Banks or Government


S

Simon

tim..... said:
But that's new money that is lost.

If the Banks just "went bankrupt" HMG would have to immediately pay
(assuming it keeps its promise) everyone who saved with that bank, their
savings back.

Keeping the Bank alive means that the e.g. 100 billion pounds of money on
deposit, is backed by the 100 billion pounds of lending that the bank has
made, some of which will go bad.

The bail out represents the amount that's gone/going bad.

I would be mighty pissed off if they came up with a scheme that took my
money just so that they can avoid paying whatshisname's pension. Yes, I
am going to have to pay a share of that pension anyway, but funding it
through a rise in taxes seems much fairer than funding it by confiscating
savings from the people who did no wrong, whilst letting the reckless
borrowers off scott free, IMHO.


The problem isn't about profit, it's about liabilities and assets. The
numbers are too large for HMG to handle if the Bank is wound up.


Where are these resources coming from after you have paid out the "savings
guarentee"?


I agree that we should dispose of the personnel, but much of that has
happened


This is irrelevant to the discussion on Banks

tim
And if the bank did go under, the savers would be protected, but the
administrators would either have to call in all the mortgages or sell them
on. Not all mortgagees are toxic, so why should they suffer?
 
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M

Mark

I'm sure that's largely true, but such events can be read about in
books. They do happen every three generations or so. All it takes is for
a generation to forget just how treacherous a friend debt can be, and
we're off to the races again. The longer ago the last such bubble, the
easier perhaps to forget.
Maybe they should teach more about debt in schools? I certainly had
to find out by myself.
Perhaps back at the start in 1985. By the time a bubble is going, a
greed-maddened public will simply replace any politicians who try to get
in the way. I recall that even back then, Margaret Thatcher was advise
to curtail the nascent housing bubble by removing mortgage interest
relief. Having a good understanding of her public, she stated "Over my
dead body".
I'm sure some sensible borrowing restrictions could be found. Like
maximum LTV on house purchases, lenders should be forced to check
whether the borrower can afford the loan etc..
That assumes that the economy is something under someone's control. It
isn't. It's just a bunch of people trading with each other. To that
extent the economy is a tool. If people misuse it, it will break.

People thought that by continually trading houses to each other using
higher and higher numbers on the cheques, they could get rich. In a way
they could, by borrowing against those higher values. Unfortunately all
that debt still needed serviced, though some seemed to assume it was
somehow money for nothing. It's no different from Fred and Barney
becoming millionaires by selling each other their caves, swapping
houses, and then each smashing up the million quid tablets.

It can't be stopped, but anyone who tries can be replaced.


They're not trying to help as yet. They're trying to resurrect the
bubble. See the nonsense about restarting the securitisation markets so
that we can go back to the banks making dodgy loans and then passing
them onto someone else in a long chain of pass-the-debt-bomb.

They're nuts and they're throwing all our future earnings at a problem
that has already solved itself. The securitisation markets were part of
the problem and their death is part of the cure.


Demand will return to pre-bubble levels because people are going to have
to relearn to save and spend rather than borrow-and-spend. The
businesses which built up to service the borrow and spend mentality will
have to shrink or vanish because they're making more than we now want.
That's already happened with cars. It will happen with a great deal
more. We'll all be the poorer if we continue to pay for people to make
cars which they'll simply have to rent space for while they rust.


Most? No.


Most? No. Many? Yes.

They'll go bust and be reposessed eventually anyway. The reset is
underway and cannot be reversed. It can be slowed though, in which case
those businesses and people will lose yet more money befre they go
under. Quite how that does the owners or people a favour escapes me.


I'd hardly call throwing trillions at the problem an "efficient"
transfer. We might later need that cash to help people.

FoFP
--
(\__/) M.
(='.'=) Owing to the amount of spam posted via googlegroups and
(")_(") their inaction to the problem. I am blocking most articles
posted from there. If you wish your postings to be seen by
everyone you will need use a different method of posting.
See http://improve-usenet.org
 
M

M Holmes

Simon said:
And if the bank did go under, the savers would be protected, but the
administrators would either have to call in all the mortgages or sell them
on.
They'd sell them on.
Not all mortgagees are toxic, so why should they suffer?
In what way would a mortgagee suffer if the mortgage was sold on? They'd
simply make the same payments to a different ultimate destination. The
same could be said of mortgage securitisation. How many folks suffered
from their mortgages being securitised?

FoFP
 
M

M Holmes

Mark said:
On Fri, 27 Feb 2009 16:14:02 +0000 (UTC), M Holmes
Maybe they should teach more about debt in schools?
I certainly believe they should.
I'm sure some sensible borrowing restrictions could be found. Like
maximum LTV on house purchases, lenders should be forced to check
whether the borrower can afford the loan etc..
Fannie Mae and Freddie Mac required conforming mortgages and they're still
bust. There was a lot more awry in the bubble than high LTV and no-doc
mortgages. If you went that route, you might also want to limit loans
to 2.5 times income and require borrowers to save with the institution
for two years to prove they could manage the mortgage. Then we'd be back
to where we were before the bubble started.

It'd help of course, but I confidently predict that the 2060's bubble
will see all well-meaning legislation put in place now repealed,
sidelined, or suborned. I also predict the Golden Ticket won't be
domestic housing next time, and since that's what everyone will be
watching for...

FoFP
 
S

Simon

M Holmes said:
They'd sell them on.


In what way would a mortgagee suffer if the mortgage was sold on? They'd
simply make the same payments to a different ultimate destination. The
same could be said of mortgage securitisation. How many folks suffered
from their mortgages being securitised?
Unless the terms of the new owner of the mortgage are significantlt worse,
or even worse, what is to stop the administrator simply calling in the loan.
 
P

PeterSaxton

I certainly believe they should.


Fannie Mae and Freddie Mac required conforming mortgages and they're still
bust. There was a lot more awry in the bubble than high LTV and no-doc
mortgages. If you went that route, you might also want to limit loans
to 2.5 times income and require borrowers to save with the institution
for two years to prove they could manage the mortgage. Then we'd be back
to where we were before the bubble started.

It'd help of course, but I confidently predict that the 2060's bubble
will see all well-meaning legislation put in place now repealed,
sidelined, or suborned. I also predict the Golden Ticket won't be
domestic housing next time, and since that's what everyone will be
watching for...

FoFP
I agree that the government strategy is simply to return to the
previous bubble times.

This is why I am in favour of a different approach that avoid large
scale bankruptcy and repossessions. If people sit around doing nothing
and live off benefits that isn't doing any good.

If they are not going to help people stay in their houses and keep
businesses going via loans then they would need to stop benefits and
force people back to work at lower wages rather than do nothing on
benefits.
 
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T

tim.....

Mark said:
I can't see why raising taxes is any fairer. It's still "taking money
from people who did no wrong."
Because it also takes the money away from the people who were reckless.

It would be impossible to just charge the reckless because of the new "namby
pamby get off free in a year" bankruptcy laws that we now have.

tim
 
T

tim.....

M Holmes said:
True, but since there's a deposit limit of 50,000 Pounds insured, that
isn't the total of all deposits.
They promised all deposits.
There'd be some value in selling the
assets of banks. What bankruptcy would get the British economy out from
under is covering all the foreign bondholders, which is what makes the
banking debt worth 2,4 times our GDP and puts us in danger of being
Iceland II. It'd also obviously reduce the shareholder value to damn
near zero.

Instead of taxpayers shovelling out money to help those who invested in
the bonds of deadbeat banks, those holding CDS's on them would have to
pay out instead. I dunno about you, but that seems a lot fairer to me.
They wrote insurance on bank bonds whereas the taxpayers did not.


It's *already* gne bad. It just hasn't been admitted yet.
Time will tell. As I haven't seen the banks lending list I can't tell. I
suspect you haven't seen this list either
So let those who insured it pick up the tab and let bad businesses go
out of business before they lose yet more money. If it was steelmakers,
they'd be out of business tomorrow.
Agreed, but then UK PLC would be out of steel making. If the banks went
bankrupt we'd have to re-establish them
If you have less than 50 grand on deposit, you're insured. if you have
more than that, you're stupid.
I suggest you try finding sensible homes for a million in 50K packets (no I
don't have a million)
Not what I'm proposing.


It's what we're doing now that let's reckless borrowers away with it. If
we let the free market determine interest rates, they'd be considerably
higher because there's a lot of demand for scarce cash. That'd help
depositors and it'd help good banks rebuild their books. It's
artificially holding rates near zero as part of the bailout that
punishes depositors and helps the reckless borrowers who brought us to
this.
Only in the short term. In a couple of years I'll be getting 5% on my
deposits and they'll be living in a house with a 100K NE. Some will go
bankrupt, many (hopefully) will grin and bear it.
Keep HMG out of it apart from compensating insured depositors.



Warren Buffet and Richard Branson are still prett rich and we'll still
need banks. Perhaps they, or people like them will do it for the profit
it would make them.

The Japanese tried all this with 19 zombie banks 20 years ago when a
very similar credit bubble burst there. 5 survive (barely) despite 20
years of bailouts and the economy has beeen in deflation for most of
that. Meanwhile house prices fell (slowly) 50% to 90% from peak and
they're not only still in the mire, they're now following us into our
mire.

Want that to happen here for 20 years? We could get it over with in 4 or
5 if we just accepted a good hard and fast liquidation of deadbeat banks
and companies. Think of it like taking off a plaster: all the pain will
happen anyway, so it's a matter of how long you want it to last.
I think it will still be over in 2 years. The Japanese situation is
strange, very strange!

tim
 
T

tim.....

Simon said:
And if the bank did go under, the savers would be protected, but the
administrators would either have to call in all the mortgages or sell them
on. Not all mortgagees are toxic, so why should they suffer?
How are these mortgagees suffering ATM?

tim
 
T

tim.....

Simon said:
Unless the terms of the new owner of the mortgage are significantlt worse,
or even worse, what is to stop the administrator simply calling in the
loan.
The fact that as houses are illiquid, they wouldn't get their money. (Worse
case is the borrower would hand you the house instead and go bankrupt)

tim
 
S

Simon

tim..... said:
The fact that as houses are illiquid, they wouldn't get their money.
(Worse case is the borrower would hand you the house instead and go
bankrupt)

No, the worse case is that the home owner will not be able to find alternate
finance, the administrator will sell the house from under you and you are
homeless.
 
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M

Mark

I certainly believe they should.



Fannie Mae and Freddie Mac required conforming mortgages and they're still
bust. There was a lot more awry in the bubble than high LTV and no-doc
mortgages. If you went that route, you might also want to limit loans
to 2.5 times income and require borrowers to save with the institution
for two years to prove they could manage the mortgage. Then we'd be back
to where we were before the bubble started.

It'd help of course, but I confidently predict that the 2060's bubble
will see all well-meaning legislation put in place now repealed,
sidelined, or suborned. I also predict the Golden Ticket won't be
domestic housing next time, and since that's what everyone will be
watching for...
I hope it's something useless like tulip bulbs, not something my
children need.
--
(\__/) M.
(='.'=) Owing to the amount of spam posted via googlegroups and
(")_(") their inaction to the problem. I am blocking most articles
posted from there. If you wish your postings to be seen by
everyone you will need use a different method of posting.
See http://improve-usenet.org
 

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