Bail-out indigestion: the good, the bad and the ugly?

Lloyd's asset insurance scheme participation was announced on Saturday; but the share performance today has been poor, with the price dropping 10% or so in early trading.

RBS, whose shares jumped on the back of their participation to over 30p, have dropped back to 18p. Quite a fall in the space of a week or so!

If Lloyd's was the good bank in Brown's eyes for saving HBOS, then RBS was the ugly, in that it just accumulated huge debts under the now despised Fred Goodwin. (HBOS too could be seen as ugly were it too still exist...)

However, now it is the turn of the bad, Barclay's. As we have reported before, Barclay's makes much of its money out of selling tax avoiding schemes. Barclay's more recently is guilty of gilding its results with some interesting number crunching post its Lehman takeover.

When the treasury mandarins have had their sleep, it will be Barclay's turn to negotiate with the Government. RBS had a share price bounce, but fell back, LLoyd's share price fell 50% odd. The omens do not look good for the Varley and Diamond show.

RBS & LBG to the races

And so it was done. The Government has capitulated before the markets. RBS has been given another £13 billion to try and stave off full nationalisation (read bankruptcy), on quite generous terms. Darling is saying taxpayers will profit, just like Northern Rock, eh?

I can see the Government's view on wanting to keep a sliver of shares on the market, as this will let them know when to sell-out of their shareholding. Whisper it, but this is a big improvement on what has gone before. But really, RBS's end of term report today was actually worse than expected.

Massive losses, ABN acquisition not only written down but the remnants written off for sale. This is a corporate disaster worse than either Mannesman or GEC Marconi. Now that is going some.

Yet the share prices of the battered banks flew today (N.B. CU currently holds LLOY shares) and may well do tomorrow. I think the market wants good news and is not prepared to dig to view the long-term picture.

RBS, maybe LLOY, are zombiefied and we are following the Japanese plan for 10 years of economic stagnation at best. Now that the Government has put the debt of the banks on the national balance sheet, I can't see what is holding them back from full nationalisation...in the US it seems momentum is behind the push to sort out Citi and BOA.

I am still against full nationalisation in the UK; not on pure ideological grounds, on competence grounds. The government have already proved with Northern Wreck that they can blow money just as well or better than the Bank executives. Plus the other key economic test as well, If Vince Cable is all for it, it is bound to be wrong.