Banks' rescue plan: Good or bad idea?
Don't worry your heads. The government's buying shares on your behalf in institutions that are basically sound and will eventually sell them and get your money back. That appears to be the message coming from some today. It begs - the admittedly facetious - question - if part-nationalising the banks was such a great idea, why didn't we do it years ago? Let's be clear.
The optimists can point to the experience of Sweden in the early 1990s. A government - of the centre right, as it happens - part-nationalised its banks and issued sweeping guarantees for inter-bank lending. The government got most of its money back in the form of dividends and the eventual re-privatisation of one of the banks it nationalised.
The pessimists can observe that saving the banks of a small country - which was not in the midst of a global financial crisis - is very different from what the British government is trying to do. There are no guarantees that we will get our cash back. What's more, even if we do, that money is not available in the intervening period to spend cutting taxes or raising public spending to get us through the recession that appears to be looming.
There is another cost too, to the reputation of London as the emerging financial capital of the world and thus to a cornerstone of our recent prosperity. That - as I wrote last night - will have huge consequences for the economy and for politics.
UPDATE, 11:45 AM: I asked Gordon Brown where the money was coming from, at his news conference this morning. His answer was that borrowing would be extended to cover up to £50 billion for taking a stake in those banks that need it, and stressed that he hoped that the taxpayer would eventually get their money back. As for the other couple of hundreds of billions of pounds, he said that these were loans on commercial terms.
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What he's simply unwilling to do is to spell out the downside risks. His aides explain this by saying that he's keen to maintain confidence in the economy.
What's clear is that the old politics of tax and spend is dead. It's not long ago when any proposal to spend a few million (as against hundreds of billions) was greeted by Gordon Brown and Alistair Darling with the cry that you had to show how you'd cut spending or raise taxes to pay for it.
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What is clear is that we have a chancellor and prime minister who are prepared to take risks with the economy and people's livelihoods, by using taxpayers money to prop up their pals in the banking system.
What is needed is bold, decisive leadership and a well-thought out economic recovery plan.
Bail-outs on the hoof using taxpayer's cash again to write blank cheques for Brown's banking buddies are not the way to run an economy.
http://theorangepartyblog.blogspot.com/2008/10/brown-bails-out-his-banking-buddies.html
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Why oh why should my hard-earned and easily fleeced tax go to pay off the hardships of speculators who have invested in a bank in Iceland.
Despite behind Conservative I have gone along with the Governments' more recent efforts to save us from the Brown stuff, but this paying off the woes of investors who have helped keep the government of iceland afloat - with no benefit whatsoever to the UK economy - has gone too far?
What next? Will we subsidise those investors who have lost out in the Bank of Nigeria or Bank of Madagascar crash?
If you speculate abroad, your losses are abroad - not my or any other British tax payers responsibility?
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It has been stated over and over that the aim is to get banking 'back to normal' so companies and individuals can get more credit...
At the same time, we are told that an excess of credit was the cause of the problem...
Taxpayer money (via the treasury) should not be given to the banks to be loaned back to the taxpayers (as customers) for a banks private profit.
Taxpayer money (as tax cuts) should be left with the taxpayer so they can PAY OFF their debts.
Then the taxpayers won't default, the banks will have their money, shops will make sales and everything is back to normal.
If the government take our money for the banks to lend back to us, then the credit snowball keeps rolling and just gets even bigger -- bust postponed, but the mother of all busts when it does come.
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Nick,
you are getting better. A very speedy new log, timely too.
As we are seeing with the falls in the stock market the banks now do not constitute as much of the index as they used to, there values have been eroded.
A governmnet supported recapitalisation scheme, now if they were to seek this money through the real market then they would offer shares which would have voting rights. Why no votes, why an arms length involvement. Why this preference idea, yes we will get dividends but without any control.
I demand no taxpayers money without representation, an age old call but a serious and real one.
Bold and far reaching solutions, that was what was needed. This is neither bold but it sure is far reaching. It breaks new ground but it will not restore confidence. Jobs and prosperity, nonsense.
A comprehensive restructuring of the banking industry. This is not conventional thinking:
the flows of money between banks, the special liquidity scheme, cough, cough:
suppport the banks through preference shares, only £25 billion, plus £25 billion
plus guarantees, investments, what on earth is this man on.
Families and businesses to help the economy move forward. Ah, revenge for the Cod Wars, we are taking action against Iceland, insist on credit lines, executive remuneration blah, blah blah.
We can look forward to a fairer and more equitable etc...active consultation European wide funding plan.
A gathering, we are being tested, let's have a summit, the right conditions, oh please note the statement was given by Gordon Brown, not the chancellor, Gordon is the Prime Minister not the chancellor, whose plan is this.
Easier for longer time lending rather than overnight. Part of a process,
Where is this money coming from, good point. Borrowing, buying shares, preference shares, not ordinary shares, stability of the banking system, a sound banking system. We expect a return on our investment.
If we didn't do anything... would the world come to an end
Another good question, why not ten years ago, we are putting money into the system, it is not only governments.
Nick, this is appalling, I want a guarantee to my savings. Your questions are getting more incisive, well done. Keep learning, where is Robert Peston, coming up with another story to undermine the system.
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Nick can we please put to bed one lie from the Labour spinners.
The Swedish bail-out is a very poor precedent. It was very small by comparison and the Swedish taxpayer lost billions, let me quote from Wikipaedia : "This bailout initially cost about 4% of Sweden's GDP, later lowered to between 0–2% of GDP depending on various assumptions due to the value of stock later sold when the nationalized banks were privatized."
This is an utter disaster for the UK. It makes "Black Wednesday" in 1992 look like a small trifle. When will the BBC present it as such, rather than cut n paste whatever the Labour spinners tell you to say?
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This is starting to make Black Wednesday look merely slighly off white... To be topped off, no doubt, by Brown blaming global forces for this unexpected "return to boom and bust" despite taking the credit for all the boom times.
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"Bail-outs on the hoof using taxpayer's cash again to write blank cheques for Brown's banking buddies are not the way to run an economy."
Maybe so, but what IS the answer? Currently the global economy is in or heading towards meltdown. The comparisons with the depression may be overblowm, but only insofar as we are at the start - the Greta Depression had to start somewhere. We have a chance tio avoid one, or to fall into it.
I for one have no desire to lose my job and home and live on state handouts in a tent city, so until someone can come up with something better to at least avoid total collapse, what the government offers is the best we can expect.
No one is offering anything better.
I despise Brown and especially Darling who have clearly put their own political future ahead of the country's needs, but in the meantime we should support them until something better is clearly there.
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We need a financial system simply to allow the economy to function. The problem is that for too long now the regulators have had no idea of excatly what the banks have been up to, and to some extent neither have bank management.
We've had experience that govenrments cannot run businesses of any kind successfully and, although they have not yet nationalised the banks, I have no confidence that they could run a bank successfully.
They should focus on the needs of the UK domestic economy, and ensure that sufficient financial services are available to British business, perhaps by allowing new small banks to open and perhaps by increasing the range of services that building societies can offer. Then let the "big" banks sink or swim by theselves.
Frankly this amount proposed isn't going to be enough and they'll be back.
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Spot on, theorangeparty. Labour will say and do anything because it's not their money that they're spending. Profligacy is in their DNA so they can never stop; might as well ask Mandelsnake to stop crawling on his belly. Won't happen.
We've had enough. Go away Labour. Even if you announced you could turn water into wine you'd still lose the general election.
NO MORE LIES.
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I have just had the press conference cut off by the BBC Radio 5 so can only comment on what I have heard.
Gordon Brown cannot be allowed to get away with blaming the States. How can he insist on anything, this is pie in the sky stuff.
I'm sorry but this is so deeply flawed, people have contracts, you can't just break them. What on earth is he talking about, he will control dividend policy, remuneration policy. That is without any actual power, he has given them the money but we, the taxpayer, have no involvement. This is going to lead to a situation worse than the Great Depression. You won't see the same levels of poverty, what it will lead to is despair, a loss of what is it all about, what exactly is the point anymore. There actually is no point, it is all about money, in the words of Shakespeare, 'we are now all pimps and whores'.
Nick, your point is very valid about what will not be done which would have been done. Our pensions are ruined, our children and grandchildren will be seriously impoverished.
This is a scorched earth policy, they must not be allowed to get away with this.
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While this rescue may put us back on the road to recovery it has also put us back on the road to the next boom and the next bust. We need to have a very radical re-think about the way we manage economics and social stability in the next 20 years and then beyond.
We also need a strong fiscal regulator not the ineffectual FSA an authority with some real clout and the remit to serve the fiscal interest of the entire nations community not just the financial sector which it has to achieve through controlling the financial sector.
It is not the big issues that breaks any defences but the small excess that affect every one of us and damage minorities that destabilises systems (10%tax) They economy and social cohesion must be safeguarded in the next ten years while we come up with a real solution to the global social and economic problems we face otherwise this so called rescue will be good money after bad and we might as well have let the lot go and start a fresh
The problem is with a rescue everyone breaths a sigh of relief and with that exhale goes half the lesson learnt. It is vital that some start thinking about the alternative solution the route to the 2nd half of the century in tact. Some positive suggestions may be found amongst the wheat and chaff by clicking the link to my other recent BBC blogs responses. There is a future as well as the present only the past is gone.
you have to change the belief that success is measured by your personal achievements and reward people by what they achieve for others. That is a major leap in human nature that will then bring about the social and economic environment we desire (or just need) it will create an interesting scenario if a bankers bonuses were based on what had been earned by the country or the businesses they funded rather than the spurious products they stitched their peers and their customers up with.
Reward savings, reward cooperation, reward sustainability and it should be that no one other than those who opt out has to go without. We need to define desirability, confirm ethics and morality, engender citizenship and community, profile wealth, success, happiness and contentment, separate price, cost, value and worth, and encourage hope, charity and inclusion within a sustainable global society.
I make no apologies for repeating here comments I may have made elsewhere in the BBC blogs For some suggestions as to solutions rather than just moans about others then see my links to other comments thank you.
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Darling and Brown were dithering, hiding in their bunker,
They have no clue what's going on, the grey man and the clunker.
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The Chancellor's recovery plan is more sensible and creative than the US plan to buy toxic assests or the Irish plan to guarantee to all deposits. If any banking system is likely re-emerge as the financial capital of the world, it is surely London.
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With the expertise, technology etc available today there should have been a Disaster Recovery Plan to cover emergencies such as this with enough resources to cover it ALL.
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Perhaps before putting any state money into the banks all the bonuses paid to the employees who have caused this mess should be repaid. If the headline figures are anywhere near true then that would make a good inroad into stabilising the situation and giving the banks the liquidity they need.
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What worries me is that the tax payer may be screwd for a generation paying this off.
Might not be worth working for a living anymore as the tax take will make your eyes water!!
Well done Labour, you have well and truely knackered UK Plc AGAIN!!!!
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This comment was removed because the moderators found it broke the House Rules.
Nick - your fears for the reputation of the City of London are parochial. The whole world (except, it seems amazingly, Africa) is in financial turmoil.
The Government is trying to keep ahead of the game - and they know as well as you or I do that it may work, or another horrible shudder may go through the world markets and we are all doomed.
Good luck to the Government, I say. Otherwise its bread and water for all of us.
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Oh Dear a BBC sponsored Conservative Party Political Broadcast. Not a suprise from an ex "Young Conservative" such as yourself.
If the Goverment had done this two weeks ago they would have been accused of undermining the workings of the free market. I'm pretty sure that in the intervening period each day both the media and the opposition will have been drafting contradictory responses to potential Goverment moves. It's just hypocrisy.
The Tories latest line that we should have saved for this rainy day didn't seem to be their line during the sunny period when they promised to split the proceeds of growth between tax cuts and public spending.
Put simply we need the Banks for all areas of our economy. A colleague of mine has been trying to re-mortgage for the last 4 months. Despite an excellent payment record she is now paying a high interest rate as the 2 year deal she signed up to has run out. The extra £350 per month she is paying would have been spent or saved, stimulating the economy. Times this by the many thousands in her position and it is obvious how the banking sector affects normal people on modest incomes.
We have been stuck in a downwards spiral. Therefore we needed some action, the action taken seems fit for purpose and certainly our Government have been more responsive than others. They should have insisted base rate reductions are passed on, but that is the only problem I see at this early stage.
I find this kind of dammed if you, dammed if you don't journalism childish and frankly not worthy of the funding I provide you with.
There seems to be a section of the media and almost certainly one Political Party who want the Government to fail on this one whatever the cost to normal people.
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"It begs the question"? You should say "raises the question." The term "begging the question" refers to a specific form of logical fallacy in which the conclusion of an argument becomes its premise.
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So we have no money to properly equip our troops but with the wave of a wand we can find £250bn to bail out a bunch of overpaid bankers who were no good at their job.
Perhaps the banking and system and government should revaluate their concept of risk?
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Ing Direct (UK) are now publishing that savers will get back £77,000 under the Dutch Banking Scheme.
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Where will the money come from, asks BBC political editor Nick Robinson at the press conference. Mr Brown says the government is buying shares in the banks and taxpayers will get the "upside".
So he didnt answer that question
So, adds Robinson, the government is making a vast investment on behalf of taxpayers - if it is such a great idea why did they not do it earlier? The chancellor says they are doing it because it is necessary to stabilise the economy.
So he didnt answer that question
Asked why the government won't guarantee everyone's savings, Mr Brown sticks to his previous form of words to say that the government has always protected savers.
So he didnt answer that question
Mr Brown is accused of trying to walk away from the wreckage of the financial system he created "smelling of roses". Now is not the time to talk about the past, says the prime minister
So he didnt answer that question
Mr Brown is asked if he would apologise to the British people for the chaos of the past few days? No, is the answer
Wow he answered one, not exactly the right answer though from someone who supposedly listens and hears and understands
Nick when you ask a question and so obviously dont get an answer why dont you ask it again and again until you get an answer. We all know how uncomfortable that make the politicians you only need to watch paxman to see that, That surely is your job as a journalist, keep asking the question until you get the answer
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What has become patently obvious is that the creation of the Tripartite structure by Gordon Brown including the FSA was a cataclysmic disaster.
Deregulation had already taken place under Thatcher; there was simply no need to add an even greater degree of freedom.
There was no need for this kind of bailout in he early nineties after the previous banking boom because there simply wasn't this degree of leverage and off balance sheet toxic waste.
The fact is that this leverage started to go into overdrive from 2000 under the new Tripartite regulatory system and rather than do something about it; Gordon Brown led by example and proceeded to add billions onto the national debt; add billions off balance sheet.
He now wants those respnonsible to be held to account but he won't hold himself to account for his own spednaholic ways and lack of oversight.
The man is a complete hypocroite; the only rational thing to do this morning to accompany this announcement would be the announcement of his own resignation.
He is the architect of the problem.
Constantly blaming America begs the question - 'Caveat emptor?' The banks were not forced into buying US mortgages but Gordon Brown's lax regulation made leverage so attractive they fell for it.
If I was an American I'd refuse to let him get off the plane next time he landed in my country.
Call an election.
He's a hypocrite and a national disgrace.
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Dear Nick
Politically this entire "crisis" is now more than a crisis, I cannot for the life of me see this working,
So lets stop trading, and batten down the hatches, "What then"?
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So, the ultras of free market capitalism brought to their knees by a combination of mindless excess and the inherent instability of the system they have milked for so long.
Don't worry, in the long term we will be much better off without the parasitic activities of the City in its current form. The people who traditionally work there, many of them quite bright, will have to do something useful instead of frittering away their time in non jobs which create nothing other than personal enrichment at the expense of others.
A cruel and flawed ideology heading towards its Berlin Wall moment. Great days indeed!
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Both Gordon Brown and Alistair Darling could have given depositors a 100% guarantee - they didn't.
Brown and Darling could have forced the Bank of England to immediately cut interest rates - they didn't.
Both these decisive actions would have prevented the banking sector from collapse and help stabilise the markets.
What we got instead was Brown and Darling dithering over what to do.
The markets took their cue from that, and what have now is a panic move by Brown and Darling to part nationalise the banks at taxpayers expense.
Who needs 'novices' when we have 'numpties' like Brown and Darling in charge.
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Good to know that our comrades in government have figured out how to pick up a turd by the clean end.
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How do the gruesome twosome get away with it?
What they have announced is an 'investment'. So why does the PM only talk about taking advantage of the 'upside'. Surely the whole point with investments is that they're not guaranteed, and there is an obvious and associated potential downside too. Companies offering investments have to make sure that their communication is clear, fair and not misleading (the FSA mantra) regarding that fact so how can the PM get away with it?
The Chancellor also said that they will carefully scrutinise the books of business they will effectively underwrite. So what if they don't like what they see? They will see plenty of self cert retail mortgages out there that anyone could get in the "good" ol' days - so what if they turn their noses up at those? Is that going to end up as a double-whammy for the taxpayer - stump up the cash AND then be told that the bank (the Government) doesn't want your business any more?
If they've thought this through, it's escaped me!!
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Nick,
Take my advice. Ask hard questions not questions that dummies ask.
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Okay, I support the Government in their endeavour to stabilise the banking system, lets deal with the problem now. I hope though the banks do not have short memories after this. 5 years a go I ran into financial trouble but I bailed myself out, no Individual Voluntary Arrangements or anything. It was all my own fault and the banks were viscous in making sure I realised that. Now the banks are in a position where it is all their own fault too but we are bailing them out. The tax payer didn't bail me out. Time for the banks to be more humble as far as I am concerned.
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Well, New Labour's policies are truly nailed to the mast "we'll bail out our mates in the city in the hopes of getting similar fat-cat salaries once we're out of office".
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When the Banks were busy moving money around the system, (our money) everything seemed hunky dory.
Now they are refusing to lend any to anyone, where has that money gone to ?
Are they just sitting on it, and going to use real Public Money to persuade the system to get moving again
Or has it all been just fantasy money and now push has come to shove, Real Money - again our money - has to be used with faint hope that we might see it again.
As it seems that any/or all of the above may be true, my faith in the Fianancial system is severely shaken and reinforces my distrust of the whole enterprise, but now its failing, what can any one individual do to restore that faith and stop any future wild speculation to try and prevent a re-occurance ?
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A Bank rescue deal - great news!
So why are the shares falling?
I assume its because the rescue is part nationalisation.
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Nick
Watched you questioning the PM ( who seemed to hogg the show rather than the Chancellor)
Can you clarify did he actually answer your question as to where the money for this rescue plan is coming from??
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Hmm, fawning politicians, what about fawning BBC reporters who were falling over their prawn cocktails to get access to the bankers, who were most likely their old Oxbridge college friends, believing their lies, refusing to look to deeply, keeping the public entertained with not-so-penetrating analysis.
We live in a democracy and with the BBC to inform, sorry entertain (that what BBC news has become) us we're unable to make decisions about the rather narrow choice of parties we're offered?
It's only a bit better in the papers (more Oxbridge clones) where the occasional maverick voice gets heard.
The BBC shouldn't be so smug, they recycled PR material as news, and insider tips (over prawn cocktails with their mates) as solid information, believed the hype, were so desperate to be in with the in crowd they lost the plot.
Blog entries from the public who don;t get invited to city events, are so much better...
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re: 16, Cablesmartial
What worries me is that the tax payer may be screwd for a generation paying this off.
It will indeed be 'slave Labour'.
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I dont see an alternative to this action but it should be seen as the initial pass on a plan that demonstrates that Brown and Darling are capable of managing a recovery and to run our economy properly with the tax-payers interesta as the first priority.
We dont need to hear any more of this "novice" stuff because the situation is truly serious.
What we now need to hear is the detail on the pre-conditions of this loan and how they are positively going to help small businesses and high morgage payers.
Clearly at national level the now huge borrowing is not sustainable.
So what I also want to hear from Brown and Darling is how they are going to forceably reduce bugets in all Goverment Departments including Government itself in order to close the borrowing gap.
They also need to bite the bullet and address the clearly unfair(remember Brown's speak) differentiation between public sector and pension arrangements.
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#5
Labour spinners like David Cameron you mean?
He saw the way the wind was blowing and what the Government were likely to do, and was talking about the merits of the 1990s Swedish bail-out at the weekend to pre-empt it and claim it has Conservative thinking.
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Good old ING Direct - what is it that keeps them ok - more sensible than our lot.
Like I said, during the Labour rule the country got out of hand personal and commercial finances up the spout. Tony Blair thought he would bomb around the world as a "saviour" whilst ignoring what was happening here.
Britain tries to save the world but can't save itself.
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Why should we have done something before?, if you are so smart why were you not advocating the plan?, wise after the event as usual .
This was a mess made by greedy banks and it was wise to wait until they needed bailing.
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Nick,
people must stop talking about banks. This is about bankers, people not institutions. even though I set up banking systems there is always the need for people, it is people who make decisions, not computers. You may talk about automated dealing systems, they still need to have the parameters built in, that is still a persons decision.
When Darling Brown talk about talking to the banks, they can't, they talk to bankers, people! What are we expected to believe that Darling Brown go around talking to buildings.
This is a scorched earth policy for whichever government takes over after the next general election, which must be held, unless something happens of course. Were there any elections during the previous world wars?
We are heading for a planned economy, something which nobody voted for. This must not be allowed to happen, Brown is not only an Aspidistra, he is also dangerous, very dangerous and I for one do not underestimate him. Be afraid fellow Brits, be very afraid.
In the meantime I read that he is actually taking my advice and going to Glenrothes, even though Mandelson is not being a candidate. I can only hope that the good people of Glenrothes do what is actually best for the long term future of the United Kingdom, do not elect a labour candidate, it will be the end.
I am totally independent and am affiliated to no political party, I just believe in human nature, in the power of the people. I hope you print this log.
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Hello Nick,
Well I am just a simple working class man,so I see it a simple way.....
Why should the normal person in the street continue to support the nouveau rich in the errors of their ways with our money?
I note the ex director of Northern Rock is still playing cricket on a nice fat pay off,and they they continue to sponsor rugby and football teams;can I have a ticket for the best box in the house?
This so called prime minster has made a critical decision to gamble our money with out a by your leave,asking parliament;and to cap it all he is a non elected PM as far as I am concerned.How about scrapping the John Lewis list Gordon?
I can just see it now as I get a letter from my bank saying they are going to put my interest up on my small company overdraft.Talk about having your cake and eating it!!
I am totally sick of paying for other peoples mistakes.
Get a grip Gordon ,and so much for the silence of the lambs Tory party.
I do not remember get all this help when I first went bankrupt ?
Yours disgusted.
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I dont know why you’re so popular. You suck up to Ministers instead of making them sweat over hard topics.
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An interesting situation. Now that banks are effectively registered charities, in return for tax-payers money I'd like to see them form a brass band along the lines of the Salvation Army.
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ING have acquired £3billion of UK investors' in Iceland banks. It will end up with several huge worldwide banks who are sensible and the little ones will disappear. I for one would transfer to ING right now, or Abbey (Santander), LLoyds etc.
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re: 26, sagamix
Don't worry, in the long term we will be much better off without the parasitic activities of the City in its current form. The people who traditionally work there, many of them quite bright, will have to do something useful instead of frittering away their time in non jobs which create nothing other than personal enrichment at the expense of others.
So quangos as well then?
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AD said on the BBC this morning that the government had to borrow this money to bail out the Banks. He also said that this has cost every taxpayer in the country £2000 .....(at the moment).
I sincerely hope that the interest rate Britain PLC will be paying to our "lenders" is a lot less than the interest rate the Bank will be paying for the loan, but as it's the "old boys network", I very much doubt it.
Given the self-inflicted instability of the Banking sector, I also wonder if Northern Rock are still making payments to the Treasury for the £26bn loan used to bail them out. Things have gone a bit quiet over there lately.
We will be repaying this debt long after we're gone, and probably long after our children have gone too, but what I find most astonishing, is how such a vast sum of money can always be found in situations like this!
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Nick,
If the banks go down I don't think the loss of a few £10bn will be that high on our list of concerns.
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What were all the huge Accounting and Audit Companies doing when they checked these banks books?
They must end up in the dock alongside the FSA who are supposed to prevent these events happening.
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Clearly I know nothing about banking but from what I hear success seems to revolve around confidence and confidence comes from success ? When ever Mr Darling , or Mr Brown speaks to us citizens markets seem to go into a tail spin . Could it just be that Mr Darling never , ever looks confident ?
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Britain is battered by waves
While Labour treat us like slaves,
Things can't get much worse
Under Nu-Labour's curse,
Bring on the election we crave!
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A waste of money, our money. Government intervention wont stop or slow down this DEPRESSION. The market will prevail in the end (it always does) so please stop wasting our money. IMO there will be many more "take overs" of the weaker or should I say less well run banks and other organizations by their stronger better run competitors. This might give the "competitions commission" a problem but not if it suits the governement i.e Lloyds TSB take over of HBOS. What's happening today? Exactly the same as happened in the US last week after their "knee jerk plan" to inject their $700 billion "rescue package", the markets are still falling. They will come back in time, when buyers decide the price is right to buy.I think Brown and Darling will be loving this, all other bad news is "buried" although this crisis is exposing their sheer inabilities. Who is running this country, politicians or Bankers?
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This is what I blogged this morning on my own little blog http://steves-helpwithdebt.blogspot.com/
If this is a game of poker, have we shown our hand too early
Tuning in to the Today programme this morning I learned that the Government had announced its latest rescue package for UK banks.
The Government is going to make £50b available for banks to access if they require funds to shore up their capital. This is likely to be in the form of preference shares. The first question is where is the cash coming from if as we are being told constantly, the government has no available cash. Presumably it is borrowing this from the market place, that same market place that won't lend to other banks.
Secondly, what is the upside here for the British taxpayer? Bank shares are at a ten year low. Presumably over the medium term, with the guarantee of government support and a pledge that "we will do all that is necessary" these bank shares will rise considerably in value. Is the British tax payer getting the type of share that can be sold in due course and the benefit of the increase in share price realised?
The second element of the rescue is that the government looks like it is going to provide a guarantee for a bank which has to the market to replace it's short term borrowing used to fund its long term mortgage lending. eg HBOS may need to replace £100b of this type of funding in the next three years or so. If the money market will not replace this borrowing the government intends to act as guarantor for the banks ability to meet any repayments on this money, and to bolster the security given to secure it. Again, any shortfall on the security will be picked up by the British taxpayer!
My question this morning is whether the market will see fit to accept this latest offer. The government and the Bank of England have been intervening for months now by providing cash for liquidity, to little effect. This is a bigger plunge, and is significant, but the market is not driven by sentiment. My worry is that the market will effectively say, "Thanks British Government, that is a nice offer, but we think that you can go higher". Essentially they will play a game of poker and see just how far they can push not only our government but others around the world. If I am right and this is like poker, have we revealed our hand too early, and what else have we got to offer. Actually shouldn't we be calling the markets bluff and saying, that's it. Take it or leave it, there is no more.
It's a disasterous game to play if this all goes wrong.
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Not to worry; as a condition of 'lending' our money to the banks, they have to promise to be responsible in future.
Nobody ask "Or else what?". It wouldn't be... British.
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Darling, is a wreck of a man. I heard him this morning giving half hearted excuses on the Today Programme about why the taxpayer was getting such a bad deal out of all of this. He's effectively sold us down the river without any guarantee that we'll have a boat to go down it in. Think about it, over 1000 spondoolies for every man women and child in the country??? The mind boggles at the thought of it. This means that this money can not be spent in the 'real economy' this means that jobs will be more at risk as firms in the 'real economy' struggle. This is what is happening. This is a disgrace.
No mention of any criminal investigation into these rogue bankers. Yes I know, some of you'll have bought into the argument that 'now is not the right time to...', but let me say this: when is the right time? When these rogue bankers have been awarded their big leaving payoffs, or when they get that 'knighthood' for 'saving' us all from the mess they created?
Also the taxpayer is expected to do all this with little say over what is actually happening in these banks. Heads have to roll: now, not when it's over.
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As the public are presently not able to send e-mails to No.10, would you like to point out to the PM that his style of tie wearing is quite sloppy and does not create a positive impression for our political leader, who is trying to impress the world that he is the one, at least in our country, to lead us out of the present mess.
This practice also seems to be current amongst many in the public eye, and beyond, another sign of sloppiness in our general culture?
Thanks
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I don't understand why Darling says it is ridiculous to link state support with caps on bonuses. It is the bonus system which is partly responsible for getting us in this mess. Please don't tell me that this is a one way street for the banks...unlimited liquidity for no downside.
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People @ 47
... "So quangos as well then?" ...
Yes, spot on ... the City is like one giant Quango ... nice one!
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I can't let PatrickGJones's comments go unanswered. The majority of people who have money with Icesave are NOT "speculators" they are simply ordinary savers. They don't own shares, but savings accounts. Internet banks like Kaupthing Edge and - to a slightly lesser degree - Icesave are registered in the UK and participate in the FSA compensatory scheme, even though their parent is based overseas. On that basis, savers are entitled to exactly the same protection as those whose money is held in a "British" bank. If we were to discriminate against such banks here, then we could only expect other countries to do the same to our banks which would make it very difficult for them to operate in the retail savings market overseas.
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So that's 50 billion going in as preferred loans, which is 800 for each person in the UK.
Where's it coming from? Increased taxes? New borrowing? If so, from whom? The banks we now own?
Or will funds be transferred from o´ther spending plans?
I think we deserve to be told.
Who are the masters here? Us or them?
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i ve just sold the hbos shares i bought last night made 25%, good money.
the problem with the city boys is they are all mouth and no trousers. times like these seperate the men from the boys. you need to be brave.
selling when the firm is in ok nic just because a meeting is called at 5 pm is plain silly and makes it easy for a brave investor.
facts energy prices are ok, fact oil price is ok, fact unemployment is ok, fact 2 massive retailers tesco and sainsbury announce good profits
this 'crisis' reminds me of the asian tiger economy crisis a few years back which turned out to be nothing.
everything is a crisis these days getting your cat run over is a crisis in the bbcs eyes.
the funniest thing was i heard last night on the 10 o'clock news this is the worst crisis since the 2nd world war. i mean come on surely the soviets threatening to hit us over the head with nukes was worse!
p.s. i am waiting for the boe to keep interest rates the same. if they drop em they to have lost their bottle.
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I do not have an answer to the current financial situation in common with the majority of the population. There are few people with access to all the required information to make a judgement.
There are those who think or assume they know enough but dont. Wisdom is knowing that you dont know and redressing the matter. There isn't one person out there with all the answers...maybe there isnt a complete answer...but we do have recognisable people in this country who can contribute to a solution.
The situation is changing by the minute and therefore difficult for any entity to try and keep the nation properly and fully informed.
I suggest that that everyone should shut up and apply their talents to supporting those from whatever sphere trying to work towards getting us out of this mess.
We can only work through this on an hour by hour basis within a given framework
THIS INVOLVES EVERY ADULT IN THE COUNTRY FROM ALL WALKS OF LIFE PULLING TOGETHER.
I am sick of hearing so called experts, who appear more concerned with hidden agendas or indeed just like the sound of their own opinions, adding to the problem rather than helping.
We have survived all manner of adversities in the past and we will do so again.
I say again shut up and get on with doing something positive to contribute
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Brown is self deluded.
He thinks he's prudent.
But he let the house price inflation and credit card debt explode.
And now he blames some outside force called the 'credit crunch'.
He's not prudent.
He's been a very naughty chancellor.
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So the Government are going to borrow the money...
WHO FROM??
The banks that it is going to be lent back to??
So the banks get a guarenteed return on the loan to the government, and the government (taxpayer) may not even get its money back...
But then of course, if the banks had the money to lend to the government, then why does it need to BORROW IT BACK?
One of the fist rules of money management is NEVER BORROW TO INVEST - you risk losing your shirt.
One of the first rules of speculating - only risk what you can AFFORD TO LOSE.
Have brown or darling ever had to manage THEIR OWN money?
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63 CumbrianCookie:
'I am sick of hearing so called experts, who appear more concerned with hidden agendas or indeed just like the sound of their own opinions, adding to the problem rather than helping.'
Shut up then!
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#23 Pot_kettle
Spot on. He's evasive as well as indecisive.
What a travesty to have the architect of the boom rebutting questions about the bust he created.
Failure is now etched on his face.
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Dear Nick
Bad move"
If the Government can bail the BANKS OUT TO THE TUNE OF £50 BILLION, POUNDS, IT CAN BAIL THE HARD PRESSED BRITISH PUBLIC OUT BY ORDERING A 2% DECREASE IN INTEREST RATES, AND ORDER THE UTILITIY COMPANIES TO REDUCE THEIR PRICES BY 50%.
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cumbriancookie i applaud what your saying.
the problem basically comes down to the fact that banks have issued mortgages to people and investors are worried that defaults are going to increase.
as property prices have reduced by a large amount repossessing the houses will not cover the liabilities therefore banks are worried about lending to each other because they are worried about the bad debts causing the banks to fold.
important points to realise are default rates are not high enough to cause problems yet investors are worried about future problems.
the only things i will be worried by are 1 if defaults rise (usually only happens with high unemployment which we don't have) or 2. if property prices drop more than 20% in the next 12 months (there is alot of latent demand in the economy for housing so i reckon after xmas prices will stabilise and we may see moderate increases) and everyone will think what was all the fuss about.
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Wait for it - all this extra debt will be an excuse for breaking the incompetent idiot's fiscal rules. Mark my words - the fact that he already broke his golden rules before all this mess, will be soon forgotten - or he's banking on it (ho ho). As the electorate we must not let him wriggle out of this and the damage he's already done.
I see like in the US, this "miracle plan" hasn't affected anything - in fact the FTSE has worsened since the announcement. You'd think Brown would've learnt from that, but then you'd think he has a brain. Unfortunately for the country, he doesn't. Useless imbecile.
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Let me get this right. Has the government had to "borrow" this money to bail out the banks? So who as been daft enough to lend it to them? So the tax payers will "benefit" from all this IF the banks start performing and after we've paid back the £50 billion loan!
Can't help but think Brown and Darling have secured their future positions on the boards of several UK banks with nice fat cat salaries.
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the_real_truth i take it you don't work in the city with that attitude!
only risk what you can afford to lose!
never borrow to invest!
really chap come on have you ever bought a house or used credit?
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Great reporting Nick.
Personally I think the Chancellor was a bit wishy washy in his promise to curb fat cat bonuses. I don't feel that he is in control of things at all. I don't like the idea of him gambling with public money at all.
George Osbourne seems much more in command (but sadly only in opposition). I'm convinced that the Conservatives really are the party for the people now. Labour are the party for losers.
How much is it going cost us to repay all the funds UK citizens have lost in Icesave?
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What a shambles... Confidence... If the present 'crisis' is about restoring confidence then the simple expedient of guaranteeing 100% of savers' funds is a 'no-brainer'... Come on Brown and Darling, get a grip, it was the 'savers' who elected you, not the banking industry. Guarantee ALL savings NOW!!!
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Why would the Tories (or Lib Dems for that matter) so anything different at the moment? Two reasons. One, no-one really has a clue what to do to solve the system and our adverserial system doesn't encourage the spirit of co-operation. Two, neither party needs to say anything - Brown doesn't listen to anyone else anyway!
Economic incompetence in 1992 indirectly led to the end of the Major Government. Black Wednesday cost billions - this bailout looks like it will cost even more. Perhaps today is a new 'Blacker' Wednesday. Either way, Labour's reputation (like that of the previous Conservative Government) for economic competence is now in serious trouble.
Howarth may have decided to end hostilities but Mandelson still lurks in the background... Beware Gordon!
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Dear Nick
Is an offer to buy non-voting preference shares, and provide loan guarantees part-nationalisation, nationalisation in any shape or form? I'm not convinced you should be using that term in this context. Ownership remains in the hands of the shareholders, doen't it?
Peter Kenyon
http://petergkenyon.typepad.com/peterkenyon/2008/10/a-bold-bank-plan-market-values-and-the-real-world.html
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How is it everyone has something bad to say about the current financial climate and the mess the government might or might not be getting the taxpayers into, when we don't mention what should be done to the people who created this meltdown.
Is jail an option, maybe taking back the wealth these people stole?
They must think we are stupid....
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nick,
did the government buy hbos shares this morning?
if so i think now would be a good time to sell.
£50bn * 150% = £75bn
£25bn worth of tax cuts please!
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branditony
The Government has borrowed money from several places, China being one of them.
Barclays bought the ailing Lehman Brothers US Brokerage for £1.75bn only last month, and HBOS were in emergency talks with Lloyds TSB about a takeover. How, then, can they plead poverty now?
The Government has borrowed and borrowed more still to try and regulate the imbabances in the global economy and as a result, people on lower wages are now paying far too much tax.
The next Government will have the devil's own job of getting the economy back on track - if 4 years is enough time to do it. I doubt it will be.
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'don't panic don't panic, there putting money in the banks don't panic don't panic'
nick do us a favour get people like peston and the reat to open demo accounts and start trading the markets so they can find out why 80% of people lose money. If they can be consistently in the 20% then we might start to listen to their 'analysis'.
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#72 - borrow to 'invest', 'only risk what you can afford to lose'
I have only taken out mortgages for the properties I have lived in -- if I can't afford a roof over my head then I am stuffed anyway...
Credit cards are only used for convenience (apart from the 0% deals - they are maxed out and the money is sitting in my offset mortgage account - saving me interest and ready to be repaid instantly when the 0% ends).
I have saved for what I want (including private school fees for the kids).
Having been sensible myself, I seriously resent having massive debt repayments(future tax payments) dumped on me by my government.
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One question nick or anyone who cares to answer.If the government is borrowing billions to pay for this will it not lead to inflation.
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Like many other things, it's a case of choosing the lesser of 2 evils given the situation that the government have created.
Either you bail out the banks with tax payer's money, or you let the whole system crash and everybody (not just the city) ultimately becomes unemployed.
I don't like the fact that the government allowed us to get into this situation, but bailing out the banks is the only practical solution.
Having said that, I don't believe for a moment that they'll frame the bail out in a way that gives the best deal to the tax payer or that ensures the banks don't take the relevant risks going forwards.
Nick asked "Why didn't it happen before if it was such as good idea"
The answer to that is a simple one:
Pensions
MPs and civil servants get guaranteed pensions paid for by the tax payer. If they had to pay into private pensions like the rest of us then Brown would have seen the risk to his own pension and his core-voters' pensions years ago and done something about regulation.
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While the overall support is welcome, the seeming knee jerk reaction to the predicament of Icesave depositors is worrying. These savers chased higher returns without asking themselves why Icesave was willing to pay 'top of the market'. It is right that the compensation scheme should kick in but only on the same basis that applies to all other UK banks. I wonder what the BCCI creditors make of all of this. By these actions we are creating a two tier banking market which is not healthy for the long term interest of communities up and down the country, especially those who already face marginalisation or exclusion.
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It is far too early to see if this is a good or bad idea. The Government could make a tidy profit or we could have just bought into billions in bad debt.
The overall trend on the markets is upwards and I would expect that this will continue into the future.
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UPDATE, 11:45 AM: I asked Gordon Brown where the money was coming from, at his news conference this morning. His answer was that borrowing would be extended to cover up to £50 billion for taking a stake in those banks that need it, and stressed that he hoped that the taxpayer would eventually get their money back. As for the other couple of hundreds of billions of pounds, he said that these were loans on commercial terms
What, what what?
Borrowing needs to come from somewhere...and it sure as well won't be the banks....where the hell is this cash from, and more importantly. why can't the banks have access to it directly rather than involving us?
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This is just a sticking-plaster though; it pumps some extra liquidity into the system, but the underlying fundamentals are still a problem, and the government don't seem to be doing anything at all to address those fundamentals. In fact they don't even mention them.
Too many bad debts; something needs to be done about those bad debts; the bad debts are still all there; this bail out money will just help the cogs of the system move for a few more days.
The government need to make a decision about exactly what happens to those bad debts; are they written off (if so, who pays), or are they written-down (if so, who pays), or are they just allowed to fester in the system for ever? That's the ultimate cause of these problems, and that cause is still there, so the bail-out is just a temporary stop-gap, the government still hasn't even mentioned anything about the fundamentals.
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Now I will be the first to admit that I'm no economic whizz-kid, but as I recall from my schooldays though preference shares give the investor first picking of any profits, they don't generally come with voting rights.
If that's the case here, how can the government say they will control the fat cat bosses salaries?
And as for getting back to normality...why do we want to do that? After all, that 'normality' is what got us into this mess.
Back in the Cold War days the government issued "Protect and Survive"; a booklet that told us that after the 'all clear' sounded following an attack we could come out of our shelters and "resume normal activities".
My point?
The government's definition of normality doesn't necessarily match what you and I consider normal.
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People need to get real. The Government and the rest of us just have to hold our collective nose and act to stop our high street banks from collapsing, taking our savings with them and ruining our economy. The cost to the taxpayer will be funded by (extensive) Government borrowing, which will impact on the amount available for public spending, inflation and in all probability on the value of the currency. But however unpleasant all this may be, it is nowhere near as bad as having high street banks going down and a full-scale depression, never mind a recession.
Also, although I'm no fan of the Labour Party, Messrs Brown and Darling have, I think, done a good job thus far in dealing with the emergency. Without being unkind, Cameron and Osborne would be out of their depth if they were in government and faced with this situation - they lack the necessary 'bottom' that comes with age and experience to be able to take decisions of this magnitude.
Profspof
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Arguably, the money was already in the system but by taking the initative the government has fixed the problem and creamed off a return for the taxpayer. It's a deft move that Warren Buffet would be proud of.
This has completely blown apart the Tory argument that they're the party of "shrewd business" and "wealth creation". Plus, it blows apart the Tories trying to talk us into recession just so they can grab power.
Labour have the upper hand and the City by its balls which creates scope for developing a better quality finance industry that plays a bigger partnership role instead of scorched earth profiteering.
Result!
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RobinJD,
It's easy to be wise in hindsight.
I do not remember many voices from the right over the past 10 years saying:
* "We need to regulate the financial industry and mortgage providers more heavily. They are providing irresponsible loans to people who cannot afford them"
* "House prices are over-valued and the Government needs to take real action to introduce rationality into the market (e.g. keep stamp duty, implement a land-value tax, abolish the capital gains tax exemption that housing has, crush the speculative buy-to-let market), and not encourage first-time buyers into the market"
* "Bankers are paying themselves bonuses that they do not deserve. They are being rewarded for taking short-term risks, which will have catastrophic (and shareholder-value damaging) long-term implications"
I think it was mainly voices on the left saying these things.
Indeed, the Conservatives were telling us that:
* "The free-market knows best. The Government should quit interfering and deregulate more and stop stifling market innovation and the regulatory approach that is killing economic growth in this country"
* "There is no house price bubble. We should abolish stamp duty, maintain the capital gains tax exemption, let the free market do its thing re BTL and give out government subsidies to help first-time buyers get on the property ladder"
* "Bankers are paid high bonuses because they're worth it. Any comment on the size of these bonuses is "the politics of envy" and shows that Labour is returning to the 1970s. The Government should reduce tax on high-earners even further to give appropriate incentives and definitely not get involved in regulating bonuses"
This is why you have absolutely no credibility on these matters. Things would have been even worse with the ideological deregulators in charge following tried-and-tested Thatcherite policies (rather than the pragmatic deregulators).
You are forced to rely on the 'follow my leader' explanation - people only borrowed because they were copying what the Government was doing.
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Democracy is an abnormal political state in the history of human beings, short-lived experiments in illusionary freedom. It seems the people of the Western democracies do not possess the discipline to control their greed and exercise restraint. This global crisis stems from the Western democracies' greed and its corruptible and corrupted financial systems intertwined with the corruptible and corrupted political leaders, institutions and associated bureaucracies. All these need tax dollars, pounds and euros. A possible epitaph for the Western democracies' extinction: Bled to death by Taxation and garotted by Greed.
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Creating calm is the highest priority. Fixing the issues and jailing rotten apples can come later. The government has a lot of leverage but dancing to the tune of turbo-journalism's demand for 24/7 headlines probably isn't something they want to get sucked into. There's advantages to controlling the pitch and pace of situations. They'd be fools to swap being stretched over one table for another table.
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Nick, your closing paragraph suggests that tax and spend is dead, at least in Brown Darling's eyes. This means borrow and spend is the new mantra, except that it's not new.
I note that government stooges are still mouthing the mantra that we're better placed to weather this financial stro than others. Who supplies these people with the mind altering drugs they'e obviously using? Are they legal? And can we get them on the NHS?
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Interesting my last comment has been moderated. I'd like to know under which of the house rules. Perhaps negativity towards the BBC is not allowed....
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This comment was removed because the moderators found it broke the House Rules.
A lot of glib comments about the government wasting our taxpayers money on bailing out the banks. What is the option? We lose our savings or pensions because the banks go bust. And when one bank goes bust it starts a chain reaction where other banks have investments in the bankrupt banks. Some people just have to make a political comment no matter how ridiculous and facile their argument.
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Q: What has the FSA been doing?
A: Based on what I have seen they have been producing endless process and paperwork to address the mortgage and investment miss-selling that was going on 20 years ago.
All the while they failed to regulate the miss-selling of billions of pound of worthless debt to UK banks.
Go figure.
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#4: A governmnet supported recapitalisation scheme, now if they were to seek this money through the real market then they would offer shares which would have voting rights. Why no votes, why an arms length involvement. Why this preference idea, yes we will get dividends but without any control.
The reason for this is very simple. If the government gains control of a bank, that bank is no longer be allowed to compete under competition laws, a la Northern Rock. The business is therefore no longer viable and all that happens is the government has taken on responsibility of winding everything up, which is expensive and doesn't give any return. The idea behind the current plans is to help the banks survive the short term and become profitable businesses again.
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look everyone.
the government may buy a stake in a few banks so what?
are interest rates at 15%?
is inflation 1000000%?
is unemployment at 3m?
last time i checked it wasn't.
my advice...
stop stressing and get on with your lives
if you have shares or want shares, ears up you may make some serious dough if you make good decisions
if you are a cash saver, don't worry your pretty little heads.
if you have a mortgage, keep paying.
everyone ensure your cvs are upto date just in case.
keep smiling.
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This comment was removed because the moderators found it broke the House Rules.
@90
The Royal Bank of Scotland has said it will not be overhauling its management in return for getting potentially huge sums in public funding. The bank, whose senior executives have been criticised for running up big losses in the past year, said management changes were not "a feature" of its discussions with the Treasury
Yes that really is having the banking industry by its Eds isnt it
The so called "strings" that were attached to the "rescue" package can already be seen as thin bits of Gossamer which have already broken
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I know its not quite the same as putting the National Reserve on a donkey in the Grand National. But even so we are straying into absurdity when everybody knows there is a risk with the bailout but the government won't be specific because they don't know what the risks are. The Scandic model was a much smaller scale and this economic tsunami could start "bouncing" about the global sub-systems.
Will Icelandic problems affect British consumers and thence British banks ?
Are hedge funds going to take out a bank or two? If so we all lose pots of our gold.
I still have not heard a convincing explanation as to how nobody saw this crisis coming but we should still retain confidence in the government and the financial system.
The Government has hordes of investment bank advisers in its ranks and yet no preemptive actions were taken.
"No time for a novice!" could be up there with "the Iron Chancellor" when they do the analysis.
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#50
I forgot to mention the Credit Rating Companies who I also hold culpable.
Mark-to-Market has to go. It is an invitation to fraud, a kind of Self-Cert.
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Nick you ask the question why not take these steps earlier? Its always amazes me how journalists can ask all the right questions and have most of the answers. But then I remembered you contribute after the events so you have the benefit of 50:50 hindsight. You also have no responsibility if you get things wrong. Remember 'those that can do, those that can't teach and those that can't teach become journalists!
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Mr Darling begins by saying the surprise half point interest rate cut will help the government rebuild the banking sector.
Presumably this is because the government is a net borrower and its interest costs will be lower. Actually its difficult to tell which way round the government is, because it sees to be robbing Peter to pay Paul, Thomas and everybody else who turns up.
By Peter, of course, I'm referring to the poor old british tax payer.
I note, some 30 minutes after the rate cut, that the effects have worn off already and the market is down again. Our brand new investments are already showing losses.
I think its time to change our financial advisers, NOW.
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More clause four concern?
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I trust that, if the UK taxpayer ends up having to compensate savers in Icelandic banks, HMRC will first check that all of the depositors have, in previous years, declared on their tax returns all of the interest which they received.
Any depositor who failed to do so should not qualify for a penny of compensation.
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No 48 Shellingout
Yes NR are still paying back that £26bn. Its gone quiet, because there's no great news story there - you may have noticed that the press much prefer doom and gloom. But the trading statement NR issued a couple of months back, stated that 10bn had been paid back, well in advance of the planned schedule. And I have heard this week, that £13bn has now been paid back - so half of the original loan.
Just because Peston isn't shouting it, doesn't mean it isn't happening.
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Nick, I can not believe you comment. It wasn't a good idea to nationalise the back years ago because the whole global financial system wasn't on the verge of collapse years ago. I can’t believe the naivety of some of the BBC’s commentators. I guess they just do not understand enough about the technicalities to comprehend the severity of the situation at hand. If one large bank goes (any where in the world) THEY ALL WILL GO!!! YES ALL OF THEM because the foundation of their asset bases will fail. There is an old saying Nick – better to remain silent and be thought a fool than to open your mouth and remove all doubt.
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I absolutely understand the need for action and I do understand the need also for a sound banking system, both, in this country and as a part of a global facility. However, I cannot escape from the conclusion that the current lending institutions no longer qualify for that description.
Surely, measured by performance, competence, instinct, leadership, relevance and leadership they have shown that they are failed organisations. Why then am I asked to back them by investing in the shares of the organisations they have run on to the rocks in a spectacular way whilst enriching themselves?
As of this moment we would all like to ensure that our money is used to assist the real economy, home owners (not investors in homes) and businesses that contribute to the real world.
We understand, do we not, that the need at this time is to take the long term view allowing supposed assets to recover over time or to be liquidated over a realistic time frame only as a last resort.
Lloyds/HSBOS might be our first test. My firm belief is that it is a good long term merger that will be great for banking but that will ultimately be part of a process that will adversely affect competition in the market and therefore will work against my long term best interests.
Meanwhile, whilst the sincere and steady management of Lloyds will argue that the deal is good long term they must be tempted to renegotiate terms when HBOS is currently work perhaps one half of the price agreed; a dichotomy for shareholders and managers.
That takes me to my last point; as a shareholder I accept that my instincts as a responsible member of society might well contradict my instincts as a shareholder and that contradiction will in turn be reflected in the expectations I place on the mangers of the business in which I have, however, unwittingly invested. Making 4 pence out of SME’s or buying up foreclosed homes to sell at the next boom and make billions; no brainer!
Bugger! Where did I put my petard that I may hoist myself!
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#91
Let's imagine that in future, we go down the route of stifling regulation of the financial services industry. What to you think is going to happen then? Everything will simply shift abroad to unregulated markets where the rates are better. After all, why would you put your savings in a UK bank offering a 3.5% rate, when a foreign internet bank will offer you 6%. Regulation imposes a cost on industry and the industry will therefore simply move to unregulated markets where it's cheaper to operate. Then when the next crash happens, we will have absolutely no control over it because all our wealth will be invested abroad. Great result!
The city culture of recklessness is a problem. My preferred solution would not be increased regulation, but increased liability. Is there any reason, for example, why we could not require banks to be unlimited-liability partnerships? Short-term risk-taking would become far less attractive if banking executives were personally liable for the debts of the business. Even better, if a bank then failed, the executives could be vindictively chased up to pay off the debts, which would give the public a sense of justice that is particularly lacking from this current debacle.
Regulation would do absolutely nothing to takle the real problem, which is the attitude of the people making the decisions. We don't need more regulation, we need more accountability. Regulation will neither change attitudes, nor will it increase accountability. After all, if you can show that you've followed all the rules laid down for you, how can you be held accountable for any failure of the system? If government defines the system, the bankers are not liable for making sure that it works.
The housing market I care little about. Those that stand to lose are the ones that took the risks in the first place. This is as it should be.
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Fear and greed sell headlines. Peston was a smart boy picking up this issue but the media can look a bit like some of these internet security campaigners who open their mouths before security holes have time to be patched. I think, similar character defects operated in the British media as much as they did in the finance industry. Both bankers and editors need to reflect on this.
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"I asked Gordon Brown where the money was coming from, at his news conference this morning. His answer was that borrowing would be extended to cover up to £50 billion for taking a stake in those banks that need it, and stressed that he hoped that the taxpayer would eventually get their money back."
To be honest this doesn't fill me with confidence - Gordon Brown "hopes" that the money will be paid back.
Well I hope that Plymouth Argyle will win the Premier League, FA Cup and Champion's League but I haven't put any money on it.
I would prefer that Gordon Brown actually came across more confident in the deal rather then just hoping it will all turn out alright.
I personally expect that we will get the money back but the PM isn't exactly talking it up here.
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Why can't people see where the real instability in our (and the world's) Highly False economy hugely stems from?
Surely but surely it's in the high stakes, high returns OR losses casino-style short term gambles on the Stocks, Shares, Futures, Whatever-they're-called markets..! and with OTHER PEOPLES MONEY.
If people were educated to this and demanded massive change be brought about by our elected leaders, along the lines that all stocks be held for say, a month(!) before they could be resold. Would that not have a huge and very welcome change!? A return to 'investments' in a company being 'exactly what they said on the tin' instead of a dirty 'bet'.
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#112
You misunderstand what I was saying.
The right-wingers on here are pinning the blame on Brown for not regulating enough, allowing a house price boom and allowing irresponsibility of bankers pay.
I'm suggesting that these problems would have been a bit greater if we'd have followed the policy prescriptions that the Conservatives had for "the poor economic performance 1997-2008".
Not commenting myself on the appropriate level of regulation. Or suggesting that the Government had got it right - they deregulated far too much and were too believing of what the City told them or too politically scared to do anything about these problems.
But that's not to say that we should go too far the other way - ideally we could design institutions that would minimise the need for regulation (e.g. corporate governance structures that allowed shareholders to effectively control the behaviour of their staff in the long-term interests of the company, like avoiding bonus structures that encourage irresponsible short-term risk taking, the sidelining of risk managers in companies). Though more is of course needed (e.g. to ensure auditing works and that there is transparency in the levels of risks taken by banks in its asset holdings).
I would agree with you on the housing market - though lots of people (the media, the Government and the whole political class) were encouraging first-time buyers into the market and sidelining the views of sensible analysts who have been suggesting that the housing market is over-valued and ripe for a crash over the past 3 years. Some will deserve support - e.g. those who had affordable mortgages but have been made redundant and can no longer keep up payments. Others will not - e.g. buy-to-let speculators. The difficulty is in telling them apart.
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#91 balhamu
You newlabour apologists simply can't accept your role in any of this can you?
Where have you been for the last eleven years then?
Why were your leaders not tightening regulation if you didn't like what Thatcher had done?
Why did your leaders relax regulations even further and then fail to supervise?
You can run but you can't hide. You were supposed to have been 'in charge' but appear to have been asleep at the wheel.
So you can write as much as tyou like about lack of credibiity but your words are hollow as long as you pretend that none of this mess is anything to do with anythign a newlabour politician has done during releven years of crass incompetence, mis-rule and spendaholic ways.
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Why has David Cameron's policy on Banker's bonuses changed so dramatically in the last 3 days? Andrew Marr to PMQs
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I see that Vince Cable has revealed that eight London boroughs had funds invested in the failed Icelandic banks.
Interesting points: should they be guaranteed? Since they are not individuals, no. Why did they have surplus funds? Shouldn't council taxpayers get it back? Don't they know there's no such thing as a free lunch? If somebody is paying higher interest, there's probably a good reason. Now we know what it was.
OK, now some pertinent questions for Brown Darling.
Is all this governent borrowing within the golden fiscal rules laid down, with religious fervour, every year from 1997 by our glorious leader?
Where is prudence?
If we are better placed than other economies to weather the storm, why isn't this being reflected in the stock market, and hence the value of our investments?
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#79 - shellingout
I agree entirely.
The next election will be a good one to lose.
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re: 116 balhamu
Actually the tories did some good things when it comes to regulation, especially in the insurance market.
They stopped these kind of circular/toxic problems in the insurance market pretty sharpish once they saw them happen there, and with absolutely zero cost/risk to the tax payer, and were most likely about to do the same thing to the banks before they got unelected.
Brown never picked up the ball. Personally I'll never forgive him for just sitting idly back and watching it all turn to dust.
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113 Charles_E_Hardwidge
Absolutely! Except maybe about Peston being smart picking up on it - I've come to think he's being fed carefully selected info, when it suits other parties to do so. Used as a way of twisting markets to suit needs. It was certainly handy for other banks, the big city boys, to have NR brought down a peg (or ten).
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What I like about the Nick (I'm a tory supporter) Robinson's blog is that he is willing to try his hand at anything if it is an opportunity to knock the Labour governement. Last I heard: Robert Preston was the Economics reporter for the BBC - Not Nick Robinson.
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For those posters referring to Black Wednesday:
surely that was a crisis that affected only the UK - brought on by ourselves?
this crisis started in the US and is cauisng governments to take similar actions both there and all over Europe
the german and irish governments have guaranteed all deposits while the belgians and dutch are nationalising banks - how much is that going to cost them?
we are all in the same boat at the moment - trying to stop the economy grinding to a halt
longer-term, it is true that the UK has more problems, because of our dependency on The City and the financial sector and our weak manufacturing base
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Behold! After boring briefings, the broad brush-strokes of Brown's Big Bank Bailout become bare. Billions of British brass will be brought to bear on the task, and big banks must beg to borrow their bit.
Basically, £50 Billion 'borrowed' by the banks, the brunt of the bill borne by the British taxpayer.
But that is but the basics of a bigger, broader, bastard of a bugbear for us Brits.
The Brown Bureaucracy has brought Britain to the brink of bankruptcy, with big bills beholden by every breadwinner in benighted Britain.
A bill of £24,700 borne by every British boy, belle and baby becomes bigger by £2000 with Brown's Big Bank Bailout.
Blame Brown. By borrowing beyond a balanced basis, Brown's b****xed British society for both us and those we beget. Britain's Bank Balance under Brown beggars belief.
Dungeekin
http://dungeekin.blogspot.com
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#117
I am no New Labour apologist.
The government should have regulated more and listened less to the concerns that right-wingers such as yourself and the Conservative party had that we had too much regulation and the Government interfered too much as it was. You are completely right about that, and that was a clear failing.
Its easier to predict something will happen after it already has!
Maybe you struggle with the concept that some people are objective and not blinkered and polarised ideologists such as yourself?
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I can see the pluses and minuses of all the players, and the flow of events over time, and the narrow and negative attitude of some folks is just internet dreg. This blog used to have higher value comment and less attitude, but since Cameron's tub thumping and a wave of Tory wannabes arrived it's been dire. This ego bubble is no different to the City, and folks might want to try calming down in here as well, cuz this place is pretty crashed as well.
Gordon Brown's pulled a sweet deal as the power and money was there for the taking. He just had to spot the opportunity and go for it, and he did. He's used established mechanisms and existing money to refocus and recapitalise. Government, banks, and the public will get the stability they need, and later discussions and investigations will help fine tune the City so it's a better quality entity that plays a more useful supporting role.
A generation of fear and greed has touched everyone and left them with ambitions and personality defects that are probably best dropped. By seizing the opportunity in the disaster Gordon Brown has helped refocus and reenergise Britain so business, finance, and the people can begin developing along better and more successful lines. If folks were open, fair, and less impatient they might appreciate the benefits and not be such losers about things.
Calm down. Relax. Be happy.
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In the City ...
- turning simple things into tediously complex things is INNOVATION
- taking big risks with other people's money is BALLSY
- earning around 5 times the average wage is FOR MONKEYS
- testosterone fuelled management by fear and intimidation is DYNAMIC
- doing everything in a bit of a panic without thinking much is SHARP
- getting a massive bonus is also good for the economy because of TRICKLE DOWN
Well sorry, you're rumbled I'm afraid. Took way too long but better late than never.
So no more "trickling down" on everyone else, thank you very much ... who knows, if you're lucky, you might be able to enjoy a bit of trickle down from some of those Public Sector workers in nice secure jobs with nice secure pensions.
Ha Ha Ha
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But Charles, in case you haven't noticed it IS all doom and gloom.
The press are simply reporting the hard facts and the snippets of information that our government decide they want to tell us about. I think in reality it is much, much worse and our hard-earned pensions will suffer much more than they have done in the past.
This isn't the end, it's just the beginning.
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Has anybody from government mentioned what they plan to do with the toxic debt?
I can't see any mention of it, by the government or by the banks or by the media.
It's like the elephant in the room that everyone seems to be ignoring.
Instead all our money seems to be going into subsidising (or even increasing) the toxic debt rather than eliminating it.
Am I missing something, or is the government, media, and banks basically ignoring the root cause of this mess and just pumping extra cash into the system to temporarily support an unsustainable setup?
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Headline in The Sun today, as the City has to be bailed out by the workers ...
Afghan woman on benefits so she can stay in large house !!!
There's your hard core BTP constituency, right there. That's why, whatever you think about Labour, you should vote for them again come GE time.
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Nick,
What was John Humphries up to this morning, trying to bully the Chancellor into saying the Guarantee word? We all know he can't give 100% guarantee and that he can't say he can't without risking further upset. Hence the clever 'Whatever it takes ...' phrase.
So what drove JH? Please say it was more than just trying to look tough against a senior politician. The Humphries ego has long ago lost its entertainment value.
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Firm support from the novices for the Prime Ministers actions. Could this be the start of some level of understanding?
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97 united-dreamer
Your problem mate is that you've bought into this epic story of imminent collapse. Can't you see it? You're talking the very language they want to hear, the new interpretation of events: collapse, destruction, maybe even the end of the world as we know it. Well, rubbish, this is just a scam to rip-off the taxpayer: full stop. As for:
'Some people just have to make a political comment no matter how ridiculous and facile their argument.'
you're damn right, so give it a rest.
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balhamu
Do you not think that Gordon Brown, in his role as Chancellor, should have seen this coming as far back as 2005, when the US was suffering serious problems? Plenty of economists predicted it, so why couldn't he?
As I've said before, his main agenda was motivated by self-interest in getting Tony Blair out of No. 10, and he focused on that. His gross mismanagement has now cost the taxpayer billions and the blame should lie solely with him and his so-called advisors.
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Nick, in your question relating to the risk to the public investment of £50bn in the banks this morning (just been shown on BBC News 24 again 14:00). The risk is simple, if the British public looses its investment in shares, then the UK banking system will have crashed, then will will have lost everything. No more banks, credit cards ........
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What I would like to know is the purpose of being a member of the EU, as soon as a major crisis do we pull together? No its I'm alright jack you look after yourself, see actions of the Germans the Irish the French etc.
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Good call. My view of Northern Rock was the first stumble was a hands up job but could've been seen through. What hammered Northern Rock was the BBC coverage which caused a run on deposits.
It's notable that liquidity was tight around this time and when the big banks had secured their slice of Northern Rock's market share the liquidity suddenly eased with no explanation. A cartel was clearly operating here.
When questioned by the select committe the big bankers robustly denied their role in banking difficulties and blamed everyone but themselves. But, look at how fast they beg for corporate welfare when it's their turn.
By putting a deal in place the government is switching attention from the "authorities" and "high attention"earners who created and fueled this mess and are scooting through the centre. Really, this is quite masterful.
I generally think the business, media, and national culture shares the same broken fundamentals, and by bringing economics and morality together, and focusing on solutions and shared understanding, the Prime Minister will create a 'New Deal'.
There's lots of Zen in all this.
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@the-real-truth
"Taxpayer money (via the treasury) should not be given to the banks to be loaned back to the taxpayers (as customers) for a banks private profit."
...So we should become a communist state? We shouldn't strive to make a profit? These aren't my ideals!
If the Govt. didn't give banks taxpayers money to lend back to taxpayers, then banking would never exist. Where do you think the banks got the money from in the first place? Ultimately, it is the taxpayers! One cannot exist without the other. So it doesn't matter what route the taxpayers money goes through to get to the banks, and what route that money with profit gets back to the individual; we need banks, they need us. Our Govt. needs to do the right thing to ensure that banks still exist. Whether this is the right thing or not, I'm undecided.
Taxpayers cannot get "money for nothing, and their chicks for free"!
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#126
I'm no blinkered idealogist, believe me!
There are some tragic errors on both sides but I simply can't accept that people who have been in charge or eleven years won't take the rap for their mistakes.
I don't like the blame game culture newlabour has inflicted on us and you seem like a reasonable man so I'd be surprised if you did either.
When I was at school if you did something wrong you put your hand up and paid the price. It sounds old faxshioned to some but to me it's common sense and it's what is wrong with the government.
And I still believe they should call an election regardless of the economic circumstances....it's not stopping the Americans, is it?
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Truth @ 81
... "I have saved for what I want (including private school fees for the kids)" ...
... "Having been sensible myself, I seriously resent having massive debt repayments(future tax payments) dumped on me by my government" ...
Conflicting statements there, I'm afraid ... forking out tens of thousands on private school fees is many things but one thing it isn't is "sensible".
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Somewhat belatedly, HMG are getting to grips with it.
They finally saw the abyss that was opening up for all of us.
I support these measures and hope that 'plan B', by-passing the banks to offer credit direct to businesses and consumers, does not have to be invoked.
The political outcome of this is that Labour will either die completely if this fails (along with our prosperity) or will match Larazus and make some sort of comeback in the eyes of the public.
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Anybody got any more money, preferably somebody else's, they want to throw at this problem?
The problem that authorities, and particularly politicians, fail to learn is that the more you interfere, the more you add fuel to the fire. Right now the speculators have an open ended pledge from the governments (all of them) that they will hold the line and save banks. At the same time they have lowered the cost of borrowing, enabling those who are short an open goal to aim at. Its the surest one way bet since the sterling devaluation of 1967, which curiously also occurred under a labour government.
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Why is it taking so long for posts to be published? It slows down the whole interchange of views, and is counterproductive.
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Note that Cameron and his ridiculous BTP are now railing against high executive pay and bonuses in the private sector! ... as the great Richard Littlejohn might say, you couldn't make it up, could you?
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regretfully #89 I do not share your view that Cameron and Osborne are not up to managing this.
Gordon Brown was an acedemic historian before entering Parliament and as Chancellor has spent the last ten years allowing the economy to get in this mess.
Alistair Darling is a lawyer who spent years as a solicitor before entering Parliament.
Neither have had formal economic education and that is why you find them only using jargon,that non of us understand,probably learnt in the Treasury.
At least Messrs. Cameron and Osborne have economics as part of their academic qualification and have spent long periods of time either in business or in the finance sector.
I personally take much more comfort at what they say rather than the sound bites of Messrs.Brown and Darling.
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118 Peter of Fife
Why has David Cameron's policy on Banker's bonuses changed so dramatically in the last 3 days? Andrew Marr to PMQs
You must have noticed today that George Osbourns has as well.
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If the banks were so safe how comes and the flip of a coin they have literally imploded.
What the devil was the rehgulator doing to ensure they got their acts together. Or are we all to kowtow to the banks in perpetuity irrespective of there irresponsible management.
The public shoudl bring class action suits agaimst teh banks for deliberately misinforming them about their well being, and we shoudl insist that they come clean about their levels of leverage, what they are showing both on and off balance sheet.
We have always known banks have been unchanged for centuries in always taking never giving. But we ned to know what teh Regulator has been doing to keep control since Northern Rock.
Somewhere this has not been just a case of being economic with the truth but there have been bare faced lies put out, and Prudence Brown talks about morals.....please pull the other one.
No svhemem will ever work until the full extent of the damage is known, and whilst the banks maintain a wall of silence this overt charity who has to borrow itself to be so generous is doomed to failure.
This is typical socialist madness at its best. Labour has killed the UK , welcome the Socialist Union of Political and economic Madness.
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Very funny:
http://www.thedailymash.co.uk/news/business/banks-to-lend-you-your-own-money-200810081308/
except that it's 99.999 percent true.
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Gordon Brown wrecked the retirement hopes of many "hardworking people" with his disgraceful tax on pension funds to the tune of £5billion per year, each and every year since his first budget in 1997. That really hurt ordinary people when they came to retire on much less than they had expected, with no hope of the pension sum ever getting bigger. That in turn has hurt the taxpayer who has to fund the welfare top-ups for pensioners below the poverty line who would have been self-sufficient after years of saving into pensions but for Gordon Brown and his to-clever-by-far stealth tax.
Now he his talking about cutting or even stopping the banks dividend payments. This money doesn't go to so-called "fat cats" but those same pension funds, and people who have saved for years into Peps and Isas to help fund their retirement. Far from being the economic genius that his supporters have for so long called him, it is clear that he doesn't understand anything about how finances really work, and what is worse, he simply doesn't learn from his past mistakes. Unless of course his real agenda is to turn everybody into supplicants on government handouts when they retire. Some future if that's the case.
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This comment was removed because the moderators found it broke the House Rules.
Latest IMF Growth forecasts in on growth in the world economy. Sharply revised downwards for all countries from their August projections, with almost-zero growth projected in 2009 for the developed world.
They are now projecting a very mild recession in the UK, while noting downside risks of a sharper recession.
Country; 2008 projected growth; 2009 projected growth:
UK; 1.0%, -0.1%
US; 1.6%; 0.1%
Germany; 1.8%, 0%
France; 0.8%; 0.2%
Italy; -0.1%, -0.2%
Spain; 1.4%; -0.2%
I think we will have a far better idea when the ONS publish their Q3 and Q4 figures on economic output and we see how the banking crisis plays out over the next couple of months.
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Zen would call this a perspective. Folks with a headline chasing and quarter to quarter mentality would want you to believe that but so do hoods in the ghetto. The habitual and reactive road leads to death. I recommend that folks avoid that.
By developing a better vision, sense of society, and seeing the daylight through the gloom we can ride this moment into the next moment. Maybe, I might notice a crash if some paramilitary thug was standing over me while I picked the maggots from my dinner but I can imagine worse scenarios.
It's funny, folks want "freedom" and "wealth" but confuse this with "freedom" and "wealth". They hate "rules" but like "rules", and hate "you" but need "you". Man, we're a messed up bunch. We never listen and have to find out for ourselves the hard way.
"Mission accomplished", or something.
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Maybe the FSA should be required, by law, to approve all business models and financial products to test if they are responsible and ethical. Any that fail will be deemed illegal and unusable.
This vetting procedure will apply to ANY organisation wishing to do business in the UK.
This would restore cofidence in the financial markets and their products, as well as helping to protect investors. The onus will be on the applicant to explain the product, it's risks and benefits when application is submitted and may be called to justify it.
The FSA should also have the responsibilty to authorise any bonus over a figure of fifty thousand pounds per deal.
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gavin-humph
I agree with you totally.
The only economic qualifications Gordon had when he was made Chancellor, was managing his own household budget!
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138 CEH:
Now we start to disagree, if you think GB et al have in anyway done a good job here!!
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Its obvious from some of the blogs here that people have attitudes that are cast in stone, and only historic references are made, without apparent pertinence to the current situation.
Hence if Cameron takes an anti-bank management stance vis a vis the rescue, this is portrayed contemptuously by the left in counterpoint to previous conservative strategies and policies, whilst at the same time they do not seem to see any conflict between the current government's mealie mouthed approach to the banks, and previous Labour government.
What is apparent is that the current situation has been allowed to develop unchallenged during the last 10-11 years, coninidentally while our most glorious, and revered, leader has been in power, both financial and absolute. Is it possible he needed the banks and financiers on board in order to obtain the funding for his pet PFI projects which, of course, have been kept off the nations books as liabilities?
I wonder if the funds that have been used for PFI were recalled (possible, because I don't believe they have been gifts) where could replacement funds possibly come from? I wonder who held all the cards at the poker table?
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The taxpayer shafted yet again.
Go to hell Nu-Lab.
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Nationalise the banks
Sack the management
Bring the interest rates down for small business
Audit the banks books
Prosecute if required
Bring in new regulation to stop this farce from happening again
Plus
Buy British
Kick out the estimated 500,000 illegal immigrants who contribute nothing.
The one million plus unemployed can fill the gaps on the minimum wage and could if required pay no Tax or NI. Got to be better than paying them to do nothing.
We are an island, time to pull up the drawbridge and look after number one.
Time to stop trying to punch above our weight.
Time to put the great back into Great Britain
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#152
What colour is the sky in your world Balhamu? And is it substance induced?
Since the IMF is continually going on record as forecasting a dramatic drop in economic growth in the UK, it is disingenuous of you to keep trailing historic projections as if they are going to force a change. Also, we are continuously told by our duplicitous political leaders that we are better placed to weather the storm than our competitors, even your discredited figures show that we will be worse off than the US, Germany and France, to name but three. And that's before we find out how much our economy is really suffering.
Still its entertaining reading. wanna buy a bank?
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Charles
While I'm merrily riding this moment into the next moment, I could well lose my job.
If wanting a normal lifestyle - not wealthy, but enough to keep our heads above water - is having a quarter to quarter mentality, then I hold my hands up.
Perhaps you could have a word in Zen's shell-like. He sure as hell couldn't do any worse than Gordon and his bunch of idiots.
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#140
You do a good job of appearing to be so.
In your view, 1997-2008 has been pure unadulterated disaster from start to finish, and the world financial crisis is all this Government's fault. You freely admit your political view is low tax, low regulation, Thatcherite Conservative.
This to me suggests a blinkered view, at odds with the evidence (as shown by many of the 'facts' you post on here being wrong and shown to be so).
Anyone who disagrees with your view is painted by you as a "New Labour apologist", which suggests a polarised view.
You imply that it's the decisions Brown has taken that have put us in this mess, and that the Conservatives would have regulated more and prevented the housing bubble.
I would doubt this, based on their ideological view (regulation stifles innovation, the government should keep its nose out of private business as the market knows best) and on their policy announcements (e.g. deregulate more in the mortgage market, abolish stamp duty, subsidise first-time buyers, keep regulators noses out of the affairs of the city and pay of bankers etc).
It all seems to have little credibility, and that you are only saying this because you have gained wisdom after the event. That's why Cameron is so quiet at the moment - he knows that he can't really make any political capital out of this as the Conservatives would have taken the deregulatory policies further and made things worse than they are.
You continually call for an election (who you're trying to send this call to is unclear) despite there only being one 3 years ago. Whatever the flaws in our constitution (and I agree with much of what Browndov says on this subject), the current government are democratically elected and there is little justification for a general election now.
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It's notable that the Tories opposed corporate governance and fair wages laws that were designed to increase the quality of management decisions and rebalance unfair pay. They were up to their necks with the City pals in trying to dominate people in Britain so it's a welcome move for them to do a U-turn in the past few days.
It takes a moment to change an intellectual position but 3-5 years to work that change deep into the middle brain as anyone trying to give up smoking or any other deeply ingrained habit will tell you. When the Tories start proving as people that their ideas and attitudes are genuine they may play a more useful role in governance.
The Tories won't admit it, and maybe not even to themselves, but this is the effective death of the Tory party. Whatever they were today they will not be tomorrow, and that uncertainty and fear is probably going to throw them off track for a while as they get their heads around it. But, get their heads around this they must.
Lots of Zen, here. They should be grateful for this lesson taught to them by Jedi Master Gordon Brown.
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not a good idea it is but a sticky plaster over the seeping wound thats the problem all it will do is delay the problem and ultimatly cost us all.
this government if they had the brains would nationalise every thing and then sort out the problem of over paid bankers etc thus saving the taxpayers who entrusted this government with guiding this country forward but being let down and bankrupted by them.
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James –Vilan in your comments at point 62
you refer to the 25 percent profit you have made in a 12 hour market trade congratulations you are through your privileged position able to do something which 99.5 percent of your fellow citizens are unable to do. What will mark you out as a citizen in the society you live and enjoy your privilege iwithn is what you do with it – Take a personal world tour, help your family, help a friend, help your community, help the developing world, campaign to see that the markets are free for every person in the land to deal in direct?
I don’t know the choice you will make in a free supportive society because the choice is entirely yours and privacy and respect for your rights mean unless you choose to tell me I will never know (but I have made one prediction on my desk top)
However what I do know is that within a few moments of sharing the knowledge of your good fortune at item 72 you are belittling the prudence of -the-real-truth in item 65. Prudence may be misguided after all it did little for Gordon Brown in the long run
However it is always worth remembering the French and Russian Elite mocking the less fortunate and the poor did little for the society and its nobility perhaps before suggesting we all eat cake you consider how we all may go about purchasing it or just send along a bit of yours. but
If they don’t want to eat it or send it back then the choice is theirs ours is to build a sustainable society because the alternatives volatility might bring about dont work.
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delminister
After sorting our the overpaid bankers, let's carry on with overpaid politicians and their expenses accounts. It's a good start and would save the taxpayer a great deal of money!
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I absolutely understand the need for action and I do understand the need also for a sound banking system, both, in this country and as a part of a global facility. However, I cannot escape from the conclusion that the current lending institutions no longer qualify for that description.
Surely, measured by performance, competence, instinct, leadership, relevance and leadership they have shown that they are failed organisations. Why then am I asked to back them by investing in the shares of the organisations they have run on to the rocks in a spectacular way whilst enriching themselves?
As of this moment we would all like to ensure that our money is used to assist the real economy, home owners (not investors in homes) and businesses that contribute to the real world.
We understand, do we not, that the need at this time is to take the long term view allowing supposed assets to recover over time or to be liquidated over a realistic time frame only as a last resort.
Lloyds/HBOS might be our first test. My firm belief is that it is a good long term merger that will be great for banking but that will ultimately be part of a process that will adversely affect competition in the market and therefore will work against my long term best interests.
Meanwhile, whilst the sincere and steady management of Lloyds will argue that the deal is good long term they must be tempted to renegotiate terms when HBOS is currently work perhaps one half of the price agreed; a dichotomy for shareholders and managers.
That takes me to my last point; as a shareholder I accept that my instincts as a responsible member of society might well contradict my instincts as a shareholder and that contradiction will in turn be reflected in the expectations I place on the managers of the business in which I have, however, unwittingly invested. Making 4 pence out of SME’s or buying up foreclosed homes to sell at the next boom and make billions; no brainer! Bugger! Where did I put my petard that I may hoist myself!
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From the volatility of share price movements it would appears that over the last two days someone has made a shed load of money in trading HBOS shares. On monday a confidential meeting was held in Downing Street between the Chancellor, Treasury officials, Head of BofE, Chief Execs of Barclays, Lloyds TSB (prospective buyers of HBOS at a price of 232p a share) and Royal Bank of Scotland to discuss extra capital funding.
This sensitive information seemingly was then leaked to the BBC's Robert Peston from Downing Street, who promptly wrote a blog in the BBC business section. Yesterday HBOS share price fell by 44% to 99p a share. Today the HBOS share has risen to a similar (as I write it is bouncing up and down like a yo-yo).
If these events had happened in New York on the Dow Jones stock index, I would be fully confident that the SEC, The fed and other fraud and regulatory bodies would be investigating all the buy and sell transactions with great interest. I do not hold out much hope for a similar outcome this side of the Atlantic. I am not sure any more what the British regulatory bodies do, much less what they are for.
This is not a proud to be British moment.
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#160
So the IMF figures published today are discredited are they? What do you suggest instead?
I thought they were significant and worth posting.
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Charles
Just one MAJOR quibble. You called it 'existing money'. I'm sorry, but this is 250 billion pounds of borrowing.
Mind you, if you genuinely believe this to be existing money it might go some way to explaining the rest of your dotty (in my opinion) pronouncements.
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This comment has been referred to the moderators. Explain.
Folks want perfect but can't appreciate what they have under their nose. Mostly, this is just more ego getting between the self and reality. Take what you can get and enjoy it for what it is.
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So I now learn that our prime minister and chancellor have concocted this plan which entails pumping in astronomical amounts of tax payers money into our failing banks.
This will hopefully stabilise the financial markets, will allow the likes of me to once again approach my bank for a loan and that this is good for me.
So I presume that means shortly I may or may not be in a position to have an approved loan of what amounts to some of my hard earned money and should I be lucky enough to get that far, I will be repaying this loan back of once again my hard earned money at a premium due to bank loan rates.
Never mind the fact that as a consequence of this action my tax payments are also likely to rise and future public service funding will be squeezed.
Now perhaps I haven't quite grasped the mechanics of this ground breaking package, to dim to understand or missed something obvious, but i wonder is there anyone out there that can shed light on our prime mininster's assertion that this is good for me, because at the moment I am at a loss.
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Does anyone know if there is a way to ignore someone on this site?
The majority of posters raise valid points (even if I don't agree with them) but there are a few people here whose contributions are so deluded that I would rather just skip them then waste the effort to read them.
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#162
Correct. 97-2008 has been an unmitigated disaster.
Benefits culture.
Entitlement culture.
Immigration out of control.
Blame culture.
Spendaholic buy now, pay later culture.
All encouraged and created by Brown/Blair.
All a disaster.
Not to mention a war that was promulgated on false evidence presented to parliament.
Now go. And I'll call for an election as often as I wish. But thanks for your help. Not.
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*163
Charles:
You must stop trying to blame the Tories for the mess we're in. Quick recent history lesson, since 1997 we have had a Labour government. Can you tell me or the rest of the class one effective thing they have done to avoid this situation. They are supposed to be in charge, can you not see how bad this situation is? Come on, with me, "things are going very badly and it needs to be sorted out quickly" - don't you feel better for saying it out loud.
Selling all the gold, the ineffective FSA, claiming an end to boom and boost prematurely (imparting false confidence on the market), encouraging unsecured credit - the list goes on and on.
You claim Brown has the City by the balls but a) how and b) why is that a good thing? Really, why is it a good thing? The more involved the govt. are, the more of my money it takes up to fund it. And the more their grubby mitts are involved in anything the less attractive we become to do business with as a nation.
If you truly believe in Zen then you must see there has to be balance. Please accept that Brown and Darling are not handling this well, please, please, please.
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This issue is all about confidence, and a bit of testing the argument is perfectly reasonable, Nick. However, my question to you is this: what is the responsibility of the media, and the BBC in particular, when they are able to undermine confidence so readily? I'm less concerned about leaks on blogs and more concerned with the way Humphreys attacked Darling this morning. Can you explain to us what you think the moral path is in a situation like this one with perceptions and reality so closely tied - where you influence, if not control, perceptions?
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Charles
I have a 3 day week under my nose.
Not perfect, but heigh ho.
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For heaven's sake Nick, STOP being so polite to these mendacious people.
They are snake oil salesmen who will not answer a simple Yes or No question without reeling off tractor production statistics.
If they don't answer the question, then keep asking until they do. It's not rocket science for God's sake.
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# 21 - UK government should re-evaluate their concept of risk?
I should say so; this wasn't even on the UK Risk Register.
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The money exists. There's plenty sloshing around. It's just that nobody wants to lend it into the market while banks have an iffy status. The government is a guarantee of that money so it's unlocked and loaned.
And you can knock off the man down the pub insults cuz they're stupid.
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The New Labour government inherited an extremely healthy economy from the Conservatives and they actually are on record admitting it.
Why do they keep trying to blame the Conservatives for the fact tha
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The New Labour government inherited an extremely healthy economy from the Conservatives and they actually are on record admitting it.
Why do they keep trying to blame the Conservatives for the fact that they daydreamed their way through their time in office and are now waking up to the nightmare?
It is their DUTY now to try and sort it out before handing over to the Conservatives the mother of all messes.
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#175
Thanks. For. That.
Call a taxi for Robin.
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Hi Nick, spot on comments on borrowing, spending and bailling out the current banking system.
This is a forced reaction rather than a well planned action to lead us out of the recession. It rather sums up the state of the modern economy that has been set up by the banking system and executed without questions by the government. The banks demand and the government obliges to provide! They blackmail the country by saying that if the ‘system’ fails than they’ll be consequences for everybody, such as pensions…right? Well, yes if you think that Banks = economy! Fortunately, it’s not like that! Banks are facilitators not generators of economy. Generators are primarily consumers and businesses. The flourish of an economy is based on the ability of the consumer to spend so that business can sell! That’s the fundamental relationship through which banks benefit as well (e.g., more businesses = more business accounts, affluent consumers = more savings/mortgages accounts). The consumer is the heart of the economy. The crisis of 1930 was born because of the lack of consuming power. No buy => No sell => No pay back bank loans => No cash flow in banking system….etc.
Even though it is evident that the ‘consumer’ part of the economy suffers, nobody comes to it’s rescue! And this is extraordinary! There’ll be no recovery unless this part is taken care as well! A possible long term plan could be the government to distribute large amounts of money (though significantly less than that paid to the banking sector), through (e.g., significant pay rise or lump sums) to the consumer and facilitate the generation of businesses! Distribution of significant lump sums to the public/consumer could solve the pension problem as well. However, this should be in conjunction with significant changes in social policies as well. For example, abolish the state benefit system for anyone that is capable of working, which is one of the cancers of modern UK! This is of course the core idea for a long term solution. But, now is the golden chance for a visionary government to make the crucial decision: Do we step up to a long term solution or preserving the current ‘status quo’ by just pumping money into an economy model based on the sole prosperity of banking system, which is already dead!
Pumping money into the markets is not a solution. You just give more cash to traders and bankers! Look what’ll happen with the £50bn in the next few weeks. They’ll vanish! Traders will grab it! You cannot restore confidence in a dead system just by pumping money and the traders know that! Check the FTSE100 index today!
Thank you for reading!
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Here is my theory on what happened at last nights meeting between GB , Ad, Bankers, FSA:
GB,AD to the bankers -
What Do you want us to do?
Bankers to GB-AD, and FSA
Just sit there and don't say a word, this is what will happen;
Tomorrow morning at your question and no answer session you will tell these idiots (ordinary people) by way of the media, that:
1. The taxpayer will get a return on their money, do not tell them that there is a very strong possibility they will not, or if they do god forbid, it will be many years down the road.
2. Tell them that remuneration is going to be capped, do not tell them that it will be capped at a rate yet to be decided by us, as we feel we deserve a rise due to the pressure we are under and have still to decide how much?
3. Make sure they are conditioned into believing that the main priority is to stabilise the banking system, and to do nothing would have a disastrous impact on their lives, thus through time they will forget to ask who caused this mess, and we will be back on track making a fortune; happy days.
With each passing minute of the farce that was meant to be a question and answer session this morning, my heart sank, as the media were meant to ask questions, and Gordon Brown and Alistair Darling were meant to answer them, they never answered one of the questions any of you asked.
What is the point of these sessions, when the media will not persist until they can get vital answers to the questions they have asked on behalf of the public.
I would suggest the media should stop providing opportunities for politicians of all parties to weave their web of spin, and stop attending and broadcasting these fiasco's, and I would think that intelligent men such as yourself cannot appreciate being treated in the manner you are, when your questions are never answered.
In conclusion there are some from the media such as yourself and John Snow who try to persist to get answers for the ordinary people of this country, but as long as things stay as they are your questions will continue to be body swerved.
Keep trying Nick
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Nick
"Good or bad idea?" is the wrong question.
"Did they have any choice?" is nearer the mark.
I would guess that the folk on here who suggest that this is not a big thing and that the opposition and the press are talking the problems up for political or financial ends are not the same people who are trying to rearrange mortgages or who are having lines of credit for their business withdrawn.
Do the government deserve to have their backs to the wall - yes
Would the Tories have done any different - probably not.
Having lots of cheap easy access money sloshing around suits our political masters.
The problem was that Government, bankers, credit rating agencies, all bought into the longevity of the rise in property values. They extended more and more inappropraite lending because they held the view that even if some of the poor saps defaulted, the bank's security would be safe.
They in effect rewrote the investment healthwarning to read "the value of your investment can go up as well as up"
All this extra cash supported consumer growth and helped cement in the political status quo. "It's the economy stupid" is so true. Voters don't tend to change government when they are content with their lot. In today's society, for many, being content equates with having lots of cash. Being able to spend more than you earn does tend to make you feel better off! And the banks made that scenario so easy to achieve. One side benefit of the credit crunch is that my doormat is no longer covered in credit card offers each morning!
This unhealthy cabal between banks and Government has to be broken.
Let's give the BoE back some of the powers now vested with the FSA and let's give Cameron's idea for an independent oversight of government borrowing more than a cursory look.
Something has to change.
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Anything which restores confidence in finance markets must be a good thing. The fact that British investors in the Iceland Bank will not lose out, is another reassurance to all those who live in Britain with savings and investments both here and overseas.
Our whole economy runs on the constant movement of money and good liquidity. If it seizes up, the consequences would be dire and effect everyone.
Even if it were to cost us more in taxes in the long run, I think we would all prefer the Government took action now to boost confidence and trust in savings and investments.
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Is it my imagination or do I feel the 1970s are back? The government in a mess financially, putting the country into even more debt. The rumblings of the left become lounder. I am seriously worried about a winter of discontent chugging down the track. All we need are the dead going unburied-or is that the labour party being buried at the next election me wonders?
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Charles says
'Take what you can get and enjoy it for what it is.'
Which is precisely the attitude employed by the bankers who took advantage of the regulators failing to do their job.
Didn't realise you were a banker Charles!
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Charles says
'And you can knock off the man down the pub insults cuz they're stupid.'
As opposed to your more intelligent and enlightened insults I suppose?
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I've just been told by a reliable source that the government have printed more money to prop up the banks. This is where it's come from. Unbelievable eh?!!
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For 11 years Gordon Brown has boasted of his successful stewardship of economy e.g.
“Britain does not want a return to boom and bust” (Budget Statement 21 March 2000)
“We will not return to the old boom and bust” (Financial Statement 21 March 2007)
We now know that Labour’s economic record was built on a tsunami of public and private debt. Fiscal rules were met by manipulating the start and end dates of the economic cycle, and by hiding £100 billion of off-balance sheet PPI liabilities, many of which the taxpayer will be funding for another 25 years. The ‘no return to boom mantra’ encouraged Britons to believe that house prices would always rise. Gordon Brown and mortgage lenders conspired to persuade ordinary people to take on debt without any consideration that it might not be repaid. Gordon Brown scrapped the existing banking regulatory system and replaced it with a weak and under-funded FSA that was not fit for purpose. Similar policies were pursued in America. In parallel to Bush/Blair foreign policy a Bush/Brown economic policy was pursued, with equally disastrous results. We need a General election now.
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The blame game is pretty futile when you're looking down the barrel of a gun, as we all were.
I think they (HMG, BofE, Treasury, FSA) might just have averted a total meltdown.
But there are actions to be taken and certainly lessons to be learnt.
In no particular order :
a) a return to 'less adventurous' banking
b) unwinding the housing bubble (still a long, long way to go)
c) much better financial risk analysis tools
d) stricter control over 'ratings/ratings agencies'
e) separation of financial instruments so that the 'toxic' stuff does not get mixed with the good stuff
f) total clarity for investors so that fundamentally they are completely aware of what they are buying and the associate risks
There may be more to add, I am not a banker, thank goodness.
It used to be a respectable profession.
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My comment was in the form of a question as to when anyone in the BBC might have to leave due to leaked information.
It was moderated away!
One should read Guido as well as the Daily Mash for interesting viewpoint on these
' turbulent ' times!
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This is a political blog, so it brings out people dedicated to a particular party's political slant.
It would be nice to have a bit less mud-and-muck slinging, but always a good idea to put on the wellies and waterproofs...
There has been unrest for years about the huge rewards financial services people paid themselves. Much comment about a credit-based economy not being "real".
I quite like bankers. They exist in every type of economy. I don't like fantacists who call themselves bankers, but invent "product" that very few people understand, derived from the theory of money.
That's what financial regulators are employed to do - understand and manage esoteric wet-dreams. That's why I justify being cross about what has happened during the Chancellorship of Brown.
I'm not too happy to see the UK tax-payer bailing out finance companies who simply screwed up. At least, not unless any executives who achieved the biggest cock-up in financial history are chucked out with no golden parachutes.
Maybe this trouble started with a US sub-prime mortgage issue - but all those doubtful derivatives helped to create an environment that governments across the global should have stamped on.
What happened? Not a lot.
At least, in the US, the SEC and various fraud busters at national or state level will try and take a forensic look at what companies actually did.
I gather that some of the "junk products" were given AAA or AA ratings by credit agencies. Either they didn't know what they were doing, or were complicit in what seems like a tsunami of doubtful or potentially fraudulent activity.
We're now exposed to around GBP400Bil of risk for tax-payers, their kids and possibly their grandchildren.
Makes the US$700Bil intervention look like chicken-feed (compared to our relative GDPs).
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This will be a quick one.
I get a bit fed up with Brown's comment about the 15percent interest rates under the Tories. That lasted for a few hours, as Major tried to combat financial attacks on Sterling, during the ill-fated ERM link.
(The ERM link was opposed by Thatcher, by the way. But essentially supported across all party lines. Personally, I didn't like it much, but all you can do is lie back and...)
Take a peek at RPI in 1975. 24percent.
Guess which party was in power?
1975 was a long time ago.
So is 1992.
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#190: Oh God, please no! Winters of discontent and financial meltdowns I can live with, but if those girly hairstyles and flared trousers come back then we really are all doomed!
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The great fear the people at large have, is -are the government and civil service smart enough to avoid being hoodwinked by the street traders of the City? Of course they aren't. Government is basically incapable of understanding any business; politicians and clerks go into public service because they cannot cope with the outside world.
Why has government been suckered in to bail out the banks? The free, unfettered market was supposed to know best. I bet the market could come up with £500 billion in a month if it was minded to do so. 'Shares can go up as well as down' you know. Some of the bullies of EC1 could quite easily make some phone calls and tell their pals to start investing again. You watch how quick they start to pile in when it suits them. It is just too lazy to be true for them to come crying to Mama and the Bank of England.
How come Fred the Shred (RBS) and the other bankers who met in Downing St. yesterday, were allowed to have the nerve to ask the government what ....plans they had put together... If I had been PM I would have bounced them out on their ears and said come back when you have a plan to put to us. How are you going to get yourselves out of the mess that you created in the first place.
The second fear is that no-one will be held accountable. If this had been any other business, it would have been considered racketeering and organised crime. Falsifying figures, skimming off invented profits, abusing a monopoly and cartel position, loan-sharking... all spring to mind. The Crown prosecuction service should hurry up and employ some ex-banking poachers and start preparing heavy-duty cases. If that happened, perhaps the people would start to have faith in a bail-out.
Regards
Colin MacKenzie Glasgow
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newtactic
Perhaps we should give Gordon Brown our paypackets. He can then tax us all on what he thinks it could stand.
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Good comment, JC.
Calm has to come first, and I'm hoping a fairly nuanced view can be taken on solutions like you suggest.
I'd also like to see more responsibility from politicians and the media, as point scoring and headline chasing doesn't help anyone.
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Well this really takes the p**s, here we have banks who for years have been hitting us with extortionist bank charges and merciless foreclosures now being given our tax revenue so that they can loan it back to us and we will have to pay interest for borrowing our own moneys. YOU COULDNT MAKE IT UP!!!!!!!
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Today's events have been interesting, I'm sure we'd all agree and anyone remotely interested in political and economic history will no doubt judge in 10 or 20 years from now how significant it all was to the economic well-being of the Uk if not the World.
The "Brown Plan" seems for now to be getting mostly approval and support not just here but internationally. His lone voice over the last few months calling for a global approach seems now to be heard and the co-ordinated interest rate cut is a great achievement.
I'm hopeful of other beneficial legacies to the "Brown Plan", a new approach to capitalism, less greed and smoother economic cycles. This IMO is what Gordon Brown meant when he talked of an end to boom and bust, he is often mis quoted or misinterpreted on this, perhaps intentionally by some.
More responsible borrowing and lending resulting from the "Brown Plan"will be welcomed and this in itself should correct the housing marketaccordinglyand slowly return the market to first time buyers.
Finally, looking at PMQs I thought the PM gave a masterclass in statesmanship. Calm, reassuring, assertive and positive. His performance was exemplory. My only slight dissappointment was his put down of Cameron's last question when he had to remind him he had flip-flopped on city bonusses in less than three days. Then again it was true!
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I'll have half a trillion on the red please. Certainly sir is it your money. No but if it doesnt come up I can get some more.
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#200
It's the choice society has made.
The best minds have gone into the City to take advantage of the massive rewards available there devising complicated ways to hide risk from the accounts. The Civil Service simply cannot compete.
Other professions have suffered as a result of this too.
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So, AIG executives went on a $440,000 weekend golfing beano as soon as the US government bailout was passed through Congress. ... Alistair Darling says it's not right to interfere in how banks reward their executives ... why not, Mr. Darling ? We own a substantial part of these banks now. It's not just our right, but your duty to see that they are properly run and that includes how much bonus is paid to executives out of taxpayers money. If someone holds me up in the street at gunpoint and steals my money, I expect the authorities to pursue the thief and after a trial, put them in prison... I, likewise, expect someone who steals my credit card and uses it to buy goods and services to be put in prison. I see no reason why I should not expect anyone who is given my money, as a taxpayer, and then uses it dishonestly to pay bonuses to incompetents and shysters, to be prosecuted and imprisoned. Lets have that enshrined in the laws governing this banking bailout, Mr. Darling .. that those who criminally misuse and squander the taxpayers money will go to jail ... that might inject a sense of urgency and due humility into the banking community.
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#199 DisgustedOfMitcham2
It's the Morris Marinas that would worry me.
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Why are people so naive? Why are people criticising the Government for the sake of trying to win political advantage?
We live in a Globalised Economy. We live in a Capitalist system. We wanted this system since 1983 when Thatcher deregulated the financial institutions. Government should NOT interfere.
Now, all of a sudden you turned into Socialists, nearing Communists. You say that the Government should have intervened earlier and nationalised the lot.
What arrogance for cheap political advantage. Is this the kind of change that livid Tories are asking for.
One minute you accuse the Government of Nationalising NR and had it been for boy Novice Cameron, it should have been left to go to the wall, but now, you wanted to act earlier.
Let me remind you lot of what Thatcher said in the first recession under the Tories, and manufactured by the Tories, in the eighties.
"You can never buck the market"
So be quiet and thank God that we do not have someone gambling with our money as we had in 1992!
We are in for a Global recession and a Global downturn, not just the UK with 15% Interest rates and 14% inflation when Oil prices were $23 a barrel.
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This comment was removed because the moderators found it broke the House Rules.
185~ Balhamu
Got to admire your fortitude, bur surely you must now realise that you could have a more fruitful discussion with a Cuckoo Clock than some of the people on here, mentioning no names but the "Boy Wonder" is a case in point
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Charles E
Been enjoying your posts as usual. They do make me smile and even think. Thats not to say that I don't think a lot anyway.
I do agree that the tories may never be the same after this.
Its not beyond the realms of possibility that Jedi Master Gordon could even be said to be responsible for this fact, as he has engineered the problem.
It really is a pity that JMG as a result of all this is will have to fall on his sword.
Because although you fully appreciate what he has done and how brilliant he has been, we have a flawed electoral system and the electorate as a whole will not see it the way you do.
He will end up being the scapegoat for this mess and will not be forgiven by enough people.
Quite wrongly the tories will merely turn up for the next election in 2010 and be elected just because it is their turn.
Bearing this in mind do you not think there should be some change to the electoral system.
Now is probably the time to do it because it will be at least 10 years before they get another opportunity. If at all.
All the good that he has done could be lost as too many of the electorate have such short memories.
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Posters who keep saying that this is Thatchers fault must be living in a parrallel universe. Blair and Brown have been in power not Thatcher, imagining what Thatcher would or would not have done in power is ridiculous when she had been retired. It is all about steering, guess what, if you go along the road and there is a bend coming you turn the wheel to take a new direction, Brown didn't, if anything Brown drove the bus off the road and continued to Beachy Head without turning the wheel. The problem for Brown is the people on the bus have a problem with this. The mindset amongst these posters is if you say this is ridiculous Brown you are classified as a Conservative, even if you have voted Labour. Read it - This UK HALF TRILLION PROBLEM HAS OCCURRED SINCE 911. Similar in the US. Work it out - how to pay for a war thru increased treasury revenues without raising direct taxation percentages or raising national debt.
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While they are trying hard to restore confidence to the banking sector.
Keep an opened mind to the grey suits
in the back ground.
Once again the imperial control of the old
is on the front foot.
The axe is sharpened and poised to strike
Pakistan may be the first to feel the might.
One world, one order, under one contol
Hmmmmm........yes people, not only difficult times, also very dangerous times
The Indians send signals from the rocks above the park.
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I'm not a supporter of Gordon Brown, but it would be stupid to blame him for the economic shambles facing almost every country today. However, the man seems to have been dogged by something more than bad luck and poor judgement, since he took office. Just check back and see all the disasters he has not only caused, but which have been thrown at him by fate, for want of a better word. I don't know whether it can be called karma, kismet, or someone has placed an evil eye on him. I've seen such unfortunate victims in my travels abroad, and am beginning to wonder if an exorcist should be brought into Number 10 Downing Street. It might be better than a Spin Doctor.
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The basic plan is good. We need action and now we have it. Should this have come earlier? Maybe. But I am sure that if this had been advocated earlier, Nick and all the other commentators would have criticised the government for being left wing!
I sometime wonder if all we want to do is to complain and not be constructive.
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Post 205. Eatonrifle
Are you Gordon Brown's chief apologist?
You make it sound like this was Crash Gordon's secret Master Plan that he has been aiming for since becoming Chancellor.
Look mate, GB has completely messed up over the last 11 years with mega borrowing and mega ignorance of a regulatory system. As guardian of the electorate's money he has been wilful.
Crash Gordon was completely bounced into todays action because he has actually been the absolute architect of the "Age of Irresponsibility"!!! He never ever intended for this to happen.
So please don't try to apologise or legitimise today's shambles for the UK as some part of the Great Gordons unknown secret strategy.
GB equals Denis Healey.............the man with the IMF begging bowl..........it is in that spirit that GB's and New Labour's history will be written.
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199. At 6:34pm DisgustedOfMitcham2
#190: Oh God, please no! Winters of discontent and financial meltdowns I can live with, but if those girly hairstyles and flared trousers come back then we really are all doomed!
It may be an improvement on how Harriet Harman looks now! Sorry, foolish joke, just trying to keep smiling.
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if you look at Standard and Poors you will see the Icelandic Banks were giving cause for concern months ago.
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You have to give the Labour bloggers their say all two of them - they have got some guts flying in the face of public opinion. Did you see that pig flying...........................
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147. grandantidote
Why has David Cameron's policy on Banker's bonuses changed so dramatically in the last 3 days? Andrew Marr to PMQs
You must have noticed today that George Osbourns has as well.
My eagle eye also noticed this sudden appeal to the gallery. Next they will be dressing in slouch hats and trench coats, a complete change of persona!
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Can I ask CEH how long ago he predicted all of this?
was it more than 10 years ago and can he supply the reference/link?
cheers
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59. sagamix wrote
Yes, spot on ... the City is like one giant Quango ... nice one!
Some Quango, it created 20% of the countries wealth.
Intrested to see whats going to fund all those public sector jobs now. Any ideas?
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#163 CEH
I'll do my best not to antagonise, but when you post are you sometimes or often drunk?
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Personally, Gordon Brown and close colleague, (Darling), are out of their depth and for me do not inspire confidence. I've yet to be convinced by David Cameron and the Shadow Chancellor. For these two, I would imagine now might be a good time to be in Opposition. I do my utmost to understand and respect the opposing opinion, Balhamu and Sagamix from memory spring to mind immediately as apparent stout defenders of Gordon Brown and the Government, grandantidote, with respect, always has a contrary opinion and appears a trifle partisan.
Charles_E_H, you sir offer up quite a lot of words, many of which do not seem relevant and, when challenged, back away or offer no response, professing to be indifferent but with a clear anti Conservative bias.
Fine, I realise I am a little off topic here, I simply want to venture an opinion and simply respond to what I read, which, for the most part is intuitive and informative.
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@ 91 - balhamu
"I do not remember many voices from the right over the past 10 years saying:
* "We need to regulate the financial industry and mortgage providers more heavily. They are providing irresponsible loans to people who cannot afford them"
- Sir, with respect, the "right " as you put it, questioned why it was that "the left" took away BofE powers to step in when banks got into trouble or looked to be over stretching - these powers were transferred to the FSA who have proved "with the benefit of hindsight" to have done nothing at all to prevent overstretching banks.
even more astounding was the countless warnings from various sides of the political and financial spectrums were ignored, the then chancellor gordon brown could have stepped in (as it was he who transferred the powers) but he didnt.
* "House prices are over-valued and the Government needs to take real action to introduce rationality into the market (e.g. keep stamp duty, implement a land-value tax, abolish the capital gains tax exemption that housing has, crush the speculative buy-to-let market), and not encourage first-time buyers into the market"
- did the left warn of this? if they did, they could have voted against various budgets gordon brown put forward, but they sat on their hands. its all well and good for labour MPs to appear at fringe meetings and give out off the record headlines, but they form the government, why didnt they vote to stop all this?
as with post office closures (campaigning locally in the media to keep them open whilst voting the bill through parliament to close them) your opposition to this being imposed on us all by a labour government, voted through the commons by labour MPs, should be directed at the people responsible for allowing it to happen, in part, ie, "the left"
* "Bankers are paying themselves bonuses that they do not deserve. They are being rewarded for taking short-term risks, which will have catastrophic (and shareholder-value damaging) long-term implications"
- any business will always maximise their profits according to the rules or laws they operate within.
gordon brown has set these rules and laws for more than a decade as both chancellor and prime minister, agree or disagree with the bankers actions, no one can get away from the fact that this has been allowed by gordon brown for more than 10 years!
"I think it was mainly voices on the left saying these things"
- with respect sir, what the "right" say or do not say is irrelevant as they were/are not in power.
the only time that the opposition parties opinions and proposals actually matter is when a general election is called.
as we have seen from more than decade of labour, what they propose in a manifesto when the country is electing a government, is not what they action after they have won the election.
when major's government bought us out of the ERM causing the early 90s bust, which saw our currency being devalued and manufacturing investment moving away from the UK, lamont threw billions at the problem to try and shore up sterling (nowhere near the £500 billion being given away now) - when this failed to stem the tide against it, we took a big hit and bought ourselves out of the ERM, again costing nowhere near todays numbers - one person was an absolute stalwart of staying in the ERM and throwing more money at the problem to shore sterling up, one gordon brown!
as ive posted above, gordon brown's opinion at that time, was totally irrelevant, as he was not in a position to action his opinion.
in today's world, the left isnt the left anymore, disagree with them i may do,but old labour and its left wing politics always used to have my respect, the likes of tony benn for example always puts forward a constructive argument with facts, etc, they would be heard in our house and on the doorstep, not spin as the "new labour" movement is so often found doing.
the voting record of todays "left" in parliament demonstrates that the people they claim to speak up for, have been badly let down.
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Carrots @ 223
... "Some Quango, it created 20% of the countries wealth" ...
Phoney wealth, as is now becoming clear.
... "Interested to see whats going to fund all those public sector jobs now. Any ideas?" ...
The tax receipts of people who don't work in the public sector. People like you.
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If tax payers money is been used why cannot banks using it be made to finance companies that are have full order books and needing a cash flow to continue. These companies are more important than banks having money to hang on to.
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UTTER NONSENSE!!!!!!!!!!!!!!
AS KARL MARX STATED ON BEHALF OF THE BANKERS THERE WILL BE 3 MAIN TRADING BLOCKS......
THE EU
THE AMERICAS
THE FAR EAST AND MAYBE AFRICA,
POWER AND CONTROL OF POPULATIONS IS NOW BEING CENTERALISED, THE LINE IS BEING BLURRED BETWEEN BANKS AND GOVERNMENTS.
.....INTERDEPENDANCE...THE BIG BUZZ WORD OF THE YEARS....COMING SOON THE AMERICAN UNION... CANADA MEXICO AND USA WITH A NEW CURRENCY...THE AMERO
THE AGENDA IS SOOOO BORING......
WAKE UP FOLKS
NOMOREFAKENEWS
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I think that Joe Public are missing the point. If the government had not stepped in as it did then the recession would have made the 1929 crash look small in comparison.
At least 30% of the working public would be looking for a job, economies around the world would stagnate and governments would have to raise taxes to try and maintain the present spending commitments.
If Joe Public wants to go back to those days then fine, go and live under President Mugabe, who's excellent economy has an inflation rate of over 4,000,000% and has at least 50% of the working population unemployed. Perhaps if the media were to explain some of the home truths to Joe Public then they could make a more balanced verdict on the governments actions.
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I think we'll have to start creating a bit of wealth again, instead of taking in each-other's laundry.
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I was surprised to see that local councils and
TFL are asking for government guarantees.
The cheek of it.
What about all those overpaid senior executives
employed by local councils to know or find out about the risks involved, they must resign or be sacked without compensation having failed the tax payer in spectacular fashion.
If any good comes out of this it will be the end of rewarding executives particularly in the public sector for failure, the government must set an example if it is to regain the confidence of the tax payer.
If the government is responsible for recommending the Icelandic bank to the local authorities then the chancellor should resign.
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How can Local Councils and even the MPA invest British Tax payers money in Icelandic Banks.
It's no wonder the British Tax payer has to bail out British banks, when British Councils can't even invest British Tax payers money in British Banks.
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Are there any Policemen / women, Nurses, Teachers, Local Authority, Forces staff and other public sector workers reading this?
YOU WERE REFUSED A PAY RISE THIS YEAR SO THE BANKERS COULD RUN OFF WITH YOUR MONEY!
The police weren't even allowed to strike to protest. Is that a fair an just society?
Do not enforce the law of the Bourgoisie.
WORKERS OF THE WORLD UNITE!
The time has come Comrades......pick up a copy of the Communist manifesto and all will be explained.
The only country who isn't panicking is China. They have been protected by their socialist principles, free trade and free markets represent the freedom of the Bourgoisie - not the worker.
They may have started on the road to capitalism - but they will be turning around as we speak.
1917 was too early, and required too much force. This time it will be an spontaneous uprising prompted by the lack of food and the loss of everyone's material posessions.
1917 was isolated - but this time it's global. There will be no intefering from external Bourgoisie nations.
Even if it doesn't happen this time - there will be a next time. It is inevitable, the Bourgoisie will create the revolutionairy proletariate.
The fall of capitalism has begun. Even the most ardent capitalist supporters have admitted that "The credit markets will never be the same again".
The system does not work - it was proven in 1929 and it took 10 years of hardship to get out of it.
Are you all prepared to live with poverty and unemployment until 2018?
Don't think public sector jobs are safe either. Where do you think the Local government will find the cash they have lost in iceland?
.....from service and job cuts.
The government just blew all the national savings which could have helped us through the recession.
It's all over folks - bar the shouting.
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hi there
Why doesnt someone start shouting about the benefits to the millions of Mr averages who will BENEFIT from all of this by the way of the reductions in there mortgage because of the cut in interest rates.
To most People the current crisis has absolutely no effect whatsoever on their day to day lives. In fact they Benefit from the Lower costs of many things they can buy because there are so many "sales" on at the moment.
They (Mr Averages) will also benefit from lower fuel cost once the petrol companies stop ripping us off with their extortion tactics on fuel prices.
Question: If the cost of a barrel of Oil has dropped more than 30% over recent weeks, where is our reduction in petrol costs at the pumps ?
So, unless you were considering buying a new home or car, you will benefit, so why is the media not pushing this out instead of all the over hyped doom and gloom which was all caused by a hand full of greedy Bankers.
The Press could end the recession in less than a week if they SHOUT about the Positives and not the Negatives.
Geoff Lord
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2. PatrickGJones
"this paying off the woes of investors who have helped keep the government of iceland afloat - with no benefit whatsoever to the UK economy - has gone too far?
What next? Will we subsidise those investors who have lost out in the Bank of Nigeria or Bank of Madagascar crash?
If you speculate abroad, your losses are abroad - not my or any other British tax payers responsibility?"
Totally agree with you.
Especially when the value of my British bank shares have fallen by nearly half. (earned by working for the bank for 18years on a very low salary)
Why are my savings (and the Pension Funds of milllions of people) worth so much less than others?
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Would Adam Smith the father of laissez-faire, be proud of the fact that a historian from his home town has intervened to save the British banking system?and what would he have said to the irresponsible, reckless individuals, selling products that did not exist, gambling with their parents pensions, and generally bringing capitalism to its knees.
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It does not matter what we think.
Already the arrogance of the people who have caused this disaster is starting to show.
They live in their own world and nobody is going to change it.
The greedy bankers, and whoever else have had their nose in the trough, will be telling us just shortly that we should be grateful that they have kept their jobs and their meagre salaries and bonuses, or we would have nobody to get us out of the mess we have got ourselves into.
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In 1968 a bank refused me a small loan because I didn't have enough assets. The exact words, said with a snear, 'Is that all you've got?'. Is there any way I can say 'NO' now? please.
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The most important thing is calm. Once stability has returned you go after the rotten apples with a lazer beam. The thing is, if investigations are launched now or the heat tips into vindictiveness you gum up the works and people clam up.
"Debathification" turned Iraq into a gravel pit, and I'm sure nobody wants that. This is why any pending action has to be insightful and proportionate. Plus, some of the guilty folks might be useful in helping improve things, and we want things to improve not see the lights blink out.
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I don't think there is anyone that wants this rescue plan to fail because it affects us all. Recriminations will have to wait for another day but come they will in one form or another. We don't know whether this plan will work or not. Another year down the line and we might have some answers. For now we will just have to wait and hope that the mess we have got ourselves in is reversed. A bunch of platitudes I know but indesputable facts nevertheless.
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It would seem the current global credit situation is mostly the fault of the banks and their methods of trading etc. The banks at present simply do not trust one another due to the flexible lending rates. The bank of England along with other nationals have reduced lending rates why, cannot the heads of states along with their national banks agree to "fixed" type of lending rate (say 4.5%) accross the board somewhere along the lines of the now Bank of England rates?
This would surely stabalise the system and allow banks the freedom to deal with any of its counterparts. Would this not make the banks work for their incomes via their terms and conditions policies??
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Can we have confidence in Mr Brown or Mr Darling, I very much doubt it
The Icelandic government requested assistance by way of a financial loan from the UK.Which was refused.
The CEO of Kaupthing requested that his bank be included in the 50billionassistance offered to other major banks in the UK,HSBC included.He was refused.
Is it not possible following these refusals that the Icelandic government and its banks looked to their own self interest and set about removing cash and assets offshore i.e. back home.
It seems to me that Mr Brown and Mr Darling have created an element of personal animosity between themselves and their counter parts in Iceland which is playing a significant role in the stand off which we are seeing over the deposits of up to 8billion belonging to local authorities, charities,and police authorities, which now rest in Iceland.Somewhere down the road Mr Brown and Mr Darling forgot the old adage "Possession is 9/10ths of the law. I believe it will be seen shortly that Brown and Darling shot from the hip and went off half cocked in prematuarly seizing assets in the UK trying to close the door after the horse had bolted and have come off second best to a much smaller nation. They are going to have to give some big insentives to bring that money back Does this not say something of their own and their advisors negotiating skills. Hence my conviction that neither Brown or Darling have that "Sure touch"which will bring success or give either a place in history. So NO the Bank bale out will not be a success.
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Sub-prime lenders AND many sub-prime borrowers are equally to blame for 'toxic debt' lying hidden in the financial vaults around the world.
And here's the delicious irony that seems to have escaped most observers.
Peter (Lord) Mandelson, was a DELIBERATE sub-prime borrower - who succeeded in fooling a building society into lending far more than it should for him to buy a house.
How much of this toxic stuff has been created by those either lying about their incomes or lying about how they came up with the required deposits.
His reward for cheating? A job in Europe (housing paid for); a seat in the Lords and advising Brown on clamping down on the type of financial chicanery he was very happy to be part of when it suited.
Lord Mandelson of Black Kettle seems an appropriate title.
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The whole Captilisation System has had its day with in rip off Britain plus around the globe.,while the G 7 scatch each others heads trying to bring back and operate the system as was,only further deep damage will occur..,Credit tools within it no longer working..,its back to basics,no more get rich systems employed to soak the populations will bring back the so called.., some would say good old days of living on the never never,ie living beyound our means..,as The Mortgage set up,its what no one wants to be rapped up for best of our life times,paying over and over again for that supposed dream home,looking over your shoulders taking time out to wounder if it will ever be an investment or a concreate block around your neck,with the Banks looking at finding ways to increase profits within new contracts to further soak those who have taken this road within the rating systems iemployed..,its going up or down finding the whole process,finding budgeting systems for us all difficult to say the least for all difficult to keep on top....,Only way is to do away with the...( Mortgage ) and system employed...,then introduce a new contractual system called ( P R C A )..,Purchase Rental Contractual Agreements,drawn up for House / industrial units,giving safe guards from increases as not tired to intrest rate systems now employed..,its set at onset..,you know purchase price plus know what at end of term final cost will be..,the percentage of rental side is used to fulfill the purchase side..,the workings to be kept simple..,no middle men to be employed except surveyer /solicitor..,keep simple.,its felt as fine detail has to be worked out..,making Banks /Building Societys toe the line will make for a better future as the term your house or what ever is at risk if for any reason payments are not kept up..,could be with drawn as Rental /Purchase Contract will give protection under certain circumstances.,its felt the People / Country needs to have forsight plus have controls returned with in there future finance and not controled by Profit /Loss of Goverments or Financial Instiuations
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I may be dense or missing the point but where has all the Banks money actually gone. Noone seems to say or even ask the question. Money is invested ,by the millions according to investors in the Islandic Bank , and yet they need Government money to carry on or even survive. So where are all the millions or should I say billions now.
I appreciate that a lot of the banks wealth is only on paper . Think of a number ,write it down and pass it on[try that in the real world] but real people invested real money with them. So I ask again where is it?
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245:
My sister who almost lost £100,000 in icesave was saying the same thing to me only yesterday. Where did all her money go? Surely not thin air. Can someone explain?
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Nick,
Why do you not tell us that in 1986 you spent a year as national chairman of the Young Conservatives? Are you prepared to tell us and make a statement? How as a Journalist can you be neutral?
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Well I would certainly hope to see a reigning back of the generous outflow of taxpayers money to other countries far and wide. Gordon has been magnanimous in his generosity with our taxes globally in the past but he has neglected those who are in need at home and in these difficult times surely "prudence" is best administred at home for once our "house" is in order we can look to helping others.
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I really do not beleive it has served any purpose for all the EU countries and the UK to have left Iceland and its small community to go it alone. I saw the prime minister strugling to look in control at the press conferences. How could Mr Brown and Mr Darling have been so ungracious and callous as to have forced this man to look for help in Russia and then ripp the heart out of the Icelandic banks in the UK. What they did was take out the plum cash deposits and hand them to ING leaving just rubish behind. Now they find a great deal of UK money is in Iceland, which is not going to be easy to repatriate.We forced this prime minister to look after his own, while stating that such action by individual countries will lead us to disaster.
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No one seems to have mentioned the DERIVITIVES!
If you were to factor in the derivitives, then their all bankrupt! no but's about it.
It's not just subprime that they were gambiling on, or should i say that we are now all gambiling on! Subprime is just the tip of the iceberg, derivitives dwarf everything else put together.
we all loose either way, ever heard of hyper inflation?
You will know all about it soon enough,..... Here it comes!
They, we, all need a bankruptcy type re valuation because we know they got their figures badly wrong! And now we are using the same logic and math, that got us into tis mess, to seek the solution and we are being advised by the same idiots!
Maybe we can trust them now that they have been caught in the act! but then again i doubt it!, where is the otovation to come clean?
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Gordon Brown did not answer Nick's question. Just where is this £37 billion coming from? Will the government increase taxes to pay for it or will it cut public spending in other areas? Will it borrow money itself - surely not, because where would it borrow from?
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Nick,
I would like to know why the government have bailed out the banks with our money. If it had been any other business, they would have allowed them to go under - Market Forces etc.
What will this bailout do for the tax payer? - nothing!
If the government wanted to put money in the banks, why did they not pay of Jo Tax Payers mortgages?. That would have repaid all moneys owed in the UK, given us some serious spending power to help the econemy. Given the banks liquidity and we would all be happy.
The banks could lend between them selves, they might even be able to lend to us. Politicians would be popular. No - thats going to far.
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Banks that being Nationalised is going to be a safe bet for the immediate future, but in the long-run it is not going to work!
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Nick asks is the rescue plan a good idea. I guess that when the seat of one's trousers is on fire it's a good idea to sit in a bucket of water. I don't think politicians are so much in control of events here as driven by them.
It is extraordinary how this situation has unfolded and developed a momentum of its own since it was triggered by the realisation of the sub-prime mortage in USA and the shock revelation that the exlposion in property values might come to an end.
One thing wish intrigues me is the relative lack of comment, in the media or elswhere, on the part played in all of this by the pressure put on Financial Service organisations by the social exclusion agenda of the Clinton administration in the USA and the Labour government here.
This played no small part in the shift towards access to credit being made more more widely available, including the provision of mortgages to people who previously would have been excluded from the property ownership on economic grounds and to higher mortgages than previously to those higher up the economic scale.
If this was not THE main catalyst which triggered the spiral of events which brought us to our current state it was surely a significant contributor.
Perhaps when politicians are lining up to (rightly) condemn banks for dishing out credit and mortgages to those whose ability to pay was at best questionable, they should pause to contemplate how much they did to encourage or even force events in that direction.
The aim of reducing social exclusion and extending home ownership and access to consumer goods - laudable. The timescale and mechanisms used to try to achieve this piece of social engineering - wholly unrealistic.
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I was just listening to the BBC news about this bail out plan. Could anyone please explain to me how this huge sum of money will be raised. They said Uk already has got debt of around 690 bn GBP.
is the money coming from international money market. in that case who are these people in international money market with the pot of money.
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