Monday, October 06, 2008

Banking Crisis: Have Commentators Economics 101

Seems that the Royal Bank of Scotland's latest shareholders have lost 25% since their £12 Billion re-capitalisation by share issue just a few short months ago. [Source: Newsnight's Paul McTrot]

This is no great surprise. Even though the RBS is doing hysterically well from the current situation. If investors can get an iron cast 7.25% from an RBS ISA or indeed their best copper bottomed Savings Account why would the more casual types among them hang around for a 3%, 4% or 5% dividend and at best flat capital value, more likely a dip, in the stock game?

Investors would switch from RBS shares and all that uncertainty to an RBS ISA! And believe you me they have been doing so. Instead of opening about 1,000 ISAs a week the bank have been opening 4,000 a day. I kid you not. 2400% increase in business.

Same sort of boost has gone to National Savings and others. Property is no longer the thing it seems. Stocks and shares - just a bit flakey right now. Savings account down the Post Office? That'll do nicely. Presumably the amount of locked-in retail business the more conservative banks are now writing will lead to an upward trend in their shares before long. Buy banks I tell you, buy banks!

There is a real opportunity for this Labour Government to boost Mutual Savings and Solid Mortgages. The Northern Rock/Bradford and Bingley remnants could be passed to a surviving mutual or re-mutualised. Though it's a shame their very decent savings books have been carved off.

Some way might even be found to combine a People's Mortgage Bank with the National Savings business, and perhaps the Post Office branch network. Mutuality could be re-established as a leading model. Credit Unions could be given a tiny slice of bank support and gain both a critical mass and some sensible fashionability.


Barnacle Bill said...

Not only banks CP, this might be a golden opportunity for the government to get back the rail network at knock down prices, also some of those power generation companies.
Quite frankly I think I would be well pleased if I was in the Treasury there are going to be some bargains of the century.

Chris Paul said...

Exactly. And a lovely time to kick off other public works. A real council house building programme? Based on mutuality as well?