£500bn Bail-Out Won't Work For Us

An eye-watering £500 billion is being pumped into the UK banking system, interest rates cut by half a percent. Both measures prop up the banks. Neither will curb soaring inflation, rising unemployment or people struggling with insurmountable debt. These are measures for the City and by the City. As the banks sail off into the 'wild blue yonder', the legacy of this monumental bail-out will be with us for years to come.

Brown and Darling may have written their own suicide note as, in the months ahead, the true scale of the bail-out hits home. 

The subdued response in the commons from all Parties said it all. Generally, they took it lying down. 

The government spin has been swallowed hook, line and sinker, with few stopping to think of the dire consequences. Talk of part-nationalisation with a £50 billion taxpayer stake is a disturbing prospect. 

But Northern Rock was nationalisation. This is not. Taxpayer's cash is being used to buy preference shares in the banks. Control still remains with the shareholders with no publicly accountable voice on the board.

£450 billion (of which £350 billion is 'new' money) will be available for bank borrowing and guarantees. That cash will have to be borrowed on international markets, blowing any fiscal golden borrowing rule out of the water. At a time of tightening our belts the government is doing just the opposite. 

It saddles the UK with colossal debt for years, decades to come. Borrowing such a huge sum comes with strings attached. No one, not the IMF, is gong to lend cash without commitment to tighten the belt - and that means cuts in public services and public spending. 

Cutting interest rates may get thing going - for the banks - making it easier for them to lend to each other through the inter bank lending rate. But the Bank of England has, until now, been reluctant to cut interest rates. 

There's a price to pay. Any big cut means higher inflation and higher unemployment. That concern has been thrown out of the window.

No-one has stopped to ask how we got into this sorry state. All the attention is focussed on the struggling banks. Who gives a toss about the banks. They and bad government caused this mess in the first place. 

The spin now is of bold, decisive action by the prime minister and his chancellor. Like Bush in the US, they are using the current financial disaster to make themselves look good and dig themselves out of a hole of their own making.

Borrow cash by all means - to kick start the economy - particularly to invest in manufacturing which has been decimated by the government, relying instead on an economy based solely on the financial world of the City. 

If the government was bothered about people, not their pals in the banking world, they would have taken the simple step of guaranteeing all savers deposits, as in Ireland and tacitly by Germany. That would not cost a penny and only kick in if a bank folded. 

Cash would only be used for people genuinely struggling as they come off the fixed term loans and mortgages. Others will have to face up to the harsh truth that they borrowed money too cheaply, without any checks and now, unlike the government, have to pay the price of reckless borrowing. 

In the US, Bush has pumped $700 billion of taxpayers cash in the banking system and the Fed billions more. It is having little effect. Treasury secretary, Hank Paulson, is today warning that some banks will still fail. The same could happen over here. 

People want jobs, affordable housing and tax cuts to help them through the hard times. The country needs a strong manufacturing base. The measures announced yesterday simply benefit banks not people.

As liberal economist, JK Galbraith, observed:

"For now, free at last from all threat of government reaction or retribution, the market sailed off into the wild blue yonder."

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Brown Bails Out His Banking Buddies Again

More than £50 billion of taxpayers hard-earned cash is being pumped into the discredited banking system by Dithering Darling and Banksy Brown, along with £450 billion for bank borrowing and guarantees. What a couple of bankers. 

The High Street banks went cap in hand to the government for a blank cheque to oil the wheels of their day to day operations after it became clear they didn't have the cash to lend to each other. 

Now taxpayers have a stake in the part-nationalised banks and building societies to the tune of £2000 each, which is set to disappear down the black hole of smoke and mirrors accounting. 

The BBC reports a further £200 billion will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies. And, on top of that, there's a lending guarantee worth around £250 billion. All in all, a staggering £500 billion.

Time will tell whether this £50 billion bail-out on the hoof and the other £450 billion is too little too late or too much too soon. And, after the bail-out of Northern Rock and Bradford & Bingley, the question is where is all this cash actually coming from and where will it all end? 

In the US, Bush and his side-kick Paulson's cap in hand plea to Congress for $700 billion taxpayers bail-out cash had little effect. Now the Fed is being forced to pump billions more taxpayers cash into the US banking system. 

There's no reason to think the same won't happen over here, despite today's 0.5% cut in interest rates by central banks, including the Bank of England. 

Pumping taxpayers money into the banks means the taxpayer, not the bank shareholders, take all the financial risk. 

Shareholders still own the banks which can continue to make huge and risk-free profits, as well as paying themselves handsome dividends and director bonuses.

Brown and Darling are clearly out of their depth and the banks are calling the shots. 

Saving the banks in this way comes at a cost. The bail-out will bust Brown's golden rule on borrowing. The treasury will have to try to raise sufficient funds on the tight international money markets to pay our national debts. 

The BBC's man in the City and the treasury, Robert Peston, sent Downing Street into a spin yesterday when he leaked details of a secret meeting between the High Street bankers and government. This exposed a weak political leadership at the beck and call of the bankers. 

What is needed is bold, decisive leadership and a well-thought out economic recovery plan, not a bumbling and fumbling Brown and Darling. Bail-outs on the hoof are not the way to run an economy.

What is clear is that we have a chancellor and prime minister who are prepared to take risks with the economy and people's livelihoods, by using taxpayers money to prop up their pals in the banking system. And that could lead to political suicide.

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Dithering Darling Is Out Of His Depth

Darling sits on the horns of a dilemma. Does he nationalise the banks or face the dire consequences. Or does he pray for an economic miracle. What is becoming increasingly clear is that he's out of his depth. 

The stock market plunged deeper into the red today, punishing dithering Darling's commons non-statement. Here is a man without an economic plan - or if he has one, he's keeping it very close to his chest. 

As markets crashed round his ears, Darling was clutching at straws, making a worthless and totally uninspiring commitment "to do everything necessary to solve the crisis." 

He needs to be bold. He needs to be decisive. He needs to restore confidence and stability otherwise the economy is doomed. Sadly, not words we associate with the chancellor or his prime minister.

The High Street banks could go bust. Without government help they may fold. Darling's decision boils down to whether to nationalise the whole banking system. 

The chancellor and prime minister Brown are under increasing pressure to guarantee depositors' money, as in Ireland and elsewhere. 

But protecting the bank's liabilities in this way, means putting them under state control. Putting government money into the banks means the taxpayer, not the bank shareholders, would be taking all the financial risk. 

Shareholders would still own the banks which would be free to make huge and risk-free profits, as well as paying themselves handsome dividends.

With smoke and mirrors accounting, no-one knows the true scale of bank debt. It must runs into trillions of pounds. Adding such a sum of money to the precarious national balance sheet would be unimaginable. Printing more money is fraught with danger for the whole economy.

And saving the banks comes at a cost. How can the treasury hope to to raise sufficient funds on international money markets to pay our national debts. 

In the US, the much-vaunted $700 billion Paulson bail-out was the final desperate act of the Bush administration and it looks as though all of that taxpayers' money made no difference.

Over the last 12 months, Brown and Darling, have been caught out and exposed as just a couple of sharp whizz kids, riding on the back of the economic boom but unable or unwilling to cope with the bust. 

A chancellor and prime minister who take risks with the economy and people's livelihoods, by using taxpayers money to prop up their pals in the banking system, are heading for political suicide.

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US Snubs Brown To Deal With Their Economy

Brown's big talk of meeting "financial and government leaders", has fallen on deaf ears, as US politicians and finance chiefs snub him, to concentrate on the real task of digging themselves out of the hole of a looming economic meltdown. 

Instead, Brown is attending a UN summit on the issue of the "Millennium Development Goals" and attending a celebrity fund-raising dinner, as aides try to fix up a hurried meeting for tomorrow.

US treasury secretary, Hank Paulson, has already turned down a request to meet the prime minister. President Bush is due to address the nation on a $700 billion rescue plan and presidential hopefuls, McCain and Obama are to meet with Bush to hammer out a cross-party emergency bail-out package.

Brown, as chancellor and now prime minister, is directly responsible for the current economic mess in the UK, when he blindly followed the US lead, to allow greedy banks to make fat profits with little regulation. 

Meanwhile, as Brown struts around the UN stage, posing for celebrity snaps with his wife, people here are left wondering how the government is going to tackle the imminent threat of rampant inflation, looming unemployment and the nightmare of burgeoning debt.

The BBC's Nick Robinson observes: "The best Gordon Brown can hope for on this trip is a dialogue which produces an appetite for reform in the future."

Instead of empty gestures and more mosquito nets for Africa, Brown should stick to the issues which directly affect people back home and leave his pet project of a global dialogue for another day.

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