Is the Bradford & Bingley "takeover" clever?

[Darat]

Been reading up on the Bardford & Bingley takeover and it seems that for about 4 billion up-front cash the government has prevented a run on the bank and the (always predicted) knock-on effects.

To me this particular takeover/bailout/propping up the fat cats (delete as the mood takes you) seems rather a clever one with up to 15 billion of any potential shortfall in the mortgages being paid for by the banks. Am I missing something?

I did think that it may have been the banks being absolutely stupid? I.e. they could have co-operated with one another and effectively directly bought the B&B out for less than 15 billion. I presume they've calculated that they will never be called on for the full 15 billion?

So has the UK government and financial bods actually been sensible or even clever?


(Note this is based on the news reports I've been hearing all day - not had time to research the matter in any detail so if I've got the wrong end of the stick about what has happened this is a parody thread and I'm being really, really clever and not at all stupid.)

[andyandy]

The deal seems pretty good for the Treasury. The £15 billion is even being priced as a loan with interest that the collective banks have to cover. So as long as we still have some banks left in a few years time, I don't think that the taxpayer will lose out.

Of course, loading the liabilities onto the UK banking sector is hardly going to improve their business outlook, their shares plummeted today partly as a result of the announcement. It may also make it more difficult for the sector to raise new capital, because the investors might fear more of the same to follow.

It is interesting that they have chosen a very different funding method to that of Northern Rock, for which the liabilities are firmly with the taxpayers.

In the long-running I would imagine that the end of Bradford & Bingley's is pretty bad news for the buy to let spectators who entered the market in the last couple of years, as mortgage deals may be in rather short supply. Oh well, I don't have much sympathy for property speculators.....