Recipe for disaster

bengasman

If the statement in this article is correct, it is not a matter of "will the banks survive", but "HOW LONG will the banks survive for".
Any first year economics student knows that the described principle is like playing Russian roulette; it does not matter how lucky you are, at some point the trigger will hit a live round.

http://uk.news.yahoo.com/banks-brokers-plunge-twist-reality-sinks-140255226.html


The specific item I am referring to, is the principle of borrowing short whilst lending long; it is the epitome of greed over business sense.
As long as interest rates are stable or going down, it is money for nothing. When interest rates go up, the margins get smaller and smaller until finally the company pays more interest for the money they have to borrow to satisfy the contracts for what they have lent.
As a result, they have 3 choices:

1. Renege on the borrower, and somehow cancel the loan.
2. Swallow the loss.
3. Get a bail out from the taxpayer.

When all 3 have failed, they go bust.

macaque_2

Governments are far too protective of banks. I accept there is a compelling need for traditional banking services but we don't get that.

Over the past 25 years, banks have reinvented themselves into organisations that skim the public (see countless examples of excessive charges and misselling) and use the proceeds to gamble.

We need are plain vanilla banking services ring fenced from speculation.

TruckerT

I reckon the only reasons for the banks' continuing presence in the 'retail' market are historical ones - they only make it pay by charging extortionate amounts for their services, whilst claiming that their services are free (.....subject to terms and conditions.....)

Banks are businesses like any other, and should have been allowed to collapse (like so many other businesses have collapsed in the wake of the bank bailouts) - unfortunately, the banks continue to control pretty well all the money that is, or is not, in circulation in the world, but are unanswerable to any government or any electorate

That is what needs to change

TruckerT