Treasury’s £100bn lifeline

Stretch said:
Which begs the question should the banks remain in private hands.

The "too big to go under" argument that's used when people refer to the banks effectively gives them a licence to take unreasonable risks at everyone else's expense.
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You forgot the bit where the governments of various countries (including the USA and the UK) set up regulatory structures that actively encouraged such behaviours (creating a moral hazard). As such, they do hold partial responsibility for the mess the banking sector is in, this is not a lack of regulation, it's a distinct case of bad regulation and encouraging excessive risk taking, as well as providing the banks and institutions with means to hide it.

Much of the current issues are also worsened by current accounting regulation (such as mark-to-market rules) that make bonds worthless because no-one will buy them, rather than worthless because they have no payout value.

This effort to replace debt insurance (which is effectively what is being done) is a good step to start getting things moving again, it's a shame brown and darling spent wasted so much time and money before they started doing things that might actually work.
 
The Treasury need to stop bailing the dead wood out with taxpayer's money.

Until these banks learn that their reckless lending has consequences then the state of the economy won't start to improve.
 
Just a thought, but how easy would it be for someone to set up a new bank, start taking customers deposits and have the advantage of having none of this bad debt?
 
Tute said:
The Treasury need to stop bailing the dead wood out with taxpayer's money.

Until these banks learn that their reckless lending has consequences then the state of the economy won't start to improve.
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I give up. Please read the replies of people who have researched all this and know the implications.
 
Tute said:
The Treasury need to stop bailing the dead wood out with taxpayer's money.

Until these banks learn that their reckless lending has consequences then the state of the economy won't start to improve.
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Even if the government encouraged the behaviour? What about the previous (failed and ill thought out) bail outs, should we just write that money off as wasted by Brown and forget about it?

What about the costs of compensating the savers (which the government has already committed to)? What if that is significantly greater than the bailout costs?

scorza said:
Just a thought, but how easy would it be for someone to set up a new bank, start taking customers deposits and have the advantage of having none of this bad debt?
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Sounds great, where do we start...
 
At this rate they might have just said to anybody with a mortgage "your house is yours, no more mortgage".

We seem to be propping up a banking system that has systemically made terrible decisions on "bad debts" by offering taxpayers money to guarantee there new decisions, current history show that the banks seem to have zero responsiblity!

Just seems a little crazy to me!
 
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HEADRAT said:
At this rate they might have just said to anybody with a mortgage "your house is yours, no more mortgage".

We seem to be propping up a banking system that has systemically made terrible decisions on "bad debts" my offering taxpayers money to guarantee there new decisions, current history show that the banks seem to have zero responsiblity!

Just seems a little crazy to me!
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Then why should the consumer have zero responsibility? They took on more than they could chew.

And don't say because it was there. If a loaded gun was there, you wouldn't shoot yourself.

What I am concerned about (admittedly I stopped following this, so the answers could be out there), is will the banks prioritise paying back the loan, or lending to each other and to us? As, I know what I would do if I was in debt. Which kinda defeats the point of the bail outs. Answer appreciated.
 
Dolph said:
You forgot the bit where the governments of various countries (including the USA and the UK) set up regulatory structures that actively encouraged such behaviours (creating a moral hazard). As such, they do hold partial responsibility for the mess the banking sector is in, this is not a lack of regulation, it's a distinct case of bad regulation and encouraging excessive risk taking, as well as providing the banks and institutions with means to hide it.

Much of the current issues are also worsened by current accounting regulation (such as mark-to-market rules) that make bonds worthless because no-one will buy them, rather than worthless because they have no payout value.

This effort to replace debt insurance (which is effectively what is being done) is a good step to start getting things moving again, it's a shame brown and darling spent wasted so much time and money before they started doing things that might actually work.
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I agree to an extent, but the banks are pragmatic people who have (or at leased had) a profitable business model you'd think they'd want to protect. Why do the banks need to be so tightly regulated in order to stop them taking suicidal risks. Maybe they did understand the risk, maybe the government didn't ether. In the end the banks must take ultimate responsibility. Otherwise the government may as well be in full control of the banking system, and at leased get some of the benefit of underwriting the risk.
 
meghatronic said:
Then why should the consumer have zero responsibility? They took on more than they could chew.
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The consumer isn't be bailed by billions though are they, at this point I would just nationalise the banking system, they've had there chance at they basically show they can't be trusted.

We are now all exposed to a risk that the banks have show they are not competent enough to manage, they all got too greedy and made ££££, in the most part they've walked away with loads of money and no recourse for their actions.

HEADRAT
 
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HEADRAT said:
The consumer isn't be bailed by billions though are they, at this point I would just nationalise the banking system, they've had there chance at they basically show they can't be trusted.

We are now all exposed to a risk that the banks have show they are not competent enough to manage, they all got too greedy and made ££££
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Total nationalisation would be disastrous for the consumer, though. And to be fair, debted consumers are getting pretty sweet deals here and there. E.g. a friends tracker mortgage rates has been cut to way below inflation, in a property she couldn't afford to buy in the first place (6x her income at least). Whilst my savings rate has been truly dwarfed by inflation.

And of course they were greedy and made money... that's the point of capitalism. It's not as though (most of us) pay for banking....
 
meghatronic said:
Sauce? :)
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http://news.bbc.co.uk/1/hi/uk_politics/7644818.stm

Not an absolute guarantee, but very certainly an implicit one, especially after the iceland issues.

Stretch said:
I agree to an extent, but the banks are pragmatic people who have (or at leased had) a profitable business model you'd think they'd want to protect. Why do the banks need to be so tightly regulated in order to stop them taking suicidal risks. Maybe they did understand the risk, maybe the government didn't ether. In the end the banks must take ultimate responsibility. Otherwise the government may as well be in full control of the banking system, and at leased get some of the benefit of underwriting the risk.
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They don't, they need either good, tight regulation, or no regulation, as opposed to bad regulation. Bad regulation is far worse than no regulation, especially when it actively encourages and rewards risk taking.

Given that most bad regulation starts out as well intended 'good' regulation, guess where my support goes...
 
meghatronic said:
And of course they were greedy and made money... that's the point of capitalism. It's not as though (most of us) pay for banking....
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We've paid for banking with high interest rates (compared to the rest of the world) in the good times, we're now paying billions for banking!

I would say we're paying a very high price indeed!

Surely the point of capatalism isn't that the greedy get rich by making terrible business decisions and then leave everybody else to pick up the pieces!

meghatronic said:
Total nationalisation would be disastrous for the consumer
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Any more disatrous than pushing the world to the edge of recession/depression!
 
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