The British Treasury is pouring another £39.2 billion into the country's two largest banks. And even though it may saddle the U.K. itself with another £13 billion in debt, Prime Minister Gordon Brown--in an electorally-suicidal game of three-card bailout monte--calls the deal with RBS and Lloyds Banking Group a boon for the taxpayer.
"At the end of the day, banks will be paying more to the British public, not the other way round," Brown assured a country itching to toss him out of office at the first opportunity, one they'll get by June.
According to Brown, the new bailout will reduce the Treasury's risk exposure by as much as £300 billion and wean RBS and Lloyds from their newfound dependency on taxpayer pounds. It will certainly be interesting to hear him mumbling, stumbling and stuttering that on the campaign trail.
So what exactly does the British taxpayer get for its new commitment? Well, another big chunk of RBS, for one, raising their stake in the hot property to 84.4%. RBS, however, is now responsible for its first £60 billion in losses, up from £42 billion, and sees its Treasury-insured assets drop by £43 billion. What exactly that means for the all-but-nationalized bank, I'm not sure. But RBS gets its paws back on £11 billion in tax allowances it forfeited the first time it took Gordon's billions.
As for Lloyds, the taxpayer gets to keep his stake at 43%, as the £5.7 billion cheque is part of a rights offering.
"This will significantly reduce the cost and the exposure to the taxpayer," Alistair Darling, the British Chancellor of the Exchequer, told Parliament. "Lloyds will begin its transition from state support to private finance" by getting out from under the Treasury insurance plan for £260 billion of its assets.
Both banks have also agreed not to pay cash bonuses to anyone making more than £39,000. But they haven't agreed to hold the line on salary increases, so do the math. Oh yea, and RBS can't be ranked any higher than fifth in Bloomberg's debt league tables. That'll keep'em on the straight and narrow.
AT A GLANCE: Lloyds, RBS Finalize Bailout Deals [WSJ]
RBS, Lloyds Bonus Caps May Prompt Pay Retaliation [Bloomberg]
RBS Restricted to No. 5 League-Table Slot Under Capital Raising [Bloomberg]