Privatising the profits, nationalising the losses

admin
5 August 2008
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It seems unthinkable but that is exactly what it happening at the moment. In recent times banks have made huge profits by lending irresponsibly to homeowners that had little chance of surviving an economic downturn.

Now that we stand on the verge of that economic downturn the banks are asking the government to guarantee the very loans they lent irresponsibly to make themselves billions of pounds in profits.

The banks argue that without the government using taxpayers money to guarantee these loans they wont be able to continue lending to those that have little or no deposit, and in turn this would mean house prices will fall further and the prospect of a long-term recession becomes more likely. Clearly this is not a welcome prospect for an unelected prime minister that used to be in control of the nations finances, so it seems likely that there will be intervention of some sort to prop up the housing market.

If as expected the government guarantees these loans it is effectively taking on all the losses, using our taxes to pay for others mistakes. Yet when times were good the banks kept the profits to themselves, with the bankers enjoying big bonuses for their work.  

A few months ago I lost quite a bit of money betting on the champions league final and I am sitting here wondering when the taxpayer will come to my rescue and compensate me for backing the wrong team. If anyone can explain the difference between my situation and the banks please let me know.

This post was originally published on my MillionaireAdventure blog which records my adventure as I relentlessly pursue my dream of becoming a millionaire. You can read the full blog at www.millionaireadventure.co.uk