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We own the banks

Robert Peston | 07:24 UK time, Monday, 13 October 2008

Who would have thought, only a few weeks ago, that taxpayers would end up owning around 60% of Royal Bank of Scotland and about 40% of a super retail bank formed by Lloyds TSB buying HBOS.

But that's what has been announced today by the Treasury, in what will count as perhaps the most extraordinary day in British banking history.

Those three banks alone are raising £37bn from the state, with Royal Bank of Scotland taking £20bn of that.

It will lead to changes in their behaviour.

The government has insisted, for example, that senior directors should receive no cash bonuses this year and will receive future bonuses in the form of shares - in the hope that this forces them to take a long-term approach to the way they manage what are now our banks.

The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007.

As for Barclays, it is proudly standing to one side.

It has agreed with the authorities to raise £6.5bn of new capital, but is confident it can do this by tapping its shareholders and other private-sector investors, rather than going cap in hand to taxpayers.

But it's not all good news for its shareholders - because it will abandon the dividend for the second half of this year, to save £2bn of cash.

Comments

Page 1 of 2

  • Comment number 1.

    There is still a long way to run with this.

    These banks are now just a public liability rather than a private one.

    I do agree that it is a good thing that they will be changing their behaviour but I will believe it when I see it.

  • Comment number 2.

    Great, now let's start sacking some suits.

  • Comment number 3.

    Dear Robert

    Could you do a sidebar on severance packages for the humbled British bankers?

    Peter Kenyon
    http://petergkenyon.typepad.com/

  • Comment number 4.

    Why is the government blindly intent on getting lending levels back to the level which caused this crash in the first place.

    What is going on now is a much needed market correction. I certainly don't want my tax used to sustain absurd lending regimes

  • Comment number 5.

    Now "we" own the banks, does that mean they will switch to ethical business practices and stop their penalty charging for unauthorised overdrafts while refunding past over-payments to "us" without having to be told to by the Courts? Its an interesting change in the role of the bank and the customer.

  • Comment number 6.

    You say that Barclays will abandon the payment of a second half dividend. In fact what has surprised me during the last few months is the fact that firms have talked about simply not increasing dividends or cutting them.
    Surely the sensible thing for a long time has been hoarding cash.
    Dividends should be seen as a bonus during the good times, not as a tool to keep the city sweet and boost share prices. However, that is just another example of the short-term thinking that has brought us to this mess.

  • Comment number 7.

    Dear Robert,
    AS we own the banks, lets get rid of FOR GOOD, the inflated egoes and golden hand shakes of these piriahs who feed off ordinary peoples stress and money problems. The root cause of ALL OF THIS is greed, nothing nothing less.The price of an individuals worth is like foot ballers, a social disgrace, and this again is forcing prices up, for ordinary people .
    The price of a player should be capped, its the feeling of that even if we sit on the bench we get paid, regardless , and the foot ball league can be likened to the Money men, Over inflated, and over rated, the cause of misery where the fans are expected to support excess, and bail the clubs out,

  • Comment number 8.

    I wonder if the Scots will be covering the RBS bailout?

  • Comment number 9.

    Will this mean my Coutts branch will move to the local Post Office?

  • Comment number 10.

    What dividend does the government get? Does it own these stakes permanently until such a time as it attempts to sell them, or does it start getting paid back immediately? Many people would like to hear more about how this new capital structure is going to work. The public is owed a fiduciary duty now. This is taxpayer money. This is our investment. Where can we read the prospectus?

  • Comment number 11.

    There must be another way to explain the government suport of the UK banks without making the man in the street believe he owns them.

    It's also time to take a few shots at the global regulators for allowing the rating agencies to remain unregulated despite their level of involvement and influence in the market.

  • Comment number 12.

    Surely by agreeing to keep lending at 2007 levels they are simply trying to reflate the bubble or am i missing the point here?.

  • Comment number 13.

    End of Thatcherism? All Gordon's fault in the first place? The political squabbling about who is to ultimately blame for this situation will continue on to the next election and beyon, but I doubt very much that a UK Conservative administration would have been able to conceive or implement this scheme, which looks very much like the sanest of the lot globally.

    I hope when the banking sector finally recovers we taxpayers are returned sufficient cash to repair the damage which we have yet to fully witness.

  • Comment number 14.

    Luckily for the world economy, however, Gordon Brown and his officials are making sense. And they may have shown us the way through this crisis.
    http://www.nytimes.com/2008/10/13/opinion/13krugman.html

    Thanks from the rest of the world!!!

  • Comment number 15.

    Maintain lending levels at 2007 levels???

    Isn't that what bankrupted banks in the first place?

    Can you clarify what this means please Robert, many of us are sitting here wandering if the government is trying to usher back in the "Age of Irresponsbility".

  • Comment number 16.

    if the banks are all re-capatilised .
    , why will they lend to each other ????

  • Comment number 17.

    "The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007."

    The real heart of the matter - massive home loans to those who cannot afford them creating a bubble - has not been dealt with and from what you say is still being artificially propped up. Given that a major financial role of government should be to intervene when the wheels come off free market capitalism, the opposite action should be taken. Darling should make it illegal to lend more than three times annual salary for any mortgage, easy as that. The avaricious buy-to-let crowd would howl and wail but the housing market would stabilise within six months.

    Of course, Gordon Brown would lose...

  • Comment number 18.

    Ah what a clever man. His budget is bust, but he's found another "off balance sheet" way to gamble taxpayers money on the housing market. Give it to banks and force them to resume "normal" lending (ie. 2007, the peak of madness). Come on everyone, we can keep this bubble going just a bit longer, at least until the next election.

    However, with a bit of luck, house price falls are now entrenched enough that sensible individuals will stay far away from it until we really reach the actual "normal" debt levels, ie. somewhere around 1995. What then for GB, will he force people to borrow and buy houses?

  • Comment number 19.

    Momentous events but unfortunately just the start. have to get the US and europe working to do teh same for the effect to take hold properly and stabilise banks and kick-start lending.

    then....we need a rebuilding of wholesale markets. So far I dont see anyone with a plan.
    bw

  • Comment number 20.

    Let us hope this works.....

    Apart from the implications for us all it would be nice if Robert could get a day off.

    I am grateful for your insights, perhaps this is a time for us all to reflect on what we value.

  • Comment number 21.

    "The government has insisted, for example, that senior directors should receive no cash bonuses this year and will receive future bonuses in the form of shares - in the hope that this forces them to take a long-term approach to the way they manage what are now our banks."

    So, directors CAN receive share bonuses THIS YEAR???? and must receive bonuses in shares in subsequent years. Even this stupid govt MUST REALISE that they can simply SELL THEIR SHARE OPTIONS raising CASH (unless there is a condition they must keep them for x years - but thats not in the press release). This is from the Govt who sorted GP's pay!!

  • Comment number 22.

    The plan won't work, wait for FTSE to drop!

  • Comment number 23.

    If I'm not mistaken Gordon is taking alot of credit for something that was invented in Sweden..

  • Comment number 24.

    Simple, simple, simple - kick start this greed fuled mess without the ultra rich getting rich out of it. This is getting perverse on so many levels.

  • Comment number 25.

    #9 - very funny!

  • Comment number 26.

    What does "we own the banks" really mean? Sorry, I am not knowledgeable about the economy, nor do I profess to have a solution to our current situation. In fact, I no longer live in the UK now.....but surely much of the detail is incomprehendable or irrelevant to the majority of UK citizens. Your blog is helpful...but we all MUST understand the implications of these actions (global & national) and their future impact on our society and our children. Can anyone reassure me that we shall amend our actions- even learn lessons- from our current crisis? And how can we prevent this from happening again (how can we ensure that this does not reoccur for our next generation?). Rescue packages and assurances are all well and good - and imperative - but we are passing our children an unstable future. If this can be prevented from happening again, let's make positive steps to do so and turn a crisis into positive action.

  • Comment number 27.

    When 'Joe Public' pops to the local branch this morning, will he/she be greeted by a sheepish looking NEW Manager apologising on behalf of his predecessor for the criminal way that is bank have treated their customers?.............No, it will be RIP OFF BRITAIN......BUSINESS AS USUAL!.......This latest injection of cash is a sham, and the greed will continue.

  • Comment number 28.

    They don't know what they're doing

  • Comment number 29.

    The free-market competition principles described by Smith and elucidated by Hayek, Schumpeter and Friedman are being vindicated at each step of this amazing drama.

    First we saw the invisible hand, through globalisation in the second half of the twentieth century, propelling many undeveloped and poverty stricken countries to a standard of living that would otherwise have taken hundreds of years.

    Now we are seeing the invisible hand sweep away crony capitalist economies (to which much of the western world has degenerated) with a similar flick of contempt as it did to the USSR economy in the nineties.

    And in the UK, particularly, the futile efforts by government to shelter the banks behind the too-big-to-fail mantra have simply shifted the lack of trust onto its own shoulders.

    When will it become clear that free-market competition is a descriptive, not a prescriptive, framework? It is how the world works. Smith did not invent it, nor was he the first to discover it, but he articulated his observations better than anyone else had. One job of government is to learn how the economy can synchronise with this reality: its only weapons are tight rules and regulations, properly enforced.

    Any attempt to actually hold back the propensity of markets to be freely competitive, rather than facilitate it, causes great hardship. Attempts to command and control the use of productive resources fail, whether by way of crony capitalist dreams, socialist fantasies or communist nightmares: the difference between them lies in the number of unnecessary deaths.

    Thatcherism and Reagonomics, were the first serious attempts to address some of these free competition principles. Although their efforts have since been dismantled, others will follow: the free-market-competition genie is out of the bottle, and if the western democracies do not adapt by choice they will by competition.

  • Comment number 30.

    Will this mean that ineterest on Government borrowing will be zero, along with all of our loans? Will usery be outlawed again? Or will we all be conned again into paying interest?

  • Comment number 31.

    Total STUPIDITY.

    1) Darling says "governemnt will not be taking active role in running banks"

    What?? Who is going to run them - the same people who screwed up last time - with no influence from their new shareholders??

    2) Darling says they will underwrite new share issues...

    What?? So instead of preference shares we may end up with normal shares (with their associated risk) at a price set by the banks themselves??

    3) Keep credit will be kept at 2007 levels

    What?? So how will that be financed this time round? last time it needed bogus toxic ninja backed loans... Or is our own money really going to be loaned back to us for the banks own profit??

    They are trying to beat the markets - they will not win - there will be money to be made at their (i.e. our) expense - fill your boots, you'll need it to pay the bill.

    More interestingly... Following the local gov asscociation saying that icesave was rock solid and they should be bailed out...

    This is what some bloggers were saying back in May.

    http://www.housepricecrash.co.uk/newsblog/2007/05/blog-icesave-credit-rating-downgraded-notches-4104.php

    If they were worried - WTF were the local government treasury officers playing at -- time for heads to roll...

  • Comment number 32.

    Robert please can you advise exactly how the British banking industry will operate going forward given the government involvement. Will this mean concerns regarding competition go out of the window now that the State effectively backs some of the leading players? Surely the government will want the partly nationalised banks to do well to ensure its investments are safe/profitable. Won't the other independent banks struggle to compete given the government guarantees?
    I still don't understand how the part nationalised banks are going to operate and what actual control the government will get for the taxpayers' money.

  • Comment number 33.

    No.8. "Jerehada".

    Yes, we Scots will be involved. Were you not aware that we too pay Income Tax?.

  • Comment number 34.

    What is the business model which will allow these banks to ever make a profit ever again?

    If they cannot play the derivatives market any more, and are only faced with the prospect of mulitple business loans defaulting, along with mortgage holders they are not only insolvent but also no longer 'going concerns'.

    As such they should simply be wound up. Putting current and future (ie our children's) tax revenue into this black hole can never possibly work.

    Right now the government's most pressing task is to prevent a flight of capital to overseas, so that we at least hang on to what little we have left.

  • Comment number 35.

    Nicely said, but until the household debt has been paid off and the British are transformed from big spenders of unearned money to savers, the banks will continue to own us, I'm afraid.

  • Comment number 36.

    I am a Lloyds TSB shareholder who believed that the bank was one of the most prudently managed and was less exposed than most to toxic paper.

    I expected a reasonable dividend if not one held at the present level

    Then they decide to buy HBOS

    I find that the joint entity will be 43% owned by the government and dividends will be paid as scrip for the next five years

    What makes this a good deal.I thought the chairmans name was Victor Blank nor Blak Cheque!!

    I shall vote against it.

  • Comment number 37.

    I just found out that the coupon on the Treasury's preference shares is 12%. At least the government is making RBS pay fully for its cash.

  • Comment number 38.

    so now the UK taxpayer "lends" money to the banks so that they can borrow it back at a higher rate. as this "cunning plan" has not addressed the real problem - how much toxic debt is hidden off balance sheet- it is doomed to fail. Bite the bullet, force banks to publish audited accounts.

    For example, RBS directors should face a criminal charge of fraud given that at the last rights issue in april, they did not disclose all relevant information.

    surely to "maintain 2007 lending levels" is madness as this was the policy that created this mess.........

  • Comment number 39.

    I dont get it.

    Why insist on bonuses being paid as shares. Its exactly that that cuased this in the first place. Hyper inflated share prices by dodgy financing. This move will encourage the bankers to do the same again. The only gamble for them will be to sell their shares at the right time and as they are inside the bank surely there is a conflict of interest there. IF this goes through the next run on the banks will be induced by the bankers themselves rather than speculators

    Bad bad policy designed by an incompetant ex chancellor

  • Comment number 40.

    So now it's confirmed that billions upon billions of taxpayers money is to be used in a (hopefully futile) attempt to artificially reinflate a monumental house priice bubble.

    So when we get the next sickening sight of a goverment minister talking of "help for first time buyers" and "affordable housing", will they be asked by the BBC journalists about the first time buyer's tax being used to keep the price of property out of their reach?

    No, of course we won't. A Mad, mad world.

  • Comment number 41.

    At the moment the crisis naturally is concentrating on the financial implications of trying to sort things out. Hopefully we will soon reach a stage where we can look in detail (and transparently) at the corporate governance issues of what has gone in. This to include (but not exclusively) the role played by CEOs (who seem able to work away wuith featherbed pensions and other compensation), the judgements or (rather lack of) by the non-executives (who were supposed to exercise independent judgements in exchange for their remuneration) and the auditors (who presumably certified that toxic debt and business models had some value).

  • Comment number 42.

    Firstly, can we stop talking about "cash". There IS no cash. Secondly, why has the BBC STILL not tackled the real root of the problem? The problem has nothing to do with any complicated-sounding economics nonsense, and is entirely due to the fact that our monetary system is based on debt. Think about that; if every penny of debt was paid off there'd be no money in circulation. Throwing more IOUs at the problem (which is what is being proposed) achieves nothing except inflating the money supply yet further. The taxpayer does NOT own the banks - because the taxpayers' debt is so vast that the balance sheet is still tilted massively in favour of those who already own them. Once upon a time I would never have believed that the BBC, to coin a phrase from one of the BBC's own editor's blogs, would be "part of the conspiracy" - but that's exactly what the BBC is. It is actively conspiring to keep the British people in ignorance over what this financial crisis is REALLY all about - and what the proposed solution was ALWAYS going to be. Yeah, right; what we all REALLY need is a GLOBAL solution. A global bank, owned by a tiny group of people, and no doubt the BBC will still try and kid us all that this is the best, indeed only, solution - but don't worry, it won't affect YOUR rights... Think about it for a moment. A global government who control a global bank. You think you have it bad now? Just wait...

    "Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of a pen they will create enough money to buy it back again. However, take away from them the power to create money, and all the great fortunes like mine will disappear, and they OUGHT to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." - Sir Josiah Stamp, former Director of the Bank of England

  • Comment number 43.

    Why is Andy Hornby still in his job?

  • Comment number 44.

    Quote RP: "The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007."

    This is sick! However, I'm confident that 2007 and the years before will not come back and the bubble WILL deflate. Anything else would be beyond irresponsible.

  • Comment number 45.

    Would I be right in saying the government will only own 60% in RBS if the shareholders don't take up the offer of shares at 65.5 pence?

    If I am right should you not have mentioned that rather than this continual sensationalising thats going on? sometimes its like your writing for the tabloid press and not providing objective journalism for Auntie!

  • Comment number 46.

    Post #7

    Quote: AS we own the banks, lets get rid of FOR GOOD, the inflated egoes and golden hand shakes of these piriahs who feed off ordinary peoples stress and money problems.

    Probably a popular sentiment. Perhaps the world's major financial centre should move from London to Dubai or Singapore. Then the Government can double income tax to make up the difference. Banks pay one third of UK Corporation Tax. By the way, we have hundreds of foreign banks operating in London. The UK banks being part-nationalised are only a part of the system.

  • Comment number 47.

    Pray let me resume my outstanding point, as it remains relevant here. RBS was initially capitalised at 12bn, issued another 12bn in April and then 16bn a mere three months ago, and now taps HMG for 20bn. If 20bn's 60% of the equity, then the true equity will be 33bn, less the 20, meaning the company's true equity base was 13bn yesterday. Yet on the 2nd October, they released half-year figures of 400 million profit. These figures don't stack up, and when read against the crisis conditions already well-installed, it means nobody responsible for preparing those figures was competent - everyone in the Group HQ who had anything to do with preparing these should go too, not just the Chief Exec, but the entire Board, Chief Accountant, Treasurer, the entire accounts team, internal audit, external audit, and financial advisers.

  • Comment number 48.

    Let's get this over with.

    I am hoping for the dust to settle so we can get on and find out WHY this was allowed to happen.

    These banks were allowed to over-leverage themselves because this government allowed them to. This government removed much of the BoE oversight on bank lending and debt accumulation and gave that to the FSA.

    It also removed much of the regulatory practices and condensed them into the FSA.

    So it removed those skilled and versed with dealing with banks to a body that wasn't.

    I watch the news with interest saying this is the 'end of Thatcherism'.

    Wrong.

    This was a mess of this government own creation. It created the banking rules, it created the conditions for this to happen.

    A government addicted to debt and led the way to millions of people over-extending themselves with debt, secured and unsecured. It has done nothing in 11 years to stem or control it.

    To blame the bankers is simplistic and also fails to understand the cause and nature of this problem.

    Blame lies in many places and I expect nothing but a full, frank and objective assessment of that.

  • Comment number 49.

    Any truth in the reports this Sunday in the Mail on Sunday that your reports (fed by your ex newspaper mates now working in the Treasury) led to unnecessary runs on the banks and widespread panic. I noticed last week that you couldn't wait to get your face on our TV screens and blab your "leaks", often unshaven you were in such a rush to expose your exclusives?

  • Comment number 50.

    just lie a mother giving birth ..socialism is organically emerging ...learn the lesson folks lets embrace to change and reebalance the world ...the world has changed ...theres no going back ,so lets go the whole way ...world currency co operation not competition.

  • Comment number 51.

    Where will all these disgraced and inept bank chiefs etc go, when they are rightly sacked by their shareholders?

    Tory MP's at the next election?

    Well the bonuses are far better now and immediate. snouts at the ready boys!

  • Comment number 52.

    just like a mother giving birth ..socialism is organically emerging ...learn the lesson folks lets embrace the change and rebalance the world ...for the world has changed ...theres no going back ,so lets go the whole way ...world currency co operation not competition.

  • Comment number 53.

    The government is making it up as it goes along. Last week it it was one plan, over the weekend another. It was only on Saturday that the Government was aware of the financial reality of UK banks. Where has the FSA been for the last 10 years, and what have the auditors been signing off?

    An economist was quoted over the weekend as saying that 50% of the growth over the last 10 years has been achieved by easy credit (the rest no doubt was government debt and PFI deals that will no longer be off balance sheet) so Gordon Brown's "economic miracle" was nothing more than a mirror trick.
    This rescue is similar to his budgets, sits down to applause then we see the small print. His popularity has reached a high water mark, now the tide will go out on his government.
    It's time for the Tories to start asking questions.

  • Comment number 54.

    @43
    "Why is Andy Hornby still in his job?"

    Just a matter of time. Rumor has it, he is to be a Tory candidate at the next general election!

    They are always on the look out for talented individuals!

  • Comment number 55.

    daft statement of the day:

    to strive to maintain house prices

    Almost the worst thing I've heard today (on the the Today programme R 4) was that 'to strive to maintain house prices' as a reason for bailing out the banks. This is appalling news. This is the most stupid statement of all of the stupid statements we have yet heard during this catastrophe. (Along with the ill informed statement that Icelandic banks were AAA rated!)

    Where has this person been living - clearly not in the real world. It is absolutely insane to pump money into inflating the bubble economy - many times in history this has been tried and it always fails. House price must fall and the quicker they do, the quicker normal business can resume.

    The choices are either: hyperinflation which destroys all the wealth that savers have accumulated, or house price deflation which makes overstretched borrowers suffer, but prudent savers retain some of their wealth.

    The choice is partly a moral choice, should the imprudent benefit suffer and the prudent benefit or vice versa. Inevitably a bit of both will happen, but for an instrument of policy to be ostensibly set out to damage savers (the prudent, mainly older) and to benefit the NINJA/Liar Loan/buy-to-let/self-cert. generation is insane and will most probably be slaughtered at the polls.

  • Comment number 56.

    Amazing really isn't it? With all the money being ploughed into the UK banks, and with the "unprecedented" reduction by one half per cent in Base Rate last week, the Governments first "nationalised" bank - Northern Rock - has decided NOT to reduce it's standard variable interest rate (at 7.49% already one of the highest) and at the same time does not allow existing borrowers to access any lowere rate "deals".

    Is this a way for the Government to recoup some of it's support to other banks??

    John

  • Comment number 57.

    A little perspective is called for. Yes the bail out of RBS and HBOS is big and Barclays may yet need some shillings. But no-one has mentioned:

    1) RBS last year bought ABN-Amro along with Fortis and Santander. Fortis has already had to be propped up but maybe this was a step too far. I don't know about Santander except it has been buying up UK banks for some time now - hopefully it has not overstretched itself. I would expect some parts of this deal to be sold off or will the UK taxpayer become a global banker as well?

    2) No-one has mentioned that our largest bank HSBC has not been mentioned. Presumably the FSA has concluded that this bank is still healthy and will remain privately owned. It does of course have substantial far east assets.

    3) There must be a little egg on the face in Edinburgh as the two major bail-outs involve the RBS and (H)BoS. Sorry Scotland - there are some benefits in the Union you know!

    4) These amounts represent a sensible defence against a possible financial tsunami which may not ow occur and a return to the much more conservative approach of the past. As such it is prudent and has set an example that the rest of the world should be following. In other words, it shows leadership that has been severely lacking in Washington.

    5) It also shows the size of the UK banking sector which the government clearly wants to retain. The US bail-out budget of $700bn (which will probably have to grow) is approximately the same size as the UK's on an economy 7 times bigger. Don't expect the Euro-zone to be much larger either.

    6) Ultimately when the RBS and Lloyds/HBOS is returned to private ownership probably in a number of tranches, the taxpayer should show a profit.

    7) If as posted yesterday, this marks the end of Thatcherism - and I am not sure this is true - Happy 83rd Birthday, Maggie (dob 13 October 1925).

  • Comment number 58.

    For those of an apocalyptic disposition, may Rahere add that he has hard historical documentary evidence from the Belgian National Archives supporting such Rev 19 theses in the framework of the Malachy prophecies, too - I take the widest view, I'm not just a bean-counter!

  • Comment number 59.

    Could you clarify the 'lending at 2007 levels' comment please? Does this genuinely mean that the government are never going to let house prices fall and thus guaranteeing that no one will ever lose money from buying a house?

  • Comment number 60.

    Regardless of the mess we need the banks. Being in public ownership is not ideal however it may restore confidence to enable a move toward a calmer period.

    For most of us the reality of this situation is that we can do little to make any real difference to the outcome. Like passengers on a ship in a storm we have to trust the crews to get us through.

    We must remember that whilst the stock markets may change many companies are still strong and continue to deliver products and services. All they lack is a confident banking system. As consumers, whilst we will all be looking to be a little more prudent we must not stop supporting businesses otherwise we may compound the problems our economy is now facing.

  • Comment number 61.

    The plan won't work. This is a short-term solution involving chucking good money after bad.

    Let's wait and see what happens when the global financial system starts to flush out the valueless toxic debt and exotic debt trading derivatives currently locked up in the system. All we've done is shore up a flawed system with a view to doing more of the same in future. Ludicrous.

    It's disingenuous of the government to talk about taxpayers being shareholders in banks for which we'll get a dividend and a capital gain when we eventually sell them. Didn't somebody once say 'shares can go down as well as up'.

    We've hardly started this painful process. Unless and until we all get our heads around the end of cheap energy and, so, the end of assuming unlimited economic growth, we'll lurch from one global financial crisis to another, each one worse than the previous.

    Let's see what happens over the coming days and weeks eh?

  • Comment number 62.

    Dear Robert

    I woke up this morning to discover that I’d suddenly become an unsuspecting part-owner in several (troubled?) banks. Now that I’m fully awake, it would be nice to understand my position a bit better and the new risks I’ve suddenly been exposed to:

    1) In what sense do I have any ownership at all?
    2) Do I have any influence at all?
    3) Does my influence relate to the amount of tax I pay?
    4) How does the continuing use of the Fractional Reserve system (i.e. the banks can use each £1 on deposit to support £8-12 of lending) make my new banks financially strong and prevent future repeats of the Northern Rock disaster?

    To try to understand a bit better, I watched Paul Grignon’s excellent Money As Debt animation, in which he explains the whole history of money and the Fractional Reserve system – and I still don’t feel any better.

    http://uk.youtube.com/view_play_list?p=8A17735DF82243F9

    I would love to hear you explain this sleight of hand on prime-time news, but I know you’re a bit busy at the moment…

  • Comment number 63.

    What about the court case about Bank Charges ?

    Surely its now a given and we can all get our own money back.

  • Comment number 64.

    #8

    Sorry - this is a problem caused by the Westminster Treasury and the City of London. If Scotland had been independent we'd be like Norway. Smug and happy sitting on a pile of oil cash and investing in our numerous and growing clean energy technology businesses.

  • Comment number 65.

    Silly title.

    Through Pension Funds and insurance policies most of us did own the Banks.

    Banks who paid a lot of tax to the Gov't when they were in profit.

    Oh well, if you have a Pension plan, check it is going to pay out what you think it will.

    Chances are you will have to top it up a lot.

  • Comment number 66.

    We own the banks...Or do the banks own us?

  • Comment number 67.

    This comment has been referred for further consideration. Explain.

  • Comment number 68.

    A simplistic view from a simple soul: (surely, someone shall explain why it cannot be done) - Can we not halt credit spending (credit cards) but support mortgage continuity to allow people to live in their homes whilst reducing the 'over income' expenditure that excessive credit limits have facilitated?

  • Comment number 69.

    Who's Jim....has someone told Sid yet? Following the wave of privatisations in the 1980s and New Labour's move with the Bank of England it is difficult to see how the government can have any credence left by nationalising the commercial banking sector ... let alone demanding it maintain the same level of lending as in 2007?! Surely debt levels need to fall and some reward be given to the frugal saver through higher rates of interest rather than entice us to take on yet more debt! Isn't that after all what the markets themselves are prescribing, higher interest rates? Only when the weaker and poorly managed entities totally fail can the fitter, better managed ones can pick up the pieces and rebuild an economy fit for the 21st century.

  • Comment number 70.

    Simply just dont understand why if HBOS is obtaining funding to shore up its position it now needs to be taken over by LloydsTSB. Surley with the whole package announced by the government it could stand on its own and provide more competition in the marketplace.

  • Comment number 71.

    And it's your fault Robert -

    If you hadn't leaked the story last Sunday (who is your source by the way), the banks wouldn't have been in such trouble on Monday morning - forcing their share price lower has ultimately made them easier targets for the government.

  • Comment number 72.

    There is a lot of bitterness in these posts - probably justifiably. But what has happened cannot be changed (and it isn't just the UK that is suffering), but what shall happen can! I wish that we could all look ahead now - to make things better rather than complain about the past or the present (that, realistically, we cannot do anything about). There are some that should be held accountable...but I hope that shall be part of our global solution!

  • Comment number 73.

    Gordon Brown just now: "The government will not be a permanent investor ...". Alistair Darling: "These banks will be run at an arm's length ...". Brown: "Other countries will do similar things in the next few days ... these are investments made at the bottom of the market ..." Darling: "These banks must be run on a commercial basis, not by civil servants ... We're not against bonuses in themselves" Brown: "We've got to hope other countries will follow ... Our first challenge is to stabilise global markets ... When we use tax-payers' money, they want to know that we are getting good value for money" Darling: "Board members need to pay more attention to risk ... that is the first line of defence [not regulation] ... The regulatory system needs to evolve ... and be strengthened ..." Brown: "The prospects for the global economy are very good indeed ... doubling in size in the next 20 years ... Britain a leader in the international economy ... rewarding hard work and enterprise ..." Darling: "There are massive opportunities in globalisation ... The British government is not in the business of running banks ..."

    Except to the completely tone-deaf, this is totally different mood music from that accompanying UK nationalisations of the 1940s. Can we therefore now move on in this blog from anachronistic and fallacious anti-Thatcherism from those who clearly still haven't got over the removal of Clause 4 from the Labour party constitution? We are entering new territory, folks, which means that nothing in the past can fully guide us, least of all discredited Marxist ideology of public ownership. I repeat, it is new territory.

    t_mike (#17) articulates the most important criticism for me. No more asset bubbles please. Sustaining the current one would surely lead to an even worse crash later, as Ron Paul has cogently argued.

    Still, given that some kind of bailout became accepted wisdom, some of the key lessons of the 1930s seem to have taken on board - not letting banks fail but insisting on some real pain for reckless lenders to avoid the grossest moral hazard. It's a clever package - plus strong arm tactics - put together by a government that has finally found its feet, as is shown I think by the reaction in the New York Times yesterday pointed to by roddymccorley in #14:

    "Has Gordon Brown, the British prime minister, saved the world financial system?"

    Tough news for the new Tories but a genuine reason to be proud to be British this morning? A thought too far for the psychology of most poor savers and tax-payers - and certainly the serial complainers on blogs like this. But if our leaders have indeed cracked the current crisis and world credit markets now turn the corner, avoiding a disaster for the poorest in the UK and the planet generally ... then we will all have something for which to be truly grateful.

  • Comment number 74.

    When Gordon Brown was Chancellor he gave up control of the Bank of England to stop government interference, and was cheered by all and sundry, now he is PM he has taken control of most of this country's banking industry, why are we cheering?

  • Comment number 75.

    Is that the sound of lawyers' pencils I hear being sharpened?

    #41 correctly aims at most of the individuals & professionals who are responsible for this unholy mess.

    Do the insurance companies who provide the Professional Indemnity Insurance to the auditors have the necessary resources to meet the claims?

  • Comment number 76.

    HBOS already down 30% this morning and RBS down 20%.........has the UK taxpayer just bought a pig in a poke?

  • Comment number 77.

    Fred the Shred - what a chancer! - lets hope he's the first of many to go.

    The package announced this morning was OK, but as others have pointed out, why did they undermine the whole thing with the absurd '2007' promise? This is an error that could unravel the process if taken seriously.

    So, OK, thats disposed of RBS, Lloyds & HBOS, now who's next?

    Barclay's is playing a waiting game at the moment, and hoping that by standing apart with HSBC they can ride-out the storm, without having to appoint government directors. It remains to be seen whether this position is viable in view of their off balance sheet nasties.


  • Comment number 78.

    Good, so now we own NR, B&B, Loyds, HBOS and RBS to name a few....

    So can we merge them using the least cost method (IE no rebranding or managerment consultants all 5 companies into one streamlined bank

    Then select the best of a bad bunch of board members ands set up ONE managerment team for the lot and then sack for incompatance (they either knew of the problems in which case they misslead investors or the didnt know in which case they were nelegant in their duties) to top 3 or 5 levels of managerment.

    After all the top 5 tears of managerment must now be costing the taxpayer 100's of millions a year to maintain!

    Oh and we can sell off their london and other offices as we only need one head office.



  • Comment number 79.

    So HBOS is getting a large injection then is being sold to Loyds...

    Dosnt that mean that to goverment will be getting X shairs in HBOS then they will be converted to X * 0.6 Loyds shairs.

    Whouldn't it be easier / cheaper to just give the monies directly to Loyds or is this to lower the price of HBOS or mean that the goverment gets a smaller overall shair for its buck?

  • Comment number 80.

    "The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007"
    Even if this was a sensible goal - I just don't see this working as far as the housing market goes. Where will the first-time-buyers come from?

    With house prices still obviously overvalued (so likely to fall further) and a deposit required you'd have to be a complete idiot to buy into this game at the moment.
    After all, it would be YOUR deposit that's at risk here - NOT the banks 70, 80 percent or whatever.

    I can not believe there are enough idiots left to make it work - or am I just too much of an optimist?

  • Comment number 81.

    "The three banks have also agreed to maintain lending to homeowners and small businesses at the levels of 2007."

    Is this Brown's quid pro quo? He hopes to kick-off the housing market again in time for the election? The last time that happened was when the "independent" MPC (who chooses half the appointments?) voted against Mervyn for a cut in August 2005 and look where house prices ended up.

    I see there's quite a few comments above picking up on this; moderators, if you've a way of flagging topics for consideration to Robert Peston, please flag this one.

  • Comment number 82.

    The government was warned a while ago
    that this "crisis" was going to happen.
    They chose to ignore the advice, either
    through stupidity or incompetence.
    With the help of hysterical media coverage
    the Labour party has resurrected clause 4,
    and the UK taxpayer has to foot the bill.
    It is Brown and Darling who should resign.
    It is the labour government who should
    resign

  • Comment number 83.

    UTTER COMPLETE NONSENSE!!!!!!!!!!

    THIS SCRIPTED AGENDA IS SO BORING!!!!
    Y A W N...Y A W N...Y A W N .....WAKE UP PEOPLE...THIS FAKE SYSTEM WE LIVE IN IS CHANGING INTO A NEW SYSTEM OF CONTROL.....THE MONEY SYSTEM HAS TO BE CRASHED, FOR THE NEW SYSTEM TO BE MANUFACTURED TO HAPPEN

    WE HAVE HAD THE EUROPEAN UNION, WE WILL NOW HAVE THE AMERICAN UNION...CANADA..USA..AND MEXICO JOIN FIRST WITH A NEW CURRENCY...THE AMERO......FOLLOWED BY A FAR EAST UNION INCLUDING THE AUSSIES ETC...WITH A NEW CURRENCY...

    THE 3 MAIN TRADING BLOCKS HAVE BEEN WRITTEN ABOUT BY MANY PEOPLE KARL MARX IN THE 1800'S, H G WELL " THE OPEN CONSpiracy" IN THE 1920'S..MONEY IS A FORM OF CONTROL IT CONTROLS POPULATIONS, IF YOU DON'T HAVE ANY YOU DON'T SURVIVE THERE IS NO OTHER SYSTEM IN PLACE I.E BARTER, LABOUR EXCHANGE ETC

    THAT'S YOUR BIGGEST CLUE TO MONEY, MADE FORM NOTHING , BACKED BY NOTHING, NOW A DIGIT IN A COMPUTER SCREEN, FORMALLY A INK MARK IN A BANK LEDGER, REMEMBER CLAY TABLETS,WOODEN TALLY STICKS, COPPER WEDGE, ALL CONRTOLLED BY A SMALL ELITE.

    we live in the open consPIRACY!!!!!!!!!

  • Comment number 84.

    76-jolo13:

    "HBOS already down 30% this morning and RBS down 20%.........has the UK taxpayer just bought a pig in a poke?"

    Another way to look at it is that maybe investors don't want to be minority shareholders in a part-nationalised bank.

    If their market capitalisation carries on deteriorating at this rate they could shortly be fully nationalised anyway. So the UK taxpayer may get them for next to nothing.

  • Comment number 85.

    With the Government essentially in control of the Lloyds/HBOS group, it will be easier to insist they break-up the business again once the market is OK; avoiding them having too much market power!

  • Comment number 86.

    I don't get it. When Lloyds TSB took over HBOS all the pundits nodded sagely and said "Well, you see, Lloyds was always the boringly prudent bank, and it's left them in a strong position."
    Two weeks later, here they are, holding out the begging bowl with the rest of 'em. Presumably they bit off more than they could chew with HBOS.
    Whither prudence now?

  • Comment number 87.

    Will the directors of the banks clamoring for lifeline be:

    1. Obliged to appear before parliamentary select committees and be ruthlessly grilled,
    2. Investigated by the commercial police for any criminal offences?

    The US appear to be taking a far harder line on the activities of directors than is apparent in the UK.

  • Comment number 88.

    Goodbye capitalism, hello socialism. Here's an idea; if taxpayers really do own the banks, when can I expect to receive my RBS, HBOS & Lloyds TSB share certificates???

  • Comment number 89.

    84-vegetable_grower

    "So the UK taxpayer may get them for next to nothing. ..."

    But then liable for all the hidden toxic debt! not much of a bargain !

  • Comment number 90.

    How thorough and proactive are the regulators now going to be? We need several orders of magnitude better than we have had in the past for the short, medium and long terms. And not just in Britain, but around the world.

    The FSA were totally negligent over the Equitable Life for more than ten years, so how good will their control now be and how much can we afford to trust them?

    After all, if we give the markets and the regulators the benefit of the doubt, history is more likley to be repeated. Inbridled capitalism has been shown to be far too dangerous but so also are complacent regulators.

    Who is going to regulate the regulators?

  • Comment number 91.

    Mr Peston,

    Could you please give us your estimate of the total debt taken on by the government by the acquisition of liabilities of the failed U.K. banks ?

    Has Mr. Brown or Mr. Darling told us anything about this ?

    Even a 'ball-park' figure would help us understand the situation.

  • Comment number 92.

    Post 62 led to a great explanation of how banks can cause inflation.

    http://uk.youtube.com/view_play_list?p=8A17735DF82243F9

    Well worth watching. It explains a lot.

    Banks cause inflation.

    Funny how this idea is not discussed more. It suits the government and bankers to not talk about this cause of hidden inflation (e.g. where the dosh for the UK housing boom came from, actually from thin air, i.e. inflation)





  • Comment number 93.

    There wasn't any choice, government should not have let house prices go out of control.

    What government is doing now is right, we need more rate cuts from BOE.

  • Comment number 94.

    No. 29 - HAve you not been p[aying attention? Nationalisation, in whole or in part, with a new system of regulation across borders (a new Bretton woods, in fact) is about as far from free market Thetcherite/Reaganite economics as you can get. The reason? Total failure of the unregulated 'the market will decide' invisible hand fantasy - now exposed as the absence of clothing those very few who continued to believe in Keynesian economics and regulated markets kept telling the Emperor (or Masters of the Universe - a breed now dead as doornails. Until the next time.)

  • Comment number 95.

    The people at RBS who dealt with my offset mortgage failed to understand the product despite a hefty fee for its uptake if they have similar calibre staff working the capital markets it is no wonder !
    RBS has always been a laggard at passing on interest rate cuts on my mortgage and rate hikes on my savings.
    I wonder whether Gordon and Al would have had the same sympathy had it not been two major Scots institutions going down - I doubt it. Lets see a British re branding !

  • Comment number 96.

    "We own the banks"

    Where "we" stands for "a remote coterie that are barely accountable to anyone else". Much the same as before, in this regard. Before it was bankers ignoring the interests of their shareholders, now it's politicians who all agree across all parties, giving no real democratic accountability either.

    Why do BBC commentators have this instinct to think of government ownership as "ownership by us"? There's a reason why we don't call this the People's Republic of Britain... let's call it healthy scepticism.

    And judging from many of the other comments on here... isn't it about time the BBC did a documentary series about the history of money and banking, with a general aim to educate people on how lending works, where new money supply comes from, etc.?

  • Comment number 97.

    Well that's all very well, this cash injection will supposedly help the Banks to loan money, not only between themselves, but also for house purchasers, so we get the market moving again - yes - but that's where the trouble started isn't it?

    The first time buyers/financially challenged tried getting round the inflated price of houses by 3 or 4 x salary, self-cert, etc. House prices are still too high and wages are too low so who will be able to afford to buy them unless they lie about their income.

    So how's this going to get rid of the 'toxic stuff' or are the Banks just going to shove it in a cupboad in the vault and try not to think about it?

  • Comment number 98.

    @93 AlphaGlen:

    To AlphaGlen and all others who erroneously believe that the government are doing a good job, and are taking or have taken all the steps they possibly could:

    Your lack of knowledge about your own monetary system, based on fractional (or zero) reserve banking, is dangerous in the extreme. In fact, your lack of knowledge about your own monetary system is the only thing which is allowing the (central) banks and their enablers in government to get away with the currently unfolding daylight robbery.

    Learn about our monetary system and the central banking scam built around it. The historical record is very clear about the problems we now face, and the inevitable outcome. Watch the excellent animated video Money As Debt on Youtube, and also the superb Money Masters, again on Youtube or Google video. Stop allowing your lack of knowledge to be used against you - and more importantly, against the rest of us, especially those of us who DO understand what is going on. Try reading some books, such as The Creature of Jekyll Island by G. Edward Griffin, and What Has Government Done With Our Money by Murray Rothbard.

    What is happening now has happened before and it will happen again and again and again until everyone finally understands that it's completely engineered, exactly as Charles Lindberg predicted in 1913 upon the passage of the Federal Reserve Act that depressions would be.

    By then, of course, it will already be far too late.

  • Comment number 99.

    I was initially impressed by mr pestons ability to be breaking the news during this crisis. No however I find myself wondering if in a crisis it is right for the BBC to be so close to the government. I wonder if mr peston has had to give up his right to tell us certain things as the embedded reporters did during the gulf war. Such a level of trust from politicians must have some cost attached.

  • Comment number 100.

    again the poor get ignored as the government works desperately to save the funds of there rich supporters.
    yes pump billions of pounds into organisations that have prooved themselves corrupt ,inept and negligent, but still they can continue to deal as before.
    it apears that being honest and hard working under this government will only get you treated as a second class citizen.
    but why do the majority of people allow it to continue?

 

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