Brown the banker's big gamble
Updated on 13 October 2008
It's a £37bn bailout of RBS, HBOS and Lloyds TSB, but will it pay off?
It's all about restoring stability, confidence and the flow of cash and credit back through the economy.
So, in return for taxpayers cash RBS, HBOS and Lloyds TSB have promised to return their mortgage and small business lending to last year's levels - far more than they're approving today.
Faisal Islam on implications of Brown's bailout
But despite the rescue package - shares in the three banks have fallen sharply:
- RBS down 8.3 per cent
- HBOS down 27 per cent
- Lloyds TSB down 14 per cent
Barclays, which says it doesn't need public money, ended the day up 3.7 per cent.
The political gamble
We the taxpayers now own a majority stake in three of our leading financial institutions - a stake worth some £37bn.
Announcing the lifeline, Gordon Brown said the government must be
"the rock of stability on which the British people can depend."
Gary Gibbon on the deal
The government will take a £20bn shareholding in Royal Bank of Scotland - up to 63 per cent of its shares.
Another £17bn will be invested in the bank formed by the merger of Lloyds TSB with HBOS - bringing the public's stake to 41 per cent.
Barclays said it would raise £6.5 billion without state assistance.
In exchange for the rescue deal, the government has told senior board members of the banks to resign, no cash bonuses will be paid and share dividends are to be suspended until the taxpayers have got their money back.
