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Prodicus tells it like it is

Property groups in £3bn call on shareholders / Companies / Property - Property groups in £3bn call on shareholders.

The question to ask about this article is nothing to do with real estate. These major private companies are trying to raise a further three billion pounds from the markets because their banks may call in loans. These loans are performing (i.e. repayments are being made, interest is being paid), but the banks can choose to call them in because of a technical default. In simple terms the default consists of allowing (!) prices to fall so that the debt represents more than the agreed proportion of value.

Question: Why didn't the banks go to their shareholders when they fell into the equivalent technical default for their industry; i.e. their assets proving to be worth less than they thought so that they no longer met the regulatory requirement only to lend a certain multiple of their assets?

Answer: because the taxpayers were easier to ask.


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Danny The Dog

I think you will find the Sept18 08, electronic run on the dollar by Asia bailing out had a hand in the thinking of why did the politicos choose this path.

This is a link

This is politics not economics

William Gruff

I don't think it was because the tax payers were easier to ask but that the politicians were easier to frighten.


Said it before, say it again,some of the Banks are beyond insolvent. RBS cannot even raise the funds to pay for the insurance on the Government bail out scheme.

It is time to be honest and break up those banks into regional banks. Personally I have nothing left to lend them !

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