Comment by graemep

Can you understand why banks were bailed out to the extent of protecting shareholders?

In the UK the first bank to go, Northern Rock, was simply taken over by the government. The shareholders got nothing. The bailout of Lloyds bank required the government taking a 40% stake. This is the way to go - if you need a bailout there should be a cost to the shareholders. otherwise you are just privatising profit and nationalising risk.

Not that UK regulation was great all round or the bailout perfect. It certainly failed to prevent the crisis which could have been done (no doubt the same applies in many countries). I looked at Northern Rock's accounts some time (an year, maybe?) before the crisis and was horrified by their reliance on interbank lending. it was obvious they could not cope with a rise in rates.