The Alistair Darling budget (part two)

I suppose the Alistair Darling budget has already been blown away with events. Previously, the UK Chancellor made a call for
old-fashioned banking and Northern Rock hit problems. Now, the U.S Federal Reserve
and J.P Morgan have had to rescue Bear Stearns. Perhaps, we should wonder how Darling would cope if more British banks hit problems. There is always the nationalisation option, although Gordon Brown must be wondering if the private sector solution to Northern Rock would have acted as a better precedent. Capacity
could have been taken out of the market, which would have hopefully led to
higher profits and capital generation.

If British banks cannot lend and therefore support the economy, they should carry out rights issues to raise new capital. The bank bosses don't want to do this since
they would lose their jobs but they might have no choice. HBOS has raised £750m at quite a high interest rate but this is quite a paltry sum given the size of the
UK mortgage bank.