Thomas Paine

Thomas Paine
"These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman."

Thursday, 15 April 2010

I am worried about the Bank Traders and Shareholders.

The Tories offer to support President Obama’s measures intended to halt, or seriously reduce, bank’s ability to engage in risky activities such as proprietary trading [making bets with their own cash] and private equity led to British banks urging the Government not follow suit.

Lord Myners, the City minister, had said the President’s proposals were the solutions to ‘American issues’ saying.

"President Obama came out with a solution to the idiosyncratic problems that he sees in the American banking system which is around investment banking in particular," he said. "It's worth remembering that proprietary trading, hedge funds, private equity, these were not at the heart of the difficulties that Northern Rock, or Royal Bank of Scotland or HBOS experienced."

The Government and the British banks are hoping to gain business from the US by keeping UK rules less restrictive. They are working towards a solution where a levy on the banks to create a ‘rescue fund’, intended to be used so as to avoid taxpayers from having to bail them out again.

Thursday’s announcement by Obama had caused panic on the stock market whilst investors speculated on the impact of the measures on banks earnings. At one stage the loss in value of RBS meant that the value of the taxpayers holding dropped by £1.6 bn.

As the Independent reports.

“While the Government sought to calm fears that Britain would follow suit, investors' fears were further stoked after the Conservatives offered support for the plans. The shadow Chancellor, George Osborne, said in a radio interview: "The President of the US proposing this creates a lot of space for the rest of the world to come up with what will be a sensible system of rules and agreements."

At one point yesterday, Barclays – the British bank which is seen as likely to suffer the most damage from a crackdown because of its substantial investment banking activities in the US – lost a shade below 10 per cent of its value, while Royal Bank of Scotland gave up 8.6 per cent. One banker said: "You can understand why investors are nervous. They just don't know what the US Government is going to do next. It has introduced a huge degree of uncertainty. There is no clarity on how these proposals will work."

I am sure the public in general will be very concerned for bank traders and shareholder who might have to go through a lengthy period of worry before they know the full impact of this legislation.

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