Bailing out the financial Institutions

[rov1200]

Gordon Brown has urged the American politicians to accept the $700 billion rescue plan.

President Sarcozy suggested a similar plan for the EU including Britain with approx half that figure. It was immediately castigated by Brown as unworkable.

What is the difference between these 2 plans and the one eventually adopted by Britain?

[Panic Button]

No doubt the French were planning that the Brits would pay more thajn their fair share as usual.

[Gromit]

The two approaches to the crisis reflect the different objectives.

The UK policy of the Government buying whole banks was to protect the banks customers (savers and mortgage holders). The plan is that when the storm has passed, the banks can be de-nationalised and sold back to the private sector (possibly even making a profit),

The US is primarily interested in getting the system running again. It has broke down because everyone is scared to trade with everyone else because they do not know how much bad debt is on each others books.

The US plan is to buy these bad debts so everyone can have confidence in each other again and begin to trade again. The US Government will eventually have to try and sell the 'troublesome assets' at a later date. Their concern is save the Corporations rather than protect the man on the street.

The UK Government initially handled the Northern Rock problem very poorly and its solution of nationalising it was one of last resort. Governments should not be running commercial banks, and the sooner they can sell it back the better. However, the result of the the Government buying it, is that the people responsible for its problems were removed and it is now being run by different people.

In the US, the people running the Corporations that made all the mistakes and caused the crisis, are still in their jobs and still running thing, with the US taxpayer picking up the bill.

[brionon]

Panic Button
Well It's all the fault of Europe innit ?

[rov1200]

Its seems difficult to me who should take the blame for this lack of confidence. The banks seem to be getting all the stick. But wasn't it the speculators who drove the share price to such low levels making the banks worthless, on paper anyhow?

I see Gordon is now going to the EU to get a European solution to small businesses to enable them to borrow so will the taxpayer having to bail out these as well as the banks especially if the banks refuse to lend to them?

[chelle7272]

Great answer Gromit :-)

one question though:

from the point of your average layman knowing nothing about finance -hasn't everyone on ,ow income over the last few years of Labour Govt been encouraged (made) to have a bank account otherwise you can't receive wages/benefits?
At first it seemed a good thing that even with bad credit, a person could obtain an account and so be able to move on in life. NOW, having a bank account makes your average person afraid that they will lose everything, because they HAD to open an account. Poor being robbed again? Whilst it seeems the ridh (i.e. �30,000 + in savings) are being given advice on how to avoid it?