Why we should have let the banks go bust

carolt

I think we urgently need to separate investment banking from high street banking. Then we can safeguard the dull but vital banks that hold ordinary people's money, and let the rest of them speculate as much as they want - and go bust of they take stupid risks.

Creating mega banks as we have done - which are 'too big to fail' - seems, in retospect, to have been precisely the wrong thing to do.

penguine

carolt wrote: »

I think we urgently need to separate investment banking from high street banking. Then we can safeguard the dull but vital banks that hold ordinary people's money, and let the rest of them speculate as much as they want - and go bust of they take stupid risks.

I agree. Haven't heard anything about serious proposals to do this imminently though. But then, the Glass-Steagall Act wasn't passed until several years into the Great Depression.

Alan_M_2

Thrugelmir wrote: »

Banking is a profitable business so how ever long it takes the money will be repaid now that we hold an equiy stake in the banks.

Normally I would agree with this statement, but I'm not so sure this time.

I think the sums of money are simply so large and increasing, that it's hard to see where it will come from unless we let them do it all over again.

Should the banks have been allowed to go bust ? I don't really know the answer to that, I'm not sure anyone quite knows the full extent of what would actually happen if this was allowed to have occurred. Moral yes, they should have been, but that isn't the issue is it.

It bothers me that the aftermath is wiping out businesses and individuals both viable and non viable and none of these people are being allowed any concession at all.

Add to that the the recent revelations of the parliamentary expenses and it makes you wonder why we're all bothering. Why not just get a nice log cabin in the middle of nowhere and live off the land......

One thing I thought this morning reading all this......Osama Bed Linen and his chums must be sat in a cosy cave having right good chuckle to themselves looking at how the evil westerners have done more damage to themselves through pure greed and stupidity than any amount of unpleasantness they could throw at us has done.

Alan_M_2

carolt wrote: »

I think we urgently need to separate investment banking from high street banking. Then we can safeguard the dull but vital banks that hold ordinary people's money, and let the rest of them speculate as much as they want - and go bust of they take stupid risks.

Creating mega banks as we have done - which are 'too big to fail' - seems, in retospect, to have been precisely the wrong thing to do.

Whilst on the face of it this actually seems like a sensible idea, when you look past the facade of a bank at it's actual workings the high street everyday bits and the speculative trading are inexorably linked.

If we separated them the days of free banking would be over, in fact without the speculators it would probably cost so much to run a bank that the fees would be so high and interest offered minimal or actually zero that it wouldn't be a viable business.

Leaving the only alternative to be a state bank for the people and private banks for the wealthy and speculators.....all sounding a little too left wing for my liking..

As much as we are all maligning capitalism right now, I still see it as the lesser of two evils and until someone comes up with a better idea we're stuck with it.

It'll start all over again, same thing different name different time......In 30 years time this will be the great credit crunch of the beginning of the century to which they'll be comparing the next crash caused by the next bunch of speculators that think they've discovered the secret to financial alchemy.....

carolt

As someone who is avowedly left-wing, I see no problem witha safe state-run bank to stash my cash, and let the investment banks do what they will.

After all, we've got the nationalised banks now - BUT we've also got responsibility for all the others too.

Worst of all possible worlds.

Generali

Alan_M wrote: »

Whilst on the face of it this actually seems like a sensible idea, when you look past the facade of a bank at it's actual workings the high street everyday bits and the speculative trading are inexorably linked.

There really is no need for them to be linked in any way. It should be prefectly possible to sell a couple of savings accounts, mortgages, a current account and a credit card in such a way as to turn a profit. Really it would be just about marketing it well and most importantly for a retail bank, having a very efficient back office.

Trading profits aren't used to subsidise retail banking IME.

Alan_M_2

Generali wrote: »

There really is no need for them to be linked in any way. It should be prefectly possible to sell a couple of savings accounts, mortgages, a current account and a credit card in such a way as to turn a profit. Really it would be just about marketing it well and most importantly for a retail bank, having a very efficient back office.

Trading profits aren't used to subsidise retail banking IME.

Really? That does surprise me.

I couldn't possibly imagine how they could pay for all those huge glass buildings without the speculation....but maybe sheer volumes can....

CLAPTON

was it the investment bit of banks that caused the crash then?
if so why were building societies affected?
many view the excessive lending on mortgages in the US as the fundamental cause of the problems

Generali

Alan_M wrote: »

Really? That does surprise me.

I couldn't possibly imagine how they could pay for all those huge glass buildings without the speculation....but maybe sheer volumes can....

Ever seen the Prudential building down in Holborn? It's amazing what the odd half a percent here and there can do for you.

Trading profits are unreliable. Wealth management is where it's at. You hang on to peoples' money for years and charge them just little bits each year.

For example, Fidelity has Assets Under Management (AUM) of USD 1,250,000,000,000. Even if they only charge a management fee of 0.5% across the board (generous by industry standards) they generate $6,250,000,000pa in fees.


Kerrrrrching!

Alan_M_2

So how would the speculating bit of the bank actually get funded if all the deposits were in a separate "retail" bank? In my simple mind I thought all the deposits were put in a central pot and the bank was then allowed to lend out or "play" with 10-11 times that amount of money.

I have a feeling I'm showing my ignorance to how these things work.....