Practical to let bank fail then buy it for taxpayer?

I understand that to let a bank fail is to be avoided as it loses the savings and pensions of many people. Would it have been practical for the government - rather than propping up a bank with taxpayer money - to let it effectively become bankrupt then nationalise it at rock bottom price?

The people who would lose out would be the shareholders and, possibly, the board. While I'm not saying to target shareholders per se it seems more appropriate for them to lose out (they invested in a business which failed) rather than the taxpayer.

The idea would be to re-privatise the bank (possibly merged with other banks which suffered the same fate) once it could be made a going concern again, making significant money for the treasury (and hence the taxpayer).

Or would failure and nationalisation of the bank wound it too deeply in some way for it to then compete in the market?

I freely admit I don't understand the economics. Hence this post. Maybe someone here will know.

James

Reply to
James Harris
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Isn't that what's happened?

Reply to
Tiddy Ogg

We're currently letting them spend our money how they like...

Reply to
mogga

Not necessarily. There's a government (taxpayer) guarantee up to 50,000 (90% of and it was 32,000). If they'd lett Northern Rock fail on day zero (something that would have concentrated minds at other banks) then there'd have been enough from the sale of assets to pay all depositors. Keeping it going has actually lost more money as asset values (mortgage-backs) have become more impaired and fallen in value.

Yes, probably.

Exactly.

Or just skip the nationalisation part and let folks like Soros and Buffet start new solid banks by buying the useful assets, and poaching the useful staff, or the defunct banks.

It's gonna happen eventually anyway because damn near all of the banks were already insolvent. All we're doing in the meantime is extending the depression and throwing good money after bad that will take generations to pay back.

FoFP

Reply to
M Holmes

I would say not. The government have lent billions of pounds to the banks in exchange for possibly overvalued "assets" that I certainly would not invest in.

If the govt let the bank go bust it could potentionally nationalise it at no cost to the taxpayer.

Reply to
Mark

But then all the people who's savings were above the 100% guarantee amount, and at that time it was only £2000 would lose faith in banks in general, and pull all the money out and put it under the mattress.

That would mean a lot of other banks going under, some of which may not have had any problems at all otherwise, and would end up costing the government a lot more.

Reply to
Jonathan Bryce

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