I’m on my own for one night as my partner has gone to Belfast for a work meeting and to spend a night with her sister and family, who live over there. The slight delay in posting is just owing to not having a lot to say – until now, of course!

Last week I caught part of a long address by Ben Bernanke that went out on Bloomberg TV. The subject was what should happen to Fannie Mae and Freddie Mac, or the GSEs as he referred to them (government sponsored enterprises). The options seemed to be: to make them more private, to make them more public or to introduce a system of covered bonds to finance lending in the residential property market. Apparently, these covered bonds are prevalent in Europe, not the UK but countries like Germany and Belgium. Anyway, Bernanke was very impressive in his command of his subject. However, what I couldn’t understand is why giving all this financial support to institutions in the mortgage market is such a great idea. I can understand that the US authorities need to help the institutions to get themselves out of the mess they’re in NOW but all these options for financing the mortgage market in years ahead seem to undermine the principle of making the lenders check that the borrowers are creditworthy and the properties are good collateral.

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The capital raising by Barclays from the ruling families of Abu Dhabi and Qatar is an area that I’m more familiar with because I had to cover ‘pre-emption rights’ in my latest work (which should see the light of day in March). As is often the case, I don’t think the press are very good at explaining the details. As I understand it, with the exception of rights issues, UK law only allows companies to raise relatively small proportions of share capital without needing to get shareholder approval in an extraordinary general meeting (EGM). However, there are two ways around this. Firstly, they can ask the shareholders for authority to allot shares ahead of the need to do so. In the Spring, Barclays asked for permission to allot about £0.5 billion’s worth of shares if it needed to and to sell a further £82 million. Obviously, the latest capital raising needed to raise a lot more cash than that.

The other alternative is to get the agreement of the institutional shareholders to allowing shareholders pre-emption rights to be breached through the approval of a body known as the Pre-emption Group which has the support of the trade groups of the big (institutional) investors. But the Pre-emption Group has guidelines that are much more restrictive than the kind of deal that Barclays had in mind.

Whether or not the Pre-emption Group, the institutions or their trade bodies said anything to Barclays, once they got wind of the ‘Gulf deal’, isn’t clear. It looks as if Barclays just dared the institutions to be obstructive when they do get to vote on the capital raising. As far as the share price is concerned it looks as if the institutions have wanted to punish Barclays. Those sovereign wealth funds who put money into Barclays in June must be feeling pretty sore; they’ve already lost a big proportion of that investment.

Basically, Barclays has pulled off the kind of deal that Goldman Sachs achieved with Warren Buffet a few weeks ago. John Waples in the Sunday Times said that UK institutional investors don’t have the fire power to make a company like Barclays bend to their will any more. If this is true, it’s not saying a lot for the UK economy if the country’s savings industry isn’t generating enough wealth to own most of one of its major banks. Hopefully, some of the sovereign wealth will see advantages in working together with the institutions.

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I've written about pre-emption in the following books:
'Corporate Actions, A Concise Guide'
'The Share Owners' Guide'(due to be published in May)

Publisher: Harriman House

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One thing that has struck me about the financial crisis (apart from the fact that everyone seems to have got bored with it now) is how little has been said about what it means. I believe the Bishop of Lewes said it could have been sent by God to help us be less greedy and I’ve heard on speaker on ‘Thought for the Day’ draw a comparison between the bail outs and compensation to depositors and God’s grace (quite clever that) and that’s been the sum of efforts to find any meaning in the credit crisis. Surely, there are some people who feel like praying that the world’s economic system gets back on track, imams who’ve wanted to point out that adherence to the principles of Islamic banking might have saved a lot of the grief, aid workers in Ethiopia who’ve wanted to tell us to ‘get real’.

Of course, we’ve now had two scandals to liven up our lives and distract us from thoughts of recession. As far as the Brand/Ross story is concerned, I literally didn’t know what all the fuss was about. However, my partner read a transcript of the infamous phone call and came to the conclusion that though poorly judged, it hardly merited the takeover of the news that followed. Not particularly provocative, in fact, not that being provoking is necessarily anything to be proud of.

I’ve been slightly more interested in the Mandelson/Oleg Deripaska/Osborne story and I’m inclined to suspect there’s more to the Mandelson side of it than the Conservative side. At least Osborne’s association with Deripaska seems fairly short-lived. Of course, the folly of either of them is striking. What part of the job description of a public servant or a representative of the people does visiting with Russian oligarchs come under. The most striking aspect of the story, however, is how little harm it’s done to Gordon Brown. Peter Mandelson’s visit to the Russian’s yacht simply seems to have pointed up the propriety of the Prime Minister and his UK holidays. Ben Bernanke actually cancelled a vacation in Myrtle Beach (S Carolina?) in August last year when the credit crunch first hit.

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No walks in the last week but hoping to get out this week.