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What should the government do?

I was pleased to be invited to submit some articles to the Parliamentary Brief over the past few months.  At the very least I hope that it gives us some conduit into the corridors of Whitehall.

The trouble is that it's hard to write something.  After all it is far easier to critique the government's actions and not be constructive.  So the focus of my brief was to be constructive and, not being too sure what to write about, it seems to have narrowed into a rallying cry for the government to provide shareholder guarantees for those with holdings in our banks.

Originally, this was to provide some incentives to buy into future bank rights issues but this would not work today, as illustrated by HSBC's $17 billion rights issue this week.  HSBC discounted the share value by almost a half, valuing shares at £2.54p against £4.91p at close on Friday.  If the strongest banks are that uncertain about getting investors, what the hell are RBS and Lloyds Banking Group going to do if they need more capital?

And this was the question I posed in my latest article, e.g. if the Government's insurance scheme doesn't turn around this situation, what do they do next?

The article's summary gives away the tone of the thesis:

“I was recently interviewed about the banking system, with the opening
question: ‘you’ve been critical of the government’s handling of the
crisis. Why?’ I responded that it was due to a lack of an overall
vision. The interviewer then asked: ‘What’s your vision then?’ My
answer was: ‘nationalise the system for a temporary period, and then

Feel free to read if you want to see more.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Ron

    Here’s an idea for you, Prime the Pumps….
    If we’re going to print money then rather than spending billions giving the money to banks, who haven’t exactly got a great recent track record, lets use quantitative easing (QE) to put money to those people who know how to look after it best.
    That’s you, me, everyone. If everyone in the country were given a ‘QE bonus’ from the Old lady of Threadneedle Street then we’d certainly prime the economy and get things moving again.
    So here’s the bones of a ‘Neu Deal’, let’s set our ‘QE bonus’ at a quantitative level similar to the numbers that have been bandied about as being used so far, say some 500 Billion or so. With this QE Bonus pot, we can give every man woman & child around £10,000. That’s 40 grand for a family of 4, should be about enough to get things going again and kick start the economy! Some people might even buy a new car, some get rid of credit card or two, and others might even invest some money buying bank shares. And, thanks to taxes, the Revenue would pull back at least 100 billion, solving the government borrowing issue at the same time…
    Cloud Cookoo economics perhaps, but then is the present plan any better?

  • Chris Skinner

    Ron – I like it! Chris