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Rescue plan due in hours

Robert Peston | 18:47 UK time, Tuesday, 7 October 2008

The Government is poised to announce details of a comprehensive rescue package for the banking system.

It will include a proposal to inject capital into banks and to provide a standby facility to ensure our big banks have enough cash to fund their day-to-day operations.

In a UK context, this is a very big moment.

It is the government's attempt to stabilise our banking system.

I'll file more as and when I have more detail.

UPDATE: 20:03

As I said this morning, the amount of capital to be invested in our banks by the Government on behalf of taxpayers will be up to £50bn - which is what most analysts estimate is needed by the British banking system.

And there will also be a promise that if any bank has difficulty raising funds from wholesale markets - which remain chronically seized up - the authorities will fill the gap.

I presume that will require the Treasury to provide additional financial help to the Bank of England (that's more taxpayers' wonga), since the Bank of England's balance sheet is probably not big enough to fill our banks' wholesale funding gap on its own.

These are big sums of our money being put at risk to stabilise the financial system. It matters to all of us that the ambitious works - not least because the reluctance of our banks to lend to companies and households is sending the economy into recession.

For what it's worth, one banker - who runs one of our biggest banks - tells me that he is optimistic that it will bring a bit of calm to the extroardinarily turbulent banking market.

It's also a big moment for the Prime Minister, Gordon Brown. This is the first genuine, full-scale economic crisis he has had to face since he entered government, as chancellor of the exchequer, in 1997.

His place in history will depend on whether taxpayers' cash is being used to slow or stem the downward spiral in the economy or whether this is good money disappearing down a deep black hole.

Comments

Page 1 of 2

  • Comment number 1.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 2.

    It had better work... this is their/your last chance!

  • Comment number 3.

    "comprehensive rescue package for the banking system"

    Please, please make it so!

    My fear is that it will be Poulson MK2 - insufficient but also too expensive.

  • Comment number 4.

    Excuse my ignorance, but are the Building Societies covered by the government's planned financial guarantees?

  • Comment number 5.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 6.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 7.

    robert preston claimed last night that the banks had asked the government for £50 billion as a stand by,result turmoil on the markets today.
    the banks claim no such request was made, whos lying?

  • Comment number 8.

    Bring out your devalued pooonds.

  • Comment number 9.

    So will Brown/Darling announce a rescue package I moved 74million out of UK today to Ireland couldnt wait any longer we had to be certain wages salaries and suppliers could be paid.NEED I SAY MORE????

    MODERATORS PLEASE DONT CENSOR THIS.

    THIS IS WHAT RESPONSIBLE COMPANY OR BUSINESS OWNERS HAVE TO DO WE CANNOT WAIT UNTIL A UK CLEARER GOES BUST.........................................................

  • Comment number 10.

    I do not have a lot of confidence in it and I have not heard it yet.
    The knowledge of the persons involved in it is enough.

    It should have been here for UK banks a month ago, I think it is too late, I hope it is not.

    Back to my plot tomorrow, potatoes will be worth more than money soon!!!

    regards

  • Comment number 11.

    Sounds good, Robert.

    But what the government must do is screw very very good terms out of the banks.

    Existing bank shareholders need to be diluted big time, and suffer the penalties of not having controlled their stupid boards of directors.

    Additionally they must make it a condition that no bonuses can be paid this year to any executives of banks helped in this way.

  • Comment number 12.

    Where is the money coming from? How much? From tax payers? We're broke already - "the cupboard is bare".. there is a long way down to go in this business cycle, and the government may need to eventually print their way out of the problem i.e. would we risk consistently high/hyper inflation with such a move?

  • Comment number 13.

    I simply want to say that Robert Peston has ben brilliant at informing us all what is going on and helping me and my wife decide what to do with our life's savings.
    Yesterday my wife and I went to a couple of banks to make sure we protected our savings by not having everything in one bank. We live in Castleford Yorkshire and in the Abbey northern humour was rife.
    There was an elderly lady who was telling an adviser " I am not interested in interest rates at my age". There was a young man in army uniform getting some cash out and he was with three colleagues also in uniform. Another woman came into the bank and looked round. She said loudly: " I know things were bad but I did not realise the've had to get the army in"

  • Comment number 14.

    Very very bad news.

  • Comment number 15.

    Robert,

    I can't believe the Government are going down the nationalisation route once more. The bank brands of UK are being badly tarnished as the Goverment lets their share prices collapse and then steps in at the last minute when all has failed. This must be bad for Britain.

    The Irish full guarantee was a much cleaner solution and has removed all its bank turmoil even as they looked down teh abyss. Meanwhile our politicians sit on the sidelines waiting until another run on a bank occurs, then stepping in and breaking up the bank. So much brand value and business competitiveness is slipping away. Gordon - wake up - smell the coffee. Preserve what little is left of our banking system and follow the Irish.

    Nationalisation will be a disruptive, messy and ultimatley expensive solution for tax payers either directly or indirectly via their shareholdings in the respective banks.

  • Comment number 16.

    I do not understand how the UK banks can be "stabilised". If the banking system AND Building Socs pick up the tab for failed Icelandic banks etc etc via the FSA every failure in this country will continue to weaken both. Presumably in theory when the last bank goes the Building societies might not be far behind?
    Where does the Government get the cash to inject capital. Prints money and adds to inflation? Liquidity problems should be solvable but it seems to me that solvency issues are the real problem and we are now in a scramble to see who can pass off what on to who and divi out the huge bill.
    Banks and borrowers have been reckless but how could a government stand back and watch the vast debt increases that have occurred over the last five years. It is there to govern. It did not need clever regulation: just a Treasury to take a macro view of interest rates that reflects the wider needs of the economy and not just inflation. The Treasury bought into it to because its coffers were being filled for its various crackpot initiatives.
    The budgeting for the next Olympics is probably a reflection of the lack of financial acumen at government level. - And wouldn't it be welcome to have some of our gold now. - and where is our great EEC - everybody seems to be operating by different rules. Will this crisis finally expose the weakness of "federal europe."
    There may be suffering from some of the problems that have come via USA but lets recognize that a much of our plight is of our own making.

  • Comment number 17.

    And how exactly will the government be injecting capital into Building Societies with no shareholders?

    Building Societies have been responsible, and how is the government rewarding them? By supporting failing banks, and giving them an unfair advantage against the responsible Building Societies.

    After walking over competition law to grant Lloyds a de-facto oligopoly through its HBOS takeover, perhaps we should not be surprise for this government's distain for those who have played by the rules.

  • Comment number 18.

    Bank share price drop today (courtesy of Peston exclusive) to ensure Govt doesn't have to pay much for its equity stake in Banks?

    All will have to be nationalised yet (and no, I'm a Tory) - Broon acts too slowly and in too limited a way. To stop a run you need almost instantaneuous action (ie not like Northern Rock) - its too late already.

  • Comment number 19.

    How much money does the government actually have to prop up the banks? Does it have an infinite amount? Is it going to run out?

  • Comment number 20.

    My company has a deposit account with the Yorkshire Bank, a member of the National Bank of Australia group.

    Will the UK government's rescue, investment, guarantee or whatever package happens, include what are effectively foreign banks?

  • Comment number 21.

    Why doesn't someone ask the smirking Gordon the Golem what happened to his claim to have ended the cycle of "boom and bust"?

  • Comment number 22.

    I sincerely hope that any rescue capital made available to banks will involve an equity transfer to the government. It is outrageous that Taxpayers are funding this bail out without any access to future upside when the economy gets back to normal. Exisiting shareholders in these banks should see their ownership diluted in consequence of this.

  • Comment number 23.

    It's well overdue time for this kind of "plan". As for it being a "rescue package", the banks themselves said that they were not bankrupt; just a little short of the readies to transact normal business.

    If the government didn't step in, I'm sure one or more of the foreign banks and/or sovereign wealth funds will !! After all, these are good assets , not toxic assets !! And they are well worth acquiring at a discount !!

  • Comment number 24.

    This is just throwing even more good money after bad.

    There is a myth that abounds that suggests that the Government MUST do something and so is panicking into coming up with ever more elaborate, but ultimately futile and extremely costly measures to stop an economic Titanic which is already sinking.

    Make no mistake the banks are flat broke - as a result of the reckless neo-liberal policies over 3 decades - and whatever this does, it will not kick start the economy, which has depended on credit. The money will purely be used to stave off the amount of bad debt that will snowball rapidly as businesses fail, unemployment rises and people start defaulting on their mortgages.

    The time for specific action was 7 years ago when the Bank of England foolishly followed Greenspan in America and made an already bad situation worse and cut interest rates to stave off a recession and in the process stoked the flames that have led to where we are today.

    In reality, the only way forward now is to let the market run its course, i.e. do nothing. As a case in point, the $700b Paulson plan that was meant to save the World Economy is now but a distant memory. The system is dead and no amount of jump-starting it will have any beneficial effect.

    We are entering into a long dark depression. Thank you James Callaghan, Margaret Thatcher, John Major, Tony Blair and Gordon Brown.

  • Comment number 25.

    Moderation is taking too long. Find a way to speed up the process.

    The least that should be expected if re-capitalisation by the taxpayer is the chosen mode is that share options should be forfeited {see Fuld at Lehman}. Desirably options exercised during this crisis should revoked/rescinded or failing that undertaken at the price prevailing when the option began notwithstanding any 3 for 1 like that done by RBS

  • Comment number 26.

    Have you heard of "The parable of the unmerciful servant" ? You are about to see it played out in the financial markets.

    http://www.thebricktestament.com/the_parables_of_jesus/parable_of_the_tortured_debtor/mt18_24.html

    http://en.wikipedia.org/wiki/Unmerciful_Servant

  • Comment number 27.

    THOUGHT YOU WOULD ALL LIKE TO KNOW THERES FREE MONEY AVAILABLE AT MY PLACE TONIGHT ONLY I DONT SEE ANY POINT IN PAYING IT IN TOMORROW AS I WILL END UP NEVER SEEING IT AGAIN.
    SHOULDNT A NUMBER OF PEOPLE GO TO PRISON FOR THIS MESS AND BE DISQUALIFIED AS COMPANY DIRECTORS SO ALL YOU BANK DIRECTORS PLEASE FORM AN ORDERLY QUEUE.

  • Comment number 28.

    I have to ask Robert, you didn't have any holiday booked any time soon did you? I think you may qualify for most of 2009 off given the demands of the job recently (maybe there won't be much business left to report on by then anyway.....).

  • Comment number 29.

    Damn!

    I thought we had a scoop :-) No doubts it will be a half baked hairbrain idea that will

    a. Cost me (the tax payer) more cash. and
    b. Not work!

    It seems to me the route of the problem is Libor, time for the BofE to lend directly to the banks taking the commercials out of the picture?

    Do that and seriously reduce interest rates and we have a change of avoiding a depression!


    I can't listen to anyone seriously contemplating higher rates, that would be catestrophic!

  • Comment number 30.

    Interesting times, Banks knowingly lent too much money and then demand the government rescue them. Taxpayers will be footing the bill for many years to come and the current government are unelectable now.

    Any chance of some of these bankers paying back some of their salaries and bonuses as they were based on false assumptions - or will they reduce their salaries as a result of the difficulties that they have put their companies and the shareholders in.

  • Comment number 31.

    Channel 4 reports that it will entail GB PLC taking an equity stake in all the High Street Banks. It's not clear yet if this extends to HSBC, the strongest, most resilient, of the banks so far or indeed to the building societies, private entities who do seek funds in the open market. Mr P. will do doubt provide the detail.

    When a house, literally, starts to collapse, shoring up the bedroom ceilings wont stop the roof arriving on the lounge floor.

  • Comment number 32.

    Whoever your source is at the treasury should be criminally prosecuted for leaking the details of yesterday evening's meeting. How the market is supposed to return to any sort of order when the content of highly confidential meetings between the Governor of the BoE, the Chancellor and bank CEOs is splashed across the BBC and Bloomberg is beyond me. The results have been all too obvious, and catastrophic. Pathetic government and pathetic journalism.

  • Comment number 33.

    Without seeing the other comments awaiting moderation, I cannot say if this has been mentioned or not, but why do we have this interminable wait for news and information?

    The government is causing yet more problems by delaying its announcement, let's get it out in the open so people can see some leadership for heavens sake!

    Peter

  • Comment number 34.

    So here we go. Not content with squandering the millions we held in gold assets now Brown and Darling are giving hard earned peoples tax to people who have no idea of the concept of the value of money.

    This is going to end in an even bigger disaster than ever now.

    What happens when they realise that there is not enough taxpayers money and we have thrown away every penny we had?

    Nothing will ever be the same again anyhow. We can't go back.

  • Comment number 35.

    Hi

    On behalf of Her Majesty, I have been asked to offer you whatever you want for your business. Infact I might only take a small part of it, so you can do whatever you like, and all those capitalist taxpayer fools will pay your wages, and let you run your business how you like. Sound ok? I'm off to bed now, so just let me me know by the morning. Cheers.

    A Darling

    From your friendly Labour Government

  • Comment number 36.

    Did anyone else notice? Someone appears to have bought almost 30,000,000 GBP of shares in Barclays just before the bell today, lifting the price by some 40 pence. Has the tide turned?

  • Comment number 37.

    this is very good news - sounds like the govt is doing the best thing it can do. unfortunately though, what happens next is really outside the control of anyone in this country. it depends on other governments - in the usa, in europe, and in china and the middle east. let's hope they all do the right thing over the next couple of weeks. then there should be a strong rally in the stock markets - an excellent opportunity to dump your remaining shares!

  • Comment number 38.

    Well, I feel a bit sorry for AD - all that way to agree a proposal less substantial than measures already in place. Hope it was a good lunch. Clearly Europe a non starter - lets hope that tomorrow's 'rescue' is full, comprehensive and rooted in national interest (assuming the powers that be have determined what that entails). Lets hope for (1) a public stake in the banks (2) a few sackings (3) a few pounds of flesh - I suppose a few stones would be too much to ask (4) an Ireland type deposit guarantee. From a purely selfish point of view, the thought of having to split up my savings/redundancy pot into chunks is depressing me - I know I should have done it already - but its a pain.... persuading someone to let me open an account with them - tried it yesterday, took hours; losing interest on bonds etc. No doubt a bit of pain for the current holder of my funds too - may be relatively secure but who knows. So, I'm hoping that whatever is announced will rescue me from having to spend the day doing my little bit to add to instability. Last thought for now - please, whoever makes the announcement, do not say 'We will do whatever it takes...' Blah blah.

  • Comment number 39.

    Maybe I missed it the day it was explained to us all but what i don't understand is now that we are ina global economy what is to stop the banks lending to people/businesses outside the UK that may be willing or able to pay a higher interest rate than we are. how is the Uk tax payers money going to be ring-fenced so that we don't subsidise or fund non-uk companies and business to the detriment of the UK economy. Damn, I forgot, we work and compete in a global economy. Tough on us if we lend money to our international competitors to the detriment of the UK. We should get our act together in the first place. Tell you what, let's go one better. Lets give our money away to non-UK companies and other governments so that they can prosper while the UK goes down the pan. Hold on a minute though, we have done that once before. It's called EU subsidies. Like Jeremy Clarkson once intimated, why should we have to pay tolls on a Spanish motorway when we helped pay for the damn thing in the first place.

  • Comment number 40.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 41.

    Where does this leave Building Socities!!??

  • Comment number 42.

    UPDATE: 20:03 - Robert Peston gets the scoop of the decade..

  • Comment number 43.

    Is this the moment when all the bitter posters slag off Robert for 'causing' the spike in bank shares tomorrow? Thought not.

  • Comment number 44.

    I've discussed this with a few ex-banking people I know. One who was a senior figure in a city bank for many years says that the bankers are running rings round the government. His impression is that their are many in the City making money and that they could sort this out.

    My instincts are telling me that something very very bad is happening here.

    Nothing will ever be the same again. Also this could now turn into a much bigger horror story than any of us could imagine now.

  • Comment number 45.

    I think what the governements are doing is absolutely crazy. I would not give these banks one cent unless they back it up with good collateral.

    These banks have been milking us over the years with charges, high interest rates etc etc. Now they find themselves in difficulty and they come to us the tax payerto bail them out. SO that they will milk us some more.

    As the Pope said. Capitalism and Communism have both failed. This is one great example. Problem is that certain people have become millionaires from these follies.

  • Comment number 46.

    On the hoof policy making and annoucement have been awful for the Uk economy. The government seems out of step with the pace of events. if it does note get a grip soon then the Uk economy will be off a cliff

  • Comment number 47.

    Having read the blog comments this afternoon I find astonishing that the views of many that believe that RP's comments are in fact significantly contributing to the paranoia that has swept over the market have been ignored.
    Please BBC show a balanced view of public opinion - isnt that what we pay for?

  • Comment number 48.

    I am expecting a Tax refund and I am not going to pay any BBC license fee/tax either. I prefer SKY anyway!

    The beeb should just ask the Treasury for direct funding.

    Robert - tell your money masters for me...you seem to have a direct line to them.

    FWIW

  • Comment number 49.

    If it turns depression into recession, then it will have been worth every penny. Let's hope that this puts a bottom under the markets.

  • Comment number 50.

    Well this is it, do or die. As I see it, if tis works we get away wit a mild recession, if it fails not only do we have a full blown slump but we have a Government that cannot afford to help the ordinary man-on-the-street because all its money has gone on trying to save the bansks.

    Fingers crossed...

  • Comment number 51.

    #5

    Mirror, mirror on the wall...

  • Comment number 52.

    So most analysts estimate that the British banking system requires about GBP 50 billion.

    Would these analysts be in any way related to the analysts that determined that RBS and HBOS needed to raise GBP 12 billion and GBP 4 Billion respectively by way of rights issues earlier in the year?

    I guess its lucky that events are moving so fast that there is little time to reflect on this mornings pronouncement that the Government will not allow any depositors to lose money. I have seen quite a few people crossing the screen on the BBC who clearly believe that they have lost money through Icesave.

  • Comment number 53.

    Peston - You appear to have some pretty top notch banking and governmental insider contacts - any chance of sharing the name(s) with us all. My guess it's Mervyn King!

  • Comment number 54.

    If I was a Premiership footballer with a load of money in a bank account ...I would be very worried! right now


    But I'm not.......HA, HA!

  • Comment number 55.

    well done peston, looks like you brought the banking system to its knees yet again

  • Comment number 56.


    #5

    Well you are living up to your name!

    1) Robert Peston's job is to report. Do you seriously believe his blog and reporting has affected the outcome of this current crisis? If you do you are living in La La land. If Robert hadn't broken the news of last nights meeting someone else would have.
    2) Get a grip - we have got to where we are not because of irresponsible journalists but because of irresponsible bankers.
    3) Be thankful that we have a media that we can rely on to get to the core of the lies, deceit and greed that has helped us to get into this fine mess. One day you might just realise that.

  • Comment number 57.

    No doubt these shares will be sold at a loss by the Tories to their business pals as soon as they get into power.

  • Comment number 58.

    I keep telling people 'This is it'!

    I keep expecting the ATM to tell me as it is saying to some Icelandic customers 'This service is temporarily unavailable'.

    If financial meltdown is a possibility then how do we know when it is here?

    I suspect I will regret not buying a very large quantity of decent claret. It would soothe the pain and be a tangible and tradeable asset.

    Get some sleep Robert. I think you will need it.



  • Comment number 59.

    If the plan is to borrow ideas from Buffet, as the suggestion was this morning (i.e. non-voting preference shares with high dividend, plus equity warrants) then it has my full support. And I suspect it may turn out to be a whole load better than the Paulson plan which could see US taxpayers paying for the loans to fund the investment for 25-30 years - i.e. as long as the original lending.

  • Comment number 60.

    Re Post 5: You seem to be following a fairly consistent theme of the day - namely spitting invective at the author and accusing him of having all manner of powers and of abusing those powers to exacerbate the overall problem.

    I suppose it would be expecting a bit too much for any evidence to be cited in support of these accusations.

    How about Robert Peston has a known loathing for Manchester United and so he deliberately spread false rumours in the US and manipulated the NYSE to cause the bankruptcy of Lehmans knowing that this would lead to the consequential collapse of AIG and thereby deprive Manchester United of shirt sponsorship income. (I guess WaMu has to be written of as collateral damage)

    You could go further - a man in a pub mentioned that a disproportionately large number of Manchester United supporters had invested their life savings in the Icelandic banking system. Being part Icelandic himself he found it relatively easy to persuade that Government to commit financial suicide in order to further punish Manchester United supporters.

    What about mentioning his little Englander mentality which fuelled his desire to unleash his powers of evil against Hypo Real Estate.

    You want to try and get a grip, all this talk of lynching people just generates bad karma.


  • Comment number 61.

    No way should banks be bailed out for free! For years they have ridden the wave of excess profits at the expense of every person and business in the UK.
    In the recession of the 1990s they contined to make vast profits whilst the rest of the country suffered - many a good business was closed and many an honest person had their home repossessed when it would have been possible for more supportive banking institutions to have alleviated much of this suffering.
    If Labour were to offer support to these greedy businesses, above supporting hard-working people who are losing out everyday to rising prices, flat wage rises, a shrinking job market and utility companies making excess profits, it would be unforgivable! If the taxpayer bails the banks the taxpayer should take the future profits.

  • Comment number 62.

    Robert Peston should phrase what he writes carefully to avoid fuelling the panic in the market. It is important that the press reports the facts as they stand instead of twisting them to sensationalise the news.

    His claim today that British banks (RBS and Barclays included) "asked" the Chancellor for funds was very categorically denied by both banks - infact by an official press release by RBS.

    Clearly there were discussion on funding last night .... but I doubt if what Robert Peston said is exactly accurate - neither Barclays nor RBS would go on public record to deny it if it in fact was the truth.

    Mr. Peston I am starting to doubt your credibilty! People in your profession should report facts and avoid sensationalising issues with a bit of twist (no matter how minor) here and there.

  • Comment number 63.

    Seems to me there could still be time to pull this back from the brink, would some measure like the below help or hinder?

    Investors/Speculators
    Provide material incentives for investors to go long - very long. Reverse taper tax relief on capital gains. 5yrs 10% tax relief, 20yrs 100% tax relief.

    Depositors
    Provide believable, not 100%, guarentees for retail and commercial depositors, paying a rate of interest that reflects the risk to depositors (sort of reverse of the "typical APR depending on circumstances" we are used to seeing on other loan adverts.)
    No tax on interest earned.











  • Comment number 64.

    The Dow Jones losing nearly 5% today is starting to look the norm.

  • Comment number 65.

    I hope the Government extract promises from the banks not to abuse the public by increasing their charges and margins, and that they support individuals and businesses. The hiking of bank margins and the calling in of debt all over the place are hurting the very tax payers who are funding this bail out.

    The Irish Government have extracted such undertakings from the Irish Banks.

  • Comment number 66.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 67.

    And if tomorrow, he doesn't provide a higher guarantee for saving deposits, then expect an unpluggable withdrawal of the higher deposits.

    Starting with mine asap.

    A harsh measure, but that will teach the blaggards to treat the depositors movable cash as not worth protecting.

    When the Banks have defaulted then some hindsight analyst might say

    'Well the primary responsibility was to protect the depositors. Everything else develops from the Depositor base. They didn't do that so the money went away and now they are bust'

    Bankers partnering with Governments.
    That sounds like a Toxic Mix.

    Doohhh !

  • Comment number 68.

    Mr. Peston,

    You need to shut up, or be shut up, until you can report what is happening or has happened, rather than speculate wildly on what might happen, and cause immense shifts in markets. You are being irresponsible.

    Yours,

    A saver, investor and shareholder who used to think he might have a pension...

  • Comment number 69.

    7. At 7:08pm on 07 Oct 2008, orangewilliamx wrote:
    robert preston claimed last night that the banks had asked the government for ?50 billion as a stand by,result turmoil on the markets today.
    the banks claim no such request was made, whos lying?


    Clearly Robert Peston ..... the banks would not go on record to deny this if that were not the case .... RBS came out with an official announcement. Peston needs to stick to facts, stop sensationalising the news and be a resposible journalist - currently I do not see any of these traits in him.

  • Comment number 70.

    where is the moderator??? is he very busy trying to get the money out of Landsbanki?

  • Comment number 71.

    If the rescue is big, bold and simple. If the communication and the liason with our European neighbours is well executed and not bungled - it might work!

    Gordon Brown could restore both our financial fortune and his political fortune.

    Time will tell.

  • Comment number 72.

    Guys - it won't work. I don't think people realise just how out of control this situation is now.

    If you look under the covers and read some of the more academic/technical blogs and websites you'll see that the portents are bad. The TED spread is wild; today, to all intents and purposes, the Fed became an OTC derivatives dealer (standby for the infinite printing of dollars); Hank's 700 billion dollar TARP has just become a pebble tossed into the boiling sea; right now the DOW's dropping like a chickenwire submarine; REITs are collapsing; gold producers and mints can't keep up; watch the LIBOR to see the tipping point and look out for gold soaring through 1,500 dollars.

    There's a growing likelihood of a full banking system shut down; a greater chance of this than of any government bail-out working.

    I'm drawing a month's worth of cash because I think we can expect an extended bank holiday any day now.

  • Comment number 73.

    Robert
    I have just watched your program on BBC4 I was amazed to see the difference in tone to that of your interview with the HBOS BOSS . It seems that you are beginning to see that the problem is related to totally unregulated , virtually incomprehensible methods that the moneyed use to extend their fortunes to the detriment of us all . This of course has its roots in the Thatcher/Friedman school of free market , no strings attached financial system they espoused. The present situation is that the governments are now trying to regain control of their own economies - those taken from them by speculators who follow Thatcherist model.

  • Comment number 74.

    While the reach of the banking crisis defies description and has been the root cause of destruction of wealth on a massive scale affecting every man, woman and child in the UK for years (possibly decades) to come. (Reduced pension funds, inability of ordinary people to raise a mortgage easily, property price crash and so on.....) I for one hope that this expensive but necessary bail out works and it is given time to do so.

    In part this situation is due to the crass stupidity and greed of individuals at the very heart of the banking system. In part lax regulation. In part government in the UK overseen by a former "prudent!!!" ha ha Chancellor who presided over the whole sorry mess for ten years, took the credit for rising house prices in the good times and raised taxes and spent all of the surplus revenue on grossly inflating government spending at every level - never mind the pension timebomb that these new civil servants have in store for us when they come to retire. Not their fault but an indication of the mess of the public finances of UK PLC and what lies in store.

    Nevertheless, while the prospect of a taxpayer backed bail out sticks in the craw somewhat, I would suggest that if we dont or worse, we do this and it doesnt work-then the ramifications for EVERY sector of UK PLC will be very severe indeed for years to come.

    i for one hope that it is enough (is £50bn enough?) and they all start lending to one another and eventually some semblance of the new normality will return. fingers crossed.....


  • Comment number 75.

    I'm fast forming the opinion the the Fractional Reserve Banking system has been a scam perpertrated by the west to defraud the middle east of the wealth that their natural reserves have brought them over the last 40 years.....as well as the chinese of their manufacturing output for the last 30 years. The dollar will imminently collapse and become worthless hence making the sovereign wealth funds valueless.

    Unfortunately for them, much of their wealth is currently either dollar or Euro denominated!.....they have/are being sh@*fted.

    This does not bode well for world relations.

  • Comment number 76.

    Good! Positive action at last! This will be seen as a 'good thing' when we reflect on the happenings of the past fortnight.

    Government and bankers working together...good things could come of this..whether they like it or not...

  • Comment number 77.

    The government is going to find £50 billion to prop up the banks. At the same time, it will stand by as thousands of post offices are closed in order to save a couple of hundred million pounds at most. The post offices should be retained and the Post Office Card Account should be expanded so that it offers a day-to-day banking service for all those who do not want to get sucked into the clutches of the high street banks.

  • Comment number 78.

    NOOOO. No bailout - at all. Let them go down, let the market sort it out and get it over with. How can we allow these idiots to spend OUR money in giving it to private banks

  • Comment number 79.

    As you noted a while back CDS positions will still implode in the next few weeks - where will this leave a mere £50bn

    It will not get any better until all leveraged positions have unwound or been covered by Government (taxpayers) money.

    It will be interesting to see the next crisis unfold.

  • Comment number 80.

    Why should the banks be bailed out? It is not they who have gambled with risks they chose to ignore. The directors and shareholders should have understood the risks and been more cautious.

    To answer my own question, if banks are not rescued then we all face loosing our savings, investments and pensions; but there should be restrictions on the level of risk allowed with public owned funds. Even the most simple understanding of finance leads you to see that the kind of risk based lending that banks have indulged in during the last decade and that customers have lapped up could not be indefinitely sustained. It really was just a matter of time.

    Oho so wise after the event!

  • Comment number 81.

    I do hope we the taxpayer get a very large chunk of equity for our capital injection, at least 51%, and that current shareholdings are comensurately diluted. This would be the very least I would accept for buying out a busted flush. If you knowingly trade while insolvent you are comitting fraud. Having a basically sound business but running out of cash is usually the banks trigger to pull the plug and call in the receivers/vultures to pay the VAT, tax and banks. I think we the taxpayer should be similarly sympathetic. Of course our 51% would allow us to sack the board and call them up in front of a house of commons committee to explain themselves. While we're at it, what were the pension funds doing lending the ftse shares to the hedgies? what did they think they wanted them for?!! Why can't the pension funds match their liabilities (+30yrs) with their assets (long dated Gov. bonds) as opposed to ridiculously volatile equities, shorts and commodities. Not risk matched. Lets hope this washes out the clowns and brings in some sense. Rogcay.

  • Comment number 82.

    The pyramid is now collapsing fast! There is no amount of fed, government, BOE, central EuroBank etc money that will plug the gaping black hole of world finance.

    In 3 weeks we will have 2 large National Banks
    (not RBS!) that will be being propped up by the taxpayers. It will take 5/6 years to return to normality and that will be after the 2nd World Depression!

    It is going to be a hard road back! Don't believe the economists or anyone who is in the industry, we are heading for financial armageddon. 40% of Britains houses will be nationalised as banks are sucked into the Nationalised world of debt and drudgery!!

    Prepare for a crime wave and scenes reminiscent of the riots of the 80s.

    Bankrupt countries and the demise of the Euro are on the way!

    Our only saving grace is the pound, it might help us climb out of the hole first, with a massive push from China who will be the financial rulers of the universe!

  • Comment number 83.

    If this is the case, then the hedge funds can now make serious money out of the UK because if the banks can go one time for capital to the government then they will keep on going back when they are forced into a corner. And hedge funds don't need short-selling to achieve that. This would be equivalent to a repeat prescription for a chronic illness because the banks will keep coming back for more capital. More of my tax for institutions that can't manage risk.

  • Comment number 84.

    what the BBC or any other organisation have failed to inform the british public is that in the U.S. that when foreclosure occurs on a property. the debt is against the property, not the individual, therefore people can just walk away from any debts, unlike this country when financial institutions will chase you to the end of the earth to get their pound of flesh

  • Comment number 85.

    Nasdaq and DJIA both down well over 5% today. US bail out seems to have had no effect. Why will ours be any different? Just chucking good money after bad.

  • Comment number 86.

    Please can we have a modicum of sense here.
    post 11 says:
    'Existing bank shareholders need to be diluted big time, and suffer the penalties of not having controlled their stupid boards of directors.'
    Many of us hold bank shares via pension funds, life assurance or in ISA nominee accounts. There is no way we can influence directors, let alone control them. Thankfully, there were signs that some pension funds and trustees were beginning to speak out against mismanagement or excess, and they should be emboldened to speak out more often in future.
    But let us not imagine that the obscene rewards taken by bank directors were unusual. Building society directors have been swilling at the trough as well, perhaps with even less justification, and how much good has it done building society members to protest against this by voting????
    The whole financial culture has been corrupted progressively over the past two decades. Yes, it needs a drastic cleanup, but let's not imagine that expropriating shareholders will solve the problem.
    If the problem is – as it appears to be – one of liquidity rather than insolvency, wiping out shareholders will only make it more difficult to raise capital in future, except on confiscatory terms from the likes of Warren Buffett or the state.

  • Comment number 87.

    Robert,

    I don't know where you got your information from this time but your 'mole' has got his wires seriously crossed.

    My mate Gordo phoned me earlier to tip me the wink about the content of the plan. Since you're a mate in the business, if you know what I mean (nudge, nudge), I'll let you in on it as long as you promise not to tell anyone....Deal?

    Gordy is about to:

    Announce the issuance of the UK's totally new, debt-free, 100% reserve currency. It will be called Sound Money or Tally for short.

    Every pound sterling in existence will be exchanged for the new currency on a one for one basis whether note, coin or binary.

    The old pounds will no longer be considered legal tender but will only be able to be exchanged for the new notes.

    The issuance of the new money will be totally under the control of the new UK government which will be staffed by financially literate people and be for the benefit of the population it serves and no-one else.

    The Bank of England will have its charter revoked and its owners will be removed to ply their money-changing usury wares elsewhere (a boat is currently moored down the docks for the bounders).

    Because the new currency is not debt-based or fractional it will not suffer from the now famous Boom and Bust cycle (this means Gordo will have to find some alternative rhetoric but thats a minor inconvenience).

    Neither will the new currency rely on the 'growth' paradox thereby stopping the inexorable destruction and overpopulation of the country and, if the UK's model is copied by others, it may just save the planet as well.

    The 3000 very expensive laws which have been brought onto the statute books over the last 11 years will all be repealed saving oodles of cash.

    Withdrawal from the European corrupt gravy train called the EU with immediate effect saving endless amounts of our money.

    The £12bn project to create a national spying database to intrude even further into the public's lives via the internet will be scrapped.

    George Orwell's book 1984, originally meant as a warning, will no longer be used as the roadmap for domestic and foreign policy.

    All PFI contracts will be called in and the schools and hospitals run for the benefit of the people whom they serve rather than the fat cats that currently milk that particular dripping roast.

    Plans to cover every square inch of this small island in houses will be scrapped.

    British troops stationed all over the world will be recalled back home and we'll stop pretending we have an empire any more. It was fooling no-one anyway.

    Every Quango in the country will be routed and replaced with....well...nothing, because they serve no purpose and are not required.

    The number of civil servants (government employees) will be reduced by 90% thus redressing the current inequitable position where 20% of the population generate revenue in real jobs to keep the other 80% in the lap of luxury.

    Now it'll need a bit of tidying up but you get the drift?

    er....that's it.

    Now a deal's a deal. Not a word to anyone. you promised.

  • Comment number 88.

    WOW!!!...I've been reading Pesto's blogs for over a year now,....and they have just gone into overdrive today!...poor old moderators!...

    Holy Moly!

  • Comment number 89.

    This plan does not have a hope in hell of working. They are just throwing public money at the banks in the same way that Lamont tried to keep the pound in the ERM.

    Every taxpayer will end up something like 2 thousand poorer, and the banks will not survive anyway.

    Why cannot they just admit that the whole banking system is knackered. Let them go to the wall then in time they will be replaced by the likes of Tesco and the Building Socs.

    Obviously the short-term liquidity crisis will be disastrous for many businesses, but this problem will remain with or without the bail-out. The 50 billion would be better spent returning 50 p in the pound to savers, while at least maintaining the value of sterling.

  • Comment number 90.

    Rob....please slow down a bit; if only for the sake of your family (and the rest of us).

  • Comment number 91.

    The US markets have closed over 5% down.

    Bank of America has lost over 25% of it's value today.

    THE BAILOUT HAS NOT WORKED IN THE USA.

    Why are we following?

  • Comment number 92.

    My money is on the deep black hole. This £1,000 for every person in the UK will probably get us through to Monday - what then - not many of us earn £1,000 a week we can burn. I have voted with my feet and am moving all our money (business and personal) to Ireland.

  • Comment number 93.

    All this happened because Brown, Darling, the Bank of England and the FSA let it happen. People don't die in masses on the roads: because there are driving laws. If you don't regulate the bankers they will act recklessly "because they can". The government is guilty of total failure in their fiduciary duties towards the wealth and financial security of the people who elected them and put their trust in them. If they would run a company like that, they would all be in prison.
    Now Brown and his gang are using the taxpayers money to buy up the bad loans of the banks and "sanctimoniously" are promising to make the taxpayers partners in the "eventual profits" of this scheme. Let everyone make a note of this and wait for the profit cheque from the treasury when thats coming true. "Arrogant odious lot"

  • Comment number 94.

    Robert,

    According to the contributor BMB on the link below, your comments wiped £19.5bn off banks' share prices today.

    http://ftalphaville.ft.com/blog/2008/10/07/16733/the-royal-bank-run/

    Are your actions any better than the 'spivs and speculators' that people were railing against just a few weeks ago?

    BFC

  • Comment number 95.

    32.

    yes. careless talk costs jobs. it seems some people are more in love with a 'scoop' and making a personal reputation than they are with the effect it has.

    no doubt if someone had leaked the secret d day plans they would be up on the blog?

    financial plans like military plans need to be kept secret until acted out. the bbc did the same during the falklands when they blabbed before the event that goose green was to be attacked in a dawn raid. Luckily the argies thought it misinformation. Just because you know a secret does not make it wise to yap?

    markets buy on rumour and sell on fact. this constant reporting rumours is irresponsible. something a yapparazzi might do?

  • Comment number 96.

    Is anybody else out there thinking this is a great time to buy? I have just tonight taken a risk with some of my money on HBOS - Not sure how long I will keep them though!!

  • Comment number 97.

    29 you must be joking. The situation (which may be catastrophic from a debt-addicts point of view) has been brought about by low interest rates. Low interest rates means people are invited to borrow money. But people are now up to their necks in debt as this "financial crisis" is a debt bubble deflation. You can twist and turn. There is no more cheap money out there, sorry!

  • Comment number 98.

    Did anyone else notice that Iceland sold the north pole and all the oil under it (and our energy future) to the Russians for a mere 4bn Euro? Bargain of the millenium!

  • Comment number 99.

    Gordon must be bold and take a risk here- not in his nature so I fear it will be too little and with too many conditions but I like the idea of prefs with warrants- will protect the taxpayer but not my persoanal pension that will undoubtedly have banking shares in it that will be moribund for years- but I would prefer to be poorer than broke.

  • Comment number 100.

    I don't believe it (and yes that is with the meldrew intonation) just tell us you are going to guarantee savings and cut interest rates.. then confidence will rise .."remember the value of shares may go up or down"To plagarise another BBC catchphrase "Don't Panic" if you are not selling your house or shares then it doesn't matter .Brown should tell the banks to stop gambling our money (put it in bullion )and stop stupid bonuses for fat cat high flyer "merchant bankers"(apply rhyming slang for quote) we don't want nationalised banks draining tax revenue we just want to safeguard our investments .... use tax money to shore up the money we have already invested and let greedy institutions go to the wall . We would have more confidence knowing our pensions are safe than owning/bailing out part of a failed banks after selling their assets

 

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