The reaction to Barclays has told us a lot about the agenda of Vince Cable and some Labour figures. They clearly want the taxpayer to end up owning more banks. Their anger that Barclays have paid more to keep their freedom, tells us the UK taxpayer is getting a rotten deal from the proposed share purchses the government wishes to make. The way Vince Cable was allowed so much BBC airtime to front run nationalisation, without any Labour slap downs, tells us it was a policy they favoured. He was a useful front man to avoid accusations that Old Labour had been rehabilitated. Meanwhile, all sensible proposals to avoid state owned banks were studiously kept off the airwaves to avoid complicating the argument.
It all worked so well. The Regulator demanded more capital at a time when it was difficult to raise it quickly. Someone leaked the talks to the media, driving the share prices of the affected banks down, making it even more difficult to raise the money from the market. Then the banks were presented with a take or take it offer which three accepted. The government meanwhile was busy nationalising the assets of Bradford and Bingley, but never told the media directly that that meant taxpayers borrowing £18 billion to send to Santander to take on the deposits.
Taxpayers will rue the days that the government was so liberal with their money in the banking sector. All these banks had a future without state equity, if the Bank of England did its job as lender of last resort, and if the Regulator worked quietly behind the scenes on a timetable for strengthening their capital. Assurances that the government stood behind the weaker banks was a good idea. Loans were helpful. There was no need to add state equity, which will prove to be a bad idea for taxpayers. Just look at the firest half results for Northern Rock – large losses – and get ready for the next results from state banks. The treat is on you.