Bank profits... state ownership... dividends etc..
Discussion
heebeegeetee said:
youngsyr said:
The lender's excuse is that if they don't lend the money to people who can, on the face of it, afford to pay it back, then someone else will.
All well and good you might think, but businesses don't make a profit by turning away customers, and if one bank in particular consistently turned down customers that others were accepting, then the conscientious bank would perform worse than the others (at least in the short term) and may well end up going out of business.
So, it's a no-win situation, they either compete on a level playing field with other banks and lend to stupid people, or they don't lend to them, to the detriment of their business.
The only way to put a stop to that situation is to legislate against it occurring in the first place, or to wait until the whole house of cards collapsed.
Nonetheless, I can understand the finance industry's upset at their portrayal in the press, which has been led by the very politicians who encouraged them to act in that manner in the first place. It was, after all, Brown who loosened up lending rules in the late 1990s, was it not?
Do you think, on the face of it, a young man who has yet to complete his apprenticeship can afford a load of £15,000? He owns nothing, so if he defaults what are you going to do to recover your money?All well and good you might think, but businesses don't make a profit by turning away customers, and if one bank in particular consistently turned down customers that others were accepting, then the conscientious bank would perform worse than the others (at least in the short term) and may well end up going out of business.
So, it's a no-win situation, they either compete on a level playing field with other banks and lend to stupid people, or they don't lend to them, to the detriment of their business.
The only way to put a stop to that situation is to legislate against it occurring in the first place, or to wait until the whole house of cards collapsed.
Nonetheless, I can understand the finance industry's upset at their portrayal in the press, which has been led by the very politicians who encouraged them to act in that manner in the first place. It was, after all, Brown who loosened up lending rules in the late 1990s, was it not?
I think that the banks have lent vast sums of money to people who on the face of it, if they lose their jobs there is no chance of recovering the money.
By all means let these customers with no collateral go to your rivals.
Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
Edited by youngsyr on Tuesday 10th August 14:23
youngsyr said:
It's pointless to discuss individual cases when only a handful of (secondhand) facts are presented.
Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
Did Brown deregulate of his own fruition, or was he lobbied by the financial industry?Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
Edited by youngsyr on Tuesday 10th August 14:23
I don't think the banks have had their hands tied at all. There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral. If we were talking about small sums that would be one thing, but we're not.
Governments and prime ministers come and go, but some of those banks have been around for a bloody long time. If the banks allow the prime minister of the day to destroy their business then that is entirely up to them.
The banking crisis wasn't just a uk problem and i can't see how Brown can be blamed for what went on in America, for instance. Banks have behaved totally irresponsibly on a global scale, but again, that is entirely up to them.
We should not allow people to escape the responsibility of their actions. Even the lowliest chavs blame the govt for everything but it's not something i expect to see at the other end of the social scale.
heebeegeetee said:
youngsyr said:
It's pointless to discuss individual cases when only a handful of (secondhand) facts are presented.
Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
Did Brown deregulate of his own fruition, or was he lobbied by the financial industry?Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
heebeegeetee said:
I don't think the banks have had their hands tied at all. There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral. If we were talking about small sums that would be one thing, but we're not.
So, you haven't heard about the requirement on large companies to publish annual peformance figures then? They clearly showed for several years that it was prudent, sensible and wise to lend money to those people!http://news.bbc.co.uk/1/hi/business/4742846.stm
heebeegeetee said:
Governments and prime ministers come and go, but some of those banks have been around for a bloody long time. If the banks allow the prime minister of the day to destroy their business then that is entirely up to them.
As I wrote above, if every other bank is making record profits from such lending year after year, what would you suggest the board of the bank do - sit back and watch the competition destroy it? Hindsight is a wonderful thing!heebeegeetee said:
The banking crisis wasn't just a uk problem and i can't see how Brown can be blamed for what went on in America, for instance. Banks have behaved totally irresponsibly on a global scale, but again, that is entirely up to them.
Brown can be blamed for what happened in the UK as he was Chancellor and then Prime Minister for the entire period! Not all banks in every country have had problems from the financial crisis, in fact some have done very well indeed. That begs the question as to what was so special about the British and American banks - could it be that the regulation they were under allowed them (compelled them?) to act in a way that led to the current problems?
Who is responsible for setting the regulation?!
heebeegeetee said:
We should not allow people to escape the responsibility of their actions. Even the lowliest chavs blame the govt for everything but it's not something i expect to see at the other end of the social scale.
... but that is exactly what you are doing, the person taking out the loan has responsibility, so does the person/body making the rules, as well as the lender!You can't just heap all of the blame at the banks' doors!!
youngsyr said:
You can't just heap all of the blame at the banks' doors!!
But if the bank gets into trouble - then that is the fault of the people running the bank (along with the Government, to some extent). The individual borrowers cant be expected to know the ins and outs of the bank's business - it's simply not possible for them to do so.
youngsyr said:
heebeegeetee said:
youngsyr said:
It's pointless to discuss individual cases when only a handful of (secondhand) facts are presented.
Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
Did Brown deregulate of his own fruition, or was he lobbied by the financial industry?Still, there's no doubting that some of the lending was wreckless, I just wanted to point out that to a certain extent banks had their hands tied as soon as the government weakened the relevant legislation.
Mature companies (and Banks) are generally not judged on how their business might look in five years time, their reputation is very dependent on how they have performed in the past year... and let's not forget, Brown had abolished boom and bust, so what could possibly go wrong?!
heebeegeetee said:
I don't think the banks have had their hands tied at all. There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral. If we were talking about small sums that would be one thing, but we're not.
2. So, you haven't heard about the requirement on large companies to publish annual peformance figures then? They clearly showed for several years that it was prudent, sensible and wise to lend money to those people!http://news.bbc.co.uk/1/hi/business/4742846.stm
heebeegeetee said:
Governments and prime ministers come and go, but some of those banks have been around for a bloody long time. If the banks allow the prime minister of the day to destroy their business then that is entirely up to them.
3. As I wrote above, if every other bank is making record profits from such lending year after year, what would you suggest the board of the bank do - sit back and watch the competition destroy it? Hindsight is a wonderful thing!heebeegeetee said:
The banking crisis wasn't just a uk problem and i can't see how Brown can be blamed for what went on in America, for instance. Banks have behaved totally irresponsibly on a global scale, but again, that is entirely up to them.
4. Brown can be blamed for what happened in the UK as he was Chancellor and then Prime Minister for the entire period! 5. Not all banks in every country have had problems from the financial crisis, in fact some have done very well indeed. That begs the question as to what was so special about the British and American banks - could it be that the regulation they were under allowed them (compelled them?) to act in a way that led to the current problems?
6. Who is responsible for setting the regulation?!
heebeegeetee said:
We should not allow people to escape the responsibility of their actions. Even the lowliest chavs blame the govt for everything but it's not something i expect to see at the other end of the social scale.
... but that is exactly what you are doing, the person taking out the loan has responsibility, so does the person/body making the rules, as well as the lender!7. You can't just heap all of the blame at the banks' doors!!
2. But events have shown otherwise.
3. I don't think that lending unwisely has anything to do with hindsight. Allowances have to be made for when things go wrong, ie the borrower falls ill, loses his job, goes to prison or whatever. If there is no mechanism to cover these events then what do you do?
4. So it *is* all therefore the governments fault, and that of national leaders in other countries, and the fortunes of the private enterprises we are discussing had nothing to do with the management of said private enterprises? The companies were effectively managed by government?
5. So that debunks what you say about the banks having to trade recklesly then. If what you say is correct, all banks would have bust. The fact that a lot didn't tells you that there must have been something wrong with those who did.
6. But regulation isn't the same as enforcement. The government allows me to drive at 70mph on the motorway, but they're not forcing me to do so in torrential rain. That would be reckless. If i drive recklessly and crash into a bridge, it wouldn't be Gordon Browns fault.
Ozzie Osmond said:
Ah, but Mr Clever Banker lends out billions and if he "only" lends £15,000 to each person then if one of them doesn't pay the money back the bank hardly notices.
Yes. Would you rather he didn't?Ozzie Osmond said:
So why waste money doing proper checks on the customer if there's no real risk?
You've extrapolated a lot there. Remember: the higher the perceived risk, the higher the borrowing costs.Ozzie Osmond said:
The only catch was the idiot banks didn't realise they'd changed the game by lending EVERYBODY too much money and the whole house of cards collapsed around them.
Sure about that? Sounds awfully Daily Mail.Ozzie Osmond said:
Same as the danger with derivatives. A limited amount of derivative trading is IMO fine - with investment the dog and derivatives as its tail.
Why must it necessarily be this way? The massive figures you read are largely meaningless anyway, FYI.Ozzie Osmond said:
But next thing you know the whole derivative scene gets bigger than the subject-matter it's based upon and again the whole game changes. Namely gambling as the dog and investment as its tail. Complete lack of common sense.
That you think this shows that you don't know what they actually do in these areas. Sorry, don't mean to be rude, but you do seem very sure of yourself. Do you think poker (for instance), as a professional, is gambling?heebeegeetee said:
...
Let's consider a hypothetical situation: let's say the FIA allowed F1 teams to remove safety equipment that resulted in the cars gaining a half second advantage a lap. In the first race the only car that has had the safety equipment removed wins by a considerable margin and so the rest of the teams decide to follow suit in order to remain competitive.All is well until after 7 races Alonso has a "racing incident" crash (no drivers directly at fault) which kills him and an investigation finds that, had the safety measures still been there, he would have survived. Who is responsible for the death:
a) Alonso
b) Ferrari
c) the FIA
d) all of the above, to a certain extent
To come back to reality, yes the banks have a duty to maximise shareholder wealth. The conflict here is that in order to maximise shareholder wealth in the short term, they had to risk shareholder wealth in the long term.
Now, with the benefit of hindsight you're saying they should have been managed differently, but I doubt very much you were saying that in 2006 when the banks were posting record profits year after year.
Edited by youngsyr on Tuesday 10th August 20:00
youngsyr said:
Now, with the benefit of hindsight you're saying they should have been managed differently, but I doubt very much you were saying that in 2006 when the banks were posting record profits year after year.
It's funny you should say that, because it would have been about 2006 when we discovered that my pal's son had accrued £15,000 in debt. This wasn't the first instance of behaviour like this that i had heard of, stories like this were becoming commonplace in the media, but it was the first time i had had close contact with such a story and could get the info from the horses father's mouth, as it were.Edited by youngsyr on Tuesday 10th August 20:00
I couldn't understand it. None of us could. None of us could understand how it could possibly be good for anyone to allow a 19 yr old boy who lives at home with his parents and has no money, resources, investments or collateral in any form to chalk up 15 grands worth of debt. My pal had no complaint about the companies that had allowed all this to happen apart from one thing: when the lad started to realise he was really letting things get above his head and he had started to get near £10k's worth, he went to his bank for advice. Their solution was to let him borrow more (aka 'consolidate' his debts) and the £10k debt became a £15k debt.
I agree that it is pointless to discuss one individual case, but is this case untypical? It might not be.
Shortly after that time that i left that job and i heard no more about my pal's son, but i haven't forgotten it. And then of course, shortly afterwards the banks crashed and it became clear that it wasn't a good idea to lend people with no money or collateral large sums of money, though the question that remains is who ever thought it would be a good idea in the first place?
I don't think your F1 analogy is a good one. Why not stick to my earlier analogy - if i crash into a motorway bridge at 70mph and die, is it the governments fault for not restricting me to 30 mph, or is my behaviour my responsibility?
heebeegeetee said:
I don't think your F1 analogy is a good one. Why not stick to my earlier analogy - if i crash into a motorway bridge at 70mph and die, is it the governments fault for not restricting me to 30 mph, or is my behaviour my responsibility?
Your analogy misses out the very important point that the banks were in a highly competitive situation. Of course in your analogy it's your fault, but what if the government removed the speed limit entirely and you worked for a courier firm that gave you an incremental bonus for every minute early you arrived?To my mind that is a more accurate representation of the situation.
heebeegeetee said:
.. stuff about your pal ..
From an early age my dad warned me about borrowing to fund a lifestyle - perhaps your pal could have been a little more proactive about curbing his son's habits instead of finding someone else to blame .. ? Btw, has he defaulted on his debts yet or is he still paying a generous amount of interest? If the latter then the banks have made a good financial decision 
As for living at home with his parents, are you suggesting that people who don't own a property should be barred from obtaining loans? That's nearly everyone i went to university with, that's after they left university.
Edited by fido on Wednesday 11th August 10:38
fido said:
heebeegeetee said:
.. stuff about your pal ..
From an early age my dad warned me about borrowing to fund a lifestyle - perhaps your pal could have been a little more proactive about curbing his son's habits instead of finding someone else to blame .. ? Btw, has he defaulted on his debts yet or is he still paying a generous amount of interest? If the latter then the banks have made a good financial decision As for living at home with his parents, are you suggesting that people who don't own a property should be barred from obtaining loans? That's nearly everyone i went to university with, that's after they left university.
Edited by fido on Wednesday 11th August 10:38
It's very simplistic to look at isolated cases and drawing conclusions from them (even more so when it's secondhand and incomplete information), just as it is to conclude that it was all the banks' fault for being greedy and lending wrecklessly.
youngsyr said:
heebeegeetee said:
I don't think your F1 analogy is a good one. Why not stick to my earlier analogy - if i crash into a motorway bridge at 70mph and die, is it the governments fault for not restricting me to 30 mph, or is my behaviour my responsibility?
Your analogy misses out the very important point that the banks were in a highly competitive situation. Of course in your analogy it's your fault, but what if the government removed the speed limit entirely and you worked for a courier firm that gave you an incremental bonus for every minute early you arrived?To my mind that is a more accurate representation of the situation.
But even taking your analogy, a lot of us including me would be quite happy with speed limits removed on certain sections of m'way or at certain times. If we ever achieved this, are you saying that it would therefore be the governments fault every time someone drove badly? There are indeed those who would say yes, but i'm not one of them because i don't think that speed kills, but that's another topic.
fido said:
From an early age my dad warned me about borrowing to fund a lifestyle - perhaps your pal could have been a little more proactive about curbing his son's habits instead of finding someone else to blame .. ? Btw, has he defaulted on his debts yet or is he still paying a generous amount of interest? If the latter then the banks have made a good financial decision
As for living at home with his parents, are you suggesting that people who don't own a property should be barred from obtaining loans? That's nearly everyone i went to university with, that's after they left university.
I've no idea if the lad has defaulted, but i for one sincerely hope he has, because i think the organisations that lent him that money were greedy and irresponsible, more so than the stupid lad who took the money. The lad was too stupid to know what he was getting into imo, whereas the finance companies knew exactly what they were doing. Or should have done.As for living at home with his parents, are you suggesting that people who don't own a property should be barred from obtaining loans? That's nearly everyone i went to university with, that's after they left university.
Edited by fido on Wednesday 11th August 10:38
Re student loans - i think that's a bad thing too. There used to be grants, but now we have tens of thousands of people going to uni but there are only the same amount of jobs as before. Thus there are lots of people leaving uni with debts and they're not going to be getting the jobs that they thought they were going to get. It's not good,it's part of the madness, and i agree that this is the governments doing.
But i still say that if an employee trades his company into bankruptcy or collapse, then that is a matter for the company alone.
heebeegeetee said:
NobleGuy said:
heebeegeetee said:
NobleGuy said:
heebeegeetee said:
Like the 19 yr old son of a colleague, whom pre credit-crunch had been allowed to accrue a debt of £15k, and the only job he ever had was that of an apprentice motor mechanic, which he subsequently got bored of and was unemployed last time i heard.
I love this. Who's fault is it that he's in debt? The bank? Are we resigning all responsibility for our own actions as usual? Is it worse that the banks lent money to people who couldn't (or is it wouldn't?) pay, or is it worse that these morons took the money in the first place?
Edited by NobleGuy on Tuesday 10th August 10:28
Now, the educated, trained and highly paid bank emplyees, who lent so much money to the wrong people that hte banks collapsed - what's their excuse?
People who borrow too much money are stupid, but they are not responsible for the collapse of the business that was lending them money. But at least very often the borrowers are acting out of stupidity and ignorance - what's the lenders excuse?
Maybe their excuse is that they were making loads of money and were greedy like we all seem to be, and no-one either side of the equation did a thing about it. Not the government(s), not the lenders and not the borrowers. We all have to take responsibility for it.
heebeegeetee said:
youngsyr said:
heebeegeetee said:
I don't think your F1 analogy is a good one. Why not stick to my earlier analogy - if i crash into a motorway bridge at 70mph and die, is it the governments fault for not restricting me to 30 mph, or is my behaviour my responsibility?
Your analogy misses out the very important point that the banks were in a highly competitive situation. Of course in your analogy it's your fault, but what if the government removed the speed limit entirely and you worked for a courier firm that gave you an incremental bonus for every minute early you arrived?To my mind that is a more accurate representation of the situation.
But even taking your analogy, a lot of us including me would be quite happy with speed limits removed on certain sections of m'way or at certain times. If we ever achieved this, are you saying that it would therefore be the governments fault every time someone drove badly? There are indeed those who would say yes, but i'm not one of them because i don't think that speed kills, but that's another topic.
You cannot blame the banks for that as they have no control over it. However, the government did have control over it and what's more the government has the responsibility to ensure that these elements are controlled.
So, as I keep repeating, you can bash the banks all you like (and they deserve their share of the blame), but you should not ignore the other parties' roles, especially that played by the UK government.
heebeegeetee said:
There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral.
But...the vast majority of lending was made with collateral which subsequently nose-dived in value and could no longer cover the debts. Not sure what you can do about that other than stop lending altogether...youngsyr said:
So, as I keep repeating, you can bash the banks all you like (and they deserve their share of the blame), but you should not ignore the other parties' roles, especially that played by the UK government.
Edited by NobleGuy on Wednesday 11th August 11:08
NobleGuy said:
We all have to take responsibility for it.
Well, i wouldn't totally disagree with that. We're all responsible for our actions, and so are those who lend so much money to people with no money that they go bust.We are an avaricious nation, no doubt about it. I can spend 2 weeks in France in my Boxster and count the other porsches i see on one hand. In a week in northern spain i saw no other porsches, and indeed mine would attract a lot of attention. Whereas in my neck of the woods they're as common as muck.
So yes, there has been a hell of a lot of promotion to follow a lifestyle beyond your means, and that is indeed a fault of governments (and it did NOT start in 1997).
But nobody is forced to join in with it all, nobody at all, but if you do, and suffer as a consequence, you've no-one to blame but yourself, and that applies whether you're an individual or a bank, imo.
NobleGuy said:
heebeegeetee said:
There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral.
But...the vast majority of lending was made with collateral which subsequently nose-dived in value and could no longer cover the debts. Not sure what you can do about that other than stop lending altogether...These derivatives were then traded and traded again between the banks, making the leverage and lack of clarity even worse.
UK banks also had their own mortgage lending which was a bit shakey to add to these derivatives that they were holding and when Lehman Brothers went down the scope of the possible situation came to light, forcing down asset valuations across the board.
So, there are at least four major parties who played their role in the UK credit crunch, as far as I can see:
1) Credit ratings agencies
2) UK Financial regulators
3) UK Banks
4) UK borrowers
Still, it's much easier for the press to just blame the banks rather than explain the situation and the politicians are quite happy to blame the banks because it hides their role.
youngsyr said:
NobleGuy said:
heebeegeetee said:
There is no measure by which it can be shown to be prudent, sensible or wise to lend money to people who have no collateral.
But...the vast majority of lending was made with collateral which subsequently nose-dived in value and could no longer cover the debts. Not sure what you can do about that other than stop lending altogether...These derivatives were then traded and traded again between the banks, making the leverage and lack of clarity even worse.
UK banks also had their own mortgage lending which was a bit shakey to add to these derivatives that they were holding and when Lehman Brothers went down the scope of the possible situation came to light, forcing down asset valuations across the board.
So, there are at least four major parties who played their role in the UK credit crunch, as far as I can see:
1) Credit ratings agencies
2) UK Financial regulators
3) UK Banks
4) UK borrowers
Still, it's much easier for the press to just blame the banks rather than explain the situation and the politicians are quite happy to blame the banks because it hides their role.
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