by Jules Evans | Apr 29, 2009 | Climate and resource scarcity, Economics and development, Europe and Central Asia
Lord Browne recently complained that not enough private financing was going into the renewables sector, particularly offshore wind farms, and he called for greater government financing, and suggested this could come from some of the newly state-controlled banks.
I suggest the UK sets up a British development bank in order to finance our shift to a zero carbon economy.
At the moment, we have several development institutions which finance clean-tech and renewables projects, such as the EIB, EBRD and World Bank, though they mainly finance them in emerging market countries, or in certain countries ear-marked by the EU as big receivers of renewable subsidies (Spain and Germany).
The UK needs its own institution to drive development of the green economy here. State-owned development banks have worked well in Asian economies, particularly for critical infrastructure projects which require long-term lending.
We could use the remains of RBS for the bank – RBS has proven experience in infrastructure financing projects.
The bank could also take on deposits, allowing individuals to invest in the transformation of the British economy, and to support the future environmental viability of the island.
Retail investment is a large, and yet mainly untapped, source of liquidity for the renewables industry. The bank could sell ‘eco-bonds’ , for example.
And it could provide government-subsidized mortgages for houses that pass energy efficiency and insulation tests.
Finally, it could provide financing and support to research centres in British universities to make them world-leaders in developing new technology for climate change mitigation and adaptation.
by Jules Evans | Feb 12, 2009 | Economics and development
There’s a great new piece by Nouriel Roubini, the economist nick-named Dr Doom for his early prediction of the extent of the losses in the US banking sector – he said $2 trillion a while back, which initially no one agreed with, though now even Goldman Sachs does.
Well, now he thinks losses may be as much as $3.6 trillion, half of them owed by US banks and half by overseas banks. However, the assets of the US banking system only amount to $1.4 trillion, so ‘the US banking system is effectively insolvent, most of the UK banking system looks insolvent too, and many other banks in continental Europe are also insolvent’.
They are what are sometimes called ‘zombie banks’ – banks that are insolvent, dead, finished, but kept in a state of living deadness by state support, when really the plug should be pulled.
Roubini, like everybody else, is a critic of the US Treasury’s new bank bail-out scheme, saying that if the government over-values toxic assets, it’s a rip off for tax-payers and an unfair bail-out of shareholders. However, if the government accurately values the toxic CDOs of banks like Citigroup, then the banks would be rendered insolvent.
He suggests the only way out might be a widescale nationalisation of the banking system, with banks cleaned up and then sold back into the private sector (to the Middle East probably. Consider this – the entire market capitalisation of the US commercial banking system is less than half the sovereign wealth fund of Abu Dhabi).
However, the ‘N Plan’, as he calls it, is ‘not yet politically feasible’ because many people still believe banks like JPMorgan and Wells Fargo are solvent. Roubini says that in the next 6-12 months, ‘the sharp rise in delinquencies and charge-off rates we are experiencing now on mortgages, commercial real estate and consumer credit’ mean that even these apparently stronger banks will also be rendered ‘near insolvent’.
Roubini concludes: ‘You can expect a similar path and an eventual government takeover of most financial institutions in other countries – such as the UK’.
Centrally planned economy, here we come.
