Britannia Radio

The Chancellor of the Exchequer stood up in Parliament and announced 
- er - nothing much.  Osborne's response was polite but clearly 
astonished at the lack of substance in the Darling speech.

Meanwhile Robert Peston is the ultimate in pessimism.  As he put it 
on the 6 O'Clock News the markets wanted action not talk. And when 
they heard no announcements from Darling there was an immediate nose-
dive in share prices.

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BBC ONLINE 6.10.08  at 5,34pm
Darling pledges to support banks

The chancellor on maintaining the stability of the financial system
Chancellor Alistair Darling says the government will do whatever is 
necessary to ensure the stability of the financial system.  [He keeps 
saying that but then dithers like his master! -cs]

He said that would include action to support the banking system as a 
whole as well as supporting individual banks.

His statement came as stock markets worldwide plunged on concerns 
about the health of the banking sector.

The FTSE 100 index of leading shares suffered its biggest one-day 
fall on record, down 7.85%.

The chancellor told MPs that European countries needed to work 
together to respond to the global financial crisis.

But despite pledges being given by some European Union countries, Mr 
Darling stopped short of guaranteeing all bank savings and called on 
EU members to co-ordinate action.
"When member states take unilateral action, it does have a knock-on 
effect," he said.
===========================
CONSERVATIVE HOME Blog   6.10.08
George Osborne response to Alistair Darling statement

This is the full text of the response by Shadow Chancellor George 
Osborne to the Chancellor's emergency statement to the Commons this 
afternoon as issued by CCHQ.

"Mr Speaker, as we see again from today's markets these are clearly 
times of great instability for our economy and great anxiety for the 
people we all represent here.

Families are deeply worried about their savings, their homes, their 
jobs and it is up to us to try to work together to get the country 
through this current crisis.

I don't think the British public would thank us if they saw happening 
here in this House of Commons what everyone saw happening in the 
American Congress.

That is why we offer to look constructively at any proposals brought 
forward by the British government.

For let's be blunt about it.
If the banking system fails, it's not just the banks that go bust.
Businesses fail. Families can't get mortgages.  People lose their 
jobs - not just in the banks but across the wider economy.

The Prime Minister said we'd never see a return to 15% interest rates 
- well this week one of our high street banks has written  to many of 
its small business customers increasing their interest rate to 15.8%.

All of us need to work together to stop Britain sliding from a 
banking crisis into a deep recession.

Of course, constructive support does not mean we are suspending our 
critical faculties.

We will return at a later date to ask how on earth Britain found 
itself, at the end of this age of irresponsibility, with more 
personal and public borrowing than any other advanced economy in the 
world.

But today I want to ask the Chancellor about the immediate issues 
facing the banking system: about the issues of confidence, liquidity 
and capital.

First, he mentioned the Banking Bill.  Can he confirm he will create 
the Bank of England resolution regime that we think should have been 
used to deal with North Rock and Bradford & Bingley.

As I told him last week when he met, this Bill will have our support.

We also welcome the decision to raise the limit of protection on 
retail deposits to £50,000.

We've been proposing this for almost a year from this despatch box 
and it is clearly the right thing to do.

Even so, events are moving fast with the broader guarantees issued by 
first Ireland and Greece, then Germany and Denmark and others.
Will the Chancellor confirm that none of these countries informed the 
British Government in advance and does he agree that it is not 
helpful for European leaders to call for international co-ordination 
at summits and then hours later act unilaterally?
As he implied in his statement their confusion is adding to market 
anxiety today.

He is going to ECOFIN tomorrow.

What reassurance can he give us that we can avoid descending further 
into a beggar-thy-neighbour approach that will in the end help no one?

Turning to the issue of liquidity:
The increasing reliance of our banks on the overnight money markets 
is creating a 'hair trigger' effect, which leaves individual 
institutions more and more exposed to events.

This clearly must be undone, and so we all support the Bank of 
England's decision to extend funding to the banks from tomorrow.
This should address the urgent liquidity problem, but let's be clear 
about what's happening here.

The Bank of England is becoming not just a lender of last resort but 
the lender of only resort.

Does the Chancellor agree with me that in the medium, term and the 
long term that is unsustainable?

We need to address not just the symptoms of the crisis but the cause.

That brings me to the issue of capital.
The cause of this crisis is that we built an economy on debt-fuelled 
bubble - and now the bubble has burst and the debt is being called in.
This leaves banks undercapitalised and their balance sheets weak.

There are steps that can be taken now to stop for example the 'mark 
to market' accounting rules adding to the downward spiral of falling 
asset values and restricted lending.
Now the Chancellor's immediate reaction was to say it would make 'no 
difference'.
Many many banks disagree with him and so do many other European 
countries.
If he won't accept our argument, will he at least engage with theirs'?

That still does not address the central challenge - the need to 
recapitalise the British banks.
Does he agree with me that this must, in the first instance, mean 
shareholders accepting their responsibility?

As I said to the Conservative Conference, banks that pay out 
dividends instead of rebuilding balance sheets should be held to 
account by regulators.

Now I know the Prime Minister said, when he went to  New York, that 
he wanted to handle this crisis on a case by case basis.   But events 
have moved on and does the Chancellor accept that the ad hoc approach 
is running out of road?  [Ditherer Brown at it again ! -cs]

No one is expecting the Chancellor to get up here and speculate on 
every single option available but he himself confirmed yesterday that 
big steps are being considered by the government.

And would it not be irresponsible to not at least consider more 
dramatic measures to help our banks - including support from 
creditors and government injections of capital.

Of course there must be very strict conditions to protect taxpayers 
and ensure that they benefit first from any gain.

We could not contemplate taxpayers' money being used to prop up the 
kind of salaries and bonuses we have seen in recent years.

The Chancellor can ask his new city minister about that in the House 
of Lords.
And we must make sure that in return for any support the banks start 
lending again.
But in the end, for all the risks to taxpayers involved, there is one 
thing worse than government action.

And that is inaction in the face of this crisis.

For then the far-greater risk to the taxpayer, and the country, is of 
a long and lasting recession.
Boom has turned to bust.
Now bust must not become something worse.

That is why Conservatives stand ready to help."
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BBC NEWS  6.10.08   at 3.47 pm
How close to capitulation?
. Robert Peston

Blimey it must be serious.

Every European Union leader has signed up to the following statement:

"All the leaders of the European Union make clear that each of them 
will take whatever measures are necessary to maintain the stability 
of the financial system - whether through liquidity support through 
central banks, action to deal with individual banks or enhanced 
depositor protection schemes.
"While no depositors in our countries' banks have lost any money, we 
will continue to take the necessary measures to protect both the 
system and individual depositors. In taking these measures, European 
leaders acknowledge the need for close coordination and cooperation."

So the mayhem of uncoordinated statements and actions over the past 
few days by the governments of Germany, Denmark, Sweden, Ireland and 
Greece was simply an accident.

They're all back on the same hymn-sheet today.

Investors seem underwhelmed: the FTSE 100 index is tumbling and 
shares are currently almost 8% lower.

If sustained this would make it the third worst fall in the history 
of the FTSE 100 index.

Does this mean we're close to that fabled moment in stock markets - 
the point of capitulation - when investors lose all hope and dump 
their stock at any price?

According to the theory, there can be no sustained recovery until the 
markets are in the clutches of utter despair.

Not everyone subscribes to the pseudo-economic psycho-babble.
But it certainly looks hairy out there.
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SKY NEWS 6.10.08
. German Savings Plan Denied
. FTSE Suffers Big Fall
.Biggest FTSE Fall For 20 Years

The FTSE 100 index of leading UK shares has suffered its biggest one-
day fall since the 1987 crash amid the deepening global financial 
crisis.

Big share falls on both sides of the Atlantic
At one stage, the FTSE dropped nearly 9%.
It closed down 391.1 points, or 7.85%, at 4589.2, wiping more than 
£93bn off the value of top firms.
Germany's DAX was down 7.1% and France's CAC-40 closed 9% lower.
The gloom was not just felt in Europe, as markets were also hit badly 
in the US and Asia.
The Dow Jones industrial average of leading US stocks fell below the 
10,000 mark for the first time in four years.
The sharp drop came amid growing fears that the global financial 
crisis may be deeper than first thought.
The Dow Jones fell around 4% in early trading.
(- - - - - -)
This was followed by the news that over 1,300 jobs are to go at two 
UK firms.
Seven hundred and fifty are being cut by Focus DIY and 600 by car 
parts supplier LSUK.
Also, the Icelandic government is putting together a rescue plan for 
its financial system as the Krona fell by a fifth against the Euro in 
a month.
There are also fears that the $700bn US bank bail-out package would 
not be enough to stem the global financial crisis.
(- - - - - - -)
Japan's Nikkei index tumbled 4.25% as it closed at a four-and-a-half 
year low.
Hong Kong's Hang Seng index slid 5%. Markets in mainland China, 
Australia, South Korea, India, Singapore and Thailand also fell sharply.
Russia's benchmark stock exchange suffered its biggest-ever one-day 
loss, closing down 18.6%.
In an effort to keep credit flowing, Japan's central bank pumped 
emergency funds into the short-term money market for a 14th straight 
business day. It poured in one trillion yen.

(- - - - - -)As the US-born financial crisis takes a stronger grip in 
Europe, BNP Paribas announced that it was taking control of ailing 
financial group Fortis's operations in Belgium and Luxembourg.
The leaders of France, Germany, Italy and Britain vowed over the 
weekend to protect fragile banks but did not discuss a European 
financial rescue package.
Markets were looking ahead to a meeting of finance chiefs from the 
Group of Seven rich nations on Friday.
Dealers said many are waiting for any announcements on co-ordinated 
action like liquidity injections or interest rate cuts.