Against the background of the German government guaranteeing all savings, the BBC's Business Editor Robert Peston has this to say:
If there is a full guarantee, then the UK may have to follow suit. It comes as the Treasury is understood to be considering buying large stakes in Britain's banks... it would be a way of injecting extra money into the banking system to get them lending to each other again, while at the same time meaning taxpayers could make a profit from the shares if the banks recovered.
Nonsense!
Sensible write downs of dodgy lending and investments coupled with debt-for-equity-swaps is the way forward. See here or here for explanation.
I've set up a fun online poll to see how many people get it.
Monday 6 October 2008
"Bank uncertainty hits UK shares"
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2 comments:
I cannot understand why a bank re-capitalised on this basis will be trusted with loans from other banks that have n't gone through this process .The capital base still looks dodgy.I do think this is the best way of avoiding nationalising them, but then again,why not nationalise them? The public( that part with any capital) is clamouring for it.
DBC, don't forget that it is the lending bank which bears the risk; which depends on the borrowing bank having sensible share capital/reserves (or not).
Any bank that has done a sensible write down & debt-for-equity-swap will henceforth be a much better risk and will therefore find it easier to borrow (should it need to). So it will be at a competitive advantage, other banks will follow suit and the credit bubble will be gently cut down to size.
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