Why Do Banks Get All The Blame?

AliceJenkins

Jimmy_31 wrote: »

I could have borrowed way way more than i could have normally borrowed during the housing boom.

Plenty of people lied to the banks to get more and more money, the banks gave it to them.

I'm sorry? can you just read my post first.

No one is saying the banks have no responsibility.

kabayiri

I'm amazed just how much money our banks lent to the likes of Ireland, Greece, Portugal, etc.

It must have been a free lending frenzy. It's not just the UK borrowing public. HBOS/RBS wrote some really poor commercial business loans too.

TruckerT

AliceJenkins wrote: »

No one is saying the banks have no responsibility

The banks have ALL the responsibility!

Businesses operate by offering stuff to their customers at a certain price, and subject to whatever terms and conditions they might choose to impose

Customers simply take what's offered - if the business in question fails as a result, then it is clear that the business had a defective business plan

The banks discovered that they had the power to reclaim all their losses from the tax-payer - check out all the boarded-up shops in your High Street, and ask yourself why they didn't get a government bailout

TruckerT

CLAPTON

Caveat_Mortgagor wrote: »

The problem is as much with the regulators as the banks.

People are stupid and greedy, that is human nature. Any economist can tell you about 'credit bubbles'. You may have heard of the south seas bubble, the tulip bubble, the tech stocks bubble. There have been many bubbles in history. A bubble in essence is a massive increase in a market price for a commodity which happens because people get greedy and borrow money. The more they borrow, the more the price increases. Until it busts.......

Bubbles are nasty and destructive. Again any economist will tell you of the destructive force of a bubble and how they should be avoided at all costs.

They are essentially borne of people borrowing a lot of money to invest. Ultimately the investment comes back down to earth.

We have just been through a bubble. This time the focus of the bubble was the housing market.

The after effects are that if people had bought houses at 4 times salary instead of 8 times salary, their mortgage payment would be half as much and they would have much more 'discretionary income' to spend as they wish. This would help the economy enormously. Alas much of todays salary was spent yesterday.

The politicians stated aim of the economy is growth. But yesterday we spent much of todays money, how can we spend the same and more today?

A credit bubble has wreaked massive damage on the economy. We know that people of all levels of intelligence are prone to getting caught up in the hysteria that bubbles generate. It is the regulators job to ensure they dont happen.

The banks 'should' accept some responsibility for ensuring they dont happen.

However, the banks and the regulators didnt focus on long term sustainability. The banks created a bonus structure that rewarded short sightedness. The regulators didnt stop them. The stupid people fell for it again!!!

But do you blame them for reacting according to the laws of nature?
If an aeroplane falls out of the sky, do you blame the way it was built and maintained, or do you blame the laws of gravity?

People are stupid and need to be protected from themselves. The banks and regulators failed. They should all be shot.

the housing assset price bubble or indeed consumer lending did NOT cause the banking crisis in the UK

the rate of mortgage default is very low and did not cause the banking collapse in the UK

if you look at the major collapses your see

-northern rock, while having a larger mortgage default rate than most, became bankrupt because it financed it's business by short term borrowing on the interbank market.
When this seized up it couldn't pay it's bills and so became bankrupt.
Not reaaly because consumers over borrowed

RBS went bankrupt because of it's acquisition policy; bought rubbish at a high price (e.g ABN Amro); and again couldn't weather the storm because it couldn't borrow on the interbank market

HBOS; the halifax bit (normal mortgages) was solvent but the rest lent too much money to businesses (especially commercial property)

so in the UK unwise lending to the domestic market did not cause the banking collapse and house prices inflation (in the UK) was not responsible either

all those collateralise loans from the USA housing bubble was the primary cause.

obviously in individual cases unwise borrowing is unwise

sheffield_lad

Well said Alice, Tesco's sell whiskey but its not their fault if customers buy too much whisky and don't know there limits.

This recession is like no other, its here because all of us in the west orgy ed on debt and now its the morning after and we have to pay it back.

What Balls does not understand is even if there were tax cuts people would not go out spending they would use it to pay off debt.

The other problem is they are now overdoing the rules on banks yes the banking crash is/was horrendous but it happened once in 80yrs and why would they repeat the same mistake a mistake that cost them billions? They won't lets have some normality back not the draconian measures being discussed.

Incidentally I like the idea on a tiny tax on financial transactions, the only issue I have is sharing it with our euro land friends, far better if the whole world instigates it but we all keep our own tax (uk=£100billion), rest of Europe (24biliiion), I wonder why they want to go shares with us lol

Jimmy_31

AliceJenkins wrote: »

I'm sorry? can you just read my post first.

No one is saying the banks have no responsibility.

You said borrowers should make a budget before they get a mortgage.

The banks should have done the same before they lent out mortgages.

purch

Why Do Banks Get All The Blame?

Cos a knee jerk reaction is easier on the brain than actually thinking anything through properly.

TruckerT

howee wrote: »

Well said Alice, Tesco's sell whiskey but its not their fault if customers buy too much whisky and don't know there limits.

Tesco don't sell whisky at a loss

This recession is like no other, its here because all of us in the west orgy on debt.

if there were tax cuts people would not go out spending they would use it to pay off debt.

Those two statements are contradictory

The other problem is they are now overdoing the rules on banks yes the banking crash is/was horrendous but it happened once in 80yrs and why would they repeat the same mistake a mistake that cost them billions?

It cost them nothing - the cost is being borne by employees losing their jobs and taxpayers trying to recover their losses

I confess that I have changed the context of the middle paragraph above, and generated a 'misquote', but I do believe that your original point is highly questionable

TruckerT

CLAPTON

howee wrote: »

Well said Alice, Tesco's sell whiskey but its not their fault if customers buy too much whisky and don't know there limits.



Incidentally I like the idea on a tiny tax on financial transactions, the only issue I have is sharing it with our euro land friends, far better if the whole world instigates it but we all keep our own tax (uk=£100billion), rest of Europe (24biliiion), I wonder why they want to go shares with us lol

the tiny tax (bringing in £100billion) would of course be passed on to consumers ........

sheffield_lad

It does not matter if they did sell whisky at a loss I would still not buy so much and more importantly drink it all in one go lol.

Indeed we orgy ed but plenty have now woke up (no access to credit), and instead of spending tomorrows paycheck they find they have to live in their means ! Most people getting a £1000 tax windfall would use it to pay off debt

It cost the most important people certainly in the banks view the shareholders!!! It would not happen again.

Tell me why for 80yrs things run relatively well? It was the toxic American debt which really caused this.