Body & Soul10 mins ago
the origin of the toxic debt
why are the banks getting all the stick? banks are in the business of lending money, that is how the economy works, the real cause of all the world financial turmoil is the thick, irresponsible, immoral, trailer trash and p!key lot who took on the debt without the wherewithall or means or inclination to meet their commitments, ninja loans were a mistake by the banks, having the underclass is a mistake by society, have a count-up and see what they have cost you......
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If you are in the business of handing out money, you have a responsibility to your bank and shareholders to make sure the people you are handing it to have the means and inclination to pay it back.
If the loans you grant are beyond the capacity of the person to pay it back then your are behaving irresponsibly.
The people who defaulted on these loans in the US lost their homes and had their lives seriously messed up. Not a happy situation for either party, and the fact that it was wholly preventable by doing a basic check on the ability to pay back the money.
The people who sold these dodgy loans took a commission and then off loaded the loans to other banks around the world and described them as AAA (the least risky) investments. The banks that bought them had a duty to check the goods (the loans) they were buying were sound investments. They didn't so they are deservedly getting a lot of stick for buying badly.
If the loans you grant are beyond the capacity of the person to pay it back then your are behaving irresponsibly.
The people who defaulted on these loans in the US lost their homes and had their lives seriously messed up. Not a happy situation for either party, and the fact that it was wholly preventable by doing a basic check on the ability to pay back the money.
The people who sold these dodgy loans took a commission and then off loaded the loans to other banks around the world and described them as AAA (the least risky) investments. The banks that bought them had a duty to check the goods (the loans) they were buying were sound investments. They didn't so they are deservedly getting a lot of stick for buying badly.
Lets consider self-certification mortgages.
If a bank lends someone money to buy a house there's a risk that person might lose their job or get sick and be unable to pay the mortgage.
The bank might foreclose and sell the house cheap and be unable to recover the difference and make a loss.
So the bank assesses the risk of that loss and shoulders that risk as a cost of doing business - off set against the profit from sucessful deals.
In a sense it insures itself against that risk.
With a self-certification mortgage where they have no proof of income that risk is higher and they have to charge a greater "premium" for that.
It's insurance again.
What has happened is the bank's assessments of risk have been grossly inadequate - their assessments have assumed generallly favorable economic conditions and when things nosedived that no longer was true.
It's not that dissimilar from the Llyods names mess 20 years or so ago.
The real problem is with a system that is so focussed on quarterly results that little or no long term vision was present and there was inadequate accounting for risk.
Of course I'm sure you'll find it a lot more satisfying to just blame the Pikeys!
If a bank lends someone money to buy a house there's a risk that person might lose their job or get sick and be unable to pay the mortgage.
The bank might foreclose and sell the house cheap and be unable to recover the difference and make a loss.
So the bank assesses the risk of that loss and shoulders that risk as a cost of doing business - off set against the profit from sucessful deals.
In a sense it insures itself against that risk.
With a self-certification mortgage where they have no proof of income that risk is higher and they have to charge a greater "premium" for that.
It's insurance again.
What has happened is the bank's assessments of risk have been grossly inadequate - their assessments have assumed generallly favorable economic conditions and when things nosedived that no longer was true.
It's not that dissimilar from the Llyods names mess 20 years or so ago.
The real problem is with a system that is so focussed on quarterly results that little or no long term vision was present and there was inadequate accounting for risk.
Of course I'm sure you'll find it a lot more satisfying to just blame the Pikeys!
Its like being in a vicious spiral.
People default on their mortgages. The banks are landed with toxic debt. People are then laid off from their jobs. This causes more people to default on their mortgages. The result is the banks have now extra toxic debt. More bailouts from the government to the banks. Less tax revenue. More government debt.
The end situation: government goes bankrupt. Banks go bust. Money becomes worthless. Everyone out of work. Food in short supply. But the sun still shines!
People default on their mortgages. The banks are landed with toxic debt. People are then laid off from their jobs. This causes more people to default on their mortgages. The result is the banks have now extra toxic debt. More bailouts from the government to the banks. Less tax revenue. More government debt.
The end situation: government goes bankrupt. Banks go bust. Money becomes worthless. Everyone out of work. Food in short supply. But the sun still shines!
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