Thursday, August 30, 2007

Bankers have been playing an elaborate game of pass-the-parcel and the music has finally stopped

Disasters, not Masters, of the Universe

This is an extremely insightful "tell it how it looks" which suggests sub-prime and associated credit crunch has been caused by a kind of blinkered pass-the-parcel game where debts have been sold, repacked, sold .... Those holding the parcel at its different stages in life all thought they were smart enough to predict when the music would stop. Worth a read this one and appears to be very much inline with what many outside of the finance industry view as farce.

Posted by denzil @ 01:20 PM (1316 views)
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10 thoughts on “Bankers have been playing an elaborate game of pass-the-parcel and the music has finally stopped

  • This article (and one or two others recently) makes a very similar point to the one I was trying to make earlier about the City’s image in the wider public.

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  • fahrenheit451 says:

    Hum … perhaps low start mortgages should be banned …
    And credit checking should be more rigourous …

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  • An Bearin Bui says:

    Good article – it pretty much sums up the reckless abandon that has characterised the credit-fuelled inflation machine aka the world economy for the last 6 years (at least). My favourite quote from the article – a financier says:

    “When something is bleedin’ obvious for quite a while, and still no one does anything about it, you just go with the flow.”

    No, not me or most other readers, I’m sure. BTL investors, on the other hand, were probably thinking exactly the same thing as this guy.

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  • The way things are looking, the Fed will cut by 0.5% soon. This will temporarily ease their housing and construction pain, and as been said before, allow time to improve the regulation of sub-prime lending in the USA.

    How do we respond to a drop in US interest rates? If we follow a US lead on interest rate cuts, we invite inflation. Push our rates to 6% and we get a £ worth $2.25…

    …and what of the UK’s housing bubble? Will it inflate further (short term), continue to dispense air slowly as in the past month, or suffer a large downward correction.

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  • japanese uncle says:

    The most outrageous part of the story is, that they played this criminally silly game with the other people’s money entrusted to them, not their own (except probably for the case of Crybaby Kramer). While this stupid circus is going on, they have been pocketing millions of fee and slaries and bonus all the time, which under the current legislation, they are not obligated to pay back. When tens of billions of pound is ‘wiped out’ as the media prefer to call it, that money has not disappeared into space, but pocketed by the most vicious and eveil of those financiers. We should not get it wrong.

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  • I’ve heard our current brand of capitalism called “marxism for the rich”, if they screw up they get bailed out and the man in the street picks up the bill.

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  • tyrellcorporation says:

    MrMickey…it certainly looks that way eh!

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  • Stoatgobbler says:

    Japanese Uncle,

    a wild misunderstanding of the situation, as ever. Let me help. The banks lent the money, unwisely, to people who aren’t paying them back. The money is therefore sitting in crappy, worthless property, not bankers’ pockets.

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  • Cristiano Barbaro says:

    Farenheit451: “Hum … perhaps low start mortgages should be banned …
    And credit checking should be more rigourous …”

    How about banning the following:

    1. that gambling house called :”derivatives trading”, “futures”, “options”

    Investments should only be tax free when they are aimed at the following:

    a – research into product improvement
    b – expansion of factory production capacity (more jobs)
    c – capital intensive purchases

    For everything else, a fair tax should be levied, and free trade should be limited to pure raw materials, you want some consumable? have it made in your own country – stop the race to the bottom of salaries which is nothing but modern day slavery.

    Finally like Roosevelt:

    1. block all repossessions by mandate for say 10 years
    2. declare all stock market betting like the above illegal, and write it off, let the speculators go bust
    3. take the currency issuancs back for the state, do NOT leave it to private entities like the FED etc… they have no right to it.
    4. Let the government issue long term credit for major infrastructure development and get people employed in real jobs again
    5. let pensions and banks function under a protected govt umbrella, like a bancruptcy management, we in the West are bankrupt even though the media don’t like to say so, may as well admit it.
    6. readjust all home values back to reasonable levels, not speculative ones – homes, first homes especially are not for speculation.
    7. reintroduce a new Bretton Woods of agreed fixed exchange rates – no gambling allowed

    The above points are more or less what Roosevelt did after 1933, and by 1945 the US was the leading economic poer of the world.

    By contrast from 1968 until today we have been following a similar path that William Coolidge tread right up until 1929.

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  • Camilla Cavendish says “I don’t know much about high finance”. If only the people posting here could be quite so honest.

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