thecrashingisles, on 01 May 2012 - 09:00 AM, said:
It's an odd headline which illustrates what a mess we're in. Are profits now determined solely by the stroke of a pen at the ratings agencies?
Isn't it a post hoc
fallacy. These funding costs were going to rise and profits were going to tank even if we confiscated every Moody computer and blackberry. Presumably money market participants do their own research these days - I'd speculate that the rating agencies are more like commentators than opinion formers.
Classic "bust" phase feedback loop, lower profits weakens ability to handle losses leading to rising funding costs, reducing lending which lowers profits and leads to the fall in the value of the loan collateral which causes funding costs to rise, which weakens profits...
It certainly does show how the banks are in a corner.
Could be totally wrong, but I can't see King stepping in to help them. Regardless of his role in getting us into this mess, it seems to me that his mood has changed.
Osborne has been loathe to borrow if he can avoid it, I can't see him chipping up to help out a political constituency upon whom the sun is most definitely going down.
It looks to me like the banks are on their own on this one, in which case they'll need to throw their customers overboard. Blowing up nonsense mortgages by the sh!t ton will get you de-leveraged faster than capitalising arrears, at least as I understand things...
Hopefully the government's long game is to have the crash, put in the banking sector ring-fence as per the Vickers report and try and get the economy going before the next election. If that is their plan they must be itching for this crash.
I hate to say it and generations of forbears will be spinning in their graves, but I've got some time for these posh boys in Downing Street. Mind you as the act that followed Brown, they didn't have to do too much right to look like an improvement.
This post has been edited by ChairmanOfTheBored: 01 May 2012 - 06:42 PM