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No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

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Don't come to us | 200 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Don't come to us
Authored by: jeremyg on Wednesday, May 30 2012 @ 05:55 AM EDT
I think the UK Government should have let the banks fail

That would have been hugely risky.

Take Northern Rock (the first UK bank to get into trouble), it's assets included 55 billion of mortgages. If it was allowed to fail the liquidators would have either had to sell those mortgages to another bank or call them in. The problem is, all the banks were busy trying to boost their cash reserves just in case their depositors decided to withdraw savings due to the crisis so they wouldn't be likely to want to use up their cash buying the Northern Rock mortgages.

Now think of the chaos if 55 billion of mortgages were called in when the other banks were not in a position to grant new mortgages to replace them. Several hundred thousand families getting letters through the door saying "Pay us the tens of thousands of pounds you owe us" with no way to raise the money but put their home up for sale.

Not a nice scenario

Cheers,

Jeremy

[ Reply to This | Parent | # ]

Don't come to us
Authored by: Wol on Wednesday, May 30 2012 @ 05:58 AM EDT
The problem with THAT (letting the banks go bust) is that it would have been
catastrophic. I had first-hand experience of exactly that ...

When Singer & Friedlander went under (they were dragged down by the
Icelandic crisis) the company I worked for lost access to ALL its working
capital, near enough. Fortunately, they had accounts elsewhere, and sufficient
cashflow to keep their head above water.

I don't know how many companies were dragged under with the bank, but if RBS or
BoS had been allowed to go under they would have taken half the economy with
them!

Cheers,
Wol

[ Reply to This | Parent | # ]

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