January 20, 2009
First British bailout failed, critic says
New measures to shore up banks in Britain amounted to an admission that the first round of bailout measures fell short, shadow Chancellor George Osborne said.
The new round of government support, including a plan to swap frozen securities for government bonds, triggered fears that banks would be fully nationalized, the Independent reported Tuesday.
It is the clearest possible admission that the first bailout of the banks has failed and now they have no options but to attempt a second bailout, he said.
With the measures, the government increased its stake in the Royal Bank of Scotland from 58 percent to 70 percent. The bank reported 2008 losses of $40 billion.
Bank shares tumbled in Britain Monday. Newly formed Lloyds Banking Group's shares fell one third on its first day of trading -- the entity formed after Lloyd TSB purchased HBOS, the Halifax Bank of Scotland. Barclays' shares dropped 10 percent after falling 25 percent Friday.
Chancellor of the Exchequer Alistair Darling on Monday did not rule out taking over banks completely.
The government has to continue to do whatever is necessary to get credit flowing, he said.