Lloyds Nationalized
In a move meant to bring stability to the British banking system, the UK government effectively took control of Lloyds bank on Friday in exchange for the guaranteeing of around 260 billion pounds worth of the institution’s toxic loans. This guarantee means that the government’s stake in the UK’s largest mortgage lender has now moved up to 75% (from 43% before the announcement), while the price of the stock fell another 8% on Friday. It has been reported that Barclays bank may also be looking for taxpayer assistance to remove some of the bad loans from its balance sheet. Barclays is the only major UK bank that has yet to receive any government assistance, but it appears that even the most well capitalized banks are not immune to the rash of defaults that have been occurring worldwide. Shares of the bank slid 12% on the news, while HSBC bank lost over 10% on mounting losses from its US unit. And, as the central bank begins its quantitative easing regime, UK government bonds are at their lowest yields since the late 80s. With nothing but bad news coming out of the UK, it is no surprise that the pound continues to get punished and is off over 2% overnight, once again trading well under $1.40.
