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Bank warns of 'deep recession'
Comments
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No, unfortunately not... Many of the previously triple A rated securities are now worth 10p in the pound... some are worthless.
Alt-A, the next big tranche of modern, superfantastic (NOT) retail mortgage backed assets that will hit the banks balance sheets are looking at 50p in the pound at current forecast house price levels for 2010-2012, meaning the banks need investment simply to survive. I don't even want to hazard a guess as to the level of exposure UK banks have to these assets. Its not small though, and I reckon Alt-A is going to hit harder than subprime. reason? well, its all to do with stages of the market, and the biggest suckers always pay top dollar near the top. Most risky investments, highest cost. This is why this crisis will get worse and worse till it just... stops. Once all the write downs have happened, around 6 months after the last mortgage reset.
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I would say a bad bank would not take these on untill they started to weigh down on the banks balence sheets again.
But they could "restart the press" if they do so, also slowing the inflatory risk.0 -
That is incorrect. Under current accounting rules banks are obliged to account for assets under what's called marked to market valuation. As the market for such assets is effectively dead, such assets hold very little value forcing banks to take significant book losses. Such book losses do not result in a cash outflow.
Can you explain how QE will enable the banks to repay depositors? If a bank cannot pay its depositors, when they withdraw then it is insolvent. I don't see queues of depositors being unable to withdraw from banks...
Because you are making the mistake that everyone these days seems to make; its what lies around the corner. Current asset markets price the liabilities vs assets in positive territory, but what happens when writedowns happen for another 4 years? can you say for sure that the status quo of depositors being paid will remain? This is what they are trying to prevent.
Mark to market may mean that depositors are protected today. but, what about tomorrow? Next month?0 -
There's absolutely no point in purchasing them at the written down value - if it is accurate then the bank could simply sell the asset on the market for the same result!.
But they are still going down in value each quarter and the write downs are still being done and they are virtualy un-sellable!
Why the hell would a bad bank buy them at their highest original value?
No wonder you belive in hyper inflation0 -
Believe me, the BOE will want to pay as little for these assets as possible. Remember, the banks need to insure these assets, and for every down rating they get the premium goes up. This means assets that are effectively worthless are in fact costing banks money!
The banks will be made to beg and grovel for a few years yet. Believe me. Merv will make sure that they wont get a penny more than they need to survive, significantly weakening their power yet enabling them to survive.0 -
no some want a "end of days" senario say they can pick up one for nothing.
Can you stop the inflamatory personal attacks please.:rolleyes:
rrrrrright, so this:
constitutes an "inflamatory (sic) personal attack" in your book then, does it? Good grief.Wow, so this massive economic crash is happening "so some can get a cheap house"! Who'd have thought it.
You are the one throwing around 'doomer' accusations by accusing some here of wanting to see total economic meltdown in order to get a cheap house - a patently ludicrous accusation - and when I point out what a load of rubbish that silly stance is I'm being inflammatory and personal. Catch yourself on.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
rrrrrright, so this:
constitutes an "inflamatory (sic) personal attack" in your book then, does it? Good grief.
You are the one throwing around 'doomer' accusations by accusing some here of wanting to see total economic meltdown in order to get a cheap house - a patently ludicrous accusation - and when I point out what a load of rubbish that silly stance is I'm being inflammatory and personal. Catch yourself on.
Being sarcastic is being inflamatory yes.
It is true some on the board want a mad max senario. I don't see how you have not managed to see the posts.
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Because you are making the mistake that everyone these days seems to make; its what lies around the corner. Current asset markets price the liabilities vs assets in positive territory, but what happens when writedowns happen for another 4 years? can you say for sure that the status quo of depositors being paid will remain? This is what they are trying to prevent.
Mark to market may mean that depositors are protected today. but, what about tomorrow? Next month?
Actually I'm one of the bears here. I think we're in for a seriously awful time over the next 5 years.
Who knows what will happen in the future - one thing is for sure though, the government cannot allow depositors to lose anything. If that happens then there will be a total collapse of confidence in the banking system and ultimately we all get dinner from the soup kitchen.0 -
Actually I'm one of the bears here. I think we're in for a seriously awful time over the next 5 years.
Who knows what will happen in the future - one thing is for sure though, the government cannot allow depositors to lose anything. If that happens then there will be a total collapse of confidence in the banking system and ultimately we all get dinner from the soup kitchen.
I have come to the conclusion once my tesco bonus rate lapses next jan, it will probably be financially inviable to keep my deposits in the bank. Which means I will pull the lot. What I will put it into I am not sure.
11 months and counting!!!0 -
Actually I'm one of the bears here. I think we're in for a seriously awful time over the next 5 years.
Who knows what will happen in the future - one thing is for sure though, the government cannot allow depositors to lose anything. If that happens then there will be a total collapse of confidence in the banking system and ultimately we all get dinner from the soup kitchen.
Sorry debtors and depositors come last in my eyes, we can have deflation or hyperinflation. Keeping business's and GDP going is the most important at the moment.
Any bail out will not be done just to keep depositors happy I can assure you of that.
The FSCS bail out scheme is for that.0
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