Friday, Feb 19, 2010
A useful cut-out and keep guide
The Telegraph: So where did all the money go?
£76bn from the Treasury to buy shares in RBS and Lloyds Banking Group ; £200bn worth of lender-of-last resort liquidity support provided by the Bank of England to stricken banks at the height of the crisis; £250bn of wholesale lending guaranteed by the Bank through the credit guarantee scheme; £185bn of loans to banks through the Special Liquidity Scheme; £40bn of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme. Then, deep breath, there is the £200bn of liabilities taken on board from the Asset Protection Scheme, and the £200bn of cash poured into the economy through quantitative easing .
Posted by devo @ 01:45 PM (2488 views) Add Comment
51 Comments
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1. icarus said...
One problem is that you have to drip-feed the banks so they will always need a little bit more. If it were possible to give the banks all they needed this would involve the banks coming clean about their potential liabilities (combined UK banks' balance sheets = GDP x 5). And that would frighten the horses.
2. Thecountofnowhere said...
I read this article and there's one thing it doesnt point out.
Where the money went that caused the black hole in the banks funding in the first place.
I'd guess it went into the bankers back pockets.
3. cat and canary said...
As Frank Skinner put it, "the last time the government spent this much money, they p*****d it up the wall on useful items at the time, like tanks and stuff"
4. alan_540 said...
Ouch!
5. jonb said...
The money was paid out in sub-prime mortgages and so on. The recipients of these loans spent the money at the local pub and on Chinese manufactured goods.
6. paul said...
Don't forget the purchase of Northern Crock - the one that kicked it all off!
7. greenshootsandleaves said...
To my knowledge (and, if I'm correct, to my surprise also) no one on HPC has posted anything about Obama's speech marking the first anniversary of the Recovery Act. It contains the following interesting passage:
'Now, the last third of the Recovery Act is what I want to talk a little bit about more today. It's the reason Blake and Doug are here. That third is about rebuilding our economy on a new and stronger foundation for growth over the long term. See, we knew when we came into office that it wasn't enough simply to solve the immediate crisis before us. We knew that even before the crisis hit, we had come through what some people are calling the "lost decade" -– a period where there was barely any job growth, and where the income of the average American household declined. This is before the recession, over the course of the decade, the average American household, they saw their incomes decline even as the cost of health care and college tuition were skyrocketing, had reached record highs. The prosperity was built on little more than a housing bubble and on financial speculation -- people maxing out on their credit cards, taking out home equity loans.
No astounding revelations there, of course, but, irrespective of whether one is for or against Britain's approach to solving the crisis, wouldn't a similar assessment and similar comments from a British politician (HMG or Her Majesty's Opposition) be welcome?
8. tenyearstogetmymoneyback said...
Thecountofnowhere
You give the Bankers too much credit. What actually happened was they borrowed it from countries like China.
The big mistake was that they borrowed it short term typically on a two year term. Once things like
Liar Loans started to be exposed the Lenders simply said to the banks at the end of each term "Give Us
Our Money Back" as they were quite entitled to do.
jonb. As was pointed out in a recent program the money spent on Chinese manufactured goods was sent back to the UK
to be lent out as even bigger Liar Loans ! 1999s Chinese made Christmas presents probably still need to be paid for.
9. mark wadsworth said...
*sigh*
For those who don't understand accounting, let me run through this again
1. £76bn from the Treasury to buy shares in RBS and Lloyds Banking Group, that went into shares. The value of the shares has fallen, half that money is effectively gone (from the shareholders' point of view), although it is still sloshing around the system somewhere.
2. £200bn worth of lender-of-last resort liquidity support provided by the Bank of England to stricken banks at the height of the crisis
That was a loan to the banks, which is still outstanding and the bulk of which will be repaid.
3. £250bn of wholesale lending guaranteed by the Bank through the credit guarantee scheme
A guarantee is not a payment, a transfer or even a loan. I am not aware that any money changed hands at all - although obviously the guarantee enabled banks to borrow more cheaply than otherwise.
4. £185bn of loans to banks through the Special Liquidity Scheme; £40bn of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme.
Those are loans, the bulk of which will hopefully be repaid
5. Then, deep breath, there is the £200bn of liabilities taken on board from the Asset Protection Scheme,
OK, there will be losses on these, but banks have to pay the first £60 billion or something, and the taxpayer only pays for the rest. So if the nominal £200 billion turns out to be worth £120 billion, the taxpayer is out of pocket by £20 billion
6. the £200bn of cash poured into the economy through quantitative easing .
In effect, once you cancel off all the ins and outs, the banks LENT the government somewhere in the region of £150 billion to £200 billion which THE GOVERNMENT then p***ed up the wall.
*/sigh*
The total losses that the taxpayer will actually have to pay will be a horrific £50 billion or something, maybe as much as £100 billion, but nowhere near the £1,151 billion you get if you add up all the gross figures mentioned.
10. devo said...
mark, why are you trying (and failing) to defend the indefensible?
11. mark wadsworth said...
I'm not defending anything. I'm just explaining how things are.
IMHO, Even if the banks 'only' got £10 billion, that would be £10 billion too much. Anything more than £nil would be too much.
However there is no point claiming that the taxpayer somehow gave the banks £1,151 billion when the true figure is less than a tenth of that.
12. braindeed said...
11. mark wadsworth said...
IMHO, Even if the banks 'only' got £10 billion, that would be £10 billion too much
The more I reflect on it 10 billion is an absolute bargain.....I think it reflects a poverty of the imagination to fail to see the Armageddon we were days, perhaps hours, away from.
The solution was audacious and breathtaking in it's simplicity. Forget the headline figures - the country will make a profit in the end. I think Broon and the Badger will be judged as genius by history. And the leader of the opposition fought it tooth and nail….still does and advocates a return to the scorched earth policies of 79-83.
13. devo said...
12. braindeed said... The solution was audacious and breathtaking in its simplicity
yes, just six little words to the bankers was all it took...
"you are too big to fail"
14. braindeed said...
They were
15. devo said...
And the leader of the opposition fought it tooth and nail
no he didn't !
he was paralysed with fear
as was every other politician you might care to mention
16. braindeed said...
Cameron and his fag castigated our badger friend for 'talking Britain down,' by daring to suggest we had lost the paddle - three months before it became apparent it was true. Where were their siren warnings about bubbles beforehand. The big two on the opposition bench are bandwagon jumpers....a botox using advertising industry toff and his fag - lightweight opportunists.
17. devo said...
'three months before it became apparent it was true'
it was apparent to everyone from 14 September 2007
of course, some of us knew rather earlier
*ahem*
18. braindeed said...
Okay....three months before the dung hit the blades proper.
And yes....lots on here predicted it....me included.
So you defending the toff soap powder salesman then?
19. devo said...
i don't usually feel the need to justify myself brainy, but while it's you, i'll spell it out...
i wouldn't p!ss on ANY politician if they were on fire
20. braindeed said...
*blush*
.....oh devo
21. alan_540 said...
..not even if they had your money in their pocket?
22. hpwatcher said...
The more I reflect on it 10 billion is an absolute bargain.....I think it reflects a poverty of the imagination to fail to see the Armageddon we were days, perhaps hours, away from.
Usual pro-Labour rot from braindeed. The irresponsible banks should have been left to go bust - it would have been a lot cheaper - and the good competent banks should have been allowed to come in and take over. Ever heard the term 'zombie banks' ?
23. hpwatcher said...
Cameron and his fag castigated our badger friend for 'talking Britain down,' by daring to suggest we had lost the paddle - three months before it became apparent it was true. Where were their siren warnings about bubbles beforehand. The big two on the opposition bench are bandwagon jumpers....a botox using advertising industry toff and his fag - lightweight opportunists.
Far better than being responsible like Brown.
24. braindeed said...
H pee @22
Usual pro-Labour rot from braindeed. The irresponsible banks should have been left to go bust - it would have been a lot cheaper
Ah …..Further ramblings from the resident, less than intellectually precocious, Proteus Animalcule
25. braindeed said...
H Pee @ 23
Far better than being responsible like Brown.
Please,
Resist
Incessant
Cacophonous
Kabuki
26. devo said...
23. hpwatcher said... The irresponsible banks should have been left to go bust - it would have been a lot cheaper
yes, and it might have worked... unlike the £1trillion backstop that clearly didn't
let them all go bust
b@stards
27. hpwatcher said...
Ah …..Further ramblings from the resident, less than intellectually precocious, Proteus Animalcule
So you have finally worked out how to put images in...clever boy!
So how was it hawking all your copies of 'socialist worker' around all your local pubs tonight them?
28. hpwatcher said...
yes, and it might have worked... unlike the £1trillion backstop that clearly didn't
let them all go bust
b@stards
Now all the good competent banks are finding it very tough going up against the rubbish state subsidised ones.....and those that have been irresponsible.
29. devo said...
braindead
That
Was
Absolute
Tripe
30. alan_540 said...
I'm with devo on letting the banks go bust - hit the reset button and start again.
31. braindeed said...
Great.....got into the Tory Club, but they were too busy following the party whip.....and munching on oranges.
32. hpwatcher said...
I'm with devo on letting the banks go bust - hit the reset button and start again.
Absolutely. And the massive worldwide debts of these banks would all have been wiped out, but now the UK taxpayer is now responsible for the lot.
33. braindeed said...
29. devo said...
braindead
What?
Another
Neo
Kulac
Elucidating
Rubbish
34. hpwatcher said...
bog off
braindeed
*
you
contribute
nothing
*
35. devo said...
@33 braindead
nice one
is there an acrostic app for that?
or do you have them preprepared?
36. braindeed said...
34. hpwatcher said...
Pot kettle black....make a sentence mono-cell. You must think you're watching a high level frisby game.
37. braindeed said...
I'm wounded
38. hpwatcher said...
Pot kettle black....make a sentence mono-cell. You must think you're watching a high level frisby game.
Don't try and be clever - it isn't your style.
39. braindeed said...
38. hpwatcher said...
Don't try and be clever - it isn't your style.
Just entertaining the less cerably challenged challenged....don't take it personally - have you finished the three peice jigsaw you got for chistmas yet?
40. inbreda said...
Jeez
It's taken me half an hour to read this board and I don't feel like I have learnt anything.
although braindeed is coming across as a bit of a tw@t
41. fallingbuzzard said...
@39. what about some entertainment for the more cerably challenged?
42. jonny parker said...
@40. If only your post had appeared first I may have given up then! Bring back random time stamp post thingies!
43. mark wadsworth said...
In the spirit of telling things like they are, no banks were too big to fail. Never have been, never will be.
In the real world...
A. Some people owe banks money (mortgage, business loan, credit card etc), and they should repay it (or be made bankrupt), and banks also have buildings, computer systems, cash machines etc etc. That's their real assets.
B. Other people are owed money by the banks (mainly depositors, but also employees, trade suppliers, short term bond holders). That's their real liabilities.
A is broadly speaking = B.
So even if the government had taken over the whole of A and assumed liability for the whole of B, for the taxpayer and the public at large it would have been a break even, and no normal borrower or employee or depositor would have noticed (like they did with B&B).
The liquidators of the residual banks could then have spent the rest of eternity arguing about which long term bondholder gets the proceeds from which residual mortgage backed security XYZ and quite how the hedge funds and STVs divvy up the profits and losses on Credit Default Swaps and all the other rubbish, but this other rubbish has nothing to do with the real world. Some hedge fund managers would have lost their Mayfair flats and Ferraris, and some City lawyers would earn enough to buy a Mayfair flat and a second hand Ferrari, but so what? Who cares?
44. jonny parker said...
@43 - I thought A would never equal B based on fiat currency/current system - meaning you can lend several times (unlimited now) your deposits etc? -perhaps a naive question - more than likely!
45. markj69 str05 said...
MW... A=B. All seems too simplistic. What happens when the asset values are reduced (House prices drop, defaults on c/cards, personal and company bankruptcy). A
Saturday, February 20, 2010 12:44AM
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46. fallingbuzzard said...
@45 When asset values fall, equity and bond holders lose out. Thats the risk involved in financing a bank. Thats why these propped up banks will still fail.
47. markj69 str05 said...
Even if A was serveral times B. The lending to borrowing ratio must have been pushed right to the limit (High risk = high return mentality) Throwing caution to the wind. With the reduction in asset values, they must have been cr@pping their pin-stripped, brace supported, pants. No wonder the gov't wanted to keep property prices up/stable.
Another thing. If there is a finite amount of money available (Or less as the general population are not earning more), all the profits being made by large corporates (Banks, energy suppliers, water, food, etc...), isn't that just a drain on the liquidity pool? Especially, when IR's are soooo low.
48. markj69 str05 said...
@fallingbuzzard... so what are the risks involved in financing a goverment, financing multiple failing banks? Stable housing market and £billion banker bonuses? Somethings not quite right there!
49. tenyearstogetmymoneyback said...
mark @ 43
Great comment.
For some reason it makes me think of Railtrack.
Didn't their previous MD end up running Woolworths !
50. Mark Wadsworth said...
@ Johnny and Mark.
If you can't or don't want to believe me that A = B, you might actually try looking at a bank balance sheet and you will see that it is true.
Or what we could propose is even easier, if bank admits it is in trouble, then the government (or the bankruptcy court or whoever) takes A in its entirety and pays off depositors, employees, trade suppliers and so on.
In the very rare cases that A has fallen (bad lending decisions etc) then depositors with more than £50,000 will get a pro rata share of the losses.
That's what they did with B&B and, after two years of dithering, what they are doing with Northern Rock.
That's the real world sorted out, I don't think any normal person cares about what happens after that.
51. fallingbuzzard said...
@48, well taxpayers are financing failing banks so no risk there because taxes and interest rates can go up to foot the bill or people can lose their public sector jobs to help fill the gap. I wouldn't have said that we have a stable housing market at all, more like illiquid and unstable, but believe the media if you like. Banker bonuses could be stopped overnight but there is no political will, and politicians encourage us and the media to harp on about reckless bankers because it takes the heat away from reckless politicans.