Tuesday, Feb 24, 2009
Lloyds gets different kind of bailout in exchange for lending promises
Telegraph: Lloyds in lending deal with Alistair Darling
Alistair Darling is set to scrap the £480m annual interest bill charged to Lloyds Banking Group if the bank promises to make billions of pounds in extra mortgages and loans available to customers, the Financial Times has reported. The chancellor is prepared to convert £4bn of government preference shares – which carry a 12pc per coupon – to ease financial pressures on Lloyds and as part of a wider deal to boost lending in the economy, the report said, citiing unnamed sources.
Posted by mountain goat @ 09:22 AM (795 views) Add Comment
21 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. sneaker said...
The insane innumeracy of these people is beyond me.
YOU MEAN £480m WILL MAKE DIFFERENCE?
2. Crunchy said...
Converting printed money to real money plus- interest.
The new destructive boom industry.
Debt/death based economy to continue.
Cheating with money now is really becoming a joke.
I get the feeling that we will not even know how much these paper promises are in circulation.
3. mark said...
isnt this illegal giving state owned banks the upper hand....
4. jackas said...
Wooo Hoooo FREE MONEY Yeah!!!
Excellent. Nice one Badger. I'm sure you've thought the long term implications of this through and you're not just myopically looking towards the next election. Nice one.
5. stillthinking said...
This plan is appalling. The whole problem is defaults. The reason why the banks don't want to lend at the moment is because of a higher risk of defaults. Darling seems to be proposing a all-or-nothing gambit, by taking the risk and attendant losses onto the public purse, he proposes to unleash a tsunami of lending sufficient to flood the economy, and in so doing avoiding defaults. Which is a step the banks cannot make on their own because, although irresponsible lending assists all banks, the individual bank would expose themselves to needless losses.
So the problems with this plan are, first off, the details, how can the banks suddenly increase provision of credit when demand for credit has collapsed? This is kind of the same problem as the banks individual versus communal actions. If, I, for example, went down to the bank today and borrowed 50K to blow on consumer goods, then everybody would be very happy. All that money would flow into different bank accounts. For me, a huge debt, for everyone, a wad of cash.
So, can he pump a demanding UK consumer with credit? Perhaps not.
Also, the damage of our "boom" was the mal-investments due to easy money. Too many restaurants, too much new office space, the -wrong- kind of companies in other words. So our boom is going to benefit a host of unsustainable enterprises. On a similar theme, we buy a lot of stuff from -abroad-, so any credit based stimulus plan in the UK is ultimately going to be more beneficial to China, the Euro and other countries.
The reason why our economy is in such a terrible situation, is because our borrowing over the last decade, has not been matched by a commensurate increase in GDP. Worse than that, we have expanded the state to socialist regime size. Nobody with any brains at all is going to rush down to the banks, so all that will happen is more irresponsible loans are made, the cost of the defaults will go up, and the pound will weaken further.
His desperation for inflation makes no distinction between excessive demand causing price rises, and price rises from a loss of faith in the currency. He cannot trigger "healthy" inflation during rising global unemployment and global excess capacity.
6. a saver said...
NO NO NO, is there nothing these desperadoes won't stoop to?
How many other people apart from me want the government to ensure that banks keep our money safe, not keep the house price bubble inflated via imprudent lending at taxpayer risk and push government debt into the stratosphere in the process? Surely even the dimmest sheeple can see through a government that say no more 100% loans and then force banks to lend 90% when most of them won't go above 75% because they know it's stupid. Should we hope that it all falls through and AD/GB have to go to the IMF for a loan?
"Mr Darling is set to announce this week that both banks have applied to use a government “asset protection scheme”, under which the taxpayer will insure for a fee up to £500bn of assets against heavy losses." I bet they have, probably can't believe their luck!
7. jack c said...
This is all very interesting because I know several junior and senior employees within Lloyds (some employed at area director level) and they have informed me first hand that they dont know what the Government are going on about regarding lending because they are reportedly lending more money now than ever before.
In addition to the above HBOS dominated the residential mtge market with a share of approx 25% if you then add in the lending from LTSB to the newly formed/merged group you get a market share of approx 35% - now picture the risk involved in what is and will (IMO) continue to be a falling residential property market.
8. mountain goat said...
I heard Gordon-sold the gold-Brown talking about this new bank lending yesterday on TV. "This is really going to benefit first-time buyers" he said. "This group have been struggling because of the high deposits being demanded".
So not just more lending, but more reckless lending into the teeth of the collapsing housing Ponzi scheme. "It will ruin you financially but it's for the good of the country..."
9. matt_the_hat said...
7. jack c ... you might want to inform your banking friends that it is not national bank lending that is the problem it is the non-national banks that have retreated back to their own shores that has left a 800bn black hole... but obviously they know that being so senior
10. happy mondays said...
Surely this will not make any difference to a falling house price market, if people fear there jobs may go, or things are financially tight, or there house will be in negative equity as soon as they buy (get a loan) Do the government and banks think we are that dumb or maybe we are? to get ourselves into so much debt even with a 20% fall in prices..Which is no where near enough for a Joe average to afford! Some people are telling me that prices are on the up, maybe just there dream, as in a world recession with everything around us contracting in, how can house prices be indifferent? So it does not matter about banks getting bail outs to start lending because only an idiot would be so gullible to buy! Or am i the idiot, and missing something here...Viva la revolution
11. jack c said...
@matt_the_hat Tuesday, February 24, 2009 11:19AM
They are aware of the problems and in fairness Lloyds in my experience ran a tighter ship than most of its competitors - this is now irrelevant however as LTSB is mixed in with the toxic HBOS. The people who simply dont appear to get it are the majority of MP's who are attempting to keep the house party going at all costs.
12. 51ck-6-51x said...
matt_the_hatt - indeed, it's the the shadow banking system that is where the credit has run dry.
happy mondays - it's at the margins where the difference that has an effect occurs. People who would borrow if they could do exist and this move is one that adds a little straw to the camels back, encouraging lending just a bit has knock on effects, and removing some tax burden from the lender means they can afford to be more competitive. If people were realistic then why were they borrowing what was "no where near enough for a Joe average to afford" before the bust? - some people think we are at the bottom right now, I may not agree and you may not, but it's a market and regulation, subsidies and tax incentives will have an effect, and if these people happen to be correct then buying now would be correct - if they also think we are going to soon be in an inflationary environment and they currently are cash rich (say they have a 40% deposit), they would be making a doubly good decision.
13. matt_the_hat said...
12. 51ck-6-51x ... The only question I think 'they' would also have to answer would be - do I trust the government after the next election to allow me enough of my salary to live on after they have decided the tax levels to pay off this debt!
Personally a better hedge against inflation I feel is gold, and you can take it with you and vote on the governments performance by using your feet. There are benefits to an open Europe!
14. matt_the_hat said...
11. jack c ... "n fairness Lloyds in my experience ran a tighter ship than most of its competitors"
Then with the old bonus structure (one-way-bet) and the systematic risk, you can only conclude that Loyds does not always recruit the brightest - the proof is the purchase of HBOS
BTW - I'm not making any criticisms of your friends, no doubt they spend more at lunchtime on Fridays than I will earn this year
15. 51ck-6-51x said...
matt_the_hatt -
I think gold is a good hedge against impending inflation, but not a great hedge against inflation itself. There are indeed benefits to freedom!
16. jack c said...
@matt_the_hat -
the "merger" was engineered at the very highest levels and seems to have backfired - but thats what you get (IMO) with most Government intervention
The people I'm talking about are not my friends simply employees who I deal with on a professional basis. The average salary at Lloyds is approximately 17k
17. matt_the_hat said...
15. 51ck-6-51x .... I think gold is a good hedge against impending inflation, but not a great hedge against inflation itself.
Please could you clarify that statement. Are you in simple terms saying that the gold price fluctuates on money supply changes, but does not necessarily track price changes?
18. 51ck-6-51x said...
matt_the_hatt -
I don't think I am talking about money supply changes - I don't think inflation is simply a product of the money supply, as some seem to believe.
I think that gold will increase in price as demand increases, which will be the case if people fear the risk of a financial crisis (or if people generally believe gold will continue up, of course [bubble]) - however as inflation rises there are better opportunities than gold which will encourage, if anything, selling, not buying of gold. Historically the correlation of gold and inflation has been fairly weak, but the correlation with market fear has been high. I'll see if I can find some article or analysis on the web...
19. 51ck-6-51x said...
matt_the_hat -
I don't agree with the conclusion of just using TIPS, but: SeekingAlpha article.
Even thinking in terms of just money supply, Mish agrees.
Investopedia has aired the views of Mark Whistler.
ThePoliticsOfDebt has a short article too.
20. mountain goat said...
51ck-6-51x - yes I think gold is a rubbish hedge against inflation in times of stability. Gold is a hedge against crisis, be that hyper-inflation or deflation, which are essentially just the fallout from monetary policy decisions during a crisis.
I sold some gold and silver today, I am expecting a pull-back to $900-850 levels before the proper mania bubble. Just felt they were looking very toppy the last few days. Also made me a bit nervous seeing gold articles on the FT front page!
21. jack c said...
Matt, Mountain & 666 - on the Gold front John Chatfield Roberts has recentlly lifted the ETF physical Gold holding to around 10% from 5% in the Jupiter Merlin fund portfolios (over 1 billion under management) - it's definitely one to watch