Time to let the banks fail

| November 19, 2010
Time to let the banks fail

If there’s one thing the financial crisis has made crystal clear now, it’s that it’s time to let the banks fail.

There’s no longer any reason why the banking sector, which clearly dragged us into the biggest financial crisis for a century, should therefore be subsidised by the taxpayer in order to simply continue it’s high risk bonus leading culture.

Let’s echo the criticism from sour Americans when the first bail-out was announced: capitalism for the poor, socialism for the rich.

This is entirely what the whole economic mess has become, and it’s time to tell the banks that enough is enough: if you cannot manage your balance sheet, faced being nationalised.

Of course, the first concern is to guarantee, in full, all of the deposits held in any bank. It is far far cheaper to guarantee tax payer money held in trust in banks than to guarantee their debt.

The second is to get rid of the notion that any bank can be too big to fail – it isn’t. If any such failure has knock on effects within the banking system, it is because it is the banking system that is specifically at fault.

All that is happening at present is that the banks are fobbing their own crises onto tax payers, and it is neither fair, nor acceptable, that this should continue.

Market forces dictate that where a business fails, it should be allowed to die. The mistake our governments are making now is exactly the same as Japan made in the 1990′s.

Instead of letting failures be failures, by taking on a banking crisis as a sovereign debt crisis, all that happens is that the nation entire becomes trapped in economic stagnation, in order to keep zombie banks running.

Let’s be clear, the nationalisation of banks who cannot remain liquid does not mean the collapse of the banking sector. There will be and always shall be a banking sector.

The question is whether normal everyday people should have their pensions cut, benefits slashed, taxes increased, savings diminished, and general standard of living deteriorate – simply in order to have the debts of the rich foisted onto themselves.

Let’s be utterly brutal: neither HBOS nor RBS deserve to be operational. Both banks have failed due to poor business decision making at the top. By the men who are even now drawing on their golden goodbyes and additional pay offs.

So long as the government had stepped in to guarantee deposits and that the banks would remain operational as nationalised interests, we would be dealing with a far smaller crisis.

This is not a call for socialist or Trotsky-ist principles: I’m a business owner, and I demand to see market interests operate freely in the business world.

So far the government of Britain has pushed a huge amount of money into subsidising banks and even the motoring industry, and businesses like mine see nothing of it.

Instead, business like mine suffer because it is tied to consumer markets who are also suffering – not because of a lack of cash availability, but because every ordinary tax payer is now expected to contribute more and receive less – simply to benefit the banks.

At present, the government of Ireland is facing a bail out because they tried the same method as everybody else, or turning over a local banking crisis into a sovereign debt crisis.

It’s time for this to stop.

Simply put, if a business is going to fail, then let it, and worry first about protecting the interests of consumers, the taxpayers.

The time of giving everything to the banks because of their bad decision making has to stop.

It’s time for taxpayers to reclaim their money, and zombie banks allowed to die.


Comments (1)

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  1. Erik Savage says:

    “Let’s be utterly brutal: neither HBOS nor RBS deserve to be operational. Both banks have failed due to poor business decision making at the top. By the men who are even now drawing on their golden goodbyes and additional pay offs.”

    I actually used to agree with this line of thinking but now that it looks like the government (and by extension us taxpayers!) will make a profit on RBS by the time shares are disposed of I wonder if my indignation towards the failures at the top of the Banks went too far and I missed the obvious good investment opportunity that the Government spotted.