economonkey

Bank of England once again bails out failing financial institutions

March 18th, 2008

With all the fuss about the McCartneys’ divorce settlement, a lot of people might not have noticed that yesterday the Bank of England pumped another £5 billion of emergency loans into the British banking system, to bale out high street banks suffering from short term cash flow difficulties. Problem is, it wasn’t anywhere near enough - according to the Times, the banks asked for a total of £23 billion in loans.

If you were in any doubt after the Bear-Stearns collapse, this should give you a clear idea of just how much of a mess the banking system is currently in. In short, we are all screwed. Our government simply will not allow a major financial institution to fail, so when things get rocky the Bank of England will always step in to save the day with tax-payer’s money - and this Get Out of Jail Free card does nothing to encourage the bankers to take a more responsible attitude towards risk. They’re essentially free to make insanely high-stakes gambles which put the stability of the entire economy in danger, secure in the knowledge that when things go tits-up, the tax-payer will cover their losses.

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