My budget wish - less FSA regulation

chucky

shortchanged wrote: »

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.

the banks weren't the problem, they kept to the "rules" - the regulation or the lack of regulation was the problem

ILW

julieq wrote: »

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.

Rather an odd definition of prudence.

Generali

julieq wrote: »

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.

Fraud is obtaining pecuniary advantage by deception. Lying about your income (deception) to obtain a mortgage (pecuniary advantage) is an example of fraud.

For this not to be fraud would need a change in the law AIUI.

DervProf

Bottom line........

If house prices weren't so high in the UK, there would not be such a problem with people having access to funds to buy houses. And the reason those houses are at the level they are is related to supply/demand (that one's for Hamish) and lending conditions. 2001 -2007, lending conditions favoured HPI. 2007-Now, lending conditions have not favoured HPI, IRs have helped to maintain prices. To continue with HPI, lending needs to go back towards the way it was in 2007. If it does, then it won't be long before lending needs to be a bit more "generous" than it was in 2007 to maintain HPI. OK, there may not be the external risks to our lenders like there were pre 2007, but it just might be that our lenders won't need the Americans to pop their bubble, they'll make it burst themselves.

DervProf

chucky wrote: »

the banks weren't the problem, they kept to the "rules" - the regulation or the lack of regulation was the problem

Which takes us back to Conrad's request for lighter regulation.

Graham_Devon

julieq wrote: »

That's the whole point. The actual crisis came from unpredictible events which took people by surprise.

Unpredictable?

There are articles in the newspapers going way back talking about irresponsible lending.

HPC predicted it and talked about it, and many of your persuassion regard them as merely idiotic imbeciles....yet here you are suggesting it was unpredictable, when a whole website of normal folk was set up predicting it, let alone experts.

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.

As for this....if the earthquake didn't happen in Japan, the tsunami wouldn't have taken so many thousands of lives. But it DID happen. No point saying "well if it hadn't of, things would have been ok".

As for not defaulting....the government took them over. They held reposessions back, it's well known, even the government said it themselves!!

chucky

DervProf wrote: »

Which takes us back to Conrad's request for lighter regulation.

you're confusing two totally different things.

one is regulation to avoid fraud or people lying about their income.

the second is the types of investments that banks are allowed to trade and advise on.

both didn't have the best regulation - the first one is a very, very small issue compared to the second which has and did have a huge catastrophic effect on the global economy.

i believe Conrad is talking about the first one.

shortchanged_2

chucky wrote: »

the banks weren't the problem, they kept to the "rules" - the regulation or the lack of regulation was the problem

So you are saying they were irresponsible then chucky?

chucky

shortchanged wrote: »

So you are saying they were irresponsible then chucky?

who the banks?? if you're saying irresponsible mortgage lending caused issues to the UK banking industry you're wrong.

the banks are driven by profit which is driven by shareholders. if you're going to blame banks, you would need to blame pension funds,investment funds and the individual share holders demanding profit from the banks.

DervProf

Graham_Devon wrote: »

As for this....if the earthquake didn't happen in Japan, the tsunami wouldn't have taken so many thousands of lives. But it DID happen. No point saying "well if it hadn't of, things would have been ok".

As for not defaulting....the government took them over. They held reposessions back, it's well known, even the government said it themselves!!

I was going to use the Japan analogy.

They new it was coming at some point, and at least they did prepare themselves as best as they could. A horiffic event, I`m sure we'll all agree. Preventable ? Well, I suppose some of us thought "if they knew there was a huge earthquake on the way, why did they not leave the country ?". Obviously, that would not have been an easy task.

Now, compared to mass loss of life, the debate about FSA regulation etc seems rather trivial. However, there are some parallels to be drawn. The Japanese knew it was likely that they'd have a massive earthquake, and did all they could to minimise damage. Some of us could see that there was a reasonable chance of an economic disaster coming, what did we do to minimise damage ? Not a lot as far as I can see. While I`m sure the Japanese people will start to rebuild, and rebuild using better methods to minimise damage from future possible earthquakes, what are we doing to minimise damage by future economic problems ? Well, the FSA stepped in and finally started to do what they should have done back in 2005. Obviously some won't like it, and it is a bit late in the day, but to ask the FSA to leave the banks to do what they were doing in 2007 is like telling the Japanese people to rebuild their houses/power stations in the same locations, using the same methods.

There will be winners and losers. Yes, tight lending will hurt potential FTBers, but so will higher asking prices. It's arguable that the fallout (no pun intended) from the way our banks used to behave is affecting more people now than it would have done had they have kept a tighter reign on the banks pre 2007.