Nationalisation Watch / Govt. rethinking 3.5 billion bailout for the banks?

ibis wrote:

Auditor #9 wrote:

The lack of control of interest rates is a red herring - stamp duty served a similar purpose and you really wouldn't have to stretch yourself to dream up other constraints that could have been applied to either spending or price spirals or both that would have cooled the ballooning, swelling market - getting developers to pay for water infrastructure in Dublin for instance. Listening to planners and professionals and acting on their advice would have been another route. Forcing the integration of public transport coincident with development, building sustainability of all sorts into plans, keeping a watch on spiralling prices and bank leverage... It's unknown what's out there in the banks now ..

Maybe other parties would have done the same as FF, I don't know. I've expressed my opinion and it's very harsh and maybe digoutday and Co. would blush at it because of the gravity of it - if a bank goes down then really and truly will it be grave for the Government. And I'm really uncertain as to the use of this support Bill because Irish debt is one of the riskiest in the world after Spain and ahead of the UK and US - there could still be big liquidity problems.

I don't know whether that's really the case. Most of the Irish mortgage market isn't 'sub-prime' (ie dodgy) at all. The dodgy ones are loans to people who really have little capacity to pay, little intent to pay, and frequently a history of credit defaults. None of that characterises the Irish market - we're a good bet because even if the prices we paid for houses were ridiculous, we'll scrimp and save to pay them. Plus, even where Irish banks repossess, the usual practice is to rent the property to the tenants, which means that the bank is simply accepting a slightly lower payment rate on an asset they continue to hold.

Auditor #9 wrote:

We got caught up in a lending and spending spree and we didn't have to. Sinn Fein were making the point that CEO's salaries should be frozen for the two years if not reduced; they shouldn't be allowed any bonuses etc. and there needs to be very strict provisions around this Deal that will see repossession-laws relaxed and people protected.

That's simply a case, in the first part, of hitting the usual suspects. The people who borrowed madly in the boom - and who therefore share the fault - weren't CEO's and the traditional middle classes, all of whom saw their relative wealth decline in the boom. It was taxi-drivers and plumbers who were leveraged to the hilt on property, and who were largely the drivers of the property boom - CEO's weren't driving the prices of two-beds in Sallins through the roof.

Have to agree with Ibis on this one - everybody in the country "bought" into the property boom - nobody put a gun to their heads to buy and leverage a second or third property - the banks were facilitators to this - FF were voted in again and again to facilitate this - it was the thing to do - and there is moral hazard at this level too -nobody wanted anybody to tell them that the party had gone on too long and maybe it was time to go home - maybe its just something we have to learn

I dont like what is being done - seeing as I stayed the feck out of all the property madness - but I'm holding my nose on this one - its the least worst option available - if credit is not made available to the rest of the economy - then we are in serious shite - no question about it - we need to facilitate the changeover from a property bust back to an export driven economy - one in which the main drivers are our own native industries and businesses - credit on good terms will be a prerequisite - you cant invest without it.

Like Ibis says - I've yet to hear of anybody sticking the keys in the bank letterbox and fecking off - undoubtedly there will be some - but overall I think the default level will be very low and people are preparing for the fact that they will have to take a hit and go into negative equity - but it could become far worse if the rest of economy is slowly strangled thru lack of credit - we're in for a few rough years regardless - but a recession I can live with - a total depression would be far far worse. The overleveraged property developers will get their comeuppance regardless - we had plenty of construction/development related bankruptcies in the 80's and we will have plenty more in this decade too - but the whole economy shouldn't have to collapse to facilitate this.

tonys wrote:

The risk is not unknown, the assets are not long term questionable

If that were the case there would be no shortage of investors. It surprises me that anyone would either consider this risk acceptable or its possible extent known. As for the assets not being 'long term questionable' all future anticipations are a matter of conjecture and are only as good as the assumptions on which they are based. Do any of us, for example, know where the slide in property values will stop or when?

tonys wrote:

I do know that if one of these banks “went down” we would have to pick up the tab anyway. This move gives us a real chance that we won’t have to do that at all.

Really?!? Yes if it works the major problems do not arise, but if for some reason confidence is not restored or some other event, that we do not expect, happens then we are in a very awkward position.

tonys wrote:

Like all decisions if it works it will be seen to have been the right one, if not, it won’t. The minister for Finance and the Government are doing what we pay them for, governing.

Yes we should pray that that circumstances do not turn in a manner that makes us regret this decision. And yes governments are paid to govern, but you do expect due care and prudence.

We will obviously never agree on this. I consider the proposal ill considered and reckless, you hold opposing views.

There's 110 billion of mortgage debt on their books Edo - would you say the default level might be 5%? If it is it's a 6 or 7 billion problem we have to manage - lots of plush social housing so ? Or will the defaulters be MABSED? (by some new agency - Fionula and Fiachra?)

EDO

The question is, is this the best way of achieving the stability that you desire. Should anything go wrong the risk in this proposal is potentially crippling.

Where do you think unemployment or interest rates will be say 18 months from now? That would have a very direct bearing on risks associated with this proposal.

Every bubble in history has the same hallmarks. (Been discussed elsewhere.) Yeah, individual buyers in bubbles bear some responsibility. But, are our memories so short these days that we can't remember the weekly RTE (Friday's ware particularly poignant) "news" programs insinuating we were a special breed of people who create wealth from nothing? These news programs broadcast the usual faces everyweek - bank economists, government ministers, senior civil servants and every tom, dick and harry in any way involved with real estate. The messages were always the same that real estate was a no lose proposition, and property values only go one way. Up! The implicit message was always the same: "get on the bankwagon while the going's good". Towards the end, the same faces changed the messages slightly to "get onto the bandwagon before it's too late", then "we'll have a soft landing", and finally "be patriotic and invest in Ireland so we can show the world we are confident people".

There's confidence, and then there's the confidence of lemmings.

There is one difference to the bubble this government is doing its damnest to re-inflate at the soonest possible moment. We are not speculating on tulips or even on dot.com company shares. We are speculating on one of the necessities of life - a roof over our heads. The eventual ramifications of this specualtion will come to fruition in time. This bubble, unlike previous bubbles, must be kept inflated. The tulip bubbles or dot.com bubbles didn't involve such a basic necessity - you can't eat, wear or live in tulips or dot.com shares. Even a partial deflation of the bubble has been too horrible to contemplate by our governors. Too many wealthy developers aren't able to pay off their speculation based loans. Too many wealthy individuals have taken de facto punts on a long term strategy that high priced property values will persist. Our own governors had taken the view that tax receipts would always be excessive due to unfettered property development. One year of non-speculation on property has brought the whole edifice crumbling down. The govt has a c. €7 billion deficit, the developers aren't paying their loans and investment money for new, expensive projects has dried up.

So, in the final shake up, our government has come up with the ultimate quick fix for the liquity junkies who are on the front line and the foundation for the entire system - the banks. An unqualified cost, if any is eventually applied, allied with unlimited risk potential all packaged in the form of tax payer gaurantees has been instituted to prop up the edifice. Drastic action taken without any debate or consultation. I suppose our govt doesn't feel the need to ask the people if they want to be exposed to potentially unlimited and unknown risks.

Previously, when we had our own currency, we probably could not have contemplated writing such an insurance policy. The world would have correctly seen that we are not that credit worthy a nation to back such a huge national liability. I have to believe that the ECB knew of this move. The move couldn't have been contemplated without the implicit strength of the monetary union behind us. This does not mean that Ireland's gamble can't fail. It can, but the monetary strength and implicit notion that the ECB might bail us out of a catasrophe has been invoked.

Get ready for Lisbon II. It's just around the corner. The message, even if the Cowen/Lenihan "put" doesn't re-ignite the property boom, will be that we had more options because of our position in the EU. Cowen is meeting with Sarkozy today or tomorrow to discuss Lisbon II. Lenihan has called for all of Europe to follow our lead on "put" insurance. (Btw, the fact that we have been able to use the implied strength of the monetary union without the Lisbon Treaty being in place will be glossed over. The message will be that even better quick fixes can be dreampt up and applied when the next crisis arises.)

And to end my waffle, this crisis has highlighted how various governments have dealt with the episode. The US seems to want to go down the unregulated path of pure capitalism on one extreme. Then we have totalitarian capitalism in China where the state decides on every aspect of economic activity on the other extreme. Europe has taken a hybrid approach. Ireland, god bless us, has taken a page out of the yankee and chinese books. Economic policy decided by a couple of govt ministers and a central banker and the implementation of a no-fault insurance policy to the wealthy liquidity junkies.

I hope the new lead and collar being manufactured by our governors is all shiny and glossy as lemmings are bedazzled by bright and shiny trinkets.

How the people is falling for this is beyond me. Here was I thinking they had some brains.

rockyracoon wrote:

There is one difference to the bubble this government is doing its damnest to re-inflate at the soonest possible moment. We are not speculating on tulips or even on dot.com company shares. We are speculating on one of the necessities of life - a roof over our heads.

Not really. We're speculating on one specific way of having a roof over our heads. It was, and is, perfectly possible to have a roof over your head without owning it.

ibis are you talking about renting or social housing? Left wing, right wing whatever wing, isn't it important that a society try to provide affordable, solid and sustainable housing for the people in the society? The market could have been guided on the way up ... But here it looks like Capitalism on the way up and Socialism for the rich on the way down - the nub of this whole bailout type effort.

It couldn't be put clearer than this :

CaveCanem wrote:

xman wrote:

Will they use the opportunity to start fixing the mind boggling private sector debt problem by enforcing prudent lending policies that will cause the property bubble to deflate, or will they try to stoke it up again?

Given that this shower wants to help FTBs bridge the gap between what banks would lend and the house price, what do you think?

The Property Pin - ISEQ Thread

McWilliams this morning - Im pretty busy this morning - Audi - I'll come back and address your posers later - but Mcwilliams encapsulates my thoughts on this far better than I ever could.

http://www.davidmcwilliams.ie/2008/10/01/lenihans-masterstroke-has-bought-us-time-to-sort-out-our-own-problems

Quote :

We are not out of the woods by any stretch of the imagination. Indeed, some Irish banks have been so recklessly managed they hardly deserve to be covered by the guarantee.

Finance Minister Brian Lenihan has made a wise choice. By coming up with a unique, Irish plan — guaranteeing all deposits — instead of importing a failed solution from abroad, he has instilled confidence in the Irish financial system.

Most importantly, Irish banks are now safe. This is the single most crucial upshot of yesterday’s move.

Political and financial reaction has been positive and, encouragingly for the challenges ahead, when everyone else around him was losing their heads the minister kept his.

The financial markets abroad have taken the news very positively. This is doubly impressive when you think of what is going on outside the country. Granted the markets will be jittery and unstable for some significant time to come.

However, by drawing a line in the sand and by indicating that the sovereign state will do its job and preserve the system, the minister has shown real leadership.

We now have an anchor and the stability banks needed to sort out their own houses. The whole point of this is to get credit and loans back into the real economy as quickly as possible.

Nor should the guarantee come for free. The chastened banks will now have to accelerate their process of writing down loans, sort out bad debts, bring developers to book and repay the Government’s trust, not in their own interest, but in the national interest.

One way of looking at these events — when sellers are attacking the Irish system — is to compare it to a military attack.

Time is of the essence. If the defences are crumbling everywhere — as they have been in the UK, Netherlands, Belgium and the USA — it’s no use mounting the same defences as those which have been overwhelmed elsewhere.

You have to insulate your own system first by using tactics that no one else has deployed.

Near term, this government guarantee obliterates the sellers who do not have Ireland’s national interest at heart.

Further out, it also buys us time to sort out our problems. (I’d have paid good money to see the faces of hedge-fund managers in London yesterday morning when they suddenly became conscious that their strategy against Ireland was in tatters and they realised that they stood to lose the millions they gambled against the Irish system).

We are not out of the woods by any stretch of the imagination. Indeed, some Irish banks have been so recklessly managed that they hardly deserve to be covered by the guarantee, but the choice was between the system or bust.

The minister obviously thought that by guaranteeing some banks and not others — as many of his advisers argued — he would open up the prospects of the weaker banks undermining the stronger ones. He has put the system first and this can only be a good thing.

As this column has argued before, there is plenty of time for recrimination. By keeping the banks liquid, the private sector will solve the problem of writing down bad loans, working with debtors to get the best deal and, most importantly, by doing all this in a controlled, not panicked fashion. When people are panicking, they tend to make the wrong decisions.

The nub of the minister’s dilemma was how to do something revolutionary that was quick, decisive and, most importantly, simple.

If we look at what the rest of the world is doing to try to stabilise their banks, we see all sorts of convoluted plans which amount simply to a large game of pass the parcel.

Every time a weak bank is passed on to a not-so-weak bank, market confidence takes a hammering and we are back to square one. The guarantee eliminates all this nonsense.

Now, we have to plot the next phase. How do we keep credit flowing in to those parts of the real economy which are productive? How do we accelerate the process of cleaning up the banks’ balance sheets and in time, and how do we punish those who recklessly got us into the mess?

But yesterday was for action not ideology; it was for stability not recrimination; and, most crucially, it was a time for practicality not complexity.

Over the course of the next few days, we are likely to see capital inflows into the Irish banking system as investors elsewhere seek the sanctity of a government bank guarantee as opposed to the uncertainty of a bank deposit, when it is clear that the banks are operating on the hoof.

Longer term, we can expect foreign banks to move here, setting up offices in Ireland and creating a banking industry which will thrive. We have set the template. The upside greatly outweighs any possible downside. The system is the most important thing at this stage. A threat can now, with the right accompanying policies, be turned into an opportunity.

In time, Brian Lenihan’s move yesterday will be seen as a masterstroke and a practical blueprint for the new financial architecture which will emerge from this global crisis.

Time will tell whether McWilliams assessment of Lenihan's move is correct. He hits the nail on the head when he says that some of the banks were so recklessly managed that they hardly deserve the protection Lenihan's action affords him.

If anything is to come out of this mess, it is the blindingly obvious necessity of proper, effective regulation of the financial sector. Markets do not regulate themselves. This piece of neo-liberalist nonsense must finally be buried in the ignomy this fatuous theory deserves. I am all for the minimum necessary, but rigorously enforced, regulation. This must come to the financial sector now. The regulator must regulate and must be forced by law to punish transgressors. If the public are to underwrite the system, we must have effective regulation of that system.

Wall Street is finished as the entity we knew. The American public want to take a baseball bat to what they believe are the criminal fraternity in the financial sector who have ruined their economy. Our builders, developers and bankers should be glad they are in Ireland, where we have been unusually tolerant of corruption and sharp practices. They could be elsewhere, facing the wrath of a public who would hold them in unparalleled comtempt.

Interesting. It's a risky move alright, but then everything is a risky move at this stage - and if it works, then it would certainly seem to have the implications McWilliams outlines.

McWilliams's piece is fairly big on rhetoric, very lose with fact and makes some wildly inaccurate predictions. Since when did the London bogey man arrive on the scene? This is the first I've heard of that English Hedge Funds were out to destroy Ireland. Has Cromwell's great-great-great grandson turned into an invesment banker? Or is this tripe spooned up to appeal to our patriotic sentiment and lead us away from the rest of the article.

Not one item in this bill-proposal addresses the excesses of Irish banking and the bankers. His message is let's forget about it for the time being. Nice, and the developers sleep easy. Christ, I wish I have become a developer or banker. An insurance gaurantee from the govt that has virtually no risk cost compenent attached to it.

And then there's the wild prediction that foreign banks will come here to set up their operations. Of course they will. There's nowhere else in the world that will almost unconditionally gaurantee deposits and bonds, etc. However, isn't this this proposal only for two years?
Or does he envision the Irish government making this permanent and that the Irish people become the de facto backer of € trillions in of the world's deposits and bonds. I'll sure sleep easier at night knowing that if a bank defaults that I'm going to pick up the tab.

Over on the Pin there's a bloomberg article stating that there have been some large cash outflows from the UK into Irish banks. (It's has its own thread.) The fun and games have started!

right. my take on the guarantee is that it is limited to all deposits and interbank liabilities.

not loans to developers (bank assets that are impairing) or any other non-bank entity.

loans are classified in the "loans and advances to customers" category of assets on a banks balance sheet. therefore guarantee of liabilities do not extend to loans to customers. therefore, it is not a 400bn euro bailout of developers.

furthermore, deposits are classified on a banks balance sheet as a liability under "amounts due to customers". therefore most liabilities of a bank are guaranteed but the assets are not. impairing loans eg to developers, are not a liability but a reduction in an asset/income generating unit and the impairment goes to a revaluation reserve until the impairment crystalises.

george lee (while doing a great service for not falling for the bull coming from estate agents/govt etc re the property crash) is completely disingenous to state that the guarantee is "Eur400bn" and in my eyes, as someone with a background in economics, finance, banking and accountancy, has lost some credibility in his rush to make the front pages with his hysterical proclamation.


edit - my other understanding is that any impairment losses on, say those developers loans, are specifically mentioned by the govt as going first against the profits (or retained reserves) of the bank, and second against the capital or equity of the bank via the share price. sheehan or goggin will not be able to rock up to leinster house with dunne or mcnamara's outstanding loan and tap cowen on the shoulder asking for him to cough up.

Yeah, I know the loans (assets) are not gauranteed but the problem for Irish banks was that the loans weren't being repaid. Their cash flow was seriously being hindered and even the ECB lending facility wasn't enough to cover the continuing shortfall it seems. What's going to occur now? The govt (tax payer) has gauranteed all cash deposit, many bonds and other cash facilities to a certain rating from my understanding. The cash will start rolling in and and the necessity of collecting on the developer debt (and other debts) is mitigated for the time being.

This is nothing more than an insurance policy on cash, deposits, etc. But it is a gaurantee, and a two year gaurantee at that. Should one of these banks default and the deposits (which should grow at very quick rates given the risk free gaurantee of the Irish nation) have to be paid back, we could be in some serious muck. There's no free lunch in the financial world.

Anyway, I have to believe that if other European financial institutions see large cash out-flows into Irish banks that there will be a some reaction.

I'm starting to think we've set up the financial equivalent of our Corporate tax scheme in some ways. We've set a standard for low corp tax rates, and now have essentially given a risk free gaurantee to deposits in unlimited quantities. Will other nations follow suit?

Interesting days, indeed. Does anyone know what fees the govt is charging the banks for the gaurantee proposal?

But what happens if even one of the six supported banks fails? Would we not in the hole to the tune of tens of billions? Willie O'Dea was saying we have no liability as the banks assets are 80billion more than the 400billion guarantee. But isn't the whole point that nobody believes the banks assets are really worth what they claim they are?

coc wrote:

But what happens if even one of the six supported banks fails? Would we not in the hole to the tune of tens of billions? Willie O'Dea was saying we have no liability as the banks assets are 80billion more than the 400billion guarantee. But isn't the whole point that nobody believes the banks assets are really worth what they claim they are?

Yes, I think that is the nub of the problem. And the banks can neither say nor not say if it is true.

Rocky wrote:

Does anyone know what fees the govt is charging the banks for the gaurantee proposal?

Someone on newstalk yesterday mentioned 14billion to insure 400billion per annum. Which is approx 3.5%. But I don't know if they actually knew the rate in this deal for sure,

coc wrote:

But what happens if even one of the six supported banks fails? Would we not in the hole to the tune of tens of billions? Willie O'Dea was saying we have no liability as the banks assets are 80billion more than the 400billion guarantee. But isn't the whole point that nobody believes the banks assets are really worth what they claim they are?

Hard to tell and hard to tell how "sound" these assets (loans) really are. This is a scheme that is not without some considerable risk. The devil is in the detail and, as far as I know, no other country in the world has given an unlimited deposit gaurantee.

My take on the whole affair is that the Irish banks had a liquidity problem. Simply put, they were not getting in enough cash flow from depositors and other sources to keep their operations running. Otherwise, why gaurantee deposits, etc. Deposits are only an infusion of cash into the Irish banking system. As stated by another poster, these deposits are viewed as liabilities on a bank's balance sheet. Money sitting around in an account is unproductive from a bank's stand point as inflation eats away at the value of capital. However, the Irish banks will need to start lending again, and pronto. It's no good having all the dosh sitting around if they can't lend at interests rates on which they can make a profit margin.

Tbh, I'm very interested to see how this works. If something (and I hope it doesn't) goes wrong, there will be reprecussions. I, for one, won't hang around to see what they are.

You're going to kill yourself???

EvotingMachine0197 wrote:

Rocky wrote:

Does anyone know what fees the govt is charging the banks for the gaurantee proposal?

Someone on newstalk yesterday mentioned 14billion to insure 400billion per annum. Which is approx 3.5%. But I don't know if they actually knew the rate in this deal for sure,

If true, that's some figure. The banks will have to do some seriously profitable lending in order to pay those fees. I was thinking in the millions.

Do you think the govt will give us a piece of the action since we, the tax payer's, are the ultimate gaurantor? I could do with a cool million now.

The govt could lend it to me now. I'll pay it back. I swear! Property development here I come.

coc wrote:

You're going to kill yourself???

Hell no. I wanted to move to Scotland around 2002 and couldn't persuade my SU to go along with the idea. If the dung hits the fan, we're outa here. Yeese can pick up the tab .

If all Irish deposits are guaranteed by the state, why not just have all deposits held by the Post office and allow the banks to borrow money against that fund. That way we'd have a very transparent way of knowing exactly how exposed the various banks are to liquidity problems, and the state has use of those funds to put to use in the national interest (hopefully more prudently than the banks have been using them...)

rockyracoon wrote:

coc wrote:

But what happens if even one of the six supported banks fails? Would we not in the hole to the tune of tens of billions? Willie O'Dea was saying we have no liability as the banks assets are 80billion more than the 400billion guarantee. But isn't the whole point that nobody believes the banks assets are really worth what they claim they are?

Hard to tell and hard to tell how "sound" these assets (loans) really are. This is a scheme that is not without some considerable risk. The devil is in the detail and, as far as I know, no other country in the world has given an unlimited deposit gaurantee.

My take on the whole affair is that the Irish banks had a liquidity problem. Simply put, they were not getting in enough cash flow from depositors and other sources to keep their operations running. Otherwise, why gaurantee deposits, etc. Deposits are only an infusion of cash into the Irish banking system. As stated by another poster, these deposits are viewed as liabilities on a bank's balance sheet. Money sitting around in an account is unproductive from a bank's stand point as inflation eats away at the value of capital. However, the Irish banks will need to start lending again, and pronto. It's no good having all the dosh sitting around if they can't lend at interests rates on which they can make a profit margin.

Tbh, I'm very interested to see how this works. If something (and I hope it doesn't) goes wrong, there will be reprecussions. I, for one, won't hang around to see what they are.

asset quality is a bit part of the problem (subprime, loans to developers etc) but interbank liquidity is the huge problem.

if irish banks can access funding on the interbank market or better still, lend out depositers money (and don't think banks will go anywhere near the lending levels they did in 2005/6) then irish banks futures are relatively (in the current global climate) secure.

listen, the chances of 5% or 10% of the top two banks mortgage book going bad are virtually nil. where banks are particulary exposed to a few big developers then there are questions about the loan book. but in financial markets, contagion is an unfortunate part of the market, therefore good banks can be destroyed by bad. and if one goes, the hedge funds will targe the rest to panic the market into earning them a few million easy pounds.

zakalwe wrote:

. . .listen, the chances of 5% or 10% of the top two banks mortgage book going bad are virtually nil. where banks are particulary exposed to a few big developers then there are questions about the loan book. but in financial markets, contagion is an unfortunate part of the market, therefore good banks can be destroyed by bad. and if one goes, the hedge funds will targe the rest to panic the market into earning them a few million easy pounds.

I'm a wee bit confused. When I read about the Bear Sterns and Lehman collapses, their problem was that individuals, companies, hedge funds and so forth believed that these companies were essentially bankrupt and pulled their funds out of the banks in order to protect their capital. No readies, no way to do business.

But yesterday and today, the hedge funds are the bogey men. Don't really know that much about hedge funds but don't they only essentially buy and sell stocks, commodities or whatever? How exactly, bar pulling their funds from a bank or investment bank, do they bring down a financial company?

rockyracoon wrote:

zakalwe wrote:

. . .listen, the chances of 5% or 10% of the top two banks mortgage book going bad are virtually nil. where banks are particulary exposed to a few big developers then there are questions about the loan book. but in financial markets, contagion is an unfortunate part of the market, therefore good banks can be destroyed by bad. and if one goes, the hedge funds will targe the rest to panic the market into earning them a few million easy pounds.

I'm a wee bit confused. When I read about the Bear Sterns and Lehman collapses, their problem was that individuals, companies, hedge funds and so forth believed that these companies were essentially bankrupt and pulled their funds out of the banks in order to protect their capital. No readies, no way to do business.

But yesterday and today, the hedge funds are the bogey men. Don't really know that much about hedge funds but don't they only essentially buy and sell stocks, commodities or whatever? How exactly, bar pulling their funds from a bank or investment bank, do they bring down a financial company?

hedge fund can target share prices and move vast volumes of shares they don't actually own or hold. by reducing a share price you can create uncertainty in a banks viability which then leads other banks to withhold lending money for fear of another bank collapse, its a self fulfulling prophesy. then you have bufoons like joeeeee duffy facilitating cranks proudly talking about taking out their life savings and burying it in the garden.
honestly, have you never seen "its a wonderful life", and jimmy stewart on the counter saying in his drawl, i don;t have your money, its in the jones house, and the smiths house and the robertsons house!!!!!!

When is shorting allowed again, new year?

There is also the lingering question on the legality. I can't see other EU states welcoming an outflow of cash and I can't see too many wanting to follow suit.

Was listening to manufacturing output in the UK, last month largest drop on record. So we are heading into a serious recession. Unemployment figures will go up and that will have an effect on mortgage viability for many. I wonder where interest rates will be heading next year?

Basically the government has now played all its cards. It is no longer a question of a Bank failing but of the state being economically crippled should anything go wrong. If any of the financial institutions start to look weak, for those with cash, the picking from the fall out would be the equivalent of hitting the jackpot.