Remember headlines like this?
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| Quote: British government unveils £37bn banking bail-out plan • Brown says plan will act as 'rock of stability' • He pledges end to 'rewards for failure' Graeme Wearden guardian.co.uk, Monday 13 October 2008 14.15 BST The government's £37bn bail-out of the banking sector will act as a "rock of stability" that other governments will soon copy, Gordon Brown said today. | |
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Well now it seems more like this...
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| Quote: £62bn mission to save banking sector within hours of collapse Suzy Jagger, Politics and Business Correspondent Royal Bank of Scotland and HBOS were given a secret £61.6 billion in bridging loans last year on top of the £500 billion of support that the banking sector received from the taxpayer, the Governor of the Bank of England disclosed yesterday. MPs expressed astonishment when Mervyn King told them about the emergency funding, which indicated that the two banks were in far greater peril than first thought. The Government has since indicated that the whole sector was within hours of collapse. Vince Cable, the Liberal Democrat Treasury spokesman, accused the Government of treating taxpayers like children in keeping the bailout secret for more than a year. “What is particularly concerning is that the Government was pumping billions into HBOS at the exact same time it was convincing Lloyds to take it over,” he said. “The Chancellor knew he was selling Lloyds a lemon, but he did it anyway to save his own skin.” Alistair Darling, the Chancellor, will face calls today to explain to Parliament why Lloyds TSB shareholders were not told of the four-month loan — the first instalment of which was paid two months before Lloyds took over HBOS. But Mr King told MPs that he was surprised at their concerns. The Bank had seized £100 billion of assets as security because it was worried that the banks were so fragile that they might not have been able to repay the loan. In 2007 there was a run on Northern Rock, with customers queueing round the block to withdraw their money after it was disclosed that the bank had sought emergency help from the Bank of England. Northern Rock was subsequently taken over by the taxpayer. Mr King revealed the RBS and HBOS loans, which have been repaid in full, when giving evidence at the cross-party Treasury Select Committee in the Commons. Questioned by Jim Cousins, the Labour MP for Newcastle Central, the Governor hinted that the politician was effectively siding with bankers by questioning the terms of the bridging loan. Mr Cousins told The Times: “When he said ‘you of all people’ should have raised this, I found his response a bit silly and personal. But what concerns me is the indication that the banking system remains in very deep trouble.” Michael Fallon, a Tory member of the committee, said that he was “outraged” by the delay in revealing the secret Bank of England loans. “They need to tell us why they agreed to this secrecy for so long and why, particularly, they didn’t insist Lloyds shareholders were given the information they needed before they voted on the merger with HBOS.” Lord Myners, the City Minister, defended the Bank’s decision to keep the loan quiet for a year. He said: “Parliament gave the Bank of England the right to operate covertly to support the banking system. We now know that the banking system was within a matter of hours of collapse. We are now seeing how true that was.” In unrequested evidence to the committee, the Bank said it had extended loans to the two banks, now state-controlled, from October 1 last year. Of that sum, RBS took £36.6 billion. It also said that RBS paid off its loan on December 16, while HBOS returned its loan on January 16. Lloyds said that it intended to buy HBOS on September 18 last year and the deal was completed four months later. The Bank said that it had not made the secret lending facilities public before because it had been concerned that the emergence of such a loan could have effectively triggered a run on the banking sector. John McFall, chairman of the committee, said: “You cannot underestimate how fraught these times were. Taxpayers have a right to know, but it is a matter of timing . . . [had the loan been disclosed at the time] there would have been a run on the banks.” | |
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