Why bail out failed banks?

esbo

They fail that's tough but so what, why bail out failed companies, they failed,
bosses will remain in power and ultimately fail again making the situation worse.

Those who make bad decisions will not learn the lesson, the result will be
an even bigger failure.

Pssst

Indeed,there are many facets to this debate. Why for instance did the Governement let quite a few critical industries in this country go to the wall without intervention eg Rover, Steel,Shipping, but they are happy to bail out institutions that have brought about their downfall because of greed?

No doubt there are still people making their fortunes out of this perilous situation?

Also,looking at the Bradford and bingley,,why has HM Government taken over all the mortgages and potential debts and sold all the assets to Santander? Why not take the assets also as a financial backstop against the potential debts?

Truth is HM government absolutely MUST back the banks to maintain confidence becuase if it slips one iota,it could start and avalanche of loss of confidence. If the day comes when people cant get their money out of banks,then all is lost and there will be civil war on the streets.

Aegis

Or, from the other side of the coin, DON'T bail out failed banks and cause mass hysteria in public, in turn causing further bank run-ons and the collapse of most of the banking and economic system of the country in which it failed.

Personally I'd rather see a few banks taken over and helped out a little.

cheerfulcat

Pssst wrote: »

Also,looking at the Bradford and bingley,,why has HM Government taken over all the mortgages and potential debts and sold all the assets to Santander? Why not take the assets also as a financial backstop against the potential debts?

The mortgages are the assets!

mrposhman

cheerfulcat wrote: »

The mortgages are the assets!

exactly, it was the liabilities that were sold.

What I don't understand is why the cash for the entire savings has been given to santander as cash (in the form of a loan) from the financial compensation scheme?? Surely, a guarantee would have worked without having to pass them so much cash??

fatpig_2

Bankers need to replace their old ferraris with new ferraris every 6 months. What would they do if we didn't? Get the bus? No, of course not. That's why we've got to bail them out.

Pssst

cheerfulcat wrote: »

The mortgages are the assets!

It might be hard to quantify how much of an asset they are. after all,they are only assets whilst they are being paid. Also,many of them are secured against properties which are steadly decreasing in value. If you have a mortgage of 150,000 on a house that was worth 200,000 but is now worth more like 110,000 and falling,would you keep paying it especially if the interest rate keeps going up?

surely cash in the bank is a more tangible asset?

pumpndump

Yes I completely agree that these banks are run by greedy brainless buffoons. BUT Most of these banks ARE the financial system of this planet. Take out a couple of key banks and the whole lot will collapse like a house of cards. And we'll be back to the Middle Ages. That's why.

esbo

No we should not bail out these people, a bankrupt system must be allowed to collapse under the weight to the sh*t which is running it.

A complete clear out of a bankrupt system is needed as it has proven to be a failed and corruption ridden.

It is like bailing out a local compulsive gambler because he spends a lot of money in the local shops, it's a bad idea becasue he will just gamble it all away again and then be back pushing his begging bowl under your nose again. However this time both you and the gambler will be both bust and penniless.

If the bail out goes through we are all doomed. End of the world stuff.

esbo

pumpndump wrote: »

Yes I completely agree that these banks are run by greedy brainless buffoons. BUT Most of these banks ARE the financial system of this planet. Take out a couple of key banks and the whole lot will collapse like a house of cards. And we'll be back to the Middle Ages. That's why.

We will be back to a finiancial system which works.
Good companies will survive, those run on credit will fail. Thats a good thing.
Why pour money into failed companies that can't pay their wage bill?
That's madness.

Reaper

esbo - I'm not sure you've thought this through. Easy to say "let them fail" but I'm not that keen to wave goodbye to my hard earned life savings.

If a lot of the banks crashed the rest would fall as panicking customers tried to take out their money. If the whole lot went the government would not be able to compensate us, they wouldn't have anywhere near enough cash to do it, and that would occur worldwide.

The world economy would nose dive and we would end up in a 1930s style humdinger of a recession.

Better to save the occasional failure now and then deal with blame and better regulation later.