"Labour bailed out the banks without insisting on a guarantee of continued lending to businesses and homeowners."

Labour bailed out people dependant on the banks to receive their pensions, get their wages, pay their rent/mortgage repayments, pay their direct debits and standing orders.

It is all very individuals being within their overdraft limits, but also the banks need the liquidity to cover day-to-day transactions.

We saw what happened with Northern Rock - they didn't have the cash reserves to cover the consolidated outgoing - or to be more precise the customers didn't have the confidence in the bank - result - a run, therefore cash reserves go down further, the current liabilities can no longer be met by inter-bank borrowing, therefore account frozen.

Also a knock on effect - other banks lose day-to-day inward cashflow from Northern Rock.

Then the same is about to happen to the bigger banks - HBOS, RSB, Lloydstsb. - Now we are talking about massive number of account holders. The banks are approaching the limit of reserves and inter-bank trading. If nothing is done, then millions of bank accounts would get frozen. - i.e. miilions of people/businesses do not have access to their accounts.

Then comes the domino effect as the banking industry is inter-dependant, so one big bank brings down the next, etc.

Result - the only cash availble is the money in peoples pockets.

So - was the government right to take decisive action to prevent this happening, or should it has sorted out the terms and conditons first and hope that in the meantime the eocnomy doesn't go into total meltdown?


Now take the bigger banks -