Wednesday, November 11, 2009

O Rly?

Bank bad debts seem finally to have peaked

Much of money is being earned on the back of super cheap central and government funding. Neither Barclays nor HSBC have taken money directly from the UK Government, but both have availed themselves generously of government funding support through the the Special Liquidity Scheme and Credit Guarantee Scheme. They’ve borrowed the money cheaply and lent it more expensively. In investment banking the story is much the same. The spread between what the bank pays and what it sells to the client at has been hugely increased. It’s like a tax on savers, grudgingly tolerated by the Government because the alternative would be financial system collapse.

Posted by devo @ 07:02 AM (808 views)
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4 thoughts on “O Rly?

  • charlie brooker says:

    But that’s not to say its stopped.

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  • you can’t tell whether a debt is good until it has been repaid in full. It could go bad at any time. There is evidence that the banks have been gambling tax payer abilout money on the stock exchange. If that crashes, all the debts go bad again.

    The fact that they are effectively gambling does not bode well for the good debt / bad debt argument going forward.

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  • Gov’t to banks : Here are some chips to play in our fixed casino. When/if you win you can pay us back.

    “Asia is dancing along as if the recession never happened” = HSBC is thriving on the back of asset bubbles there, courtesy of massive government loans and fiscal stimulus.

    Investment banks are living off asset bubbles, not lending for value creation.

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  • One of the comments puts it well, “bad debts slow as rates approach zero”.

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