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    ****ing bankers
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    (Original post by justlol)
    not really, sure in some instances but more to do with the lack of education in financial matters. i mean house prices always go up, right?
    truesay
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    The Illuminati bankers.
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    (Original post by davidr123)
    No its not the bankers....the bankers just trade - it was the US government that CAUSED the global recession.They underwrote home loans for people with no jobs, income or assets to win votes - just like Labour created pretend jobs that cost a fortune but have no economic value with taxpayers money - to win votes here.

    These debts were then bundled into packages and entered the financial markets, bankers by definition are greedy and creative - and they disguised and sold on these debts - when the loans began defaulting it ended up in huge losses that caused banks to fail who'd been duped into buying these dodgy loans as they'd passed through "reputable" banks so no one questioned them...

    The bottom line is the US government should NEVER have underwritten home loans for people with taxpayers money. Had they not undertaken "social-engineering" to win votes - it would never have happened on this scale.

    It is a painful lesson that there is no such thing as a free lunch.

    Channel 4 had a few good programmes about it - niall ferguson's ascent of money and Britain's trillion pound debt horror story on 4od.
    The Federal Reserve?
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    PS Helper
    I see no one here knows what a banker is or the difference between a banker and a trader.
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    (Original post by usainlightning)
    What about those that took out the credit in the first place? Surely the blame doesn't rely solely with the bankers.
    Because most people are idiots who would take big loans without even thinking about the consequences. It would be like blaming some cows for straying out of their field because the farmer left the gate open.
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    (Original post by justlol)
    Inside Job: 'Inside Job' provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.

    won best documentary oscar, narrated by matt damon, watch it here:

    http://www.megavideo.com/?v=N4BDVCO8
    cheers for the link...i think the film is potentially useful but it comes across totally the wrong way and makes the wrong conclusions (its clearly a political film i.e it was the bankers, it started with reagan)...some of it is useful in particular, criticizing greenspan and summers and the interview with volcker was nice but other stuff like interviewing eliot spitzer or implying all bankers use drugs or that they should be jailed is totally, unbelivably ridiculous...basically, they way they cast banks is totally stupid...and there a lot of mistakes particularly about securitization.

    either way, banks going public, too little equity, regulatory capture and bad government policy are problems however, the basic problem is always the same, people want to believe something that isn't true and they are greedy. if they go bankrupt, its their fault so blaming goldman sachs for selling them something that wasn't good shouldn't be an issue.

    the biggest difference would be to make banks privately owned again (somehow) and make them hold more equity. people will always be stupid, it just depends on how much rope you give them to hang themselves. deregulation is more complex but derivatives are good it just depends on how you deal with losses etc.
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    The very short answer is millions of individuals, business entities, governments et al throughout the western democracies somehow all collectively putting on "Rose tinted spectacles" for over ten years, and forgetting the fairy tale they were told as children about "The Emperor's new clothes".

    Or in simple terms, there is no such thing as a free lunch.
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    who do the government owe all this money to?
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    Basically, in the US, there was a massive housing bubble, built on debt. The banks were lending more, so lent to people who would otherwise not be given a loan, i.e. those with bad credit ratings (They gave these people Adjustable Rate Mortgages, which have massive payments when times turn bad). However, these people then began defaulting on these payments, so the banks lost the money they lent them. Many houses were foreclosed (taken by the banks to repay the debt), causing a flooding of the market and falling house prices. This was the subprime crisis.

    The credit crunch then ensued, because the banks had lost money they had expected to have. They then could not offer credit to companies wishing to expand or invest. These companies then struggled without this capital, so jobs were lost and we got into a viscous cycle, with consumer spending falling and the stock markets crashing, further unemployment was created in a downward cycle.

    Basically there was also lack of regulation of the financial system, allowing this wreckless lending. Government policy was also to expand home-ownership to those who could not afford it.

    Due to low interest rates in the US, a share in these ARMs were attractive for short-term gains, so investors from around the world became tied-in and suffered the subsequent losses.

    Hope that helps!!
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    (Original post by Jacktri)
    who do the government owe all this money to?
    They issue securities to investors. These are usually bonds and guilds. So anyone can lend the government a few thousand over a fixed period and get a reasonable interest rate. It's usually people's pension funds, etc.
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    Greedy Banks
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    A lot of things went wrong but it was rooted in the financial sector.

    As people have alluded to already on the thread in the US there was far too much lending of mortgages to people who couldn't afford to borrow. But why was this so widespread? Low interest rates from the Fed were one reason, another was the range of financial 'innovations' that went on during the early to mid 2000s, where mortgage lenders lent loads of dodgy mortgages to people likely to default, then bundled up the debt and sold it on in securitised packages to other banks. So while they still got admin fees for collecting on the debt, they had sold the value of it to someone else (ie another bank/pension fund). That someone else probably sold it on somewhere else so it was like pass the parcel until somebody finds out that what they are holding, isn't worth what they thought it was, because the debtors are starting to default.

    But this is an easy way for mortgage lenders to get rid of risk - lend to people unlikely to pay it back, sell the mortgage obligation on, and its someone else's problem when the default happens.

    Two key players got fooled in all this - 1. the ratings agencies, who ended up giving AAA rating to a lot of this debt which was actually risky as anything, but fooled other institutions into thinking it was legit, 2. insurance companies like AIG, who thought that because these securitised packages of debt (eg Collateralised Debt Obligations) were made up of lots of different individual mortgages, the risk was spread, ie so what if a few defaults happened, the majority would not default. Unfortunately when the housing market collapsed, the defaults started to roll in en masse, and the nightmare for any insurance company materialised...they found they had insured risk which was correlated, so when they were paying out on one, they were paying on a whole load.

    Many individual banks got shafted because they were sitting on a load of assets that they thought were worth something but were worthless. But they had also behaved completely recklessly. They had developed business models which were totally dependent on short term and overnight finance to meet immediate needs of creditors. When doubts started to emerge about individual banks' solvency, other banks got edgy about lending to each other and so that short term and overnight finance dried up and thats when the cards were about to collapse but for governments stepping in and taking on the debt.

    Since that happened the bankers have reverted to enjoying hefty remuneration and pointing the finger at governments for being in high levels of debt...yes debts that were created by banks ridiculous excesses and risks during what was the golden age for banks to be able to make money. Briefly in 2008 there was some serious debate about reforming the banking system to prevent this from happening again, but the bankers have managed successfully to change the discourse of political debate away from them and onto the issue of sovereign debt,the cure being cuts in public services and welfare.
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    The reasons some people are putting on here are laughable.

    I can't believe that out of the 50 odd people to post only 2 or 3 have got it correct.
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    Wow with all these educational merits everyone has on here you would think that someone has a bit of common sense themselves.
    What caused the recession is simple automation of products ( the implementation of robots in the workplace) as well as cheap labour in third world countries.. When robots were implemented every western country lost workers which increased every economical problem you see now.
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    The 2007 flooding crisis.
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    (Original post by Smilingsam)
    Wow with all these educational merits everyone has on here you would think that someone has a bit of common sense themselves.
    What caused the recession is simple automation of products ( the implementation of robots in the workplace) as well as cheap labour in third world countries.. When robots were implemented every western country lost workers which increased every economical problem you see now.
    I hope this was a joke.
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    (Original post by T.I.)
    I hope this was a joke.
    Well your post was that i have quoted here for you...
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    (Original post by Smilingsam)
    Well your post was that i have quoted here for you...
    My post simply expressed my opinion.
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    (Original post by MagicNMedicine)
    A lot of things went wrong but it was rooted in the financial sector.

    As people have alluded to already on the thread in the US there was far too much lending of mortgages to people who couldn't afford to borrow. But why was this so widespread? Low interest rates from the Fed were one reason, another was the range of financial 'innovations' that went on during the early to mid 2000s, where mortgage lenders lent loads of dodgy mortgages to people likely to default, then bundled up the debt and sold it on in securitised packages to other banks. So while they still got admin fees for collecting on the debt, they had sold the value of it to someone else (ie another bank/pension fund). That someone else probably sold it on somewhere else so it was like pass the parcel until somebody finds out that what they are holding, isn't worth what they thought it was, because the debtors are starting to default.

    But this is an easy way for mortgage lenders to get rid of risk - lend to people unlikely to pay it back, sell the mortgage obligation on, and its someone else's problem when the default happens.

    Two key players got fooled in all this - 1. the ratings agencies, who ended up giving AAA rating to a lot of this debt which was actually risky as anything, but fooled other institutions into thinking it was legit, 2. insurance companies like AIG, who thought that because these securitised packages of debt (eg Collateralised Debt Obligations) were made up of lots of different individual mortgages, the risk was spread, ie so what if a few defaults happened, the majority would not default. Unfortunately when the housing market collapsed, the defaults started to roll in en masse, and the nightmare for any insurance company materialised...they found they had insured risk which was correlated, so when they were paying out on one, they were paying on a whole load.

    Many individual banks got shafted because they were sitting on a load of assets that they thought were worth something but were worthless. But they had also behaved completely recklessly. They had developed business models which were totally dependent on short term and overnight finance to meet immediate needs of creditors. When doubts started to emerge about individual banks' solvency, other banks got edgy about lending to each other and so that short term and overnight finance dried up and thats when the cards were about to collapse but for governments stepping in and taking on the debt.

    Since that happened the bankers have reverted to enjoying hefty remuneration and pointing the finger at governments for being in high levels of debt...yes debts that were created by banks ridiculous excesses and risks during what was the golden age for banks to be able to make money. Briefly in 2008 there was some serious debate about reforming the banking system to prevent this from happening again, but the bankers have managed successfully to change the discourse of political debate away from them and onto the issue of sovereign debt,the cure being cuts in public services and welfare.
    You are closer to the truth.

    It is all about a failure to price risk and a regulatory failure to spot that risk was not being priced properly.

    There is nothing intrinsically wrong with US banks lending to dead beat borrowers at the right price. After all that is what loan sharks do.

    The failure to understand and properly price the securitised packages of that borrowing meant that the institutions that bought those packages bought them too cheaply which in turn fuelled the bubble because it meant that further lending to dead beat borrowers could be made too cheaply.
 
 
 
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