The Multi-billion banking rescue: What the experts say ...
08 October 2008
The hyperbole is justified; the news is momentous as countries around the world desperately thrash out deals and pump billions into the financial markets.
Furthermore, in an unprecedented move six central banks, including the Bank of England, came together and jointly announced a 0.5% rate cut.
Here in Britain the Government’s multi-billion pound rescue package means the part-nationalisation of some of our largest banks. The Stock Market reacted shakily to the news, so it still hangs in the balance as to whether the Government's bailout will work. Is it enough or too late?
Here’s a taste of what the key players are saying; the analysts, the politicians and the institutions.
Prime Minister, Gordon Brown "The programme is designed to restore confidence and trust in the financial system and, more than that, to put the British banking system on a sounder footing so as to build strength so that it can support jobs and prosperity right across the economy."
The Chancellor, Alistair Darling "The big problem is that if we don't do this we run the risk that banks will stop lending to each other and if they don't lend to each other then they won't lend to us. That is happening here, it is happening in America, it is happening in Europe, it is happening all over the world. I want to give a jolt to the system to move it on."
Guide to Investing in uncertain times
Shadow Chancellor, George Osborne "We want this to work, we hope it will work." But he added that taxpayer’s money mustn’t be used to pay bonuses to wealthy bankers.
Liberal Democrat Leader, Nick Clegg called today’s announcement "a day of reckoning for the Britiseconomy". He added; "There will of course be a need to examine the detail, but today is a day to stand together."
Governor of the Bank of England, Mervyn King “A major recapitilisation of the UK banking system of at least £50 billion is a necessary condition for regenerating confidence in the financial system. This is a significant step forward”.
David Kern, Economic Advisor at the British Chambers of Commerce called the measures “radical” and went on to say "Given the erratic mood of volatility in the financial market there remains clearly a risk of renewed speculative attack".
HBOS Statement "The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system."
Need to Remortgage? Free quote & advice
HSBC Statement said the Government’s measures were "important and necessary steps in restoring confidence to the sector." But went on to say "HSBC has no current plans to utilise the UK recapitalisation initiative".
Simon Rubinsohn, chief economist at the Royal Insitution of Chartered Surveyors "The dramatic response from the authorities is an appropriate response to the chaos in financial markets over the past few weeks and the global economy's slide into recession. This should help to start the process of rebuilding confidence but we suspect that more action will be necessary over the coming months."
Miles Templeman, director-general of the Institute of Directors "We welcome the coordinated monetary and fiscal response to the current crisis. However, we strongly believe that a further interest rate reduction of 50 basis points will be required next month, if not before."
Alex Potter, banking analyst at Collins Stewart "Government finally comes up with a viable bank rescue plan. Having procrastinated for far too long, the UK governmnt has finally reacted to the actions of, inter alia, the Irish, Danes, Swedes and Germans and instituted a bank rescue/stability plan." He added: "This plan should work - but will materially impact dividends. We feel that the wholesale funding plan is key to short-term stability and that the capital raisings should stabilise banks further out. As such, we anticipate some short-run price recovery.
John Cridland, Deputy Director CBI "The Chancellor's much-anticipated announcement will herald the first essential step on the road to financial recovery.”
Multi-billion bank bailout: 8 Quick Facts
Matthew Elliott, Chief Executive of the TaxPayer's Alliance "The Government is using taxpayers' money as an easy way out, before having fully explored other options that wouldn't have put £50 billion of our hard-earned cash on the line."
Paul Niven, head of asset allocation at F&C "It is too soon to make strong conclusions over the long-term impact of the move on the banks themselves but, in our view, we have now entered a new era for global banking. In return for taxpayers' money the state will gain a level of control over their governance, pay, and lending practices. Regulation will increase markedly and controls on all elements of banking practices will rise."
In further bad news, the International Monetary Fund has warned the world economy is facing the biggest financial crisis since the 1930s saying “the global economy is entering a major downturn” “many advanced economies are now close to recession, while emerging economies are also slowing rapidly”.
Iceland Bank Meltdown: Icesave Cash Frozen
SaveBorrowSpend Philippa Adam
