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I don't really fully understand the intricacies of global finance, but as far as I can tell we (the taxpayer) gave a lot of our money to the the banks who had not been very good at their jobs.
The govt approach seems to have been to lend the money in return for shares, and sell the shares at a later date BUT did not commit to delivering a profit to tax payers.
A few bits I don't get;
Are we going to get interest on the "loan"?
Why would we not hold onto the shares for future profit? They usually make a few quid do they not?
Why aren't we just keeping the shares and taking whacking great dividends?
Should there not be more public consultation on this? It seems to have gone very quiet which makes me very suspicious that it's all being dealt with quietly.
This isn't intended as a thread for slagging whichever political party you happen to dislike, just a question of why things are done and how do we (considering the deficit) ensure that we maximise our "investment"?
I'll be very angry if those who effed everything up get a nice easy ride.
Why would we not hold onto the shares for future profit?
When might that be? Would you buy shares in this bank? Gov't is borrowing money so to keep the shares has to think the return is greater then the borrowing cost.
Those who made the mistakes were rich, and still are, so they will get an easy ride whatever. Sorry - but please direct your anger somewhere useful.
Should there not be more public consultation on this?
Problem is, the public know **** all and can be easily manipulated by party spin.
When might that be? Would you buy shares in this bank? Gov't is borrowing money so to keep the shares has to think the return is greater then the borrowing cost.
I thought that the share value is roughly what we paid and that is why they're looking at selling. It's likely that they will start making more money now is it not?
It's likely that they will start making more money now is it not?
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For example, Royal mail shares currently trading at under 4 quid - above offer price of £3.30 but much lower than 1st day trading of £4.55 (all time high topped at £6.18 IIRC, I sold at £5.98)
I'll be very angry if those who effed everything up get a nice easy ride.
Best start getting angry then.
To summarise....
We all got well and truly bent over, and continue to be, while the people responsible were left absolutely unaffected by it all, trousered all their enormous salaries and bonuses and skipped off into the sunset, like the Morcombe and Wise end credits, laughing their tits off that they bum-raped us all that easily
It was so easy in fact, that they're busy creating the perfect conditions to do it all again, as they can't believe that governments would be so mind-numbingly stupid as to leave the whole system completely unreformed, and gleefully urged them to get on with[s] their limitless greed and fraudulent behaviour [/s]'Business as Usual'
Something to look forward to eh?
I know that this is probably a contrary view, but wasn't the bailout necessary? Without getting too idealist about it; is it not probable that we'd be in even deeper shit had Gordon handed over the moneys?
Even if not, it's done now and I just want us to do what is in the taxpayers interest, and not the banks. They seem very keen for to govt to sell up.
I know that this is probably a contrary view, but wasn't the bailout necessary?
Of course it was. We'd be even more ****ed now if it hadn't happend. That's why they did it.
I know that this is probably a contrary view, but wasn't the bailout necessary?
If the people who's job it was to monitor these things had actually done so, if the government had bothered listening to the people warning them what was happening, instead of unquestioningly fawning over bankers, or if the senior management of the banks (in return for their obscenely enormous salaries) actually had the remotest clue, or even a passing interest in what their mischievous minions were doing, we'd never have needed a bailout in the first place
And the horsemeat thing?
And parliamentary expenses?
And all the government interception of well, all the internet?
Of course it was. We'd be even more **** now if it hadn't happend. That's why they did it.
So what would have happend if they'd just let the banks go tits up? I never could work that out.
The "bank bailout" can be distilled into three broad areas:
Liquidity support - the Bank of England provided liquidity, short term loans, at above market rates to the banks to theirs needs, these were profitable.
Equity: The government purchased shares in four banks: RBS, Lloyds and Bradford & Bingley & Northern Rock (both of whom were nationalised). The amount paid for the RBS shares is still more than their present value by about 25%, Lloyds are above breakeven and some have been sold, Northern Rock and Bradford & Bingley were restructured into a viable operations, which were been sold, and "bad banks" which are being worked out under government ownership. Money is likely is to be lost overall on the latter two banks that were nationalized.
Off Balance sheet scheme - there was an Asset Protection Scheme and a credit guarantee scheme which essentially involved the payment of a fee by the banks in return for a guarantee of some of their assets and some of their liabilities (so they would find investors). These schemes were closed without costs and the fees charged are a profit.
The real cost of the crisis was the cost of dislocation caused in the economy.
There was the very real risk that people would go to cash machines and not be able to take out their money as banks went bankrupt.
Where would that leave people with mortgages through bankrupt banks?
The government had no choice but to lend. Unfortunately, we rely on borrowing too much.
Haven't RBS paid everything back now anyway?
while the people responsible were left absolutely unaffected by it all
It's rather simplistic to [i]only[/i] blame the banks for the disaster. In reality it was society as a whole. People desperate to get on the property ladder, lying on applications, borrowing way beyond their means, general greedy consumerism. The banks were only one part of the problem, but they're not solely responsible. Some of the responsibility must lay with those that borrowed money from the banks in the first place. That's something that gets almost universally ignored.
I'll be very angry if those who effed everything up get a nice easy ride.
Definitely not! This bloke had to give up his knighthood!! Imagine that?!!! But not his absolutely ****ing massive pension. As that would have been a bit harsh
And also..... erm.... yeah.... also ..... no..... thats it really...
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loosing your savings is a good point but:
Where would that leave people with mortgages through bankrupt banks?
This is the bit I don't understand. Where would it have left them? Would the insolvency people have demanded immediate repayment of the loan? (which wouldn't have happened) or would the debt just have been sold to another lender? (if they could have found one).
This is the bit I don't understand. Where would it have left them? Would the insolvency people have demanded immediate repayment of the loan?
They'd have sold your loan to Wonga
Mefty; thanks for that clarification. Wasn't the majority of the money part of the second (and unresolved) "equity" part?
People desperate to get on the property ladder, lying on applications, borrowing way beyond their means, general greedy consumerism.
I thought that it was mainly due to the "sub-prime" situation in the US where the banks were wholly negligent in their lack of checks and balances of individuals finances?
If it had been confined to a consumer level the fallout would have been a lot less even given the level of default and fraud.
What absolutely rodgered the financial system was the debt being repackaged, leveraged and repackaged again into obscure derivatives.
On top of this insurance was sold on both the repackaged debt and on the banks themselves so in the end no one knew who could actually pay their obligations so the system ground to a halt.
In reality it was society as a whole.
Yes, including those people who were suckered in by neocon policies and voted for them. But then again, how were normal people to know?
What absolutely rodgered the financial system was the debt being repackaged, leveraged and repackaged again into obscure derivatives.
Ahh yes, I remeber talking to a guy who was vaugley involved with trying to sort out one of the banks that did go to the wall (might have been Lehmans?). He was quite hot on derivatives and said the bank was selling products so complicated that nobody at the bank actually knew what they were or (more importantly for him) give any idea of a fair value for them.
Exactly how much do 'you' think you paid to bailout the banks? £1000 each, £10000 each?
£TOOMUCH. Unless we get a very healthy profit. The banks are profiting again, why shouldn't we?
The majority of the actual cash outlay was for capital but the real exposure was at least ten times greater under the other two. However now only the shares are outstanding and we are losing money as we are funding them, ie paying interest, and receiving no dividends. This loss may be recouped if we sell at a profit.
This is a pretty good source if you want more information - [url= http://www.nao.org.uk/highlights/taxpayer-support-for-uk-banks-faqs/ ]NAO FAQ[/url]
Thing is, as individuals you've probably stuck a tenner in. And it's not like you got taxed more to pay it. All these people that go on about how they bailed the banks out, how they paid bankers wages etc etc. Really?
Royal Bank of Scotland (RBS) has reported pre-tax profits of £1.6bn for the [b]three months[/b] to the end of March
How the **** are we not getting our share of this? Don't we effectively own 80-odd% of it?
Thing is, as individuals you've probably stuck a tenner in. And it's not like you got taxed more to pay it. All these people that go on about how they bailed the banks out, how they paid bankers wages etc etc. Really?
Yeah, we could not have found a use for those billions at all. It was just spare cash lying around. Local councils, hospitals, police etc are wiping their arses with fivers. And with these service being cut, we've not lost out on anything at all, have we?
Dunno if this has got much coverage yet, just caught up with the File On Four podcast today...
[url= http://www.bbc.co.uk/programmes/b04hvynp ]Surprise surprise, more bankers ripping us all off[/url]
And if you can't listen to the whole doc...
[url= http://www.bbc.co.uk/news/business-29316907 ]http://www.bbc.co.uk/news/business-29316907[/url]
How the **** are we not getting our share of this? Don't we effectively own 80-odd% of it?
We would get our share but not sure how much would be paid out and how much retained for future use.
When the shares have been sold, as they have done, the profits will go back into the coffers. Not out to individuals. Like I said, a tenner each. 30,000,000 tax payers in the country. 80% of 1.6bn = 1.28bn. 1.28bn divided by 30mil = £42. After tax you can have £30 each. Hardly millions is it?
Thing is, as individuals you've probably stuck a tenner in
What's that then? 70,000,000*10 = £700,000,000
Latest figures suggest it has so far cost £123,000,000,000 - so around £1750 for every man, woman and child [so far]
Thing is, as individuals you've probably stuck a tenner in.
Out of interest, I looked this up. Very simplistic, but apparently we lent £850 billion. There are 32.49 Million employed in the UK, so an individual contribution of approx £26,000. This seem right?
Actually, I can't see that we've answered the mortgage question?
If my mortgage lender goes bust, my debt is one of it's assets that would be sold on if a buyer could be found? Would the terms of my mortgage still be binding on the new mortgage company?
Here's a piece that may help - or not
Granted, more than a tenner, a lot more. But is anyone £26000 worse off because of it? As an individual? And I'm not talking about recession or redundancies, I'm talking about as a direct result of the bailout.
Actually, I can't see that we've answered the mortgage question?
Above ^^^^
They'd have sold your loan to Wonga
Would the terms of my mortgage still be binding on the new mortgage company?
I [i]suppose[/i] that the new lender could send you a new contract/Ts&Cs to sign or seek settlement under the current terms?
But is anyone £26000 worse off because of it? As an individual?
I'm not sure the "we" in the OP referred to individuals, more the country as a whole. And when you add up all those tenners it comes to a lot of money that could be spent on something else.
So it would be nice to get it back (with a bit of profit) sometime.
I think it would be under current T&Cs, so if your interest rate could be whatever the lender wanted it to be then you might be in trouble - though you could then cancel it if T&Cs allowed. Mortgages would likely be sold on for less than their value depending on how risky it was deemed to be and the T&Cs - so if a fixed rate easyish to value.
But is anyone £26000 worse off because of it? As an individual?
We all are through the decreased level of public services we receive due to the cuts. The UK is getting poorer due to the borrowing. We work longer, and it's probable that pensions will be crap. Benefits freezes. Pay freezes for public sector. Les govt projects for the private sector to service. Less police, health professionals, military redundancies. Who exactly do you think is effected by decreased govt spending?
So, going against your original post I think, you're now saying that the profits should be poured back into services etc. rather than paid back to tax payers. Which they will be, and when the Government sells their shares, which they recently did in Lloyds then those profits will be ploughed back into the treasury. Likewise, when the banks start paying dividends again those profits will go back into the treasury.
So I think your beef is with the goverment, not the banks?
You're only getting a tenner back Bob
@mefty has provided a pretty good explanation.
The Asset Protection Scheme has been very successful, basically the banks paid a big "insurance premium" and they have not made any claims (as the "insurance excess" was quite large and looses have been below that figure)
The banks where lent a lot of money at profitable rates, so that's been a plus
The shares the government bought are currently worth less than was paid. It is worth noting that in Oct 2010 they could theoretically have been sold for a profit. The shares the US government bought in their banks (which were in a bigger mess) have been sold at a profit. This is partly as the US economy has recovered more strongly and also as the government has been a bit more pragmatic in supporting the banks rather than battering them further. At some stage it is likely the UK government can sell the bank shares for a profit.
Granted, more than a tenner, a lot more. But is anyone £26000 worse off because of it? As an individual? And I'm not talking about recession or redundancies, I'm talking about as a direct result of the bailout.
@runssianbob - in my view the UK is much better off as a result of the bailout than if there had not been one. The damage to the economy and small businesses especially had the banks failed would have been enormous. Also as per @mefty's post most of the support measures have been profitable. Figures like £26k per head cost is just mis-information, trying to divide the total cost of support by each person without recognising a lot of the loans have been paid back or the "insurance" not used and in fact it has been profitable.
If the bank that has lent you money goes bust by way of mortgage, then as an asset of the bank, your loan will be sold to another institution. The terms of the loans will be binding on the successor institution, but as with anything legal you need to look at those terms as there can be ways, rarely, whereby the successor bank can make it economically untenable to continue the loan. In the rare circumstances where this can be done, it will be even rarer for it to be in the bank's commercial interests.
So, going against your original post I think, you're now saying that the profits should be poured back into services etc. rather than paid back to tax payers.
The government doesn't have money. It's all taxpayers. Exactly how much of the debt is owed by the Tories or labour?So by saying taxpayers, I mean the uk as a whole. I absolutely mean (and have done the entire thread) that the money goes back into the pot/hole so that we as a society can benefit.
So I think your beef is with the goverment, not the banks?
Well both governments actually. I thought that was obvious, hence questions around public consultation.
So jambalaya... Ultimately we should be thanking the banks for giving us this unique investment opportunity?
So jambalaya... Ultimately we should be thanking the banks for giving us this unique investment opportunity?
No of course not. What happened was a colossal failure of certain bank's management and of regulation.
@mefty, loans could well have T&C which say the loan is potentially repayable a the lenders option in the event of bankruptcy for example. I was made to repay a mortgage 12 months after I got it as the lender decided to exit the business, it was in the T&C small print that they where allowed to do so at 3 months notice
The direct cost to the taxpayer is the cumulative annual cost of servicing the debt raised to cover the bailout, say, £5bn per year plus the cost of any support we are not expecting to be repaid, plu/minus any loss or gain on the sale of equity.
There are also the indirect costs, the downturn saw a massive increase in the defeciit, that has prob cost £200+bn over the last 5years. Finally there may also be the costs of any increase in the costs of general borrowing if UK is seen as a more risky borrower
In total that is ####loads in my estimation
In terms of individual mortgages, ask someone who had one with Northern Rock I guess. But I think the mortgage book is sold on with same T&Cs. I think it would be breach of contract to demand full and immediate repayment
What happened?
Joe Public got shafted and those who benefitted most (Bankers mainly, but also Politicians) continue to benefit and tell us how it could've been far worse if we'd just let them fail...
Prove otherwise.
@br Joe Public benefited hugely over the prior years.
@olddog - you say "say £5bn per year", I take it you guessed this (at 2% implies £250bn of additional debt) ? Most of the headline figures for banking support (the ones in the trillions) refer to the maximum potential exposure for the asset protection programme which has actually been very profitable as the total amount of claims has (as far as I know) been zero ! We would have had an economic downturn even if every single UK bank was unaffected as the scale of the crises in the US was so large