Who gained from the crisis?
Posted by Christie Malry on March 31, 2010 at 9:28 am
It's become commonplace, almost sloppily so, to claim that the banking crisis has privatised profits but socialised losses. Ritchie is one of those trundling out that point of view today.
The peoiple of Ireland are discovering, as have the people of Iceland before them, the reality of limited liability. The upside belongs to shareholders. The down side is public.
The upside belongs to shareholders? I suspect former shareholders of Northern Rock might want to challenge that. They saw the bank completely nationalised - they lost everything. The upside on Northern Rock, if any, now belongs to the public.
Shareholders in Lloyds Banking Group who bought in at 800p a share in 2002 probably don't feel that they benefited from the upside, even with dividends taken into account. Similarly with RBS. In both cases, their interests have been diluted by rights issues and, worse, the government is threatening to force them to make bad loans.
The upside in this sorry tale has been borne by those who overextended themselves and have not been forced to pay it back. Traditionally, they would have been forced to face the music. Now they've been bailed out and, with the currency devalued, have seen their debts reduced too.
With politicians' rhetoric about banks having to pay back every last penny of stimulus, it's unclear that the public will lose out either.
The biggest winners from the crisis are left-wing nutjobs who have seen their half-baked proposals for a new economy given an audience they simply don't deserve. Given that the root of the problem was bad asset allocation, how on earth can a Green New Deal, which will shovel taxpayers' money by the bucketload into ill-conceived, unprofitable ventures, possibly be the answer? We will all be the poorer for it.
[...] This post was mentioned on Twitter by Christie Malry. Christie Malry said: New blog post: Who gained from the crisis? http://bit.ly/cvMB6f [...]
[...] on from this morning's post, here's something from Accountancy Age on shareholders getting all the downside and none of the [...]
There is something a bit ironic about Tax Research LLP complaining about limited liability.
Does Ritchie understand what the first 2 letters in LLP stand for? Is there any reason he and his partners can't just act like a normal partnership with unlimited, joint and several liability?