Market forces
To risk boring my non-financial readers, there's a brilliant letter in today's FT from a true Republican called Dimitri Triantafyllides, which derides Barack Obama's solution to the US sub-prime mortgage crisis. Obama has proposed that unscrupulous mortgage lenders should be fined. Mr Triantafyllides makes an analogy of buying a car for his son and essentially arbitraging his son's bad credit with his own good credit. If his son defaults on the repayments to his father, why should the son keep the asset and the father be fined? The letter ends, "Washington needs to allow people and companies to face their responsibilities as adults, not children."
posted by Whispering Walls at 10:55 am
6 Comments:
I think this totally misses the point - the whole problem with sub-prime lending [as with the Savings and Loans bailout years ago] is that there are no 'market forces' when a bank goes bust - the bloody tax payer and thus the poorest in society have to carry the can for the idiots at the top [who get paid the most dosh] refusing to adhere to anything like responsible credit policy !!
Forcing the banks to shoulder their share of responsibility by passing on the costs of any bailout to the idiot organisations would help to avoid another 'Enron' or 'LTCM' type fiasco.
Strange how people like you are such advocates of 'market forces', but only when it benefits you..
And another thing - I note from an article in the Telegraph a few weeks ago that the effect of the current instability in the markets is to put the kibosh on some of the leveraged buy outs / private equity takeovers currently infecting the economy. For too long these have been seen as one-way bets, and if this takes some of the exuberance out of this stupidity, then great.
If this means that deals like the ones below are on hold, then the cloud really does have a silver lining..
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/29/cnmarkets229.xml
And if it means that the ridiculous and over-inflated bonuses seen this year are curbed in future, and that job destroying mergers like Barclays / ABN Amro are put on the back burner, then the sub-prime fallout can't come soon enough in my opinion.
Even better, if some overpaid execs get a real roasting [as seems to be happening to execs at Barclays and S&P] then a few hundred thousand homeless Yanks seems to me to be a 'price worth paying'.
Isn't this where our society is going wrong? NOONE takes responsibility for their own actions any more. I have to say Obama continues to appear a tad touched in the head.
I've had a bet on for a long time ( before she even said she would run) that Hilly will be President. It will be Mitt Romney versus the surgically modified ex First Lady - who will win in a cvnater if he is her opponent.
anon - who ripped you off? Anyway, Barcalays isn't about to take anyone over, they are in deep dooda. Fred the Shred will win ABN, and make it pay well, and enhance shareholders and stakeholders equity
I have to say that I agree with KL - everybody passes the buck these days (excuse the pun).
Anyway, Anon, it appears from your second comment that you too are happy to go along with market forces in suitable circumstances.
For my part, I think it is irresponsible for banks/mortgage lenders to encourage punters to take on unsustainable levels of debt. 3 and a half times salary with a 10% deposit upfront is fine. To offer 5x with no deposit is crazy.
ww - couldn't agree more. The inflation in property prices would never have got to the ridiculous present levels if the banks etc had kept to their old tried and tested formulas.
We're getting out of residential and have been over the last 6-8 months.The rental returns are nowhere near adequate for the present capital values
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