Government reveals change to credit card interest repayments that could save customers £500m a year

Last updated at 9:45 PM on 13th March 2010

Crucial change: Credit card interest repayments will see them applied to the most expensive debt
The Government has persuaded credit card providers to change the way they charge interest on uncleared bills - a move that could save nine million cardholders £500million a year in interest. Gordon Brown and Business Minister Keith Brennan will announce the deal with card issuers tomorrow as part of a series of measures to ensure indebted cardholders are treated more fairly. At present, most card companies treat a cardholder’s monthly repayments as paying off their cheapest outstanding debt, leaving the most expensive part of their debt accruing often sky-high charges. An exception is Nationwide Building Society. For example, a borrower may use a card to withdraw cash. This
attracts higher charges than uncleared debt resulting from spending.
But when monthly repayments go to pay off a borrower’s debt, these cash
amounts are the last to be cleared.
A poll among consumers conducted as part of the Government’s
investigation into credit cards launched last year indicated that most
users were unaware of this industry practice.
Now the Government has secured a voluntary agreement from card
companies that repayments will be applied to the most expensive debt.
It hopes to follow this with legislation as ’soon as possible’.
Other measures to be confirmed tomorrow include a requirement for
card issuers to set a higher minimum monthly repayment amount for all
new customers, encouraging cardholders to repay rather than accumulate
debt.Minimum repayments are typically set at two per cent of the outstanding debt, but card issuers have agreed to three per cent.

There will also be measures to stop struggling cardholders being hit
by further interest rate rises or being given higher credit limits as
an encouragement to spend more.
Card debt stands at £54billion with 32million people holding more than 73million cards.
Although the Bank of England base rate is 0.5 per cent, credit card interest rates are still close to 20 per cent.
The Prime Minister has said that he wants ‘to make banks and credit
companies behave responsibly and act fairly’ and put an end to the
’sharp practices that sting so many credit card holders‘.

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‘Apartheid’ call system filters out poor Barclays clients

By
Daily Mail Reporter
Last updated at 3:04 PM on 13th March 2010

Queries: Barclays customers with low credit approvals will be put through to Indian call centres
Thousands of struggling bank customers will be connected to Indian call centres while more affluent account holders will get one in Britain.
A new banking phone system will identify those with low credit approvals and put them through to India.
Those who have considerable savings or a credit limit that allows them to borrow around £500 from the bank or buy its products will be connected to a British operator.
Bosses hope the new line will filter out their customers who do not have the money to buy the bank‘s products so their British staff will potentially be able to sell to every caller.
Barclays is testing the system and call centre staff have been briefed that it will start on April 1.
One Barclays sales executive said: ‘Before we’ve had people ringing up who have been overdrawn, so we haven’t been able to sell them anything.’
Critics say the bank is only interested in people with cash and not the genuine concerns of millions who have queries about the state of their finances.Eddy Weatherill of the Independent Banking Advisory Service said: ‘This is an apartheid system and certainly preferential to their wealthier customers.

‘This is not intended to give the best advice, but a chance to make more money.’
Barclays was one of the few banks to not borrow from public funds during the banking crisis last year.
A spokesman said: ‘Customers will speak to different teams in different locations depending upon the nature of their query.’

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Free banking, forget it! More current accounts now charge a fee

By
Becky Barrow and James Coney
Last updated at 5:52 PM on 13th March 2010

The number of current accounts which charge a fee has nearly doubled in five years, research reveals today.
It fuels fears that the era of free banking is rapidly disappearing, with customers forced to pay up to £25 a month for a current account.
More than 40 per cent of current accounts now levy a fee. Of the 104 current accounts on offer, a record 44 charge a fee, compared with just 24 five years ago.
Many current account holders have found their fees have drastically increased over the past five years
The research, from the financial information firm Moneyfacts,
includes all standard current accounts, but excludes student or
graduate accounts and ‘basic’ current accounts which do not permit
overdrafts and other standard services. The fee-charging accounts, also known as ‘packaged’ accounts,
lure customers with perks such as travel or mobile phone insurance, car
breakdown cover and card fraud protection.

But many of the perks may be pointless, such as breakdown
cover for customers who do not own a car, or over-priced, such as
travel insurance which is cheaper if bought separately. Up to 6million people have some type of ‘packaged’ account, with average fees of around £12 a month. This
week the Financial Services Authority raised its fears about this type
of account, saying many people would be ‘better off’ without one. Yesterday experts predicted that free current accounts will
continue to be withdrawn as banks, under pressure to cut back on their
charges, see them as a new moneymaking scheme. In many cases, customers have been moved on to the fee-paying
current accounts without being told, spotting the monthly fee only when
they check their statements.
The number of current accounts which now charge a fee has double in the past five yearsMichelle Slade, a personal finance expert from Moneyfacts, said she had personal experience of a customer paying for a fee-charging account but not needing the perks.
She said: ‘My grandfather found himself upgraded to the Lloyds Platinum account, charging £17 a month.
‘But he never travels abroad so he did not need the travel insurance, and he already had breakdown cover with his car insurance.’
A Lloyds spokesman insisted its accounts offer ‘good value for money‘. She added: ‘They can work out cheaper than buying the package of benefits available within the account individually.’
Eddy Weatherill of the Independent Banking Advisory Service said: ‘Packaged accounts are great for the banks because they bring in a guaranteed amount of money every month. But there is a sleight of hand going on with them.
‘They are all bells and whistles. It doesn’t cost the banks anything because the value of the so-called perk is nothing.’

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Union calls on BA to end ‘needless war’ with staff and reinstate pay offer in hope of avoiding Easter strikes

By
Ray Massey and James Chapman
Last updated at 1:40 PM on 13th March 2010
Union bosses today urged British Airways to end the ‘needless war’ against its own staff and reinstall an offer that could halt crippling strikes and Easter holiday chaos.Unite warned of the ‘dangerous’ folly of using untrained staff to crew plans, noting that just two days ago a BA crew in New York proved their worth by saving a man’s life after he collapsed at the airport.BA cabin crew are set to stage a ‘cynical’ three-day walkout on March 20, 21 and 22 and another four-day strike from March 27-30, then more in April.Airline chief executive Willie Walsh has accused Unite of trying to ‘destroy’ the airline and says it is living in ‘time warp’.Writing in today’s Mail, he said the strikes are another ‘cold-blooded threat’ to the travel plans of hundreds of thousands of passengers.But Len McCluskey, assistant general secretary of the union, hit back today and urged BA to reinstate its new offer to see if strike action can be avoided.
Strike! (From left) Unite officials Steve Turner, assistant general secretary Len McCluskey and Brian Boyd at yesterday’s press conference where they announced the industrial action
‘BA’s managers must pause and think hard about what they risk losing if they continue with this needless war against its own workforce,’ he said.’Once again, I urge Mr Walsh to put yesterday’s offer back on the table. Allow your workers a voice. Trust them to make the correct decision on their futures and bring stability back to this airline.’

In November, BA cut the number of cabin crew on long-haul flights and brought in a two-year pay freeze from 2010. Its staff are generally the highest paid in the industry. But it is understood BA’s 11th-hour offer yesterday would have meant no reduction in pay and reversed reduction of one crew member for some long-haul flights.
BA boss Willie Walsh has tried to face down the strikers in previous disputesIt was withdrawn after strike dates were announced because the airline said it had been condition on industrial action not going ahead. Mr Walsh has organised a ‘phantom airline’ of 6,000 volunteers, including 1,000 pilots retraining as cabin crew. ’If Unite thinks a strike will ground this airline, it will be disappointed. The flag will continue to fly,’ he says.But Mr McCluskey today used the example of the New York rescue to argue that it is a ‘dangerous folly’ to use untrained strike-breakers as crew.Staff saved the life of the 42-year-old man by giving him mouth-to-mouth and CPR while paramedics travelled to the scene.’Time and again we hear of how BA cabin crew pull out all the stops for those in their care. The lazy view that these men and women are “mindless militants” could not be further from the truth,’ Mr McCluskey said.’Even in the face of vicious intimidation from their company, they remain dedicated, caring and exceptionally skilled professionals who feel passionately about BA and about defending what it stands for world class care for passengers.’Unite’s deputy general secretary, Jack Dromey, added: ‘My strong advice to him (Mr Walsh) is to cool the rhetoric and to get back around the table. Our door is open at any time. There’s no question but that our team stand ready to negotiate a just solution.’But it takes two to negotiate a just solution and that’s why my advice to Willie would be to tone down some of the things he has been saying in the public arena and put the best interests of the passengers first.’The strikes appear deliberately timed to cause maximum misery for
families. Travel firms point out the action will hit the start and
finish of the Easter holidays, principally the weekend before Easter,
when many start their breaks, and an earlier weekend when tens of
thousands have booked cheaper flights.
Strike one: How Heathrow Terminal 1 check-in desks looked in 2006 when staff at British Airways staged a walkout
Further strikes are planned from April 14 if the dispute over pay cuts and changes to crewing levels remains unresolved.

They would affect up to five days of school holidays in many areas
of Britain, threatening to leave families stranded away from home.

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Happy Easter: BA union militants wreck getaway plans for thousands of families by targeting strikes at holidays

By
Ray Massey and James Chapman
Last updated at 10:24 PM on 12th March 2010

Millions of British Airways passengers are facing Easter holiday
chaos after militant union leaders announced a ‘cynical’ series of
crippling strikes.
Gordon Brown - who failed to condemn the walkouts - was under
growing pressure over his links to the unions that bankroll the Labour
Party. BA cabin crew will stage a three-day walkout on March 20, 21
and 22, followed by a four-day strike between March 27 and March 30 and
more in April.
Strike! (From left) Unite officials Steve Turner, assistant general secretary Len McCluskey and Brian Boyd at yesterday’s press conference where they announced the industrial action

BA boss Willie Walsh has tried to face down the strikers in previous disputes
The strikes appear deliberately timed to cause maximum misery for
families, and chief executive Willie Walsh accused the union of trying
to ‘destroy’ his airline. Travel firms point out the action will hit the start and
finish of the Easter holidays, principally the weekend before Easter,
when many start their breaks, and an earlier weekend when tens of
thousands have booked cheaper flights. Further strikes are planned from April 14 if the dispute over pay cuts and changes to crewing levels remains unresolved.
They would affect up to five days of school holidays in many areas
of Britain, threatening to leave families stranded away from home.
Easter is one of the busiest periods of the year, with more than a million getting away by plane.
Last Easter, nearly 300,000 passengers flew from Heathrow, 270,000
from Gatwick, about 200,000 from Stansted and 200,000 from Birmingham.
By last night, it was almost impossible to book an alternative
flight on strike-hit routes because BA, tour operators and worried
passengers had booked nearly all after the strike announcement. Last night BA chief executive Willie Walsh declared: ‘We are not going to let the Unite union destroy this great airline.’
Writing for today’s Daily Mail, he said cabin crew had been
‘cynically misled’ by union leaders who announced strike dates despite
a generous new offer from the firm.
Strike one: How Heathrow Terminal 1 check-in desks looked in 2006 when staff at British Airways staged a walkout
In November, BA cut the number of cabin crew on long-haul flights
and brought in a two-year pay freeze from 2010. Its staff are generally
the highest paid in the industry. But it is understood BA’s 11th-hour offer yesterday would have
meant no reduction in pay and reversed reduction of one crew member for
some long-haul flights. ‘If Unite thinks a strike will ground this airline, it will be disappointed. The flag will continue to fly,’ Mr Walsh said.

Mr Walsh has organised a ‘phantom airline’ of 6,000 volunteers, including 1,000 pilots retraining as cabin crew.
Labour is facing a 1970s-style ’spring of discontent’ just as
it tries to persuade voters to give it a fourth term in power, with
unions also threatening to bring the rail network to a halt over Easter
with the first national strike action in 16 years.
Last night, in words which echoed union militancy of the
1970s, Unite’s assistant general secretary Len McCluskey said he would
call on ‘the whole of the labour movement at home and abroad to stand
with us’.
Unite has handed £11million to Labour over the last three years and is bankrolling the party’s election campaign.
Downing Street said the Prime Minister hoped a negotiated
solution to the dispute could still be found, but a spokesman added
pointedly: ‘The Prime Minister has very good relationships with all the
unions.’ Challenged over the strike plan at a Downing Street news conference, Mr Brown said merely that he was ‘disappointed’.
‘It’s in my view essential that the parties continue to talk now
even at this eleventh hour,’ he said. ‘I hope they will do so but I
remind them of the danger and risk to the British economy of disruptive
strikes going ahead.’
Shadow Chief Secretary to the Treasury Philip Hammond accused
ministers of failing to condemn the strike because Unite was a major
Labour donor.
‘Once again, the Prime Minister is putting his own narrow political interests above those of the British people,’ he said.

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Bonus tax ‘won’t be used to cut deficit’: Windfall from bankers to go on more spending

By
James Chapman and Sam Fleming
Last updated at 10:01 PM on 12th March 2010

Alistair Darling is expected to use an expected £2bn in extra revenue from the City’s ’supertax’ for more public spending
Labour will refuse to acknowledge the ‘inevitable’ need for tax rises or use a windfall from bankers’ bonuses to pay down the deficit in this month’s Budget. Alistair Darling is planning to use an expected £2billion in extra revenue from the 50 per cent City ’supertax’ for more public spending, according to Whitehall sources. But economists say the approach is ‘irresponsible’ and that tax rises equivalent to 3p on income tax are the only way to rebuild the shattered public finances. The Chancellor will reject arguments from the Conservatives and LibDems that he should make a ‘downpayment’ this year on the £178billion black hole to prevent a catastrophic collapse in international confidence in Britain. Ministers believe that tax increases already announced  -  including a one penny hike in National Insurance and a new 50p top rate of tax  -  will be enough to help halve the deficit over four years. Economic growth and eventual public spending cuts would come before tax rises, Foreign Secretary David Miliband said yesterday. He added that the Government will save £10billion over the next five years from lower than forecast levels of unemployment. ‘Let me just say, we’ve set out the tax rises we are committed to: the 50p rate, the 50p rate on bankers’ bonuses,’ he said. ‘We’ve said very clearly that when it comes to reducing the deficit that about one third of the deficit will be reduced through tax rises and about two thirds through spending reductions.’ His remarks came after Treasury Chief Secretary Liam Byrne caused consternation by appearing to rule out any further tax rises over the next four years if Labour wins the General Election. Among other measures expected to be revealed in the March 24 Budget are a Government- sponsored fund to invest in infrastructure such as roads and rail. The Treasury is also expected to stick close to its Pre-Budget Report forecasts of 1.25 per cent growth in 2010 and 3.5 per cent in 2011. Mr Darling has been resisting pressure from Gordon Brown for a bigger fiscal giveaways, focusing instead on shoring up market confidence in the public finances. The Institute of Fiscal Studies says Britain will have to add 3p to income tax or the equivalent. Economist Michael Saunders, of Citigroup, warned that other European countries with huge deficits including Greece, Italy, Portugal, Ireland and Spain are all taking much tougher action than Britain. ‘Very few countries face a bigger fiscal challenge. ‘The UK’s existing fiscal consolidation plans lack credible detail and are far less aggressive than other high- deficit countries,’ he said. Howard Wheeldon, senior strategist at BGC Partners, added: ‘The remarks yesterday by Mr Byrne are as appalling as they are almost impossible to believe. Such remarks can in my view only be seen as completely irresponsible.’ The LibDems last night unveiled their slogan for the general election –which turned out to be a hybrid of Labour and Tory messages. The party launched its campaign under the banner: ‘Change that Works for You. Building a Fairer Britain.’ It appeared to be a mixture of the Conservative slogan, which urges people to ‘Vote for Change’, and Labour’s, which promises a ‘Future Fair for All’. One dismayed LibDem activist said at the launch in Birmingham: ‘It is BOGOF - buy one get one free.’ Another admitted it was ‘ungainly and awkward’ But party sources said it was the slogan picked out as the favourite ‘by a mile’ during talks by focus groups.

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Greece gets a £22bn bailout to help stabilise vulnerable euro

By
Karl West
Last updated at 10:05 PM on 12th March 2010

Greece finally won a £22billion bailout from the eurozone countries last night to help stabilise the vulnerable single currency. Germany is understood to have finally bowed to pressure, despite facing huge internal resistance to the drastic measure. Officials in Brussels claimed British taxpayers would not have to contribute to the rescue deal but critics said it was obvious such a large bailout would have impact around the European Union bloc - including the UK.
A riot police officer tries try to avoid a petrol bomb during clashes in central Athens yesterday
Finance ministers of the 16 member states that use the euro, including Greece, are preparing to finalise details of the rescue on Monday. Brussels sources said eurozone countries have agreed a set of ‘co-ordinated bilateral contributions’ in the form of loans or loan guarantees to Greece that will help ease the country’s financial crisis if Athens cannot re-finance its soaring debts. The aid package will go a long way towards nursing Greece’s finances back to health, but some European countries believe Athens could need up to £50billion by the end of the year.

Fears of a Greek default this year have undermined the euro, putting the Greek government under intense EU pressure to introduce austerity measures to address a huge budget deficit. In response, rioters have taken to the street as the country has been gripped by a series of national strikes. Earlier this week hundreds of masked and hooded youths punched and kicked motorcycle police in Athens as riot police responded with volleys of tear gas and stun grenades. Last night top level sources in Brussels told the Guardian a deal had been reached. One said: ‘There have been quite intensive preparations under the eurogroup. We have the ways and means to do it. ‘It will be a co-ordinated approach of bilateral contributions [between EU governments]. ‘A bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context.’ The latest development comes as EU economic commissioner Olli Rehn told German media the EU would ‘lose international credibility’ if it allowed Greece to collapse.

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British firm Ernst & Young accused of ‘professional malpractice’ over $700billion collapse of Lehman Brothers which triggered world recession

By
Daily Mail Reporter
Last updated at 10:29 PM on 12th March 2010

One of Britain’s biggest companies could face legal action over the $700 billion collapse of Lehman Brothers, a scathing report revealed today.Accountancy giant Ernst & Young failed to challenge the book-keeping ‘gimmicks’ the American investment bank was using to stay afloat, according to report author Anton Velukas.  He concludes that the British firm been ‘negligent’ and that Lehman could pursue claims against the firm for ‘professional malpractice’.It is also revealed that one of the UK’s leading law firms gave Lehman the green light to use the accountancy gimmick - known as ‘Repo 105′ - in the first place.Linklaters provided an opinion letter which allowed the US investment bank to exploit the accountancy loophole and ‘lose’ $50 billion from its balance sheet.New York lawyers had previously refused to approve the procedure. The collapse of Lehman triggered a catastrophic worldwide recession.
Accused: Protestors hold signs behind Richard Fuld, former chairman of Lehman Brothers, as he takes his seat to testify at a Congressional hearing in 2008
In 2008, just before Lehman filed for bankruptcy with $700billion
(£461billion) in assets, the report reveals it transferred
$50.38billion (£33.2billion) in a Repo 105, effectively improving its balance sheet. 
There is no suggestion that Linklaters acted either
illegally or unethically.Mr Valukas, who was appointed as examiner
by the judge handling Lehman’s bankruptcy, said: ‘Unable to find a
United States law firm that would provide it with an opinion letter
permitting the true sale accounting treatment under United States law,
Lehman conducted its Repo105 programme under the aegis of an opinion
letter the Linklaters law firm in London.’
Claims could also be based on shortcomings in Ernst & Young’s
probe into a whistleblower alert and reviews of Lehman’s public filings.Ernst & Young said in a statement: ‘Our last audit of the company was for the fiscal year ending November 30, 2007. ‘Our
opinion indicated that Lehman’s financial statements for that year were
fairly presented in accordance with Generally Accepted Accounting
Principles (GAAP), and we remain of that view.’Questions about
Lehman’s accounting had been raised in the months before its
bankruptcy, notably by hedge fund manager David Einhorn, who thought
the bank was not taking proper write-downs.
A Lehman Brothers employee drowns his sorrows on the day the investment bank collapsed in September 2008The official investigation also found Lehman used accounting
gimmicks and had been insolvent for weeks before it filed for
bankruptcy.
Management’s decisions can be questioned and the
firm’s valuation procedures for its assets may have been wanting - but
those responsible were not liable for the firm’s collapse, the 2,200-page report concludes.
However, Lehman could have claims against former
chief executive Dick Fuld and chief financial officers Chris O’Meara,
Erin Callan and Ian Lowitt for negligence or breach of fiduciary duty,
he added.
Mr Valukas did not find that
Lehman’s directors had acted illegally, but said that Wall Street paid
a large role in causing an acute liquidity crisis at Lehman in its
final days.
The examiner suggested Lehman may also be able to
pursue claims against banks like JPMorgan and Citigroup for taking some
$16billion (£10billion) in collateral out of Lehman’s coffers as it
struggled to stay afloat.’REPO 105′: ACCOUNTING GIMMICK THAT MADE THE BANK LOOK HEALTHYLehman was dependent on raising hundreds of billions of dollars of short-term finance every day just to survive.This cash was raised on so-called ‘repo’ markets where assets can be swapped for short-term loans.Because money raised in this way has to be repaid within days, the assets are not deemed to have left the banks‘ balance sheets.However, under the terms of ‘repo 105′ Lehman could report a reduction in assets if it exchanged those assets for funds at a conversion rate of 105 to 100.Put simply, assets with a value of $105 would be swapped for loans at a value of $100, meaning that $105 of assets could be removed from the balance sheet when reporting group financial results.The examiner concluded that the use of Repo 105,
which dated back to 2001 and was used without telling investors or
regulators, gave the appearance that Lehman was reducing its overall
leverage levels in 2008 when in reality it was not. Lehman
used the gimmick to temporarily remove $50billion (£33billion) of
assets from its balance sheet in 2008, according to the report.A lawyer for Lehman’s former chief executive said that Fuld ‘did not know what those transactions were’.'He
didn’t structure them or negotiate them, nor was he aware of their
accounting treatment,’ Patricia Hynes said, noting that the firm’s
outside auditor and legal counsel had not raised any concerns about the
transactions with him.The examiner also said a claim could be
based on Ernst & Young’s failure to abide by professional standards
relating to communications with Lehman’s audit committee. The examiner’s report could provide ammunition for future legal claims that would let Lehman recover more funds for creditors. Lehman’s lead bankruptcy lawyer, Harvey Miller, said in court on Thursday that the unsealing of the report came at an ‘opportune time’ as the company is in the process of coming up with a reorganisation plan that will detail how the bank will complete its bankruptcy.The report, which details the harrowing days of September 2008 before Lehman filed the largest U.S. bankruptcy in history, was compiled from thousands of documents and emails and interviews with such key players in government and Wall Street as Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, JPMorgan CEO Jamie Dimon, British authorities and Lehman executives.The bankruptcy judge overseeing the case, James Peck, said the report ‘reads like a best-seller’.The examiner said Lehman could be found to have been insolvent as far back as September 2, 2008, even though it did not file for bankruptcy until September 15.’Lehman’s small margin of equity relative to assets meant it did not need much loss in asset value to render it insolvent,’ the examiner wrote, adding that Lehman had an unreasonably small amount of capital to be operating its business beginning in the third quarter of 2008.During that period, Lehman entered into new and more onerous collateral agreements with rival Wall Street banks - agreements that the examiner suggested could be challenged because Lehman was technically insolvent.Indeed, the report details the increasingly aggressive collateral calls that JP Morgan made in the days before Lehman’s September 15, 2008, bankruptcy filing.
$6000 billion collapse: The exterior of the world headquarters for Lehman Brothers is seen in New York
On September 11, for example, JP Morgan executives met and decided that the collateral Lehman had posted ‘was not worth nearly what Lehman claimed it was worth,’ the report says. The next day, J.P. Morgan asked for an additional $5 billion (£3.2 billion) in collateral.About that time, J.P. Morgan discovered that one of the securities posted by Lehman, an asset-backed security known as Fenway, was ‘worth practically nothing as collateral’.In the report, the examiner raised questions about whether JPMorgan had acted ‘in good faith’ but also detailed an interview in which Dimon said he told Fuld in every conversation ‘that he did not want to harm Lehman.’The examiner found Lehman could have potential claims against JP Morgan, which is still holding about $6.9billion (£4.5billion) of Lehman’s collateral, and Citi in connection with collateral demands and guaranty agreements in Lehman’s final days that hurt its liquidity.’Lehman’s available liquidity is central to the question of why Lehman failed,’ Valukas wrote in the report.
End of an era: A worker leaves the offices Lehman Brothers in the Canary Wharf, London after the bank was made bankrupt in September 2008. Thousands of workers lost their jobs
A Citi representative said that while the firm was still going through the report ‘the examiner has not identified any wrongdoing on Citi’s part.’ JP Morgan declined to comment.The report described how Bank of America executives backed away from a deal to buy Lehman, lacking U.S. government aid.Bank of America’s due diligence team concluded Lehman’s commercial real estate valuations were too high, and identified $65billion (£43billion) to $67billion (£44.2billion) in assets the bank ‘would not have wanted at any price’, the examiner’s report states. Many of Lehman’s assets could not even eligible to be used as collateral by a Central Bank, according to the report.Valukas found that Lehman could make claims on assets held by Lehman affiliates that were transferred to Barclays Plc when the British bank ultimately bought Lehman’s core U.S. brokerage after it filed for bankruptcy.But the examiner said the value of those assets, such as office equipment and customer information, ‘may not be material.’Lehman’s estate has sued Barclays, alleging that it reaped a secret $5billion (£3.3billion) profit from its rushed purchase of the company’s U.S. brokerage. Lehman is also entangled in litigation with Bank of America.Barclays declined to comment and a Bank of America spokeswoman said the company would have no comment on the Lehman examiner’s report until its staff finished reading the document.Under U.S. bankruptcy law, an examiner can be appointed in any bankruptcy case if someone requests it and the court finds the company’s debts exceed $5million (£3.3billion). Lehman had over $700billion (£461billion) in assets when it filed for bankruptcy.

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The regulatory authorities - Stock Exchange, FSA, etc - must write to ALL banks and ask them to confirm the accounting practices especially with regard to off-balance sheet transactions and request that financial statements be re-drafted and confirm that all solvency ratios and test remain valid?
- SH, Leeds, 12/3/2010 13:13

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J P Morgan and Citibank will get away with it because they are the ones really in control.
Between them J P Morgan, Citibank, Goldman Sachs, Wells Fargo and Bank of America control over 200 trillion dollars of derivatives.
There are no free markets, just interventions by organisations like these.
America, the worlds largest economy had a GDP of just over 14 trillion dollars in 2009 and government spending of just over 3 trillion dollars.
Obama and all the worlds governments are just little puppets whose strings are pulled by the likes of J P Morgan and crew.
- Tim, Northants, 12/3/2010 12:24

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Those chief executives, who fiddled the accounts will have got massive bonuses though wont they?
- sandy, outer space - thank God!, 12/3/2010 12:17

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It seems there are lies, damn lies and creative accountancy -but only the latter is not likely to get you into criminal trouble.
- DG, Cheltenham, 12/3/2010 12:10

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“Lehman employed off - balance sheet devices”
Which is EXACTLY what Gordon Brown has been doing for the past 13 years with PFI/PPP.
- AW, Surrey, 12/3/2010 11:45

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” Lehman Brothers used accounting gimmicks and had been insolvent for weeks before it filed for bankruptcy in September 2008 with more than $700 billion (£461 billion) in assets, an official investigation has found. ”
Is this kind of headline lying in wait for whichever Party takes control of the UK in May?
- Philip, Bankrupted Britain, 12/3/2010 11:43

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Millions face 10% death tax: Middle class hit hardest by Labour plan to fund elderly care

By
Kirsty Walker and Daniel Martin
Last updated at 10:08 AM on 11th March 2010

Health Secretary Andy Burnham announced the new plans yesterday
Millions of middle income families are facing a 10 per cent ‘death tax‘ levy to pay for social care of the elderly.
Health Secretary Andy Burnham yesterday said he wanted to see those with bigger houses pay more to provide for the old.
Up to 17million families would be forced to pay the tax - whether or not their loved one had required any care.
A 10 per cent tax raid would leave the relatives of middle income earners with estates worth £500,000 with a £50,000 bill when their relatives die. This would be on top of an inheritance tax bill of £70,000.
Critics condemned the plans - saying they would penalise those who had saved all their lives. The Tories warned the true tax bill could be even higher, because a 10 per cent levy would raise £4.5billion - only a third of what is needed to pay for caring for the elderly.
Mr Burnham will set out proposals to tackle the problem of an ageing population in a highly-anticipated White Paper in three weeks. But yesterday he unveiled the three main options for raising money: a 10 per cent levy to be paid from an estate on death; means-tested amounts to be paid across the whole of retirement; or, the option of deferring pensions for three years to pay into a new National Care Service.
In return, every person over 65 would be guaranteed a free residential care home place if  they needed it and any home help before that is necessary. 
Up to 17million families would be forced to pay the tax, regardless of whether their loved one had required any social care. (Posed by models)
The average 65-year-old today can expect to need care costing £30,000 - with the burden on women averaging £40,400 and men £22,300.
Senior Labour sources confirmed that a compulsory 10 per cent levy, if introduced, would be capped at £50,000 on estates worth £500,000 or more.
The payment would be on top of inheritance tax, which comes in at 40 per cent on estates worth more than £325,000. 

Although details have not been worked out, it appears there would be no lower threshold before the ‘death tax’ kicked in.
The payment would be ‘per estate’, not per person - meaning a husband and wife would only pay once - probably after the second death.
There were concerns that some would be able to avoid paying the death tax in the same way that many dodge paying inheritance tax, such as by putting money in a trust for their children.
At the moment, 2.5million households qualify for inheritance tax. The Tories said the new tax would mean 14.5million more being caught by death duties.
Every year around 240,000 estates are notified for probate. A 10 per cent tax would raise around £4.5billion, said the Tories, but pointed out that the costs of caring for the old would be £14billion a year.

Tory health spokesman Andrew Lansley said Labour would regret the plans when it comes to the General ElectionMr Burnham said he had ruled out the option of a flat rate tax for all apart from the most deprived of around £20,000.
He told the conference, organised by Age Concern, that another
option was making people pay means-tested instalments over the course
of retirement. This too would hit the middle classes harder.
He added: ‘[Another] option could involve someone deferring
their state pension, for instance, by working to the age of 68, and
paying their contributions into the National Care Service.’ Neil Duncan-Jordan, of the National Pensioners’ Convention, said: ‘The fact is that all these proposals are aimed at pensioners paying for pensioners rather than the population as a whole paying for those who can’t look after themselves.’
Mark Wallace of the Taxpayers’ Alliance said: ‘It is totally unfair to punish people for doing the right thing and saving up all their lives, when they are taxed on earning and saving the money in the first place.’
Under the current system, all the elderly with assets of more than £23,000 are expected to pay for the full cost of social care and many have to sell their homes.

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Millions of families’ homes at risk from shock interest rate rises or falls in property prices

By
James Coney
Last updated at 8:55 AM on 11th March 2010

Millions of families’ homes are at risk from shock interest rate rises or falls in property prices, Britain’s financial regulator warned yesterday.It fears that households who have failed to pay back debts could be pushed to the brink should the economic recovery falter.Under greatest threat are credit-hungry families who use credit cards and loans to keep up an affluent lifestyle, and young professionals who borrowed many times their income to get onto the property ladder.
FSA chairman Lord Adair Turner warned yesterday: ‘This recession is really quite different than the early 1990s’
In a bleak analysis, the Financial Services Authority forecast that any rise in unemployment, interest rates or a further crash in property prices could drastically slash the already stretched incomes of many middle class families.This would lead to them missing mortgage repayments, and eventually losing their homes.It will come as a timely warning to thousands of homeowners. Yesterday, it was reported how more than a million desperate borrowers are applying for credit cards with interest rates as high as 60 per cent.Many economists believe interest rates will start to rise at the end of this year. And this month Halifax and Nationwide both reported falls in the value of houses for the first time in more than a year.FSA chairman Lord Adair Turner warned yesterday: ‘This recession is really quite different than the early 1990s. ‘We have households which are more indebted than they were in the past and that creates a vulnerability.’

The FSA’s report examines the state of the economy, and sets out potential threats for households and businesses.The Bank of England base rate has been at a historic low of 0.5 per cent for one year. This has helped reduced the amount homeowners mortgage repayments by about £20 billion.Despite this families have failed to repay their debts, instead choosing to use spare cash to top up their pensions or invest in the stock market. Meanwhile the cost of borrowing on credit cards and loans has risen.And an estimated 4.7 million homes are still paying mortgage rates that are more than eight times higher than base rate.The City regulator said that as the economy recovers the Bank rate may need to increase to more ‘normal’ levels, such as those before the recession. This would ‘increase the cost of debt before household incomes have recovered fully.’ The report said: ‘The high level of debt income has left many households vulnerable to property price, income and interest rate shocks.’Figures from the Council of Mortgage Lenders show the number of repossessions soared to a 14 year high in 2009 as homeowners were battered by the recession. Around 46,000 people lost their homes throughout the year - an increase on 15 per cent on the previous year.However, this was well below the 75,000 that was first expected, mainly due to historically low interest rates and pressure on banks and building societies not to take people’s homes. Ed Stansfield, an economist with Capital Economics, said: ‘I think we could see a very long tail for arrears and repossessions with high numbers of people losing their home stretching back for many years to come.’People will realise that more of their income is being taken up by higher taxes or greater debt levels. ‘Any sudden changes in the economy will seriously widen out the number of people that are going to be affected.’In a further warning the FSA sounded alarm bells that desperate banks were forcing customers to buy expensive products in a bid to boost their own profits. Banks have seen their takings on current accounts stripped - so are resorting to flogging insurance and investments as a way of making extra money from customers.And the regulator warned that many consumers are gambling with their retirement savings in a frantic attempt to boost their income to the same level as before the recession.The report said: ‘They may be tempted to purchase products (and firms may seek to sell them) with the potential for greater return, but which are not suited to their individual circumstances or which are higher risk than they appreciate or desire.’

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