It could cost another £100 billion – and we could lose £40 billion of it.

Oh no not again! That must be the lay person’s reaction to this latest extraordinarily complicated bailout whose details – including how the insurance scheme will work without a cap – will not be fully available until well into next month. So far, only Will Hutton en passant is prepared to guess openly at the final figure – £100 billion and everyone’s picking it up. BTW, where did the first £37 billion go to since last October?. That powerful analyst Vince Cable, once Shell’s chief economist, now Lib Dem Treasury spokesman and the closest Westminster has to offer as an objective expert is mystified. Quotes from Guardian and BBC Radio 4’s Word At One interviews

‘I don’t know where the first £37bn actually went. The figures have never been published and seem to have been used to prop up the balance sheets which is not only what it was supposed to be there for. That’s why I reluctant to support more debt. “Buying up toxic debt is a thoroughly bad idea which is not a priority”. The taxpayers could lose another £40 billion… RBS will have to be directed to the problem of new lending.”

The BBC ‘s Robert Peston

attempts the explanation of an extremely complex package which is still full of questions and holes. He draws a clear distinction between now and last October’s bailout…

What’s been announced by the Treasury and Bank of England this morning is not a survival plan for the banking system: we’ve already had that. If it’s anything, it’s a survival plan for the British economy…

All of this represents the last chance saloon for Treasury initiatives to revive lending that fall short of direct government control of lending by banks…. If credit doesn’t become more readily available, the recession will deepen – and one consequence will be that bank losses will escalate even beyond the current alarming forecasts. At that point, a new rescue plan for the banks would have to be launched. And there would be full-scale nationalisation of our biggest banks.

This time Gordon Brown is Mr Angry. , especially over RBS, But has he any right to be ? Brown oversold the first bank rescue, says the FT’s Banking Editor. And even if it works, this latest bailout will not be enough to replace all the international credit which has disappeared from the UK market. Last throw – total nationalisation – and then what? Cross your fingers.

BTW, a pretty muted Conservative response so far.

George Osborne, the Tory shadow chancellor, said the Government had no choice but to help the banks again because the October package had “failed.”
He said: “I don’t like the idea but it’s a question of what options there are.”

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