Reply to: The UK Banking Bailout

[suityou01]

Was that scare not over last October? I thought the market was panicing because that's when the Lehman Brothers credit auction was?

The missus works on the loan desk of one of the yank banks and she always bores me with her tales of how the world is going to end.

Now something of interest. Please elaborate, I am listening.

[Incognito]

I am deeply wounded

Everyone knows the country's broke mate.

[Incognito]

maybe, but RBS (and hbos) delved heavily into complex instruments, which was great when they held their value (for co profits and bonuses), but once they became devalued the entire organisation was in trouble.
Will the share price ever recover ? who knows

Was that scare not over last October? I thought the market was panicing because that's when the Lehman Brothers credit auction was?

The missus works on the loan desk of one of the yank banks and she always bores me with her tales of how the world is going to end.

[suityou01]

Ah ha, a poster with some genuine input. Can you elaborate please?

I am deeply wounded

[AtW]

If it's an American institute then it's covered by TARP, it's not our problem. I actually wonder just how little of the bailout is to pay off for exposure to US debt.

I am pretty sure TARP does not cover everything (like credit card debts or loans) - it's not that straightforward either.

[EternalOptimist]

I didn't think the nationalised banks were heavily exposed to this type of security.

Link



I thought they were mainly the root cause of this by repackaging their sub-prime lending and it's pension funds and the likes that have lost the real money.

maybe, but RBS (and hbos) delved heavily into complex instruments, which was great when they held their value (for co profits and bonuses), but once they became devalued the entire organisation was in trouble.
Will the share price ever recover ? who knows

[Incognito]

RBS bought ABM Amro (or whatever it was called) who were heavily active in USA giving loans and credit cards to people who could never repay it, not all of it was secured and even if it was some other credits (morgage) had priority in claims.

If it's an American institute then it's covered by TARP, it's not our problem. I actually wonder just how little of the bailout is to pay off for exposure to US debt.

Linky

The kind of things banks were allowed to do is ridiculous - Lehman Brothers bought yellow cake for uranium enrichment ffs!

Please don't steer the thread off topic, I know how you feel about the banking sector in general.

[AtW]

RBS bought ABM Amro (or whatever it was called) who were heavily active in USA giving loans and credit cards to people who could never repay it, not all of it was secured and even if it was some other credits (morgage) had priority in claims.

The kind of things banks were allowed to do is ridiculous - Lehman Brothers bought yellow cake for uranium enrichment ffs!

[Incognito]

The building societies fit neatly into the environment that you have described, the loans are secured and value may eventually return. Most firms borrow, some borrow massively, as the recession bites, some fail , which is a loss to the bank, the banks become cautious, more firms fail. etc
toxic debts. high risk debts.

Many institutions wrapped their loans/debts into instruments, other institutions bought the instrument without understanding what was in it, these were sold on and traded. Until you know where the trail ends -
toxic debts.high risk debts.

I didn't think the nationalised banks were heavily exposed to this type of security.

Link

It is not clear whether RBS has sustained losses. The trading book of its global banking and markets division was worth £16 billion at the half-year, although CDO trading was a small part of this total.

I thought they were mainly the root cause of this by repackaging their sub-prime lending and it's pension funds and the likes that have lost the real money.

[AtW]

Many institutions wrapped their loans/debts into instruments

AAA rated quality assets

[EternalOptimist]

Ah ha, a poster with some genuine input. Can you elaborate please?

The building societies fit neatly into the environment that you have described, the loans are secured and value may eventually return. Most firms borrow, some borrow massively, as the recession bites, some fail , which is a loss to the bank, the banks become cautious, more firms fail. etc
toxic debts. high risk debts.

Many institutions wrapped their loans/debts into instruments, other institutions bought the instrument without understanding what was in it, these were sold on and traded. Until you know where the trail ends -
toxic debts.high risk debts.

[Incognito]

A lot of the debt is not secured

Ah ha, a poster with some genuine input. Can you elaborate please?

[Incognito]

Do you not think that if nobody lives in a house for 10 years and it's a whole block of such houses they will become rundown?

Will Govt pay local taxes for those houses, like say council tax - whether you live there or not?

Thing is Govt does not want to take over those houses because right now they use accounting trick to mark value of those houses to "fair value" rather than market, that's how they avoid announcing futher losses, but as soon as they take over houses they won't be able to do that.

It's pretty much the same scam as that of lake Chicamacomico.

And out of the portfolio the government holds, how many of them do you think are actually held by the government at the moment? Mortgage Express has 4.6% of it's mortgage book three months in arrears or repossessed and that's a larger proportion than any other nationalised bank.

The government wouldn't 'hold on' to any property it repossessed, it would be auctioned as is standard in the industry.

I also believe that UK banks have already written off American Sub Prime losses prior to Nationalisation and using the RBS as an example, its exposure to the American housing market is mainly through Citizens bank which qualified for relief under the US TARP scheme. So let's forget about the American Sub-prime market for this thread.

[EternalOptimist]

A lot of the debt is not secured

[AtW]

It's a secured debt. The asset may be devalued now, but will rise in value at some point.

Do you not think that if nobody lives in a house for 10 years and it's a whole block of such houses they will become rundown?

Will Govt pay local taxes for those houses, like say council tax - whether you live there or not?

Thing is Govt does not want to take over those houses because right now they use accounting trick to mark value of those houses to "fair value" rather than market, that's how they avoid announcing futher losses, but as soon as they take over houses they won't be able to do that.

It's pretty much the same scam as that of lake Chicamacomico.