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y66, on 2012-May-14, 07:37, said:
Really true and really relevant. Socialized losses refers to banks making risky bets with government insured deposits. If non banks want to make risky bets with their own money, that's fine. That's called capitalism.
I am honestly struggling to think of any time the government has ever paid out under FDIC. I can think of banks that went bankrupt and wiped out their equity. Even some cases where they went bankrupt enough to wipe out their bond holders, but never so bankrupt that they could not pay out to their clients upon liquidation.
If you mean the costs of part nationalization at a number of banks, eg, Northern Rock, or RBS, then its very unclear whether the UK government will actually lose any money. So far all the government loans have been repaid, and following the sale of the banking part of it to vigin media, the tay payer is a few hundred million out of pocket, but expects to recoup some of that (maybe even make a profit) from the asset company holding most of the mortgage books.
RBS and Northerrock have both paid back the loads the treasure gave them on schedule, and by far the biggest factor in determining whether they were overall a loss is what price they get from RBS equity when they sell it. If they hold on to it for long enough they look sure to profit from it.
Do you have an actual example of a socialised loss? Also, you do realise that the FDIC is funded by premiums paid by the banks themselves, it is not tax payer funded as such. I mean we have just seen the worst financial crisis for a century at least, and the FDIC had enough assets stored up from its premiums to cover the costs of receivership (i.e. paying off the bank's clients) of nearly 100 banks, at zero cost to the taxpayer.
