Just when you thought it was safe to go back in the water...
20 Jan 09
The ‘most depressing day of the year’ has been followed by a very scary week, as yet another government bail-out for the banking sector has done little or nothing to bring banks’ share prices back out of free-fall
Monday 19 January was “officially” the most depressing day of the year, according to psychologists who have based their rather spurious-looking formula on six factors: weather, debt, time since Christmas, time since failing our New Year's resolutions, low motivational levels and the feeling of a need to take action.
For government officials and bank directors, all of these factors rather faded into insignificance. What they were depressed about was another slide in bank shares, as it became apparent that even the panic of last autumn underestimated the true scale of the black hole in our financial system.
The pledge by the UK government to underwrite banks’ losses on “toxic assets”, at some estimates, could add up to £200 billion. That makes last year’s £37 billion bail-out look like a bargain. The government also unveiled more emergency measures. They include extending the Bank of England’s £200 billion Special Liquidity Scheme and the credit guarantee scheme, and introducing a new £50 billion pot for investing public money in private sector assets.
More and more of the taxpayers’ equity is being poured into the financial system, but that does not seem to have stabilised it or even bought the government much control over what the financial institutions do with their assets. Very few people seem to want full nationalisation of the banks, but it looks like that’s where we’re headed.