Interviewed on the Today programme, Lord Myners, the UK's Financial Services Secretary, admitted that £62bn was indeed secretly loaned by the Bank of England to Royal Bank of Scotland and HBOS in October 2008, to enable them to keep trading. This is in addition to the £500bn bailout we did know about.
Seeing as the news was kept from the public, it is incredible that the British taxpayer – having had £1,000 each spent in their name – isn't protesting in the streets to complain.
Are there any other secret loans we don't know about?
Mervyn King, the Governor of the Bank of England, sanctioned by the Government apparently took the action believing the banks in question where within hours from collapse. His action was vindicated as there were no signs of abnormal panic in the market.
But what if it hadn't worked, or had not been enough? Where are the limits of acceptable intervention without the public's knowledge? Much smaller sums of money spent by the Government receive more scrutiny and analysis, and quite rightly if the money is being taxed from the public.
When trust in public servants is already low, and the probity of politicians is challenged almost daily, this economic revelation is truly not welcome.
I'd normally report the removal of £1,000 from my account, without my permission, to the police. Where's the difference here?
your post opens up some interesting discussion on when or if a government should secretly use taxpayers money.
I believe Mervyn King's secret intervention was justified. When looked at in the context it was made and considering public nature.
Let us consider Northern Rock. Even though the British Government announced that any money deposited in the bank would be safe and that under UK legislation any amount under £50k in any bank would be safe, people still panicked. I can remenber the queues of people going round the block to withdraw their money. Within days, customers where taking money out of safe well capitalised banks as panic spread.
I don't believe that informing the public that another bank was in trouble would have been in the public interest.
Furthermore, you state £1,000 has been spent in our name without us knowing.
While it might be hard to stomach, it is always worth remembering that in previous years banks also paid tax, as did their suppliers, that their 'overpaid' employees would also have contributed 40% of their income in tax (even their bonuses!), not to mention the shareholders who paid capital gains when they profited.
To state that all money paid to banks is from the general public is incorrect.
I also believe firmly that our money has not been 'lost' as any accountant will know, if you buy a company or get shares in exchange for cash - it has been used to buy assets, it has not been flushed down the toilet!
While you can argue that the value of assets in a volatile market may rise or fall, I firmly believe that over the medium to long term, they will pay us all back with interest.
By the way, you may be suprised to learn that I don't work for a bank, although I am a Lloyds Banking Group shareholder who has personally lost out because of Mervyn King's decision. Would any Lloyds TSB shareholder have sanctioned the takeover of HBOS if they had known the depth of their liquidity problems?
Posted by: Paul Lombardelli | 01 December 2009 at 16:43