Nationalise RBS and make it lend money!

John is calling for full nationalisation to force the Bank to lend money and create jobs

I was watching RBS announce losses of £1.5bn this morning, and reckoned that the current rules regarding RBS are bonkers. The rules, drawn up when the last Labour government bailed them out,  means that, although the taxpayers own 82% of the company, we do not have a rep on the board and cannot force the company to lend money to businesses and create jobs.

Yet,  quite rightly, the public hold the government responsible when the Bank doesn’t  lend money and creating jobs

As long ago as March, Business Secretary Vince Cable was arguing for a different approach. Nationalise the Bank fully (to change the rules keeping the current structure would be a legal minefield), change the rules, set up RBS as a State Bank, and force the State Bank to lend money and create jobs.

Vince is right. Full nationalisation of RBS would recognise that the current rules are not working, that selling off to the private sector is not going to happen in the short-term, and give the UK a state bank that can make investment decisions that can prioritise job creation and growth in the economy.

It would be better than the current mess, where the government is responsible but cannot act.

4 responses to “Nationalise RBS and make it lend money!

  1. As much as the idea of a Business Bank is welcome – I’ve played around with such ideas myself – I am wary of language about “forcing” banks to lend to businesses. I do not want banks lending on the basis of what is politically acceptable – we could potentially be taking huge quantities of risk onto the government’s balance sheet (never mind the additional debt) that could go very wrong, leaving taxpayers in the lurch. We’ve spent too long telling banks two diametrically opposed things – they need to take less risk, and lend more to businesses. You cannot have your cake and eat it, and John, I have to say I believe you’re pushing that line here. The far more important, and far more delicate task, is to restore confidence in the system to get the capital flowing again, to get people and businesses investing again. That cannot be solved by big dramatic steps like gobbling up and gutting RBS.

  2. What’s that? The global banking system collapsed to its knees in 2008 because they were lending too much and at too much risk relative to their deposits and assets?

    I know! I have a cracking idea. Let’s force them to lend more money, increasing their insolvency, propping up failed borrowers and bad lenders at the taxpayer’s expense! That will solve EVERYTHING and definitely won’t lead to another financial crisis. Honest.

  3. It wasn’t SME business lending that brought the banking industry to its knees, nor people looking to responsibly buy their own home. Yet these are two areas where bank lending has been massively reined in by most banks.

    Other banks are managing to hit their lending targets – but not the 80%+ government owned bank! Why? Because the structure set up by the last government gave tax payers all of the responsibility with none of the power.

    It isn’t the case that ‘take less risk’ and ‘lend more to business’ are diametrically opposed. Banks still prefer to lend on higher risk (and often short term) projects or leveraging because the rewards are higher per pound invested. This is what need to change in the banking system.

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