Are you affected by the credit crunch?

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    Jul 12, 2008 6:37 AM GMT
    I have a feeling that in the UK we're going to be hit even worse than in the US. People have borrowed way beyond their means and house prices are collapsing. Meanwhile energy and food prices are shooting up. And, yes, our Government has borrowed spent and all our money.

    On a day to day basis I've noticed everything has become more expensive.
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    Jul 12, 2008 7:17 AM GMT
    And it is different from the US in what way? I have a friend who is trying to sell a fantastic flat in the Docklands and we were just talking about the markets - to be honest I think our market is lower than yours - rather than selling flats developers are converting them into rental apartments to try to make some profit. In the interium we have a glut of 2 years worth of inventory - even some 20 story buildings which are unsold...

    Thank you Mr. Bush.... icon_evil.gif
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    Jul 12, 2008 7:19 AM GMT
    Obama Pictures and McCain Pictures
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    Jul 12, 2008 7:20 AM GMT
    Obama Pictures and McCain Pictures
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    Jul 12, 2008 11:12 AM GMT
    swpdxguy saidThank you Mr. Bush....


    No one has a bigger hate on for the Bush Crime Syndicate than I do, but here's a nasty piece of reality check:

    The subprime crisis can be laid directly at the door of the repeal of the Glass-Steagall act. This was the wall between commercial banks and various forms of investment, instituted under FDR precisely because of the exposure to unregulated risks that caused so many banks to go under from 1929-1933.

    And guess who enthusiastically signed the act repealing Glass-Steagall? Yup, it was 1999, and it was Bill Clinton.
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    Jul 12, 2008 1:42 PM GMT
    I'm just suspect overall with the current (and I mean last decade) trend of less regulation.

    Industries that have been deregulated don't seem to be flourishing at all:

    Commercial Aviation
    Energy
    TV / Radio Broadcasting

    As far as housing is concerned, the market "regulating itself" led to subprime lending practices that has many consumers overextended - and banks, such as California's IndyMac, failing. It's scary.

    And yes, I have noticed the credit crunch. I have put less away into short-term savings this year than in any other. I'm just grateful I have the wherewithal to contribute to my 401(k), shop for interest rates, consolidate what debt I have, and have a good job that allows me to make the mortgage payment every month.

    I for one am completely OK with the gov't stepping in and placing a few more controls on some industries gone awry...
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    Jul 12, 2008 1:53 PM GMT
    COJock1974 said
    Industries that have been deregulated don't seem to be flourishing at all:

    Commercial Aviation
    Energy
    TV / Radio Broadcasting

    I have to disagree somewhat. I remember when domestic round trip airlines tickets were $700-800. Now thanks to carriers like Southwest and JetBlue, I can often find those same trips for $200 or less. (Although we'll see how long that is true now that fuel is so much more expensive). It also seems more direct flights are available than in the past. I think airline travel has improved since deregulation.

    As for broadcasting, there has been some consolidation in ownership in the last 10 years or so, but I don't think it's really changed too much. I know it is true that playlists are narrower and dictated from on high, which is unfortunate. But stations that played a truly good variety of music were rare anyway. And this is something I know about since I used to be a radio promoter. We're fortunate where I live (Nashville) that we have a truly independently owned and operated radio station that has a local program director who makes the playlist. They even make a point of playing local independent artists.
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    Jul 12, 2008 1:57 PM GMT
    The housing credit problem here was really the result of an industry that abandoned all common sense and best practices guidelines.

    When they started allowing interest only loans, then "stated income" loans (i.e. lie about your income loans), and adjustable rate first mortgages, I knew we were headed for big trouble.

    These are the kinds of loan products that allow people to buy a house they can't afford and to pay more for it than its really worth. That's a recipe for a housing bubble.
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    Jul 12, 2008 2:49 PM GMT
    Global_Citizen said
    When they started allowing interest only loans, then "stated income" loans (i.e. lie about your income loans), and adjustable rate first mortgages, I knew we were headed for big trouble. These are the kinds of loan products that allow people to buy a house they can't afford and to pay more for it than its really worth. That's a recipe for a housing bubble.


    But they didn't simply "decide" one day to do this. They were prohibited from access to the bond and securities markets for decades by the Glass-Steagall acts. Once that barrier came down, they were able to bundle loans into mortgage-backed securities, which were then further bundled and sold in packages t0 hedge funds and other banks, and all of the risk was sent downriver so to speak.

    The rot came from the disconnect between who was WRITING the risk and who was BEARING the risk. Once that connection was no longer direct, the writers (mortgage companies) no longer felt any caution about the risks they were taking on. So: adjustable mortgages (the first step), reverse mortgages, interest-only loans, etc.

    All spurred on by the Wizard of Oz--oops, I meant that fraud Alan Greenspan, who somehow convinced the country that he was brilliant, instead of the partisan Republican hack he'd spent his whole career being.
  • CuriousJockAZ

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    Jul 12, 2008 3:11 PM GMT
    jprichva said
    swpdxguy saidThank you Mr. Bush....


    No one has a bigger hate on for the Bush Crime Syndicate than I do, but here's a nasty piece of reality check:

    The subprime crisis can be laid directly at the door of the repeal of the Glass-Steagall act. This was the wall between commercial banks and various forms of investment, instituted under FDR precisely because of the exposure to unregulated risks that caused so many banks to go under from 1929-1933.

    And guess who enthusiastically signed the act repealing Glass-Steagall? Yup, it was 1999, and it was Bill Clinton.



    Thank you, JPRICHVA, for that much needed "Reality Check" because you hit the nail on the head. While it's become in vogue to blame President Bush for every single thing that comes down the pike, the reality of it is that there is lots of blame to go around, and not the least of which is The American People themselves who have lived WAY beyond their means for far too long, charging this, charging that, living off home equity like it was an ATM card, etc. The chickens have come home to roost, and if someone bought a home, a car, or something else they couldn't afford, they sure as hell can't blame the President.
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    Jul 12, 2008 3:17 PM GMT
    It had to happen in the UK everyone borrowing too much and house prices were ridiculous as everyone got greedy!
    Also those whizz kids in the City pushing everyone's money around and them buying there Porsche's out of the deal!
    Well Fuck them all I say and that's what you get for being greedy and I don't give a shit!
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    Jul 12, 2008 3:46 PM GMT
    jprichva said
    But they didn't simply "decide" one day to do this. They were prohibited from access to the bond and securities markets for decades by the Glass-Steagall acts. Once that barrier came down, they were able to bundle loans into mortgage-backed securities, which were then further bundled and sold in packages t0 hedge funds and other banks, and all of the risk was sent downriver so to speak.

    The rot came from the disconnect between who was WRITING the risk and who was BEARING the risk.

    You are completely correct. These changes were a disaster waiting to happen.
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    Jul 12, 2008 3:51 PM GMT
    Caslon5000 saidObama Pictures and McCain Pictures
    LOL, hahahahaha! icon_lol.gif
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    Jul 12, 2008 4:12 PM GMT
    jprichva said All spurred on by the Wizard of Oz--oops, I meant that fraud Alan Greenspan, who somehow convinced the country that he was brilliant, instead of the partisan Republican hack he'd spent his whole career being.
    This sort of thing is so frustrating. I didn't know the history of this, but it all amounts to careless, wreckless government. SO many times we are just sold to the highest corporate bidder or to the cronies of the people in charge that are supposed to be serving us. It is no wonder that so many Americans stopped thinking we can ever do anything about it. I write my representatives all the time (mostly about civil liberties) but I think they will really just do what is in their interests. I will continue to do it because email is cheap anyway.

    It is interesting though that the U.K. is going through something similar. I never really thought about what other parts of the world in relation to our economic problems.
  • CuriousJockAZ

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    Jul 12, 2008 4:22 PM GMT
    ActiveAndFit said I didn't know the history of this, but it all amounts to careless, wreckless government.



    No, the more accurate statement when it comes to the current credit crunch and mortgage and real estate debacles is that it all amounts to "Careless and wreckless American people living beyond their means". Don't get me wrong, I am just as guilty as the next guy, but at the end of the day when I've spent more than I make, or purchased something like a house, or multiple houses, that I can't really afford, I can't blame anyone but myself.
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    Jul 12, 2008 4:29 PM GMT
    CuriousJockAZ said
    ActiveAndFit said I didn't know the history of this, but it all amounts to careless, wreckless government.



    No, the more accurate statement when it comes to the current credit crunch and mortgage and real estate debacles is that it all amounts to "Careless and wreckless American people living beyond their means". Don't get me wrong, I am just as guilty as the next guy, but at the end of the day when I've spent more than I make, or purchased something like a house, or multiple houses, that I can't really afford, I can't blame anyone but myself.


    I agree with you CuriousJock that Americans need to be more responsible but I think that you have to remember, most people seek advice from loan counselors, that is why they are supposed to exist, to tell you if you can afford something or not. When the people see that you have a dream say for instance of owning a house, and the "experts" tell you that you can afford one at a certain price, you tend to believe the "experts" so although Americans must take responsibilty for their actions, quite frankly it is the fault of the banks. The reason they are the "experts" and you have loan advisors and counselors is so that you are advised or counseled correctly. They are the ones that can approve the loan, they hold the money, that is why they are there, so i dont care how much a person wants a 500,000 dollar house, if they cant afford it, whether or not they want to sign the paper that says they can, that bank and its "experts" , counselors/ advisors should push the denied button. They are the "experts", they are the ones who have to approve it.
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    Jul 12, 2008 5:02 PM GMT
    Actually, despite some lurches up and down, my business is continuing to grow through all of this. In fact, I'm going to have to hire some help, which means I may have to start wearing shirts more icon_sad.gif

    After a day with particularly grim headlines, orders will dry up for about two days. But then they come back. Maybe 48 hours is as long as any news item can hold the public attention.

    For other reasons, I do have to refinance, though. I am having a heck of a time proving my income to the bank.
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    Jul 12, 2008 5:29 PM GMT
    CuriousJockAZ said
    ActiveAndFit said I didn't know the history of this, but it all amounts to careless, wreckless government.

    No, the more accurate statement when it comes to the current credit crunch and mortgage and real estate debacles is that it all amounts to "Careless and wreckless American people living beyond their means". Don't get me wrong, I am just as guilty as the next guy, but at the end of the day when I've spent more than I make, or purchased something like a house, or multiple houses, that I can't really afford, I can't blame anyone but myself.


    No, my statement was accurate. When the government allows the desires of business interest to work against the interests of the people, the government is serving money and not people. The same goes for lobbyist i.e. legalized bribery - it is against the whole idea of an "equal" government because people of less economic means are ignored in favor of the whims of the wealthy.

    As far as the wealthy conservative illusion that those poor people just got themselves into trouble, it is blindness to the condition of most of these poor people. Many of the loan victims I have seen interviewed on the news, had NO idea of what trouble they were getting into. Many were just convinced that they could afford the loans without really understanding the potential problems.

    And when our government spend our tax dollars and even still has to borrow funds from our good democratic friend China for things like Wars based on deception, it just is more evidence of wreckless and careless government.

    Our irresponsible government needs no pardon or excuse for their waste and their betrayal of the American people.
    http://www.nationalpriorities.org/
    The War in Iraq Costs $536,066,600,836 and counting
    http://www.nationalpriorities.org/costofwar_home

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    Jul 12, 2008 5:45 PM GMT
    GobB said I agree with you CuriousJock that Americans need to be more responsible but I think that you have to remember, most people seek advice from loan counselors, that is why they are supposed to exist, to tell you if you can afford something or not.
    This is so true .. people in the real estate industry can be so eager to turn houses like "tricks" All my life in home ownership and real estate I have seen it .. everyone wants their cut of the pie no matter if it is good for the person buying or not. It is simple "profit rules over all" .. if you can "part a fool from his money" then it is the "fools" fault. There are too many people that think that way. I wonder what these people think about "loan sharks" and loan shark laws?
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    Jul 12, 2008 5:46 PM GMT
    Is that Rome burning that I smell, bring me my fiddle.
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    Jul 12, 2008 5:51 PM GMT
    ursamajor saidIs that Rome burning that I smell, bring me my fiddle.
    Yes and some marshmallows and hot dogs .. no make that champagne and caviar to celebrate the wonderful job we have done!
  • CuriousJockAZ

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    Jul 12, 2008 5:54 PM GMT
    Again, it's easy to blame the lender or the bank, but bottom-line is that it's up to the consumer to read, know, and understand what it is they are getting into BEFORE they sign on the dotted line. No one at the bank is twisting their arm to buy the house or refinance their loan. Also, keep in mind that many of the people that went in and got "Stated Income" loans were over-stating their income to the bank in the first place. Why? Because they could. People with good credit were able to take out "Stated Income" loans and this was basically an open invitation to over-state your income in order to get the loan and buy the house that otherwise you may not have been able to qualify for. Now, is it the fault of the bank for allowing this, or is it the fault of the consumer for lying on the application, or for not understanding clearly what they were getting into? Granted, the banks are now paying a VERY heavy price for allowing this, which is why it is next to impossible to get a "Stated Income" loan anymore regardless of how glowing your credit score is. That said, I feel the responsibility still rests with the consumer to tell the truth, know the facts, and educate themselves BEFORE they take out the loan and buy a house they may not be able to afford should the loan adjust down the line.
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    Jul 12, 2008 5:57 PM GMT
    I agree with ActiveNFit and the others saying it does fall back on the gov't responsibility.

    The mortgage market is like a game between Mortgage banks, brokers and buyers. The gov't regulations are the rules they need to play by. If the rules are well written, you can have a decent sustainable game. It isn't up to the banks, brokers or buyers to make all the rules or enforce them.

    If you leave it to the 'free market', you are allowing the rules of the game to be hammered out by buyers who are desperate for a home and banks who are desparate to get business before it goes to the competition. You are selling money when you are in that business, so it gets cut-throat on the pricing and the maneuvering.

    Here's the other factor - banks and brokers are people who day in and day out exhaust he mental capacities of really smart number crunchers and lawyers and marketers who come up the the product, the presentation and the fine print. Its difficult for John Q Homeowner to compete with understanding the full implications short-term and long-term of a mortgage contract and all the bloody closing costs - considering they are up against a whole team of professionals.

    That's why gov't regulation is vital in transactions of this complexity, magnitude and impact on consumers.
    The gov't adds it own resources into understanding pitfalls and writing regulations that protect consumers.
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    Jul 12, 2008 5:58 PM GMT
    Well, so far we have two UK banks that would have gone under if the Government hadn't bailed them out - Northern Rock and now Bradford and Bingley.

    I wonder whether it would be better let them go bust than throw good money after bad.
  • CuriousJockAZ

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    Jul 12, 2008 5:59 PM GMT
    It's kind of like a marriage, when it goes bad you don't blame the preacher who performed the ceremony.