The last time a one-eyed man was called on to make a double save, Gordon Banks was playing for Stoke. Now only 3 months after Gordon Brown single-handedly saved the world by injecting £20 billion in cash for ordinary shares and preference shares (which have since been swapped for ordinaries), the one-eyed son of the Manse is gong to do it again, but this time putting in up to £19.5 billion. That is £39.5 billion in the year. Remember that number because we will come back to it.
This is how it works. As part of the bailout package the government will guarantee up to £ 325 billion of assets, although if the pound devalues that number will go up. The government, ever eager to drive a hard but pointless bargain, insists that RBS take the first £13 billion loss. RBS reply that they don’t have £13 billion to lose, so the government say they will inject £13 billion.
Then the government say they aren’t going to do this for free. Oh no, they want a fee. 2% sounds good. Quite frankly they shouldn’t have bothered. This stuff is either worth very little or it's fine, actually the former. 2% is an absolute steal for the bank. It's a fraction of what they would pay for one year's insurance for this lot, forget about a once-and-for-all payment. In any event that means they have to pay £ 6.5 billion in premiums, which RBS say they have not got, so the government says they will put in another £6.5 billion if required.
So where does that leave us for the year? Well RBS say they lost £24.1 billion for the year, and they will have to pay out another £6.5 billion, so let’s call that a £30.6 billion loss, but on the plus side they have offloaded a net £ 312 billion of dodgy assets and they got equity commitments of £33.9 billion, so they are in good shape. They also lose some tax breaks for a few years, but as they probably don’t expect to pay tax in the UK for a while but I don’t expect that makes much difference.
The tax payers side of the story doesn’t look so rosy. Already a net £33 billion out of pocket and at risk for a further £ 312 billion against assets known to be worse than a bit iffy.
Who said crime doesn’t pay?