Tuesday, 25 October 2016

Reader's Letter Of The Day

From The Metro:

Good riddance to the greedy bankers who are threatening to leave the UK for Europe over Brexit (Metro, Mon).

Let some other mugs bail them out in future. But before they go, let's make sure every penny they owe is paid back to the British taxpayer.

Fred, Hampshire.


Sobers said...

That'll be the bankers who may end up making the UK taxpayer a profit then:


Lola said...

Good vitriol. Largely missing the target as they need to be accompanied by:
Large parts of the Treasury
Large parts of the Government
Ed Balls
Gordon Brown
A. Blair.
A Darling
D Cameron
G Osborne
M Carney
etc etc

Mark Wadsworth said...

S, good link, but read the article. Overall we will break even. Either way, let's get our money back.

Ben F said...

It's rubbish we'll break even. The opportunity cost for one. For another the banks have only returned to vague profitability by the govt allowing the banks to farm the young via land prices. Emergency low rates and other props like help2buy are holding public/private debt higher than they would otherwise be, which goes to the banks which they then pay some back to us.

This merry-go-round nonsense shouldn't be fooling anyone.

Mike W said...

Sobers I like the article. Complete and utter banking collapse in 2008 and an economy, still bumping along in recession for years to come. You certainly are a glass half full kind of a guy.Do you see some value, portfollio buys in the data that you are not sharing?

The report summary table by Rosthchild, that you refer to, that we are making a small pofit on the banks with an Estimate of future RBS share sale value looming large; produced by, ermm, Rothschild (by any chance)? Good luck mate!

I assume the bad news is buried after that bit. The yearly divy bill on all those bonds used by Badger and co to bail the spivs out.

Lola said...

Harriet Baldwin:
“As of last week, the Rothschild report estimates that situation has completely turned around, that the overall recovery from the bank interventions is in the order of £14bn of magnitude and the overall cost of funding on our Treasury issuance is at record lows thanks to the prudent economic management of my right honourable friends.

Some would call that prudent economic management 'financial repression'. So what is not shown in these bank bailout costs is the loss of interest, cost of inflation, increase in taxation and other financial pain visited on the Great British Public. Or am I missing something?

Steven_L said...

Did anyone ever download the Fed spreadsheet that showed all the US bailouts?

I wish I'd been more careful to keep it, but I'm sure it'll be somewhere online. It clearly shows that the UK bailout of RBS was chickenfeed to what the Fed pumped in. Bernanke bailed out Barclays too.

Ben F said...

Spot on Lola.

Mark Wadsworth said...

L, they are going to be a bit more difficult to pin down.

BF, calculating the net loss or gain to the taxpayer is tricky, as is calculating the net gain to the banking system, which is quite possibly much larger than the cost to the taxpayer, in which case, should't the taxpayer be getting a share of that profit as well as money and interest returned?

L, second comment, agreed.

SL, others say that in relative terms, the UK and US bailouts were about the same, I dunno what the truth is, "too much" is always "too much" even if somebody else is worse.

Bayard said...

"Overall we will break even. Either way, let's get our money back."

No, read the article to the end. Overall, we lose, to the tune of £3Bn:

This looks like there has been an additional cost to the taxpayer of about £17bn, which for some reason has not been covered in government-commissioned Rothschild report.

Of course, if we include that loss of £17bn in the final balance sheet, it more than cancels out the £14bn surplus ministers are keen to talk about, and means the taxpayer has suffered a net loss overall.

Sobers said...

Personally i think that a price of a few billion pounds to ensure the entire financial transaction system didn't go down the Swannee nearly a decade ago is well worth paying. What does the State gets for say, 5bn these days? SFA if truth be told, they waste ten times and more than that every year. There would have been considerably more damage to the economy than 5bn if any of the major banks had gone at that point. Cheap at ten times the price to be honest.

Bayard said...

"Personally i think that a price of a few billion pounds to ensure the entire financial transaction system didn't go down the Swannee nearly a decade ago is well worth paying."

Ah, but was the whole financial system about to go down the Swannee, or did the banks just make it look that way, so that they could be bailed out and the shareholders and bondholders didn't suffer too much of a loss? As I recall, from that time, there were many people saying how the banks could have been rescued without the bailout, I think there was even ideas on this blog about it, along the lines of debt-for equity swaps. So no, I don't thin that a few billion quid was a fair price to pay to ensure that a lot of rich people didn't get ever so slightly poorer.

Mike W said...


I agree entirely with your recollection of the period. And the 'Debt for Equity' discussion started by Mark here. I even bought Alistair Darling's Back From the Brink (2012), (For 1 pence I might add) to see why the insider of insiders of the crash rejected the idea.And challenge folks here with it. Waste of 1 pence plus postage! He seems not to have any understanding of anything outside his bubble. His book reads like a man oulining what the civil service had told him to think, repeating all the TINA platitudes, and having the distinct recollection that the government's position was his idea and deep understanding all along!

His Wiki entry, used to have the banks he worked for after the crash. ( sorry resumed work for). The links seem to have gone now! But it was several more than, cough, just Morgan Stanley.

Mark Wadsworth said...

S, you do realise that the "financial transactions system" is a real thing run largely by computers and people on normal salaries? If Thames Water went bankrupt because of land speculation, do you think that the government would't ensure that the blokes at the sewage works and pumping stations were paid and water was pumped around?

B, MW, ta for back up. As it happens, the government got it right with Northern Rock, they just shut it down, reimbursed depositors and collected the outstanding loans themselves. Overall the government made a modest profit on it and the money market funds made a modest loss*. The parts of the "financial transactions system" that NR owned were transferred to Virgin Money or somebody and everything went fine.

* A kind of debt for equity swap. Shareholders were wiped out, well tough.

Sobers said...

FWIW I think Gordon Brown did the right thing at the time - there were no good options, just the least worst one, and restoring confidence in the entire system at one fell stroke at the cost (as it turns out) of single figure billions, if indeed it does end up being a cost, was about the best we could have hoped for in the circumstances. Anything else that left banks to swing in the wind, everyone wondering which would fall next, whether they'd get to the bank and the doors would be locked, cash machines not working, cards not working, everyone panicking trying to get their money out of whichever bank looked shaky next. With hindsight it all looks easy - 'We could have done this or that, and it would have been better' - I remember exactly how shonky things were then, and at the time if you'd offered everyone what we've had they'd have grabbed it with both hands.

Mark Wadsworth said...

S, you have somehow completely changed the actual topic.

To simplify matters, I shall make the same lazy and incorrect assumption that the bank bail outs were the *only* way to save the banking system and hence economy.

If the bank now bugger off abroad "nearly a decade later" is it not fair to ask them to repay it all sharpies? Or do you think the UK government/taxpayer should be bailing out foreign banks?

You are also making a basic mistake. The article you linked to refers to a small net cost or benefit to the taxpayer from the exercise. Again, to save arguing I will assume this is correct.

But those few billion either way is not the relevant figure. The relevant figure is the gross amount lent to/given to UK banks, which was tens or hundreds of billions. That is the sum of money that banks should pay back.

Bayard said...

"restoring confidence in the entire system at one fell stroke"

AFAIR, there was only one bank that had a run on it and that was Northern Rock. RBS was very shaky, but if it had gone to the wall, it wouldn't have caused a run on any other banks, why should it, Northern Rock didn't. Also, AFAIR, Lloyds was directly brought down by Gordon Brown's meddling, Barclays and HSBC were OK, Natwest would have been OK if it hadn't been part of RBS. Again, the doom and gloom were propagated by those who stood most to gain from them. We've seen exactly the same tactic wheeled out for the Scottish Independence and EU referendums. At least with the EU referendum there is some chance of showing all the doom and gloom for the hype that it is, assuming the Tories don't succeed in sabotaging the whole process - if you make someone make the tea against their will, don't be surprised if the tea is undrinkable.

Mark Wadsworth said...

B: "the doom and gloom were propagated by those who stood most to gain from them"

Exactly, it was all hype to get more subsidies.