So now we all have to pay the banks Libor fine.

wotsthat

angrypirate wrote: »

And now the Tories and BofE are all claiming Labour seriously overpaid for the Banks and its unlikely we'll ever make a profit. Can NOT believe these morons have a chance of getting back into power in 2015
http://www.telegraph.co.uk/news/politics/9804591/Labour-overpaid-massively-for-bank-bail-out-claims-Grant-Shapps.html

The bailouts were meant to stabilise the banking system. It's debatable whether this was necessary or desirable (I would have protected the depositors of NR & HBOS but let them go bust).

However, one thing the bailouts were never meant to be was profitable. Politicians may have attempted to sweeten the pill by hinting this was a possibility but it was never the main reason.

If a bank has failed in the private sector it's unlikely to be any more efficient in the public sector and more burdened with political interferance.

GeorgeHowell

grizzly1911 wrote: »

You entitled to disagree but I doubt the conservatives would have stood by and simply allowed a banking collapse to happen and the ensuing chaos.

Whether a Conservative government would come to their aid remains to be seen. It would no doubt be based on the degree of risk and magnitude of the problem.

We are in the grip of global capitalism, they are pulling the strings and governments are running around picking up the crumbs.

The theory is fine whether it works for the good of society as a whole is up to the individual to decide.

Given Labour's track record on (lack of) control of public spending, what they saddled us with on PFI's in particular, the fact that they are managerially incompetent especially on financial and business matters (as are the civil service who they let loose on it), it is very easy to believe that Labour overpaid. There is no basis for the assertion that the Conservatives would necessarily have made the same mistake, I'm afraid that's just playground, "No, you are too.." type stuff. Likewise the snipe about "get-rick-quick" Shapps, as if being a success in life disqualifies him from the right to a position in public life -- depressingly typical Labour thinking I'm afraid. Not too much noise from the lefties about Blair making an estimated £60m fortune and introducing a trading department in his Mayfair business empire headquarters. He's on the 'right' side of the political fence and therefore apparently immune from such criticism.

kabayiri

CLAPTON wrote: »

I've asked many times before but most people decline to answer (except Generali)


but when you say we should have let the banks fail do you mean

- that ordinary people with their saving and their salies in their current a/c should have had them wiped out?

- businesses with saving and working capital in the banks should have been wiped out?

- local councils, charities, not for proifit companies etc with their current a/cs and savings should have been wiped out?


or do you mean something different?

The discussion gets very polarised (not unusual).

Bail out banks good camp vs let them sink bail out bad.

In a genuine market economy, other banks would have pored over the books of the failed banks, and bought up the bits which were viable and ditched the remnants.

The problem was that a lack of regulation and very short term funding by these banks removed the option of an orderly resolution, which takes time.

I think they overpaid though. The banks had nowhere to go for funds, and were over a barrel. They would have had to accept pretty much any deal.

CLAPTON

kabayiri wrote: »

The discussion gets very polarised (not unusual).

Bail out banks good camp vs let them sink bail out bad.

In a genuine market economy, other banks would have pored over the books of the failed banks, and bought up the bits which were viable and ditched the remnants.

The problem was that a lack of regulation and very short term funding by these banks removed the option of an orderly resolution, which takes time.

I think they overpaid though. The banks had nowhere to go for funds, and were over a barrel. They would have had to accept pretty much any deal.

The main issue is that most people don't understand what letting banks fail actually means.



banks in very simple terms comprise

- assets ; these are their loan book i.e. mortgages, overdrafts, business loans etc

-liabilities i.e. your and my current a/c (if positive), savings ISAs and the equivalent for businesses, charities, local gov etc etc

-reserves

-shareholder capital


if a normal business goes bankrupt then

1. the assets are sold off
2. whatever cash is raised then it is divided according to a set of rules; in simple terms
-priority debts are paid (receivers, taxman etc etc)
-then most other creditors (in banking that means you and me if you have savings with then) are prorata-ed and paid accordingly ; that could be ZERO
-share holders are wiped out

Now does your definition of letting banks fail include your savings being wiped out, your current a/c being wiped out, the equivilent for business, organiations etc?

GeorgeHowell

CLAPTON wrote: »

The main issue is that most people don't understand what letting banks fail actually means.



banks in very simple terms comprise

- assets ; these are their loan book i.e. mortgages, overdrafts, business loans etc

-liabilities i.e. your and my current a/c (if positive), savings ISAs and the equivalent for businesses, charities, local gov etc etc

-reserves

-shareholder capital


if a normal business goes bankrupt then

1. the assets are sold off
2. whatever cash is raised then it is divided according to a set of rules; in simple terms
-priority debts are paid (receivers, taxman etc etc)
-then most other creditors (in banking that means you and me if you have savings with then) are prorata-ed and paid accordingly ; that could be ZERO
-share holders are wiped out

Now does your defintion of letting banks fail include your savings being wiped out, your current a/c being wiped out, the equivilent for business, organiations etc?

The key issue is the extent to which shareholder capital was protected by public money, and whether it was overprotected.

kabayiri

Isn't it an issue of scale?

A small regional bank fails : not a problem. You can underwrite accounts, and other banks will buy out the assets and customer base.

When RBS or a similar behemoth fails? The sheer scale could tear the heart out of any guarantees.

Too big to fail, is perhaps a reflection that nation states no longer have command over major corporations. It's the corporations who can call the shots now.

Generali

CLAPTON wrote: »

I've asked many times before but most people decline to answer (except Generali)

It's because the answer that most people have is one they don't want to voice:

I shouldn't have lost out and the things I value shouldn't have lost out but everyone else can go hang.

If you're going to bail out depositors of banks than that is immediately a contingent liability of well over £1,000,000,000,000 alone and that's just the biggest liability banks have.

I'm interested to see exactly how much of Europe has to go bust until people understand 2 truisms:

1. If the solvent bail out the insolvent then everyone risks becoming insolvent.
2. For every surplus there must be a deficit: the Germans are as profligate as the Chinese.

CLAPTON

GeorgeHowell wrote: »

The key issue is the extent to which shareholder capital was protected by public money, and whether it was overprotected.

for a bank, the shareholder capital is trivial compared to its liabilities and assets.

the banks failed because of its poor lending and problems with refinancing.

if letting them fail simply means letting the shareholders lose everything then that exactly what happened to B&B and Northern Rock and 90% 9ish) for Lloyds and RBS but that isn't what is normally meant by letting businesses fail.

if letting banks fail, merely means wiping out shareholders then that simply means nationalising any failing banks.

GeorgeHowell

CLAPTON wrote: »

for a bank, the shareholder capital is trivial compared to it's liabilities and assets.

the banks failed because of its poor lending and problems with refinancing.

if letting them fail simply means letting the shareholders lose everything then that exactly what happened to B&B and Northern Rock and 90% 9ish) for Lloyds and RBS but that isn't what is normally meant by letting businesses fail.

if letting banks fail, merely means wiping out shareholders then that simply means nationalising any failing banks.

The Telegraph article says that the government spent £66 billion buying bank shares. Who did that get paid to ?

CLAPTON

GeorgeHowell wrote: »

The Telegraph article says that the government spent £66 billion buying bank shares. Who did that get paid to ?

I don't know off hand how much the taxpayer spent but
the government at the time decided for RBS and Lloyds

- not to let the two banks fail
- not to fully nationalise the banks but rather to pour money into the banks to recapitalise them in exchange for new shares; so the money went to prevent the banks becoming bankrupt.