BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Why a new government may extend support to banks

Robert Peston | 08:34 UK time, Thursday, 11 March 2010

There is a much bigger story in the Financial Service Authority's Financial Risk Outlook than the new stress test which I wrote about yesterday.

It is that the UK's banks have to find £440bn of loans and finance between now and 2012 to replace maturing debt.

The Gherkin and Canary Wharf

There are only three places that money can come from.

The money could come from savers in the form of a growth in deposits.

And, as it happens, we have been saving a bit more in the UK.

But if the banks' stock of lending stayed flat for the next couple of years (which looks plausible if unpleasant for our economy) and we saved at the rate of the last three months of 2009, the gap between banks' loans and deposits would still be just under £400bn at the end of 2012.

According to the FSA, we would have to increase our saving in bank deposit accounts by 12% per annum to close the funding gap, which - in the FSA's words - would "imply a savings rate far in excess of conceivable levels".

Another possible funding source are markets for asset backed securities, which closed with such calamitous consequences for the global economy in the summer of 2007.

Now, banks have again started to be able to raise money by packaging up mortgages and selling them to investors in the form of bonds; these markets are back in business.

But in order to close that £440bn funding gap, our banks would have to issue new debt in the next couple of years on a scale equivalent to the boom years of 2004 to 2006.

There are two problems with this.

First, it may not be possible.

Second, it may be highly undesirable: separate research by the FSA shows that these asset-backed securities - or at least those retained on banks' balance sheets - were the source of a staggering 70% of all losses on loans and investments incurred by 10 of the world's biggest banks (including the UK's) between the summer of 2007 and March 2009.

In other words, further instability and chronic weakness in the banking system could be the consequence of closing the funding gap by resorting to the securitisation market.

Where else could the money come from?

Well there is only one other place: taxpayers.

As it happens, over £300bn of the maturing debt that the banks have to replace is the finance provided by taxpayers to prevent them from collapsing in late 2008 and early 2009.

This taxpayer finance takes the form of £134bn of state guarantees for debt issued by banks under the Credit Guarantee Scheme and a further £178bn of Treasury bills provided by the Bank of England in exchange for banks' securitised mortgages.

If this sounds complicated, just think of it as just over £300bn of loans by taxpayers to banks, which are scheduled to be repaid by 2012 or so.

Now the clear implication of the FSA's analysis of banks' £440bn financing requirement is that taxpayers would not be able to withdraw that £300bn of support in 2012 without precipitating another banking crisis, or an economic crisis, or both.

Which means that any new government has a very difficult decision to make more-or-less immediately after the general election: should that £300bn of taxpayer support be extended?

Failure to do so would have one immediate and dangerous effect: it would encourage banks to stop lending; since the less any bank lends, the less it has to borrow, the less finance it has to raise.

But if banks went on such a lending strike, the UK would inevitably be tipped back into recession.

However if a new government rolled over that £300bn of support, that £300bn borrowed by banks would increasingly look like a long-term liability of the state; and in those circumstances there would be a stronger argument that the £300bn should be added to an already-ballooning national debt.

Which could be painful.

Finally it is probably worth pointing out that one bank, Lloyds, is much more exposed to this problem than others.

It has received £157bn of taxpayer finance via the Special Liquidity Scheme and the Credit Guarantee Scheme.

Quite how it would reduce this to nil by 2012 without closing its door to new lending is somewhat intriguing.


Page 1 of 2

  • Comment number 1.

    Of course the next government will extend support to the banks; they have no choice, they are owned by them.

    We could have nationalised our banks, instead they bankised our nation.

  • Comment number 2.

    So no brainer then the taxpayer debt will be rolled over in large part, the only question at issue is the terms.

    Move along nothing to see here....

  • Comment number 3.

    Perhaps we (the tax payer) shoudl extend the loan, but nail on them on the interest rate. After all it's what the bank's do to us.

  • Comment number 4.

    RP: There are only three places that money can come from.

    (1) The money could come from savers in the form of a growth in deposits.

    Bank of England base rates are 0.5% (a smoke and mirrors deception).

    Banks are offering savers rates of 0.3%-1.75%.

    The Government, through the Treasury's National Savings & Investment (NS&I) Direct Saver product is offering savers rates of 2%.

    So how are the banks going to increase deposits, rather than lose them, when they are now competing against the Treasury ?

    Looks like the government is out to poison the banks, and make sure that they truly crash after the general election, when they can blame the next Government (which probably won't be themselves) !

  • Comment number 5.

    An excellent piece.

    Most banks - RBS aside, obviously - have been acting like they're in the clear and don't need government help, so it's back to 'business as usual' (including bonuses). Now it turns out that they're on long-term life-support after all. Will this induce a bit more humility? I doubt it.

    When most people refer to 'the national debt', they mean the figure published by the government. But official reports also refer to the level of 'Treaty Debt' - and that's a more honest number, and one that we should use. Add public sector pension obligations (at least £1 trillion) and PFI commitments and the total is at least £2 trillion.

    On the banks, there's no alternative to taxpayer support. As well as being 'inconceivable', a 12% savings ratio would have huge demand implications ("the paradox of thrift"). As for going back to wholesale securitisation, that would be madness - haven't we learned anything from the crisis?

    So it's very clear that we need to redefine banking - Glass-Steagall, anyone?

  • Comment number 6.

    What's this? - Banks struggling to pay back the money they owe us?


    After all - it's what they do to us!

    Government subsidising private banking bubbles is like a very famous brand off crisp.
    Once you pop - you just can't stop

  • Comment number 7.

    "There is no means of avoiding the final collapse of a boom brought about by credit expansion.

    The alternatives are only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved"

    Ludwig von Mises 1881-1973

    And what route do you think our current lords and masters in Westminster will take.......?

  • Comment number 8.

    Talk to any SME and Lloyds have already closed the door to lending, despite the bs on their website, so in that respect at least they are ahead of the curve.

  • Comment number 9.

    It looks as if the figures missed out a couple of points somewhere and no one a read the copy. Who ever wins the election will still have a crisis to manage, or more like firefight.
    Should we have gone directly to nationalisation? Of course hindsight is a perfect science but I foresee this happening...... soon

  • Comment number 10.

    1. Mugs we want to rollover your £300bn
    2. Rob what kind of sell out government spokesperson are you?

  • Comment number 11.

    Puts all those bonuses that everyone was getting so bent out of shape about into context, doesn't it?

  • Comment number 12.


    I'm afraid I have to question your story on Northern Rock yesterday. Your piece on Radio 4 last night was very much a slant of 'taxpayers making a profit' from Northern Rock - however, on your blog your tone (on the same story) was a lot more realistic. Even the title "Can taxpayers make a profit from Northern Rock?" is a question but on the radio you seemed certain that they can and will.

    Are we to assume that you know you can get away with making claims of a profit on an 'unchallenged piece' on radio 4 - but to make such claims on your blog would open the floodgates of criticism and questions regarding your analysis?

    I find it very concerning this may be the case.

    Fortunately today's story does seem in line with what you said on the radio this morning.

    I sincerely hope you are not bowing to political pressure - we would prefer direct and honest analysis please. We can get whacky and wild statements from the Government at any time!

  • Comment number 13.

    I heard yesterday that there is a good chance that the ratings of UK banks will be reduced. Seems a good idea

    It seems like the economy is reliant on savers and those who have been prudent. These people have been bailing out those who were not sensible and this has gone on long enough.

  • Comment number 14.

    It is absolutely clear that the whole banking system would have faced bancruptcy without massive tax payer support. Robert has outlined the staggering amounts of money that banks have speculated with, without proper longterm strategic planning. Where are the 'skills' of those highly talented finance leaders who have almost bancrupted the world economy, if the tax payers worldwide would have not bailed all of them out with an estimated 15 trillion US dollars in loans, guarantees an freshly printed money coutesy of the central banks.
    Yesterday, an excellent article by Prof Jeffrey Sachs in The Times (10 March 2010) exposed the greed and immorality of the global banking system and criticised the servatile politicians who benefit from it.
    Please find Prof Sachs' article and many more resources exposing the immoral exploitation by the global financial services sector here:

  • Comment number 15.

    > the UK's banks have to find £440bn of loans and finance between now
    > and 2012 to replace maturing debt.

    Last time I checked, most of the UK's banks are still owned by shareholders (at least partly). Therefore, the money will have to come in the form of "Equity Release".

    In the same way that we force the elderly to sell thier homes to afford care, then we must make banks sell equity to fund thier debt habit. And, only when that runs out, should we even consider helping them out.

  • Comment number 16.

    That sounds a bit like a Ponzi scheme Robert
    Are you sure you have the facts right ?

  • Comment number 17.

    So if I understand the article correctly, the entire UK banking system has a £440 bn problem, but LLoyds by itself is just over 1/3rd of the problem at £157bn. It is probably safe to assume that RBS is an even bigger share of the problem potentially up to £200 bn. On that basis the rest of the UK banking industry of about £100 bn (and presumeably some of that is Northern Rock)

    That is, or at least should be, entirely within the inter-bank market to cover even if asset backed loan market does not open. Even if it is not then there is time to do additional capital raising.

    All this proves is what a complete mess RBS and HBoS (Lloyds would have been fine without this awful merger) made of their businesses. Which leads me to another question - is this a UK banking crisis or can we blame the Scots for this (after all Gordon Brown is Scottish too)

  • Comment number 18.

    Well that puts the banker's position into perspective and somewhat ties the hands of the incoming administration.

  • Comment number 19.

    Once again Mr Peston seeks to scare the wits out the public. He seeks to create the news not report it. For example he tells us that Lloyds is more exposed at £157Bn than anyone else and assumes that will need to be renewedat similar levels or all lending ceases. In the banks report following its results recently it specifically addressed the issue saying they will need to rasie £13-15Bn a year which is exactly one tenth of what Mr Peston claims. With power comes responsibility and its about time he exercised some.

  • Comment number 20.

    Robert, you are right in highlighting the necessity of debt deflation. This has traditionally and historically the 'role' of the crash after the bubble in all depressions. We have been putting off the evil day, but we cannot do it for ever.

    So far policy has managed to let the big debtors refinance on very favourable terms, on the backs of savers - I recall reading that the biggest buy-to-let landlord would have gone bust had interest rates not been reduced to 0.5 percent. Unfortunately not even Gordon Brown or David Cameron can walk on water and arithmetic decrees that either the 300 bn GBP is added to the national debt and the country becomes bust (OPTION1), or savers stump up the money to bail out the banks (but they will not do so unless the returns on savings are dramatically increased)(OPTION2) - or the third option the losses are crystallised (OPTION3).

    OPTION1 - can't happen as it cures nothing as the act of doing so pushes up interest rates dramatically and will cause yet more devaluation of sterling.

    OPTION2 - Savings return will rise that is a certainty, but unless there is special provision to help the banks the money will not go to them as they are effectively distressed borrowers.

    OPTION3 - Banks and other borrowers (including households with un-payable mortgages) will go bust and cannot be rescued (this is what crystallisation of losses means).

    My guess is that all three will happen!

    In short as was blindingly obvious QE and zero interest rates did not and indeed could not have 'fixed' the financial crisis. All they did was delay fixing the problem till later (as well as making the problem more entrenched and worse.) QE and zero interest rates as an economic policy works only AFTER the necessary debt deflation has taken place. We haven't done the first step yet! We have to unwind the over indebtedness of both individuals and the state. So taxes up, interest rates up by a factor of ten and more work for estate agents selling forced-sale property.

  • Comment number 21.

    Not normally one to read the Torygraph (other slightly right of middle papers are available) but saw this on google (other search engines are available):

    Interstingly James Dyson has picked up on a decline in Maths and Science - which I note other 'western' countries have too, they have been noting the quality of graduates and undergraduates from Asian countries compared to their home grown ones in maths and science. Any thoughts?

    On another note I re-read the typos in my comment yesterday and apologise!

  • Comment number 22.

    the new building site in town is currently paying the bricklayers 80 pounds per day ,they were earning 90pounds a day in forces in operation and life in the real economy. let it apply to the banks we cannot continue to support this giant ponzi scheme.

  • Comment number 23.

    As another aside I was talking about exports with a friend in the pub and the football was on, my take was that we are probably a net importer but that it shouldn't matter as after any transfer fee the asset and his pay remains friend pointed out that I was probably wrong as many of the overseas players probably ship a lot of their money back home, and that probably around 50% of their spending on luxury goods here will be on imports?

    Anyone got any ideas on this? Saves on shaggy dog stories tonight.

  • Comment number 24.

    10. At 09:19am on 11 Mar 2010, londonunderground wrote:

    "1. Mugs we want to rollover your £300bn"
    Mugs answer - "go compare the market for another deal - we no longer want to lend to you. Fortunately a free market will mean there is another lender willing to lend in our place - isn't there???"

    When are we off to burn these banks to the ground? I thought we had started, but it's just a restaurant fire in Shoreditch!

  • Comment number 25.

    If there were not such an irrational "worshipping" of low interest rates, and savers received that to which they are entitled, they would save considerably more and the banks would have greater funds. Building societies and the like would have more to lend and people/companies would stop moaning about their failure to provide the desired lending.
    Higher interest rates would also counter rising inflation and boost the pound. That in turn would create confidence and recovery would be clear for all to see.
    So let's have less of the low-interest manta and more common sense.

  • Comment number 26.

    For some months I have watched the nonsense and ill informed comment on this blog but i think today's is such a nadir that I have to comment. I can see Mr Peston is trying to simplify the subject mater for the audience but this is stretching the point. Of course the banks are still hugely reliant on wholesale funding markets for their finance but mr Peston suggests ABS is the only 'market' route for this... he forgets to mention all the various short term instruments, senior debt, term deposits, central bank monies etc.. the list is pretty exhaustive. he also forgets to mention one massive point and that is that assets which have been sold do not obviously require refinancing... the refinancing is huge in the next 2 years, but not just for uk banks governments are facing an enormous refinancing need before 2012.. this is about the ONLY area where the UK looks favourably placed. The banks do face a lot of problems but trying to whip up some more populist hostility is entirely without merit.

    I know for most people these details are inconvenient as it's far better to just blame more things on the banks. But the idiocy of trying to drive banks out of society is like voting for your own death. As for the highly ill informed Glass-Steagel Brigade let us not forget that at banks like northern rock had no investment bank function. At the very heart of where the big universal banks like RBS/Citi etc lost money is not prop trading lose cannons but lending decisions to companies and individuals... This inconvenient truth makes poor copy for the journalists which is why it gets such limited coverage.

    Whose fault is it for someone taking out a loan they can't afford? principally it's the person who couldn't afford the loan. A society that wants to all live like the beckhams cannot survive and people just need to accept they have to get poorer for the next decade... principaly that means public sector workers...

  • Comment number 27.

    Just a thought but given the extent of banking's debts is there any reason not to simply tax the bank's profits (they still seem to be making incredible amounts of money) using a special rate of, oh! say 95% to 100% until the bank's and UK's financial overexposure is rectified?

    I appreciate this would impact their share value and perhaps expose them to take over bids (who would want them) but if that is a concern the Government can block a take over anyway.

    Are there any good reasons for not doing this?

  • Comment number 28.

    17. At 09:41am on 11 Mar 2010, Justin150 wrote:

    "Lloyds would have been fine without this awful merger"

    yep - you keep clinging on to that 'what might have been' and I shall cling on to the fact that had the German revolution not failed then none of this Lloyds, banking crisis or the debt slavery our children are born into wouldn't have happened at all.

    How long would Lloyds have lasted (without the merger) when the Libor spiked?
    The answer is - the next day.

    ....or did we forget that the entire banking system froze and the illiquidity of money meant that anyone who did not fund their loans from savings was finished?

  • Comment number 29.

    I rang the alarm bells on this when the Bank of England alerted us to the problem in their earlier financial stability report.

    This is the crunch issue. It will influence economic growth in the UK for the next decade.The BoE reckon that over £1 trillion of UK banks' term liabilities need to be refinanced over a 5 year horizon. Unguaranteed funding, they say, stands at £750 billions. The state schemes ( SLS and CGS) have guaranteed £312 billions which mostly close in 2012. But, the State only guaranteed the good stuff with collateral didnt they? Whilst securitisation markets might have reopened, presumably this is for good new business - has any of the old stuff been re-sold?

    So, even if the State extended the guarantee it will not be the answer.If you add the pressure to raise capital amounts and quality and liquidity from the regulators and further credit losses, this gets very worrying.Bank bail-out 7 or 8 next.Robert, persuade the Beeb to put this to Darling, Osbourne and Cable.

    I suppose Mervyn could print some more money and buy new bank debt.......that will close the funding gap! Maybe Chinese money will help!

  • Comment number 30.

    19. At 09:43am on 11 Mar 2010, morescaremongering wrote:

    "In the banks report following its results recently it specifically addressed the issue saying they will need to rasie £13-15Bn a year which is exactly one tenth of what Mr Peston claims"

    ....and where did they propose they would raise that money?
    Take a choice....

    a) Another rights issue
    b) Fleecing customers (making them uncompetitive and losing business)
    c) Deep pocketed financiers (Arabs perhaps)
    d) The Government
    e) Thin air

    I realise that the word 'billion' now seems small, but raising that kind of money in a recession is virtually impossible - even for companies without a Government stake in them - which produces uncertainty for investors...

  • Comment number 31.

    Yes, this just serves to show that trying to get rid of debt just by moving it to someone else (the government) does not actually solve much.

    At some stage we have got to make some movement towards the equilibrium objective where savers and borrowers largely balance each other, and this absolutely must mean savers getting a better deal than they do now, and borrowers getting a worse deal.

    It's not surprising that no-one saves at the moment, with:
    a. such derisory interest rates available
    b. such lack of competition between the banks
    c. such a rigged savings market (being controlled by all the investment institutions in the City of London agreeing between themselves such outrageously high annual costs)

    If the "market" for money as a commodity was a normal one (and not fixed by the Bank of England), the going rate for savings at the moment, with the huge demand and the lack of supply that you are highlighting Robert, would be much much higher, and indeed it needs to be.

    Putting it an alternative way - the only route out of this is for those who have over borrowed to steadily work their way out of debt by producing a lot more than they consume for the next X number of years and just accept it..... a bit like the whole of the UK really!

    So, if there was a properly operating "market" for money, with such a huge requirement for

  • Comment number 32.

    These are indeed large and disturbing figures Robert. I agree with you that it is hard to see where some £440 billion is going to be found unless it is from the taxpayer/public-sector. As Lloyds appears to be so much of the problem it makes the merger to which it was subjected look worse and worse.
    As this problem built up in 2004/06 according to your article it made me think of the analysis I have seen over the past few days concerning policy errors over this period on dissecting our Monetary Policy Committee views and actions and some new research from the IMF. There is a lot to think about in this and it should be used to prevent the same mistakes being made again.

  • Comment number 33.

    Didn't Mervyn King say recently that the banks would have to pay back that money at the end of 2012 and there was no way they should be allowed to extend the loans and guarentees at the taxpayers expence? What happened there then?

    Many people on here (me included) said at the time that these loans were made that it was just a way for the taxpayer to pick up the risks while the banks just had to sit back and make the profits. The counter argument was that it was not a permenant thing, well it looks like it is!

    Where is the regulation we were promised to go alongside all this bailout money?

    There was to much credit in the boom years, thats what fueled the asset bubble, in the new post crunch world there was never going to be the money around that there was before, thats one of the reasons why things like housing have to come down in price. I thought we all had to learn to borrow less and save more because most of the credit being dished out to people in the run up to the crash didn't really exist!

    Again like many people said 18 months ago, all thats going to happen in the long term is we will inch back by degrees to exactly where we were pre crash, this time with everything underwriten by us taxpayers.

  • Comment number 34.

    20. At 09:43am on 11 Mar 2010, John_from_Hendon

    good post.

    The problem with expecting savers to "save the day" (pardon the pun) is that after the lesson of 2007 -2010, who will ever want to be a saver again?

    Savers thought they were doing the right thing, but it turns out they would have been better off spending like there is no tomorrow, running up huge debts and taking themselves either into bankruptcy or the edge of it - hoping for a Government bailout of some description. I mean the Government has been offering to pay peoples mortgages for them!

    Net savers will be feeling foolish as they would have preached prudence to the net debtors in the past - but look who's foolish now.

    ...and the next emotion to follow feeling foolish - is anger.

  • Comment number 35.

    Now let me see if I've got this straight. Banks are paying billions in wages to thier fat cats, while they still can't afford to service thier own debts? Have I got this right to far? Surely intelligent people would only pay bonuses once the business is solvent enough to be able to afford it? Which must mean that bank bosses are simple-minded.

  • Comment number 36.

    This whole global crisis is a Ponzi scheme but I don't think the truth will be found on BBC website.

    And I honestly wonder, why do you people keep on discussing the economy here and trying to put your thought eloquently, funny and original? It's just a waste of time.

    The next government won't obey the will the electorate, they will obey to their master, the financial oligarchs BECAUSE the base frame of the system is still in place.

    Put this sticker on your soon-to-be-empty fridge

  • Comment number 37.

    The government used taxpayers' money to rescue the banks because they were persuaded that the survival of the banks was vital. In fact allowing the banks to survive, but under a mountain of debt, has not worked, because they have been unable to provide the amount credit necessary to enable the economy to recover. It would have been better to allow them to fail. This would have wiped out most of the debt.

    If the banks are unable to meet their liabilities when the guarantees end, there would be a second opportunity to do this.

    An administrator would be able to restart the retail business by freezing deposits over 50k GBP in a matter of days, but without huge overhanging debts. The government should consider buying the restarted banks from the administrator. After all, if the banks are so vital and can affect all of us so seriously, if they do the wrong thing, should they not be fully nationalised. They would then be accountable to us, and could be ordered to concentrate on serving the interests of the public, rather than on ensuring large bonuses for their staff.

  • Comment number 38.

    #35 ...and we the taxpayer & main shareholder authorise it! I did ask if the same would be true in industry/private sector, i.e. will a loss making company give out large bonuses, will effectively bankrupt companies give them out? Any comment from people in the know to allow a comparison?

  • Comment number 39.

    No 35.
    Which must mean that bank bosses are simple-minded.

    NO they are just playing both ends. After all governments are short term things and don't plan further than 3 years, the banks are planning to stay around until the retirement plans kick in.

  • Comment number 40.

    Funny they never seem to mention these sort of figures when they quote how much profit they make ??

    I am not expecting banks to make a real profit in my lifetime,and the whole business of banks lending money to finance take overs of firms that put british tax payers out of jobs is just farcical.

  • Comment number 41.

    35 Jacques Cartier

    Has it occurred to you that the banks are paying bonuses to their executives to reward their success in getting the government to bail them out?

    With no downside and plenty of upside they cannot lose, and want to keep it that way. Money talks.

    It's wrong, but that's how it is.

  • Comment number 42.

    I wondered when this would become 'a news item'

    It has been there for ages, just hasn't been reported in the press

    If Darling had allowed Lloyds TSB to buy Northern Rock, who know what would could have happened

  • Comment number 43.

    "Well there is only one other place: taxpayers"

    And of course that is an unlimited resource innit???

    Ho hum


  • Comment number 44.

    WOTW "How long would Lloyds have lasted (without the merger) when the Libor spiked?
    The answer is - the next day."

    My recollection is that Lloyds, before the merger with HBos, ran their business fairly conservatively and would have been in a situation similar to Barclays (and in fact probably a better position because they did not have a big trading arm) namely that they would have probably needs to raise some capital and yes there was a temporary need for govt to step in when the inter bank market closed, but (and this is true for Barclays now) once the inter bank market re-opened there would have no further need for govt assistance.

    The merger with HBOS completely changed LLoyds and sadly the deal was about as bad as it could be in terms of timing and risk.

    The point of Robert's article is not about what happened in the past but what is the inevitable issue about to the face the banks over the next 12 months or so. My point, which you have not answered, is that the huge numbers that Robert is quoting are made up mostly of Lloyds and RBS (and a bit of Northern Rock). When you take out Lloyds, RBS and NR suddenly the numbers do not look that difficult at all. Not saying that the inter bank market can cope with it all - particularly as public debt issues must be eating into capacity - I suspect there may be some rights issues, but the problem seems manageable. In other words Robert is blowing this out of proportion.

    I know you will not agree with me as you have decided that any bank that has to raise any money from the inter bank market is a busted model - you and I can disagree about that

  • Comment number 45.

    Perhaps interest rates will rise at the year end? At the current 4.1% on 10 year Bonds, government debt is so cheap it's embarrassing, and 0.5% on the Bank's Repro is ridiculous.
    Higher interest rates would encourage even greater debt repayments by borrowers than even now, and leave lenders with more cash to lend to those who need it most - and are willing to pay more for it.
    What's also needed is a public exchange market for CDOs and CDSs so that we can all have a handle on what's going on. Such transparency is greatly needed and would enable the secondary debt markets to work again - and this time under the eagle eyes of Regulators and Investors alike.
    I wish it were as simple to do as it is to write!

  • Comment number 46.

    I don't know what you are all so worried about.

    Our friend Onward-Ho has just been given another couple of million by the bank for another real estate punt. So everything must be looking rosy.

    The banks are marking to fantasy instead of market and whoever is in power can keep the printing presses rolling like the USA is doing.

    The drugs don't work, they just make it worse.

  • Comment number 47.

    24. At 09:55am on 11 Mar 2010, writingsonthewall wrote:
    When are we off to burn these banks to the ground? I thought we had started, but it's just a restaurant fire in Shoreditch!
    Fire, destruction and death are not the answer. Total loss of data is the way forward for a clean slate. That I imagine is only possible from inside.

  • Comment number 48.

    35. Jacques Cartier:

    "Which must mean that bank bosses are simple-minded."

    Maybe, but I'll bet they're making more money than the rest of us, so who are the mugs, them or us?

    Banks are paying bonuses on the basis that they are LIQUID again, which they are. But they are not all SOLVENT (debts versus assets). This has to make their business model faulty, and their remuneration practices inappropriate. Taxpayers are being taken for a ride.....

  • Comment number 49.

    # 34. At 10:29am on 11 Mar 2010, writingsonthewall wrote:

    > who will ever want to be a saver again?

    People never _want_ to save - they have to, out of fear and greed. If people were encouraged not to save at all, things would get better for everyone. Saving is how the powers keep people in thier thrall. If you want an easy life, never keep a dollar past sunset, because some goody-two-shoes will always come to the rescue.

  • Comment number 50.

    Erm, they could also issue bonds in the rmarket Robert? That's the normal way to raise cash for large companies...

  • Comment number 51.

    26. At 10:10am on 11 Mar 2010, Ben Harvey wrote:

    "For some months I have watched the nonsense and ill informed comment on this blog but i think today's is such a nadir that I have to comment. "

    Why is it that whenever someone starts a comment off like this - they then follow it up with ill informed comment and nonsense?

    Of course there are other forms of financing - but the problem is nobody wants to finance them

    I hate to break it to you - but banks are no longer the 'firm and solid institutions' you seem to believe they are.

    You also seem to forget that a large contributer to the high national debts around the world were in fact the banks themselves!

    "Whose fault is it for someone taking out a loan they can't afford? principally it's the person who couldn't afford the loan."

    That sums up your opinion, it's the fault of the borrower - even though the lender is supposed to be assessing the risk in order to maintain it's lending responsibility - but I guess that's of no concern.

    So I hope you mechanic, builder, doctor overcharge you when you take your car, house, body in for repair - because surely it's your fault for not knowing basic car maintenance, building maintenance and physiology.

    Just remember, a 'bad borrower' needs someone to offer to lend him the money first to become one. He cannot do it alone.
    However you will find that 'bad lenders' will simply find someone else to lend to if mr 'bad borrower' turns him down.

    Oh the difficulty of contradiction eh?

  • Comment number 52.

    31. At 10:22am on 11 Mar 2010, Noideaatall wrote:

    "Yes, this just serves to show that trying to get rid of debt just by moving it to someone else (the government) does not actually solve much."

    Thank you for reminding us of this fact - it seems many people think this debt 'just appeared from nowhere' onto the Governments balance sheet.

    They must have 'x-factor' style short memories....

  • Comment number 53.

    Ben Harvey 26 -

    I was with you till you got to:

    "Whose fault is it for someone taking out a loan they can't afford? principally it's the person who couldn't afford the loan. A society that wants to all live like the beckhams cannot survive and people just need to accept they have to get poorer for the next decade... principaly that means public sector workers"

    A rather confined way of putting it I have to say. How exactly do you judge whether a person can afford a loan or not? Do try and show a little bit of balance about this! The playing field has changed for most of use beyond recognition in less than a year. For years Brown boasted stable macroeconomics and then suddenly the country is plunged into chaos, plunging pound, firms struggling with empty order books, foreign takeovers and closures, shops shutting because no-one is spending etc etc etc. Poor old silent citizens! Always being judged by someone with the rose tinted spectacles and the moral high ground. Naughty people for borrowing too much. Are things a bit tough for you? Oh dear(tsk tsk)..

    There OBVIOUSLY is a point at which the individual cannot be held responsible per-se for his/her financial predicament and where the State must own up to and shoulder the blame for the damage it has done to its people. We passed that point months ago and Brown ignored it expecting everyone to just 'carry on as normal' or 'fight on' as if nothing hasd changed! Everything has changed and we're heading for the economic Stone Age! Brown just hasn't got a big enough brain to comprehend what to do now and he and everyone else who subscribes to those stupid views can blether on smiling till the coows come home about facing this new 'Battle of Britain' in Churchillian style but as long as he continues to ignore the social trainwreck of insolvenices, broken relationships, redundancies and everything else that he's caused as Chancellor and Prime Minister I for one vote that this ghastly mess is his, his governments and not mine or any other citizen's, same as it was in the days of Sir John (Major) of Family Values in the 90s.

    Brown bankrupts Britain. Nothing learned, nothing new.

    The only thing that can resurrect whats left of the economy is fight our place in the world of commerce and industry ie: MAKE AND EXPORT. if nayone has a cosier view I'm all ears because the 'tax pot' is being emptied faster than it can be refilled.


  • Comment number 54.

    There is at least one other way for the banks to raise the funds they need, raise mortgage rates to say 10% and then mercilessly forclose on any defaults and sell the property at auction. Not very popular but it will quickly reduce their borrowing requirement and as proprty prices collapse their will be even more defaults.

  • Comment number 55.


    "will a loss making company give out large bonuses, will effectively bankrupt companies give them out? Any comment from people in the know to allow a comparison?"

    Not sure if I'm 'in the know', but the answer is no. For all the criticism of big corporates, rewards are generally linked much more tightly to *overall* performance than in the banking sector. Partly because of relentless pressure to drive up quarterly EPS numbers, remuneration is generally linked to shareholder returns, earnings, peer group comparators and returns on capital.

    The banking thing is a bit of a game. Banks claim that, if they don't pay up, they'll lose their best people. That maybe true - but where will these best people go? The answer, of course, is to other banks. So what is needed is all-encompassing regulation.

    Logically, if weaker banks aren't allowed to pay top dollar, the best people will go to the stronger banks. First of all, there's nothing intrinsically wrong with the strong succeeding and the weak failing. Of course, that could mean some banks getting bigger, moral hazard increasing, and competitiveness diminishing. So we probably need anti-trust powers to break up banks that become too big. No problem in principle, but governments (esp. the US) will face formidable and well-financed lobbying against any such proposal.

  • Comment number 56.

    Heard you on the radio this AM Robert. You seemed to imply that the authorities would have no option but to let the banks once again deal in bundles of mortgages and complicated packages to free up credit.

    Surely that's what got us into this mess in the first place. I said that before but then, no one listens to me!

    Beat the recession - SPEND SPEND SPEND. That's why our balance of payments is so healthy. As we don't produce much that's no surprise. Who cares - USA has been doing it for years. Everyone lives on credit these days.

    The gap between the rich and the poor should be getting narrower - despite falling wages there's no evidence of falling benefits so no wonder no one wants to work. We're talking averages of course since there's a lot of people out there who want to work if there's a job.

  • Comment number 57.

    26. At 10:10am on 11 Mar 2010, Ben Harvey wrote:

    > trying to whip up some more populist hostility is entirely without merit.

    Now and again, somebody mutters some banker-friendly jargon that's meant to
    set things straight. But we've got every right to complain about those
    greedy fat-cats down in the smoke who have destroyed our country better
    than the luftwaffe ever did. By “populist”, you mean bank-friendly taxpayers,
    do you? It's time for bankers to tighten their belts too, Ben.

    > trying to drive banks out of society is like voting for your own death.

    The banks killed themselves – they didn't need “populist hostility” to do it.

    > Whose fault is it for someone taking out a loan they can't afford?
    > principally it's the person who couldn't afford the loan.

    It's not the fault of us taxpayers, yet we footed the bill, Ben. We want our money back from the bankers who threw it way on rubbish.

    > people just need to accept they have to get poorer for the next decade...
    > principally that means public sector workers...

    It's certainly not the fault of public sector workers either, except in your fevered imagination.

  • Comment number 58.

    Thanks Robert for continuing to expose the weak spots/malfunctions/irrational behaviour in the UK banking sector.
    There are so many immoral and mad aspects in the way the current global financial 'services' sector malfunctions that it is very difficult to understand how this whole sector has been getting away with regularly bankrupting/inpoverishing societies without being seriously regulated and being held to account. That the financial elite is getting away with ponzi schemes/boom and bust schemes is only astonishing if one doesn't analyse the cosy/corrupt relationship between the financial elite and a servatile political elite in all countries. Money easily corrupts decision-makers and big sums of money corrupt and blind almost everyone who can or wants to get a slice of it. Reducing the massive bonuses and incomes of bankers and strict regulation and transparency in the global financial sector is the only way to prevent a repeat of the current financial crisis. It will be difficult enough to get out of this debt crisis, we certainly don't need another repeat in a few years.
    Please find many more arguments concerning the urgent need for a national and global reform of the banking sector here:

  • Comment number 59.

    The 300 bln is actually best backed by the government on a continuing basis.As the asset values have now all increased they represent a near zero riskand cost to the government as well as a good earner.To issue these loans on the private market now would divert precious funds away from new lending which is not what we need.
    What we do need is a shift away from the uber-pessimistic valuations which resulted in the mark to market valuations and brought such calamity on the world.
    Remember loan default is not the main UK problem, it was the calling in of loans prematurely and selling the assets off for buttons which has produced the terrible losses.
    Abit of calm, abot more time, and a bit more gutsy optimism from surveyors and lenders and Bob's your uncle, thwe show will get on the road.
    Money needs to be spent on looking at how mortgages are securutised to properly assess the risk they represent and allow revaluations of them to take us forward .... as in Switzerland,when Credit-Suisse issued "toxic" bonuses, these "toxic" assets are actually not toxic at all in the main.

  • Comment number 60.

    Does our cash-flow like this diagrammatically ?

    Individuals ➩ HMRC ➩ Banks ➩ Stupid Investments ☁♽ RECYCLED

  • Comment number 61.

    can't help thining this is fairly typical of BBC business reporting at the moments, reporting the "near worst case" scenario rather than the most likely scenario. Roll over the money at rates which favour the taxpayer. Not great and overly simplyfied i know, but not end of the world stuff

  • Comment number 62.

    Robert you say :
    'Where else could the money come from?
    Well there is only one other place: taxpayers.'

    What about company profits- or can that not be touched or talked
    How many billions are made each year- and how long would it take to clear
    our defecit if they were not untouchable ?
    Strangling the taxpayer will not solve the problem- I'll just spend less.
    After all, they're 'profits'- over and above wages costs investments etc

  • Comment number 63.

    If the banks are so desperate for money, how is it that interest rates are so low?

    The current situation is a complete fudge, designed to give the impression everything is getting better, at least until after the general election.

    Then all hell will break loose...

  • Comment number 64.

    Oh dear! It reminds me of a nursery rhyme.

    Old Mother Hubbard
    Went to the cupboard
    To get her doggie a bone.
    When she got there
    The cupboard was bare
    And the poor little doggie had none.

    I think the only people getting the bone here are the taxpayers.

    It is time to separate the retail banks from the rest and let the rest go bust or is the term `roll-over'. Whatever!

  • Comment number 65.

    Oh good - so we (via public debt) will finance the banks, allowing them to continue to pay a miserly rate of interest on our savings.

    Hopefully a new government will charge the banks a considerable fee for the finance (rather than under cutting ordinary depositors), greater than the cost of financing the related debt and make a profit on the deal.

  • Comment number 66.

    I readily accept I don't understand the complexities of banking. Any help would be appreciated. The sequence of events seems to have been:
    1 The Banks sold each other debts which they knew at the time could not be paid back but charged high transaction fees that made themselves individually as employees very wealthy but took the Banks as institutions to the point of collapse.
    2 The taxpayer, without being asked, made up the funding to prevent the Banks as Institutions collapsing in the form of low interest loans.
    3 The same bank employees carried on trading using the public money and again as employees paid themselves huge sums of money, both collectively and individually, based on transactions that again were not based on the productive use of money to rebuild the economy but on internal trading transactions made easy due to having a huge source of money at a very low interest rate. Although trading between themselves the Banks still don't wish to trade with their customers in the form of providing loans, and when reluctantly lending want to charge higher rates of interest and want guarantees as security against the loans. They continue to trade between themselves safe in the knowledge that they have the ultimate security, the Government will not let them collapse.
    4 The Bank as institutions say they can't pay back the public money without going bust again.
    5 We are focussed at the moment on the huge public debt and in order to fund this thousands of public sector employees will be unemployed and adding on the multiplier effect of the businesses that support Local Government many small private sector companies will also fail. The social cost will be huge.
    6 In addition we are likely to have to pay higher 'taxes'in one form or another and will have an ever poorer physical infrastructure and reduced health and social services.
    The above is simplistic I know but assuming kindly that at least it has some base in reality why are we not looking forward to a 'Golden Age' when all this money is paid back. Or is the term 'loan' a euphemism for paying off someone else's debt with no prospect of being paid back?

  • Comment number 67.

    # 54 - of course enforcing such realism in interest rates would be likely to cause the rate demanded to finance government borrowing to rise as well.

    Instead the taxpayer in general will no doubt be forced to incur yet more debt to support the flawed investment of those who chased money for nothing via property speculation.

  • Comment number 68.

    So it looks as if the banks will have no choice but to ask for an extension of their £440bn loan from the taxpayer if they want to stay afloat next year? This must be a prime opportunity for our government to dictate our terms (which they never did properly the first time around).

    If the banks refuse to play ball this time - nationalise them 100%.

    Incidentally, these banks would be able to pay back a large portion of this £440bn debt if they hadn't been giving away billions of pounds of our money on individuals bonuses.

    Sick. Sick. Sick.

  • Comment number 69.

    Many coversatives blamed individuals for the crisis because they were spending on things they could not afford and therefore defaulting on mortgages. Seems the banks are paying out big bonsues when they may not be able to pay back their public "loans." Since the taxpayers own substantial stock of the banks maybe those representatives of the public might want to exercise some control and stop the bankers from dictating terms for a probelm that they created through unethical and more likely illegal practices. If some had gone to jail or at least taken to court to expose the process to the public maybe they wouldn't be sitting on their high horses and making demands. We are looking at the very real established "Ruling Class" and the different set of rules they play by. If the banks are not required to down-size and prevented from using their empty loan processes there will be no solution.

  • Comment number 70.

    I hear lots of rhetoric from politicians of all parties on what stringent cuts are going to be necessary to the public purse to reduce the deficit. But nothing on when and how the banks are going to be made to start paying back the billions they have been given to keep them afloat!

  • Comment number 71.

    53 GC says,

    The only thing that can resurrect whats left of the economy is fight our place in the world of commerce and industry ie: MAKE AND EXPORT. if nayone has a cosier view I'm all ears because the 'tax pot' is being emptied faster than it can be refilled.

    There is another way, Import Substitution, think and look before you buy.

  • Comment number 72.

    Now we are paying the price of the weakness of the government in trying to save everything both good and bad.

    These bad banks are going to drain our resources for years to come. What sense is there in trying to save badly run businesses by mortgaging the working people up to the hilt. They have sold everything else now they are selling the future of the people.

    Gordon Brown says he made the right decisions. I disagree.

    It was because he made the wrong decisions and is sticking to them that this country will be in big trouble for years to come.

    Can we turn the clock back and reverse what he has done? If we don't we will be back to where we started for all you are blogging about today is how quickly we return there.

    Next time there will be nothing or nobody left able to pick up the tab.

  • Comment number 73.

    errr.....its really quite simple. Out the £300bn of Government debt to one side for the moment.

    If a further £140bn needs to be repaid to other funders, that means those funders will have £140bn available to invest back into the system. The banks' task is to offer them sufficiently attractive terms to encourage them to reinvest (or "roll over" if you prefer) the cash. Its the way the world works.

    The Government's job is to make sure that the British taxpayer gets an equally attractive interest rate when it rolls over our share of £300bn.


    NOW which party leader do you trust more to get a decent deal? Cameron OR the one who promised the end of "boom and bust" and led us manfully into the biggest bust on record. I suppose he was half right - the boom came to an end.

  • Comment number 74.

    Now, banks have again started to be able to raise money by packaging up mortgages and selling them to investors in the form of bonds; these markets are back in business.

    So they are so intelligent, so worthy of their bonuses, and they have the brilliant idea of ding it all over again. Pure genius! Not.

  • Comment number 75.

    44. At 11:28am on 11 Mar 2010, Justin150 wrote:

    "My recollection is that Lloyds, before the merger with HBos, ran their business fairly conservatively"

    My recollection was that all banking was run fairly conservatively before 2007 - because that's what they told us!

    We can't actually know they didn't until "the tide went out and we could see who had no trunks on" - to paraphrase Warren Buffet.

    Lloyds were / are like the UK - people are too busy worrying about Greece and Portugal to notice the UK position. It's a relegation battle - simply keeping yourself off the bottom. It doesn't mean you're in any better position yourself simply because others are worse.

    "yes there was a temporary need for govt to step in when the inter bank market closed, but (and this is true for Barclays now) once the inter bank market re-opened there would have no further need for govt assistance."

    So that's an admission that all these banks who skillfully avoided collapse did in fact need Government aid - even if it was the TARP or BoE liquidity funds provided.

    I rest my case on that.

    I do agree that the takeover of HBOS by Lloyds was a huge factor in their downfall, but panic makes people do crazy things. Even crazier when you're face with Government pressure to save an ailing bank (which is what the takeover was really)

    If Barclays had been 'persuaded' to buy up Lehmans - they would be the Lloyds of today.

  • Comment number 76.

    48. At 11:42am on 11 Mar 2010, Friendlycard wrote:

    "Maybe, but I'll bet they're making more money than the rest of us, so who are the mugs, them or us?"

    yes, but most people can safely tell others what they do for a living - they can't.

    Money will be no good once hyperinflation takes off and the Dollar falls - then it really will be 'survival of the fittest'.

    You can trust me that bankers are not the fittest.

  • Comment number 77.

    Good article from Robert, and good posts (as usual) from Writingsonthewall ans Invisiblehandadvisor.
    But 90% of the British public suffer from chronic apathy.
    Who's Robert Peston?
    What's happening in Corrie?
    What are Katy and Peter doing?
    The apathy of the public is the bankers' and ministers' great ally.
    Joe Public won't wake up until he's lost his job and the dole money's been cut off.
    The trade unions must be thinking long and hard about this capitalist mess.

  • Comment number 78.

    I'm not sure I understand this.

    If we do hand over the money to help the banks with their debt, that means we will have massive job cuts, mass unemployment and the nightmares that come with it because they tip us into recession dragging the economy into the abyss, right?

    If we don't hand over the money to help the banks with their debt, that means we will have massive job cuts, unemployment and the nightmares that come with it as we struggle with the debt, right?

  • Comment number 79.

    59. At 12:24pm on 11 Mar 2010, onward-ho wrote:

    "and a bit more gutsy optimism from surveyors and lenders "

    Oh you mean overvaluing properties? - well that's a good idea!!!!

    "What we do need is a shift away from the uber-pessimistic valuations which resulted in the mark to market valuations and brought such calamity on the world."

    Yes you're right, why do we bother valuing things by what they are worth - why not simply value things to the value we want them to be?

    I think you're losing it now.....

  • Comment number 80.

    62. At 1:01pm on 11 Mar 2010, John1961

    There is a google blog from a UK NGO that highlights the lack of parity between us and corporate taxes - Tax Justice Network, if you are interested.
    You might need some beta-blockers before you sit down to read!

  • Comment number 81.

    65. At 1:16pm on 11 Mar 2010, Reaper_of_Souls wrote:

    "Oh good - so we (via public debt) will finance the banks, allowing them to continue to pay a miserly rate of interest on our savings."

    ...and don't forget charging 5% on secured loans (mortgages), 8-10% on unsecured loans and about 21% on credit card debt!

  • Comment number 82.

    A few have touched on this point.

    To all those who suggest the crisis was the fault of the borrower - what say ye now when the banks are borrowing money from the taxpayer which they are unable to pay back?

    Seems the hunter - has become the hunted....

  • Comment number 83.

    50. At 11:46am on 11 Mar 2010, VinChainSaw

    No they could pass a hat around the bank boardrooms and trading floors. They could repo' themselves!

  • Comment number 84.

    Being in the picture or the shape of things to come.

    Well, Robert Peston has painted a sort of picture we can more or less apreciate. For good measure he has added a gloomy shot of London with a pear-shaped object in the foreground.

    Thanks Robert, we have got the message!

  • Comment number 85.

    I thank you for your insight, mine was in a similar, more simplistic vein but I thought maybe I was in a parallel dimension. My follow up question is what is the critical mass that can be employed whilst supporting the arguement and are we close to or beyond that point? If beyond how are they still maintaining their status quo, gentlemens' agreement?

  • Comment number 86.

    Re: 69. At 1:33pm on 11 Mar 2010, ghostofsichuan

    I am wondering if ghostofsichuan is right in his suggestion of taking banks to the court. Maybe only extensive legal action taken against banks, pursuing them agressively though the courts, can expose what really goes on in banks internal processes, exposing their cosy nepotism networks and inform the wider public. Moral reasoning and media attention seems to make no difference. Who could take legal action, on what grounds, and what chance of success? Could one pursuit banks legally for lack of due diligence and fraudulent surveyance? Any legal practitioners/scholars reading this blog have any ideas?

  • Comment number 87.

    Problem: UK banks have to find £440bn between now and 2012 to replace maturing debt.
    Your recognition of three potential solutions:
    1.savers in the form of a growth in deposits,
    2.asset backed securities (i.e. those asset-backed securities that started the financial free-fall in the first place)

    Should taxpayer support be extended?
    Absolutely not.

    Japanese experience also indicated three potential solutions:
    1. Guaranteeing banks’ liabilities i.e. deposits, in order to avoid bank runs,
    2. Separating out banks’ bad assets i.e. getting bad assets off bank balance sheets; and
    3. Recapitalizing the affected institutions.
    In October 2008, the US via TARP (the ‘Troubled Asset Relief Program) embarked on its third step (that is, recapitalization), but had no strategy (and omitted) step 2.
    The UK must deal with the second step in order to restore confidence through credibly; this means fully writing down ‘toxic debt’, thus enabling banks to clean up their balance sheets and at last engage in business at vaid levels of capitalization.
    Bypassing step 2 can only lead to poor liquidity and FUTURE INJECTIONS WILL SEEM NECESSARY, when they are really not. The banks must be cleansed!
    The recent proposals by the United Kingdom, Germany and Ireland to establish ‘bad banks’ to strip the bad assets from affected banks’ balance sheets is a step in the right direction.
    A government-sponsored bad asset bank (and some other dumping place) is thus essential. As an initial step this approach would involve an audit of assets.
    Once this separation of good and bad assets has occurred, set up of a bad bank scheme to deal with ‘genuinely’ toxic assets (as opposed to those that still have some chance at maturity to pay something, but most likely will be written-off.)
    Dealing with bad assets will need revised, quick winding down methodology. As the econmoc crisis has shown, resolution mechanisms for big financial institutions need to be improved. We must set up to let large institutions fail, without wounding the financial process and causing market blurbs. Bankruptcy procedures for insolvent banks have to be stream-lined.

    I'm writing away and thinking - all of this (above) needs expertise, precise, qualified, ingenious financial expertise which can be found throughout the EU. In fact Brussels generated Basel, remember? Bring the EU specialists together, decide what will be done together. Take action together.
    EU interconnectedness during this complex process will bring the UK and all European countries a set of laws and regulations that will ease the transitions to
    - seperation good and bad debt
    - write-off procedures
    - quick, smooth bankruptcy procedures
    - recapitlization of good banks...AND
    - rules for dealing with the USA which has refused thus far to lift one finger to regulate its finances. More and more American voices are calling for a return to a Glass-Steagall, but I wouldn’t take that to the bank!
    Look at what's happening, look at the duplication of process:
    UK - bridge banks put in place. A new ‘special resolution regime’ provides a range of tools to resolve a failing bank in an orderly manner, including an accelerated method to transfer its business to a healthy bank;
    Germany - approved a bill that establishes a mechanism for governments to nationalize systemically important banks that are in serious difficulties. Government ownership would be temporary and for the purpose of restructuring the institution concerned.
    Why oh why must each EU country design its own package?
    Please, please. Please send your best financial minds to an EU financial conference, take advantage of the renowned financial capability of the EU and get uniform. Uniformity in finance is great!

  • Comment number 88.

    # 69
    In answer to your latter points maybe a short term contribution to healthcare by those who can afford it, e.g those on a given income pay a tiered & capped amount to any visit to the Dr or hospital for say a year or two, those below still get the NHS, non doms pay full, those on private insurance use their private insurance as first point of call. That means I'd probably pay for my 6 month check ups, any drugs or elective surgery, my folks and sister wouldn't. I'd have to budget a little better as would colleagues in other professions (even surgeons & GPs strangely), NQTs, nurses, part timers, unemployed and retail would still get it free. Obviously needs ironing out but would help reduce some of the debt. Once we're on an even keel go back to the NHS (minus some of the red tape).

  • Comment number 89.

    #1 expresses the answer to this post rather well. Since October 2008 the UK has become RBS (and others) PLC. UK governments for the forseeable future have no option but to stump-up any amount of cash required by RBS/UK PLC. In effect these huge banks and the UK government are now ONE AND THE SAME INSTITUTION. UK taxpayers are now on-the-hook and standing as security for about one-quarter of global debt provision.

    The recent ramping of asset prices was intended from the first to revive the securitization market. This has clearly failed and can only provide a fraction of required lending. The full implications of the 'bail-outs' of 2008/9 have yet to be appreciated by most commentators, who still see institutional difference between 'The Government' and 'The Banks'. There is now no such distinction.

  • Comment number 90.

    Come my love, with your desire.
    Out of the blue and into the fire

  • Comment number 91.

    Kevinb wrote:

    If Darling had allowed Lloyds TSB to buy Northern Rock, who know what would could have happened

    Wasn't it Virgin who wanted Northern Rock and not Lloyds? Just as well he didn't because only LTSB looked capable of taking on the burden of HBOS at the time. Integrating HBOS is a diffiult enough job to convince people inside and outside the office walls but if we had Northern Rock on top, we would be still working on it in 10 years time.

  • Comment number 92.

    and the theft just goes on and on. . .

  • Comment number 93.

    As usual, there is a lot of misunderstanding here as well as the normal hate rantings.
    The funding that is due to mature soon will need refinancing. Wha does that mean? Imagine I have £100 available to lend. I want to lend for only 5 years and yet you want to borrow for 25 years. Clearly I will not lend it. However, I will lend it to the bank who will then decide whether they will take the risk of lending it over a longer period to you. After 5 years, I want my money back. When the bank pays it back to me, they have nothing left that to lend to anyone else. So they borrow £100 of another investor and the bank is now able to lend out another £100 to another individual/business.
    Savers/investors are not willing to tie up their money for 25 years so banks look at shorter term funding of say 5, 7 or 10 years - those higher rate saving accounts are usually bonds of this type.
    So if the banks do not refinance, they do not necessarily go bankrupt, but they would certainly find it impossible to lend any more than they already have. Meanwhile, if those that have already borrowed do not repay, it will be the bank that suffers.
    I admit this is a simplified version of how it works, but that is the general outline.
    As for the hate rantings, well it is pointless to try and address those ;)

  • Comment number 94.

    With all this banking stuff - we forget the biggest laugh of the day.

    I saw Alistair Darling on the TV this morning promoting a new service provided by the Government on 'managing finances and debt' for all us plebians.

    I nearly burst my bladder - sorry Darling, I only owe a few thousand, you will owe 1.1 TRILLION by 2011 - just in time for a lavish big party you're throwing in 2012!

    I think the lunatics are proving they are in charge of the asylum. I felt a bit sorry for the man, he's a trier, but he can't win this game no matter how hard he tries.

  • Comment number 95.

    76. writingsonthewall:

    "Money will be no good once hyperinflation takes off and the Dollar falls - then it really will be 'survival of the fittest'.

    You can trust me that bankers are not the fittest."

    Point one - yes, money will devalue very rapidly indeed. Point two, yes, some bankers are feeble, but others are pretty fit, since getting to the top, where the really big money is, is a competitive, cut-throat, survival-of-the-fittest business.

  • Comment number 96.

    77. At 2:01pm on 11 Mar 2010, stevewo

    Have faith - one thing the general public do know is right from wrong.

    They are just a bit confused as to why their leaders are so fallable. It's a bit like a mechanic breaking the news to a new car owner that they have 'bought a lemon' or to the new house owner - 'you've bought a money pit' takes a while to sink in...but when it does - we get uncontrollable explosions of anger.

    Greece is further down the road than us - and I think they're on their 3rd General strike in a month!

  • Comment number 97.


    RP when refering to the UK, it may be useful to actually compare to the position the rest of the world are in.

    Accepting that UK banks have £440bn of debt to refinance by 2012, the banks in the rest of the world have around £4,400bn to refinance. the rest of the worlds banks have a total of £6,333bn to refinance by 2015.

    It may also be relevent to mention some of the "good" news. UK's gov't bond redemptions average 14 years as compared to 5 to 9 for europe and less than 5 years in the USA.

    still frighting stuff, but the implication that this is a UK and not worldwide problem is extremely myopic vision IMO

  • Comment number 98.

    WOTW "Yes you're right, why do we bother valuing things by what they are worth - why not simply value things to the value we want them to be?"

    Value is determined by what a buyer is willing to pay for what is being offered by the seller. Both will want the best price - the seller the more the better, the buyer the less the better.
    It is like the shortage of affordable homes in the countryside caused, allegedly by townies paying over the odds. But surely it is caused just as much by the original country dweller selling for as much as possible.....

  • Comment number 99.

    My folks made me aware of this one:

    when I studied there Loughborough has ladybird books, Herbert Cranes, the Brush, Hawker Siddley Switch gear and plenty of others. Most have gone. The Uni has continued to do well with some very good spin offs in Sports Equipment, Hydrogen Fuel Cells, Egonomics and the like but these tend to be much smaller, specialised employers. This is just one market town in the UK that cannot continue as it is without rebalancing the private & public sectors (that said I believe the Uni is very successful in attracting Asian Engineering and Science students).

  • Comment number 100.

    It seems that as soon as a bank customer / credit card holder encounters any kind of problem the immediate response is to up the interest rate to that customer.

    Clearly banks know what they are doing as they are such efficient to me the answer is simple. just keep progressively upping the interest rates on the loans they owe the taxpayers once they become overdue.

    If as a result any bank stops lending...up the repayment costs even other words, exactly mirror what the banks do to their customers.


Page 1 of 2

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.