Should the UK government intervene in the open market?
Confirmation that the NS&I have reduced savings rates to effectively open the door for UK banks has been greeted with howls of dissatisfaction from the open market. At a time when the UK government quite clearly confirmed that even majority state-owned banking institutions would be run at arm's length and free of any intervention from politicians there appears to have been a significant U-turn. However, should the government be allowed to intervene in the open market?
On the surface there appear to be pros and cons regarding the UK government's strategy because when you consider the billions of pounds invested in various UK banks surely there's nothing wrong in increasing the value of taxpayer share stakes?
However, the billions of pounds invested in share stakes in the likes of Northern Rock, Royal Bank of Scotland and Lloyds TSB pale into insignificance when you consider the £100 billion plus which has been poured into the UK financial sector to increase liquidity. This liquidity has been injected so the banks across the board can benefit and the UK banking sector can re-emerge from the ashes.
Even though non-state controlled banks such as Barclays and HSBC will also benefit there is a feeling that the government may be attempting to hike the value of state-owned banks and part state-owned banks ahead of a potential sell-off later this year. Intervention by the government appears acceptable for the good of the sector, although this particular move does not seem to fit well with the UK government's public strategy.
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