[news] World Financial Meltdown

[somabc]

Sorry for the gloomy post but has anyone being paying attention to the news? You may think the current crisis only affects some bankers who have bet their shirts and lost but unbelievably it looks like the US & UK government are stepping in to protect them (at our expense).

 

http://www.youtube.com/watch?v=LkjjMGuun-M

 

The Associated Press: Paulson urges quick action on $700 billion bailout

 

 

DRAFT ACT

 

"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to 700,000,000,000 dollars outstanding at any one time"

 

"The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation"

 

"Designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them"

 

"Sale of Mortgage-Related Assets. The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act."

 

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency"

 

Former CEO of Investment Bank Goldman Sachs - US Treasury Secretary, Hank Paulson is likely to be given authority to spend trillions of dollars (up to $700 billion at a time) buying 'toxic' debt, ie mortgage securities that are now worthless. There is to be no oversight on which deals are made. They cannot be challenged in Court.

 

The US does not have the money to fund this, so it will be borrowing the money (or simply printing more). Our government may have to borrow £90 billion and is already talking about a 5p rise in income tax to help pay for all this. The jobless rate is predicted to hit 2 million within 18 months and may rise above 1980s levels in the greatest financial crisis since the 1930s.

 

Financial crisis: Alistair Darling may have to borrow £90 billion and raise taxes, say experts - Telegraph

 

BBC NEWS | Business | Q&A: Financial crisis and you

Edited September 22, 2008 by somabc

[torledo]

It's astonishing isn't it ?

 

The US govt. are going to buy up all these mortgage-related assets, yet most of these securitized investments nobody has a clue of the value of.....they are in effect writing a blank cheque to ensure further bailouts of banks who have been exposed and were deemed too big to fail. Sends a clear message that the financial sector is in turmoil.

 

Your right, they don't have the money to do it, so if your a govt. and you need money in an emergency what you do ? Well, you print more of the green stuff, which ofcourse brings it's own problems for your natoinal currency.

 

There was talk that they'd have to extend this daft scheme to cover unsecured borrowing such as credit cards, but i'm guessing they can't print the dollar bills required fast enough.

 

Here in the UK we now have a shotgun marriage between HBOS-LloydsTSB and the enlarged group now control over 30% of the mortgage market without any intervention from the competition commision, the govt. own another bank who were exposed to the fallout from the mortgage asset crisis resulting in 50 billion pounds of taxpayers money and the govt. will need to raise borrowing this year to 90 billion. All of this has happened under an unelected prime minister.

 

Never mind a 5p income tax hike, the morally justified route would be for all of us to pay NO tax, why should taxpayers money be used to bail out banks and their irresponsible behaviour. More pertinently why should we pay to cover the mistakes of a govt. and bank of england who created an almighty property bubble, and then put the blame on everyone else when the decade long party came to an end. In this country the effects will be felt for a long time to come, we're only just at the beginning with major problems ahead with inflation and unemployment.

 

The old adage was that when the US sneezes the rest of the world catches a cold....not it's more like the US sneezes and the rotw is paralyzed from the neck down.

[witch]

Not that I necessarily agree with using taxpayers money to bail out banks -but the turmoil for us if they don't will allegedly be much worse - huge interest rate hikes and goodness know what else.

And BTW - we don't elect the prime minister in this country, we elect the party and they choose the leader. Technically, all prime ministers are 'unelected'

[torledo]

Not that I necessarily agree with using taxpayers money to bail out banks -but the turmoil for us if they don't will allegedly be much worse - huge interest rate hikes and goodness know what else.

And BTW - we don't elect the prime minister in this country, we elect the party and they choose the leader. Technically, all prime ministers are 'unelected'

 

I'm well aware that we don't elect a prime minister, but it's just that, a technicality.

 

Actually, hyperinflation, which is a real possibility if you start printing money on a global scale to correct the markets, is far more serious than huge interest hikes.

 

For many ftb's there has already been a decade of turmoil, and for those who have bought in the last 2 years, the turmoil has been negative equity as a result in the correction of unsustainable 140% HPI

and higher than 10-year norm libor rates which have meant people have been hugely affected by even 1% interest rate rises. In the current market even a couple of percentage points causes turmoil becuase of the levels at which people have burdened themselves with mortgage debt. The problems have been created by too low interest rates in the early part of the decade, and relaxed lending which the govt. would dearly like us to return to.

 

My fear is that as a consequence of bailing out the banks in order to safeguard depositors and maintain stability they as a result perputuate the housing bubble. The more govt. money used to plug holes in the bank balance sheets the more banks feel they can do what they want and will revert to type i.e reckless lending. Don't forget one of the govt. aims is to return liquidity to the banking sector, which means getting banks to return to 'normal' lending. Unfortunately normal lending over the last 10 years has been lending to people who can't or shouldn't buy a home, aswell as lending at historically high multiples.

 

The current downturn in lending is in part due to lack of consumer confidence but also because lenders have had to return in some respects to more checks and prudent lending, in other words how many people have got a 10% deposit AND can buy at 3.5 times income 3.5/1 joint income ? [remeber average wage is 23k and average house price is 177k] The answer is not enough to maintain previous levels of lending the govt. wants to return to....unless we see a major correction in the market, which the govt. don't want because of the potential for mass negative equity. If the govt. maintain the bubble through their intervention and we don't see a correction it'll be far worse for the country in the medium to long term.

[Guest Guest]

The current downturn in lending is in part due to lack of consumer confidence but also because lenders have had to return in some respects to more checks and prudent lending, in other words how many people have got a 10% deposit AND can buy at 3.5 times income 3.5/1 joint income ? [remeber average wage is 23k and average house price is 177k] The answer is not enough to maintain previous levels of lending the govt. wants to return to....unless we see a major correction in the market, which the govt. don't want because of the potential for mass negative equity. If the govt. maintain the bubble through their intervention and we don't see a correction it'll be far worse for the country in the medium to long term.

 

 

Yep, hopefully the big crash is yet to come. Yes some people had to buy in the last few years and i do feel sorry for them, but the majority of people who have bought didnt have to pay the rediculas amount of money they did and are the reason why we are in the shat we are now.

[somabc]

It would be better if the fed gave $700 billion to homeowners who could then use the money to pay the banks, I would rather people got a free house than have the banks repossess and take taxpayers money for the loans. They could pay everyone's mortgage payments in the USA up to a certain level for the next 5 years.

[RabbieBurns]

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95, with HBOS, earlier this week your £1000 would have been worth £16.50, £1000 invested in XL Leisure would now be worth less than £5, but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214.

 

So based on the above statistics the best current investment advice is to drink heavily and re-cycle.

[HodgeHi]

This annoys me. People buy houses. Thats what we all aim to have eventually. When we buy houses shouldn't be dictated to by the banks and how they manage themselves. If the only deals available are the ones offered by the banks you have to take them if you are buying a house at that time. How long do you wait before buying? It may never happen or someone else will buy the house that you were looking at.

 

Me and my missus purchased our house over a year ago now and it was not easy. We both earn a crap amount of money and i am still paying off the sh*t that i mounted up when a college/uni. We then had a child, and were still living with my missus' parents. We decided that we should buy a house to give our son some better stability as we used to flit between my parents house and back. So we did. We went into the part ownership which is a waste of time but we managed to get a house for 47000. I don't think we went overboard.

 

But the big problem is we as a country will be bailing them out again, but what do we all get in return? Sh*t on by the banks. When the interest rates went up my loans that were still outstanding went up too. which is fine. But by a damn site more than what they should have. So i look to swap to someone who has a lower APR. They gave me %29.5. I declined. But then because i had another search against my name on my credit report my APr went up again. Apparently this is because there is a thing called a default and if you have so many checks against you report they can then hike up their rates as they now deem you a risk. Absoulte B*ll*cks. F**k the banks they are all a bunch of scum. halifax wanted to charge me over £65 for going over my overdraft by £3.50

[mattx]

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95, with HBOS, earlier this week your £1000 would have been worth £16.50, £1000 invested in XL Leisure would now be worth less than £5, but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214.

 

So based on the above statistics the best current investment advice is to drink heavily and re-cycle.

 

I'll drink to that !!

[Domino]

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95, with HBOS, earlier this week your £1000 would have been worth £16.50, £1000 invested in XL Leisure would now be worth less than £5, but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty cans to an aluminium re-cycling plant, you would get £214.

 

So based on the above statistics the best current investment advice is to drink heavily and re-cycle.

 

Tenants lager = £5.03 for four

£1000/5.03 = 198.80715705765407554671968190855

198.80715705765407554671968190855 * 4 = 795.22862823061630218687872763419

 

214 / 795.22862823061630218687872763419 = 0.26918238993710691823899371069182

 

so recycled cans are worth 27p each?

 

I could retire on the contents of my kitchen!

[Guest Guest]

Tenants lager = £5.03 for four

£1000/5.03 = 198.80715705765407554671968190855

198.80715705765407554671968190855 * 4 = 795.22862823061630218687872763419

 

214 / 795.22862823061630218687872763419 = 0.26918238993710691823899371069182

 

so recycled cans are worth 27p each?

 

I could retire on the contents of my kitchen!

 

£5.03 for 4! Are you mad, most shops do atleast 8 for £6, if not better. I normally get 54 for £20 when its on offer at Asda/Tescos/etc

[RabbieBurns]

up here we get 8 for 5.99 , less if bought in bulk

 

edit: beaten to it

[somabc]

Tenants lager = £5.03 for four

£1000/5.03 = 198.80715705765407554671968190855

198.80715705765407554671968190855 * 4 = 795.22862823061630218687872763419

 

214 / 795.22862823061630218687872763419 = 0.26918238993710691823899371069182

 

so recycled cans are worth 27p each?

 

I could retire on the contents of my kitchen!

 

Did anyone teach you about significant figures?

 

You can maximise your return by buying asda smart price lager!

 

http://img.dailymail.co.uk/i/pix/2007/11_01/lagergrapMOS1111_228x685.jpg

Edited September 22, 2008 by somabc

[torledo]

some sobering reading on northern rock post govt. bailout...

 

Increase in customer arrears threatens to worsen Rock slide | Business | The Observer

 

Also, i was reading today how there will be significant cost savings i.e redunancies and branch closures from the new LTSB-HBOS bank. In most cases where there is a dual presence on a high street one will close [not surprising] but think about how many tens of thousands of job losses that equates to.....and these aren't city high fliers.

[torledo]

This annoys me. People buy houses. Thats what we all aim to have eventually. When we buy houses shouldn't be dictated to by the banks and how they manage themselves. If the only deals available are the ones offered by the banks you have to take them if you are buying a house at that time. How long do you wait before buying? It may never happen or someone else will buy the house that you were looking at.

 

Me and my missus purchased our house over a year ago now and it was not easy. We both earn a crap amount of money and i am still paying off the sh*t that i mounted up when a college/uni. We then had a child, and were still living with my missus' parents. We decided that we should buy a house to give our son some better stability as we used to flit between my parents house and back. So we did. We went into the part ownership which is a waste of time but we managed to get a house for 47000. I don't think we went overboard.

 

But the big problem is we as a country will be bailing them out again, but what do we all get in return? Sh*t on by the banks. When the interest rates went up my loans that were still outstanding went up too. which is fine. But by a damn site more than what they should have. So i look to swap to someone who has a lower APR. They gave me %29.5. I declined. But then because i had another search against my name on my credit report my APr went up again. Apparently this is because there is a thing called a default and if you have so many checks against you report they can then hike up their rates as they now deem you a risk. Absoulte B*ll*cks. F**k the banks they are all a bunch of scum. halifax wanted to charge me over £65 for going over my overdraft by £3.50

 

I don't envy you hodgehi, i wouldn't touch partbuy schemes with a barge pole....although i understand how often it's the only option available in the recent climate. Unfortunately shared equity is nothing but a ruse to keep the property bubble going.....the govt. would rather peddle these schemes than allow the market to reduce to affordable levels. Hence the current spate of interventions with stamp duty and BoE capital injections.

[somabc]

Financial crisis: Default by the US government is no longer unthinkable - Telegraph

 

Mad as hell - taxpayers lash out - Sep. 21, 2008

Edited September 22, 2008 by somabc