Think Tank : Scrap Fsa 75K Guarantee

[crashmonitor]

We have methods to stop you cash hoarding HPCers

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/12099986/Scrap-guarantees-for-savers-deposits-to-avoid-banking-crises-says-think-tank.html

[mattyboy1973]

People aren't bright enough to tell which bank is the riskiest. If the regulators can't and if the managers can't then how can someone with a couple of hundred quid and no info tell.

Pretty dumb. All they have is rumour and panic to work on. In other words let's bring back frequent meaningless bank runs and market panics.

However, I do support no bank guarantee ....just those depositors of that amount who represent a tiny proportion of the total.

I also support plenty of jailtime for the reckless like Fred who let's face it will have resulted in hundreds or even thousands of deaths due to the ensuing crisis and cutting back.

I'm not sure it is such a dumb idea, and is something I have also thought about in the past.

The benefit would be that the public should become aware (be made aware) that they are actually loaning money to the bank when they deposit it, and there is no guarantee of getting it back. I imagine this might lead to "safest bank" type tables in the papers in the same way that we now get "best interest rate" comparison charts, and it would lead to banks being rewarded for prudence instead of punished. A big contributor to the last crash, IMO, was banks having to out compete each other (at the direction of their shareholders) to offer more and better deals on this and that - far beyond anything prudent. If you didn't want to play the game, your share price suffered and you got replaced with someone who would.

[zugzwang]

More scientifically illiterate free market crap from the bankster apologists at the Mt Pelerin Society.

[Eddie_George]

More scientifically illiterate free market crap from the bankster apologists at the Mt Pelerin Society.

If only it were free market and the banks would have gone bust.

Privatise the profits, socialise the losses, as always,

[Eddie_George]

People would pull the money out and buy btl with it...

But then the banks would be bust* and could not lend, so houses would be bought for cash only and prices would fall. Bring it on!

* Of course the banks can never fail

Edited January 15, 2016 by Eddie_George

[Bruce Banner]

People aren't bright enough to tell which bank is the riskiest. If the regulators can't and if the managers can't then how can someone with a couple of hundred quid and no info tell.

Pretty dumb. All they have is rumour and panic to work on. In other words let's bring back frequent meaningless bank runs and market panics.

However, I do support no bank guarantee ....just those depositors of that amount who represent a tiny proportion of the total.

I also support plenty of jailtime for the reckless like Fred who let's face it will have resulted in hundreds or even thousands of deaths due to the ensuing crisis and cutting back.

It was pretty obvious that the Icelandic banks which were paying huge interest rates were not a good place to put your money. The infuriating thing was that Brown/Darling, not only bailed out all UK investors for the principal, but the interest too.

[billybong]

This is one of their vote IN scares for the eu referendum. As the guarantee is an eu rule it can only be cancelled if the UK leaves the eu.

At least that's the way it's presented.

Edited January 15, 2016 by billybong

[Bruce Banner]

Just because you and I are better informed, perhaps more intelligent, doesn't mean the ignorant and weak of mind should lose their money.

The people who should lose their money are the larger deposit holders who represent by far the lion's share of deposits.

And their 8% interest, paid in full?

Edit: A significant number of local authorities were keeping "their" money in Icelandic banks.

Edited January 15, 2016 by Bruce Banner

[Funn3r]

If your bank deposit was not guaranteed then why would you put money into a bank? Because massive savings interest rate (haha)?

It would encourage people to store cash at home, which would in turn present a huge security problem, people demanding they be allowed to have defensive guns etc.

[crashmonitor]

If your bank deposit was not guaranteed then why would you put money into a bank? Because massive savings interest rate (haha)?

It would encourage people to store cash at home, which would in turn present a huge security problem, people demanding they be allowed to have defensive guns etc.

I think we would be looking for alternatives. First port of call would be National savings but I guess they would pull the plug on new deposits, second port index linked bonds which would no doubt have an even more negative yield as the price adjusts to demand and thirdly gold.

Edited January 15, 2016 by crashmonitor

[Bruce Banner]

The size of their deposits means that regardless of their attitude to the bank's riskiness it was completely immaterial. If you're suggesting that punishing small depositors will stop banks behaving badly, you're badly wrong. So, it doesn't matter whether it is paid or not. I certainly wouldn't pay it to larger depositors and I would honour any liabilities to small depositors from the bailing in of large depositors.

EDIT: For the avoidance of any doubt, I am completely against the bailing out of banks.

Like the local authorities?

Edit: Repaying small depositors their deposit, but without interest, could hardly have been seen as a punishment.

Edit 2: The FSCS, at the time, covered 100% of the first £2,000 and 90% of the next £33K, so the small depositors were already protected.

Edited January 15, 2016 by Bruce Banner

[Timak]

And their 8% interest, paid in full?

Edit: A significant number of local authorities were keeping "their" money in Icelandic banks.

I worked at a local authority that had a large amount of money in Icesave.

They claimed they were forced to put it in the bank paying the highest rate of interest by auditors, otherwise they weren't making best use of public money.

[irrationalactor]

I see no problem with the FSCS guarantee.

If you have less than 75k then you're fine. If you have more than 75k then you're big enough to take on some of the risk.

The banks should never have been bailed out. The billions in government guarantees would have been much better spent backstopping the FSCS, helping to set up new banks, and investigating the systemic corruption.

If you remove the guarantee all you are doing is ensuring that poor people remain poor, as all the risk of a global financial monster they have zero control over rests on ordinary people with a few thousand in the bank. It would just be another way of making society pay for the crimes of bankers.

Remove the guarantee and a lot of people will take out wads of cash to stuff under the mattress. Around 2008 when my trust in the banks reached rock bottom, I did something similar (despite being a renter with no real secure place to store valuables) - it took a few years before I figured money in the bank was safe enough that I could deposit my buffer and stop worrying about getting robbed.

[TheCountOfNowhere]

I see no problem with the FSCS guarantee.

Do people really believe if push comes to shove this guarantee is worth the paper it's printed on ?

[spyguy]

Scrap all implicit subsidy of the state and its banks.

Put all bank workers pensions into a capital gap between the equity and the bond holders.

Have a 20 year instant claw back on failure salary for all directors.

[Bruce Banner]

Do people really believe if push comes to shove this guarantee is worth the paper it's printed on ?

I do, I would expect the government to print the necessary money. Of course nothing is certain, other than death and taxes, but I feel reasonably relaxed with my money spread around in tranches of £75K.

Edited January 15, 2016 by Bruce Banner

[sPinwheel]

So you get your £75k back. But it's worthless.

[winkie]

If your bank deposit was not guaranteed then why would you put money into a bank? Because massive savings interest rate (haha)?

It would encourage people to store cash at home, which would in turn present a huge security problem, people demanding they be allowed to have defensive guns etc.

They could remove the promise to pay bearer on demand....and keep changing the design of the notes, old notes to become obsolete.....

[irrationalactor]

So you get your £75k back. But it's worthless.

It's already worthless when measured against house prices.

For a priced-out saver, there's no sensible way to survive a hyperinflationary event, anyway. If we stop believing in the government's backing of the currency then we stop believing in the value of money, the illusion evaporates, and we're all paupers. Only some of the paupers live in nicer houses than others.

Guess I should take all my money out of the bank and run it through a shredder. Better than having the bankers or the government steal it off me.

[winkie]

Woods are selling well at the moment.....for tax and firewood reasons......sit on it and you might get a retirement home out of it.

[smiley]

I think just bringing this measure in - or perhaps just talking about it - could trigger a run on the banks.

[Bruce Banner]

It's already worthless when measured against house prices.

For a priced-out saver, there's no sensible way to survive a hyperinflationary event, anyway. If we stop believing in the government's backing of the currency then we stop believing in the value of money, the illusion evaporates, and we're all paupers. Only some of the paupers live in nicer houses than others.

Guess I should take all my money out of the bank and run it through a shredder. Better than having the bankers or the government steal it off me.

Houses can be confiscated.

[crashmonitor]

It's already worthless when measured against house prices.

For a priced-out saver, there's no sensible way to survive a hyperinflationary event, anyway. If we stop believing in the government's backing of the currency then we stop believing in the value of money, the illusion evaporates, and we're all paupers. Only some of the paupers live in nicer houses than others.

Guess I should take all my money out of the bank and run it through a shredder. Better than having the bankers or the government steal it off me.

That all depends on where in the country you live, I doubt the cash savers of Nottinghamshire, Derbyshire, Lincolnshire and Yorkshire are too fussed with house prices pretty close to where they were ten years ago and fixed rate bonds of 7% available in 2007.

The only thing that has cataclysmically devalued is northern provincial housing, not the cash.

[PopGun]

That all depends on where in the country you live, I doubt the cash savers of Nottinghamshire, Derbyshire, Lincolnshire and Yorkshire are too fussed with house prices pretty close to where they were ten years ago

Erm no they're up 30-40%, well asking prices are anyway. Edited January 15, 2016 by PopGun

[crashmonitor]

Erm no they're up 30-40%, well asking prices are anyway.

The stats would say otherwise..... Most northern cities hovering around zero since 2007, any idea what you would have compounded in the bank?

http://www.thisismoney.co.uk/money/mortgageshome/article-3326740/House-price-growth-UK-s-20-major-cities-set-hit-10-year.html

Edited January 15, 2016 by crashmonitor