Here we go again. Yesterday’s news of trouble at JP Morgan, America’s second biggest bank, is today matched by Royal Bank of Scotland, the UK’s second largest. RBS is another huge loser in the American subprime mortage market and is set to announce big writedowns next week.

RBS is understood to be seeking to raise capital from its shareholders in a rights issue thought to amount to £10 billion ($20bn), which is probably the biggest rights issue ever demanded in the UK.

The bank, which bought troubled NatWest and ABM Amro, has been running on low capital ratios for quite a while. It also has major exposure to subprime debt instruments. It has been linked with Spain’s Banco Santander for many years.

When such a major player is caught short like this, it brings home the extent and depth of the crisis in transatlantic financial markets, with all the knockon effects to the rest of the world.

Vince Cable, a spokesmen on Treasury matters who carries more weight than the Treasury these days, believes all the banks should follow the example of RBS, since they will need a great deal of liquidity from the Bank of England and that should be underwritten by shareholders, not taxpayers.

Next week’s announcement will be awaited with some trepidation.

With the U.S. now firmly in recession, Syntagma looks at the causes of this spectacular downturn and speculates that the Iraq war may have a lot to do with it.

“The American economy is now in recession. A slew of new data clearly reveals both a marked downturn in activity, combined with a rise in inflation — something not seen since the stubborn “stagflation” period of the 1970s. Some economists expect a robust return to growth later in the year off the backs of aggressive rate cuts by the Fed…”

Read the article here.

In another piece today, our sister site examines banks’ attitude to risk and how securitization let the side down, handing huge advantages to authoritarian Asian regimes.

“In the old days, banks took the risk of lending money on themselves and ensured that borrowers would be able to pay it back over time. Securitization means that they can lend to any Tom, Dick or Harriet, package up the debts into large parcels of small slices from many borrowers, and sell them onto other banks and finance houses.”

Read the article here.

If you are a small business owner, or work for one, you may like to read a post on how to cope with the likelihood of a forthcoming recession — even worldwide depression.

“Clearly, we’re in for the roughest of rides over the next two years, and possibly longer. Although interest rates are tumbling and will continue to do so, even in the eurozone, the increasing lack of liquidity around the world as banks horde cash, Scrooge-like, will permit little flexibility.”

Of course, some people get rich in the harshest of climates by betting on market falls. Given that it’s the new markets in financial instruments and derivatives that started this off in the first place, it’s ironic that some savvy souls will probably make billions out of other people’s misery.

Read the post in Small Business Booster.

British people were told yesterday that the personal data of nearly half the nation has “gone missing”. In the newly merged department of Inland Revenue and Customs, a “junior official” downloaded the personal details, including bank account data and National Insurance numbers, of 25 million people and placed all of it on two unencrypted CDs.

The official then put the CDs in an envelope and posted it. The package wasn’t even registered so couldn’t be tracked or traced. It’s now officially “lost in the post”.

Alternatively, it may have been stolen to order by organized crime. We have been told, the official is now under guard in a “safe house” to protect him or her against the media, and presumably criminals seeking “to make him an offer he can’t refuse”.

This morning there’s huge panic all over the UK as people wake to find their bank accounts and personal identities compromised in the most dangerous way possible.

Once again we see the perils of allowing a central administration to accumulate vast quantities of information through a system of universal benefits more in tune with the Soviet era than the distributed nature of data in the age of the internet.

What can you do to protect yourself against the kind of scam everyone in the UK is now worried about?

1. Check your bank and credit card statements for the next 5 to 10 years. Criminals can lie low and strike when banks get sloppy again.

2. Change your online banking password, especially if you use family data as a memorable word.

3. Look at your credit report. The information in the Child Benefit Agency records is enough for a criminal to apply for loans, credit cards and even mortgages in your name, as well as other forms of credit such as mobile telephone and catalogue accounts. Your credit report lists all your credit commitments and recent applications for credit, so you can instantly see if someone has been trying to use your ID.

Apart from that, you are at the mercy of Government officials and your bank’s security measures. Ultimately, they must take responsibility for protecting their customer’s data.

Unfortunately, British Government agencies routinely break its own Data Protection Act. The shambles goes on.