Moving With Purpose

13 October 2008



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Brown and Darling Save British Banks

Over the week-end, the British government came to the rescue of three troubled banks, the Royal Bank of Scotland, HBOS and Lloyds TSB. The price tag is £37 billion. In exchange the British taxpayer now has a 60% stake in RBS and a 40% stake in the other two. The BBC’s business editor, Robert Peston, said the announcement would “count as perhaps the most extraordinary day in British banking history” adding it was “an absolute humiliation” for the banks.

Prime Minister Brown explained his government’s move, “Our action is driven by our values. For this Government, and I believe the whole country, the guiding idea is fair reward for hard work, effort and enterprise, not incentives for irresponsibility or excessive risk-taking for which the rest of us have paid.” So, the toxic debts aren’t going to be bought – the banks themselves are.

This isn’t like the nationalizations in the 1940s, however. “This is not standard public ownership," the PM said. "This is the Government buying shares, allowing the banks to be run commercially, making sure that we can encourage other investors into the banking system, then – because our holdings are temporary – being ready to sell them when the banks are strengthened. I think you will find over the rest of Europe over the next few days exactly the same thing will happen.”

The Tories grumbled, but they know there is no better alternative. The Shadow Chancellor, George Osborne, said, “To regard today as a triumph, as some in Government seem to do, is bizarre. And it misjudges the public mood. For this is no triumph. It is a necessary but desperate last-ditch attempt to prevent catastrophe.”

Heads are also rolling. RBS chief executive Fred Goodwin quit without a severance pay-off. RBS chairman Tom McKillop is to retire. HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson are also leaving their jobs. That is what taking responsibility for one’s actions means.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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