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King and banks' capital

Robert Peston | 08:29 UK time, Wednesday, 23 January 2008

A speech last night by the Governor of the Bank of England contained a stark analysis of what may lie ahead for banks.

Mervyn King said that central banks could not fix the fundamental problems in money markets, which underlies commercial banks reduced appetite for lending to all of us.

"The solution to the underlying problem does not rest with them [central banks] but with the banks and financial markets" he said. "Banks must reveal losses promptly, and, most importantly, raise new capital where necessary".Mervyn King
When I was a boy, if the Governor of the Bank of England had made such a statement there would have been a minor earthquake in the City.

It would have been taken for granted that he knew that the balance sheets of one or more of our big banks were shot to pieces. And that massive rights issues of new shares, to raise capital, were undoubtedly on the way.

That was then, when the Bank of England had direct responsibility for supervising the health of banks and the elevation of the Governor's eyebrow could change climatic conditions.

Since Gordon Brown's regulatory reforms of 1997, the Bank has a more indirect relationship with banks: it is responsible for the stability of the financial system rather than the health of individual institutions.

But that doesn't mean his words can be dismissed as just another view, albeit rather more intellecutally robust than most analysts'. If the Governor really has no special knowledge of conditions in the City, then we're probably in serious trouble.

And Mr King doesn't think the problems at the banks are just that they have failed yet to make a clean breast of their losses on their foolish investments in securities linked to sub-prime lending - though we can expect more losses out of that mess of their own making.

King opined that "there is a risk that weaker activity and lower asset prices could result in another round of losses for banks and a further tightening of credit conditions".

He implied that the recent sharp falls in the share prices of banks weren’t wholly irrational.

After the tumbles in their share prices, the historic dividend yields for some of our biggest banks rose to astonishingly high levels, between 8 and 11 per cent - which suggests that investors fear that their dividends will be reduced.

If King is right, and some banks need new capital, cutting their dividends would be one way of achieving that. At a time of such economic uncertainty, cutting the dividend might be smarter than issuing shares.

To be clear, there is no suggestion that any of our banks are in serious difficulties. But the bad-news season for them may not be over.

Comments   Post your comment

I watch the unfolding events in the financial sector with great interest – but I don’t begin to understand them. I’m afraid I only have a couple of degrees – but neither of them is in psychiatry. If the markets are driven by worry, a little bit scared, uncertain and a touch paranoid then how much weight do you think that commentators such as yourself have on that market sentiment? Perhaps one useful economic indicator might be a poll of journalists rather than silly old profit and loss – see how they feel when they get out of bed that morning and graph that against the worries of the poor old city types? Bet there’s a correlation!

  • 2.
  • At 09:24 AM on 23 Jan 2008,
  • FR wrote:

Well now, how much clearer has Mervyn got to spell it out, then? Perhaps a bullhorn?

Do these men look like they have the situation under control? Every one of their statements is tinged with underlying fear and on the verge of panic. I saw Darling on newsnight with Paxman a couple of nights ago, and the guy must have blinked about 500 times in a 3 min slot. He is more bewildered than the rest of us. I can see him resigning very soon - the pressure will kill him otherwise.

The truth is that there is a massive conspiracy of silence occuring - and it's for our own good.

The internet is littered with sound, reasoned and intelligent men and women analysing the monetary system figures in the public domain and coming to one conclusion - complete failure of the banking system.

One bank in America alone, Bank of America, the largest, has $72 trillion of SIV's, CDO's and CDS's on it's books. Since Friday, when the AMBAC monoline was downgraded, the value of these bonds is now completely unknown. That's $72 TRILLION in just one bank. I am not making this up. I'm not here to mess with your brain and make you feel unhappy - I am stating the truth! It's all out there if you look for it!

Our banks in the UK are far less transparent than in the US. I believe our banks are hiding truly gargantuan losses and Merv, the Darli(n)k and Bomber Brown all know this - they will not be sleeping well in these last few weeks.

We have come to the point in our fiat monetary system where it cannot be expanded an iota further, and must contract. I have read these events occur approx. every 80 years. The last was 1929. This time, considering how many more people are on the planet and the sums involved, things are not looking good.

We need a white knight in the face of hopeless adversity, and I see none.

  • 3.
  • At 09:55 AM on 23 Jan 2008,
  • Bryan wrote:

No doubt many replies will say you are promoting a 'run' on the banks again! But keep-up the good work. It cannot be hammered-home hard enough to some institutions, the need to reveal their FULL losses (including off-balance sheet) to the sub-prime debacle, and also the idiocy of some of their investment decisions etc.

  • 4.
  • At 10:04 AM on 23 Jan 2008,
  • robert marshall wrote:

For the problem banks to get their act together they need to not only cut their dividends but stop using valuable cash to pay ridiculous bonuses.
Banks used to be reverred enterprises now they are known as rip off merchants without exception.
Global economy or not we must return to a basis that has strong foundations.
Various tiers of capital are not enough when the constituent parts have the security of a chocolate teapot!
The issuance of wierd derivitive products with no liquidity must stop here and now so we can see what mess they are in, and all the off balance sheet shenagins must be brought back on.
The days of greed are over and whilst it is important everyone understands that, there is no way banks can or should be treated with any exceptions to how all companies must operate.
Without these new priorities this mess will continue for years to come.
We also need to have a basis change within the FSA and to stop the cosy relationship they maintain with the large banks.
Will this happen?, with the present managementin place it's most unlikely the lame duck Chair needs to go now soi that real movement can happen, and the CEO needs to reassert priorities that have got lost in its own gold plating of very simple EEC rules.

  • 5.
  • At 10:08 AM on 23 Jan 2008,
  • John T wrote:

Yes the glass could be half empty, but it is at least half full. We all know that the media prefers bad news, but the lack of balance leads me to rechrisen the BBC as 'Gloomberg'.

The US is suffering a hangover from their credit binge, that's where the hangover should stay. The enthusiasm of unbalanced reporting on the negative side will encourage the spreading of the pain to this country.

The UK economy is still predicted to grow by the majority of analysts, albeit more slowly. Unemployment is low, and companies (including the banks)are still making good profits. I see no decrease in the amount of marketing the finacial services industry is undertaking.

If the UK Banks have not fully disclosed their bad debts, (and they all made recent trading statements), then the stock exchange and the FSA should deal with their Directors.

  • 6.
  • At 10:12 AM on 23 Jan 2008,
  • robert marshall wrote:

For the problem banks to get their act together they need to not only cut their dividends but stop using valuable cash to pay ridiculous bonuses.
Banks used to be reverred enterprises now they are known as rip off merchants without exception.
Global economy or not we must return to a basis that has strong foundations.
Various tiers of capital are not enough when the constituent parts have the security of a chocolate teapot!
The issuance of wierd derivitive products with no liquidity must stop here and now so we can see what mess they are in, and all the off balance sheet shenagins must be brought back on.
The days of greed are over and whilst it is important everyone understands that, there is no way banks can or should be treated with any exceptions to how all companies must operate.
Without these new priorities this mess will continue for years to come.
We also need to have a basis change within the FSA and to stop the cosy relationship they maintain with the large banks.
Will this happen?, with the present managementin place it's most unlikely the lame duck Chair needs to go now soi that real movement can happen, and the CEO needs to reassert priorities that have got lost in its own gold plating of very simple EEC rules.

  • 7.
  • At 10:22 AM on 23 Jan 2008,
  • John Constable wrote:

It is now clear that the reorganisation of responsibilities that Gordon Brown undertook when he removed some of the BoE's remit and gave it to the FSA, was a major strategic blunder.

In one sense, the BoE is now 'flying blind', only indirectly sensing what the banks are up to.

Brown will merely say that 'the (tri-partite) system may needing some minor adjustments from time-to-time'.

Meanwhile 'Rome burns'.

  • 8.
  • At 10:28 AM on 23 Jan 2008,
  • Ian Harris wrote:

I wonder who will own all our new schools, hospitals, army barracks and government offices when the UK banks have to liquidate their off the balance sheet PFI schemes to shore up their capital?

Anyone fancy them being owned by a foreign government or sovereign fund!

Also if the big banks lose the bank charges court case, I know it will probably go all the way to the House of Lords and not be settled till next year this could cost them billions and tie them up in millions of claims for years.

No wonder the banks share prices have tanked over the last few months.

  • 9.
  • At 10:44 AM on 23 Jan 2008,
  • Jamie Darlow wrote:

Talk about stating the obvious, this has to be one of the most pointless stories I've ever read. Nicely penned though, keep it up!

  • 10.
  • At 10:57 AM on 23 Jan 2008,
  • John K wrote:

As I understand it, the BofE and the MPC have only one responsibility, keeping the inflation rate at or close to the governments target, right now 2%. With CPI >2 and RPI >4, unless they raise the target there is no way the bank should be cutting rates. Hence the reason why the governor is saying fixing the problem is outside of his control.

Having said the above, look out for a rate cut with the excuse they're looking to the long term, rather like they did in the early 70's.

  • 11.
  • At 11:02 AM on 23 Jan 2008,
  • Scamp wrote:

Actually, I think our banks are in serious difficulties because very few people trust them anymore.

  • 12.
  • At 11:04 AM on 23 Jan 2008,
  • Ian Ryder wrote:

Wow, is Mervyn preparing us for the worst (or best depending on your perspective)? No rate cuts?

Lets hope so, if he's saying we need to flush the system and start making our own things instead of importing them then we best have some serious pain now and be done with it.

House prices need to half or more, lets hope they don't try and drag things out Japanese style.

  • 13.
  • At 11:43 AM on 23 Jan 2008,
  • robert marshall wrote:

Yes we need eficient banks but lets not protect them to the point where we all suffer whilst they charge with impunity and take reckless risks that your little finger wouldn't entertain.
Let them eat cake like we have all had to do as a result of their insatiable greed and make them compete as happens in every other country in the world!

  • 14.
  • At 12:02 PM on 23 Jan 2008,
  • douglas lawson wrote:

Peston tries to add doom and gloom to every story that he wrights, it was his fault that the northern rock thing got out of hand-in my view he prompted a run on that bank .
Now he is trying to promote a slump and spin this with every bit of news he can.

  • 15.
  • At 12:09 PM on 23 Jan 2008,
  • John Newell wrote:

This will not be over until the yen carry trade grinds to a halt. This speculative lark due to 0.5% interest rates in Japan went sour with the rising yen. Now the speculators are forced to liquidate their international holdings and buy yen forcing the yen even higher. It is a painful learning experience for them. Pity everybody else has to suffer too.

  • 16.
  • At 12:35 PM on 23 Jan 2008,
  • Dorte wrote:

What a very revealing last couple of lines; 'there is no suggestion that any of 'our' banks are in serious difficulties'. Really, so you do not consider NR to be one of 'our' banks then Robert? What is your definition of 'our' then; based in London?

I'd be interested in seeing what happens to the UK economy when people wake up to reality and try saving/paying off debt with their earnings instead of spending it in the high street (on stuff they don't really need). At least for a short while. An economy based on constantly increasing consumer spending is hardly prudent. Gordon Brown's time as Chancellor was not one of shrewd economics but jolly good luck. Now he's passed the poisoned chalice onto dear Darling just as the luck is running out and the vultures of the cash-rich Middle East and Far East are gathering.

  • 18.
  • At 01:10 PM on 23 Jan 2008,
  • Grant wrote:

The upside of light touch regulation is quite clear - no barriers to innovation, profits conjured out of thin air, etc, etc.

However the down side - that the markets will be allowed their full vengeance on those who fail, does not seem to be understood or accepted by our government. So we end up with the worst of all possible worlds - no restrictions on the way up, and no strings support on the way down. This is clearly untenable in anything longer than the short term - what happens if one of the major banks gets into real trouble?

I am sure Mervyn King understands this, which is why he is preparing us now, and I suspect that it is starting to dawn on Mr Darling. But Mr Brown? I worry...

  • 19.
  • At 01:16 PM on 23 Jan 2008,
  • Albert wrote:

Robert, whose idea was it in the mid 80s that any Tom, Dick & Harry could buy their house on a 100% mortgage?
One wonders when this sub-prime lending had its birth!

  • 20.
  • At 01:17 PM on 23 Jan 2008,
  • Luke Hudson wrote:

I think you are mistaken sir, $72Bn at Bank of America, not $72Trn. BoA's total balance sheet is only $1.7Trn

So if BoA has $72bn and has to take a 1/3rd average haircut on its MBS, bearing in mind that not all of them are bad, so assume 50% of them lose 2/3rds of their value, that will cost it $24bn, slightly over 1 years net profit,and around 1/6th of its $145bn capital base (see boa website) - not good but not ending the banking system.

I love the idea that people on the internet are taken as a sound source, on what basis? You are stating the truth so you say - but manage to be out by a factor of 1000,(and not a typo as repeated twice) information that could be obtained in 5 minutes. Look at the real figure and it is not that big a deal, .

  • 21.
  • At 01:20 PM on 23 Jan 2008,
  • Paul wrote:

Post 14 - Are you saying that Peston controls the world economy via this blog? Excuse me while I fetch my tin-foil hat...

  • 22.
  • At 01:24 PM on 23 Jan 2008,
  • Philip Rawlinson wrote:

Call me old-fashioned but isn't this nothing more than something which is not supposed to exist anymore - a classic business cycle? In the good times there is liquidity for all, easy credit conditions, asset inflation and low savings rates. Then comes the hangover, sometimes (but not always) precipitated by an external event. Liquidity contracts, credit is reduced and institutions and individual households reduce expenditure and begin the painful process of repairing their balance sheets. The greater the excess, the greater the correction. The central banks need to tread carefully and allow markets to find their own equilibrium. So what if the economy contracts and shareholdres get burned. So what if marginal institutions go to the wall. So what if unemployment ticks up and asset values deflate. All of this short-term pain is necessary for the health of the long-term economy. The central banks should back off. If they don't expect much worse to come. Remember double-digit inflation?

  • 23.
  • At 01:38 PM on 23 Jan 2008,
  • phil wrote:

FR (post#2) I tend to agree with you. I thought at the time that the only reason Brown would consider an election was that he could see huge financial problems coming. Could you give some references/links?

John K (post #10)also raises a valid point. I believe the MPC was told that inflation was its only concern, and Mervyn King has repeated this on every possible occasion. Now the 'independence' of the BoE is being thoroughly subverted and its expected to use bank rate to prop up the financial system. However, this seems highly unlikely to work. I also hope they dont cut rates but I'm not optimistic.

  • 24.
  • At 01:47 PM on 23 Jan 2008,
  • Steve, London wrote:

Is it possible that the impact of Basell II may also require banks to raise capital to maintain healthy Tier 1 and Tier 2 ratios?

  • 25.
  • At 01:50 PM on 23 Jan 2008,
  • P.Dough wrote:

But Robert, if the BOE no longer has direct responsibility for supervising the health of banks how can the Governor really have any special knowledge of conditions in the city. More to the point, if the BOE no longer has direct responsibility for supervising the health of banks who does? The banks themselves. Or nobody. So if ever there was a case for reinstating the auditors this is it. Supervision remained in the cadre of central banking for a hundred years or so, and remains the feature in other countries by the way, precisely because it is the vital organ functioning to protect society against these kinds events whether resulting from incompetence, corruption or other factors. If risks identified included incompetence, the regulator would meet that with procedures before it became a crisis, if corruption with discipline before it became a crisis and so on. Reforming it out of the sector is proving to be an expensive lesson in why to reform it back in again.

  • 26.
  • At 02:01 PM on 23 Jan 2008,
  • Carl F wrote:

"To be clear there is no suggestion that any of our banks are in serious difficulties" - so why speculate so negatively ?

  • 27.
  • At 02:02 PM on 23 Jan 2008,
  • ML wrote:

I think, my friends, why Mr. Peston is so despondent may have something to do with the 5-1 scoreline against his 'beloved Arsenal'. Back on the subject, it really is a catch 22 situation though - raise interest rates and risk an economy slowdown and create a larger trade deficit or lower them creating yet more debt, higher inflation but hopefully narrow the trade deficit. I really can't see where this one is going but it is damned interesting.

  • 28.
  • At 02:40 PM on 23 Jan 2008,
  • Ian Harris wrote:

The NYSE opens shortly, I write this at 2.20PM, any guesses as to how much it will open down?

My guess is between 4 and 5%.

This post isn't scaremongering the banks like the rest of us have lived beyond our means for too long and there needs to be a correction.

Expect lots more bad news than good financially this year.

  • 29.
  • At 02:42 PM on 23 Jan 2008,
  • Mimi wrote:

Some comments on this blog (#14 amongst them)blames Peston for the run on NR and now for spreading gloom about the financial state the US economy finds itself (which in turn affects the UK). What type of people save over tens of thousands in a bank yet cannot make up their mind whether or not they want to keep saving in a bank or take their money out without waiting for RP to give his go ahead? I would think there are still some intelligent people about. His blog is well written and it gives a good understanding and insight into the the workings of the financial establishment and the economy.
Wake up and smell the coffee ya'll.

  • 30.
  • At 02:44 PM on 23 Jan 2008,
  • David wrote:

What a mess!

The reckless lending of banks over the last 10 years is a disgrace. Do these people not realise that they have a tremendous responsibility. These 'games' played in the City affect peoples lives.

Cut interest rates and we have inflation. Raise interest rates and we have a house price crash. Either option won't work. The simple fact is, we're skint!

  • 31.
  • At 02:50 PM on 23 Jan 2008,
  • Pete wrote:

Banks must take full responsibility for their problems and cut dividends and bonuses accordingly rather than make the rest of the economy suffer as they try to disguise their incompetence or expect everyone else to pay for their mistakes.

The problem is that it is journalists putting pressure on banks rather than the Government, BOE or FSA. Their failure to act has meant that the problem has moved from a specific issue which could be rationally addressed to speculation and apocalyptic oneupmanship which isn't helping anyone.

No 1 comment was spot on. Unfortunately there's no chance of any good news from the BBC soon given that Robert's beloved Arsenal took a beating last night!

  • 32.
  • At 02:57 PM on 23 Jan 2008,
  • stanilic wrote:

Whoever said markets are driven by greed and fear was right. We have had the greed and now we have the fear. However I never appreciated that fear has a proportionality greater than greed.

When the economy was globalised we also globalised the greed. Now fear stalks the global economy as nobody knows where the black hole or holes are located.

Mr King is letting the banks know where their responsibilities lie. This is correct. It would seem the global finance industry has gone on strike, is sitting on its palms and leaving central banks to resolve a problem it has caused. Sadly there is little prospect of the elephant cleaning up its own mess.

  • 33.
  • At 04:01 PM on 23 Jan 2008,
  • Tim Saunders wrote:

You misunderstand what he was saying. He means that credit margins will widen as interest rates drop to allow banks to rebuilt their capital through increased profits. This is exactly what happened in the US in the early 90's. If loan demand is weak, bank just invest in government securities earning a better return than they pay their depositors and CD investors.

There will not be the need for rights issues - these are required when loan demand is so strong the banks need more capital to fund thier growth - this is not likely to be on the cards for some time.

  • 34.
  • At 04:40 PM on 23 Jan 2008,
  • TB wrote:

Another issue that will be vexing the PM is that as a result of the AMBAC downgrade and inability to complete a planned equity offering the cost of borrowing for a number of PFI projects underwritten with AMBC backed guaranteed infrastructure bonds may be very severely impacted. Projects likly to be affected include the bonds of the Highlands Alpha Schools Project, Amey Lagan Roads, Catalyst Healthcare (Manchester), Northern Batched Consort Healthcare scheme (Blackburn, Salford and Tameside), Channel Link Enterprises, Metronet Rail, Ostregion and Tube Lines. I have little doubt the usual farce will ensue and the Taxpayer will be hit for the costs.

  • 35.
  • At 05:28 PM on 23 Jan 2008,
  • Alexander wrote:

I thought that Alistair Darling looked seriously depressed in the House today at PMQs. I don't know if that is worth mentioning or not. But it interested me anyway.

  • 36.
  • At 05:33 PM on 23 Jan 2008,
  • John Sugden wrote:

For heaven's sake can we leave the Arsenal Football club out of all this? Things are much too serious for flippant comments about RP's thoughts on football. I am 75 , and have seen this all before--we are in a business cycle--and cycle wheels go round and come back to where they were. Stop panicking and hold on.

  • 37.
  • At 06:57 PM on 23 Jan 2008,
  • Toby wrote:

I suppose I should be worried about the forthcoming recession, since I will almost certainly become poorer. However when I look what will actually happen I find myself, like Dominic Lawson, 'laughing in the bath'. Here's why:

America looks set to lose its status as the economic superpower.

All those chinless wonders in the city will be out of a job and have to go back to boring old manufacturing.

All the economic migrants to the UK will find they are better off elsewhere, thus relieving public services and reducing congestion.

The huge mountain of funny money that has been created in SIV's etc will have to be unwound through bankruptcies.

Brown is going to look like an idiot when people realise that we have a black hole in public finances and taxes will have to rise.

Obesity may no longer be a problem.

As the economy goes down so will our greenhouse emissions, helping reduce global warming.

What's there to worry about?

  • 38.
  • At 08:19 PM on 23 Jan 2008,
  • Jeremiah Harpur wrote:

Well the ECB seem to want to go in the opposite direction. No hints of private bank bailouts, etc. I don't think the ECB position is sustainable. Keeping rate 'high' relative to the US will force the fed into lowering its rate again. Since high margin costs in Euroland cannot be offset against low costs in the US due to liquidity and credit concerns, the highly politicised ECB has injurd the EU equity market. It is complete nonsense to argue that low interest rates will jeopardise inflation control in the current climate. The best that can be said of the ECB at present is that it has a policy, the BOW on the otehr hand has run out at least three different and conflicting policies on NR and the credit crisis in the past few months. If share prices fall by a conservative 3% across the EU between now and Friday noon, you can bet that the ECB will be having an unscheduled conference next week.

  • 39.
  • At 08:42 PM on 23 Jan 2008,
  • ted wrote:

A large part of the problem in the financial markets is basically a large part of the problem in many other areas of the economy and business--- and it's related to the tension between "pushing and pushing a model" in the interests of efficiency...and having a way of being able to know, and react; when previous behaviours that were 'good' and worked become behaviours that "just don't work any more."

Northern Rock is interesting exactly because it is such a black and white example (no pun intended)it was a business model that worked fantastically well----so well that toward the end it was impossible for management to turn it down, let alone switch it off... it now seems perhaps people at the bank were warning that if it didn't slow down it would blow up; but a bit like the bus in "Speed" ----even if they wanted to slow down it would blow up anyway.

As many people have said it wasn't the only Bank doing it---but so many business mechanisms today do seem to be like that; great ideas that can work brilliantly for a bit but seem incapable of fine tuning ... GEC/Plessey..Enron... Worldcom .

My point is that catastrophic and horrible for staff, shareholders and suppliers, as those corporate car crashes were they remain contained as it were.... but when Banks start sliding off the road its as if they were carrying armed nuclear weapons.

So when the bankers finally career off the road the smash-up affects every sector and, in a globalised world, that means every one of us.

----well I suppose, except those few still living self sufficiently outsided the credit financed system.

There used to be an often stated view that, after an all out nuclear war, the best people to join would be Kalahari bushmen--because their lifestyle and environment would probably be the most resilient---Maybe in the present problems that seem so resistent to conventional management, Carlyle and JP Morgan would receive more valuable advice if they headhunted a Bushman or two instead of investing in a pair of suits filled by two ex-Prime ministers?

  • 40.
  • At 09:09 PM on 23 Jan 2008,
  • M Davis wrote:

I said the inflation figures looked suspicious. Has the Bank of England Governor seen the true figures ?

  • 41.
  • At 09:23 PM on 23 Jan 2008,
  • colin reeve wrote:

A bright spot amidst the gloom and doom.

For years I've been longing for the reassuring sight of a good old British Bobby on the street. Today I finally saw one, then another and another............................

  • 42.
  • At 11:25 PM on 23 Jan 2008,
  • GA wrote:

IMHO it is all about the monoline insurers from this point on... if there is government intervention or sovereign fund capital to prop up the monoliners then stability might resume.

If the monoliners get downgraded then the capital markets will be in for a tough time.

Gordon props up NR; maybe AMBAC and MBIA will be propped up by Ben. It's a strange world.

  • 43.
  • At 12:18 AM on 24 Jan 2008,
  • Joe wrote:

I agree with John K.
Inflationary pressures have to be combated. As such there is no room in the BOE remit to cut rates with CPI over 2%.

If they do cut rates (the last one was unjustifiable), then it will require a change of government policy to achieve it.

If that happens, don't expect them to advertise it.

Hopefully the press and other media will get onto them to reveal the fundamental change, then the fiscal credibility of Brown and Darling will be shot.

This whole crisis is sounding more and more like a political death knell just like the ERM dumping did.

  • 44.
  • At 09:19 AM on 24 Jan 2008,
  • Bryan wrote:

The proposed bail-out for the monolines means that an ever-increasing proportion of western finicial institutions are dependent either on state welfare or foreign sovereign funds. It will be very interesting to observe the full political implictions of this, in addition to the changes in global economic power relations.

  • 45.
  • At 09:23 PM on 31 Jan 2008,
  • Ben Grower wrote:

Thank goodness for Gordon Brown abd Alistair Darling. Without their brave intervention many other banks would have suffered a rush and then millions of hard working people would have lost their savings and pensions.
if it had been the Tories they would have only saved their friends and let everyone else go to the dogs.

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