present

You might have missed it, but you will have woken up on Thursday with a great big present sat at the end of your bed. Well, it wasn’t visible because the present was this. Thanks to swift Government action, we, the taxpayer are now majority shareholders in Royal Band of Scotland. Oh Mr Darling, you shouldn’t have. No, really. You shouldn’t.

RBS announced yesterday that it will give families struggling to make mortgage repayments (and there are a lot of them) a slither of respite, allowing every one six months of breathing space. And a roof over their heads, presumably.

Economists are speculating there could be a total of 100,000 repossessions by the end of next year, way eclipsing the level of house losses in 1991.

Here comes the problem:

  • You are a homeowner who cannot keep up with the mortgage. You want mercy from your bank.
  • You are a shareholder in said bank. You want your money back, pretty darn quick.

Despite politicians suggesting the contrary, you can’t have both. You can’t make back the £15bn of taxpayer’s money laid out in preference shares while people aren’t giving any money to the bank.

What’s to be done? Peter Mandelson will likely continue to pester banks into lending more, (which they say they are) while being nicer to customers who are struggling.

But this won’t make RBS (or Northern Rock) any more liquid. Banks need cash at the moment more than they need a house so getting payments from customers, in cash, should be a priority. If nobody pays their mortgage, and no repossessions occur, where the dickens are banks meant to find money to repay us?

It’s a pickle, whichever way you wrap it up.