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Monday, October 13, 2008 11:27:01 PM
U.K. Chiefs Repair Image With Bailout
* OCTOBER 14, 2008
U.K. Chiefs Repair Image With Bailout
http://online.wsj.com/article/SB122393145925029981.html?mod=yahoo_hs&ru=yahoo
By CARRICK MOLLENKAMP , DANA CIMILLUCA and ALISTAIR MACDONALD
Associated Press
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
more in Europe »
LONDON -- It remains to be seen if the U.K. bailout package will rescue the country's banks. But it has changed the image the world had of the U.K.'s top officials.
On Monday, the U.K. government said it will invest as much as £37 billion ($64.3 billion) in three of its biggest banks, including 281-year-old Royal Bank of Scotland Group PLC. In one swoop, the government took controlling stakes in banks with balance sheets totaling £2.5 trillion, about 50% more than the country's gross domestic product.
View Full Image
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
Associated Press
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
In a matter of days, Prime Minister Gordon Brown and Treasury chief Alistair Darling have shed their reputation for bumbling. Just a year ago, their missteps contributed to the U.K.'s first bank run in more than a century, and a month ago Mr. Brown had some of the lowest opinion poll ratings of any modern prime minister. Today, their plan is being held up as a model around the globe.
On the wave of European and U.S. government interventions Monday, the FTSE 100 main share index jumped, closing up 8.2%. Barclays PLC president, Robert E. Diamond Jr., said he checked Monday morning with a Barclays desk that oversees money markets, a corner of finance frozen in recent weeks. The government moves now are expected to free up bank lending. A trader told him, "it was almost a deep sigh of relief."
In a speech Monday, Mr. Brown invoked the July 1944 meeting at Bretton Woods, N.H., where Western leaders met to map out a postwar financial order and established the International Monetary Fund, to describe the steps he envisions leading.
"Around us we must build a new Bretton Woods -- a new financial architecture for the years ahead," Mr. Brown said.
Formulating the plan behind the two men was a coterie of lesser-known government advisers and a roster of investment banks including UBS AG, the Swiss bank, and J.P. Morgan Cazenove, a venture of J.P. Morgan Chase and Cazenove Group.
Such signs are saving the job of Mr. Darling, who lost credibility among City bankers after the bank run on mortgage lender Northern Rock last year, as well as with his moves to increase taxes on some foreign residents. Amid a worsening credit crisis, some people question whether the role of chancellor of the exchequer was suited to Mr. Darling, a reserved Scot who has expressed in interviews he is happiest at his house on an isolated island in Northwest Scotland.
While the Treasury had considered various contingency plans for its banks, work moved into high gear after Ireland took the extraordinary step on Sept. 30 of guaranteeing all of its bank deposits, people familiar with the matter said. U.K. officials worried British deposits would flow into Irish banks.
The U.K. Treasury saw a full-scale deposit guarantee as prohibitively expensive. Treasury pushed to inject capital into the banks. But in meetings the U.K.'s banks argued that what they really needed was a way to unfreeze bank-loan markets, people familiar with the matter said.
On the evening of Monday, Oct. 6, several bank chief executives gathered in Mr. Darling's office. Some expected the Treasury to present its plan. Instead, Mr. Darling spoke more generally, people familiar with the matter said. At one point, Barclays PLC CEO John Varley told Mr. Darling he needed to move fast and come out with a plan for the banks, they said.
The Treasury didn't go into specifics to avoid disclosing sensitive details on banks in front of their peers, a person familiar with the matter said.
The next morning, bank stocks in London plunged. Between 9 a.m. and 11 a.m., RBS shares were off by 23%. Mr. Darling cut short his meetings in Luxembourg with European finance ministers to return to London.
The Treasury called in bank chief executives for individual meetings that night. The government proposed pumping capital into the banks by buying preferred shares. The bank chiefs expressed concern over the limitations of preferred-share investments in absorbing banks' losses, according to a person familiar with the matter.
Later, bankers from J.P. Morgan Cazenove, its chairman David Mayhew and his top executive Naguib Kheraj, and bankers from UBS, David Soanes and Robin Budenberg, met as a group in Mr. Darling's office. By the end of the night, the banks had persuaded the government to guarantee some of their debt, the second critical plank of the plan alongside the capital injection.
The next morning, Wednesday, Oct. 8, Messrs. Brown and Darling announced a broad outline of their plan.
In the U.S., officials knew the Britons had been working on a plan, but details arrived only as it was unveiled in London. "We sort of had a sense that they were working furiously to pull together a plan," said a U.S. Treasury official, David McCormick, who was in contact with his counterpart in the U.K.
The Treasury hired Credit Suisse Group and Deutsche Bank AG to implement it. UBS switched to working for RBS and Lloyds on their capital raising. The banks thought they had until year end to raise £25 billion to meet the government's targets, either through selling shares to the government or privately.
But by Friday, the Treasury decided it needed to raise money for the banks by Monday, according to people familiar with the matter. Bank stocks were falling, amid the shutdown of Iceland's banking sector, the increasing sense that U.S. investment bank Morgan Stanley might be in trouble, and increasing fears about an economic slowdown.
Saturday, Treasury officials updated Messrs. Brown and Darling: RBS needed immediate help. Over the weekend, U.K. markets regulator, the Financial Services Authority, combed through bank balance sheets to stress test them against the worst-possible economic downturns.
Monday morning, they laid out their plans for the government to take as much as a 63% stake in RBS and take control of mortgage lender HBOS PLC.
—Michael M. Phillips contributed to this article.
Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Alistair MacDonald at alistair.macdonald@wsj.com
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
http://online.wsj.com/article/SB122393145925029981.html?mod=yahoo_hs&ru=yahoo
To get Fibonacci Retracement Support and Resistance for a stock click here and enter symbol.
http://www.ddmachine.com/default.asp
This Is only my opinion posted here please due not buy or sale a stock base on my opinion. For practice or educational purp
* OCTOBER 14, 2008
U.K. Chiefs Repair Image With Bailout
http://online.wsj.com/article/SB122393145925029981.html?mod=yahoo_hs&ru=yahoo
By CARRICK MOLLENKAMP , DANA CIMILLUCA and ALISTAIR MACDONALD
Associated Press
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
more in Europe »
LONDON -- It remains to be seen if the U.K. bailout package will rescue the country's banks. But it has changed the image the world had of the U.K.'s top officials.
On Monday, the U.K. government said it will invest as much as £37 billion ($64.3 billion) in three of its biggest banks, including 281-year-old Royal Bank of Scotland Group PLC. In one swoop, the government took controlling stakes in banks with balance sheets totaling £2.5 trillion, about 50% more than the country's gross domestic product.
View Full Image
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
Associated Press
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
The U.K. set out its plan for a bank bailout on Monday. Above, Gordon Brown (left) and Alistair Darling.
In a matter of days, Prime Minister Gordon Brown and Treasury chief Alistair Darling have shed their reputation for bumbling. Just a year ago, their missteps contributed to the U.K.'s first bank run in more than a century, and a month ago Mr. Brown had some of the lowest opinion poll ratings of any modern prime minister. Today, their plan is being held up as a model around the globe.
On the wave of European and U.S. government interventions Monday, the FTSE 100 main share index jumped, closing up 8.2%. Barclays PLC president, Robert E. Diamond Jr., said he checked Monday morning with a Barclays desk that oversees money markets, a corner of finance frozen in recent weeks. The government moves now are expected to free up bank lending. A trader told him, "it was almost a deep sigh of relief."
In a speech Monday, Mr. Brown invoked the July 1944 meeting at Bretton Woods, N.H., where Western leaders met to map out a postwar financial order and established the International Monetary Fund, to describe the steps he envisions leading.
"Around us we must build a new Bretton Woods -- a new financial architecture for the years ahead," Mr. Brown said.
Formulating the plan behind the two men was a coterie of lesser-known government advisers and a roster of investment banks including UBS AG, the Swiss bank, and J.P. Morgan Cazenove, a venture of J.P. Morgan Chase and Cazenove Group.
Such signs are saving the job of Mr. Darling, who lost credibility among City bankers after the bank run on mortgage lender Northern Rock last year, as well as with his moves to increase taxes on some foreign residents. Amid a worsening credit crisis, some people question whether the role of chancellor of the exchequer was suited to Mr. Darling, a reserved Scot who has expressed in interviews he is happiest at his house on an isolated island in Northwest Scotland.
While the Treasury had considered various contingency plans for its banks, work moved into high gear after Ireland took the extraordinary step on Sept. 30 of guaranteeing all of its bank deposits, people familiar with the matter said. U.K. officials worried British deposits would flow into Irish banks.
The U.K. Treasury saw a full-scale deposit guarantee as prohibitively expensive. Treasury pushed to inject capital into the banks. But in meetings the U.K.'s banks argued that what they really needed was a way to unfreeze bank-loan markets, people familiar with the matter said.
On the evening of Monday, Oct. 6, several bank chief executives gathered in Mr. Darling's office. Some expected the Treasury to present its plan. Instead, Mr. Darling spoke more generally, people familiar with the matter said. At one point, Barclays PLC CEO John Varley told Mr. Darling he needed to move fast and come out with a plan for the banks, they said.
The Treasury didn't go into specifics to avoid disclosing sensitive details on banks in front of their peers, a person familiar with the matter said.
The next morning, bank stocks in London plunged. Between 9 a.m. and 11 a.m., RBS shares were off by 23%. Mr. Darling cut short his meetings in Luxembourg with European finance ministers to return to London.
The Treasury called in bank chief executives for individual meetings that night. The government proposed pumping capital into the banks by buying preferred shares. The bank chiefs expressed concern over the limitations of preferred-share investments in absorbing banks' losses, according to a person familiar with the matter.
Later, bankers from J.P. Morgan Cazenove, its chairman David Mayhew and his top executive Naguib Kheraj, and bankers from UBS, David Soanes and Robin Budenberg, met as a group in Mr. Darling's office. By the end of the night, the banks had persuaded the government to guarantee some of their debt, the second critical plank of the plan alongside the capital injection.
The next morning, Wednesday, Oct. 8, Messrs. Brown and Darling announced a broad outline of their plan.
In the U.S., officials knew the Britons had been working on a plan, but details arrived only as it was unveiled in London. "We sort of had a sense that they were working furiously to pull together a plan," said a U.S. Treasury official, David McCormick, who was in contact with his counterpart in the U.K.
The Treasury hired Credit Suisse Group and Deutsche Bank AG to implement it. UBS switched to working for RBS and Lloyds on their capital raising. The banks thought they had until year end to raise £25 billion to meet the government's targets, either through selling shares to the government or privately.
But by Friday, the Treasury decided it needed to raise money for the banks by Monday, according to people familiar with the matter. Bank stocks were falling, amid the shutdown of Iceland's banking sector, the increasing sense that U.S. investment bank Morgan Stanley might be in trouble, and increasing fears about an economic slowdown.
Saturday, Treasury officials updated Messrs. Brown and Darling: RBS needed immediate help. Over the weekend, U.K. markets regulator, the Financial Services Authority, combed through bank balance sheets to stress test them against the worst-possible economic downturns.
Monday morning, they laid out their plans for the government to take as much as a 63% stake in RBS and take control of mortgage lender HBOS PLC.
—Michael M. Phillips contributed to this article.
Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Alistair MacDonald at alistair.macdonald@wsj.com
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
http://online.wsj.com/article/SB122393145925029981.html?mod=yahoo_hs&ru=yahoo
To get Fibonacci Retracement Support and Resistance for a stock click here and enter symbol.
http://www.ddmachine.com/default.asp
This Is only my opinion posted here please due not buy or sale a stock base on my opinion. For practice or educational purp
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