Tuesday, January 20, 2009

Head-scratcher Big UK banks seem to be in just as bad shape as their American cousins. The government is about to start a second round of bailouts (Of up to $100 billion) and the targets are rumored to be the three biggest: Royal Bank of Scotland, HSBC, and Barclays. RBS is the worst off, with an immediate cash infusion needed, as much as $42 billion. The British goivernmnent will increase its stake in RBS from 58% to 70%. Barclays refused the first round of bailouts last October and points to recent profits, but its stock price has fallen on the expectation of further nationalization. Nevertheless, it has publicly stated that it will accept the bailout. On the same day, we read that distressed Swiss bank UBS is selling parts of its commodities business to --- Barclays. No .sum has been announced. The division in question handles banking services for base metals (nickel, zinc, and lead) along with oil and U.S. power and gas businesses. How, one wonders can Barclays be in financial danger and at the same time buying new assets? What’s the logic here? Of course Barclays already swallowed u much of Lehman Brothers this year. And in 2007 it bought US mortgage bank EquiFirst, and tried to buy Dutch bank ABN Amro. It is now the #3 commodities-oriented bank in the world. Is it just that the bankers know one trick-- getting bigger until you collapse? That's what Citigroup and Bank of America have done already. Incidentally, UBS has recently sold its global agriculture and Canadian-based commodities energy business to US bank JPMorgan Chase. JPMorgan Chase remains the seemingly unscathed survivor of the Big Three US banks, but is it overreaching as well? 3:07:36 PM

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