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Banks ask chancellor for capital

Robert Peston | 07:00 UK time, Tuesday, 7 October 2008

When Treasury officials started working overtime last week on an emergency plan to inject new capital provided by taxpayers into our banks, the chancellor wasn't sure how our banks would react.

Would they proudly tell him to hop off?

Or would they put out the begging bowl?

Alistair DarlingWell last night a trio of the UK's biggest banks - Royal Bank of Scotland, Barclays, and Lloyds TSB - signalled to Alistair Darling that they'd like to see the colour of taxpayers' money rather quicker than he might have expected.

According to bankers, these three were disappointed that at a private meeting last night with Darling, held at his request, he didn't present to them a fully elaborated banking rescue plan.

One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.

On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital.

But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened.

Also at the meeting were Mervyn King, Governor of the Bank of England, and Adair Turner, chairman of the Financial Services Authority.

And although the other big banks were represented, it was the chief executives of Lloyds TSB, Royal Bank of Scotland and Barclays - respectively Eric Daniels, Sir Fred Goodwin and John Varley - who formed a tightly-knit caucus and gave urgent focus to the discussion.

The three banks estimate that they may need around £15bn of new capital each, with £7.5bn paid up front and a further £7.5bn guaranteed by the Treasury that would be delivered if it became necessary.

Current rough estimates are that the capital injection could be as much as £50bn in total for all British banks.

As yet however, there has not been any detailed negotiation with the Treasury on the amount of taxpayers' money that may be invested in them.

There is no precedent in the UK for taxpayers to take such significant stakes in banks.

The Treasury has been working on a rescue plan along those lines, as I disclosed in my note on Saturday.

The three chief executives will talk again today, so that they can establish a common position, in advance of any further negotiations with the Treasury on a rescue package.

The Treasury's current thinking is that it would acquire preferred stock in the banks, that wouldn't carry voting rights. But it would also take warrants over the ordinary shares, which is a device for ensuring that taxpayers would benefit if the banks' share prices were to rise.

However, the chief executives also told Darling that a capital injection of this sort would not be enough to stabilise the banking system.

The steady withdrawal of funds by other financial institutions, the collapse of the wholesale funding market, remains a serious problem - which probably can't be solved by the Bank of England continuing to provide ever greater loans against an ever wider range of collateral.

In the next couple of years, many tens of billions of pounds of asset-backed securities have to be paid off or redeemed by British banks. So the banks want a commitment from the government that it will lend to them, whether or not they have collateral of the sort demanded by the Bank of England, to allow them to redeem these bonds.

The banks are not looking for a formal guarantee from the Treasury that it will protect wholesale depositors, which is what the Irish government gave to Irish banks, but they would like a formal pledge that it will fill any funding gap created by the steady ebbing away of wholesale funding

If such a commitment were not forthcoming, confidence in one or more British banks may continue to ebb away, to a potentially lethal extent - or so the banks fear.

Comments

Page 1 of 3

  • Comment number 1.

    What's going to happen to the government's credit rating? Will interest rates end up going through the roof causing an ever bigger collapse, just down the road to suit the politicians.

    Hairy times indeed.

  • Comment number 2.

    And we just all admit these banks are insolvent Robert? All this talk of on paper they are fine is rubbish - as you pointed out at the weekend there is a £625 billion funding gap - for any other business we'd all agree they should be made bankrupt. This £625 billion is going to have to come from taxpayers and is likely to bankrupt this country in my opinion.

    Iceland is showing the way, investors will run away to somewhere safer and won't want sterling.

    Of course all that is dependent on the whole financial system not imploding which seems like a realistic outcome right now.

  • Comment number 3.

    I wonder if we could hypothesise how the current banking (effectively over-valued assets) situation would develop if it were allowed to work itself out without intervention by governements or use of taxpayers' money?

    Opportunities abound.

  • Comment number 4.

    i see yet another call to lower interest rates. If the banks are not lending and have problems with liquidity what difference would this make? the banks would probably not pass on the cut in order to prop up their margins. As it was low interest rates that caused the problem, how about putting the rates up, so they offer a ""real above inflation rate. money would flood into the banks solving the liquidity problem at a stroke. then again i may be missing something, but what precisely will a cut in interest rate do?

  • Comment number 5.

    I am disgusted and frustrated that as a British Citizen, I have no voice as to how my taxes are used. I do not agree that the nations taxes are used to bail out big wig fat cats who really should suffer these consequences of their greed. I would prefer that the nations taxes are used to save the lives of the people in our DIRTY NHS HOSPITALS. Its amazing to see that saving money is more important to the Government than saving lives.

    Does the nation not have a voice, or is Gordon Brown just deaf?

  • Comment number 6.

    We all need to realise that our very monetary system is nothing short of a pyramid scheme.

    One might reasonably ask, "where has all the money gone"?

    The fact is, much of it has been sucked into the parasites which are the banks leeching wealth from our economy.. and now the merry go round has stopped, the banks are being caught with their trousers down. The whole fractional reserve banking system is an Enron style obfuscation.

    http://www.silverbearcafe.com/private/moneyasdebt.html

    Robert,

    I'm getting continually annoyed that neither you, nor the BBC are broaching the subject of how our very monetary system works, and how fractional reserve banking works (and its inherent unfairness - it is a pyramid scheme).
    Please do a piece on this very important subject during a very important time.

    Thank you.

  • Comment number 7.

    I think this is like 1989 when communism failed but in reverse, time to kick the capitalist establishment out (all three political partys) and replace them with a communist one. Social housing and real jobs that pay real wages for all.
    Also the end for eternal market growth, lets build a sustainable economy which would also be greener for the planet.
    The only question is? can we turn around now, or do we have to go through the pain of a world wat first?

  • Comment number 8.

    Higher interest rates would be great to attract more people to save. The trouble is most people don't have much (if any) cash to save so it would be academic. It would also crush the economy as people would spend less.

    Sooner or later we're going to have to take this bitter pill but no politician wants it to happen on their watch. From an economic perspective it's probably best to take the pain so we can all move forward afterwards, but from a political perspective lets just keep things ticking over so we can blame it on the next guy.

  • Comment number 9.

    you do have a say in how your taxes are spent...its called a general election.its a pity only 4 in 10 bother to vote.

  • Comment number 10.

    What should the taxpayer get for his money. An equity stake in the Banks?Heaven forbid. The Government should nationalise the land held by the banks (not irrevocably) and lease it back over a 100 years on terms that make economic sense now. Henry George. Your day will have finally come. The land should belong to the people!

    PS Beware forecasting doom! It will be self-fulfilling if you do.

  • Comment number 11.

    #5 groovystewboo

    The UK apparently elects by democratic process a government which they invite to run the country on their behalf.

    The British citizenry do so without expectation or legal requirement for the government to refer back to the population at large, through refernda or other means, for discussion, direction or agreement on how it implements the various and individual policies is develops and implements in keeping withthe mandate it receives through the democratic election process.

    If you voted. It's your fault.

    If you didn't vote. It's your fault.

  • Comment number 12.

    The important piece of news for me in the article is that:

    "On paper, Lloyds TSB, RBS and Barclays don't have a pressing need for additional capital.

    But they have become concerned that they are being weakened significantly by investors' perception that they are short of capital and their balance sheets need to be strengthened."


    What this indicates is to me is that these banks are fundamentally healthy and
    any problems facing these particular banks is almost entirely one of lack of oil on the wheels of the world's banking system.

    So, once Governments manage to address the issue of confidence in the world's banking systems, which is something they seem focussed on achieving whatever the price, then they will not have a problem and the winner will be the UK taxpayer who will benefit from the warrants as the share price recovers.

    Personally I think we will look back on the last few days and, in hindsight, feel good about the fact that at the darkest hour, governments around the world worked together, albeit not entirely in harmony, to keep the world's economic system going and that the bottom line wil be increased confidence in the system.

    NOTE: I am only referring to confidence which will result from the response to the problem. It is not intended to condone, nor should it detract us from addressing the issue as to, how we got into this mess and why the actions taken by Governements around the world was necessary.

  • Comment number 13.

    Anyone for trickle down now?

    Anyone for attending the funeral for monetarism?

    Anyone for a handful of geeks fidling with interest rates to manage the economy?

    Anyone for a Prime Minister who spent 10 years 'managing' the economy?

    Anyone for popular capitalism now?

    Anyone for confusing free enterprise with free markets?

    Anyone for trusting businessmen and politicians ever again?

  • Comment number 14.

    As I'm on a roll - here's where the money would be better spent.

    Reduce the price of Oil.

    Lower income families would be able to afford to heat their homes, run their cars AND pay their bills (especially their mortgages) far more easily.

    Repossessions/foreclosures would reduce, over-valued debt would stabilise, cash-flows (liquidity) into lenders would increase and even with the deeply flawed FR banking system, this would still lead to a quicker trunaround in current cicumstances than simply giving banks taxpayers money directly.

  • Comment number 15.

    As ever, when it comes to serious decision making, HM Gov is dithering and prevaricating.

    Fact 1: The banks in the UK are obviously insolvent.

    Fact 2: Inflation, as in the real index is running at around 21%

    Fact 3: most uk industry is in recession and business is falling away by the hour

    Now is time for a radical re think.

    Nationalise all of the banks and get rid of hundreds of fat cat directors and managers who have milked the system and us for years.

    Streamline the banking system and kick the academics out of the Bank of England and replace them with businessmen.


    Run the Nationalised banks until they are profitable and all of the shady systems and fat cat fiddles are dead and gone then sell the banks off in a massive flotation.

    Put in very heavy regulation and controls in every aspect of financioal services.

    Act now.

  • Comment number 16.

    As ever, when it comes to serious decision making, HM Gov is dithering and prevaricating.

    Fact 1: The banks in the UK are obviously insolvent.

    Fact 2: Inflation, as in the real index is running at around 21%

    Fact 3: most uk industry is in recession and business is falling away by the hour

    Now is time for a radical re think.

    Nationalise all of the banks and get rid of hundreds of fat cat directors and managers who have milked the system and us for years.

    Streamline the banking system and kick the academics out of the Bank of England and replace them with businessmen.


    Run the Nationalised banks until they are profitable and all of the shady systems and fat cat fiddles are dead and gone then sell the banks off in a massive flotation.

    Put in very heavy regulation and controls in every aspect of financial services.

    Act now.

  • Comment number 17.

    Well I guess this "unofficial" press release will cause yet another run on bank shares today with the big three leading the way ...

    I'm all in favour of reporting the news, but I can't help but wonder if a line is being crossed here ... this will in most probably make / create / trigger todays news of yet more falls in bank shares.

    What would have happened to the stock prices of theses banks if this blog had not been written?

    We all recognise that free speech is permitted ... and we all also recognise that shouting "Fire" in a crowded theatre is not ... which category does this fall under?

    However, if this info was already in the public domain, then its just repeating that info ... or is this new oxygen for the raging fire of panic

  • Comment number 18.

    Robert,
    I have been following everything very closely and find your blogs informative,factual and very quick after the events.
    Do you have any predictions based on gut feelings or is that not in your portfolio.
    This cant all be a few people not paying their mortgages after all.
    In Turkey people are emptying their accounts as I speak so your next headlines will be about this economy mark my words.
    Panic or sensible Turks?????

  • Comment number 19.

    It seems as if a massive injection of state money into all the big banks is now inevitable. In which case, I would like to see the government take a 100% equity stake in these particular companies ... full nationalisation, in other words, at a price close to zero.

    Michael Foot proposed all this back in 1983, of course. Ahead of his time, wasn't he?

  • Comment number 20.

    This is commonly called 'Sh*t or get off the pan'

    About time the government was put on the spot for its dithering ways; they are doing untold damage to the financial system.

  • Comment number 21.

    #6 Why keep going on about fractional reserve banking as a fundamental problem?

    Yes it is a problem, but only because the glue in the system has hit the velocity of money.

    The system works like this.


    1. a Bank lends you £10,000
    2. you buy a car
    3. The car manufacturer pays its suppliers and its employees and puts the rest in the bank.
    4. Its employees buy food from a supermarket and spends on other things
    5. This process (3/4) is repeat in both the supplier company and in those buisinesses where the employee spends its money.
    6. As a result the money the bank lent you finds its way back to the bank through the accounts of other people.
    7. This money is then available to lend to me to also buy a car.

    The issue is how quickly the money goes through this cycle, namely the velocity of money.

    It practical terms it is analagous to the fact that water entering the upper reaches of the Thames is drunk by six people before it reaches the sea.

    Tell me, what is FUNDAMENTALLY wrong with this system?

  • Comment number 22.

    It's not just that banks that have been irresponsible, to quote Mr Brown last night
    "And where there has been irresponsibility we must now have instead transparency, integrity, responsibility, good housekeeping."

    The problem is that he doesn't recognise that governments that spend when they cannot afford to pay back are as irresponsible as the banks and their over lending.
    Definitely a "Sir Richard Mottram" moment.

  • Comment number 23.

    "Peston's Picks" seems a very optimisitic name for a blog today...

  • Comment number 24.

    Are we permitted to ask, who is feeding you with these 'insider' 'fresh from the meeting' updates? I begin to wonder whether your fly on the wall journalism whilst undeniably insightful, that your mole's leaks simply seek to achieve the selfish objectives of the very same people who contributed to this catastrophe?

  • Comment number 25.

    reduction in interest rates is a waste of time and caused the problem in the first place.the problem with the western world is that we are all greedy we want more and more for less and less.everywhere you go in uk you dont see poverty you see decent cars people living in expensive houses, most of it on credit and the expectancy of increased growth .well the reality check has arrived .

  • Comment number 26.

    A couple of sayings come to mind:-

    1) You can't buck the market

    2) If you can keep your head when all about you
    Are losing theirs and blaming it on you;


    Thatcher and Kipling - well if Mr Darling follows these and doesn't react to "Corporal Jones types" wanting a couple of Trillion Pounds spent to react to todays bad news then he can start planning a long term strategy for the British economy.

  • Comment number 27.

    At last, the first signs of concerted action. Yes, on paper these institutions are fine. However confidence is the great devaluer. Recapitalisation is the answer, combined with a good rate cut (see Down Under) to get confidence back and money moving. We have nothing to fear but fear itself has been said many times since FDR. Truer today than ever. Let's not be smug or anti-bank; anti-Gordon/Dave/Mevyn. Look forward and let's get moving again.

  • Comment number 28.

    'One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.'

    These 'men' should have been on their knees to Darling and King. They obviously know no shame. I only hope the government have made this bailout conditional on their 'employment' contracts being terminated immediately (without 'compensation') on receipt of the first payments.

  • Comment number 29.

    I think most people are missing the point on 'confidence'.

    The probelm (as reported) is not consumer confidence in banks, it is inter-bank confidence.

    If banks don't trust each other then who are we to say whether they are right or wrong?

    The solution is in their own hands -- start trusting each other (if they are, indeed, trustworth). If they don't trust each other then why on earth should the taxpayer trust them?

  • Comment number 30.

    What an embarrassment these banks are. They are a danger to ordinary people and to the country.

  • Comment number 31.

    Take radical action.

    Nationalise all the banks now - take the hit and accept that the cost of taking this action will be to devalue sterling.

    Lowering interest rates is pointless - if this current credit crunch has done anything, it has educated more of the population that BOE interest rates are virtually meaningless when it comes to how much they pay on their loans and mortgages. Nowadays, everyone is an expert on LIBOR...

  • Comment number 32.

    If the "global financial system collapes" (a much-used phrase right now), what exactly happens to me ("the man on the street")? Do I get paid? Can I draw cash? Can I use my credit card?

    I've just listened on the Today Programme to a trader in Frankfurt say that the odds on a collapse of the global financical system exceeds the odds on a rescue. Oooh er.

    Then, enter Sir Philip Green who says (I paraphrase), "Cheer up .... businesses will keep trading .... people have jobs .... there isn't really a problem .... get on with it".

    Who's right? And, back to my first question: if the system (or my bank) fails/collapses what is the direct effect on me and over what period? Is Sir Philip right ... it doesn't much matter because we just carry on going about our business. It all seems a bit bizarre to me.

  • Comment number 33.

    i see another way out....lets see the whole system collapso, everybody on a level playing field(thats a new term thats come in)and pay the real money to the real people who do the real jobs.the fat cats can get to become thin cats and do some hunter gathering!!!

  • Comment number 34.

    Robert, I understand that you have to report the news and tell us what is happening, but REALLY do you have to be so dramatic!! STOP using words like "collasping", "collision" and so on and so on........YOU are helping to cause a panic! I have a lot more than £50, 000 in savings and shares and I am quite prepared to ride it out. YES, things are terrible at the moment, YES it is worrying and I am not being unrealistic about he trouble we are all in, but if you and your other colleagues continue to panic and dramatise your reports it will become a self fullfilling prophesy and YOU will help to start an even bigger panic than there is now!! PLEASE STOP IT!!!

  • Comment number 35.

    It is important that the Government cannot exert political pressure through this mechanism, given the painful process that the banks need to through (ie. trimming their balance sheets, under supervision by the FSA and Bank of England).

    Lack of voting rights is not enough, the nature of the Governments exit from this arrangement must be preordained, and out of the hands of Messrs. BaD

  • Comment number 36.

    So the end of the world hasn't come yet. How disappointing is that. I was so much looking forward not having to hear those creepy voices of the debt junkies any more, calling for rate cuts (which wouldn't work anyway).

  • Comment number 37.

    A few months ago Messrs Brown and Darling were saying that the economy was well placed to avoid serious impact...

    How wrong were they!

    Thousands of jobs have been lost already and probably hundreds of thousands of jobs are going to be lost. We keep getting told this is a global problem, isn't it about time someone realised that a global problem can't then be solved by individual countries, this problem needs all the major economies of the world to act together.


  • Comment number 38.

    Just how much of the taxpayer's money will be going into Barclays purchase of Lehman assets in this process? Shouldn't Barclays be forced to sell their investment banking assets before coming to the taxpayer for a handout?

  • Comment number 39.

    Icesave has shut its website down this morning. I can't get in to my account to deposit or withdraw money.

    The Icelandic governments steps to shore up its banks has obviously been a huge success then... or maybe not.

  • Comment number 40.

    yes markus i agree, the debt junkies are back and doing ok thank you very much...lets have interest rates at 0 lets borrow money till it comes out of our ears..lets live for today, lets see the house prices go up till you pay a trillion pounds for a 1 bed flat..who cares..... this is the crazy scenario that caused all these problems in the first place.

  • Comment number 41.

    One of the reasons the banks do not trust each other is they still have not been honest about the amount of debt they have accrued from the sub-prime fiasco. They have the capital but do not want to lend it to each other. Why should the tax payer bail them out?

  • Comment number 42.

    As we have an economy based largely on house building and selling money to each other it's not surprising the way things have gone, i am surprised that the tories can even open their mouths over the state of the economy as they were the ones who set us on the road to having a smaller manufacturing base as has happened in the USA. As for interest rates do you really think that cutting even half a point would make any difference in the slightest, if that were to give joe public an extra £50 a month in his pocket what would that do ?. I think interest rates need to be at least what they are, lowering rates just encourages more borrowing and what we need now is more people saving, we have tried the credit route and see what has happened!.

  • Comment number 43.

    isn't the problem that Darling isn't so much Dr Dolittle and Dr Do Nothing. apart from repeating the mantra 'we'll do whatever it takes' - what has he done. I suppose inaction speaks louder than words

  • Comment number 44.

    @21

    The fractional reserve system works ok on the condition of infinite economic growth. Economic growth is tied to availability of energy.

    As we enter Peak Oil we will see the amount of energy available to do work decline.

    Why does fractional reserve banking require continuous growth? Because the £10,000 loan you cite actually costs much more because of the bank's interest. Therefore the bank expects more money back then it ever loaned out in principal.

    The only way to pay this back is to fuel more economic growth through issuing more money (debt) but this all comes to a standstill when we finally realise the fools gold that is infinitely growing economies.

  • Comment number 45.

    # 5 - I'm with you. My wife is a qualified Neonatoal Nurse looking after premature babies. Three are only ever two nurses for 10 intensive care babies! Her unit hasn't seen a dime of all the billions that have apparently been spent on the NHS under GB and here we are now funding billion-£ bail-outs for fat cats with sharp suits.

    # 6 - agree with you too. Come on Robert, if you're doing these blogs for our benefit - please listen to what we need from you! Tell us about Fractional Resenrve Banking - Pleease!

  • Comment number 46.

    Hello Robert

    I have read your blog for a while and whilst I appreciate the fact that you highlight deficiencies in the banking systems, how about a positive blog about the one big bank not currently begging for tax payers cash;

    HSBC

  • Comment number 47.

    How dare the banks try and ambush the government to use significant amounts of the UK taxpayers money to bail them out.
    For too long their relentless pursuit of profit using reckless actions with unfoseeable risks, has put them in this position and to expect the average man and woman in the street to finance their rescue would be laughable in other times.
    The banks have got themselves into this mess and it is them that should get themselves out of it.

  • Comment number 48.

    I do not understand while people are still bleating about the oil price. The wind came out of that bubble a couple of weeks ago. At 135 USD, of course it was unsustainable but it has found levels which are more or less acceptable and downward pressure on the price will continue if demand falls off in reduced economic activity. 85-90 USD a barrel is about right.

  • Comment number 49.

    Without the banking system we are all in the mire. Perhaps we should nationalise more banks then at least the taxpayer reaps the rewards instead of the fat cats who get massive bonuses for being incompetent.

  • Comment number 50.

    The translation service for the House of Congress have had to regretfully announce some corrections to news reports of the House Oversight and Government reform committee.

    Mr Fuld:We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders,"

    This should have read:
    We told the compensation committee what we needed in an email then had a big meal with them where it was voted through--the vote was recorded ..... on a napkin...somewhere...."

    Mr Fuld said I "(take) full responsibility for the decisions that I made and for the actions that I took"

    This should have read instead of "full"... insert "no".

    Finally... as to the remit of the committee...
    " To restore our economy to health, two steps are necessary," he said. "First, we must identify what went wrong. Then we must enact real reform of our financial markets."

    Should read:
    " To restore our economy to health, two steps are necessary," he said. "First, we must identify what went wrong. Then we must cover it up and hope we can start it all up again with taxpayers money asap"



  • Comment number 51.

    Oh dear! What a let down!

    After giving hope of firm strategic action by having the meeting of the EU grandes fromages over the weekend, we waited, with almost bated breath, for our illustrious chancellor to succinctly outline his plan to stop financial and confidence boats rocking so violently in his speech to Parliament yesterday, but all we got was more good intentions.

    All of what happened yesterday could have been avoided if a positive plan had been unveiled, even if imperfect.

    In matters financial as in most of the rest of life confidence and perception matter more than reality, as we all know, or there could never have been a stockmarket at all.

    Plan to save our financial system
    1. Guarantee all savings
    2. lend money to banks on condition that they stick to good rules of lending which are:
    a) don't lend more than 70per cent of asset value
    b) don't lend long and borrow short

    and, so that the perception and confidence return
    i) don't refuse a person with good credit a loan
    ii) re-negotiate terms of bad lending in past so that it turns into good lending
    iii) don't overcharge customers
    iv) look after customers and provide a real service as banks used to

    and when things have settled a little:
    v) put right the PPI misselling without having to be asked
    vi) put right the overcharging without having to be asked


    NM

  • Comment number 52.

    Robert,

    Can you and your contributers help on this. Rather than bail out the market why didn't the $700b go to Joe Public as tax breaks or loans. Everyone gets $n, those with debts have to use their handout towards their debt. Those with money left may chose to: invest in shares, commodities, bank account, property etc or just spend in their local economy.

    A bit simplistic I know but debts get paid meaning banks and other institutions get a contribution to their self made mess. And the rest can increase consumer spending giving the economy a shot in the arm.

    Martin

  • Comment number 53.

    I was watching BBC 1 early this morning and i was sure i heard the reporter say the government might have to use tax credits money. Is this true or have I grossly mis-heard??

  • Comment number 54.

    Surely this report is incorrect - you say the Big three Banks are waiting to see the colour of 'taxpayers money' and then later it's what they (the big three) are going to do for the taxpayer. The only thing that I see is we will be giving them money for their 'businesses' to stay solvent! I agree with another post that interest rates going up would be a good idea as this will draw money into the Banks and solve the 'liquidity' problem (why don't they say they are short of readies).

  • Comment number 55.

    PLEASE RID US OF THE FRAUD THAT IS FRACTIONAL RESERVE BANKING!

    You know it makes sense, don’t be a slave to debt interest all your lives!

    As I have said before......one option we could adopt is the ISLAMIC banking system as model....

    The ISLAMIC banking system is one based on the principles of Islamic law and guided by Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of usury or the collection and payment of interest. Collecting interest is not permitted under Islamic law.

    An example of how the Islamic banking system uses methods of profit/loss sharing to facilitate financial transactions is that for some types of loans, the borrower only needs to pay back the amount owed to the lender, but the borrower can choose to pay the lender a small amount of money to serve as a gratuity. i.e. the reverse of how that fat northern bloke in the Nationwide adverts explains it (you know the one….Xmas party…..glug, glug, glug, glug!).

    Since this system of banking is grounded in Islamic principles, all the undertakings of the banks follow Islamic religious morals. Therefore, it could be said that financial transactions within Islamic banking are a culturally distinct form of ethical investing. There is no division between the spiritual and the secular in this type of socially responsible investing.

    I’ve read in the press (The Daily Mail 13.09.08) that we are becoming an Islamic state in any case….so why don’t we just adopt it sooner rather than later!

  • Comment number 56.

    I sympathise with people with savings in the banks(i wish i had some).but does it not make sense to sit tight with it...no bank ,in effect will go bust in europe, the system will not allow it. I would say long term invest in property there will be some bargains on the market pretty soon.

  • Comment number 57.

    The contrast with Belgium's remarkable. Even the Belgians, hardly the brightest light in the financial firmament, have sorted out their problems with Fortis and Dexia inside a matter of days, and have done something to keep the small shareholders happy into the bargain, realising that there's a fundamental difference between a pension fund and Joe Bloggs, who invested in something he thought was safe as a bank as he couldn't keep all his dosh in the bank, who gets at best a comparable return in dividends to his bank deposit interest, and often worse, in return for a risk which has now hit him hard.
    By comparison, the UK Treasury knocked off for the weekend, the banks are imploding through lack of leadership in the government, and even worse, lack of any really new ideas. Simply rehashing the Lamont years is nonsense, we need joined-up thinking of a basic nature at an international level, and we're not getting it.

  • Comment number 58.

    The City sought the freedom that Margaret Thatcher gave them in the 1980s - complaining about the heavy hand of the state. But suddenly the ones who've made millions in bonuses are demanding the state intervene and shore up the economy and rescue it from the fiasco these highly paid 'Masters of the Universe' have created. Talk about having your cake... For all their 'intelligence' and needing to be paid huge salaries to maintain competitiveness it's clear that most of them have no idea what's going on or how to control money (and I mean money, not this figment of their imagination created through fractional reserve banking!).

    The heads of all these organisations that oversaw the creation of this chaos are obvious by their absence - where are they all? On their yachts in the Caribbean, or in countries that don't have extradition treaties?

    Jobs for the boys indeed - perhaps we need Maggie back to break the power of the inner City ring of gamblers with our futures - just as she did with the miners.

  • Comment number 59.

    If the banks want more money, they should offer better interest rates to savers. If the government wants to help, they could abolish the tax on savings.

  • Comment number 60.

    And for those who don't understand Fractional Reserve Banking - can I suggest you watch the film The Money Masters http://video.google.com/videoplay?docid=-515319560256183936 - which makes clear that state support for the banking system in this current situation will further empower those who least deserve it.

  • Comment number 61.

    #44

    "Why does fractional reserve banking require continuous growth? Because the ?10,000 loan you cite actually costs much more because of the bank's interest. Therefore the bank expects more money back then it ever loaned out in principal."

    This is plain nonsense. What matters is the total amount of credit created. The bank is only an itermediary. If the lender (via the bank) takes the interest out of the bank and uses it it buy something, money is reduced again and you are back where you started. Hence, as long as the interest rate is properly governed and effective, the total amount of lending (and re-lending of interest) stays stable.

  • Comment number 62.

    The monetary system is a pyramid scheme with its full weight resting on its point.

  • Comment number 63.

    ive a feeling that thatcher wouldnt want to come back!!! shes done all right thank you very much......and the privatisation of the railways!!! what was that all about!!!

  • Comment number 64.

    If we are going to have to put taxpayers' money into the banks, perhaps the best way to do it would be to invite any bank that thinks it needs the money to make a deep-discounted rights issue, to be underwritten by H.M. Treasury.

    That gives existing shareholders the opportunity to stump up more cash, or see their stakes massively diluted if they don't. If the rights issue shares are left with the government, at least it gets them at a bargain price.

  • Comment number 65.

    3, 5, 6, 44, 45 I'm in agreement with you all. We must be told the truth about Fractional Reserve Banking. But 21, I disagree with you. The trouble with FRB is that it's ultimately unsustainable as it relies on continued growth. If that growth had been measured then it would have been sustainable for much longer than the present time. But because of rampant greed within the ethos of bigger, more, faster, where those that have financial power want to rake in as much as they can con out of the system, without a care in the world for the well being of the majority, then it's doomed to fail and is in no way sustainable. We are at that point now and the system has got to fundamentally change NOW.

  • Comment number 66.

    #22: What is fundamentally wrong is that the banking system has manufactured new, novel and very high risk ways of trying to make more and more money.

    Their profits over the last few years have been obscene with their lending policies which have allowed people to borrow money they can't repay when times get slightly tougher (which naturally happens in a cyclical world economy) have been the foundation of their current woes.

    If, and it is a very big if, the tax payer bails out the banking system it must only be done alongside a root and branch review of the banking system and significant controls put in place to curb their excesses.

    Perhaps the executives and shareholders of the 'Big Three' who seem to want taxpayers money to 'oil their wheels' (and make a profit!) would like to plough back in some of the money they have made.

    Or perhaps some of them want to talk down their shares in order to buy them cheap and compound their economic greed.

  • Comment number 67.

    The banks want a guaranteed access to money yet do not appear to want to offer any security. Funny, that doesnt sound like the banks I know. If cash is king I hope the taxpayer gets only the very best deal for their money.

  • Comment number 68.

    Another spread of rumours??

    When is this spineless government actually going to do something? We need action NOW.

    Also the FSA must sort out the rumour mongers who are profiteering from their illegal actions. These are the very people who were cashing in on short selling and made a killing out of the NR Fiasco.

  • Comment number 69.

    I have become increasingly concerned by the apparent lack of 'backbone' shown by the politicians in dealing with this crisis. While I acknowledge that something should be done I feel that to effectively give taxpayers money to the banks would be foolhardy in the extreme, unless the treasury can show us, the public, that they are going to recoup that money at some point in the near future (- with interest, I might add).
    I would also like to point out that it was alo reported within the last fortnight that the Bank of England and other national banks in Europe have pledged money, in the order of billions of euros to 'tide through' the banks. Surely, it is not necessary to provide yet more to the banks of Britain when shares in RBS have risen this morning.
    One final thought. This should looked on as a lesson: That regulation has failed and that over the coming months and years, the laws regarding finance and mortgages should be completely overhauled so that regulation is strengthened. The banks should be made to feel their responsibilities, and should made to act accordingly.

  • Comment number 70.

    Treasure officials, work, overtime ?? What an earth-shakingly novel idea !!

    "There is no precedent in the UK for taxpayers to take such significant stakes in banks."

    Robert, how do you define "significant" ?? Is 100% "significant" ?? Remember NR ??

    So the "Gang of Three" has spoken !! I wonder what the fourth is doing ?? Sniggering into their nice cup of Oolong tea, perhaps ??

    What price Alex Salmond's contention that Scotland is a world class financial centre when both HBOS and RBS come begging to the central government for more capital ?? Perhaps the Scots have sewn up their sporrans even tighter and with Kevlar threads just in case....

  • Comment number 71.

    Lets not give the banks a penny until the resignations of Messrs Goodwin, Varley and Daniels along with their boards have been submitted and accepted.

    We must not reward these people who having behaved so disgracefully in the past ten years or more are now are sucking the life out of small businesses by making them pay inflated interest rates.

  • Comment number 72.

    It's time to have strong vetting processes for "businessmen", because of the damage they do. We wouldn't normally let an ice-cream van driver fly a 747, would we? So why let young yuppies run banks?

    "Unforseeable global turmoil" seems to be a euphemism for occasions when sly businessmen disguise debt as profit, while making absolutely sure their own "nut" is safe and sound. Wasn't that the story with WorldCom and Enron too?

  • Comment number 73.

    What's the difference between Alistair Darling and Norman Lamont. Nothing really.

    What's the differnce between Robert Peston's reporting and Private Fraser from Dad's Army. Nothing, as both think we are all doomed.

  • Comment number 74.

    Why can't we just borrow direct from the BoE and let these greedy bankers and their broken banks fall on their swords?

    If Lloyds feels it has enough cash to buy up Leymans, then I resent handing it any taxpayer money!

  • Comment number 75.

    # 1

    I doubt injecting £50 billion into the banks will impact on the UK’s credit rating. In any case, I think there would be strong demand for the bonds that the Treasury will issue to fund this injection. UK pension schemes are systemically short of long-dated bonds to match with the maturity profile of their liabilities. At present they’re getting the exposure they want via swaps with investment banks (which have suffered rating downgrades and insolvency in some cases, so I bet company treasurers would jump at the chance to replace these with UK government bonds).

    # 4

    The call to lower interest rates is to stimulate spending and investment, given that we’re in recession. Will it work? I doubt it, given the disconnect that’s developed between LIBOR and actual market rates. However, the authorities must be seen to be using all the tools they’ve got. I think what we should be looking for is tax cuts, as these definitely would feed through to households and businesses (depending on the specific taxes that were cut). Governments are going to run bigger deficits to minimise the risk of deflation. We know that, courtesy of the suspension of the Eurozone’s Stability and Growth Pact last weekend.

    Incidentally, there’s no need for BoE to put up rates to stimulate savings: BB has been running TV adverts for their 12 month savings product offering 6.7%, for instance. So if you’re comfortable with the credit risk of Abbey/BB, what you want is already on offer.

    # 12

    I agree confidence is the issue, and with it the perception that banks may not have sufficient capital to withstand future losses. Not sure I agree that governments are doing everything they can, though. I’d like to see BoE being a bit more imaginative. I’d like to see them flood the market with short term liquidity, not just £40 billion but, say £100 billion or £200 billion – the bigger the number the better. Why? Well at present we constantly hear that the demand for funds is exceeding the amount offered by BoE. That reinforces the feeling of a liquidity shortfall. However, if they flood the market then, sooner rather than later, we might get an announcement that the auction of funds was undersubscribed, ie not all wanted, and the interest rates banks are prepared to pay is less than BoE was targeting. We then create a feeling of excess, or at least adequate, normal market funding which may then stimulate bank treasurers to review their interbank credit lines and start lending more. It’s all about perception. I have no idea if this would work, but have got to the point where just about anything is worth a try.

    # 24

    RP has told us today that his sources were the CEO’s of the Big 3 banks (HSBC conspicuous by their absence: they don’t need any help). Personally, I think RP has taken the fun out of his blogs, as working out who has fed him the stories was half the fun of reading them. He’s got good contacts in the Treasury and at Nos 10 and 11 Downing Street. And, yes, his sources (and RP himself) have an agenda. My feeling is they want to overstate the crisis so that GB and Ally D are perceived as having done a good job when it is eventually solved. That’s the only way Labour wins the next election.

  • Comment number 76.

    at 07-51 DGAMBLE wrote that this unofficial blog would help cause a run on the market - and has been proved correct.

    With the world now picking up on the irresponsible and incorrect headline from Mr P, the positive start to the days has turned into another route.

    Maybe the BBC should start a blog on the impact of 24 hour "news" reporting on this crisis.

  • Comment number 77.

    All this harping on about Fractional Reserve Banking, appears to be missing the point somewhat. There are issues with FRB in terms of the required exponentiality of growth and it's demands on resources, but this is not the cause of the current crisis.

    Most of the benefits of progress and modern life we all enjoy today are only available due to the growth created through this system - one which has served us well for 300 or so years. And why shouldn't governments support it, after all one of the greatest expectations placed upon them by the electorate is to create economic growth and increased living standards.

    THE PROBLEM with FRB is the way it has recently been manipulated by the banking system. FRB is meant to create liquidity in the system by generating money supply from illiquid assets through the supply of credit against those assets as collateral. Where it has all gone wrong is with the quality of the assets used as collateral. The system is underpinned by the collateral being sound and the credit fulfilled at a later date. When unsound assets are used as collateral and loans defaulted upon, the whole system comes crashing down - a situation further exacerbated by the securitisation, repackaging and resale of this poor collateral.

    The banking system is to blame for its slipshod approach to lending, primarily driven by a selfish motivation for profit growth rather than a nations economic growth. At least if the banks were in the hands of government, the strategies of both institutions would be aligned for the benefit of the electorate!

  • Comment number 78.

    It has all gone very quiet re bank charges recently.

    I imagine that will be allowed to fade away by the government and the Banks if they can get away with it.

  • Comment number 79.

    So all this fuss is about share options, shareholders and share value. It's got nothing to do with debt or credit.

    They're scared that their market capital will plummet on the basis of speculation, even when the fact is that they are still very strong businesses.

    But you can't tell a broker not to jump on the panic selling bandwagon, regardless of the facts.

    If they were all private businesses - they wouldn't be looking to the tax payer at all unless they actually were in big trouble.

    Perhaps then, rather than asking the government for cash - they should simply be buying back their own share capital, with a view to getting out of the market altogether?

  • Comment number 80.

    #52

    Because I think that works out at about $25 per head - that wouldn't go very far.

  • Comment number 81.

    I can't help but notice that RBS shares are a little 'off' this morning, currently almost 30%. How far can they realistically decline before the government has to step in?

    Presumably this would involve slightly larger sums than BB or NR and would force Darling's hand with regard to guarantees?

    Is there any suggestion / suspicion that the market could be forced downwards to achieve this for the benefit of all the others?

  • Comment number 82.

    #7 What an excellent idea !! The Chinese Communists seem to be doing very well. Perhaps we should institute the same here !!

    There's no dole in China for a start. Get those dole scroungers into the sweatshops or let them starve !! Also ban the trade unions !! Communists have no need for trade unions !! You will do what you are told or you will be "re-educated" !!

    Oh and *ALL* territory is the UK indivisible !! There will be no tolerance of separatist terrorists !! They will be taken out and shot !!

  • Comment number 83.

    It's time to get the politics out of this and figure out exactly the exposure and formulate a detailed plan of action.

    All I have seen on here is ill advised knee jerk reactions and ignorant political jibes.

    This would have happened no matter which government held the reins its roots are on the Big Bang deregulation in the Reagan/Thatcher years.

    The stock exchange pressure on ever better quarterly half yearly results was unsustainable and led to greedy short term decision making by executives.

    This crisis needs to be better understood in order to be remedied. Personally I'd be worried if Darling signed a knee jerk blank cheque in the manner of the US Treasury. The guaranteeing of deposits makes ense as it will stop a run on the retail banks which will exacerbate what is effectively a wholesale run on the banks. Cutting interest rates will be similarly damning in the longer term. Hopefully the downward pressure on commodities will effectively deflate prices and put money in pockets.

    The hysteria must stop. Also - who has gained from this apparent black hole? the money is somewhere it has not disappeared into the ether. Even derivative positions unravel with winners and losers. The money is in the system and needs to be found and exposed. Mumbling about hedge funds isn't terribly convincing who the hell is sitting on the big pile with a smug grin?.

    Until the market situation is fully understood and there is complete transparency we cannot begin to talk abou fixing "it".

    We'll just have to endure more politicians/journos trying to out hype each other with just how gloomy life is.

  • Comment number 84.

    People,

    Wake up!

    You need to realise that our politicians are senior banking executives. Our reporters are the bank's Public Relations team. Our Tax inspectors are the Banks Rent Collectors. Our Police are the Banks Enforcers.

    Banks == Government == Media

    They do not care that you voted for them or not. They are in power and will do as they please.

    The banks have a loaded, financial gun to the head of every man, woman and child of this once great country. Even the innocents yet to be born will be carrying this heavy burden.

    Why do all the major religions of the world say usrury is a sin? Why does Islam prohibit interest? Why do we say "Never a lender or borrower be?" Who are we going to wars with? Why?

    When any political decision needs to take place, ask yourselves does this help the banks or the people?

    The credit crunch is not the problem, it is the solution. Let's purge these parasites from us for once and for always.

    We are many. We are stronger.

    FWIW

  • Comment number 85.

    what the hell do you think you are doing acting as a channel for information like this. you have just acted as a conduit for a run on the banks. tell the government that if they intend to leak to you that they should think about what they are doing before they leak. not sure if they had noticed that the markets are a little nervous right now - last night falls might have given a hint.

    we will find a way to find the leaker and have him prosecuted by the fsa.

  • Comment number 86.

    I find it absolutely unbelievable that Barclays buy large parts of Lehman. Presumably they thought at the time that they had adequate capital to take and fund this new business. In fact they must have been confident about their capital position as they even contemplated buying the whole thing before Lehman went down.

    Yet somehow now they seem to be "demanding" that they have a capital injection? If they were in such a precarious position should they not have forgone buying a new business? This sort of behaviour by the banks shows to me that moral hazard issues is a huge issue. The bankers make bad decisions without worrying about it as we the taxpayers will pick up the bill. Not that we have a choice in the matter.

  • Comment number 87.

    @61

    The illusion of infinite economic growth is the cornerstone of modern day banking. It's the "confidence" that everyone preaches about.

    Confidence in future economic growth is dissolving as global consciousness begins to understand that Peak Oil means that the 20th century boom fueled on continually expanding oil supplies is coming to an abrupt end.

    The old paradigm is dying quite dramatically. We're moving into a new paradigm of stable economies and these can't be fueled by reckless issuing of debt by banks.

  • Comment number 88.

    Very few correspondents appear to understand that the banking system is founded on debt not on credit. The Government must stop dithering over the methodology of its next move, which has to be to support the ability of the banks to continue in business. Uncertainty at this moment is profoundly toxic to the financial metabolism of the UK. This is no time for academic niceties or Brownian inaction.

  • Comment number 89.

    #21

    Hopefully your question was not just rhetorical and you truly want to know why the Fractional Reserve Banking system is FUNDAMENTALLY wrong.

    When you borrow the original sum that sum is added to the money in circulation. When you repay the loan you pay, lets say, 3x what you borrowed. But the additional 2x that you have to pay back was never created but you must still withdraw it from the money pot to repay the capital plus the interest. Therfore, for their to be enough money in the pot to withdraw 3x what you put in there must be another 2 borrowers taking out the same size loan as you thereby putting their borrowed amounts back into the pot. Taking it to the next stage you need 4 borrowers, then 8, then 16, then 32, then 64 and so on and so on. That is called a geometric series.

    For that to work[sic], the mathematical model behind the system requires a geometric growth in debt, population, energy consumption, raw material consumption, waste production and pollution (and a complementary geometric decrease in our co-inhabitants of this planet !). The word geometric means non-linear. i.e the previously mentioned list doesn't just grow linearly, it grows exponentially, 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024 etc etc. The earth CANNOT sustain geometric growth of any of the above list INDEFINITELY. That is NOT an opinion. That is NOT a political statement. That is NOT the viewpoint of a religious crank. That is NOT pathetic wish of a tree-hugger. It is a physical, mathematical, practical, undeniable FACT.

    The model behind the current system is utterly flawed. Any talk of patching it up so that it can continue is unbelievably futile. The only reason it has managed to work at all until now is that a source of (almost) free energy has fuelled the previously described exponential expansion. That free source of energy (oil) is peaking out. Note: I did not say running out. I said PEAKING out. That means that since June 2006 the world's daily oil output has been in decline. i.e every day since June 2006 the worlds daily output has never been higher than in June 2006 and has been falling consistently since. It doesn't matter whether you believe in the Peak Oil theory or if you think anyone who believes in it is a nutter. The figures speak for themselves. The world's daily oil output since June '06 has been decreasing. It is an absolute fact.

    In order to satisfy the base requirements of a debt-based, fiat, Fractional Reserve monetary system the consumption of energy must increase to fuel the increase in manufacture of goods and general industrial activity which in turn increases the consumption of those goods by ever increasing numbers of people taking out more and more loans to buy those goods which in turn results in more and more fiat money being printed. If the increase in energy consumption is strangled because of a decrease in the supply (which it has been) then the bedrock of that geometric system is undermined and the financial system collapses with it.

    Without the creation of new loans/debt/credit (call it whatever you will) the rate at which the money pot is being filled with new money is lower than the rate at which the loans are being repaid or written off, which destroys the quantity of money in the money pot (when its repaid or written off as a bad debt the original loan amount is destroyed but so is the leveraged amount - 40x in the case of Northern Rock). Therefore, if the rate of money destruction is greater than the rate of new money creation then the money pot shrinks. When the money pot shrinks it is called a DEPRESSION.

    I hope this changes your mind in your defense of the debt-based, fiat, Fractional Reserve Banking system

  • Comment number 90.

    Lot of drivel being talked about the solvency of the banks. No business can survive without credit- banks cannot supply credit if they cannot borrow. Their balance sheets do in fact look OK but the engine that keeps them going is acting like its got the wrong fuel in it.
    The Government need to stop prevaricating and get on with it- uncertainty is the killer. If people think taxpayers money is the problem- if a clearer goes down just think how many people will not get paid - their wages as well as by their customers, how many charities and local authorities and universities will lose their funds and just how long do you think it will be for depositors to get their guaranteed amount back. And do you think the other clearers would survive? We would be talking about a major depression in the UK and look back at Germany in the late 20s to see what is likely to happen- major social unrest and a breakdown of life as we have known it. Things just are not that bad so the top bankers and the Chancellor just need to get on with it- but lets hope the Chancellor exacts a high price from the Boards of these banks- they deserve to be hammered for not protecting the assets of the banks by being ignorant of the risks they were taking - they should repay the money they have been paid in the last 5 years plus interest as they added no value and the previous bosses of RBS need to be locked up.

  • Comment number 91.

    "3, 5, 6, 44, 45 I'm in agreement with you all. We must be told the truth about Fractional Reserve Banking. But 21, I disagree with you. "

    I might use these numbers for my next investment - £1 on Lotto!

    Mr Peston, I am dissappointed that you continue to sensationalise the situation of various banks and onlu occasionally look beyond the City. At times your blog seems almost spiteful in its ignorance, that I wonder if you ever applied for a job in banking......

  • Comment number 92.

    Robert, you are a first-rate sleuth, reporter and communicator. I am sure you understand the ramifications of events, so why so little analysis? I'll be generous and attribute it to not wanting to add to the woes by speculation.

    However, surely the portents are that globalization, free markets and the EU are shot, that the UK banking system can only be resurrected by being subordinated to the Bank of England (ie, nationalized as part of the Bank), and we face a fierce recession?

    On another tack, if the City was the power-house for wealth generation, why do economists differentiate between the financial markets and the 'real' economy. Surely trade is trade, or is making money out of money something quite different?

  • Comment number 93.

    Why not nationalise the banks and be done with it? If it hits the pound sterling it will make us competitive in a shrinking world market. Inflation will rise. As our currency has almost lost its reserve status it shouldn't be a deciding factor. Anyway, others will react and seek to remain competitive.

    There will be moaning from the bankers, but they got us into this mess. To avoid a meltdown I can't see an alternative. As a lifelong believer in capitalism it grieves me to come to this conclusion, but needs must when the Devil drives.

  • Comment number 94.

    Lot of drivel being talked about the solvency of the banks. No business can survive without credit- banks cannot supply credit if they cannot borrow. Their balance sheets do in fact look OK but the engine that keeps them going is acting like its got the wrong fuel in it.
    The Government need to stop prevaricating and get on with it- uncertainty is the killer. If people think taxpayers money is the problem- if a clearer goes down just think how many people will not get paid - their wages as well as by their customers, how many charities and local authorities and universities will lose their funds and just how long do you think it will be for depositors to get their guaranteed amount back. And do you think the other clearers would survive? We would be talking about a major depression in the UK and look back at Germany in the late 20s to see what is likely to happen- major social unrest and a breakdown of life as we have known it. Things just are not that bad so the top bankers and the Chancellor just need to get on with it- but lets hope the Chancellor exacts a high price from the Boards of these banks- they deserve to be hammered for not protecting the assets of the banks by being ignorant of the risks they were taking - they should repay the money they have been paid in the last 5 years plus interest as they added no value and declared profits that did not really exist. Mind you Mr Brown encouraged them to lend to poorer people- he did not want the less well of not to have acess to credit!

  • Comment number 95.

    Hey, look on the bright side. At least Comrade Bruin promised no return to boom and bust, and he's kept his promise. After the Tory boom we had a bust, but after Gordy's boom we face a total economic meltdown instead. Nice one Gordy!

  • Comment number 96.

    #32

    Is this the same Sir Philip Green who has his Monaco-domiciled wife as the 'owner' of many of his companies, so he can collect dividends of hundreds of millions of pounds without paying tax? The same Sir Philip Green who flew in and out of the country each week to avoid paying income tax on his salary?

    Call me old-fashioned, but I'd say you need to contribute your fair share to UK-plc to have a say, never mind a knighthood.

    In general

    These financial institutions now demanding money from taxpayers couldn't be the same companies that were threatening less than a year ago to move offshore if they didn't like the corporation tax rate or if the tax dodges their employees benefited from were removed? Surely not? I can't see Bermuda, the Virgin Islands or even the Republic of Ireland having the tax revenues to fund the scale of funding they are now demanding (and yes, they should be begging not demanding).

    The cleaners were paying more tax than some in the hedge fund and private equity industries. Unless we reform the way the financial sector is regulated and taxed cleaners will be paying for the bail out of the City's mess.

    On the rescue of the clearing banks, why should the government not have voting rights for its investment? Why, if the banks are insolvent, should the taxpayer pay more than 1p? How can Barclays ask for £15 billion of tax revenues from cleaners and nurses and maintain a bonus pool of £2.5 billion for ex-Lehman employees? And, if Goldman Sachs is paying Buffet 10%, UK-plc should get an even higher figure.

    The future

    Before Big Bang many of the City firms were partnerships, were the owners, the partners, faced unlimited liability in the event of their financial institution failing. So they wouldn't just lose their jobs, but also the Ferraris, houses, art collections, etc. Perhaps for those who might be tempted to take risks with the stability of the financial system this old-fashioned ownership structure should become obligatory?

  • Comment number 97.

    #14 _ This is not a new plea. While other governments subsidise the price of oil that their citizens use, our government *tax the hell* out of what we use !! Then they have the barefaced cheek to blame the oil companies for the high price of fuel !!

    And they ask us to trust them ??

  • Comment number 98.

    whilst iam not a fan of brown and darling,i think its unfair to blame them to much.I would shell more blame on the get rich quick culture by a certain woman pm who will remain nameless. money is king ...society doesnt exist. (her words)
    .. no money isnt king.....long live money. friends family and health are the things that really matter..and pressure is a enemy machine gunner pointing at you, not a few quid lost here and there...all our priorities are wrong.

  • Comment number 99.

    THIS GOVERNMENT SHOULD EITHER STOP LEAKING INFORMED RUMOUR OR SOMEONE SOULD BE FIRED – TREASURY OR DOWNING STREET. If we want an orderly market in this country without the stock market falling completely out of bed, then order should be restored sooner rather than later. If there have been deliberations with Sir Fred Goodwin and John Varley about the lack of working capital and contingency plans to improve it, then announce them – bosh! But for goodness sakes to drip feed sensitive information of this nature to a market whose confidence is shot to ribbons is just insanity. This government is either naive or stupid or conceivably somebody has let them down badly. Time this irresponsible behaviour ceased. Otherwise we shall be the laughing stock of the world’s financial community which will result in London surrendering its premier position as the leading financial centre of the world.

  • Comment number 100.

    Do we have any idea how British Banks are exposed to derivatives such as Credit Default Swaps? Insurance policy's sold and traded in case of debtor bankruptcy such as Lehman Brothers. Bonds that must now be paid.
    Are they asking for taxpayer money to pay off these debts?

 

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