The Future of Our Banking System

After the market meltdown of 2008, and the suddenas our Governments technically bought these Banks
realization that our Banks were exposed and facedaccording to the current share value.Once the share
bankruptcy, our Governments stepped in and bailedvalue increases, and exceeds the original price
many of these Banks out with taxpayers money,technically these shares could be sold at a profit,
effectively taking over their debts.bringing in extra revenue to our Governments.In
The old pre-crash Banking system was complex,theory this has happened in the past, Indonesia is an
large Banks became internationalized with the Globalexample:
Economy, and often used depositors savings to handAfter the Asian Crisis of 1998, Indonesia had
out loans to consumers outside their own nationalhundreds of exposed National Banks, that were
boundaries. As these banks grew, so did the needeither merged or taken over by the Government.
for profits, and credit. This ended when marketsThese Banks were reformed, as local Banking laws
realized these profits were based on overvaluedgoverning Banks were. Then many were sold off at
property prices and stocks in the US and the UKa profit to the Government, through the local Stock
Technically leaving these Banking giants exposed tomarket.The irony of these Banking reforms were
toxic debts, and the personal debts of creditors duethat the Banking giants that are currently broke and
to over-extended credit.indebted in our Countries, took over and bought into
Governments stepped in buying shares in some casesmany of these Banks.
or in other cases effectively taking over theseTherefore Internationalizing the Banking system in
banking giants that dominated the old era of fastIndonesia, although except in the case of ABN Amro,
Globalization.Technically keeping Banks open that lostno International Bank in Indonesia has collapsed or
trillions of dollars in speculating in a false bubblebeen bought out by the National Government.
economy.This action was requested by the IMF that granted
Many people were angry, those in debt and unable toIndonesia billions of dollars in emergency loans, loans
obtain further credit faced personal bankruptcy,the current Government are still paying off today.
whilst the sudden realization that our Bankers whoAnd is probably the modal our Governments are
are traditionally pillars of good money management,hoping to emulate, in order to save our banks,
had turned out to be as short-sighted and bad atreform them and eventually sell them off at a profit.
money management as a compulsive gambler in aOne question still haunts both our Governments and
casino.confused taxpayers: What happens if our Economies
But that was then, So what is the future of thesedo not recover?
Banks?The effect of huge Bank bailouts has meant that
Many Bailed out or Nationalized Banks are in realitythese toxic Banks are in fact owned by our
Global Banks. That simply means although they areGovernments. Many Governments state officially
over exposed in one Country, they may be profitablethey have not been nationalized, but are technically
in another Country. Citibank are a good example ofNational property.If a recovery fails to materialize,
this, with a presence in most Countries in thethen Governments can simply take over these Banks
World.In most cases large Banking concerns have anofficially, by either buying out the remaining minority
'autonomous' Branch in each Country, which oftenshareholders or by declaring them National property.
means that they are protected nationally, rather thenThis is the worse scenario, as our Governments
Internationally:officially own our debts and in regards to housing,
In the last Banking crisis in Argentina, depositorsany property these banks own through private
found International Banks closed, and their savingsMortgages.
gone. Irrespective of the fact many of these banksPrivate housing today could in fact become National
were profitable outside Argentina, leading to a trendproperty, with Mortgage payments going straight to
were Argentineans today prefer to deposit funds inthe State.
a protected local Bank.In economic terms if Banks are completely
With Governments effectively "owning" many ofNationalized, then Governments control the money
these International Banks, these overseas "Branches"supply, our debts, businesses and housing. Our
could be sold off to localized interests. This was theEconomy would turn into a command economy. We
case of Morgan Stanley that sold off its Asian-basedstill will "own" our private property, but only if we can
Branch to a cartel of local Investors.This should cutrepay the debts owed to these new State Banks. In
the excess fat off these bloated, over-exposedan extreme scenario our Banks could be merged into
Banks, and bring in additional income that should helpone single State Bank.
to lower their huge debt levels. Therefore technicallyComplete control of the economy by our
severing ties of these autonomous regional banks,Governments may be the last option left, in the case
that still remain profitable, locally.of a total economic failure. It could also lead to strict
Selling assets raises money, and could help relieve thecontrols on monetary policy, and in Countries worse
burden nationally these failed banks have passedaffected by the Crisis, even a change of currency.
onto Governments via the Taxpayer. More exposedBoth of these scenarios are feasible, and much
Banks could eventually become 100 percent owneddepends on when our Economies start to recover.
by our Governments. As debts mount, and theThe new reality we face is that Bank bailouts, have
banking system is reformed.created a dependency on our economy recovering,
Governments in the long-term claim these toxicotherwise we could face living in a State that has
Banks will be eventually privatized once they arebeen forced to become Communistic in order to
downsized, and profitable sections of these bankssurvive a complete financial collapse.
are sold off. This depends on an economic recovery,