Financial Crisis

[OneRedArmy]

IIRC the mandatory stress test (mandated by FinReg) for mortgage affordability is a rate rise of 2% (not 1% Pete).

Not only was this probably not high enough, but its accuracy is also questionable given the economy with the truth that people tend to fill in on their outgoings ("forgetting" to mention personal loans and other commitments which impact monthly affordability significantly). As Macy said above, brokers and banks in many cases encouraged applicants minimise their outgoings in order to get a larged approved amount.

[geysir]

What are you talking about Nostradamus?

That the Western world is entering a period of recession?

Hardly groundbreaking news I would've thought.

Not Nostradumus you smart alec
Living in your future, as domiciled in an exposed economy now, witnessing the early effects of an economic collapse, that Irish people just can't imagine yet.

That the Western world is entering a period of recession?

Recession sounds a mild world to explain an economic collapse.

[OneRedArmy]

Not Nostradumus you smart alec
Living in your future, as domiciled in an exposed economy now, witnessing the early effects of an economic collapse, that Irish people just can't imagine yet.


Recession sounds a mild world to explain an economic collapse.

I presume you're talking about Iceland? Not sure its a valid comparison as the only valid comparison is size. You are a small, very closed economy, we are a small very open economy.

Also, can you quantify the difference between a recession and a collapse? Is it GDP, asset prices etc. and what level of fall etc. etc.?

Suggest you phone Joe Duffy anyway, it sounds like something he may be interested in.

[pete]

IIRC the mandatory stress test (mandated by FinReg) for mortgage affordability is a rate rise of 2% (not 1% Pete).

I am sure that is what was used. I am not aware of full details. I never remember affordability test when I got a mortgage all I remember was mortgage was lower than rent & I wasn't paying huge rent.

[Dodge]

I am sure that is what was used. I am not aware of full details. I never remember affordability test when I got a mortgage all I remember was mortgage was lower than rent & I wasn't paying huge rent.

Surely that was the affordability test? You obviously had to provide bank statements etc. We (missus and me) had to go through a fair bit of paper work before being approved (in 2003). Mortgage lady told us the fact that ourr repayments were lower than the rent we were paying was a factor

[pete]

Mortgage lady told us the fact that ourr repayments were lower than the rent we were paying was a factor

Don't remember that coming up as an issue. Money from rented room was allowed though. There was certainly no discussion on affect of interest rate increase. All I remember was 3 times rules seemed very restrictive. This was pre dotcom crash so probably wouldn't have touched me in 2002.

[OneRedArmy]

Don't remember that coming up as an issue. Money from rented room was allowed though. There was certainly no discussion on affect of interest rate increase. All I remember was 3 times rules seemed very restrictive. This was pre dotcom crash so probably wouldn't have touched me in 2002.

Pete they wouldn't necessarily discuss it with you. Banks tend not to discuss their credit policies.

But in terms of timing you may well have come in before the mandatory 2% stress.

In terms of simple salary multiples vs monthly affordability measure, its the latter that has tended to predominate over the last 5 years. Its a more accurate measure, but obviously relies on the accuracy of the information provided. If people understate their monthly commitments then it is likely they would be loaned a larger amount, which obviously is harder to repay in full if circumstances change.

[geysir]

I presume you're talking about Iceland? Not sure its a valid comparison as the only valid comparison is size. You are a small, very closed economy, we are a small very open economy.

Also, can you quantify the difference between a recession and a collapse? Is it GDP, asset prices etc. and what level of fall etc. etc.?

Suggest you phone Joe Duffy anyway, it sounds like something he may be interested in.

Ahh, the comfort of smugness
First they said it was sub-prime mortgage exposure.
Even the Iceland banks regarded them as way too risky.
Then they said, ahh it's only the Iceland State with its Banks running an alternate economy ten times the size of the national GDP.

Probably you are well aware of the difference between the criteria used and argued about to differentiate between a recession and depression. That's where Reagan cooked Jimmy Carter's campaign

Depression, the GDP declines >10%
add in the collapse of the consumer market as more and more people stagger under the weight of trying to pay their house loans, more people coping with decreased or no purchasing capacity.
Consumer production, retail, all connected economic activity etc etc are all geared up for the peak.
Then add unemployment.
The most alarming aspects of this economic deterioration is
that unemployment levels have already risen greatly and continue to
rise. How many people lost their jobs today?
How many people are likely to lose their jobs in the next months?

Collapse of Banks, collapse of the markets. How many banks at this moment in time are tottering on the brink?
The markets in freefall today?

Fixes? I forgot about the fixes, bailout, injection of cash etc etc are mere artificial props.
Can you please give your optimistic assesment of the viability of these fixes? How about an assessment of the effect of the $700bn bailout in the US.
It is inevitable that Capitalist-funded politicians will posture in respect to some sort of economic bailout. And it is equally inevitable that any economic bailout that is put into place by capitalist-funded politicians will tend
to put money in the pockets of the rich than the pockets of the poor.

Recessions and slumps, we had a good few. This is different to anything that happened since the 1930's.

[monutdfc]

Peter Power's complete lack of knowledge on Q&A last night was astounding. He said that the Bank's liabilities weren't guaranteed!!!
He said that the government wouldn't take equity stake sin the banks, it'd be too risky - eh, hello, we already have the risk

[Macy]

If people understate their monthly commitments then it is likely they would be loaned a larger amount, which obviously is harder to repay in full if circumstances change.

People were encouraged to understate their monthly committments. We were told it was "a pity that your credit union appears on your payslip as we have to ask about that now".

[Dodge]

People were encouraged to understate their monthly committments. We were told it was "a pity that your credit union appears on your payslip as we have to ask about that now".

In fairness our bank weren't like that at all. Pretty helpful but not to that point

[mypost]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder??

[OneRedArmy]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder??

Its clearly because its because we are a small country and Europe is being mean to us and nothing to do with the detail of the proposals, which nobody, not least you, has read in any case...

If only life was as simple as in Mypost-world.

[pete]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder??

I am open to correction but I believe they want Ireland to scale back from unlimited deposit guarantee. Back to maybe 250k. Again not certain but I think Germany are only guaranteeing deposits & not Bank loans.

Seems clear that some bank staff (e.g. Irish Nationwide) too keen to shove the guarantees in the face of European competitors to realise what a sweet deal they got. A couple of small worst performing banks going to the wall or forced to merge with someone else may not be a bad thing.

[geysir]

Fianna Fail are the government funded by developers and builders and are duty bound to offer up honest taxpayers money to prevent them from having to sell off any of their assets.
Maybe the Germans have not exactly got the same priorities.

Icesave in England has closed its internet till.
150k savers there, totalling about £4bn, cannot withdraw their money
The parent bank, Landsbanki, has to pay out about €700m servicing in the next 12 months. But has liquid assets of £7bn in GB.
The liquid assets by banking standards are good quality. I don't know how much they can get for those assets in a sell off or firesale.

[Bald Student]

Its clearly because its because we are a small country and Europe is being mean to us and nothing to do with the detail of the proposals, which nobody, not least you, has read in any case...

If only life was as simple as in Mypost-world.

To me it looks more like some other countries got caught out by the two Brians. They're probably being asked at home why their plans don't look as good as ours. They're talking their way out of the hole by saying we're breaking european rules, while they draw up laws to copy us behind the scenes. Saying that the Irish laws need a few tweaks then helps to explain away the contradiction.

We need to remember that foreign countries are run by politicians as well.

[pete]

To me it looks more like some other countries got caught out by the two Brians. They're probably being asked at home why their plans don't look as good as ours..

I think its more a case of foreign banks moaning that they have a competitive disadvantage. With a state guarantee Irish banks can get loans from any one they wish.

I think I heard that Irish Banks are supposed to have 80 billion greater assets than liabilities. Not sure if that is the face value of those assets or discounted.

[Dodge]

I think its more a case of foreign banks moaning that they have a competitive disadvantage.

Had a competitive advantage. Most european countries have now gone with similar plans to us, to the point that we're not seen as trying to get one over on them now.

The actual details are irrelevant

[Reality Bites]

I am outraged that more people are not out on the streets calling for the heads of these major banks for overseeing the shoddy lending practices that have contributed to the mess we're in! Think of it this way they are to blame for the pain you are all going to feel in next weeks budget and guess what when rates go down they ain't going to pass it on to you no they are going to charge you for the Bailout ,Injustice? you betcha so grab your hurley shovel or even better a scythe and look for Drumm, Goggin etc.. there heads should be made to roll...

[Dodge]

I am outraged that more people are not out on the streets calling for the heads of these major banks

Where you protesting? I might join