About two years ago, I sat round a dinner table with senior accountants working for a large building society, a major motor insurer and a leading consumer credit business. I argued that there was something wrong with the global banking industry if banks could deliver record profits whilst lending mortgages at below base rate and paying interest on current accounts above base rate. I felt that it didn't matter how clever the instruments were, basic common sense had to apply.
Essentially if money was being lent cheaply, and deposits encouraged expensively, then there was a bad debt charge waiting to happen. If profits continued to grow, then the banks were in denial of this problem, and it was going to bite in the next couple of years.
Of course, back then I didn't understand the full extent of the problem. I do now..., and I'm frankly amazed at the herd mentality and crass stupidity shown by highly intelligent, massively paid people.
I have read extensively journalists' assessments of how and why the credit crunch occurred. This slideshow (with some strong language) is the best explanation I have seen. Enjoy.
No comments:
Post a Comment