The British government has announced it is partially nationalizing
three British banks with up to $63 billion of taxpayers' money. Prime
Minister Gordon Brown promises the unprecedented bail-out is an
important step in thawing out the frozen money markets. For VOA, Tom
Rivers in London reports.
In a bold move to get money moving again, the British government will inject $34 billion-worth of capital into the Royal Bank of Scotland and just less than $30 billion into Lloyds-TSB and HBOS, the two institutions currently renegotiating merger terms.
The bottom line is, this huge infusion of money means effectively that around 60 percent of RBS and 40 percent of a merged Lloyds-TSB HBOS will be taxpayer-owned here.
Prime Minister Gordon Brown says to stand by and do nothing was never an option.
"In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about," he said. "For savers, for small businesses and for homeowners, we must in an uncertain and unstable world be the rock of stability upon which British people can depend."
The money will come with strings attached. The top executives of RBS and HBOS are leaving their positions. And the remaining banks have been told to revert back to the mortgage and small-business lending levels last seen in 2007, which is much higher than is currently being offered.
British Treasury Secretary Alistair Darling says Britain alone will not be able to fix the global credit problem, but he says others now appear willing to follow suit.
"It is striking, that in my conversations with my counterparts at the G7 and the IMF in Washington over the weekend and with the prime minister's discussions with his colleagues in France yesterday that right across the world governments are now ready to do whatever it takes, whatever is necessary to stabilize and strengthen the banking system and to help us deal with the uncertainly and turbulence," said Darling.
Prime Minister Brown echoed those sentiments and for the first time in weeks, his comments at a news conference were tinged with a tone of optimism.
"I think you will find that in the rest of Europe over the next few days, exactly the same thing is going to happen and I think that you will find there are some discussions taking place in America around the Paulson plan about the use of the 700 billion that has been approved by [the] Senate and Congress for purposes that we are talking about this morning. So, this is perhaps the first government to do what I believe a large number of governments are going to do over the next few days and it is about restoring trust and confidence in the banking system which is absolutely essential for a successful banking system to flourish."
At first reading, the European markets liked the move, trading firmly higher.