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Industry welcomes Govt bail-out

The industry has reacted positively to today’s news that the Government is injecting £37bn into Royal Bank of Scotland, HBOS and Lloyds TSB.

John Charcol senior technical manager Ray Boulger says: “I think at the moment it does look like it’s going to be enough.

“Obviously the initial reaction in the market is positive as far as banks, other than HBOS and RBS, is concerned so that in itself is a good sign that the market thinks it is enough.

“The key point is the amount the Government is prepared to invest has
actually been increased even over the course of the weekend, which would
suggest that the Government has been flexible in terms of how much it needs to put and it is prepared to put in as much as necessary.

He adds: “From a mortgage point of view it is important that there is a commitment from the banks that they will continue mortgage lending as well as businesses.

“The other key point is going to be to look at what the three-month Libor
market does today because with the banks having now got their recapilisation
the Government guarantee on inter-bank lending comes into force.”

Mortgageforce chief operating officer Kevin Duffy says: “The Government, certainly in the last week or so, has finally grasped the nettle but my own feeling is we must surely be near the bottom in terms of the cycle?

“While it will feel unusual employees of RBS to be effectively Government employees, and I can understand why taxpayers might be perturbed by it all, I actually do see a situation in 12 months time when the taxpayer will be enjoying addition return on the investment and over a relatively short period of time – maybe two to three year – there is no reason why those companies can’t be returned to private ownership.”

Premier Wealth Management managing director Adrian Shandley says: “Hopefully today’s news will stop the panic. The banks are going to be compelled to lend to small businesses and homeowners but the government has dithered constantly and it should have acted a lot earlier.

“If you take away the cause of the illness which was effectively the banks then hopefully you should get some sort of normality resuming albeit in a recession. If we had taken better action earlier then we could have possibly averted this or at least limited the depth of it.”

Chilton Consulting chief executive Mark Chilton says: “It ought to be enough, and it ought to also be a good investment from the Government’s perspective. It’s more than enough to cover the toxic assets that may be in there, its certainly enough to recapitalise the banks mentioned but as to whether it is enough we just don’t know.

“But, to get really competitive lending that people are prepared to do, we’ve got to see another base rate cut, at least another 0.5 per cent to get any stimulation back into the mortgage market.”


Rating for answers

What is the point of a rating agency that cannot predict when a company, bank or fund is not fit for difficult times? That is a question which I think the big global agencies should be answering themselves.


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