Double your money? Nationwide ATM

[SiM]

So what? Banking pays more because it is higher skilled job than other jobs. There should be no argument with that... Some bankers work 20 hour days, 7 days a week. Can you do that? If you did, do you expect to be rewarded financially?

I agree regulation was poor, but again nice hindsight... Not many people expected that all these poor people won't pay back (I guess a lot of these people do not have the work ethic to be able to earn what they owe by getting a job etc). The banks model had assumptions, one of them was regarding the correlation of defaults. That assumption was wrong. Plus the markets made it worse by making liquidity of lending dry up (e.g. by short selling banks - reduces the confidence in banks) - now the frozen liquidity has passed onto other industries which is why they need bailing out.

[badass]

So what? Banking pays more because it is higher skilled job than other jobs.

Evidently not since they needed a bail out caused by incompetance and greed.
Its all very well saying its easy to see this in hindsight, but a lot of people saw this happening in advance and were ignored.

[Zak33]

And who doesn't

I don't

it's a business, and we're all just jealous that we dont have the capital to do it too!

[SiM]

Evidently not since they needed a bail out caused by incompetance and greed.

May be no big bonuses this year, but in a couple of years time experienced bankers will be on 200%+ bonuses again... Even this year a graduate banker gets a starting package worth over £40k. Of course the average banker gets a lot higher salary.

Greed is true, but even a shop owner is running his business with the aim to maximise profit...
The smartest people from the top universities try to get into banks - only the cream of the crop get in so they are hardly incompetent. How many banker's do you personally know? I bet you none of them can be described as incompetent...

Its all very well saying its easy to see this in hindsight, but a lot of people saw this happening in advance and were ignored.

A lot of people were saying a crash is going to happen for years... but they were wrong the first 1000 times they said it. Of course it was eventually going to happen - but no one predicted it would become this bad.

[Infinite]

This ATM screw up happened at a local bank near me during summer, it was loaded with twentys instead of tens so people got double.

I told my dad and he said something like this happened ages ago aswell, but apparently the bank wanted their moneys back and obviously had records from the machine and sent letters and took back the money from their account.

However a few days later read in the local paper that since it was an external company that loaded the machine the people got to keep their moneys...

[shadowmaster]

Greed is true, but even a shop owner is running his business with the aim to maximise profit...
The smartest people from the top universities try to get into banks - only the cream of the crop get in so they are hardly incompetent. How many banker's do you personally know? I bet you none of them can be described as incompetent

None?! You can get incompetent doctors, scientists, engineers, but you cant get incompetent bankers? Whats so special about bankers that makes them immortal to being incompetent? And before you say, I know 15 or so bankers all close family and friends, some which can definitely be described as incompetent and they'll admit it themselves. They all work for one of the major banks, (JP Morgan, UBS and a couple of others which I cant remember) and have some best academic records you can find, ie a lot of them are Cambridge, LSE, UCL graduates, etc. They are not stupid, but dont think a good academic record = high intelligence or the ability not to be incompetent.

Anyhow Sim I don't hate banks, but I dislike those greedy bankers that got us into this mess and I'm sure thats not all of you. A lot of my friends lost their jobs with banks and even though I do occasionally tease some of them , they worked hard as you said, are highly intelligent and don't really deserve what happened to them.

[SiM]

None?! You can get incompetent doctors, scientists, engineers, but you cant get incompetent bankers? Whats so special about bankers that makes them immortal to being incompetent? And before you say, I know 15 or so bankers all close family and friends, some which can definitely be described as incompetent and they'll admit it themselves. They all work for one of the major banks, (JP Morgan, UBS and a couple of others which I cant remember) and have some best academic records you can find, ie a lot of them are Cambridge, LSE, UCL graduates, etc. They are not stupid, but dont think a good academic record = high intelligence or the ability not to be incompetent.

OK, none, was an exageration. There are incompetent bankers (mostly women though - not a joke, they are hired for other reasons ), but very few. Remember competent people can make mistakes too...
At least in my experience, the front office selection process is very good at weeding out incompetence (they don't look at academics much - need to have minimum upper second at half decent uni, but that is it). There are some who get through because they have good interview skills but are otherwise incompetent, but those are few and far between. Are the people you know in front office? I doubt they are in a high calibre, front office position if they admit that they are incompetent. Another point, even in the good years, banks are ruthless at firing people (at least in front office). If you are incompetent, you won't last long.

I am sure you know a large number of physics and engineering graduates go into banking. I even met one doctor (medicine graduate) who was working in a bank. I guess the best go into banking leaving all the incompetent ones as real engineers/scientists etc*
*that was a joke

Anyhow Sim I don't hate banks, but I dislike those greedy bankers that got us into this mess and I'm sure thats not all of you. A lot of my friends lost their jobs with banks and even though I do occasionally tease some of them , they worked hard as you said, are highly intelligent and don't really deserve what happened to them.

I don't know where the greedy stereotype came from

[TheAnimus]

Evidently not since they needed a bail out caused by incompetance and greed.
Its all very well saying its easy to see this in hindsight, but a lot of people saw this happening in advance and were ignored.

First off, a tiny portion of people poisoned the well. Banking is built on trust, the amount of times i've heard people say its a done deal, only for it to be cancled because someone was un-sure of what they'd agreed too.

Its not a case of people been conned, but mutually beneficial agreements based on what each side expects.

As for people seeing it coming, this is interesting idea because Shiller is a major proponent of property indecies. This would allow people to easily view their idea that property is going to bottom out.

Modern finance allows people to express their views very easily, if you belive something is undervalued you go long, if you think its overvalued (ie hte people who thought it was coming) you short. Very few people who 'saw it coming' where willing to put their money where their mouth is, so why listen to them?

Rates may have been cut after 9-11, but it was still the banks choice to lend money. No one forced them do so. You leant it to everyone and anyone, and then packaged the debt, sold it out again and again, and again, each time making a nice cut in between. And expecting at the same time that house prices would be going up forever. What the hell were you people thinking?

Now this is interesting that you say that it was the banks choice.

Lets not forget that since the clinton administration, lending to sub-prime has been encouraged, bush also jumped on this band wagon. We saw lending massively increase.

Lets not also forget that when rates go low, people still want to get the higher rate, to which they where accustomed. As such people are forced to look elsewhere for that rate.

But also lets remember that in the US of A, if you where black, you didn't get any part of the "new deal" (the ground braking scheme to bring an end to the great depression). This was a horrific injustice that continued for the most part for 70 years.

Now the problem was that with all this encouragement people began to make mistakes, the concept of correlated risk was overlooked. Sales people where worryingly incentivised to sell mortgages people could never afford. etc.

The finger has to be pointed in a lot of places, and yes the people in finance really should of known better, they where ment to be the smartest people out of the circuit after all. But it was just a tiny % that screwed things up for all of us, the same way browns borrowing has for us.

[bsodmike]

There are incompetent bankers (mostly women though - not a joke, they are hired for other reasons )

LOL harsh, but true I guess

I am sure you know a large number of physics and engineering graduates go into banking. I even met one doctor (medicine graduate) who was working in a bank. I guess the best go into banking leaving all the incompetent ones as real engineers/scientists etc*
*that was a joke

Hahah....that's probably quite true indeed

[badass]

I am sure you know a large number of physics and engineering graduates go into banking. I even met one doctor (medicine graduate) who was working in a bank. I guess the best go into banking leaving all the incompetent ones as real engineers/scientists etc*
*that was a joke

There may be a grain of truth in that. Less than half of the IT engineers that I have met should be allowed to tie their own shoe laces, let alone make decisions that can affect even a handful of people.
I think the problem is the same across all industries though. It's tunnel vision. People cannt see outsied their own little bubble. Unfortunately for the banking indistry, the bubble that many lived in didn;t include the fact that people that were plainly obviously not suitable to lend money to were both getting loans and being targeted by adverts to lend money too.

Why was forcing people to raise a 10% deposit so good and why was it forgotten about a while ago?
It was good because people actually had to have the self control to save thousands of pounds themselves before they would be allowed to borrow hundreds of thousands. The fact they have the self control makes them less likely to get in funancial trouble.
Why was this forgotten? People in banks got greedy and their tunnel vision did not allow them to see this was a bad idea.

[kalniel]

Why was forcing people to raise a 10% deposit so good and why was it forgotten about a while ago?

Because house prices went up so much that banks either had the choice of lending, backed by an asset that would increase in value over and above the interest of a loan, or not letting people afford a house at all and loosing the money. We needed to address the house supply problems a LONG time ago, then more people could afford a decent deposit.

[TheAnimus]

Because house prices went up so much that banks either had the choice of lending, backed by an asset that would increase in value over and above the interest of a loan, or not letting people afford a house at all and loosing the money. We needed to address the house supply problems a LONG time ago, then more people could afford a decent deposit.

Bingo!

The toxic debt was a symptom of many illnesses. As much as we'd like to blame these on the credit securitization people. Its not all there fault.

What is a house actually worth? Mark to Markit is the normal way of determining that.

[Saracen]

Because house prices went up so much that banks either had the choice of lending, backed by an asset that would increase in value over and above the interest of a loan, or not letting people afford a house at all and loosing the money. We needed to address the house supply problems a LONG time ago, then more people could afford a decent deposit.

But that's self-fulfilling. There's only a market in houses if people can afford them, and they can only afford them if they can get the money. If they can't save it and have to borrow it, then increasing credit availability just increases prices. It's a feedback loop, and one banks certainly sustained, if not created, by ever more lax credit availability.

Any asset price is a function of supply and demand. If demand exceeds supply, price goes up. You can address that either by increasing supply or decreasing demand. But if you feed demand by constantly making it easier to get money, leaving people with the psychological impression that house price rises are inevitable, then you build demand pressure.

And the thing is, especially when banks are using ever greater leverage, increasing supply is a slow process. You can't build houses faster than banks can increase finance is leveraging isn't controlled.

This is Economics 101, but seems to have been beyond those oh so smart bankers. Of course, whether it was actually beyond them, but they ignored the inferences because they didn't want to kill the Golden Goose while they could still harvest a few eggs, is entirely another matter. Now, instead of just killing the goose, they've risked making the entire genetic line extinct.

[Saracen]

Bingo!

The toxic debt was a symptom of many illnesses. As much as we'd like to blame these on the credit securitization people. Its not all there fault.

What is a house actually worth? Mark to Markit is the normal way of determining that.

Mark to market is just an accounting convention though, and one that's there for a good reason, that being that investors need a way to value long-term assets other than purchase price. The mistakes were firstly to leverage so heavily on what is merely an accounting price, and secondly, for governments to allow such leveraging against a susceptible figure.

Banks are really fond of telling investors that prices can go down as well as up, but seem to have forgotten that lesson themselves, in their greed to cash in on an apparently never-ending boom in house prices. It doesn't take much to work out that if you've leveraged heavily (large multiples) on house prices, and then house prices collapse, you're going to be left with a shed load of exposure potentially not covered with the assets the loans are secured on. In their greed to milk all the profits, and do all the growing they could, and to either grab market share or protect their own from being grabbed, banks collectively failed to do a proper risk assessment of what their policies would lead to if house prices either didn't continue to rise at predicted rates or worse yet, fell.

And such failure to predict (or to ignore those that did the analysis and warned of the risks) is a fundamental failure of retail banks to do their main job, which is prudent managing of money. Instead, they collectively turned into property speculators one step removed, by making money (and "growing" their business) on risks associated with property loans. That's why people are annoyed about all these securitised assets - because the banks invented their own markets, and forgot rules one and two - prices can go down, and pricing according to risk means being able to quantify the risk.

And yet for the most part (with rare exceptions), the people that managed the banks while they were doing this are still in their jobs. Why? Given that they've failed so spectacularly as to cost their investors a huge percentage of the value of their investments (which also means the vast majority of pension fund asset values, by the way), and given that several of them required vast amounts of funds from the taxpayer, such managerial incompetence deserves immediate dismissal, seeing as these people obviously (with an exception or two) don't have the moral fibre to accept where the buck stops and do the decent thing by quitting.

[badass]

Because house prices went up so much that banks either had the choice of lending, backed by an asset that would increase in value over and above the interest of a loan, or not letting people afford a house at all and loosing the money.

There's a difference between not making as much money and loosing money. I think the failure to realise the difference may have had an effect on this bubble that built up so large.

[kalniel]

But that's self-fulfilling.

Exactly.

There's a difference between not making as much money and loosing money.

Actually as far as plenty of investors go, there isn't. They will put their money in the institute that's making the most money - not making as much as the competition is worse than losing less than the competition.