Bank Losses and Nationalisation

Rochdale_Pioneers

We can't nationalise RBS and Lloyds fully because we would then swallow their losses and liabilities. With Northern Rock and Bradford and Bingley their exposure was mainly on mortgages - the risk of default is very low (0.4% of Northern Rock mortgages defaulted last year).

With these two with their massively exposed investment banks, we - and they - don't know what the exposure is. If we take on RBS and find that they owe someone £100bn we as sole owner have to find it on top of money already paid out in shares. If we as majority shareholder find out they owe £100bn we have the option of them going bust. All we lose then is money already paid out.

But its not just these two banks or just British banks in this mess. There will have to be some kind of global solution to this tangled knot of debt that will probably involve mass default. That will mean a lot of investors and shareholders lose their shirts, which is a risk you take with investing in the stock market. Whats worse - global investor billionaires go bust, or governments go bust trying to repay these individuals?

mummytofour

I wish we had some other system. I think the banking system is past helping but whatelse can we do? As we have no back up system, do we?

The gov money could be better spent on re-training the bankers...

harryhound

[quote=kennyboy66;17910911
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). .[/quote]

The Gulf Arabs are getting something like 14% and would be preferential creditors over the shareholders. They have options to convert to shares if the rescue works.

Even now I think I would take a punt if offered those terms.