Traditional banks serve no useful purpose.

It is typical for a labour government to sink taxpayers money into an industry just as it enters terminal decline.

Why give money to the banks ‘in the hope’ that they might lend it out, when you can lend directly?

And the second question – how do we get it back?

BBC says:-

Taxpayer to own 43% of superbank

The Treasury is to own 43.4% of the merged Lloyds HBOS bank, after few shareholders bought new shares.

Only 0.24% of the 7.5 billion shares HBOS offered to existing shareholders were taken up while Lloyds TSB saw only 0.5% of its offered shares taken up.

The newly named Lloyds Banking Group will control about 25% of British customers’ personal bank accounts and about 28% of the mortgage market.

If this is not a “National Bank” in all but name, except to the degree of 8% more ownership, then I’ll be happy to eat my bowler hat.

Incidentally, I’m not counting the private corporation which avoid paying tax at all, as many inevitably do, nor am I counting the losses made by some banks in relation to ‘fines’ which they’d struggle to pay if not for support by the taxpayers.

Certainly a National Bank ( although it’s a hypothetical pipe dream ), would be fairer to the masses of public and business who would undoubtedly use it and would also likely have a great deal more confidence in leaving their savings in it if such a bank actually existed.

What we want is to do the best we can as a nation. While there are no doubt those who could work harder, I think that in general we will achieve more by working smarter.

I know this is counter-intuitive. However it is difficult to see in this day and age (when NO ONE in the government sector is paid in cash), how the UK government could boost money supply by physically printing cash.

M0 growth is being led by demand for notes, not the supply.

ps well done on the radio interview.

The Govt. have masively increased the money supply to no avail and look set to continue.

If you imagine that money flow is a river and the banking crisis is like someone built a huge dam that stopped the banks lending the money. The flow stopped, contracting the money supply and reducing aggregate demand.

Rather than take down the dam the government turned on all their taps and instead of starting the flow again they have just flooded the valley behind the dam with money. Eventually the money will over top the dam, but this will only be a the same flow as before the dam was erected so everything will seem ok again……………………….until you take down the dam by getting the banks to loan freely again….then there will be an almighty tidal wave of money leading to massive inflation.

Simply guaranteeing the loans or eating up the bad debt would have saved the day originally but now, due to the monetary expansion, the 12% return on the bailout and the increased reserve requirements for tier 1 banks is all that is keeping us from Zimbabwean inflation.

This leaves an interesting dilema for a true socialist like Brown.

At the flick of a swith he could halve the debt of people in debt while halving the wealth of those that prefered to save than borrow and have some wealth to lose.

The best solution would be to use the return rate on the bailout and the tier 1 reserve ration to only allow the flow of money to come back slowly. So if the money behind the dam is going to be let out slowly then as growth returns (who nows when) these rates will have to be increased not decreased as DC has said.

Alan, given the situation in reality, the days of government running the country on an economy based on personal debt is over. Ask most people and they’ll tell you their intention for the future is not to have it. The banking industry hasn’t the ability to cover its losses and heaping taxpayers money into them in an effort to create confidence of people in fear of job loss and debts up to their eyes already, isn’t going to work. Consumerism is the only way banks can continue in their present guise but meanwhile we will meet their bills through borrowing which doesn’t have a cats chance in hell of being repaid without a real economy. Thus Brown borrows and meets the interest rather like the minimum payment on a credit card, and ‘hopes’ that the same system which placed us in this predicament will somehow miraculously get us out of it. A National Bank could determine different levels of interest for commercial lending and make profits for the treasury. It could absorb the asset values of homes and make a profit on those too, thus helping to minimise taxes as the country itself would be making the profit rather than private investors and shareholders. Private banking ( if viable ) could still operate but would not have as big an impact on our economy.

Of course, the regulatory authority does not determine policy, they implement it. So if the prediction of some of our fellow correspondents are correct concerning the true direction of GB’ s mission, then no matter how brilliant the implementation of regulatory control we are heading in an very unappealing direction.

This is hardly a sound basis upon which confidence can grow.

A rise in the stock market is not the answer. That is exactly what he (Brown) thought and argued in 1997 when he imposed his tax on the pension funds. The problem is more fundamental than that. The tax undermined the actuarial basis on which the viability of funds was then based. The funds either had to persuade the employer – or the employee – to pay in higher contributions to offset the Brown tax or face long term decline and an inability to meet their obligations to fund members.

The Brown tax on a fund of which I am a member cost an estimated £11 million per annum (I asked the administrator the question). Cumulatively that has compounded to over £100 million so far. The fund has a big deficit; it is not clear that the employer will continue to fund this deficit. The fund has suffered further stock market losses. The employer is now on short time. The outlook for scheme members looks bleak. Maybe the M and S scheme is better placed. If I were you I would start making enquiries.