Morning:
13°c
Bail-out rules to be eased
Paul Waugh, Joe Murphy and Jonathan Prynn16.10.08
- Andrew Gilligan: Banking excess may save us from the police state
- Banks fight for dividends
- Oxford University has £30m stuck in Iceland
- Blues over bailout put the Footsie in freefall
- Switzerland buys UBS stake in bid to save its banks
- Oil below $70 spurs cut in petrol prices
- Register for our City Briefing email
- Download the latest Market Report podcast
GORDON BROWN today fuelled hopes the Government would ease the terms of its £37 billion bank rescue deal, saying he could relax rules on dividends.
The Prime Minister said the Treasury would look at improving the bail-out plan if the banks came up with reasonable suggestions.
His remarks came as a senior Labour MP predicted that ministers would restore City confidence in the deal by making it more attractive to private investors.
Treasury select committee chairman John McFall said that "a middle ground" between taxpayers and shareholders would soon be found.
LloydsTSB is lobbying Chancellor Alistair Darling to drop a five-year ban on paying dividends to private investors amid fears that it could undermine its takeover of Halifax Bank of Scotland. It wants Mr Darling to allow dividends to be paid after a year.
Treasury sources told the Standard that Mr Darling had only ever categorically ruled out a dividend within the first year.
"If the banks come up with a way of repaying half our shares back earlier, for example, then maybe there could be a small dividend payable," one source said. Fresh hopes of a "clarification" of the plan came as Brussels revealed that the British government had not originally wanted to impose a draconian five-year ban on dividends for private investors in Royal Bank of Scotland, HBOS and LloydsTSB.
Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes, confirmed that it was the EU that forced the UK to toughen up the terms of the deal to comply with curbs on state aid. Downing Street refused to elaborate on Mr Brown's comments, saying any statement about the Government's discussions with the banks would be highly market sensitive.
Mr McFall told BBC Radio 4's World At One programme: "We have to ensure that dividends are paid to make it attractive for investors to come in.
"I'm quite optimistic about this and I think a middle ground is going to be found to reward the shareholders but also to protect the taxpayers. We must have that primary aim to ensure confidence. We can only get confidence if we reward shareholders."
Mr McFall blamed difficulties with the deal on the fact that it was "devised over 72 hours of a weekend".
Business Secretary Lord Mandelson today took a significant step towards clearing the way for the creation of the LloydsTSB "megabank" with new powers to change competition laws.
He urged the House of Lords to allow the Enterprise Act to be amended so that "maintenance of stability" of the economy could override fears of a lack of competition.
"It is critical that in those cases where a proposed merger could bolster financial stability in the UK's economy, the overall public interest is served by a proper consideration of the need for stability, alongside the implications for competition," Lord Mandelson said.
Nervous banks were finally starting to respond to Mr Brown's rescue package by lending more freely to each other. The London interbank offered rate, or Libor - the rate at which banks are prepared to lend to each other - was dropping: today's three-month Libor eased from 6.21 per cent to 6.18 per cent.
Libor - used as a benchmark for many mortgage deals - is forecast to fall more steeply to 6.07 per cent next week when the Bank of England says it will make it easier and cheaper for banks to borrow money from the Government. This should pave the way for more competitive new mortgage deals.
However, market activity was rather less encouraging. By 3.30pm the FTSE-100 index of Britain's biggest companies was down 151.2 points at 3840.5.
Reader views (22)
How is Brown going to relax the rules on bank dividend payouts when this morning's Telegraph carried the story that the EU will not allow any of the aided banks in the EU provinces to pay dividends for five years? Is he to defy the central government? Also, Alistair Darling made clear on BBC Newsnight last evening that there would be no divident payouts to aided banks. This has always been the Brown Government's biggest problem: the left hand doesn't know what the right hand is doing. The same with statements on the environment. Just endless hypocrisy and political opportunism.
- Phil Jones, London UK
Gordon Brown, banks, rating agencies and the (foolish) public are to blame. But ultimately I don’t care whose fault it is (providing Gordon’s mob are voted OUT soon- if not then we will return to 1970's style poverty). Considering how best to take advantage of this climate I recall Warren Buffet's wise words, "Be fearful when others are greedy and greedy when others are fearful". This must be the perfect moment to invest in equities then! I will look at US equities because its economy its productivity is second to none and as such will most likely be the first to pull out of recession.
- Richard, Colchester
Can this Crash Gordon never do anything right?
- Jacqueline, Hampstead, London
Anne Wright - it is apparent that Alex C has a far more developed understanding of the current crisis than you do. Greed did not cause the crisis. Greed is another word for hunger or appetite. It is a vital energy. It drives the markets. What has caused the crisis, it is becoming clear, was a huge class of improperly rated assets. Was this criminal or grossly negligent? That depends on whether it was deliberate misrepresentation or merely a failure of understanding by those who had a professional duty of care to do so. The mother of all market corrections which we are now experiencing was not caused by people buying houses they couldn't afford. It's not the fault of dodgy American real estate agents (despite Gordon Brown's desperate attempts to blame this on the US). It was caused by sophisticated financiers, in Europe and America, who put risky debt into unpriceable shells and overheated them until they blew up the entire banking system, up to the door of the Bank of England.
- Blackstone Coke, London
I love all the doom merchants here reveling in the thought of the end of the world as we know it, I bet they're the kind on rubber neckers who like to look at accidents on the motorway, but let's face facts, we live in one of the worlds most affluent countries with luxuries that were unimaginable just 30 years ago. Life is good, and maybe it won't be quite as good as it has been for some for the next couple of years but good never the less.
- Nj, London
Its not just bankers who are at fault here it is the people who have borrowed beyond their means and cannot pay back loans/credit cards/mortgages. Its people who have become greedy and want everything now instead of working for it and saving for it. Its people who become jealous because their neighbour has a better car so they have to go out and get one. Its the throw away society that we live in where people want the lastest gadget regardless of whether the current gadget still works or not and the companies that bring out new gadgets even before the old one is a year old. Its the people who ask the bankers to invest in instruments they know nothing about and people who just dont get good advice when chosing their pension/mortgage/savings account. There is a bigger picture here the banking industry is only part of it, people greed is the bigger part.
- Anne Wright, London
Anne Wright - What I understand is that someone bought something relying on a rating given by an agency they knew were at best unreliable and at worst corrupt. You have to admit someone did something wrong. Who would you blame?
- Alex C, London
The great Crash Brown has missed the big picture again. He should go away with his Nu Labor bunch.
- Georgie, London
Suppose shares could only be traded by second-class post, with cash lodged up front a week before, and a dealing tax only imposed on a share held for less than three months. No real investor would be inconvenienced, and the spivs would starve. We have to take the manipulation out of the market, and slowing down the rate of churn is the easiest way. This is not an argument for or against capitalism, just for investment against gambling.
- Mdj, Leyton, e10 london
No, no, Smb. Last week was "the worst week since the 1930s"! Comparisons must now be made to the share prices when humans first walked the earth.
- Phil Jones, London UK
Maybe it is time we started making things again in this country. I am fed up with shops offering endless 'eastern' low quality goods and tat!
- Michael, London
Get an understanding of the investment industry and then comment. People who are knocking the investment workers clearly have no understanding of what they are talking about.
- Anne Wright, London
In a free market, in theory at least, for every seller there must be a buyer. One cannot help but get the feeling that the big interventions of government are merely a sticking plaster over a gaping wound and will do little to resolve the underlying problem. In fact it may make it worse since it sends misleading and distorting signals to a market which cannot read and price the bottom in consequence. Either one has a free market or one does not.
- David, London
This isnt just a banking crisis, although Gordon Brown would like you to think so. Letting you believe that it is, allows him to escape blame for the financial state of the country where he set us up for a crash.
To quote Lord Rees Mogg:
"When individuals have taken on debts they cannot repay, when businesses are trading beyond their resources, when banks have lent too much to overstretched borrowers and a government faces a rising budget deficit, the stage for the crisis has been set."
There you go. Enjoy!
- Dave Davies, Basingstoke, Hants
Note to banks and bankers: No, you can't have any more of my tax!
- Nobby Clark, Perth, Scotland
Thatcher got it wrong when she accused the Miner's of being "The Enemy Within" now we know who they really are,the (B)anker's.
- Raymond, Stoke on Trent
Hedge Funds love panic as long as they are feeding it. Short Selling has made some hfunds very rich.
- Alex C, London
The global recession has been long overdue. I am glad even though its been tough renting that I have stuck it out and on principal not paid ridiculous house prices. I am going to be a winner at last!
- Beth Dwyer, London UK
Fly you must be one of the fools losing money.
- Brian Fast, Sydney Australia
This 'panic' will continue for several more months until it all steadies down. The unemployment will rise and more 'panic' will set in. A good time for a General Election methinks. Get rid of New Labour and its poltroons. Maybe a change of government will make a difference. The place to watch will the USA in November to see who becomes the next President. That might put a steadying hand on the Markets.
If this works there, then there could be pressure put on Gordon Brown to do likewise here in the UK for an early Spring Election.
- Uncle Vanya, Chelmsford England
so we continue to let the traders, speculators and vultures drag us all down into the brown stuff through their continued paranoia, gossip & general fear and loathing. The global recession is nothing but self generated panic.
- Fly, london
Didn't shares crash to a ten year low last week?
- Smb, London, UK
