Britain is officially back in recession. Double-dipping

[I1L2T3]

So the banks created something that no one understood and other institution still bought it.

Wouldn't banking regulations have prevented that?

 

Absolutely they invented and created products few people understood. Banking regulators didn't understand them. Governments didn't understand them. Few in the actual banks understood them. But then credit rating agencies gave the illusion that they at least understood them enough to judge the rating levels. And as we know it was AAA-ratings all the way.

 

As for regulation banks took a lot of stuff off the books, shifting to SIVs to circumvent capital controls - international regulations like Basel blown out the water.

 

Many of the financial products were created and traded through unregulated shadow banking institutions. Many of these organisations and institutions (including mainstream banks) operate internationally through multiple proxies and in multiple locations. The problem of how to regulate global financial services is still with us and there isn't a government on this planet that knows how to start regulating it, the coalition included.

 

Could the last government have regulated better though? Absolutely they could have. Taking the mortgage market alone there are many, many things they could have done like banning self-certs except for the genuinely self-employed and people with suitable financial arrangements, banning I/O mortgages without repayment vehicles for all but a handful that genuinely suits, banning LTV of over 95%, banning banks from operating their own estate agents etc... etc... etc...

[Anna B]

Absolutely they invented and created products few people understood. Banking regulators didn't understand them. Governments didn't understand them. Few in the actual banks understood them. But then credit rating agencies gave the illusion that they at least understood them enough to judge the rating levels. And as we know it was AAA-ratings all the way.

 

As for regulation banks took a lot of stuff off the books, shifting to SIVs to circumvent capital controls - international regulations like Basel blown out the water.

 

Many of the financial products were created and traded through unregulated shadow banking institutions. Many of these organisations and institutions (including mainstream banks) operate internationally through multiple proxies and in multiple locations. The problem of how to regulate global financial services is still with us and there isn't a government on this planet that knows how to start regulating it, the coalition included.

 

Could the last government have regulated better though? Absolutely they could have. Taking the mortgage market alone there are many, many things they could have done like banning self-certs except for the genuinely self-employed and people with suitable financial arrangements, banning I/O mortgages without repayment vehicles for all but a handful that genuinely suits, banning LTV of over 95%, banning banks from operating their own estate agents etc... etc... etc...

 

This was Gordon's 'light touch.'

 

Anyone with missgivings who tried to point out the problem was promptly sacked.

 

Incidently Tony, about quantative easing (post 169): every time they do it, the news shows film of printing presses merrily printing £50 notes. Is this artistic licence? Serious question.

[green]

Most of the money that exists didn't exist until it was lent into existence, and government decide through regulations what a bank can lend into existence.

 

Absolute Tosh!

 

Go back to school Mr Smith. Its these myths that have helped get this country into this mess.

 

The Government had NO IDEA how much monies the banks had borrowed out.

 

When banks borrow us monies, it is not from savers. They create it. Hence why no one knew RBS was leveraged 35 times.

[WeX]

So you're saying the RW bullies are snobs, well, we knew that all along.

 

What wednesday1 a RW bully

[I1L2T3]

This was Gordon's 'light touch.'

 

Anyone with missgivings who tried to point out the problem was promptly sacked.

 

Incidently Tony, about quantative easing (post 169): every time they do it, the news shows film of printing presses merrily printing £50 notes. Is this artistic licence? Serious question.

 

Yes, it's the 'light touch'. Utterly disasterous on a domestic front but also totally ignorant of the challenges of regulating a globalised finance industry.

 

As for printing money they don't really do that. In simplistic terms they push the buttons on the BoE computer and the money is magically and electronically then in existence. Then it goes to indebted banks in return for assets, some of which are toxic. That said they do seem to have printed a lot of physical five pound notes, or they seem to be more and more available in ATMs now.

[MrSmith]

Absolutely they invented and created products few people understood. Banking regulators didn't understand them. Governments didn't understand them. Few in the actual banks understood them. But then credit rating agencies gave the illusion that they at least understood them enough to judge the rating levels. And as we know it was AAA-ratings all the way.

 

 

I seem to remember most, if not all these products were mortgage debts bungled together and sold on. So if we hadn't had the property bubble these products wouldn’t have been created. I am sure all the governments new the property bubble was inflating and must have know how much money was being lent to buy these overpriced properties. And the ALARM bells still didn’t ring.

[MrSmith]

Absolute Tosh!

 

Go back to school Mr Smith. Its these myths that have helped get this country into this mess.

 

The Government had NO IDEA how much monies the banks had borrowed out.

 

When banks borrow us monies, it is not from savers. They create it. Hence why no one knew RBS was leveraged 35 times.

 

banks tend to lend us money and we borrow it.

[L00b]

I am sure all the governments new the property bubble was inflating and must have know how much money was being lent to buy these overpriced properties. And the ALARM bells still didn’t ring.

'Course they rang, aplenty. But turkeys still didn't vote for Xmas

 

Would you have gambled your political life on "doing the right thing"?

 

When it still all looked and sounded hunky-dory to all and sundry and, most importantly, to the very vast majority of the la-la-la-I-can't-hear-you electorate of the time?

 

...you know, like Cable and precious few others tried to do?

[I1L2T3]

I seem to remember most, if not all these products were mortgage debts bungled together and sold on. So if we hadn't had the property bubble these products wouldn’t have been created. I am sure all the governments new the property bubble was inflating and must have know how much money was being lent to buy these overpriced properties. And the ALARM bells still didn’t ring.

 

Totally agree. Where were the brakes on the property market? Why didn't the government do anything? Why were the opposition (apart from VC) so ineffective?

 

That said, if it hadn't have been property it would have been something else. The DotCom bubble had devastating economic consequences too (pension funds have never recovered from the bust) and we seem to be sleepwalking into another tech bubble. The thing is the banks and shadow banks will always move onto the next thing that offers significant gains and now they can't collateralise our mortgages so freely they will look to collateralise something else. There is now barely a commodity or asset that cannot be marketised, leveraged and traded. Food is one of the next things they are looking at.

[I1L2T3]

banks tend to lend us money and we borrow it.

 

Which is fine until they start lending money they shouldn't be (i.e. breaking capital controls), excessively sourcing lending funds from the markets, using complex financial instruments to gain leverage etc...

 

We're no longer in the happy simple times when what a bank lent was carefully controlled and based on the capital it held. The general disconnect from that happened over a decade ago.