We have led the world today with a proposal to restructure our banking system. We are taking the steps that I believe that other countries will take in the future.
It’s really beyond me to know whether this plan will work. But the reaction to it seems broadly, if cautiously, positive.
Will Hutton:
Britain has produced a well thought-through, bold and comprehensive plan to put its financial system on a sounder footing - well ahead of any other government. Messrs Brown and Darling for once deserve some congratulation. …
The proposed recapitalisation of the eight banks is vital - and it is conspicuous that it goes well beyond what any other government has contemplated. It will leave British banks as the most solidly capitalised in the world…
The most eye-catching, eye-popping element of all is the up to £250bn of government guarantees for lending in the interbank market. This is targeted at what has emerged as the heartland of the problem - the de facto bank run, in which the big banks had completely lost confidence and stopped lending to each other. The guarantee is a double whammy. It will allow them to lend to one another again without fear, and to use guaranteed loans to finance maturing asset-backed securities - and on a huge scale.
Anatole Kaletsky:
So well designed was Mr Darling's package that Italy, Spain, Sweden and Denmark are expected to announce similar measures. Whether the plan can avert a serious recession is doubtful, especially with the Bank of England offering only tepid support with a half-point interest-rate cut, but at least Mr Darling has put in place the preconditions for some kind of stabilisation.
…deposits in the big British banks in Mr Darling's recapitalisation programme are now 100 per cent guaranteed. Once this is recognised, conditions in the British money markets should return to normal, banks should resume lending to one another and the £200 billion credit line will probably never be drawn.
…
While Mr Paulson seemed to take personal delight in wiping out the shareholders of any institution that dared to ask for his support, the British Treasury has realised that these scorched-earth tactics were disastrous. For shareholders in British banks, an offer of government help should not be the kiss of death that it has become in the US.
…The upshot… is that the British banking system now has a decent chance of stabilising.
Jeremy Warner:
the UK authorities have belatedly got their response to the banking crisis broadly right with yesterday's wide-ranging package of measures.
…
It looks like a massive gamble with taxpayers' money, but unless the whole banking system is about to go down the swanee, then the Government ought to get all its money back and some. …
This all should have been done six months ago. Hindsight is a wonderful thing, but things would all look a lot better today if it had.
…
I can't answer the question of whether it will work.
Hamish McRae:
The wooden spoon clearly goes to Iceland but the US has done none-too-well either. Continental European governments have done rather better with their bank rescues and this latest British plan makes a great deal of sense because it goes to the heart of the problem. It will give the banks access to whatever capital they need to keep functioning. You cannot do this well for that is not in the nature of the beast, but the British authorities are doing it better than most.
And, a bit less parochially than a British columnist who might be drawn unwittingly to partriotism, here’s what the Wall Street Journal Europe reckons:
The biggest step forward was taken yesterday in London. The U.K. government said it would inject up to £50 billion into eight major banks and others that may qualify. This is a much-needed recognition that a capital hole and the resulting lack of trust among bankers lie at the heart of the global financial rout.
… What we've seen over the past several weeks is a global run of fear. The extraordinary losses from mortgage instruments combined with banking failures have replaced trust with fear. Banks need capital to absorb the losses, and private capital won't fill that gap at this point without the life preserver of public capital as well.
With that in mind, the measures announced by the U.K. represent intellectual progress and offer the most sensible plan to date. Unlike U.S. Treasury Secretary Hank Paulson's plan of buying up toxic assets to create a market for them, the British approach addresses the root of the crisis.
The government plans to inject up to £50 billion in return for preferred shares -- giving taxpayers some upside once the panic passes. London will further guarantee £250 billion in new debt issuance for those banks that participate in the recapitalization plan in order to secure their short- and medium-term funding. And the government provided additional liquidity of at least £200 billion through the central bank's Special Liquidity Scheme.
…
Let's hope London's plan sets a precedent.
Me, I’m just hoping the sky doesn’t fall in. If not, then credit (crunchy or otherwise) will also be due to Sweden, whose 1992 financial bailout in many respects is the model for this one.
No comments:
Post a Comment