Asset management representatives reacted mostly positively to todays announcement that the U.K. government will make up to £500 billion ($866 billion) available to bail out banks, including up to £50 billion to partially nationalize major banks.
Richard Buxton, head of U.K. equities at Schroders, wrote in an e-mailed statement that the bailout package, along with the coordinated effort by the British and other central banks to lower interest rates, were good news that, together, could potentially mark the turning point in the current crisis.
He wrote that the package provides the necessary backstop while leaving banks with some role to play in determining how much they borrow, in what form, and to what extent there is appetite from existing shareholders to help with the recapitalization process.
Its definitely a positive for the wider market, said Simon Pryke, head of global research at Newton Investment Management in London. I dont think whats going on is particularly good news for shareholders.
But shareholders are the lowest in the capital structure and probably the ones to bear the responsibility for investments gone bad, said John Velis, head of capital markets research for Europe at Russell Investments in London.
Mr. Pryke said its too early to say whether the bailout will be beneficial to long-term investors years from now.
Mr. Velis also said other countries will follow the U.K.s lead in nationalizing the banks.
Even the U.S. is going to have to suspend its free-market ideology to allow the government to buy into banks, he said.