Sense on Cents

Why are companies, both financial and non-financial, hoarding cash? Having addressed that question yesterday in writing, Hoarding: ‘Cash Is King’, we did not have to wait long for hard evidence and billions of reasons for this hoarding phenomena. Let’s navigate across the pond.

What does a nationalized bank look like? Welcome to the Royal Bank of Scotland, the recipient of more government assistance than any other bank worldwide. With another 25.5 billion pounds of ‘bailout bonanza’ flowing into RBS today, the bank has now accepted 45.5 billion pounds of government assistance. In the process, the UK has an 85% ownership stake in this bank. If that is not the definition of nationalization, I don’t know what is.

Why does RBS need more government assistance? Continued losses on those dreaded toxic assets. Oh, you mean those toxic assets are still around? Where did you think they went? In addition to direct government assistance, RBS is receiving a government backstop in the form of insurance on 282  billion pounds of toxic assets. (more…)