Could a consumer bond/ssia re-capatilise the banks?

[vbold]

Just an idea I was mulling over at the weekend - The banks are currently short of capital and the Gov are borrowing on international markets to lend to the banks - would it be possible (a good idea at all?) for the Gov to issue consumer bonds (or an ssia type product) in order to re-capitalise the banks?

If something like this was offered at say a 10-15% rate of return I would expect that it would have a very high take up rate. This could, within the first year, attract in order of 1.4 billion into the banks - based on the assumption of 1million take up @120 per month. (There is still close to 1.75 million people working)

It would provide a “safe haven” for investors and consumers who are wary of the stock and property markets and at a better and guaranteed return at a time of increased risk and low returns.

Just an idea

[Open_Window]

Sure they could have set up a government backed Bank for the laugh with a great deposit rate and no lending called the Bank of SSIA or something… oh wait

[Proximo]

@proximo

I’d say we’ll have a Public Bond issued in the not too distant future. It’ll be disguised as SSIA MARK 2 - paying a heavy coupon - but less than what the Government will charge the Banks for their Re-Capitalisation/Nationalistion.

Oh, and it will be Heavily Oversubscribed. Every Granny in the country will be in it.

viewtopic.php?f=19&t=16339&hilit=public+bond&start=15

Put your shirt on it …

Or in it !!

[yoganmahew]

There are a couple of problems:

1. The government can currently borrow at 5something%, so for the moment, the price you’re putting on it would be too high. How long that will last for is another question!
2. The money would have to come from somewhere. The most likely place for it to come from would be deposits currently in the banks - this would not be good for them! (Particularly not for the weaker ones).

On the other hand, it may be that pension companies and individuals could do with somewhere like that to stash their wedge, but this would probably take money away from the government’s bond issues.

A shortage of new money/credit across the system would seem to be the problem. Deflation seems to be the natural answer. Inflation is another answer. Neither are desirable. Which one is least damaging in the long term?

[Bostonorberlin]

I was thinking of something similar this weekend too… but in some ways we already have this facility … PRIZE BONDS…
SHOULD CITIZENS BE BUYING PRIZE BONDS.
After all the money ends up being managed by NTMA anyways …

Irish residents can buy Prize Bonds, for €6.25 per bond, with a minimum purchase of €25.
The money paid for the bonds is given to the National Treasury Management Agency (NTMA), which looks after the State’s finances.
A percentage of the total fund (3pc at the moment) is allocated to prizes for a weekly draw. The results of that draw appear on TV3 Threetext and at prize bonds.ie and winners are also notified by post.
Prize Bonds must be held for the first three months; after that they can be sold with no notice.
All prizes are tax free, for Irish residents.

Although buying Irish prize bonds may best be parapharsed from Dirty Harry …
"Well the question you have to ask yourself is do you feel lucky punk, did I fire 5 shots or 6, well do you ? "

[oilman]

Every Granny in the country will be in it.

theres many a granny that have outperformed big developers over the last yr !