On 30th. December, whilst checking her account, a friend discovered her £20,000 overdraft had been withdrawn without any notice.
She had banked with Barclay's ( BARCLAY'S! They're the best off probably) for 40 years, had had the overdraft for several years ( it's called their Evergreen I believe) and it had completely disappeared from one day to the next.
Her mortgage payment was due out on 31st. She had no other immediately available cash. She finally managed to speak to someone ( moral: owe the banks at least £100,000 otherwise no-one will talk to you) who said that in the circumstances, the £19 k could stand for two months - but there would be a fee of £285 and the interest rate would be er 6% over base.Thereafter it would drop to £15000 for 12 months - with a fee of £1000.
So she has gone from no fees and 1.5% over base in one day to effectively £1285 in fees and a more than tripling of the rate she has to pay.
Now ignoring the rights and wrongs of Banks pulling existing deals ( and it's happening hundreds if not thousands of times every day) the point here is that on her overdraft, the Bank has gone from losing about 0.5% on the money it lends her i.e. about £100 pa to making a profit of £2000 or so - which ends up as a rather nice 15% gross return.Which just about gives them a profit.They would, of course, prefer to change her into a term loan which would give them about 18% - and mean that the cash in the now-in-credit current account was effectively being lent back to her....
The Banks have to do this. They cannot lend money for no return, and until this Government gets that idea into their thick skulls there won't be any easing of the credit crisis.
The first recapitalisation and Bank of England lending to the Banks is set at far too high an interest level. The Fed in America has the right idea. Give the Banks free money and they will soon enough get it out to the punters. Arguably this is already happening - and the near 40% drop in house prices there is beginning to attract back buyers, albeit slowly.
So all the talk of the second lot of cash going to the Banks will come to nothing if Brown and Darling don't get it - THE BANKS HAVE TO MAKE MONEY.
The alternative, of course is total nationalisation of the entire banking system and simply giving anyone money and writing off the losses - after all this government believes in the rich paying for the poor ( er, not too sure about that - I suspect the rich and their companies will emigrate). But the conditions that have been attached to the Phase 1 bailout clearly show the government not only does not know the first thing about money, finance,business or even human nature, it is stuck in it's Leftist control dogma - which got us here in the first place.
I have a task for the new Dr. Who...... and this is him