British government mounts world’s largest bank bailout

[Hannah Bell]

Alistair Darling, the Chancellor of the Exchequer, has just announced the world’s biggest bailout for a single bank in a bid to rescue the Royal Bank of Scotland (RBS).

One year after an initial bailout, the government is to put an additional £25.5 billion into RBS, in which it already has a 74 percent stake. In addition it has set aside a further £8 billion...

In order to maintain the fiction that this is still a private and not a publicly owned bank, the government’s additional equity stake, equivalent to a further 12 percent stake, will not have voting rights, allowing RBS to retain its listing on the London Stock Exchange.Despite the bailout, there is to be no attempt to control the bank’s activities....The Treasury will also underwrite £282 billion of its toxic assets...

The total cost of the RBS bailout has now reached £53.5 billion and far surpasses all previous banking bailouts anywhere in the world. It dwarfs the $45 billion (£27.4 billion) state handout to Citigroup in the United States...the profitable parts of the bank are to be hived off leaving the government holding the rump...

The way that Darling introduced these measures is instructive. Posing as some kind of bank regulator, he sought to present this plundering of taxpayers’ money as not only a net saving but also a major government initiative to increase competition. All of this is a complete fiction...

Finance union Unite has warned that 25,000 branch jobs are at risk. RBS said that the future of 6,000 of its staff is in doubt...HSBC has announced 1,700 job losses in its second round of the restructuring of its 50,000 UK workforce...

The implications of the financial crisis, of which this latest bailout is but a part, are spelt out in the latest report from the International Monetary Fund. It puts Britain’s structural deficit at 6.8 percent of GDP....

The IMF forecast that the increase in interest charges would be equal to the transport budget. While the government has not published its estimate of the annual cost of debt servicing, it has said that debt servicing charges in 2013-14 will be a massive £58 billion. When interest rates rise, the charge will be even higher, underlining the very real concerns about Britain’s creditworthiness and even solvency.

The IMF said it would take spending cuts and tax rises equal to about 8 percent of GDP to bring down the debt to GDP ratio to the 60 percent ratio that has been the average in the G20 nations as a whole. This translates into a massive 20 percent cut in government spending.

http://www.wsws.org/articles/2009/nov2009/scot-n09.shtml