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Jane-DoH
27th Aug 2011, 20:17
Being that much of the problems in our society is caused by banks and their infiltration and subversion of our governments, I'd like to kick off a hamster-wheel thread devoted to the actions of big-banking.

Wall Street Aristocracy Got $1.2 Trillion in Federal Reserve's Secret Loans (http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html)

stuckgear
27th Aug 2011, 20:23
the thing is Jane, banks are doing what any company should do, maximise its profits for its shareholders.

Now, if banks and indeed any company can mitigate the risk involved in its operation by passing it on to a third party, then for themselves it's the best course of action for them.

the end result is that they maximise their own profits and shift the risk to the taxpayer.

Now is that the banks fault, or the regulators or the poor legislation and political influence that allows them to do so?

You can bet your bottom dollar that if you had a company and the ability to maximise your profits and pass the risk on to the never ending pot of gold that is the taxpayer you would do so.

free money ? trebles all round !

11Fan
27th Aug 2011, 20:24
-idnqCU-ECI

Jane-DoH
27th Aug 2011, 20:29
11Fan

Very good!

Jane-DoH
27th Aug 2011, 20:58
Thomas Jefferson once said that centralized banks were more dangerous than whole standing armies. I doubt even he truly believed the full extent of the machinations centralized banks would be capable of.

The Big Banks Are Waging Economic Warfare On The World (http://www.washingtonsblog.com/2011/07/big-banks-are-waging-warfare-against.html)

sU4Nvv5yqVg

As an interesting note: If any of you you either heard of, or read the book "Tragedy and Hope" by Carroll Quigley which talked about the Council on Foreign Relations and the Royal Institute of International Affairs (aka Chatham House), it mentioned their intention to establish a feudalistic system of banks coordinated through the Bank of International Settlements (i.e. The BIS)


R.C.
"In concept debating is about engaging in a formal discussion regarding opposing points; in actuality, the purpose of a debate is to either win the argument by being right, or to win the argument by any means necessary which includes misquoting, taking people out of context, using half-truths, whole-lies, pushing people's buttons, shaming, intimidation, and sheer endurance to exhaust one's opposition into submission -- in this scenario the virtue is in winning; being right is merely an added bonus" - An observation of the state of affairs regarding debating.

911slf
1st Sep 2011, 17:07
Will any Ayn Rand fan please explain to me one more time why it is wrong to regulate banks? :confused::confused::confused::confused::confused::confused:

sea oxen
1st Sep 2011, 18:55
Sure.

Who's going to decide the regulation. You?

All right then, we'll have the government do it.

That worked out just fine last time, didn't it?

SO

flying lid
1st Sep 2011, 21:03
So the UK had a defecit in 2008. Fair enough.

Then the banks, through sheer greed & incompetence f*** themselves up.

The government, stating the banks are too big to fail, then uses OUR money to bail them out, with (non existing) money "borrowed" from them the said banks, to be paid back by us by adding many billions to to the above said deficit. Meanwhile, the banks are up to their old tricks, and more.

We are, quite simply, becoming "debt slaves" to the system. Look at our kids with £50K+ future university loan debt, etc.

Tower of London for the lot of them, politicians (of both parties) included. One way trip via traitor's gate.

Revolution soon - it will start out of the blue, from an odd direction, like last months youth riots. (not condoning them - but the British people are getting increasingly miffed with the politico/banker elite)

Lid

tony draper
1st Sep 2011, 21:22
Hamsterwheel? this is the best kind of wheel for bankers.:E
http://i11.photobucket.com/albums/a194/Deaddogbay/WHEEL.jpg

stuckgear
1st Sep 2011, 21:37
Who's going to decide the regulation. You?

All right then, we'll have the government do it.




Well B:Liar and Gormless clown reduced, relaxed and removed certain banking regulations in order to woo city support for their party ideology. hmm that all worked out well !

in terms of regulation it is insane that retail and investment banking arms are not separated.

If I recall the security on deposits in the UK is 50K.

So Anybank takes its customer deposits, sits down at the roulette wheel and throws the lot on 'lucky 9'. oh bugger, lost the lot, the taxpayer will have to bail the bank out.

why ?

because all the deposits with Anybank PLC, the life savings, the pension accounts all those companies doing their banking and payroll, will go tango uniform overnight, with creditors and debtor not being paid, wages and life savings disappearing because the regulators allow the banks to put their depositors money on 'lucky 9' when the wheel is spinning and the ball is rolling.

All that happens is the profits are privatised and the risk is dispersed to the taxpayer and they can be as irresponsible as they like.

Again, any business has its prime target of return on investment to the shareholders, and they are removing the liability of their risk by governments allowing them to disperse the risk to the taxpayer.

I read an analysis somewhere (probably FT) that it would have been cheaper for the government to underwrite the retail deposits (pay out the balances to those who had funds in the bank) and let the bank go pop rather than this insane precedent that has been set.

Muffin Themule
2nd Sep 2011, 00:08
Well B:Liar and Gormless clown reduced, relaxed and removed certain banking regulations in order to woo city support for their party ideology. hmm that all worked out well !
I think you'll find they merely continued the good work of their predecessors, Mr. Gear. Names escape me now, but IIRC, the PM was of the female persuasion.

hellsbrink
2nd Sep 2011, 03:59
Wondered how long it would be before someone tried to blame Thatcher

sea oxen
2nd Sep 2011, 07:35
stuckgear

Yes. It does cost the State money from time to time to maintain a stable retail banking system, but the amenity to the general economic environment outweighs the cost. If people are too afraid to deposit their money, there'll be less to lend. Not all borrowed money is squandered on tat, holidays and plasma televisions. People want to start businesses, extend their homes and mortgage properties as well.

Northern Rock should have been allowed to die. The majority of its investors held only derisory funds and it would have been a good dry run of the FSCS.

It's tempting to blame Brown and Blair for it because they are nauseating people - but it's rather short-sighted, given that other major countries had banks rescued. As for blaming Thatch, it's fast becoming the new Godwin :)

Let's not forget that Anybank, devoid of its merchant banking arm, could be snuffed out with a sudden downturn in the economy and the housing market. Isn't that what happened to Freddie and Fanny?

If I recall the security on deposits in the UK is 50K.
I understand that it's £85,000 per person per institution, but IIRC was £30,000 in NR's day.

SO

D SQDRN 97th IOTC
2nd Sep 2011, 08:00
Stuckgear

the limit has increased....it is now £85k
FSCS > Deposit Limits (http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/deposit-limits/)

this covers 99% plus of all those with deposits.

Lucky 9? Don't make me laugh. The "risky" bets were taking deposit money, and lending that money to people like you and me who wanted to buy houses....risky bets called mortgages. Some of those people couldn't pay the money back, they lost their jobs, the house prices fell in value....so the banks took the hit. That's the job of the bank.....it is supposed to take the risk of a borrower defaulting instead of the deposit maker.....and from the interest earned on the mortgage, the bank keeps some for itself and then pays some back to the deposit maker. Usually banks keep about 2% for themselves. If you think you can do a better job of generating a return on your money by lending direct to people and companies, then go for it. It is a free world. Some web sites have set up to do just this, and compete with the banks. Check this out:
Zopa UK Loans - Get a great rate loan from Zopa Lenders (http://uk.zopa.com/ZopaWeb/)

Back to the issue....with interest rates so low in the last decade....so as to keep government debt repayment low but also which fueled a booming property market, and which the government wanted to keep booming at all costs as it took in large amounts of tax revenue. But with boom, there is going to come bust...despite the less than wise words of Gordon Brown.

The banks can be irresponsible? I don't think you understand how business is run. If any business goes bust...there will be creditors who go unpaid. Who loses? Well the shareholders of the business see the value of their shares go to zero. Pensions usually hold banks in their life funds........you don't want your pension company to buy those shares because you lose sleep at night due to the risk ? Well change to a pension fund that doesn't invest in banks. Ultimately, the management of any company is accountable to its shareholders. If shareholders don't want their business taking excessive risk, then they appoint a board and CEO that is risk adverse. They want more risk? They tell the board.

Extra rules apply to banks, and to the people who run them who are in positions of significant influence. If they behave irresponsibly, they are banned from the industry. They might get a golden goodbye in the process, as did Fred the Shred, which is so large that he couldn't care about being banned. But he is the exception the press keep writing about, the majority get nothing and are shown the door.

stuckgear
2nd Sep 2011, 08:37
I think you'll find they merely continued the good work of their predecessors, Mr. Gear. Names escape me now, but IIRC, the PM was of the female persuasion.


Gordon Brown's speech to bankers in the city of london


“I congratulate you on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London ... I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created."


Brown's speech to bankers in 2004:


"in budget after budget I want us to do even more to encourage the risk takers" (2004).


...

If people are too afraid to deposit their money, there'll be less to lend.

Indeed and it is insantity that the retail arms are put risk by the casino arms.


Not all borrowed money is squandered on tat, holidays and plasma televisions. People want to start businesses, extend their homes and mortgage properties as well


indeed, and the casino arms are not engaged in this aspect.


Northern Rock should have been allowed to die.


I agree, it would have been cheaper to secure the retail deposits and let Northern Wreck die. However, with banks interlending and secuitising debt off each other, Northern Wreck going pop would have bankrupted other banks too.

...


The "risky" bets were taking deposit money, and lending that money to people like you and me who wanted to buy houses....risky bets called mortgages


mortgages for people who couldnt afford them did not bring down the banks, eg, RBS offloaded its mortgage debt for 1.5bn to blackstone, however....


Royal Bank of Scotland plans to restructure up to £15.8 billion of debt in a balance sheet overhaul that will generate a 1.25 billion pound gain and help the bank on the road to recovery.
Detailing the long-awaited plan on Thursday, the bank said it expected to buy back or exchange 6.2 billion pounds of upper Tier 2 and Tier 1 debt as part of the overhaul,


The banks got into trouble by buying and selling debt between them, which they were borrowing from other banks to lend to tothers to do so.

The initial debt then grows exponentially as the debt is traded, coupled with interst, profit and incurred debt to do so, while other banks are doing likewise with each other. the orginal debt security is then dwarfed by the asassed debt package and the end result is nothing but paper and debt with a security that only covers a portion of the debt. but the debt itself still exists and is secured against nothing.


In a given bank debt trade, the seller might be an original bank lender seeking to rid itself of its piece of a troubled loan (a transaction called an original assignment), or the parties might be trading a piece of bank debt previously assigned by the original lender (a transaction referred to as a secondary assignment). How do the parties find each other? As might be expected, there are brokers in the distressed debt market that bring together buyers and sellers. One type of broker will remain involved in the settlement process to ensure that the trade settles; regardless, the buyer typically will take the assignment in its own name, be listed on the sale documents as the buyer, and be legally obligated to perform as specified in the sale documents. Certain banks and financial institutions will also act as brokers, but (primarily as a service to the sellers), they will do so by acquiring the debt piece from the seller and then selling it to the buyer, which, again, will be legally bound by the sale documents it enters into with the broker that is selling the debt piece.
A bank debt trade usually begins with an oral agreement between traders on the price and amount of debt that is to be assigned. The next step is to enter into a written trade confirmation, a standardized version of which, like many other transaction documents in the distressed debt market, has been published by the LSTA. The trade confirmation specifies the key terms of the transaction: the trade date, the nominal (i.e., face) amount of the assignment, the purchase rate (usually expressed in percentage terms), the form of purchase (assignment or participation), the settlement date, the form of the purchase and sale agreement, the treatment of accrued but unpaid interest, and which party is responsible for paying the assignment fee, among other terms and conditions.



the limit has increased....it is now £85k



thanks for that, i got in late after long day and the brain was a bit worn out.


But with boom, there is going to come bust...despite the less than wise words of Gordon Brown


indeed, there have been many 'bubbles' in the past and bubbles always burst. both recent and historical. The problem is that banks get carried away on the tide and always try to ride the boom. I don't know if it is beacuse those who have seen bubbles before are retired or moved on to make way for the new 'young turks' in banking, or if they just try to milk as much as possible ingonring the fact a collapse is imminent, or if they are just plain f:mad:king dumb.


Extra rules apply to banks, and to the people who run them who are in positions of significant influence. If they behave irresponsibly, they are banned from the industry.


Lest they incur the wrath of the Fundamentally Supine Authority ?

911slf
2nd Sep 2011, 09:46
Ayn Rand: The Fountainhead of Greenspan's Errors (http://www.politicsdaily.com/2009/11/12/ayn-rand-the-fountainhead-of-greenspans-errors/)

D SQDRN 97th IOTC
2nd Sep 2011, 13:27
"The initial debt then grows exponentially as the debt is traded"

Er...I don't think so.

So Northern Rock went bust - where was its casino arm? It didn't have one, and the retail side of the bank went bust due the retail side of the bank.

Halifax nearly went bust - and was bought by Lloyds. Where is the casino side of Halifax?

RBS sold some mortage debt - but not at face value. It was at a massive write down.

Lehman Brothers went bust - where was its retail arm. There is a complete fallacy - in fact total bollox - that the investment banking side of banks put the retail side of those banks at risk in the UK.

and your statement...
"mortgages for people who couldnt afford them did not bring down the banks"
THAT
is fundamentally what the financial crisis of 08 - till now is all about. It started in the USA....and the contagion spread here.

I suspect someone is a daily mail / daily express reader and believes all he reads.

It is the same problem we see today in Greece...they have been lent money they cannot afford to pay back. The odds are that at some point in the near future they will default on their debt. The question investors - i.e. lenders - ask themselves, is not "what is the return on my money", but "will I see the return of my money"?

hellsbrink
2nd Sep 2011, 17:55
Except, D SDRN, various banks were left exposed thanks to buying debt from US "banks" like Fannie Mae and Freddie Mac. Sure, they did have issues due to their own lending policies (wasn't Northern Rock the one offering 125%+ mortgages as well as allowing so many people to take out "self-certification" mortgages?) but the debt they exposed themselves to by buying the debt from others pushed them over the edge.


So, did they need a "casino arm" which was separate from the "retail arm"? No, because they did enough gambling through buying bad debt and by allowing themselves to lend so much money irresponsibly. The policies of NR, HBoS (Don't call it "Halifax", that name died years ago when BoS effectively "bought" Halifax. A huge mistake) and others were their "casino arm" and their gambling failed miserably leaving many people to pay the price.

D SQDRN 97th IOTC
3rd Sep 2011, 08:17
Hellsbrink

You are correct in that the contagion spread because investment banks parcelled up the mortgages by a process of securitisation. These parcelled up mortgages were generally called either CMOs or CDOs - collaterallised mortage obligations, or collaterallised debt obligations. And the investors that these securities were sold to took massive hits, including the banks themselves.

My point was that the underlying problem to this crisis was bad lending by the retail banks - remember it was a "sub prime" mortage problem? There were "liar" loans...there were "ninja" loans - no income no job or assets.
The "bets" or the "casino" that people were putting money on was the ability of people to repay sub-prime mortgages in the USA. Mortgages that were sold by retail "banks" in the USA, like countrywide. These retail banks told the investment banks that the required amount of due diligence had been done on those mortgage when they were sold. This turns out not to have been true.

You are right that Northern Rock had daft lending criteria - up to 125% and 7 times salary. Halifax still exists as a brand name...I have my current account with them.
Halifax | Mortgages, Bank Accounts, Savings, Credit Cards, Loans, ISAs (http://www.halifax.co.uk)
But if you want to get technical now and call it HBoS now...don't make me laugh. It was bought by Lloyds as I stated in one of my earlier posts.

So what irresponsible lending did the likes of Barclays Capital make - the investment bank of Barclays. What irresponsible lending did HSBC make? It didn't - but it was bloody stupid when it bought Home1 in the USA for many billions, and then immediately after the purchase realised what a crock of rubbish it was and wrote the investment off.

So why did Lehman go bust? Did it buy bad debt? Yup....the CMOs and CDOs that I mentioned above. It also bought land - on the belief that it was only ever going up in value - like house prices don't you know. And they lent lots of money to developers. Well 15 years ago, Lehman exited certain businesses, like dealing in commodities, as that was not a core business for them and they had no real expertise in that area. Very sensible and conservative. However, in the middle of the last decade, they suddenly decided they were masters of the property world, and bet their house on it. Not so sensible.

So yes, some investment banks got what they deserved, Bear Stearns, Lehman Brothers, Merrill Lynch...but they had no retail banking arm. (OK - so Merrill had a retail sales arm, but for private banking and wealth management - it wasn't subprime.) The retail banks that needed bailing out in the UK, did not need bailing out because of the risks put on by their own investment banks. If one did, would you care to say which ones?

And to use your word "gambling". If you conside that when a bank or building society make a gamble when it lends you money to buy a house via a mortgage, then OK, they were gambling. But this gambling by giving mortages is still carrying on today...are you saying this gambling should be stopped? Or are you saying the securitisation of mortgages should be stopped? Clearly you cannot be saying that the granting of mortages should be banned. That would be plain daft. On the securitsation of mortages....do you know what the impact would be on the market if you stopped this activity? Do you know why it exists?

mixture
3rd Sep 2011, 10:33
So what irresponsible lending did the likes of Barclays Capital make - the investment bank of Barclays. What irresponsible lending did HSBC make?

Are you sure you're not a lawyer, that's very carefully worded statement.

Of course all the majors played their role in the crisis.

For example, re: Barclays, an article from 2007 for you to mull over :

Barclays’ woes grow as crisis in sub-prime forces its client to be rescued - Times Online (http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2332477.ece)


All the big names were as bad as each other in their greed .... its just that some managed to escape oblivion through luck, or in Barclay's case, that timely and substantial cash injection by some nice chaps from the Middle East.

stuckgear
3rd Sep 2011, 16:02
"mortgages for people who couldnt afford them did not bring down the banks"
THAT
is fundamentally what the financial crisis of 08 - till now is all about. It started in the USA....and the contagion spread here.


and how did that contagion spread ? by the trading (buying and selling) debt between banks as a commodity.

that's how contagion spreads. If the banks had not been buying and selling their debt to each other then individual banks would have fallen on their arses not pulling each other down with them because of their intertraded debt packages.

mixture
3rd Sep 2011, 16:37
stuckgear,

Indeed, but then the basic rates margin isn't enough for poor Bobby the banker's bonus is it !

:E

ZiJa9diJOMk

stuckgear
3rd Sep 2011, 20:59
Irelands 6.5% on their 'bailout' perchance ?

trebles all round, again !

:}

D SQDRN 97th IOTC
4th Sep 2011, 07:01
Stuckgear

So at last we are getting somewhere - you recognise the root of the problem was non performing mortages.

Would a lack of trading have stopped the contagion? Interesting thought. A lot of what you call trading, is called investing by others. When your pension fund buys bonds, is it trading or investing? When I buy government bonds, like Gilts or Bunds, am I trading or investing? How about if I buy lesser quality government bonds like Greek or Spanish government bonds. Would you say with the benefit of hindsight that I was a cause of contagion for buying Spanish government bonds if at some stage the spanish government defaults?

Well these CMOs and CDOs were triple A rated by the credit reference agencies like Standard and Poors and Moodys. They were meant to be safe investments. So why not trade them - they were as safe as US government debt.

Or is your position that people should now not be buying US government debt....because that will create contagion if the USA defaults, and better the USA government goes down by itself rather than take others with it.

So where should I put my money stuckgear - am I allowed to buy and sell any bonds in your world?

From a different perspective, consider this. A lot of US sub prime loan books were substantially non performing. I think you make a good point that the buying / exchanging of loan books makes the world more interconnected. In a normal market, when only 1 seller of sub prime loans has a non performing loan book, then this process of buying / selling creates diversification, and reduces risk. However, if ALL the loan books are non performing (substantially), and nearly EVERYONE in the USA has been misselling sub prime mortgages to people who cannot afford them, then no matter how much you diversify, you are still buying highly correlated crap - to put it bluntly. And if between one seller of his crap (hahahaha, he thinks, I will offload some of my poor portfolio to the mug over there in return for some of his better quality stuff, hahhaha, the sucker) and another (who is thinking exactly the same as most of the sellers were inept, corrupt, missellers of sub prime mortgages), exchanging their debt between themselves or keeping themselves as little islands, then you either get taken down because your own assets are rubbish, or you get taken down because your assets that were rubbish that you swapped for other assets you hoped were better, also turned out to be rubbish. In both cases both firms go bust. The trading or the debt made no difference.

And all the while, the credit reference agencies were saying these parcels of debt were as solid as USA government debt !

Something is not right, you will agree. Well heopfully the litigation launched on behalf of Freddie Mac and Fannie Mae against a dozen or so banks will finally lay to rest what really went wrong in the middle of last decade.

hellsbrink
4th Sep 2011, 08:42
Well heopfully the litigation launched on behalf of Freddie Mac and Fannie Mae against a dozen or so banks will finally lay to rest what really went wrong in the middle of last decade.

I thought we already knew that, since Fannie Mae and Freddie Mac allowed themselves to be expose to far too many mortgages that people had no chance of paying. There was an attempt by the Bush Government to reign in this train-crash-waiting-to-happen, but that was spiked down by the Democrats (especially a certain two Democrats called Billary Clinton and Obama) and everyone was able to sit back and watch the train-crash happen in super-slow motion.

Any lawsuits against others such as BoS is merely diversionary.

D SQDRN 97th IOTC
4th Sep 2011, 14:00
Hellsbrink

I agree with you...but you know how it is with lawyers...and someone is always to blame but oneself. In this case Freddie Mac and Fannie Mae were professionals - this was their business. It is like saying a "traveller" got ripped off by allowing a fellow traveller to tar mac his drive, and then he complains a few years later when the tar mac starts breaking up because the foundations weren't solid enough.

The legal case will give the opportunity for people to argue it was all about bankers' greed - that casino operations of investment banks brought down the retail banks, it was about complex derivatives....

When at its heart, it boils down to something very simple. Some very greedy salespeople sold mortgages to people who couldn't afford them...and the people who couldn't afford them wanted them because they saw property ownership as a way of getting rich, so had become greedy themselves. The politicians? Well they saw votes in the people that normally wouldn't have mortgages, so strong armed the retail banks into offering mortgages to these people. If these mortgages weren't offered, then banking licences were threatened...so the normal controls that the banks had were suppressed.

But now the politicans cannot accept any blame for their part in this. Do you think the Democrats would say "we were part to blame", and blow away their chances of election for the next generation? Er....no. They are politicians after all, so found it better to find someone else to blame. And that blame fell on the banks.

Don't get me wrong. Some of the blame should fall on the banks. But only on banks? No. The regulators failed. The central banks failed. The politicians failed. And also adults who should be responsible for themselves, failed.

mixture
4th Sep 2011, 17:08
D SQDRN 97th IOTC,

The legal case will give the opportunity for people to argue it was all about bankers' greed - that casino operations of investment banks brought down the retail banks, it was about complex derivatives....

When at its heart, it boils down to something very simple. Some very greedy salespeople sold mortgages to people who couldn't afford them...

Maybe "at heart", but the fact remains that the transformation of something very simple (basic bank lending) into multiple levels of various complex financial instruments substantially grew the scale and extent of the problem.

And by leveraging financial instruments, the banks were lending more than they would otherwise be able to afford at unrealistic rates.

I've got no sympathy for bankers. And I do hope the regulators get their respective acts together too !

D SQDRN 97th IOTC
5th Sep 2011, 06:59
Mixture

I think you have a few things confused....too much reading of the daily mail.
Let me try to explain........

Did the banks activity enable the scale of the problem to grow? Yes, I suppose that is correct. But only in the sense that as investment banks took assets off the balance sheets of retail banks so these retail banks could then sell more mortgages. This is a service that investment banks do for plenty of industrial and service companies. At the time, the investment banks were not to know that sub-prime was such a misselling scandal.

So what exactly did they do...in simple terms so people on the street can understand?

Imagine I am a retail bank, and I have normally sold mortgages to prime customers only. I am happy with the risk of this asset on my balance sheet, so I keep it there. (Loans to the bank that makes the loan are assets - it is only debt to the person who borrowed the money.)
The regulators and politicians told me in the 90s that I was discriminating against certain ethnic minorities by not lending them money. I say as a bank, "no, it has nothing to do with their ethnicity, it is because they cannot afford the loans." The argument goes on...but eventually I gave in, and started selling subprime.

See the links posted by Basil.

In contrast with good asstes, I am NOT happy to have these assets on my balance sheet, so I want to sell them. Well the investment banks can help me do this, by securitising the loans - i.e. turning them into tradeable securities. The loans can also be novated by private placement, or a combination of the two.

So OK, there may have been some complex financial instruments out there as a result as a result...but not the bulk. The complex instruments may have been designed and created at the request of professional investors like hedge funds.

So how did this help make the problem worse? I will tell you.

So now I, little retail bank, I had done a little sub-prime (sounds shady, like doing something you shouldn't really be doing), got the risk off my balance sheet, (didn't get caught) and made a little bit of money. This isn't so bad, I thought. So let's do a bit more......and all the while I am thinking, AND EVERYONE ELSE IS THINKING THE SAME THING, that who cares if some of the people default on their mortgages...because these mortgages are secured against property, right. AND PROPERTY PRICES HAD ALWAYS GONE UP IN THE LONG RUN.

So pretty soon, this is the best game in town. Little retail banks are gradually moving through the ranks of the sub-prime like locusts, and eventually they reach the bottom. They are selling to people who WONT EVEN MAKE THE FIRST REPAYMENT. So what kind of due diligence can they be doing on people if they default on the first repayment?

So if the investment banks had not enabled them to clear their balance sheets, and given them room to sell to increasingly poor people, I guess you are right that this problem would have been smaller. But that doesn't make the investment banks responsible for the misselling any more than Smith & Wesson is guilty of murder because it sells guns.

AND THEN, property prices started to go down in the USA. They are now a third off their peak according to some estimates. BIG problem. Non performing loans, and a property market which is crashing..........

That is / was the underlying cause the crisis. Too much debt taken on by people who couldn't afford to pay it back. You see exactly the same happening now in Greece. Would you blame the investment banks - and say to them..."hey, you ! If you hadn't have helped me sell all this debt in the first place, I wouldn't be in such a pickle now." I think you wouldn't. So why with the retail banks?

mixture
5th Sep 2011, 08:19
DS97I,

Unfortunatley for you, I don't read the daily mail. Nor are my opinions necessarily soley based on what I read in the papers, or see on TV. I just suspect my thoughts may not have come across clearly because, unlike your good self, I tend not to spend too much time posting replies. So perhaps I should take a leaf out of your book at some point, but at the moment I'm quite busy with other things outside of PPRuNe.

You appear to be pushing the "off balance sheet" game as a purely risk-reduction one, when in reality it has been traditionally heavily used as another creative accounting mechanism. Hence the existence of various post-credit crunch rules such as FAS166/167 whose aim is to prevent asset hiding's role in increased leverage, and provide the beancounters with a way to show more profit at year end by pretending to transfer a risk to someone else (but that someone else doesn't exist, as it's only a financial instrument). Unsupported lending is not sustainable, hence off-balance sheet tricks are nothing more than a game.

It's very easy to hide behind your banker's desk and point at the smelly unwashed masses on the street and say they could not afford repayments. But the fact is, the banks could have said no, but instead, like a fishmonger trying to sell a questionable piece of fish, or an estate agent trying to sell a house located next to a busy dual carriageway, they found ways to make as much money as possible out of an otherwise unattractive situation. So the bankers to have to accept the reality that they have to shoulder a fair proportion of the blame, as do the regulators for being too lax with the rules. Of course the greedy buy-to-let oiks etc. have to take their share too, but only a proportion, not the 100% you're trying to dump on the man on the street.

As for calling hedge funds "professional investors", don't make me laugh…. glorified takers of excessive risk more like it. In one of my roles, I've met enough hedge fund managers in my time, and on the whole they are a bunch of arrogant, self-centred twits focused soley on maximising their personal bank balances and caring little for their client's portfolios.

Unfortunately I don't buy the picture you are painting of banks being little miss perfect, who didn't and couldn't have possibly done anything wrong to get themselves into this situation.

D SQDRN 97th IOTC
5th Sep 2011, 08:34
Mixture

I wasn't arguing with you. I was simply telling you what happened in layman's terms.
I didn't go into the accounting issues - so as not to make it too complex.
I have never painted the banks as little miss perfect. You should read my posts - I have called them stupid, greedy, etc. The point I make is that they are not singlehandedly to blame.
I have no idea how much time you spend on your posts, I just bash mine out.
I am not a banker.
You need to distinguish between retail and investment bankers. I am neither.
The point about misselling mortages is also my point, and banks should have said "no", you cannot afford this. But as I said....greed took over....

Hedge funds are deemed professionals under the EU MiFID directive. Wasn't my choice of words, but good it makes you laugh.

mixture
5th Sep 2011, 10:10
I knew it would be dangerous to step onto a thread that has the word hamstewheel in its title.

Think I better step off the wheel before I get all dizzy and disorientated. :E

Apologies if I misinterpreted what you were trying to get across.

D SQDRN 97th IOTC
5th Sep 2011, 10:58
No worries. I am not a big fan of the retail banks.

I have been fleeced over the years with outrageous charges....payment protection insurance, mortgage indemnity guarantee fees, low interest rates on my savings which were high when I first opened the account but then by stealth go slowly lower and the banks count on inertia.

I am believer in that banks should be allowed to safely fail...so shareholders who invest in that bank as a company lose all that investment. Moral hazard and all that.

Where banks cannot safely fail...as this would cause widespread chaos...this is where the issues / problems lie.

stuckgear
5th Sep 2011, 11:26
DS,

apolgies for the absence, not quite the time to contribute to this thread.

in respect of your cite:

I am believer in that banks should be allowed to safely fail...so shareholders who invest in that bank as a company lose all that investment. Moral hazard and all that.

Where banks cannot safely fail...as this would cause widespread chaos...this is where the issues / problems lie.

Likewise.

and that situation would also lead to economically responsible behaviour from banks. Unfortunately, 'prudence' set a poor precedent.

Jane-DoH
5th Sep 2011, 13:26
D SQDRN 97th IOTC

I am believer in that banks should be allowed to safely fail...so shareholders who invest in that bank as a company lose all that investment. Moral hazard and all that.

Where banks cannot safely fail...as this would cause widespread chaos...this is where the issues / problems lie.

Agreed, the problem is the banks are extremely powerful, they wield enormous influence on politicians, are practically waging economic warfare on the world (http://www.washingtonsblog.com/2011/07/big-banks-are-waging-warfare-against.html), and too big to fail is beneficial to them.

Big banks aren't going to just let themselves be chopped up into a bunch of smaller banks...

D SQDRN 97th IOTC
5th Sep 2011, 13:57
Indeed.
And I understand the Chairman of Lloyds has made an appointment to see the chancellor to fight his corner.

With respect to the very large banks - the G-SIFIs, the globally significant important financial institutions, the UK policiticans will place an incremental capital requirement above and beyond Basle III and CRDs III and IV.

So this will provide a natural brake on their size, because once this incremental charge kicks in, they stop becoming so competitive....as the only way they can meet the requirement is either to raise extra capital or cut back on risk.

stuckgear
6th Sep 2011, 09:25
Apr 16, 2010

Gordon Brown yesterday confessed that Labour's light touch on financial regulation was a mistake that contributed towards the financial crisis. Previously he had repeatedly self congratulated himself for saving the banking system from collapse and blamed lack of banking sector regulation on pressure from the City of London, form the banking sector, Bank of England and FSA, all of whom he alluded to wanted light touch regulation so as to maximise profits which funded Labours public sector spending spree which he says he reluctantly went along with rather than implement the regulatory reforms that he had all along envisaged.



Today the U.S. SEC charged Goldman Sachs with Mortgage Fraud. Alleged Fraud that was apparently conceived and from Goldman Sachs London offices under Gordon Browns light touch financial regulation regime.

Fraud that British tax payers had to pay the consequences of to prevent the collapse of mega-banks such as RBS and HBOS.

Fraud that contributed to wiping out 6% of the British economy and setting the economy back permanently at least 5 years in terms of lost economic output.

Fraud that has put Britain firmly on the path towards high inflation and eventual bankruptcy with total public debt heading for 100% of GDP from 40% of GDP prior to the crisis.

The Goldman Sachs alleged mortgage fraud lies at the very heart of the financial crisis in that Goldman Sachs was betting AGAINST the mortgage backed securities full of sliced and diced Toxic assets that were mis-rated by culpable ratings agencies as safe Triple AAA securities, that Goldman was selling to investors that would soon see them virtually all go bankrupt and head for tax payers to bail them out.

Goldman Sachs was effectively betting that millions of U.S. home owners would lose their homes that would wipe out the value of the mortgage backed securities that it was deliberately mis-selling to investors. Goldman Sachs was priming the U.S. housing market for a crash so as to maximise profits. This strategy included shorting large holders of mortgage backed securities such as Bear Stearns and Lehman's. This is NOT news, we have known about this since late 2007


http://www.marketoracle.co.uk/Article18715.html

Jane-DoH
7th Sep 2011, 08:51
Gordon Brown's probably just covering his buttocks, any regulation he imposes would probably be superficial window dressing

Jane-DoH
12th Sep 2011, 15:39
Bank of America will cut 30,000 jobs - Yahoo! Finance (http://finance.yahoo.com/news/Bank-of-America-will-cut-apf-1897361930.html?x=0&sec=topStories&pos=main&asset=&ccode=)

Jane-DoH
23rd Sep 2011, 23:05
Economic worries all over the world - Yahoo! Finance (http://beta.finance.yahoo.com/news/economic-worries-over-world-194759522.html)

More economic warfare eh?

BarbiesBoyfriend
23rd Sep 2011, 23:28
Bankers are parasites. Literally.

They are like fleas on a dog. No dog: No fleas.

We, those who work, are the dog.

Had to laugh at the UBS trader that 'lost' £1,500,000,000. (£1.5Bn)

He lost it, but somone else 'made' it.

UBS would have been a bit quieter had they 'made' the money. I think the deficiencies in his modus operandi might have been overlooked. Dont you?

Here's the real problem tho. Lets stick with our UBS guy.

He lost a fortune, others made one- and got handsomely paid for doing so. Kerchiiing!

Next day, maybe UBS win. Kerchiing!

Result, squillions abstracted in commision -from real people who didn't take part-by two bankers who did no real work.

These bloody parasites get paid in real money. Real dough, generated by actual work. But they never work themselves.

The money a trader takes home is real- and it's his- but he never made it.

Parasites.

vulcanised
24th Sep 2011, 12:09
You are quite corect, but there are even bigger and more obnoxious fleas who also don't mind dealing in death:-

On the desert trail of Tony Blair's millions - Telegraph (http://www.telegraph.co.uk/news/politics/tony-blair/8784596/On-the-desert-trail-of-Tony-Blairs-millions.html)

Jane-DoH
24th Sep 2011, 19:57
Vulcanized

Completely and totally corrupt...

Jane-DoH
12th Oct 2011, 18:27
Goldman, Morgan Stanley May Shed 'Bank' Status (http://finance.yahoo.com/news/Goldman-Morgan-Stanley-May-cnbc-3569095254.html;_ylt=AllgVfG2c0DyN2mrG.9OrO.7YWsA;_ylu=X3oDM TE1aHNkNmQwBHBvcwMzBHNlYwN0b3BTdG9yaWVzBHNsawNnb2xkbWFubW9yZ 2E-?x=0&sec=topStories&pos=main&asset=&ccode=)

Effectively they are changing their status to bypass the Volcker Rule... opinions?

con-pilot
12th Oct 2011, 22:17
I get free checking and on-line bill paying service, a few bucks a month interest, mistake-free accounting of my deposits and withdrawals, ATM access world-wide, free notary services, a helpful and friendly staff at my local branch, and I have no complaints.

My bank is no villain to me.

Same for me and we bank with a locally owned bank. My Visa/ATM/Debit card works all over the world, I've used it all over the world, at least around the world. From OKC to Beijing, London, Paris, Istanbul, all over the Caribbean, Mexico, everywhere.

Just use locally owned banks. Works for me.

Jane-DoH
13th Oct 2011, 02:43
Locally owned banks are definitely better than international banks... the fact is that considering that international banks are money and power hungry, they will inevitably try and take over local banks.

cavortingcheetah
13th Oct 2011, 03:29
Nothing wrong with shedding the Volcker rule if certain banks want to be investment banks rather than depositor banks. That's a broad brush distinction of course but disclosure of the terms and conditions will be compulsory in the USA. In Philadelphia until around the 1960s banks could not function as trustees as well as banks. As for large and small banks, as long as the local bank can liase from time to time with an international such as Chase Manhattan in order to transmit SWIFTS, then why not indeed. Problems arise though with small banks whose computers simply do not have the capability to recognize letters for transfers. Notice the routing number on the bottom left of your cheque books? Many non US banks and institutions use IBANS which have letters as well as numbers. Locally owned banks might be more likely to go bust than larger banks and beware of take overs if you own stock in the local banks. When Wells Fargo took over Wachovia, even though the move was not a hostile one, she share swap was something like 4/1. In other words, if you owned $100.000 of Wachovia stock, you got $25.000 of Wells Fargo stock. Some stagecoach ride into a dry gulch! It's the same here as anywhere else, if you've an account at Wells Fargo you can draw money at any branch. Try drawing cash in San Diego from the Cape Cod Bank and Trust Company. That's not a restrictive criteria for every one of course as the credit card takes care of most smaller financial transactions. I'm not really sure that international banks are that interested in small fry (assets under $1 billion banks) these days. There is no international 'plot' to rid the world of small depositor banks. The one of those that comes to mind has some six branches in and around the Philadelphia Main Line and none in the city at all. It's extremely successful and has public relations that are excellent. Every time I deal with a UK bank I sigh down the telephone at them and have to remind myself that I am dealing with a British client service industry which means obstruction and lack of pragmatic common sense at every turn. This is almost invariably backed up with that snooty nosed attitude the lower classes acquire when they think that they, mired in sloth, envy and the pedantry of the peasant, have the opportunity to put one over on one to whose position occasioned by hard work and good fortune they would aspire.