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Robert Henderson · Guest

There is a good deal of logic in the idea that banks should be
nationalised because they create much of the money supply through their
offering of credit and other forms of investment of the money
deposited with them. .Not only that, because the loans and other
investments they offer are of greatly varying quality the taint the
quality of a currency. An analogy would be with a currency based on
a precious metal where the authority responsible for the currency
allowed private mints to produce coin of quality which varied greatly
from that produced by the national mint.

The amounts being guaranteed by the British government have become so
colossal that (Â£500 billion in total for the latest support offered by
Darling and probably something nearer Â£1 trillion if the costs of
the Northern Rock nationalisation and all the guarantees and government
credit lines established since them are added together) that question
has to be asked why not simply nationalise the banks?

Could it be done? The present total market value of Britainâ€™s
four largest banks is less than Â£100 billion. What the cost would be
for all UK banks is debatable but it is unlikely to exceed Â£250
billion., a fraction of the exposure the taxpayer already has.
Moreover, there would be no necessity to purchase a large part of
British banking because most of the banks are in reality insolvent.
They could simply be taken into public ownership without compensation
to the shareholders. The fly in the ointment is the international
status of our banks. Whether the larger banks could survive as
nationalised banks adopting a prudent regime is dubious because of
the danger of major depositors taking money abroad. To that can be
added the likely outflow to foreign parts of specialist staff and the
adverse effect on British reputation for financial solidity .
However, if the present crisis persist it could be that nationalised
British banks would be attractive to depositors because it would be
seen as safe.

There is a halfway house. The British government should make a
commitment to takeover any bank which cannot carry on trading on its
own account. That would allow the banking shhep to be divided from the
banking goats.

RH
--
Robert Henderson
Blair Scandal website: http://www.geocities.com/ blairscandal/
Personal website: http://www.anywhere.demon.co.uk

Mel Rowing · Guest

On Oct 8, 11:52 am, Robert Henderson <phi...@anywhere.demon.co.uk>
wrote:

[quote]Could it be done? The present total market value of Britain’s
four largest banks is less than £100 billion. What the cost would be
for all UK banks is debatable but it is unlikely to exceed £250
billion., a fraction of the exposure the taxpayer already has.
[/quote]
The above is probably true. However don>t confuse exposure with cash
actually handed over.

If you insure your life for £100000 the company becomes increasingly
exposed by that amount. However, it would only be in the event of your
death that this exposure would become a liability.

IIRC about £200 bn of the above is a standby facility that the banks
can draw on if necessary.

If they do the that £200bn. (and the interest on it) will remain on
the books as a liability no matter how long it is before it is repaid.

The other £50bn. is equity capital injection. That will be handed over
AIUI in exchange for preference shares. That will serve two purposes.
First it will improve the capital base of the sector and second it
will punish the shareholders of failing institutions since not only
will it dilute their holdings (same bank divided by more shares) but
the preference share holders dividend (usually fixed) will take
preference over ordinary share dividend so reducing the latter. In
fact it seems unlikely that any of the big 4 will pay a dividend at
all next time round.

That is the reason that banks shares have been dropping like stones
for the past couple of days or so and nothing to do with whether
Darling>s scheme is successful or not. It>s far too early to make any
judgement on that.

One of the troubles with nationalisation is that public enterprises is
that they soon become political tools. Do we really want the banking
system to be used to influence the policies of businesses directly. Do
we want banks to be refusing to lend money to companies so that they
can pursue "non-ethical" objectives?

Do we want banks to provide social loans at non commercial rates to
"deserving" people.

What>s going to happen the first time our state bank repossesses the
home of a defaulting mortgagee?

Think about it!

Colonel Sanders · Guest

On Oct 8, 9:49 pm, Robert Henderson <phi...@anywhere.demon.co.uk>
wrote:
[quote]In message <Vr6dnZcombHtDnHVnZ2dnUVZ8q2dn...@bt.com>, Maria
oldwo...@theshoe.com> writes

banks could survive as nationalised banks adopting a prudent
regime is dubious because of the danger of major depositors
taking money abroad. To that can be added the likely outflow to
foreign parts of specialist staff and the adverse effect on
British reputation for financial solidity . However, if the present
crisis persist it could be that nationalised British banks would be
attractive to depositors because it would be seen as safe.
There is a halfway house. The British government should make a
commitment to takeover any bank which cannot carry on trading on its
own account. That would allow the banking shhep to be divided from
the banking goats.

No. The only way that the system can continue is to allow the dodgy
banks to collapse IMV.

You would end up with no banking system because there are few if any
British banks which are solvent. They continue to trade because of the
government credit lines

The option of letting them all go to the wall does not exist because we
would end up with no banking system, something no modern society can
exist without. Take it away and private business would simply collapse,
private individuals be ruined and society reduced to chaos.
. RH
--
Robert Henderson
Blair Scandal website:http://www.geocities.com/blairscandal/
Personal website:http://www.anywhere.demon.co.uk
[/quote]
Why does society need a debt based economy, only because
the bankers say so?!

Colonel Sanders · Guest

On Oct 8, 8:52 pm, Robert Henderson <phi...@anywhere.demon.co.uk>
wrote:
[quote]There is a good deal of logic in the idea that banks should be
nationalised because they create much of the money supply through their
offering of credit and other forms of investment of the money
deposited with them. .Not only that, because the loans and other
investments they offer are of greatly varying quality the taint the
quality of a currency. An analogy would be with a currency based on
a precious metal where the authority responsible for the currency
allowed private mints to produce coin of quality which varied greatly
from that produced by the national mint.

The amounts being guaranteed by the British government have become so
colossal that (£500 billion in total for the latest support offered by
Darling and probably something nearer £1 trillion if the costs of
the Northern Rock nationalisation and all the guarantees and government
credit lines established since them are added together) that question
has to be asked why not simply nationalise the banks?

Could it be done? The present total market value of Britain’s
four largest banks is less than £100 billion. What the cost would be
for all UK banks is debatable but it is unlikely to exceed £250
billion., a fraction of the exposure the taxpayer already has.
Moreover, there would be no necessity to purchase a large part of
British banking because most of the banks are in reality insolvent.
They could simply be taken into public ownership without compensation
to the shareholders. The fly in the ointment is the international
status of our banks. Whether the larger banks could survive as
nationalised banks adopting a prudent regime is dubious because of
the danger of major depositors taking money abroad. To that can be
added the likely outflow to foreign parts of specialist staff and the
adverse effect on British reputation for financial solidity .
However, if the present crisis persist it could be that nationalised
British banks would be attractive to depositors because it would be
seen as safe.

There is a halfway house. The British government should make a
commitment to takeover any bank which cannot carry on trading on its
own account. That would allow the banking shhep to be divided from the
banking goats.

RH
--
Robert Henderson
Blair Scandal website:http://www.geocities.com/blairscandal/
Personal website:http://www.anywhere.demon.co.uk
[/quote]
They should!
None of their capital was earned by honest trading.

Mel Rowing · Guest

On Oct 8, 1:00 pm, Maria <oldwo...@theshoe.com> wrote:
[quote]Mel Rowing wrote:

The other £50bn. is equity capital injection. That will be handed over
AIUI in exchange for preference shares. That will serve two purposes.
First it will improve the capital base of the sector and second it
will punish the shareholders of failing institutions since not only
will it dilute their holdings (same bank divided by more shares) but
the preference share holders dividend (usually fixed) will take
preference over ordinary share dividend so reducing the latter. In
fact it seems unlikely that any of the big 4 will pay a dividend at
all next time round.

That is the reason that banks shares have been dropping like stones
for the past couple of days or so and nothing to do with whether
Darling>s scheme is successful or not. It>s far too early to make any
judgement on that.

Surely this is yet another feedback loop - the more you pump into the
system, the more the holdings are diluted, the more the share prices
fall, the more money has to be pumped in. etc etc.
[/quote]
I think you miss the point.

The intention of this morning>s action was not to restore the fortunes
of the share market. If major bank shares become penny shares because
of all this then so be it.

Rather it is first to re-capitalise the banks so that they are
strengthened and so less dependant upon the fickleness of depositors
and lenders.

Second through guarantee to reduce risk and so restore confidence. The
lenders will once more begin to lend les fearful of default and
depositors will feel more secure and less vulnerable to bank failure.

Mel Rowing · Guest

On Oct 8, 1:32 pm, Robert Henderson <phi...@anywhere.demon.co.uk>
wrote:
[quote]In message
4a958d88-59a4-4a5e-b1cd-a3f9fe7f5...@8g2000hse.googlegroups.com>, Mel
Rowing <mel.row...@btinternet.com> writes

On Oct 8, 11:52 am, Robert Henderson <phi...@anywhere.demon.co.uk
wrote:

Could it be done? The present total market value of Britain’s
four largest banks is less than £100 billion. What the cost would be
for all UK banks is debatable but it is unlikely to exceed £250
billion., a fraction of the exposure the taxpayer already has.

The above is probably true. However don>t confuse exposure with cash
actually handed over.

If you insure your life for £100000 the company becomes increasingly
exposed by that amount. However, it would only be in the event of your
death that this exposure would become a liability.

IIRC about £200 bn of the above is a standby facility that the banks
can draw on if necessary.

If they do the that £200bn. (and the interest on it) will remain on
the books as a liability no matter how long it is before it is repaid.

(1) if the banks are insolvent then they do not have to be purchased
[/quote]
They most certainly do!

If any company becomes insolvent then it>s put into administration on
behalf of its creditors. The administrator by law must raise the
maximum amount he can to distribute amongst the creditors (which would
in this case include the holders of God knows how many trillions of
pounds worth of deposits)

He would do this either by selling the business as a going concern or
by liquidating it whichever is in the best interests of the creditors.

Liquidation would be out of the question since that would wipe out all
depositors. What government would beggar every business, and every
individual of substance in the country?

The government would therefore be compelled to take over all the banks
as going concerns.

You will recall that when the government sold the savings business of
B&B, the FSA was obliged to hand over ISTR £14.5bn to Santander in
respect of the £20bn. or so of liabilities in the form of customers
deposits which, of course will eventually have to be paid back.

The question is therefore who would pay the government to take over
the trillions of pounds worth deposit liabilities in the British
banking system? The answer is nobody would. Therefore the value of
these less the value of any assets inherited (you did say the banks
were insolvent i.e. liabilities >assets) would be the price the
government would end up paying.

[quote](2) the credit lines would not need to be so large because
government ownership would both remove uncertainty and allow money to
start circulating again. At the moment the credit lines are being used
to cover the bad debt holes in the banks' balance sheets.
[/quote]
Why should it?

Money is not circulating because banks are reluctant to lend money to
each other through fear of default, not because they have run out of
money! remove the fear of default and the system will rebalance
itself.

[quote]If the banks were nationalised the government it is unlikely that they
would have to shell out more than they already have nor underwrite more
than they have. Moreover, the taxpayer would own the assets and take all
the profits and if you cannot make profits from cautious banking you are
mentally deficient.
[/quote]
All that is probably true but you would soon arrive at a situation
where all money was actually was owned by the government whose
predominant role it would be to distribute it. A socialist heaven!
Firms that did not cow tow to the latest political whim would find
their credit line interfered with. "Deserving" cases of individuals up
to their eyes in debt which they can>t pay would be forgiven their
debt.

There would be no end to it.

There is a role for government but allowing it control of every penny
that passes through our pockets would be going too far even for me!

[quote]--
Robert Henderson
Blair Scandal website:http://www.geocities.com/blairscandal/
Personal website:http://www.anywhere.demon.co.uk[/quote]

Maria · Guest

Robert Henderson wrote:
[quote]
There is a good deal of logic in the idea that banks should be
nationalised because they create much of the money supply through their
offering of credit and other forms of investment of the money
deposited with them. .Not only that, because the loans and other
investments they offer are of greatly varying quality the taint the
quality of a currency. An analogy would be with a currency based on
a precious metal where the authority responsible for the currency
allowed private mints to produce coin of quality which varied greatly
from that produced by the national mint.

The amounts being guaranteed by the British government have become so
colossal that (Â£500 billion in total for the latest support offered by
Darling and probably something nearer Â£1 trillion if the costs of the
Northern Rock nationalisation and all the guarantees and government
credit lines established since them are added together) that question
has to be asked why not simply nationalise the banks?

Could it be done? The present total market value of Britainâ€™s four
largest banks is less than Â£100 billion. What the cost would be for
all UK banks is debatable but it is unlikely to exceed Â£250 billion., a
fraction of the exposure the taxpayer already has. Moreover, there would
be no necessity to purchase a large part of British banking because
most of the banks are in reality insolvent. They could simply be taken
into public ownership without compensation to the shareholders. The
fly in the ointment is the international status of our banks. Whether
the larger banks could survive as nationalised banks adopting a
prudent regime is dubious because of the danger of major
depositors taking money abroad. To that can be added the likely
outflow to foreign parts of specialist staff and the adverse effect
on British reputation for financial solidity . However, if the present
crisis persist it could be that nationalised British banks would be
attractive to depositors because it would be seen as safe.

There is a halfway house. The British government should make a
commitment to takeover any bank which cannot carry on trading on its
own account. That would allow the banking shhep to be divided from the
banking goats.

No. The only way that the system can continue is to allow the dodgy[/quote]
banks to collapse IMV.

Mel Rowing · Guest

On Oct 8, 4:59 pm, Maria <oldwo...@theshoe.com> wrote:
[quote]Mel Rowing wrote:

I get the point - it just isn>t working because of what I said?
money in -> shares down -> loss of confidence -> money in -> shares down
-> loss of confidence etc.
What I am saying is that whatever they are doing it for, it is possibly
having the effect of losing more confidence, not gaining it.
[/quote]
Forget share prices!

They go up and down with mood but the company stays the same. It
operates in the same buildings, the same people work for it etc. More
importantly it operates on the same capital base. If that capital base
is inadequate the the only thing that can be done is to inject more
capital and increase the size of that base.

Robert Henderson · Guest

In message <Vr6dnZcombHtDnHVnZ2dnUVZ8q2dnZ2d@bt.com>, Maria
<oldwoman@theshoe.com> writes
[quote]banks could survive as nationalised banks adopting a prudent
regime is dubious because of the danger of major depositors
taking money abroad. To that can be added the likely outflow to
foreign parts of specialist staff and the adverse effect on
British reputation for financial solidity . However, if the present
crisis persist it could be that nationalised British banks would be
attractive to depositors because it would be seen as safe.
There is a halfway house. The British government should make a
commitment to takeover any bank which cannot carry on trading on its
own account. That would allow the banking shhep to be divided from
the banking goats.

No. The only way that the system can continue is to allow the dodgy
banks to collapse IMV.
[/quote]

You would end up with no banking system because there are few if any
British banks which are solvent. They continue to trade because of the
government credit lines

The option of letting them all go to the wall does not exist because we
would end up with no banking system, something no modern society can
exist without. Take it away and private business would simply collapse,
private individuals be ruined and society reduced to chaos.
.. RH
--
Robert Henderson
Blair Scandal website: http://www.geocities.com/ blairscandal/
Personal website: http://www.anywhere.demon.co.uk

Maria · Guest

Mel Rowing wrote:
[quote]On Oct 8, 11:52 am, Robert Henderson <phi...@anywhere.demon.co.uk
wrote:

Could it be done? The present total market value of Britain’s
four largest banks is less than £100 billion. What the cost would be
for all UK banks is debatable but it is unlikely to exceed £250
billion., a fraction of the exposure the taxpayer already has.

The above is probably true. However don>t confuse exposure with cash
actually handed over.

If you insure your life for £100000 the company becomes increasingly
exposed by that amount. However, it would only be in the event of your
death that this exposure would become a liability.

IIRC about £200 bn of the above is a standby facility that the banks
can draw on if necessary.

If they do the that £200bn. (and the interest on it) will remain on
the books as a liability no matter how long it is before it is repaid.

The other £50bn. is equity capital injection. That will be handed over
AIUI in exchange for preference shares. That will serve two purposes.
First it will improve the capital base of the sector and second it
will punish the shareholders of failing institutions since not only
will it dilute their holdings (same bank divided by more shares) but
the preference share holders dividend (usually fixed) will take
preference over ordinary share dividend so reducing the latter. In
fact it seems unlikely that any of the big 4 will pay a dividend at
all next time round.

That is the reason that banks shares have been dropping like stones
for the past couple of days or so and nothing to do with whether
Darling>s scheme is successful or not. It>s far too early to make any
judgement on that.
[/quote]
Surely this is yet another feedback loop - the more you pump into the
system, the more the holdings are diluted, the more the share prices
fall, the more money has to be pumped in. etc etc.

Robert Henderson · Guest

In message
<4a958d88-59a4-4a5e-b1cd-a3f9fe7f5fb3@8g2000hse.googlegroups.com>, Mel
Rowing <mel.rowing@btinternet.com> writes
[quote]On Oct 8, 11:52Â am, Robert Henderson <phi...@anywhere.demon.co.uk
wrote:

Could it be done? Â The Â present total market value of Â Britainâ€™s
four largest banks is Â less than Â£100 billion. What Â the cost would be
for all UK banks is debatable but Â it is unlikely to exceed Â£250
billion., a fraction of the exposure the taxpayer already has.

The above is probably true. However don>t confuse exposure with cash
actually handed over.

If you insure your life for Â£100000 the company becomes increasingly
exposed by that amount. However, it would only be in the event of your
death that this exposure would become a liability.

IIRC about Â£200 bn of the above is a standby facility that the banks
can draw on if necessary.

If they do the that Â£200bn. (and the interest on it) will remain on
the books as a liability no matter how long it is before it is repaid.
[/quote]

(1) if the banks are insolvent then they do not have to be purchased
and (2) the credit lines would not need to be so large because
government ownership would both remove uncertainty and allow money to
start circulating again. At the moment the credit lines are being used
to cover the bad debt holes in the banks' balance sheets.

If the banks were nationalised the government it is unlikely that they
would have to shell out more than they already have nor underwrite more
than they have. Moreover, the taxpayer would own the assets and take all
the profits and if you cannot make profits from cautious banking you are
mentally deficient. RH
--
Robert Henderson
Blair Scandal website: http://www.geocities.com/ blairscandal/
Personal website: http://www.anywhere.demon.co.uk

Mel Rowing · Guest

On Oct 8, 5:02 pm, Maria <oldwo...@theshoe.com> wrote:
[quote]Mel Rowing wrote:
Money is not circulating because banks are reluctant to lend money to
each other through fear of default, not because they have run out of
money! remove the fear of default and the system will rebalance
itself.

Is this true? Are the figures public so we can see them, and where are
they if so?
[/quote]
No! No figures!

All the money in your purse came from the banking system and that is
where it will end up. The holders and owners of money serve as a
conduit that passes money about the system (e.g. from bank to bank)
The system is not homogeneous. But for further movements within the
system then money would accumulate in certain areas i.e. you in some
banks you would have a surfeit of potential lenders but a shortage of
cash whilst in others there would be a surfeit of funds but a shortage
of lenders. It is the facility of interbank lending that smooths out
such irregularities. It also means that when you go to your bank
either as a private or commercial lender the you can be sure of the
availability of funds.

However, this mechanism has become dislocated and that is the problem.
Money is sticking instead of circulating. It is best described as an
economic thrombosis. Note in the model I outline above, no cash is
ever lost or gained or lost to the system. Even if your purse is
stolen the thief returns the contents to the system. No matter what
the economic circumstances the amount of currency or currency
equivalent (ledger entries etc.) in circulation remains and must
remain exactly the same.

Mel Rowing · Guest

On Oct 8, 5:14 pm, Robert Henderson <phi...@anywhere.demon.co.uk>
wrote:
[quote]In message
5e5af38b-9646-4672-b643-09275dc83...@a18g2000pra.googlegroups.com>, Mel
Rowing <mel.row...@btinternet.com> writes

(1) if the banks are insolvent then they do not have to be purchased

They most certainly do!

If any company becomes insolvent then it>s put into administration on
behalf of its creditors. The administrator by law must raise the
maximum amount he can to distribute amongst the creditors (which would
in this case include the holders of God knows how many trillions of
pounds worth of deposits)

That amount may be zero if the administrator deems that is the best
chance of keeping the company or part of it as a going concern. Only
where a company is liquidated is there a distribution of realised
assets, assuming there are any. RH
[/quote]
If that amount were zero then the bank would be solvent!

An administrator is appointed solely to represent the interests of the
creditors and to recover for them as much of their combined losses as
possible. As such there is no onus upon him either to sell the
enterprise on as a going concern or to liquidate it. It all depends
upon which course of action will yield the most for the creditors.
Indeed the law requires him to base his decision on this
consideration. If he defaults in this duty then not only does his
reputation suffer, he could personally be taken to court for the
balance.

Therefore the very least a new owner could expect to pay for a going
concern is the liquidation value plus the difference between the total
value of the enterprise>s assets and its liabilities.

count 2 · Guest

If tax payers give money to banks then we are shareholders and the
taxpayers should be given dividends back when banks get rich again.
All top management in banks should be sacked and hedge fund managers -
there should be a 28 day rule when selling shares.

RussellT · Guest

"Robert Henderson" <philip@anywhere.demon.co.uk> wrote in message
news:bfWRSUMYDJ7IFwwU@anywhere.demon.co.uk...
[quote]
There is a good deal of logic in the idea that banks should be
nationalised because they create much of the money supply through their
offering of credit and other forms of investment of the money deposited
with them. .Not only that, because the loans and other investments they
offer are of greatly varying quality the taint the quality of a
currency. An analogy would be with a currency based on a precious
metal where the authority responsible for the currency allowed private
mints to produce coin of quality which varied greatly from that produced
by the national mint.

The amounts being guaranteed by the British government have become so
colossal that (£500 billion in total for the latest support offered by
Darling and probably something nearer £1 trillion if the costs of the
Northern Rock nationalisation and all the guarantees and government
credit lines established since them are added together) that question
has to be asked why not simply nationalise the banks?

Could it be done? The present total market value of Britain>s four
largest banks is less than £100 billion. What the cost would be for all
UK banks is debatable but it is unlikely to exceed £250 billion., a
fraction of the exposure the taxpayer already has. Moreover, there would
be no necessity to purchase a large part of British banking because
most of the banks are in reality insolvent. They could simply be taken
into public ownership without compensation to the shareholders. The fly
in the ointment is the international status of our banks. Whether the
larger banks could survive as nationalised banks adopting a prudent
regime is dubious because of the danger of major depositors taking
money abroad. To that can be added the likely outflow to foreign parts
of specialist staff and the adverse effect on British reputation for
financial solidity . However, if the present crisis persist it could be
that nationalised British banks would be attractive to depositors
because it would be seen as safe.

There is a halfway house. The British government should make a commitment
to takeover any bank which cannot carry on trading on its own account.
That would allow the banking shhep to be divided from the banking goats.

RH
--
Robert Henderson
Blair Scandal website: http://www.geocities.com/ blairscandal/
Personal website: http://www.anywhere.demon.co.uk
[/quote]
None of that is a good reason. Time to take an economics course for you.
However, there is a good argument for nationalizing the now private Federal
Reserve in the US.


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