Taxpayers Set To Pocket £27Bn From Bailing Out Britain's Banks

[interestrateripoff]

http://www.independent.co.uk/news/business/news/taxpayers-set-to-pocket-16327bn-from-bailing-out-britains-banks-2066270.html

The taxpayer stands to make up to £27bn from the emergency bailout of Britain's banks when the Government's stakes in Lloyds Banking Group and Royal Bank of Scotland (RBS) are sold, estimates suggest.

The public purse can expect to benefit from £19bn of share price gains, another £2bn in fees for guaranteeing bank bonds, plus £5bn in fees for the Asset Protection Scheme (APS) and £1bn in loan fees, according to calculations by the trade magazine The Banker.

Britain's banks revealed booming half-year financial results last month, helping to further boost their already climbing share prices. Lloyds, which is 41 per cent owned by the state, saw its profits rocket to £1.6bn from a £4bn loss the year before, while the 80 per cent-government owned RBS surged from a £3.4bn loss to a £1.4bn profit.

The return on taxpayers' equity stakes will depend on when the Coalition chooses to sell, but The Banker's estimate is based on a general stock market increase in line with nominal economic growth. "Even if you take a fairly conservative view of the share prices, the outlook is strong," said the editor Brian Caplen. "Every time Lloyds's share price goes up by 10p, the Government makes £2.76bn."

The Government also stands to cash in on less tangible assistance. The previous Labour administration offered four types of assistance to lenders in crisis: loans, share purchases, borrowing guarantees and the APS – or "insurance" against toxic debts. Together, the measures would have cost the Treasury £850bn but most were not needed. "Only" about £130bn was taken up in the form of equity and loans, yet the Government still stands to collect fees, according to Mr Caplen.

For example, Lloyds paid the Government £2.5bn in fees for the APS but quickly left the scheme after a successful capital raising in November. RBS is still paying APS fees although it is unlikely to need the fund's help. Mr Caplen added: "What the Government has done is rather clever. On every step of the way in the bailout and restructuring, it has charged the banks hefty fees for the various commitments and services provided."

Wow more paper profit, until these shares are sold we've made no money. When they are put back on the market we will then find out what the real market price is.

[Minos]

Would this be profit conjured out of QE? Not really profit then.

[Bloo Loo]

http://www.independe...ks-2066270.html

Wow more paper profit, until these shares are sold we've made no money. When they are put back on the market we will then find out what the real market price is.

nonsense...make a share backed security and sell them to the people...as "Austerity Bonds".

Hey...I could be a banker...Im beginning to think like one.

[teef]

Does anybody seriously believe that we'll make a profit out of bailing out Lloyds or RBS? Sounds like they've got Enron's old accountants in - Arthur Anderson. Without Government backing the Lloyds share price would collapse overnight - actually it wouldn't take that long!

[Realistbear]

Funny, I haven't received my cheque yet. Perhaps its in the post and coming by 2nd class which might explain the delay?

[leicestersq]

http://www.independent.co.uk/news/business/news/taxpayers-set-to-pocket-16327bn-from-bailing-out-britains-banks-2066270.html

Wow more paper profit, until these shares are sold we've made no money. When they are put back on the market we will then find out what the real market price is.

Actually, it is a real profit, the shares are openly traded on the market.

It may not be what us doomsters like to read, but you have to accept the judgement of the market. The taxpayer has, at this moment, made a gain.

It does have a side benefit of course. We get lots of posters on here saying that we should allow social security fraud to continue as otherwise we would be hurting the poorest and instead we should do something about the bankers. They cant use that argument for the time being, not withstanding the fact that social security fraudsters arent actually the poorest of people anyway. It helps clear the way for social security reform by clearing away such spurious arguments, something that is desperately needed.

On a visit to East Midlands airport recently, I walked along a road parallel to the runway. Lots of East Europeans, on their way to presumably low paying jobs. Yet we have 3 million out of work??? The reason we have so many out of work is because people are defrauding and gaming the system, not because there arent enough jobs to do. Our economy is supply restrained, people dont work because the benefits system is too lucrative. Thanks to Eastern Europe, we can see that this is a huge problem.

The test for the reforms of Ian Duncan Smith, is to build a system where you are significantly better off earning the NMW, than you are out of work. That includes all benefits including housing. As I have said elsewhere, an important plank of such a policy is to remove council housing as a long term subsidy, and the best way to do that is to sell it all off to the highest bidder, and relieve councils of their responsibility to house people. Council housing is one huge pile of abuse, I bet loads of people have mates on the inside that have allowed them to get council housing ahead of their need, not to mention that if your needs change, you get to keep your pile, the whole thing is an utter mess, and needs to be dispensed with. Instead, we need a single benefit for all things, including your housing, and then you have to fend for yourself with the private sector.

Put a few incentives in place, keep demand high in the economy, hey, even create a few massive work schemes if need be, and get our nation back to work.

[interestrateripoff]

Actually, it is a real profit, the shares are openly traded on the market.

It may not be what us doomsters like to read, but you have to accept the judgement of the market. The taxpayer has, at this moment, made a gain.

I would disagree RBS only has what about 16% of total shares trading at present? LHBoS has what around 50% of shares trading. Until the market is flooded with all the govt shares I would argue it's a real possibility that the current share price is artificially high. Although it could be that when the millions of govt shares come flooding back onto the market traders will happily pay today's price for them.

[DisQ]

Does anybody seriously believe that we'll make a profit out of bailing out Lloyds or RBS? Sounds like they've got Enron's old accountants in - Arthur Anderson. Without Government backing the Lloyds share price would collapse overnight - actually it wouldn't take that long!

get ready for more QE coz its been so good the first time see public are making profits so more we print & dish out & more profit we'll make, why not....

ofcourse it'll followed by hyperinflation but thats too complicated for economic experts lets just sell people whatever bankster order them. :angry:

[leicestersq]

I would disagree RBS only has what about 16% of total shares trading at present? LHBoS has what around 50% of shares trading. Until the market is flooded with all the govt shares I would argue it's a real possibility that the current share price is artificially high. Although it could be that when the millions of govt shares come flooding back onto the market traders will happily pay today's price for them.

Tis difficult to argue against Mr Market. The market knows full well that at some point the government will start selling shares in these banks. The price of the shares will therefore take into account this future sell off already.

The market doesnt even need to know when it will happen, only that it will happen.

The market will gobble up any shares offered close to the market price, perhaps just a small discount will be needed to get them away, but in theory they could start selling them off now, indeed, I dont see why they dont start offloading small amounts of them now.

[Confounded]

Actually, it is a real profit, the shares are openly traded on the market.

It may not be what us doomsters like to read, but you have to accept the judgement of the market. The taxpayer has, at this moment, made a gain.

Do you really think we can sell 90% of the RBS shares back into the "market"? The fundamentals have deteriorated (despite the government price fixing of the "assets" they own) so on that bases there is no reason to think the government could sell for a profit.

I see scenarios where they will have to buy all the shares in these banks as this next phase of the crisis deepens.

In the same way the countries net worth of houses is £3 trillion all home owners can not exit the trade at those valuations. We are just entering the phase where Joe public will realise this.

[Confounded]

Tis difficult to argue against Mr Market. The market knows full well that at some point the government will start selling shares in these banks. The price of the shares will therefore take into account this future sell off already.

The market doesnt even need to know when it will happen, only that it will happen.

The market will gobble up any shares offered close to the market price, perhaps just a small discount will be needed to get them away, but in theory they could start selling them off now, indeed, I dont see why they dont start offloading small amounts of them now.

[needsleep]

It could be between £50-100bn apparently. And that is a problem for the coalition. They don't want to be seen to be benefitting from this but have always known that income streams related to the bailouts will come on line. Is there a risk they could downplay this and sell at low prices that will make Brown's gold fire sale look good.

[Bloo Loo]

It could be between £50-100bn apparently. And that is a problem for the coalition. They don't want to be seen to be benefitting from this but have always known that income streams related to the bailouts will come on line. Is there a risk they could downplay this and sell at low prices that will make Brown's gold fire sale look good.

what..sell the family silver?

whoda thunkit?

[needsleep]

what..sell the family silver?

Haha yeah. Tories sell everything else off cheap to their mates. Why not the nationalised banks?

It will of course "be the best thing for the country"

[leicestersq]

chris c-t,

are you sure that this report doesnt take into account MBS and the APS? I thought that it did.

And I dont recall that the government did anything with these bonds. The bank of England lent money against them, but the banks have to repay the money on those loans, and they are on the hook if they do not repay. Yet despite this, there is equity in the shares, so they must have been solvent enough to repay the loans, which means no loss for the taxpayer.

Now I do accept that if the housing market Titanics from here, there will be huge losses for the taxpayer, but at the moment, there appear to be some gains.

[Cogs]

Haha yeah. Tories sell everything else off cheap to their mates. Why not the nationalised banks?

It will of course "be the best thing for the country"

I wonder what the wheeze will be this time? "Privatising" the treasury department that administers public ownership of the shares is my guess. We'll lose 27 billion but save 500k. The Age Of Austerity wins again.

[mdman]

This is a crude calculation based on what share price the Government injected capital into these zombies.

It does not account for the NPV of the liquidity and loan guarantess, nor the cost to the taxpayer of QE (which was a straightforward arb opportunity for banks) not other support, nor the manipulation of shadow housing inventory, and Enron accounting techniques endemic in these zombies

Frankly, you can opine about benefit fraudsters on another thread leicestersq. This one's reserved for banking fraudsters.

[THE L4 KID]

Sorry to be dense here, I know I'm not a financial expert but if I made an investment of £850 (£850 billion being the cost of bailing the banks out) and after 7 years I get £30 back (£30 billion being the sum they're talking about recouping from the banks), meanwhile the person I borrowed the £850 from is getting ready to kick my front door in and repo all my stuff and I can't afford to eat - how is that optimistic news?

Especially, as most on here seem to agree, the return is a shakey one at the moment with no guarantee it will carry on as it is.

Am I missing something?

Simple replies much appreciated!

[Milton]

I would think when the gov sells its shares in these banks, they would be sold in the form of bonds, but only when the banks start paying dividends again, AKA 2012 onwards.

At that stage, the bonds would be bought via fund managers, Landsdowne etc, for Sipps and the like. [And there will be incentives added by the gov to make them more attractive.]

It would also make sense for the banks to reduce the amount of shares in circulation, to counter the dilution, which is very possible.

Point being they still have lots of options available to them.

If you look at the recent european stress tests, Basel III regs, [the group of unelected bankers in Switzerland who can apparently act omnipotently] on Tier one Capital ratio were excluded.

There will never be a real reckoning of the true Mark to Market value of HBOs/Lloyds mortgage book for instance. [until we have had all our money stolen to pay for this toxic mortgage debt, or other peoples houses]

The dice are loaded.

Thieves Liars Embezzlers Gangsters Facists: The New World Order. [Or Nu-Labour for short]

Edited August 31, 2010 by Dan1

[@contradevian]

Tis difficult to argue against Mr Market. The market knows full well that at some point the government will start selling shares in these banks. The price of the shares will therefore take into account this future sell off already.

The market doesnt even need to know when it will happen, only that it will happen.

The market will gobble up any shares offered close to the market price, perhaps just a small discount will be needed to get them away, but in theory they could start selling them off now, indeed, I dont see why they dont start offloading small amounts of them now.

Only making a profit by virtue that Merv is holding on behalf a little blag bag labelled "poo" containing all of RBS's toxic loans and banks continue to rip off their customers! So yes, RBS's share price might be improving but its bad investments have of course been socialized. I dare say it will all be dressed up as profit for the sheeple and the high frequency trading scams, interbank money go round, and bonuses will continue as they are worth it.

Edited August 31, 2010 by Sir John Steed

[needsleep]

Sorry to be dense here, I know I'm not a financial expert but if I made an investment of £850 (£850 billion being the cost of bailing the banks out) and after 7 years I get £30 back (£30 billion being the sum they're talking about recouping from the banks), meanwhile the person I borrowed the £850 from is getting ready to kick my front door in and repo all my stuff and I can't afford to eat - how is that optimistic news?

Especially, as most on here seem to agree, the return is a shakey one at the moment with no guarantee it will carry on as it is.

Am I missing something?

Simple replies much appreciated!

My understanding is it all has to be gradually paid back. Some payments start in March 2011. Expect much squealing from the banks around that time. Osbourne will have played right into their hands by killing off any recovery by then anyway.

Edited August 31, 2010 by needsleep

[THE L4 KID]

My understanding is it all has to be gradually paid back. Some payments start in March 2011. Expect much squealing from the banks around that time. Osbourne will have played right into their hands by killing off any recovery by then anyway.

So in short we're still on for a train wreck, which is my understanding also, but I can't understand why bbc were reporting this as good news this morning....

[Goat]

It could be between £50-100bn apparently. And that is a problem for the coalition. They don't want to be seen to be benefitting from this but have always known that income streams related to the bailouts will come on line. Is there a risk they could downplay this and sell at low prices that will make Brown's gold fire sale look good.

Could be an electoral dream for the government if it pans out ok.

If the profit came out at the top end (£100 bn) you could have a nice privatisation in 2014 realising a nice profit of £50bn for the government with another £50bn straight into the hands of 10m private voters investors.

Even if the profit was only £50bn split the same way that's still £2,500 each in the run up to the 2015 election.

[newbie]

If the profit is £27Bn then about £13.5Bn should be paid out as bonuses to the bankers who advised the government to do this. They made it happen and it's only fair that they get remunerated for their money making talent.

[Georgia O'Keeffe]

Tis difficult to argue against Mr Market. The market knows full well that at some point the government will start selling shares in these banks. The price of the shares will therefore take into account this future sell off already.

The market doesnt even need to know when it will happen, only that it will happen.

The market will gobble up any shares offered close to the market price, perhaps just a small discount will be needed to get them away, but in theory they could start selling them off now, indeed, I dont see why they dont start offloading small amounts of them now.

Stay of the smack, it does you no good whatsoever