Banks- (insurance) take a nose dive

[Rich]

(and those who have had their hands burnt in the last recession, sounds like you had a hard time of it) .

I fought tooth and nail against the banks advice to re-mortgage my house so they could get their hands on the equity, banks are the biggest bunch of crooks in the country, always have been and always will
I'm going back to cash

 

[GaryPanic]

I fought tooth and nail against the banks advice to re-mortgage my house so they could get their hands on the equity, banks are the biggest bunch of crooks in the country, always have been and always will
I'm going back to cash

gold sovereighs buried in the back garden - gold seems to hold it value quite well

 

[Rich]

- gold seems to hold it value quite well

So does OIL
hell Americans even go to war to get their hands on it

 

[Len Boorman]

Being an old'un let me tell you about the good old days

To get a mortgage.
1) You had to be an investor already otherwise they would not even talk to you.

2) Maximum was 3 times gross basis salary

3) You had to supply a payslip to prove your salary

4) You had to declare all other loans, hire purchase etc and some checks were done although probably not completely thorough.

5) Credit/Debit cards did not exist at the time. Had they you would have probably have meant was showing a statement to prove your debt or lack of it and also your credit limit.

6) Mortgage was normally 90%, sometimes 95% and unusually 100%


What this meant was that

1) Mortgages were limited to what you could afford

2) House prices had a natural damper

3) Reposessions were not unknown but probably much fewer that we see in more recent years

4) Negative equity was virtually unknown

Then the stupid financial expers got greedy and we are all stuffed.

There are a number of these people that should be locked up for false pretences. i.e being in charge of a financial instutions when they were actually totally incompetant

That's my grasp of the situation.

Fortunately

No mortgage
No Loans
Saver who gets good rates at the moment

Len

 

[Fifty2One]

Len
Was that the good old days when people bought what they could afford?
People seem to be in too much of a hurry to get the latest and greatest and biggest and best irregardless to if they have the money or not. Seems like having zero debts is definately a rarity. I only owe what comes in on the next bill.

 

[Len Boorman]

I think the problem is that there is so much hype about getting the best/latest thing now. This is easy to resist if you do not have the money but organisations are so anxious to lend you money and they make it so easy.

This is where institutions who are supposed to be so clever with money should show their expertise but all they show is their greed.

I love it when stpeed by somebody trying to get me to take out a credit card

They say " the interest rate is brilliant only XXXXXX% per month".

I say "How much are you going to pay me ?"

This generally leads to a puzzled look. I then explain that I do not care about their interest rate because I will never pay any. However if they are so interested in getting my business what do I get from it.

That normally ends conversation.

Passes the time while wife is looking around the shop for the sixth time

L

 

[The_Doc_Man]

Where I get confused is why people were allowed to speculate on REITs. What's to speculate? The price of the mortgage is well known because it is spelled out in the contract. In essence, an REIT is not a gamble, but putting in an environment where you do short sell or short buy or whatever allows you to gamble anyway.

Gambling on a game where the return on investment is already well known seems to me to be just plain crazy.

As to getting out... I didn't get out of financial institutions, but I rolled over my Merril Lynch stuff to another carrier about 6 weeks before MLPFS got put up for sale. In fact it was just luck, but the net result is that I'm not bad off right now with respect to the market insanity.

A couple of the housing lenders (Fannie Mae and Freddie Mac) were bolstered by the government long ago, but to my way of thinking, the correct solution is to let the non-bolstered companies fail and have the stock holders sue the CEOs for improper fiduciary management of retirement funds. It would teach a very important lesson to see a few of the "suits" do some hard time. Sadly, stupidity is not considered a crime.

 

[georgedwilkinson]

In light of the deepening of this issue, I did a little research/root cause analysis. I had heard on Fox this morning that Greenspan had warned Congress in early 2005 that this was coming and that the Republicans wanted to take care of it then. Then they went on to mention that the media didn't cover it at all.

So I googled 2005 Fannie Mae and found sufficient information from 2005 to make me believe that Fox essentially got the story right. Here is an interesting column that supports the assertion:
http://www.businessandmedia.org/news/2005/news20051006.asp

This article was from later in the year (October, 2005) after the media had had time to do their investigative reporting and failed to come through.

I found multiple articles (written in early 2005) about Greenspan warning Congress and just about everybody else who would listen that trouble was a-brewin'. It's possible he was ignored because he also was siding with competitive banks who were being hurt by having their business taken away by the GSEs. In hind-sight, it was probably coincidental that he took the commercial bank's side.

The commercial bank's seemed to respond with predatory lending practices that pushed their credit card rates (to existing card holders) through the roof.

It doesn't look like this is gonna be easy to fix, if that's even possible.

But don't fall for the crap about who caused the mess. It was caused by Bill Clinton (however well meaning) and allowed to fester by the Democrats in Congress (led by Barnie Frank, seemingly) in 2005 with their willing accomplices in the news media. I guess the media was too busy doing a character assassination on Bush to track down the facts.

 

[Rich]

But don't fall for the crap about who caused the mess. It was caused by Bill Clinton (however well meaning) and allowed to fester by the Democrats in Congress (led by Barnie Frank, seemingly) in 2005 with their willing accomplices in the news media. I guess the media was too busy doing a character assassination on Bush to track down the facts.

Correct me if I'm wrong, but didn't Bill leave office long before 2005, I thought Bush was in charge (if you can call it that)

 

[georgedwilkinson]

It was Congress who dropped the ball in 2005 when Greenspan pointed out to them that Clinton's policy had failed. In fact, they out and out blocked any action on it by the President, split exactly down party lines. Read the articles from 2005.

 

[Rich]

It was Congress who dropped the ball in 2005 when Greenspan pointed out to them that Clinton's policy had failed. In fact, they out and out blocked any action on it by the President, split exactly down party lines. Read the articles from 2005.

Aw come on, Bush could have pushed it through if he really wanted to, he managed it with the lies he fed over Iraq

 

[georgedwilkinson]

From http://www.aei.org/publications/pubID.22514/pub_detail.asp:

In what turned out to be a huge strategic error, Fannie and Freddie chose to fight legislation in the Senate Banking Committee that embodied the administration's minimum requirements, particularly the receivership provision, in the late spring of 2004. The companies called in their chits and managed to obtain solid Democratic opposition to the bill crafted by the committee's chairman, Richard Shelby (R-Ala.). The committee also watered down the receivership provision. The partisan nature of the vote to send the bill to the floor virtually assured that it would not be taken up in the Senate unless Fannie and Freddie relented in their opposition, and the administration opposed the committee bill because of the weakened receivership language. Administration spokesmen warned the companies that if they continued to oppose the bill in 2004 there would be a tougher version in 2005, but Fannie and Freddie would not budge. It may be that the GSEs were banking on the defeat of President George W. Bush and on the assumption that a Democratic president would abandon the effort to pass tougher regulation.

 

[ColinEssex]

The long and short of it is that the USA started the world economic crisis with their stupid lending on sub-prime mortgages. Now it's going to cost each US taxpayer $2700 to bail out the problem or $700 billion if you prefer.

God bless America, we have alot to thank it for (not)

Col

ps - I still think 'Fannie' is a wierd name.

Col

 

[Rich]

ps - I still think 'Fannie' is a wierd name.

Col

It means ass in the US, rather apt eh

 

[GaryPanic]

as i mentioned earlier in the post - look out for an insurance levy of some kind (and not just state side)

you may end up with a insurance tax (there is some in the US already but not on all insurance policies )

we in the UK have 5% on most (17.5% on travel)
don't be surprised if this goes up by 1% after the election - this would be a pure revenue exercise

1% uplift on insurance not much to the indivdual but 25% uplift in insurance tax - its an easy fix ..for the goverment - started out at 2.5% then 4 now 5

inhertiance tax up lift to at least 500K
messing around with stamp duties..
I ramble

Northern Rock here is a short term liability which is going to cost us in the UK possible 1-2% as a tax bill - long term it will become an asset - but I don't think we will every reap the benefits of it ..

THe US has a simlar problem with the Banks (not AIG - this will be the US 's biggest asset, if i had a few quid spare i would invest in this one)

 

[georgedwilkinson]

Fannie Mae was originally the Federal National Mortgage Association (FNMA). It was shortened by industry and financial insiders in their day to day speech to Fannie Mae. It stuck.

 

[Rabbie]

The exact liability of mortgages is hard to quantify because no-one knows how many people will default on their payments so the figures quoted for Northern Rock are not necessarily accurate at present. I suspect the same is true of Fanny Mae and Freddie Mac. We just don't know how many people won't be able to pay their mortgages.

 

[Banana]

George- thanks for that article.


FWIW, here's two articles I think says far more about the crisis & the bailout plan.

Can the rescue plan fix the US economy?

The Real Cost of Full Bailout
(Interestingly enough, that article was written *before* the most recent crisis & talks of 700 billion bailout)

 

[statsman]

It all goes hat in hand with the "instant gratification" generation.
I WANT I WANT I WANT I WANT I WANT

I want a 10,000 sq. foot house in the best neighbourhood in town. I only make $50,000 a year. So, get a loan for the down payment. Get a sub prime 60 year mortgage and when the day of reckoning arrives, walk away from it.

When these young people try to get another mortgage a few years down the road...Good luck.

 

[georgedwilkinson]

Of course, when people have got enough equity in their home, they refinance (at a huge hidden cost) and pay off their credit cards so they can run them up again.

The banks really should have refused most of these bad loans, but they were, for a time, making their money back from their usurious rates on credit card debt and the refi fees/points.

Not sure how it works in other countries, but in the US, banks send out pre-approved credit card applications with absolutely no proof of income. My daily mail was full of such offers. That's been going on for way over 10 years. Wow!

Of course, many consumers don't realize they're in over their heads when they accept these offers. I mean, the bank wouldn't send it to you/increase your credit line if you couldn't pay, would they?