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| Tracey Suntan-King |
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Tracey Suntan-King
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 Posted: 13:58 - 03 Mar 2015  Post subject: Does This Expain the Financial Crash? |
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Doing the rounds on Faceache. Is this bedtime story a plausible explanation of the financial crash?
Drunk & Unemployed
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Tracey Suntan-King
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| Flatbadger |
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Flatbadger
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Posted: 16:37 - 03 Mar 2015  Post subject: |
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White on black might be good when it comes to Guiness, but sod reading that writing! 
Short-termism causes the trouble. You can't blame bankers - they're just doing what any upstanding sociopath would do.
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| Orennayar |
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Orennayar
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angryjonny
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| stinkwheel |
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stinkwheel
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| swampy |
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swampy
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Posted: 18:31 - 03 Mar 2015  Post subject: |
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| bnp72 wrote: | Kind of...
Apart from the usual socialist spin where the blame is mainly laid on the irresponsible bankers/bar owner for allowing credit, rather than the irresponsible unemployed drunks who ran up the debt in the first place because they were "allowed" to do so, without the means or intention of ever paying it back. |
https://www.city-connect.org/wp-content/uploads/2011/09/yawning.jpg
Because Socialists.... Your default answer...
angryjohnny hit the nail on the head. This was a global crisis caused by banks selling toxic debt in order to boost their profits and maximise their bonus.
It was essentially irrelevant which party was in government at the time, as it would be incredibly unlikely that the Tories would have introduced any more regulation than Labour of the banking industry.
I am also a shareholder in RBS (as are you), if they can afford to pay public sector workers bonuses, then they should be able to pay me a dividend on my shares. That should sit well with your right wing philosophy...
These are the people you should get angry about - they are getting a better deal than you from public money, rather than turning your ire to public sector pensions or benefits claimants as you do...
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| mentalboy |
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mentalboy
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| Posted: 18:37 - 03 Mar 2015 Post subject: |
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If you really want a laugh, check out Fannie Mae and Fannie Mac and how post-collapse borrowing restrictions were eased up a couple of months ago allowing them to start loaning to customers in the same kind of fashion that caused the last collapse.
How long before they're bundling bad debts and dumping them on greedy Euro banks who think they're buying a bargain?
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Flatbadger
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| Rogerborg |
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Rogerborg
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| Posted: 20:57 - 03 Mar 2015 Post subject: |
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The analogy is a bit suspect, as the banks weren't pissing their lending up the wall, they were buying property, which was viewed as being safe as houses. As long as everybody kept lending, the good times would keep on rolling...
| mentalboy wrote: | check out Fannie Mae and Fannie Mac and how post-collapse borrowing restrictions were eased up a couple of months ago allowing them to start loaning to customers in the same kind of fashion that caused the last collapse. |
Profligate lending inflated the bubble, but the actual cause of the collapse was the banks shutting off the money hose.
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swampy
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Jewlio Iglesias
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grr666
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| Posted: 21:36 - 03 Mar 2015 Post subject: |
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If someone eats far too much and becomes very fat and subsequently unwell is that the fault of
the company that makes the food or the person stuffing it into their mouth?
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Pigeon
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| Posted: 21:36 - 03 Mar 2015 Post subject: |
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| mpd72 wrote: | Kind of...
Apart from the usual socialist spin where the blame is mainly laid on the irresponsible bankers/bar owner for allowing credit, rather than the irresponsible unemployed drunks who ran up the debt in the first place because they were "allowed" to do so, without the means or intention of ever paying it back.
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People are like goldfish, throw in enough food and they will consume it all regardless if they are hungry. And bankers are lying, cheating, psychopaths who would rob you blind in the street if they thought they could get away with it.
In the middle is government legislation and enforcement. My 2p for what it's worth is this is where the biggest failing was.
The Glass-Steagall act was put on place to separate the activities of commercial and investment banking. It stopped high-street banks from creating and investing in securities.
Components of the act were watered down over the years but particularly the late 90's and the Fed's interpretation meant banks were allowed to deal in securities, moreover, using client money (specifically monies from retail banking).
So the banks can create debt (mortgages etc), re-package it to spread the risk of good/bad debt (securitise) and get it appraised by ratings agencies so investors can gauge the value of the debt based on its perceived risk. Sold as a Collaterized Debt Obligation (CDO).
But ratings agencies earn vastly money from the sell side, not the buy side. So they are incentivised to positively rate products from banks.
So these CDO's get AAA+ rated, when they are really much lower.
So banks get to offload the risk of the debt they have created at a great price. But moreover, they can also gamble with other financial institutions on the value of their own debt through credit derivatives (such as Credit Default Swap). Which is great, because now they can use leverage and trade on margin. Vastly increasing the potential wins (and losses).
What about if they could securitise (re-package) the CDS's. Offload the risk of the products where they are gambling on theirs and others repackaged mortgage backed securities. Synthetic Collateralized Debt Obligations (SCDO's). Brilliant.
The "value" of SCDO's went from $15bln in 2005 to $5trn at the end of 2006!
And all because governments allowed banks to operate in a much riskier way. Yes people should not have borrowed more than they could afford to repay. But leverage and derivatives combined with poor governance meant those relatively small losses became mind bogglingly enormous.
They pumped a bull with steroids, let it out of it's cage into a china shop and wondered why everything was smashed. |
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Rogerborg
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| Posted: 22:06 - 03 Mar 2015 Post subject: |
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| mentalboy wrote: | Those two lenders (amongst others) would give mortgages to people who had zero earned income |
But viewed another way, the banks were actually buying property. They couldn't lose, even if they never got paid a penny on the mortgages.
You know, unless they stopped lending and foreclosed on millions of people, and saturated the market with repossessed homes that nobody could afford because they'd stopped lending, thereby sending prices plummeting and gutting the value of their own investments.
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| Posted: 22:21 - 03 Mar 2015 Post subject: |
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| Pigeon wrote: | | mpd72 wrote: | Kind of...
Apart from the usual socialist spin where the blame is mainly laid on the irresponsible bankers/bar owner for allowing credit, rather than the irresponsible unemployed drunks who ran up the debt in the first place because they were "allowed" to do so, without the means or intention of ever paying it back.
|
People are like goldfish, throw in enough food and they will consume it all regardless if they are hungry. And bankers are lying, cheating, psychopaths who would rob you blind in the street if they thought they could get away with it.
In the middle is government legislation and enforcement. My 2p for what it's worth is this is where the biggest failing was.
The Glass-Steagall act was put on place to separate the activities of commercial and investment banking. It stopped high-street banks from creating and investing in securities.
Components of the act were watered down over the years but particularly the late 90's and the Fed's interpretation meant banks were allowed to deal in securities, moreover, using client money (specifically monies from retail banking).
So the banks can create debt (mortgages etc), re-package it to spread the risk of good/bad debt (securitise) and get it appraised by ratings agencies so investors can gauge the value of the debt based on its perceived risk. Sold as a Collaterized Debt Obligation (CDO).
But ratings agencies earn vastly money from the sell side, not the buy side. So they are incentivised to positively rate products from banks.
So these CDO's get AAA+ rated, when they are really much lower.
So banks get to offload the risk of the debt they have created at a great price. But moreover, they can also gamble with other financial institutions on the value of their own debt through credit derivatives (such as Credit Default Swap). Which is great, because now they can use leverage and trade on margin. Vastly increasing the potential wins (and losses).
What about if they could securitise (re-package) the CDS's. Offload the risk of the products where they are gambling on theirs and others repackaged mortgage backed securities. Synthetic Collateralized Debt Obligations (SCDO's). Brilliant.
The "value" of SCDO's went from $15bln in 2005 to $5trn at the end of 2006!
And all because governments allowed banks to operate in a much riskier way. Yes people should not have borrowed more than they could afford to repay. But leverage and derivatives combined with poor governance meant those relatively small losses became mind bogglingly enormous.
They pumped a bull with steroids, let it out of it's cage into a china shop and wondered why everything was smashed. |
Goldfish are stupid, people need to start taking some responsibility for their own actions, apart from Liberals of course, who generally are on the same debating level of a goldfish.
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| swampy |
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swampy
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| Posted: 22:36 - 03 Mar 2015 Post subject: |
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| bnp72 wrote: | Goldfish are stupid, people need to start taking some responsibility for their own actions, apart from Liberals of course, who generally are on the same debating level of a goldfish. |
I completely agree. Including those people whose greed and pursuit of the mighty dollar led to this disaster with their 'make money and hang the consequences' approach to business.
You know, those people who still work in the industry and are taking yours and my money in their bonuses.
Yours and mine bnp72
I dunno about you, but I'm a bit pissed they haven't taken responsibility for their actions in any other way than to take a year off of coke and whores at bonus time in 2009 before getting straight back on it a year later when all the fuss died down...
I agree with personal responsibility (I am after all towards the anarchist end of the spectrum). The proles shouldn't have asked for the money if they couldn't pay it back... However, why do you think banks credit check if not to assess whether those they lend to can pay back. Is it not somewhat irresponsible to give money to people that you know can't pay it back. Is it not then criminal to sell that debt to another organisation therefore making money out of giving loans to people you know cannot pay them back ? Wheres the fucking personal responsibility in that chap ?
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Last edited by swampy on 22:59 - 03 Mar 2015; edited 1 time in total |
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angryjonny
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Old Thread Alert!
The last post was made 10 years, 343 days ago. Instead of replying here, would creating a new thread be more useful? |
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