At this point, we all know that people in the financial sector (I think the technical term is fecking eejits) paid over the odds for assets that we now refer to as toxic. But where has that money gone? After all, if people paid excessive amounts for their stinky soggy ex-hot potato parcel and that parcel isn't worth what the buyer thought then at least the seller has the cash right? right?
The core issue we are being repeatedly told is that loans were given to people to buy their homes and these are people who can't now afford to make the repayments. Yet it is worth remembering that not all of those people will default and even those that can't make loan repayments will be able to pay rent which has to be worth something more than nothing.
In part I suspect that by painting the situation as bleak as possible serves to allows some people who are directly responsible for this way of doing business to pretend that there was nothing they could have done differently. That this is, in words all too familiar to users of the Irish health service, a system's failure. It's not, it's a failure directly attributable to those same individuals who were collecting the bonuses for how great they were doing. Those who made the decisions should be fired.
I remember reading somewhere only 5% of subprime morgages have defaulted. This seems to be fear of what could happen rather then what is happening. Although the effects of this fear are making people lose jobs which will result in more defaulting sub-primes resulting in what they think is happening actually happening. If you get me. Vicious circle.
ReplyDeleteMorages is money given now for money earned in the future. The money that people buy the house with is more the money the will earn in a future date. i.e. much of the money loans does not exist yet.
Crazy thing this banking