Bend Over

[schmunk]

Doesnt bother me too much, just feel the pain when I pay £200 tax a month as a student, not as much as you full time workers, but £200 for a student is a hell of a lot of money at the end of the day

It still leaves you with £1,150 in your pocket each month, which is a hell of a lot more than most students, so it's all relative...

[Rave]

The point of the bailout seems to be to restart lending to viable businesses that are currently being starved of cash- with disastrous consequences, in some cases. That's fair enough.

But clearly, in their current state, the banks are not viable businesses. If the government wants to lend out our tax money to keep companies in business, then IMO they should just start their own bank and start doling out the cash. Any bank fool enough to have ended up with billions of non-performing debt on their books should just be allowed to fail. Sure, the government would have to dole out billions compensating retail depositors- but I reckon that's going to be a hell of a lot cheaper than nationalising all the bad debt the banks have ended up with.

RBS just posted a loss of £28bn. I reckon that is the tip of the iceberg, as more and more people will default as the economy declines. We are talking about serious money here- serious money that taxpayers will have to pay back. I fully expect my standard of living to be noticeably compromised for the next 20 years as a result, and to say that I'm unhappy about that is an understatement.

[Rave]

http://blogs.telegraph.co.uk/ambrose...iously_alarmed

Just in case anyone thinks I'm being overdramatic.

[Lucio]

I'm not quite sure how qualified this guy is given he thinks that Gordon Brown wets himself "...the fiscal incontinence of Gordon Brown..."

[TheAnimus]

The problem with a bailout like this one, is how exactly is it going to kick start lending?

People aren't lending because of a lack of trust.

Why will privatising RBS fix this?

The banks had to have assets at a suiteable level for their obligations, the problem comes with when thouse assets are worth less than they where, and the debt obligations more than they first seamed. People can like it or lump it but banks are a necessity of our capitalist economy, where do you draw the line? Few would say we shouldn't have a Bond market, yet in learning how they function countries suffered all kinds of problems, centuries before Argentina.

Now lets not forget either that a hudge majority of the city where shocked (ie, they thought it was stupid, but didn't want to seam like they where stupid because surely Gorden's knighthooded buddy wouldn't be wrong?) when RBS bought ABNA.

[iranu]

But clearly, in their current state, the banks are not viable businesses. If the government wants to lend out our tax money to keep companies in business, then IMO they should just start their own bank and start doling out the cash.

Yes, that is exactly what should happen. Chucking huge sums of money at RBS and the like is only going to plug this months hole for losses it's not going to make them lend unless you nationalise them.

I cannot understand why if the banking system is of such national importance that it was allowed to get away with such misfeasance to the extent that the tax payer has to bail them out. It should be criminal negligence and I'd like to see the directors et al up in court with very serious prospects of spending a decade behind bars. Why is the head of RBS throughout this boom allowed to keep his millions which were gained through sheer recklessness whilst the ordinary man on the street and his as yet unborn children shoulder the burden?

[albertknowles09]

Yeh banks shouldn't trust poor people. The banks' obvious mistake was to lend at crazy LTV ratios. I can't comprehend why they would do.

[TheAnimus]

No albert it wasn't just that.

NINJA loans played a massive part in the US, but what brought the meltdown was the collapse of Lehman Brothers (which was in turn the fault of NINJA style loans, and a rather big Dick).

(also I think I might start a question time thread on the issues of home ownership and class divides... but i digress.)

So when LB collapsed, the problem was a lot of the institutes hadn't thought about Correlated Risk. Say I work at hedge fund, I have some trades on my book with Bank A,B and C. I calculate the risk of bank C going under, I see all the money i have with trades with Bank A and B. I think I'm OK. Problem is, bank B has a libality on bank A, Bank A has a lot of money with bank C. There is a domino effect as the collapse of one rushes through the others. This then brings down the value of bank A which in turn brings down B, and my book is worth a hell of a lot less than I anticipated.

So a lack of understanding of correlation is one thing, and this is quite hard to model.

But there is also the incentivising of Traders. First off I'm not a trader, I've given great thought to being one, I've even done a few deals under instruction, but I couldn't stick the hours required. I've seen a friend have their fiance cheat on them 6 times in a quater, and I don't blame her, he was working 7:30am to 11pm. day in day out, and on sunday would spend most of the day reading the news. To me, it seams like a sh!t life.

So how do you perswade people to work those hours? Money and lots of it, if you've already got 2.5M in the bank, its hard to get them back to work again so you have to have large bonuses available.

But when people are just offered large amounts of money they might not invest it well, I call this the Martin Lewis effect, grabbing every penny with no thought to the consiquences.

For example take Icelandic banks. British banks where offering about 5% AER when the Icelanders where offering 7-8% AER. If you have a trader who is just incentivised by the money they get each year (and 5 year defferals won't work, no one would trust Labour) they would stick their money in the icelandic bank. Hey its just greed. Bloody stupid to question why they all paid more, but so many people made this mistake.

How do you stop this Martin Lewis style thinking? CVA, this is a way in which a trader pays a risk fee, up front on the trade, which then goes to a different desk to be hedged away. The idea is that the bank insulates itself from the counterparty default risk automatically on every trade they do, meanwhile the trader sees less money for the more risky trades. If CVA had been implemented by Dick, LB would never have been able to get in to the mess it was in.

[fray_bentos]

TheAnimus unfortunately you've replied to what looks like a spam posting. What albertknowles09 wrote was lifted word for word from a post by SiM on the first page of this thread back in January: http://forums.hexus.net/general-disc...ml#post1614457 (but he did at his own full stop).
hmm: now i read your post perhaps you knew it was spam...