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Should Banks Be Allowed To Fail?


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#1 ferrettbadger

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Posted 07 October 2011 - 09:44 PM

Seems the big question of our time.

I guess the ultimate free market position is that banks, like any other company should be allowed to go south. But are they such important institutions that the cost to us all of lettering this happen is so great that we have to intervene.

What do we think?

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#2 Rev Jackruss

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Posted 07 October 2011 - 09:44 PM

yes! I think

#3 Haragai - U14769281

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Posted 07 October 2011 - 10:47 PM

Yes, banks can go belly-up, like IceSave. The principal country has (most of the time) a guarantee fund in place to compensate the people that have an account with said bank. There is a limit to the guarantee, usually around 100.000,00 Euro.

More interestingly: Can a country go bankrupt ? F.i. Greece, what would they do? Sell off some islands. I expect they can have a good price for Krete or Gersonisos or Lesbos. :D15:
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#4 Rev Jackruss

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Posted 07 October 2011 - 11:06 PM

I'ed like to buy a small greek island

#5 Lea2975

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Posted 07 October 2011 - 11:41 PM

I think the banks should be left to go bang! Might teach them to be more careful with money

Countries can go bankrupt as far as I know and we're teetering on the edge of bankruptcy as a country (in the UK)

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#6 swl

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Posted 08 October 2011 - 10:06 AM

This is probably a good one for RF.

My feelings are there are banks and there are banks. Some are quite small scale so if they folded, the damage would be limited. But what if a big bank went, my bank for instance?

Assuming another bank couldn't step in, how would no bank affect me? In fact, imagine no banks.

1) No bank, no overdraft, no credit card. If the bank goes, so does my debt. Win for me ;)
2) How does my employer pay me? Cash? Do I have to travel 300 miles to collect it?
3) How do I pay my bills? The cable company and phone company have no offices. My electric/gas is supplied by a French company and I've never seen an office.
4) How do I manage online transactions. Would something like Paypal step into the gap left by banks?

#7 Edward the Bonobo

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Posted 10 October 2011 - 09:21 AM

It's even more complicated that that, of course.

Banks don't only have relationships with their customers. They spread their risk around so have various investment relationships with all sorts of other entities. Thus the failure even a relatively small bank can have severe knock on implications.

The 'Too Big To Fail' phenomenon whereby banks can potentially take down the whole of Capitalism isn't particularly new, either. Some argue that the solution is smaller, localised banks, along the US Savings and Loans model. Even here, though, history tells us that the collapse of even a small bank can have huge implications.

A noteworthy example was when a small Savings and Loans bank in New England went bust, taking others with it, causing bankruptcies and foreclosures, a mass migration west and The War of the Black hills which, a.though nominally won by the Lakota Sioux, would eventually lead to their extermination.

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#8 swl

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Posted 10 October 2011 - 02:40 PM

Well yeah, I was simplifying for my own benefit - what would be the direct consequence to me.

It seems to me that banks are an example of a business model that has grown away from the consumer. The customer has very little say in a bank's business because unlike utilities or supermarkets, there is very little choice. It is incredibly difficult to switch banks in a process that involves multiple id checks, proofs of address, proofs of employment, sperm samples and signing away the first-born. Every development seems to be about maximising profit rather than improving service. ATMs are provided at the expense of bank clerks, internet banking and card services at the expense of employees and branches.

I'd be happy to see the banks broken up into smaller operations and for real competition to be introduced. The small bank model still holds good http://news.stv.tv/s...falkirk-branch/

To my mind, banks are a utility just like gas, electric and water. We should be able to switch supplier just as easily and if one went bust there would be no shortage of replacement suppliers.

#9 swl

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Posted 10 October 2011 - 02:42 PM

Oh and Ed - from banks to capitalism to genocide in one post. Well done :G9:

#10 Edward the Bonobo

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Posted 10 October 2011 - 03:45 PM

They're inseparable. ;-)

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#11 Edward the Bonobo

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Posted 10 October 2011 - 03:51 PM

...

It seems to me that banks are an example of a business model that has grown away from the consumer. The customer has very little say in a bank's business ...

...


And which part of the phrase 'the Alienation of Value from its origins in Labour' did we not understand? ;-)



...
ATMs are provided at the expense of bank clerks, internet banking and card services at the expense of employees and branches...


Now you're scaring me with your Marxism.

Edited by Edward the Bonobo, 10 October 2011 - 03:53 PM.

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#12 swl

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Posted 10 October 2011 - 04:01 PM




Now you're scaring me with your Marxism.


Meh. Even a scratched cd hits the right note twice a day.

#13 hated female

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Posted 11 October 2011 - 12:59 PM

wot i think is unfair is people who have took out bank loans and havent relized they have had a ppi atttached to ther loan with out them even knowing this ppi stands for payment protection insurance now some banks have not told ther customers that they have this on top ther bank loans ther are millions ofpeople who doesnt no this barclays bank have set aside 7 billion for all ther customners who wish to make any claime against them my poor grandmother who is 92 have had banks loans for over 20 years and at the moment ther is a company whos fighting her claim n witch to see id this bank slapped ppi on her loasn with out her knwoing and if it is proved they have and many other customers like my grandmother she is going to be getting a good amoutn back altho thecomapny thats fighting this claim take 39per cent for them selfs so i think banks shud not be trusted and wot i dont get is this altho they no they have done this to ther customers they dont comeforward n say oh yes we did put ppi on yerloan and never told u and oh yes u are intitled to money bacl they dont they live n hope no one make s any claim to them altho they have set 7 billion aside for people who have been told of this my elderly grandmother had a phone call to tell her all this info so at th moment id its proved they did put ppi on her loans over the last 20 years without her knowing shes going to be intiltied to alot of money back cudbeany thing up to 15 thoussand pound SO FOR THAT I DO NOT TRUST ANY BANK
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#14 Vip

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Posted 11 October 2011 - 06:44 PM

I have always found switching banks pretty easy myself - I've been through Nationwide, HSBC, Nationwide (again), Yorkshire Bank, smile, and now, First Direct. There have been minor hiccups but in the main it has been pretty hassle free (owning a passport and driving license makes this process easier, I admit).

I'd say the main thing is that there isn't a lot to choose between them. So I could pay-in via a cashpoint at Nationwide, or go almost completely online with smile. Aside from that they're all pretty much the same (and smile has lost its edge now the other banks have caught up with internet banking). I only change to get a better deal on certain products. If I used a different selection of products no doubt they'd be marginally cheaper at a different bank. There's no real competition, because the services are so similar.

But then it's the same with utilities - what real difference is there between Scottish Power and British Gas to the average consumer?
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#15 Edward the Bonobo

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Posted 12 October 2011 - 04:20 PM

With Utilities there is a de facto cartel - if not a cartel in the legal sense - because the same companies are responsible for both the wholesale energy market and the energy retail markets. They can set the retail price according to what they think they should pay themselves for retail energy. Competition between them thus works in the companies' favour rather than the consumers' because their prices even not on what consumers are prepared to pay (cf Supply and Demand) but on looking around at what their competitors think they can get away with charging.

'Competition' is a nice theory. In a perfectly efficient economic world, all would be solved by the magic of the markets. But worlds with magic in them are mythical. In reality, one of the effects of market economies is that they often work to establish conditions which favour some parties more than others.

One view of this is that everything would be OK if only we had a proper Free Market. This is a bit like saying it would be nice to have a puppy if only they didn't crap on the carpet. Puppies are cute and all, but the crap is an inescapable characteristic. Similarly - Free Markets simply tend towards non-free structures.

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#16 Ancient Brit

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Posted 16 October 2011 - 08:56 AM

Is it right to say that "surely there is a conundrum here" - :D12:

#17 Willem

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Posted 16 October 2011 - 12:26 PM

I do think there's a conundrum here. I don't know much about economic theory so anyone who does, please correct me. But it seems to me the nature of the beast called 'competition' ... in human economy ... that it would be very hard to keep a large number of small banks that can compete with each other that way for a long time. The weaker ones would die and the stronger ones would in practice 'eat them' and get bigger and stronger. That's a difference between nature and economy. In nature, say, in a pride of baboons ... the little and weak males may die in a fight with the big and strong males, but the big males can only get bigger up to a point set by their genetic limits. You'll never get a baboon that's almost as big as the planet and able to dominate not just other baboons, but all other species in the world.

Not so with banks and many of the other institutions we make. There seems to be no natural limit to their size. So, the big and strong banks will get bigger and stronger as their littler and weaker competitors die ... WITH NO LIMIT. Inevitably you will end with something monstrous and almost impossible to control.

#18 pal

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Posted 16 October 2011 - 12:40 PM

Yes, banks can go belly-up, like IceSave. The principal country has (most of the time) a guarantee fund in place to compensate the people that have an account with said bank. There is a limit to the guarantee, usually around 100.000,00 Euro.

More interestingly: Can a country go bankrupt ? F.i. Greece, what would they do? Sell off some islands. I expect they can have a good price for Krete or Gersonisos or Lesbos. :D15:

Can't sell it cos nobody owns it. Goldman Sachs might like to plunder it. :)

#19 pal

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Posted 16 October 2011 - 01:01 PM

I do think there's a conundrum here. I don't know much about economic theory so anyone who does, please correct me. But it seems to me the nature of the beast called 'competition' ... in human economy ... that it would be very hard to keep a large number of small banks that can compete with each other that way for a long time. The weaker ones would die and the stronger ones would in practise 'eat them' and get bigger and stronger. That's a difference between nature and economy. In nature, say, in a pride of baboons ... the little and weak males may die in a fight with the big and strong males, but the big males can only get bigger up to a point set by their genetic limits. You'll never get a baboon that's almost as big as the planet and able to dominate not just other baboons, but all other species in the world.

Not so with banks and many of the other institutions we make. There seems to be no natural limit to their size. So, the big and strong banks will get bigger and stronger as their littler and weaker competitors die ... WITH NO LIMIT. Inevitably you will end with something monstrous and almost impossible to control.

It is in the banks interest to not lend to local manufacturing and the problem can be solved by setting up a national retail bank with the trillion dollars given to banks returned; just let them (the banksters) go away and do their own thing; except that most should be in prison.

No the problem is mainly just Fraud packaging stuff as top quality where it is in fact worthless, and greed where banksters couldn't find enough customers to fleece so sold to people who didn't have the means to pay, then sell as top rated asset (debt) to a mug or mugs.
Quantitative Easing is just a way to give banksters bonus and taking it from your savings, and pension funds are useful to banksters to plunder.

Don't need any knowledge of hedge funds, short selling or jargon because it is invented to cause confusion so the bankster can distract you from the theft being committed.

They have got all the money (our money) but we the people have, the guillotine. :S12: :G7:




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