Years of fraudulent Accounts by Barclays, overvaluing assets, over stating profits and jolly fine divvies - shares crash - again.
WSJ reports that Barclays said it didn't know of any reason for the fall in its shares shortly before close of business Friday. Ho.Ho.Ho.
Reasons market denizens give include ;
1. The 3 month Financial Services Authorityban on short-selling financial stocks ended.
2. The UK Government will announce new aid / bailout / throwing away taxpayers money measures next week from which Barclays will not benefit unlikr previous recipients of Gordon's helicopter cash - Royal Bank of Scotland, HBOS (now including Lloyds) including "softer" terms on preference shares taken up.
3. If (as is wildly rumoured) the UK Government setup a "bad bank " to buy up bad assets (as the original but discarded after 13 days US TARP
scam ..er...plan... bright idea) Barclays will not be able to particpate.
Readers might not be up to speed on the way Barclays prepare their financial statements - they might usefully look at Page 167 of Barclays Annual report 2007 which details how asset impairment is handled.
8. Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective evidence that loans and receivables or available for sale financial investments are impaired. These are impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and prior to the balance sheet date (‘a loss event’) and that loss event or events has had an impact on the estimated future cash flows of the financial asset or the portfolio that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: (inter alia)
e) the disappearance of an active market for that financial asset because of financial difficulties; or
f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The amount of the loss is recognised using an allowance account and recognised in the income statement (ie as a loss) .
So the rub is , that if Barclays have been lying about the value of their very many assets and refused to take impairments so maintaining the fiction (which they have done for years) that they have made profits - they are, by by refusing to "come clean" , put themeselves in the position that they cannot use the taxpayers money to scrub their balance sheets of all the shit they have been hiding and overvaluing.... for years.
So they persist in reporting after close of trading today that "its 2008 profit before tax, (reports due Feb 17th) after reflecting all costs, impairment and market valuations, would be "well ahead of the GBP5.3 billion consensus estimate of sell-side analysts."
CEO of Barclays (£2.8Mn a year) since 2004 is John Silvester Varley (born 1 April 1956), in 1981 he married Carolyn Thorn Pease, daughter of Sir Richard Thorn Pease, and in so doing married into the fascinating Quaker Pease family, whose bank became part of Barclays in 1902.
Curiously ( Catholic, Downside, Oriel College Oxford (History)) by then trained and working as a solicitor (like his father) , joined the Merchant Banking section of Barclays the following year,1982, with it appears no knowledge, history or experience of banking in any form. He is apparently, unlike any other major bankers and excellent table tennis player.
It is of interest to note that Varley's sister in law Nichola Pease is chief executive of JO Hambro Capital Management and was a nonexecutive executive director of what was Northern Rock plc. Her husband is Crispin Odey who founded Odey Asset Management, which made £55 Mn Y/E April 2008 and paid him£23 Mn salary....their especial skills ? Shorting UK bank shares. They were at it again later this year shorting Bradford & Bingley involving the taxpayer in a direct £ 4 Bn write off and the introduction of the FSA ban on shorting financial shares.
What goes around, comes around.
Are Barclays too BIG to fail ?
Expect some remarkable and "unexpected" events as the share shifters get dug in. Again.
Get ready to shortly own a chunk of Barclays along with your other banking assets like RBOS and HBOS.