensive funds from Arab sovereign wealth funds. When Britain needs all its big banks to act together to stop a credit crunch-induced slump, Barclays, putting its own interests - and bonuses - first instead triggers a second phase of the crisis. ..
The prime minister is incandescent; the bank has not been straight with either the government or its shareholders about its balance-sheet risks. It did not share in the first round of bank recapitalisation, instead raising cripplingly expensive funds from Arab sovereign wealth funds. When Britain needs all its big banks to act together to stop a credit crunch-induced slump, Barclays, putting its own interests - and bonuses - first instead triggers a second phase of the crisis. ..
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