Banks

A question that was e-mailed to me after yesterday's blog has prompted this one. The question referred to the evils of socialized banks.

So what's the issue?

Basically, ABN AMRO was nationalized after the US loans failure that challenged that bank's existence. This was a private bank with history dating back to 1765, but like other European banks, one that invested heavily in US bank "securities". When those securities turned out to be worthless (essentially being bundles of mortgages that the US banks knew would never be repaid), banks all over the world that had invested in these were shaken up.

As a result of these struggles, ABN AMRO, the second-largest bank in the Netherlands, was nationalized (purchased by the Dutch government) in 2010.

An apparently American idea is that government owning banks is evil. I find few other sources who have a problem with it.

The Dutch government paid nearly 17 billion for ABN AMRO in order to prevent its failure. Now other countries which shall remain nameless have simply given that amount of money to banks to prevent their failure. In exchange, those governments got... criticism. Oh and the banks didn't fail. And that's about it.

But while the Wall Street Journal put ABN AMRO's fourth-quarter 2011 loss on the front page (this loss was largely due to the bank's participation in bailing out Greece), less screaming was made about the profits the bank made in the three previous quarters.

Overall, the nationalized bank made a profit of 689 million euros in 2011.  The private bank lost 414 million euros the year before.

While even the Dutch are complaining that the bank is not growing as fast as they hoped, it's still a lot of money the government has gotten back off a saved bank. (!)

So where's the evil? Apparently, the fact that these profits are going to the government (who spends these profits for the benefit of all the residents of NL) instead of to private stockholders (who would spend these profits on another Caddy for the multi-Caddy-owning wife) is a problem.

I must admit a level of stupidity here that I'm not used to: I can't find the downside.