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Eddie_George

Banking Reform Act Becomes Law

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Don't forget in 2007 banks only guaranteed £33k of deposits and shareholders/bondholders were on the hook if a bank failed.

Then they failed, Ireland changed the rules, everyone else followed suit and the investment banks were given oodles of money to buy up retail banks so they could access the Fed discount window/LOLR and get themselves a bailout.

When the rich are at risk of losing any money, they tell their drones in govt. to suspend/change the rules.

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Don't forget in 2007 banks only guaranteed £33k of deposits and shareholders/bondholders were on the hook if a bank failed.

Then they failed, Ireland changed the rules, everyone else followed suit and the investment banks were given oodles of money to buy up retail banks so they could access the Fed discount window/LOLR and get themselves a bailout.

When the rich are at risk of losing any money, they tell their drones in govt. to suspend/change the rules.

You mean the law is just to placate us and the VIs will get what they want if push comes to shove!? Who would have thunked it!

I agree btw.

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You mean the law is just to placate us and the VIs will get what they want if push comes to shove!? Who would have thunked it!

I agree btw.

Of course.

Free market for the wealthy.

Rigged market for everyone else.

Why else would the wealthy tolerate it?

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When the two to four people at the very top of the government are on the side of people who own and run large banks and have the power to hand out hundreds of billions of pounds of taxpayer cash in a single weekend without needing to ask the Cabinet, Parliament or put it to the electorate in a referendum, it doesn't matter what the law says.

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The cynicism is not surprising but not entirely justified. The reforms of the banking reform bill are extremely expensive for banks and will hit profitability. The banks do not like them at all.

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The cynicism is not surprising but not entirely justified. The reforms of the banking reform bill are extremely expensive for banks and will hit profitability. The banks do not like them at all.

The repeal of Glass Steagall in the States ushered in the boom that led to the current bust.Separating retail banks and invesment banks inherently makes the banking system less dangerous to taxpayers.

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The repeal of Glass Steagall in the States ushered in the boom that led to the current bust.Separating retail banks and invesment banks inherently makes the banking system less dangerous to taxpayers.

No one would argue with that but they've had 6 years to do something about it......watch what they say do

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1. High Street banks will be separate from investment banks, keeping your money safe.

As they should be.

But if you deposit money in a bank account, it's no longer 'your' money, it's the banks. You become a creditor.

In the UK, the bank failures were NOT due to to failures of the investment arms of the banks (thought there was, and currently still is, that hazard). So 'your' money is not entirely safe in a bank.

2. If a bank fails, it's investors will be made to pay, so taxpayers don't have to...

If the bank fails, there will not be a bail-out, so there will have to be a bail-in. Meaning that your deposit will be converted to bank shares, and you will become an 'investor' in the bank, like it or not.

See above. This contradicts 1. If a bank fails, and there is no taxpayer bailout, your deposit isn't safe, for this very reason.

3. ... and your deposits will be paid back first.

First? Before what, exactly? Would you have priority over all other creditors?

In principle the banking reforms are good, but they are too slow in being rolled out, and the government text quoted in the OP is grossly misleading at best.

Edited by happy_renting

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Don't forget in 2007 banks only guaranteed £33k of deposits and shareholders/bondholders were on the hook if a bank failed.

The thing is, up to 2007 there was pretty much zero chance of losing money by placing your money in a british mainstream bank. Sometime in the mid 90's the game plan changed, and now there is no longer anywhere safe to deposit money.

I am completely mystified by all this. I thought that security for depositors (as opposed to bond or shareholders) was the cornerstone on which the banking system, and even capitalism was built. Now it seems that not only are we at risk from their reckless policies, but we are probably considered fair game in the event of money being required to prop up the system.

Meanwhile we have the EU continuing the madness with their plans for "europeanisation" of the banking industry, presumably not having noticed that much of the original problem was caused by the "globalisation" in the first place. Banks were previously judged whether they were too big to fail on a national scale. Now it will be on a european scale. That means it is going to be even more risky for us. The only logical action is never to bother saving, and throw ourselves on the mercy of the printing presses in our old age.

Edited by BigPig

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If the bank fails, there will not be a bail-out, so there will have to be a bail-in. Meaning that your deposit will be converted to bank shares, and you will become an 'investor' in the bank, like it or not.

There doesn't have to be a bail-anything, they could just let the bank go out of business and sell off the assets. Depositors are senior creditors and are supposed to be paid first out of the sale of assets before bondholders or shareholders get a penny.

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I thought that security for depositors (as opposed to bond or shareholders) was the cornerstone on which the banking system, and even capitalism was built. Now it seems that not only are we at risk from their reckless policies, but we are probably considered fair game in the event of money being required to prop up the system.

Depositors should not have absolute security, there are no certainties in life and we should not pretend that there are. They should be senior creditors able to buy deposit insurance from a third party if necessary. We should also have full reserve banking for people who are highly risk-averse.

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There doesn't have to be a bail-anything, they could just let the bank go out of business and sell off the assets. Depositors are senior creditors and are supposed to be paid first out of the sale of assets before bondholders or shareholders get a penny.

No they can't. Banks do not operate in the wider economy like a corner shop.

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No they can't. Banks do not operate in the wider economy like a corner shop.

Well done for internalising the banker propaganda, have a biscuit.

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Well done for internalising the banker propaganda, have a biscuit.

You're an idiot. It has nothing to do with propaganda.

Those who are in power cannot allow a bank to fail under a fractional reserve banking system. The entire economy would be pulled down with it.

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The cynicism is not surprising but not entirely justified. The reforms of the banking reform bill are extremely expensive for banks and will hit profitability. The banks do not like them at all.

Banking is the most regulated industry in the World...because bankers think they are above the law, routinely circumvent it and this is just the next hurdle for them to find a way round

Criminals hate being caught.

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Depositors should not have absolute security, there are no certainties in life and we should not pretend that there are.

I guess absolute security is not possible, but with my money in a regulated financial institution in a functioning modern state, I would expect a pretty good reason for not getting my money back, and " hey, we all got a bit carried away in the good times, and we do have bonusses to pay, you know" wouldn't be good enough.

In my opinion, my money is more at risk now after this act than it was 20 years ago.

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You're an idiot. It has nothing to do with propaganda.

Those who are in power cannot allow a bank to fail under a fractional reserve banking system. The entire economy would be pulled down with it.

A project which consumes more real resources than it generates has made a loss. The losses from this type of malinvestment have to be taken by somebody as real resources are finite. If governments refuse to allow banks and their creditors to take losses when those banks make bad investments then neither the banks nor their creditors have any incentive to allocate capital in a way which takes account of the risk of loss. Their best strategy under this scenario is simply to pile into the fastest-growing bubble du jour, make hay while the sun shines, and then hand the losses to the government when the bubble bursts. They will keep doing this until the government itself goes bust.

That is what is going to "pull down the entire economy".

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The reforms need to go towards banking practice rather than safeguards and so called assurances. Money is a utility and the reason for the bailouts was simply that govt couldn't fathom the fallout of so many people and businesses unable to access/manage/use their money, and the prospect of so much being lost. Potential for chaos. That's where the system needs to be changed.

Depositors should have zero guarantees of their money ever being returned to them and it should be law that this is pointed out in bold in a contract before opening any account.

If our society can't function without stable access to money the system that manages it should be shock proof. Able to allow institutions to go bust without bringing down everything else. In our current system I can only imagine reducing the the size and scope of personal banking, and separating investment banking will work. So they did one thing right but a more fundamental change still needs to be done.

Personally I lean more towards the ideals of positive money anyhow, having govt create money.

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I guess absolute security is not possible, but with my money in a regulated financial institution in a functioning modern state, I would expect a pretty good reason for not getting my money back, and " hey, we all got a bit carried away in the good times, and we do have bonusses to pay, you know" wouldn't be good enough.

In my opinion, my money is more at risk now after this act than it was 20 years ago.

Its at no more risk as the FSCS cover is the same.

Keep you money within the limits and if the odd bank fails then you will be covered,

Bankruptcy is a function of the market wherever credit is employed...note, it is impossible to go bankrupt if you owe no money.

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The cynicism is not surprising but not entirely justified. The reforms of the banking reform bill are extremely expensive for banks and will hit profitability. The banks do not like them at all.

Simple question.

What was the ratio of a bankers salary to that of other professional occupations in the 1970's vs now?

On that basis the banksters can whine and complain all they want. Even with these reforms they have still never had it so good. Zero sympathy.

Edited by alexw

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A project which consumes more real resources than it generates has made a loss. The losses from this type of malinvestment have to be taken by somebody as real resources are finite. If governments refuse to allow banks and their creditors to take losses when those banks make bad investments then neither the banks nor their creditors have any incentive to allocate capital in a way which takes account of the risk of loss. Their best strategy under this scenario is simply to pile into the fastest-growing bubble du jour, make hay while the sun shines, and then hand the losses to the government when the bubble bursts. They will keep doing this until the government itself goes bust.

That is what is going to "pull down the entire economy".

Forcing loss's onto where they should be, is very very different to letting a bank fail.

You are getting the two confused.

IMO, he is entirely right in the outcome of letting a major bank fail. It's the difference between a plane undertaking an emergency landing because an engine has caught fire, and slamming into the ground at full speed due to the same reason.

Edited by alexw

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Forcing loss's onto where they should be, is very very different to letting a bank fail.

You are getting the two confused.

A bank runs a balance sheet, checked and balanced DAILY.

This means that DAILY, assets and liabilties are equal.

A failed bank should have ZERO effect on its depositors...if all assets are properly valued, then on wind up, the regulators should be able to pay everyone back..

Course, they lie daily about the value of assets...hence QE to maintain asset values.

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A bank runs a balance sheet, checked and balanced DAILY.

This means that DAILY, assets and liabilties are equal.

A failed bank should have ZERO effect on its depositors...if all assets are properly valued, then on wind up, the regulators should be able to pay everyone back..

Course, they lie daily about the value of assets...hence QE to maintain asset values.

That's the theory, but then compare it to reality. What happened when lehman's failed, what were the secondary effects on the world economy? Now consider what would happen if practically ALL the world's major banks were allowed to fail in a similar manner.

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