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Barclays shares tumble, pressure to nationalise Lloyds and RBS grows
Jonathan Prynn and Paul Waugh21 Jan 2009
Shares in banking giant Barclays took a fresh pummelling today as investors continued to fret over the outlook for the beleaguered industry.
Barclays bore the brunt of the sector's latest slump, falling 19.7p to 53.2p during a volatile start to trading.
The newly-created Lloyds Banking Group, which dived as much as 47 per cent yesterday, fell 20 per cent before staging a recovery. The Dow is now below 8,000, while the FTSE 100 is close to dipping below the 4,000 barrier.
Investors have continued to flee the financial sector amid doubts over the Government's second bank bail-out and because of fears that more UK institutions will need to be nationalised.
Royal Bank of Scotland, soon to be 70 per cent owned by the Government, bucked today's downward trend with a rise of six per cent. Its shares fell 67 per cent on Monday.
A confidant of the Prime Minister today urged that RBS and Lloyds be fully nationalised to prevent their total collapse. John McFall, chairman of the Commons Treasury select committee, said the state should step in "for the sake of financial stability".
Mr McFall, who made his plea jointly with leading private equity chief Jon Moulton, warned that the banks would be crippled by uncertainty without 100 per cent nationalisation.
Lloyds now has a stockmarket value of £6billion, barely half the sum put into it by the taxpayer last October. RBS is worth less than £4billion.
In a joint article, Mr McFall and Mr Moulton wrote: "Let's get it over with - nationalise the pair of them."
Their call came as Germany's finance minister Peer Steinbrück became the first foreign politician to express doubts over the Treasury's plan to insure "toxic" loans. At a meeting of EU finance ministers in Brussels, he said: "I am sceptical that a national scheme will work."
Ministers could "do a Railtrack" by simply confiscating the banks without paying compensation to shareholders. Or they could increase the capital to 100 per cent with the banks' agreement.
Charles Goodhart, former chief policy adviser at the Bank of England, claimed nationalisation of the two banks would increase national debt enormously, from 45 per cent of GDP to about 300per cent. RBS has liabilities of nearly £2trillion.
Mr McFall and Mr Moulton said full nationalisation would allow credit to start flowing again. "They could lend a lot. This would temper the recession in the short term," they wrote.
But Tim Congdon, a former economic adviser to the last Tory government, warned that 100 per cent ownership would be "disgraceful". "These banks are not bust. They have immense capital and the Government has been effectively stealing from them," he said.
Reader views (10)
i would be interested in knowing where the immense capital is considering how many plees for more money have come in one form or another. as a bank worker the pressure to sell often leads to one problem or another from mis-selling to bullying.the banking system is built upon lies and these are coming home to roost. when i first began in banking i was proud to be in such an honest enviroment, maybe i was being nieve? things really do need to change and an election or bringing to task the ones that have turned a blind eye to what was building up because there must have been a few that did know.
- Jon, london, 21/01/2009 21:50
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The FSA must be completely out of their mind to lift the ban on short selling this week.
- Brian, Bristol, 21/01/2009 16:28
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If the banks had concentrated their activities to the UK, ie lending etc and not looked to expand around the world and taken risks as they did, then the UK would not have been so badly stung.
The problems were not caused by repossessions in the UK but due to funding drying up following exposure of the banks and others to the toxic loans in the US. Arguing that customers over extended themselves is another matter which is now playing a part because credit has dried up.
Perhaps the pressure to turn a profit and the bonuses gained by creating the biggest banks in the world were too much for the executives, and in their rush to expand they did undertake their due diligence.
- Harry, London, 21/01/2009 13:48
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The main problem in the financial markets is lack of confidence. The only real way to rebuild confidence is to hold a general election NOW (not wait until 2010). The USA also has major problems, and although Obama appears like a genuine "good guy" it will take months before he can take any significant steps. However, what his election as President does it create the confidence that SOMETHING is changing. Brown and Co CANNOT do what is necessary in the UK unless they first ADMIT their past mistakes - something they will never do. Result, investors don't believe anything will change 7 have no confidence in the government to take the RIGHT steps. We can't afford to wait until 2010. If we have an election NOW, whoever is elected will at least have a mandate to act.
- Malcolm, London, 21/01/2009 13:40
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Perhaps it's high time that the banks returned to their basic core activities rather than trying to be "jacks of all trades and masters of none" (e.g. bankassurers etc).
Presumably tthat would make it much easier for the relavant "Regulator" to regulate them as well. Perhaps that's where the problem has been all along?
- Fraser, Telford Park, 21/01/2009 13:01
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Yeah i agree with Stuart, funny how as soon as the short selling started again a false rumour was spread about it, even though they are going to declare a profit, ban short selling. How about Gordon steps down and we have an election, anything they do seems to make things worse.
- Ben, London, UK, 21/01/2009 12:24
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No I'm sorry I'm not willing to pay more money to the millionaire banksters to keep them in luxury when the recession is slowly destroying me. We are being mugged and looted by these people, who hide their wealth offshore, thus increasing the burden on us ordinary taxpayers even further. Let them fail and let us get rid of both the banking system and the government and monarchy. We don't need any of them.
- Neil, london uk,, 21/01/2009 12:10
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Tim Congdon has hit the nal on the head. Gordon & Alastair would love to nationalise these banks for their egos and force them to lend on a non commercial basis to boost the economy. If any more of the UK banks are to be fully nationalised then heads must role at FSA and BoE as it suggests the government disagrees with their independent oversight of asset values and capital sructure.
- Steve, Essex, 21/01/2009 10:57
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The shareholders (millions of them) own the bank, not the government. The bank is solvent.
- John Machin, Toddington UK, 21/01/2009 10:11
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nothing to do with the fact that the FSA lifted the ban of short selling this week?
- Stuart, london, 21/01/2009 10:09
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