Mervyn King - The right to be angry
Discussion
eldar said:
Interesting. 50% of my mortgage was endowment. When I paid it off, the endowment bit showed a profit. Not as big as predicted, sure, but better than I was expecting. Endowment wasn't all bad, assuming you weren't greedy or thinking short term.
Very much as my own situation was, I took out a Endowment plan to pay off half of my then mortgage, that was in 1983. I opted for Scottish Life, they seemed to me to be a Company that provided steady growth rather than some other Companies which seemed very volatile, in terms of performance year on year, at the time. IIRC those that took on the product in its earlier years or took out a shorter term of investment did rather better than those investors that followed. My own investment was a twenty year product.groan said:
I bought a shop in 1989 on a TSB 10 year IO loan backed with locost endowment. A Standard Life MC Plan 80. I cashed it in about 6 months before maturity. Paid off the loan, and made a small (few grand) profit on top. As above, not the projected profit, but a profit nonetheless. The rant above is 100% hindsight wisdom. Does he seriously think lenders would have accepted endowments as a repayment vehicle if they'd known them to be a con or a likely failure?
Erm no, its not hindsight actually, as I mentioned in my post, the regulators actions against brokers and Companies that had sold products brought in legislation to ensure that notice be brought to Endowment plan investors warning of any impending shortfall in projected investment outcome at time of sale expected by the customer. Therefore investors such as myself had updates which had previously been unavailable, these updates could be used for the investor to make an informed valuation and decision upon either continuing the investment or otherwise. You need to read the previous posts or at least have a better understanding of the history of the products we are discussing before making remarks that, frankly, make you look like a Muppet.
t and then makes excuses when challenged upon his stupid comments.crankedup said:
No! because it seems nobody has a true recognition of what current value actually is at the moment. So you may see my point that 'current value' is merely based upon what somebody may perceive to be a bargain. True or accurate current value, for me, is based upon an historical pattern to sales prices of similar products, in this case houses. So I would look at comparable houses sold within the previous 12 months within the same geographical area as our target house. At the moment not enough sales are generated to provide a meaningful 'current value' analysis.
Sales are still at around 1/3 of the peak, so I can't see why one can't get an idea of what the market value is. I think it is more that people are so used to rising house prices that they can't get their head round a falling market.NoelWatson said:
Steffan said:
The financial instruments that Northern Rock, Mortgage Express and other were using were so complex no one understood them properly.
Why don't you explain what exactly Northern Crock did so people will know what they did wrong? It is essential to remember that throughout these transactions Northern Rock was Supervised and Authorised as a Bank, Mortgage Lender and Borrower by the FINANCIAL SERVICES AUTHORITY, and the Bank of England and the Treasury. (At the time of National Home Loans (The Model) the FSA was Called FIMBRA).
Northern Rock followed the example set by National Home Loans in the early 1990's by borrowing heavily on the short term money market and lending on the long term mortgage market. They started doing this around 2000 to grow their business as quickly as possible. It grew massively until by 2007 they were one of the biggest lender of residential mortgages in the UK.
There was always a clear weakness in doing this.
If the money market demands repayment the borrower (Northern Rock)cannot repay the debt and relies on further short borrowing to bridge the gap.
Not surprisingly in the case of National Home Loans in the early 90's come the difficulties of the short term money markets under the Major Government short term money dried up and National Home Loans were taken over as insolvent by Barclay's as part of the then Bank of England Lifeboat scheme. Effectively they went bust.
Not surprisingly Come the crash of 2008 the short term money markets under the Brown Government short term money dried up and Northern Rock became a pariah in the money market. In my view incorrectly the Government determined to take over the Bank, to prevent insolvency, and the Taxpayer made massive losses in sustaining the mess of Northern Rock.
Effectively they went bust.
What disturbs me is that all this was carried out in the full glare of daily weekly and monthly inspections of Northern Rock by the FSA, the Bank of England and the Treasury. AND THE MODEL AND COLLAPSE OF NHL WAS THERE FOR ALL TO SEE.
This system was made even more incomprehensible to anyone including the Auditors by the creation of Package Mortgage Instruments which were also used to sustain massive borrowing and lending by Northern, Rock Mortgage Express and others in this market.
The individuals concerned deliberately misled the firms buying these packaged mortgages as to the real quality of lending that was being made. Very poor credit cases, very high ratio lending cases and frankly shallow reference cases were deliberately packaged and sold as high quality mortgage investment instruments.
The market began to find out about this, a practice which originated in America, and was widely abused there and this contributed to the collapse of Northern Rock.
That is a very short broad brush explanation but I think it gives the flavour of the madness that was exhibited by Northern Rock AND the culpability of the Financial Services Authority, The Bank of England and the Treasury.
ALL of this was authorised borrowing and lending!
To use a naval term it happened on their watch.
Have you noticed any resignations? Any new faces? Any Changes? Exactly.
I am fearful that the whole system will remain as it is and we will be once more up the creek. Without an economic paddle.
I agree its simple if you have studied it.
I don't think its simple for the average borrower or investor in a bank.
My question is why were the Bank of England et al who did study it, were paid to study it, knew about it and approved and authorised the use not able to anticipate the obvious dangers inherent in borrowing short and lending long on this scale and with these risks?
After all the Model NHL crashed over ten years previously.
I suspect, like the Titanic, no one was actually looking. Hence the crash.
My worry is that rearranging the deckchairs at the FSA, BofE and Treasury are not going to alter the fundamental problem.
The supervisors are either not bright enough, not powerful enough or not interested enough to change the fundamentals of this system
More of the same will mean more of the same. Another Crash.
We need root and Branxh reform of the Banking system not platitudes.
I don't think its simple for the average borrower or investor in a bank.
My question is why were the Bank of England et al who did study it, were paid to study it, knew about it and approved and authorised the use not able to anticipate the obvious dangers inherent in borrowing short and lending long on this scale and with these risks?
After all the Model NHL crashed over ten years previously.
I suspect, like the Titanic, no one was actually looking. Hence the crash.
My worry is that rearranging the deckchairs at the FSA, BofE and Treasury are not going to alter the fundamental problem.
The supervisors are either not bright enough, not powerful enough or not interested enough to change the fundamentals of this system
More of the same will mean more of the same. Another Crash.
We need root and Branxh reform of the Banking system not platitudes.
crankedup said:
Erm no, its not hindsight actually, as I mentioned in my post, the regulators actions against brokers and Companies that had sold products brought in legislation to ensure that notice be brought to Endowment plan investors warning of any impending shortfall in projected investment outcome at time of sale expected by the customer. Therefore investors such as myself had updates which had previously been unavailable, these updates could be used for the investor to make an informed valuation and decision upon either continuing the investment or otherwise. You need to read the previous posts or at least have a better understanding of the history of the products we are discussing before making remarks that, frankly, make you look like a Muppet.
Well, apart from my own 'training' (Royal Life), qualifications (FPC 1 & 2) and experience (Ins Co footsoldier to MD Fin Servs Coy) which has involved the sale of 1000's of mortgage (and other) financial products, I've also been a user of them since the 60's when my old man asked me if I wanted to continue the premiums on the Full Endowment he'd taken out in my name in the 1950's. Although your rants are so poorly expressed (in English) that the ambiguities this throws up makes them in part uninterpretable, I THINK you are raving about the 'low cost unit-linked endowments' which first appeared in the UK in the late '70's. Or are you raving about endowments per se? You may not know this (from your understanding of the history of the product) but endowment insurance policies have been used (successfully) from the late 1700's to today (which is why there is a TEP market).
What's your understanding and experience of the product based on? Have you ever trained, qualified in, or worked with the product? Could we start there, please?
IroningMan said:
Because I presume that, had they [NR] fallen over, whoever bought their debt book would have sought to get more than 0.44% over BoE from me?
In fact your mortgage would just continue as before but in the hands of whoever bought the wreckage of Northern Rock. In fact, some borrowers might simply have stopped paying thier monthly instalments and waited to see what happened. It would take new owners a long time and a great deal of effort to get that lot sorted out. Needs caution over possibly awkward contract terms though. Steffan said:
Northern Rock followed the example set by National Home Loans in the early 1990's by borrowing heavily on the short term money market and lending on the long term mortgage market. They started doing this around 2000 to grow their business as quickly as possible. It grew massively until by 2007 they were one of the biggest lender of residential mortgages in the UK.
There was always a clear weakness in doing this.
If the money market demands repayment the borrower (Northern Rock)cannot repay the debt and relies on further short borrowing to bridge the gap.
Can you explain how this model is different from other players in the market - some examples would be good. So for example, what duration were they borrowing over, were they hedging, and why did they come unstuck? And can you provide some links (from reputable sources please, not Daily Mail)? It's just that I am trying to get to the bottom of this and what you have said doesn't tie in with what others have told me. (Not that I am talking solely about money market funding and not securitization)There was always a clear weakness in doing this.
If the money market demands repayment the borrower (Northern Rock)cannot repay the debt and relies on further short borrowing to bridge the gap.
crankedup said:
Came across this old thread which is still very much where we are today, no change except the banks and other financial industry bods are still being unearthed for wrong doing.
Meanwhile I am trying to find stuff on GROWTH plans.
Go on then in for a penny in for a pound... Meanwhile I am trying to find stuff on GROWTH plans.
So I have posted this in a few threads and never seemingly had a (from addled memory!) response to it which constituted a real debate on the point other than simply disagreeing!
That point is that there is or needs to be on some level an understanding that you know what in some cases unpalatable actions which will I am sorry to say simply have to be tolerated for business to succeed. If we seek to legislate, regulate and control to the point of utopian perfection any industry to be frank ultimately those industries will reach a tipping point where they wil simply up-sticks and move their core operations to somewhere that won't do that.
Other than simply disagreeing what do folks think?
heppers75 said:
...
Other than simply disagreeing what do folks think?
You're right.Other than simply disagreeing what do folks think?
What I find more amusing is the irony in the original post on this thread
Mervyn King said:
“It is very unproductive to single out individuals.”
Is it now...I wonder if that was a premonition to save your own arse one day, little realising you'd forget what you'd said when doing precisely this (singling someone out).Mervyn King said:
“...Bankers were given incentives to behave the way they did. That’s what needs to change. We must resolve this problem.”
Incentives such as regulators turning a blind eye, perhaps...heebeegeetee said:
anonymous said:
[redacted]
I knew of a 19 year-old who never had what I would call a proper job and who was lent £15,000 overall, just prior to the crash.I never met anyone who could understand that. I hope the bank(s) lost their money.
heppers75 said:
I sincerely hope you know the remainder of the facts behind that persons personal circumstances and can substantiate that statement and have simply chosen not to share them as if that is your sum total in knowledge on the situation with which you have formulated that post then that qualifies as about one of most naive posts on here I have ever read!
Heppers, could you try to use a bit of punctuation? Not being pedantic, I think you have something to say but it's hard to make sense of your overlong sentences.BTW on your point about the financial industry "upping sticks", people have been saying that for almost 5 years now, during which the almost universal condemnation has continued. When does it start?
heppers75 said:
heebeegeetee said:
anonymous said:
[redacted]
I knew of a 19 year-old who never had what I would call a proper job and who was lent £15,000 overall, just prior to the crash.I never met anyone who could understand that. I hope the bank(s) lost their money.
On confronting the son and carrying out some investigation they learned that their son had a total debt of some £15k. My colleague only had one complaint about the main bank concerned - which was that when his son had approached the bank to come clean and admit he had gotten himself into deep financial trouble, their response was to lend him some more money.
heppers75 said:
Go on then in for a penny in for a pound...
So I have posted this in a few threads and never seemingly had a (from addled memory!) response to it which constituted a real debate on the point other than simply disagreeing!
That point is that there is or needs to be on some level an understanding that you know what in some cases unpalatable actions which will I am sorry to say simply have to be tolerated for business to succeed. If we seek to legislate, regulate and control to the point of utopian perfection any industry to be frank ultimately those industries will reach a tipping point where they wil simply up-sticks and move their core operations to somewhere that won't do that.
Other than simply disagreeing what do folks think?
There are some very good ideas out there, 30% flat rate tax, abolish NI, massive cuts to public sector, that would require some short to medium term pain, but in this age of everyone-a-winner and people able to choose not to work (and have a very comfortable) living I fear it would not be possible without civil strife. So I have posted this in a few threads and never seemingly had a (from addled memory!) response to it which constituted a real debate on the point other than simply disagreeing!
That point is that there is or needs to be on some level an understanding that you know what in some cases unpalatable actions which will I am sorry to say simply have to be tolerated for business to succeed. If we seek to legislate, regulate and control to the point of utopian perfection any industry to be frank ultimately those industries will reach a tipping point where they wil simply up-sticks and move their core operations to somewhere that won't do that.
Other than simply disagreeing what do folks think?
The only way out of the current mess is a leader with the vision and balls like Thatcher to make so hard decisions, (or a dictator backed by the military to enforce law and order). Unfortunately I can't ever see anyone like Thatcher appearing on the stage in the UK, and the forces have been drastically diminished to even contemplate a coup...
I 'think' the majority of people can see what is necessary, but as ever law and politics seeks to prevent change.
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