Plan on table along with the tandoori chicken

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Plan on table along with the tandoori chicken

By George Parker and Peter Thal Larsen

Published: October 9 2008 02:59 | Last updated: October 9 2008 02:59

Alistair Darling sat in the Treasury on Tuesday night, surrounded by the documents that would put in place a £400bn plan to rescue Britain’s financial sector. But one piece of paper temporarily held his attention: the menu for Gandhi’s Indian takeaway in Kennington.

“I’ll have the tandoori chicken,” the chancellor intoned. “And the boiled rice and sag aloo.” Mr Darling had decided to ring the changes: when his officials had worked into the early hours to nationalise Bradford & Bingley last month they had eaten pizza.

So it was that over a curry, Mr Darling and his Treasury team began to hammer out the details of the deal that would partially nationalise the high street banks and flood the markets with liquidity.

Once the foil containers had been cleared, Mr Darling began the hard grind of working through the plan with Britain’s top bankers, who arrived at the Treasury just after 10pm.

The executives were still largely in the dark about the extent of the scheme, and how it would work. Although contingency plans had been in preparation for several weeks, Mr Darling admitted to MPs on Monday it was still not fully formed.

Mr Darling addressed the executives, flanked by Treasury officials and advisers including Robin Budenberg and David Soanes, from the investment bank UBS, and David Mayhew and Naguib Kheraj, of JPMorgan Cazenove. Nilufer von Bismarck, a partner at Slaughter & May, the City law firm was also in the room, as was Michael Klein, the former Citigroup investment banker who has advised the government.

Earlier in the evening, the banks’ chief executives held a conference call to agree a common line in discussions with the Treasury. But quickly a clear split emerged: on one side were executives from HSBC, Standard Chartered and Abbey, the UK subsidiary of Santander, all of which felt they did not need additional capital, but were prepared to participate in a government bail-out if it benefited the system. On the other were executives including Sir Fred Goodwin, chief executive of RBS, John Varley, his counterpart at Barclays, and Eric Daniels, head of Lloyds TSB, which is in the process of acquiring HBOS.

At a meeting with Mr Darling on Monday night, these three executives had joined forces in pushing the government quickly to make clear its plans for a recapitalisation.

Eventually it was agreed that all eight institutions would participate in the scheme to differing extents. Mr Darling went to bed at 1.45am, satisfied the deal was done, the bankers leaving at about the same time.

But that left less than six hours for details of the plan to be prepared and published before the London markets opened.

Treasury officials worked through the night, sustained by Diet Coke and water. Paul Myners, the new City minister and former chairman of Marks and Spencer, was at the table, as was Nick Macpherson, the chief Treasury civil servant, and John Kingman and Tom Scholar, two other senior officials.

By 5am the package was finalised and Mr Darling and Gordon Brown convened to discuss how to present the plan to the media and to the House of Commons.

The prime minister had retired to his flat at 10pm the previous evening, having earlier authorised the plan in principle with Mr Darling and Mervyn King, the governor of the Bank of England.

After a year of living in the shadow of Mr Brown, the Treasury was at pains to claim this rescue package was very much the work of Mr Darling and his team, although the prime minister was fully involved.

But that was not the end of the drama. Number 10 insists neither Mr Brown nor Mr Darling knew that while they were finalising the bank rescue plan, Mervyn King was preparing a half-point cut in the Bank of England’s interest rate, in step with other central banks.

Contact between Mr King and Ben Bernanke, chairman of the Federal Reserve, and Jean Claude Trichet, head of the European Central Bank, intensified over the past few days with the Fed pressing ever harder for co-ordinated rate cuts, something it had wanted since mid-September but had initially been fiercely resisted by the Bank. It did not inform government about these conversations or the emerging plan to hold an emergency monetary policy committee meeting early on Wednesday.

But nothing was certain even on Monday night when the Bank was making contingency plans to delay the governor’s trip to Washington on Thursday, in case he could not get to the airport in time after the scheduled MPC meeting.

The other members of the MPC were informed at the last minute and on Wednesday agreed to take the step of cutting rates with other central banks.

Additional reporting by Chris Giles

Government action finds little favour among by-election voters

Just weeks before voters in the Scottish seat of Glenrothes pass judgment on the government in a by-election, the bail-out of the banks seemed to be winning Gordon Brown few friends, writes Andrew Bolger.

“It looks like the fat cats are just going to get fatter,” said Janice Thomson, a clerical assistant with Fife council. “It doesn’t seem fair that we are bailing out the people who got us into this mess.”

Ms Thomson predicted that the Scottish National party would emerge victorious when the poll was held in four weeks – as did all the other voters the FT canvassed on Wednesday.

Stephen Rae, a retired engineer with the Royal Air Force, said: “We shouldn’t have got into this state in the first place.

“They say bankers’ bonuses are going to be cut – but I think it would be a good idea if the prime minister cut his own salary by, say, 25 per cent.”

Several voters contrasted the generosity of the support being offered to the banks with the modest efforts made by the government to soften the blow of rising fuel prices.

“Fuel going up was a killer for the pensioners I look after,” said Evelyn Mason, a home carer. “Since Gordon Brown came to power I’ve stopped supporting Labour – he’s just a wimp.”

Laurie Martin, an engineer, also believes Labour will lose the constituency, which neighbours the prime minister’s own . “I’m worried about the state of the economy. I’m not clear about the details of this bail-out of the banks, but the money will have to come from somewhere – and I think it will be us,” he said.

Craig Telford, an unemployed barman, was also unimpressed by the government’s efforts.

“Multi-billion-pound companies should not be being bailed out,” he said.

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