Another Brit Bank Bailout

The Brits are bailing out their banks. Again. This morning, the U.K. government announced a sweeping financial rescue plan to shore up the finances of the nation's banks so they can start lending again and to calm the stampede of investors from bailing on the sector en masse. The Times of London said the price tag for the latest bank bailout is "impossible to quantify" at this stage. But, Chancellor Alistair Darling warns, the cost of doing nothing is greater. "If the banking system collapsed, the economy 'would come down with it,' " the newspaper quotes him as saying. A particularly hectic sell-off in bank shares last week provoked the move, the Wall Street Journal writes. "Urgency to finalize the package increased after a nerve-wracking late trading session on Friday that saw shares of Barclays PLC, considered one of the stronger U.K. banks, plummet 25% while Royal Bank of Scotland Group PLC fell 13%." In October, the U.K. government unveiled a $740 billion bank-bailout package, largely considered the model rescue plan for troubled banks. The new plan works in this way: The government will use taxpayer money to lend to troubled banks on the promise that the banks will resume lending to homeowners and businesses. The Guardian writes that under such a plan, more banks, including HSBC and Barclay's, could be partially nationalized.

The direst bank appears to be Royal Bank of Scotland. It announced this morning that it expects full-year 2008 losses to near £28 billion ($41 billion) and that the government will increase its ownership stake in the troubled lender to 70 percent. RBS Group CEO Stephen Hester later apologized for amassing what the Daily Telegraph calls "largest corporate loss ever in the UK." "I do feel sorry for shareholders—I'm one of them. This is not the sort of record any enterprise would be proud of, it's our job to fix things now," Hester was quoted as saying.

Speaking of troubled banks, there is some confusion this morning over Citigroup's plans for its prized Japanese brokerage unit Nikko Cordial. The WSJ, citing sources in the know, say Citi is preparing to sell Nikko Cordial Securities in what would be a major reversal for the hobbled institution. Last week Citi said it would keep the prized unit, Japan's third-largest brokerage, out of the proposed spin-off of its Smith Barney brokerage to Morgan Stanley. "People familiar with the matter say Citigroup hadn't planned to sell Nikko Cordial until the eve of its earnings. But after spinning off Smith Barney, Nikko Cordial Securities was left as the only major retail brokerage business within the group and didn't fit into Citigroup's plans," the newspaper reports. Still, Citi is saying, not so fast. It issued a statement on Monday morning saying it remains committed to Nikko, the Financial Times' Alphaville blog reports.

The good feeling flowing out of Washington, D.C., ahead of President-elect Barack Obama's inauguration seems to have reached Asia, where markets were on the rise. Japan's Nikkei 225 was up 0.8 percent, Korea's Kospi Composite 1.7 percent, and Australia's S&P/ASX 200 0.8 percent in what will be a quiet day's trading, given Martin Luther King Jr. Day. "Markets were hoping for quick action by incoming president Barack Obama to push through a new stimulus package, including tax cuts and infrastructure spending, as authorities try to kick-start consumer spending and encourage banks to lend," writes the WSJ. LG Display led the gains after its chief executive said "that the LCD market had hit a bottom and TV panel prices could recover in the coming months," Reuters reports.

The New York Times Co. might not be at the brink quite yet, but its personal cash crunch is bad enough that it's courting a $250 million "loan" from Mexican billionaire Carlos Slim, the WSJ and NYT report. The Times Co. had about $46 million in cash and $1.1 billion in debt back in September. With credit lines coming due and a need to refinance long-term debt, Slim's millions—in the form of a preferred-stock issue that offers not voting rights but an annual dividend—would give the Sulzberger family, which controls the Times Co., much-needed capital "without forcing them to relinquish control or dilute other shareholders." But, the WSJ writes, "[t]he downside is that the cost of such capital is generally very high." Slim, a telecommunications titan, already claims a 6.4 percent stake in the Times Co.

And, finally, Web retailers could soon feel the pinch of the tax man. According to the Associated Press, an increasing number of lawmakers are hoping to collect on those online purchases that remain untaxed (some states, such as New York, have successfully fought to close the virtual tax loophole) to bring a much-needed revenue stream to cash-strapped states. Citing analysts, the Associated Press reckons that taxing online purchases could generate $3 billion in tax revenues for state governments. But it would not be an easy passage. The measure would need to pass through a Congress preoccupied with tax breaks and stimulus packages.