Thursday, Mar 22, 2007
Rising house prices have hidden a multitude of sins
The Economist: Subprime mortgages - When the tide goes out
IT SHOULD have been a warning sign to Britain's mortgage lenders, but news of the meltdown in America's subprime market (see article) has prompted only self-congratulation. With straight faces, lenders, rating agencies and investors have counted the reasons why mortgage lending in Britain is as neat and orderly as the terraced Victorian houses it often finances.
Posted by sold 2 rent 1 @ 11:01 PM (161 views) Add Comment
4 Comments
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1. Whiteknight said...
Again....
1. People "in charge" of organisations who lend recklessly today to earn income which boosts profits today at the expense of the stability of their institutions tomorrow need to be reminded that:
a] Any bonuses they earn on record earnings currently will be pursued when they are charged with negligence and worse.
b] They could serve jail sentences.
c] Having collected their winnings and left the organisation will not get them far enough away.
d] People will still remember who was running each institution prior to a merger. There are such things as computers and databases that keep these things linked.
2. Regulators and committees responsible for banking system stability need to know that we will also remember who was on watch at the time of the debacle. Disasters dont happen over night. They will not be allowed to melt away into the background.
3. Regulators and committees responsible for banking system stability need to issue open letters to the Boards and management teams of all banks reminding them their responsibilities. IMHO a reminder of PERSONAL responsibility and liability does wonders .. institutional reminders do not.
4. In stronger conclusion to its last report, the regulators need to say outright that self-certified based lending is not acceptable. They are the regulator after all. Some namby pamby statement about it being "questionnable" or "inadvisable" is not good enough.
5. Under-achieving, under-talented politicians who would put their own careers and power ahead of the next 20-30 years of the countries prosperity need to be held to account and ignored. They should not be allowed to stick in their ivory towers talking about everything being OK whilst it is far from OK.
6. Those who are listened to in the markets need to stop thinking they talk this one down. They can't. Every passing moment counts. IMHO its too late anyway. Far too late. But still every passing moment counts because there is a small finite probability it is not. Turn off the supply of over cheap money now. It was tried. We couldn't gain control of foreign resources we had our eye on to bail us out. People make mistakes. Move on - accept the consequences. Once everybody is dealing with the consequences we are at least moving forward.
2. Rep013 said...
I love this last quote when talking about the UK property market ..... certainly something to think about.
Lenders and rating agencies are heartened by their models, which show that it would take a combination of higher interest rates and falling house prices to make a worrying number of mortgage loans go bad. But this is the exact confluence of events that is causing such woe in America. A little less complacency and a little more prudence are in order.
3. Dugmug said...
Good article - I'm sure I've heard people say there wasn't a sub-prime market to speak of in the UK? :-)
4. lvmreader said...
Amen!