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Oct 10 2008 : The Day The Banks Were Just Three Hours From Collapse

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Wow :o

Revealed: Day the banks were just three hours from collapse

By Glen Owen

Last updated at 11:21 PM on 24th January 2009

http://www.dailymail.co.uk/news/article-11...s-collapse.html

Narrow escape: The Bank of England was forced to contact RBS's creditors abroad to persuade them not to withdraw their funds

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.

But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.

The build-up to 'Black Friday' started on Monday, October 6, when the FTSE 100 dropped by nearly eight per cent as bad news on the economy started to multiply.

The following day, Chancellor Alistair Darling began all-night talks ahead of an announcement on the Wednesday that billions of pounds of taxpayers' money would be used to pour liquidity into the system.

But shares continued to plummet, turning into a rout on the Friday when the FTSE crashed by ten per cent within minutes of opening.

Both Royal Bank of Scotland and HBOS were nearing complete collapse - but Lord Myners, who built up his fortune during a long career in the City, said the problems ran far wider.

'There were two or three hours when things felt very bad, nervous and fragile,' he said. 'Major depositors were trying to withdraw - and willing to pay penalties for early withdrawal - from a number of large banks.'

Lord Myners: 'There were two or three hours when things felt very bad, nervous and fragile'

The threat to the system was so severe that the Bank of England was forced to contact RBS's creditors in New York and Tokyo to persuade them not to withdraw their funds, but it is not known which other banks faced a run on their reserves.

'We faced the very real problem of how banks could stop depositors from withdrawing their money,' a Treasury source said yesterday.

'The banks themselves were selling their shareholdings, accelerating the stock-market falls, and preparing to shut up shop. Mortgages would have been sold on and savers would have been spooked, to put it mildly. It would have been chaos.'

After a weekend of crisis talks, which concluded at dawn on the Monday, it was announced that Lloyds TSB was taking over HBOS, supported by £17billion of taxpayers' money, and RBS would receive an injection of £20billion - prompting the resignation of RBS's infamous chief executive, Sir Fred 'the shred' Goodwin. Share prices at last started a small rally.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said last night that it was 'highly irresponsible' for Lord Myners to reveal the scale of the problems because it could serve to further wreck already fragile levels of confidence.

'We are not out of the woods yet,' she said. 'I fear for Barclays, after the fall in its share price, and Lloyds has been damaged by the HBOS takeover.'

She added: 'If it was panning out in that way, then the Government would have had no choice but to step in and nationalise the entire financial system.'

Angela Knight, chief executive of the British Bankers Association, said: 'The issues related only to HBOS and RBS. To imply that all the banks would have gone under is wrong. It is complicated.'

Lord Myners also said that bank executives had been 'grossly over-rewarded' during the 'golden days' of big bonuses. 'They are people who have no sense of the broader society around them,' he said. 'There is quite a lot of annoyance and much of that is justified.'

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I thought everyone knew this anyway?

The article should be titled 'Mr. X stating the bleeding obvious'. I would argue that the banks are still on the verge of imminent collapse even now. The entire system is blowing up. Broken.

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Articles like this help redress the fear / greed balance in homeowners with respect to their future price expectations.

I am all in favour of more articles like this to raise the fear level and help drive prices lower even if they are just a repetition of things that we already knew.

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I thought everyone knew this anyway?

The article should be titled 'Mr. X stating the bleeding obvious'. I would argue that the banks are still on the verge of imminent collapse even now. The entire system is blowing up. Broken.

The fact that another bail out is needed, in my opinion is a sign that the BOE and the Government are afraid again of a banking collapse, and not just to get the banks lending to business and a world wide lack of confidence in the UK. I believe the banks should have been left to collapse, we depositors would have been given our 35k, admittedly some would have lost alot and a lot of people would have suffered, but the banks would have got what they deserved and might have learnt a lesson or two.

All this bail out money could have been used better in other ways, rather than disappearing down a black hole.

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Yeah, but then I think it takes a while to bet able to start a topic without Mod approving the post, can't remember how long that takes.

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Blimey, Yellercat, I'll have to get going then - a 100 posts? I don't have that much to say usually - i just read and inwardly digest!

Get posting on 'off topic', or alternatively have 12 cans of stella and stay on HPC you'll soon hit a hundred posts.

However you may not want to look at what you posted.

btw i had no idea we were 'that' close to a CGNAO scenario.

Barclays could still phuck things up for us.

Edited by slurms mackenzie

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What strikes me is the number of commentators saying Lord Myners was irresponsible for admitting to scale of the problem.

Telling the truth just wont do, its not the way gordon likes to do things

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I make it a rule never to post while under the influence no matter how much I'm tempted although I was a little giddy on the day I joined - Meltdown Monday (the first one on Sept 15) so the Stella's out!

I have actually started a thread before when I posted a link to the Tarp application form ages ago and people seem to start threads on their first post - but never mind, let it lie, let it lie x

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The fact that another bail out is needed, in my opinion is a sign that the BOE and the Government are afraid again of a banking collapse, and not just to get the banks lending to business and a world wide lack of confidence in the UK. I believe the banks should have been left to collapse, we depositors would have been given our 35k, admittedly some would have lost alot and a lot of people would have suffered, but the banks would have got what they deserved and might have learnt a lesson or two.

All this bail out money could have been used better in other ways, rather than disappearing down a black hole.

Have you thought about the prognosis for such an occurence?

Even if one major bank collapses the rest would follow within a few days.

People would panic, savings would be withdrawn, businesses would collapse.

Government knows that we have to get to the bottom of this mess, except an orderly meltdown

over a few years is preferable to a sudden capitulation that would lead to rioting and civil unrest.

I hate to say it but they are doing it for our own good.

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We are in a lot worse shape now than we were in October, That bail out is long gone, and the banks are back for more. The banks in this country are broke and owe ?=2 trillion do I hear 3? the thing is we don't know, but it is probably much more than the estimates. Just look at the US. The banks are coming back to the trough time and time again. Soon it will be Insurance company's then councils and god knows who else.

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Cgnao was prediciting it about 3yrs ago though.

does anyone know if he swooped in, gave a vague 2 line warning in capitals that could have referred to anything, then left stating it was 100% guaranteed??

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So the key is Barc. If we see a dramatic reduction in their share price (where the shorters are at work) we should make provision for some ready cash and a full larder?

What grips my poo is the fact the bailouts have partly gone to repair the damage done to the capital base on all that dodgy overseas lending.... See the other thread about the Spanish ghost town.......... It's not even our own debts that are being financed......

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Have you thought about the prognosis for such an occurence?

Even if one major bank collapses the rest would follow within a few days.

People would panic, savings would be withdrawn, businesses would collapse.

Government knows that we have to get to the bottom of this mess, except an orderly meltdown

over a few years is preferable to a sudden capitulation that would lead to rioting and civil unrest.

I hate to say it but they are doing it for our own good.

It happened in 1929, financial armageddon, millions lost their jobs and their homes but the recovery came eventually. Bail out or no bail out, lessons will never be learned, the economic cycle will always occur as long as greedy humans are involved. The crash of the 90's was a blip on the economic landscape of which we came out of quite well because we were financially well placed to withstand it, but todays problem is not a little crash and we are in a bad place financially to withstand it, it is the beginning of a depression that will last for years and the sooner we get to the bottom, the sooner the recovery will begin. Throwing money at it and hoping is madness, the money will never be recovered and problem will not go away.

IMF bail out is on its way.

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So the key is Barc. If we see a dramatic reduction in their share price (where the shorters are at work) we should make provision for some ready cash and a full larder?

What grips my poo is the fact the bailouts have partly gone to repair the damage done to the capital base on all that dodgy overseas lending.... See the other thread about the Spanish ghost town.......... It's not even our own debts that are being financed......

I do not think that we can make the assumption that it is shortsellers driving down Barclays' share price.

It could well be rational investors who think that it will be taken over by either the Gulf States or the UK government and that their shares will be worthless soon so they want to get a bit now rather than nothing shortly.

Oh, if only the would be house sellers thought the same way .....

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We are in a lot worse shape now than we were in October, That bail out is long gone, and the banks are back for more. The banks in this country are broke and owe ?=2 trillion do I hear 3? the thing is we don't know, but it is probably much more than the estimates. Just look at the US. The banks are coming back to the trough time and time again. Soon it will be Insurance company's then councils and god knows who else.

The banks have not come back for more at all. The government spun it but what happened is that the terms of the initial bailout were not condusive for the banks to lend money. This was the fact that the Govt told the banks that they would have to raise tier one capital to 10% and that the preference shares that pay 12% meant that 1 billion of cash was beng kept to pay this.

It is the govt that is desparate to get the banks to lend above what they thnk are prudent levels for the times.

So In bank bailout 2 they reduced the capital ratio to 4% (If I remember corectly) and said we will convert preference shares to common stock that does not pay interest. Plus the additional offer to underwrite a percentage of the bad loans. But no more money was injected into the banks.

Bank bailout 2 as it has been spun was nothing of the sort. It should have been named "We got it wrong the first time and now hope we have got it right." It was a big U-Turn from the Govt.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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