Could people REALLY lose all their savings?

dunstonh

In the UK, all savings accounts cover you up to £85,000. Is this ABSOLUTELY guaranteed?

As long as the UK Govt is solvent then yes. Whilst the protection doesnt come from the Govt, the Govt does agree to loan the money to the FSCS which then needs to be repaid by financial services companies.

if banks in the U.K start to collapse next year, one after the other, what's the worst that could happen?

Worst? you board up your windows, stack up on baked beans and weapons.

I mean it could cause suicides surely (sorry for the doom) if people lost everything....is that REALLY possible?

The total loss scenario with society reverting back 300 years is completely possible. It's unlikely and things would have to go a heck of a lot more wrong (and there is no current indication of that coming even close).

I was speaking to someone rather high up in the building of protected investments recently who said that they stopped using Lloyds as a counterparty even though they are mostly Govt owned and will possibly end up fully Govt owned. This was because the Govt could decide to let certain parts of the bank go into default whilst keeping other parts running. i.e. they could keep the retail banking side going but allow defaults on other parts that do not directly affect the retail consumer. That hasnt happened yet but they didnt want to take the risk. However, it was interested to hear their views.

kidmugsy

meunier wrote: »

That loss is exactly what happened in the Great Depression of the 1930s ...

Not in Britain it didn't: are you thinking of the bank collapses in the US?

C_Mababejive

meunier wrote: »

That loss is exactly what happened in the Great Depression of the 1930s - which, I believe, is why regulatory bodies to help protect against such were created.

My own parents lived through this period as children. It very much formed their own (and as a result their children's) moral codes. Coming to their political maturity in the 1960s, the world saw a man walk on the moon. It hasn't happened since.

I wonder will the same happen again in the 2020s? Somehow I doubt it. The toll of greed that began to knell oh, so sharply in the 80's will, I somehow think, have much to answer for.

Regarding the great depression and the collapse of wall street/people loosing fortunes in stock etc and jumping out of windows...

Surely if in 1930 you owned 10,000 shares in the acme railroad company,then as long as gthe company didnt collapse,you still owed 10,000 shares in 1950 when the markets had recovered?

dunstonh

Surely if in 1930 you owned 10,000 shares in the acme railroad company,then as long as gthe company didnt collapse,you still owed 10,000 shares in 1950 when the markets had recovered?

One of the biggest issues in the depression was the level of gearing that took place. Very few individuals do that nowadays.

meunier

Yes, you are indeed right. My father by birth and my mother by her own mother's second marriage were 'North American', specifically Canadian.

meunier

kidmugsy wrote: »

Not in Britain it didn't: are you thinking of the bank collapses in the US?

Yes, you are indeed right. My father by birth and my mother by her own mother's second marriage were 'North American', specifically Canadian.

zagfles

dunstonh wrote: »

One of the biggest issues in the depression was the level of gearing that took place. Very few individuals do that nowadays.

Except with housing of course...which is what started the current crisis.

jamesd

zagfles wrote: »

Except with housing of course...which is what started the current crisis.

Not really. The closest thing to a single starting event was the introduction of securitisation of mortgage loans between ten and fifteen years ago. Securitisation meaning that mortgage lenders could give a mortgage and then sell on the risk of it to others in a package of loans. In the typical case without having to retain any liability at all for the quality of their underwriting, notably in the US.

In the US that led to lots of lending to very poor quality borrowers who subsequently had an unexpectedly high default rate. To that was added a reduction in home prices in the US which led to an inability to fully repay after foreclosure (repossession in the UK). Worse, in many US states if you're foreclosed on you don't retain any liability for the shortfall as you do after repossession here. That in turn gave people an incentive to just walk away from their loans, further increasing losses for the people who had purchased the mortgages.

Ultimately that combination led to decreasing trust between banks and failure of at least one large bank due to a failure of regulators to appreciate how painful it would be to let it fail. That further worsened the lack of trust between banks.

That then created a problem of its own: some banks in the UK and elsewhere had been funding long term (2-5+years) mortgage lending with short term (months to a couple of years) borrowing from the markets. When the trust between banks dried up that meant that they were unable to replace their short term borrowing as repayments became due. That then led to the failure of two medium sized UK mortgage lenders who had made the most use of that form of financing, including Northern Rock, and severe funding stress even for those that had used it less but still significantly, resulting in partial nationalisation fo some more major UK banks.

The more immediate crisis in the Eurozone was started when it was founded without a way to adjust spending in an effective way between regions with different types of economy. It was made much worse by a fraudulent application and acceptance of membership for Greece based on falsified national income and expenditure numbers and a failure to properly audit those before accepting its membership. A succession of governments in Greece made that worse by spending in an irresponsible way and continuing to hide the problems.

And that's the short summary of the financial crisis to date and it long-standing underlying causes. The variation of property prices was just what markets do, it was the other factors that led to a crisis.

zagfles

jamesd wrote: »

Not really. The closest thing to a single starting event was the introduction of securitisation of mortgage loans between ten and fifteen years ago. Securitisation meaning that mortgage lenders could give a mortgage and then sell on the risk of it to others in a package of loans. In the typical case without having to retain any liability at all for the quality of their underwriting, notably in the US.

In the US that led to lots of lending to very poor quality borrowers who subsequently had an unexpectedly high default rate. To that was added a reduction in home prices in the US which led to an inability to fully repay after foreclosure (repossession in the UK). Worse, in many US states if you're foreclosed on you don't retain any liability for the shortfall as you do after repossession here. That in turn gave people an incentive to just walk away from their loans, further increasing losses for the people who had purchased the mortgages.

Ultimately that combination led to decreasing trust between banks and failure of at least one large bank due to a failure of regulators to appreciate how painful it would be to let it fail. That further worsened the lack of trust between banks.

That then created a problem of its own: some banks in the UK and elsewhere had been funding long term (2-5+years) mortgage lending with short term (months to a couple of years) borrowing from the markets. When the trust between banks dried up that meant that they were unable to replace their short term borrowing as repayments became due. That then led to the failure of two medium sized UK mortgage lenders who had made the most use of that form of financing, including Northern Rock, and severe funding stress even for those that had used it less but still significantly, resulting in partial nationalisation fo some more major UK banks.

The more immediate crisis in the Eurozone was started when it was founded without a way to adjust spending in an effective way between regions with different types of economy. It was made much worse by a fraudulent application and acceptance of membership for Greece based on falsified national income and expenditure numbers and a failure to properly audit those before accepting its membership. A succession of governments in Greece made that worse by spending in an irresponsible way and continuing to hide the problems.

And that's the short summary of the financial crisis to date and it long-standing underlying causes. The variation of property prices was just what markets do, it was the other factors that led to a crisis.

Right. But as I said the crisis (ie the 2007 crisis rather than the Eurozone) all started with geared investment in housing. Without that all that followed wouldn't have happened.

jimjames

zagfles wrote: »

Except with housing of course...which is what started the current crisis.

That may be true but the difference compared to owning shares or bank accounts is that you have a physical asset. Even if everything goes belly up and the price of it may drop but you can still rent it out and get an income or even in worst case barter value against it.

I'll rent you a house/room and you pay me in food or some other commodity.

To the OP, these reports of banks in the US losing savers ALL their money. Can you provide some evidence to support this? SOme links to any reputable web sources?