Government to allow banks to fail

RayWolfe

Why can't people post the word money without the prefix "hard earned"?
That is so clearly nonsense in a lot of cases. Did the people who banked their BS Demutualisation funds "hard earned" them? Was the payment to the outgoing Northern Rock board members "hard earned"? Was the money people got from investing in the stock market in the good years "hard earned"?
Some money is hard earned but not all. Some of mine was, some was fortuitous, and most people will be the same.

bristolleedsfan

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=174172

isofa

RayWolfe wrote: »

Why can't people post the word money without the prefix "hard earned"? That is so clearly nonsense in a lot of cases. Did the people who banked their BS Demutualisation funds "hard earned" them? Was the payment to the outgoing Northern Rock board members "hard earned"? Was the money people got from investing in the stock market in the good years "hard earned"?
Some money is hard earned but not all. Some of mine was, some was fortuitous, and most people will be the same.

I think perhaps because they are differentiating between speculative investors - who take a calculated risk and can afford to, against savers - who should not be taking a risk at all, and can't afford to lose money.

With people like CEOs of top failed organisations still getting a payout, I think is totally disgusting. These people should be sacked without a penny - they are ultimately responsible for the mess their company got into - and the wider mess the financial system is now in. Isn't Applegarth of NR fame still getting rewarded?

These people played on pure greed, were rewarded for it then, and even after the collapse of their organisations.

happywarmgun

sadabbott wrote: »

If the government refuse to bail them out, what will happen? What is the problem? Let it happen.

I'm quite sympathetic to your view on this. The reality is there is no easy answer - there is pain to come for any option - who gets the pain and when they get it depends on your political philosophy.

If you let a bank 'fail' the pain is:

a) Shareholders lose all their money.
b) Folk with savings over £50k who haven't had the sense to spread their eggs into different baskets loose a chunk of money.
c) Staff at the banks lose their jobs
d) Public confidence in banking is shaken which can cause self fulfilling runs on other banks which will put them in the same situation.
e) Banks refuse to lend to each other meaning they cannot get capital to issue new loans
f) People cannot get credit - in business this means failures of businesses of all sizes and hence wider unemployment (with consequential increase in welfare demands on government), on the high street this means you can't get a mortgage - hence a drop in demand for housing hence a collapse in housing prices. Hence a further drop in peoples 'value' (home equity etc) hence a squeeze on spending, hence more pressure on business.....


Whilst most hard noses can live with A through C* - it is D through F that create what seems at first glance a compelling case for intervention.

The trouble with intervention is that whilst the intent is honorable (stopping symptoms b-F) - the intervention is very, very costly to the tax payer - and MOST LIKELY WILL NOT WORK!!!!!

My fear is that injections of capital now will simply delay the correction of capital markets to return everything to fundamentals driven values (there is nothing new under the sun, so the markets must do this). The interventions will allow a few more people to jump off the reverse pyramid scheme over a few more months with Joe Taxpayers money - but will leave us where we would have been anyway, but with a huge national debt that will take generations to shift and stifle the ability to recover from the bottom when we get there.

But then, I'm naturally a pessimist! Those who are taking a punt with the tax money to save this have good intentions - but we all know what the road to hell is paved with.

So I would let it happen too. I hope for everyone's sakes my pessimism is misplaced.


(*and I speak as someone who has watched a paper loss of 8,000 on my HBOS shares - I'm a grown up I made an investment with my eyes open and take it on the chin)

geepster

RayWolfe wrote: »

Why can't people post the word money without the prefix "hard earned"?
That is so clearly nonsense in a lot of cases. Did the people who banked their BS Demutualisation funds "hard earned" them? Was the payment to the outgoing Northern Rock board members "hard earned"? Was the money people got from investing in the stock market in the good years "hard earned"?
Some money is hard earned but not all. Some of mine was, some was fortuitous, and most people will be the same.

That posting was rather picky and really a bit unnecessary. I didn't say the NR directors money was hard earned - quite the opposite in fact. I was merely stating a view . Posts like yours will put people who are new to this forum off from submitting a post and yours had nothing to do with the subject. Never mind. By the way, I won't say "hard earned" again!!

jack_spratt_2

With some of the comments of " let the banks fail" its not just about shareholders and depositors its also about the thousands of people with families who depend on there monthly salary . If the Banks are not paying them !! its you and me anyway .

GeorgeHowell

Private depositors with less <=£50,000 should be alright. However there are commercial depositors who are unprotected and there is the money that banks lend to other banks. If a big one is allowed to fail and these groups lose out big time then there could be a domino effect with unpredictable consequences which governments do not want to countenance -- particular those who have to go to the country within two years or so. I guess none of us have sympathy with the aptly described "venal" bunch of obscenely highly paid, greedy, and disreputable wide-boys, cowboys, and con-artists who have got us into this. But as someone points out there are many lowly workers at banks who would be thrown onto the dole. I have mixed feeling about shareholders. It is unwise for small shareholders to be in single companies anyway. But the most influential shareholders are usually fund managers, including those of pension funds. I have little concern for their plight as individual but the money that they control belongs in large part to us, one way or another, so we should not be too cavalier about throwing shareholders to the wolves.What should happen is that in return for the bail-outs governments ensure that the venal brigade are never allowed to do this again, whatever that takes. The bonus culture has to come to an end, even if direct capping legislation is required to bring it about.