Reply to post: Re: Easy to understand

Cryptocurrencies to end in tears, says investor wizard Warren Buffett

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Re: Easy to understand

The banks weren't bankrupt. Well apart from a couple of small building societies and Northern Rock and the government made a profit on selling the assets of that after it was broken up, so it probably wasn't either.

The banks were illiquid. That is they had a bunch of assets that they couldn't sell (such as mortgages that were still being repaid) and a bunch of debts that they couldn't pay in the short term. Bonds and peoples' savings accounts.

So the government took custody of their long-term assets in return for huge loans of freshly printed money. the banks were then liquid and the panic subsided. Within two years all UK banks had paid those loans back, and the Bank of England returned their collaterol and "unprinted" the money. This is what Central Banks are supposed to do, and is the only way so far discovered to have a stable banking system - short of the government running it.

So shares went down, but didn't disappear. Obviously in the case of RBS the government also took a huge stake, so share value collapsed. But if you held on to them, the price started to slowly rise - and might continue to do so.

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