On the other hand the disadvantages include that the spread of commutable …show more content…
When banks in America collapsed the banks in Europe realised that their investments had failed and that there was now little cash to loan to people. This caused the prime rate for current and future loans to infatuate.
The house prices in Europe rocketed up and the effect was the same in America with banks having assets in the form of fore closured houses which they could not sale because not many people could afford the payments of the mortgages. Northern Rock a big mortgage lender in Britain was the first to fall with a £100 billion debt in all; it was taken over by the government and was added to the British national debt. Bradford & Bingley, which was half the size of Northern Rock, and had £40 billion mortgages lent out, was also quick to be nationalised.
The 20th largest bank in the world, The Fortis bank was quick to be nationalised partially with the injection of €15 billion by Belgian, Dutch and Luxembourg governments. In Germany Hypo Real Estate needed a €50 billion euros bailout by the government. The European Central Bank was also quick to lend money to banks so that they would have enough