10 years since the start of the financial crisis.
Discussion
andy_s said:
If the itinerant builder tells the old lady her roof needs re-doing when it doesn't and he can do it for a good price, is the old lady to blame when she's left bereft of savings and ends up under the same roof she started out with...?
Different scenario though. The builder being intentionally fraudulent.By coincidence we have just acted for the police in several cases of itinerant builders defrauding the elderly for unecessary and grossly overpriced building work and they quite rightly have received prison sentences of varying terms.
Yes the lending institutions pushed their products very cleverly. Just like the car pcp 'treadmill' bubble which many are quite rightly predicting as being the next 2008. Many are rolling the debt from their returned vehicle onto the shiny new one. What could possibly go wrong?
But, not unlike the majority of aspirational homeowners pre 2008 no one is forcing the pcpers to take on extra debt to fund their shiny new lifestyle vehicle perhaps solely to impress the neighbours. It is their decision and their decision only. Presumably based on a 'better and more prosperous' future.
Or when everything goes tits up again who will they blame?
El stovey said:
Sullivan later admitted it was run as a profit making centre. There’s no doubt this is what they were doing.
RBS chairman Sir Philip Hampton had to apologise for the "lack of clarity" by his executives. They were described as being “wilfully obtuse” in the inquiry by the treasury select committee.
That whole episode of evidence was ridiculous. The execs clearly didn’t have a clue.RBS chairman Sir Philip Hampton had to apologise for the "lack of clarity" by his executives. They were described as being “wilfully obtuse” in the inquiry by the treasury select committee.
My understanding is that GRG was run as a profit centre in that loans were written down when they entered GRG and their job was to recover more than the written down value.
The implication of profit centre is that they defaulted loans to get assets cheap and make a profit over and above the loan amount, and, as far as I have seen, that has not been evidenced.
andy_s said:
I'm not anti-bankers - at the time I was against the 'strip them of their bonuses' etc that was going on, but the sub-prime case and the SME shenanigans were clearly sharp business practise designed to sweep up the gullible and naïve.
The gullible and the naive where the people whose credit scores meant they were sub-prime borrowers and allowed to borrow more money than they should have been able to. Those people were only able to borrow that money because "sophisticated" fund managers/insurance companies/pension funds" bought assets that were backed by those mortgages. The bankers could have structured those deals and sold that risk if those f
k wits running those companies bought them. I find it incredible that to this day that people focus on the bankers but don't get angry with those people that actually bought that risk...the chances are that many people that read this forum have money with these asset managers or their occupational pension schemes were invested in theses securities
Cheib said:
The gullible and the naive where the people whose credit scores meant they were sub-prime borrowers and allowed to borrow more money than they should have been able to. Those people were only able to borrow that money because "sophisticated" fund managers/insurance companies/pension funds" bought assets that were backed by those mortgages. The bankers could have structured those deals and sold that risk if those fk wits running those companies bought them.
I find it incredible that to this day that people focus on the bankers but don't get angry with those people that actually bought that risk...the chances are that many people that read this forum have money with these asset managers or their occupational pension schemes were invested in theses securities
No European AAA ABS debt defaulted during / since the crisis, and it is those that were normally the ones held by the institutions you referred to above. Default rates on AA tranches was also pretty low.k wits running those companies bought them. I find it incredible that to this day that people focus on the bankers but don't get angry with those people that actually bought that risk...the chances are that many people that read this forum have money with these asset managers or their occupational pension schemes were invested in theses securities
The same can’t be said for tranches originated in the US.
The crisis was not driven by credit but by liquidity (or lack thereof), driven by overleveraged investors in certain structured markets.
Regardless, you are correct that many people (institutions) that bought these types of assets didn’t understand them and didn’t do appropriate due diligence before investing.
av185 said:
Different scenario though. The builder being intentionally fraudulent.
By coincidence we have just acted for the police in several cases of itinerant builders defrauding the elderly for unecessary and grossly overpriced building work and they quite rightly have received prison sentences of varying terms.
Yes the lending institutions pushed their products very cleverly. Just like the car pcp 'treadmill' bubble which many are quite rightly predicting as being the next 2008. Many are rolling the debt from their returned vehicle onto the shiny new one. What could possibly go wrong?
But, not unlike the majority of aspirational homeowners pre 2008 no one is forcing the pcpers to take on extra debt to fund their shiny new lifestyle vehicle perhaps solely to impress the neighbours. It is their decision and their decision only. Presumably based on a 'better and more prosperous' future.
Or when everything goes tits up again who will they blame?
Can you explain in more detail how the UK automotive credit market will precipitate events similar to the collapse of several global financial institutions and create a world wide recession ?By coincidence we have just acted for the police in several cases of itinerant builders defrauding the elderly for unecessary and grossly overpriced building work and they quite rightly have received prison sentences of varying terms.
Yes the lending institutions pushed their products very cleverly. Just like the car pcp 'treadmill' bubble which many are quite rightly predicting as being the next 2008. Many are rolling the debt from their returned vehicle onto the shiny new one. What could possibly go wrong?
But, not unlike the majority of aspirational homeowners pre 2008 no one is forcing the pcpers to take on extra debt to fund their shiny new lifestyle vehicle perhaps solely to impress the neighbours. It is their decision and their decision only. Presumably based on a 'better and more prosperous' future.
Or when everything goes tits up again who will they blame?
James_B said:
RBS remember lost fifty billion pounds through bad debts to individuals and businesses. They were being destroyed by customers welching on the deals that they signed and were trying to staunch the flow.
Back at the time I had a colleague whose 19 year old son, who was an apprentice at local dealership, had been lent a total of about £15,000. The son was living at home with his parents (my colleague was his father). The parents only found out because their suspicions were highly aroused over the sheer amount of post the lad was getting, and so they (illegally, perhaps) opened his mail. That's when the st hit the fan. The only complaint my colleague had about the banks was when the son had accrued about £10k worth of debt and knew there was no chance whatsoever of him paying it back, when he approached the bank (or banks, I don't know which or how many were involved) to get help, their answer was to lend him more money. (I believe they called it 'consolidation).
So, you take the view that the banks were "being destroyed by customers welching on the deals that they signed" but I take the view that the banks were monstrously stupid and irresponsible to lend that money in the first place. That in itself wouldn't be so bad and ideally the banks should have been allowed to collapse as should any business which has been badly run, but of course that couldn't happen because the banks were playing casino with other peoples money.
if what you say is right, surely RBS must have been monstrously stupid to lose as much as £50 billion through bad lending? Did they not have a clue what they were doing?
If the UK (or western world) economy relies on liquidity then that liquidity has to be maintained. The liquidity crisis could have been avoided if all parties had collaborated; the sub-prime implosion could have been avoided by unwinding over a long period. Instead, the banks pulled down the shutters in an attempt to protect their own interests.
V8 Fettler said:
If the UK (or world) economy relies on liquidity then that liquidity has to be maintained. The liquidity crisis could have been avoided if all parties had collaborated; the sub-prime implosion could have been avoided by unwinding over a long period. Instead, the banks pulled down the shutters in an attempt to protect their own interests.
It wasn’t the banks that ran out of liquidity, it was leveraged investors investing in asset backed securities.The banks were subject to the regulations and by the government forcing them to reduce their risks, often at any cost.
sidicks said:
V8 Fettler said:
If the UK (or world) economy relies on liquidity then that liquidity has to be maintained. The liquidity crisis could have been avoided if all parties had collaborated; the sub-prime implosion could have been avoided by unwinding over a long period. Instead, the banks pulled down the shutters in an attempt to protect their own interests.
It wasn’t the banks that ran out of liquidity, it was leveraged investors investing in asset backed securities.The banks were subject to the regulations and by the government forcing them to reduce their risks, often at any cost.
sidicks said:
Read about the introduction is the Community Reinvestment Act (CRA) and the pressure put on banks to comply.
Uh huh.What penalties were in place for banks who wouldn't recklessly extend credit then? Was anyone is the banking industry prosecuted for being prudent instead of reckless?
Of course not, no-one was 'making' the banks hand out money to anyone who could fog a mirror.
Clinton's bigger crime was the part he played in effectively killing off the Glass-Steagal act which allowed investment banks to play with depositors funds and which gave them the pretext to stick their hands out for a massive socialist-style bailout once their greed caught up with them.
Lucas Ayde said:
V8 Fettler said:
One example is the Northern Rock business model, which was based on liquidity being pemanently available, it wasn't, NR crashed.
Handing out 125% percent mortgages probably didn't help either .....andy_s said:
No, apparently it's the people that accepted these 125% mortgages that are to blame...
Whilst ultimately it's the banks who create the credit and then risk collapsing the system and trashing the economy when they overextend themselves, I'd have to say that people who took on such stupid debts are feckless idiots too.Of course, from the banks point of view why worry? The more you lend, the more you can potentially make and if it all goes belly up, a nice word with the politicians you've been carefully cultivating and the taxpayer steps in to clean up the mess and make your losses good. It certainly worked out nicely for most of the banking sector (other than NR and Lehmans of course) who have been doing nicely out of a decade of bank-friendly fiscal repression and bailouts/stimuli.
The only surprise is that Northern Rock got to where it was; Today it would have been bailed out or provided with as much liquidity as needed behind the scenes - I believe they changed the law shortly afterwards to allow the BoE to keep banks on life support without telling the public who are effectively back-stopping the banks losses.
What the public really need to do is inform themselves of the difference between bank credit and money ... and how the banking sector effectively creates about 90% of the 'money' supply through interest bearing loans. Maybe then people wouldn't be so laissez-faire about letting the bankers get away with what they do.
are the top people in banks not paid for their expertise in risk management? Are these people not paid millions to make sound investments on behalf of their shareholders? Are they not incessantly claiming to be world class/leaders in their fields?
SPECTACULAR FAIL, then. Still in denial now.
If it was the regulator's fault, then crime must be the police's fault. But it isn't.
SPECTACULAR FAIL by greedy, overpaid individuals and corporations who felt zero sense of responsibility beyond their own enrichment.
SPECTACULAR FAIL, then. Still in denial now.
If it was the regulator's fault, then crime must be the police's fault. But it isn't.
SPECTACULAR FAIL by greedy, overpaid individuals and corporations who felt zero sense of responsibility beyond their own enrichment.
Lucas Ayde said:
What the public really need to do is inform themselves of the difference between bank credit and money ... and how the banking sector effectively creates about 90% of the 'money' supply through interest bearing loans. Maybe then people wouldn't be so laissez-faire about letting the bankers get away with what they do.
The public generally need (if you are concerned for their welfare) looking after or a steer in the right direction.The populace in the 90's weren't any more/less knowledgable about banking but banks were low risk, no credit to students, most young people really, I remember getting that first loan or credit card required work to prove yourself, now it's "here you go see how you get on"!
The move away from this benefits who.........
deadslow said:
are the top people in banks not paid for their expertise in risk management? Are these people not paid millions to make sound investments on behalf of their shareholders? Are they not incessantly claiming to be world class/leaders in their fields?
SPECTACULAR FAIL, then. Still in denial now.
If it was the regulator's fault, then crime must be the police's fault. But it isn't.
SPECTACULAR FAIL by greedy, overpaid individuals and corporations who felt zero sense of responsibility beyond their own enrichment.
10 years on and you are still trying to push the blame all into one party, rather than recognising that the blame should be split between governments, regulators, banks and customers.SPECTACULAR FAIL, then. Still in denial now.
If it was the regulator's fault, then crime must be the police's fault. But it isn't.
SPECTACULAR FAIL by greedy, overpaid individuals and corporations who felt zero sense of responsibility beyond their own enrichment.
andy_s said:
Classing the criticism of the banks as 'pious bullst about evil banks' is straight from the Trump play book. It's neither pious, bullst nor characterised as 'evil', what it was was sharp practise to make money - that's a banks' raison d'etre..
To characterise all borrowers as stupid, reckless and greedy is similarly Trumpesque - for sure there was lots of it but there were many (perhaps a majority) who were either desperate, saw opportunity or were simply naïve.
A regulated, trusted financial organisation says it's OK to do something and encourages borrowing vs. Joe Mug who takes things at face value... I know where I apportion the majority of the blame.
I'm not anti-bankers - at the time I was against the 'strip them of their bonuses' etc that was going on, but the sub-prime case and the SME shenanigans were clearly sharp business practise designed to sweep up the gullible and naïve.
If the itinerant builder tells the old lady her roof needs re-doing when it doesn't and he can do it for a good price, is the old lady to blame when she's left bereft of savings and ends up under the same roof she started out with...?
good post, imo of course. rather than remove bonuses a good hard kick in the balls every morning for a month might have sharpened ideas up a bit t about evil banks' is straight from the Trump play book. It's neither pious, bullst nor characterised as 'evil', what it was was sharp practise to make money - that's a banks' raison d'etre.. To characterise all borrowers as stupid, reckless and greedy is similarly Trumpesque - for sure there was lots of it but there were many (perhaps a majority) who were either desperate, saw opportunity or were simply naïve.
A regulated, trusted financial organisation says it's OK to do something and encourages borrowing vs. Joe Mug who takes things at face value... I know where I apportion the majority of the blame.
I'm not anti-bankers - at the time I was against the 'strip them of their bonuses' etc that was going on, but the sub-prime case and the SME shenanigans were clearly sharp business practise designed to sweep up the gullible and naïve.
If the itinerant builder tells the old lady her roof needs re-doing when it doesn't and he can do it for a good price, is the old lady to blame when she's left bereft of savings and ends up under the same roof she started out with...?
andy_s said:
Lucas Ayde said:
V8 Fettler said:
One example is the Northern Rock business model, which was based on liquidity being pemanently available, it wasn't, NR crashed.
Handing out 125% percent mortgages probably didn't help either .....It's nice knowing I'll be mortgage free in 4 years also.
sidicks said:
10 years on and you are still trying to push the blame all into one party, rather than recognising that the blame should be split between governments, regulators, banks and customers.
But again, isn't that like blaming the police for crime? I mean yes, if the police don't do their job properly then crime will rise, but that doesn't make people choose to be thieves.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff