UK News
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Too big to fail? Guerrilla central banking and the last resort
Deciding it was safe to come clean because banks are now on a more even keel and the worst of the credit crisis is behind us, the Bank of England has told the nation that at the height of the turmoil it secretly lent Royal Bank of Scotland and HBOS a colossal £62 billion, which is more than the entire British defence budget.
Both banks faced the imminent closure of high street cash machines and the curtailment of normal banking operations across the country.
The Bank said “this was a dire emergency” and Downing Street called the secret lending of taxpayers’ money in the Autumn of 2008 “a powerful reminder of how close the banking system came to near collapse.”
In Westminster, some MPs were flabbergasted, even though the loans have now been repaid.
“It is astonishing that this was kept secret for over a year,” said Vince Cable, finance spokesman for the Liberal Democrats. “The government has treated taxpayers like children while expecting them to foot the bill.”
John McFall, Treasury Committe chairman, said the sum caused “a little bit of an intake of breath thinking how many universities, how many colleges, how many jobs you could support with this.”
“It’s Enought to Make Anyone Feel Queasy,” was Ian King’s headline in The Times. “Any More £62 bn Loans You Haven’t mentioned, Merv?” asked the Daily Mirror, addressing itself to Bank of England Governor Mervyn King.
from Commentaries:
Will Murray success at Wimbledon be RBS’s best return?
Royal Bank of Scotland is not best known for backing winners.
So the Scottish bank must be savouring Andy Murray's run at the Wimbledon tennis tournament.
World number three Murray is one of the "sports personalities of present and past" sponsored by RBS during the heady days of Sir Fred Goodwin.
Murray must count as one of Sir Fred's more inspired investments. Murray's play has literally gone from strength to strength -- all the time with the RBS logo emblazoned on his shirt sleeve.
Stephen Hester, Goodwin's successor as chief executive of RBS, must be hoping Murray maintains his winning streak and goes all the way to the Wimbledon men's final.
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The Wall
I take issue with some of the comments being thrown out today such as “the taxpayer has footed the bill” How so? the money has been repaid and no doubt with something extra on top as i’m pretty sure it’s not free money. the comparrisons with schools , universities , defence are not paralleled as there is no return from sone of these expenditures whereas with a “loan” and loan being the key word here, there is a return of the original investment plus some profit for the tax payer. Imagine what could be done if the government sold their stake in the major banks at a significant profit in the future. There’s exra money in the pot which wouldn’t have otherwise been there to sread downward on education and health and the armed forces. Where will the outcry be then.Individuals are not necessarily stupid but people en masse are. Look at the panic which eventually led to the collapse of Northern rock when it was announced they’d asked for a facility , not even taken , from the Bank of England. Mass hysteria and people queueing to withdraw the lifeblood of the bank for fear of them going under yet they themselves perpetuated the ultimate demise of the bank.Good call by the B of E I say. you can’t trust idiots to make the right decision.