Banks have been reckless so now they need to be patient

Royal Bank of Scotland (84%-owned by us) successfully won the right to sell Liverpool Football Club without the agreement of its present owners, Tom Hicks and George Gillett.

That was a good result for the taxpayer because it means that RBS will get back the £237 million it lent to the Americans to buy the club in the first place.

It's also probably good news for Liverpool fans since their new owner, New England Sports Ventures, is buying the club without recourse to borrowing, and actually has a track record for turning around sports clubs.

In another part of the High Court, Lloyds Banking Group (41%-owned by the taxpayer) was attempting to put Targetfollow, the property group that owns Centrepoint and is controlled by Iranian businessman Ardeshir Naghshineh, into administration.

High Court judge Roth adjourned the case until October 25 at the earliest, saying Targetfollow should be given more time to see if talks to bring in an outside investor come to fruition.

A fortnight's stay of execution should be welcomed by all concerned. It may be enough time for Targetfollow to find a white knight. It should allow Lloyds to reconsider alternative proposals. For property developers and owners, it may be cause for a sigh of relief.

When Lloyds took over HBOS, it inherited a vast portfolio of dodgy property loans, many of which originated in Peter Cummings' department at Bank of Scotland.

The bank has taken massive writedowns on those loans but over the summer it has also begun to behave more aggressively on non-performing loans. Several Scottish developers including Kenmore, Kilmartin, Elphinstone and Heritor's have been put into administration by Lloyds. Carphone Warehouse founder David Ross's Kandahar property empire is also in breach of its covenants with the bank.

In the court, Lloyds' QC Barry Isaacs argued: "Every week that passes is detrimental to the value of these assets." He added that Lloyds wanted to be able to dispose of them before the end of the year to make sure they were sold at "an optimal value while there is optimal interest".

Surely if that is the case, Lloyds is in danger of cutting off its nose to spite its face. Experts reckon that between them Lloyds and RBS account for more than a third of the £250 billion of outstanding property loans in this country. That is a phenomenal proportion.

The banks have already written down the value of many of those loans or the underlying property assets.

Targetfollow reckons its assets are worth £680 million (including Centrepoint at £150 million). Lloyds estimates them to be worth only £450 million, which goes nowhere near covering its £700 million loan to the company. So Lloyds is working on the basis that the properties are a third less valuable than Targetfollow thinks. That is a hefty discount even in these moribund commercial property markets.

But this could become a self-fulfilling prophecy. If Lloyds and RBS start dumping loads of offices, warehouses and residential developments on to the market, values are bound to plummet.

Surely it is in all our interests (as property owners, indirectly as property investors and as bank shareholders) for the banks to try their darnedest to work these property loans through. Even, if needs be, to take the assets onto their own books and sell them when the markets are actually recovering.

Now is not the time for any kind of fire sale.