Now I'm no Economist, but...

[Jackass]

What happened to the free market?

Since when did banks suddenly become more important than the tax payer?? They are, after all, private business, just like your local Tesco or Spar shops. Should the Government bailout your local grocery store too?

My point is, why not let each and every one of these banks fall on their own sword?

Why not let all the people who lent irresponsibly lose their jobs and why not let the unfortunate innocent people in the banks lose their jobs, just like they would if they worked in a factory.

Why in gods name would we need to pump billions from our Governments bank vault, literally bankrupting them, and then have the Government get a massive, un-repayable loan, like a 26 year old couple on a combined 45k per anum getting a €500,000 mortgage on a bungalow in Skerries, only to give it all to the banks again, and keep just enough to pay the electricity bills?

Why don't we just let each and every one of these banks fail. And any debt they chase, become obsolete, freeing up billions in the Economy and bringing security to almost every house in the country, and having borrowing power back for people, and allowing people to spend, and use the bailout money to set up a national Government bank, for which the Taoesheach is personally responsible, and for which lending practices are part of Dail Eireann discussions, and let the free market take it's course.

If I went around lending billions of Euro I didn't have, I certainly wouldn't expect everyone reading this to pay for it, so why should the banks?

Like I said, I'm no Economist, but let nature take it's course. Why can't we let them fail and become obsolete. Why can't the €500,000 p/a pensions they are trying to secure become worthless, because they are the very people who failed and don't deserve it ...

I can't understand why corporate leaders are immune to criminal investigation for this obvious fraud. If a trader on the stock exchange gambled with imaginary money and caused an entire bank to collapse, he'd end up in jail, just ask Nick Leeson, so why are we bending over backwards to save these guys?

I'm not in any way annoyed or bitter about it, I'm just completely at a lost as to why things are happening the way they are and it's a really genuine question...

lucianot

Because, I suspect, bankers and millionair investors belong to a class that goes hand in hand with the political class. They support each other and they use each other to thrive and make more power and more money.

ihateclowns11

yea what he said

Cavehill Red

When you're hyperrich, you don't ever lose - you just change the rules of the game.

Hence when Swiss bankers and Roman Abramovich look like getting a hosing on their Irish bonds, they call their pals in the EU and IMF and get them to insist on bailing out Ireland, which in fact means us bailing out them.

Victor

There are a number of factors:

First off, closing all the banks would probably put 30,000 people out of jobs. We don't particularly need that.

We still need the branch structure of the banks for running day to day business - where would a shop keeper lodge their money?

Much of the present problem stems from the bank guarantee. In making it an unlimited guarantee (I think the previous level was about 20,000 euros per account), they ended up guaranteeing everything the banks owed.

Had they limited it to say, 100,000 euros per account, they would have limited their exposure somewhat. However, if all the banks went bust and even if we separated the retail operations from head office operations, not only could businesses not borrow, but its quite likely that nobody would lend to the state either.

Even if the banks were allowed go bust, with small-medium depositors protected, that would have had a knock-on effect on the likes of pension funds who had shares in banks, property, etc.

The other part of the problem at the moment is that the government isn't taking in enough tax to cover current expenditure, never mind capital expenditure or providing for future expenses (pensions for current employees).

Combined, we would have had a situation where we couldn't borrow anything and there wouldn't have been enough money to run the state. We would have ended up in much the same place we are now.

---

It all goes back to the Celtic Tiger. Instead of the state having to borrow large amounts of money, private households were borrowing money from banks (who were borrowing internationally). A proportion of this went to the state in taxes. Instead of setting aside all this money for capital expenditure and future pension liabilities, a lot of it was spent on things that weren't particularly useful - salaries, pensions and welfare became bloated and any sense of thriftiness or caution was thrown to the wind. Lots of this borrowed money ended up being spent on cars, booze and holidays, each of which only last a relatively short time.

Bob_Latchford

how much was spent on cars, booze and holidays by the Irish consumer? billions upon billions upon billions?

Dont really buy that one. Can see why property might be an issue but not beer and wine

Time Magazine

"Too big to fail", essentially.

silverharp

or too big to save :pac:

Victor

Bob_Latchford wrote: »

how much was spent on cars, booze and holidays by the Irish consumer? billions upon billions upon billions?

Dont really buy that one. Can see why property might be an issue but not beer and wine

Yesterday's beer doesn't put a roof over your head (or food on the table).

For every property loan, at least there is some (now worth less than was paid originally) asset. For every credit card bill spent on booze, there is no asset.

silverharp

Victor wrote: »

Yesterday's beer doesn't put a roof over your head (or food on the table).

For every property loan, at least there is some (now worth less than was paid originally) asset. For every credit card bill spent on booze, there is no asset.

not to mention the distortion all this "fake" spending generates. Its the equivalent of expanding your restaurant when the circus comes to town and you didnt realise all your customers were clowns :pac: this is why the stimulus argument is wrong, there is no way to turn the bogus capacity into useful production.