Stuff and Nonsense

I’ve been duped. Perhaps you have too. I always took it for granted that my money was safe with a high street bank. I suppose most people were of this opinion. During the recent economic strife though, for the first time in my life, I’ve heard about a limit on how much of my money I can count on getting back if the bank fails.

This was a revelation. Banks are monitored, regulated, audited; everything we see in the media (until recently) is geared towards giving us all the impression that our money is safer in the bank than under the mattress. But it’s not true is it? Don’t misunderstand me, I don’t have any money. No, not at all. Like most of you I’m a net borrower from the bank. The balance on my mortgage far outweighs any other assets I may have other than the house itself. You can bet your life I’d be a outraged all the more if I had retired and had my £40k pension lump sum only to find that the last £5k of it could evaporate in the event that my bank hit the dirt.

I’ve seen the warnings about shares “Values of investments my go down as well as up”. Of course. Who’d be daft enough to believe otherwise?  On life insurance policies we are warned “You may not get back all you pay in”.

But when did you EVER see a warning on the bank poster “Caution: You may not get back all you pay in.”

Some banks even charge for these accounts. Of course, one may earn a few percent interest on the cash in the bank but if you wanted to put £50k in the bank would you put it all with the same banking group if you were forewarned “Remember, the x% interest means you have to risk 50% of your capital. You’ll definitely earn x% this year but if we overstretch ourselves you may only get £35k back.”

It’s fundamentally dishonest. I don’t want something for nothing. I appreciate that to earn that small amount of interest then I have to let the bank USE my money temporarily but where was the warning that they may LOSE it? That’s the point. I, naively no doubt, always thought that the bank is using my money to make so much more that they can afford to give me a very very tiny return. It seems plausible.

Of course we hear that no private individual has ever lost money from a UK bank. We hear that no UK bank will actually be allowed to fail, simply because no government wants to be the one in power when the first hit is taken by the public (aside from the taxpayer bailing out the banks of course which DOES seem to be acceptable.) I don’t know if that’s true, I don’t know who to believe any more. I suppose I should be glad that I’m a net borrower, but just as the well heeled depositor will lose a packet if the bank dies, that same bank may call in my mortgage and put me and the family on the streets! Despite this unpleasant possibility,  I  should stop moaning. I’m benefiting right now from borrowing from the bank which ultimately must mean borrowing from the depositors who have surplus cash. I wonder if those depositors know though that their cash isn’t safe when the bank fails?