The FT reports this morning that:
Senior government figures are discussing the possibility of buying out private investors in Royal Bank of Scotland and fully nationalising it amid mounting frustration at banks' failure to lend to British businesses.
Cabinet ministers are having conversations about whether to spend around £5bn buying up the 18 per cent of the bank the government does not own, although George Osborne, the chancellor, is opposed.
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But will it stop the bank criminals?
http://www.zerohedge.com/contributed/2012-08-01/stunning-crimes-big-banks-worse-your-wildest-imagination
RBS. Possibly the most corrupt bank in the world and Deloitte’s biggest world-wide customer.
Deloitte have known all about financial shenanigans inside this bank for years yet failed to report it or withdraw from the audit relying on the ICAEW sponsored defence that such things are “client confidential” and disclosing this information would be “in breech professional client privilege.”
And if all else fails:- “ if it is not money laundering we are under no obligation to report anything to the regulators or the police.”
The ICAEW is the glue that helps bind the stench that is the unholy union between the Big 4 and the banks. Nationalise (some of) of the banks, hold all auditors legally responsible for reporting crime and disband the ICAEW. And the world will be a happier and safer place.
Mervyn King: “it is hard to see why institutions whose failure cannot be contemplated should be in the private sector in the first place.”
From his paper: Banking: From Bagehot to Basel, and Back Again.
Nationalization and other forms of social governance is a censured solution begging to be re introduced into public debate. Like all solutions public ownership does sometimes throw up problems but there is a long history from which to learn from and look at what might be best practice.
It is important that socialized enterprises in whatever form do not get captured by one interest group. The introduction of multi stakeholder democracy can be a solution. Privatization, all to often with its evils, was facilitated because few of the public felt they had ownership or influence, governance was too top down. A form of economic democracy might help generate a sense of economic citizenship leading to more equitable outcomes; and don’t we need it!
The first port of call can be some of the already part nationalized banks, the fraction that is still in private hands can be hived off so little cost need be implied.
“Buying out”? OK. Provided the sellers gratefully recognise that their 18% shares have no value other than the nominal one already paid for by taxpayer’s 82% underwrite of their busted flush. We’ve paid through the nose already. Just expropriate and handle any consequences in the manner of a Courageous State. Its high time.
Rubbish! The tax payers could not afford to bail RBS out. That is why they bought in. In the case of RBS they bought in something like 58%. That raised to 82% when the government forced them to take out insurance (with the same government) but RBS could not afford it so the government took stock instead. That whole insurance issue, which was flawed and could never be used was virtually theft.
The money lent to RBS by the government was to be repaid, over five years, at an interest rate of around 12%. The government has been coining it in whilst bashing the banks to keep the prices down and hide their own short comings. Well, guess what? We are now four years down the line and that lovely gravy train is starting to come to an end. The clowns in westminster know this and are looking for a plan to replace it. Expect RBS price to sky rocket over the next 18 months and towords the election. But nationalisation will certainly not happen.
Yep
And the moon is made of cheese
Ah, doesn’t this bank like all the other majors have debts (off the books, of course) bordering on the infinite? Do we really want to take that debt on our shoulders? Or are we simply going to renege on it? What exactly do we do with it when we get it?
Run it as a bank
Nothing says it then has a government guarantee
Why not do a sort of prepack over the weekend minus some of the onerous liabiliites of course, leaving a good bank in place and a state controlled (but not a state liability) bad bank to run off?
This would allow space for new banks to move into with better business models, some state help may be needed to enable new banks to setup more quickly.
What would be the point of nationalising the bank, when owning 82% gives you effective control anyway? It would just be a waste of the cash used to buy out the remaining shareholders.
With 82% owenership the government can do what they want with the bank, and if they want it to start lending more they should be ordering the management to do so, or replacing the management with staff who will carry out their orders.
Oh, far from it
It means you don;t have to worry about legal action from them
It means you can delist
And it means you can put in place objectives other than profit
The social yield would be enormous
Which is, no doubt, why you don’t want it
Not at all. I couldn’t care less whether the bank was nationalised or not. It could be an interesting experiment to have a nationalised bank competing in the market place.
The problem is that over the crisis the countries with large public sector banking involvement, saw the public sector banks perform worse than the private sector banks. In Spain it is the Caixa controlled by local governments that made the worst loans, while in Germany it was many of landesbank that owned some of the worst sub-prime CDOs and had to take government bailouts. It is also often far too easy for politician to use public sector banks to push some particular political ideal they have rather than let them just serve the economy.
Generalisations
And in case you forgot – why not include Freddie and Fannie
You guys always seem to mention them
Even though the stats don’t support it