Sub-prime evolved from the inadequate pricing of risk, nothing more.Isn't that how the sub-prime evolved........
Excellent summary Kremmen, people tend to only focus on the negatives and not the positives of a strong financial sector in Australia. A spike in interbank lending rates decimated the industry in the US, our banks with greater control and greater levels of trust with one another fared much better.* Here: Ubiquitous free bill-paying with BPay. USA: Total shambles, most of it costing fees, with many small institutions still sending "electronic" payments by physical cheque. (Why do you think Paypal exists?)
* Here: Ubiquitous cheap or free direct credit to other bank accounts. USA: Total shambles, again.
* Here: Direct deposits into your account happen reliably same night. USA: Depends on the bank. Might be tonight. Might be tomorrow night. Maybe the next day.
* Here: Simple ATM use all around the country. USA: Various cross-usage schemes. Again, shambles.
* Here: Every bank that I am aware of (apart from INGDirect and similar) is on SWIFT and can directly send/receive money to banks overseas either in AUD or another currency, overnight. USA: Many small banks don't bother, so the only way to get money in/out internationally is through an intermediate bank in USD, which involves extra fees, delays and manual intervention.
Sub-prime evolved from the inadequate pricing of risk, nothing more.
It was caused my market inefficiency, not the efficiency of the banking system.
The new deal left her with a house payment of $1,069 a month””nearly all of her monthly income and twice what she'd been paying on the FHA loan before Ameriquest and Long Beach hustled her through the series of refinancings. She was shocked when she realized she was required to pay more than $1,000 a month on her mortgage. "That broke my heart," she said.
Sub-prime evolved from the inadequate pricing of risk, nothing more.
It was caused by market inefficiency, not the efficiency of the banking system.
Understand your point but surely lack of regulation or enforcement had a part arla Ameriquest and others who raped the system.
So what did she do?The new deal left her with a house payment of $1,069 a month””nearly all of her monthly income and twice what she'd been paying on the FHA loan before Ameriquest and Long Beach hustled her through the series of refinancings. She was shocked when she realized she was required to pay more than $1,000 a month on her mortgage. "That broke my heart," she said.
The buck stops, where ever the buck stops. Banks didn't hold a lot of these mortgages on their balance sheets (well they did, but often not the ones they originated...). Check out http://orgnet.com/cdo.html for a fun way to see how the contagion worked.Surely the buck stops with the banks as far as the pricing of risk is concerned (they did not have to lend the money).
If the Sub-prime debacle and subsequent Global Financial Crisis was not caused by an inefficient banking system, then who was to blame???
US Lenders were terrible and more lending regulation would have helped, but it was inadequate pricing of risk in the derivative instruments that led to the shutting down in very quick succession of the securitisation market that halted lending worldwide (and yes, even in countries like Australia where the standard of lending is much higher than the US and in many respects is world-leading).Understand your point but surely lack of regulation or enforcement had a part arla Ameriquest and others who raped the system.
An inefficient pricing system, although pre-GFC we did just encounter a once in history shift in global demographics where something like 10% of the entire world's population switched from an agrarian to industrial existance from 02 to 05, which brought with it a greater saving and investment market as people who lived in the developing world and largely lived hand to mouth suddenly had some (albeit meagre) savings to place in deposit.Surely the buck stops with the banks as far as the pricing of risk is concerned (they did not have to lend the money).
If the Sub-prime debacle and subsequent Global Financial Crisis was not caused by an inefficient banking system, then who was to blame???
Poll: Will you switch your accounts from the Commonwealth because of this rise?
Yes
62%
No
17%
Depends how much it costs me
21%
Total votes: 10872.Poll closes in 6 hours.
Disclaimer: These polls are not scientific and reflect the opinion only of visitors who have chosen to participate.
Meantime, the other big banks are wisely just pulling their heads in for now and will make their own announcements re rises at a smarter time than did the CBA.
Might as well manage the news cycle as long as the great unwashed are emotional and irrational.So Wise really means:- sneaky, cowardly, contemptible, deceitful, devious, disingenuous, furtive, guileful, recreant, secretive, shifty, slippery, sly, snide, stealthy, surreptitious, tricky, unscrupulous, untrustworthy and underhanded.
So Wise really means:- sneaky, cowardly, contemptible, deceitful, devious, disingenuous, furtive, guileful, recreant, secretive, shifty, slippery, sly, snide, stealthy, surreptitious, tricky, unscrupulous, untrustworthy and underhanded.
So Wise really means:- sneaky, cowardly, contemptible, deceitful, devious, disingenuous, furtive, guileful, recreant, secretive, shifty, slippery, sly, snide, stealthy, surreptitious, tricky, unscrupulous, untrustworthy and underhanded.
So what did she do?
Like many older black women who owned their homes but had modest incomes, Pittman was deluged almost every day, by mail and by phone, with sales pitches offering money to fix up her house or pay off her bills. A few months after her heart attack, a salesman from Ameriquest Mortgage's Coral Springs office caught her on the phone and assured her he could ease her worries. He said Ameriquest would help her out by lowering her interest rate and her monthly payments.
For Ameriquest, the fact that Pittman couldn't afford the payments was of little consequence. Her loan was quickly pooled, with more than fifteen thousand other Ameriquest loans from around the country, into a $2.4 billion "mortgage-backed securities" deal known as Ameriquest Mortgage Securities, Inc. Mortgage Pass-Through Certificates 2004-R7. The deal had been put together by a trio of the world's largest investment banks: UBS, JPMorgan, and Citigroup. These banks oversaw the accounting wizardry that transformed Pittman's mortgage and thousands of other subprime loans into investments sought after by some of the world's biggest investors. Slices of 2004-R7 got snapped up by giants such as the insurer MassMutual and Legg Mason, a mutual fund manager with clients in more than seventy-five countries. Also among the buyers was the investment bank Morgan Stanley, which purchased some of the securities and placed them in its Limited Duration Investment Fund, mixing them with investments in General Mills, FedEx, JC Penney, Harley-Davidson, and other household names.
It was the new way of Wall Street. The loan on Carolyn Pittman's one-story house in Atlantic Beach was now part of the great global mortgage machine. It helped swell the portfolios of big-time speculators and middle-class investors looking to build a nest egg for retirement. And, in doing so, it helped fuel the mortgage empire that in 2004 produced $1.3 billion in profits for Roland Arnall.
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