The Biggest Game of Chicken, Ever

It is interesting to see the commentary in the press about the 'part-nationalisations' of the three banks.  It was also illuminating to see the Chancellor on Newsnight last night, being very shifty about the dividend issue.

I don't understand why he was doing that, since before the deals can be completed the terms will have to be set out very clearly for all to see, so he might as well have come clean.

The Chancellor and the PM don't seem to understand that they haven't completed these deals, simply by negotiating the terms with the banks' boards.  Do they not realise that the boards only have the power to negotiate deals that they can then recommend to their shareholders?  Shareholders will have to decide whether to agree to the issue of preference shares, to such a large number of new ordinary shares being issued, and the rights issue - all of which have a material impact on their ownership of those institutions.  To do this, the banks will have to issue papers setting out the terms in full, so it will then become very clear what the specifics are concerning dividend payments.  I think enough people were caught short by the last rights issues to ensure that, this time, those papers are scrutinised very carefully indeed and, if the dividend issue is a) left unclear and b) very unfavourable, I can see lots of trouble ahead.

I think it is quite possible that the shareholders will reject the resolutions that will have to be put to them, and if so, it will be interesting to see what the Government does.  Nationalising B&B and NR is one thing.  Depriving the millions of individual shareholders (many of whom are retired and rely on dividends to live) and pension funds (which affects most of the UK's population) of their stakes in such massive institutions is another.

Let the battle commence - or will the Government back down before then?  I think they lose either way.