Privatization is back on the political stroke economic agenda this morning after a report commissioned by Chancellor of the Exchequer George Osborne in the UK looks like he will be set to return bailed out banks to the private sector.
Lloyds Bank Group got a whacking £46 billion to shore up its dire financial situation in the wake of the financial crisis in 2008 and 2009. The proviso at that time (imposed by the European Commission due to competition reasons) was that the group off-load a subsidiary, TSB. Except, who in their right mind would buy a bank that is failing from another bank that is also failing.
Yeah of course, we all like a good deal and to make a profit by buying into something as it’s going down the tubes in the hope that it will pick up. Except, Lloyds and TSB were so far stuffed down the damn tubes that they looked like they would pull anyone that even went near the revolving doors inside, lost forever! The only one likely to invest was the state.
Today, Lloyds is owned to the tune of 39% by the British taxpayer, and they don’t seem like they are any happier with that either. The reputation of the group has just descended into hell step by step in a whirlwind succession of financial cock-ups.
Lloyds of course have brought the marketing guys in and have revamped the TSB image to the best (?) of their ability. Well, they should have decided to change the name. People always forget when you change the name of a company, don’t they. Foul up incredibly badly, change the name, and start all over again (fouling up). People buy into that!
Now, George Osborne has been advised in the report (by think-tank Policy Exchange) to return the shares to the taxpayers. 48 million of them! The TSB has 632 branches and head hunters have already been commissioned to find a chairman. Anyone looking for a job at a failed bank? It will be floated on the London Stock Exchange by 2014 according to rumors (if we can believe those).
If Mr. Osborne decides to go ahead with the share hand-out, then it will be the biggest privatization plan that has ever taken place in the UK. Even the Iron Lady would be standing back in awe all weepy eyed with admiration. Mr. Osborne seems surprisingly positive when he talks of nursing wounds and wanting a healthy bank to return to the hands of the private sector. Admirable, Mr. Osborne. Except, the stake that the taxpayer now holds in the bank is worth £18 billion less than was originally invested (£46 billion). That’s a super investment, isn’t it? But, hey, we can create a new generation of shareholders that will be weaned on investing in the stock market and dabbling like their grannies used to back in the 1980s and 1990s. Oh, I get it! No need to change the name of the TSB, the people won’t remember that far back, right?
Anyhow, simply the methodology of how it’s going to work. Life is so easy, Mr. Osborne; Every person that is on an electoral roll in the UK and over the age of 18 will just have to apply and the estimates show that there will be roughly 20-30 million people that do so. That means each person will get shares to the value of between £1, 000 and £1, 650. So, don’t go telling everybody. Mr. Osborne has to give the go-ahead and people are banking that he will!
The slogan for Lloyds Banking Group is “For the journey”…does that mean that Mr. Osborne just ‘came along for the ride’ or is he ‘having one for the road’. Whatever way you look at it, the road is a long one, Mr. Osborne. You may come out of this with a hefty loss, but some might argue that it was worth it all to save the bank from disaster back then.
Will that make everybody happy by the time election time comes round? Your call!
Originally posted Osborne: Privatization Program for TSB (Lloyds Group)
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