creditcrunchnews

The UK Government has now taken the controlling stake in Lloyds Bank, increasing the taxpayers holding of the company from 43% to 65%.

The Chancellor, Alistair Darling, has announced that the move is vital to help banks lend more to business and individuals. This increased share is supposed to restore confidence to the consumer & the banks themselves and to get the flow of credit moving again, to the tune of £28 billion over the next couple of years. This is considerably more than part government owned RBS and the nationalised bank Northern Rock.

The Conservative& Liberal Democrat party are not as sure this is a positive step as taxpayers will now be insuring £260 billion of toxic loans and may not give value for money.

Lloyds originally was forced to seek help from the government after taking over the ‘wounded’ HBOS bank which reported losses of £11 billion in the last financial year.

The UK has now spent more money than any other country bailing out its banks. This latest move is part of the Treasury’s Asset Protection Scheme backed by the British taxpayer which is basically designed to act as insurance to Banks’ more risky assets to prevent further losses.

By increasing its stake in Lloyds to a controlling stake, the government has now made a powerful statement that it will now make decisions for, and control the banks it has stakes in, making financial, commercial and political decisions on their behalf.

It does make you wonder whether the next step will be to totally nationalise Lloyds and the Royal Bank of Scotland like Northern Rock has been, before the credit crunch is over.