Earlier today, The Daily Mail stated that the banks in Britain are still in need of the taxpayer’s money in order to stay in business (http://www.dailymail.co.uk/news/article-1317396/Banks-need-cash-taxpayers-government-aid-ends-year.html). This is shown by a new report titled “Where Did Our Money Go?”
During the financial crisis, the government decided to give monetary aid to the banks, as they were afraid that if the largest banks went bankrupt, this could bring down the entire banking system. Now, the government has decided to stop giving the banks money, which is problematic for the banks.
Many have criticized the way the government acted during the financial crisis. By aiding the largest banks, the government rewarded the banks that took the largest risks. Essentially, the largest banks “know” that the government will not allow them to go bankrupt, so they can have a policy in which they take large risks and either receive high returns on their investment or their investments go bad, and they will be saved by the taxpayers. By implementing this mindset on the chairmen of the banks, the government is ruining the competitive banking market. The larger banks are favoured, and the smaller banks and the taxpayers lose.
In conclusion, it is important for the government to keep the largest banks alive in order to keep the banking system working. However, the banks must not make it seem as they will always help the major banks. They must therefore be very cautious and strict when giving monetary aid.