Saturday, August 22, 2009
State guarantee but zero payment
NR aka Bank of Nulab defaulted on subordinated debt. Aside from calling the government guarantee into question, it also makes me wonder to what extent the savings of the population are being honoured anyway. Financial institutions hold these bonds and ultimately financial institutions are the collective savings of the UK population. So if for example as a saver with money in the bank and -also- a pension fund, annuity or whatever, the government says well your 50K is safe but simultaneously pops 50K off the value of an investment vehicle. Net effect is still money gone. It isn't a guarantee really. I mean, are people happy to have money in the bank safeguarded at the cost of torching pension funds?