A very big rescue
The Treasury's rescue package for the banks is substantial, as big an economic initiative as it has probably ever taken.
But then the problem it's trying to fix is huge.
First, the government will make available at least £50bn of taxpayers' money to invest in banks.
The cash will be there if banks need it, if they are being damaged by a perception that their balance sheets are too weak.
If any bank didn't need the additional capital - which will be classified as Tier One under the rules that determine the strength of banks, and will probably be in the form of preference shares - it would not have to take our money.
But if a bank does want it, there will be strings attached - such as restrictions on executive pay and limitations on what it pays out in dividends to other shareholders.
Taking taxpayers' money will not be a licence to trade as normal.
Second, the government will try to fill the almost lethal funding gap created by the collapse of wholesale money markets.
For a fee, it will guarantee the money they borrow from other banks and financial institutions for periods of up to three years.
This is crucial. Because one of the great fears at the moment is that they will be unable to refinance their asset-backed bonds and other wholesale borrowings as they mature over the coming two or three years.
This will be seen as particularly helpful to HBOS - and should facilitate its takeover by Lloyds TSB - since there has been uncertainty about how it was going to pay back holders of its mortgage-backed bonds,
Third, there will be a doubling from £100bn to £200bn in the Bank of England's Special Liquidity Scheme - which allows banks to swap their mortgages for Treasury bills, which are the equivalent of cash. It's a way of providing them with greater certainty about their funding for the next two and a bit years.
Pulling this together, what the government is doing, on behalf of taxpayers is providing hundreds of billions of loans and risk capital to fix banks and a banking system that's perilously close to the brink.
At a time when financial markets across the world have seized up, only taxpayers have the resources to fix this problem.
But three questions follow.
Will it be enough?
Well, unless the economy spirals into total freefall, it should be sufficient to keep our banks functioning in these challenging times.
Can it prevent the economy sliding into recession?
Most economists think we're already there. But the package should help to prevent the downturn becoming vicious.
Will taxpayers be poorer for the rescue?
There are a number of ways of looking at this.
Plainly it would be better for most of us if a deep recession - which would create misery for perhaps millions thrown out of work - can be avoided.
But there is no guarantee that we'll make a profit on the £50bn that's being invested on our behalf (although we might).
And given the sheer scale of how much we're lending to banks, many many hundreds of billions of pounds, there has to be a question mark over whether we'll get every single penny back.
This represents the semi-nationalisation of the banking system.
And what can't be predicted with any scientific precision is how many years it will take for the system to be privatised again, for there to be a reversion to almost business-as-normal for our banks.
I'm 
© MMIX~RS~q~RS~~RS~z~RS~13~RS~)
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What will happen to the first bank that seeks help from the government? The markets will conclude that this bank is in trouble, and will stop lending to it completely. So the government will at that point be forced to fuly natinalise that bank. This plan is therefore nuts and no bank that isn't on the verge of collapse anyway will take it up.
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Still can't bring yourself to say Fractional Reserve Banking?
You are a joke.
Who's going to bail me out?
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Will any of this money be used to speed up the FSCS so that I get my money back from Icesave?
I can't even ring the FSCS as their 'phone line broke once people started trying to use it!!
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Darling dithers to the last. Where's the 7 o'clock announcement?
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Where is the detail on this package?
Why have we been givn so little information?
We were promised detail at 7 this morning.
What's gone wrong?
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George Osbourne is right. Save small businesses. Save families. They are the future. Don't pay bankers bonuses with public money. They will desert us all too easily in the future.
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What is the dividend on the preferred?
10%?
Or did we get sold down the river?
Come on, what is the taxpayer getting paid for this?
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I think he may just have saved the world - well done Darling.
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Robert, If we are buying assets, these assets that were so worthless, that were verified by highly paid Auditors, what are we buying..
perhaps...the debts of three friends that have chosen to go bankrupt.....
....Perhaps the asset is the loan forced on a disabled friend living on benefits, who cannot read or write effectively.
Bankers and auditors should be ashamed!
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In today's statement from the Treasury, it says:
"In addition the Government is establishing a facility, which will make available Tier 1 capital in appropriate form (expected to be preference shares or PIBS) to 'eligible institutions'. Eligible institutions are UK incorporated banks (including UK subsidiaries of foreign institutions) which have a substantial business in the UK and building societies. However applications are invited for inclusion as an eligible institution from any other UK incorporated bank (including UK subsidiaries of foreign institutions). In reviewing these applications the Government will give due regard to an institution's role in the UK banking system and the overall economy."
Does this mean a possible way out for Icesave?
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A bold move-and i think in time the correct one. If this works along the lines of the Nordic bail out, albeit on a larger scale, then the period of exposure to the risk will be shorter than we may expect and the pay offs for the taxpayer ultimately larger than anyone is predicting.
i for one hope so.
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I still struggle with the fact that we, the tax payers, will effectively be giving the banks money in order for them to lend it back to us AND CHARGE US INTEREST on the loan.
To me, this is the same as asking the guy next to you to change a ten pound not into 8 pounds.
Or maybe I've missed something......
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I may be a little green when it comes to Treasury and BoE balance sheets, but where is all of this money coming from? Is the government having to borrow this on the tax payers behalf, is it coming from funds which have been allocated for other purposes.........???
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Captain Brown "Darling, time to unveil the bold and ambitious plan to stabilise the ship"
1st Officer Darling "Aye, Captain, I'm sure a ship stabilised at 45 degrees to the vertical will work just fine"
Delusions! Delusions! Delusions!
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Robert
I dread it when you speak on radio/television with yet another 'scoop.' It always seems to send the markets into a tail-spin and investors to panic into withdrawing/moving money.
Surely this is akin to insider-trading. Please try to be a bit more conservative when you speak.
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...how many years it will take for the system to be privatised again,...
most cds will mature ie expire in 2-5 years. which will remove 60 trillion worth of debt from the system. so its just a question of buying time.
there are always ways of getting losses back from banks like taxing profits so no need to worry.
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unfortunatly this is an inter country banking war, if one country protects its banks another has to, this is an opening shot. but the problem is capital has evaporated and the loses are escalating 50 bn is a drip. The next countrys promises will be bigger and better drawing the money away 10 % off usa and japan and uk in days means next crisis will be pensions insurance companys. pension schemes wont have the assets to pay as promised and will want leant money back the hole gets bigger .
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There's absolutely no advice for the ordinary account holder. I have money in both Nat West, who are not participating, and Abbey, who are.
So where do I move my money? From Nat West to Abbey, because Abbey is now protected, or from Abbey to Nat West, because Nat West doesn't need help?
Absolutely useless again. Just think about the big banks, and forget the average customer who can't understand what all this is about.
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There's a financial tsunami wave going to hit the city in minutes. The banks will be taken out. This is over.
Alistair Darling has put the money of hard working people in great danger.
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3. At 07:38am on 08 Oct 2008, svrsig wrote:
"Will any of this money be used to speed up the FSCS so that I get my money back from Icesave?"
In a word No - the FSCS is not funded by the taxpayer but by all other businesses within the financial industry - so you will have to wait for your savings company to be announced in'default' before you can claim compensation. Right now, you will have to wait until you are officially told you have lost your monies and probably at that time you will be told how to claim.
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Asking for assistance through an injection of capital should not weaken the bank in the eyes of creditors, it declares the need for help and the solution to it at the same time. Shame about the shareholders though. And possibly the taxpayer.
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The role of Business Editor of the BBC carries huge influence and responsibility. The impact of their views can be profound. I would much prefer to see the incumbant, aka The Grim Reaper, go back to training school and learn how to be a little more positive in his reporting.
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They'll be back next week for more money from the taxpayer.
Crybaby capitalism at its worst.
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I understand that one of the conditions will be a tightening up of executive compensation packages. How will this be defined? Some traders for example may be on phenomenal salary packages, but will not be classified as executives. Who will oversea this area? Compensation review bodies have proved themselves to be pretty slack in drawing up contracts which take into account any clawback options when things go catastrophically wrong.
I?m not falling into the trap of looking for easy targets in blaming ?greedy bankers?, but I feel that as on ordinary employee with a mortgage, if I borrow too much and effectively gamble with other peoples money, if things go wrong I will end up paying, possibly by losing my home.
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The bail-out of Banks means that we're back to square one. How long before history repeats itself? It always does because no-one ever learns from it.
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How do you take preference shares in a building society?
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Your reports on Radio 4 yesterday were more like you crowing about the effect your news has on the stock market than any intelligent analysis of the current crisis. If your reports make things worse, which you said happened yesterday, how can you justify them? The BBC and other media are meant to report what is happening so the public are informed not go out of its way to get scoops and to ruin sensitive negotiations to the point where the stock market upon which we all rely for pensions is harmed. Rein in your ego please and start actually reporting.
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How many new bridges, hospitals, roads, farms and factories could we build with all that money? And how many more people we would then employ?
The government are not looking to improve the country - they are simply looking to bail out 3-4 banks.
Shame to the spineless governments. I have no doubt the Tories would not do any better.
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Sounds like a sensible plan to me. There is probably no alternative to it. However, God forbid that the banks go ever back to "almost business-as-normal" if that means they do what they did over the last decade or so.
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#19
So when did RBS sell Natwest?!...
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#19 - Natwest are owned by RBS, and so are covered under this proposal.
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What's all this about negotiating until 5am?
Negotiating what? The banks are stuffed, we should be dictating terms to them. "They don't know what they're doing" as they sing at the football. The banks should be nationalised.
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About time - even the announcement was later than had been pre-announced which means something else had gone wrong.
Now, where are the honourable men? The role of the Chairman of a company is primarily to look after the interests of shareholders and in this they have all failed. Who will fall on their sword first?
The main boards of the banks too need to take an honest look at whether they have run the companies in the best interests of the company itself.
And, lastly, this is an opportunity for the previous chancellor to face honestly his role in encouraging profligacy rather than prudence, of smiling whilst he rode the crest of the wave of the housing bubble and encouraging a 'home-owner' society whatever the cost whilst refusing to reform the public sector.
And, for the previous chancellor to admit that his much vaunted separation of the Bank of England from its previous regulatory role, encouraged banks to push the boundaries of prudence as the FSA were clearly not watching them very well, at best.
With firm and honourable actions from Chairmen, main boards and the former Chancellor, some sense of honour, trust and respect might also be re established and a focus of getting the Country into a good state of which we can be rightly proud.
NM
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This looks bold and big enough- well done HMG. The aspect that bothers me though is that if directors take the money, they get a big pay cut and shareholders will get lower returns. Will they do this willingly? The answer I think is yes because they have to act in the best interest of shareholders and the company as a whole and the company cannot make money if it cannot trade- basically what is happening now. What is interesting here is also that individuals who invested in bonds will get their money back and in effect savers have been guaranteed too. On top of this, it is possible that this will not cost the taxpayer money at all.
Shares will continue to slide because we are in a recession and sterling will weaken because the UK has a weak economy but Euro land and USA is just as weak so I think the Yen will be the place to be.
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It's high time the banks were brought to book. Nobody seriously expects prosecutions or civil actions against the banking leaders responsible. Defence lawyers will be into the middle of it before you can sneeze. That is why we need wholesale supervision by the government. I, for one, don't want reprivatisation. We have to change the system.
Permanent nationalisation is the most extreme revenge we can have.
Where the banks are concerned, I want revenge - and I want it now.
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So who WON'T get the £50bn [or is it £150bn inc the extra £100bn for the Special Liquidity Scheme]? Is it our schools, hospitals, poor children, O.A.Ps .... or is it supposed to be coming from the future tax-payer?
Mr Bewildered
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Will it be enough?
No. Just wait for Lehman's CDS auction tomorrow ;)
Can it prevent the economy sliding into recession?
Definitely not, it is locked in, and Q4 will be much much worse, with further banks going under and entire governments going bankrupt.
Will taxpayers be poorer for the rescue?
Whatever happens with this specific bailout, taxpayers will be a lot poorer.
They will have to pay more tax as a result, and they will have to put up with years of much higher inflation as a result of this.
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Well hes done something,
BUT in the next 6 months people will get there private pension statements and their endowment policy statements.
This is when the true effect of this crisis will hit a lot more people.
Oil has dropped but because the value of the pound has also dropped the price of oil, gas, electricirty and petrol at the pumps has hardly moved since the hi.
If lucky this massive increase in out debt levels will not end in a run on the pound.
We will be re-paying this for decades. We need to cut back on public spending and the size of goverment NOW
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Another disasterous fudge of epic proportions. When in a great hole, stop digging.
ALL sizes business are in melt down and estimates of one third of a million unemployed by next year is probably out by a factor of ten. My view is we will see unprecedented numbers of companies go to the wall in the next 3 months.
The users are feeling the pain of the debt addiction and the pushers are obtaining further supply from the misery barons of Browns inept government. NONE of this money will help householders and businesses. It will be lapped up by the bankers.
Brown has broken Britain and he should carry the full responsibilty. The Country has no confidence in Brown and our puppet MP's should do what they are paid to do and reflect their contituents views and force Brown out NOW.
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Hopefully a consequence of this plan will be that the takeover of HBOS by Lloyds TSB will be shelved for the time being if not permanently. I doubt it though :-(
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The longer this goes on the more angry I get with the bankers. They have REALLY cocked up the way they run our banks. I really hope there are some Chairmen and directors heads rolling at AGM's as they have proved beyond doubt that they are incompenent. If they are sacked by the shareholders they should not receive golden handshakes (although I suppose they are written into the contracts of employment).
I also hear of billions of pounds going from government (the taxpayer) to the banks but as yet nothing about how the banks WILL be regulated SO THAT IS CAN NEVER HAPPEN AGAIN.
Maybe as an election looms in 2010 and maybe as things get better the bankers will start lobbying for no real change to regulation as no doubt the two main parties will need their funding.
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#19
As Wikipedia puts it:
National Westminster Bank Plc, or NatWest as it is commonly known, is a commercial bank in the United Kingdom which has been part of The Royal Bank of Scotland Group Plc since 2000.
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Thanks, Borwn for this morning borrowing another £10,000 per house hold (250b from 25m households).
Hopefully you have put in place conditions such that the city's bonus pot will be used to pay back this loan before handing millions to city traiders.
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Even with the banks getting this money, what is to stop them from sitting on this money and not use it to help people out?
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Yesterday you told us about the £50bn well in advance, the banks did not sue you - you were right. They were spinning.
My advice to your naysayers is to read a different blog. For happy news read:-
http://www.thedailymash.co.uk
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At last our govenment does something which could make a real difference.
What also annoys me is that this blog often states 'to encourage them to start lending again'.
Either they should be forced to lend again as part of this deal, or the banks should be able to borrow from the government just like they would another bank. Their should be no opt-out here for a tight bank to say NO.
Also... The Tax payer.
If this measure brings stability to jobs and the economy Im all in favour.
We should however, CANCEL THE OLYMPICS, and claw back the 12Billion that was originally gonna cost us. How on earth can we afford that in times like this ???
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DISGUSTING.
Bail out the pensions - the banks ought to stew in their own greedy messes.
Put The Bankers on the Dole!
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RBS is down 40% already.
Darling has failed.
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Our money is gone already!
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The FT has published a comment stating the following in relation to the question of 'where the money is coming from' - "At £50bn ? roughly equal to £1,400-£2,000 per taxpayer ? the recapitalisation of the banks would more than double Britain?s planned public borrowing this year, pushing public sector net borrowing close to £100bn and more than 6 per cent of national income, worse than any year since 1994-95."
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Presumably the govts stake in the banks to be taken by the bank issuing new shares, thus diluting the value of those already issued. How much will the Treasury pay for the shares, and how is the price related to the dwindling value of the shares already in circulation?
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So where is this money that we are giving the banks? In the bank? Does this mean that we will have to sell gold to make more money and will inflation be the result?
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So, this clearly isn't going to work, so what's next? Clearly there is going to be a run on the l'old pound.
I presume in seven days times, every commentator (and probably every Tory...) is going to claim they wished we had joined the Euro.
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Yellow journalism can be defined as inflammatory, irresponsible reporting that exploits, distorts or exaggerates news to create sensations or attract readers.
You, Sir, have taken it to a new level.
What is slightly bemusing is the motive. Surely merely creating sensations or attracting readers can hardly be worth the price that was paid today as a result of the uncertainty.
The uncertainty, was not your creation. However, the panic today, was.
The rescue package, if indeed required, would have been passed without your contribution to the mass panic and erosion of confidence.
Many are likely to look forward to a judiciary / parliamentary that examines the leak and the decision to deal yet another blow, a useless one at that, to a wavering economy.
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Thinking about the longer term (and yes, it's crystal ball gazing to a certain extent).
If there are conditions in the deal that executives' renumeration is capped in some way, those executives will jump ship to another industry in order to maintain their high renumeration packages.
This will leave gaps in the upper management layers that may be filled by people of lesser ability. This is because they are the only ones who will accept lesser renumeration packages.
The effect of this would be to reduce the effectiveness and competitiveness of the banks on the world stage.
You could argue that the banks haven't done a very good job anyway and that the current executives are not worth diddly. However, I would say that the bankers were doing what bankers do. Making money (short term) at other people's expense. I believe all bankers do this.
So, it's a catch 22 situation. Do you introduce a mechanism to restrict renumeration packages and therefore potentially weaken your banking industry. Do you allow the free market to operate the way it wants and hopefully rebuild it's place against foreign competition? Or is there another option?
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Does the Treasury have any evidence of liquidity shortage? It has to be something very secret, because all other banking figures show plenty of liquidity. The three largest clearing banks, the main sources of inter-bank landing say that the inter-bank landing has collapsed... Or is it just some PR exercise by the Treasury ("we are working, you know and do it better than other countries") and helping the banks to cover up their own blunders?
How does the Treasury know that 5O billion would be enough? The banks told them? The same ones who said that everything is OK? Will there be any new regulation related to the use of these publicly financed capital increases, any scrutiny? Or is it a present from the nation to the beloved banks?
The Treasury spoke about increments of 25 billion. How many times? Taking open ended committment on preference shares, nice move. And if the banks cannot pay dividends (as they need the liquidity and the capital, supposedly because they are in trouble), will the government vote with the shares then? If so, then in what way? How will it manage the conflict of interests?
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@lunatics_and_asylum (comment 13) - "I still struggle with the fact that we, the tax payers, will effectively be giving the banks money in order for them to lend it back to us AND CHARGE US INTEREST on the loan."
If a bank takes up the offer and then profits from it, so does the tax payer, because the tax payer gets a stake in the bank. (Of course, as far as banks normally pay tax on their profits, this was already the case, but now it's even more so.)
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#35
If they need the money but they don't take the package, then each banks chairman becomes the First Lord of the Treasury - in other words as they fail the state nationalises them! It's actually in the directors and share holders interest to take the 'Kings Shilling' and a pay/dividend cut...
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RBS.L ROYAL BK SCOTL GR 100.00 p 8:10AM 48.10 (-32.48%) 15,023,086
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All you jokers complaining that Peston is unduly pessimistic make me sick. Seems to me he is being rigorous and sceptical and rightly so. These financial machinations are complex and need to be questioned, not just nodded through in the hope that banks can get back to the good ole days of business as normal.
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If a bank is in such trouble that it needs MY money to bail it out, how can it afford to pay dividends?
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This comment was removed because the moderators found it broke the House Rules.
Comments 16, 23 and 28. Spot on. There is a word in German that is creeping into the English language 'schadenfreude' which is aptly translated by one source as 'malicious joy in the misfortunes of others'. Mr. Peston positively languishes in it. Shame on you, sir. If you had any decency, you would quit now.
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#2 re dickie56 comment.
Like the comment but we should not have to wait for AGMs.
Restoration of trust is paramount and that is best achieved by Chairmen of failing banks together with their main boards taking honourable action and resigning because they have not done the job for which they were appointed.
We don't want another situation where the CEO of Northern Rock in front of the House of Commons Select Committee could not even see that he had steered the company into trading at too great a proportion of risk by borrowing short and lending long for the bulk of the business model.
He should have resigned in a timely manner.
We need to see good, honourable actions to build trust and restore respect.
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I agree with several of the comments re your dispatches on the current situation. Whilst not disputing that events require reporting you need to be more circumspect in what you say and importantly when you say it as currently every utterance you make is seized upon to the detriment of everyones savings, investments etc.
Scooping the events of the banks meeting late on Monday, was partly instrumental in yet more loss of my pension fund and, reduction in what limited investments I have, being saved for my retirement together with millions of others beside me.
You have a privileged position for access to information, it should be used wisely,please consider what you are saying before you say it
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You say ?there is no guarantee that we?ll [ie tax-payers will] make a profit on the £50bn that's being invested on our behalf (although we might).?
Surely if the government is taking preference shares in any of the banks (a la Warren Buffet in GS) then not expecting to make a tidy profit would be tantamount to saying the current share prices of these banks are indeed too high. Surely HM Treasury and BoE have lots of inside information that says they should know they will profit from the deal big-time. Isn't this the UK Gov't calling the floor for these stocks? How am I being naïve?
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Just watch the pound tank now!
The speculators will switch from our banks to our currency.
Remember your last holiday abroad?.....you should do....because it will probably the last one for a very long while.
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The weakness in this presentation is that he's also underwriting the UK subsidiaries of foreign banks, without ring-fencing their intercompany debt structure. It 's understandable, if the UK wants to remain a leader in the banking sector, but it's still wrong, as most of this will leak out unrecoverably into the world economy inside the next 2 weeks.
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There have been several comments regarding the problems with the Icesave bank.
Investors in these accounts surely weighed up the risks involved before investing?
I considered opening an account before deciding not to risk my life savings for less than 1% extra interest above what can be earned with a solid UK building society.
Stop whingeing you took a risk, it didn't pay off so now you pay the price of waiting and worrying.
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Robert
Are you to blame for the Monday's share price drop.
Do you have to report bad news with such glee?
It seems that you want banks to fail!
Tone it down a bit - this is now affecting real people.
Your negative reporting is having an influence on the market.
I for one will be complaining to the BBC about your reporting......
Seems to me that - those wo can, trade and those who can't, report........
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Brown, Balls, Cooper and Darling should all be forced to give an undertaking not to take emloyment in the finance sector for a period of say 10 years.
This bail-out is misconceived, very poor value for taxpayers, too expensive AND won't work.
They should nationalise any bank showing signs of failing. These banks are insolvent and cannot continue trading. Darling HOPES the banks will lend to their retail customers. If they were nationalised or at the very least had voying rights, they could FORCE the banks to lend. In fact, they will use the money simply to repay short-term borrowing.
This set of muppets do not know what they are doing in my opinion.
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#40
Brown has not bankrupted Britain, those who have are Thatcher (who put this idiotic ideology in place) everyone who has taken out a mortgage or other loan that they knew they couldn't truthfully afford, and anyone who has speculated on the BTL markets. Brown will no doubt get the flax from those who have short sight (that is political shortsightedness, not clinical) and those to young to remember the period from May 1979 through to May 1997 and the damage done to the real industries that earn real money in any economy.
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It is not only executives' salaries but also middle management and traders who get paid millions in bonuses for trading nothing much than hot air between themselves.
What do I mean by 'hot air'?
If you sell me an apple, that is a tangible product exchanging hands. I go home with an apple in my bag and can eat it when I want.
But when you trade in 'apple' derivatives then we get so far detached from the original product (the one apple) that we make believe that the economy is worth 15 apples when in fact we started with only one apple.
Having sold the derivatives on that one apple 15 times, for ever increasing prices, and with every trader earning a hefty commission and bonus, until, one day someone in the chain calls and requires the apple because he is hungry. This generates a chain of events, where all the people in the chain will lose money as they have to back out the initial trades in order to find that real apple and give it to the one who wants it.
The system can cope with the above case except when there are many people hungry and they all, at the same time, require their apple. Then the system implodes and we see it for what it is. One apple supporting 15 traders who all lived off it on the assumption noone would ever need to eat that apple.
This is what we are seeing now. A big chunk of our economy based on nothing more than hot air and make believe riches.
I will quote you from my life insurance quotation. I will need to pay 50 pounds a month to get cover in the event of my death. If I take out this insurance then 1000 pounds will be paid, instantly, as a bonus to the agent (middleman) who introduced me to that insurance company. 1000 pounds! This is 20 payments and it will take me one year and a half to simply cover for the agent's fees, before even start putting money into the pot that is supposed to guarantee my life's savings if I ever need it.
The above is an example of how much flowed our economy is, and how a large part of the working population is producing nothing more than hot air, just like that insurance agent above, instead of working in a hospital, a factory or a farm producing tangible goods that would really benefit all of us and which we could not possibly lose save for a natural disaster or an Act of God.
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So, Darling's package is truly 250bn which nicely plasters over the cracks of the banking system. But at what price? This is intended to put confidence back in the markets. Hasn't worked in the USA and won't work here.
Will ANY of these banks now relax their lending policies and start to support business and individuals needing finance. I very much doubt it.
The small business sector of the market has for years been forced to secure its borrowings on individual homes. You can bet that the first answer from any of these institutions, when being asked to prop up a small business will be "too risky".
The economies are going into freefall not because of the banks liquidity, but because it became impossible to prop up asset inflation any longer.
The worlds economies have a long way to fall before any sensible "bottom" is reached, and then a good few years rebuilding.
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Like most commments above I hope that this stabilizes the system but I have my serious doubts. What is very worrying is that the focus will now switch to countries and their burgeoning deficits and their ability to keep financing these.
Brown , Darling and King have had a year to work out a plan and have totally failed as has the much vaunted tripartite system. This needs to be completely restructured. In the bad old days the Bof E had a direct link with the banks as a suprevisor. The unintended consequences of desirable Central Bank independence was to create a system where everyone was involved yet no one in charge.
It also has its roots in issues like Equitable Life and the endowment mis- selling scandal. People lost confidence in the insurance and pensions indutry and moved en masse in property even referring to it as " my pension". The Government and the Opposition has a great deal to answer for in not watching any of this. Thus they have had a long time to assess this and have failed to act until 5 o' clock in the morning on Oct 8th 2008!
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To add to my previous comment, perhaps the only way stabalise the market in an instance is to see BROWN RESIGN with immediate effect.
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For years now Gordon Brown has described every penny of Government expenditure as "investment" - whether it was money spent on inflationary pay awards to public sector workers or whether it was increased aid to corrupt African countries.
Now that the Government is making a genuine investment with the prospect of not just earning a return in the form of income - but also a potentially massive capital gain - the word "investment" has become so devalued that they are having great difficulty in describing the true nature of what they are now doing.
Well done Gordon!
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#41
No I doubt it will, I get the feeling that one of the aims of all this is to get back to a smaller compact banking system, the phrase that got used some place was core business.
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If I heard Mr Darling correctly, the UK is going to guarantee British depositors in an Icelandic bank. Fair enough, these are British depositors.
But it sounds as though Iceland isn't even going to honour the minimum guarantee (about GBP 16,000 per person), and plans to support only their own nationals.
If true, this is outrageous. If this is the situation, we should seek to recover our money from Icelandic-owned assets in the UK.
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Dear Robert
"IT AINT GOING TO WORK, you know."
BCCI AND BARINGS, i wonder where the lessons learnt in these crisis have gone,
There can be no stopping the Traders operating in the markets, who are driving the worlds Economy, from exploiting the wests Economies for profit
"DEREGULATION OF THE MARKETS IS THE CAUSE OF THIS SICKNESS."
That is the name of the game and the only game, USA will be bought to its knee's followed by Britain, UNLESS, politicians stop the traders from doing the damage.It is too late for America, its Economy is Bust.
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Robert
Could you go on holiday for a week - and give a chance for the economy to recover?
Your reporting is so dismal and down beat, that it's causing the negative sentiment across the country.
Why don't you, look at Peter Jones' (Dragon's Den) appearance on Breakfast yesterday morning, for some influence. He said that if we continue to talk about recession, it will come true....
Your appearence on the news makes us now cringle.....Can you really be so happy about all this.
Is this your big chance to make a name for yourself. Just do it for all the right reasons.
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Looks like this deal is pretty one sided in favour of the banks.
There is no clear possibility of the taxpayer taking part in the rising stock price of the banks that it is bailing out.
A preference share, without conversion benefits, only allows a coupon (rate of interest) to be paid. There is no suggestion that the preference shares will have conversion options.
No detail is given on the coupon.
Darling tells us that in exchange for this deal, the Government has guaranteed bank to bank lending.
So in return for providing the banks access to money from the taxpayer, on undefined terms, the banks have managed to negotiate that the Government also guarantees bank to bank lending.
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With the Government now owning shares in our High St Banks; can anyone tell me if there will be an impact on Offshore Branches of these Banks in places like Jersey. Will the Government be able to stop the Tax evasion by these branches? Do UK Offshore centres have a future for (partial)State owned Banks?
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Once you get your head around the Debt-based, fiat, Fractional Reserve Banking System it becomes absolutely clear that it is mathematically flawed. It does not work and cannot work. It gives the illusion of working in the short term but the growth of the money supply expands geometrically (exponentially).
When you get to the steep part of the geometric curve it is impossible to get enough traction (new people taking out new loans) and the fill rate of the public money pot falls behind the emptying rate. The money pot starts to run dry. Thats called a Depression.
Bear in mind, the money supply 'only' contracted by 3% during the depression of the 1930's. Such is the instability of the FRB system a 3% reduction in money supply causes systemic collapse.
The ONLY weapon the government has in its armoury is the Printing Press. For those asking above 'Where does the money come from' the answer is not some public bank account which is sitting there stuffed full of pound notes. No. When the money is required, Mr Darling simply trots along to the mint and prints some more.
Remember the cancer that is inflation. Inflation, wrongly and complicitly reported by the BBC and the mass media, is actually a measure of the devaluation of the pound in your pocket. Every new pound printed devalues the pounds already in your pocket. When AD or GB say they have little or no control over inflation they are lying. The Printing Press causes inflation.
When AD says you 'might' get some or all of your £50bn back don't forget that the £50bn was spent today at today's value. When we get it back it will be spent at the future, devalued rate. i.e. the purchasing power of that £50bn in future will be less by the fact that you printed the new £50bn in the first place.
Roberts reporting on this issue is reprehensible. He complicitly and steadfastly refuses to explain the true nature of this supposed 'fix'. What happened to Public Service Broadcasting?
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re 74 - all you have to do is negotiate the right price- go to an IFA that charges by the hour and has all of his commission entitltment written back into the product pricing. Sorry that you spoiled an interesting post with a totally invalid example.
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This comment was removed because the moderators found it broke the House Rules.
I think Robert Peston is actually being quite positive about this one - he seems to think it will work. It does need wide support however including from the doom-mongers on this blog.
Weren't we expecting bank shares to go down as a result of this announcement? Therefore, the drop in RBS share price is no reflection on the likelihood of success.
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#47
We can't cancel the Olympics, we can ask for the contract to be cancelled but at what cost though (although the IOC could decide that the worlds economic situation is such that they will cancel the games) or we could simply default, which would not only make the UK a laughing stock inn the world but it would reduce our ranking in the world to about the same level as a 'Banana Republic'!
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The only snag I can see is the effects of the inevitable publicity given to any bank asking for money - the cure is to take investments in all banks if any bank asks for such investment.
Also Poulson included protection fro savers and borrowers - where is this in the proposals?
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An American commentator described the US Government bailout this way: "The banks go to Las Vegas to gamble. If they win, they keep the profits. If they lose, the government takes the losses."
I can't see how this is any different.
Is it possible to ask for my share of the money in this bailout package to be withdrawn? I mean, it does divide up to over £800.00 for every man, woman and child in Britain and I think I could put my share to better use.
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16, 23,28,64 - a few voices of reason in this increasingly irrational world. Sadly, Peston's judgement (or talent) won't be questioned. The BBC will instead "praise him" and there'll be lot's of ego-massaging and self-gratification in an around broadcasting house today no doubt. "Well done Robert".
I've said before that the media will create its own demise (and that of society). It will certainly do so as long as the BBC (oh yes, something else the tax payer owns a slice of), continues to scaremonger and proffer journalism which is little more than vacuous speculation.
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#51
Just prove how much the bankers and speculators have taken down this country, by the end of all this they will have done more damage to this country that the unions ever did...
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I've not read the Treasury statement, and the queries below might be answered if I had done. Apologies if that's the case, but my questions are:
1. What's the dividend on the pref shares? 10%? More?
2. Is there any talk of taking warrants or options on the banks' ordinary shares so that the Treasury shares in any upside on the price whilst public money is committed to the banks via the pref shares? If so, how will the Treasury measure the upside on shares in non-quoted banks and building societies?
3. Is there any talk of putting government appointed reps on to Boards of banks that take the pref shares help? In particular, is the Treasury going to ensure it has actual representation on bank remuneration committees in order to give teeth to its requirement that bonuses etc be reined in?
4. Finally, looking at similar bail outs in the US, and Hypo Real in Germany, in every case, I think, the CEO has resigned. Is acceptance of pref shares investment going to be conditional on the Chair and CEO of all institutions that accept it having to resign?
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I'm with 61.
It makes me laugh out loud when I read the comments about how negative RP is.
He's been blamed for everything from the NR fiasco to the sell offs yesterday.
What did he do this time to cause the FTSE to be plummeting today? Nothing. The governement have announced a rescue package and it is worthless already.
The whole global economy is suffering, and no matter what the Chancellor or the PM does is going to be a blip in the ocean. Better to keep the powder dry so we can use these funds when the proverbial finishes hitting the fan.
I still believe that for as long as people keep thinking that we can boost the economy back to where it was, then we have a long way to fall.
What we had was an historical anomoly of easily available global credit which caused a massive bubble in lots of sectors. The party is now over.
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There seems to be no reporting of what these measures will cost tax payers in the future.
Its as if we've found a magic treasure chest in the corner of a room that will make it all better.
Inflation and chaos is my guess, all because the government was too soft to stop banks lending beyond their means.
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So the UK state now has ownership effectively of a large fraction of the UK economy but this ownership will not mean intervention to change prices set by the market. Striking similiarities to the Chinese economic model? Do you think so? Are we adopting something akin to "Socialism with Chinese characteristics" ?
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A big rescue with a short term solution and why should the government worry they will be writing their memoirs in two years. Not that we cannot do without the rescue but what is it doing, sticking sand bags in a 20th century semi destroyed financial temple when we need a temple to sustain us through the 21st century.
That needs a massive re think for 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 need some radical thinking 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 started a fresh with current knowledge
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.
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Restrictions on executive pay? In the US executives are having to give account of themselves in front of Congressional Committees. When are we to call on those who put us in this mess to explain themselves? I think resignation of the CEOs
should have been part of the package. Should greed, vanity and self-delusion on the part of those in charge go unpunished?
It was said by a BBC correspondent, that those in 10 Downing Street had been working hard over night to put the package together. They are all in jobs which they wanted, and being paid well enough for doing it. What of those who had no sleep last night as they face total wipe-out, through no fault of their own?
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i agree with post 1. the problem with this deal is the voluntary aspect. would have been better for the government to announce an audit of all the banks, and those found wanting would be capitalised on the government's terms, whether they want it or not..
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"For a fee, it will guarantee the money they borrow from other banks and financial institutions for periods of up to three years."
This seems, to me, HMG going into the Credit Default Swap CDS business. I just hope the fees charged are similar (no make that better then) those that the Berkshire Hathaway's subsidiaries are currently charging.
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There seem to be quite a few of you who have a problem with Robert Peston's reporting. I welcome his reports if only because as an investor I've been working blind for the last few years. Oh yes, I've been using the information given me by banks and investment houses but it has all been provided by people who can turn a debt into a triple A asset at the stroke of a pen, so has proved practically useless for me (though not for them).
However, I don't think we're being given the whole truth even yet. We're told that the banks are hoarding their money rather than lending to each other. A bank which hoards its money will go out of business very quickly. The fact that banks and building societies are making it very difficult for anyone to get money, almost at any price means they have other plans for it. Or haven't any.
I suspect that there are debts looming which all banks will need to pay off to remain solvent and which very likely will consume the entire available capital and more. The only way to survive in that scenario is to write these debts off.
Perhaps what the banks are doing is enhancing the credit flow problems so that they can use the fear created to suck the Government (ie, us) into underwriting the debts. Then we rather than they will take the hit.
Of course this is pure speculation with no basis in fact. It probably merits no more than a triple A rating.
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Let me get this right!
Because of the greed, stupidity and incompetence of the Boards and Directors of Financial Institutions and Banks around the world and in the UK we, the UK Taxpayers, now need to underwrite and fund their appalling behaviour.
Am I also correct in stating that this money could have been better spent on education, health, road safety amongst many other areas?
Am I also correct in stating that the directors of these financial organisations will walk away with no pay reductions, no loss of pensions, no loss of anything - unlike their many customers?
Why does the government not start by removing all personal wealth, assets etc. from these directors as the first stage in the recovery process? Any of the rats that tries to leave their organisations should face charges of treachery.
Those directors will certainly show no signs of remorse, guilt or shame. They haven't so far...
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Paul Thomas (comment 19)- NatWest is owned by RBS who are under siege. No bank is safe whilst the market rules!
The real point behind this is that the demand for credit is too great and will have to be cut back. That seems to portend a recession whatever palliative is tried.
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So Darling has decided that my (taxpayer) money is going to go to Icesave investors so they don't lose anything.
I put my money elsewhere with a lower return because I considered it lower risk -- will Darling be making up the difference to my (and millions of others) savings?
Darling should not be using MY MONEY to bail these people out - if I wanted to bail them out I could choose to do so (or not) myself.
Anyone who put money in Icesave on the advice of an ADVISOR and was not warned of the risk should be claiming on that ADVISORS profesional indemnity insurance.
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The bailout plan may work or may not work, however there has to be a plan B.
Which is for HMG to bypass the banks completely and lend directly to businesses which the Americans are now doing.
BTW, you can tell which banks 'need' the money by seeing which banks shares are stil dropping today.
The market is right much more often than it is wrong.
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If each individual bank has been hoarding cash as they don't trust to lend to each other, why do they need to lend from one and another now anyway? Surely they have stored up enough cash to continue lending to business and the public?
I cannot see how this plan can work unless every government takes the same action? We are continually told this is a global economy and whilst it may protect the big 4 banks in the UK for the time being, as UK banks have interests all around the world surely problems abroad will continue to affect UK banks?
It is yet further evidence that the EU is not working and it's "every man for himself". Very worrying.
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The only real option the Government has left is the Mugabe option - print money. This is what happened in Weimar Germany in the thirties. I am not sure where all these billions are coming from as increasing government borrowing or taxation are not politically possible at the moment. Printing money is something they can do without telling anyone or getting parliamentary approval.
I suspect we should keep a very close eye on the money supply figures and expect rapid inflation and falling interest rates. At least this would push up house prices whose collapse started all this off.
Can I repeat the thanks expressed by many commentators to Robert for his clarity and grasp of the subject.
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Please consider this.
If, as I suspect, the banks have been involved in high level fraud (as being investigated in the U.S), then as of this morning we are all shareholders in a huge money laundering criminal network.
And the Government know it!
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#89 At least a banana republic has bananas to trade. All the UK seems to trade in is dodgy bankers.
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The banking sector has overvalued its assets and undervalued its debts, this has led to the bank system locking up.
the credit that led to the boom has gone and everything is having to be revalued at a more accurate cost.
As long as depositors balances are guaranteed it should stop a run on the banks, anything else is going to be written off as Britain cannot shore up the entire finincial market.
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For goodness sake Robert!!! EVERYTIME you come on my heart sinks, you seem to take great pleasure in reporting in such a negative way that you quite clearly has a bearing on the markets. Like other readers will you look at the interview with Peter Jones and take some tips from him!! He must be doing his nut at you!! STOP BEING SO NEGATIVE!! You seem to take great enjoyment in such negative reporting and as so many people are watching you ARE having an influence........try to be more POSITIVE or do us a favour and go on holiday or just GO AWAY!!! YES things are a hairy and unprecedented, but please end each report on a POSITIVE NOTE FOR GOODNESS SAKE!!!, but you and your irresponsible reporting along with many others are doing more harm than good!!!!
PLEASE STOP IT!!!!
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It is amazing how the media have been able to cover this unfettered !
Not only has the coverage made the crisis worse, even Mr Wogan said so !
A more trustworthy figure there never was.
But the attitude of Government has done everything possible to undermine investor sentiment.
The forced marriages of Alliance and leicester, and then Hbos.
The plundering of Bradford and Bingley.
All these events have destroyed shareholder and Pension plan holder confidence.
The City of London may never recover from this.
The incompetence, dishonesty and sharp practice coming to light in the media, may never be overcome.
And Shareholders have seen just how few rights they have when the chips are down..
None at all.
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JimsterBond007 # 71 said, 'Seems to me that - those who can, trade and those who can't, report........'
Jimster then (#82) says,' Could you go on holiday for a week - and give a chance for the economy to recover? Your reporting is so dismal and down beat, that it's causing the negative sentiment across the country.
Your appearence on the news makes us now cringle.....Can you really be so happy about all this. Is this your big chance to make a name for yourself. Just do it for all the right reasons.'
Personally, I would add that those who can't report, make it up. He's already made a name for himself. He essentially doesn't have a clue what he's talking about. He's never worked in finance, or at any other real job that I can work out. 'The Peston Factor' as it will be known for years to come.
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the market has dropped again. It did so yesterday. they used to call this making a market. You can see this on your local market, goods are affered at a price. If there are no sales, the prices change until there are takers. Is the stock market any different?
There are lots of comments on prices, but very little on volume of sales. If only one share of a company is sold at 20pence, that is the price of the company on that day. A small market will invariably have big falls and big bounces.
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How is any limit on executive pay going to work? Abbey are owned by Santander - do you just limit Abbey employees pay or do you call up Madrid and tell Spain that their nationals are now subject to a UK extra territorial law on salaries and benefits.
What do you do when the Spanish ignore you? Start a war?
Why is Nationwide involved and not the plethora of smaller building socieities? Does this have any implications for their ongoig viability?
Why are stock markets continuing to fall? They normally provide a good clue to the likely effect of market changes.
Why do politicians say that this is something whose success can only be judged over the medium term, and yet need to work all night to agree the deal because of its urgency?
What happens if it doesn´t work? How will it´s success be judged? What is meant by the statement:
"Well, unless the economy spirals into total freefall, it should be sufficient to keep our banks functioning in these challenging times"?
How do you define "freefall"? - Presumably something worse than the position at the moment. What is meant by "functioning"? Simply that these banks continue to exist as institutions transacting nominal amounts of business or that they are in a position to finance sensible initiatives backed by ordinarily credit worthy entities?
The number of questions alone probably points a path toward the big picture answer.
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Congratulations on sparking a multi-billion pound scare. Try reporting instead of distorting and realise that you could directly affect thousands of people's jobs and lives with your silly blog.
I don't work in banking.
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YOU ARE ENTERING
- GREAT BRITAIN -
the world's newest banana republic
POPn.: mostly fleeced
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- Too much irresponsible lending caused the situation.
- Realisation of overpriced housing (mainly in America) triggered the situation.
- Frantic efforts to protect themselves (the Banks) is perpetuating the situation.
- Will government intervention save the situation, or?
have we just underwritten high house prices in the long term?
It seems to me that part of the solution has been provided but without the controls and regulation to govern how this money will be used, how do we know it wont just line the pockets of the rich and trigger the next crisis in 18 months?
Personally, I hate the thought that I have worked hard and saved hard but still cannot afford a house and now the Government (and tax payer) has a significant interest in keep house prices high.
Some might say that house prices have fallen but I disagree. Apartment and flat prices have plummeted but house prices have hardly shifted. And why do we have so many apartments and flats because of the governments planning mandates.
Affordable homes for families, controlled inflation (across everything relating to family life), and moderate growth. Sounds sensible to me but when will the government start to underwrite these sorts of solutions?
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For goodness sake Robert!!! EVERYTIME you come on my heart sinks, you seem to take great pleasure in reporting in such a negative way that you quite clearly has a bearing on the markets. Like other readers will you look at the interview with Peter Jones and take some tips from him!! He must be doing his nut at you!! STOP BEING SO NEGATIVE!! You seem to take great enjoyment in such negative reporting and as so many people are watching you ARE having an influence........try to be more POSITIVE or do us a favour and go on holiday or just GO AWAY!!! YES things are a hairy and unprecedented, but please end each report on a POSITIVE NOTE FOR GOODNESS SAKE!!!, you and your irresponsible reporting along with many others are doing more harm than good!!!!
PLEASE STOP IT!!!!
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I believe that Robert's reporting of this issue has been spot-on. I listened to his 0730 piece on Today with John Humphrys this morning, and I think Robert did an excellent job of trying to answer the rather inane questions he was being asked. If anything, it was Mr Humphry's questioning that had the air of sensationalism about it....
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Will taxpayers lose money? Surely - if Darling's comments this morning about protecting IceSave depositors mean what they appear to - we already have lost money. The Ice Save move is the government responding to emotional blackmail, and they can't bail out everybody.
None of this is for free, and the markets will test the government's nerve, just as Soros did for Black Wednesday. Putting up a package 'big enough' to fix things has to invite challenge in the markets to see if it is big enough.
Plus, proportionate to GDP, all of this is much, much bigger than the US bailout.
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#77
Now that really would send the markets in to free fall.
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Thinking about the management of Banks, has reminded me of a career day I went to, many, many years ago.
I was curious about accountancy, and I asked one of the representative's at his desk which degree I should go for if I wanted to be an accountant.
He said, just do any degree you like, you have to train professionally later anyway.
In the event I never bothered with university.
But I do wonder how many people with Art History, engineering, media studies,or social science degrees, have been busy making a mess of the Banking system?
Maybe the Banks should promote from below, properly trained up Staff, who actually know, from the front desk up, how a Bank should be run.
And not people who just have a piece of paper that says they can remember formulae and the complete works of shakespeare!
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I thought the HSBC was solid in all this, yet they are sipping at the taxpayers' cup as well? Why has is the FTSE falling like a stone again in the face of this news? Seems the more the Government do, the worse it gets ... someone's loving all this, I just wonder who it is?
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Yes, just cheer up Robert: then we can sit back as the market convulsions around the globe - from Tokyo to Wall Street - will just magically disappear! (Oh I wish I had some people's faith in positive thinking!)
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Without resorting to profanity I can hardly contain my resentment and contempt for this whole affair. Why should a penny of my (or anyone else's) tax money be used when I've tried to be genuinely prudent and ensure that I stay within my own means.
Privatise the profits and socialise the risk, plain and simple.
It doesn't really matter how many strings are attached to this deal the senior people at the top of the banking institutions are laughing at each and every one of us!
These individuals are hugely rewarded for success, they are hugely rewarded for failure and ultimately they have Joe Bloggs to bail them out when it all collapses. There is no realistic deterrent of ultimate failure because they have relied on the assumption that there will be a bail out and guess what...!
What has happened is at best incompetence and at worst theft. The deals made are for huge sums for future payment, money that doesn't yet exist, BUT the commissions are suddenly real and are paid to the people involved. Money for nothing and it should be recovered.
Also what about all the so called "profits" which were being reported by banks until this year. This, to me, indicates serious manipulation of the facts approaching outright lying.
The people on boards across the whole industry should be called to account and face criminal proceedings. If I, or most anyone else in this county worked in the manner of banks we would be sacked and expect a visit from the police.
If society now has to bail out this scam then society has the right to demand a high price!
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What recent events have shown is that the media have an enormous impact on the markets. Commentators ,without exception, have been guilty of spreading panic. Early on this morning Breakfast was reporting that following the rescue package the FTSE was down. Only after this had been done several times did they point out the much bigger rise in banking shares. Given that this crisis is now more about panic than balance sheets such actions are totally irresponsible. but what the heck it makes a good story and if the result is self fulfilling then .... more gloom and doom headlines! One only has to read some of the comments here to realise that many people have lost the plot! If the media devoted less time to this "story" and resticted themselves to facts rather than scaremongering the situation would settle down. The massive fluctuations in markets do not reflect any real economics.
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To all those complaining that the reporting of bad news seems to have a bad effect on the market. Well of course it does, that is only right and to be expected.
It's not Robert's or the BBC's fault if the news is bad. Things are really really bad right now, you may have lost money, tough, just get over it.
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Interesting times ( and I wish someone would look at my novel - One Step To Danger - which presages banking collapse!) but two serious points:
1. The paradox is that, if governments seek to influence banks to push loans into the economy, they risk increases in bad debts if these fail. If they allow banks to improve capital ratios (get more capital, reduce debt) the measure helps banks and not the economy.
2. If Icesave is the precedent, can I grab with impunity any 7% plus rate offered by any dodgy bank over the more prudent ones from some of the UK banks and National Savings?
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One really disgraceful thing is how quickly the Chancellor can put quite covertly together a £50bn package, all behing closed doors without the deal being presented before Parliament.
The other is coming your way soon, which is that those banks involved that have received so much help and advice from Govt will carry on in the same old way despite 'help from the taxpayer'. There will be no recognition of that as they start the inevitable roll-out of repossessions and foreclosures that are always the consequence of events like this. It was as great political opportunity missed by the Govt to say 'no more of this..'
To be honest I have zero faith that this will 'get the economy moving' as they all like to say. It would have been better to close all the UK banks and nationalise the whole system, bring everything under one state bank.
Who speaks for common (working) people in all of this? No-one. But we earn the tax that pays for this! Does that not deserve some remark from those who represent us - MPs? I seen NO such remark. I hope the Labour Party - who always claimed they stood for that - get slaughtered in the next election and never again come to power.
GC
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As banks are becoming semi-nationlised with the government in effect becoming shareholders, are memebers of the government going to be forbidden from purchasing shares in those banks privately?
I am just wondering at what point anything will become a conflict of interests for them and their own private investment activities.
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If a bank takes any of this £50b, will they still pay bonuses to their staff? My guess is that they will. This isn't an just an 'executive' thing - it's a culture that runs through the whole organisation. I am working in a very large UK bank, and most of the IT department are expecting bonuses at the end of the year. If a bank is in such a state that it needs to access this money (my money - your money) then no bonuses should be paid to anyone!!
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Once again the system is supporting unfair meritocracy!!!Alistair Darling was outraged when Gordon Brown proposed a 50 Billion pound plan to bail out the poor!But for helping out banks who are at the root of the problem, its absolutely fine to give them money on valueless assets...
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Welcome to the Welfare State.
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We're told that the credit crunch is casued by banks being unable to get their hands on money to lend. The two main ways of doing so are the "wholesale money market" (whatever that is - it has never been fully explained, even by RP) or by investor deposits.
However, Northern Rock is closing deposit accounts to new investors because there are too many of them.
Can anyone explain this conundrum? Is the Government trying to put the taxpayer's bank out of business? Or are they trying to protect us from something - is so, what?
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The crash in share prices does not mean the plan has not worked. It means that existing shareholder realise that their company cannot survive without public help, and for this the public will take its pound of flesh. The equity injections breaks the link between the share price (pre-injection) and the perception of creditors. The share price is no longer an indicator of the banks health, but of the current shareholders stake in it.
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Any bank drawing on this will be marked down by the gamblers, sorry,stock market and the shares will collapse.
The real solution is to create an emergency law to Nationalise all banks and financial services for a period of at least 7 years when they will then be sold into the markets if they are profitable. At the same time bring in exchange control laws to prevent sterling from being dumped.
In the meantime sack 90 % of the Directors, Senior Managers, Treasury officials and Bank of England stuffed shirts for gross incompetence and stop all bank and financial sector bonuses.
The sector has shown it can't run a business and it has endangered every other business in the world through its reckless behaviour.
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Many British Companies removed themselves from their British taxation base.
This is the same tax base that both their survival and that of their Banks are now dependant upon.
I believe that they ought to be named and shamed for the benefit of those of us who are left to pick up their tab.
We might be able to support their more patriotic competitors instead.
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Interesting solution. I'm prepared to give GB and Darling some credit for that. I can't see that anybody else could have come up with anything better under the circumstances. If Tory and Lib Dems support it, I'll give them some credit too, for putting party politics to one side when there's a crisis.
The Treasury taking preference shares if the Banks want to is quite a good idea, as they give the Taxpayers investment a little more protection. If the Bank fails, holders of preference shares are repaid first. But that presumably means the value of ordinary shares will fall ?
And guaranteeing the money borrowed between banks seems a good way of freeing up the reluctance for Banks to lend to each other. To my mind its rather like the idea that Savers deposits are guaranteed. Banks can have their investmetns in other Banks guaranteed if they want to. Not such a bad idea in the current climate.
But they key thing is that banks can draw upon these facilities if they want to. Its their choice. They're not nationalised in the true sense, but they can acquire state support if they need it.
Its good to see Executive pay capped if the Bank has to use these facilities, but that could mean that Banks will try to muddle through without using these facilities and we'll be no better off.
So I'd cap the pay of every Executive in the Financial Sector at the moment, as they are collectively responsible.
And I still hope that the Interet Rates stay where they are tomorrow. People have got to get away from the idea that they can borrow money cheaply, and just get on with the job of rebuilding the economy.
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Perhaps we should let the government run the banks and the bankers run the country... given the mess they've both made it should be a laugh if nothing else!!!!
(Oh.. the government are running the banks. maybe I'm a bit late with one!!)
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#55: I know it's a cliche, but "don't shoot the messenger"
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lots of valid comments - as we are at the intervention level anyway, why doesn't the Government / BofE force the UK banks to place a defined percentage of their capital on the interbank market which will help unfreeze the system.
This is a bank created mess and they are over valued anyway so some readjustment of their worth is necessary - help should be given to other business sectors now affected by the fallout rather than only to the Banks.
Finally, the lack of confidence in the market is partly due to the lack of leadership from Government - everything done has been reactive rather than proactive - where are the proactive measures to make anyone believe the Government actually has a long term plan?
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Hey everyone, Just back from 2 weeks holidays in the Hebrides, have I missed much?
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Is it true that The Government, as a condition of the rescue operation, have demanded that Sir Fred Goodwin step down as Chief Executive of RBS? This is reported on The Daily Telegraph website by Jeff Randall but nobody seems to be picking up the story.
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There will be many people (such as myself) who worked for companies who went bust, often for no fault of their own, perhaps because times were difficult for a while, and received virtually no money from the government. In our case it happened because we acted on absolutely disastrous advice from the city, who were more interested in short term profits than long term strategy. In many of these cases we were told that the government?s hands were tied because of EU competition rules. Perhaps, now the precedent has been set, we can take action if necessary in the future to protect what is left of British Industry and ignore EU rules.
And where are the calls from the city that this should not be done because of the effect on the PSBR?
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how this is reported requireds maturity and responsibility from all not just Robert Peston - here is thie joined up approach with Government and the Banks - yes that is not normal but these are far from normal times!
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A lot of anger and pessimism on here again today.
Well, I'm going to buck the trend and give a thumbs up to the government for this one.
I think it's a far better plan than Paulson's to let the banks manage out the toxic debt rather than just buying it.
The banks share prices will stay on the low side as the share capital is diluted (along with the strings about divvies etc); however I'd much rather have a stabilised banking system rather than immediate leaps in share prices.
Whilst there has been a lot of anti-Gordon (and I subscribe to some of that); this might just be his defining moment.
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I for one am extremely unhappy about the level of reporting from the BBC.
At no time has the fractional reserve system been explained and frankly the questions being posed to people like Darling are weak, to say the least. Why let them get away with weak replies to your questions? Are they not there to serve us, the public? It is your job to pursue them until they answer the question.
I have the feeling this will not solve this crisis and, in the end, the government will HAVE to raise interest rates to pay all of this money back. We will see a drop in rates for a year at the most but then watch those rates fly up.
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Alas, compared to the magnitude of what's coming I fear that £250bn is mere pocket change by comparison.
We wouldn't try to help out a friend with mortgage arrears by rummaging behind the sofa for spare change, but that's effectively what Comrade Darling has done here.
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Robert,
All this flak you're copping...it's hilarious. Best not to look as if you're enjoying your job too much, mate.
"Don't mention the War!"
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Another Labour Government printing money. I have no doubt that they have no choice in the matter but it is strange to be back in the 1970's yet again. They are even talking about power cuts for this winter and with Abba being one of the top selling groups this year, because of their film, then who needs a Tardis to travel back to that troubled decade. Is that Maggie I see before me???
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#91
Can a CND member ask for their share of the spending that is spent on nuclear weapons back?... Tax is tax, once paid the only way the taxpayer can alter how it gets spent (or indeed returned as tax refunds) is to change the elected government.
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A few things to add here:
1. not all banks are equal in this - some disclosed tons of 'toxic debts' and that is what has landed them in this mess; others didn't make anywhere near the same scale of bad decisions, but are caught up in the overall freeze caused by loss of confidence in the market - I don't feel this distinction is being properly clarified here
2. when we speak of taxpayers, I'm sorry, but the impression I am sure people are being left with is the sense that this group is entirely made up of 'ordinary' people on the 'average high street' who are innocent bystandersa in the machinations of the super-rich and greedy:
(a) the banks, the shareholders of banks, the executives of banks and the employees of banks are also taxpayers - often bearing a more considerable burden than others
(b) there is a degree to which a larger number of people than just the shadowy denizens of the City are complicit in this - anyone who took out a credit card or a mortgage they could only afford if their salary went up or their house value increased without fully understanding the risks and the basis on which they were being put in funds is complicit at best through ignorance, at worst through recklessness
(c) if the banks aren't shored up, the impact will be felt not only by those evil snake oil salesmen with their executive toys, but also by every branch employee, data imputter, security guard, cleaner, caterer and other employee of the banks, big and small, never mind the rest of the economy.
Yes there is culbability, and yes, it should be addressed, but we shouldn't blinker ourselves to the subtleties of this situation just because the nominal numbers look so large. we are bailing ourselves out as much as others, and a littel bit of humility and self-awareness would go a long way right now, instead of just looking aruond for someone else to blame.
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I wonder how long it will be until RB's mole is outted.
This has been a PR disaster for the Treasury and they will - I hope - chase the little rascal out of his job. Not only is it unethical, but it seems highly probable that someone in the "circle of trust" is profiting from these leaks. It is shambolic and reflects badly on all our policy-makers.
People should be galvanising to call for an investigation.
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Can anyone tell me how this classifies as a 'nationalisation'? It doesn't seem much different from the Fed's bailout plan. It doesn't look like recapitalisation either! Then Robert tells us that he doesn't know when they'll be privatised again!
Is the State controlling the banks or not?
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Just been watching Darling and Broon on BBC news. What a pair of shifty ne'r do wells.
The money they are putting in will NOT be lent to individuals and companies. This will be used simply to pay off the next instalments of the short-term lending. So forget the idea you will be able to borrow money yourself. This is spin to make it appear taxpayers will get something - you won't!
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As part of forcing the banks to give something back to us the taxpayer in return for our £250 billion hand out I'd like to see them being forced to stop ripping us off with their outrageous charges for going overdrawn and then charging again for informing us about it.
The government should place caps on bank charges as part of any deal.
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An expert interviewed on Radio 4's 'Today'programme suggested we should have bought up the banks' toxic debt instead, and said that, in the case of one of the big banks, this toxic debt was only GBP 13bn anyway, which is pretty small in this context. If he is right, this is encouraging.
Hopefully, the banks will now fully disclose their toxic debt, write it off, and use taxpayer capital to fill the resulting hole in their balance sheets, with taxpayers getting their money back eventually. If this is how it goes, this might just work.
How bank shares respond will be important, but watching the broader FTSE isn't much of a guide. It's clear that we are in recession, and it is logical that the implications for lower company earnings will bring share prices down. If Sterling weakens, the value of UK shares to overseas investors will decline, also implying lower share prices.
A decline in Sterling seems likely, but would not be altogether bad. It would favour the UK in terms of competitiveness. The solution to this crisis is, regrettably, bound to involve an inflation element.
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"Mr Brown has been putting pressure on the Treasury to underwrite mortgages to help homeowners avoid defaulting on home loans.
He believes the scheme could transform the housing crisis, prevent families being thrown out of their homes, get the property market moving again and ease pressure on banks and building societies. To finance it, the Government would issue 30-year gilts which would need to be refinanced every two or three years.
But the Treasury is opposed to the measure, which it says could end up costing as much as £40bn and be the equivalent of the Government 'doing another Northern Rock'. '' Extracted from an article from Simon Walters and Brendan Carlin
Eat your words Mr Darling!
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Mr Peston,
The British banks bought blocks of toxic mortgages from US banks.
There are 2 issues.
1. Did the US banks lie about the credit ratings of these toxic mortgages up for sale, telling the British banks that they were AAA ?
or
2. Were the British banks so incompetent that they didn't check the credit ratings of the toxic mortgages before agreeing to buy them ?
Whatever - the only people who are going to be rich in the future are lawyers when all this unravels - but where will they put their money ?
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I can confidently predict that UK Bank Rate will fall by one quarter percent tomorrow 9th October 2008.
How do I know? Because I read the nsandi (National Savings and Investments i.e. The Government) interest rate announcements.
They went down this Tuesday by one quarter percent, forecasting Thursdays independent Bank of England announcement just as they do every month.
Of course I must be wrong because the Government and Bank of England are completely separate!
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I would like to hear what Mr Preston has to say about his ill thought out comments on yeaterdays blog that managed to wipe billions off the value of such banks as RBS. Yet again a small elite is destroying "ordinary" peoples lives with sheer stupidity. Well Mr Inside Scoop, care to explain yourself?
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It's 9:52 am and the FTSE, CAC and DAX are all down by over 5% - does this mean the plan isn't working?!!
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Well, that seems to have gone down well. Another 10% off my share holdings value.
Just to go off subject for a moment.
What is it with the media these days? Most of the news, especially on TV, relates to things that are going to, or might happen, or could go wrong, etc, not on actual news of events that have happened. As a prime example on BBC News 24 last evening, breaking news is that there is going to be breaking news, which was repeated over and over again in the space of seconds! And than they make up some possible things that the breaking news could be or preempt the breaking news with their own version of it.
Lets report real news.
Let me ask another silly question.
How many people would know there was anything going on if it were not for the news?
I am not saying this should be the case, just raising the extreme alternative to what we are getting as a hypothetial question.
It is not like there are bombs dropping around our ears, or wagons collecting disease ridden bodies going up and down the streets. They would be proper disasters, unlike some news we are being fed at the moment.
Of course the credit issue might effect us in a very bad way but in a rich democracy it seems that most individuals who have been prudent and careful in managing their cash there should not be too much to worry about, fingers crossed eh!
Except of course what new doom and gloom the media broadcasts and publishes.
It makes the climate change debate seem like light entertainment in comparison.
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Unlike banks, the British taxpayer doesn't take away the umbrella when it starts to rain!
We must make sure they remain eternally grateful.
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The Bank of England has traditional been referred to as 'lender of last resort'. This is is the basis upon which Northern Rock (privately) went to the Bank for aid. It was made public, which caused the run. The rest is history. What is different with this initiative from Gordon Brown, Alistair Darling, the BOE and the Treasury. If a high street bank applies for capital assistance and it is made public, we will see Northern Rock 2.
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As part of the deal the government should insist that the banks cannot send anymore work offshore or bring the offshore into the UK to do the work and then allow them to claim residency.
Unemployment is already increasing because of this and it is for jobs that they supposedly cannot fill in the UK which is utter rubbish.
I wonder if Mr Preston is invited to the investment bankers parties this year??
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When are Tweedke Dum and Tweedle Dee going to tell us the substance of the re-capitalisation.
What will be the coupon on the prefs, will they be convertible?, if so how will the conversion price be set (? last weeks share price?), how will this be applied to Abbey/Santander (after the Government gifted them the deposits of Bradford and Bingley - how dumb was that?), or Nationwide?
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If a bank takes up the offer of a portion of this £50b will they still be able to pay staff bonuses? I suspect they will. This isn't just a 'executive thing', the bonus culture spreads right through the organisation. I am working in a large UK bank at the moment and many of the managers within the IT department are expecting a bonus at the end of the year - even in this current climate - it always happens. If I am contributing to this £50b 'bail out', (and all tax payers are), then I personally do not want to contribute to a bonus paid for poor performance!!
All bonuses should be stopped.
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154, 155:
Great posts, absolutely right.
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One other thought on this crisis, and it applies across the world, not just in the UK.
If the Taxpayer is funding the rescue of the Banks, but we're alll going to be out of jobs because there's a recession and we are therefore not paying income tax and not able to spend money in the shops because we've no income, who exactly are the Taxpayers ?
Does that mean that Road Fund on a 4x4 goes up to £1 million and there are going to be lots of new stealth taxes ?
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If the banks are reluctant to lend to each other, they must have stacks of cash in their vaullts that they are reluctant to lend. So why not use that instead of borrowing money off other banks?
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Now government is moving in the right direction but not BOE. BOE needs to cut rates to 3% or lower but once stabilized should increase to neutral levels.
No one is a winner now, even oil producers as oil will drop to around $40 or less and their investment in shares has fallen as well plus the interest they get from treasury deposits will fall as well.
If BOE didn't cut rate by 1% tomorrow and keep on cutting rates unemployment will clim to 10% or more in the next few months as employers lose hope and cut staff and close business.
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"Business-as-normal" ?
What may have been considered as normal up to now can never be considered as normal again.
Good article here btw that shows the impact of this nonsense on our general economic wellbeing...
http://energy.pressandjournal.co.uk/Article.aspx/868384/
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The banks should be nationalised and money should be lent to borrowers interest free. The whold problem has arisen due to the fractional reserve system. For the government to lend money interest free to borrowers would be cheaper than this mess in the long term and would create genuine value.
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Robert, could you explain something: who are the banks normally lending the money?
The news articles say the problem is that banks are not lending to one another. This implies that some banks have lots of borrowers and few depositors, so these banks borrow from the banks with lots of depositors and few borrowers. Who are the second set of banks that have all the money? And what will they do with it now they have stopped lending to other banks?
I suspect that the banks that stopped lending are Far Eastern that have built up a pile of cash due to our horrendous trade deficit. If it is these banks, then may be they stopped lending to the US/UK because they realised that there is too much debt so the entire countries are bad risk. If this is the case then what the government is doing will make no difference because what we really need to do is lower the debt levels rather than stick a plaster over it.
However, this is just my speculation - you're a journalist so perhaps you could find out who the banks that stopped lending are, and find out why.
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Robert,
enjoy your 15 minutes of fame. You may be remembered for more than just reporting the turmoil in the market.
Not sure I would want to be in your shoes now or in the future.
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#110
To right, at one time we did at least have things like coal, steel, ships, cars, washing machines, fridges and freezers etc. to sell (or at least the capacity to do so), now - since the 1980s and 'Thatcherism' - all we have are dodgy bankers... :-(
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I'm 29, I understand what is happening, and I am now worried. I know that what is happening in the markets and what will happen over the coming weeks will put this country into big difficulties for many many years to come.
I think that the biggest problem is that most people my age and younger don't understand, or can't be bothered to try and understand, that the problems go much deeper than the banking sector (can you imagine Chris Moyles trying to having a discussion about it on his breakfast show!!). And these are the people who need to know that the next ten years of their lives will be nothing like the last ten. It will hit them hard (I know, a lot are my friends, some of whom have already lost their jobs and soon their houses).
As for Robert Peston; I find that it is the style of his reporting rather than his content that is the problem. Every time he reports he laces his output with phrases like 'as I said last night' or 'as I've been saying for weeks now'. Yes Robert, we know that you are a great prophet but we don't need constantly reminding of the fact. And please try to take the drama out of it, you are not on EastEnders.
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FTSE 100 4,430.14 -175.08 at 10.15am. I guess that answers that, then?
Is this less to do with Darlings proposal and not more to do with details of Lehman defaults?
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Gordon Brown let slip that one Institution is contracted to buy US sub-prime mortgages for the next 2 years. Which one? And shouldn't the shareholders be told?
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how strange that us ordinary folk can see what's happening when our government can't? Banks yesterday said they wouldn't be taking government help and today they do? It can only be because the handout has been made more palletable to them....aka no strings attached!
A word to the wise-if GB and friends have decided to restrict CEO pay like they said in the US, look at Lehman's.....executives get $400 million 'retention' pay but employees can't even get redundancy pay.
Also, the banks in the US are being allowed to value their toxic debt at it's future worth (taking into account interest paid on repayments if not defaulted) not current!
Is this what will occur here?
Again I say-give that $50 bn to victims of the banks greed-at the mo, it's like sending aid overseas and the people who need it not seeing a single grain of rice!
To restore confidence I would suggest:
Seize and freeze the assets of the fat cats
Install administrators in failing banks
Publish the balance sheets
Run the banks in the customer's interest
Investigate and prosecute those responsible
Only by being totally honest with the general public will Market confidence be restored. I rememer someone a few days ago saying clarity will stop the slide-let's do it!
The banks have single-handedly have managed to bring down capitalism-there will be a lot of people around the world who will be celebrating!
Just close the stock Market and have a bank holiday for a week!
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Bank's bleating about government ditherings are a bit rich, they are the ones who are responsible for this mess and all the chiefs who's banks needed bailing out should go.
As for RP's reporting do you think he is calming down a bit now?, i and others have been going on about his reporting for weeks now and how exceptional times need a calm head when faced with the problems we have. He needs to remember that it was his running of the NR story that in my view brought it's demise-like someone picking at a scab until it bled,
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#112
It's negative because this crisis is negative, it's not nice sound-bite news that's meant to make us feel great whilst eating our cornflakes - those days are gone for now, employment is most probably going to turn into unemployment whilst the value of the pound will probably tumble too. Sorry if you can't take bad news...
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Regarding the flak directed at Robert Peston and the BBC, for reporting the news, be fair chaps...
I agree up to a point, but without Roberts clear explanations of what's going on I wouldn't have understood any of it. He's therefore doing a very good job. It might be bad news, bad news sometimes breeds bad news, but he's reporting it well and educating people too. Nominate him for an award at the next industry do, somebody.
My long-standing criticism of BBC News 24 is the way reporters try to present the news as it is happening, trying to say lots of things about what is nothing more than a few words on a cable somewhere.
Report the cable, then give it five or ten minutes to collect everybody's thoughts and get some direction before trying to look clever on the telly. I've noticed experienced reporters often asking damn-fool questions of so-called experts who can't say much because there's no detail and everybody seems to be repeating themselves endlesly. Its not pleasant viewing.
Watching News 24 when a story is breaking makes me feel quite uncomfortable, though it is also quite funny sometimes. Put the weather forecast on when it scheduled to appear, so I know if worth popping outside to cut the grass, and take the few minutes to prepare yourselves better.
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Even though gold is high at least I would be able to use that in exchange for building materials for my house extension we have saved so hard for during the last 6 years.
I have a feeling most people do not understand that inflation is about to hit the roof.
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176 - how ridiculous is that - lax credit got us into this problem - free credit would leave us looking like Zimbabwe
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FTSE is plummeting again... It's called Buy the Rumour and Sell the Fact!
I'm selling crude oil as fast as I can this morning but the crazy hedge funds are buying it up cause they're worried about inflation and using crude as a proxy hedge.
The thing we should really be concentrating on here is speculation in the crude oil market. Crude oil drives inflation in the long run and the hedge funds buying it up now are going to be responsible for making the recession longer and more severe than it would otherwise be.
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I like post 85, NorrieC is correct in what he is saying!
Drop interest rates to near zero, creating inflation that will eat the debt away. This is the ONLY way out of this mess (We also need to control this with the ECB and Federal reserve) so the currecy is preserved on the world stage.
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#114
...and those who wish to tell lies and dammed lies (to the point of deformation) post to anonymous blogs...
I do wish that all these bankers and speculators would just stop bleating, their 'rants' are so shallow that all they are doing is making everyone else think 'what next, what else are they hiding'...
Give it a rest chaps and chapesses, the only people you are damaging (further) is your own profession!
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This looks like a very good deal, but it's hard to see how it will have the necessary impact, given the international nature of the root cause. Perhaps we needed to see action like this six months ago, but in any case the real problem is that so many people have taken on a level of debt they cannot afford, and will have to stop making new purchases in order to pay for what they 'bought' in previous years. How can you mend a system which is designed to provide a service which is, in the end, so damaging?
I feel a bit brusied because I saw the housing slump and share crash coming, so I sold everything in 2007 - and put most of it into Iceland...
The rest is in a Natwest account. Now they won't let me move it on to other accounts: they've imposed a limit of £10,000 a day.
Personally, I don't find that particularly reassuring.
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First of all Robert's question was dreadful, 'if this is such a good idea why didn't we do it 10 years ago?' Just such a negative, unhelpful comment.
The accusation of dithering are based upon press speculation - another example of the media being negative and pulling the economy down.
Of all the posible solutions this would seem to be the best - including the 'do nothing' option.
The number of people on this blog who complain - and have no constructive input is amazing.
However well done Darling and Brown, even if they did help to get us in this mess in the first place, the US wasn't the only place to make bad loans. It also looks like they have EEC leadership - let's see if this is true.
We will see, in the next few months, what this really means to the economy. It would help if the BBC was a part of a solution and improved it's reporting standards and attitude to this situation.
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#27. At 08:00am on 08 Oct 2008, FilmZomB wrote: "How do you take preference shares in a building society?"
It looks like you don't; you buy "Permanent Interest Bearing Shares" (PIBS) http://www.thisismoney.co.uk/pibs
PIBS are referred to in the Treasury announcement. New one on me, as is so much in this crisis!
Perhaps in the desire to compete for business with the banks, Nationwide has overstretched itself a bit? In general, I think the building society model of prudent lending and higher ratios of liquid assets to deposits is a good one, and, touchwood, seems to be surviving better than the banks' model so far.
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Robert, keep on posting as you do. I get the impression that ALL of these twits complaining about your 'irresponsible' journalism are (b)ankers sweating about their jobs. Well keep sweating I say and how dare you accuse anyone of being irresponsible - that's really taking the pee.
These banks and their overpaid executive teams need to be taken in hand and given a proverbial 'slap'. Nationalise the lot I say and put them all on SO2 civil service pay grades, otherwise I feel in another 10 years we'll being doing this dance once again.
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164 Sarah:
No, it doesn't mean that. A lot of observers think we can judge this process based on stock market indices, but these are not a reliable indicator because they are measuring something altogether different - business prospects.
As everyone now knows, we're either in recession now, or soon will be. That means that companies will earn less, logically making their shares worth less.
It's quite possible that the banking system will recover whilst stock markets continue to go lower for quite some time.
Rather than watching the FTSE, etc, the better indicators are likely to be market interest rates, which take the pulse of inter-bank lending.
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#128
The down turn on the stock market this morning has most likely been caused by the (almost) 10% drop on the Nikkei over night - sellers simply didn't have time to digest the UK plan in the time before the markets opened, since then there has been a rebound - how much due to the plan we won't know for a while (if ever).
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#132
As I understand it anyone working in or for Govt. who is (or likely to be) in possession of 'inside information' have to transfer their investments (share holdings etc.) to blind management, in other words if any shares are bought the person buying them will not know for who they are buying and as such will buy due to market knowledge and not any other.
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#89:
Regarding cancelling the 2012 Olympics: I do not think it needs to be cancelled, but the costs can definitely be scaled back. Basically, you need a running track, a swimming pools and some other bits.
To put the 12 billion costs in perspective, for that price we could make a 400m athletics track paved with solid gold 9mm thick! (at today's gold price).
But what about somewhere for the athletes to stay? Based on the 2008 games, there were 10500 athletes entering, so the 12bn equates to 1.14 million pounds per athlete. They are only here for two weeks, and I doubt most people in east London live in 1.14 million pound properties!
Alternatively, the 12bn would be enough to buy 159 gold medals per athlete entering!
These are just a few examples to put it in perspective. All the facilities will still cost a substantial amount, but 12bn? IMHO, the Livingstone/Coe Olympic cronies are gouging the tax payer like the bankers!
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#1 - was my first thought on reading this - if simply being reported as having meetings with Darling can knock gazzillions off their shares, then heaven help the first one who stands up, admits his arms have been severed and says that he'd quite like one of Darlings sticking plasters to see if it can fix it.
#103 "Am I also correct in stating that this money could have been better spent on education, health, road safety amongst many other areas?"
no it would have been better spent on stockpiling 49bn worth of Pot Noodles for the soup kitchens to feed us all with (plus 1bn worth of Turkey and stuffing as a little luxury to help us through the first christmas)
Still its easy to see where the blame will be pointed - forget the banks with their unsustainable lending and the public with their unsustainable borrowing, its all the journalists fault.
Post slump we'll have the self-appointed great leaders of Stoßtrupp HBOS and Stoßtrupp Loyds standing at the barricades condeming the 'stab in the back' perpetrated on their glorious economic system by negative journalists who failed in their duty of boosting morale, not forgetting those unpatriotic subversives who didnt stick 'Support Our Banks!' stickers on their car bumpers...
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This is what Peston should be reporting now because it's the truth and it will re-assure investors and help to shore up mortgage-backed balance sheets...
"The banks mark their mortgage exposures to market and are currently showing a huge black hole. As such they are withholding funds to shore up the hole.
Inflation is the only thing that will make the mortgages equal to the book value on the bank's books. The government is going to have to print their way out of this mess. In ten years time your house will probably be 'worth' more than double what it is now. The fact that a loaf of bread and what you earn will be double what they are now is also true.
This is probably the best time to invest in a house because interest rates will have to stay low to combat the inevitable recession. And inflation and the devaluation in the pound will ensure that relative to your fixed mortgage debt your house value is guaranteed to rise."
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Given the governments decision to step in and cover Icesave depositors funds in full, should the decision makers involved be declaring any interests they may have ie as potential savers themselves in this particular institution.
I trust the journalists are holding the government and decision makers to account over these financial issues of the day given the opposition parties decision to say nothing, question nothing and then call it ?responsible opposition? taking on the look of the Churchill* nodding dog.
*other insurance companies are available!
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re. 179 (and all those others bemoaning Thatcherism, and the decline of manufacturing)
We have no manufacturing (coal, steel, ships, cars, as you put it) because the unions priced themselves out of the market. All these things can be made cheaper elsewhere.
Or maybe you were suggesting that these industries be subsidised? Well, that would be using taxpayers money, right? Why should I have contributed, as a taxpayer, toward the subsidisation of loss making manufacturing industries? That is no better than me 'bailing out' the banks.
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#152
"Is that Maggie I see before me?"
I hope not, I would hate to have to go through all this again in another 25 years, you speak of the 1970s, there is one big difference between then and now though - we don't have any real industry to export with, or even support our own economy, if the pound does plunge we really are going to have to have massive Govt. public works to (like the USA had in the 1930s) to rebuild our own manufacturing base as we will just simply not be able to afford to import everything...
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at least the americans got to vote on their rescue package.
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#167
The run on NR was caused by it's funding model, the realisation by the deposit customers that their money was secured by nothing more than fantasy money that has never, could never and would never exist in reality - in other words every penny of their unsecured loans was at risk - nationalisation only came after the bank had to admit that they could no longer honer their debts. Neither, as is often put about by bankers, was RP or Govt. responsible for the crash of NR - all they did was report fact and bail out the bank in that order.
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Won't this make "assisted" banks less competitive, leaving unassisted banks to gain an increased market share and increase the risk that the assisted banks won't pay back the debt?
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RE: 56. lunatics_and_asylum
"If there are conditions in the deal that executives' renumeration is capped in some way, those executives will jump ship to another industry in order to maintain their high renumeration packages.
This will leave gaps in the upper management layers that may be filled by people of lesser ability. This is because they are the only ones who will accept lesser renumeration packages."
I don't think there's any real risk of that. First of all, where are these other industries? Finance industry salaries and bonuses have been at the extreme high end of what is on offer for many years. Even quite severe limits would simply bring them back in step with other industries.
I also doubt that your "lesser ability" issue is a concern. It's pretty obvious that the management of British finance houses in general (not just the High Street banks) has been disastrous. Discarding the people who created this mess is hardly a loss is it? You are quite likely to find that the people hired to replace them are the sensible, competent, rational ones who were passed over previously because they wouldn't take stupid risks on deals they knew would end in failure. Ironically the people you fear might be of "lesser ability" are equally likely to be far better at the job.
"You could argue that the banks haven't done a very good job anyway and that the current executives are not worth diddly."
It's not really an argument is it? More like observing that water is wet.
"However, I would say that the bankers
were doing what bankers do. Making money (short term) at other people's expense. I believe all bankers do this."
It may be what they've done in recent years but it shouldn't be and it has clearly failed. People who are "good" at doing bad things aren't worth keeping.
"So, it's a catch 22 situation. Do you introduce a mechanism to restrict renumeration packages and therefore potentially weaken your banking industry."
Weaker than it already is?
"Do you allow the free market to operate the way it wants and hopefully rebuild it's place against foreign competition?"
What you are seeing today _is_ the result of letting the free market operate the way it wants. Without a series of government bail outs the banks would have foundered weeks ago. They still might. I very much hope they don't since I will suffer from that far more than the useless overpaid fat-cat executives that created this situation. Nevertheless failure still remains a possibility, despite the extravagant bailout that you and I will have to fund.
"Or is there another option?"
If you are referring to curbing excessive pay to bankers then yes there is.
Any increase in total compensation (meaning all of salary, bonuses, pension contributions and any and all other benefits) should be tied directly to _enduring_ _added_ value. Pay rises associated with a brief spike in the share price should be clawed back - with interest. A regime like that would drive away the chancers and replace them with people who think and act based on long term benefits. Short term profits would certainly be lower but longer term crashes wouldn't happen.
By the way, I don't think this should be confined to bankers. The senior officers of all companies operating in Britain should be required to meet this standard.
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NOW would be a very good time to emigrate!......before you are taxed out of existance and your savings become valueless.........ESPECIALLY if you are a rich greedy banker!
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182 - I think this was a reference to Bradford and Bingley that had contracted to buy UK mortgages from GMAC - highly likely that Brown did not understand what he was talking about on this since BB did control the parameters under which such mortgages were issued. In any case this is history now since BB has been nationalised and this contract terminated.
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Is this legalised piracy by Long John Silvery Brown and his bushy eyebrowed parrot Darling?
Its our money they are throwing about but they are not going to control how its going to be used ?
Surely the Banks will go right ahead and do what Banks normally do - which is lend it out again to do more of the same ?
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As Robert Peston quite rightly said, the big risk to the UK and the taxpayer is a significant recession. For those of us living room outside the South East bubble, it is obvious that the recession has been in process and released two months. Retail sales are collapsing and business activity falling. Not only has the consumer been hit by two streams of virtual taxation in the form of higher energy prices and higher fuel prices, and the money supply to both consumers and businesses has been severely squeezed. This deflationary pressure means that the Bank of England's arguments that the inflation needs to be squeezed out of the economy by high interest rates looks ridiculous. As Vince Cable commented on Newsnight last night, a 2% cut in interest rates is necessary immediately. This was supported by Richard Branson's call for a 1% cut earlier in the day. It is only a significant move of this type which will prevent the spiralling deflation which sets this whole banking rescue plan at risk.
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#56 Highly qualified Bank Executives jumping ship to other industries? Don't make me laugh, who will have them? I think they'll be lucky to get jobs sweeping the roads.
#78 Inflationary Public Sector Pay Awards? The only Public Sector Pay Awards higher than the CPI (which does include Council Tax or Mortgage Interest Rises) were those the MP's awarded themselves. Most PS's have been taking below inflation pay rises (pay cuts) for years
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#203
No, we have none of those industries because Thatcher chose not to back them, unlike Germany, Japan, France, USA, India, China etc.
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This has been coming for a very long time, way before GBrown.
Radical reform of global money regulations and political systems is necessary. Trying to support today's problems will not stop another collapse later.
It is time to stand up to the moneymen. These leeches rely on our cowardice and greed to enable them to control us.
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I think you are becoming part of the problem - and that you are enjoying the power you have.
A wise man said "We have nothing to fear but fear itself" - but you engender fear all the time - even suggesting On the Today programme that the government may not be sound.
And this is not your fault - but your delivery makes people anxious.
I think that Evan Davis would be a much better front person for the BBC's coverage - looking at the economic aspects not just the business aspects.
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#154 jhp168,
Your post is not untypical of those involved directly in the financial industry who post here under pseudonyms.
It relies on the hypothesis that all but the upper tier of the financials are innocent bystanders and that they should not be punished for the sins of their masters.
I can see why that might draw the sympathy vote out and lead to a situation whereby the blame is more accurately directed thus letting you off the hook.
Unfortunately, it doesn't work that way. You are using the emotional leverage of the innocents' pain to argue that the system be allowed to remain as is. Sorry, but that cannot be allowed to happen. We must rid ourselves of the Debt-based, fiat, Fractional Reserve Banking system which is inherently self-destructive taking us with it.
The fact that you choose to work for the one of the organisations behind this debacle cannot be used as a patsy to allow it to continue. That may sound harsh but it is but a drop in the ocean compared to the destruction and pain that your masters have inflicted on the population of the world by the use of their fraudulent system.
Your case is based on the same premis as the Nazi defence at the Nurenberg Trials which was thrown out on the basis that you have to take some personal responsibility for your actions.
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re. 214
Exactly. And they have been supported using tax payer money - my money. Which is completely inappropriate for industries in long term decline due to the cost base. Using tax payer money for the bank bailout isnt much better, but the big difference is that it is (hopefully) short term, and incorporates ownership and some return on the tax payer investment.
Subsidising manufacturing in perpetuity, as you suggest should have happened, would not in my view have been a good use of my taxpayer pound
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This blog over the last few days has been full of political vitriol and witnessed the tired old fight of whether it was the right or the left which caused the problem, when it started and who made it worse.
Whilst the current incumbent is no friend of mine, they, and their predecessors, can all be categorised into the same group. That group is the collection of self-serving, arrogant, ignorant, ne'erdowells who, instead of serving the public believe that the purpose of the public is to serve them.
In that regard they operate the machinery of the debt-based, fiat, Fractional Reserve Banking system with its built in inflationary principal for their own benefit. In a deliberately inflationary model the people who get to spend the new money first have the financial advantage over the rest since they are spending the money at the old, higher value. By the time it filters down to you and I the devaluation has taken place and the spending power of our pounds are reduced commensurately. As usual the heads that get first option feed at the trough are the politicians cronies, PFI crooks and Defence Company megalomaniacs.
The enemy here is not left or right. The enemy is anyone who complicitly allows and promotes this system's continuance. By engaging in party political squabbles you fall into the distraction trap and thus you miss the elephant in the room. In some cases the diversionary tactic is entirely deliberate to that very end.
Spend your efforts fighting the elephant and not the annoying and distracting flies.
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Smart move by the government
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#218
But the taxpayer having to support a discredited (pun intended) banking system, and their over paid bankers is?...
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Interest rates down...
House Prices UP....
Are we on the magic rounbdabout again.
As sharholders will we now have a share in the massive bonuses this time.
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#219 NorrieC
Well said - There has been far too much of the "how do we get back to the highs and avoid the recession/depression" and not enough recognition that if we don't allow the system to reset itself - a mistake made in the recent past - then we are guaranteeing misery for us all into the foreseeable future.
I agree with you that the whole system has to change and mortgaging my grandchildren's future with this "OPEN-ENDED" bailout just ties us all into this bankrupt system for ever.
They talk of radical ideas - There is nothing radical in capitulation - who has got the new ideas that the world is crying out for.
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#219
Yes but how do we fight the elephant/s?
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And another thing... Can I have a few million to bail out West Ham United? Every other f*cker seems to be getting some
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Can somebody explain to me why the 'financially savvy' Icesave customers receive the full amount, While largely low paid women, who put away £10 a week with Farepak(with no ROI) to stop their fella from frittering it away on horse racing or beer, in order for their children to have a better Christmas were judged less deserving.
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208 what other industry will employ someone with bank manager on their cv
Better they had a diacharge certificate from a loonatic asylum on their CV
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Anyone think Peston and the BBC have gone too far in terms of sensational journalism on the Credit Crunch?
We see the Rock brought down, we see Barlcay's shares hammered today and probably the knife being sharpened for 10,000s of jobs in the banking sector.
I read the Metro today on the Tube and they reckon alot of the hysteria is down to aledged comments made about who turned up for this mornings finance meeting and who didn't - wiping apparently £12B off stock value.
They say 'never preach politics from the pulpit'. I think its high time that the BBC understood the gravity of the situation and the power of media and the internet in terms of informing people rightly or wrongly.
It is also true that the 'Goggle effect' is in play. That is, if I search for it on the web using google - its results and content must be right! The only rule in journalism that I used to be true was make sure you get your facts right before you publish them.
It stuns me, its almost like someone has just understood how banks operate. Let the people who know do their stuff.
Focus on being positive Beeb - were all going to need it as the inevitable headcount reduction commences.
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#226
One was a bank and the other was a 'private' collecting club.
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To post number 19. NatWest (under the umbrella of RBS) is indeed part of the scheme.
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RE: 228 AndyNorthChamp
"Anyone think Peston and the BBC have gone too far in terms of sensational journalism on the Credit Crunch?"
No.
"Focus on being positive Beeb - were all going to need it as the inevitable headcount reduction commences."
Are you really claiming that the meltdown in the banking industry is caused by Robert Peston? Or even the whole BBC?
Let's assume, just for a moment, that we believe this. Suddenly we can solve the whole banking collapse problem quite easily; we just get Robert Peston to run some Pollyanna-ish everything-is-wonderful stories about the UK finance sector and lo all will be well. If it's really that easy don't you think that by now the banks would have clubbed together and slipped him the odd billion to do just that?
On the other hand, maybe, just maybe he's reporting what is actually happening in a rapidly changing world as best he can.
Seriously, which of these two is more likely?
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re #228
Anyone else feed up with all these (ex)bankers and (ex)speculators wanting to shoot the messenger (RP and BBC)? It's understandable though, no one like a 'grass'...
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#141..... the bankers have secretly been the government for centuries!
Why else do you think Blair was rewarded with a $5m p/a part time job with JPMorgan, and after only 7 months from resigning from office!
It's also why it makes no difference which party is in office. They all (I mean both) follow the same secret agenda such as EU expansion, political and economic union, expansion of the single european currency etc, etc.
Where was our promised referendum on the EU treaty?
Look what happened after Ireland voted NO (although they were supposed to vote yes by being bribed before hand with massive EU subsudies). The NO vote is now getting side stepped (read steam rollered) by these shysters.
There is no democracy....its just a sham and a con trick that is being performed by a cabal of 'elite' financial and political megalomaniacs. HENCE THE BAILOUT TODAY.
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#225......I second that motion!
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#224......with mice!
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Have I missed something or have Brown and Darling fallen short of following the German, Irish and Greek lead of guaranteeing all the savings of all UK residents with funds in UK banks? That seems to me to be the first step necessary to encourage people to regain their confidence in the UK banking system. I am sure the multi-billion pound bail-out scheme to save the banks will please the bankers, but I cannot see it stopping all those ordinary people whose life savings are more than £50,000 from hedging their bets and spreading their savings around several banks. Illogical, maybe; time-consuming to go through all the ?anti-money-laundering? process before opening a new bank account, of course; necessary because of the Treasury?s stupidity, certainly! Did they learn nothing from Northern Rock and the public?s concern for their savings? Then it was ?a run on the bank? ? could it soon be ?a run on the banks?? Trouble is where will you put your money then?
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Can you explain what is left in the public kitty after this government injection
so that a proportional representation of the cost to the country can be seen rather than quoting the actual amounts loaned to the banks, I know 400 billion is big but in proportion to what?
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What you are not mentioning is that the taxpayers are entrusting this vast amount of money to the politicians, regulators and bank executives who got us into this mess. Where is their any sense of accountability?
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Can someone explain:
400,000,000,000.00 GBP = 691,213,941,191.54 USD
United Kingdom Pounds United States Dollars
1 GBP = 1.72803 USD 1 USD = 0.578692 GBP
Wow ?.so the smaller economy of the UK requires to bailout UK Banks to the sum in Dollars equal to the USA? Are we in a bigger mess than the USA? :-o
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I cannot understand the collective amnesia shown by the posters in their defence of Maggie. Where were they in the 1980s - on a sabbatical or perhaps at primary school? Look around today and most of the ills in society you find can be directly traced back to the policies of the Conservative administration over the 1979-92 period.
As other postings have stated in recent days, the seeds of this crisis were sown in the 1980s through the monetarist policies of ?Thatcherism and Reganomics?. As a result we are now bereft of a viable manufacturing sector (the manufacturing that does take place is nothing more than an assemblage of components into foreign-based products). We mostly seem to earn our living now by cutting each others hair or working for the public sector, either directly or as consultants/sub-contracted labour. Over the years, the rush to encourage foreign investment rather than promoting home grown industry has led to a deskilling of our workforce, making us extremely vulnerable in times of recession. Now we are told that our investments have been in derivatives and other intangible assets which obscenely disadvantage the poor.
A posting on the 6th October (#50) suggested that yet another academic theory might be our saviour (Elliott Wave Theory which some how combines economics and psychology). But isn?t this the type of thinking that has caused the problem in the first place ? an over reliance on untested economic theories. Both economics and psychology are pseudo rather than real sciences. Proponents of these disciplines would have us believe that the laws that underpin these subjects are immutable when they are anything but. If I drop a brick off a bridge (which I know the height of), Newtonian Mechanics allows me then to calculate almost precisely the time it will take to reach the ground and the speed at which it will be travelling. There is no such certainty with modelling within the stochastic processes of the economics and psychology ? most economic models are a collection of, poorly calibrated, linear econometric equations which attempt to measure the immeasurable.
This is fine whilst such endeavours remain within the confines of academia, but when such theories escape into the real world of social and economic policy making, then it is time to worry. We can all remember (well maybe some of us can) Mrs Thatcher with her economic guru Professor Walters in tow and their monetarist mantra - presiding over the run down of the mining, steelmaking and shipbuilding industries, selling off the ?family silver? in terms of the public utilities and at the same time heaping generous praise on the recently unregulated City.
In the field of cognitive psychology, a Labour Government (!!!) astonished our economic competitors in the immediate post-war period by basing its secondary education policy on a simple linear equation which arrogantly and ridiculously purported to measure innate intelligence and to express it as a single number (IQ: the so called intelligence quotient) ? no matter that this equation had been developed by academics with known eugenic tendencies and who therefore had brought a certain amount of social baggage to the task. As a result the full economic and technological potential of a generation of school children (10+ million) ? mostly from the working classes - was sacrificed. In the 1970s it was discovered by Kaman in the US that this theory had been based on both fraudulent and synthesised data, the final insult!
So let?s close those palaces of opulence at our universities called ?Business Schools? and convert their use to the teaching of the real skills needed to survive in this technological age namely: the natural sciences, engineering and modern languages. And in future, governments should not be too eager to hang onto every word of the economic shaman, or to surrender the task of the financial governance of the country to the multi-nationals and the City men. And above all, let?s teach our kids to be less acquisitive and to value morality, probity, parsimony and human relationships above the mere possession of money.
I found it interesting that the poor Irish banks have been getting it in the neck within this blog for daring to act as capitalists in attempting to woo investors from Britain by offering a 100% guarantee on savings; for it was in Ireland only 160 years ago that the strict adherence to the economic orthodoxy of the time by Charles Trevelyan which directly contributed to the greatest calamity ever to befall peacetime Western Europe, with a million deaths through starvation and the enforced emigration of a further two million souls from Ireland.
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The CEO of Lehmans was paid $300 million over the last 8 years. Why can't he and the other 'bankers' provide some of the funds required to bail out their business ?
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THE UNTOLD STORY OF THE COLLAPSE OF KAUPTHING SINGER & FRIEDLANDER ? ISLE OF MAN SUBSIDUARY
Since the collapse of KSF A lot has been written in the media about how both the UK and Icelandic government are dealing with it and that both governments have promised full compensation for their depositors in their respective countries. Very little has however been reported about the fate of the depositors in the Isle of Man subsidiary of the bank. The Isle of Man authorities have just voted to increase the maximum compensation to £50,000 for future bank insolvencies. It has still not been decided whether this should also work retrospectively for the Kaupthing case. However what is not commonly know is that it doesn?t really matter what sealing they put on the compensation since the Isle of Man intend to finance this system directly from the largest of its 37 banks or so which from now on will each pay £500,000 annually into the scheme. A little math quickly reveals that it will take decades if not centuries just to pay the minimum compensation out due to the total size of the deposits in KSF IOM. Hence the IOM compensation scheme is in reality just a smoke screen intended to fool depositors into thinking IOM is as safe as the UK and avoid a bank run in the IOM. Added to this problem is that the funds from the Isle of Man KSF subsidiary seem to have been used to prop up both the UK branch and the main office in Iceland as several reports indicate money was diverted from the KSF Isle of Man subsidiary in the days before the collapse.
The only conclusion I can draw from this is that we the IOM depositors are likely to have financed parts of both countries rescue plans and legal actions are likely to follow from this.
The other consequence of this is that many people are likely to wake up and realize IOM is not a safe place to deposit funds. This may then in turn cause a run on several other IOM banks thereby triggering more bank collapses.
You may think why should I care, there all just rich tax evaders. This is however not the case since most of the depositors in KSF IOM are regular people like me. I personally was forced to move my account out of a UK mainstream bank when the bank refused to renew my VISA card after I had to move abroad to find work because I no longer had a UK address. My intention was to move back to the UK next year and buy a house for my hard earned money but this obviously has to be put on hold now. Thus this is a story of regular people having been caught up in something completely out of their control and with no safety net provided unlike all the other KSF UK depositors.
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This is all well and good but as a Northern Rock customer I'm amazed at the Governments hypocrisy. Last week they were complaining about the banks not lending to each other and that this was paralysing the money markets and hence driving us towards recession, when at the same time what in affect is their own bank, Northern Rock were refusing to pass on rate cuts. By all means pass on £40 billion of tax payers money to help the banks but lead by example Mr. Brown!!
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By the time you complete your vetting one would not know where one's comments were and most of it may no longer be relevant.
Thanks but no thanks, so I won't bother again.
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When I applied for my 1st driving License, Passport, etc - I had to have the Forms signed by
A Priest,
A lawyer,
A Banker,
These were the Professions that we were told we could TRUST.
We the tax payers paid for their education so that they could steal, cheat, and abuse us -
No wonder the people have lost faith in their Government.
What a JOKE
Whatever happened to Legal, Honest, and Decent values.
Great Britain and others have been sucked into following the Corrupt Business Practices of The USA whose mantra was always WIN at ALL COST - We are now getting what we deserve.
SleepyDreamer
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Robert Peston recently suggested that I could buy £10 notes for £6.60 by buying shares in HBOS which were about to be bought by Lloyds TSB. Who do I sue for my losses?
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There are several issues/questins that will surface over the next few days.
1. Where is this money coming from exactly? How come it wasn't there for pensioners, council housing etc etc , then when the fat cats need it it magically appears. Where exactly did it come from?
2. Why is it in dollars? If it's UK money for UK banks why is it in a foreign currency? What if the exchange rates alter dramatically? What did we use to buy this foreign currency?
3. Is the taxpayer gurenteed to at least break-even over this even after inflation is accounted for? How long will it be before the money is back in the Governments (our) hands? And can we then have it spent on us please?
4. Why are these banks being 'forced' to lend at 2007 levels? Surley that will re-inflate the housing bubble and lead to more unsustainable unsecured consumer debt which was the major cause of this to start with?
5. If the banks/lending houses off-sheet borrowing is to be brought onto the books, will the Government be doing likewise (ie leading by example).
6. Can we afford to plough more cash in if this isn't enough? If so how much, for how long and from where. Already in the US, of the usd700BN plan they launched a couple of weeks back they have already pledged nearly usd800BN and it is widely believed they will reach usd1TN by the end of this month. There must be a theoretical limit to all of this otherwise money will cease to have any value in the real world once culminating point is passed. If we just keep pouring it in then surely eventually we get hyper-inflation.
7. Why were working people shafted over FarePak, but are expected to belt-tighten and dig deep for bankers?
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Gordon and Alister had very little option to come up with a solution any different.
Trouble is who is going to go into an estate agent a buy a property today.
Common opinion is property prices are going to fall so new buyers are waiting in the wings.
Even when new buyers make their appearance on the stage on debt they are going to be very watchful indeed and wont take any external prompting or cues.
To insist on 2007 lending levels sounds a bit of a mystery as lower property prices,a higher deposit and sceptisism makes such a target even greater.
More of us are going to pay off our debt and when that is achieved start saving in earnest.That is if we have anything left over by any most likely impending tax rises.
A rise on the stock markets will appear short term but I suspect falls will soon be the mood of the day
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Mr Peston!
What he clearly doesn't appreciate is,
1. The money has to be borrowed from SOMEWHERE. Britain simply doesn't have the money to pay for such a deluge of borrowing, because they can't even afford 2Bn for the armed forces to have proper bullets and decent helicopters to avoid our soldiers dying in Afghanistan.
This borrowing is therefore from the BANKS.
The banks were expecting this, and will now charge interest in order for the governments to lend it back to them.
2. The Labour government made a huge success of running the last nationalised industry. This was called British Leyland, and basically the money they borrowed to run that, was used to make duff cars, in the end which no-one wanted to buy.
This time your government is merely borrowing money in order to produce duff money, as the last thing the UK in its final stages of decline has produced as a specious idea to sell to the rest of Europe.
3. Your data is safe in their hands!
One day after another PC data disk is lost for the UK army...
- in one fell swoop the new Labour government has got it all it wanted without ever having to ask for it.
As a nationalised bank will have no scruples about snooping on your personal finances, then in the same week the government announces the (yet unfinanced) ID card and national database, then the moment you present that at a bank, you are effectively logging into your local government office.
Imagine?
On sick leave? Sir?
No sir, we have proof you were fit enough to go to work because you went to your bank and used your ID card 7 times on that day AND bought gas to fill up your car....
One small step.........ONE GIGANTIC jump forward of the police state...even if they are stupid enough to bank in Iceland...
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Will it be an extraordinary day when Robert Peston does not use the word "extraordinay"?
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