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Like Thunder Rumbling in the Distance, the Warning Signs Are Growing

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The Financial markets are fragile these days, and economist Dr. Richard Wolff talks about the capitalism crisis which is fast approaching. He also touches on the idea of a tax reform which President Trump has mentioned.

There was breaking news disclosed during this 22 August 2017 interview, and involves the bank Provident Financial Plc, a British subprime lender.

Seems strange to consider it was just ten years ago when a crisis in the subprime mortgage market in the United States exploded into an international banking crisis and the collapse of the investment bank Lehman Brothers a year later, on 15 September 2008.

Now a subprime lender in Britain is suffering huge reversals, with a massive drop in their share price and the hovering hedge funds with the correct position profiting from the losses suffered in the last 24 hours by Provident Financial Plc.

Provident Financial’s shares fell as much as 76 percent after they forecast a full-year loss and revealed Provident is being probed by regulators.

The U.K. Financial Conduct Authority is investigating their Vanquis Bank credit-card unit, and the regulator had previously ordered Provident to stop offering a particular repayment product to the public.

Provident also cited further deterioration at its home credit business after a botched roll-out of new technology model to replace the old business model which had been in place for more than a century. 

All this news was capped by the announcement that Chief Executive Officer Peter Crook had stepped down from his position which he had held for a decade. Manjit Wolstenholme will temporarily run the firm as executive chairman.”My immediate priority is to lead the turnaround of the home credit business.”

Peel Hunt’s Stuart Duncan said the company did not seem to be in imminent danger of collapse, but warned it could face problems if Vanquis Bank customers start withdrawing deposits.

“If they read that Provident or Vanquis is in trouble, it will be interesting to see how the deposit base behaves over the next few years.”

Provident Financial Plc. serves millions of customers, many of them unemployed or on welfare, offering credit limits of £250 to £4,000. Using the banking model of extending credit to the working class had been good to Provident, with the company stock tripling over the decade which saw other British banks collapse or need to be  bailed out during the last financial crisis. Provident was started in 1880 by Joshua Waddilove, a philanthropist and social reformer who saw extending door-to-door credit as a way to alleviate poverty.

References

https://www.bloomberg.com/news/articles/2017-08-22/provident-financial-ceo-steps-down-on-loss-dividend-scrapped

https://www.theguardian.com/business/2017/aug/22/provident-financial-dives-second-profit-warning-peter-crook




 



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