The word is coming out that after talks with the bankers, the government is resigned that there is little they can do to stop the payments. It will be given the sop of a promise to lend more to small businesses and have to swallow the big payouts which are often disguised as salary increases as high as 50%.
The government has made a complete horlicks of this and will get into big trouble when the news breaks, especially from the Lib Dems. The way to deal with it, is and always was, to tell the banks pay what you like, but no state aid. If you go bust all your assets will be nationalised for £1, shareholders will be wiped out and directors will have full personal liability for the shambles. Quantitative easing will be used to refill depositor accounts. This does not have to be proclaimed form the rooftops. It can be said behind closed doors.
In the case of the taxpayer owned or part owned banks the answer will be no you cannot do this or if you do we will issue more taxpayer shares amounting to double the value of the payments, diluting shareholder equity significantly in the process. The message is blunt but quite straightforward. You took vast risks and ran you business into bankruptcy. You were rescued by the taxpayer. It is not business as before.
Had the government not set up a long winded commission to investigate the structure of banking which will almost certainly recommend enormous structural changes, separating traditional banking from speculative gambling, which has delayed this essential reform, it could have got on with that job and gained much acclaim from the taxpayers keeping these gluttons afloat.
As it is the coalition will shuffle and and explain but nobody will listen. This comes on top of a string of policy faux pas, including the latest crisis over flu jabs. Only last week the Health Secretary told us an advertising campaign in the autumn was not needed. Without it, the take up was only 40% of those eligible. Now there is a rush and vaccine is running out. In Scotland there was an advertising campaign and there they have no problem. If you put everything together, this Blog takes the view that this government is beginning to look incompetent and muddle headed. Dave and Nick need to get a grip before voters come to the same conclusion.