Do you mean let the banks default on their liabilities and then buy them up with their assets? That's not the way our legal system works, thankfully. If you "pick up" the banks you pick up their liabilities. The only "letting them fail" option is to start a completely fresh bank from scratch. I guess that ain't so easy, never mind the chaos between the time the banks failed and the very long time to build up a viable replacement.I am curious as to why the banks were not allowed to fail and then the government pick them up for less than the cost of recapitalization. issue so why?
Do you mean let the banks default on their liabilities and then buy them up with their assets? That's not the way our legal system works, thankfully. If you "pick up" the banks you pick up their liabilities. The only "letting them fail" option is to start a completely fresh bank from scratch. I guess that ain't so easy, never mind the chaos between the time the banks failed and the very long time to build up a viable replacement.
But our banks have failed through their own fault. Why should we pick up the tab for that?
Because if the banks go to the wall then we re all in trouble. The banks form the centre point of an economy! The consequences of letting the banks fail are dire.
Yes, if the banks go to the wall we will receive a severe sharp shock but that is better than what the government is doing now. Proping up these zombies banks and dragging the whole crisis out over a longer period of time.
Banks have failed in the past before and will continue to do so in the future.
No economy has ever successfully let their biggest banks fail. AIB and BOI cannot under any circumstances be allowed to fail. The rest you can argue about.
When Japan proped up its failed banks in the 1990s they suffered from stagnation. They still haven't fully recovered from that.
Why can't we allow AIB and BOI fail, they already had and wil ultimately fail as the recapitalisation won;t work. What a waste of €7 billion euros.
The reason Japan lost a decade was they took way too long to even begin to recognise the problem. They continued to allow the banks make reckless loans and they were slow in using monetary policy to help. It wasn't till the late 90's that they actually started facing up to the problems and made the banks who were reluctant to do so because of the stigma attached make write downs. The Japanese model didn't fail because it propped up the banks, it failed because it wasn't decisive enough in cleaning up the balance sheets.
Anyone who thinks the Irish economy could survive its two main banks going under is deluding himself. There is no doubt that if this happened, we would be looking at soverign default.
The Japanese banks were Bailed out by the government in the 1990s. That's what happened. Incidentally, it was either Greenspan or Bernanke that paid a visit to Japan at this time and warned the Japanese not to bail out their banks.
If those banks are allowed to go to the wall we will have entrepreneurs coming along to set up new ones.
I think people keep forgetting that there's a lot of ordinary people with their life's savings on deposit in banks. These would be the people to lose most if the government let the banks fail.I am curious as to why the banks were not allowed to fail
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