are the banks paying off their loans?

[petemurphy]

All these billions that the taxpayer lent - are they all paying them off as they should do? if so whats the prob with bankers bonus's? if they are paying off according to the terms the gov set then fine surely? or are they fiddling it? if they are paying them off are we making a profit?

[petemurphy]

Soovy said:

The bailout is certain to be MASSIVELY cash positive for the taxpayer. That is to say that the taxpayer will be making billions in profit.

But, that doesn't suit the message. So you won't be hearing it.

so why the doom and gloom and cutbacks?

[petemurphy]

andymadmak said:

Ozzie Osmond said:

Soovy said:

The bailout is certain to be MASSIVELY cash positive for the taxpayer. That is to say that the taxpayer will be making billions in profit.

So,

1. Remind us, why did the banks need "bailing out"?

2. If the "billions in profit" for the taxpayer are "certain", why didn't the bankers bail out the banks and pocket the billions for themselves?

Banks needed bailing out because of the level of toxic debt in western economies - mostly UK/USA it has to be said. Much of that toxic debt was created by politicians - not specifically though overspending (although UK did that to spectacular levels) but moreso because banks were told to
1) Lend to people that they would traditionally not have touched with a barge pole
2, Keep lending against rising asset values (usually property) that any fool could see were unsustainable.

Clinton started the ball rolling with his changes to Fannie May and Freddie Mac, but the errors were multiplied by politicians the world over who saw an artificial property value lead boom as the way to conceal gross over expenditures by Governments.
People say it was Thatcher who de-regulated and thus created the conditions that allowed the debt crisis to envelope the UK banking sector. In fact, whilst Thatcher did de-regulate, she had left in place just enough comand and control to ensure things did not get out of hand. Brown effectively removed the last pit props holding up the scrutiny and regulatory frameworks within the UK and THATS how come the UK was worse hit by the US banking crisis than any other western economy. Quite literally years before Northern Rock collapsed, questions were being asked in the HoC by Lib Dem and Conservative MPs who were expressing concern about the level of sub prime debt that NR was taing on. Brown told them to bugger off and stop being so pessimistic.....

Why didn't the bankers rescue themselves? Erm, I'm not sure you quite have a handle on the scale of the problems involved. I doubt any single banker had the money as an individual to rescue a major bank In fact Barclays did rescue themselves, but other banks were too far in the crap and could not negotiatedeals with lenders. And who would want to? Barclays didn't touch the Governments (our) money but they still get tarred with the same "it's all the banks fault" by the public and media and bonuses to Barclays execs attract just as much opprobium as those to HBoS bods. Nobody could accurately predice how the crisis would end. Remember, for every pound that banks lend they must have an ammount in reserves, either as cash or assets. The banking crisis came about because the value of certain assets (the toxic debt bundles) fell, and banks very quickly became "over lent" against their reserves. This meant they could not loan money to anyone, whether a good customer or a sub prime one. When credit dried up, business stops, and the whole system collapses. This is what was at stake, and this is why ONLY Government level intervention in the form of nationalisation and loan guarantees would calm the international markets.
As toxicity from the debt markets is cleared, bank values will rise again. The Guarantees can be removed and those shares that we the tax payer hold in the nationalised banks can be sold at a significant profit. There are parrallels with the Governments rescue of Rolls Royce aero engines in the 1970s.

HTH

Andy

thanks interesting

who did the gov borrow off in simple terms ( geniune question ) to spend so much? were the banks "told to" as i thought the politicians are telling them to do this now but they are ignoring them?

[petemurphy]

andymadmak said:

petemurphy said:

andymadmak said:

Ozzie Osmond said:

Soovy said:

The bailout is certain to be MASSIVELY cash positive for the taxpayer. That is to say that the taxpayer will be making billions in profit.

So,

1. Remind us, why did the banks need "bailing out"?

2. If the "billions in profit" for the taxpayer are "certain", why didn't the bankers bail out the banks and pocket the billions for themselves?

Banks needed bailing out because of the level of toxic debt in western economies - mostly UK/USA it has to be said. Much of that toxic debt was created by politicians - not specifically though overspending (although UK did that to spectacular levels) but moreso because banks were told to
1) Lend to people that they would traditionally not have touched with a barge pole
2, Keep lending against rising asset values (usually property) that any fool could see were unsustainable.

Clinton started the ball rolling with his changes to Fannie May and Freddie Mac, but the errors were multiplied by politicians the world over who saw an artificial property value lead boom as the way to conceal gross over expenditures by Governments.
People say it was Thatcher who de-regulated and thus created the conditions that allowed the debt crisis to envelope the UK banking sector. In fact, whilst Thatcher did de-regulate, she had left in place just enough comand and control to ensure things did not get out of hand. Brown effectively removed the last pit props holding up the scrutiny and regulatory frameworks within the UK and THATS how come the UK was worse hit by the US banking crisis than any other western economy. Quite literally years before Northern Rock collapsed, questions were being asked in the HoC by Lib Dem and Conservative MPs who were expressing concern about the level of sub prime debt that NR was taing on. Brown told them to bugger off and stop being so pessimistic.....

Why didn't the bankers rescue themselves? Erm, I'm not sure you quite have a handle on the scale of the problems involved. I doubt any single banker had the money as an individual to rescue a major bank In fact Barclays did rescue themselves, but other banks were too far in the crap and could not negotiatedeals with lenders. And who would want to? Barclays didn't touch the Governments (our) money but they still get tarred with the same "it's all the banks fault" by the public and media and bonuses to Barclays execs attract just as much opprobium as those to HBoS bods. Nobody could accurately predice how the crisis would end. Remember, for every pound that banks lend they must have an ammount in reserves, either as cash or assets. The banking crisis came about because the value of certain assets (the toxic debt bundles) fell, and banks very quickly became "over lent" against their reserves. This meant they could not loan money to anyone, whether a good customer or a sub prime one. When credit dried up, business stops, and the whole system collapses. This is what was at stake, and this is why ONLY Government level intervention in the form of nationalisation and loan guarantees would calm the international markets.
As toxicity from the debt markets is cleared, bank values will rise again. The Guarantees can be removed and those shares that we the tax payer hold in the nationalised banks can be sold at a significant profit. There are parrallels with the Governments rescue of Rolls Royce aero engines in the 1970s.

HTH

Andy

thanks interesting

who did the gov borrow off in simple terms ( geniune question ) to spend so much? were the banks "told to" as i thought the politicians are telling them to do this now but they are ignoring them?

Well the Government did a number of things to finance its spending spree.

1, It taxed, - alot! Wind fall taxes on this and that - the damage to the private pensions sector was utterly shameful.
2, It was creative in how it borrowed - PFI is a good example
3, It consistently talked up UK economic prospects and quashed any questionning of the endless "we have ended boom and bust" mantra that Brown regurgiated every day.
4, point 3 above enabled the Government to sell more loan notes (Gilts) internationally than perhaps it would ordinarily have been able to do.
In the absolute final analysis, the Government borrowed all this money....from us, and other tax payers around the world. Thats it in a nutshell. And we had better hope that the people we have borrowed it from continue to believe we can pay it back - otherwise if they think we might possibly default in any way, then they will put the interest rates up and we will be deeper in the st. Given that £1 in every £6 the Government spends goes on paying interest on the debt we already have!, and £1 in every £4 the Government spends is currently borrowed its not hard to see that we are ACTAULLY borrowing money as a nation to pay off Labours spending induced debts. If the interest rate we pay as a nation goes up (either cos it actually goes up, or we have to offer more interest on Gilts just so institutions will buy them) then watch those figures get far worse very quickly.

has just pfi and gilts ended up being trillions of pounds of debt? what would happen theortically speaking if we just defaulted on all gilts and started again and dont borrow anything internationally but just used tax to pay for things?