We seem to have seen off the Bad Bank idea. Instead, as the papers reveal, we will end up with an “insurance scheme”. it will be very difficult to get it right. Either the taxpayer is going to be made to pay huge losses in due course, or the banks will be weakened further by high premiums.
My thoughts on the risks for taxpayers are in the Mail on Sunday this morning.
January 18, 2009
And who will supervise the banks to prevent the banks taking the profits and the taxpayer taking the losses ?
January 18, 2009
The tax payers will be footing the brown bill for a very long time.
Doesn’t look like their will be much left of ole blightey by the time the conservatives get the chance to start the rebuild once again.
January 18, 2009
The article in the Mail puts this very clearly. We are in danger of doing an Iceland: small country, huge international banks going bust.
We are on the tipping point now of losing everything. As you rightly remark, and I hope I have understood this, in another post, there is actually no need to panic (except that we ought to be unloading large chunks of RBS’ Empire fast).
Mr Brown has been spinning the figures with “off balance sheet” for so long now that it must have become a habit. I notice, for instance, that most Labour people quote the vast numbers of people who pass A levels as if it were something to be proud of. The knife crime figures are another example of “off balance’ accounting. Not reporting the Trading figures is the latest example.
The danger for politicians – especially ones as arrogant and so surrounded by toadies as Mr Brown – is that they come to believe in their own spin.
Then they do something really silly.
Stalin, for example, refused to believe that Russia was being invaded in 1941 for several days, even when his generals were reporting the attack.
We shall see what Mr Brown does in the next few days, perhaps. (Unless that is off balance too).
January 18, 2009
It is my understanding that an insurance scheme works because the premiums paid by non-claimants cover the payouts. Assuming the banks know which loans (etc) are bad will they not just ‘insure’ those, making it likely that nigh on all loans insured will go bad and require an enormous pay out by the taxpayer? It doesn’t sound like insurance to me, more like a fig-leaf to hide the real losses on the banks’ books which would have been exposed if they were to be purchased by a ‘bad bank’.
January 18, 2009
The devious part of me wonders if this scheme creates an opportunity for UK banks to buy up bad debt from other banks at a healthy discount, ‘insure’ it and pocket the difference in the between the insurance pay out and the amount paid for it… Moral hazard anyone?