Collapse in US lending standards has "central banks are scared out of their minds"

[w¡n9Nµ7 §£@¥€r 123]

Jean-Pierre Roth, president of the Swiss National Bank, said market turmoil was far from over as tremors from the sub-prime debacle continued to rock the world.

"We're certainly not at the end of the story. There are question marks surrounding the development of the American economy," he said. "Something unbelievable happened. People who had neither income nor capital got credit with very attractive conditions. Now reality is striking back," he said.

...

Stockmarket historian David Schwartz warned investors not be fooled by signs of recovery. "The truth is no-one knows how serious the financial problem in the US is, nor how it will unfold. We do know central banks are scared out of their minds," he said.

http://www.telegraph.co.uk/money/main.jhtm.../bcnswiss20.xml

[mawilson 2,133]

Not good for my 401(k)..... but why is it so freaking unbelievable?

They didn't get credit to travel around the world, they got it to buy property.

Property which will be repossessed and resold if they can't afford the payments.

[britbird 4]

On the one hand I'm with the camp that says 'if you don't read the small print and end up with massive repayments that's you're own damn fault', but on the other hand a LOT of these crazy loans were aggressively marketed to people who likely had no clue what they were getting into. To my mind some of the marketing is rather like the tactics used by certain military recruiters to get naive kids to join up (note, I said SOME not ALL)

This sort of thing (and, frankly, the ridiculous credit card offers that get mailed out) need to be regulated OR the penalities for misuse need to be so high that people won't sign up for them in the first place.

either way, we are all going to loose out - mortgage rates for those people who are responsible and don't over borrow will go up, first time buyers will loose out, and house prices will remain artificially inflated as a reaction to people taking out these insane mortgages.

[mawilson 2,133]

On the one hand I'm with the camp that says 'if you don't read the small print and end up with massive repayments that's you're own damn fault', but on the other hand a LOT of these crazy loans were aggressively marketed to people who likely had no clue what they were getting into. To my mind some of the marketing is rather like the tactics used by certain military recruiters to get naive kids to join up (note, I said SOME not ALL)

This sort of thing (and, frankly, the ridiculous credit card offers that get mailed out) need to be regulated OR the penalities for misuse need to be so high that people won't sign up for them in the first place.

It's perfectly Darwinian -- survival of the fittest. The idiots always get f*cked first.

[Caladan 19]

The question is how much of the rest of us are f*cked. There's plenty of blame to go around.

[britbird 4]

it's like a big cluster financial f**k. Because the people who try so darn hard to prove that Darwin was wrong end up screwing it up for the rest of us. Assclowns.

What I fail to understand is 1) how you can stack up a 40K credit card bill and not think, 10K into it, 'err...maybe this isn't a great plan 2) why the credit card companies are allowed to loan all that money in the first place without checking to make sure that it's secured to something 3) why people think they need a 2 grand flat screen tv, 3 grand brand name purse, lease on a BMW and all the associated crapola in order to feel 'happy'.

Gaaaaaaa!

[Dan J 277]

There was a bit of fraud in this whole situation. Many people got mortgages by overstating their income, sometimes by 100%. No one really verified or checked.

[mawilson 2,133]

it's like a big cluster financial f**k. Because the people who try so darn hard to prove that Darwin was wrong end up screwing it up for the rest of us. Assclowns.

What I fail to understand is 1) how you can stack up a 40K credit card bill and not think, 10K into it, 'err...maybe this isn't a great plan 2) why the credit card companies are allowed to loan all that money in the first place without checking to make sure that it's secured to something 3) why people think they need a 2 grand flat screen tv, 3 grand brand name purse, lease on a BMW and all the associated crapola in order to feel 'happy'.

I can't answer 1) and 2) but I can understand 3).

[britbird 4]

it's like a big cluster financial f**k. Because the people who try so darn hard to prove that Darwin was wrong end up screwing it up for the rest of us. Assclowns.

What I fail to understand is 1) how you can stack up a 40K credit card bill and not think, 10K into it, 'err...maybe this isn't a great plan 2) why the credit card companies are allowed to loan all that money in the first place without checking to make sure that it's secured to something 3) why people think they need a 2 grand flat screen tv, 3 grand brand name purse, lease on a BMW and all the associated crapola in order to feel 'happy'.

I can't answer 1) and 2) but I can understand 3).

(I should confess that when my first law firm paycheck rolls in, I'll be awarding myself a splendiferously large flat screen...but I'm going to pay for outright! Oh yes! I promise!)

[mawilson 2,133]

(I should confess that when my first law firm paycheck rolls in, I'll be awarding myself a splendiferously large flat screen...but I'm going to pay for outright! Oh yes! I promise!)

There you go. Good girl.

Don't fight consumerism, embrace it.

[Mr. Big Dog 10,747]

Don't fight consumerism, embrace it.

Other than the house for which we took out a mortgage, my attitude is: If I can't pay for it, I don't need it. Keeps me out of trouble. You should try it.

[rika60607 215]

And then those idiots have babies ?

It's perfectly Darwinian -- survival of the fittest. The idiots always get f*cked first.

[rika60607 215]

As far as I heard part of the problem is that people got adjustable rate mortgages, and the rates got... well, adjusted! Leading to higher payments thanpeople can afford. Add to that that many salaries got "frozen" i.e. no 3% increase a year for you. It is harder to find a job lately if you lost one... So... a downward spiral.

So you think house prices will not go down?

[Dan J 277]

As far as I heard part of the problem is that people got adjustable rate mortgages, and the rates got... well, adjusted! Leading to higher payments thanpeople can afford. Add to that that many salaries got "frozen" i.e. no 3% increase a year for you. It is harder to find a job lately if you lost one... So... a downward spiral.

So you think house prices will not go down?

House prices in most markets have gone down as well. Thats part of the problem too. You cant refinance a mortgage for more than the house is worth.

There is not really just one thing that led to this situation, its a bit bunch of smaller things all added up = really bad.

Owning a house is no longer a guaranteed path to wealth as it once was. And should be considered with risk as any other kind of investment.

[Heracles 417]

Owning a house is no longer a guaranteed path to wealth as it once was. And should be considered with risk as any other kind of investment.

A lot of this also has to do with people using get rich quick schemes, such as property flipping, to make easy cash.

The hens eventually had to come home to roost and now 8,000,000 will most likely lose their homes..

Edited August 20, 2007 by Boo-Yah!