Should the government have let Northern rock fail?

[discodown 11]

It occurs to me that if NR had been left to sink rather than a precedent being set then the financial industry may well have taken notice and got itself in order and the resulting recession wouldn't have been as severe.

 

Would anyone agree or does anyone have a counterpoint to this?

[Jason Bourne 11]

Interesting question.

 

If the bank failed, loads of people would have lost their life savings.

 

But given how the governments have treated ordinary working folk historically, why did they bail out the bank and not, say, the coal / steel / car industries?

[Jilly69 10]

On the one hand yes.

 

Northern Rock and all the other banks are businesses at the end of the day and the Government don't do anything to save many other businesses that fail.

 

But on the other hand the banks do have a lot of power over people.

 

The general public would lose their savings and anyone with a loan or mortgage would in theory have to pay the debt back to the liquidator in one go.

 

Or more likely the debt would be sold on to another company who might try and change the terms and conditions.

 

So overall I think the banks have to be saved. I think things would be a lot worse if the banks weren't saved.

 

But I do think they should be punished in some way in the future. Maybe a windfall tax or something that they can't pass onto their customers.

[pk014b7161 11]

read this question posed by a sun reader in the letters,where have all the billions of pounds suddenly come from to bail out the banks when we were told there was no money for hospitals the force,s cancer patients etc

[StarSparkle 10]

Interesting question.

 

If the bank failed, loads of people would have lost their life savings.

 

But given how the governments have treated ordinary working folk historically, why did they bail out the bank and not, say, the coal / steel / car industries?

 

The financiers / bankers effectively own the politicians, that's the difference. Politicians are only the puppets of the money-men - they do what they're told to by them

 

StarSparkle

[StarSparkle 10]

read this question posed by a sun reader in the letters,where have all the billions of pounds suddenly come from to bail out the banks when we were told there was no money for hospitals the force,s cancer patients etc

 

It's all down to political will - the politicians will always find money for the things they WANT to find money for eg wars

 

StarSparkle

[Dr Psyches 10]

But I do think they should be punished in some way in the future. Maybe a windfall tax or something that they can't pass onto their customers.

 

I snipped your post, I hope you don't mind. I snipped it to make the point that the government now owns a large share of many banks. They won't have to tax them, they can just take their share.

 

As the governments shares will be preference shares, it means the government has first dibs at any shareholder handout ahead of the owners of regular shares. Cunning eh?

[Cyclone 10]

It occurs to me that if NR had been left to sink rather than a precedent being set then the financial industry may well have taken notice and got itself in order and the resulting recession wouldn't have been as severe.

 

Would anyone agree or does anyone have a counterpoint to this?

 

I think so yes.

It would have been cheaper to cover the savings for people than to rescue it, that would have stopped runs on any other week banks without giving out the message that UK Plc would rescue you from bad business decisions.

[Cyclone 10]

read this question posed by a sun reader in the letters,where have all the billions of pounds suddenly come from to bail out the banks when we were told there was no money for hospitals the force,s cancer patients etc

 

They control the money supply, they can just invent money when they need it.

What it does though is devalue money already in circulation (also known as inflation). It's exactly the same as if they raised taxes, but more sneaky as most people don't understand that they just lost part of their money (or rather of the value of their money), and of course it's very difficult to be clear on how much is spent from where and how much money they are just inventing.