Firstly, it's got under the French dwarf's skin and prevented him from doing what Napoleon attempted to do 200 years ago.
Secondly, it has made the rest of Europe turn round and think - 'what do the Brits know that we don't?'
Thirdly, it's not the first time we've made a stand against what some people are attempting to do by turning Europe into a Federalist state - last time I looked we were a Monarchy.
Fourthly, I'm fed up with us following blindly with European legislation whilst the burgars of countries like France, Italy, Spain and Greece just ignore them to suit their own political agendas.
Fifthly, does anyone really think that there can be a true European superstate, without the UK in it? We belittle ourselves far too much for people to actually think that this isn't the case.
Sixthly, Countries like Switzerland and Sweden who are proud of their neutrality, seem to do OK
Seventhly, If you really think the rest of Europe are going to stop trading with us, you're having a laugh. Without the like of Mr England buying his BMWs and Renaults, a significant slice of European manufacturing would become insolvent. The same cannot be said the other way round - mores the pity.
Eighthly, Europe as it stands at the moment is going down the pan quicker than a torpedo shaped turd. Far too many countries who lied and cheated their way into joining the 'European Club', whose total additions to World economics depended on a good crop of olives or weather or not they can keep their beaches clean for 8 months of the year. And then just took, took, took.
Ninthly, I'm fed up with subsidising other countries economies with my tax pound, when our own is in desperate need of investment.
Finally, I'd rather be outside pissing into a house that's on fire, than inside trying to put it out.
Well done Cameron - it's about time we had some leaders with more balls to do what's is best for us.
Firstly, it's got under the French dwarf's skin and prevented him from doing what Napoleon attempted to do 200 years ago.
Secondly, it has made the rest of Europe turn round and think - 'what do the Brits know that we don't?'
Thirdly, it's not the first time we've made a stand against what some people are attempting to do by turning Europe into a Federalist state - last time I looked we were a Monarchy.
Fourthly, I'm fed up with us following blindly with European legislation whilst the burgars of countries like France, Italy, Spain and Greece just ignore them to suit their own political agendas.
Fifthly, does anyone really think that there can be a true European superstate, without the UK in it? We belittle ourselves far too much for people to actually think that this isn't the case.
Sixthly, Countries like Switzerland and Sweden who are proud of their neutrality, seem to do OK
Seventhly, If you really think the rest of Europe are going to stop trading with us, you're having a laugh. Without the like of Mr England buying his BMWs and Renaults, a significant slice of European manufacturing would become insolvent. The same cannot be said the other way round - mores the pity.
Eighthly, Europe as it stands at the moment is going down the pan quicker than a torpedo shaped turd. Far too many countries who lied and cheated their way into joining the 'European Club', whose total additions to World economics depended on a good crop of olives or weather or not they can keep their beaches clean for 8 months of the year. And then just took, took, took.
Ninthly, I'm fed up with subsidising other countries economies with my tax pound, when our own is in desperate need of investment.
Finally, I'd rather be outside pissing into a house that's on fire, than inside trying to put it out.
Well done Cameron - it's about time we had some leaders with more balls to do what's is best for us.
Admirable sentiments with which it is hard to disagree.
Sadly though it is all smoke and mirrors, if only it wasn't, but so far the media and some politicians are buying Cameron's PR stunt and he might just con all of the people all of the time.
Cameron's veto was to protect his pals and paymasters in the city. Water under the bridge now but if only previous UK Prime Ministers had had the guts to veto French and German moves to protect and subsidise their car and manufacturing industries back in the 70s and 80s. Look at the success of Peugeot, Renault, EDF, Mercedes, BMW, Volkswagen, Siemens, Bayer .... I suspect that succesive tory PMs were happy to see the demise of heavy industry as that was the bedrock of Labour and Union strength and political opposition.
Where are we now? .. still protecting bankers and money changers at the expense of 'proper jobs' especially for young people. Never mind about well paid footballers getting depressed, little can be so depressing as to have worked hard at school for years, passed exams, lead a good life, and to be told there is no job and little hope for you .. THAT is hard times.
It will be interesting now to see how creepy Clegg swings it with his own backbenchers and party members. He is so desperate for power that he is prepared to jettison a core principle of the Lib-Dems. What would happen if he is ousted and the coalition collapses? Well we would have an election in which Cameron's stance would be put to the voters. That would obviate the need for a referendum. Personally I can't see the Lib-Dems will sack him because they know that in an election they would be wiped out.
Nice to see goonerhater keeping true to form and abiding (not) to NSS's forlorn plea to keep party politics out of this debate. lol
Where do we stand? When Michael Portillo appears on my TV and praises Gordon Brown, I can only stare in total discombobulated befuddlement. I cannot believe that totally isolating this country at this critical time is good, but neither can I believe that upsetting Merkozy is bad. Have to fall back on my usual guide, ie the City fat cats are happy therefore it bodes ill for 90% of the nation.
It will be interesting now to see how creepy Clegg swings it with his own backbenchers and party members. He is so desperate for power that he is prepared to jettison a core principle of the Lib-Dems. What would happen if he is ousted and the coalition collapses? Well we would have an election in which Cameron's stance would be put to the voters. That would obviate the need for a referendum. Personally I can't see the Lib-Dems will sack him because they know that in an election they would be wiped out.
Nice to see goonerhater keeping true to form and abiding (not) to NSS's forlorn plea to keep party politics out of this debate. lol
To be fair he is not the only one!
Exhibit A Your Honour ..."headbanger/Eurosceptic wing in the Tory party"....
So there are no 'Eurosceptics' in the Labour Party?
Where's our plebiscite?
The politicians of both sides have promised and promised this. Have an open, honest, fair and truthful debate from all sides then ask the people
If we can vote on PR or it's half sister, then why can't we be allowed to vote on what is probably the most important issue for the long term stability of this Country and Europe as a whole.
membership or not of the EEC is THE most important decision to be made by the UK electorate or politicians if they refuse again and again to put the issue to a proper vote. We need NO NO NO Tories, Labourites, Liberal Democratites .. just people asking to be elected to parliament on ONE topic, one soapbox, one ISSUE .. Europe in or out .. every other policy is irrelevant and party politics has become null and void .. Europolitics is THE NAME OF THE NEW GAME .. The economis future and independence of this country .. ALL OF IT .. depends on whether we stay in or come out of Europe and the sooner it is decided the better. Politicians in this country couldn't arrange a bang in a brothel (yes I know it's probably illegal !!) .. they are generally simply more interested in their own careers rather than the future of this country and its people
So there are no 'Eurosceptics' in the Labour Party?
Where's our plebiscite?
The politicians of both sides have promised and promised this. Have an open, honest, fair and truthful debate from all sides then ask the people
If we can vote on PR or it's half sister, then why can't we be allowed to vote on what is probably the most important issue for the long term stability of this Country and Europe as a whole.
What is everybody afraid of?
Kate Hoey, Frank Field, Dennis Skinner and, possibly, to a lesser extent Gisella Stuart are all Labour Eurosceptics and there may be more.
Gisella Stuart is an interesting one because I believe she actually has some experience of negotiating with the EU or EC as it may have been then.
The Euro block has proved it cannot act together and make important decisions. That is the justification alone for staying out of their club. Some very tough decisions might need to be made if things get bad. Politicians cannot dare suggest what will happen in Europe doesn't find a solution, they just refer obliquely to a "serious problem". No one dare mention a run on the banks with business having no access to money to pay wages to employees. Some fundamental changes will be needed to restore banks to solvency and and the whole financial system will need to be re-built. We cannot contemplate not being in control of our own destiny in this scenario.
Discussions about trading terms and who we trade with can wait until we know we have something to trade and money to buy stuff.
By the way, the solution is not to give all these billions of money to the banks, the clever thinkers see that it would be better to give it to the individuals who have the debt and ensure they pass it on to the banks they owe the money to. The bank's debt falls as does the individual's. The effect also is to take away the pretend money which they lend and make their easy profits from. The banks and individuals both end up with nil or sustainable debt - simples.
Bank A lends to Mr Smith to buy his house with 100% mortgage. Mr Smith defaults so owes Bank A. Bank A forcloses on the mortgage and takes control of the property that's only worth 75% of the original mortgage.
Bank A lends to Mr Jones to buy his house with 100% mortgage. Mr Jones is happy to pay his mortgage on time every month until the mortgage is paid off. Bank A happy as they are making 7% PA on Mr Jones's mortgage.
Are there really so many more Mr Smiths out there than Mr Jones?
Is the whole banking collapse down to thousands of Mr Smiths?
In which case, we should take it all out on the Mr Smiths of the World and not the bankers.
Bank A lends to Mr Smith to buy his house with 100% mortgage. Mr Smith defaults so owes Bank A. Bank A forcloses on the mortgage and takes control of the property that's only worth 75% of the original mortgage.
Bank A lends to Mr Jones to buy his house with 100% mortgage. Mr Jones is happy to pay his mortgage on time every month until the mortgage is paid off. Bank A happy as they are making 7% PA on Mr Jones's mortgage.
Are there really so many more Mr Smiths out there than Mr Jones?
Is the whole banking collapse down to thousands of Mr Smiths?
In which case, we should take it all out on the Mr Smiths of the World and not the bankers.
toxic debt .. loans made which are inherently 'poisonous' .. if one lends £100,000 over 25 years to someone who is grossing £5,000 a year and has a wife and seven children, the 'odds' in favour of him being able to repay the debt and not to default are slim to zero .. and slim's outta town. In the early 2000s, hundreds of thousands of such 'loans' were made and defaulted on. Toxic debt was being traded as a AAA rated derivative .. VERY toxic, VERY poisonous
Bank A lends 100% mortgage to you. You pay it back. Jolly good for you. Even better for the bank, as you observe
Bank A also lends 100% mortgage to a tramp. Tramp is delighted that bank gives him a mortgage. Pretends to pay it for a few months
It does this 100,000 times in equal proportions.
It then mixes them all up and sells them in big bundles to Bank B on the other side of the world. Bank B is reassured that the bundle is fine, because Bank A has an AAA+ rating from Standard&Poors. Trouble is, Bank B has no way to unbundle the bundle and does not realise that half the bundle is mortgages given to tramps, and can't do anything about it anyway. Bank B is identified by Standard& Poors as a bank with lots of dodgy debts, because of all the bundles it bought from Bank A. S&P downgrades Bank B' s rating, causing a run on it, and lots of innocent savers lose their deposits.
That's toxic debt, Addickted. Brought to you by the very people Cameron wanted to protect yesterday (to the exclusion of all other decent businesses in the UK).
So Mr. Lincs, how did it ever happen in the first place? I still can't really get my head round it. And what exactly is going to stop it all happening again ( assuming that we can first get though the growing crises ). It just seems to me that Dave has appeased his toxic back benchers and put party unity ahead of national interest, nothing has really been solved and the battles are still to come. Merkozy has comprehensively out manouevred our Dave and we are looking pretty silly. Is that an unreasonable point of view?
So Mr. Lincs, how did it ever happen in the first place? I still can't really get my head round it. And what exactly is going to stop it all happening again ( assuming that we can first get though the growing crises ). It just seems to me that Dave has appeased his toxic back benchers and put party unity ahead of national interest, nothing has really been solved and the battles are still to come. Merkozy has comprehensively out manouevred our Dave and we are looking pretty silly. Is that an unreasonable point of view?
less bonuses for bankers who were being paid for arranging loans irrespective whether or not the loan was actually viable or was repaid .. a limit on borrowing, in the 'good old days' the limit might have been (say) 3 times annual income .. more 'intrusive' credit checks ... a decrease in house/property prices to reflect a realistic borrowing/lending regime .. stricter government regulation .. and errrrrrrrrrrrless greed all round .. we live in greedy/acquisitve times .. ban TV and ALL forms of advertising ... move back to the caves
Bank A lends 100% mortgage to you. You pay it back. Jolly good for you. Even better for the bank, as you observe
Bank A also lends 100% mortgage to a tramp. Tramp is delighted that bank gives him a mortgage. Pretends to pay it for a few months
It does this 100,000 times in equal proportions.
It then mixes them all up and sells them in big bundles to Bank B on the other side of the world. Bank B is reassured that the bundle is fine, because Bank A has an AAA+ rating from Standard&Poors. Trouble is, Bank B has no way to unbundle the bundle and does not realise that half the bundle is mortgages given to tramps, and can't do anything about it anyway. Bank B is identified by Standard& Poors as a bank with lots of dodgy debts, because of all the bundles it bought from Bank A. S&P downgrades Bank B' s rating, causing a run on it, and lots of innocent savers lose their deposits.
That's toxic debt, Addickted. Brought to you by the very people Cameron wanted to protect yesterday (to the exclusion of all other decent businesses in the UK).
The toxic debt came from the US where mortgages were sold to people on social benefits. It happened because money is made from selling debt to the market where people who have capital but want future income pay to receive the future mortgage repayments. So if you are selling debt you don't worry if it's going to be re-paid, you just want to create debt as a commodity to make money from.
So Prague, Bank A makes money out of Mr Jones and loses money out of Mr Smith in fairly equal proportions.
Bank A sells the 'good debt' on along with the 'bad debt' to Bank B in fairly equal proportions.
Now, either Bank A and Bank B share the debt or they share the profit Prague. Whatever the position they still end up with the 'asset' that they provided the mortgage in the first place with the 'bad debt'.
Are you saying that all the worlds financial problems are because a few thousand tramps Prague?
Or is it because some greedy bankers thought they could earn a fast easy buck? Hasn't that always been the case, but without a so called financial collapse? Some you win, some you lose. That's how the markets work Prague, going back to Egyptian times.
And what about all the asets that were owned by the tramps - are they still not an asset? Reduced in value maybe, but surely still an asset?
If Bank A gambles with Bank B, then one of them will be richer after the event and one of them poorer. Do you see? One Bank in the shite, one in the money.
So Mr. Lincs, how did it ever happen in the first place? I still can't really get my head round it. And what exactly is going to stop it all happening again ( assuming that we can first get though the growing crises ). It just seems to me that Dave has appeased his toxic back benchers and put party unity ahead of national interest, nothing has really been solved and the battles are still to come. Merkozy has comprehensively out manouevred our Dave and we are looking pretty silly. Is that an unreasonable point of view?
It happened because the banks demanded two things - less regulation and oversight (they claimed/still claim that "red tape" hinders business), they also claimed that they were best positioned to judge risk and that politicians and regulators acted to put brakes on them. Consequently extending debt became normal provided a small deposit was first paid as in most mortgages. The problem with this was that the market for people who wanted a mortgage or a loan and could responsibly pay it back was dwindling, thay already had mortgages or there was more competition. So, to extend the market and entice new punters in deposits were reduced to zero and in some cases amounts were loaned at over 100% of the value of a property so that the buyer could pay legal fees, buy furniture etc. This is fine, but risky business practice as these people are on the margins in terms of disposable income. If they lost their jobs or if interest rates rose, or if they were financially profligate they could soon fall into arrears leaving the bank in trouble as they had lent 100% of the sum, or in some cases more, so there was no safety margin.
The banks/mortgage providers however needed to protect themselves so they bundled up the loans into packages and flogged them on - say lumping together severlal million punds worth of loans and selling them, which gave them quick cash so that they could continue to loan money to the next set of unsuspecting mugs. And those bonds were flogged on at small profits in what was little more than a game of financial pass the parcel, all was well until interest rates rose and the debt started unravelling leaving banks holding large quantities of worthless debt. Not only did this happen with mortgages but also commercial and domestic loans and even the banks over-leveraged themselves - eg RBS borrowed a shedload of money to buy ABN Amro, which turned out to holding too much dodgy debt, but no one had bothered to look at their debt book to see what they were buying. Once repossessions started happening the banks had a problem, supply and demand meant that prices for property were falling, so re-possessed property was being sold on for significantly lower than it's original value and all that added meaning that banks etc were not only holding bad debt but were having to incure significant write downs which hit their profits.
Curiously the banks who were claiming that the government regulators were strangling them and were threatening to take their ball away to Switzerland or some place with even laxer banking and corporate laws turned into socialists over night as they queued up for government money to bail them out of their financial profligacy. When I sat government money, I mean of course our tax payer money.
So Prague, Bank A makes money out of Mr Jones and loses money out of Mr Smith in fairly equal proportions.
Bank A sells the 'good debt' on along with the 'bad debt' to Bank B in fairly equal proportions.
Now, either Bank A and Bank B share the debt or they share the profit Prague. Whatever the position they still end up with the 'asset' that they provided the mortgage in the first place with the 'bad debt'.
Are you saying that all the worlds financial problems are because a few thousand tramps Prague?
Or is it because some greedy bankers thought they could earn a fast easy buck? Hasn't that always been the case, but without a so called financial collapse? Some you win, some you lose. That's how the markets work Prague, going back to Egyptian times.
And what about all the asets that were owned by the tramps - are they still not an asset? Reduced in value maybe, but surely still an asset?
If Bank A gambles with Bank B, then one of them will be richer after the event and one of them poorer. Do you see? One Bank in the shite, one in the money.
So where has all the money gone?
That's not the way it works - the banks etc bundle up debt according to risk - so let's say relatively safe 25 year mortages at a 5% fixed rate with 10% deposits will be sold in one bundle. Dodgier debt - say 25 year mortgage at floating interest rates with 0% deposit is sold in an entirely separate bundle, they aren't, or at least shouldn't be mixed together.
If Bank A gambles with Bank B, then one of them will be richer after the event and one of them poorer. Do you see? One Bank in the shite, one in the money.
...............
You are assuming that this is a zero sum game, to be fair some times it is, but mostly it isn't.
Thanks BFR. What I don't get is why experienced bankers like RBS bought such dodgy goods. Why weren't the dodgy bits obvious, why didn't the FSA and Eddie George regulators have a grip on what was happening? If the banks themselves didn't know what was going on, then surely there was deception/fraud somewhere, so why haven't any of the villains been marched off to the Tower?
Thanks BFR. What I don't get is why experienced bankers like RBS bought such dodgy goods. Why weren't the dodgy bits obvious, why didn't the FSA and Eddie George regulators have a grip on what was happening? If the banks themselves didn't know what was going on, then surely there was deception/fraud somewhere, so why haven't any of the villains been marched off to the Tower?
The issue was that markets and house prices were rising, so the likelihood was that a re-possessed semi-detached with say a 100% mortgage on a property worth £100k could be sold at either cost, a small but sustainable loss or could even be flogged at a profit, at least that was the theory. So there was not much downside risk. Similarly with RBS, they intended to buy what they thought was a profitable company which once a few costs were stripped out would be even more profitable, they failed to examine the books properly and thought that if they generated enough cash they could pay the bills regardless. The problems kicked in when the re-possesions started mounting and properties were sold after re-possession at massive losses to get the debt off the books. Unfortunately the Fred Goodwins of the world were cast in certain sectors as heros and both Labour and the Conservatives relied on money coming out of the City to look too deeply into the ramifications of the pack of cards imploding.
But a mortgage was taken out to pay someone who was selling something - a tangible asset. Which is still there.It may be a smaller asset, but none the less it still has a value.
At what percentage of debt does it become unsustainable? What was the repossession rate of all mortgages? Even in bad times it is only a small percentage of all mortgages go wrong - say a max of 15%.
Comments
Excellent news.
Firstly, it's got under the French dwarf's skin and prevented him from doing what Napoleon attempted to do 200 years ago.
Secondly, it has made the rest of Europe turn round and think - 'what do the Brits know that we don't?'
Thirdly, it's not the first time we've made a stand against what some people are attempting to do by turning Europe into a Federalist state - last time I looked we were a Monarchy.
Fourthly, I'm fed up with us following blindly with European legislation whilst the burgars of countries like France, Italy, Spain and Greece just ignore them to suit their own political agendas.
Fifthly, does anyone really think that there can be a true European superstate, without the UK in it? We belittle ourselves far too much for people to actually think that this isn't the case.
Sixthly, Countries like Switzerland and Sweden who are proud of their neutrality, seem to do OK
Seventhly, If you really think the rest of Europe are going to stop trading with us, you're having a laugh. Without the like of Mr England buying his BMWs and Renaults, a significant slice of European manufacturing would become insolvent. The same cannot be said the other way round - mores the pity.
Eighthly, Europe as it stands at the moment is going down the pan quicker than a torpedo shaped turd. Far too many countries who lied and cheated their way into joining the 'European Club', whose total additions to World economics depended on a good crop of olives or weather or not they can keep their beaches clean for 8 months of the year. And then just took, took, took.
Ninthly, I'm fed up with subsidising other countries economies with my tax pound, when our own is in desperate need of investment.
Finally, I'd rather be outside pissing into a house that's on fire, than inside trying to put it out.
Well done Cameron - it's about time we had some leaders with more balls to do what's is best for us.
Admirable sentiments with which it is hard to disagree.
Sadly though it is all smoke and mirrors, if only it wasn't, but so far the media and some politicians are buying Cameron's PR stunt and he might just con all of the people all of the time.
Cameron's veto was to protect his pals and paymasters in the city. Water under the bridge now but if only previous UK Prime Ministers had had the guts to veto French and German moves to protect and subsidise their car and manufacturing industries back in the 70s and 80s. Look at the success of Peugeot, Renault, EDF, Mercedes, BMW, Volkswagen, Siemens, Bayer .... I suspect that succesive tory PMs were happy to see the demise of heavy industry as that was the bedrock of Labour and Union strength and political opposition.
Where are we now? .. still protecting bankers and money changers at the expense of 'proper jobs' especially for young people. Never mind about well paid footballers getting depressed, little can be so depressing as to have worked hard at school for years, passed exams, lead a good life, and to be told there is no job and little hope for you .. THAT is hard times.
Nice to see goonerhater keeping true to form and abiding (not) to NSS's forlorn plea to keep party politics out of this debate. lol
To be fair he is not the only one!
Exhibit A Your Honour ..."headbanger/Eurosceptic wing in the Tory party"....
:-)
So there are no 'Eurosceptics' in the Labour Party?
Where's our plebiscite?
The politicians of both sides have promised and promised this. Have an open, honest, fair and truthful debate from all sides then ask the people
If we can vote on PR or it's half sister, then why can't we be allowed to vote on what is probably the most important issue for the long term stability of this Country and Europe as a whole.
What is everybody afraid of?
Kate Hoey, Frank Field, Dennis Skinner and, possibly, to a lesser extent Gisella Stuart are all Labour Eurosceptics and there may be more.
Gisella Stuart is an interesting one because I believe she actually has some experience of negotiating with the EU or EC as it may have been then.
The Euro block has proved it cannot act together and make important decisions. That is the justification alone for staying out of their club. Some very tough decisions might need to be made if things get bad. Politicians cannot dare suggest what will happen in Europe doesn't find a solution, they just refer obliquely to a "serious problem". No one dare mention a run on the banks with business having no access to money to pay wages to employees. Some fundamental changes will be needed to restore banks to solvency and and the whole financial system will need to be re-built. We cannot contemplate not being in control of our own destiny in this scenario.
Discussions about trading terms and who we trade with can wait until we know we have something to trade and money to buy stuff.
By the way, the solution is not to give all these billions of money to the banks, the clever thinkers see that it would be better to give it to the individuals who have the debt and ensure they pass it on to the banks they owe the money to. The bank's debt falls as does the individual's. The effect also is to take away the pretend money which they lend and make their easy profits from. The banks and individuals both end up with nil or sustainable debt - simples.
I'm still not sure what 'toxic debt' is.
Bank A lends to Mr Smith to buy his house with 100% mortgage. Mr Smith defaults so owes Bank A. Bank A forcloses on the mortgage and takes control of the property that's only worth 75% of the original mortgage.
Bank A lends to Mr Jones to buy his house with 100% mortgage. Mr Jones is happy to pay his mortgage on time every month until the mortgage is paid off. Bank A happy as they are making 7% PA on Mr Jones's mortgage.
Are there really so many more Mr Smiths out there than Mr Jones?
Is the whole banking collapse down to thousands of Mr Smiths?
In which case, we should take it all out on the Mr Smiths of the World and not the bankers.
So Mr. Lincs, how did it ever happen in the first place? I still can't really get my head round it. And what exactly is going to stop it all happening again ( assuming that we can first get though the growing crises ). It just seems to me that Dave has appeased his toxic back benchers and put party unity ahead of national interest, nothing has really been solved and the battles are still to come. Merkozy has comprehensively out manouevred our Dave and we are looking pretty silly. Is that an unreasonable point of view?
This all day long.
So Prague, Bank A makes money out of Mr Jones and loses money out of Mr Smith in fairly equal proportions.
Bank A sells the 'good debt' on along with the 'bad debt' to Bank B in fairly equal proportions.
Now, either Bank A and Bank B share the debt or they share the profit Prague. Whatever the position they still end up with the 'asset' that they provided the mortgage in the first place with the 'bad debt'.
Are you saying that all the worlds financial problems are because a few thousand tramps Prague?
Or is it because some greedy bankers thought they could earn a fast easy buck? Hasn't that always been the case, but without a so called financial collapse? Some you win, some you lose. That's how the markets work Prague, going back to Egyptian times.
And what about all the asets that were owned by the tramps - are they still not an asset? Reduced in value maybe, but surely still an asset?
If Bank A gambles with Bank B, then one of them will be richer after the event and one of them poorer. Do you see? One Bank in the shite, one in the money.
So where has all the money gone?
It happened because the banks demanded two things - less regulation and oversight (they claimed/still claim that "red tape" hinders business), they also claimed that they were best positioned to judge risk and that politicians and regulators acted to put brakes on them. Consequently extending debt became normal provided a small deposit was first paid as in most mortgages. The problem with this was that the market for people who wanted a mortgage or a loan and could responsibly pay it back was dwindling, thay already had mortgages or there was more competition. So, to extend the market and entice new punters in deposits were reduced to zero and in some cases amounts were loaned at over 100% of the value of a property so that the buyer could pay legal fees, buy furniture etc. This is fine, but risky business practice as these people are on the margins in terms of disposable income. If they lost their jobs or if interest rates rose, or if they were financially profligate they could soon fall into arrears leaving the bank in trouble as they had lent 100% of the sum, or in some cases more, so there was no safety margin.
The banks/mortgage providers however needed to protect themselves so they bundled up the loans into packages and flogged them on - say lumping together severlal million punds worth of loans and selling them, which gave them quick cash so that they could continue to loan money to the next set of unsuspecting mugs. And those bonds were flogged on at small profits in what was little more than a game of financial pass the parcel, all was well until interest rates rose and the debt started unravelling leaving banks holding large quantities of worthless debt. Not only did this happen with mortgages but also commercial and domestic loans and even the banks over-leveraged themselves - eg RBS borrowed a shedload of money to buy ABN Amro, which turned out to holding too much dodgy debt, but no one had bothered to look at their debt book to see what they were buying. Once repossessions started happening the banks had a problem, supply and demand meant that prices for property were falling, so re-possessed property was being sold on for significantly lower than it's original value and all that added meaning that banks etc were not only holding bad debt but were having to incure significant write downs which hit their profits.
Curiously the banks who were claiming that the government regulators were strangling them and were threatening to take their ball away to Switzerland or some place with even laxer banking and corporate laws turned into socialists over night as they queued up for government money to bail them out of their financial profligacy. When I sat government money, I mean of course our tax payer money.
Money heaven.
That's not the way it works - the banks etc bundle up debt according to risk - so let's say relatively safe 25 year mortages at a 5% fixed rate with 10% deposits will be sold in one bundle. Dodgier debt - say 25 year mortgage at floating interest rates with 0% deposit is sold in an entirely separate bundle, they aren't, or at least shouldn't be mixed together.
If Bank A gambles with Bank B, then one of them will be richer after the event and one of them poorer. Do you see? One Bank in the shite, one in the money.
...............
You are assuming that this is a zero sum game, to be fair some times it is, but mostly it isn't.
The issue was that markets and house prices were rising, so the likelihood was that a re-possessed semi-detached with say a 100% mortgage on a property worth £100k could be sold at either cost, a small but sustainable loss or could even be flogged at a profit, at least that was the theory. So there was not much downside risk. Similarly with RBS, they intended to buy what they thought was a profitable company which once a few costs were stripped out would be even more profitable, they failed to examine the books properly and thought that if they generated enough cash they could pay the bills regardless. The problems kicked in when the re-possesions started mounting and properties were sold after re-possession at massive losses to get the debt off the books. Unfortunately the Fred Goodwins of the world were cast in certain sectors as heros and both Labour and the Conservatives relied on money coming out of the City to look too deeply into the ramifications of the pack of cards imploding.
Thanks BFR I do see that.
But a mortgage was taken out to pay someone who was selling something - a tangible asset. Which is still there.It may be a smaller asset, but none the less it still has a value.
At what percentage of debt does it become unsustainable? What was the repossession rate of all mortgages? Even in bad times it is only a small percentage of all mortgages go wrong - say a max of 15%.
No-one actually understands this.
The End