Is RBS bust and they are not telling us? Part two

Today I thought I try and concentrate on a more positive picture of Royal Bank of Scotland (RBS). First, the British economy is going to need a counterweight to the new domestic banking giant Lloyds Banking Group. A diminished or disappeared RBS is not what we want in competition terms.
RBS still has some massive assets. For instance, I have been a NatWest customer since student days and I have been impressed how cheery the Potters Bar branch has been despite the uncertainty.
The bank's foreign assets, especially the U.S ones, should be kept. I thought it was a mistake to sell the Chinese interests just because cash could be easily raised. The original deal made a lot of sense.
The RBS brand is well-known. I know scorn has been poured on Fred the Shred's sports sponsorship activities but again these made sense, if the aim was to become a global bank.
RBS chairman Stephen Hester has been here before. I suppose he did not personally sort out the aircraft leases of Abbey National but a lot of work was expended in sorting out the mortgage bank. He delivered up the bank to Banco Santander, which was possibly not in the national interest, but it did sort out the problem.

I think RBS is bust but nobody is telling us.

In the old days the Bank of England used to take its time sorting out a collapsed bank such as Johnson Matthey and in some cases it would make a profit. The official
scheme is for Royal Bank of Scotland (RBS) to keep on lending, sort out the toxic stuff, make profits and then reduce the British state holding in the bank to a more reasonable level. However, it might be that RBS is bust and would need the tender treatment of the Bank of England reserved for collapsed banks of yore.
For instance, if we are wondering about the future of the City of London, then we might have to let Edinburgh as a financial centre look after itself. I think it could survive the wounding up of RBS.
Would New Labour and the Scottish National Party (SNP) allow the dismantling of RBS, which is about to take a £500m hit on Cattle's according to the Sunday Telegraph, just to save a few billion? Obviously not but if it is £100bn, then there might not
be much choice. Perhaps, the regulator Financial Services Authority (FSA) could fudge
the issue for a few years.

If we think we've got problems with Fred the Shred!!

In the United States there is the ticklish $165m problem of retention bonuses for AIG, we have the smaller problem of the pension pot of Fred the Shred, who built and then destroyed Royal Bank of Scotland (RBS) with the help of a few others on the way. I am not that interested in the size of the pension pot but in the fact that business mogul and now new Labour minister Lord Myners ending up holding the pension pot baby.
I have read many an article extolling the gifts of Lord Myners and I remember seeing him in the City of London holding two enormous briefcases followed by a PA holding more stuff. That is how important he was. Now, Lord Myners has been left holding the baby and that is something British civil servants are there to prevent. However, in these rarified circles, everyone has amazing pensions, Fred the Shred, Lord Myners and especially the civil servants.
Lord Myners has found out the hard way about politics. He has to take the can for a relatively minor detail in the scheme of things while his political bosses can escape more major indiscretions. Lord Myners will have found he has a raft of political enemies and quite a few are probably located in the Treasury.

Apparently the £37bn package is not fully working.

Stocks are tanking all over the world. In the United Kingdom the £37bn bail out package for the three major banks of Royal Bank of Scotland (RBS), Halifax Bank of Scotland (HBOS) and Lloyds TSB is not fully working. The package has done really well to shore up the three banking groups but has been unable to get Libor down. This would free up lending.
I have just read a Forbes article and it mentioned the words "credit standards" and "weaker borrowers". This will see banks tighten up lending criteria on their clients both in the United Kingdom and in the United States. In the British housing market borrowers need a hefty deposit just to get going. The Halifax will be so much more cautious after suffering a near-death experience. While Northern Rock, despite its nationalised nature, is repossessing 32 homes a week.
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There is talk that the mortgage portfolios of Northern Rock and Bradford and Bingley could be merged, which would help reduce costs. It might help if the Halifax injected a part of its mortgage book as well. This could reduce competition concerns about its merger with Lloyds TSB.
Royal Bank of Scotland has got a massive balance sheet and it will probably take time to bring under control. I wonder if the government knows what it has got into. A smaller institution might be a safer one, which would not bode well for employees.

It looks pretty bad for share markets at the moment.

It looks pretty bad for share markets at the moment. Apparently, investors are not impressed by the rescue of Fannie Mae and Freddie Mac in the United States. Here, at home in good old Blighty I am worried that my modest portfolio is going to become
even more modest. The Daily Telegraph's Tracy Corrigan writes today that "The British banking system seems in a dreadful mess." She says that Alliance and Leicester is a drop in the ocean for Santander, the second biggest bank in
Europe.

I would recommend that bank shareholders lie down a bit and ponder why did they let those overpaid executives get away with it. There were siren voices all throughout
the past few years.
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I wonder what the main shareholders are planning to do with "Fred the Shred" at Royal Bank of Scotland. However, you have to hand it to RBS. The Scottish bank got its
capital raising/rights issue off first in the queue and out of the way. Now RBS is in a hurried phase of selling off unwanted assets.

PS. I really like Tracy Corrigan's articles.