Banking Industry

[Digit]

IF that's the moral high ground Steve in my case I'd say the view was great. I owe nobody nowt, I paid cash for house, car, TV, woodworking machines etc etc.
I don't consider a certain amount of indebtedness a problem personally, it's when you can't afford to pay it back that the trouble begins.
And that applies throughout, but of late the fact that someday re-payments will have to be made seems to have escaped some people's attention.
Equally, if things have got tight in your household I would guess that some things have been put on hold, that you do without etc.
That is attempting to balance your out goings with your income.
That is what Rich is on about and I suggest is what most of us are having to do.
That being the case perhaps the government of the day should show the same, dare I use the word, Prudence?

Roy.

 

[Losos]

That being the case perhaps the government of the day should show the same, dare I use the word, Prudence?
Roy.

Yes Roy, not so long ago that word was being bandied around as a good thing, but it didn't last long did it :?:

As G1 has said we put our money in the bank in the expectation that they will use it wisely and thank us by paying a small fee to us.

We do not expect (At least I don't expect) that they will lend it out to all and sundry (What are now known as NOJAPS = No Job, Assets, or Prospects)

I also owe nobody nowt now, but I did once have a mortgage, when I applied I was told it would take six weeks to approve (So they could get documentary evidence that I did have a Job, Assets, & Prospects) and further more the maximum loan would be 75% of the lowest valuation on the property.

I remember I moaned a bit at the time but the fact is that is what I expect people who have my money now to do, and they ain't done it have they :?:

 

[Digit]

That which is easily had tends to have little value I fear Losos.

Roy.

 

[Losos]

As an adjunct to that apparently we donate £30,000,000 annually to the People's Republic of China as aid!
What was it they spent on their Olympics?

Roy.

Never mind the Olympics Roy, they are a country which approves and supports their cruel and immoral fur farm industry. Dogs (Including the beautiful and noble Newfoundland) are breed and killed in the most horrible way. This is not me just mouthing off, several EU quasi government bodies have confirmed it, and had people out there observing and photographing it. (I can post links of their reports.)

Now you tell me we give them 30 million a year :evil: :evil: :twisted:

Hope you are wrong, or you made a typo, but however many naughts there are at the end it is still wrong and makes my blood boil.

 

[Digit]

I am aware of those reports Losos and agree with you, and no, my figures are correct, as reported in the press.
They are also not a one off case, the EU recently suspended aid to the Palestinian Authority 'cos they were spending it on directly or indirectly on funding terrorism rather than aiding their people.
The list is quite long I'm afraid.

Roy.

 

[Grinding One]

When I got out of the Army they said I had the GI Bill to help in buying a house ,not! They said only if I lived in a town of 2000 or less people do I qualify...To far to walk to work tho.Had to wait till I had saved up enough as the bank put it,to get the loan.Now they give them to people who do not want to work or even help themselves to get to the free food the churches give out.They want it delieverd :twisted:

 

[Evergreen]

Very few people on this side of the Altantic realise that subprime mortgages arose as the result of socially well intentioned legislation by President Carter in 1977 which was then stoked up even more by Clinton in the mid 1990s. The intention was to make credit for home purchase available to just about everybody. Banks were obliged to lend money to people who were very high risk in order to improve their ratings with the government.

How those risky mortgages then became linked to the massive internationalisation of debt is very well explained here

http://www.thislife.org/Radio_Episode.aspx?episode=355

Just click on the link to "The Giant Pool of Money" and prepare to be gobsmacked...

 

[Digit]

I got my house the hard way as well.
My first was incomplete as the the builder had gone bust in one of the usual slumps.
We looked at in the morning, borrowed the deposit from dad and all was signed and sealed by 4 o'clock that same afternoon!
Before we could move in I had to find a job in that area!
By the time we had paid the mortgage etc we sometimes didn't eat till I was paid!
Having finished the house and garden we sold at a profit and bought another run down place.
This we continued to do throughout the following twenty years till we moved here, where as I said, we paid cash!
We had no heating, no lighting, no plumbing, and no drainage.
But we made it into what we wanted.

Roy.

 

[Rich]

What is it like up there on the moral high ground Rich? Got a good view? Unless you also saved for an awfully long time I suspect you also have a mortgage? What about your car? Always have enough put buy in case of breakdown or write off in an accident? While it is nice to think we are all fiscally prudent and save for the things we want in todays world credit is a fact of life, for both individuals, business and governments. Borrowing against future earnings is and always has been performed. Its when borowing exceeds capacity to pay back on future earnings that a problem arises. Naturally the scale is different for individuals and governments and rules for the two are not the same, but as we are seeing with the current crisis, its the drying up of lending facilities that is causing the problem rather than the fact that lending facilities exist!

Steve

WHO mentioned moral high ground steve? not me, I was merely pointing out common sense, if that is what YOU call moral high ground, then let's have more of it.

Rich.

 

[Losos]

Banks were obliged to lend money to people who were very high risk in order to improve their ratings with the government.

Well I guess this is somewhat simplistic but if I was the CEO of a bank and taking money in and then lending it out to others why would I give a dam about the government :?:

The bank doesn't need anything from the government (OK the CEO might be hoping for a gong or summit) as Rich was trying to say it's money in = money out, and the difference in 'interest' between the two is what pays the wages and the depositors. Simple init :?: :lol:

 

[Evergreen]

Banks were obliged to lend money to people who were very high risk in order to improve their ratings with the government.

Well I guess this is somewhat simplistic but if I was the CEO of a bank and taking money in and then lending it out to others why would I give a dam about the government :?:

American banks were required by the Community Reinvestment Act to demonstrate they were providing loans for all sectors of their communities – which gave rise to the so-called “CRA rating”. It's part of their regulatory framework. Think of it as a sort of star rating system for hotels, only this time it’s for banks and imposed by the US government.

But the really horrifying part comes with the selling on of mortgages to an international market that was eager to invest billions of dollars. And the quickest way to understand that is to read the "Giant Pool of Money" article.

Pour yourself a big glass of Fullers 1845 and have a fascinating read - it's worth the effort.

 

[Rich]

I can't quite grasp this chaps, if I was a bank, why on earth would I want to take on loans taken out by people who were unlikely to pay them back, perhaps I'm naive, but I just can't see the sense in it????

Rich.

 

[Grinding One]

Banks were obliged to lend money to people who were very high risk in order to improve their ratings with the government.

Well I guess this is somewhat simplistic but if I was the CEO of a bank and taking money in and then lending it out to others why would I give a dam about the government :?:

American banks were required by the Community Reinvestment Act to demonstrate they were providing loans for all sectors of their communities – which gave rise to the so-called “CRA rating”. It's part of their regulatory framework. Think of it as a sort of star rating system for hotels, only this time it’s for banks and imposed by the US government.

But the really horrifying part comes with the selling on of mortgages to an international market that was eager to invest billions of dollars. And the quickest way to understand that is to read the "Giant Pool of Money" article.

Pour yourself a big glass of Fullers 1845 and have a fascinating read - it's worth the effort.

But not all banks did this ,thats why some are still solvent...it was the big guys trying to steal as much as they could before" We need a Bailout" now they want the same people who couldn`t afford a house to give them their tax money and me to as they wreck their credit on top of it too.
Bunch of Snake Bankers....

 

[StevieB]

Rich, you seemed to be pointing out that lending money is a bad thing, and that if something was wanted it needed to be saved for. I was pointing out that thats an admirable sentiment (my reference to the moral highground) but not entirely practical in any society and never has been. Apologies if I caused offence.

Your comment as to why banks lend to people who are unlikely to repay - its because the banks do not hold on to the loan until it matures or defaults. Lets say you want to borrow a tenner from me, and I say sure, but you can pay me back £1.10 a month over 10 months to make £11 paid back in total. Now in two months time, when you have paid me back £2.20 I say to someone else - Rich is a good person, he is paying me back as agreed. But I really need some cash myself - I will sell you Rich's loan, which is worth £8-80 over 8 months for £8.00. Everyones a winner. You get your tenner, I get £10.20, the debt is off my books and the new banker gets your remaining £8-80. to me its attractive as I get a slightly smaller return but I get it much faster, and if you default then hey, not my problem.

This whole cycle is repeated and repeated as credit loan swaps are made and it only collapses if the man at the bottom cannot pay. By the time its gone through several cycles, and been bundled up with millions of other loans nobody knows exactly how many of the loans are bad (since you mix in some good ones) and what exposure you have to people defaulting. Banks are now sitting on huge numbers of these, nobody knows what they are worth, since nobody knows how likely the people at the bottom are to default.

I can also insure my credit swap against defaulting, but as they were viewed as good security I get a good insurance rate. The insurance company (such as AIG) viewed it as a good investment since it came from a bank to bank transfer, not a debtor to bank transfer. As a consequence when these swaps default AIG cannot afford to pay out.

Now imagine that we are not talking £10 but hundreds of millions. Billions even. The sums involved are largely 'on paper only' figures but they are the grease that oils the wheels of commerce. The Bank of England is also involved, the government is certainly involved - where do you think it gets its billions necessary for NHS upgrades and PPI deals. It borrows from the money markets. If the markerts collapse then the govenrnment is in real trouble. Thats why people say 'this or that bank is too big to fail'. Because of who it will affect as a knock on, not because of the need to save jobs in the bank itself. Additional layers of complexity to the whole system include buying US credit swaps, currency fluctuations, investments in global institutions, investment in commodities whose prices fluctuate - oil, gold, etc. and a myriad of other factors.

At the end of the day Banks exist to make money. They do this by taking deposits and lending those out again at a higher rate of interest than they pay the depositors. Much as we might wish they did, they do not keep our deposits in an underground vault with a big metal door. At any one time no bank has enough in its reserves to pay all its depositors if they suddenly want their money back. If that happens you get a run on a bank, most recently evidenced by queues of people outside Northern Rock. It couldn't meet demand and was nationalised as a consequence.

You can argue that its fat cat bankers that have caused the problem, or greedy lending. Indeed greedy borrowing could also be blamed. The cause is not simple, and nor is the cure. Sensible fiscal policy by both borrowers and lenders will help, but not borrowing or lending at all will not.

Steve.

 

[ByronBlack]

The crux of it as I see it is that these banks have deliberatly sold bad credit to other banks knowing full well that the person that they lent to had no possible way of repaying, to me this is Fraud, and I'm pleased that the FBI are investigating a number of these banks, but I'm not naive to think that the real culprits will be held accountable, instead muggins here and the rest of the populace will have to bail these greedy bankers out.

I'm with Rich, we have too much borrowing in our society, more so than almost any other nation in the world, it's rediculous and not needed. So what if you can't buy a BMW, you'll have to settle for a Fiesta instead, and so it goes for all the rubbish that people waste their money/credit on (big screen TV's, Sofa's, biggers houses, flash cars etc..)

Ultimately, it's greed that created this situation, and it'll take prudence and frugality to get out of it. I for one have plans in place to remove all debt (apart from the mortgage unless I win the lottery) and downsize that I don't have to rely on the state or the banks to finance my lifestyle.

 

[Grinding One]

The crux of it as I see it is that these banks have deliberatly sold bad credit to other banks knowing full well that the person that they lent to had no possible way of repaying, to me this is Fraud, and I'm pleased that the FBI are investigating a number of these banks, but I'm not naive to think that the real culprits will be held accountable, instead muggins here and the rest of the populace will have to bail these greedy bankers out.

I'm with Rich, we have too much borrowing in our society, more so than almost any other nation in the world, it's rediculous and not needed. So what if you can't buy a BMW, you'll have to settle for a Fiesta instead, and so it goes for all the rubbish that people waste their money/credit on (big screen TV's, Sofa's, biggers houses, flash cars etc..)

Ultimately, it's greed that created this situation, and it'll take prudence and frugality to get out of it. I for one have plans in place to remove all debt (apart from the mortgage unless I win the lottery) and downsize that I don't have to rely on the state or the banks to finance my lifestyle.

On a side note to this I have a few Certificates of deposits and in 6 months I got 20 cents interest on a 1000.00 CD Wow at this rate I`ll be able to retire again in a million years.

 

[RogerS]

......

I'm with Rich, we have too much borrowing in our society, more so than almost any other nation in the world, it's rediculous and not needed. So what if you can't buy a BMW, you'll have to settle for a Fiesta instead, and so it goes for all the rubbish that people waste their money/credit on (big screen TV's, Sofa's, biggers houses, flash cars etc..)
.......

So you've not borrowed any money for anything then, Byron?

No mortgage?

Sounds to me as if you're making a value judgement here. What gives you the right to make it?

 

[Digit]

What gives you the right to make it?

Perhaps your line applies Rog. "Common sense is not so common" :lol:

Roy.

 

[ByronBlack]

I'm making that judgement based on the massive screw-up that over-borrowing has lead us to, and it's a greed society that feeds that borrowing/lending

I have borrowed, and I say that in my post, but by the end of the year I would have got rid of any outstanding debt, barr the mortgage, but then I was sensible when I got my mortgage and saved for the best part of 5 years to afford a decent enough deposit so that I wouldn't be in the poop if rates went up.

The problem we have with unnessacary borrowing is the 'want it now' attitude, if we all just had a little patience, or some enterprise we could afford the things we wanted without having to laden ourselves with unnecessary debt.

A frugal/sensible lifestyle that isn't driven by status or greed, in my humble opinion is the way to avoid massive financial melt-downs like we are seeing.

Roy - really no need for that comment just because you don't agree.

 

[RogerS]

I'm making that judgement based on the massive screw-up that over-borrowing has lead us to, and it's a greed society that feeds that borrowing/lending

I have borrowed, and I say that in my post, but by the end of the year I would have got rid of any outstanding debt, barr the mortgage, but then I was sensible when I got my mortgage and saved for the best part of 5 years to afford a decent enough deposit so that I wouldn't be in the poop if rates went up.

The problem we have with unnessacary borrowing is the 'want it now' attitude, if we all just had a little patience, or some enterprise we could afford the things we wanted without having to laden ourselves with unnecessary debt.

A frugal/sensible lifestyle that isn't driven by status or greed, in my humble opinion is the way to avoid massive financial melt-downs like we are seeing.

Roy - really no need for that comment just because you don't agree.

So what is the difference between borrowing the money to buy a house and borrowing the money to buy a car? There isn't any.