LETTER: Bailing out the banks

IT has been suggested the public should be given shares in RBS and Lloyds once they return to profitability as a “reward” for taxpayers’ money bailing them out. This involves creating additional shares thus reducing the value of existing shares.

By then the sums used to bail banks out will have been repaid with added interest. The risk taken by the Government on the taxpayers behalf will have paid off.

Those who really fund this politically motivated move will be existing shareholders, many of whom made additional investment during the crisis by way of the open offer and rights issues in order to avoid their share of the company being reduced. The culprits will still be paying themselves big bonuses.

Maybe the Government should consider that the next time such a crisis should occur investors may be more likely to sell, thus increasing the amount the Government will have to provide. Separating investment banking, although a good move in itself, will not prevent the state having to bail out investment banks in a crisis. Allowing Lehman Bros, which was primarily an investment bank, to fail is generally held to have precipitated the crash.



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