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Bob Loblaw

German State To Lend Directly To Head Off A 'credit Crunch'

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Cant see this posted anywhere else

http://www.telegraph.co.uk/finance/comment...unch-looms.html

Germany could directly intervene in the credit insurance and lending markets as soon as September to head off a looming credit crunch, as it fears the economic recovery may soon falter as banks refuse to roll over loans.

Axel Weber, the Bundesbank chief and until recently the arch-hawk, last week spoke of a second wave of the credit crisis as home-grown problems come to light, triggered by ratings downgrades that force banks to put aside more capital. "The first round of disruption in the bank balance sheets from structured credit products is behind us. Now we are threatened by stress from our domestic credit industry," he said.

"They are in panic," said Hans Redeker, currency chief at BNP Paribas. "They know the money supply and credit figures coming out are going to be awful." He added that Germany's stimulus measures have put off deep problems until after the election in September. The car scrappage scheme has brought forward demand, implying a cliff-edge drop when the scheme expires. Kurzarbeit (short work) schemes that subsidise companies to keep idle workers on their books are slowly bleeding corporate balance sheets. "This has delayed the restructuring that needs to occur," he said.

I do wonder why the Government in the UK has not suggested becoming directly a lender of last resort. Lend individuals and business money at BOE rates. They can print as much as they want so loans for everyone and the recession is over :)

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This really pisses me off. They should have done this, globaly, 2 years ago and let the banks go bust. That way they would avoided blowing trillions in helping "friends", whom kept all the money.

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This really pisses me off. They should have done this, globaly, 2 years ago and let the banks go bust. That way they would avoided blowing trillions in helping "friends", whom kept all the money.

They did. And it was wrong.

But you need someone to do the tedious administration. Who is equipped for that? Why yes, it's the banks. Hence they became the agency for government printing.

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This really pisses me off. They should have done this, globaly, 2 years ago and let the banks go bust. That way they would avoided blowing trillions in helping "friends", whom kept all the money.

What would have happened to peoples savings had a high street bank been allowed to go bust ?

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This really pisses me off. They should have done this, globaly, 2 years ago and let the banks go bust. That way they would avoided blowing trillions in helping "friends", whom kept all the money.

And you really think the BOE has the manpower to lend to millions of joe bloggs on the street. As someone else states, only the retail banks have administrative capacity to do the lending. The BOE will have even less ability to do all the credit checks etc (admittedly the banks cut back on that too, but at least they're being more sensible and doing that now!)

Next people will be suggesting that the BOE should print as much money as everyone wants, and we can all sit at home and not have to work and all be millionaires ;)

Edited by jcpricewatcher

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What would have happened to peoples savings had a high street bank been allowed to go bust ?

Invoking the depositor protection scheme would've been a lot cheaper than bailing out every bondholder.

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Invoking the depositor protection scheme would've been a lot cheaper than bailing out every bondholder.

Ok thanks, would that have meant that everybodies savings would have been protected in full ?

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And you really think the BOE has the manpower to lend to millions of joe bloggs on the street. As someone else states, only the retail banks have administrative capacity to do the lending. The BOE will have even less ability to do all the credit checks etc (admittedly the banks cut back on that too, but at least they're being more sensible and doing that now!)

Not entirely true. Tescos, M&S, etc are extremely well-placed to deal with retail customers. Without the bailouts, we could've had a bunch of new retail banks up and running smoothly by now.

Next people will be suggesting that the BOE should print as much money as everyone wants, and we can all sit at home and not have to work and all be millionaires ;)

Why "Next"?

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Invoking the depositor protection scheme would've been a lot cheaper than bailing out every bondholder.

If one of the major banks were allowed to go bust, people would have had their current accounts frozen, whilst they were waiting for compensation. People wouldn't get paid, companies wouldn't get paid, suppliers wouldn't get paid, people wouldn't be able to pay each other etc etc. People would have been knocking on the branches demanding their money. I think it would have been total chaos!

Also any of the man on the street's pensions with bond/share holdings would haave been completely hammered.

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Ok thanks, would that have meant that everybodies savings would have been protected in full ?

£35k each would have been the payout.

Even that shouldn't have happened - all savers should have been wiped out, the bansk shut and then the staff rehired by people who weren't corrupt ******wits.

Savers gave their money to idiots, spivs and conmen without realyl checkign what they were up to. The only long term solution is for them to get wiped out, over and over again until the message is rammed home that bankers can't be trusted.

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If one of the major banks were allowed to go bust, people would have had their current accounts frozen, whilst they were waiting for compensation. People wouldn't get paid, companies wouldn't get paid, suppliers wouldn't get paid, people wouldn't be able to pay each other etc etc. People would have been knocking on the branches demanding their money. I think it would have been total chaos!

Also any of the man on the street's pensions with bond/share holdings would haave been completely hammered.

Yep - everyone who made a bad bet would have lost.

Then in the morning they'd all have got up and done some thing else. The crisis would now be a receding memory.

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£35k each would have been the payout.

Even that shouldn't have happened - all savers should have been wiped out, the bansk shut and then the staff rehired by people who weren't corrupt ******wits.

Savers gave their money to idiots, spivs and conmen without realyl checkign what they were up to. The only long term solution is for them to get wiped out, over and over again until the message is rammed home that bankers can't be trusted.

Ok then, so there are some people saying here, that banks left to fail would have wiped people out ( assuming over the threshold) and that would have been a good thing ?

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Not entirely true. Tescos, M&S, etc are extremely well-placed to deal with retail customers. Without the bailouts, we could've had a bunch of new retail banks up and running smoothly by now.

Why "Next"?

Yes, and in Tesco's case, they had been considering trialling such a thing, but the who financial side (credit checks etc) was done by RBS behind the scenes.

But either way, wouldn't these supermarkets be effectively acting as agencies, which means BOE wouldn't be lending directly.

Maybe a potential possibily at the time - if these supermarkets could have bought one of the banks which were on the brink of collapse? But they didn't have enough free liquid capital at the time.

I guess that's why the remaining banks relied on middle eastern and far east investors...

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Ok then, so there are some people saying here, that banks left to fail would have wiped people out ( assuming over the threshold) and that would have been a good thing ?

Yep.

The false feeling of safety that government guarantees bring is enabling massive and pointless speculation with phantom money. It's only when the savers lose the lot that the man in the street will pay attention, and that's what's really needed to fix this problem.

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Yep.

The false feeling of safety that government guarantees bring is enabling massive and pointless speculation with phantom money. It's only when the savers lose the lot that the man in the street will pay attention, and that's what's really needed to fix this problem.

I suspose the domino effect for anybody with savings over the threshold spreading to the other banks at the speed of light. It would appear from the number of posters saying "let the banks fail & anybody with too much cash in their account can swivel" that they have very little money saved and are probably in debt up to their eyeballs.

thanks

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Yep.

The false feeling of safety that government guarantees bring is enabling massive and pointless speculation with phantom money. It's only when the savers lose the lot that the man in the street will pay attention, and that's what's really needed to fix this problem.

Yes, I agree, the savers would lose, and be more careful next time.

But the bigger problem (until the assets were recovered, which could take days/weeks) would be that the man on the street wouldn't be able to get ready access to his money to pay the bills, buy food etc.

Companies banking with that bank wouldn't be able to buy stock from their suppliers. They wouldn't be able to pay the wages of their staff.

Ok, some people with multiple bank accounts with different companies may be ok. But I'm pretty sure the average man will only have the one account which they use day to day! And will probably not have a cash reserve of a few hundred kept at home in case...

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Yes, I agree, the savers would lose, and be more careful next time.

But the bigger problem (until the assets were recovered, which could take days/weeks) would be that the man on the street wouldn't be able to get ready access to his money to pay the bills, buy food etc.

Companies banking with that bank wouldn't be able to buy stock from their suppliers. They wouldn't be able to pay the wages of their staff.

Ok, some people with multiple bank accounts with different companies may be ok. But I'm pretty sure the average man will only have the one account which they use day to day! And will probably not have a cash reserve of a few hundred kept at home in case...

Nah, you worry too much.

People are a lot more resilient than you are giving them credit for. What would happen is that millions would pursue their own self interest and sort themselves out asap.

In fact the banks know this and this is why they are so keen on keeping the status quo going. It's taken decades to get this level of parasitism up and running.

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What would have happened to peoples savings had a high street bank been allowed to go bust ?

I always wondered why the government couldn't have simply let the banks go bust then pick them up lock stock and barrel for next to nothing. And only then spend the billions of pounds preserving customer savings rather than propping up the fat cats. The govt could have owned a whole raft of banks for a pound each or something!

Edited by webchat

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I suspose the domino effect for anybody with savings over the threshold spreading to the other banks at the speed of light. It would appear from the number of posters saying "let the banks fail & anybody with too much cash in their account can swivel" that they have very little money saved and are probably in debt up to their eyeballs.

thanks

You must've missed the survey of HPC posters a couple of months ago. About 45% admitted to having over £100k savings.

I guess that must count as very little money saved.

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I always wondered why the government couldn't have simply let the banks go bust then pick them up lock stock and barrel for next to nothing. And only then spend the billions of pounds preserving customer savings rather than propping up the fat cats. The govt could have owned a whole raft of banks for a pound each or something!

You have the principle half-right. But when the bust bank goes into administration, it's up to the administrators to make the best price for the assets. When Northern Rock went bust, there were prospective buyers who could've honoured the savings guarantee in a free market.

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You must've missed the survey of HPC posters a couple of months ago. About 45% admitted to having over £100k savings.

I guess that must count as very little money saved.

Yeah for some this maybe the case, but when I start taking figures from an anonymous online survey as fact, then I might as well believe everything

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What would have happened to peoples savings had a high street bank been allowed to go bust ?

Same as happens now. They're becoming more worthless every day.

The state guaranteed tons of money and claim thats why the bill is so high for bailing out various banks.

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Yes, I agree, the savers would lose, and be more careful next time.

But the bigger problem (until the assets were recovered, which could take days/weeks) would be that the man on the street wouldn't be able to get ready access to his money to pay the bills, buy food etc.

Companies banking with that bank wouldn't be able to buy stock from their suppliers. They wouldn't be able to pay the wages of their staff.

Ok, some people with multiple bank accounts with different companies may be ok. But I'm pretty sure the average man will only have the one account which they use day to day! And will probably not have a cash reserve of a few hundred kept at home in case...

Only if it's hopelessly mishandled.

With a £35k protection in place, only amounts above that need be frozen, if day-to-day operations pass to a non-bust provider. C.f. the Santander and Nationwide takeovers of bust banks/socs.

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Yeah for some this maybe the case, but when I start taking figures from an anonymous online survey as fact, then I might as well believe everything

Perhaps I need to put myself forward as an example, as you've seen my posts to this thread. I didn't put myself down as having over £100k in the survey, though if you lump in extras like ISAs and non-sterling savings then I certainly do, and that's without counting investment-class assets (which are not covered by government guarantees).

I expect that's why I resent the government pissing my money away on useless projects, lame ducks, etc.

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Perhaps I need to put myself forward as an example, as you've seen my posts to this thread. I didn't put myself down as having over £100k in the survey, though if you lump in extras like ISAs and non-sterling savings then I certainly do, and that's without counting investment-class assets (which are not covered by government guarantees).

I expect that's why I resent the government pissing my money away on useless projects, lame ducks, etc.

My concerns were for anybody with over the £35k threshold.... would they have lost anything above that... lost permanently ?

That was the point I raised and still don't seem to have a proper answer.

If a bank with peoples savings , had been allowed to fail. Would their cash have vanished, never to be seen again ?

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