Sunday, 12 October 2008

Controlling stakes in RBS and HBOS?

From the FT website:

Britain was on Sunday preparing to pump more than £37bn into four of the country’s largest banks in a broad-based recapitalisation that could that could see the UK government end up with controlling stakes in Royal Bank of Scotland and HBOS.

Controlling stakes in the two of the largest banks in the country? Do they really need that much capital?



dearieme said...

Does that mean that they are really insolvent? If so, what is the point of "saving" them - wouldn't it be wiser to wind them up?

aSteve said...

Alice, are you having a giraffe?

The only question that matters is if £37bn is enough to cover the short-term losses!

The simple fact that Barclays, HBOS, Lloyds TSB and HBOS are willing to contemplate selling preference shares to the government proves that they are all insolvent. That's a game-over move for the bank from the perspective of ordinary shareholders.

Charlie B said...

I find it fascinating that this can be done on the direction of the government without any need for the involvement of parliament. So billions of future tax revenues are committed (substantively and repaying debt interest) without so much as a word to or from the representatives of the people who will pay it. How come?

Barry said...

Charlie, Parliament is an irrelevance. The effective government of Britain is based in Brussels, the role of our elected representatives being condemned to that of a satrap. The axis of power is now Brussels to 10 Downing Street. No one else counts.

Mark Wadsworth said...

The banks don't 'need' the money, they 'want' it.

If the banks stopped lending to first-time-buyers (oh ... they did, or at least FTB's have stopped borrowing) then the total repayments on existing mortgages would be over £120 billion per annum (i.e. over 10% of the total outstanding advances), which I posted about yesterday evening.

The gummint doesn't 'need' control of the banks either, it wants it.

And we the, the long suffering taxpayer neither 'need' nor want it.

So who's got the upper hand here?

Nick von Mises said...

Either way, this weekend I was out buying tins of food, a camping stove and withdrawing a few hundred pounds in small denominations from the bank.

Anonymous said...

Mmm, I wrote on this comment page six months ago that both the banks and the building companies are bust, and the best thing would be to nationalise both sectors and to put them both to work on housing and training the neets in useful work skills.

Watch out for the collapse in the building sector.

Meanwhile, the US have got interest rates so low they areobviously planning on another bubble to get them out of this one...

B. in C.