fellow Posted June 6, 2010 Share Posted June 6, 2010 Transparency: How Many Banks Are Having Problems? Each quarter, the Federal Deposit Insurance Corporation releases the number of banks it feels might need to be bailed out by the government. And though signs continue to point to the recession nearing its end, problems at banks continue to grow rapidly. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted June 6, 2010 Share Posted June 6, 2010 As long as huge leverage exists the banks will have problems. By definition all banks are insolvent because they can't pay everyone out on demand, no other companies are allowed to operate in this way. Quote Link to comment Share on other sites More sharing options...
Mixle Posted June 6, 2010 Share Posted June 6, 2010 As long as huge leverage exists the banks will have problems. By definition all banks are insolvent because they can't pay everyone out on demand, no other companies are allowed to operate in this way. That's the way banks normally operate, and would be a liquidity problem. What we have is a solvency problem. That is, it looks unlikely that the banks can pay everyone out over any timescale, at all. Quote Link to comment Share on other sites More sharing options...
RufflesTheGuineaPig Posted June 6, 2010 Share Posted June 6, 2010 That's the way banks normally operate, and would be a liquidity problem.What we have is a solvency problem. That is, it looks unlikely that the banks can pay everyone out over any timescale, at all. That is correct. Also, plenty of companies operate this way, though it's not always a good idea. All banks have a liquidity problem... they only have to keep a small fraction of deposits as a cash reserve to pay depositors on demand. That's what fractional reserve is. It's also the reason why a good bank can still be brought down by speculation that it's a bad bank... it creates a "run" on the bank where everyone tries to withdrawn their money at one, quickly exhausting the reserve. Quote Link to comment Share on other sites More sharing options...
plummet expert Posted June 6, 2010 Share Posted June 6, 2010 That is correct. Also, plenty of companies operate this way, though it's not always a good idea. All banks have a liquidity problem... they only have to keep a small fraction of deposits as a cash reserve to pay depositors on demand. That's what fractional reserve is. It's also the reason why a good bank can still be brought down by speculation that it's a bad bank... it creates a "run" on the bank where everyone tries to withdrawn their money at one, quickly exhausting the reserve. Trading whilst insolvent is a criminal offence for Company Directors. Most of the 'at risk' banks are trading in exactly that state! Quote Link to comment Share on other sites More sharing options...
shermanator Posted June 6, 2010 Share Posted June 6, 2010 As long as huge leverage exists the banks will have problems. By definition all banks are insolvent because they can't pay everyone out on demand, no other companies are allowed to operate in this way. Exactly!!! The problem with the banks isn't one of liquidity but solvency.....as I suspect Santander will be finding out quite soon Quote Link to comment Share on other sites More sharing options...
South Lorne Posted June 6, 2010 Share Posted June 6, 2010 (edited) Exactly!!! The problem with the banks isn't one of liquidity but solvency.....as I suspect Santander will be finding out quite soon ...sure I read in the paper the other day that Santander are leading the pack for the RBS Williams and Glyns Branches in England....who decides on fitness ...FSA....or RBS...or anyone....?....and what is the latest on Santander..?.... Edited June 6, 2010 by South Lorne Quote Link to comment Share on other sites More sharing options...
winkie Posted June 6, 2010 Share Posted June 6, 2010 ...sure I read in the paper the other day that Santander are leading the pack for the RBS Williams and Glyns Branches in England....who decides on fitness ...FSA....or RBS...or anyone....?....and what is the latest on Santander..?.... ....any info on metro bank? Quote Link to comment Share on other sites More sharing options...
South Lorne Posted June 6, 2010 Share Posted June 6, 2010 ....any info on metro bank? ..not mentioned in the final running...it's the new bank from the US opening 8 to 8 for certain higher segments of the market... has it opened first branch... ?...planned to be opposite High Holborn Tube station .... Quote Link to comment Share on other sites More sharing options...
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