United Kingdom Banks In Trouble - Above Politics 50

Homer and Martin are joined by special reporter Neformore to discuss the second bail out of some UK banks and why some banks are not looking for any help from the UK Government. Why lending is still not flowing despite the fact the UK tax payers owns banks and have majority share holding in others? We also discuss the first few days of President Obama's term of office.

And a rant from Homer to end.









ABOVE POLITICS Number 50, with Martin Bain and Homer Fife, from AboveTopSecret.com.
Show length is 30:37.
Direct link to show MP3 file: atsmix_3194.mp3 (10 mb)
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ABOVE POLITICS is the alternative political program from AboveTopSecret.com, all content is copyright (2009) by AboveTopSecret.com and The Above Network, LLC, all rights reserved. No content of the program may be rebroadcast in part or in whole from any web domain other than ATSMIX.com or ABOVETOPSECRET.com without prior written permission of The Above Network, LLC.


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[edit on 1/26/2009 by Dave Rabbit]

Congratulations Martin and Homer for breaking the HALF CENTURY mark on shows.

Dave

Some great points discussed and I have never stopped to consider why not all the banks in the UK have not needed any bail out money. I had assumed, wrongly as it turns out that all the major UK banks were badly run, and needed the UK tax payer to bail them out.

And as for the bonuses at Northern Rock!!! Talk about rewarding failure. The employees are Northern Rock should be grateful that have jobs. With out the UK tax payer, they would all be out of work now. How must some one who has been made redundant feel when they hear that employees of Northern Rock are get bonuses that come from tax payers.

And worst, our MPs who are on the elected gravy train seem happy with all this.

Some anti-communist advice from my grandfather…
A. Politicians can't run businesses. Many have degrees in Communication Studies, Politics, even History but very few have done Economics. In fact it’s fair to say very few probably know what a business is beyond the fact it’s something they periodically take money from. Otherwise they wouldn’t grab money from businesses that make a loss as is the case with U.K. Business Rates.

B. In politics you tend to appoint people because they support you, rather than because they’re the best person for the job.
How does a politician lacking in business skills know someone is good for a job? And why should they even care providing the person is well spoken and obedient?

C. Also politicians who rise to the top are frequently corrupt. After all getting to the top often involves networking, groups, and doing things through fair ways and foul.

So the banks were being badly run, they will continue to be badly run because our politicians don’t know who to choose instead. Potential replacements who come to their attention do so either through self promotion, or networking. Good people on the other hand don’t need to self-promote, or network a great deal either, for they are in demand.

The U.K government shouldn’t have bailed out the banks since they are full of rich, hidden, international money. Instead they should have simply guaranteed peoples current acount deposits; simply to prevent public panic bank runs.
They are right to offer loans providing they are backed up by assets.
But they need to ensure the people running those assets do as requested, if need, by legistation to make them easyier to hire and fire (without compensation).

reply to post by ATSMIX


Could the UK banks have been responsible for the UK government's decision to force Iceland to take a loan from the UK, in order to help with the banking bailout?

See: www.abovetopsecret.com...

I'm curious about the Bailout issue.

As the only money the Government has is from us, the Tax Payers, and they are giving us money back as a stimulus, is this not a zero point equation?

They take it as tax,and give it back as stimulus....

What the?????

I just wanted to say how hypocritical it is of you to tell people to stop blaming Bush for the world's problems and then you start blaming people losing their jobs on Obama because he's a Democrat.

The tax cuts have been proven not to work.
Look at this

Yes, they report, new wealth has been created. Yet it is only a small few who have benefited from this "more market/less government" line.
Looking at total net worth or gross income over the 1980s and 1990s, each of these studies has found a number of disturbing trends. One of the most distressing is the skyrocketing gap between the top and the growing bottom in all of our societies.
In the U.S., the Economic Policy Institute has found that the richest 10 per cent hold 72 per cent of all wealth, the top 1 per cent more than half of this. By contrast, the other 80 per cent of Americans had only 17 per cent of all accumulated wealth in 2000. Unsurprisingly, the U.S. now leads the way among advanced economies in having the worst rate of inequality.
Similarly, the Canadian Center for Policy Alternatives has reported that currently the richest one-fifth of families hold 76 per cent of all wealth in Canada. By contrast, the bottom half of us had only 5.6 per cent of all accumulated wealth.
And if these figures aren't jarring enough, it seems that things are only getting worse.
During the 1990s in the U.S., the top 1 per cent of earners took home most of the benefits of economic growth, with their incomes growing an astounding 59 per cent.
CEOs saw their bank accounts swell, their average salaries rising from a ratio of 72 times more than the wages of an average worker, to a ratio of more than 310 to 1.
For young families, though, especially young single mothers, things only got worse. In the U.S., a third of single mothers live in poverty, and for the poorest two-fifths of households, incomes fell.

www.commondreams.org...

Just stop rewriting history. Homer, I know you're a Bush supporter, but, come on, how could the tax cuts have benefited all of us if they just went to the wealthiest 1%?

Also, the credit crisis is not JUST a sub prime mortgage problem.

As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.

The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.

Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit.

“This collapse in housing value is sucking in all borrowers,” said Mark Zandi, chief economist at Moody’s Economy.com.

www.nytimes.com...

It would be also ignorant to think that Fanny May and Freddie Mack caused the housing crisis.

First, let me clarify the question. We are asking what caused the housing bubble, and, by definition, the cause cannot be explained by changes in an underlying market fundamental. I don't mean that we can't point to, say, a rumor that led to a rapid increase in the price of some good as speculators rush in, just that bubbles - by definition - are divorced from market fundamentals.

I think a more interesting question is what sets the stage for a bubble to emerge - what allows the rumor, irrational exuberance, etc., to express itself as a bubble? One thing that is needed is liquidity and credit, some way of substantially increasing demand. This is the air that inflates the bubble. Even if all the other conditions for a bubble to emerge are present, if there is no way to inflate the bubble - no way for speculators to rush in and drive up the price - then it won't inflate.

We already know that there was enough available liquidity to inflate a housing bubble. So something went wrong in these markets that allowed the bubble to emerge and then pop, and this is causing us immense problems right now, but what was it?

I think the most important factors are agency problems, the mis-pricing of risk, and the failure of securitization to distribute risks across the financial system.

With respect to the agency issues, there is a long chain between the home buyer, the mortgage broker, and, ultimately, the sliced and diced complex securities that nobody fully understands. Let's take one step in the chain, that of a a bank or mortgage broker, either one. Suppose they are paid a fee, i.e. by the number of mortgages that pass through their hands each month (as, essentially, they were). The more mortgages they can push through, the higher their income. They are required to meet certain guidelines as they do this, but so long as their income depends upon the number of mortgages passing through their hands and not what happens to the mortgages later on - so long as it is a fee-based system - they have every incentive to push the guidelines as hard as they can and to find a way around them whenever possible.

If mortgage brokers had done their job and only made loans to people who could pay them back (i.e. with "reasonable" levels of default), we wouldn't have a financial crisis. So right away, in nearly the first step of the chain, we have to ask what went wrong, why they were willing to take so many questionable loans. The problem is what economists call an agency issue. The brokers had no stake in the outcome once the mortgages left their hands. The same with banks, all they had to do was process the mortgages, package them up, then sell them and collect their fee.

Think about the incentives here. Suppose you are a mortgage broker and you begin to suspect that the bubble will pop soon, that all this lucrative business might end. To protect the business, should you get worried and start checking mortgages more carefully to make sure that things don't get further out of hand? No, you should accelerate what you are doing, write even more mortgages - nothing you can do can stop the bubble from popping, you are just one of many, many brokers far down the chain - so why not collect as many fees as possible before the gravy train ends? What if everyone thinks this way, and they all rush to sell as many of these things as they can? Mania.

economistsview.typepad.com...

Look, Homer I've given you the facts. Now stop blaming everything on Democrats and stop spreading misinformation. I don't blame Bush for this. I blame the whole economy for it. Now that you know the facts, I ask you, to stop being childish about it. I mean, by stop thinking that it's only because of a Democrat, etc.
And, the cause of the economic crisis is not fanny may and fredie mack.

[edit on 31-1-2009 by Frankidealist35]