Banks, politicians and bank of england bosses all made decisions that had a much bigger impact than any individual borrower.

Of course these organisations had a much bigger impact than individual consumers. However, individual consumers made hundreds of thousands of poor decisions which collectively contributed to the problem, just like hundreds of banks made poor decisions which collectively contributed to the problem.

A single bank acting like a dick would have made a relatively small impact on the economy. But individually, they’re all still culpable.

An individual voter cannot be entirely blamed for voting in the Tories/Labour, but is part of a much larger group which can be blamed for what follows.

Anyone who lends to an idiot hardly deserves to be rescued when it all goes wrong.

Bravisimo nails it!

anyone investing/saving their money in a bank that offers people 100% mortgage is an idiot who deserves to have lost their savings

Can you inform us all which one of the banks, in our highly competitive banking sector (which most definitely isn’t a cartel!) , was offering an alternative to this. Maybe we should have looked abroad for alternatives. Iceland maybe?

However, individual consumers made hundreds of thousands of poor decisions which collectively contributed to the problem,

But they were all just thinking of their own situations.

How many individuals in Northern Rock do we think made the decision to lend wunundredandwhatever percent of house values? A few handfuls? So who was more culpable when the house of cards came down? The borrowers or the lenders?

How about the mutual building societies Binners? They were a fairly good alternative!

Do they even exist any more. I can think of the Nationwide, and ….erm…. erm… no thats it.

And having my savings and pension with them, I know that during the boom years, there was some bunch of banking sector carpet-baggers trying to de-mutualise them every year!

Anyone who lends to an idiot hardly deserves to be rescued when it all goes wrong.

Yeah but ostensibly they weren’t rescued for their own sakes. They were rescued becuase otherwise the whole system would have gone tits up. The unfortunate by product was that the bankers were saved.

There also has to be distinction between lending to allow the economy to grow and reckless lending to the aforementioned idiots.

its an interesting issue , certainly a small number of individuals made some foolish decisions over borrowing

however they were not employed to be financial experts and I am happy to give some leeway to non experts who made silly decisions when someone offered them more than they could afford. I was offered a mortgage x 5 of my earnings @100% at the time but had the sense to decline this.

however the financial institutes were experts [ its why we pay such high bonuses to keep this expertise here iirc ] and they hold more responsibility than the person on the street

If it is my job to lend money and i lend it to someone who cannot pay it back then this error is my fault and the system that allows me to make bad loans – i assume banks dont want to do this

Zulu is correct and he stays true to his right wing views that we should not have intervened and let the markets decide

To have bailed them out means , in the future, they can be as reckless as the govt/people will bale them out. In essence we have put them in the position of being irresponsible children who have mummy and daddy to bale them out when they **** up whilst they pick up bonuses for their expertise.it is a no loose situation and that will have consequences in future reckless behaviour

Still 47 of them running Binners, and the banker’s couldnt de-mutualise them on their own, the members had to vote for it!

http://www.bsa.org.uk/aboutus/buildsocmember.htm

*
* don simon
 – Member

no some people have much bigger levers.
No they don’t. Or do you have problems thinking for yourself? Be a man and take responsibility for your actions.

can someone try explaining the role of policy makers, Banks and bank of england in house prices to Don Simon please.

Listened to a BBC4 podcast last night: ”ANALYSIS WHAT IS MONEY? “
Had some interesting interviewees on it. This bit struck me. At what point (and for what reason) did we culturally shift in our moral classification of debtors and creditors?

LANCHESTER: It’s a trick of language, when I was a kid it used to be called debt and now it’s called credit. I don’t think you have to be all that old to remember when debt was just regarded as an uncomplicated bad thing. And now we call that credit. And that I think is a very profound cultural shift to do with this essentially rebranding.

COGGAN: History is a battle between creditors and debtors, and the nature of money is the battleground.

STONER SAUNDERS: Philip Coggan author of Paper Promises: Money, Debt and the New World Order

COGGAN:. Go back into novels of Dickens and you’ll see that debtors were imprisoned, debtors were viewed as immoral, people who took on responsibilities which they then ducked. But I think in modern culture it tends to be the creditors who are seen as immoral, so we have campaigns against predatory lenders. We tend to blame the lender for forcing the borrower into debt rather than the borrower for taking on too much debt.

John Lanchester, author of Whoops! Why Everybody Owes Everybody and NoOne Can Pay
Philip Coggan – Author of Paper Promises: Money, Debt and the New World Order (BUT also my favourite book on the financial markets: The Money Machine: How the City Works
Stoner Saunders- Presenter, No relation 🙂

Banks and bank of england in house prices to Don Simon please.

🙄
MTFU and stop whinging.

Stoner, is the shift as much to do with what has become necessary in order to live a “normal” life? If i could have rented a house at a reasonable price i may have done. But that wasnt an option.

A certain amount of blame has to lie in the lack of oversight that allowed the banks to grow, effectively unregulated, into these huge, uncountable corporate monsters that became ‘too big to fail’

Once they achieved that tag, we were (and still are) effectively underwriting their activities by acting as guarantors. And they knew it (and still know it) hence the crazy risk-taking

If you went into a casino and saw someone spunking thousands away on a roulette table, would you offer to cover their losses. Of course you bloody wouldn’t.

But hey ho. That’s where we are right now. Only they’re still racking up a big bar bill on top, swilling vintage Champagne. Just to add insult to injury!

It’s a two way thing isn’t it; the banks were greedy and foolish in offering excessive multiples and the borrowers were greedy and foolish in accepting them.

You don’t have to know anything about economics to understand that 5 x income and/or 100% mortgages leave you very overexposed. If you can’t work that out then, I’m sorry, you get what you deserve!

lack of oversight that allowed the banks to grow

Id disagree with “lack of oversight” and qualify it with lack of effective oversight. I think the biggest failing has been the appalling flippancy institutional investors have applied to their roles as shareholders. Proprietary traders within banks were permitted to trade on the banks behalf without the shareholders understanding the risks they were exposing the bank’s share capital to.

Proprietary traders within banks were permitted to trade on the banks behalf without the shareholders understanding the risks they were exposing the bank’s share capital to.

Not just shareholders. Those who were supposed to be supervising said traders didn’t either.

Ultimately what it all amounts to is that too many people were guzzling at a free lunch without remembering the old saying.

aa hit the nail on the head third post:

Cant really tell from that quote what people should be accepting responsibility for. If its for being in debt yes, if its for the global debt crisis then no. Hardly my fault i have a big motgage, it was still pretty much the cheapest house i could buy.

I’d add that I reckon its intentonally obtuse, he’s a politician.
It stirs up enough sh1t by playing on personal jealousies to have people pointing fingers at each other (it can’t be me), whilst deflecting attention from the real causes. Also its deliberately unspecific enough to give an easy back door way out if he’s challenged on the facts.

You don’t have to know anything about economics to understand that 5 x income and/or 100% mortgages leave you very overexposed. If you can’t work that out then, I’m sorry, you get what you deserve!

A huge amount of people are very stupid and policy makers need to account for this.

Stoner – do you think that the situation has changed in any significant way? I don’t see any increase in meaningful and effective regulation or oversight. And it sure the hell won’t happen under this lot. Has there been a structural change in the way these companies operate?

Seems to me, that the next banking crash is ‘when’ not ‘if’. Only we’re not going to be in a position to bail them out this time, as they’ve effectively bankrupted us already.

It genuinely shocks me how quickly ‘the establishment’ has returned to business as usual, having apparently learnt nothing!

Anyway must go.. Homes under the hammer is on!!

You don’t have to know anything about economics to understand that 5 x income and/or 100% mortgages leave you very overexposed. If you can’t work that out then, I’m sorry, you get what you deserve!

you do need to be able to work it out and that working out should be done by the professionals doing the lending no the person borrowing who has legitimate case for pleading ignorance of economics and exposure risks in a financial setting. The banks did not get what they deserve for not working this out as we bailed them out.
I cant see a credible defence for a banker re the risks
yes some borrowers were foolish but they needed someone to offer them the loan in the first place in order to be foolish. If the banks had been prudent then so would the customers.

and what AA said i was in the odd position of not being able to afford rent but able to get a mortgage which is circa 20-30% cheaper than rent

I dont think shareholders have changed particularly.

There have been big changes though, the most considerable being the capital adequacy rules that banks must adhere to. (i.e. liquid assets as a ratio of liabilities) They’ve increased enormously.

I was having lunch yesterday* with a retired very senior banker – used to have a team trading volumes in the £tn’s under him. He remarked that if you look at Morgans Stanley’s results, they show much the same profit this year as 6 years ago but the size of the balance needed to do that is over three times what it was in 2006 because of the adequacy requirements. He also recounted the woeful level of FSA oversight. Once a quarter, an under-qualified, under-paid, under-experienced FSA monkey would come by and be presented with trading data with no effort to asses s any systemic risk. Much of the risk in the system could only be assessed by looking at the industry as a whole. No one bank could go to an other and ask to see their risk profiles and positions to see if there was a systemic problem – each bank throught that they were working within the safe area that their internal models defined. It really should have been the role of the FSA to pick up on the circular-cluster-bumming that was developing.

* nothing more decadent than a Fish Finger sandwich and a pint of Doom Bar Im afraid.

EDIT:

Seems to me, that the next banking crash is ‘when’ not ‘if’.

Nothing new under the sun. What should have happened (IMO) last time though is that more banks should have been let go to the wall. But that would have brought even more pain to the “little guy”. Bailout was probably the least worst of a hobsons choice if you’re a politician.

EDIT: just remembered another tale of a bank using the dutch FSA as an easy recruitment pool for their risk departments. Smart grads on €40k, get poached for salaries 10x.

can someone try explaining the role of policy makers, Banks and bank of england in house prices to Don Simon please.

It’s not until you talk about the banks as a collective that they can influence house prices, a singular bank or banker has no more influence over house prices than an individual buying a house.

But if your talking collectively then you must compare to the buyers/sellers as a collective and they, as a collective, have a far greater influence on house prices.

i was in the odd position of not being able to afford rent but able to get a mortgage which is circa 20-30% cheaper than rent

cheaper on 100% mortgage? if not then you’re not comparing like for like.

It’s not until you talk about the banks as a collective that they can influence house prices, a singular bank or banker has no more influence over house prices than an individual buying a house.

i accept your point but in real terms a banker who makes 10 loans a week has more influence than a customer who takes out five loans a year.

I was referring to Banks as the Banking sector however.

cheaper on 100% mortgage? if not then you’re not comparing like for like.

you’ll have to explain this to me

Some of you must be too young to realise that Thatcher started this ball rolling.

Its taken 30 years to come to roost. Set up an economy all driven by the power to borrow money and buy things rather than make things and keep the money circulating round this country and not China.

Also giving people the right to buy their homes, which is fair enough but for every home that was bought the councils should have built one to replace it, they didnt and now we have millions of private landlords getting rich from government benefit payments, and soaring house prices in the late 90’s and 0’s

Well it took 30 years to get here and its going to take not far off that to get out, at least 15 years.

A-A, am I correct in thinking that you are a teacher? If so, I hope that you remind your children that ultimately we all take responsibility for our actions. If we all look to shift the blame to others then we have learned nothing from the crisis or from life. Very sad.

To the catalogue of people to blame, don’t forget the politicians who thought that it was a great idea to force feed low income households with financing they couldn’t afford. That was a far bigger toxic bomb (sub prime) than UK household debt although the latter was/is also far too high. Hence the prolonged slow/zero growth period ahead.

It would still have been cheaper on a 100 % mortgage perhaps 10 % ish?

I was trying to keep party politics out of it.

Steve, can you remind me, is that the same woman who thought individuals and countries should balance their budgets like a grocer’s shop? Agree with your final point, but hope 7-10 years not 15!

I teach science to kids. I leaves morals to others. Why is it the right wingers so often feel the need to bring up my job?

I don’t think Thatcher had the first clue what she was unleashing on us all with the Big Bang! And just look where its got us

But the knee-jerk Tory instinct to deregulate everything over-rides all other considerations.

cheaper on 100% mortgage? if not then you’re not comparing like for like.

[quote]you’ll have to explain this to me[/quote]

As I’m sure you know for a set mortgage amount re-payments vary based on the LTV, the larger your deposit the lower the interest rate. Put in a large enough deposit then sure your payments will be less than rent.

So the only fair rent/mortgage cost comparison is using a 100% mortgage as otherwise your not including the deposit value in the equation.

I’d be very surprised if 100% mortgage on the property has lower repayments than renting the property (but happy to be shown otherwise hence my original question).

Yeah but i cannot offset my rent against any savings can I so its more about what ican afford each month. In my cas 550 or 750. Actually now i can afford both but then it was more marginal.

I agree Binners i dont think she had a clue, but never the less thats where it all started. Free market my ‘airce’ A place for the wealthy to con and steal from the poorer in society.

Yeah but i cannot offset my rent against any savings can I

Which highlights my point that you need to use a 100% mortgage comparison.

Unless you are willing to use your savings to reduce the monthly rent, in which case you can factor the deposit in and evenly spread the same amount against the rent payments for the same period of time as the mortgage term.

I’d be very surprised if 100% mortgage on the property has lower repayments than renting the property (but happy to be shown otherwise hence my original question).

I answered and it would in general – ie I can buy a house for cheaper than i can rent in the same area/town at the same size. Rents for a three bed house being circa £500 and a mortgage circa £400.
yes surprising to say the least and that seems somehow wrong but it was the case 2 years ago. I doubt it has changed any as house prices are stagnant and I doubt rents have dropped

probably a common situation oop North.

probably a common situation oop North.

That’s another thing to add to the North/South divide then, as it’s not the case down here.

1 bed flat, value £220,000
Rent £750 month
Mortgage at 90% LTV, 30 years, interest only at 4.5%, £825 month

so even with 10% deposit renting is cheaper.

are there any mortgages around with a 10% deposit at the moment?

everyone i know looking for a house needs 20% at least

so to buy that 1 bed flat you need 44k just to get a look in!

and our mortgage (we bought 2 yrs ago) is less than the rental price for other houses on our street (i just checked)!

In reading rents are stupid as are house prices, its cheaper each month to buy and its based on monthly payments that most make decisions certainly as first time buyers or people a long way from retirement.