Where My Caravan Is Restive

“How horrible, fantastic, incredible, it is that we should be digging trenches and trying on gas-masks here because of a quarrel in a faraway country between people of whom we know nothing.”

The quotation is from Neville Chamberlain in September 1938 in a broadcast referring to the Czechoslovakian Crisis. It is not in my memory; perhaps I was scrumping or doing something equally socially useful at the time.

It might well apply to the current worries about the Bank of America in the USA although it is now apparent that a number of UK banks are embroiled in the disastrous mortgage mess there. It is going to cost someone a lot of money. Mostly it will be ordinary taxpayers.

So it is not so far away as it seems, it could be your own bank, whether it be nationalized or not. But it is more than that. As a consequence of the default of the major property groups owned by the Tchenquiz brothers the Bank of America now has control of the relevant assets put up as securities.

These include companies that hold the freeholds to a major part of the UK leasehold property sector and also those providing property management services to a high proportion of leasehold developments, critically including a large number in the retirement sector.

At least we think that it will be the Bank of America that owns these companies. But as a great deal of assets and income streams have been deployed into leveraging a variety of financial instruments for trading and speculation, it is far from clear who really owns what. The slew of toxic debts has meant that nobody anywhere may know.

In the media reports and discussion as to what is going on, there is some UK comment but not a great deal. It is almost certain that the government will not realize that a lot of UK property assets are on the slab in the USA and what the impact and effects may be if it all goes wrong is not known.

If the Bank of America can unload this unexpected burden onto someone then who can it be? Perhaps one of the larger Private Equity Groups, probably offshore somewhere, or the Chinese, always eager for a punt, or the Arabs, persistent collectors of property assets for the long term, or even the Russians, looking to put more squeeze on UK property.

Whoever it will be, it will not be good news for those involved. The only certainties are that the new owners will want to extract a much larger amount from these investments and almost all of it will go offshore one way or another given recent deals made by the government with financial interests.

This might well happen when the US authorities whack some of our big banks for a substantial amount of compensation money that they so badly need for their own property sector. The quarrel in a far away country could become a riot at home.

Go long on second hand caravan prices?

Memento Mori

In the old days, it might happen that you would notice in the street more women than usual standing at their doors with older ones across the street from a particular home. They would be talking quietly and waiting. They would often remain for some time despite the household jobs to be done.

Then across the street the upstairs curtains would be drawn and shortly after the downstairs ones. The women would go back into their houses and the old women return to theirs.

The death watch was over.

There would be times when the wait was a long one. There would be others when either fervent praying brought about a recovery or the old blighter wasn’t going to go easily.

Across the web much the same is happening, this time it is the Bank of America that is the subject of the watching and waiting and there will be precious little quiet, dignity or respect when the lights go out. Business Insider sums it up:

http://www.businessinsider.com/bank-of-americas-stock-collapse-2011-8

It will not be like any other and the ramifications will be different because when a big bank goes down it is never the same and always with a great many unforeseen and unintended effects. At the moment the stock is twitchy but that is no great guide.

The only thing that is the same is that lessons have not been learned from other similar events in the recent past and also the financial world, governments and the rest will not learn the lessons from this one.

Whatever happens, even if this patient recovers the situation will not be the same in future and there will have been both direct and a lot of incidental damage done. Because of the many mysteries within the Bank’s accounts there is no telling what will be the future.

In the UK because of other matters there has been little notice taken of this, along with many other things that are problematical because it seems so far away and in any case as far as the USA is concerned a big earthquake along with a hurricane has more personal interest stories than a bank.

In the recent crash, however, we found out that the UK was far more connected than we thought. How many local councils had big money in Icelandic banks that were not quite banks when the money ran out? How much UK money is involved in Greece? If it is anything like Ireland it will be a lot.

The Bank of America also has major UK connections. Because of the default of one of its largest customers it now holds thousands of freeholds of UK leasehold properties. Moreover, it is the effective owner of several of the largest property management service companies running leasehold developments.

What will happen to them? Who might be their eventual owners? What will be their financial objectives? Who in the UK will be worst affected? What impact might this have on rentals and operations in the UK leasehold and renting sector?

Don’t ask our government, the Bank of England or any UK bodies, they will not have the faintest idea nor will they know what to do if the going gets rough.

Are the old ladies gathering on the pavement across from your place?