Bailing Out Banks

***Mr D*** · 28-01-2009, 16:27

All this bailing out banks you hear about on the news.

Why are we bailing them out? what is the reason for the govement loans?

can someone explain.

andrewb · 28-01-2009, 16:57

There used to be a balance between how much a bank had in its coffers, and how much it was lending. It would not lend more than it had. Sounds like common sense right? Over the last decade however, the gap between what they have, and what they're lending, grew from practically nothing, to £700 billion. Now we have a situation where the banks won't lend to each other, because they have no idea how much 'bad debt', each other has, so they won't risk losing their money.

Once the banks stop lending to each other, and business, and people, it causes a huge amount of problems. Business works on credit, if they can't get credit, even profitable businesses can go to the wall, leaving vast amounts of unemployment.

The government think that by injecting, huge amounts to the banks, it will kick start them into lending again. The trouble is, will this work, or will it simply increase our government, public, countries, debt to sky rocketing heights?

jaysay · 28-01-2009, 17:09

Quote:

Originally Posted by andrewb

There used to be a balance between how much a bank had in its coffers, and how much it was lending. It would not lend more than it had. Sounds like common sense right? Over the last decade however, the gap between what they have, and what they're lending, grew from practically nothing, to £700 billion. Now we have a situation where the banks won't lend to each other, because they have no idea how much 'bad debt', each other has, so they won't risk losing their money.

Once the banks stop lending to each other, and business, and people, it causes a huge amount of problems. Business works on credit, if they can't get credit, even profitable businesses can go to the wall, leaving vast amounts of unemployment.

The government think that by injecting, huge amounts to the banks, it will kick start them into lending again. The trouble is, will this work, or will it simply increase our government, public, countries, debt to sky rocketing heights?

Well it sure as hell ain't made much difference yet, whether it will or not we can only wait and see. If it we get the same outcome as the useless cut in VAT then we're in for a very grim future to say the least. The only thing that is sure about the whole sorry mess is that what ever happens my Grandchildren's Children will be paying the debt off long after I've gone.

***Mr D*** · 28-01-2009, 17:11

Quote:

Originally Posted by andrewb

There used to be a balance between how much a bank had in its coffers, and how much it was lending. It would not lend more than it had. Sounds like common sense right? Over the last decade however, the gap between what they have, and what they're lending, grew from practically nothing, to £700 billion. Now we have a situation where the banks won't lend to each other, because they have no idea how much 'bad debt', each other has, so they won't risk losing their money.

Once the banks stop lending to each other, and business, and people, it causes a huge amount of problems. Business works on credit, if they can't get credit, even profitable businesses can go to the wall, leaving vast amounts of unemployment.

The government think that by injecting, huge amounts to the banks, it will kick start them into lending again. The trouble is, will this work, or will it simply increase our government, public, countries, debt to sky rocketing heights?

Cheers, thats what I though.

Wonder why I cant get a loan then, Faultless credit history, feels to me more like this loan is to help themselves not the public.

Unless of corse your happy paying 25% APR.

panther · 28-01-2009, 18:35

Dont know why the taxpayer should bail em out, when all they do is screw us with charges!!, the cheeky gits!

SPUGGIE J · 28-01-2009, 19:27

Without a boost to their coffers from the govenment there is a chance they will go to the wall the same as any business. Unfortunately if a bank goes bust then it will drag down more than just its self. As Mr B says without lending everything goes belly up so the banks need a pot of real money to get back to business. It will take time as its like "once bitten twice shy" so to speak. As they were running on "phantom" money it was to me no different than a pyramid scheme the way they ran their business.

entwisi · 28-01-2009, 20:37

Just be clear that not all the UK banks have gone cap in hand to UK.GOV. Barclays has maintained its independance and has taken nothing from yours or my pockets and will not do so due to its own private finance initiatives.

Eric · 28-01-2009, 20:56

Seems like what you guys need is a properly regulated banking system ... if unregulated and irresponsible banks can screw up an economy .... if fact, like the US banks a lot of economies, they should be subject to govt. regulation and scrutiny. And that scrutiny should be rigourous and constant. Canadian banks are rock solid; and this is one of the reasons that we will probably avoid the worst of this economic crisis. We have been running budget surpluses for a few years now; and the projected deficit for this year is only around $24 billion .... and most of this is for govt. funded projects to offset what is still only an economic "downturn".

andrewb · 28-01-2009, 22:20

Couldn't agree more Eric. Here's a picture of the FTSE 100 stock market levels over 30 years. Note the enormous booms, and busts, after the Bank of England's regulatory powers were removed in 1998.

Royboy39 · 28-01-2009, 22:31

Quote:

Originally Posted by andrewb

Couldn't agree more Eric. Here's a picture of the FTSE 100 stock market levels over 30 years. Note the enormous booms, and busts, after the Bank of England's regulatory powers were removed in 1998.

That is a wonderful representation Andrew.... but it is very difficult to educate pork.,

garinda · 29-01-2009, 00:41

Quote:

Originally Posted by andrewb

Couldn't agree more Eric. Here's a picture of the FTSE 100 stock market levels over 30 years. Note the enormous booms, and busts, after the Bank of England's regulatory powers were removed in 1998.

How odd.

Apparently that illustration mirrors exactly a similar graph of the nation's libido, and subsequent birthrate.

jaysay · 29-01-2009, 10:36

Seems odd that even though good old Gorden keeps blaming everybody but himself for Britain's Ills, he has been found out for what he really is, very economical with the truth. The IMF have stated that Britain is the worst place economy of the advance nations to weather the rescission with projected negative growth of 2.8% in 2009. The IMF have also stated that the Government needs to increase taxation by £20 billion or cut spending by the same amount to put Britain plc back on track, but even then it will take until 2030 to get us back to the position we were in in 2007. The sooner Brown and Darling are put out to grass the better, before they irreparable damage this countries long term future

andrewb · 29-01-2009, 14:12

"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism."

Karletto Marx, Das Capital, 1867

garinda · 29-01-2009, 16:53

Quote:

Originally Posted by andrewb

"Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism."

Karletto Marx, Das Capital, 1867

Are you agreeing that a capitalist system will inevitably lead us to Marx's idea of communist Utopia?

Are you doing a Blazey, and exchanging your blue rosette for a red one?

jaysay · 29-01-2009, 17:04

Quote:

Originally Posted by garinda

Are you agreeing that a capitalist system will inevitably lead us to Marx's idea of communist Utopia?

Are you doing a Blazey, and exchanging your blue rosette for a red one?

No such thing as communist Utopia, or a socialist one either for that matter as ably portrayed in the song The Working class can kiss my ass I've got the bosses job at last, very well portrayed by messieurs Blair Brown Straw, and all the other Muppet's