The Independent has done a good summary of lending by UK banks, to whom and on what kind of loans most of their losses arose (above and beyond the fact that senior employees were ripping of the banks to the tune of £10 billion or £20 billion a year).
The figures all look perfectly plausible to me, yes, lending to UK household went up a lot in the decade leading up to the 'financial crisis' (which we knew about), but this was only a small part of the overall increase.
H/t Drewster at HPC.
Sunday 6 May 2012
Economic myths: UK household borrowing
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21 comments:
But did not the housing bubble feedback loop increase their collateral thus enabling them to create more electronic money to pish up the wall? Even a shitpile needs a foundation.
The power to create money, or their own virtual money/currency as they seem to have done does not mean it was not underpinned in some way by real money?
I don't recall anyone saying the crisis was the Uks fault.
Hasn't it always been understood that It Started in America?
Our banks lent to theirs. Our recession stemmed from theirs.we already knew this,surely? The people saying this crisis isn't the fault of many uk borrowers are saying that ordinary people are paying for the bad activities of the banks.
I think that has been understood since 2008. W
Mr Brown was correct when he said the Yanks fault.
He was just wrong when he pretended it was only their fault and nothing to do with our own financial situation.
Bill Q
The financial crisis was born in AIG's London branch, after Gordo loosened the rules for CDS.
S, yes of course, and lending by UK banks to abroad was largely land-related (whoever indirectly).
BQ, the Indy article is a response to Philip Hammond blaming it all borrowers "the banks had to lend to somebody". And the UK would have been f-ed with or without f-age in the USA or Eurozone.
SB, the financial crisis was one of the 18-year recurring pre-progammed ones.
Diff to pinpoint where the first block on supply and demand occurred due to rents and taxation, triggering this one. The industrial network is global and consists of a gazillion transactions. But so what. We don't need to know it with scientific precision. Just that by opposing general laws it *will* happen. Nature doesn't care who is the biggest robber or the biggest benefactor. Everyone gets hit good and bad. That's why a Jubilee is the least harmful remedy. Good and bad are redeemed. So this debate is just another one seeking blame and punishment for everyone else. This might help if you like reading a bit, old stuff, applies more intensely today:
http://www.henrygeorge.org/pchp22.htm
And what, Mark?
JH, and nothing in particular. The Indy article is just a good summary, it's real facts about the real world around us. It's important to know what goes on before we decide what to do about it, if anything.
Strictly speaking it was universal mis-reg-yew-lay-shun of Banking that bust them...Note well that that mis-reg-yew-lay-shun was constituted (in the UK at least) as 'nationalisation by reg-yew-lay-shun'.
I think the real killer was all the off-balance sheet stuff. So effectively outside of regulation and also conducted by institutions that are not actually banks (e.g. hedge funds) but act like banks (i.e. speculate on assets rather than help fund investment!)
QP - what off-balance sheet stuff are you referring to? All the mortgage loans were on balance sheet. In Japan in the 90s, all those loans were backed by equities and were on balance sheet. The off-blance sheet derivatives SHOULD have spread the effects through the sector but, because they were bought up by the institutions that issued them, they effectively re-concentrated the risk. It is a mess - it is easy to blame it on the Regulators but the bosses of the banks should have spotted it.
I just hope that the same has not happened in the insurance and reinsurance sector.
L, the 'regulation' or otherwise didn't help, but spotting that bank balance sheets had quadrupled in the space of a few years ought to have been a warning sign.
QP, as G says, there wasn't much off-balance sheet stuff - if anything, bank balance sheets were wildly overstate because they were lending to and borrowing from each other. And the 'shadow banking sector' is a myth dreamed up by G Brown to shove the blame elsewhere.
MW. If you take a close look at the FSMA 2000 plus things like Basel 2, you will see a common thread. There was a deliberate weakening of bank capital requirements / ratios by bureaucrats. If you weaken the capital requirements banks expand their balance sheets. It was government failure coupled with unremitting mis-regulation. Mind you the rent seeking greedy bastards in the banks went for it with alacrity...
Well I not an expert but I was under the impression that a significant amount of this:
http://en.wikipedia.org/wiki/Off-balance_sheet
Which appears to be what Graeme describes, in that the securitization process was self-supporting, contributed to the "credit-crunch"
Maybe I have just been spending too much time on zero hedge :-) did enjoy this though:
http://www.zerohedge.com/news/everything-you-know-about-monetary-policy-wrong-and-why-very-bad-news-europe
L, possibly, and that is possibly why this 'financial crisis' was worse than others, but they happen in predictable cycles of every 18 years or so anyway, no matter what 'regulations' are in force.
QP, "off balance sheet finance" and "shadow banking" are terms which politicians and failed regulators like to use to push the blame elsewhere. As it happens, there is probably too much stuff ON banks' balance sheets than is missed OFF, so it's easiest to ignore the topic completely.
MW, well quite. 'Reg-yew-lay-shun' can only serve to make the manic exuberance of a bubble market worse - because bureaucrats have no market function and always unaware of what's really going on. I had bank balance sheet analysis in ooooooo 2002/2003 that showed it was all going tits up. Why didn't the bureaucrats?
L, the bureaucrats had exactly the same balance sheets, but they were told to assume that "it's different this time" because all this fancy inter-bank syndication and securitisation had magicked the risks away. The same mentality as "there is no house price bubble this time it's for real".
L so Natwest Global sold a derivative to Natwest Uk, and another piece to Nat West Europe.....the horrible thing is that it had all happened in Japan 10 years earlier and no one in a position of control the Western hemisphere wanted to learn a lesson.
G, exactly. This "selling to yourself" thing was apparently the (near) downfall of UBS. A friend whose wife works for Barclays says that the 'securitisation' department was bundling up and selling on crap with all manner of shiny guarantees and that their 'fixed interest' department down the corridor were merrily snapping it all up again by mistake. The same applies to QE, it's just numbers on bits of paper being shuffled round and doubled up each time, with a handsome cut for the bankers.
Real loans to real borrowers and real deposits by real depositors did double (or whatever) but bank balance sheets went up four or five fold - most of this was just fantasy lending between banks.
Lola, when interest rates were around 15%, there were clear limits on the price of housing. i am very surprisd that no one seems to have considered what might happen when interest rates went to 5%. mmm...sudeenly houses are worth 3 times as much as they were....quids in for the homeowners!
We want more
MW.G. Agreed. Agreed. Sadly....
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