Should Darling pay bank shareholders dividends?

It is a tough question.

On the one hand, it seems ridiculous for the government to be pumping in new capital, only to see shareholders receiving dividends, which could have also gone to improve capital adequacy.

On the other hand, it won't be easy to persuade new shareholders to invest money in banks if the government forbids dividend payments.

However, this problem was always going to arise once the government decided on a partial nationalisation. If Brown and Darling had gone the whole way and completely nationalised the banks, there would be no private shareholders to worry about. Once the government had stabilised bank balance sheets, it could privatise the banks, and the taxpayer would get the full value of the capital injections.

A partial nationalization was always going to end up as a dog's breakfast.