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Saturday, January 24, 2009

UK: Banks Were Just Three Hours From Collapse


Since then Royal Bank of Scotland (RBS) and Barclays (BCS) have started the toilet bowl death spiral…

Helmet time?

Revealed: Day the banks were just three hours from collapse: “Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.”

Like I said, UK and Iceland: Not So Different and the UK is Similar to Iceland: Has Ambrose Evans Prichard Seriously Concerned.

Economic Freedom Correlates with Peace

[ Hat Tip Toro’s Running of the Bulls ]

Speaking of economic freedom and global unrest, an excellent post over at Division of Labour nails it: Economic Freedom Correlates with Peace.

Related Posts:
Global Violence, Gold: But Not Yet

Friday, January 23, 2009

Global Violence, Gold: But Not Yet

In Angry Jobless Indians: Social Contracts I warned of the pending social unrest that will sweep the globe as the economic situation continues to deteriorate:

“10 million unemployed you men make for a 'volatile' political environment in the world's largest, messiest democracy where an election goes well if only a few small bombs go off.

Other major export economies are in just as much trouble. In China: “The figures are horrifying.” I wrote:

“The social contract is that the government creates widespread economic prosperity. In return, the plebs won’t make trouble for the ruling patricians. They also won’t demand political liberty. Export jobs in China are disappearing as fast as in India and the social contract is about to be severely stressed.”

In Hyperinflation Then Global War I discussed the book The War of the World by Nial Ferguson:

“Ferguson develops a theory to explain the brutal violence of the 20th century. He postulates that ethnic unrest is prone to break out during periods of economic volatility and uncertainty. Severe economic distress has the tendency to suddenly unravel even advanced processes of ethnic assimilation which then rapidly escalate into full-scale conflict. The catalyst for catastrophe is always the decline of great economic and political powers and more importantly the emergence of new powers.”

Protests are popping up all over the world now. They’re small and they’re being ‘managed’. However, the global economy will continue to deteriorate and somewhere some government will fail under the stress. If the governments that fall are in an ethnically homogenous country, any transition will be fairly uneventful. If the governments that fall are in an ethnically diverse country, expect trouble.

The trade is to go long violence and short tranquility some how. Despite my deflationary stance, gold springs to mind… but not quite yet.

Gold is still making lower highs and the down trend holds. Watch the $900 level and watch the news. Real geopolitical developments will occur quickly.

FACTBOX-European governments face protests over economy: “Protests against governments and banks have increased in some European countries as the global economy has deteriorated.

Here are details of some of the protests around Europe:


-- Police used teargas against anti-government protesters when a demonstration outside parliament turned violent on Thursday.

-- The parliament building has become the focus of anger against Prime Minister Geir Haarde's coalition government's handling of the financial crisis. Demonstrators have called for the prime minister and other senior officials to resign and his limousine was pelted with eggs by demonstrators on Wednesday.


-- Hundreds of Bulgarians demanded economic and social reforms in the face of a global slowdown on Wednesday in a second week of anti-government protests.

-- Students, teachers, green activists, doctors and public servants took part in the rally in front of parliament in Sofia, calling on the Socialist-led government to take action or step down. Many shouted "Mafia" and "Resign".

-- Last week hundreds of protesters clashed with police, smashed windows and damaged cars in Sofia when a rally against corruption and slow reforms in the face of the economic crisis turned into a riot.


-- High youth unemployment was a main driver for unrest in Greece, initially sparked by the police shooting of a youth in an Athens suburb. General unemployment runs just above the EU average at 7.4 percent but the figure is 21.2 percent for the 15-24 age group and 10.5 percent for those aged 25-34. The protest forced a government reshuffle.


-- Last week, a 10,000-strong protest in Latvia descended into a riot, some protesters trying to storm parliament before going on the rampage. Government steps to cut wages, as part of an austerity plan to win international aid, have angered people.


-- Police fired teargas last week to disperse demonstrators who pelted parliament with stones in protest at government cuts in social spending to offset an economic slowdown. Police said 80 people were detained and 20 injured during the violence.

-- Prime Minister Andrius Kubilius, who was only sworn in in December, said the violence would not stop an austerity plan launched after a slide in output and revenues.

Barclays: Death Spiral Fun

This is called Death Spiral Finance… and it always ends in tears. Stupid Barclays (BCS) got themselves into a death spiral situation.

For nimble traders of the intraday variety, BCS can be great fun, but don’t hold overnight… long or short. Gaps of 20% in either direction will be the norm.

Barclays May Have to Give More Control to Gulf Group (Update2): “Barclays Plc may have to give up more control to Middle East investors if the U.K. bank is forced to seek additional capital.

Abu Dhabi’s royal family and two Qatari investors purchased a 32 percent stake in October after London-based Barclays decided against accepting funds from the British government. Barclays fell 10 percent today in London to the lowest in two decades after the bank said its agreements stipulate it must offer additional shares at a discount to the Middle East group before accepting any money from the U.K.

The provisions, intended to prevent the dilution of the 32 percent stake, wouldn’t stop the company from taking up assistance from the U.K. government, Barclays spokesman Alistair Smith said by telephone today. Other investors who bought Barclays convertible notes have similar protection, he said.

The anti-dilution clauses “have no bearing on Barclays’s ability to participate in the package of measures announced by the tripartite authorities,” Smith said.

Barclays raised 5.3 billion pounds ($7.4 billion) on Oct. 31, selling securities including convertible notes to Sheikh Mansour Bin Zayed Al Nahyan of Abu Dhabi, Challenger Universal Ltd. and Qatar Holding. Barclays has plummeted since then in London trading on speculation it will need more capital to cover credit writedowns and may be taken over by the British government.

“This means that it’s going to be tricky for them to raise capital in the next five months,” said Bruno Paulson, an analyst at Sanford C. Bernstein in London who has an “outperform” rating on the stock. “The clause didn’t really matter when the stock price was healthy. It only kicked in severely this week.”

The stock is down 61 percent this month and 67 percent since Barclays announced plans to sell the convertible notes. They pay interest of 9.75 percent until they are converted to stock at 153.3 pence apiece on June 30.

Qatar Holding and Sheikh Mansour also bought 3 billion pounds of securities known as reserve capital instruments. These require Barclays to pay annual interest of 14 percent and give the investors warrants to buy more than 1.5 billion Barclays shares at about 198 pence apiece. Barclays fell to 59.2 pence in London today, valuing it at 5 billion pounds, less than it raised from the Gulf funds last year.

The contracts with the investors would prevent the U.K. government from taking a majority stake in the bank, the Times and Telegraph in London reported earlier today.”

Barclays Prefers to Pay Cash for U.K. Guarantee, Varley Says: “Barclays Plc would prefer to pay for the government’s toxic asset guarantee plan in cash rather than equity, Chief Executive Officer John Varley said in a video broadcast on the Web site of Cantos Communications Ltd.

“Our predisposition would be to pay in cash,” Varley said. “The government was very clear it’s not looking for ordinary equity as a means of satisfying that payment.”

The U.K. government announced plans, Jan. 19, to guarantee toxic assets for a fee and gave the Bank of England power to buy 50 billion pounds ($69 billion) of securities in the second effort in three months to underpin confidence in the banking system. Barclays has declined 55 percent in the past week on speculation it may take more writedowns and could be nationalized.

“There is no truth” in speculation the government is unhappy with how Barclays has valued some of its assets, Varley said. “We have a real-time obligation to ensure that the numbers that we publish are reliable and our numbers are reliable. We take that obligation with deadly seriousness.””

Geithner: Immediately Puts Foot in Mouth, Markets Tank

Knocking on 800 pre-market. There really is no reason for that support to hold. 740 here we come! There ain't nothing Obama can do...

800... then 740, then 600 something... should be fun. Strap on those helmets.

The catalyst for this round of selling were the comments yesterday (which are now being debated vigorously) from Timothy Geithner that sounded very protectionist. He accused the Chinese of currency manipulation. The guy gets sworn in and immediately sticks his entire foot in his mouth. Brilliant.

Upsetting the only people with enough buying power to absorb the massive amount of treasuries that are now being issued is one of the most asshat things anybody could do, especially on their first day at work.

Geithner Warning on Yuan May Renew U.S.-China Tension (Update3): “Timothy Geithner’s warning that President Barack Obama believes China is “manipulating” its currency may trigger renewed tensions between two of the world’s three biggest economies.

Geithner, Obama’s nominee for Treasury secretary, also told senators the administration will press China to “adopt a more aggressive stimulus package” to boost its domestic economy. The remarks on manipulation were a shift from President George W. Bush’s team, which stopped short of using the term in criticizing China’s exchange-rate management.

“The signal this sends is not good” for ties between the two nations, said Charles Freeman, a fellow at the Center for Strategic and International Studies and former top trade negotiator for China at the U.S. Trade Representative’s office. “It opens a Pandora’s box. We need the Chinese to hold onto their Treasury and agency debt.”

Geithner’s comments triggered a drop in Treasuries on concern that demand from China, the largest foreign investor in U.S. government debt, may wane. They may also reignite calls among some U.S. lawmakers for measures to punish trading partners perceived to have undervalued exchange rates.

“What they can’t work out diplomatically we can work out legislatively,” said Representative Charles Rangel of New York, who chairs the House Ways and Means Committee, which has jurisdiction over trade issues, in an interview. “The committee has been saying for years” that China has manipulated the yuan’s value, he said.”

Thursday, January 22, 2009

Decoupling: Hilarious

Decoupling! Hahahaha… I have raged and raged about the lunacy of decoupling. The export economies of Japan and China are about to learn that you never ever put all your eggs in one basket. The market charges really really high tuition.

The chart of Japanese exports is from the excellent post Don’t Mention Decoupling in Asia over at EconompicData.

My Related Rants:
The Other Bigger Shoe: The Rest of the World
Dollar Smile, Global Decoupling, Oil Super Spike and Yields
The Dollar Smile Theory, Overbought Euro
The Dollar Smile Theory
Oil and Global Decoupling Theory
Global Decoupling Theory, Correlation Contagion
The Global ‘Decoupling Theory’ is Garbage
Asia Tanks

Battle Lines are Drawn

The battle lines are drawn between support around 800 – 805 and resistance around 850 – 860. Yesterday the Bulls had the upper hand as Obama promised a better financial system bailout plan. This morning, a dose of harsh reality has equities offered.

Microsoft (MSFT) suddenly and unexpectedly released poor earnings pre-market, catching everybody flat footed. (Now down 8%.)

U.S. Stock-Index Futures Fall on Earnings, Recession Concerns: “U.S. stock futures retreated as companies from EBay Inc. to Nokia Oyj reported falling profits and reports on housing starts and jobless claims signaled the recession is deepening.

EBay sank 8.1 percent in trading before the open of U.S. exchanges as fourth-quarter profit fell 31 percent and forecasts missed analysts’ estimates. Motorola Inc. slumped after Nokia, the world’s biggest mobile-phone maker, said industry sales may drop as much as 10 percent this year. The Standard & Poor’s 500 Index was poised to trim yesterday’s 4.4 percent rally after initial claims for unemployment benefits matched a 26-year high and housing starts slumped to a record low.

U.S. stocks yesterday surged the most since Dec. 16 as President Barack Obama’s plan to shore up lenders and Bank of America share purchases by company executives sent financial equities to their biggest rally in two months. The S&P 500 is still off to its second-worst start, surpassed only by last year’s 9.8 percent drop during the first 13 days of trading, as analysts cut earnings estimates by a record 83 percentage points.

“Corporate earnings are still bad,” said Claudio Meiger, who manages about $100 million at Basel, Switzerland-based CIC Schweiz AG. “The market is very news-driven, we take one step up on the good news and then we take two steps down again.””

Wednesday, January 21, 2009

Its All The About Testosterone

“Financial markets may be swung by testosterone.”

No way! My professors all guaranteed me markets were strong form efficient or at least some kind of efficient, back when I was a naive wide eyed student. The market knows everything all the time and has everything priced in rationally is what the textbooks said. Only a fool would try to time or beat or otherwise attempt to outsmart the market.


One of them even told me trading with technical analysis was like driving a car forwards will looking in the rear view mirror. Another one insisted that my trading gains were nothing but random luck and that I was just on a lucky streak… a ten year lucky streak through two major booms, bubbles and busts.

Thank goodness the entire field of economics doesn’t rest on the assumption that individual economic agents act rationally and are always trying to maximize their utility in a consistent manner. Oh wait… doh!

[ sarcasm off ]

Best traders start to develop in womb: “Financial markets may be swung by testosterone, says a Canadian economist who found that high prenatal exposure to the hormone makes traders more successful.

John Coates, an Ottawa native teaching at the University of Cambridge, has found successful traders usually bear physical signs of high testosterone, which begins in the womb and continues in adulthood.

This gives them fast reactions, aggressive drive and stamina, causing them to trade partly with their hormones, like a tennis player making lightning-quick decisions at the net.

This is the same researcher who found last year that traders who have the highest levels of testosterone in a morning saliva sample will make the most money that trading day.

Coates once traded derivatives for Goldman Sachs, and later ran a derivatives trading desk for Deutsche Bank.

"It was while observing (traders) during the dotcom bubble that I realized economics had been missing something, that the traders during bubbles and crashes actually display clinical (medical) symptoms," he said.

In bubbles, there were "classic manic symptoms" among traders: racing thoughts, euphoria, less need for sleep, delusions --and a willingness to take "irrational" risks. And when markets crashed, traders had hangover symptoms, with high levels of cortisol, a stress hormone, and an irrational aversion to risk.

"There are two risks to the market," said Coates. "One is from people who can't control their runaway steroid feedback loops"--excessive highs in a bubble and lows in a crash.

"That can cause traders to make irrational decisions both in a bull and a bear market."

His new research was expected to be published Tuesday in Proceedings of the National Academy of Sciences, a research journal.

UK Similar to Iceland: Has Ambrose Evans Pritchard Seriously Alarmed

“The Baby Boomers have had their moment in power. The most spoilt generation in history has handled affairs with its characteristic hedonism. The results are coming in.” –Ambrose Evans-Pritchard

Yup. Living beyond your means is as fun as getting rip roaring drunk… and like getting absolutely smashed, there is that inevitable reckoning that even more booze can do nothin to prevent. (Try as you might.)

A little more color on my post from earlier today UK and Iceland: Not So Different.

Ambrose Evans-Pritchard is SERIOUSLY ALARMED: “The slide in sterling has turned "disorderly".

We can argue over whether or not the first phase of devaluation acted as a shock-absorber for a badly mismanaged economy, providing a cushion against debt deflation and the housing crash. But the latest dive has a very malign feel.

For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control.

The currency has fallen five cents today to $1.39 against the dollar. It is now perched precariously on a two-decade support line -- the levels tested in 2001 and 1992. If it breaks that line, traders may send it crashing down towards dollar parity.

The danger is blindingly obvious. The $4.4 trillion of foreign liabilities accumulated by UK banks are twice the size of the British economy. UK foreign reserves are virtually nothing at $60.6bn. (on this, more later in a piece I'm writing today)

If the Government is forced to nationalise RBS and perhaps Barclays with their vast exposure in dollars, euros, and yen, it risks being submerged. It is one thing for a sovereign state to let its national debt jump in a crisis -- or a war -- perhaps even to 100pc of GDP. It is another to take on foreign debts on such a scale with no reserves. Yes, the banks have foreign assets as well to match the debts. But how much are these assets really worth?

This is the moment when the "rubber hits the road" -- to borrow from American argot -- the moment when the reckless debt experiment of our economic and political leaders comes back to haunt.

We cannot even do what Iceland did to save its skin. Reykjavik refused to honour the foreign debts of its buccaneering banks. It let them default, parking the losses in Resolution Committees. Small islands can do that. Iceland has fish instead, and lots of metals.

Britain cannot follow suit. The debts are too big. If London takes such disastrous action it will set off global panic and lead to an asset death spiral, drawing the entire world into deep depression.

What have our leaders wrought? The reckless conduct of City, the fiscal incontinence of Gordon Brown (3pc deficit at the top of the cycle), and the pitiful regulation of the UK housing boom have all combined to bring the country to the brink of disaster.

England has not defaulted since the Middle Ages. There is a real risk it may do so now.

And no -- just so there is no misunderstanding -- it would not have been any better if Britain had joined the euro ten years ago. The bubble would have been just as bad, or worse, as Ireland and Spain can attest. We have our disaster. They have their disaster. When the dust has settled in five years we can make a proper judgement on the sterling-EMU issue. Not now.

The Baby Boomers have had their moment in power. The most spoilt generation in history has handled affairs with its characteristic hedonism. The results are coming in.

The blithering idiots.”

Yen: Something Broke Somewhere

Major Distribution Days, Wait for the Cluster

29.28:1 Down / Up Volume Ratio. Two Major Distribution Days in 2009. Wait for a cluster of them before going in for the bounce.

The lows around 4600 are going to be tested. Wait for the final rinse before going ‘bottom fishing’.

UK and Iceland: Not So Different

"I would urge you to sell any sterling. It's finished. I hate to say it, but I would not put any money in the UK." –Jim Rogers

The British Pound (XBP) broke important support around $140 from the 1993 and 2001 bottoms. The speed and magnitude of the decline should really raise some concerned eyebrows right about now because there is a very real possibility that the Pound could go Krona on us. It really is possible for the UK to be a bigger, badder Iceland.

All the growth in tax receipts linked to real estate and financial services was of course was nothing but an illusion. Those tax receipts are gone now, almost certainly never to return. Most of the financial firms won’t record profits for years and when they finally do, they will have years of losses to carry forward. The net result will be a giant, prolonged corporate tax shortfall.

In the meantime, the government is throwing good money after bad. This is of course plunging the country deep into debt. Just like in Iceland, although to a lesser degree relative to GDP, UK banks have liabilities in other currencies. As the pound goes into free fall, these liabilities explode in value crippling the banks. As the UK issues more debt to stabilize the banks, even more pressure is put on the pound. A vicious, debt death spiral could easily be sparked.

Don’t dismiss the possibility that even a respectable first world economy could get swept away in this credit crisis. Take it seriously, because the consequences will certainly devastate every financial market in the world.

Calls to nationalize RBS and Lloyds as markets lose faith in bail-outs. Sterling hammered on currency markets as traders take: “Jim Rogers, a veteran US investor, said the UK economy was "finished". He told Bloomberg: "I would urge you to sell any sterling. It's finished. I hate to say it, but I would not put any money in the UK."

Rumors were awash in febrile markets that ratings agencies could downgrade the UK's sovereign debt ratings if the government had to issue tens of billions of pounds of government bonds to finance its latest rescue for the banks. A downgrade would increase the cost of raising debt for Britain, the world's fifth largest economy. The price of insuring British debt against default also rose sharply.

Alistair Darling, the chancellor, was forced in Brussels to dismiss market talk that he, like Denis Healey in 1976, would have to turn to the IMF for a bail-out, saying he had laid out at the pre-budget report in November how he intended to pay for the government's schemes.

But Peer Steinbr├╝ck, Germany's finance minister, also at the EU finance ministers meeting in Brussels, said he and others had urged a swift return to sound public finances and expressed fears about the situation in Britain, which is forecast to have a 9.5% budget deficit next year, and Ireland, whose deficit in 2010 is put at 13%.

Saying he did not understand Darling's scheme to insure UK banks' multibillion-pound toxic assets via the Bank of England and a "bad bank", he said: "I am skeptical that a national scheme will work."

Steinbr├╝ck echoed market fears about the UK scheme by saying it was unclear how to find the right price for the securities in a bad bank. The bank might have to be capitalized with up to 30% of what was on lenders' balance sheets – up to €200bn.

The bail-out also worries the City. "The market rightly fears the long-term fiscal costs of a collapsing banking system," said Graham Turner, of consultancy GFC Economics. The gilts market was spooked by the potential costs to the public purse. Gilts prices fell sharply on the fear of greater supply, which in turn pushed yields up to 3.55% for a 10-year benchmark gilt. Falling yields recently have helped bring down the price of some corporate borrowing and fixed-rate mortgages.”

Related Posts:
Iceland: What Happens After Imploding?
Iceland Melts, 77% Single Day Drop
Russian Ruble Devaluation
Russian Default Risk Jumps
Could It Happen to the Russian Bear?
Russia: First Bank Run
Russia: Smashed Again, Halted Indefinitely
Russian: One of the BRICs Just Bricked...
Russia Smells Blood, Commodities Bounce, The 'Great Games' Heats Up
The Russian Bear Awakens: Poland Threatened
War: Russian and Georgia
Russian Winter?

Tuesday, January 20, 2009

Financials Get Destroyed

In the post Banking Index Chose Never I wrote, “Time to test them there lows. You can thank BAC and C for that.”

Forget “TEST”. A more appropriate word would be “RAPED”.

BCS -40%
BAC -28%
C -17%
GS -17%
JPM -19%
MS -14%
STT -61%
UBS -16%

In Royal Bank of Scotland: Kills Oversold Bounce I wrote: “Do not buy bank common shares for anything but a quick scalp or trade. The overnight gap or event risk is far too great. The banking system is insolvent. Discovering which individual banks are not is a very dangerous game to play.”

I must emphasize that again. Most of the financial system will be outright or de facto nationalized. Common shares are either worth zero or close to zero JUST like Fannie Mae (FNM), Freddie (FRE), Bear Stearns and Lehman.

Stay away. You won’t miss the bottom. Trust me. The bottom will be a long time in the making and it will be booooooooooooring. Financials will languish for years. You’ll have plenty of time to cherry pick the best of the survivors.

The rest is just trading.

Apparently Trading is Difficult...

Hehe, apparently trading is difficult.

State Street, Barclays Suck Markets Lower

In yesteday’s post, Royal Bank of Scotland: Kills Oversold Bounce I wrote:

“Do not buy bank common shares for anything but a quick scalp or trade. The overnight gap or event risk is far too great. The banking system is insolvent. Discovering which individual banks are not is a very dangerous game to play.”

Yup. Today pretty much illustrates the dangers.

Pre-market the bid on State Street (STT) is $24.00, down over 30%. The previous panic low in October 2008 was $27.87.

Barlays (BCS) is down over 40% pre-market, bid at about $4.20.

Bank of America (BAC) is down 15% pre-market, bid at about $6.00.

Because of the debacle with Royal Bank of Scotland (RBS) on Monday, financials will get taken out to the woodshed today and shot…

State Street Net Falls 71% on Costs to Support Funds (Update1): “State Street Corp., the world’s largest money manager for institutions, said fourth-quarter earnings fell 71 percent on costs of more than $800 million to prop up funds and cut its work force.

Net income fell to $65 million, or 15 cents a share, from $223 million, or 57 cents, a year earlier, the Boston-based company said in a statement today. Excluding certain items, profit was $1.18, beating the $1.13-a-share estimate of 13 analysts surveyed by Bloomberg.

State Street said Jan. 16 that fourth-quarter results would include expenses to offset losses in its stable value funds, cut jobs and write down the value of investment securities. Last month, the company said it would eliminate 1,700 jobs, or 6 percent of its workforce, as declines in financial markets reduced client assets on which it charges fees. Global stock markets fell 47 percent in 2008.

“What drives their revenue is the value of their assets under custody and assets under management, and those have declined precipitously,” Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in an interview before the earnings were released. Cassidy, who doesn’t own State Street shares, rates the company “sector perform.” He had estimated the company would earn $1.04 a share.”

Monday, January 19, 2009

Royal Bank of Scotland, Kills Oversold Bounce

Well, that really really shortened the Oversold Bounce Time...

It's a US holiday, but in Europe Royal Bank of Scotland (RBS) is down more than 65%....

Do not buy bank common shares for anything but a quick scalp or trade. The overnight gap or event risk is far too great. The banking system is insolvent. Discovering which individual banks are not is a very dangerous game to play.

RBS May Post 28 Billion-Pound Loss as Crisis Deepens (Update4): "Royal Bank of Scotland Group Plc said it may post a loss of as much as 28 billion pounds ($41 billion), the biggest ever reported by a U.K. company, as the credit crisis worsens. The stock slumped as much as 71 percent.

Britain’s biggest government-controlled bank may post a full-year loss before exceptional goodwill impairments of as much as 8 billion pounds, Edinburgh-based RBS said in a statement today. In addition, the bank may write down the value of past acquisitions by as much as 20 billion pounds.

The loss would eclipse Vodafone Group Plc’s 22 billion- pound net loss in 2006. RBS has been crippled by its acquisition of ABN Amro Holding NV’s investment banking assets three months before the credit crisis began, a takeover Chancellor of the Exchequer Alistair Darling today called “disastrous.” The Treasury said today it may raise its stake in RBS as it announced the second British bank rescue in three months."