UK plans new bank bailout measures
An earlier recapitalisation scheme has failed to restore confidence in UK’s banking sector Photo: AFP
Britain will unveil a package of measures in the next day or two to try to get banks to resume lending, Gordon Brown, the UK prime minister, has said.
It marks a second bailout of British banks, following the 37bn pound ($54.5bn, €41bn) recapitalisation scheme in October, which has largely failed to restore confidence in the banking sector.
Speaking in Egypt on Sunday, on the sidelines of a summit on the conflict in the Gaza Strip, Brown said: “We know the essential problem is the resumption of lending.”
The package is designed to “get lending moving in the economy” to help families and businesses hit by a freeze in the global credit markets, he said.
Government officials and bank chiefs have spent the weekend in talks to try to reach a deal.
A key part of the bailout will be a huge state insurance scheme to guarantee billions of pounds of banks’ bad assets, according to local media reports.
The Sunday Times newspaper said that among the measures, up to 100bn pounds of new lending could be guaranteed.
It said the taxpayer’s stake in banks like HBOS and Royal Bank of Scotland could rise further.
“We have recapitalised the banks, we have injected money into the economy, at the same time we know that the essential problem that has been holding back banks internationally is the resumption of lending,” Brown said.
“That’s what we’re going to be doing tomorrow and that is what the package is about.
Brown said ‘what we want to do now is to get the resumption of lending’ Photo: AFP
“My first priority is hard-working families worried about whether they can get a mortgage, businesses who work hard every day. They need the banks to do the job they say they’re there for.”What we want to do now is to get the resumption of lending and you will see tomorrow there are measures taken that will ensure that banks and non-bank institutions are able to resume lending or expand lending and in some cases to start lending.
“What we want to do is see businesses get the money that they need to be able to create jobs and secure investment for the future.
“What I want to see is people who are mortgage holders having access to mortgages at prices they can afford.”
The bailout announcement came a day after Brown told British banks that they must own up to the extent of their bad assets.
He said on Saturday in London that British banks’ exposure to international losses was the largest problem they faced and called for an internationally agreed solution.
“The international community has got to modernise and change and reform and get to the roots of the problem that make us angry about the way that the system is operating,” he said.
Shares in Royal Bank of Scotland and Barclays plunged on Friday after US giant Citigroup announced a $8.29bn fourth-quarter loss and Bank of America got a $20bn state bailout.
And recession is likely to become official in Britain this week when data is expected to show that the economy contracted for a second straight quarter in the final three months of 2008.
Top U.S. banks post huge losses as Bank of America gets aid Again
Jan 16, 2009
By Jonathan Stempel and Dan Wilchins
NEW YORK (Reuters) – The U.S. government extended $20 billion of new aid to Bank of America Corp hours before both the largest U.S. bank, and the country’s third largest, Citigroup, reported multibillion-dollar losses from the ongoing global credit crisis.
Bank of America posted its first quarterly loss in 17 years on the heels of the government’s midnight announcement that it would help the bank absorb its January 1 purchase of troubled brokerage Merrill Lynch & Co.
The U.S. Treasury will provide the new aid in exchange for preferred stock, and along with the Federal Reserve and Federal Deposit Insurance Corp, agreed to limit Bank of America’s potential losses on $118 billion in tainted assets.
Also scrambling to survive huge new losses triggered by the credit crunch was Citigroup, which unveiled plans to split in two and shed troubled assets.
The announcements came before a U.S. holiday weekend that ends on Tuesday when President-elect Barack Obama will be sworn in. Obama again said that even with a wide range of measures to pull the United States out of recession, the U.S. economy will likely worsen before it improves.
U.S. Treasury Secretary Henry Paulson, on his last full day in office, said a substantial portion of the second half of the government’s $700 billion financial rescue fund should be reserved for bank capital programs.
Top U.S. policy-makers said they are discussing setting up a government bank that would use federal funds to buy troubled assets from financial institutions to try to stem the crisis.
Paulson and FDIC Chairman Sheila Bair both said an “aggregator bank” was one of several ideas U.S. regulators had discussed.
The Treasury said it will lend Chrysler LLC’s finance arm $1.5 billion to help it make new car loans as part of a broader program to revive the U.S. auto industry.
The Treasury earlier extended a $4 billion loan to Chrysler for its automotive operations and had granted $13.4 billion in operating loans to General Motors Corp.
Shares in Bank of America and Citigroup rose in early trade after tumbling sharply on Thursday, as investors believe the government will not let the two banks fail.
But the size of the losses and need for fresh aid unsettled Wall Street. The two banks’ stocks fell and pulled down shares of their two large rivals, JPMorgan Chase & Co and Wells Fargo & Co.
“Now it’s clear that there could be more big banks coming back to the well, asking the government for money,” said Matt McCall, president of Penn Financial Group in Ridgewood, New Jersey. “When does this end and when do they say no? They just keep writing checks.”
Influential bond investor Bill Gross of Pacific Investment Management Co told Reuters that the worst harm to banks’ balance sheets may be over.
Fear of more bank losses spread to London, where shares in Barclays fell 25 percent and other bank stocks tumbled as worries about capital and write-downs resurfaced. Dealers said there was no single reason for their sharp slide.
After the market closed, Barclays reported it expects to report pre-tax year profit well ahead of analysts’ estimates of 5.3 billion pounds ($7.91 billion), and said it knows of no justification for the stock slide.
The Bank of England and Downing Street confirmed a meeting took place among Prime Minister Gordon Brown, the Bank of England governor, finance minister and securities regulator, but neither would comment on the talks.
British ministers aim to announce yet another bank lending package, a Treasury source told Reuters, while Ireland nationalized Anglo Irish Bank, its third-largest lender, to avoid a collapse.
Bank of America, Citigroup post huge losses
Citigroup, once the world’s largest bank, reported a fourth-quarter loss of $8.29 billion and recorded $28.3 billion of write-downs and credit losses. Over the past 15 months Citigroup has amassed $92 billion in losses and write-downs.
Bank of America reported a $1.79 billion quarterly loss, while losses at Merrill Lynch were a record $15.31 billion.
Citigroup stock fell more than 8.0 percent to a session low of $3.44 after Moody’s Investors Service said it may cut the bank’s credit rating.
Moody’s cut the credit ratings of Bank of America, whose shares tumbled 13.7 percent.
After the bell, Credit Suisse cut Citigroup’s price target and earnings outlook, and almost doubled its loss estimate for the bank in 2009 to 90 cents from 50 cents per share.
The news of massive new bank losses and more aid came after the U.S. Senate on Thursday cleared the release of the remaining $350 billion of emergency funds to tackle the crisis. The Bank of America aid will come from the first $350 billion package.
With economies and credit markets worldwide yet to respond to massive bailouts and deep interest rate cuts, Bank of Japan Governor Masaaki Shirakawa said financial conditions in the world’s second-biggest economy were tightening rapidly.
Conditions in France were also on the slide. The Bank of France estimated the French economy contracted sharply in the fourth quarter and its monthly survey of business managers showed they expect the downturn to deepen.
The euro zone trade balance swung from a surplus to a deficit in November as exports plunged twice as much as imports, data showed, underlining the fast pace at which the region’s economy was sliding deeper into recession.
New U.S. economic data raised the possibility of deflation. The pace of U.S. inflation slowed to a half-century low last year and industrial output fell for the first time since 2002.
The reports suggested the economy could take longer to pull out of a downturn that is on track to be the longest and possibly deepest since World War Two.
(Additional reporting by Joseph Giannone and Ellis Mnyandu in New York and Patrick Rucker, David Lawder and Lucia Mutikani in Washington, Steve Slater and Dominic Lau in London, Jan Strupczewski in Brussels; Writing by Herbert Lash; Editing by Chizu Nomiyama)
I guess we are going on this roller coaster ride again.
All Banks should be audited, by outside professionals and find out exactly where all the money they got i the first Bailout went.
Seems to me there is a whole lot of fraud happening or something else.
Every penny should be accounted for. Tax payers are paying for the Banks BS. Why should they. I am really wondering how long this BS will continue on for. It certainly is one way of sending people into a panic however.
Maybe they are just stealing, tax dollars to line their own pockets with or line someone else’s…….
This is all to fishy at this point in time. Could be they are creating crisis after crisis just to mess with everyone’s mind, so we all live in fear.
Create a crisis and well it has been done before many times.
Create a Crisis , fix the crisis, become a hero, a savior whatever..
What a scam.
Whatever the case these banks need someone running them, that is honest and actually knows how to run a bank. The ones who run these ones begging for money again obviously can’t do the job. They aren’t worth rescuing either.Just because your big doesn’t make you worth saving.
Seems to me Banks should only be owned and operated, by people within their own country anyway. Bank owned by anyone from another country shouldn’t even be allowed.
So where has all the money GONE? Did they ever look.
Unusually Large U.S. Weapons Shipment to Israel: Are the US and Israel Planning a Broader Middle East War?
Lots of posting on this subject in the Archives.