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Brown ally: We’re looking like Iceland-on-Thames
Paul Waugh, Deputy Political Editor19.01.09
- Anthony Hilton: Brown's gamble may save the banks but the economy cannot wait
- Barclays in bounceback after fears are soothed
- Northern Rock's bid to boost mortgage market welcomed
- Bank is given the green light to print more money
- Lloyds moves to calm worry on financing
- Poll: Will Brown's bail-out work?
- Blog: Whoops, that's another £50bn on borrowing
GORDON BROWN lashed out at “irresponsible” British and foreign banks today as he gambled hundreds of billions of pounds on another bid to rescue the economy.
Less than three months after the Treasury bailed out the banks with £37 billion of taxpayers' cash, the Government unveiled a raft of measures to get credit flowing again.
More than £500 billion of taxpayers' cash is being used to underwrite possible losses by the banks, insure them against “toxic” loans and help them lend to businesses and individuals.
The Prime Minister denied he was writing a “blank cheque” and claimed that today's schemes were “temporary”.
He said: “I came into politics because of the scourge of unemployment in my own home area and I will not sit idly by and let people go to the wall because of the irresponsible mistakes of a few bankers.”
More than 45 per cent of Britain's mortgage market was funded by overseas wholesale funding, he pointed out.
But as he launched a fresh broadside against bankers for taking risky loans from America and elsewhere, the Tories pointed out that Mr Brown appeared to be blaming “everyone but himself” for Britain's dire economic state.
Shadow Chancellor George Osborne said: “When is Gordon Brown going to face up to his responsibilities and admit his shortcomings during the 10 years he was Chancellor? He failed to see the boom and failed to prepare for
the bust.”
Yet the starkest warning to the Prime Minister came from one of his closest allies. Will Hutton, head of the Work Foundation think tank, warned that the scale of the liability for taxpayers,
as well as overall borrowing, was so enormous that the International Monetary Fund may have to be called in.
“With the amount of red ink in the UK budget deficit next year, together with the amount of new liabilities the taxpayer is having to underwrite, we look like Iceland-on-Thames.
“The open question is whether we can get through this without a loan from the IMF,” he told BBC Radio 4's World At One programme.
The Conservatives and Liberal Democrats gave a broad welcome to most of the package, although both pointed out that it was clear that the original bank bailout last October had failed to release cash to ordinary firms.
Today's Treasury package included an insurance scheme to protect banks from “toxic” loans, with no limit on the amount available.
It also included a £50 billion “asset purchase scheme” to buy corporate debt and an extension of the £250 billion credit guarantee scheme that encourages banks to borrow cash. In another move, the Government increased its shareholding in the Royal Bank of Scotland to 70 per cent.
Nationalised bank Northern Rock will relax its tough rules to offer more home loans, in the process delaying its repayment of the £11.5 billion loan made by the Government last year.
In a statement to the Stock Exchange, the Treasury said that the package of measures had been prompted by the “global economic downturn intensifying in the past two months”.
Speaking at a Downing Street press conference alongside Mr Darling, the Prime Minister said much of the credit squeeze was down to the withdrawal of lending facilities by foreign institutions.
Mr Brown said the main UK banks were maintaining lending, but he added: “I know from meetings up and down the country that many individual borrowers are facing difficulties.
“A principal reason for this is the reduced availability of credit across the economy because of the retrenchment of many overseas banks back to their home markets and the withdrawal of non-banking financial institutions from funding.”
Both Mr Brown and Mr Darling repeatedly stressed that today's package was not a bank “bailout” but was help for business and individuals.
Click on the graphic below to see a bigger version of the image:
What's in the rescue package?
* INSURANCE OF TOXIC ASSETS
In return for a fee, the Treasury will insure banks against any future losses from "toxic" loans.
Cost: Uncapped, but could top £200billion
* REPRICED BANK SHARES
Treasury converts £5billion of its preference shares in RBS into ordinary shares, effectively taking the taxpayers' stake from 58 per cent to 70 per cent. In return, RBS agrees to release £6billion more in loans to business and individuals. Onerous 12 per cent interest charged by Government will be relaxed
Cost: £5 billion.
* MORTGAGE-BACKED SECURITIES
A new government scheme to underwrite "mortgage-backed securities", as recommended by former HBOS chief Sir James Crosby.
Cost: £100 billion
* CREDIT GUARANTEE SCHEME
The current scheme, which guarantees new lending by banks, will be extended for the rest of the year. It had been due to end in April.
Cost: £250 billion
* ASSET PURCHASE SCHEME
A brand new project to get the Bank of England to buy up "high-quality" assets such as corporate bonds, commercial paper and syndicated loans.
Cost: £50 billion
* NORTHERN ROCK
The nationalised bank agrees to start lending to customers again. It had put squeeze on lending in order to repay £11.5billion in Treasury loans invested last year. But the Rock is ahead of schedule thanks in part to aggressive repossessions.
Cost: Unknown
Reader views (36)
To ease the problem its history needs examining, Labour have been in power for ten years with !crash gordon in control of finance. He sold a large quantity of gold at $220 an ounce which is now $850 an ounce which demonstrates his expertise. Where has the much vaunted regulation of financial institutions been while all this was building. Tony Blair, intent on his adoration and servitude to bush, in order to feather his own nest, paid little attention to the mire Labour was taking the country into and now its all too late, the crash is here, and all puppy dog can focus on is running to his master bush to get a medal for surrendering british dignity in order to elevate his own status on the world stage and of course provide fuel for the wicked witches dreams who has a better burn rate of money than a 747 on full throttle. Crash Gordon will blunder on for a few months and labour will be voted out leaving devestation for the Tories to sort out again.
- Mark Devries, Bangkok Thailand
Please, please Gordon stop. Just stop. You've done enough.
- Ant, London, UK
Message for Mr Brown is In the name of Almighty God Go!!!and let us have a general election - NOW!!!
- Arthur Lincoln, Roeselare, Belgium
Brown has an ally?
- Ben Riley, Norwich
Thats a bit rich coming from the man who has borrowed more money than every other Government put together since the war!Peopleseem to forget the fact that this Clown was running the finances of the country, and still is as eyebrows is nothing but a glove puppet, for the last 10 years. He sat back and did NOTHING but tax you more, waste YOUR money and claimed to have saved us from the TORY boom and bust! I for one would love a return to those days.GET REAL PEOPLE!!!!
Get rid of these incompetent losers and DEMAND an election NOW!!!!
- Duncan Walker, Lucky to live in Thailand
According to the annual reports and accounts last year these banks were all "going concerns" in the view of the directors and auditors. Makes you wonder doesn't it.
- Cassandra, Iceland on Thames
Crash Gordon and his cronies need to go NOW. We desperatly need a new government - i wish the Queen would disolve Parliament, she has the power.
- Mark Burton, St Ives Cambs
God Bless Mr Brown for trying all possible ways to move this country forward unlike the Tories, who are not willing to do something for ordinary people as quick as possible or they are just probably bereft of ideas.
However, correction to Mr Brown for saying irresponsible mistakes of the Banks, in fact, it was reckless, evil and outright robbery and total irresponsible code of practise expected of the Bankers and their agents of corrupt people
- Olusegun Opanuga, Dulwich & Norwood, London, UK
Brown lashes out at irresponsible banks!! Do I hear the shattering of glass as the former chancellor throws stones in his glass house.
- Minnie, London, UK
Does Crash Gordon still have allies?!??
- Jacqueline, Hampstead, London
How can you reward failure with such huge sums of money from the tax payers? How equitable is that?
- Abba, Kaduna - Nigeria
Sure they have handled it badly but what is the solution, other than resign which realistically is not going to happen.
To their credit at least they are trying things rather than letting the free market take it's course. The real question is what would the Conservative do differently, this is a question as opposed to a statement. If there is something that will fix matter without having to rescue the finanacial institutions then let hear it and please don't say tax cuts, they will take a long time to have an impact, by which time the economy will be beyond salvage.
- John, London
Time to go into the sideboard drawer and get out the old lapel pin badges saying 'I'm Buying British' and go out and buy an Austin Allegro or Maxi.
- Doug Watt, london
Thank you 'Roger' of Surrey.
Why on earth are we keeping these incompetent and corrupt bankers in their jobs? A clean sheet is very badly needed.
- Godfrey, london
what about Mandelson in all this he advocated globalization free market de regulation in countries to make it easier for big business to trade he went around the different countries advocating this. while he was EU Commissioner. Blair Brown were aided and abetted by Mandelson the banks did not do this on their own they were given a free hand and with EU aproval and the FSA the big bonus and salary came with the big money they were trading with in investment and loans etc. Brown cannot say much about big bonuses and salary the Government is the biggest culprit . I think Mandelson knows what has caused all this but they keep blaming the banks and people running the banks. How was RBS able to take over so many other banks without anything said by the EU monoply comm or the FSA was it because it was Scottish. Brown can rant as much as he likes but he has to take a large part of the blame When Labour is at fault is always keeps blaming someone else. we ought to get Brown and co out before it is too late to save our country
- Jacqui Williams, peterborough cambs
Labour have never ever understood how to run the economy which is why all labour governments have ended in failure and the country going to the IMF to bail us out - Conservative governments have always understood the need to balance books and live within our means - The only reason the British public gave Brown the benefit of the doubt as they hadn't elected him was because the image that had been created about, wrongly, was that unlike all other Leadling labour politicians, he understood prudence and how to run the economy. For the sake of our country and our future, can this arrogant, stupid and ignorant man, please resign, call a general election and let Cameron, Clarke, Osborne et all restore the economy to solvency and banish unfunded hair-brain PC policies to history/
- Steve Freud, New York
How come Lloyds increased it's dividend at the half year and said that they were not badly hit? Now look at the share price. Looks to me as if Blank was telling porkies!! As a loyal shareholder who stupidly believed this spin I am not amused!!
- Mordwinoff, Lisle France
Brown has to go before he ruins this country not just for my children but for my childrens children.
He gave the Banks free rein to do as they please, and they did. Stuff the banks give the money to the people.
- Mr.S.Port, London
I can only echo all the previous remarks on the banking crisis.
Can it be that Brown and co are so stupid?
I know in the past the labour party and fiscal policies do not go hand in hand,but to carry on the way he is will only dig a deeper hole,for the good of the country why won,t the rest of his buffoons point this fact out to him.
Come on Gordon put your hands up and resign there is still time to keep this ship afloat we call England.
- M J Bantges, Lincoln
When will the bankers get thrown out for being incompetent? When will the bonus's be taken from them? I do not what one single penny paid to them from me whilst these same people are in charge.
- Roger, Surrey
Gordon says that he has had meetings and he understands individual borrowers are having difficulties - obviously has not had a meeting with the Laird Mandlecon then.
- Alex, Southampton
Shame that Brown is so sticky. The "very wrong" man for the job of PM. He should go.
- Steveo, London
The government says its not printing money. Quite true. Its using a phoney check book backed by fresh air. Sadly they are one and the same thing. If you want a crisis go for unfettered, unregulated capitalism. If you want a complete disaster add a socialist government into the mix.
We are going to end up with a Cuban economy. Equal shares of nothing for all. Its called socialism.
- P. Counsell, plymouth Devon
I still fail to see the long term benefit of the taxpayer bailing out the asset owners, when the taxpayer is being hammered by the same asset owners in the form of aggressive job cuts which have increased the rate of the downturn, in a manner akin to the biblical parable of the king forgiving a servant of his debts, but the servant not extending the kindness to a peasant.
If ever a democratic adage was true, it is that the government represents the people who elected them. That means is taxpayers money is to be used, bank shareholders face the consequences of when dividends cannot be paid, what happens when share prices go down,
and when greedy self serving excutives cannot award themselves ill warranted bonuses.
Why Brown didn't do this first time around remains a mystery. Let's hope he has learned his lesson
- John Bloomfield, Twickenham
Gordon Brown lashes out at “irresponsible”, so says the man in charge of supervising, scrutinising and regulating the banks!
Once you get passed safeguarding depositors, there is no reason to safeguard in of the failing banks. So far Gordon Browns actions have more to do with political skin than economic expediency.
It is also hard to see why any shareholder would allow those that brought about failure of their investments would allow those they have placed in charge to remain in their positions. The so called banking crisis wasn’t unforeseen, which suggests that not only should there be some regulation but also criminal prosecutions for fraud.
- Ian, Reading, England
This crisis has now reached such a level that the wellbeing of the whole UK is under serious threat. The dangers we face are almost on a par with the start of WW2. It is abundantly clear the twin comedians, Brown and Darling, are utterly incapable of resolving the crisis, at least in the short term. At the very minimum a coalition Government should be formed so that the brightest and most competent, from all the political parties and industry, can unite together and take the necessary actions and decisions on behalf of the whole country. The devastating situation we find ourselves in is of national and international importance, any action taken should be taken in the national interest, party politics should play no part.
- Paul, Birmingham UK
We cannot afford to wait for Mcbroon to call a General Election. Ithink your correspondent suggesting a march on Downing St has a point but even that is insufficient. Somthing has to be done to secure the removal of this wretched man together with Darling and the rest of the useless crew masquerading as the Cabinet.
- Ian Glen., Durham. England.
I believe that most true Labour activists and even MPs are secretly gloating over what is happening to the Financial sector.The City was always viewed by the Socialists as a haven for class privilege and excess and to see it inadvertandly being destroyed under a Socialist Government must be deeply satisfying to a lot of left Wingers.2 of the Big 4 banks basically Nationalised-what more could they wish for?
- Thomas, London
The problem here is what really are we protecting? Greedy banks that have already swallowed up billions of our money! Do we really won’t to protect these banks that much? If a business can't sustain itself, it should be aloud to fail. A balance will be reached in the end and we can rebuild the economy when that happens. Surely it's time to learn our lesson and get out while we can. Putting more money into the banks only re-sets the problem. I wish we had a leader in this country that did not let the banks have him over a barrel; it should really be the other way round.
- Paul, London
Astonishing. What about the last £50 billion? What happened to that exactly. Oh yes, it went straight in to the banks coffers and none was translated to lending. The governmnet need to do something to help inter bank lending which is simply not happening because they all think each other will not be good for the debt.
I have seen absolutely nothing about changes to the FSA rules governing banks, how much they should have as reserves, how they can package debt etc. Until the system in which greedy bankers can operate in is refined we are simply funding the same problems as before.
- Ag, The Village of London
I hope that those people who played a pratical joke the country by voting Labour are both very happy and very poor.
This whole situation is now past the joke and Gordon Brown needs removing office before he offers 'loans' to ever business that he has over taxed for the last decade.
We will be left paying for this slap stick government for years and I feel sorry for the children who will be taxed to death for their entire working life.
- Simon Barry, Wigan
I think that it is about time that we organised a march on Downing Street and demanded the resignation of Brown and his motley crew before the country is totally ruined.
Do not think we can avoid pain, the economy is in bad shape. Strong measures need to be taken.
Crash Gordon, of the Do Nothing Right Party (Labour), is desperately hoping to do so in the hope of being re-elected. What he is doing, is gambling our future away for good.
- Harry H, London UK
Crash Gordon needs removing from office. They are mad. We do not have that kind of money - this amount is alomst the same as in the USA but we do not have that kind of economy... This is not possible!
- Georgie, Islington, London
So now we know, while the taxpayers were fighting the banks in this country to get there unfair overdraft charges back these same banks were busy giving out billions and billions to foreign businesses.
With this government practically nationalising the Banks now, does this now mean that i can ask Gordon Brown for my unfair overcharged bank charges and put an end to a 2 and a half year wait.
- Mr.S.Port, London
Forgive me for saying but is this not just history repeating itself. I have worked in the derivative financial markets since 1986 and believe that certain structured products have a role to play. HOWEVER the industry has become way,way too complex with ambitions which defy reality and prudence. It strikes me that the government are recreating a financial TIME BOMB which is in many ways similar to the sort of financial products which "irresponsible bankers" created to fuel what should have been POLITICAL issue of control. I can't help but feel that we are just digging a far greater hole for ourselves..
- Michael, Switzerland
I believe we should allow the banking system to collapse along with the whole of the economy. That way, the walls of our imprisonment will come tumbling down.
- Neil, london uk,
