Shamik Das

Wednesday, October 08, 2008

Darling rolls the dice

"I promise to pay the banker on demand"

ALISTAIR DARLING will today announce a sensational FIFTY BILLION POUND rescue package for the British banking system, which last year made a profit of £37 BILLION.

The move comes after another day of turmoil in the City during which Halifax Bank of Scotland (HBOS) and the Royal Bank of Scotland's share prices were in freefall, falling 42% and 39% respectively, with HBOS's new owners Lloyds TSB down 13% and Barclays down 9%.

As the day wore on, many bankers were scathing at the way the Chancellor had delayed, dithered and failed to make any decisions until late, asking why action wasn't taken at the weekend, during the 65-hour cessation of trading between Friday evening and Monday morning.

Will the real Alistair Darling please stand up? Protesters mock the Chancellor ahead of his first budget

The government plan is effectively a public private partnership, a semi-nationalisation of the City, unthinkable even a few days ago but now seen as inevitable to prevent a complete collapse of the system.

This may prove to be a short-term fix, however, with political considerations determining banks' future actions - especially in the run-up to an election; unpopular but necessary economic decisions may not be taken for fear of upsetting voters.

Though there is one thing in this present crisis for which we can all be thankful, namely that Mr Darling and the Prime Minister have acted with a bit more haste than they've displayed previously, avoiding the interminable indecision over Northern Rock last autumn.

Read the Chancellor's statement on the Treasury website
All the latest on the financial crisis


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