Not one single institution, or governemnt, or expert, understood the risk or foresaw the severity and impact of the current crisis, and yet a bunch of you expect amateur investors to have behaved differently.
It used to be the case that Bank/Building society managers, would make an informed decision, about your ability to repay any mortgage taken out.
Incomings/outgoings/Job/financial health all were taken into consideration.
The upper echelons of these institutions decided in their wisdom to turn managers into salesmen, where they had to meet targets, in order to grow.
The "products" these salesmen sold were commission driven, unbelievably this commission was paid in advance of the buyer concluding their side of the bargain.
This in turn left banks supplying products, which in many instances were unsuitable for the customer involved.
So why did they not understand the risks ? incompetence / stupidity / greed ?
In America the amount of money lent to people who could never hope to repay their debts was staggering, sold by salesmen on a commission basis.
Banks throughout the world then knowingly bought some of this debt, supposedly cheaply.
So why did they they knowingly buy such debts ? A collective decision based on what..... sound financial principles ?
As for the British mortgage market, do mortgages based on 4X/5X/6X salary ring any bells. Do mortgages of 100%, 110% 125% with no deposit ring any bells.
Britain will soon face its own subprime mortgage fiasco, although on a smaller scale than America. Did no one believe that this was foolhardy........Hmmmmm.
Are not banks audited?, where were the auditors?
Did the the financial directors not know their balance sheets........If not why not.?
Where were the FSA in all of this?
Unfortunately the wages/bonuses that could be earned meant that prudence/financial acumen was replaced by pure greed, and the whole financial market was compliant.
Even Gordon Brown denounced their behaviour, but I would ask as chancellor, did he not know the financial health of these institutions, if not, why not.