what's behind the financial turmoil
Thursday, 28. August 2008, 15:15:02
If you've heard anything about the credit crunch, you've heard that it was the result of record foreclosures and mortgage defaults. What's not emphasised is that those defaults took place in America; a series of mistakes or carelesness in lending to people when their credit ratings clearly indicated that these people could not handle that level of debt.
So if there was no change in the behaviour of uk borrower i.e. no increase in defaults, why do we have this financial market crash? Its because our banks and our financial system are pegged to the US financial system, as soon an the money run out in the US, UK banks couldn't find a place to borrow new money, some of them also lost money in their US investments, that is why we had Northern Rock. sites like breadmarket have seen an increase in their traffic because people who were considered viable before now fall into the bad credit lot.
Perhaps instead of selling off Northern Rock the government can turn it into its lending arm for government backed mortgages, this way when private banks run out of money, people have a place turn to, and the economy keeps going!
So if there was no change in the behaviour of uk borrower i.e. no increase in defaults, why do we have this financial market crash? Its because our banks and our financial system are pegged to the US financial system, as soon an the money run out in the US, UK banks couldn't find a place to borrow new money, some of them also lost money in their US investments, that is why we had Northern Rock. sites like breadmarket have seen an increase in their traffic because people who were considered viable before now fall into the bad credit lot.
Perhaps instead of selling off Northern Rock the government can turn it into its lending arm for government backed mortgages, this way when private banks run out of money, people have a place turn to, and the economy keeps going!
WIDGETIZE