Government buy into High Street Banks. Good News?

Discussion in 'Current Affairs, News and Analysis' started by PartTimePongo, Oct 13, 2008.

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  1. With the news the UK Government has taken the world lead in buying into the Banks, has Gordon Brown wittingly or unwittingly spearheaded the recovery?

    Is the Government action to rein in Banks, protect the consumer and assert financial controls the best option?
  2. Or it could be one step towards a One Bank Europe, Governments having control, might find it easier to 'say' well why not a 'bank' of Europe.
  3. Not wonderful news at all.
    Asides from the massive expense to the taxpayer there has been no atempt to tackle the underlying problem of over stretched consumer debt.
    He has jst provided the funds to continue to expand on that debt. Give it a couple of years and we will face exactly the same problem again. Money loaned out against assets of plumetting value.
  4. Or can it give the Government greater control over the interest rate on the high street?

    Personally, I think it is a good step, but it could have happened much much earlier. Dr. Cable is indeed vindicated , both in his warnings and his suggestions of what was required.
  5. Absolutely not. The actions of the UK government have been about as useful as those of Hank Paulsons USD700Bn injection into the US system. If this is Gordon Browns attempt to look great and statesmanlike (i.e., a Labour MP has suggested that this is his "Falklands").

    To add insult to injury in regards to the supposed consumer protection motive, HM Treasury have "loaned" £100m to the now defunct Landsbanki to bail out Icesave.

    Over and above this(!), the acts of Robert Peston in his blog should be sufficient to be causing the FSA to be investigating, and for Mr Peston himself to be looking forward to some "happy time" at HM pleasure. He's basically been involved in driving the market by creating false rumours.

    For example, the takeover of HBoS by Lloyds TSB because in an interview with Peston the CEO of Lloyds TSB said that "HBoS takeover was due to them having not having sufficient funding arrangements" is so much BS. HBoS did not fund 100% through RMBS / securitisations; rather, about 20% of their funding was through this source the remainder being through deposits as per the "norm". This is the reason that HBoS grew as well as they did whilst C&G (Lloyds mortgage lender) didn't grow at the same rate. HBoS mortgage portfolio is also significantly more profitable.

    In short, the BBC have many, many good points but Robert Peston isn't one of them. He should be vilified but, being a New Labour stooge he will instead be applauded.

    Health Warning: Just because it's in the media doesn't make it fact!
  6. scarletto I agree, it is just one more move towards a European Banking system.

    But then this gov can get as into as much debt as they like? As it will be the next Gov that has to get us out of it. - not very fair, but then not a lot is in politics.
  7. No definitely a bad move, the 37Bn implant of cash to RBS, HBOS and Lloyds TSB is all on borrowing, so the problem hasnt really been cleared. The Spin machine is up and running 100% with Campbell producing various headlines about Cyclops being the financial saviour of the world.
    This is a massive risk, and the shares of RBS were seriously undermined by various announcements that were leaked to BBC's Robert Peston last week.

    Ultimately you and me and the rest to the taxpaying public just added to the national debt today by £37Bn on top of the 100Bn that has recently been paid for Northern Crock and Bradford and Bingley.

    Todays highlights are that Gordon has managed the stock market recovery - he hasnt - it would be natural for buying to take place after a fall like we saw on Friday.
    Barclays and HSBC have remained outside of the rescue passage - thus tying the hands of the treasury and the "nationalised" banks, as competition law still requires a fair market in banking - no offers of cheap mortgages can be made by the Government owned banks.
    LIBOR didnt change as dramatically as expected - only dropping 0.5%.
    Banks are not passing on the 0.5% cut in interest rates announced last Wednesday.

    This is a massive gamble, particularly as government coffers are bare, potentially another £500Bn added to national debt. Gordon is murmering about banks practising off balance sheet accounting, when he himself presided over PFI, the purchase of Northern Rock all of which are "off Balance sheet"

    Gordon Browns policies of easy credit and uncontrolled spending caused this crisis, he is no economic miracle worker, and never will be. He is trying to take credit for it as his "falklands moment" but he has f*cked everything he has touched so far since 1997 and I have no confidence that this will be any different.

    I would be happier though if I could hear some criticism from the opposition benches, instead of the muted silence we are hearing up to now.
  8. Would seem wiser people than you disagree

  9. Fortunate as it is for Mr Krugman to win the Nobel Prize for Economics; this doesn't tend to scan properly:

    He praised the British Government for having acted with "stunning speed" to address the financial crisis, again contrasting Mr Brown's efforts with those of Henry Paulson, the US Treasury Secretary.

    Ii isn't exactly speedy, given that the problem's been extant for the last year.
  10. Those same wiser people that got us all into this stinking mess in the 1st place?
  11. Parapauk:
    I just know that if you borrow money not only does it have to be paid back but usually with interest too.

    If the government can find a line of credit to pass on to the banks how come the banks can't?

    Gordon Brown and his dark eyebrowed sidekick are not known for their economic or political skills - 10% tax for example!

    Darling is being taken along for the ride, and when this little scheme starts to fail you can bet your last dollar that he will take the blame!
  12. This is just re-inflating (or "unfreezing") the market without addressing the underlying cause of bad debt. It only prolongs the agony. Without notable write-downs by the banks and other financial institutions, possibly with a temporary moratorium on mortgages it's pointless pumping that amount of money into the economy when the money itself is backed by nothing but debt.

  13. Yes I forgot Brown's role in giving all those U.S. Wallmart workers earning $6 an hour being given a $600,000 mortgage. And also I forgot the Tories have been crying out for greater regulation for years.
  14. Of course Krugman can write what he wants, he doesnt have to pay for the gamble that Brown has taken with the UK economy, and yes Brown is partially if not quite heavily responsible for the British Banking systems involvement in the Sub Prime market.

    Keeping interest rates low is good for the mortgage market, but not so good news if you want to control debt, it also encourages people to put their savings elswhere where rates of interest are potentially higher - KSF for example. Banks saw a market in the US lending money into the Sub Prime market for higher returns, unfortunately the returns didnt materialise leaving the Banks with Millions in bad debt.

    Gordon Brown created an organisation to regulate banking in this country called the FSA to police banking policies, unfortunately all 3000 employees failed to spot the risks being taken, consequently banks started to collapse under bad debt.

    So really although he is being made out to be our saviour today, he was the one who's term as chancellor made him directly responsible for the crap we see today. It will bite him firmly on the ass!
  15. Interestingly, the Wal-Mart workers being given stupid multiple type loans were only the tip of the iceberg.

    The lenders who made these loans then packaged them together with other, less dodgy, ones and then had them rated as predominantly high-class, high-quality loans which were then split up again for sale onto investors as fixed-income bonds.

    The ratings agencies are at fault: they had a huge conflict of interest as they were being paid by the lenders.

    The investment banks who packaged the loans are at fault: they carried out inadequate due diligence.

    The investors who bought into the bonds are at fault: they did not understand the nature of the underlying assets.