With one bank totally nationalised and others due to get recapitalised any day now it is time to ask ‘Who is paying, or going to pay for all of this?’. And the answer is in short – the tax payer, it’s just a matter of when and how.
One interesting conversation I had today was with a banking colleague (and I don’t have many friends in the bank system!) who asked me this ‘How can some banks offer deposit rates that are so far above the money market?!’. I told him that this offer existed because of the margins being charged on their lending.
His belief was that they are effectively selling government bonds via their deposit function, the state can either capitalise them -and doing so goes on the official record- or they can be propped up with deposits paid in by the public for high returns, however those returns may eventually have to be paid for by the state and thus, ultimately, by the taxpayer.
