300bn bank bailout

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

The move follows last year's injection of £37bn into the banks, which apppeared 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.

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Chancellor Alistair Darling

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.

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

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.

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.

I believe that this is the equivalent of £33k for every tax payer in the country.

dear dear dear

This will not be the end of the road, if the government continue to operate one solution tactics. Putting money into the economy is probably the only way. But this is not the only way to do it. Use this money to give real tax breaks to business, for example, would help greatly! I am just about to hand over about a quarter of my profits from last year to the government. Now..if I could reinvest all that, arguably I might generate a job or two!

It is a complex problem, more so than I have made it sound. But the government is grabbed hold of two control levers - interest rates and putting money into banking. There are other ideas out there Mr Brown. Better ones. But what would he care about that? He has an election to win. Which he probably wont. Then someone else, of either party, can take the blame.

I saw abit of "Working Lunch" today and one viewer emailed in about this story with ...

"why doesn't the government use that money to just pay off every UK homeowners mortgage!"

never going to happen obviously, but what a great thought, if only!

If this is an insurance scheme, which it seems to be, 300bn will just be the total of the risk won't it?

The total spend will be nothing like that. So you could hardly give the same dosh out in 'real' money.

Correct Boris, but that doesn't make such good/interesting news.

Paul, are you going to re-invest forever, or will you take some out at some point? And where will the government ever get the money for hospitals etc.. If it was true re-investment, then it would be tax-deductible

Last week someone was moaning about interest rates going down - that makes two solutions doesn't it?

Totally hacked off with having to say the same things over again, and hearing inconsistent comments again!

Grrrrrr

On the other hand, shall we feed the downturn with these comments

4N Business forum is getting like John Humphries

Yup..I will re-invest and re-invest. I will build the value of my businesses. I will take as much as I can and make it build a secure industry for tomorrow. Because that is the way I work. And by doing that I have added millions and millions of pounds to companies over the years. It works. And as a result of that, hundreds, even thousands of people have had jobs, fueling a real and lasting economic benefit over considerable amounts of time.

I think my track record on putting money into the economy is pretty good! And I still can. Because of my previous continuous re-investing. Now I have a strong suite of businesses, entirely free of debt. Started when the cost of debt was high. The cost of debt never bothered me then, and it doesnt how, high or low. I make these comments not from a perspective of my personal interests, which are largely able to survive downturn or upturn, but as a businessmen. Probably an old fashioned businessman, I suspect, but one who has been a part of teams that have expanded hugely in times just like now.

I am not interested in talking the economy up or down. It is whatever it is. I observe it, because that impacts on my decisions. I am interested in helping businesses of all sizes seize the metal and grow. Because that is what I do.

Oh and another thing, In November (roughly) the Government announced £50bn cash injection plus £350bn (?) of credit guarantees. By the look of the start of this thread only £37bn of the £50bn was called upon, and I am not sure that the announcement today is not just a classic New Labour re-announcement of teh same money.

So we have:

• Cash injection to the banks
• VAT reduction
• Credit Guarantees to the banks
• Interest rate cuts
• Nationalisation of two banks
• Part nationalisation of other banks
• hand holding of mergers of numerous banks and building societies
• extension of credit to businesses with cashflow issues (and I have seen this working)

Some single solution that is!!!!!!!!!!!!!!!!

Those who could do better, please go and join the policy makers. Those who just want the solution that suits them personally, please wake up and smell the cofee

2nd rant over, until someone winds me up again

point still stands that the re-investment you describe is tax-deductible

I am glad I wound you up. Mission accomplished. Here I go again. I do not want a solution that suits me personally. As you will have noticed, I do not need personally any support. My investment portfolio is long term, and provided I dont rashly cash it all this evening, will do ok, probably. I want the right kind of support for business.

Joining the policy makers is not an option. They are recruited by election, not by competency, track record, or innovation of ideas.

The cash injection into the banks, the only one of the above that I see as necessary, became necessary due to actions of responsible parties, not politicians. The politicians had to bail out the institutions, of course, but my point previously is that it could have been foreseen. And was. By a number of reputable economic commentators.

That will do for now! I will await the next rant.

And why don't those who are competent, or have track records, innovation or ideas get themselves recruited by election?

IMO same reason that Alan Shearer and Alan Hansen will always remain as pundits on MoTD

Not sure that the support for business is inappropriate at the moment - govt is supporting cashflow, banks WILL lend to solid and well planned businesses. Many of the overdrafts that are being called in, are the 'special' overdrafts that are needed at certain times of year - I hear people saying things like - 'I came to use it and it had disappeared' - check before you need it!

I would not claim to be qualified to be the next chancellor. But I can out earn him at what I do, so I am not tempted.

I profoundly agree that banks will still lend to the right business opportunities. They are probably being a bit more picky just now, but maybe that is needed and should be supported. And, if the banks are taking appropriate levels of business support, why do those loans, and why should those loans be underwritten elsewhere than by the banks?

Actually, I think the recession, or whatever it is, will blow through, either later this year, or during the next. The timing is hard to predict. But recessions blow through. No need to intervene quite at this level.