HMRC warning..

[JohnD]

Not really. I'm suggesting that certain banks / entities that packaged asset-backed securities probably felt that it was an area that they couldnt afford to simply hand to the competition.

You take a very sympathetic and charitable view.

I suggest that they found out about a wangle to make some extra profit and wanted a piece of the action. The fact is that they were bundling up a heap of unsafe and unsustainable loans, and trying to shift them onto trusting mugs.

You have to remember that interest rates are 'a' bank's meal-ticket and they spent an awful lot of time at historically low levels - a market distortion ....

It would be more accurate to say that banks make a lot of money out of the margin, by borrowing at low (or nil) interest rates and lending at high (or extortionate) rates.

Banks can now borrow money at 0.8%

What's the APR on your credit card?

 

[ban-all-sheds]

Wrong either way. What you describe was symptomatic of the boom, not the cause.

If it was symptomatic then it was because banks deliberately put themselves into the position where they would develop the symptoms.

Banks lend, that's what they do, so being 'forced' doesnt come into it.

Of course it does - nobody forced any of them to make loans they should not have. The fact that banks lend, the fact that that is what they do, does not equate to them having to lend to anybody who asks no matter how poor a credit risk they are.

Then identifying what is and is not a good credit risk has its limits.

Indeed it does.

Clearly, "Throwing caution to the wind" and "clearly poor risks" are nonsense, a priori, concepts.

No - what's nonsense is to suggest that the banks could not possibly have been expected to realise what poor risks they were lending to, and that they were innocent victims of unforeseeable circumstances, not negligent idiots.

To coin a phrase I seem to have used a lot in this thread, probably because of the amount of it being spoken by people like you, that suggestion is complete b*ll*cks.

Your point would be to suggest that insurers should never be caught out by earthquakes, for example.

No - my point would be to suggest that insurers should never write flood damage insurance for a building made out of papier mache and tissue paper built on a beach below high-tide level.

Or, more appositely, my point would be to suggest that insurers should never insure unknown things against unknown risks.

Are you a good credit risk now?

Yes.

Can you guarantee your future income stream?

No.

No, neither can they, which is why risk assessment in any industry is art not science,

More b*ll*cks - there is a great deal of science which can be applied, and you didn't need to apply that of the rocket variety to work out that sub-prime mortgages, for example, were a stupid idea.

and besides, the fact is that people like booms. Those responsible for a boom and bust belong as much on the demand side of the equation as the supply side.

People like all sorts of things. If you are to have a working society you need those in positions of knowledge and power, e.g. politicians, bankers etc, to exercise restraint and not just give anything and everything to anybody purely because they want it.

As for inventing financial instruments based on "unsound loans" (again, implausibly retrospective),

It's not implausibly retrospective. Either those selling them knew they were unsound, in which case they should not have been selling them, or those that were buying them did not know what they were buying, in which case they should not have been buying them.

this was down to a few select banks, not the industry

Oh - so it's only a few select banks in trouble, is it? I could have sworn it was a much larger percentage of the industry.

... and as I've said previously, if firms are forced into unhealthy competition, the outcome is seldom sustainable or attractive.

FFS.

Nobody was FORCED into anything - they chose to do it themselves because of greed and ignorance and stupidity.

It wasn't an Act Of God - it was their fault.

 

[BeeLZeebub]

So you're suggesting that structured products and CDOs only relate to "a few select banks?" In that case the financial crisis must have been just a minor thing. No, that's not right....

[The idea that making loans to people who can't pay them back, on poor security, tempting them in at low interest rates which are then going to rocket, can only be seen as A Bad Thing after it's crashed?

Do you realise how many banks there are in the world John? I'm bemused by your implicit belief that a crisis cannot be sparked by one or two entitities .... consider the 1998 crisis in Russia and the role of LTCM ....

Well again, you state that a loan would be issued to someone who couldnt pay it back ..... that's posteriori judgement. Do I think some ridiculous practises were in place? Of course .... but recall that my whole purpose in raising these arguments is to point out that a lot of the criticism facing banking generally has been unjust.

 

[JohnD]

Well again, you state that a loan would be issued to someone who couldnt pay it back ..... that's posteriori judgement.

No it isn't.

That's why the sub-prime market (=lending to people who can't pay it back) was a high-risk operation. Baiting the punters in with initial low-interest rates, then subsequently winching them up, is part of the business model to make them more profitable, but of course causes the defaults that make the business collapse.

Would you want be in the business of making loans to people who can't pay them back? I wouldn't, I'd think it was stupid. Maybe if it was your money I was lending, not mine, and if I could make a fat profit for myself, I might be tempted.

my whole purpose in raising these arguments is to point out that a lot of the criticism facing banking generally has been unjust.

And I am pointing out that a lot of the weasly sympathetic excuses wheeled out to defend banking generally have been unjust(ifiable)

 

[BeeLZeebub]

Wrong either way. What you describe was symptomatic of the boom, not the cause.

If it was symptomatic then it was because banks deliberately put themselves into the position where they would develop the symptoms.

Banks lend, that's what they do, so being 'forced' doesnt come into it.

Of course it does - nobody forced any of them to make loans they should not have. The fact that banks lend, the fact that that is what they do, does not equate to them having to lend to anybody who asks no matter how poor a credit risk they are.

Then identifying what is and is not a good credit risk has its limits.

Indeed it does.

Clearly, "Throwing caution to the wind" and "clearly poor risks" are nonsense, a priori, concepts.

No - what's nonsense is to suggest that the banks could not possibly have been expected to realise what poor risks they were lending to, and that they were innocent victims of unforeseeable circumstances, not negligent idiots.

To coin a phrase I seem to have used a lot in this thread, probably because of the amount of it being spoken by people like you, that suggestion is complete b*ll*cks.

Your point would be to suggest that insurers should never be caught out by earthquakes, for example.

No - my point would be to suggest that insurers should never write flood damage insurance for a building made out of papier mache and tissue paper built on a beach below high-tide level.

Or, more appositely, my point would be to suggest that insurers should never insure unknown things against unknown risks.

Are you a good credit risk now?

Yes.

Can you guarantee your future income stream?

No.

No, neither can they, which is why risk assessment in any industry is art not science,

More b*ll*cks - there is a great deal of science which can be applied, and you didn't need to apply that of the rocket variety to work out that sub-prime mortgages, for example, were a stupid idea.

and besides, the fact is that people like booms. Those responsible for a boom and bust belong as much on the demand side of the equation as the supply side.

People like all sorts of things. If you are to have a working society you need those in positions of knowledge and power, e.g. politicians, bankers etc, to exercise restraint and not just give anything and everything to anybody purely because they want it.

As for inventing financial instruments based on "unsound loans" (again, implausibly retrospective),

It's not implausibly retrospective. Either those selling them knew they were unsound, in which case they should not have been selling them, or those that were buying them did not know what they were buying, in which case they should not have been buying them.

this was down to a few select banks, not the industry

Oh - so it's only a few select banks in trouble, is it? I could have sworn it was a much larger percentage of the industry.

... and as I've said previously, if firms are forced into unhealthy competition, the outcome is seldom sustainable or attractive.

FFS.

Nobody was FORCED into anything - they chose to do it themselves because of greed and ignorance and stupidity.

It wasn't an Act Of God - it was their fault.

As I said of your previous post, it said nothing of the cause of the boom, only the symptoms. As for this tirade, it speaks of a profound ignorance of just how the world works. Your post is full of normative statements, 'shoulds' and 'shouldnts' and there's a bizarre presumption of "full knowledge" on the part of banks etc and their clients about any given situation. Given that you have some insight into credit risk, please provide us with a copy of the letter that you wrote to your pension fund pre-2008 inquiring about any exposure they may have had to the sub-prime sector. Also, in view of the economic backdrop of the past decade or more, you dont know if you're a good credit risk. That's the point, and whilst you continue to miss it, have the good grace to argue with more civility.

 

[BeeLZeebub]

Well again, you state that a loan would be issued to someone who couldnt pay it back ..... that's posteriori judgement.

No it isn't.

That's why the sub-prime market (=lending to people who can't pay it back) was a high-risk operation. Baiting the punters in with initial low-interest rates, then subsequently winching them up, is part of the business model to make them more profitable, but of course causes the defaults that make the business collapse.

Would you want be in the business of making loans to people who can't pay them back? I wouldn't, I'd think it was stupid. Maybe if it was your money I was lending, not mine, and if I could make a fat profit for myself, I might be tempted.

my whole purpose in raising these arguments is to point out that a lot of the criticism facing banking generally has been unjust.

And I am pointing out that a lot of the weasly sympathetic excuses wheeled out to defend banking generally have been unjust(ifiable)

As I said in my last post, bad practises were in place, and no I wouldnt defend sub-prime lending in any circumstances. But again, I'm trying to get you to see that you simply cannot criticise banking generally - to do so shows a complete lack of understanding of the causes of the 2008 crisis and developments since.

 

[BeeLZeebub]

Not really. I'm suggesting that certain banks / entities that packaged asset-backed securities probably felt that it was an area that they couldnt afford to simply hand to the competition.

You take a very sympathetic and charitable view.

I suggest that they found out about a wangle to make some extra profit and wanted a piece of the action. The fact is that they were bundling up a heap of unsafe and unsustainable loans, and trying to shift them onto trusting mugs.

You have to remember that interest rates are 'a' bank's meal-ticket and they spent an awful lot of time at historically low levels - a market distortion ....

It would be more accurate to say that banks make a lot of money out of the margin, by borrowing at low (or nil) interest rates and lending at high (or extortionate) rates.

Banks can now borrow money at 0.8%

What's the APR on your credit card?

It's not intended to be charitable. I'm trying to explain the circumstances of how something like sub-prime lending came about. The assumption that everyone was simply wreckless isnt entirely fair because you have to see it against the dimension of time. Who knows how long a period of strong growth will last? If it lasts ten years (per the last housing boom), was it wise not to get involved? The same dilemmas prevail on both sides ...

 

[ban-all-sheds]

As I said of your previous post, it said nothing of the cause of the boom, only the symptoms.

If the banks were not the cause of it then they could only have been caught up in it via greed, stupidity and ignorance.

You can toss all the "a posteriori" terms around that you like. There is much which is now obvious to lay people after the fact which should have been obvious to experts before it.

As for this tirade, it speaks of a profound ignorance of just how the world works.

Nonsense.

Please do not think that because I expect, demand, (and were I in a position to do so would punish transgressions with eye-watering severity) experts to behave with expertise that I am denying the reality that they do not.

Your post is full of normative statements, 'shoulds' and 'shouldnts' and there's a bizarre presumption of "full knowledge" on the part of banks etc and their clients about any given situation.

It's really incredibly simple.

The financial industry built a machine which did not work properly and whose workings they did not understand.

They should neither have done that, nor operated it, any more than an engineering company should build or attempt to operate a flying machine if they don't understand how to do it.

To keep on saying "oh, it's all so complicated how could they have known" simply proves that I am right - they should not have built something so complicated that they did not understand what they had.

Given that you have some insight into credit risk, please provide us with a copy of the letter that you wrote to your pension fund pre-2008 inquiring about any exposure they may have had to the sub-prime sector.

You utter t**t.

I have no expertise in that area.

I expect, nay, demand, that my pension fund do.

Also, in view of the economic backdrop of the past decade or more, you dont know if you're a good credit risk. That's the point, and whilst you continue to miss it, have the good grace to argue with more civility.

Will you have the good grace to stop coming out with t**tish b*ll*cks about it not being the fault of the financial industry?

 

[ban-all-sheds]

It's not intended to be charitable. I'm trying to explain the circumstances of how something like sub-prime lending came about.

It came about because of greed, ignorance and stupidity.

The assumption that everyone was simply wreckless isnt entirely fair

Yes it is.

because you have to see it against the dimension of time.

No you don't.

Who knows how long a period of strong growth will last? If it lasts ten years (per the last housing boom), was it wise not to get involved?

It was wise.

It has always been wise.

I'll say it slowly so that you might understand it.

YOU

DO

NOT

LEND

MONEY

TO

PEOPLE

WHO

CANNOT

AFFORD

TO

PAY

IT

BACK

UNLESS

A

NON

SUSTAINABLE

BOOM

CONTINUES.

 

[BeeLZeebub]

As I said of your previous post, it said nothing of the cause of the boom, only the symptoms.

If the banks were not the cause of it then they could only have been caught up in it via greed, stupidity and ignorance.

You can toss all the "a posteriori" terms around that you like. There is much which is now obvious to lay people after the fact which should have been obvious to experts before it.

As for this tirade, it speaks of a profound ignorance of just how the world works.

Nonsense.

Please do not think that because I expect, demand, (and were I in a position to do so would punish transgressions with eye-watering severity) experts to behave with expertise that I am denying the reality that they do not.

Your post is full of normative statements, 'shoulds' and 'shouldnts' and there's a bizarre presumption of "full knowledge" on the part of banks etc and their clients about any given situation.

It's really incredibly simple.

The financial industry built a machine which did not work properly and whose workings they did not understand.

They should neither have done that, nor operated it, any more than an engineering company should build or attempt to operate a flying machine if they don't understand how to do it.

To keep on saying "oh, it's all so complicated how could they have known" simply proves that I am right - they should not have built something so complicated that they did not understand what they had.

Given that you have some insight into credit risk, please provide us with a copy of the letter that you wrote to your pension fund pre-2008 inquiring about any exposure they may have had to the sub-prime sector.

You utter t**t.

I have no expertise in that area.

I expect, nay, demand, that my pension fund do.

Also, in view of the economic backdrop of the past decade or more, you dont know if you're a good credit risk. That's the point, and whilst you continue to miss it, have the good grace to argue with more civility.

Will you have the good grace to stop coming out with t**tish b*ll*cks about it not being the fault of the financial industry?

I've said, the banking sector was not in itself the contributing factor to the financial crisis; but the industry got caught up in it like any other firm or individual got caught up in it. Because it was inescapable. That doesnt make them culpable.

Some things were NOT obvious to the "experts" beforehand, that much is obvious. I have agreed that it's hard to forgive, but you'd have it that it was down to everyone being stupid (which is a familiar theme with you). Personally, I think I'd dig around the subject before lashing out.

"The financial industry built a machine ... blah blah blah". Again, grandstanding cr#p, ignoring anything that's been said. What have the excesses of the sub-prime market got to do with the rest of the financial industry you ignorant pr#ck?

The problem with credit risk is that you're modelling human behaviour with maths: it wont always be accurate. You seem to think it should. Clearly that is a imbecilic view.

 

[BeeLZeebub]

It's not intended to be charitable. I'm trying to explain the circumstances of how something like sub-prime lending came about.

It came about because of greed, ignorance and stupidity.

The assumption that everyone was simply wreckless isnt entirely fair

Yes it is.

because you have to see it against the dimension of time.

No you don't.

Who knows how long a period of strong growth will last? If it lasts ten years (per the last housing boom), was it wise not to get involved?

It was wise.

It has always been wise.

I'll say it slowly so that you might understand it.

YOU

DO

Blah blah.

So you made sure not to buy your house in a boom then huh? You know, you really should think around subjects a little before laying in ... otherwise you'll get a reputation as a bombastic idiot

 

[JohnD]

kettle, pot?

 

[mikhailfaradayski]

Well, i just wasted ten minutes of my life reading this twaddle in the hope that someone may have commented in relation to the OP.

BL, I don't suppose you are a politician getting a back-hander from a bank per chance?
You do seem to be flogging a dead horse here. No matter how much you wriggle around, i doubt there will be many people outside of the greedy banking circle who will agree with you.

Donald Rumsfelt would be proud of you!

 

[ban-all-sheds]

I've said, the banking sector was not in itself the contributing factor to the financial crisis; but the industry got caught up in it like any other firm or individual got caught up in it. Because it was inescapable. That doesnt make them culpable.

Wrong.

Banks, or other financial institutions are not the same as "any individual".

They are not supposed to get "caught up" in things.

Much of what happened was escapable, had they not behaved with ignorance, greed and stupidity. And yes, I am going to keep on saying that because it is true. Apologists like you hate the truth, of course.

Some things were NOT obvious to the "experts" beforehand, that much is obvious.

Then those things should not have been brought into existence by those same experts, should they?

I can see how someone stupid, ignorant and greedy might make something to sell when he doesn't know how it will work, or what it will do, and I can see how other stupid, ignorant and greedy people might buy them by the box because they think they can sell them on at a profit, but in doing so they have all destroyed any claim they have to being experts.

"The financial industry built a machine ... blah blah blah". Again, grandstanding cr#p, ignoring anything that's been said. What have the excesses of the sub-prime market got to do with the rest of the financial industry you ignorant pr#ck?

What happened to the products of those excesses?

The problem with credit risk is that you're modelling human behaviour with maths: it wont always be accurate. You seem to think it should. Clearly that is a imbecilic view.

I don't expect it to be completely accurate, but I do think that those doing the modelling should do it as well as they can, and what is clearly an imbecilic view is that they did do that.

 

[ban-all-sheds]

So you made sure not to buy your house in a boom then huh?

As it happens I've bought property when I needed/wanted to, not because it was rapidly going up in value at the time.

I have never, and never would, decide to buy a house using a loan which I could not afford to service.

I have never, and never would, decide to borrow more than the property was worth when I bought it.

And do you know why?

It's because I am not stupid or greedy or ignorant.

Now - I grant you that there are (were) many property buyers who were all or some of those, that's inescapable, but my point is that those doing the lending should not have been - for them it was escapable because they were (or should have been) experts.

Lending people more than they can afford to service? That's not inescapable, it's just stupid and ignorant, and if done for short term gains and bonuses it is just greed.

Lending people more than the asset is worth? That's not inescapable, it's just stupid and ignorant, and if done for short term gains and bonuses it is just greed.

Deciding to build synthetic financial instruments based on sliced and diced collateralised debt? That's not inescapable. Etc.