Bank Bailout

[drplokta]

The joke about the UK bank bailout is that the taxpayer is going to lend money to the banks so that they can lend it back at a higher interest rate and make a profit on the difference. But it seems more likely to me that the taxpayer is going to lend the banks money so that they can lend it back at a lower interest rate, and make a loss on the difference. Warren Buffett's similar (if private sector) bailout of Goldman Sachs pays him 10% interest, well above the rate of most bank loans and mortgages. And the banks don't need extra profitability at this time, they need extra liquidity, and if it makes them a loss that's a small price to pay for being able to keep going until they can rebuild their balance sheets and pay back the government loans.

Comments

[alexmc.livejournal.com]

Totally agree.