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Darling rushes to finalise deal as banks accuse him of dithering
Nicholas Cecil, Chief Political Correspondent07.10.08
Alistair Darling is tonight finalising details of a multi-billion-pound bank rescue.
The Chancellor was speeding up a major injection of capital after panicky protests from bankers who accused the Government of dithering.
He raced back from a summit of finance ministers in Luxembourg this afternoon where he is understood to have won EU backing to seize a stake in high street banks in return for taxpayers' money.
Mr Darling had a private meeting with banking chiefs and Bank of England Governor Mervyn King last night.
Dramatically speeding up the announcement, he called in Mr King and the head of the Financial Services Authority this afternoon for talks in Downing Street.
The three were then going to brief the Prime Minister on the details of the plan.
The Treasury was spurred on by another roller-coaster day for shares. Billions of pounds were wiped from the value of Britain's biggest banks when their shares collapsed shortly after the start of trading on another day of high drama in the City.
The hammering was triggered by leaked reports that three chief executives of Britain's biggest banks had talked to the Chancellor about a recapitalisation package.
One senior banking source said of the discussion: "They made it pretty clear to him that the dickering has got to stop. They accused him of treating it all as a political problem when in fact it is a financial one."
At one stage shares in Royal Bank of Scotland were down by more than 40 per cent in frenzied trading, although they eventually settled at around 25 per cent lower.
The latest gyrations came after yesterday's record one-day fall in the FTSE-100. At lunchtime today the index of leading companies was up 57.9 points at 4647.1.
The reports on the rescue plan meeting were carried on the BBC Today programme and in a blog written by its influential business editor Robert Peston.
The leak infuriated the bank bosses and was said to have left stock market traders "incandescent with rage."
Two banks, Barclays and Royal Bank of Scotland, were forced to issue statements saying they had not asked the Government for money.
The Standard learned that the three chief executives, John Varley of Barclays, Eric Daniels from Lloyds TSB and Royal Bank of Scotland's Sir Fred Goodwin, pleaded with Mr Darling to stop dithering on a multi-billionpound rescue plan.
Last night's talks were centred on the potential injection of £50 billion of taxpayers' money into the banks in the shape of new capital. Also present at the meeting were Bank of England Governor Mervyn King and the new chairman of the Financial Services Authority Adair Turner. Downing Street denied that the Government is dithering but warned against "irresponsible" actions which could further destabilise the banking sector.
The Prime Minister's spokesman refused to be drawn on reports that the Government was considering a plan to recapitalise the banks by taking shares in them, effectively partnationalising them.
He said: "We are, of course, looking at every aspect, including with other countries and the financial sector itself."
He said it would be "irresponsible for the Government to speculate on the specifics of any future responses". He added: "As and when the Treasury are in a position to say more they will say more, but we are not going to speculate prematurely."
But Liberal Democrat treasury spokesman Vince Cable said the uncertainty over the Government's plans was proving highly damaging and warned that it could "force more banks to the wall".
Shadow chancellor George Osborne said: "In response to today's further market moves, we stand ready to support the Government."
As ministers emerged from the Cabinet meeting this morning, Foreign Secretary David Miliband told reporters: "These are very serious times. We take them very seriously."
Reader views (34)
Top Man Rupert,
******** to the lot of them. I have a family, I have a mortgage. Let everyone queue up tomorrow and take our money out of the care of these fools - by which I mean Brown, Darling, the Bank of England and the idiots in the City who created this mess. Let's take our money from the bank deposits and buy every bit of gold from Argos and all of the other high street jewellers - stand back, and watch!
What really worries me is that when 44 year old blokes like me lose faith in the system, how the hell are the underclass going to react. Historical times, hysterical times breed discontent. I repeat - ******** to the lot of 'em.
- Ged, Westminster, London
So when is the announcement going to be made to stop all bonus payments to failed bank staff?
- James, London
It has been plain since the Northern Rock fiasco that some contingency plan was needed. Brown and Darling who have never managed anything in their lives are still dithering a year later and plainly have made no plans.
Stop dthering.
- Simon Wells, BRENTWOOD ENGLAND
Why is that useless Derling and Mr. Bean Brown still there?? Incompetence gets rewarded? I think not if they ever would seek a popular vote!
- Jacqueline, Hampstead, London
I am incandescent with the banks and the directors who have been so irresponsible and perhaps fraudulent whilst paying themselves huge amounts of money and unrealistic bonuses. Tough luck to you all I say. Are any bankers going to return ANY of their huge bonusses to at least show a little humility?
- Paul, London UK
Roz of Chamonix, that pretty much sums this
useless Government up.
- Chris, Woking, UK
What a lamentable state of affairs when the heads of the three largest banks in the country cannot sort out their problems without handouts from the tax-payer. There has been no run on their deposits. If they feel they cannot meet their obligations they should renegotiate them - they have the necessary clout - but what do they do instead - hurt the small business and go crying to mummy Darling. They are simply not worthy of our trust and certainly not our money.
- John, London
Earlier this year I was told by a senior civil servant at the Treasury that we were definitely not going to have a recession. I got a U in Maths O level, they have a PhD in Maths. Who got it right? Me I think. And I am supposed to trust these people to sort out what's going on? Be afraid, be very afraid! Why not make Robert Peston Chancellor, he seems to understand the whole thing a lot more than this bunch of idiots.
- Anon, london
We're not sure that he knows what he's doing, are we ?
- Peter Haldane, London
The problem with Alistair Darling is one of incompetence, This is the man who allowed £40 million to be spent on a Light Rail Scheme in Leeds and never even laid a piece of track.
But this is what we have come to expect from this Government who clearly can't arrange a booze up in a brewary.
- Martin A, Poole Dorset
Thinking of Darling & Brown, one is reminded of rabbits and headlights.
As with all their decisions over the last decade or more that if they stand back and do nothing, someone else will get them out of the do do.
Money is for spend on political aspirations and projects, not a tool of an effective economy.
- Ian, Reading, England
'Not a request for a hand out from the taxpayers - just for action.' H'm. Who pays?
Well. Alistair will have plenty of time to think about it all as he flies from Luxembourg to UK and then to the USA. No doubt he's looking for ideas.....
- John Problem, Hackney Wick, London, UK
Why are the hard working taxpayers being asked to bail out such companies as Northern Rock etc. with possibly more to follow ? Oops silly me - we were not asked !
Why also in times of 'boom' were bankers / directors / shareholders allowed to pocket £xx but as soon as their decisions come home to roost they plead poverty and expect handouts ? I can think of numerous charities who could use £50bn to do a worthwile job supporting communities and individuals with the greatest needs.
- Les, Beds
Darling is a puppet of that other useless Jock Gordon Brown who screwed up Bank Regulation by taking upon the Treasury control of debt and changing the measure of inflation to hide reality.
So .... inflation was higher than the BOE's brief could reach and house price inflation and mortgage debt got out of control because the CPI (Brown's inflation rate - not the real one) takes no account of this. Then Brown bragged about his liar inflation rate and debt rose uncontrollably.
Ironic that it is the Scottish banks (one of whom screwed up the Halifax) are the ones in the worst schtuk. The Act of succession occurred because the Jocks ran out of money - here we are again.
OUT WITH BROWN.
- Proudanglo, Sussex England
Why will giving a paltry £50bn to the banks make a jot of difference? Ditto with cutting interest rates. What is being quietly forgotten in all this furore about plunging bank share prices is that we, the taxpayers, do not have enough money to pay our utility bills, mortgages or to fill our cars with fuel. When are we going to get a £50bn handout? We are the ones that need our confidence restored, and my confidence will rocket if I have more money available, knowing it is not being paid to a load of city bankers.
- Nobby Clark, Perth, Scotland
So, "Senior City figures and traders were said to be 'incandescent'..." Maybe they should become more energy efficient to help save us all some money and become fluorescent instead............
- Daniel, Camden
How dare the banks and traders be "angry" at the Government for not taking swift action, when they got us into this mess in the first place?
Perhaps now the banks will be willing to submit to a statutory limit of £5 per charge for penalty charges in consumer accounts.
Or could it be that the ol' one event triggers multiple charges (failed direct debit and overdraft excess) is still in place even now, and poor households paying out several hundred pounds in charges per month each as the Government pledges their taxes to the banks for generations to come?
A disgusting continuation of profiteering, in the circumstances.
- Reg, London
Above all, we need clear decisive action from our government today, not "by the end of the week"
- Dudley, Dorking
It appears that not a day goes by now without our realising we are being led by a bunch of lacklustre idiots.
- David, Peterborough UK
So the greedy spivs that caused this crisis are angry with the government for not giving them a blank cheque to bail them out?.You have to admire their front.
- Colin, barking essex
I hold no candle for the LibDems, but Vince Cable is certainly talking sense. This is not time to worry about one or two percentage points on inflation. This is the time for decisive action. Today, not 'in days'!
An hour can make a difference to the atmosphere of fear and mistrust. Whatever they are going to do, they should do it NOW! Never mind what the other European countries are doing. Each one of them will do what is best for their citizens and their economy. Brown and Darling have no guts; they have their eyes on their political survival, not the interests of the country as a whole.
- Beatriz, London
Let the market correct itself, or bail out - but at least have some cojones and do something.
Inaction has been an absolute contributor to the UK now officially being in recession.
Gordon says we need serious people - well serious people make decision - Alistair - get your head out of the sand and your finger out of you **** and do something -even if it is the wrong thing - do something.
- Jc, SE1
Things won't get better until at least Brown, and ideally the whole Labour govt has been booted out.
- St, London
When will they learn that simply saying "something will be done" without providing specific details and immediate implementation will calm no-one. The have apparently learnt nothing from the stamp duty fiasco. The problem is this government is so terrified of making a wrong decision that they would rather do nothing and let the markets grind to halt on their own. Any decision, even if wrong, is better than doing nothing, but that takes courage, a quality singularly lacking from this bunch of timeservers.
- Warren Hertzberg, London
Its ironic that Taxpayers money is being used to bail out companies whose Directors are infamous for their habits of Tax avoidance and occasionally admit that they pay less tax than the cleaners. Time for a reform of the Tax system.
- Norman Lament, Brentford
One should not guarantee all savings at 100%. Certainly, small savings. But anyone with over £50,000 should not be encouraged to put all his money in the bank paying the best rates (probably the least safe), secure in the knowledge that the government will completely bail him out should the bank fail.
An unlimited guarantee of 90% or even 95% would make more sense. No catastrophic losses spreading through the economy should a bank fail, but every reason for investors to choose carefully. An investor should be able to survive losing 5% or 10% of his capital, but it'll give him an incentive to look deeper than the advertised interest rate, and won't reward bad banks at the expense of good ones.
- Nigel, London
All the current problems are due to the banks greed. We all have to suffer because this. I can't see £50 billion doing much to tackle this problem. The banks themselves need to change there practices but they won’t. So the government need to force through new legislation to make the banks change there business practises, but of course they won’t.
Money will be ploughed in time and time again, more charges; more price increases and higher taxes to pay for the bail outs. The only consistent thing here is the bank bosses remain very rich what ever happens.
There are solutions to the problems we face; unfortunately, in the society that we live in today it’s only the ones at the top who can truly change things. But they would not have quite as much money or control, so they never do.
- Paul, London
CK,
Germany did not actually give a guarantee to all depositors per se. the statement was ambiguous.
it is not a legislative promise by any means.
- Scott, London
UK consumers and samll business who are the lifeblood of our country need a bailout out too please. We need all our debt & mortgages written off plus we need a cheque for a million pounds each so we can go shopping again plus we need mortgages rates at UK Gilt levels of around 4% to keep up in our homes. We need a bottom up rescue otherwise the banks will take our money, steady their balance sheets, pay themselves massive bonus and put two fingers up to us and say we are not going too lend you any money. Tough luck.
- Rupert, London
Its our taxpayers money that is being used in this rescue. Two main points. What is the point in having an organisation called the Financial Services Authority. This so called "authority" was giving banks clean bills of health. So why were the FSA so wrong? Secondly. Its our grandchildren that will have to bail us out of this mess. In the old days you always tried to put back something for the future.Now it seems to be "we want it now" with no thought for the future. The old days of Britain being the workshop of the world are long gone and the so called "service industries" especially those in finance that were supposed to be the "future"-we dont make anything anymore or hardly anything-these so called service industries in the financial sector have badly let the entire country down. Do we need them? Will the city of London end up like the former steel and coal mining areas?Mass unemployed with skills no one wants!
After all they got us into this mess. Finally why not use the soon to be empty bank/finance buildings as homes for the homeless?
- Eric Flack, Glasgow
And where will this money come from? The National Credit Card of our children?! Not from the country's gold reserves, that's for sure!
This Government has taken over a grand old stately home, sold off its contents, built over its gardens, laid off the staff because their mortgages make them dearer than imported labour, stripped the lead off the roof and sold it round the back of the pub, and now that it's leaking and trashed they're pissing on the carpets before they leave, doors swinging in the chill autumn wind . . .
- Roz, Chamonix, France
Bank rescue 'within days'
If Germany was prepared to guarantee 100% deposit with bigger national savings than UK, why would UK not do the same to pacify the depositors?
Is it not a case of Insurance companies underwriting the house hold insurances, yet never thinking that whole scale catastrophic claims would occur?
Now we are in a situation of CONFIDENCE rather then LOGIC!
Once the former is lost, no matter what kind of BANK RESCUE will help and the eventual cost will be many times than the original that was contemplated!
- Ck, Middx, UK
What is the point of reducing interest rates and handing huge subsidies to the banks when they carry on increasing costs to customers? My business has just been told that the cost of overdraft borrowing is going up from 1% to 6% over LIBOR despite no change in our credit rating. It is just sheer greed. There is no chance of bank dividends or bonus payments to overpaid and incompetent senior management being cut. My company will just reduce the size of the business by cutting down on turnover to avoid paying the ridiculous rates demanded by the bank.
- David Wallin, London
This government is run by weak-minded poltroons. A real chancellor would order the B of E to lop two percentage points off interest rates TODAY, stop all this talk of bail-outs, and let the market correct itself. The best thing the government can do is to do nothing at all!
- Neil, london uk, Airstrip ONE .
