Defaulting banks - where will it stop?

[David Guyatt]

Part 2 on the road to wholesale nationalization, I wonder? Not that nationalization would necessarily be a bad thing, except that once all the toxic waste had been treated and rendered harmless -- thanks to taxpayers -- and once bank balance sheets are back to a healthy glow, they would all be privatized again at bargain basement prices.

The most interesting statement from the below story is that the senior bods at Royal Jock are "...said to be unhappy about the Government having majority control."

Poor wee things.

The second interesting thing is that Brown is said to be furious that Royal Jock bought ABN-Amro -- overflowing with toxic debt - for a mere £49 billion in October 2007.

Furious? I'd shoot the buggers (whoops, can't say that these days or I'll get arrested under a terrorism charge -- so how about "I'd rap them on the knuckles very severely?" instead). They paid a magnificent price for massive debt that (imo) they knew to be worthless. Why? Well, cynics like me might well opine that they were de facto rescuing the Dutch bank with British taxpayers money in advance of the catastrophe to come. ABN-Amro is one of those connected banks don't ya' know.

Brown announces further £300 billion rescue package for British banks:

http://news.sky.com/skynews/Home/Busines...1315205821

19/01/2009 11:10
Chancellor Alistair Darling To Stake Billions On A Second Bank Bail-Out | Business | Sky News

£300bn Bank Bail-Out Confirmed
11:00am UK, Monday January 19, 2009

A £300bn rescue package has been announced by the
Government in an attempt to get British banks lending again.

New bail-out deal could increase Government stake in banks
Chancellor Alistair Darling set out plans for a new insurance scheme to protect banks from so-called toxic assets, a move which it is hoped will encourage institutions to restart lending to businesses and households.

Mr Darling is staking hundreds of billions of pounds of taxpayers' money in an attempt to free up "blocked" credit markets and head off a worsening recession.

Bank of England Fund £50bn to buy quality securities and get cash flowing freely.

Royal Bank of Scotland Measures to strengthen bank’s position but no extra cash

Money Supply BoE gets green light to print extra cash if needed
Mr Darling told Sky News: "In each case money is being provided for assets from the banks.

"These are assets we can sell as the economy recovers. "If we do not do anything, the cost will be far, far greater.

"The recession would be longer and deeper than it otherwise would be."
The move follows last year's injection of £37bn into the banks, which appeared to ease the crisis but failed to solve it.

The plans were given added urgency by Friday's dramatic stock market falls amid fears that the banks were set to reveal further massive write-downs.

In a statement, the Government said: "The likely impact of today's
announcements on the public finances will be mostly temporary, as
investments will be held for no longer than is necessary to ensure stability and protect taxpayer interests; liabilities will be backed by assets; and fees will be charged for relevant schemes."


It said the new measures were necessary because of the continued
deterioration in the global financial and economic situation over the past two
months.

"The Government is clear that meeting lending demand to otherwise
creditworthy businesses, homeowners and consumers is essential for
supporting economic recovery," it added.

Royal Bank of Scotland also reached agreement with the Treasury to replace
£5bn of preference shares with new ordinary shares, effectively increasing the Government's stake in the bank.

The Government bailed out the banks in October - so why wasn't that state aid package enough?

The Treasury was also proposing to swap preference shares it took in HBOS for ordinary shares - effectively freeing-up cash for the banks concerned.

If the deal goes ahead, it could take to 50% the Government stake in Lloyds, which today begins trading today as Lloyds Banking Group after its merger with HBOS.

The group is said to be unhappy about the Government having majority control.

This further assistance comes as a number of banks prepare to announce another set of gloomy results.

RBS today said it alone expected losses of between £7bn and £8bn for 2008, prior to any write-downs on the value of its acquisition of ABN Amro.