What caused the banking crash? Impact on regulation

sports_brah

sports_brah

sports_brah

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Final topic!

Does anyone have some good insights as to what caused the financial crisis and the impact it has had on regulation?

Any particular actions that have been taken to "fill gaps in the framework" with that have your interest?


Basically a discussion around this topic would be pretty helpful to me. I've got a fairly indepth understanding, but hearing others chat about it might reveal a few more insights.


Thanks! :)
 
Regulations as a result of 2008 collapse:

United States:
Dodd Frank
FATCA

UK
CASS
FCA Handbook

EU
EMIR
UCITS V, VI
BASEL III

These are some of the headline regulations I've come across.
 
Basically, poorly-rated collateralised debt obligations made up of subprime mortgage-backed securities. I have no idea about the measures which have since been put in place to prevent a reoccurrence, but if you're interested in a detailed account of the reasoning for the crash I highly recommend you watch 'Inside Job'.
 
subbytna said:
http://en.wikipedia.org/wiki/Glass–Steagall_Legislation

Repealling the above law is what caused the financial crash. Cheers Bill Clinton.

It allowed banks to gamble with their depositers money instead of their own money.
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It's truly hilarious that people point to Clinton as one of the best periods of economical health generated by a president... really hilarious. He managed to get to reduce the public debt by, damn it, too tired to remember, increasing private debt, borrowing from pension funds, can't remember. He increased the "worse" debt with more long term problems in an attempt to pretend everything was hunky dory in the more widely talked about public debt and to get rid of the deficit.

All while repealing incredibly important legislation and generally being a ****.

Nothing worse than a government that fudges the number while screwing your future but having all the results of such action fall on the next guy in charge, usually the other party.... then most of the population is too stupid to blame the people who caused the problem, they blame the people who clean up the problem(or attempt to).

Here Labour massively influenced how badly we were hit, left our banking system barely regulated, borrowed our way out of early trouble with HUGE deficit increase that has led to all the reductions in spending since Labour were kicked out. They then have the gall to complain about the cutbacks the whole time after Labour mismanaged the government into this situation.

Only people I dislike more than Labour for mismanaging the country so badly is the short sighted people who are blaming the current government for attempting to clean up the previous ones massive unmitigated disaster.
 
Banking crisis here goes

Bank 1

Loan 1 Lends money for mortgage to a 50% depositer
good job all is well, a vitural guaranteed return. AAA

Loan 2 lends money but purchaser has only a 5% depost
and close to payment threshold, could be dodgy but hey lets risk it. :rolleyes:

Loan 3 lends money to someone with no deposit and taking an extra
25% on top so 125% all together, good job and all but very high risk.
Where they mad.:confused:

Bundels all the 3 loans together to sell as a AAA investment based derivative
on the lending of loan 1 the 50% depositer. :eek:

Bank 2 looks to buy AAA invetments to pay out at maturity.

Bank 2 buys bond at X% payout after x amount of years but
needs cash after a while so leverages above bond for x amount of cash.

Bank 3 buys a certain percentage of bond to give bank 2 cash.

Loan 2&3 at bank 1 default and property prices drop, the bond is worth nothing or graded to
junk 1p on the £1 if lucky! :(

Thats about as easy as I can explain. It is much more complex as it
was also loans and all other forms of debt bundled up with good and bad
so no one could know if they held a good or bad bond.
 
It was caused by government removing the risk from the mortgage market and the banks that exploited this low risk environment and leveraged worthless loans in to more worthless loans and some how made money in the process.

So it was the government and organisations like freddie mae and fannie mac that were set up to make everyone a home owner.

All these bad loans eventually that were rated aaa were then realized to be worth nothing and as everyone was involved it would have caused a lot of organisations to go bust. There was other factors that were contributing to the problem each bank or insurance organisation was facing as a result of this realization in the market. The banks had already started tightening up personal loan credit the year proceeding the crash. The government which still does not accept any responsibility for removing the risk as far as i am aware, this is in the states. They instituted tarp the trouble asset relief program. They gave out $800 billion to various organisations that were influenced by this dodgy credit default swap and mortgage back securities.

That is about as much as i understand it. Just another big fraud.
 
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anything I don't mind said:
It was caused by government removing the risk from the mortgage market and the banks that exploited this low risk environment and leveraged worthless loans in to more worthless loans and some how made money in the process.

So it was the government and organisations like freddie mae and fannie mac that were set up to make everyone a home owner.

All these bad loans eventually that were rated aaa were then realized to be worth nothing and as everyone was involved it would have caused a lot of organisations to go bust. There was other factors that were contributing to the problem each bank or insurance organisation was facing as a result of this realization in the market. The banks had already started tightening up personal loan credit the year proceeding the crash. The government which still does not accept any responsibility for removing the risk as far as i am aware, this is in the states. They instituted tarp the trouble asset relief program. They gave out $800 billion to various organisations that were influenced by this dodgy credit default swap and mortgage back securities.

That is about as much as i understand it.
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We have Clinton, Bush, Blair, Brown and Alan Greenspan & Co to thank for that. :mad:
 
David Bowie started it

Bill Clinton and Black people also have some blame, as do various bank's for relying too much on flawed mathematical models which underestimated tail risk
 
dowie said:
David Bowie started it

Bill Clinton and Black people also have some blame, as do various bank's for relying too much on flawed mathematical models which underestimated tail risk
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:D


I've got the black swan sort of stuff, take more emphasis on the "fat tails" etc.


I'm just trying to figure out the regulation will play a part in the changing of the structure of the banks eg Anglo Irish Bank. etc :)
 
sports_brah said:
:D


I've got the black swan sort of stuff, take more emphasis on the "fat tails" etc.


I'm just trying to figure out the regulation will play a part in the changing of the structure of the banks eg Anglo Irish Bank. etc :)
Click to expand...

don't know about anglo irish bank but yeah regulation has played a part...

banks have invested more in risk management, ditched prop desks, they're less keen on complex derivatives and more keen to profit from flow, increased volume... They've now decided not to follow trends set by aging rock stars.
 
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