letting banks fail

SLUSK

Why are people so scared to let banks fail? In a capitalist system you must let the bad bank fail, this is how capitalism is supposed to work.

Here is some a bit of sanity from Jim Rogers.
http://www.youtube.com/watch?v=nL39oCE2zpc

jimmycrackcorm

Would you ever have any confidence in putting money in a bank if it could fail?

SLUSK

I would be more careful about which banks I put my money into.

Lots and lots of banks have failed in the past. It is not the end of the world.

jimmycrackcorm

SLUSK wrote: »

I would be more careful about which banks I put my money into.

I think that's my very point.

SLUSK

I don't see the problem.

jimmycrackcorm

jimmycrackcorm wrote: »

Would you ever have any confidence in putting money in a bank if it could fail?

If banks could fail, would they not be a little bit more careful with the money you put in?

SLUSK

Am I the only one here who is against a system of private gains and socialized losses? Am I the only voice of sanity on boards.ie?

partyguinness

SLUSK wrote: »

Why are people so scared to let banks fail? In a capitalist system you must let the bad bank fail, this is how capitalism is supposed to work.

Here is some a bit of sanity from Jim Rogers.
http://www.youtube.com/watch?v=nL39oCE2zpc

Because this is Ireland with 4 million people not the US.

In principal, I would have no prob letting them all sink but we are a small little island country with only a few banks. If they went then our entire fiancial system would collapse.

Imports/exports, currency flow/exchanges, investments etc etc. No direct debits. credit cards, standing orders, cheque, ATM Machines.

Just think about it for a second and you will realise it would be suicide just to prove a point.

A pyrrhic victory in ever sense of the phrase.

partyguinness

SLUSK wrote: »

Am I the only one here who is against a system of private gains and socialized losses? Am I the only voice of sanity on boards.ie?

We are all against it. But we made our bed..etc etc.

We were all happy to take the cheap credit, bank share divendends, credit cards, higher wages etc. Now the party is over deal with the hangover..:D

That is our problem..we are too small and too dependent.

SLUSK

If you let the banks fail more competent bankers from abroad would take over, whole of Ireland could probably be a subsidiary of Deutsche Bank

partyguinness

SLUSK wrote: »

If you let the banks fail more competent bankers from abroad would take over, whole of Ireland could probably be a subsidiary of Deutsche Bank

Competent bankers (as well as competent '"economists") are few and far between even in Germany..;)

partyguinness

All this reminds me of the phrase:

"We are not as smart as we think we are."

Time Magazine

SLUSK wrote: »

I would be more careful about which banks I put my money into.

The problem is that perhaps not everyone has the same response as you. Your faith in the banking system should incorporate the likelihood of everyone else going crazy.

Lots and lots of banks have failed in the past. It is not the end of the world.

The sun would rise, but let's quote an arbitrary finance prof on this:

Brian Lucey wrote:

Letting banks, any bank, go bankrupt abruptly is not a good idea. A nanosecond later (or on market open) the other banks are sold to zero, the bond and institutional lenders demand repayment, the system siezes up and then the state is holding not a contingent liability but an actual liability of 400b.
Apart from that, its a good idea.

SLUSK wrote: »

Am I the only one here who is against a system of private gains and socialized losses?

No.

Am I the only voice of sanity on boards.ie?

No.

SLUSK wrote: »

If you let the banks fail more competent bankers from abroad would take over

Correction. More competent bankers from abroad might take over.

Given the state of the international capital markets, I wouldn't want to rely on it.

rcunning03

SLUSK wrote: »

Why are people so scared to let banks fail? In a capitalist system you must let the bad bank fail, this is how capitalism is supposed to work.

Here is some a bit of sanity from Jim Rogers.
http://www.youtube.com/watch?v=nL39oCE2zpc

Completely agree with you. Somebody would of taken over the banks lowered people's loan repayment along as they gave a written gaurentee they would pay it back and sold all the excess property off at a price people could afford. There would of been a lot of pain but the amount we would have to spend on welfare and retraining newly unemployed people would (I imagine) be a lot less than the money we are giving the banks.

All the crap would of being flushed out of the system and we would have moved on by now.

Anyway here are a couple of websites you might like

www.lewrockwell.com

www.mises.org

partyguinness

rcunning03 wrote: »

Completely agree with you. Somebody would of taken over the banks lowered people's loan repayment along as they gave a written gaurentee they would pay it back and sold all the excess property off at a price people could afford. There would of been a lot of pain but the amount we would have to spend on welfare and retraining newly unemployed people would (I imagine) be a lot less than the money we are giving the banks.

All the crap would of being flushed out of the system and we would have moved on by now.

Anyway here are a couple of websites you might like

www.lewrockwell.com

www.mises.org

Sold off the property to who exactly? The property market here is saturated.

It's all well and good lowering valuations etc But who is going to buy them?

Who would give a written guarantee?

A guarentee isn't worth the paper its written on. Go into Court any day of the week and you will see that.

rcunning03

partyguinness wrote: »

Sold off the property to who exactly? The property market here is saturated.

It's all well and good lowering valuations etc But who is going to buy them?

Who would give a written guarantee?

A guarentee isn't worth the paper its written on. Go into Court any day of the week and you will see that.

If it was €110,000 for a nice three bedroom house I think a lot of people would get back into the market and even a few foreigners would buy up the properties.

Written gaurantees would be enforced by the courts as long as both parties had agreed with them. There would need to be strict penalities written into the contract which Judges would enforce as they are into the enforcement of contracts.

lucky-colm

yeeeeehhhhhhh me:D

partyguinness

rcunning03 wrote: »

If it was €110,000 for a nice three bedroom house I think a lot of people would get back into the market and even a few foreigners would buy up the properties.

Written gaurantees would be enforced by the courts as long as both parties had agreed with them. There would need to be strict penalities written into the contract which Judges would enforce as they are into the enforcement of contracts.

Re para 1...that remains to be seen but €110k for a 3 bed house would be nice.

That all sounds lovely and wonderful in theory but that's not the reality.

Just a minor example...Sean Dunne and Joe Carroll are being dragged through the Courts on foot of guarantees...where has that got the banks??

If you have to enforce a guarantee it attaches to the guarantors assets i.e property...back to sqaure one for the bank...you get the drift

rcunning03

partyguinness wrote: »

[/B]


Re para 1...that remains to be seen but €110k for a 3 bed house would be nice.

That all sounds lovely and wonderful in theory but that's not the reality.

Just a minor example...Sean Dunne and Joe Carroll are being dragged through the Courts on foot of guarantees...where has that got the banks??

If you have to enforce a guarantee it attaches to the guarantors assets i.e property...back to sqaure one for the bank...you get the drift

Sean Dunne and Joe Carroll should be bankrupt and begging on the streets for a spare cigarette but the Irish banks are rolling over their loans and interest payments because they know NAMA will take over their dodgy assets and they will get a fat wad of cash for assets that people with wealth won't touch.

The banks if they weren't getting bailed out would have to take the assets that were gaurenteed by developers who now cant afford the repayments and sell the properties quickly.

Maybe no Irish bank would of survived but that does not bother me some foreign bank or investor would of bought the Irish banks and write down the losses, cause there will always be a need for a banking industry and there will always be money in banking.

partyguinness

As the expression goes:-

"If you owe the bank a 1000 its your problem. If you owe them 1000000 its their problem [and now the Irish taxpayer]"

Selling off assets quickly is not as easy as it sounds..a buyer is needed and they need to find cash.

They should be bankrupted. Their guarantees are worthless beacsue by the time the banks get in there are no liquid assets just a load of apartments for the banks to deal with.

Thats their problem. The banks can look after themselves but unfortunatly this country is too small to just throw away the fianancial system.

And this Bull**** about the IMF coming it??? No they wont because the ECB is in charge and they wont have anyone coming into their territory and messing with their banking system.

rcunning03

partyguinness wrote: »

As the expression goes:-

"If you owe the bank a 1000 its your problem. If you owe them 1000000 its their problem [and now the Irish taxpayer]"

Selling off assets quickly is not as easy as it sounds..a buyer is needed and they need to find cash.

They should be bankrupted. Their guarantees are worthless beacsue by the time the banks get in there are no liquid assets just a load of apartments for the banks to deal with.

Thats their problem. The banks can look after themselves but unfortunatly this country is too small to just throw away the fianancial system.

And this Bull**** about the IMF coming it??? No they wont because the ECB is in charge and they wont have anyone coming into their territory and messing with their banking system.

I think we've chosen long term pain over a quick sharp but possibly lethal correction. I still believe the market would of sorted it out and it would of been such a hard lesson it would scar the national memory and the banks would never again lend so recklessly and consumers would save more and the banks would get capital reserves from people saving and the people saving would get high interest rates on their savings to keep their money in the banks.

The Germans will never allow high inflation again because of what happened in the thirties. I agree with you about IMF it'll be the ECB sorting our mess out if it comes to that. Hopefully by saving our banking industry we haven't doomed the country.

The annoying thing is for NAMA to work, property has to become unaffordable again and we would have to go back to getting stupid loans for incrediblty over-priced property and then the whole thing will collapse again and we'll be back in the same situation. Thankfully though it won't work - never does.

Then again maybe I was brain-washed in the 80's with big bird and elmo on seasame street telling me how great liberty and free markets are.:)

partyguinness

Remember this is the same open market got us into this mess in the first place and the geniuses are still left in charge,

I think what will be left standing at the end of this is tighter regulation.

The free open market as we know it has been changed for ever.

Bad/light touch regulation has failed miserably.

TBH nobody knows what the final outcome will be...and these daily reports telling is that we will be out of rescession next year or 2011 is more crap...they havent got a clue.

Davy stockbrokers are owned by Bank of Ireland..FFS..and we must believe them!!

Where is Dan "I'm the smartest boy in the class" McLoughlin these days?:rolleyes:

Hasschu

The most likely outcome is that NAMA will prop up property values by keeping property off the market at taxpayer's expense. The unaffordability factor will continue for at least a decade as the economy stumbles along overburdened by debt (gov't, consumers and business). The banks mortally wounded, operating on crutches supplied by either the ECB or IMF or both will survive. The gov't will be strapped for cash and so will do little more damage to the economy for at least the next 20 years. The EU will ensure that nobody starves, 75% of the working population will continue to work, so what is everybody complaining about.

rcunning03

Hasschu wrote: »

The most likely outcome is that NAMA will prop up property values by keeping property off the market at taxpayer's expense. The unaffordability factor will continue for at least a decade as the economy stumbles along overburdened by debt (gov't, consumers and business). The banks mortally wounded, operating on crutches supplied by either the ECB or IMF or both will survive. The gov't will be strapped for cash and so will do little more damage to the economy for at least the next 20 years. The EU will ensure that nobody starves, 75% of the working population will continue to work, so what is everybody complaining about.

That's actually quite positivein a strange way. I suppose as long as there is no potato blight we'll be fine

thebman

Isn't a likely effect of this that the ECB/EU will determine that if we are going to have a common currency, we are going to need common regulation across the EU to try to ensure stability and that one country doesn't cause so many problems for the EU in future?

Hasschu

The EU is a consortium of nation states where each state retains a great deal of autonomy. In Ireland our gov't choose not to use any of the tools available to it to manage our economy responsibly. Instead it cheered on the asset appreciation, construction boom which was the source of much party income. Ireland is small enough not to be a problem for the EU, individual German Lander are bigger than Ireland. Austria is actually the biggest problem on the ECB plate due to its banks being over exposed to over priced property markets in Hungary and Eastern Europe. When the ECB deals with Ireland they have in mind precedents they are setting when it comes time to deal with bigger problems. So far the ECB is being extremely generous to us which must have a calming effect on bankers throughout the Euro zone. Anyhow today is the day we vote yes to the EU and brings to an end another one of of our flirtations with insanity.