Brown: Hero or villain? Doubts now mount
Just a day ago he was the Hero of world markets: Gordon the Superman who saved the banks! Brown the new Master of the Universe! European journalists treated him as the maestro of world finance.
But now the doubts are roaring in. Shares in HBOS and RBS have enjoyed a small rally today. But they are well down since the rescue was announced.
Of course a rescue plan had to be put in place to assure depositors and staunch the flight of confidence.
But the terms of the rescue are now being critically examined.
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Was the Brown plan right to rule out dividend payments to bank shareholders for years ahead?
Is Brown's insistence on the Lloyds TSB emergency take-over of HBOS going through a step too far? The bank rescue bail-out would seem to have made it redundant. Yet it opens the prospect of thousands of extra job redundancies through "synergistic benefits" on top of job losses that are already looming in Scotland's financial sector.
Such has been the fall in Lloyds TSB shares that HBOS investors are now being offered less than a pound a share on the latest downwardly revised terms - the second such downward revision in a few weeks.
From the moment this plan was announced I feared it would be a financial Culloden for the shareholders in RBS and HBOS and fuel enormous resentment. Remember that HBOS shares are very widely held - 2.1 million small investors - not fat cats or hedge fund managers.
To wipe out the prospect of dividend payments to shareholders for years is hardly the biggest come-on line for private investors to subscribe for the new equity being offered by RBS and which would have meant less taxpayer money having to be put in.
As for the government's preference shares, these are to enjoy a 12 per cent rate of interest. Wow! Even Warren Buffett settled for just 10 per cent when he agreed to stump up $5 billion for a preference share recapitalisation of Goldman Sachs.
The problem with the rescue terms is that they may prejudice the ability of the banks to finance an economic recovery in 12 to 18 months' time. At the same time they will send equity shareholders scurrying to the hills. There is little prospect of them touching bank shares for years. And pension funds - reliant on dividend income - will give the banking sector a wide berth.Yet these are the forces you need to mobilise alongside taxpayer injections.
No-one now expects any early recovery in banks or across the economy. You only have to look at today's unemployment figures - in particular the angle of ascent - and the bleak British Chambers of Commerce survey to see that we are going into a severe recession.
What we badly need now are further interest rate cuts - a pity that a cut did not accompany the rescue package on Monday which would have had a bigger impact on sentiment. Now the market is back down again today on concerns over the depth and length of recession.
