Bank Losses and Nationalisation

piggeh

Well we can always join the dollar I guess

setmefree2

I read a solution (somewhere) that sounded right to me.

As a housing bubble increases, banks should be required to hold higher capital ratios. Simple really - why didn't we think of it before? Doh!

dopester

The_White_Horse wrote: »

the best option would have been for the govt to let the banks fail in the first place.

It isn't my area of expertise, but I'm expecting there is a limit to how far the government will take the attempt to rescue and to pay or takeover every bad debt - to forestall supposed credit collapse.

I'm thinking, but not betting, RBS could be it. RBS could be a the point where the market shows the government they must back down and accept deflation - let the market deal with RBS - ... even if there is significant social unrest and the end of the welfare state in the present form, and NHS too.

stevetodd

dopester wrote: »

It isn't my area of expertise, but I'm expecting there is a limit to how far the government will take the attempt to rescue and to pay or takeover every bad debt - to forestall supposed credit collapse.

I'm thinking, but not betting, RBS could be it. RBS could be a the point where the market shows the government they must back down and accept deflation - let the market deal with RBS - ... even if there is significant social unrest and the end of the welfare state in the present form, and NHS too.

There is obviously a limit as to how much the Gov can do but I think we are a long way from this happening. When a bank, particularly one as large as RBS goes under (and not nationalised) it will be utter choas (much more so than now) in the market place.

WTF?_2

baby_boomer wrote: »

What a pity that Gordon decided to saddle Lloyds with the HBoS disaster - thus ruining two banks for the price of one!

The Lloyds management has a lot to answer for - as do the institutional shareholders who voted it through because they also owned HBoS shares and thought this would better preserve their stakes' value.

I don't think the decision to merge with HBOS was forced on Lloyds.

They saw the opportunity to buy a rival at firesale prices to form an organisation with a huge share of the market that would otherwise have been impossible under competition rules. Plus. the government were willing to support the losses of HBOS and Lloyds losses into the bargain.

However it has all went horribly wrong and its starting to look like the entire Llyods/HBOS mess is going to end up under majority government control, which wasn't their idea at all. I don't know if Barclays can avoid the same fate but this shows why they went to some considerable lengths to avoid taking government support, there will be some major profit potential for solvent banks down the line but government controlled ones will be forced to lend at unprofitable rates.....

bubblesmoney

piggeh wrote: »

Well we can always join the dollar I guess

i dont think the americans would be interested with that. since when did pet dogs (tony & brown) that followed the master get to decide american policy.

Radiantsoul

As a Labour government they are ideologically opposed to nationalisation. I actually think a Tory government might have been nationalised first.

The fall in share prices seems to indicate not so much the market thinks the banks are bust, but that they are already virtually nationalised and so little is going to flow to normal shareholders for a good while yet. I wonder if any of the banks will pay a dividend for a couple of years at least. And government is leaning on the banks for a rise in lending when lending is likely to further increase costs(the insurance offered is unlikely to be cheap enough to ensure profits). If the banks don't lend then it is likely that one or more will be nationalised(RBS is currently the weakest).

dopester

Radiantsoul wrote: »

If the banks don't lend then it is likely that one or more will be nationalised(RBS is currently the weakest).

This guy sums up most of my reasons why RBS isn't a prospect the government would happily nationalise. I'm not saying RBS is a total basket-case... they have some good stuff which the market would carve up between itself. Get rid of it now before deflation lowers the price of the good stuff even further maybe. I'm not sure about all their exposure to toxic stuff though.

Still... adding a £trillion+ to the national-debt might be a step too far.

Why RBS can’t be nationalised
http://www.financemarkets.co.uk/2009/01/20/why-rbs-cant-be-nationalised/

kennyboy66_2

!!!!!!? wrote: »

I don't think the decision to merge with HBOS was forced on Lloyds.

They saw the opportunity to buy a rival at firesale prices to form an organisation with a huge share of the market that would otherwise have been impossible under competition rules. Plus. the government were willing to support the losses of HBOS and Lloyds losses into the bargain.

However it has all went horribly wrong and its starting to look like the entire Llyods/HBOS mess is going to end up under majority government control, which wasn't their idea at all. I don't know if Barclays can avoid the same fate but this shows why they went to some considerable lengths to avoid taking government support, there will be some major profit potential for solvent banks down the line but government controlled ones will be forced to lend at unprofitable rates.....

I'd love to know the truth about Lloyds/TSB but it plainly was a wrong move by their management whether it was forced upon them or not. I suspect they were strong-armed into it. If not it was a huge and reckless gamble.

Barclays is a good example or how the relationship between shareholders and managment is broken in many cases.

Their scuttling off to the middle -east looked wholly designed to preserve their top boys pay packets. They treated their existing shareholders with utter contempt (a narrow escape for the shareholders in hindsight). They are almost certain to need hefty government support - I suspect Barclays hasn't fessed up to many of their dodgy loans.

I reckon the Treasury / BoE / Brown will want to humiliate Barclays management when they come with the begging bowl.

dopester

!!!!!!? wrote: »

I don't think the decision to merge with HBOS was forced on Lloyds.

Given some of the big smiles on the Lloyds TSB big-shot's faces at the time, I suspect you are right.

I can't help think they got assurances of one kind or another though from government, but whether they are honoured is another matter.