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 | # ]
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