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swissy_fit

Could Banks Hedge Against A Housing Market Drop?

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Just had a thought.

I've been assuming that the government can never deliberately allow a big drop in houseprices because that would bankrupt the banks again, requiring more bailouts, then sovereign default.

Could the banks and the government and the BOE collude by setting up hedges (with very silly foreign banks as the counterparties!) against their loans going bad in an HPC, then doing something like capping mortgages at 75% LTV to triggerthe crash?

If the banksters could prepare and hedge their losses in an HPC, it could actually be allowed to happen.

What say you all?

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Just had a thought.

I've been assuming that the government can never deliberately allow a big drop in houseprices because that would bankrupt the banks again, requiring more bailouts, then sovereign default.

Could the banks and the government and the BOE collude by setting up hedges (with very silly foreign banks as the counterparties!) against their loans going bad in an HPC, then doing something like capping mortgages at 75% LTV to triggerthe crash?

If the banksters could prepare and hedge their losses in an HPC, it could actually be allowed to happen.

What say you all?

...didn't GS do this 2006/7....when they called the crash internally.....?... :rolleyes:

Edited by South Lorne

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...didn't GS do this 2006/7....when the called the crash internally.....?... :rolleyes:

Not the same.

That crash was called by the semi-autistic bloke who read the contracts behind the NINJA loans, I forget his name, then word got round and GS were best-placed to exploit it, as ever.

I mean genuine collusion between the banks, the BOE, the FSA and government. DC and NC could say

"Look, if you want to stay in business(cos we're not bailing you out again), start hedging against your loans going bad now.

If you don't, we're going to take you over completely or asset-strip you to pay for everything".

As soon as the banks have prepared their hedges, cap mortgages at 75%, and just wait.....

Bingo, the required deflation happens fast, the country can start over, and some idiot foreign counterparty is left holding all but about 5% of the bill.

Now could they find an idiotic foreign counterparty?

How about a nice unscrupulous Swiss trader looking to earn a very big bonus, or a Norwegian...... (I'm thinking it would be better if the idiot or unscrupulous foreigner isn't from a country with a powerful military and can afford to pay....)

Edited by swissy_fit

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Just had a thought.

I've been assuming that the government can never deliberately allow a big drop in houseprices because that would bankrupt the banks again, requiring more bailouts, then sovereign default.

Could the banks and the government and the BOE collude by setting up hedges (with very silly foreign banks as the counterparties!) against their loans going bad in an HPC, then doing something like capping mortgages at 75% LTV to triggerthe crash?

If the banksters could prepare and hedge their losses in an HPC, it could actually be allowed to happen.

What say you all?

They could partially do so, but the extent required would too great to actually achieve your suggestion. However, I do think that the Housing market is ready to correct. It will need little else to do it on its own. The sensible BoE controls would be a great contribution and for future stability also. The Coalition will want to blame it all on something else, so hope it will start before much is in place.

There are two banks in the UK highly exposed to any further HPC and any further commercial property falls. So watch out! There are over 750 banks in the USA in various states of risk. Banks there go under very regularly! There are many of them and they can be quite small.

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Just had a thought.

I've been assuming that the government can never deliberately allow a big drop in houseprices because that would bankrupt the banks again, requiring more bailouts, then sovereign default.

Could the banks and the government and the BOE collude by setting up hedges (with very silly foreign banks as the counterparties!) against their loans going bad in an HPC, then doing something like capping mortgages at 75% LTV to triggerthe crash?

If the banksters could prepare and hedge their losses in an HPC, it could actually be allowed to happen.

What say you all?

:lol:

It's already happened but forget about those silly foreign banks.

We, the taxpayers, are the ones on the hook for these via guarantees Brown signed on our behalf. I think it's about £300bn of bank loans we've guaranteed.

House prices tank and the loans go sour, we make the banks good.

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Why bother...who would take the bet?...another bank?

they lie about their assets already....they will just lie bigger.

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Why bother...who would take the bet?...another bank?

they lie about their assets already....they will just lie bigger.

They do hedge.

Part of it was to sell the mortgages to others and take the profit up front aka securitisation.

They do lots of other stuff to but it only covers them to an extent. A big drop and they are stuffed.

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Just had a thought.

I've been assuming that the government can never deliberately allow a big drop in houseprices because that would bankrupt the banks again, requiring more bailouts, then sovereign default.

Could the banks and the government and the BOE collude by setting up hedges (with very silly foreign banks as the counterparties!) against their loans going bad in an HPC, then doing something like capping mortgages at 75% LTV to triggerthe crash?

If the banksters could prepare and hedge their losses in an HPC, it could actually be allowed to happen.

What say you all?

Only works if the foreign banks get bailed out from their losing bets :)

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Only works if the foreign banks get bailed out from their losing bets :)

Sure.

It would have to be somewhere that values its credit rating and can afford to pay, and doesn't have a powerful military. The list isn't long.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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