"Sorry, we had to convert the funds in your mortgage offset account to worthless shares in our bank so we can repay a loan to Goldman before we go bust. Your home loan has been transferred to Deutsche, who asked us to forward on this foreclosure notice."
That BTW is a very rare in this country. Just to keep it in perspective. Found this government report: http://fsgstudy.treasury.gov.au/content/Davis_Report/04_Chapter2.asp and this: http://www.abc.net.au/money/currency/features/feat3.htm
Pyramid Building Society, wasnt a bank, but on 13 February 1990 the state treasurer Rob Jolly and attorney general Andrew McCutcheon held a press conference and assured the public that Pyramid was sound A second run of withdrawals began in May 1990 and at that time premier John Cain apparently tried to get a deal up with the ANZ by offering a $90m government guarantee, but the ANZ had lost interest. In June the government suspended withdrawals for a week and appointed an administrator. Cain announced there was no government guarantee of deposits, unleashing a storm of outrage at the contrast with the government's initial advice. The administrator's report on 1 July 1990 was that the societies had to be wound up. On the morning of 3 July the premier was still saying there was no government guarantee, but by the afternoon he'd been rolled by his own caucus and had to announce that there would in the end be a guarantee.
We've had levies for far less (e.g. the bullshit budget repair levy). So the big question is, would there be a massive levy applied to everything to cover bank failures and hme loan defaults? Maybe a "temporary" doubling of the GST, fuel surcharges, increased income tax on anyone earning over ten cents, etc.
In the case of massive bank failures governments can't sell debts because no bids on their bonds. The end result is, the government itself defaults. In the case if one lager banks fails like Deutsche Bank the government has no option to step in to take it over to stop the domino effect, but they can't do this in the case of massive large systematic bank failures as they will be hopeless.
