The Global Credit Crisis

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OverseasCafe

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Did anyone see Dispatches - How the Banks Bet with Your Money on Channel 4 on Monday night (or E4 last night)?

Pretty scary stuff, I have to say I had my eyes opened as to the severity of the crisis in the US and the human devestation it is causing in areas there.

If you're in the dark on how this global mismanagement of funds by the financial institutions has affected the financial markets, and may well do so in the future, it is certainly worth a look. I'm sure it will be repeated on E4 from time to time.

It is also disquieting to know that the worst may be yet to come. Not a comforting thought for those snapping up cheap bank shares. Some of these banks may well not exist in a couple of years time. Northern Rock could just be the tip of the iceberg.

Sorry for sounding like a harbinger of doom, but the credit squeeze has greatly affected those buying and building property abroad and there seems to be a growing concensus that it is merely a short term blip. The above programme would tend to suggest otherwise.

Link to the programme synopsis is at
 
Didn't see the programme but I work in a bank and yes its tough and uncertain times however a lot of times these documentary style programmes are over sensational. They have to be to attract viewers.

Banks will pull through. They generally always do. Its not the first 'mini-crisis' the financial sector has faced. People and economies need banks...fact of life.
 
Banks also hate to lose money. Expect lengthy procedures for getting loans in the future, coupled with hefty arrangement fees. Naturally the sensible borrowers will end up having to 'sponsor' the reckless borrowers as banks claw back the losses caused by defaulters.
 
merx07 said:
a lot of times these documentary style programmes are over sensational.
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I doubt that line would work on those in the US who have lost their homes because of the crisis. There's nothing that can be said or written that will over sensationalise losing your house because banks have been behaving in a reckless manner. Many of those in the deepest trouble should not have received loans to begin with and the banks have to take some responsibility for relaxing their rules to such an extent that people living on benefits were given the impression they could pay off huge home loans.

For those who can get their hands on it there is a very good piece on the fallout of the subprime crisis in the US on page 8 of the business section of the Sunday Times (Feb 24th). It goes into some detail on the human cost this major financial scandal is having on the average ex-homeowner in Cleveland, Ohio, the centre of the greatest fallout from the subprime crisis. I can't find it online but I'm sure it is there somewhere.

Cleveland Mayor Frank Jackson has filed a lawsuit against 21 major investment banks that he said have enabled the subprime lending and foreclosure crisis in his town. The lawsuit uses Ohio's public nuisance law as a vehicle for seeking damages. The law allows recovery for circumstances created by a defendant that interfere with the public's rights and interests.


The firms are accused of creating a public nuisance by making mortgages available to people who had "no realistic means of keeping up with their loan payments." A dozen of the banks have collectively filed thousands of foreclosures in Cleveland over the last four years.


Jackson has said; "Subprime mortgages have proved as bad as drugs in the destruction they have wrought on the community." That is a pretty damning indictment.

The suit includes institutions such as Deutsche Bank, Citigroup, Bear Stearns, Goldman Sachs, Merrill Lynch, Morgan Stanley, HSBC Holdings, Lehman Brothers and Wells Fargo.


Of course the chances that such an action will make the banks mend their ways is highly unlikely, but it is good to see someone prepared to make a stand to show that there is a human cost to the 'creative financial packages' that are invented to constantly increase voracious banks' desire for ever growing profits.

There is also some info on the law suit on http://blog.cleveland.com/metro/2008/01/cleveland_sues_21_investment_b.html
 
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"Many of those in the deepest trouble should not have received loans to begin with and the banks have to take some responsibility for relaxing their rules to such an extent that people living on benefits were given the impression they could pay off huge home loans."

Most Irish banks/building societies did not relax their rules to this extent. They were then regarded as being mean or too careful about their lending! People don't like to be refused a mortgage even when they obviously can't afford it. Perhaps now they can see it was in their own interest & be grateful.

100% mortgages are a joke & should never have been introduced in this country. At least that's one good thing that has come out of all this. It has opened peoples eyes to reality.
 
Perplexed said:
"Many of those in the deepest trouble should not have received loans to begin with and the banks have to take some responsibility for relaxing their rules to such an extent that people living on benefits were given the impression they could pay off huge home loans."

Most Irish banks/building societies did not relax their rules to this extent. They were then regarded as being mean or too careful about their lending! People don't like to be refused a mortgage even when they obviously can't afford it. Perhaps now they can see it was in their own interest & be grateful.

100% mortgages are a joke & should never have been introduced in this country. At least that's one good thing that has come out of all this. It has opened peoples eyes to reality.
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Funnily enough Northern Rock were pushing their 125% mortgages throughout the last 2 years, which provided 100% plus an element of unsecured loan. No wonder they got into trouble!
 
"March 17 (Bloomberg) -- JPMorgan Chase & Co. surged in New York trading after striking a deal backed by the Federal Reserve to buy Bear Stearns Cos. for $2 a share, 90 percent less than the 85-year old firm's market value last week."

Ouch, that's gotta hurt.
 
OverseasCafe said:
"March 17 (Bloomberg) -- JPMorgan Chase & Co. surged in New York trading after striking a deal backed by the Federal Reserve to buy Bear Stearns Cos. for $2 a share, 90 percent less than the 85-year old firm's market value last week."

Ouch, that's gotta hurt.
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To say the least........
View from inside Bear Stearns
You really can't plan for something like this. For $2 a share, the top executives are outraged at CEO Alan Schwartz for letting this happen, notes the New York Times. Many employees remain in disbelief, stunned that the nation's fifth-largest investment bank went belly up so quickly; apparently, there was no meeting to inform them. Most assume they are laid off, and many trudged out of the building with their office belongings. It takes a certain grace to hold it together at a time like this. Financial News Online notes that employees and executives at the bank owned nearly 40 percent of the bank, which is high compared to other banks. Shares held on behalf of them were worth $2.7 billion not too long ago. Now they are worth $55 million.
Full article
NEWYORK TIMES
http://www.nytimes.com/2008/03/18/business/18bear.html?_r=2&ref=business&oref=slogin&oref=slogin

FINANCIAL NEWS ONLINE
[broken link removed]

YAHOO FINANCE
http://biz.yahoo.com/ap/080317/jpmorgan_bear_stearns.html?.v=17
 
Funnily enough Northern Rock were pushing their 125% mortgages throughout the last 2 years, which provided 100% plus an element of unsecured loan. No wonder they got into trouble!
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Touche !! I meant to state Irish banks. Yes, I know some of them did get into 100% mortgages later in the game, to keep up with the competition. They were quick to back down again at the first sign of trouble. I think you'll find that normal regular banks are very prudent with lending ie main criteria is always ability to repay & proof of same. Pity some of the subprime banks didn't do likewise...........& also a pity that other banks weren't ready to hop on the bandwagon to make a quick buck.

One other point I found interesting in my w/end reading. The fact that though Ireland may have a lot of debt we also have a lot of savings. This is the main factor that makes us different from the US. If you have savings you can ride out a bit of an economy dip. Just thought it's nice to see one bit of good news for what it's worth.
 
cousin_borat said:
This is a very well written article on the history leading up to the current crisis from Catherine Austim Fitts who worked in the Department of housing and urban development (HUD) in the US under Geore Bush Snr.

The whole article whilst very long is well worth persevering with. Some extracts related to the subprime crisis:

http://www.dunwalke.com/5_Leveraged_Buyouts.htm
http://www.dunwalke.com/7_HUD_is_a_Sewer.htm
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Thanks for the link cousin.
looks very interesting indeed.
Going to print it off and digest it later
 
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