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Angry UK savers forcing sale of Northern Rock

Via NY Transfer News Collective  *  All the News that Doesn't Fit
 
The Telegraph - Sep 16, 2007
http://www.telegraph.co.uk/money/main.jhtml;jsessionid=WRKLTFU5KMZUFQFIQMGCFFOAVCBQUIV0?xml=/money/2007/09/16/cnrock116.xml


Angry savers forcing sale of Northern Rock

By Iain Dey and Patrick Hennessy

Northern Rock, the crisis-hit bank under siege from thousands of
its customers, was preparing itself last night for a selloff, The
Sunday Telegraph can reveal.

One plan being worked on by City bankers was to divide the company's
L100 billion mortgage portfolio between the other major banks in
what would amount to a private-sector rescue of the lender.

In scenes not experienced for decades, police were needed to keep
the peace at branches across the country as increasingly angry and
desperate investors rushed to withdraw their funds.

However, despite many queuing from before dawn, scores were sent
away empty-handed when cashiers ran out of time to serve them.

The Northern Rock crisis sparked a wider political row as David
Cameron, the Conservative Party leader, pinned the blame on Prime
Minister Gordon Brown. Mr Cameron accused the prime minister of
presiding over a "huge expansion of public and private debt" during
his decade as chancellor.

Writing for The Sunday Telegraph, the Conservative leader declared:
"Though the current crisis may have had its trigger in the United
States, over the past decade the gun has been loaded at home."

Personal debt had trebled under Labour to L1.3 billion, Mr Cameron
added, as he called on ministers to explain the "chain of events"
that led up to the Bank of England's decision last week to prop up
Northern Rock.

The bank siege became a virtual stampede, despite repeated assurances
by Alistair Darling, the chancellor, that the lender remained
solvent.

However, sources close to the company said that if customers continued
to draw their deposits at the same alarming rate, Northern Rock
would be forced to break up.

Government and Bank of England officials are understood to be
preparing a public statement designed to reassure millions of
customers across the banking sector that their savings were safe.
Both are anxious to secure a "quick fix" of Northern Rock's woes
before the crisis spreads.

One plan under discussion in Whitehall is a co-ordinated rescue of
Northern Rock involving other banks and the Bank of England.

"If the run on deposits looks out of control, Northern Rock would
effectively be nationalised and put into administration so it could
be wound down," said an official.

A source close to Northern Rock said: "Things look really ugly. If
the share price falls heavily on Monday, then a fast break-up and
sale of the assets looks inevitable."

On Friday, following 10 days of discussions involving the chancellor,
Mervyn King, the governor of the Bank of England, and Sir Callum
McCarthy, the chairman of the Financial Services Authority, the
Bank of England offered Northern Rock an emergency credit line.

The reputation of Mr King, the Bank of England's highly respected
governor, has taken a battering over his handling of the crisis
involving the country's fifth-largest mortgage lender.

"Mervyn was being too clever," said one of his officials. "If he
had sounded a little less tough, banks might still be lending to
each other."

A Whitehall source said: "The governor has handled this badly. He
urgently needs to reassure savers."

Northern Rock's near collapse is the latest symptom of the squeeze
in world financial markets, which began in the United States late
last year when overstretched homeowners began to default on their
mortgage payments.

The credit squeeze has made it difficult for Northern Rock to raise
money to fund its business.

Although the Bank of England's deal ensures that Northern Rock has
more than enough money to honour all of its commitments to savers
and mortgage customers, its longer-term future remains in doubt.

"Queues outside our branches are not pretty viewing on TV," admitted
Adam Applegarth, Northern Rock's chief executive. "Has our brand
been damaged today? Well, of course it has."

He added: "It will be a long slog as an independent company to
rebuild that. Our share price has come off 30 per cent. You have
got to be more vulnerable [to a sale] if your share price has come
down. It's up to the bidders to make a bid."

With frantic manoeuvring continuing in Whitehall and the City,
police were called on to calm "boisterous" customers in numerous
branches, including Sheffield, Manchester, Glasgow, and London.

At least L1 billion was withdrawn from the bank by worried savers
on Friday -- 4 per cent of the bank's deposits. Branch staff said
they were even busier yesterday.

It is understood that attempts by the Bank of England to find a
single buyer for Northern Rock have failed. Instead, it is more
likely to be sold off piece by piece with possible buyers including
HSBC, Lloyds TSB, Barclays, Royal Bank of Scotland, and Halifax
Bank of Scotland.

Merrill Lynch, the investment bank, is expected to oversee the
auction, which could begin as early as next week.

                       ***

The Times of London - Sep 15, 2007
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2461206.ece


Bankers fear #12 billion run on Northern Rock

by David Smith, Grant Ringshaw, and Holly Watt 

Northern Rock, the mortgage bank rescued by the Bank of England
last week, could see as much as #12 billion -- nearly half its
deposits -- withdrawn by worried savers, experts say.

The run on the bank continued yesterday as police were called in
to keep the peace when angry and desperate customers besieged
branches across the country despite assurances from the Treasury
and Bank of England that their savings were secure.

Branches due to close at midday opened until 2 pm, but many hundreds
of people were still trying to get their money when the branches
closed and minor scuffles and arguments broke out.

Senior executives at Northern Rock spent yesterday at its Newcastle
head office monitoring events, but the lender is seen to have little
future as an independent entity. It held talks about a possible
takeover by Lloyds TSB before the crisis and is expected to be sold
off cheaply to a rival.

The bank, which saw #1 billion taken out by worried savers on
Friday and at least #500 million removed yesterday, is prepared for
a further flood of withdrawals when branches open tomorrow. Many
will be by customers with nearly L10 billion in postal accounts,
who can make withdrawals only by writing to the bank.

"The question is why wouldn't you take your money out and put it
somewhere else," said one senior banker, who predicted #12 billion
worth of withdrawals from the bank, which has #24 billion in deposits
from savers. "Though Northern Rock is solvent, a lot of people have
been gripped by the fear that they might lose some of their savings.
It is a huge problem."

One banking analyst warned: "It is not beyond the realms of possibility
that they could lose half of their deposit base, if not more."

"We have not had a decent run on a bank for many, many years. The
difference now is the Internet and that means you can get your money
out very quickly. Banking is about confidence and that has gone
from Northern Rock in a spectacular way."

This weekend there was criticism from backbench MPs and economics
experts over the authorities' failure to avert the crisis. Mervyn
King, the governor of the Bank of England, faces a grilling from a
parliamentary committee on Thursday.

Gavyn Davies, the former BBC chairman and Goldman Sachs economist,
questioned whether the authorities had been tough enough in monitoring
financial institutions. "Once we get into this sort of problem,
some sort of rescue becomes inevitable," he said. "Authorities need
to impose tougher risk controls when times are good. They have few
palatable choices during the meltdown."

Critics believe that regulators should have curtailed Northern
Rock's activities earlier. The former building society used to
account for 2 percent of the total mortgage market a decade ago,
but its share now stands at about 9 percent.

In the first six months of this year, it was responsible for one
in five new mortgages and offered generous loans -- up to 125 percent
of the value of the property -- to first-time buyers.

David Cameron, the Conservative leader, accused Prime Minister
Gordon Brown of having "presided over a huge expansion of public
and private debt without showing awareness of the risks involved."

Writing in a newspaper today, Cameron says: "Though the current
crisis may have had its trigger in the United States, over the past
decade the gun has been loaded at home."

Whitehall officials said the decision to prop up Northern Rock was
agreed by the Treasury, the Bank of England, and the Financial
Services Authority, the regulator. "We expected this, but there is
no need to panic," said a Treasury official. "It is a solvent
institution."

But George Mudie, a Labour MP on the committee that will question
the Bank of England governor, said: "I'm wondering where it leaves
Mervyn King in terms of credibility. Northern Rock"s business model
is similar to the private equity industry, which we have been looking
at, and there are now a lot of very worried people."

Michael Fallon, a Tory member of the committee, said: "It seems
very odd that Mervyn King was saying there would be no bailout.
Then he sets out how to do a bailout. And then he does the bailout.
We need to understand much more clearly how the decision was taken.

Yesterday, Professor Willem Buiter, a former member of the Bank of
England's monetary policy committee, became the first insider to
criticise the Bank of England's intervention. "A bailout has occurred
that should not have occurred and moral hazard has been injected
into the financial markets -- into the financial system -- that
wasn't necessary," he said.

However, other senior former Bank of England insiders rallied to
King's defence. Sir Alan Budd, who was chief economic adviser to
the Treasury during the last Tory administration, said: "My general
thoughts are that it is always easy to be wise after the event. I
think Mervyn King and his colleagues will have been reluctant to
offer assistance until they judged it was absolutely necessary."

Budd also predicted a cut in interest rates to help calm nerves.

Police were called to help bank staff deal with "boisterous customers"
at branches in Glasgow and Sheffield yesterday, advising at least
one store to close its doors. In Manchester staff handed queueing
customers chocolates to placate them.

Ernest Floate, a retired civil engineer whose pension was hit when
Equitable Life almost collapsed four years ago, was one of hundreds
of people at a branch in Kingston, southwest London, from 6 am
yesterday. "When I heard the news I just thought, 'Oh no, not
again,'" he said.

One couple from Islington, north London, tried to withdraw L250,000
in savings from the Golders Green branch. The wife, a retired nurse,
said: "I don't trust the bank. I feel I need to close the bank
account and take my money elsewhere."

Outside the Bolton branch, Janet Walker from Atherton said: "I've
completely lost confidence in Northern Rock and just want to get
my money out."
                                 *
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Major supply route to Baghdad vulnerable as British troops  leave Basra

Via NY Transfer News Collective  *  All the News that Doesn't Fit
 
The International Herald Tribune - Sep 16, 2007
http://www.iht.com/bin/print.php?id=7519131


Supply route vulnerable as British troops leave Basra

By Thom Shanker and Stephen Farrell

WASHINGTON: As British troops pull out of their last base in Basra,
some military commanders and civilian government officials in the area
are concerned that the transition could leave them and a major supply
route to Baghdad at greater risk of attack.

The route, a lifeline that passes fuel, food, ammunition and equipment
for the war, crosses desert territory that is home to rival militias
and criminal gangs. In interviews, Americans stationed in the southern
provinces and Pentagon planners say they are closely watching the
situation as the British pass security responsibility to local Iraqi
units.

There is little talk of increasing the U.S. troop presence along the
major supply route, called MSR Tampa, which links Baghdad and Kuwait.
But officials in Baghdad and Washington say other options include
increased patrols by armed surveillance aircraft, attack helicopters
and combat jets.

The significant attention being paid to security in southern Iraq came
as General David Petraeus, the senior allied commander, announced plans
in Washington last week to reduce U.S. troop presence by five combat
brigades across the country by next summer.

Petraeus, in an interview last week, said he was confident that
continued allied and Iraqi patrols along the supply routes, and a
growing Iraqi security presence in the south, would guarantee
protection of the desert roadways.

But the general, en route back to his headquarters in Baghdad, also
said that he would stop in London, where "we are going to talk tasks"
and that "among the tasks is the need to continue
line-of-communications security, certainly."

Petraeus said the security mission in three of the four provinces in
southern Iraq already had passed to Iraqi forces with no discernible
impact on the supply routes. And he said bypass routes now being used
allow convoys to avoid some trouble areas.

The British pulled out of their last base in central Basra on Sept. 3,
and are set to cut their force to 5,200 from 5,500. The remaining
British troops are now stationed at Basra International Airport,
outside the city.

They are still responsible for security across Basra province until it
is transferred to the Iraqi government.

British commanders insist that their plans "go up to 2009," and that
even after they transfer Basra they will continue to meet all their
obligations, including protection of the Tampa supply route.

Basra is the last of four British-administered provinces in the south
to pass into Iraqi control.

Major Mike Shearer, a British military spokesman in Basra, said that
during the transfers the allied forces signed a memorandum of
understanding with each province that enabled foreign troops "to
maintain freedom of maneuver and the right to transit" along major
supply routes.

Brigadier James Bashall, commander of the British 1st Mechanized
Brigade in Basra, outlined the likely chain of events for the British
troops during the transition.

"Our strategy has always been that it will transition, enable
self-reliance, come out of the town, we will deliver provincial Iraqi
control and then we will sit up here and we will support them where we
can in an 'overwatch' posture," he said during an interview in July.

He defined "overwatch" as a situation in which Iraqi soldiers and
police officers are in day-to-day charge of security, but that British
troops would intervene "in a limited sense" if the Iraqis asked.

According to officers at the U.S. 3rd Army forward headquarters in
Kuwait, which oversees the vast shipments of supplies flowing north
into Iraq, on any given day more than 3,000 vehicles are on the road in
convoys hauling food, fuel, ammunition and other equipment.

Although far more vulnerable to attack by roadside bombs and ambush,
land convoys are cheaper than hauling the same volume of goods by air.
For comparison, on any given day the 3rd Army headquarters launches
about 110 airlift missions, moving about 3,200 people and 400 pallets
of supplies.

At the U.S. military headquarters in Baghdad, Lieutenant Colonel James
Hutton, a spokesman for the Multinational Corps-Iraq, said military
statistics showed "a recent drop in both the number and effectiveness
of attacks on these convoys." The most significant threat in the south
continues to be roadside explosives, he said.

Hutton said commanders attributed this decline in attacks to
"aggressive patrolling," and he added that the recent call for a
cease-fire by Moktada al-Sadr, the Shiite cleric whose Mahdi army
militia is the biggest in Iraq, might "lead to further reductions of
violence in the southern provinces."

But Iraqis in the Basra region fear that the Iraqi security forces are
too heavily infiltrated by the militias to ensure order in the city, a
vital oil hub where smuggling, banditry and carjacking have long been a
way of life for powerful criminal gangs.

Thom Shanker reported from Washington, and Stephen Farrell from
Baghdad. Ali Hamdani contributed reporting from Basra.

(c) 2007 The International Herald Tribune 


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Brits and Saudis finally sign #4.43bn Eurofighter deal

Via NY Transfer News Collective  *  All the News that Doesn't Fit
 
sent by Tim Murphy (activ-l)


The Guardian - Sep 18, 2007
http://politics.guardian.co.uk/foreignaffairs/story/0,,2171356,00.html

Britain and the Saudis finally sign #4.43bn Eurofighter deal

By Richard Norton-Taylor

After years of delicate negotiations, nearly thwarted by bribery
allegations, Britain and Saudi Arabia announced yesterday they had
signed a deal for the sale of 72 Eurofighter Typhoon fighter aircraft
for #4.43bn.

The terms of the contract - called Salam, Arabic for peace - and the
total costs involved are confidential, the Ministry of Defence
insisted. However, officials made it clear the sum is likely to be much
higher than the #4.43bn published figure, which relates only to the
cost of the planes, not to upkeep, spares and training.

The MoD said the agreement, signed on September 11 but disclosed
yesterday, "follows plans outlined in December 2005 to establish a
greater partnership in modernising the Saudi Arabian armed forces". It
said Project Salam built on a "long and successful relationship between
the UK and Saudi Arabian governments and their armed forces". The two
governments, it said, "shared key objectives on national security and
actions to combat global terrorism". Saudi Arabia was an "important
strategic ally for the UK in the Middle East".

The deal follows the #21bn al-Yamamah contract negotiated by the
Thatcher government and involving the sale of BAE Systems Tornado jets
and medical equipment.

Opponents of both deals say they breach the government's arms export
guidelines, which say sales should not be approved for countries which
abuse human rights.

A bribery investigation by the Serious Fraud Office into earlier
dealings between Britain and Saudi Arabia was dropped last year after
Tony Blair and Lord Goldsmith, the then attorney general, said it would
harm the UK's national security interests. The SFO spent #2m and two
years amassing documents which showed BAE had transferred #1bn to
Washington accounts controlled by Prince Bandar of Saudi Arabia, and
another #1bn to Swiss bank accounts linked to agents for Saudi royals.
The records include classified MoD files detailing government
involvement in the al-Yamamah arms deal payments.

The Saudis and BAE say the payments were above board. But Mr Blair said
the Saudis privately threatened to cut intelligence links unless the
investigations were halted. He said this might increase the risk of
British citizens being murdered in al-Qaida terrorist attacks.

The US justice department said this summer that it had opened an
investigation into allegations that BAE had funnelled money to Prince
Bandar bin Sultan, a former Saudi ambassador to the US.

Prince Bandar has denied he profited from the 1985 al-Yamamah deal and
BAE has denied allegations that it offered bribes in return for
contracts.

The SFO is examining BAE's weapons sales to other countries following
separate accusations that it paid kickbacks. BAE has appointed Lord
Woolf, former lord chief justice, to lead a committee to review its
policies and processes. The government has blocked attempts by MPs to
investigate the affair.
                                 *
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