You are right. The banks were never baled out in the way they have been this time. The main reason is because they didn't need to be. Basically the world economy is like the Fable of "The Emperor's new clothes". It worked as long as everybody kept lending to each other and everybody didn't ask for their money back immediately.This maintained the illusion of wealth and prosperity.
In the old days it was very difficult indeed to get a mortgage, because the building societies could only lend from the deposits they took in from savers, whilst holding back a sensible reserve. A few years ago some regulation changes happened and some flash Harry marketing types took over and became aggressive lenders. eg Northern Rock, used to be a regional building society until their new boss decided to go to America and sell their loan book in exchange for a massive input of cash. They would then add a small margin and aggressively sell mortgages to anybody who could vaguely show an ability to repay, using American cash. The income to loan multiples crept up as leneders battled with each other to gain the new business.NR's market share went ballistic.
If you are still awake, the whole thing stated to unravel when the bigger banks started to realise that a lot of these packaged loans were not all A+ clients, but in many cases distinctly dodgy ones with little ability to repay. Worse than that, they had no way of quantifying the problem. Good from toxic.So, the method by which the Northern Rocks (and others) were relying on to keep things afloat immediately dried up and they had to go to the Bank of England for a hand out because they ran out of ready cash. This wouldn't have been a problem if it had been kept quiet tbh.But a run on the bank ensued.
Things have happened so quickly because of the internet, and because the banks and institutions are so closely interlinked nowadays. This didn't used to be the case at all.
So banks started to call in loans and overdrafts, affecting nearly all companies, good bad or indifferent. This is turn has affected confidence all over the world, and as property prices have dropped and savings interest reduced, confidence gets worse and a death spiral takes hold. And, very few governments around the world have saved any money for this rainy day - ours especially so.
End of speech !
now im a bit too young to remember the last recession well(yes really!!)
however i dont remember companys/banks getting baled out in the way they are this time.
am i remembering right?
