Do Rich People do the Lottery ?
#121
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Good bit of brainwashing there. Obviously the initial short-term effects would be pretty devastating compared to what we're used to, but that's what happens when something is tackled head on. As with everything in politics, the good in the short-term is at the expense of the prosperity in the long-term. These banks need to fail! How is someone supposed to manage risk if they can make endless mistakes and maintain the same quality of life? Yes, they had to make some cuts, but the people at the top should be out of a job. They need to know that if they make a mistake they don't have any means to get by, which is what would have happened had the government not intervened.
Once everything has collapsed better banks will be formed on proper foundations. Personal resposibility is the foundation of any prudent lender. You lose money you don't eat.
Once everything has collapsed better banks will be formed on proper foundations. Personal resposibility is the foundation of any prudent lender. You lose money you don't eat.
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"Change is hard because people overestimate the value of what they have and underestimate the value of what they may gain by giving that up!!!"
#122
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In life you screw up your job you get sacked not get a bonus,every man and woman that controlled a failed bank or business should be sacked be made responsible for their actions
#123
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Why did the directors of every failed bank not get sacked due to bad control bad management ?lets get the cash out the banks into our back pockets,then we dont need them.
Last edited by Gregsti01; 27 September 2010 at 11:34 PM.
#125
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Some good points on this thread and I just want to be completely clear.
I am not defending banking as it stands, I am not saying it should not change. What I am saying is that allowing the banks to fail has consequences far beyond suggesting that this will be a short term tweak, an adjustment that we quickly move on from.
I am clear that I do not think that allowing any of the large banks to fail was even possible without catastrophic impact and so am a staunch defender of the rescue.
The problem we may have is that the capitalist world is so far down the path of this model of banking that to change it even using evolution not revolution would still be a complete upheaval of politic, soclal and economic norms. The status quo as hodgy says is a powerful thing.
I am not defending banking as it stands, I am not saying it should not change. What I am saying is that allowing the banks to fail has consequences far beyond suggesting that this will be a short term tweak, an adjustment that we quickly move on from.
I am clear that I do not think that allowing any of the large banks to fail was even possible without catastrophic impact and so am a staunch defender of the rescue.
The problem we may have is that the capitalist world is so far down the path of this model of banking that to change it even using evolution not revolution would still be a complete upheaval of politic, soclal and economic norms. The status quo as hodgy says is a powerful thing.
When it fails next time it will be even worse. The market won't forget that the state stepped in and will price risk accordingly.
The easy solution is not always the best.
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And to counter that pricing-in of the bail out the regulatory regime has already changed to significantly increase the Tier 1 core capital ratios to make banks far more resilient.
The securitisation market (which was the key driver of the overheating in the credit markets) is all but dead and regulators right across the Western world will be unpicking the links between investment banking and retail banking. Trading on a banks on right will again become a thing of the past.
So that specific 'moral hazard' (who the hell invented this pompous phrase) has been dealt with to create intended consequences.
You also forget that the pricing in of the 'hazard' had already been done years ago as there were a number of banks who knew they were on the too big to fail list.
The securitisation market (which was the key driver of the overheating in the credit markets) is all but dead and regulators right across the Western world will be unpicking the links between investment banking and retail banking. Trading on a banks on right will again become a thing of the past.
So that specific 'moral hazard' (who the hell invented this pompous phrase) has been dealt with to create intended consequences.
You also forget that the pricing in of the 'hazard' had already been done years ago as there were a number of banks who knew they were on the too big to fail list.
Last edited by Trout; 28 September 2010 at 08:31 AM.
#127
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And to counter that pricing-in of the bail out the regulatory regime has already changed to significantly increase the Tier 1 core capital ratios to make banks far more resilient.
The securitisation market (which was the key driver of the overheating in the credit markets) is all but dead and regulators right across the Western world will be unpicking the links between investment banking and retail banking. Trading on a banks on right will again become a thing of the past.
So that specific 'moral hazard' (who the hell invented this pompous phrase) has been dealt with to create intended consequences.
You also forget that the pricing in of the 'hazard' had already been done years ago as there were a number of banks who knew they were on the too big to fail list.
The securitisation market (which was the key driver of the overheating in the credit markets) is all but dead and regulators right across the Western world will be unpicking the links between investment banking and retail banking. Trading on a banks on right will again become a thing of the past.
So that specific 'moral hazard' (who the hell invented this pompous phrase) has been dealt with to create intended consequences.
You also forget that the pricing in of the 'hazard' had already been done years ago as there were a number of banks who knew they were on the too big to fail list.
Regulators just fight the last war.
#128
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Basically Capitalism is a perfectly reasonable system and has worked well in the past.
The problems arise as with any system, when it eventually descends into extreme mode, that is when its bad face will show. When we see people prepared to sell their souls for the sake of their greed and with their totally unfair and selfish actions taking full advantage of those who are not in a position to counteract that, all sense of fairness has gone out of the window and it will eventually fall apart.
It is just a pity for those who have to suffer the consequences.
Les
The problems arise as with any system, when it eventually descends into extreme mode, that is when its bad face will show. When we see people prepared to sell their souls for the sake of their greed and with their totally unfair and selfish actions taking full advantage of those who are not in a position to counteract that, all sense of fairness has gone out of the window and it will eventually fall apart.
It is just a pity for those who have to suffer the consequences.
Les
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You have too much faith in the power and virtue of government Trout. This is Capitalism, the financial industry will just innovate new products and ways of doing things, the more obscure and impossible to understand by the uninitiated the better. The whole POINT of the system is to create a mountain of debt money, call it derivatives or CDS's or whatever.
Regulators just fight the last war.
Regulators just fight the last war.
The whole POINT of the modern banking system is the create credit and expand money supply. Fractional reserve banking enabled capitalism, it enabled models like securitisation and a huge expansion of a derivatives market, but it did not cause them.
You could have derivatives, securitisation and captilism in markets that are not based on fractional reserve banking. Don't get the two mixed up!
Yes, like any market, products will develop that become increasingly sophisticated, but you talk as if it is some Machiavellian dream in obscurantism. I don't think so - it is similar to Intel - the processors now are massively more complex than the ZX81 - it is not a deliberate obfuscation it is simply a matter of evolution.
#130
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And this is where we will have to agreed to differ.
The whole POINT of the modern banking system is the create credit and expand money supply. Fractional reserve banking enabled capitalism, it enabled models like securitisation and a huge expansion of a derivatives market, but it did not cause them.
You could have derivatives, securitisation and captilism in markets that are not based on fractional reserve banking. Don't get the two mixed up!
Yes, like any market, products will develop that become increasingly sophisticated, but you talk as if it is some Machiavellian dream in obscurantism. I don't think so - it is similar to Intel - the processors now are massively more complex than the ZX81 - it is not a deliberate obfuscation it is simply a matter of evolution.
The whole POINT of the modern banking system is the create credit and expand money supply. Fractional reserve banking enabled capitalism, it enabled models like securitisation and a huge expansion of a derivatives market, but it did not cause them.
You could have derivatives, securitisation and captilism in markets that are not based on fractional reserve banking. Don't get the two mixed up!
Yes, like any market, products will develop that become increasingly sophisticated, but you talk as if it is some Machiavellian dream in obscurantism. I don't think so - it is similar to Intel - the processors now are massively more complex than the ZX81 - it is not a deliberate obfuscation it is simply a matter of evolution.
....and I would disagree that banking is there to serve. The number 1 goal of the elites who profit from banking is to serve themselves, same as any other group or interest - that does not mean to say they can not be useful to the wider economy of course, but only as a by-product of that self interest.
Sure it's not deliberate obscurantism by any nefarious cabal but otoh the net effect is the same; a mountain of debt money in different forms, it gets traded back and forth until it collapses under its own weight. Each time it gets traded it entitles the traders to a cut of the real economy; it's the whole point.
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...again you are mixing mechanisms. Asset backed currencies can exist either in a fully reserved system or a fractional system. We have had both in the UK.
I would also disagree somewhat that the banking system is there to serve itself. Individual businesses with shareholders are, however the current system serves government in that it allows the Government, combined with the Central Bank (BoE) to drive money supply, inflation and interest rates. The current system allows greater freedom of movement of all these elements.
I would also disagree somewhat that the banking system is there to serve itself. Individual businesses with shareholders are, however the current system serves government in that it allows the Government, combined with the Central Bank (BoE) to drive money supply, inflation and interest rates. The current system allows greater freedom of movement of all these elements.
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...again you are mixing mechanisms. Asset backed currencies can exist either in a fully reserved system or a fractional system. We have had both in the UK.
I would also disagree somewhat that the banking system is there to serve itself. Individual businesses with shareholders are, however the current system serves government in that it allows the Government, combined with the Central Bank (BoE) to drive money supply, inflation and interest rates. The current system allows greater freedom of movement of all these elements.
I would also disagree somewhat that the banking system is there to serve itself. Individual businesses with shareholders are, however the current system serves government in that it allows the Government, combined with the Central Bank (BoE) to drive money supply, inflation and interest rates. The current system allows greater freedom of movement of all these elements.
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Well the three key banks that were in trouble were Northern Rock, HBoS and RBS. The key leaders from those organisations have all gone. Some 'retired'; some fired; some under regulatory or criminal investigation!
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I do the lotto, i would never cast myself as rich but i do ok. £14 a week. fiver both wed & sat & 4 quid on a friday. Its the taking part that counts.
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Example is the likes of Didier Drogba, here is a guy earning in the region of 120k per week, yet he still has to take out a 15 year Mortgage to buy property, even though you would imagine he can buy them outright. Not when you're lifestyle eats deep into that pay packet.
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I was in the local Thresher a few years back, when the TT was still new and two young blades arrived in one, cabrio, got out, all big black coats, aftershave, smart shirts and posh phones, went it and they made it clear they were party animals on the way to another "bash", kind of Yuppies twenty years on.
Anyway, they wanted Champagne, there me with my Stella, crisps etc and these guys were buying Champage, one suggested Moet but the drive of the Audi said no, its ****, and selected something at about fifty quid, he flashed his gold card, it got declined, he produced another, also declined and then tried his Switch and that was declined as well ! he sheepishly asked him mate to pay, his card went through, never seen such a change in demeanour in one person before, he looked round at me with a "what can you do" look, and I just ignored him and paid.
Anyway, they wanted Champagne, there me with my Stella, crisps etc and these guys were buying Champage, one suggested Moet but the drive of the Audi said no, its ****, and selected something at about fifty quid, he flashed his gold card, it got declined, he produced another, also declined and then tried his Switch and that was declined as well ! he sheepishly asked him mate to pay, his card went through, never seen such a change in demeanour in one person before, he looked round at me with a "what can you do" look, and I just ignored him and paid.
#143
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The banks were not acting alone here - for every 'dealer' there were hundreds of thousands of willing customers (addicts!).
The banks were part of a system that was rotting all the way through. They were merely supporting the insatiable appetite for credit and cash.
Of course you may be an unlucky victim that had a vulnerable business and you had no debt or loans, no credit cards and a minimal or no mortgage. In other words, financially resilient.
The problem is that there were too many people with debt in their home and their businesses that found it too easy to point the blame solely at the banks when the credit dried up. And the very same people were all part of the problem, alongside the banks and alongside the financial system.
When your personal financial situation becomes dependent on a third party then you are always exposed to risk.
The banks were part of a system that was rotting all the way through. They were merely supporting the insatiable appetite for credit and cash.
Of course you may be an unlucky victim that had a vulnerable business and you had no debt or loans, no credit cards and a minimal or no mortgage. In other words, financially resilient.
The problem is that there were too many people with debt in their home and their businesses that found it too easy to point the blame solely at the banks when the credit dried up. And the very same people were all part of the problem, alongside the banks and alongside the financial system.
When your personal financial situation becomes dependent on a third party then you are always exposed to risk.
Yes, Mr XYZ might not have enough to pay his mortgage but the collapse happened due the idea of selling those toxic assets as I understand.
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there was a mechanism created by retail bankers and investment bankers called securitisation where instead of using their own money to pay out a mortgage they used money from other people - they effectively sold the mortgages on in a package.
The mortgages themselves were sold by mortgage brokers to people who could barely afford a MaccyD never mind a mortage.
The were four key problems...
The brokers didn't give a s**t as they were making commission and had no responsibility
The banks did not own the loans any more as they sold them on - but everyone was persuaded that everything was secure as property prices were rising relentlessly so no-one was going to make a loss.
The investment banks (and their regulators and rating agencies who were as convinced of rising property prices as anyone else) created 'packages' of loans that they sold in the financial markets.
That were bought by investors looking for guaranteed high returns.
So the system created a tower of cards balanced on the single card of relentless property price rises.
Need (greed) was all the way through the system - customers, brokers, bankers, investment bankers, rating agencies, governments, regulators, investors...
But this was actually a small part of banking and many bankers poo-pooed the mechanism of fund raising and indeed some banks took no part in it at all. Three UK banks were impacted - two because they copied this model - albeit on a smaller scale in the UK and one because it had huge international exposure.
Two other banks were impacted but could raise the capital privately to cover their *****!
So, no, not all banks and within those bank affected, not all bankers. Small groups within these banks set up the deals.
Once the instruments were in the market with the seal of approval of rating agencies and regulators then what's not to love?!
Of course the underlying assets were worthless as soon as the property market paused for breath. Hence toxic assets. They were not 'toxic' when sold and they were saleable because the whole world from consumers to presidents thought the property boom was here to stay!
#146
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I was in the local Thresher a few years back, when the TT was still new and two young blades arrived in one, cabrio, got out, all big black coats, aftershave, smart shirts and posh phones, went it and they made it clear they were party animals on the way to another "bash", kind of Yuppies twenty years on.
Anyway, they wanted Champagne, there me with my Stella, crisps etc and these guys were buying Champage, one suggested Moet but the drive of the Audi said no, its ****, and selected something at about fifty quid, he flashed his gold card, it got declined, he produced another, also declined and then tried his Switch and that was declined as well ! he sheepishly asked him mate to pay, his card went through, never seen such a change in demeanour in one person before, he looked round at me with a "what can you do" look, and I just ignored him and paid.
Anyway, they wanted Champagne, there me with my Stella, crisps etc and these guys were buying Champage, one suggested Moet but the drive of the Audi said no, its ****, and selected something at about fifty quid, he flashed his gold card, it got declined, he produced another, also declined and then tried his Switch and that was declined as well ! he sheepishly asked him mate to pay, his card went through, never seen such a change in demeanour in one person before, he looked round at me with a "what can you do" look, and I just ignored him and paid.
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Here is the Subprime crisis explained.
Subprime Primer
Step through it one page at a time as there is lots of reading!
Subprime Primer
Step through it one page at a time as there is lots of reading!
#149
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At least two things in principle here...
there was a mechanism created by retail bankers and investment bankers called securitisation where instead of using their own money to pay out a mortgage they used money from other people - they effectively sold the mortgages on in a package.
The mortgages themselves were sold by mortgage brokers to people who could barely afford a MaccyD never mind a mortage.
The were four key problems...
The brokers didn't give a s**t as they were making commission and had no responsibility
The banks did not own the loans any more as they sold them on - but everyone was persuaded that everything was secure as property prices were rising relentlessly so no-one was going to make a loss.
The investment banks (and their regulators and rating agencies who were as convinced of rising property prices as anyone else) created 'packages' of loans that they sold in the financial markets.
That were bought by investors looking for guaranteed high returns.
So the system created a tower of cards balanced on the single card of relentless property price rises.
Need (greed) was all the way through the system - customers, brokers, bankers, investment bankers, rating agencies, governments, regulators, investors...
But this was actually a small part of banking and many bankers poo-pooed the mechanism of fund raising and indeed some banks took no part in it at all. Three UK banks were impacted - two because they copied this model - albeit on a smaller scale in the UK and one because it had huge international exposure.
Two other banks were impacted but could raise the capital privately to cover their *****!
So, no, not all banks and within those bank affected, not all bankers. Small groups within these banks set up the deals.
Once the instruments were in the market with the seal of approval of rating agencies and regulators then what's not to love?!
Of course the underlying assets were worthless as soon as the property market paused for breath. Hence toxic assets. They were not 'toxic' when sold and they were saleable because the whole world from consumers to presidents thought the property boom was here to stay!
there was a mechanism created by retail bankers and investment bankers called securitisation where instead of using their own money to pay out a mortgage they used money from other people - they effectively sold the mortgages on in a package.
The mortgages themselves were sold by mortgage brokers to people who could barely afford a MaccyD never mind a mortage.
The were four key problems...
The brokers didn't give a s**t as they were making commission and had no responsibility
The banks did not own the loans any more as they sold them on - but everyone was persuaded that everything was secure as property prices were rising relentlessly so no-one was going to make a loss.
The investment banks (and their regulators and rating agencies who were as convinced of rising property prices as anyone else) created 'packages' of loans that they sold in the financial markets.
That were bought by investors looking for guaranteed high returns.
So the system created a tower of cards balanced on the single card of relentless property price rises.
Need (greed) was all the way through the system - customers, brokers, bankers, investment bankers, rating agencies, governments, regulators, investors...
But this was actually a small part of banking and many bankers poo-pooed the mechanism of fund raising and indeed some banks took no part in it at all. Three UK banks were impacted - two because they copied this model - albeit on a smaller scale in the UK and one because it had huge international exposure.
Two other banks were impacted but could raise the capital privately to cover their *****!
So, no, not all banks and within those bank affected, not all bankers. Small groups within these banks set up the deals.
Once the instruments were in the market with the seal of approval of rating agencies and regulators then what's not to love?!
Of course the underlying assets were worthless as soon as the property market paused for breath. Hence toxic assets. They were not 'toxic' when sold and they were saleable because the whole world from consumers to presidents thought the property boom was here to stay!
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Were they fraudulent - probably not at the beginning - I am pretty sure that no-one at Northern Rock thought their sub-prime was fraudulent, but they probably saw it as manageable risk. Went the market went sour there were probably a small number who did continue to package sub prime fraudulently!