It’s Payback Time For Bailed Out Banks
For about a week last autumn, when the banks started getting bailed out, it looked like full-on nationalisation might actually happen. In the U.S., you had the delightful sight of Henry Paulson swallowing a mouthful of sick to announce that oh god, the government was taking on parts of a bank. Meanwhile over here, those Halifax ads with all the singing workers started to resemble those Communist propaganda films where everyone just loves to tend the countryside, after the government took on 40% of HBOS and Lloyds.
How weird that all seems now, as the banking sector divorces itself from government and cruises back to the single life. First there was Goldman stating its intentions, then JP Morgan, and yesterday we had Lloyds paying off the Treasury to the tune of £2.6bn. And now today in the Wall Street Journal is the news that the U.S. Treasury expects the initial payback of bailout funds to be in the $50bn ballpark, twice as much as they originally expected for this point in time.
Of course, no-one’s really healthy just yet, and Lloyds in particular still has a long way to go. As well as the insurance premiums it must keep paying to the government to have its assets backed by the Treasury, the government still owns 43.4% of the bank. In the recent share offering, Lloyds has used the money gained from private investors buying new common shares to pay off the preference shares that the government held, but as the government also bought £1.7bn-worth of shares in that offering, the £2.6bn pay-off merely prevented the government’s stake in the bank from reaching above 60%. Lloyds should be disappointed to see that takeup of the common shares by private investors was only 76%, showing that faith in the bank hasn’t fully bounced back. They also announced 1500 more job cuts today as they heavily peg back the Cheltenham and Gloucester brand.
It’s also a bit worrying for what we previously looked at today, compensation. Many banks want to escape the restrictions on pay that are a condition of bailout money, and there’s a worry that there hasn’t been enough time to legally implement a new style of compensation before the banks escape back to the world of risky bonuses and lavishly refurbished offices.
But while the government wasn’t able to reap that much interest from the preference shares, considering they only had them for a few months, they did still get £250m. Maybe the best case scenario, of some banks failing while the others make the government lots of money while absorbing assets and creating a leaner banking market, will happen yet.
Posted by Ben Beaumont-Thomas in Hot Money | June 9, 2009 12:42PM |
June 9th, 2009 at 8:00 pm
i dont think any bank should pay any money back to the government , as there is no justices, its tax payers dosh , so there for indiual should deside to pardon the hard hit bank as the funds were from the tax payers, were every one from the great britain nations funds
so no money should be paid by the banks, if you dont help the high street banks to day then , how do you expect the banks to help you , when you need them , mateees 07886655668 my no
June 9th, 2009 at 8:09 pm
we should make all english banks more stronger
and not making them feal like the victims8395a9
once again i would love to see all banks pardoned with there deths, so now perhaps , they in turn may have confidence in helping us
my no 07 88 66 55 66 8 mr paul adam
October 1st, 2009 at 11:57 am
ITS ALL SO GOOD TO SEE DIFFERENT BANKS IN ACTION EVEN THOUGH EACH OTHERS DO OWN THEM, MY FEALING TOWARDS BANKS ARE SIMPLER THAT THEY ALL NEED TO CLIMB A MILE TO KEEP HOLD OF THERE CUSTOMERS ALL THERE PRODUCTS SHOULD BE Individual HENCE EACH PRODUCT SHOULD CARRY GENIUNE DEALS FOR ALL OFF US
THE GOVERNMENT SHOULD NOW GIVE TO ALL BANKS ANOTHER STIMULATE PACKAGE FOR EXAMPLE GIVE ANOTHER 3 BILLION EACH TO EVERY BANKS AND IN TURN SHOULD GIVE THEM TOTAL PRIVACY TO LEND TO THERE CUSTOMERS, AS THE GOVERNMENT RECIEVES ENOUGH REVENUE THROUGH ALL PROFORMING BANKS AS IT IS
PAUL ADAL
MOBIL 07886655668