Scottish MPs will question senior executives from Royal Bank of Scotland and Lloyds Banking Group – two of the banks given multi-billion pound bailouts by the government.

The Scottish Affairs Committee will hear from Gordon Pell from RBS and Archie Kane from Lloyds, and Alasdair Darling will be questioned further about the massive pension paid to former RBS chief executive Sir Fred Goodwin. Scottish Secretary Jim Murphy has accused Sir Fred of ”banking vandalism” and called his £16m pension fund “extraordinarily distasteful”.

Pound Sterling - UK Markets

A report released by the Office for National Statistics says that the UK public sector borrowed more than expected as central government tax revenue fell sharply on the year and spending continued to rise.

The UK public sector borrowed £9bn in February, a steep increase from £1.1bn a year earlier. Expectations for net borrowing were around £7.7bn and the reported level is the highest February borrowing figure since records began in 1993.

A report from the Council of Mortgage Lenders says that the slump in mortgage lending continued in February with gross lending down by 60% on February 2008. Lending, at £9.9bn, was 15% lower than in January, and was the lowest figure for any month since February 2001. The CML said its members’ ability to lend was drying up because too many savers were choosing to put their money in National Savings policies. Mortgage rationing has led to house sales falling by more than half.

US Dollar - US Markets

The Federal Reserve has said it will buy almost $1.2trn worth of debt to help boost lending and promote economic recovery. The Fed said it would start buying long-term government debt and expand purchases of mortgage-related debt.

The size of the move has stunned investors, and caused the Dow Jones stock index to jump almost 200 points. It is hoped that the measures will boost mortgage lending and the struggling housing market by lowering interest rates on mortgages and other forms of consumer debt.

The news caused a mammoth drop for the US Dollar. The greenback experienced its third biggest one-day decline yesterday since daily pricing began back in 1970, bringing a swift end to the rally that had pushed the Dollar to the highest levels since 2006. The greenback ended the day down against both the Euro and the Pound, and reached a three-week low against the Canadian Dollar.

Euro – European Markets

According to the Dutch National Bureau for Statistics, Dutch consumers are more pessimistic in March compared to a month earlier. The Dutch consumer confidence index stood at -34 in March, falling from February’s reading of -30. The bureau added that consumers have never been so pessimistic about the economy.

The bureau also released a report showing that the Dutch unemployment rate was 4.1% in the three months to February 2009, up from 3.9% in the previous three-month period, marking the third such period in a row in which unemployment has increased.

Other Currencies - Highlights

Excluding the Yen, all of the ten most-active Asian currencies have strengthened against the US Dollar. The Yuan rose to its strongest level this year, as the People’s Bank of China set the reference rate at the highest level in more than three months.

Meanwhile, analysts are predicting that the Indian Rupee will fall beyond record lows in the coming months, as the Reserve Bank of India focuses on supporting the government’s spending measures and attempts to stifle a market sell-off that has driven the yield curve to its steepest levels in 11 years.

Selling properties, especially investment properties and buy to let properties used to be quite easy. Sorry to all the sales people out there, but it did.

Having previously worked for a property investment company, I know that it was plausible to push through 4 – 5 deals a week, very rarely without any lending problems and mortgage approvals tended to be easier than finding a Manchester United fan in London. Those were the glory days of lending and up until a year ago the level of lending was at a record high and the amount of buy-to-let mortgages that were being approved was staggering, also accompanied by some of the best rates investors had ever seen.

Some would say this is the reason we are in the midst of a recession and struggling, but that is another blog, one of which we have covered and will cover elsewhere.

Recently, I brought a couple of stunning BMV deals to the table, as we felt that after a year in which we would not touch property, we now had a couple of deals that really did make sense to the investor. This was due to better discounts, newer and an increased amount of decent mortgage rates and just the general feeling that property had hit its lowest level and was now starting to recover, according to reports from leading lenders and banking institutions.

We sold Penn Lane within a couple of days and currently have offers on the further two properties that we have on our books, but we kept hitting a common discussion with some of our investors – “would love to buy it, I am just too old, I wont get the mortgage”.

As with anything, previous misconceptions had started to creep back in to investors minds. Some of our investors tried to get a mortgage just as things were starting to look really bad and were hit with many reasons why they would not be approved, one of them being age which is in fact in relation to risk. This had then been indented into their investment strategy and they were probably now missing out on deals that they really wanted to get involved with.

We work with one mortgage broker and a quick call to them to inform them of this supposed age issue and we were met with they reply that this indeed was not really the case anymore, and in fact we could offer mortgages to people in their late 50’s and beyond. Chris then went back to the investor, forms went in, and he is now waiting to complete on the deal next week, which is a bonus not only for us, but also for the investor that a year ago was simply not able to go through with these deals any more.

In April last year mortgage lenders got edgy, they were panicking, they knew trouble was ahead and they were refusing mortgages for many reasons. In fact, I can not mention the name, but I knew of one mortgage that would not go through this time last year because the property had decking!!

With mortgage lending now recovering, new criteria are in coming into play and some old reasons to refuse are falling away.

Are you too old for a mortgage on an investment property? Ask us, you might just be surprised.

The US Dollar has weakened overnight following reports the US government may nationalise major US banks as a result of the financial crisis. Sterling has staged a minor rally following the publication of retail sales figures for January and EU leaders met over the weekend to discuss economic strategy ahead of the G20 summit in London in April.

Pound Sterling - UK markets

Sterling has strengthened overnight, climbing to 1.45 against the US Dollar and gaining 1.6% on the Yen amid news that the US government may nationalise major banks. The news fuelled a round of risk aversion but this failed to strengthen the traditional safe havens and Sterling gained on its major currency partners overnight.

PM Brown has announced a £14 billion credit injection into Northern Rock and the bank is to start lending again, expected to take on £5 billion worth of mortgages this year. This is a reversal of earlier government decisions and comes tempered with the warning that banks should end risky speculation and return to their more traditional role as ‘stewards’ of people’s money. Retail sales figures on Friday boosted the Pound as they rose by 0.7% for the month of January taking annual sales up by 3.6%. However this comes at a time when retail analyst Experian predicted 10% of high-street stores will be empty by the end of February and more solid trends may be visible in quarterly statistics. Nationwide housing prices are released in the UK today with new mortgage approvals out tomorrow.

US Dollar - US Markets

The Dollar has weakened for the third consecutive day on speculation that the US government may bail out major banks even further. The Dollar is down 0.74% on the Canadian Dollar and has also declined the Pound, Euro and other major currency partners.

Dollar weakness comes after Christopher Dodd, Chairman of the Senate Banking Committee announced that nationalisation of some banks may be necessary. Wall Street and equity markets fell to multi-year lows and the Dollar declined against the Euro and Yen. The Philadelphia Fed survey on Friday showed manufacturing has slumped to a 19 year low and a survey of business economists has shown the US recession is the worst in three decades. Consumer spending accounts for 70% of the US economy and this is expected to decline by 2.3% this year. There is no data out in the US today.

Euro – European Markets

The Euro has also rallied against the US Dollar, currently sitting at 1.28 after attempting to break 1.30 overnight. The Euro has also gained on the Yen and is currently trading at 0.88 against the Pound.

Leaders of Britain, France, Germany and Italy met over the weekend to formulate a position ahead of the G20 meeting to take place in London in April. Tighter market regulation and an end to risky speculative investments are expected to top the agenda. European leaders also agreed the IMF’s emergency fund for debt stricken countries should be increased to more than $500 billion. ECB President Trichet is to give a speech today.

Other Currencies - Highlights

The Australian and New Zealand Dollars have appreciated for the fourth consecutive day against the Dollar on speculation that the US Government is to increase its stake in the major US Banks. The Yen also declined amid speculation over the deteriorating Japanese economy expectations that export demand will continue to slump. This weakness could eventually undermine the safe haven status of the Yen. Minutes from the Bank of Japan’s February meeting are released today. The Canadian Dollar has gained against the US following weaker American equities and reports that Canadian core inflation fell by 0.4% in January. Canadian retail sales figures are due today.

I was hoping to get a blog done yesterday to discuss the ongoing crisis but didnt…with the news that the FSA chief has resigned due to the whistleblower comments of yesterday, I have more discuss!

In fact, rather than prattle on like so many currently do as to the why’s and wherefores, I’d like to offer another solution. Split the retail and investment banks completely…. Of course, it is likely that the investment bank is funded from the retail banking part of each Group, so whether this ever happened is open for debate. However, with banks running to the taxpayer tail between their legs, it’s about time the taxpayer demanded and got what they were after.

What is it the taxpayer wants you may ask? A secure and well run bank for starters. A return to the days when you could call in at your local branch and talk to someone who could make a decision. I recently walked into my local branch to get some old bank statements and was told I had to write off and I would be charged £30 for the pleasure! The fact that a printer was right next to my personal banker did not seem to help…

Bank customers also want a return to customer service as at least an equal to a bank’s other primary objective of making money (it is not keeping your money safe!). If a bank wishes to gamble with funds through its investment division it is quite entitled to, but not at the loss of security for its customer’s deposits. The only alternative can be that the two divisions are split, with tax payer money funding the retail bank only (and therefore its improved service) whilst the investment bank fights on it own to get itself out of the trouble it got itself into…..In this instance retail banking would not suffer.

Unfortunately this is not the case, and as a result retail banking will continue to suffer whilst the cash machine known as taxpayer funds are diverted into the investment division to prop it up (or retain the usual profit margins, commonly known as “re-capitalising”).

Businesses that are failing are left to die, as we all saw with Woolworths. Why shouldn’t that be the same for investment groups? Split the banks, nationalise the retail side until it improves, and let the investment division fight like we all have to…saying sorry to government this week is not, and should not, be enough!

As we like to do at Discover and Invest, let’s look for the solutions to our needs…

It appears that the first chunk of money RBS received wasn’t quite enough. As predicted by many, another bailout has been announced, and it is also being predicted that it will not be the last.

We surely have to start questioning the government’s role in this episode. Having part-nationalised the bank, the government have representatives at board level, in theory to steer the bank to safety and to get it lending again. So far it appears neither has happened.

What also seems to be the case is the lack of transparency where the level of debt is concerned. Do we really not know the total level of debt that RBS owes? Why is that? Gordon Brown today has said he is “angry” with RBS for the debt but how is it he did not find out about this at the last bailout?

Whilst this chaos continues apace, the taxpayer is continuing to foot the bill. Some say this is essential to the economy as we cannot have the banks failing, which we can’t. However, it does have the taxpayer over a barrel. The biggest problem is the huge sums involved. What does billions of Pounds mean in reality for the taxpayer? We aren’t going to know for a year or two that’s for sure. The effect on the economy then , in terms of inflation and increased public debt, could be worse than the problems we face today.

It is difficult to know where this will all end. With light regulation, private sector firms deemed too big to go out of business are safe in the knowledge that the taxpayer pot is available to save them. The biggest case to answer is the lack of transparency however, not just here but also in the US. Our elected representatives are taking measures on our behalf that is not only costing an astronomical and unprecedented amount of money, but that also concerns our savings. In light of the seriousness of this episode, we as citizens have a right to know how the funds are being spent and what the true state of the balance sheets of these companies really are.

It has been extremely concerning to see that short-selling has made a return.  Although the ban was temporary to begin with, it seemed to be a measure that stabilised the markets when it was introduced.

Short-selling as defined by Wikipedia, “is the practice of selling a financial instrument that the seller does not own at the time of the sale. Short selling is done with intent of later purchasing the financial instrument at a lower price. Short-sellers attempt to profit from an expected decline in the price of a financial instrument.”  The controversy comes into play when it is suspected that parties with large sums of capital manipulate the markets to send a stock downwards in order to profit.  The larger the fall, the larger the profit.

So  back to short-selling’s return.  Low and behold, Barclays’ share price drops 25% in a day amid calls for a new financial bailout (and further panic).  A statement read that  “The board of Barclays knows no justification for the fall in the share price”; in other words, short-sellers are considered likely to be responsible.

Humans are creatures of comfort and therefore we like stability.  As a result of stability gained, we begin to feel confident and look to improve on whatever situation we find ourselves in.  Confidence breeds success and therefore stability is a vital ingredient for a positive economy.

As a result, nothing can be worse than market volatility.  As famous investors have noted in the past, markets are generally run by human emtions.  If we are confident, the markets rise.  If we are uncertain and feeling in a panic, the markets and the economy are bound to suffer.  Stability leads to confidence, volatility leads to panic.

So if we genuinely want to solve our dilemas sooner rather than later, stability should be sought.  All agree that the lack of regulation in financial markets has caused this disaster, but we then go and shoot ourselves in the foot by allowing short-selling to return.  A ban on short-selling should be permanent, if only for a return to a stable economy.

It seems listening to Radio 4 at lunchtime is where I get some of my better ideas for blog posts these days.  Today of course was no different.

I nearly fell off my chair when I heard the news that the person to be the new “Minister for Banks”, otherwise known as the newly created Trade Promotion and Investment Minister, is….. a banker!

Has it occurred to anyone that when the banks decide that they require another bailout, (and many are sure there will be another one), the taxpayer, who is funding this, does not seem to have anyone acting on their behalf?  That a position in government to discuss banking solutions is not filled by a public servant, elected by the majority, but by a banker?  Ultimately, that the decision to use more taxpayer money will be taken by someone representing the banks??

On a positive note, Mervyn Davies’ bank, Standard Chartered, has kept its reputation through the crisis, so hopefully some decent advice can be passed on.  However, the idea was to keep a tight ship before the crisis happened, not after.  Ultimately, it will be interesting to see if lending does improve and on what basis.  It is still my strong belief that the levels of personal debt needs to be debated and tackled before we see any significant improvement.

In early 2008, Birmingham Midshires became the last lender to ditch the controversial, yet rather popular, 125% mortgage. These mortgage and loan deals, allowing people to borrow more than the value of their home, were often criticised for letting borrowers take on large debts, most of which is really starting to backfire in the current climate as people really struggle to cope with the payments.

It is estimated that around 20,000 people a year opted for these types of mortgages since they were introduced, mainly first time buyers who have struggled to get onto the housing ladder and were left with little other option but to effectively borrow beyond their means with these types of mortgages.

They were also aimed at older single people, most likely divorcees who have left the family home and have no savings and therefore were left with no other option, if they wished to buy rather than rent.

Fast forward just under a year and the mess, devastation and problems this type of mortgage left behind is only now really starting to hit home.

With house prices dropping month by month, these types of mortgages are starting to become a noose around the neck of their borrowers, with many now struggling to cope with the repayments, or certainly beginning to fear the worst over the next couple of years.

Northern Rock and Abbey National came under massive criticism and scrutiny for offering these types of mortgages a few years ago, and many others followed suit, but the beginning of 2008 saw every one of these products removed from the shelves, possibly and lesson learned but too late for many?

The mortgage immediately locked the buyer into huge negative equity, owing more than their property is worth from the very first day they moved in. Did these mortgages and this type of borrowing contribute to situation thousands of home owners find themselves in now? I think the answer has to be yes, but for the mortgage companies to take all of the blame is somewhat naïve, after all, would you pay 25% more for products in a shop, or would you just wait until you can afford them?

Should the mortgage companies have been allowed to do this or does it lie with the individual borrower to sit back and really debate whether the idea of over borrowing was really worth it? Ironically, if these 125% mortgage buyers had waited until now, not only could have entered the housing market, they could have done it so much cheaper and could have afforded so much more.

Although this type of borrowing helped thousands of first time buyers get on the housing ladder, as history continues to be made, the 125% mortgage will probably fall into the category, which should be titled “We Really Shouldn’t Have Done That”.

A famous song once began “Looking back we could have done it differently” and I think that sums up how we all feel in 2009.

At the start of 2008 everyone was happy, investors were cheering at the continuing rise in house prices, availability of mortgages and so many options to invest their money it was unreal. Fast forward four months to April and the wheels began to fall off in a dramatic and rapid downturn that would leave everyone feeling the bitter cold of recession by the end of the year.

Investment companies began to close their doors and declare administration, mortgage companies decided not to lend to the 90% of people they would have done four months earlier and even the credit card companies started to be a bit more wary about who they would issue their plastic money machine to.

By the end of 2008 high street shops were closing, more and more companies were closing their doors for the final time and the threat of redundancy was hanging over many of the country. The banks had to be bailed out by the Government, with one major player only being saved with a few days to spare. The news that we all expected to hear was confirmed that the country was now in recession and how the media told us, every headline, news program and radio debate show was dominated by how the next two or three years would challenge us all.

It is fair to say that how quickly things changed in the space of 12 months came as quite a shock, but, the leading question is, why did things change so quickly?

The bubble had been ready to burst for many years. The banks were over lending, credit was easier to pick up than the flu and you could invest in property in every corner of the globe, it really was that simple. Property prices were rising at a rate that was just unsustainable and the introduction of the 125% mortgage was surely a sign that things were getting out hand, meaning that you owned an extra 25% of nothing!

As we all look around and wonder who is to blame, it is a very leading question. Do we blame the banks for over lending? Is it the mortgage companies who have allowed people to borrow beyond their means? Is it the investor who has caused the price rise of property by over buying? Are we as individuals to blame for overspending and over borrowing? Or should we firmly look at the Government and ask the question – How did this happen and why was it not spotted and brought under control?

2008 was a year in which we started with so much optimism and ended with more doom and gloom than even the most pessimistic person in the world could have predicted.

So, to finish in the words of another famous song, in 2009 “things can only get better”.

I am one of many who take what one reads in the media with a pinch of salt. Only today I read an article in one of the nations more reputed tabloids in which a columnist commented that our recession will be short but sweet. This came from the same person I can remember reacting to the Lehmans collapse recently by claiming we will not be plunged into a recession at all! Now he admits we are already in one. A quick bit of googling and I discover another fairly recent article by the same person claiming that the markets are set for a buoyant end to the year! I dread to think what he might write if his savings were with Icesave.

So consistency has never been the name of the game in media circles, that’s no secret, and it reaches the point where it’s best to see beyond the headlines and find out the story for ones self. At the time of the Lehmans collapse I took great interest as an old friend had earlier in the year been delighted to have secured a position with them. Naturally I became concerned, wondering how this had affected him. We met for lunch in Canary Wharf and it was the case that he, like others, had been ‘approached’ weeks in advance by competitors and as such was now secure.

However I was not prepared for the almost circus-like activity in the busy bar we had entered. Every table seemed to have piles of printed matter in front of everyone sat at them and individuals were walking round between the tables holding brief conversations with those sat & leaving with copies of said printed matter. I had experienced ‘speed headhunting’ for the first time!

Upon leaving to return home I thought back to what I had read in the paper just a day before. One described turmoil, another spoke of the collapse of Canary Wharf, and another even referred to the activity in Canada Square to be similar to a scene from 28 Days Later! My experience was the opposite. The atmosphere was calm, even jovial, and most certainly not pessimistic. Now of course this was not the case for everyone and yes there were those seriously affected by the losses, but the key point in this is that once the media hears of a story they love to inject a bit of fear factor, don’t they? And why? Because we, as a whole, believe it.