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How dithering Darling failed to please bankers or the markets
Nick Goodway, City Correspondent7 Oct 2008
When Chancellor Alastair Darling rose to address MPs on the financial crisis at 3.29 pm yesterday the FTSE 100 share index was a mere 200 points down.
When he sat down barely 15 minutes later another £25 billion and another 191 points had been wiped off the value of Britain's largest companies.
Share traders sat, heads in hands, disbelieving the lack of any new message from the man they expected to throw the financial markets a lifeline.
Shortly after the stock market closed with a record ever loss, Royal Bank of Scotland's creditworthiness was downgraded by rating agency Standard & Poor's.
For the second week running, the Treasury organised an early evening conference call between the Chancellor, Governor of the Bank of England Mervyn King, the new chairman of the Financial Services Authority and the bosses of Britain's big high street banks.
Treasury officials listened in as did junior government ministers from other departments.
The bankers are understood to have joined the call at about 7.30pm. The main protagonists were Barclays' John Varley, Royal Bank of Scotland's Sir Fred Goodwin and Lloyds TSB's Eric Daniels. Michael Geoghegan, chief executive of HSBC, was abroad and not on the call.
HBOS's Andy Hornby and Abbey's Antonio Horta-Osorio were minor players having already played their part in rescue deals. As the meeting progressed it became clear to the bankers that Mr Darling's plans remained very much theoretical and could take days, maybe even until next week to deliver.
The call ended before 9pm. Treasury officials began to brief the daily newspapers and by 11pm the Financial Times website was running a story that a £50 billion recapitalisation plan was being considered.
By the morning, BBC Business Editor Robert Peston reported the previous night's talks on his blog at 7am.
He said: "When Treasury officials started working overtime last week on an emergency plan to inject new capital provided by taxpayers into our banks, the Chancellor wasn't sure how our banks would react.
"Would they proudly tell him to hop off ? "Or would they put out the begging bowl? "Well last night a trio of the UK's biggest banks - Royal Bank of Scotland, Barclays, and Lloyds TSB - signalled to Alistair Darling that they'd like to see the colour of taxpayers' money rather quicker than he might have expected."
Mr Darling landed in Luxembourg at 7.15am for talks with EU finance ministers at which he called for co-ordinated action to deal with the financial crisis.
Mr Peston's story was broadcast on BBC Radio 4's Today programme at around 7.30am.
The stock market opened at 8am with the FTSE-100 up on what dealers call a "dead cat bounce" after yesterday's crash.
Around 8.30am dealers caught up with the BBC reports and the S&P credit downgrade and RBS shares started to slide. They hit an all-time low of 90p at 9.23 am.
The Prime Minister began briefing the Cabinet at 9am in a one-hour-and-20-minute meeting on the latest developments in the global economy.
New York mayor Michael Bloomberg, speaking after leaving 10 Downing Street at 9am, said that international leaders must work together to tackle the global financial crisis.
Mr Varley told a banking conference in the City shortly after 10am that Barclays has "categorically not requested capital from the Government and has no need to do so". RBS's Mr Goodwin later did the same.
At 11am Downing Street refused to confirm any timetable for a recapitalisation plan warning against "irresponsibility" in dealing with market-sensitive information.
The Prime Minister's official spokesman said: "As and when the Treasury are in a position to say more they will say more, but we are not going to speculate prematurely."
