£50bn UK Bank Rescue Package..

[laptop]

the government's preference shares

As I understand Monday's FT, the government has realised that it can't under/regulation law buy (enough) preference shares in banks, so it's forced to buy voting shares.

 

[taffboy gwyrdd]

I just cant understand how THe Clunk is being hailed as some kind of genius. I guess the switch in media narrative is in itself a good story for them.

But:

1) Where is the "money" comming from? is it more funny stuff that will lead to inflation? Is debt the answer to debt -what kind of "rock of stablity" is that?

2) This talk of being tough on bankers is bollox. The retiring ones walk away with mega millions. The bonuses wont happen "this year" i.e before April. Then they will be paid in shares - shares of a bank we own. This looks like more corporate welfare than ever to me. Am I wrong?

3) The supreme renewed confidence of the markets aint neccessarily good news. are they just pleased they've been given more money to fuck about with and pay themselves with like the junkies so many of them are?

4) If the govt injects £Xbn, does that mean 10 times as much can be leant out with fraudulent fractional reserve banking, thus merely delaying and deepening the crisis?

 

[A Dashing Blade]

. . .
1) Where is the "money" comming from? is it more funny stuff that will lead to inflation? Is debt the answer to debt -what kind of "rock of stablity" is that?

The UK DMO announces its intention to begin a gilt and Treasury bill sales programme designed to raise £37 billion in order to contribute to the financing of the re-capitalisation of UK banks announced on 8 October 2008. It is envisaged that these sales will begin in the week commencing 20 October 2008, but that, given the auction of 4½% 2013 on 16 October, the programme will not commence with the sale of a five-year maturity gilt.
. . .

The DMO will announce the details of the programme at 3.30pm on Tuesday, 14 October 2008.

Basically, yes, debt will be issued to finance debt. As I pointed out earlier, inless they're careful about the maturities of the debt, this could cause a few problems going forward

2) This talk of being tough on bankers is bollox. The retiring ones walk away with mega millions. The bonuses wont happen "this year" i.e before April. Then they will be paid in shares - shares of a bank we own. This looks like more corporate welfare than ever to me. Am I wrong?

Nope, you're not wrong. Plus, there's been no talk of restricting traders bonuses

3) The supreme renewed confidence of the markets aint neccessarily good news. are they just pleased they've been given more money to fuck about with and pay themselves with like the junkies so many of them are?

The one hing markets don't like is uncertainty, this is what has caused the reqcent equity volatility. Once uncertainty has been removed ie the news has been announced, markets can adjust prices accordingly.

4) If the govt injects £Xbn, does that mean 10 times as much can be leant out with fraudulent fractional reserve banking, thus merely delaying and deepening the crisis?

I'd say not as the refinancing is going towards existing bad debt, not the creation of new debt

 

[taffboy gwyrdd]

Thanks Dashing Blade

 

[FabricLiveBaby!]

It will not work.

Debt is the problem.

You cannot solve a problem of debt with more debt.

The government have stuck a plaster on their puusy maggot filled wound.

They have postponed the problem - until it goes gangrenous and have to lop it off completely.


If they get what they want (mortgage lending back to 2007 levels) the fall will be worse.

You cannot put a problem like this off.


What will the taxpayer be thinking in a years time when their tax bil goes through the roof?

.... will they be able to pay their mortage?

I think not.

 

[rover07]

I now own Nat West, Royal Bank of Scotland, Bradford and Bingley, Northern Rock...plus a 40% stake in Lloyds TSB and Halifax.

Well chuffed, not a bad weeks work... nice one Gordon!

 

[fredfelt]

Looks like to me with the details being announced on the DMO website tomorrow.

But, it would seem rational to expect the new gilts to be of the same maturity as the forecast Govt stake (5 years - 10 years??).

Issue that amount of paper into that sort of maturity bucket is going to massively steepen the yield curve (ie 5-10 years rates much higher than short-term rates.

So . . . companies will be forced to borrow short-term as they can't afford to borrow medium/long term

Which is what f**ked everything up to begin with. (ie short term rates being lower than long term rates)

Thanks! I think I understand. Also thanks for that link

(http://www.dmo.gov.uk/documentview.aspx?docName=/gilts/press/pr131008.pdf)

 

[Barking_Mad]

Gordon Brown's Mansion House speech to the city last year,

"I congratulate you on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London ... I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."

Was he really stupid enough not to know this was coming?

 

[Bernie Gunther]

From the point of view of the ascendancy of finance capital over all other kinds of social power through a restructuring of its relationship with the state and indeed society as a whole, say since the 70's, he was absolutely right. I do strongly disagree that it was a good thing, but the scale of the change is I think beyond dispute.

I very much doubt that the present crisis is going to do much to change anything fundamental in those structures of power. What worries me is that keeping the whole mess propped up will involve intensifying primitive accumulation of various kinds and intensifying the authoritarian measures required to make people bend over for that ...

 

[ska invita]

Todays news is a disgrace: we've just paid £20billion for a 60% stake in a bank (RBS) that's only worth £12billion (that 60% stake is therefore worth about £7billion).

I make that a loss of £13billion. The government should have bought the bank outright. Why didn't it? What value does wasting that £13billion have? I can only imagine it supports the illussion of indepedence for the bank (i.e. not really state controlled). Seems like a traversty to me.

Can anyone explain the above to me? I've been asking around and looking for commentary in the press but haven't found anything.

 

[taffboy gwyrdd]

Gordon Brown's Mansion House speech to the city last year,



Was he really stupid enough not to know this was coming?

thanks for that. One New World Order or another anyway.

 

[Bernie Gunther]

Can anyone explain the above to me? I've been asking around and looking for commentary in the press but haven't found anything.

Does it make more sense if you think of it the other way around? Not in terms of states controlling banks, but of investors controlling states?

With both the government and the people held hostage via dependence on a vast credit ponzi scheme and the threat of capital flight?

 

[Bernie Gunther]

Or to put it another way:

Financial capitalists took the lead as a social force in demanding the defeat of those domestic social forces they blamed for creating the inflationary pressures which undermined the value of their assets. The further growth of financial markets, increasingly characterized by competition, innovation and flexibility, was central to the resolution of the crisis of the 1970s. Perhaps the most important aspect of the new age of finance was the central role it played in disciplining and integrating labour. The industrial and political pressures from below that characterized the crisis of the 1970s could not have been countered and defeated without the discipline that a financial order built upon the mobility of capital placed upon firms. 'Shareholder value' was in many respects a euphemism for how the discipline imposed by the competition for global investment funds was transferred to the high wage proletariat of the advanced capitalist countries. New York and London's access to global savings simultaneously came to depend on the surplus extracted through the high rates of exploitation of the new working classes in 'emerging markets'. At the same time, the very constraints that the mobility of capital had on working class incomes in the rich countries had the effect of further integrating these workers into the realm of finance. This was most obvious in terms of their increasing debt loads amidst the universalization of the credit card. But it also pertained to how workers grew more attuned to financial markets, as they followed the stock exchanges and mutual funds that their pension funds were invested in, often cheered by rising stocks as firms were restructured without much thought to the layoffs involved in this.

Both the explosion of finance and the disciplining of labour were a necessary condition for the dramatic productive transformations that took place in the 'real economy' in this era. The leading role that finance came to play over the past quarter century, including the financialization of industrial corporations and the greatest growth in profits taking place in the financial sector, has often been viewed as undermining production and representing little else than speculation and a source of unsustainable bubbles. But this fails to account for why this era - a period that was longer than the 'golden age' - lasted so long. It also ignores the fact that this has been a period of remarkable capitalist dynamism, involving the deepening and expansion of capital, capitalist social relations and capitalist culture in general, including significant technological revolutions. This was especially the case for the US itself, where financial competition, innovation, flexibility and volatility accompanied the reconstitution of the American material base at home and its expansion abroad. Overall, the era of finance-led neoliberalism experienced a rate of growth of global GDP that compares favourably with most earlier periods over the last two centuries.[16]

It is, in any case, impossible to imagine the globalization of production without the type of financial intermediation in the circuits of capital that provides the means for hedging the kinds of risks associated with flexible exchange rates, interest rates variations across borders, uncertain transportation and commodity costs, etc. Moreover, as competition to access more mobile finance intensified, this imposed discipline on firms (and states) which forced restructuring within firms and reallocated capital across sectors, including via the provision of venture capital to the new information and bio-medical sectors which have become leading arenas of accumulation. At the same time, the very investment banks which have now been undone in the current crisis spread their tentacles abroad for three decades through their global role in M&A and IPO activity, during the course of which relationships between finance and production, including their legal and accounting frameworks, were radically changed around the world in ways that increasingly resembled American patterns. This was reinforced by the bilateral and multilateral international trade and investment treaties which were increasingly concerned with opening other societies up to New York's and London's financial, legal and accounting services.

source

 

[ska invita]

Does it make more sense if you think of it the other way around? Not in terms of states controlling banks, but of investors controlling states?

With both the government and the people held hostage via dependence on a vast credit ponzi scheme and the threat of capital flight?

i think i get what you mean, and i understand the bail out in principle - but i dont get why Brown would pay up £20billion for something worth £7billion (the market value of 60% of RBS).

P.S.Todays free rag also adds that HBOS is headed for a total state nationalisation:
http://www.thisislondon.co.uk/stand...ould+be+facing+full+State+takeover/article.do

 

[elbows]

Oh it now seems that the 'no dividends till the government gets its money back' stuff is being eroded. Or at least several different people at the BBC think so, government seems to be denying it at the moment but time will tell.

Unsurprisingly the share prices arent doing to well because of the no dividends thing. But if the government backs down on this then people will have even more reason to complain about the bailout.

And there is continued chatter that the Lloyds HBOS merger might not happen.

 

[TomPaine]

Until we get control of the Bank of England and abolish the current methods for "creating" money, absolutly nothing will change.

TomPaine