THE HERALD (Glasgow) 10.3.09
The £585bn bank bailout has failed, say Tories
MICHAEL SETTLE
The UK Government's new £260bn insurance policy to cover Lloyds
bank's toxic assets is proof that last year's multi-billion pound
bailout of Britain's ailing banks failed, the Conservatives said last
night.
And the Liberal Democrats called for the £80m of bonus payments due
to junior staff at Lloyds this year to be scrapped.
The latest guarantee, when added to the £325bn cover for the Royal
Bank of Scotland's bad assets, brings the total bailout to £585bn,
the biggest financial commitment in the UK's history.
"This massive second round of banking bailouts is proof that the
Prime Minister's first bailout last October failed," declared Phillip
Hammond, the Shadow Chief Secretary to the Treasury.
"The test of it will be whether credit actually begins to flow again
through our economy, not what promises of more lending the Government
says it has secured," he added.
Under the terms of the Lloyds deal the first 10% of any losses would
be met by the bank itself with 90% of further losses covered by the
Treasury.
In a Commons statement, Stephen Timms, the Financial Secretary,
claimed the deal would "ensure financial stability, safeguard the
interests of the taxpayer and support the real economy by increasing
lending". In return for the cover, Lloyds has promised to up its
lending by £14bn.
The £15.6bn fee for the protection could see the UK Government's
ownership of Lloyds rise to 77%. The taxpayer already owns all of
Northern Rock and 68% of RBS.
Mr Timms, standing in for Chancellor Alistair Darling, told MPs the
insurance scheme would enable Lloyds and RBS to "clean up their
balance sheets" and help them resume lending but he admitted
returning the banking sector to rude health was "not going to happen
overnight".
However, Mr Hammond criticised ministers for supporting the takeover
of HBOS by Lloyds, saying in a matter of weeks it had transformed the
latter from a solid and cautious bank to a "crippled giant", which
was now incapable of surviving without large infusions of taxpayers'
cash.
The Shadow Chief Secretary said, despite Gordon Brown's insistence
that the recession stemmed from the US sub-prime market, more than a
quarter of Lloyds' toxic assets were UK mortgages "lent by HBOS in a
bout of over-exuberance".
On the stock market, Lloyds shares ended 4.1% higher at 43.7p, having
sunk as much as 14.3% earlier in the day.
On bonuses, Mr Timms stressed they should be restricted to "junior
staff earning an average of £20,000".
However, Vince Cable, for the LibDems, insisted none should be paid
at all. "It's all very well to appeal sympathetically to the
relatively-low paid staff but how would we react if it was announced
that every public sector worker was going to be paid a £1000 bonus in
the present state of public finances?"
Earlier in Edinburgh at a public question-and-answer session held by
the Commons Treasury Committee, Labour backbencher and committee
member George Mudie said that despite claims of renewed lending from
the banks, "firms are having to close down and lay workers off
because present lending arrangements or overdraft arrangements are
being changed or being withdrawn".
=======================
POLITICS HOME 10.3.09
"You & Yours", Radio 4 at 12:31
Brown: I take responsibility for what happened when I was Chancellor
Gordon Brown, Prime Minister
The Prime Minister said he did not shy away from his responsibility
for his actions as Chancellor, but insisted the financial crisis did
not originate in Britain.
"I take responsibility for everything that happened during the period
in which I was Chancellor, I don't shy away from it," he said.
However he added: "What I can't say to people is the cause of the
crisis is something that happened within Britain alone".
He said that the problems in the credit market could only be solved
if the international dimension was understood.
"If you don't understand what the problem is you'll never solve it,"
he said.
Mr Brown also said that while there were problems with the regulation
system, the scale of the crisis meant even 'good' banks had been
affected in unexpected ways. [Like him forcing the 'good' Lloyds to
merge with the collapsiing HBOS whose problems were almost ALL UK
Ones -cs]
"I've said the regulatory system was not good enough. I've said it
has to change," he said, but added that the crisis "affected good
banks as well as bad banks as they couldn't escape being polluted by
what was happening across the world".
He said it would be difficult for a regulator to foresee that the
crisis would "reverberate right across the world where nobody again
trusted the banks". [Eh? -cs]
Mr Brown also defended the amount of government money put into the
banks, saying it was not "money for nothing".
"This is not money for nothing this is not something for nothing we
have bought shares in the banks and have effectively got more
control," he said.
He also said that there was a "very good chance that the shares we
have bought in the banks will be worth more in the year to come".
[Whatever it is - 'a bunch of lame excuses' ? - an apology it isn't!]
========================
TELEGRAPH 10.3.09
World in grip of 'Great Recession', IMF warns
The world is now in the grip of the "great recesssion" and global
economic growth could dip below zero for the first time in sixty
years, said Dominique Strauss-Kahn, the head of the IMF.
Mr Strauss-Kahn, the managing director of the International Monetary
Fund, made the comments at the opening of a conference in Tanzania on
the impact of the world financial crisis on Africa on Tuesday.
He said: "The global financial crisis, that might now be called the
great recession, provides a sobering backdrop to our conference. The
IMF expects global growth to slow below zero this year, the worst
performance in most of our lifetimes,"
Domestic demand across the world was being hit by continued
deleveraging by world financial institutions and a collapse in
consumer and business confidence.
"When we release our next package of forecasts at the spring session,
that is to say in April, everything leads us to believe that it will
indeed reveal a negative global growth for the first time in 60
years," he said
It is the first time that the IMF chief had predicted an actual
global contraction. Last month he said the IMF expected zero growth
in 2009 and the month before that the fund released data including a
0.5pc global growth forecast.
He said last week he saw no chance of a global recovery before 2010
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