Saturday, 22 November 2008

A lovely comment on bank shares by Tony Peterson

Socialist Economic Bulletin has had a number of posts dealing with the economic errors in the government's policy to purchase shares in Royal Bank of Scotland (RBS), HBOS and Lloyd's TSB at what are now far above market prices. But sometimes someone puts something not in the most scientific way but in one that beautifully captures its essence. One example is a comment by Tony Peterson on The Independent's article on the threat to nationalise banks that refuse to lend at an appropriate level this morning. He comments on the Lloyd's TSB decision to 'allow' the government to purchase shares in it at 173.3p each.
'Here's a good one to watch for. At the Lloyds egm [Emergency General Meeting] I warned the board that they were likely to follow in the footsteps of the 1929 bankers who bought their own worthless stock and became the first men in history to swindle themselves. [Lloyds TSB chairman Sir Victor] Blank promised us that all his board would take up their full entitlement to new shares at 173.3p That evening the value fell to 118p. I've checked their holdings and calculated the level of self-swindle they are pledged to. Negative bonuses this year, chaps.'
The difference however is the following. If the directors of Lloyd's TSB want to 'swindle themselves' by buying their own company's shares at far above market prices that is their affair. It is quite a different one if the government forces everyone in the country, aka the taxpayer, to buy bank shares , through the bail-out package, at far above market prices regardless of whether they wish to or not. That would be to allow bank shareholders to swindle the taxpayer.
It is merely to add insult to injury when these same banks, having pocketed the taxpayers money at far above market prices, then don't lend to the rest of the economy.

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