End of the credit crunch - not!

[DimPrawn]

http://news.bbc.co.uk/1/hi/business/7351073.stm

The scheme would temporarily allow banks to swap their mortgage-based assets for government bonds.

The hope is that banks will find it easier to borrow and lend to other banks using these bonds as security, which in turn would ease up lending to individual borrowers.

The government does not consider this a bail-out of the banks and I've been told the scheme will not go ahead unless it can be designed to protect the taxpayer from any loss.


Now this is scary. The tax payer gives the bank a bond and the bank gives the tax payer a worthless sub-prime tainted "asset".

So the bank hands over all it's risky debt to us (the taxpayer) and then is free to offer 125% mortgages to those who can't afford them again.

This is going to get ugly.

[TheRefactornator]

My crystal balls tell me there will definitely be an end to this so called current credit crunch.

I foresee a horrible snotty pile up of chav scroungers fighting with foreign nationals, pimps on spikes, mass price comparison website death and christ on a bike. Nothing to worry about really...move along please nothing to see here.

[HairyArsedBloke]

Launder worthless debt into AAA debt. “New lamps for old, new lamps for old”.

I wonder what the big banks said to el Gordo……

“Right then you one-eyed, snot-gobbling, infantilist. This is how it’s gonna be, or the AB/DL pictures are on the front page of The Sun on Friday”

[Bagpuss]

This just highlights how the governemnt has been relying on the reckless spending of the feckless to fund it's ever larger 'investment' commitments

Let those who lived beyond their means go to bankrupt, it is the only way they are going to learn a bit of old world economic sense

[thunderlizard]

I have only been paying attention to this saga on&off, so is this a fair summary?

(1) Banks make ever-increasing profits by borrowing against mortgages whose risk they ever-decreasingly understand
(2) Eventually banks understand the risks, stop borrowing, and write down massive losses
(3) The government decides to wind things back to the tail end of stage (1) using our tax money.

[Turion]

I have only been paying attention to this saga on&off, so is this a fair summary?

(1) Banks make ever-increasing profits by borrowing against mortgages whose risk they ever-decreasingly understand
(2) Eventually banks understand the risks, stop borrowing, and write down massive losses
(3) The government decides to wind things back to the tail end of stage (1) using our tax money.

Yes, you've got it, finally. In order for the govt to keep boasting of years of growth, the best continuous times 200 odd years etc, blah, they need people to spend money they don't have! tres facile, n'est pas.

Of course, to finance this they must call on those who are careful, don't spend, or borrow above their means. These boring people are not good for 'Gordies Style Growth'. Hence he taxes this group like f^ck.

[MrRobin]

Yeah sort of

(1) Banks lend to anyone and everyone they can with minimum consideration about whether it can be paid back
(2) Banks repackage up the loans in bunches as "CDOs" and sell to each other, without the knowledge of what the real risk of the debts are
(3) The borrowers start to default as the economy slows and prices rise and banks discover that the CDOs are much more risky than they thought
(4) They stop trusting one another and stop lending to one another and for banks that fund all their loans from this method (a la Northern Rock) this is a big problem - The Credit Crunch
(5) The government is now trying to help the banks regain trust of one another and ease the crunch by offering much less risky loans in return for the risky ones
(6) Go to (1)

[Sockpuppet]

Well I don't think it will matter.

The banks won't start chunking out cheap loans again. They want to increase profits and this gives them a nice excuse to act cartel like and not drop prices.

Good news for me. House prices dropping at £160/day. Its like half a day extra billing everyday for me.

[Pickle2]

Good news for me. House prices dropping at £160/day. Its like half a day extra billing everyday for me.

You need to up your rate.