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£100bn to halt the banking panic
Jonathan Prynn, Joe Murphy and Paul Waugh18.09.08
- Clean up irresponsible City, demands Brown
- 40 per cent of us will be customers of megabank
- The revenge of the nerds
- PM denies lobbying to protect Scottish jobs
- Wall Street clampdown on the rogue traders
- Commentary: Shock of shocks for the mighty Goldman
- Lloyds TSB divi paid in shares after HBOS deal
- New banking giant set to face sell-off calls from its rivals
- Fuld rejected Koreans’ offer to rescue Lehman
- Merger heralds jobs bloodbath for South-East
- Fed pumps in £100bn to avoid another collapse
A £100 billion fightback against the global financial meltdown was launched today by governments around the world.
Six central banks, including the Bank of England, pumped funds into the money markets to end the panic that has brought many of the world's most powerful banks to their knees.
They acted as events threatened to run out of control with the last two independent Wall Street investment banks - Morgan Stanley and Goldman Sachs - the latest victims of the wave of share selling.
Today, HBOS confirmed that it had been forced to accept a £12.2 billion takeover from Lloyds TSB to save it from becoming "the next Northern Rock".
In London, shares responded to the merger and the injection of liquidity with their first sustained rally since the collapse of Lehman Brothers on Monday. By lunchtime the FTSE-100 Index was up 88.9 points at 5001.3.
Gordon Brown said the Government had taken "the right action" over HBOS, adding: "We have got to clean up the financial system."
Today's latest turmoil came as figures from the Council of Mortgage Lenders showed that new lending was down 36 per cent on last year at £21.8 billion.
However, the high street appears to have been in unexpectedly good health last month. Retail sales were up by 1.2 per cent, with clothing selling particularly well.
Mr Brown turned on the City, blaming "irresponsible behaviour" for the banking meltdown.
In a searing rebuke to a culture that put profit before traditional, sound practices, he said it was time to "clean up the system".
"I think we have got to look at where there has been ir responsible behaviour," he said. "I have said for some time that we need reforms in the system. I believe there is now an audience that agrees with me."
Signalling tougher regulation in future, he went on: "We need reforms in the system. We have got to clean up the financial system. We don't want these problems recurring in the future."
The Prime Minister's declaration of war on roguish elements of the City will delight Labour activists meeting for their party conference this weekend.
Allies seized on his action to boost his fight to stave off a leadership challenge. After attacks on his leadership, his spokesman said Mr Brown was too busy to be worried. "The Prime Minister is solely preoccupied with the big important issues facing the country. He is getting on with his job."
Today Mr Brown also defended his decision to act swiftly to smooth the way for the Lloyds TSB takeover of HBOS, despite critics saying it would mean less competition and therefore higher charges to customers in the long run.
"I believe we have taken not only the right action, we also have to deal with the other problems and that includes the mistakes that were made in the past," he said, stressing the need for a return to sound banking practices.
"Our determination is to do everything to maintain the stability of the financial system and to do everything to protect depositors in Britain, who need to have confidence in the banking system." He added: "I have proposed a number of things to our international colleagues, because global action is needed to deal with a global problem."
The Prime Minister is expected to use a forthcoming visit to America to lobby for action. Earlier this week he asked French president Nicolas Sarkozy to back him in demanding a European response at an EU summit next month.
Mr Brown wants new rules to make banks more open about their assets, liabilities and exposure to risk.
He is concerned that financial products have become so complex that even some bank chiefs have admitted they were not sure what the consequences would be if they went wrong.
He is also raising the role that ratings agencies should play and seeking better co-ordination between regulators.
No10 would not explain exactly what behaviour Mr Brown was referring to as "irresponsible" or made a "clean up" of the system necessary but officials said he was particularly struck that financial institutions had been "taking risks without being fully aware of the consequences". They said he had raised similar sentiments before, but acknowledged his language today was more condemnatory.
A spokesman said: "If there has been any market abuse or irresponsible lending, then it needs to be looked at by the relevant authorities."
In an Evening Standard interview, Harriet Harman said Mr Brown would lead world talks towards "greater transparency and stronger regulation". International rules were needed to stop banks moving offshore to avoid them.
Reader views (15)
If dear old Mr Brown wants to demonstrate how tough he intends to be with the banks, why not allow the FSA to lift the current stays on ALL county court cases, pending outcome of the ' bank penalty charges test case ' - and simply overrule the appeals, launched by the banks.
The stays implemented, July 2007 was wholly unfair on Joe public.
- Michael, Herts, UK
It is a shame the people who have created this mess aren't going to be punished for it. It is truly sickening.
- Tony, london, england
Banks have been ripping the public off for years and this is a matter of just deserts as far as I am concerned!
Money breeds contempt and they've been VERY greedy!
- Anon, London
Dr Wilbury, London, UK
"On hearing about the merger with LloydsTSB, apparently Halifax's Howard was speechless".
Howard Brown speechless - Music to my ears 
But they're still pumping out Halifax adverts on UKTVGold as I write this - Arrrrgh!!!!
- Mark.H, London
"So yes, when people show signs of irresponsibility, it's only a reflection of the incomprehensibly immoral, lying government that has cripplingly indebted us all."
Yes, Da, you're so right. If only we had a right-wing conservative government like the Americans we'd have escaped all these economic problems.
- Tonyb, Twickenham
Oooooh! Dr Wilbery, you are awful.
- Minnie Ovens, USA
Hmmmmm. That would be the same Gordon Brown who has written blank cheques by not curtailing public sector pensions, as well as entering into all these hugely costsly public-private partnerships with not a smidgeon of a clue as to what he was doing. Fortunately, his pension scheme is risk-free, as is his pay (if not his job) so no problems it all goes wrong, eh??
This is also the Gordon Brown who has nurtured debt-fuelled binging on property that isn't affordable (120% mortgages, no capital gains on your home, too low interest rates) and endless credit card debt for those with little or no income.
So yes, when people show signs of irresponsibility, it's only a reflection of the incomprehensibly immoral, lying government that has cripplingly indebted us all.
- Da, london
Gordon, this is your chance. This is your great chance. Have you got the teeth and the nous? Or has it all been a shell game for you, too?
- Blackstone Coke, London
Communism looks like a good way of life right now!
Look at the fallout from this property and mortgage/debt binge. The speed at which banks and institutions are going under is just shocking - and we will all pay for it in the end, it just does a full circle.
- Mortgage Broker N3, London, England
OK, so the government is able to find £100 Billion to rescue the banks...! Is this the same government that cannot find enough money to pay for cancer drugs? or safe vehicles for our troops? or good care for old age pensioners? or dustbin collection every week?
And the list goes on.
Where has this magical money come from? I can guess. It will show up as taxes in the near future.
- Dene Wood, Grays, Essex, That little country by the sea that used to have
Sadly all this comes at a costs to the average workers; we would not see the culprits, greedy money grabbing managers suffer. It is about time that we accept not to reward failure and to expect those who create these kind of catastrophic situations to be brought to justice.
- Roberto, France
Funny isn't that Gordon Brown, who announced the end of boom and bust by selling off the UK's gold reserves at the bottom of the market, and taxing pensions, is now blaming the City for the issues here. Rather the Bank of England should have raised interest rates long ago, stopping the housing bubble. But that bubble was in the government's interest-to make prople happy and be sure of reelection. Brown has got what he deserved. The issue is not the City, rather his (and Blair's)irresponsible government
- Philp, Moscow, Russia
I'm glad these banks are falling like a deck of cards, years of greed and lack of foresight - they deserve to go down. It's the every day worker who suffers - yet again. Gordon Brown started this snow ball and with the economy when he was Chancellor and now he's doing the same with the running of this country!
- Normal Office Worker, City of London
On hearing about the merger with LloydsTSB, apparently Halifax's Howard was speechless. Guess that means that a Black Horse will be merging with a Hoarse Black!
- Dr Wilbury, London, UK
The mess this whole financial sector finds itself in is a self fulfilling prophecy. Driven by greed, poor regulation and a government that does not care as long as it continues to look good are just some of the reasons that we find ourselves in this mess. I would be laughing if this was not going to affect us all. Perhaps when the dust settles banks should add a few new departments to their organisations. Namely, common sense, morality and greed regulation.
- Fly, london
