The UK government is the majority owner of yet another of Britain’s largest financial firms. After putting up 37 billion pounds just this past October to recapitalize Lloyds (along with Royal Bank of Scotland), officials have siezed control of the firm with a 75% ownership after converting preferred shares into ordinary stock. This is the fourth major bank or lender that the Prime Minister Gordon Brown has taken the helm of (the others being Northern Rock, Royal Bank of Scotland and Bradford & Bingley). In return for its controlling share, government funds will be used to insure 260 billion pounds ($367 billion) of the company’s assets. A new utensil for stablizing the struggling economy, early rumors suggests Brown will require Lloyds to increase loans to consumers and businesses in a move to pass on the Bank of England’s rate cuts that have so far stalled at the bank level.
Due to the lack of liquidity over the weekend, the market will not be able to show whether this government intervention will be treated as a step to remove risk from the market and extend credit to those who need it or confirmation that financial conditions are worsening and nationalization is further squashing investors’ holdings.