Were UK banks are really in that much need of help from the government?
- From: Mel Rowing <mel.rowing@xxxxxxxxxxxxxx>
- Date: Tue, 7 Apr 2009 08:48:42 -0700 (PDT)
On Apr 7, 12:03 pm, "Iain" <s...@xxxxxxxxx> wrote:
Do you honestly think that the UK banks are really in that much need of
support from the government? There are two key points where I can see the
flaws, and this almost certainly applies to many other areas:
Not an easy question to answer but if they didn't need it then the
country certainly did.
So long as the government insists upon guaranteeing bank deposits then
the answer most certainly is yes.
Take that out of the equation then I am sure that most banks could
have worked out their own salvation.
For instance they could have persuaded depositors to convert their
their deposits into equity.Faced with a looming bank failure what
alternative would the depositors have had? I know which way I would
have voted.
Next not all loans are bad. In fact not even so called "toxic" loans
go into default. Loans provide the income stream for any bank.
However, such a stream would not become available for more lending but
would be diverted into capital reserves against the contingency of
more defaults. In short the bank would be offering no more loans nor
accepting any deposits until the situation stabilised.
This being the case most of the branches and offices could go creating
massive savings leaving a ghost living upon its assets whilst at the
same time meeting its liabilities. Take the present Equitable Life as
an example which despite its defunct status, has not been liquidated
and still remains solvent . It still meets its liabilities but does
not sell any financial products whatsoever, It has been pared down to
the bone and the income stream generated by its assets is used
predominantly to meet its liabilities. It exists simply by managing
policies/plans taken out by members prior to the difficulties.
One day after the guaranteed annuities ( the cause of the problem)
have died with their holders then tentative recovery might be
considered.
I don't see why troubled banks could not behave similarly.
The problem of course is time. Banks that do not lend at all let alone
over selectively are in no way going to ameliorate any credit crunch.
Money tied up in deposits converted into equity is not easily
available to be spent and the situation would last years or perhaps
decades.
What government would want that?
.
- Prev by Date: Re: Parkinson in shock attack on Jade Goody
- Next by Date: Re: Abelard's Question: How Many Polar Bears ?
- Previous by thread: Don't tell him he didnt warn them...
- Next by thread: Dedicated to the islamonazis of this group and jewhaters everywhere for Pessah
- Index(es):
Relevant Pages
|
Loading
