Bank Funding

dunstonh

Can you confirm what public funding you are talking about?

Is this the Northern Rock nationalisation or the attempts to restart the movement of credit? Both of these are very different things. Of course, setmefree appears to believe that we would all be better off if the banks went bust and sent us back into the middle ages.

Out of interest, I was too young in the 60s & 70s but were similar signs of "outrage" shown when blue collar industries were nationalised?

jamesd

Your question is not simple, it's confusing because of the many meanings it can have.

For example, banks keep reserves with the Bank of England and the Bank of England lends money to banks in exchange for them depositing security (rights to income from loans) with it. Some people (you recently) have mistakenly thought that this was public funding of banks when it's really the BoE lending them back their own money.

Similarly, some might view taking mortgage loans and exchanging them for BoE loans as public funding, even though the money amounts the BoE gets will be higher than the amount it pays the banks, so it'll make a profit on the deal. Again, it's the BoE lending banks back their own money.

Others might view lending Northern Rock money secured by mortgage loans as public funding of banks, even though again the money came from Northern Rock in the first place!

There won't actually be any public funding of banks until the interest paid to the Bank of England on the loans becomes less than any money it might lose somehow. And part of its job is to make sure that doesn't happen. So far it has succeeded in doing this and making a profit along the way, saving taxpayers money and also keeping the banking system running.

Your question effectively assumes that something that hasn't happened and isn't planned is somehow going to happen and that's misrepresenting the world as it really is, apparently to try to make a bogus political point.

Meltdown_2

jamesd wrote: »

Your question is not simple, it's confusing because of the many meanings it can have.
...
There won't actually be any public funding of banks until the interest paid to the Bank of England on the loans becomes less than any money it might lose somehow. And part of its job is to make sure that doesn't happen. So far it has succeeded in doing this and making a profit along the way, saving taxpayers money and also keeping the banking system running.

I am a member of the public.
I, and the rest of the public (well, most of them) put our funds in banks (& BS & CU).
So that is public funding of banks.
Do I think that banks should be supported by public funds?
Well, retail banks certainly should - or they wouldn't exist.
As for investment banks, etc ...?
And government funds ...?
Hmmm ...

KAZZYGIRL

quite simple NO

ShelfStacker_3

KAZZYGIRL wrote: »

quite simple NO

And your reasons and thoughts behind that...?

KAZZYGIRL

ShelfStacker wrote: »

And your reasons and thoughts behind that...?

After Listening to the interview this morning with Andrew Marr and Alistair Darling this morning i wouldn't trust this Government to blow up balloons,and even Darling admits that they cant make the Banks drop their interest rates.
And Darling did state quite that the Bank of England will be loaning the banks the money.
If the banks drop their rates then perhaps i will think differently,but at the money they are just taking and not giving.:mad:

This was the interview
http://news.bbc.co.uk/1/hi/uk_politics/7357085.stm

Milarky

Yes, but with more strings than we presently see (or hear) - the last thing they need to do is send a signal to banks that they are a push over. I think a lot of people share the prejudice that banking as a whole requires to be disciplined but it's not as simple as that because of the 300 year old arrangement between banking and the state that the latter will finance the wars of the former. (Where do we think the 'National Debt' comes in? - its the government's rollover loan - on which it pays interest with taxes it collects) Banking is really just an outsourced arm of the state - a modern day system of privateers - minimally regulated because they know where all those state skeletons are buried...

jamesd

Kazzygirl, yes, the BoE will be lending the banks the money. Sort of.

First it takes from them mortgage debts - the bank's rights to mortgage payments from the people it lent money to. Then it creates some government bonds and lends the banks those goverment bonds.

Using the magical powers of central banks everywhere it just took mortgage debts from the banks that they can't sell and transmuted them to govenment bonds that they can sell.

Quick wave of the wand and suddenly the BoE lent the banks back their own money (really the mortgage payments of consumers).

If enough consumers can't pay their mortgage payments there's a chance that the BoE might lose money on this deal, eventually. It's more likely to make a nice profit, though.

It's nice to be a central bank and have the ability to conjure up money or transmute it at will.

jamesd

Milarky, that's part of why the plan so far is to just do it for loans up to last year. Enough to help the problems and late enough that the banks and their owners (shareholders) have already suffered quite a bit.

setmefree

Thanks for all views so far, I think it's time for everyone to sit back and see what this latest lending spree pans out..
With regards to the Government supporting it,well i think they have finally lost trust from a of lot of their supporters, and the 10p tax is going to be their downfall.