Bite The Bullet And Nationalise The Banks

[interestrateripoff]

http://www.independent.co.uk/opinion/comme...ks-1451394.html

The Prime Minister is the equivalent of a doctor asked to save the same life several times. At first the relatives are grateful but then they wonder why his services are required so often

The sums involved are staggering. The banks were more reckless than even the most pessimistic minister had feared. The previous much-hailed rescue package has failed. Now Gordon Brown steps in again.

Not surprisingly voters are alarmed as the Government navigates in near darkness armed only with billions of pounds of their money. They are not the only ones who are worried. Brown is bound to be fearful too, far from certain whether this latest throw of the dice will work and much more aware than he was about the frightening scale of the banks' toxic debt. Once more perceptions of him change and he "bounces" no longer in the polls. Currently the Prime Minister is the equivalent of a doctor who is asked to save the same person's life several times. Originally the relatives are grateful but then start to wonder why his services are required so often.

Yet in such epoch-changing times the long-term political consequences are as unpredictable as the economic ones. There is still an extraordinary mismatch between the sudden ideological confidence of younger ministers and the growing Conservative lead in the opinion polls. At a weekend conference organised by the Fabians, ministers spoke like liberated prisoners emerging from the darkness. They do not underestimate how bad things are and how much worse they might become, but for them the near-collapse of the banks is a form of ideological vindication. The mismatch became most vivid late on Saturday afternoon. As they delivered speeches about a new progressive era news seeped through of the last poll giving the Conservatives a 14-point advantage.

The huge gap between their new found confidence and deepening unpopularity is both easily explained and without obvious resolution. Anxious, angry voters turn against the Government as they pose questions which no minister can answer with complete confidence. Will the latest proposals persuade the banks to start lending again? Who is responsible in the end for the banks' toxic debt – the taxpayers or the banks that acted with such deranged irresponsibility? Will they get back the hundreds of billions of pounds that appear to be thrown at the crisis?

At the same time the latest outburst of hyperactivity in No 10 and the Treasury explains the newly-discovered ministerial self-confidence. As the cabinet minister Ed Miliband declared at conference, no one can claim that the current crisis was brought about by too much government action. Government was not active enough. Miliband argued that 2008 will be seen as a watershed year, like 1945 and 1979: "This is a moment of profound crisis for the idea that in economics as far as possible we should leave markets to their own devices." From the Blairite wing, James Purnell suggested that the idea of achieving a fairer society through state action had been damaged by the Winter of Discontent in 1979. Now he saw the chance for more "balance".

Another cabinet minister, Douglas Alexander, suggested "we ultimately witnessed the demise of an ideology that says the only role for government is always to get out of the way".

All three are happy to make speeches every day of the week outlining the transformed ideological landscape. In contrast, while miles ahead in the polls, David Cameron has yet to make a single equivalent speech which addresses the ideological shift. Cameron is capable of delivering classy speeches so the reason for the gap can only be that he has nothing yet to say about the closing of the Thatcher/Reagan era, a period in which he formed his views about the state and markets. He has accepted there was a failure of regulation, but he has not explained when and how he wished the state had intervened in the past or in what form it will do so in the future.

Nationalisation is the only option as it appears the govt is unwilling to create a new fairer banking structure.

The banks are bankrupt.

Even the media is starting to recognise the fact and this all achieved in a fundamentally strong economy.

I wonder how long before we here the phrase from Ponzi Brown that he's nationalised the banks because it was the right thing to do?

[CrashedOutAndBurned]

The policy most often mentioned to demonstrate how off-the-charts mental was Michael Foot was the nationalisation of the banks. Now many 'free market' economists are advocating it while the hard-left rail against banking bailouts. Funny old world.

Edited January 20, 2009 by CrashedOutAndBurned

[bagsos]

The policy most often mentioned to demonstrate how out-the-charts mental was Michael Foot was the nationalisation of the banks. Now many 'free market' economists are advocating it while the hard-left rail against banking bailouts. Funny old world.

Not thought about it like that; good point well made!

[VeryMeanReversion]

If nationalisation requires UK plc to accept all liabilities of these banks, but those liabilities exceed our capacity to pay, should we still nationalise? It seems like signing your own death warrant.

What are the consequences of letting it go bankrupt (and just covering the depositors, with newly minted sterling if necessary).

VMR.

[thod]

What are the consequences of letting it go bankrupt (and just covering the depositors, with newly minted sterling if necessary).

The shareholders and bondholders will lose their investments.

The bank can declare bankruptcy on Friday, sell its loan book to the government over the weekend, and reopen on Monday with all debts erased. Once it is declared bankrupt then nobody can make a claim against it. Its assets are sold off to the highest bidder. which is the government. It is foolish to bid on anything whose liabilities exceed its assets, you simply buy the assets from the receiver.

What is happening is that GB is taking your money and guaranteeing those investors money. However since most investors are overseas, it is him taking money from the UK populace and shipping it offshore. Grounds for treason maybe?

[Wad]

The thing that annoys me about both bailout I and bailout II is that it is the bank bondholders that are gaining out of this.

Every time the Govt puts a slug of equity in or even just liquidity the value of the bank subordinated bond tranches goes up because the probability of default falls.

In my view we shoudl have forced the subordinated tranches of debt on Uk banks to be coverted to equity by law. That way the banks would have been well capitalised by now and the Govt would have had to put no money in at all. The bond and equity holders would have shared the pain pari parsu according to the value of their holdings before the forced debt-equity conversion took place. Obviously equity holders woudl be diluted but taxpayers woudl not be on the hook for unlimited losses.

It really is that simpe to solve. Why is no Govt not forcing debt-equity conversion in banks?

Desperate times call for desperate measures but it des not mean we have to be stupid b y taking all the bank liabilities. Let the existing equity and bond holders take the pain and let them deal with managers who need their bonus slashed and sacking.

[the_austrian]

Bank deposits are already liabilities of the State which is why the deposits of each bank have the same value. Bank employees are just State employees who get paid more.

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all deposits immediately upon demand. This practice is universal in modern banking.

[A_Landlord]

The shareholders and bondholders will lose their investments.

The bank can declare bankruptcy on Friday, sell its loan book to the government over the weekend, and reopen on Monday with all debts erased. Once it is declared bankrupt then nobody can make a claim against it. Its assets are sold off to the highest bidder. which is the government. It is foolish to bid on anything whose liabilities exceed its assets, you simply buy the assets from the receiver.

What is happening is that GB is taking your money and guaranteeing those investors money. However since most investors are overseas, it is him taking money from the UK populace and shipping it offshore. Grounds for treason maybe?

This is what should have been done.

Edited January 20, 2009 by A_Landlord

[It is different this time]

Bite The Bullet And Nationalise The Banks

They already have! They've not officially announced it yet..

[threesixty]

"The Prime Minister is the equivalent of a doctor asked to save the same life several times. At first the relatives are grateful but then they wonder why his services are required so often"

Gordon is the political equivalent of Dr Harold Shipman...

[deflation]

Gordon is the political equivalent of Dr Harold Shipman...

But Shipman didn't revive anyone, just helped them on their way. I think he's more like Jigsaw form the Saw movies. Trapping the guilty (the banks) and then giving them the chance to live by redeeming themselves, a chance they seem unable to grasp.

[the_austrian]

"The Prime Minister is the equivalent of a doctor asked to save the same life several times. At first the relatives are grateful but then they wonder why his services are required so often"

Gordon is the political equivalent of Dr Harold Shipman...

Not just Gordon.