No share purchase deal from Darling

6 October 2008

Darling addressed the House of Commons and said he would not bring forward a plan that was not sufficiently developed as was seen in the US last week.

Last week the US Congress failed to pass the first draft of its Economic Stability Act because it did not sufficiently protect taxpayers and failed to address concerns about corporate responsibility.

Darling refused to outline potential rescue plans being considered by the government but said that the stability, the taxpayer and the protection of deposits remain the priorities of the government.

Darling says: "All options need to be looked at and I agree nothing is worse than coming forward with a plan that is not sufficiently developed.

"Action must be taken quickly and decisively so that it works."

George Osborne, Conservative shadow chancellor, pledged his party's support for the government but insisted the opposition would resume its position as an interrogator of the government specifically with regard to the source of the current crisis.

He says: "The government has become not just the lender of last resort but of only resort and this is unacceptable.

"The economy has been built on a debt-filled bubble that has finally burst."

Vince Cable, shadow chancellor for the Liberal Democrats, also gave his
support for the government but continued this weekend's call for the
government to revise the Bank of England's mandate in the face of the credit
crisis.

He also called for the government to clarify the merger of HBOS and Lloyds
and the guarantee of £50,000 deposits that the Financial Services Authority
will enact tomorrow.

Cable says: "There must be clarity about the recent mergers and deposit
guarantee.

"It has become apparent that in emergency conditions the government must
make it clear that the BoE should also consider overall financial stability.

"We need to think of radical cuts in interest rates. Decisive decisions need
to be taken to safeguard jobs."

In response Darling says: "Cable is wrong. If you establish an independent
central bank that you don't change its objectives because you're in trouble.
There is no need to change its remit."

Mortgage Strategy's editor Robyn Hall says that announcing a decisive plan to boost capital support would have fared better for Darling and the markets rather than spouting more rhetoric.

In an article on Mortgage Strategy Online, he says: "Some economists are already forecasting that the seizure in the wholesale markets will now be catastrophic due to a lack of urgent action.

"One of Mortgage Strategy’s preferred options after boom turned to bust would be the Dragons’ Den approach - taking equity in UK lenders in return for cash.

"This model is similar to the the move by Warren Buffett, the legendary US investor, who put $5bn into Goldman Sachs.

"He receives the benefit of the dividend stream and has the option to buy more stock at a knockdown price.

"Such a move over here would be likely to unthaw the credit markets and allow banks to start lending to each other once more."

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