Monday, Jan 19, 2009
Second Rescue Package In Three Months
The Telegraph: Bank bailout plan announced by Alistair Darling
Alistair Darling has admitted he has no idea how much money the Government will need to pour into failing banks to stave off a collapse in the sector that could bring down the entire economy.
The Treasury has formally announced a scheme to allow banks to exchange cash or shares for a Government guarantee on their "toxic" debts, transferring any losses they suffer from the banks to the taxpayer.
Posted by 51ck-6-51x @ 09:02 AM (1554 views) Add Comment
21 Comments
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1. paul said...
Notice how the government is also slipping in a clause to use Northern Rock as a vehicle to prop up the housing market - nothing to do with the bank bailout or liquidity.
Everything to do with rescuing Labour at taxpayers' expense and rescuing reckless borrowers to win votes.
2. Crunchy said...
However, the Chancellor admitted he can't estimate how much taxpayers' money will needed in the latest bailout.
“We need to talk to the banks - we will then decide how much risk we are prepared to take on,” Mr Darling told the BBC Radio 4's Today programme.
"We're doing it, because if the banking system collapsed, every single one of us, the economy would come down with it. I don't think anyone would argue you ought to let that happen," he said.
crunchy- Contradictions as always.
Alistair, with that statement why even speak to the banks? Give them a blank cheque and run the printer. Get on with it man!
You are not keeping up with me, Darling.
3. troy said...
Apparently we (and the press on TV live just now) are misunderstanding this have it all wrong. This bail out has nothing to do with helping the banks.
According to Gordon a few minutes ago this is to help the people. Fine
4. troy said...
In the last few minutes Gordon has just gone a rather large step further. He's calling (again) for a new world economic order (even reminded us all he's been saying it for years) to protect the people. Presumably from another ten years of his sound fundamentals.
I think the do have a good chance of pulling this off worldwwide. Who's going to stop them?
5. This comment has been removed as it was found to be in breach of our Blog Policies.
6. 51ck-6-51x said...
@w4hpc
I dunno, it's better than most of the alternatives and leaves scope for more. Putting a floor under future losses should help matters for the ailing banks.
OK it's not what most of us here would suggest, but for Gordon & Alistair it's a whole heap better than it could've been!
7. mark wadsworth said...
It's complete nonsense, it won't work and it can't work, even if the only aim is to prop up house prices.
The least bad things to do are to transfer 'good loans' and ordinary deposits to new banks (which people could do entirely voluntarily), the bad loans get stuck in the old banks which become closed funds that get wound down and then cheerfully crumble, and the losses are shared between reckless/unlucky borrowers and reckless/unlucky investors in banks.
8. jackas said...
People need to face the consequences of their actions.
9. letthemfall said...
Apart from 51ck.. most comments here range from 'it won't work' to childish abuse. Given that the consequence of lending drying up is economic collapse, what else would you suggest? If one major bank collapses there would be pandemonium. The thought of supporting inflated house prices appalls me, but for that to happen people have to want to borrow the extra money, and it is not clear that they do. If this action prevents good companies from collapsing then it may keep us from depression. To be honest I'm not sure anyone knows what's going to happen now.
10. 51ck-6-51x said...
@mark wadsworth - If this frees up capital across all banks, such that they lend to each other more readily (due to the floor provided) then surely that allows market forces to (finally) determine the good and the bad banks*
* Although there does seem to be some use of NR as a tool - I thought this was going to become a good bank, but it now looks like it will become a bad one.
11. Crunchy said...
9. letthemfall
DEPRESSION- From bad to worse. From worse to dire. From dire to depression. From depression to a new system we will all in time accept.
America's is in one. We are playing catch-up. IMHOpinion.
12. mark wadsworth said...
@ Letthemfall "If this action prevents good companies from collapsing..."
A good company would be able to take out a new loan with a properly capitalised new bank, that's the point.
@ 5ick, no, no, no, interbank lending is part of the reason for the credit bubble. Let's put the clock back ten or twenty years and have banks funded by (at least) 10% share capital and (up to) 90% deposits and no interbank, no money market, no bonds, RMDS or that rubbish. That model worked fine for centuries and still works for Nationwide & HSBC.
13. icarus said...
Darling needs to talk to the banks to find out how bad things are? Didn't he do that over a year ago? Either they didn't come clean then or they simply didn't know how bad things were. It'll be the same this time around. They'll say "it's not hopeless, but it's bad enough for you to keep the money flowing into our coffers - and we'll tell you when to stop".
14. icarus said...
mark w @11. Very true. Inter-bank markets were used purely to enable the banks to clear regularly and smoothly. Commercial paper markets were there purely to enable companies to obtain short-term funding to smooth their operations. These markets have been transformed by US/UK investment (and later some commercial) banks into today's wholesale money markets the main function of which is/was to supply vast funds for speculative trading.
15. rm96696 said...
Isn't it a bit sick that all of the government's measures seem to be focused on propping up the property bubble?
P.S. is norther rock going to reintroduce the 125% together mortgage?
16. Foobar said...
I'd be a lot happier with this bailout if the government published the names and addresses of all the people who worked in the banking sector during the last five to ten years and achieved a net income in excess of 200k/yr as a result of the practices that have led to a bailout being required.
17. plato said...
I believe Mark W is correct but we are heading for a new financial order, so lets all get on this 'floor' and see if it can take the weight. The ones that fall first will cushion those that follow - How comforting!
18. letthemfall said...
mark w
But isn't creating a bad bank in effect the same thing as underwriting the toxic debts? Either way it will cost the taxpayer.
19. mark wadsworth said...
Letthemfall, what does the taxpayer have to do with it?
What I said was "... the bad loans get stuck in the old banks which become closed funds that get wound down and then cheerfully crumble, and the losses are shared between reckless/unlucky borrowers and reckless/unlucky investors in banks."
20. letthemfall said...
mark w
Well, it's an interesting idea. I imagine such a step would cause economic chaos and the taxpayer would end up losing a mint. It is appealing to think of all those overborrowers going down the pan, but it would probably take the rest of us down too. But of course it has never been tried.
21. 51ck-6-51x said...
@mark wadsworth - I think the interbank market is a useful market and I also believe that it is not a necessary condition for the credit bubble. The interbank market is not required to perform securitisation, for example.