not quite right mbk....... ( warning, a very long post )

The Glass-Steagall Act in the US separated "safe" retail banking from "risky" investment banking (ie bond trading). In 1999 that act was repealed by Bill Clinton as quid pro quo for the banks to start extending home loans to "disadvantaged" members of society, ie people who couldn't really afford to borrow in the first place. Once the shackles were off the banks could bolt huge risky home loans onto their massive retail deposit-funded balance sheets. As long as the housing market rallied there was no problem as the growth in the assets underlying the mortgage loans allowed the banks to lend even more money to cover repayment shortfalls. Such was the growth in the housing market that even the big banks could not justify the size of their balance sheets so they started to securitise these loans and sell them off their balance sheets. Once they discovered that the rating agencies didn't understand what was going on they started to ramp it up big time, selling what was essentially pig-s**t as high quality investment assets. And when they discovered they could get even lower credit customers to borrow ever more money by offering discounted, "teaser" rates for the first couple of years the market for securitised bonds soared even further. Then add in the derivative boys and what they could do to cashflows and the whole sorry mess just snowballed.

In this country you have to remember that Clinton was the mentor for all things " New Labour", including how to use the peoples own money to bribe them. That is why Brown as Chancellor stripped the Bnak of England of it's regulatory powers and disguised the fact by making them solely responsible for setting interest rates ( whilst retaining the right to decide on the make-up of the rate setting committee ). The tri-party regulatory regime put in it's place had more holes than a colander and the banks in the UK immediately piled into the mortgage market the same as their Yankee cousins. Again, as long as property prices rose the whole thing worked. But it was the biggest pyramid selling scheme the world had ever seen.

In 2005 the Bank of England Financial stability division published a report that said the growth in the property lending market AND THE DERIVATIVE TRANSACTIONS ATTACHED TO IT posed a clear and present danger to the financial stability of this country. IF Labour had grasped the nettle then there is a chance we could have avoided the worst of the fallout but that would have involved an admission of error and painful cuts in public spending. But they didn't and here we are.

Apologies for the long post but this is a very complex subject and it is this very complexity that the politicos have used to disguise their motives. Personally, I find it incredible that this Labour government is not dead and buried in the polls and put it down to the scandals of the last year. Either way, whatever you believe, vote for the candidate with most integrity. And buy gold.........

Posted By: MrMorrers on April 6th 2010 at 12:39:13

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