Darling announces £50 billion rescue plan

Killa_ken said:
Could someone tell me what exactly triggered all this mess to happen, from what I can tell banks have been doing this for a long time and all of a sudden this **** hits the fan :confused:
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Economically the sub-prime market went belly up because no one could afford to pay back their mortgage. This meant banks had to write off HUGE amounts as bad debt due to the way the accounting rules work. Banks then wouldn't lend to each other and here we are.
 
Well, 2 questions:

1) Under accounting rules most banks use the allowance method for bad debt and thus surely they should have already made provisions for this considering they did loan this money to these people knowingly and should have made the correct allowances? Although I suppose doing this wouldn't look too good on the books.

2) How did we end up with all of a sudden no one being able to pay back their mortgages? It was going fine until bam sub prime! sub prime!
 
Killa_ken said:
2) How did we end up with all of a sudden no one being able to pay back their mortgages? It was going fine until bam sub prime! sub prime!
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Banks make their money on the dept you sign off as a mortgage. Once you sign they have X money to play with because you've signed off.. thus you signing paper = creating money.. they don't actually have the money to sign off..

People have been allow to forked out for mortgages that they can't afford by the banks when the banks themselves should have said no. That's when the rates go up, people default and the bank nolonger has that money - which they've just used for some other purpose.. such another transaction.. too many and the banks have a situation on their hands..

The "money as debt" video does explain the situation very well in that sense although I'd treat it with a little pinch of salt..
 
if anyone is interested in understanding how all this happened just watch this on iplayer, I just did and it's a interesting proggy and explains it all and how it went wrong.

http://www.bbc.co.uk/iplayer/episode/b009r2f3/Super_Rich_The_Greed_Game/

all caused by sub prime mortgage lenders selling on the debts as 'good investments' (and our banks falling for it)
 
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Banks need to stop being greedy and start being more sensible when it comes to lending money. If someone can't afford a house / flat / mortgage whatever, then tough luck, don't lend them the money if they stand no chance keeping up with repayments and inflation.
 
Heatsinked said:
Banks need to stop being greedy and start being more sensible when it comes to lending money. If someone can't afford a house / flat / mortgage whatever, then tough luck, don't lend them the money if they stand no chance keeping up with repayments and inflation.
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they really didn't care as they were planning on selling the debts anyway afaik (for big commission and personal gain).. but ultimately it was the initial lenders that caused all of this, and misselling the debts to our banks as a good investment.

because no banks now know who has all the duff sub prime debts they are unwilling to risk lending cheaply to each other in case they cant afford to repay and the whole market has stalled.

this all effects us as businesses cant borrow as easily, and neither can we to buy houses etc...
 
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500, not 50. I wonder how much of that will be taken by the fat cats, afterall that is the big worry here isn't it?
 
HELP, I'M RICH AND I'M LOSING MONEY. HOW ABOUT YOU POOR SCRUBS AND POND SCUM GIVE ME SOME?








THANKS, NOW **** OFF


Our economical system is so broken. I like how we're asked to bail banks that specialize in mortgages for second homes for example, while a lot of us can't even afford our own. Utter dunces the lot of them.
 
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