Is it ok to let HBOS go under

vivatifosi

Rochdale_Pioneers wrote: »

Yes lets express our anger at the banks by letting HBOS fold. Lets all enjoy the reaction as all our other banks collapse by a mass sell-off of their shares and a mass calling in of their debts by creditors. Then lets see the UK's credit worthiness fall.

Letting Lehman collapse is widely regarded as the cataclysm that pushed the American system over the edge. Why do some of you want the same to happen here?

I'm not in favour of letting banks fold.

However we're talking what was formerly one of the largest companies in the UK and nobody had time to do full due diligence. The devil is always in the detail in M&A. We can't be surprised if things come back and bite us in the butt if we don't do the job properly to start with. If you don't have time to do due diligence - put more people on the task.

Nobody is showing leadership in this issue, you have a bunch of numpties putting keeping their jobs first and it is painful to watch. As a result we have HBOS lolling around on the economic high seas like a broken supertanker, spilling its toxic waste everywhere and frankly its not good enough. Someone has to show leadership and I don't see anyone good about to step up and take the reins. As we are going to chuck public money at HBOS, then someone needs to be accountable to us and show us why it is money well spent. I'm not holding my breath.

Cleaver

RHYSDAD wrote: »

Thanks for the thinly veiled sarcasm.

No problem. It's my specialty.

vivatifosi

Cleaver wrote: »

No problem. It's my specialty.

Thank goodness you've stuck around Cleaver. My blood pressure would be going through the roof reading these boards if I didn't have your light-hearted quips to cheer me up.

trenchwars

Isn't the problem that the British banking sector is too large.

Institutions like Halifax and Northern Rock grew from small mutual building societies to massive institutions.

The banks have grown as a result of excessive consumer borrowing, which has now declined and there is no guarantee that borrowing will ever return to 2007 levels.

It seems logical to me that there should be a contraction in the banking sector. The natural way for this to happen would be for the badly-run and debt-laden banks to go bust. The stronger banks will take short-term losses but will survive.

The Government will not allow this to happen, and is instead trying to prop up the failed banks through nationalisation in the hope that they will eventually return to profitability and can be sold off.

The problem is that this is based on the assumption that at some point there will be enough demand for credit in the market for these banks to make money again.

Personally, I think the banks should be allowed to fail. Depositors could be compensated directly out of the Government's coffers to prevent panic from spreading, who could in turn recover the money by seizing the bank's mortgage assets and selling them off to the remaning banks.

Shareholders would be wiped out, but that's what happens when you invest money in a badly-run business. Most instutional investors should have sold their shares in the overexposed banks by now if they had any sense.

Count_Dante

trenchwars wrote: »

Isn't the problem that the British banking sector is too large.

Institutions like Halifax and Northern Rock grew from small mutual building societies to massive institutions.

The banks have grown as a result of excessive consumer borrowing, which has now declined and there is no guarantee that borrowing will ever return to 2007 levels.

It seems logical to me that there should be a contraction in the banking sector. The natural way for this to happen would be for the badly-run and debt-laden banks to go bust. The stronger banks will take short-term losses but will survive.

The Government will not allow this to happen, and is instead trying to prop up the failed banks through nationalisation in the hope that they will eventually return to profitability and can be sold off.

The problem is that this is based on the assumption that at some point there will be enough demand for credit in the market for these banks to make money again.

Personally, I think the banks should be allowed to fail. Depositors could be compensated directly out of the Government's coffers to prevent panic from spreading, who could in turn recover the money by seizing the bank's mortgage assets and selling them off to the remaning banks.

Shareholders would be wiped out, but that's what happens when you invest money in a badly-run business. Most instutional investors should have sold their shares in the overexposed banks by now if they had any sense.

But where is the advantage in allowing Lloyds to fail in comparison with nationalisation? Shareholders will get wiped out anyway if the bank is nationalised, and if there are too many staff there can be redundancies.

Dylanwing

IMHO Brown missed a lot of tricks with his bailouts, he was too focussed on Saving the World and the Bankers that he overlooked the ordinary citizens. Simple things like 6 Months notice (minimum) for withdrawal of existing borrowing facilities (With a few exclusions for insolvency), instead of repossession, property moves to social housing with owner paying rent (Again, finer details need sorting to avoid abuse and cap State liability), and of course, a cap on salaries and bonusses (Might be counter-productive in some ways, but it keeps us plebs happy!). The social and financial cost of unemployment and repossessions is huge, and will really start to hurt in about 12 Months time, which will be too late for his headline grabbing (But ineffective) panic measures. He has thrown a lot of taxpayers money at Banks, but the taxpayers seem to be getting very little in return. It all seems to be firefighting, rather than looking ahead. And it might help if Government contracts for train building went to a UK Company rather than Japan - It might also help our green credentials!

trenchwars

Count_Dante wrote: »

But where is the advantage in allowing Lloyds to fail in comparison with nationalisation? Shareholders will get wiped out anyway if the bank is nationalised, and if there are too many staff there can be redundancies.

True, but at least the taxpayer wouldn't be on the hook for potentially multi-billion pound losses.

mrposhman

trenchwars wrote: »

True, but at least the taxpayer wouldn't be on the hook for potentially multi-billion pound losses.

SHORT TERM.

The investment in banks was not designed to create a quick buck for the taxpayer. It was designed to stop the economy completely disintegrating before our eyes whilst also providing the potential for capital growth on the capital invested.

If HMG sell the shares back to Lloyds at a gain of 50% in 5 years will you still be making comments like this??

Look at the big picture, the potential gains on these shares is massive (albeit with huge risk) but imo the risk of completly going bust is low. Remember, (though the media have tried hard to hide this) HBOS was always likely to be making a huge loss this year. This is media sensationalism at its very worst.

trenchwars

mrposhman wrote: »

SHORT TERM.

The investment in banks was not designed to create a quick buck for the taxpayer. It was designed to stop the economy completely disintegrating before our eyes whilst also providing the potential for capital growth on the capital invested.

If HMG sell the shares back to Lloyds at a gain of 50% in 5 years will you still be making comments like this??

Look at the big picture, the potential gains on these shares is massive (albeit with huge risk) but imo the risk of completly going bust is low. Remember, (though the media have tried hard to hide this) HBOS was always likely to be making a huge loss this year. This is media sensationalism at its very worst.

How can you be sure that the failure of one or two banks would lead to the disintegration of the economy? When Nothern Rock got into trouble many people were suggesting that a sensible course of action would be to let it go into administration.

I'd rather have a government that didn't take huge risks with my taxes.

I'm not sure these banks can ever be returned to profitability, given that the credit market has shrunk, and they will have to compete with institutions that have not sought public help. Northern Rock and HBOS are brands now associated with failure and incompetent management.

Woby_Tide

Broken_hearted wrote: »

One bank going under will not collapse the whole system banks go under from time to time as normal circumstances.

Really? How many High Street banks have collapsed and gone completely under in the past 50 years(Google fails to return any easy hits due to the current crisis)?