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My budget wish - less FSA regulation
Comments
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This is the thing with major events like the credit crunch, people only live for today, and don't think about the consequences of their actions. At some point, maybe in 2004, did it not occur to anyone else that the financial markets were playing a dangerous game ? I know I mentioned it to people a few times, and I`m no expert economist. The evidence was as clear as day, yet many "experts" said they couldn't see it coming.
I have been saying for a while that we humans need to stop breeding at such a high rate. We have the intelligence, and the means to have a big say in our destiny, but all we do is keep bleating "I want more, more, more".30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Fraud is an emotive word. What he is asking for is that lenders are allowed to manage their own risks without excessive regulation. It's up to a lender to choose what basis he or she lends on, how much verification they do and how defaults are financed.
They had their chance to do that in the past and look what happened. People should be lent money upon their ability to pay from their wages. The 'multiples way' and thorough checking that used to happen did a reasonable job, letting people fill in whatever they wanted which happened in the years upto 2007, didn't.
Regulation is there for good reason.Have owned outright since Sept 2009, however I'm of the firm belief that high prices are a cancer on society, they have sucked money out of the economy, handing it to banks who've squandered it.0 -
I don't disagree with Derv's last statement by the way. Some rules are needed to prevent overexuberance.
But historically, the situation pre-crash was that base rates were around 5% and tipped to gradually rise, with predictions of stagnation in prices.
No need to invent a situation when the real situation is known.
Under those conditions there was no issue with mortgage default. There's no reason for thinking there would be problems had that been sustained, and bear in mind that the people on low rates isn't a high proportion, the fashion was for fixing. The evidence is (with net debt decreasing) that low rates are a bonus, not a lifeline.
Unless you understand what all independent studies of the financial crisis have concluded - that it was caused by the introduction of securitised debt generated in the US via reckless lending onto financial institution balance sheets - then you haven't a prayer of understanding what has happened since.
The problem is that bears were expecting a crash. When a crash happened they assumed it confirmed all their theories regarding why it happened, when in fact it was a surprising and unprecendented turn of events. The structural issues in the UK they saw don't really stand scrutiny given the supply/demand imbalance. It's very difficult to do "what ifs", but there are sufficient indicators in the pre-crash situation and the way the bounceback happened or rents increasing as I mentioned yesterday to draw conclusions about the state of the market and the firmness of underlying demand.
It's all too easy to say that "well, rates were floored so obviously the crash was arrested", but to argue that you have to show a chain of evidence that low rates are generally available and that there would have been a problem if they were higher. That evidence doesn't exist. Nor does evidence exist that mortgage interest support was a significant factor or that BTL increased prices significantly.0 -
They had their chance to do that in the past and look what happened. People should be lent money upon their ability to pay from their wages. The 'multiples way' and thorough checking that used to happen did a reasonable job, letting people fill in whatever they wanted which happened in the years upto 2007, didn't.
Regulation is there for good reason.
What happened is that borrowers repaid their debts. What's wrong with that?0 -
I don't disagree with Derv's last statement by the way. Some rules are needed to prevent overexuberance.
But historically, the situation pre-crash was that base rates were around 5% and tipped to gradually rise, with predictions of stagnation in prices.
Did the person/people who tipped base rates to gradually rise + price stagnation also tip the credit crunch ?
If they did not see the credit crunch coming, did they not (as I did) question the way that banks like Northern Rock we behaving ?30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
What happened is that borrowers repaid their debts. What's wrong with that?
Nothing, but they are now repaying debts with a little help from [STRIKE]the Halifax[/STRIKE] BoE.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
Did the person/people who tipped base rates to gradually rise + price stagnation also tip the credit crunch ?
If they did not see the credit crunch coming, did they not (as I did) question the way that banks like Northern Rock we behaving ?
That's the whole point. The actual crisis came from unpredictible events which took people by surprise.
Northern Rock were behaving in a way that left them vulnerable to a shock, but had the shock not happened they'd probably be lending still. There's no real sign of underlying default in the lending they did. In fact they could have gone down (and just about did) as I remember the turn of events without being too big to fail. What caused generalised panic was the idea that even "prudent" lenders had unknown liabilities hidden in their balance sheets.
It was the banking industry as a whole that was too big to fail, not an individual lender, and certainly there was no trigger from defaults.0 -
That's the whole point. The actual crisis came from unpredictible events which took people by surprise.
Northern Rock were behaving in a way that left them vulnerable to a shock, but had the shock not happened they'd probably be lending still.
Unpredictable events ?
The Americans were witnessing a property/lending boom on a huge scale. Subprime lending was hitting the headlines on a regular basis.
Northern Rock seemed to be offering ever more "generous" mortgage deals, and were becoming one of the top lenders in the UK (from being a minnow a few years earlier). I suspected that NR were overstretching themselves.
UK property prices were certainly reaching levels where borrowing requirements were huge, many folk I spoke to were mentioning how difficult it was becoming for FTBers.
Everything seemed too good to be true. And when things seem too good to be true, they often turn out to be rubbish.
You say "had the shock not happened they'd probably be lending still", maybe they would. And maybe they'd be in an even more dangerous position than they were.
The thing is there is no case of "if it hadn't happened", it did happen, and we should learn some valuable lessons from it.30 Year Challenge : To be 30 years older. Equity : Don't know, don't care much. Savings : That's asking for ridicule.0 -
That's the whole point. The actual crisis came from unpredictible events which took people by surprise.
Northern Rock were behaving in a way that left them vulnerable to a shock, but had the shock not happened they'd probably be lending still. There's no real sign of underlying default in the lending they did. In fact they could have gone down (and just about did) as I remember the turn of events without being too big to fail. What caused generalised panic was the idea that even "prudent" lenders had unknown liabilities hidden in their balance sheets.
It was the banking industry as a whole that was too big to fail, not an individual lender, and certainly there was no trigger from defaults.
But julieq this just contradicts your mantra on risk taking by banks. You always harp on about how the banks manage their risks sensibly but in this situation and others it shows that many of them did not manage risk taking sensibly.
And yes there were some banks that did better and did not need a bailout but there was still a significant amount that left this country in the sh*t.0
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