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State-owned Banks Need Their Prophecies Of Recovery To Be Self-fulfilling

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Leading the charge was Eric Daniels, the chief executive of Lloyds Banking Group, declaring that the worst was over.

Asking us to ignore the unprecedented £10.9bn increase in bad debts at Lloyds, he insisted that impairments had already peaked and the bank was through the worst.

Unfortunately his opposite number at RBS – Stephen Hester – had no intention of sticking to the same script. Business may be booming for RBS's investment bankers, but overall the comprehensive results announcement made for grim reading.

Hester is convinced that we are far from being through the worst. With no miracle cure, he warned, we were facing a couple of years of heaving lifting.

Perhaps we shouldn't be surprised by the contrasting views from Britain's two state-backed banks.

Having led Lloyds into its disastrous merger with HBOS, the only hope for Daniels is a sharp recovery. Without it the danger is that losses from Halifax's self-certified and buy-to-let mortgage books spiral, adding to the billions already written off the value of those disastrous investments by Bank of Scotland.

Hester, by contrast, has no need to be upbeat – the newish chief executive bears no responsibility for the dire state

of RBS, which can be laid squarely at the door of Sir Fred Goodwin & Co.

In fact, the bleaker the picture Hester paints, the more drastic the action he can take as he attempts to restructure RBS. But it hasn't just been our state-owned banks – with their very differing agendas – painting contrasting pictures over the last seven days.

We have also had contrasting pictures from the two Kings. While the Bank of England governor – Mervyn King – was downbeat, Carpet King Lord Harris said he was encouraged about the future for the first time in two years.

The stock market, meanwhile, shrugged it all off.

Closing the week up more than 100 points. As I argued last Saturday – with the momentum behind it, this rally may still have further to run.

Nevertheless, the market has certainly got ahead of itself. With unemployment set to continue rising and an annual government deficit of £200bn to deal with, it is going to be a rocky path to recovery.

When they mean drastic action I assume they are meaning big job cuts?

Two totally conflicting opinions from the bosses of our failing banks. I certainly don't see Lloyds optimism but I suppose when you've got the crap they've taken on your hoping that miracles will happen.

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Guest KingCharles1st

Yes- sack all the counter staff at the Banks- it will be the best for us when we all we have is electronic money- you need to sharpen up laddie

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What these state owned banks require is a fair and just covenant to operate within, agreed to by the taxpayer, with a strict code of conduct and reprimand to extol punishment when said covenant is broken.

Until we start calling a spade a spade, and punishing excess, incompetence, and greed, we will forever be enslaved and robbed from crackers like Fred Goodwin.

Yes, they will (have) brought down the entire system. The real scary question is, to what underhanded and inheritly dangerous extent will this plutocracy go to keep us all indebted?

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I saw Hector Sants on the Andrew Marr show.

Talking about bonuses he said if the banks keep paying OTT bonuses the FSA will make them hold more capital. Not stop the bonuses!

mmmmm.... doesn't that means they will want to screw the public more to build up the capital and do less lending to businesses? Meanwhile the casino stuff will just carry on and when it goes pear shaped the tax payer wallet will be opened again?

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