The global money crisis may be rattling nerves in the banking and financial service industries, but the panic is not only limited to the board rooms. Ordinary people are worried about their savings and retirement plans, despite assurances that it is not all gloomy. At least not yet.
Nick Edwards, Reuters’ Treasury Editor, said: “People are comparing this to the Great Depression but we are not there yet. We have not yet had the same scale of banking collapses and the system is not yet completely dead.”
Not completely dead, but banks are increasingly facing liquidity problems. They are lending less, making it difficult for customers to carry on with normal business.
Small business owner Roger Bhatti said: “It is making it not only difficult but sometimes impossible to start new commercial projects. Now I go to the same bank, it takes them not weeks, but months to put a package together. By this time, I may lose the project altogether.”
And for people with money in these nervous banks there is a temptation to panic and quickly withdraw their cash, even if the bank has been nationalised.
One Fortis customer said: “Our bank’s been nationalised with a plan by three countries. What do you expect will happen? The people who run to withdraw their money now are crazy.”
In the UK another bank has just been taken over. Bradford & Bingley had a reputation for being a bank that did not ask too many questions of people wanting housing loans. But not everyone is happy the government stepped in and put it into public ownership.
Bradford & Bingley shareholder Jon McKnight said: “On Friday, everything was fine, but at the weekend I heard: ‘Oh it’s been nationalised!’ So, in effect the government has stolen that company from the shareholders. They didn’t have an extraordinary general meeting, they didn’t consult us, they just took it away. This is like what the Soviet Union did in the Cold War, like banana Republics do, not a democratic country in the 21st century.”
The use of taxpayers cash to save banks in trouble has provoked fierce debate. Critics claim there is nothing stopping the same companies from making the same mistakes all over again. They say the money should go to ordinary people in trouble, not big institutions.