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Tuesday, 24 February 2009

RBS & Lloyds shareholders wiped out?

Robert Peston says taxpayers may become liable for £500bn worth of bad loans and investments made by Royal Bank of Scotland and Lloyds Banking Group. For Lloyds read HBOS, but the government is trying to blame the new owners for everything to avoid the blame falling on themselves.

This is what they call the Asset Protection Scheme. It protects the bank's assets, but not yours Mr Tax Payer. RBS has a Thursday deadline to agree terms, while Lloyds has until Friday.

The idea is to draw a line under bad assets to free up cash that the banks can lend to companies and individuals. If the deal is completed it will take the total support by British taxpayers to the banks to £1.3 trillion.

Did you hear that word? Trillion. It's a word from astrophysics not fnance. That is 13 followed by eleven 0's. Bill Gates as was multiplied by 26. About the same as the gross national product. Apparently the Treasury wanted the banks to take the first 10% of any loss, thus wiping out the equity they injected last year.

Oh, and a small issue if you are an RBS or Lloyds shareholder. You just got wiped out.

According to Peston "there would be little or nothing left forRoyal Bank's and Lloyds' private sector shareholders", after the government took its share of the profits, but I guess you can still keep the share certificates. If you get a dividend this year, maybe you can stick it in the Christmas pudding. No wonder Peston was trying to distance Brown from the Lloyds/HBOS merger a few weeks ago.

Taxi for Mr Daniels?

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