Bank Insurance

Bank insurance scheme smells like nationalisation by stealth to markets

(guardian.co.uk) - That was not meant to happen. Royal Bank of Scotland’s shares were not meant to fall by two-thirds. Lloyds, now incorporating HBOS, was not supposed to lose almost a third of its value. Barclays, shouting about how well it is doing, was not meant to decline 10%.

The financial markets were meant to see in yesterday’s government proposals a path towards the resumption of normal lending to a recession-hit economy. What we saw instead was open speculation on the chances of further nationalisation.

Three factors explain what happened. First, the presentation was awful. Gordon Brown used the occasion to decry “irresponsible” risk-taking at RBS. Forget the fact that RBS’s former chief executive, Sir Fred Goodwin, the man who oversaw that lending, was knighted under Labour.

Brown, in the opinion of many in the City, preferred to look backwards because he didn’t like what he saw ahead. Nor did it help that Stephen Hester, Goodwin’s replacement, sounded less bullish than he did a few weeks ago. RBS’s new leader spoke about big losses and big problems and the lack of a silver bullet.

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