News Tristan on 05 Jan 2009 04:00 pm
Credit Crunch News: Banks Set To Shaft Darling Again?
I read with interest in The Times over the weekend that the Chancellor is considering another bailout package for Britains Banks. When will the government learn, the banks in this country are taking their money and running with it!
The evidence is clear in the amount of lending being done during the last quarter of 2008 that despite the governments best efforts to get credit flowing freely again, the banks are simply not playing ball. I wonder why this is though?
Is this simply a case of banks trying to take the government for a ride? One minute saying
“yes, we’ll start lending money willy nilly as long as you (the govt) bail us out”
And then as soon as the deal is done, deciding to renege on their promises to the government, and simply stashing the money away and building up their capital reserves, at the expense of Jonny Taxpayer and a naive government no less.
Or is it simply that as a nation, there is now not enough “good credit risk” customers out there, only swathes of “poor credit risk” customers, whom the banks no longer wish to lend to anymore? I suspect it’s a bit of both, banks probably do want to stash money away, build up their reserves, and lend at higher margins than previously, whilst the government would like the banks to start lending freely (as this would potentially boost spending in the wider economy), the banks can’t comply if in doing so, they end up repeating the same mistakes which caused the credit crunch in the first place.
There has been talk of the government starting a new, nationalised bank, that would buy up all the other banks’ bad debt, thus cleansing the financial system of all the toxic debt that has been causing so many problems for the past eighteen months or so. Even this may not help the situation, if the real problem comes down to there being a lack of credit worthy individuals or businesses to lend to.
So perhaps the reality of 2009 is that we will all have to improve our credit ratings, which will allow the banks to lend to us again, thus resolving the current financial crisis. Doesn’t bode well for the government - who seem to think that bankrupting the country, by borrowing heavily to fund spending on public works and job creation schemes is the way to stave off a serious recession - if the banks will only lend to those with excellent credit records (who generally don’t need to borrow money).
