Let the banks fail...

Graham_Devon

An idiot....or someone simply going against the grain?

Could this actually work? At the moment, we've simply socialised the losses and capitalised the gains. And it seems were continually doing that now through various government / BOE schemes where the banks get cheap money and never do what they are supposed to do with it... More worryingly, there doesn't seem to be a way out of this cycle at the moment.

One of Britain’s leading financial watchdogs has described allowing big banks to fail without receiving a bailout from taxpayers as the ‘holy grail’.

Andrew Bailey, a senior official at the Bank of England and the Financial Services Authority, said it must be a top priority for regulators when rules come into force next year.

Taxpayers are sitting on combined losses of more than £30billion in Royal Bank of Scotland and Lloyds as share prices have plunged since they were bailed out in 2008.

More (though not much more) here...

http://www.thisismoney.co.uk/money/news/article-2213220/Letting-big-banks-fail-holy-grail-says-BoE-FSA-official-Andrew-Bailey.html

Thoughts?

CLAPTON

Before you can discuss letting banks fail you need to understand the consequences
the article says absolutely nothing about what he means by 'fail'

does it mean that
-shareholders are wiped out? (probably yes)
-savers are wiped out? (election loser)

StevieJ

The Yanks had a bright idea like that - Lehman Brothers

purch

Graham_Devon wrote: »

Thoughts?

About 3 years too late. :eek:

As the late great Yogi Berra might have said...."Sounds like Deja Vu all over again"

CLAPTON

StevieJ wrote: »

The Yanks had a bright idea like that - Lehman Brothers

yes but that wasn't a retail bank so didn't have voters, local authorities, health authorities, local companies etc as savers

StevieJ

CLAPTON wrote: »

yes but that wasn't a retail bank so didn't have voters, local authorities, health authorities, local companies etc as savers

Even so, I think they regretted it.

Wookster

CLAPTON wrote: »

Before you can discuss letting banks fail you need to understand the consequences
the article says absolutely nothing about what he means by 'fail'

does it mean that
-shareholders are wiped out? (probably yes)
-savers are wiped out? (election loser)

These two points pale into insignificance when you consider that the payments & clearing system will probably grind to a halt quite quickly should a systemically important institution fail.

CLAPTON

Wookster wrote: »

These two points pale into insignificance when you consider that the payments & clearing system will probably grind to a halt quite quickly should a systemically important institution fail.

interesting but why would that be ?
as the bank would be bankrupt it would have no need to be part of clearing ; it's cheques would be worthless and it's customers would have been wiped out.

Wookster

CLAPTON wrote: »

interesting but why would that be ?
as the bank would be bankrupt it would have no need to be part of clearing ; it's cheques would be worthless and it's customers would have been wiped out.

When a bank's ATMs are used it is effectively creating assets (i.e. debits that need to be applied to customer's accounts) and similarly when it takes deposits it is creating liabilities (i.e. the bank owes the depositor money), which it cannot do once the directors know the undertaking is insolvent.

This is known as wrongful trading.

wymondham

If a business is not viable then it should fail....

ILW

wymondham wrote: »

If a business is not viable then it should fail....

Even if it will take thousands of other businesses and millions of jobs with it?