Can Someone Explain the Bank Bail-Out?

Guido has flu and so does baby Ms Fawkes, who made her unhappiness abundantly clear between 2 a.m. and 4 a.m. this morning. So perhaps it is the grogginess that is hindering Guido’s ability to comprehend Gordon’s financial genius. The £600 billion bank bail out plan to restore liquidity to the credit markets includes the following elements:
  • H.M. Treasury has guaranteed British inter-bank lending (charging a hefty penalty risk premium adding to the cost of inter-bank lending).
  • The Treasury has demanded preference shares from the banks with, from memory, a 12% interest charge to be paid by the banks.
  • The Treasury has also encouraged the FSA to double the requirement for banks to hold government gilts in their reserves, yielding somewhat less than a paltry 4%.
  • The Treasury is demanding that banks lend at mortgage rates closer to base rates.
Is Guido missing something? How can the banks make a profit and recapitalise if the government has both hiked their cost of capital and reduced the returns on their reserves, as well as exhorting them to reduce their margins on mortgage lending? How does this plan add up?



Tip offs: 0709 284 0531
team@Order-order.com

Quote of the Day

Diane Abbott on Amber Rudd:

Who can have confidence in Amber Rudd to make far-reaching changes to the Home Office if she doesn’t seem able to get basic facts right?”

Sponsors

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.
Heidi Bye? No Comment on Labour MP Quit Rumour Heidi Bye? No Comment on Labour MP Quit Rumour
Security Risk Sugar Baby Met Dave in No 10 Security Risk Sugar Baby Met Dave in No 10
London Knife Crime Up 21% London Knife Crime Up 21%
Len Threatens Labour MPs Len Threatens Labour MPs
He Who Must Not Be Named He Who Must Not Be Named
Williamson at Smeeth Hearing in Support of Her Abuser Williamson at Smeeth Hearing in Support of Her Abuser
Bastani Not Going to IPPR Bastani Not Going to IPPR
Labour Parliamentary Candidate: “I’m In The Mood to Beat Up Prince William” Labour Parliamentary Candidate: “I’m In The Mood to Beat Up Prince William”
Mogg: Number 10’s Customs Partnership Is a ‘Cretinous Betrayal of Good Sense’ Mogg: Number 10’s Customs Partnership Is a ‘Cretinous Betrayal of Good Sense’
Why Brexiteers Are Worried Why Brexiteers Are Worried
Two More Labour Candidates Posted About “Illegal Sexuality” and “Jewish Money” Two More Labour Candidates Posted About “Illegal Sexuality” and “Jewish Money”
Labour Spent £2 Million on Private Mailshots Labour Spent £2 Million on Private Mailshots
May Told to Ditch Customs Partnership “Turkey” May Told to Ditch Customs Partnership “Turkey”
Ministers Warn May: We Must Leave Customs Union Ministers Warn May: We Must Leave Customs Union
Adam Spliff Institute Celebrates 420 Adam Spliff Institute Celebrates 420
Nick Timothy Leaves Twitter Nick Timothy Leaves Twitter
Owen’s Descent Continues Owen’s Descent Continues
Producer of Labour’s Race Row Election Broadcast Tweeted About “Jewish Kapos” Producer of Labour’s Race Row Election Broadcast Tweeted About “Jewish Kapos”
UK Tech Investment Surges 115% UK Tech Investment Surges 115%