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Faith in banks

Robert Peston | 09:55 UK time, Tuesday, 20 January 2009

It's more than a little local difficulty that Royal Bank of Scotland yesterday suffered the indignity of becoming a penny stock (though it's bounced a bit this morning).

RBS logoBecause of the plans for global domination of its previous chief executive, Sir Fred Goodwin, this bank is known from Wall Street to Shanghai.

It's big in America. It had till recently a symbolically important stake in Bank of China. It was the victor in the world's biggest ever cross-border banking takeover battle, when it acquired the poisonous rump of ABN Amro (but not "ANB Ambro," as Gordon Brown put it, when scolding Royal Bank yesterday).

Whether we like it or not, the collapse in its value from more than £70bn a couple of years ago to £4.6bn represents unfortunate worldwide advertising about the perceived frailties of our financial system and our economy.

In the context of how others see us, here are remarks made overnight by Jim Rogers, the well-known investor, to Bloomberg: "I would urge you to sell any sterling you might have...It's finished. I hate to say it, but I would not put any money in the UK."

Errr, say what you mean Jim.

Inevitably, sterling has fallen - to its lowest level against the Yen since 1971 and to its lowest against the US dollar since March 2002. For what it's worth, Rogers believes sterling will approach parity with the dollar.

The connection between sterling and the health of our banking system goes like this.

Our banks have colossal overseas liabilities; they've borrowed huge sums abroad. According to Bank of England figures, the gross foreign currency liabilities of British banks are around £4,400bn (having quadrupled over a decade).

Of course the banks all have matching assets. But the problem is that the assets tend to be illiquid, hard to sell. Whereas the lenders to the banks can often ask for their money back at relatively short notice.

The reason that Royal Bank of Scotland and HBOS - now part of Lloyds - were semi-nationalised in October was that lenders to them were demanding their money back. They were hours from collapse and it was therefore vital that the British state should be seen to be standing firmly behind them, to reassure all lenders to them that their funds were safe.

But when the Treasury acquired big stakes in Royal Bank and what's now called Lloyds Banking Group - and when it committed £500bn of loans and guarantees to make sure that all the big banks could repay providers of wholesale loans that could demand their money back - at that point the liabilities of the banks increasingly came to be seen as the liabilities of the state.

This is not an accounting issue of whether Royal Bank's £1,900bn of liabilities is on the public-sector balance sheet.

It's about whether, when it comes to the crunch, the state would honour those liabilities.

And, of course, we all know that the Treasury would honour those liabilities. The damage to the British economy of allowing a bank like Royal Bank to renege on what it owes would be unthinkably huge.

So it matters, in the first instance, that our banks are perceived as viable, profitable businesses - able to pay their way.

And it also matters, in the second instance, that the UK state is viewed as being able to honour the liabilities of its banks, in the unlikely event that a mob of overseas lenders to the banks all asked the teller one day for their money back.

What this means is that if you put any kind of probability on a recurrence of the collapse in confidence in our banks that we saw in October, then some portion of banks' overseas liabilities should be counted as an increment to the ballooning debts of the government - which is why there's a link between the perceived weakness of the banks and a fall in sterling.

Although - as you'll have spotted - there's a dreadful paradox: a fall in sterling actually makes the problem worse. Because, as Royal Bank of Scotland helpfully pointed out in its trading update yesterday, a fall in the pound increases the sterling value of banks' overseas assets and liabilities.

All of which is to explain why, in these febrile circumstances, something as nebulous as "confidence" in our banks really matters.

In that context, what may count is that investors yesterday believed that short-sellers were once again driving down the value of bank shares - even though I am reliably told there was very little short-selling.

That fear of short-selling may have persuaded other investors to dump bank shares, or given them a further reason to do so. Which is why the lifting of the ban on short-selling of financial stocks last Friday may have been unfortunately timed.

Also, as I said last night on the Ten O'Clock News, the prime minister' may have meant well when giving a stern instruction to the banks that they must come clean about the scale of their dodgy assets. But it unnerved shareholders, who wondered on what basis they could value banks, if even the most powerful man in the country didn't know what horrors lurk inside them.

As for the lack of detail in the multi-hundred-billion pounds plans announced by the Treasury to stimulate lending, that was an invitation to the City to fear the worst - to conclude that the banks would become profitless instruments of the state.

Where does all this lead?

Well if the world's investors already see Royal Bank as a de facto part of the state, if the constant noise about its future in the City and the media is damaging to wider confidence in the financial system, then the government may conclude that full nationalisation of Royal Bank of Scotland isn't necessarily worse than the status quo.

Comments

Page 1 of 5

  • Comment number 1.

    Yesterday was just a subliminal blip on the radar, it's back to BAU Business As Usual again

  • Comment number 2.

    If RBS are nationalised the Government will have acquired another tool by which they can control (or attempt to control) the mortgage lending market. With so much contradiction in their policies and statements, it's about time the Government stated their aspiration for the housing market in the medium term. They are using a lot of our money to fund this venture, and I for one have little confidence that the money will be spent to best effect.

    Please read following petition:

    http://petitions.number10.gov.uk/LendingReform/

  • Comment number 3.

    Yes, it is essential to lubricate the processes that are needed to cause a restart of bank lending.

    But it is equally essential to bring back stability to the Stock Markets and confidence to the wider economy and to the Pound Sterling. Surely the Government must realise this but their actions including yesterday’s seem to have the reverse effect.

    Assuming the Government is not pursuing some covert marxist plan to take total control of the whole financial sector, then they must now be desperate to find an action that would be beneficial. Many of their actions have been unprecedented but now have become the norm. But all have failed to restore either confidence or stability.

    If the Government were to allow any of LloydsTSB, RBS, or Barclays to fail, or if they were to announce a full Nationalisation, neither result would restore stability or confidence to the Markets.

    But, I believe that this suggestion would do so.

    It might be called soft continuation of partial nationalisation, but it is practical and in the present situation should be actioned immediately.

    The Government needs to make two immediate announcements:

    1. That the ban on Short Selling of Financial Stocks is reimposed with immediate effect, and

    2. That with immediate effect the Government will purchase in the open market Banking shares of a list of banks, which would need to include LloydsTSB, RBS, Barclays, and perhaps others. The announcement would state that they would continue to do so until the price of each had increased to a defined level that would be stated in the announcement. This level for LloydsTSB and RBS should be the price at which the Government purchased the recent offer shares (173.3p and 65.5p), and for Barclays would be an agreed price, perhaps £2 or £2.20.


    The effect would be immediate and probably dramatic:

    (i) Stability would return as investors would know that while the price remained lower than the stated price then they would be foolish to sell,

    (ii) The immediate price for each of these shares would probably be much higher than now, and possibly close to the target,

    (iii) Any Short Sellers would be severely burned,

    (iv) It is likely that the Government would not have to purchase a large volume of shares as the announcement itself would be likely to cause the share prices to rise close to, if not beyond, the target prices,

    (v) An upward momentum of stability and confidence would be re-established that hopefully might be self perpetuating and take the price continuing upwards with general easing of financial tensions.

    I ask the Government: Please Do It Now.

  • Comment number 4.

    In this poker game between the traders and HMG, the govt are playing like ameteurs. They have declared their hand, and the traders can now bluff them as much as they like. With Ali D declaring that they will do "whatever it takes" to keep the banks running, he has lost all negotiating power. Therefore it is inevitable that the governemnt (and hence us taxpayers) will come out of this badly and the traders will, long term, do rather nicely. The Chancellor can lend £20b, £50b, £100b, whatever, but he is not in a position to demand that the banks give him something in return (such as lending to business). If, as is currently the case, the banks simply refuse to pass on the money, what can the Chancellor do? Nothing - he has committed himself (us) to saving them, so can't let them go to the wall. The banks can just demand more money and the govt has no choice but to pay.

    A similar thing happens frequently in my industry, ship building. Every time a new warship is built the government think they have this contracting business worked out. Pay the contractor a firm (fixed) amount and pass the risk of building the ship to budget on to the contractor. But, ultimately, the government can not absolve itself of risk. Half way through the ship building period, the ship builder turns to the government and demands more money. The govt says "no, you gave a firm price" to which the shipbuilder says "fine, then we will stop building". The govt has no choice but to pay up, because the half built ship can't be taken elsewhere for completion, it can't justify buying half a (useless) ship and at any rate, it puts the defence of the realm at risk not having a complete naval force. So the govt cannot win, and it will get similarly beaten by the banks.

  • Comment number 5.

    OK Gordon, ten years as Chancellor which would you like to confess to - stupidity or negligence?

    Why is the Labour Governemnt still treating the private enterprise system like it is a religious experience for them.

  • Comment number 6.

    Huh and I thought it was as much about the share holders being worried that they come last in the handouts!

  • Comment number 7.

    Surely time to demand back those "performance bonuses" which turn out to have been no such thing.

    This would be an undesirable precedent in terms of retrospective legislation, but extraordinary times ...

  • Comment number 8.

    I've been wondering about the banks' foreign currency liabilities for a while now. Thank you for clarifying that, Robert.

    Whilst the state can always repay its Sterling debts, i.e. gilts, by printing pound notes, it cannot repay foreign currency debts nearly so easily. This was Argentina's problem; it borrowed money in foreign currencies and the government was driven to seize private pensions.

    I don't pretend to know how to solve the current mess, or even know who to blame for it, but for the UK government to take over huge foreign currency obligations does not sound like a good idea.

  • Comment number 9.

    Just remind me again exactly how much did we pay for the RBS shairs yesterday?

    what percentage of the bank did that give us?

    And exactly how much are they worth today?

    I hope the goverment placed a MASSIVE short option on its shairs so that we at least made a killing!

  • Comment number 10.

    Robert,

    I wonder if you could possibly help me because I always thought that banks had their books audited every year. You know those highly paid accountants who walk through the doors collecting astronomical fees for signing letters that the figures represent true and fair value.

    So, what have they been doing during this great global collapse? Can we have an investigation into this whole sorry fiasco.

    What I must say is that some people have this naive thought that the banks are being nationalised, well can we take it then that when I walk through the door of my local nationalised bank that the person on the other side of the counter is a civil servant, and that they have signed the official secrets act. Just a thought!

  • Comment number 11.

    Actually the question is whether the UK government CAN honour those liabilities. How many of them are GBP denominated? Is the UK government simply going to print money to pay off the GBP denominated liabilities because it certainly doesn't have the cash and its ability to raise debt is going to get more and more constrained.

    Look to a UK default on its government debt and saying hello to the IMF....

  • Comment number 12.

    I suppose by being in the first handful of countries having to go to the IMF in the next few months there will at least be some money left in the fund to bail UKplc out.

    Its a case of lets get our hands on it before anyone else can.



  • Comment number 13.

    Rogers is an immensely irritating individual whose contributions are little other than him talking his own book. To believe that shortselling played no part in yesterday's debacle is naive it is again very evident this morning, just look at what is going on in LLoyds and Barclays. Our pensions hve done well as a consequence of the FSA's idiotic actions. Sure make Sir Fred the scapegoat for RBS' predicament if you must but please lets not overlook the howlers committed by the FSA on short-selling and capital requirements, and the accounting profession's obsession with Basel II. Perhaps trading in finacials should have been suspended alltogether pending clarification.

  • Comment number 14.

    With RBS I fear Crash has got us all into a huge hole with probably immense and as yet unidentifiable losses.

    To think that just a few years ago Scotland and the Scots had an incredibly good reputation Worldwide for financial acumen and integrity.

    Three men Sir Fred Goodwin, Crash and Alistair Darling have blown a huge hole in that reputation. One that British banking let alone Scottish banking may never recover from.

  • Comment number 15.

    Poor poor Sir Tom McKillop!

    What a way to go.

  • Comment number 16.

    It's obvious that Foreign Global banks located in the city would never their transfer money and accounting systems to London but they would happily leave dodgy assets there.

  • Comment number 17.

    The phrase I hate the most is: 'Perception is reality' because it's not. It's only reality to those too lazy or unable to find the truth.

    Our banks are so unbelievably undervalued because we don't know perception from reality. No one is pinning risk and value to their debt, particularly their potentially toxic debt.

    We will carry on riding the merry-go-round until the banks can put numbers to this. Until that happens there is really nothing else worth talking about. However complicated, the banks must get on with it.

  • Comment number 18.

    Quote "As for the lack of detail in the multi-hundred-billion pounds plans announced by the Treasury to stimulate lending, that was an invitation to the City to fear the worst - to conclude that the banks would become profitless instruments of the state."

    Another great success story for Government's handling, eh ?

    On another tack, Robert, I could not follow through your logic in your post above.
    If as you state above ,
    a: that until recently the banks had foreign assets and liabilities matched
    b: that many foreign liabilities had to be repaid early to those overseas owners who demanded them back
    and
    c: that the value of sterling has semi-collapsed,

    then the banks must have overseas assets worth more than their liabilities, and with Sterling's big fall this must make the value of the assets much larger than the liabilities, and the banks must now be hugely, immensely profitable.



    Or is it that someone, somewhere, has not been telling the truth ?
    Were the banks already not solvent previously ?
    Or are the assets of the banks so ridiculously overvalued (by semi-fraudulent accounting techniques) that the banks were never solvent ?

    I just cannot make head or tail of your reasoning.

  • Comment number 19.

    typo in para 3
    abbreviation of until is 'til not till

  • Comment number 20.

    I find it ironic that you were the person who started the run on a UK bank, and yet discuss the importance of faith in banks!

  • Comment number 21.

    Faith in banks is just what is needed. A period of calm. As such ending the shorting ban was a bad idea. RBS' statement on the same day as the bailout was a bad idea.

    All the news is bad and the price of getting it all out at once has been a big collapse in confidence.

    This is very bad media and senitment management indeed.

    Sadly, there are few options left for bailout Number 3.

  • Comment number 22.

    Finally, some real clarity about this. It has always been an issue of solvency. The banks fear they aren't because of unknown (or, unknowable global loans and the scale of potential defaults).

    The government gallumphs to the rescue, without being clear (if it is actually possible), about what we are all rescuing.

    There is resulting fear and worry about the government's and national credit worthiness.

    So, print money (inflation of money supply) or, a spectacular national default. Take your pick.

  • Comment number 23.

    Robert, how many more dodgy 'securities' are being hidden in 'special vehicles' in offshore tax havens? How much do we really know? God knows where this'll all end. As someone said this morning socialism for the rich and capitalism for the poor. Soros argues that in future new types of 'security' ought to be pre-approved before they enter the market. I think he's right, otherwise, once the brakes are off they'll be all at it again. We have to be thinking about a comprehensive public inquiry into all of this mess. I hope in the US Obama has the good sense to do something along these lines, it might just push the current 'New interventionist Labour' to do something similar. I must be dreaming, it's not going to happen under this bunch of pudding heads.

  • Comment number 24.

    The 'currency market' is telling you what the rest of the world thinks of Broon and Darling, Bobby.. time the BBC reported that as far as the world is concerned, our Govt is just plain WRONG.

  • Comment number 25.

    Deafening silence from the Scottish Nationalists.

    Perhaps they realise that if they had succeeded in gaining independence, Scotland would now be as bankrupt as Iceland, thanks to the utter folly of their supposedly prudent Scottish banks.

  • Comment number 26.

    And do we really think the world is going to have confidence in the UK? A country whose enterprise spirit is now encapsulated in a welfare system so generous that millions of Brits will not even consider working. And with no prospect of altering that inside two generations?

    I don't think so.

  • Comment number 27.

    Its all very well for Jim The Jolly Roger (his comments sounds like those of a pirate) to say what he said but America and nearly all the world have very similar issues as the UK - so where would he put his money - the answer he moves it continually and stokes rumours behind his trades. Not so easy for Jo public so one must to quote Kipling - keep your head when all others..... - I would say do not listen to anyone, (not even Robert but continue reading he is interesting), but trust in only yourselves during this crisis, and remember there are always great opportunities in any crisis. Clearing out the dead wood in the worlds economies may be painful but it is necessary and will be beneficial to all of us in the long run. No pain no gain..........

  • Comment number 28.

    He has already given Merv the keys to the printing press so may as well start spending, buy the banks and Jaguar, could re-open Woolies while he's about it.

    Give bucket loads to the Rock get house prices up, lets really build a bubble to be proud of, then light the blue touchpaper and stand well back.

  • Comment number 29.

    Can someone explain to me why it would be so terrible for the RBS to fail?

    I understand the situation is more complicated now given the government/taxpayers have pumped in vast sums of cash to keep them afloat so far.

    If the bank collapses, apart from RBS employees losing their jobs which is obviously not good. Surely all those who owe RBS money from this country in loans & mortgages etc would have them written off. Wouldn't this just inject a massive amount of cash in to consumers pockets, that would then be used to restart retail spending etc?

  • Comment number 30.

    Good blog Robert. You hit the nail on the head with your last comments. When Brown opened his trap with his injudicious comments, he made the situation immeasurably worse. It has been noted before, that when he gets angry all common sense (what little there is in the first place) flies out of the window.

    So the RBS shareholders got spooked. It looks like the new Lloyds bank Group shareholders are following suit likewise. the remaining banks were also tarred with the same brush but to a lesser extent.

    Brown effectively has been in this job for twelve years. He should know better. Rumours and statements by the authorities have always been the basis for price swings in the stock markets.

  • Comment number 31.

    Bert

    yesterday you said it was not a bust bank - where you coming from chief?

  • Comment number 32.

    #3, anyone with a brain would dump their shares on the government so essentially you are advocating full nationalisation of most of the high street banks.

  • Comment number 33.

    Deafening silence from the Scottish Nationalists.

    If they had succeeded in gaining independence, Scotland would now be as bankrupt as Iceland, as a direct result of the utter folly of so-called prudent Scottish banks.

  • Comment number 34.

    We simply cannot afford to nationlise RBS. Its share price is a joke; its balance sheet is massive. The risks of doing so are driving down Sterling. There are many more urgent needs for what remains of Government credit than meeting liabilities RBS has run up around the world. We need to focus on protecting our liabilities to depositors and then allow it to be wound up. If we go on like this we are going to end up like Iceland. At some point some sanity must be restored to the public finances before we are all ruined.

  • Comment number 35.

    Come on moderators........what are you going to do when the slurry REALLY hits the aircon in an avalanche and Robert is doing five pieces a day? Hurry up.

  • Comment number 36.

    This appalling Government hasn't a clue. Brown loved the false boom for years and encouraged it. He has not even had the decency to admit even the slightest hint of his own disastrous failure.

    Either that, or he does know what he is doing and is trying to drive the final nail into England and hand our soul to the EU, lock stock and empty barrel.

    A total shambles.

  • Comment number 37.

    Once again thank you for some very insightful points, Robert.

    But exchange rates are relative of course and the weakness of the situation in the UK would need to be set against the strengths and weaknesses of that in the US and the Eurozone etc, where the foreign liabilities may not be as great but the extent of the toxic loan problem/potential impact of a pure trading downturn might be larger.

    However, such are the perils of thinking one can be a centre of the financial world when you are not part of a large currency block.

    Trying to find the upside of this, though, it probably bodes well for any modestly indebted heavily exporting company in the UK - which anyway is the sort of business that UK plc should have been supporting over the past years rather than the enormous Ponzi scheme being constructed within the Square mile (or these days a bit to the East).

    But to digress for a moment.... can we open a book on the FTSE Chief Executive who has destroyed the most shareholder value in the last 25 years?

    Could someone commission some research on this?

    And could we then arrange for any gongs/handouts and bonuses to be recovered from the prizewinners?

    I imagine that some while back a guy called Simpson would have been there or there abouts.

    Today (and perhaps for the next 25 years at least?) though, I suspect RBS shareholders will have someone else in mind.






  • Comment number 38.

    There is no way we will restore confidence with the media's feast of despair and gloom. We are undoubtedly in a mess, but let's try and have some form of balanced view. I am not saying stick our heads in the sand but who do the media think they are helping?

    They will say they are just reporting the facts well Ok let's have some positive ones as well

    As for the repayment of the bonuses, I only wish we could get them back since none of those irresponsible and incompetent bankers are suffering in this. I always thought there was some mystyque about the banking world but I can make a bad bet as well as the next person.

  • Comment number 39.

    #13, its the regulators that have an "obsession" with Basel 2, which leads onto banks and accountants having an obsession too. Ditto VaR.

    Otherwise agree with suspending share trading in financials whilst the market has time to price the information. As it is, everyone thinks the UK gov is going to pull a Northern Rock on LTSB, RBOS and possibly BARCL.

  • Comment number 40.

    #5 watriler.
    Its not GB's fault - he was lied to by the City. Almost everyone else was taken in by it too - I've been laughed at for years for saying 'this is the way the city works and its a lie and a sham'. Now we can all see its a lie its 'someone elses fault' and not the greedy, the culpable and most of all those who knew it was a lie - the accountants and boards in the city who fooled everyone into beleiving there was some sort of economic miracle going on.
    The big mistake is giving tax payers money to these fools parasites. They know that to lend it to anyone would be throwing money away.
    We should have just let them rot - we're going to have to soon.

  • Comment number 41.

    Westminster should be fenced off, assets seized, declared an independent state and left to rot.

    New Government formed in the provinces.

    GC

  • Comment number 42.

    'There's no future and England's dreaming'

  • Comment number 43.

    It is a sure sign the UK economy is in trouble when Burberry cuts jobs !

    Even the so called wealthy market is starting to shrink.

    But, with no new exports, and Pay rises running below the rise in the real cost of living, our consumer economy will shrink further.

    This is a vicious downward spiral, firms make losses, lay off staff, who then cannot spend money, which causes further lay offs, etc, etc.

  • Comment number 44.

    #29 anyone who has deposits will have them locked up whilst the bankruptcy works out. Also the mortgages and loans are still due. So people who banked lose their money whilst other who owe still have to pay. Would it be that bad? No idea but LEH bankruptcy was bad but in the end the CDS market worked perfectly.

  • Comment number 45.

    I understand full nationalisation was discussed at the weekend for RBS and there are many on this forum who advocate just that. One of the reasons why that is to be avoided is that full nationalisation implies a credit event which means all the insurance (CDO,CDS) that RBS took out against its bad debt needs to be sorted out much as it was with Lehman. This would mean other banks including some of the UK banks would have to make further significant write downs, triggering more banks to collapse. Dominoes comes to mind.

    The next problem is that the size of these banks and their risks seem likely to be bigger than even the UK economy can support.Uk tax income per year approaches 700 billion and UK bank assets are in the trillions and although there is not a correlation you get the idea about how big these banks really are. There are strong rumours today that Gilt auctions are going very badly and nobody wants to lend the UK government any more money as Gordon takes on more and more risk.

    The government has some very hard choices to make and I expect that they will take the easy option of printing money. The trouble is if they do it too quickly then the weekly shopping bill could double as Ratings agencies downgrade the UK much as they have done to Spain. Unlike Spain and Ireland which have the Euro, Sterling will most probably tank as a result, rising prices, setting in motion a vicious circle of decreasing consumer spending money as inflation goes through the roof. The alternative is to balance the budget and take a leaf out of California's page where pension and state benefit payments have been suspended for the time being. Even Ireland is talking tough to balance their budget with suggestions of benefit cuts and public sector wage cuts.

    Despite how much we may think our banks have failed us what many forget is that during the goods times they were paying lots of tax to the government. Estimates suggest tax income has dropped by a third for the UK government. This leaves the UK government with the option of increasing taxes to compensate, printing money to make up the difference, cutting expenditure to match the tax income. There is of course one alternative and perhaps the only escape route for the UK economy and that is to make UK banks international beating profit making banks so that they can be taxed at high levels again. Unfortunately it looks like the UK economy and government is all resting on UK banks continuing to be profitable private entities.

  • Comment number 46.

    Errr... shareholders have been getting worried that Gordon knows more about the banks' financial situation than they do.

    Does this mean that the banks have come clean in front of the Prime Minister, but not in front of shareholders, financial analysts and the FSA?

    Makes bit of a mockery of the fundamental principles of capitalism doesn't it?

    Now either the shareholders are (and always have been) incompetent and gullible, or they are telling us that central planning is a better way of knowing what is really going on. I'm very confused.

    I can just imagine the voices in Gordon's head at the moment "Just keep pumping confidence into the system, and it will all be fine, lad."

  • Comment number 47.

    Why On EARTH would the GOV want to NATIONALISE RBS?

    Would it not be FAR BETTER to keep a 70pct stake in a listed bank, which it could offload at a later date bit by bit?

    All this talk of nationalisation is so 1970s.

    The World has moved on!


    THE EXCHANGE rate could have two impacts depending on what the banks have done to offset their currency risk.


    BUT as these traders are the same people who buy holiday homes in France and do not bother to exchange their sterling at the time they agree the purchase price so ending up with unnecessary currency risk between the agreed purchase and completion of the purchase.

    I would not be surprised to see that the BANKS (run by these currency challenged traders) have not done a thing to cover the currency risks Robert is talking about.


    I looks more and more like the UK has been one of the biggest sources of funding for the American credit BUBBLE.


    The sheer incompetence of the Management of the banks and the UK regulators AND the British Government is quite UNBELIEVABLE!


    We are so lucky we are not a MANUFACTURING economy!


    Pitty we are NOT in the EURO!

  • Comment number 48.

    no doubt Mr Curzon bought dollars yesterday - wait for it !

  • Comment number 49.

    Excellent bog Robert - I think this really gets to the core of the UK's banking problem.

    I really don't see how we as a nation can afford to take on £1900bn of RBS's foreign currency liabilities. It's the old question again - what possible consequence of saying "sorry it's RBS's fault, nothing to do with the UK Government" could be worse than saddling ourselves with £1900bn of real foreign currency debt?

  • Comment number 50.

    Robert,
    I think your use of the quote by Jim "bow tie"Rogers just plays into his hands. He is the first to say that he buys at the bottom and sells at the top. Why help him achieve his objective.?
    The only reason America stays afloat is because China and India need it to do so.
    All of our current problems relate to British banks following the nefarious ways of the Americans who will never change. With the medias support and less speculative trading our banks can once again become stable institutions. Give them and Gordon Brown a chance.

  • Comment number 51.

    Can someone explain one thing to me. If banks are desperate for cash i.e. to reduce their exposure to loans they've given to institutions like RBS, and they know that HMG has guaranteed to cover RBS's position, won't RBS's lenders simply all come knocking on RBS's door (effectively HMG's door) for their money?

    Robert hints at this, but says it's an "unlikely event that a mob of overseas lenders to the banks all asked the teller one day for their money back."

    I don't understand why it's so unlikely. But then I'm an outsider to this whole business and don't understand a lot of it (dont think i'm alone there). Can someone help me out?

  • Comment number 52.

    Talking of Brown's injudicious comments did anyone see News at Ten yesterday where the ITN report had the bottle to ask a question that the BBC would never ask.

    Is this not equivalent to writing a blank cheque?

    Brown's response at the end was chilling and revealed his totalitarian nature.

    It was along the lines of:

    Be careful asking questions like you just did.

  • Comment number 53.

    On a different subject, & one cleverly picked up by Mr Pirate at the time of RP's blog on the subject, annual food inflation confirmed at 11.9% today, Tesco's annual like for like sales increase 3% - so a drop in actual food sold of c 9%.

    So rather than a good December performance actually a shocker in terms of sales quantities.

    Their profit is only holding up because their costs will not have gone up anything like their sales values because they continue to screw the suply chain.

  • Comment number 54.

    The Question hanging over all the Stockmarkets must surely be:

    How much corruption is actually out there ?

    This might sound a silly question, but when a man like Madoff can pull a fifty Billion con, where does that leave the rest of the system ?

    It is interesting how many UK companies seek Offshore status for their Tax affairs.

    It would be interesting to know how much Tax revenue is lost to off shored companies, some of which have entirely UK based services.

    So, can public investors trust any of the big companies ?

    How can we know if what is reported in their accounts is the truth ?

    How many more Madoffs are out there ?

    And when will how Housebuilders get Nationalized ?

    One man can start an avalanche with a shout. Funny that shouting wont stop it afterwards......

  • Comment number 55.

    Capital, and particularly fictitious capital, has to be devalued for capitalism to regain a positive profit rate.

    Capitalism only produces for profit.
    The system doesn't meet human needs.

    People out of work, people in debt, people losing their houses, people unable to feed themselves properly, people unable to keep themselves warm, people needlessly dying.

    Why have a system that puts profit before people?

  • Comment number 56.

    The bounce in RBS this morning seems to be of the dead cat variety. Also note other bank shares esp Lloyds are down. There is a total lakc of confidence that the Government knows what it is doing and is capable of doing what it wants to do. Meantime Sterling continues to slide...

  • Comment number 57.

    Hi all,

    Here is a simple idea to get the banks lending again: Instead of the gov backing the lending via the high street banks, simply have customers that are looking for loans go to Northern Rock, since the gov own it outright. Once the banks start loosing more and more business from businesses or mortgages, they will quickly start lending again. Stop bailing them out for creating the mess in the first place.

    The existing small firms loan guarantee scheme (SFLGS) does not work for a lot of businesses and adding more money to the guarantees also will not work. Reason: although the SFLGS will cover 75% of the loan, this is not enough for the banks. They want 100% plus, security which for most small or new businesses is not an option. Some banks will not even consider using the SFLGS until you have the other security in place.

    The other side to the banks being offered even more guarantees, is that the banks then have little or no risk and will therefore go back to a year or two ago whereby they will lend to anyone for anything. Alot of the loans will fail, and the banks will simply fall back on the guarantee schemes and continue to rip the back side out of what should be a very good scheme.

  • Comment number 58.

    Robert,

    Alistair Darling said of HMG recapitalisation in November :

    "The objective of the recapitalisation scheme is to ensure that each eligible institution has sufficient capital to sustain confidence in the institution. Institutions should therefore have a sufficient buffer of capital above the minimum requirement both to absorb losses that might ensue from a downturn and to continue lending on normal commercial criteria. In assessing any proposals in relation to eligible institutions, HM Treasury will continue to focus on three key objectives:

    maintaining financial stability;
    safeguarding the interests of taxpayers; and
    protecting depositors and consumers.
    In providing capital to any eligible institution, HM Treasury, on the advice of the Bank of England and Financial Services Authority, would need to be satisfied that these three objectives were met.

    2. There is no automatic right of access to the recapitalisation scheme. At a minimum HM Treasury would expect the following high-level conditions to be met before capital could be offered to any eligible institution:

    The institution must have a plan to meet an appropriate level of capitalisation, as determined by the FSA. (Information about the FSA approach is set out in its statement of 14 November 2008). It is a matter for the institutions concerned to disclose to the market their capital requirement;
    The institution must have a sustainable business model and delivery plan;
    The institution’s funding profile, sources and mix must be clear, broad-based and sustainable; and
    The senior management team must be credible, with demonstrable ability to deliver the business plan. "

    See my earlier posts on RBS. Sir Peter Burt this morning on Today said that RBS told HMG of its black hole, so yesterday's losses should have come as no surprise. It came as a surprise to me, and the markets by the look of it, aside from the waste of taxpayers' money that's gone down the pan on paper. What has gone wrong so soon after RBS capitalisation?

    The money market liabilities were taken care of by way of HMG guarantee for 250 billion / sovereign wrap, were'nt they?

    Sterling and equities will be vulnerable if HM Treasury / UK banks do not keep their houses in order.

  • Comment number 59.

    If the government want the banks to start lending, why don't they use the nationalised banks to lead the way? The problem now is that there is no competition in the market. If RBS were to say "OK, let's lend again", the other banks would soon get their act together or risk losing market share.

  • Comment number 60.

    I wish people would stop referring to RBS as a Scottish bank and that its behaviour is going to have a very negative impact on how people now perceive the Scots and Scottish bankers.

    RBS may well have had its oversized HQ in Edinburgh but its largest institutional shareholders were City institutions and it was regulated (alledgedly) by the FSA, the Treasury and the BoE none of which are Scottish.

    RBS was therefore a product of City greed and short termism which believe you me did little or nothing to help grow the Scottish economy beyond the direct employment it provided.

  • Comment number 61.

    Indeed, it's all about confidence.

    That's why Brown and Labour have failed, and continue to fail.
    They are associated with the "old-politiek", and have failed to show the integrity that engenders trust.

    Change is essential. Before UK society is broken too.

  • Comment number 62.

    'Can someone explain to me why it would be so terrible for the RBS to fail?'

    If RBS failed, there would be a run on every major bank in the UK the next day. The entire UK financial system would fall apart within 3-5 days and the government would have nothing it could do to stop it.

  • Comment number 63.

    I am amazed there is quite so much store put on share prices.

    So that a collapse is almost seen as self-fulfilling and leading to nationalisation.

    I dont think 100% ownership of, say, RBS achieves very much at all.

    The extra 30% isnt worth it for taking all the liabilities on the public debt or decimating pension funds even further.

    And seizing more assets is hardly the best way to encourage foreign investment.

    There is a multitude of examples of markets getting prices so wrong its embarrassing to the human race.

    So ignore the share prices and just look at the fundamentals.

    The fundamentals are not pretty, granted, but measures to address the problems do not require nationalisation.

  • Comment number 64.

    The government is now putting us all in debt and giving that money to the banks in the hope they can be persuaded to lend it back to us, at interest.
    The current financial system is institutionally dishonest and largely parasitical. It needs major overhaul.

  • Comment number 65.

    It seems then that the UK is the sick man of Europe. The debt filled boom that evaluated Britain from the problems of the 70's has shown itself to be a smokescreen.

    Perhaps if Thatcher and it's Nu Lab reincarnation didn't continually bash the Unions and suppress wages; people wouldn't had needed to borrow the amounts they required in the first place.

    The beginning of 20th century saw the Ottoman empire as the sick man of Europe. This century it's the UK!

  • Comment number 66.

    Before Jim Rogers puts the £GB down (we can we are Brits), he should look at his $US because when the Chinese Jim Rogers say sell $US there will be no newspapers in the USA as the presses will all be printing $USm notes.

  • Comment number 67.

    #19 "Till" is a perfectly acceptable alternative to "until". Look it up!

  • Comment number 68.

    #40, yes Mr Brown is a poor victim of the City, but didn't you know that he predicted this in 1998. He is a genius and knows all. He will save the world - again!

    Weird there was no complaints about the City "lying" when they were contributing a quarter of corporation tax receipts and 30% of GDP and funding Brown's debt fueled binge...

  • Comment number 69.

    I enjoyed Yesterday in Parliament this morning with dear Dobbo, member for Christmas North, ranting on about bailing out Tory bankers. Poor old soul, where has he been the last ten years?

    The Tory bankers seem to still have all their money whilst the SNP and Socialist (Champagne Tendency) bankers have posted their money into a deep, dark hole which they expect the taxpayer to fill up with their wealth so they can skim some off for their next bonus.

    It is this deep dark hole which is the problem and, quite frankly, I am getting scared. So are the currency markets by all accounts.

    I have to revert at this point to an old record I have been playing for some time now.

    The government has not got a clue what it is dealing with. Mr. Brown even admitted as such yesterday. As other posters have remarked they have handed their entire strategy over to the market dealers with permission to skim as much off the top as humanly possible.

    In short this government is so incompetent it has to go and go soon.

    A comment on Teletext last night remarked that Mr. Brown has no mandate for this sort of commitment and called for an election. A very good point.

    There are two options: an immediate general election or the PLP dump Brown as leader. If Labour go for an election now they will suffer fewer losses than if they go in six months or a years time. If Labour leaves it until the summer they will be wiped out. it is their choice.

    Mr. Brown and his administration is finished. Its culpability in creating this mess is widely recognised and its failure to deal with it effectively is apparent.

    It is more than the banks that need confidence, so does the government. It has none, so it must go. The call now belongs to the Parliamentary Labour Party: are they capable of a coup followed by a coalition government or are they just a bunch of stooges. Over to you, Dobbo.

  • Comment number 70.

    10:20am, PleaseDoItNow, you should run for Chancellor. Honestly, you took the words right out of my mouth. GBP 50 million pounds yesterday would have gotten a positive close in RBS and saved us all billions in paper losses. More importnantly, they would have achieved the single most important thing required at the moment - confidence in the markets. On top of that, quashing talk of nationalisation would also have a massive impact. Nationalisation of RBS or Lloyds would be cataclysmic for stock market. Shareholders are not gamblers at a casino, they are a very important part of the capital structure. Keep taking away their investments in solvent organisations and equity risk premia will destroy the market and with it pension funds... how long till pension liability issues become the issue? Not long if equity markets are not supported.

  • Comment number 71.

    #46, no they are worried that Brown will force them into nationalisation which will screw them a la Northern Rock or force them to lend crazily and so bankrupt them later. Either way, its a sell...

  • Comment number 72.

    Gordo, you have done enough messing now, just put the interest rates to 5% to save sterling and drop the value of your new overseas debts.
    All existing sensible internal UK borrowing can cope with that.

    Then put a zip on it, and go away on holiday for three months and let it all settle.

    But before you go, put a call into the Fraud Squad and tell them to have a whole load of guys in pinstripe suits in the chokey by the time you get back.

    If you are lucky, there might have been a coup and you can stay away for good.

  • Comment number 73.

    #33

    Silly chap.

    If Scotland had succeeded in gaining independence it would have the benefit of a Norwegian type oil fund and a much more diversified economy that included a greater level of higher tech value adding manufacturing companies because RBS and HBOS would have been properly regulated and would be working in collaboration with the Scottish Govt and industry to develop the Scottish economy.

    Nice try though.

  • Comment number 74.

    Its time to jump ship.

    Two tickets to Reykjavik please.

  • Comment number 75.

    From Reuters: statement by Lloyds bank chairman:

    "I think we can probably conduct our business better than the government can conduct it for us," Blank said in an interview with Sky News.'

    Mmmmmmmmmmm ... methinks he's a tad worried that good old Gordon'll soon be calling the shots.

  • Comment number 76.

    Time for an update Robert:

    Lloyds Banking Group is tanking! Down 40% this morning.

  • Comment number 77.

    The man on the street is enslaved further and further into future tax debt becuase he is forced to pay the debts of the very very rich under the threat of the total collapse of the economy.

    It will all completly collapse anyway so let it all come tumbling down rather than this controlled demolition that gives the elite TOTAL CONTROL.

    Brown etal are going to get the steaming smelly blame heaped on their heads from a large height while Cameron and co' will no doubt come in and save us with a 'new economy' that will surely no doubt make use of the NuWOLabour RFID ID DATABASE Systems.

    now there's a plan

  • Comment number 78.

    The lack of confidence isn't in the banking system but more with the banking institutions ability to manage themselves properly, professionally and indeed honestly.

    With reference to T A Griffin and the over paid accountants and auditors. This is not the first time that large corporates have shown that they have an unhealthy and some would say illegal hold over those who are performing the audit. I agree they should be named and shamed as it is impossible to miss such an obvious exposure and share holders should have been informed.

    As far as the currency is concerned. I have mentioned before that I unfortunately have to pay maintenance in Euros however my children are buying all things from the UK as is my ex wife. The children are then selling the games, clothes etc for considerable profit. Admittedly skiing has been cancelled but the holidays will be here. I can see how the low stirling could boost the economy, if there is one left.

    In France while the banking system is more robust due to the stringent lending the cost of living is now astronomical and I can see I much more difficult and longer depression (let's be honest, this not a recession) throughout Europe because of the heavier reliance on the manufacturing base.

  • Comment number 79.

    Re 45, brickfielder.

    Very interesting. I thought that the UK government funding crisis wouldn't hit until next year, but as back in October, events seem to be moving fast.

    Clearly this government don't have the will to make hard choices about spending, and as they've all but announced they're going to start printing money, I expect inflation to take off very soon, today's figures notwithstanding.

  • Comment number 80.

    Surely the real stories this morning concern (1) Jim Rogers and (2) reports that a rating agency is going to downgrade UK govt debt. This is why sterling is crashing.

    Overseas investors look at countries the way equity players look at companies:

    1. What is the outlook for income and spending? (in the current instance, dreadful)
    2. Do I believe the balance sheet? (no, because of huge off-balance-sheet liabilities)
    3. Do I trust the management? (it is not even worth asking this question until after an election).

    The UK may not be "finished" - provided that Labour IS "finished", PDQ.

  • Comment number 81.

    England was lumbered with the Scotch 300 years ago when they came begging for Union as they had bankrupted their own country. We in England have provided three centuries of gifts and support, always ungratefully received, and they have now through their Scotch Raj now bankrupted England. Not content with that Brown tells the world how to behave and only the Germans are standing up to the bankruptcy of the whole world. Scotch prudence has been a fallacy over the centuries coupled with a seemingly national incapacity to accept they are wrong. No wonder Alex Sammond is quiet these days as he knows Scotland cannot exist without Union. We can do without them though. The recent report that by 2012 Scotland will be the 3rd largest receiver of public funding support, only just pipped by Cuba, is as damning as it gets.

  • Comment number 82.

    At the the time of writing, the moderation queue is about an hour.

    The "angst and anger" is understandable.

    The sense of betrayal is justified.

    This is the biggest 'national' crisis since WW2.

    And it was predictable.

    Britain did'nt need Europe.

    Europe was 'bananas and cucumbers'. Full of REGULATIONS which would have hampered the freedom of the CITY. Meddling in British affairs. Telling our banks how to run their businesses. Merkel warned Brown at G7 Heiligendam. The German press reported that she was laughed at by Bush and Blair.

    Europe will suffer a deep recession.

    Not because of the banking system (except Ireland ; but Ireland is containable) but because of the insolvency of Europe's customers in the Anglosphere.

    The winner will be Eastern Europe. That is where the value creation.. roads railways ie. infrastructure will be as far as the ECB is concerned. Payback in 20 years. No short termism. That's where the 120 million hardworking customers will be. The east europeans are skilling up fast. Poland will have a higher per capita than England by 2020. Because work creates value not speculation.

    The East Europeans want decent schools, good hospitals, good roads and good houses and good pensions. They are sick of blackmarket spiv economies.

    Britain is not a role model.

    The British model has failed big time.

    Why?

    Basically because you hate each other.

    You hate your estate agents, your banks, your councils, your politicians, your 'cowboy builders', your teachers, your police.
    Read your yellow Press... Sun, Mirror, News of the World.
    You hate your vicars, you hate your students. You hate 'education' and you hate your customers!

    'I'm all right jack and scr.w you'

    An economic system reflects the values of the society in which it evolves.

    You probably hate me too!

    Do you really believe it that when an American says 'have a good day!' they really mean it.

    Of course not.

    They hate each other too.

    The fact you can see that means there is hope for you yet.





  • Comment number 83.

    People are rightly angry about the current economic situation, the abilout plans being enacted, and the wat it seems to have noe end in sight. People feel powerless. But there is a distinct lack of understanding about how modern monetary systems work (not just here, but in the government, and dare I say it, in the banking "industry" itself. Maybe they just don't want to reveal their lack of understanding to us. I agree with many other posters here that RP has a public service duty to give us that educational understanding... maybe another piece rather like his New Capitalism one?
    In the meantime, some may like to look at this link to see some views on what a better monetary system might look like.
    http://www.wfhummel.net/reformplan.html
    The theories of Hyman Minsky are very relevant here... especially his views on massive debt deflation, which the world is about to embark on. The trouble is, our economy is built on debt, rather than any other "collateral", and in particular economics seems unable to take proper account of the importance and value of human capital, which is vital in service and "knowledge" economies.

  • Comment number 84.

    This reaffirms my theory either Brown is one of the stupidest politicians in history or the most devious totalitarian dictator this country has ever witnessed. Peston for once makes some very salient points.

    Why lift the ban on short selling before anouncing the next actions on Banks to improve liquidity?
    Why undermine investor confidence by suggesting all UK Banks have further toxic debts hidden in their balance sheets?
    Why not provide the clarification needed to give investors confidence that this was not going to be wholesale nationalisation in everything but name?

    If a government wants to nationalise the banking system it is going to be a lot cheaper if the share prices are demolished.
    This is quite a clever way of transfering wealth from the modestly wealthy to the poor of the UK. Banking will become another form of taxation. Total market capitalisation of the banks 18 months ago would probably be about £700Bn, by nationalising for say £50Bn the gov has effectively transferred that wealth from the prudent savers and investors to be spent on the massive requirement for welfare benefits and the huge black hole in the bugdet created by an extended period of reckless gov spending.
    The biggest loosers in this mess are the shareholders and private pension holders, a large majority of the country, the beneficiaries people with no investments or savings or private pensions on long term benefits.
    Nice one Gordon you surely are a ......

  • Comment number 85.

    Hmmm....this is all a blow to Eck the Fish's (aka Alex Salmond's) desire for Scottish Independence. His much vaunted arc of wealth (Iceland, Ireland and Scotland) has now become the arc of insolvency! At least this may scupper his desire for a local income tax...surely nobody in their right mind would increase taxes at this time?

  • Comment number 86.

    From this site:

    "A key feature of the government's plan to stimulate lending by our banks is a direct intervention in the mortgage market"


    Ho hum. 'Your home is at risk if the economy collapses and there ain't nothing you can do about it'


    Repossessions up and they still expected you to take on a mortgage.


    GC

  • Comment number 87.

    #55, yeah its called communism. You can move to North Korea to enjoy it.

  • Comment number 88.

    Come on!

    What's happening will generally be seen as 'a good thing' when we look back on this crisis. Why? Because it will be seen as the end of the catastrophic policy of 'self-regulation'. It will also bes seen as a massive 'wake-up' call for politicians.

    Successive governments have failed to regulate the financial institutions properly and as a result have had absolutely no idea what was going on. Politicians have failed in their duty to oversee the successful management of this country. Their pathetic bickering and school boy squabbling about such inconsequential matters such as the 'John Lewis list' is too sad to merit comment.

    We have a very tired, outmoded and unprofessional version of democracy which delivers glacial change in a time of accelerating change. It no longer serves the needs of our society.

    In the general scheme of things, it doesn't matter much whether RBS is nationalised or not. What does matter is political reform!


  • Comment number 89.

    Jenatzy @19

    No, it's not. "Till" is the oldest form of the word. "'til" is the non-standard form. Check Wiktionary.

  • Comment number 90.

    as a shareholder, every year i receive the annual accounts which always include an "independent report" by the appointed auditors... this always says "blah blah blah gives a true and fair view of the state of the groups affairs........"
    can someone tell me why all the banks auditors are not now facing charges for misleading the shareholders? My Barclay's report mentioned nothing about all the assets that cannot be valued etc......

  • Comment number 91.

    From the Times online:

    Jim Rogers, who co-founded the Quantum fund with George Soros, the billionaire investor, told Bloomberg: “I would urge you to sell any sterling you might have. It’s finished. I hate to say it, but I would not put any money in the UK”

    Pheeweee! Can it get any gloomier?

  • Comment number 92.

    But nobody explains how full nationalisation will help the situation - if anything it will be an admission of failure by the government and further destroy international confidence.

    International investors would have to deal with a fully nationalised bank which would be less open about toxic assets etc than currently, casting further doubt on the credit worthiness of the UK Government.

    Watch sterling really plumet if RBS is fully nationalised as this would also tell investors that Lloyds would be next in line, and the IMF would undoubtedly have to be called in after a few months.

    You're right about short selling though - many long term investors are now dumping simply because they believe the short sellers are driving the prices down, which in effect they are - it only takes a relatively small volume of short sellers to create panic in the current circumstances.

    Says something is very seriously amiss about the quality and judgement of our leaders and civil servants that the ban was lifted.

  • Comment number 93.

    # 52 GRUD999 said that the ITV asked what the BBC would not i.e. HMG writing blanc chq.

    I fairness the Today programme asked Darling at 8.15am yeaterday morning. I forget the answer but it was not in agreement.

    #60 WEE-Scamp said RBS is not Scottish.

    I have banked with them for 20 years and maybe found 2 English people in that time and they were customers.

  • Comment number 94.

    We need a PUBLIC INQUIRY.
    This inquiry needs to look for criminal incompetence, criminal negligence and fraud.
    It needs to look at the entire industry over the last 7 years.
    Ratings agencies, certified published accounts etc.
    Why do we have tens of thousands of multi-millionaire bank staff at the same time as broken banks?
    Were lottery jackpot bonuses paid at a time of non-existant profits, or when executives knew that their bank was failing?
    Of course a public inquiry may be highly critical of the government, but unless we get one, we will never shut up.
    The gov can continue to try and save the economy....the enquiry can be held by others.
    We know it's "global" Gordon, but our bankers seem to be the worst on the globe, by far.
    They have lost the entire annual GDP of the nation.
    No other country comes close.
    For this small matter of the countrys' banks going bust, we need a PUBLIC INQUIRY now.

  • Comment number 95.

    Robert - a few names please, to flesh out:

    'Our banks have colossal overseas liabilities; they've borrowed huge sums abroad. According to Bank of England figures, the gross foreign currency liabilities of British banks are around £4,400bn (having quadrupled over a decade).'

    Oh, and by the way, just a thought ... in the context of the de facto, possibly soon to become full frontal, bank nationalisations, I've just stumbled across the wording of Clause 4 of the Labour Party Constitution - as dumped on 29 April 1995:

    'To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry and service'

    Goodness me! - '... common ownership of the means of ... exchange.'

  • Comment number 96.

    Is there a wall between the share capital of a bank and its operational finances? I would like to think there should be and that the share price of a bank should not impact its P & L. Any ideas?

  • Comment number 97.

    It's obvious what's going to happen here. They won't wholly nationalise RBS because that way if there is a huge liability the government will have to pay and risk default. The government will split RBS, with the quality business (deposits and quality business lending) remaining in government ownership and the rest remaining private. This protects the savers and businesses (voters/economy) while allowing the foreigners to go to the wall without rhaving an official national default. The septic bank is still very much upon us.

  • Comment number 98.

    So pumping vast quantities of our money into the banking system isn't working. No suprises there.

    But is it lack of confidence in the banks or the British government that is the issue here? Brown's lack of detail in yesterdays announcements left me uncertain that he knew what we, as a country, were signing up to. No doubt others felt the same.

    When will it end?

    Can't the Tories make a bid for you and Vince Cable on the transfer market?

  • Comment number 99.

    I estimate the loss to date to shareholders in the banks is reaching about £500Bn. Shareholders are by far the biggest loosers in this mess. Most of the reckless investment bankers have made their money and probably do not need to work again, the politicians seem to be immune to dismissal on the grounds of gross misconduct, foolishly we give them a mandate to do what they like for a 5 year period without fear of loosing their livelihoods, financial journalists have positively thrived on this debacle(particularily state sposored ones). Perhaps Peston will donate the proceeds of his recent book sale to a shareholder welfare fund.

  • Comment number 100.

    Confidence may be 'nebulous' as you say, but it is fundamental to any recovery of our economy let alone to individual investors.

    No matter what the mechanics of the latest round of rescue plans announced this week they will not deliver until confidence in the government itself is restored.

    Mr Brown and Mr Darling continue to play the blame game.

    It is not so many months ago that their mantra was that the UK was better placed than other leading economies to weather the international storms.

    It was repeated at every opportunity and is now shown to be what it always was: a hollow boast.

    Until they or there successors become believable confidence will remain illusive.

 

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