THE BIG LIE EXPOSED: Big banks ignored sub-prime troubles

This is such an important development, despite the fact that many of us being well aware of the major personal debt issues we face, I just had to post it without delay.  Why?  The old line ‘ our banks are fundamentally sound’ has once and for all been expose for what it is.  A LIE.

Sean Parnell, FOI editor of the AUSTRALIAN writes today:

AUSTRALIA’S big banks ignored the sub-prime crisis in the US and actively took greater risks in the home mortgage market to see off a challenge from rival lenders.

The banks not only relaxed their lending standards in recent years – ultimately luring many customers into financial distress – but held off tightening their terms of credit to build a better market position.

Reserve Bank documents, obtained by The Australian using Freedom of Information laws, show the change in lending standards was driven by competition and the housing boom.

In the last six months of last year, banks informed the Reserve Bank that the proportion of new mortgages described as non-standard – such as low-document loans and those with high loan-to-valuation ratios – was increasing.

That was despite the sub-prime crisis, rising interest rates and evidence that more of their existing mortgage customers were unable to make repayments.

In April this year, as the Reserve Bank ended its run of interest rate rises, an RBA analysis found the relaxation of lending standards had allowed some Australians to take on extraordinary debts. Households with annual incomes of $60,000 or more could borrow up to five times their annual income – up from 4 1/2 times in 2004 – requiring repayments of about 50 per cent of gross income, up from 45 per cent in 2004 and well above the common cut-off point that lenders applied of 30 per cent.

Single individuals could borrow amounts requiring repayments of 50-75 per cent of their net income, about 5 per cent higher than in 2004.

Although most borrowers had not utilised their greater borrowing capacity, the analysis found “recent low-income home buyers do appear to have taken on relatively larger loans”.

The median mortgage debt servicing ratio – the proportion of income spent on a mortgage – for recent mortgagors had risen from 20 per cent in 2003-04 to 22 per cent in 2005-06 and had been “accompanied by an increase in financial stress”.

Based on income scales, the largest increase, 4 per cent, came from lower-income households and first-home owners.

The analysis noted that new and poorer mortgagors had increasingly found themselves in financial trouble; since 2004 there had been a gradual increase in the proportion of loans that were at least 90 days in arrears.

A follow-up analysis in July this year, based on data collected in May, found that for households earning $90,000 or more, their borrowing capacity had fallen by 6per cent since late last year. But most of that was due to rising interest rates as lending standards were “still much looser than in 2004”.

That month, the Reserve Bank’s financial stability department also warned that the relaxation of standards, and particularly the rapid growth in low-document loans, “may mean that the average borrower in arrears is now less able to ‘self-cure’ than in the past”.

54 Responses

  1. Amazing. That is exactly what I have been saying in my responses. Now I feel totally vindicated.

  2. Good Lord!

    How the lies and deceit come home to roost!

    Serious indicators since 2004!

    What did the RBA do? Nowt!

    What did EITHER government do? Nowt!

    What did an ignorant population do? Borrow, borrow, borrow and spend, spend, spend!

    If the “magic gate” is 30% of income (and it has been for many years – it was 25% when got I married 40 years ago and took us 3 years on a trademan’s income to save the deposit for our first home). Why wasn’t it closed by someone when it was left open. Oh! No regulations well, well, well…

    Why bother with reports when the decision makers just sit on their hands as the ship hits the iceberg.

    My family have been educated, in many ways, never to trust governments or large organisations (learn the system and use it to your advantage).

    If anything comes out of this bloody financial mess, people should learn never to trust any organisation implicitly with their money – ever again – some of us don’t . (I haven’t had a loan since the NAB dudded me in 1984 on my motgage!)…

    …they should already know not to trust any politicians…

    …it also proves that the government and regulators work for the banks not the people…

    …and what about the media – what a bunch of slackarses they have become – plenty of info about drugged out “superstars”, movies, music and other glittery nonsense in current affairs programs but no real investigatory journalism …

    … the closest we got to real journalsim in the last decade was Glasshouse and The Chasers both satirical shows and both “pulled” by the ABC – I suspect because they got too close to the truth for the pollies!

    The one word that keeps rattling around my head this morning is EDUCATION – in finance systems, in government systems and in history…

    The people have been badly let down by greedy bankers, power hungry, selfish politicians, a poor education system and lazy journalists!

    …and anyway JMc…I told ya so! Nananana!

  3. Shane and TB

    Why did I know this thread would excite you two.

    My God! Talk about going for the jugular – and rightly so!

    “The people have been badly let down by greedy bankers, power hungry, selfish politicians, a poor education system and lazy journalists!”

  4. SMH’s Micheal West is also calling for banks to come clean on their exposures to toxic CDS’s

    “Australia’s Big Four banks are all exposed to the default of Lehman Brothers via credit default swaps (CDS) – a noxious bull-market derivative which threatens further contagion in the ailing global financial system.

    National Australia, ANZ, Westpac, Commonwealth Bank and the nation’s biggest insurer AMP are listed on the ISDA’s (International Swaps and Derivatives Association) Lehman Protocol. The five have written “adherence letters” to the ISDA asking the Association to act as their agent in settlement negotiations arising from the Lehman default.

    This Wednesday is the deadline for lodging settlement notices for CDS trades and October 20 is the date for settlement.”

    Simple put: the amount at stake in the credit default swap market is great than the world’s annual economic output.

    The $55 trillion question
    The financial crisis has put a spotlight on the obscure world of credit default swaps – which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?

  5. I’m with Michael West on this one.Simple put: the amount at stake in the credit default swap market is great than the world’s annual economic output.

    The $55 trillion question

    The financial crisis has put a spotlight on the obscure world of credit default swaps – which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?

    Time to come clean says Michael West

    Australia’s Big Four banks are all exposed to the default of Lehman Brothers via credit default swaps (CDS) – a noxious bull-market derivative which threatens further contagion in the ailing global financial system.

    National Australia, ANZ, Westpac, Commonwealth Bank and the nation’s biggest insurer AMP are listed on the ISDA’s (International Swaps and Derivatives Association) Lehman Protocol. The five have written “adherence letters” to the ISDA asking the Association to act as their agent in settlement negotiations arising from the Lehman default.

    This Wednesday is the deadline for lodging settlement notices for CDS trades and October 20 is the date for settlement.”

  6. What I don’t get is why so many out there are surprised. This has been coming for years. If a child burns his finger, you can be sure he won’t touch the saucepan again. Everyone must have known it couldn’t last. JMc I’d also put some of the blame on consumers. At some point people have to take responsibility for their own actions and decisions. Having said that, there really needs to be accountability for the advertisers, spruikers, and the CEO’s that profit from the largesse. I notice the AMEX crew are still very visible in shopping centres and at airports.

  7. James

    I’ve been repeating the same message for as long as I can remember now. So have many others. It’s simply a major breakthrough as far as ‘airing the truth’ publicly is concerned.

  8. James I agree that consumers have some responsibility but most are not educated to your level (seriously)…

    … and life is about having fun…

    …people rely on “experts” instead of doing it themselves – we have to – getting two teeth pulled tomorrow but I won’t do it – need an expert and I trust her …

    …do I trust banks, financial advisors (due respect to you and Shane) and pollies..? Nah! Especially not now!

  9. I saw my bank manager at Burger King on the weekend… he asked me if I wanted fries with my burger.


  10. James

    I came across a comment just recently by a blogger claiming to be a bank auditor and didn’t he lift the lid:

    Costello reforms help Australia weather financial storm

    I have been working in the Aust Banking System as a credit auditor for the past 15 years. I can assure you that the banks in Australia have indeed been lending in the low doc loan arena, reverse mortgage arena and have been tripping over themselves to lend to anyone who can fog a mirror. Approval is by way of credit scoring which anybody having submitted 3 applications can easily pass. Brokers are well versed in getting a loan approved, bankers are no longer financial managers, simply sales people paid by their targets. Creditworthiness went out the window years ago. Banks have worked on the premise that they will never lose because the property securing the debt will always rise, hence the 100% or even 110% loan to value lending to people who can’t afford the loan so get an interest only housing loan (revolving credit or basically an overdraft.) As somebody has already pointed out we have not had the property crash others have but we will (remember 87-89) and then the sub prime or alt a loans will hit the fan. Then we will see just how profligate the banks have been.

    * Posted by: Ladder of Chill on October 7, 2008 11:12 AM”

  11. Now you can bet the shallow punditariat will be waiting agog to see Malcolm Merchantbanker try to weave a silk purse from this sow’s ear.

    How’s a political party that votes as leader a former banker (of all things!) going to have any credibility in a landmark period of history when it is seen that bankers and myopic capitalist greed have brought the whole world economy into rubble?

  12. Absolutely agree on the banks, John Mc. One thing, however, is that if they ride out this storm, they will be fine. Those assets will eventually increase in value, and the losers will be those forced to sell in the short term. There is a selfish, evil side of me that is licking his lips at the prospect of buying up cheap assets over the next year or so. I’m not really sure how much you can blame governments, especially in Australia, for all of this. I’m not really sure the extent to which they have the real power to stop this sort of corporate behaviour. I don’t exactly remember Kevin Rudd coming out before the election saying “You lot are borrowing too much money and we are going to act to wind it back”. They can’t manage our respective businesses for us, which I guess poses the question as to whether they ought really to be bailing the banks out. Common sense says they probably must, but does that then give them the right so a greater say on banking business practice, and is that something we want from our government? It is actually going to be ok in the long run, human nature will force the various markets back up in time. But boy some people are going to suffer along the way.

  13. “There is a selfish, evil side of me that is licking his lips at the prospect of buying up cheap assets over the next year or so”

    Any prudent investor would be thinking along similar lines. Don’t feel guilty about it.

    The truth James is that our government and RBA surely knew that the lending lunacy was getting out of hand and did nothing to stop it. In fact, we now know that to be the case.

    Here’s something you may be interested in reading.

    Robert Shiller always provides interesting insights as well as offering thoughtful solutions. His previous book Irrational Exuberance was released on the eve of the 2000 stock market crash. His proposed solution is similar to that of people like George Soros. There’s no avoiding the pain of this fallout however. The more leaders who are willing to put on their thinking caps the better I’d have to say

    The Subprime Solution:
    How Today’s Global Financial Crisis Happened, and What to Do about It
    Robert J. Shiller

    The subprime mortgage crisis has already wreaked havoc on the lives of millions of people and now it threatens to derail the U.S. economy and economies around the world. In this trenchant book, best-selling economist Robert Shiller reveals the origins of this crisis and puts forward bold measures to solve it. He calls for an aggressive response–a restructuring of the institutional foundations of the financial system that will not only allow people once again to buy and sell homes with confidence, but will create the conditions for greater prosperity in America and throughout the deeply interconnected world economy.

    Shiller blames the subprime crisis on the irrational exuberance that drove the economy’s two most recent bubbles–in stocks in the 1990s and in housing between 2000 and 2007. He shows how these bubbles led to the dangerous overextension of credit now resulting in foreclosures, bankruptcies, and write-offs, as well as a global credit crunch. To restore confidence in the markets, Shiller argues, bailouts are needed in the short run. But he insists that these bailouts must be targeted at low-income victims of subprime deals. In the longer term, the subprime solution will require leaders to revamp the financial framework by deploying an ambitious package of initiatives to inhibit the formation of bubbles and limit risks, including better financial information; simplified legal contracts and regulations; expanded markets for managing risks; home equity insurance policies; income-linked home loans; and new measures to protect consumers against hidden inflationary effects.”

  14. Just found this from back in 2003, When John Howard commissioned a report on Home Ownership. The result was a suggestion that the home owner and the banks share the risk of releasing the equity in buying a home.

    And who was the chair of the report? Malcolm Turnbull.

    Go figure.

  15. James.

    Consider those “lot who will suffer” they are the ones about to or just retired – they’ve lost not only a lot of money but thier future…

    If you make a lot of money out of their pain, don’t whinge when your taxes have to support them ’cause the system you support let them down.

    Swings and roundabouts my friend – the “baby boomers” are still the largest demographic in the country (world) and you don’t really want to mess with us do you?

    BTW if anyone – anyone – cannot control themselves and society suffers, then it is a government responsibility to control that person or legal entity

  16. Personally I blame ‘the christians’.

  17. How do you get rid of a merchant banker when he knocks on your door?

    Pay him for the pizzas.

    (ABC Radio Sydney this AM)

  18. James of Melbourne

    I agree I don’t think you can blame the governments for most of this. However if you visit Piers Akerman it is all Kevin Rudds fault and the mess in the US is all the democrats fault. That is what is making me angry. they cannot even admit that capitlasim in its pure sense has failings. They will still resort to rantings for their own ideology.

    The fault here lies with CEOs who had to have and maintain market share at all costs. Those who kept ehir lending prudent will be able to ride this out much better.

  19. So they knew about the flaws eh? Of course they did! Nice find Joni.

    “Mr Joye told The Sun-Herald from Cambridge that the proposal was about enhancing consumer choice. He said it was a “free option” for the prospective home owner.

    “Our plan is not in any way predicated on property prices increasing … we intend to address what are structural flaws inherent in our current system of housing finance. Under our arrangement, families have the option of sharing prospective price appreciation and depreciation with a passive institutional partner. They would have, therefore, an opportunity to eliminate a significant proportion of what is one of the largest risks to their standard of living.”

    Mr Joye said financial institutions had expressed “strong interest” in the project, even offering to undertake a pilot research project. “We really do believe that this is a once-in-a-lifetime wealth creation opportunity.”

    The value of all Australian owner-occupied dwellings is about $100billion. But Australians are groaning under house debt. Sixty per cent of all household wealth is invested in the home, and some experts warn that households which are over-extended – that is, spending more than 30 per cent of income on rent or mortgage payments – will increase to 1 million by 2020.”

  20. PS This blog’s time stamping hasn’t been adjusted for daylight saving.

    (Always complaints from the unwashed commenters; as if blog admins don’t have enough to do! 🙂 )

  21. Let me see what I can do re AEST.

  22. James

    Possibly 3-4 months ago, I mapped out what I thought would be our major challenges going forward.

    There are a number of challenging factors that will need to be addressed, in my opinion. It’s a combination of factors and how they play out that will determine how much damage is done and how much time will be needed to repair the damage. The prospect of major job losses also doesn’t auger well for many people carrying boatloads of debt.

    1. Personal debt and poor savings record: It’s claimed that Australians are the world’s worst when it comes to saving, an Investment and Financial Services Association report said.

    The IFSA report, released last year, showed that on average Australian households have $160 in debt for every $100 they earn.

    In fact, only recently it has been reported that bad debt and household interest servicing have reached historic records, even before the major banks raised their lending rates independently of the RBA.

    2. China’s inflation factor: Former US central-bank chairman Alan Greenspan has been emphasising that prices for Chinese exports have started to rise, which will contribute to a revival of global inflation. Ben Simpfendorfer, China strategist for the Royal Bank of Scotland, puts it succinctly: “Where China was a deflationary influence over the last 10 years, it will be an inflationary influence over the next 10 years.”

    3. Is our financial sector as solid as it claims to be?: Our banks assure us that we are in a stronger position than the US to cope with any fallout, I tend to be more skeptical. Our banks have surely been aided in earning record profits off the back of complex and risky debt arrangements with other lending institutions, businesses, and individuals in recent years? This has been a global issue, not just one relating to the US alone.

  23. The rot has been setting in since about 1990 as afar as I am concerned.

    Prior to this CEOs and bosses listened to their employees and received praise and criticism and took onboard positive and negative comments. Since around 1990 COEs and bosses have demanded to only hear positive oucomes and objectives.

    Decisions were handed down fomr the top and no one dared question any aspect of them, they were to be implemented and achieved at all costs.

    Anyone who dared question the almighty were considered negative employees and to be conditioned in the art of being positive and everything is OK. Sounds a bit like mind altering concentration camps to me. All repsonses have been scripted and employees robots wihtout their own opinions.

    Don’t believe me listen to the responses you get in Banks or calls over the phone from sales teams, all scripted and all rehersed in parrot fashion.

    This resulted in CEOs and bosses being told everything is fine even when it isn’t. This culture needs to be smashed so people can have an input into the business they work for. Maybe if some of the big boys had listened to a bit of criticism from their emplyees rather than have them removed for not being the company mould, then things would have been found out long ago and not after the wheels have already fallen off.

    As for the words “Worlds Best Practice” which came from the US. If I hear that one more time I am gonna explode. World best practice indeed, world biggest disasters. The worlds best practice companies we have been comparing our Aussie companies to are now all bankrupt or burning in financial holes. Its time for this imported garbage and rhetoric to stop and a return to a more normalised relations with employees and a more down to earth expectation of income and profit levels.

  24. Shane, I tend not to visit Ackerman’s blog much as I try to avoid Phillip Adams. As I’ve pointed out before, centralisation, whether it be corporate or state, cannot work whilst we continue to crave individual freedom, which I do. I had a look at what he said in this case and to an extent he was right. It was a “Democrat” policy that largely brought about this mess. It was a socialist policy messing with a capitalist market, if you like. Denying that means the lesson will never be learnt. Having said that, I doubt that a more Capitalist type of strategy would have saved us from a similar type of disaster. It was simply a capitalist exploitation of a socialist type of policy that got us where we are today. If that makes sense. But you see, this is inevitable. Socialist type of policies always look great in theory, except that theory tends to ignore the inevitable aspect of human behaviour, that the strong will always attempt to exploit the weak, and the greater the power of the strong, the greater the exploitation. Economic rationalism has placed a great deal of power in the hands of so few, in much the same way as Communism would. I’d suggest that resultant poverty is significantly less with the ER version than it would otherwise be so I would tend to favour it if I only had those two choices. But I really would love to see government policies directed towards a more decentralised economic and political system. The total wealth created may be far less, but the end result in my opinion would that it would be more evenly spread, and the social well being of people would be far better managed at that level.

    TB, the retirees will be fine as long as they don’t cash out. The money isn’t lost, the values have simply decreased, and they will come back providing the losses are not crystallised.

  25. “lazy journalists” TB? – the business model for journalism has skewed the bias heavily towards interests that contribute to the bottomline ie real estate,cars, banks etc and to politicians that tout the same pro commerce ideology. Why should there have been any warning signs from the journos during the bubble about the bubble?
    And for that matter why should the people who sold that snake oil suddenly start saying “well we were wrong and a little bit of regulation actually is a good thing”?
    How could the people do other than they have done when they aint gettin the truth?

  26. James

    Soros claims that the market’s current troubles originated in 1980 when U.S. President Ronald Reagan and United Kingdom Prime Minister Margaret Thatcher led a laissez-faire movement that reduced/eliminated regulation of banks and financial markets, the FT reported.

    Soros’ reforms to correct current system flaws include: changing bankruptcy laws to allow mortgage terms to be modified, and creating an exchange with a sound capital structure and strict margin requirements where current and futures contracts could be traded, Bloomberg News reported.

    In his latest book, The New Paradigm for Financial Markets, Soros writes that we are now in a financial crisis that’s unparalleled.

    “It’s the worst, most serious crisis of our lifetime,” Soros tells Steve Inskeep.

    Soros blames what he calls a “super-bubble” that started about 25 years ago. That’s when a less-is-more philosophy became popular with economic regulators. That allowed Wall Street to invest increasing amounts of money in credit.

    “The idea was that regulators always make mistakes, state interference in the markets just messes things up,” Soros says. “And that was a false idea …. Regulators are human and bound to make mistakes, but markets are also human and they are also bound to make mistakes. Instead of markets always being right, they’re actually always groping at trying to find out what the facts are. But they never get it right.”

    ‘Strange’ Financial Instruments

    Soros says there’s a “super-bubble” in the economy that’s bigger than just the recent housing crises, and he blames exotic financial instruments for helping cause it.

    “The markets have introduced financial instruments with fancy names — CDOs and CLOs and all these strange instruments that are traded in very large volumes. And they were all constructed on the belief deviations are random. That’s how some of those instruments were rated AAA and institutions bought them, and a few months later they turned out to be valueless and they were selling at 10 cents on the dollar.”

    Soros disagrees that much like the housing market, America, as an investment, is overpriced.

    “I am saying that America has in the last 25 years sucked up the savings of the rest of the world and consumed it and issued a large number of IOUs,” he says, referring to U.S. debt. “These IOUs are now held in the central banks of China and other Asian exporting countries [including Japan] and oil producers.”

    Those countries are worried that there’s too much U.S. debt and “they don’t want to hold” those IOUs, Soros says”

  27. James – the comment on retirees, I was just listening to a track called “Money” from the UK band Space which had a great lyric:

    “I didnt lose, your money
    Oh no your money, just lost you”

  28. nic t

    Well said.

  29. James of North Melbourne | October 13, 2008 at 12:29 pm

    By the way James, you do make some very valid points.

  30. James of North Melbourne

    I agree with a lot of what you have said. You also seem to be a person looking for a middle of the road solution. I think both sides have things to answer for in regards to permitting this type of meltdown to occur. the problem is financiers always try to find fancy alternative types of funding rather than the simple borrow and pay back loans.

    The same as the share market. The share market was introduced as a way of people investing their money in a share of a company that needed capital to expand or start up. If the company did well the shares went up and dividends were paid. I dont’ think any of the orignal founders of the sharemarket would have dreamt of the variety of rubbish type options and loans and put options and sells and short sells the market conducts today. the market simplt started as a means to raise capital and pay dividends to those investors.

  31. John and Shane, thanks for your comments. I wonder whether the solution is a “middle of the road” one or whether it needs to be more defined as “something completely different”. It’s not just political and economic, EVERYTHING has been centralised, in the name of efficiency. A great example is sport. AFL, NRL, FFA etc. Team sport used to be something that brought communities together. Town against town, school against school, even church against church. It engaged people from all walks of life to a common purpose. And I think we were all healthier for it. Now sport at a local level seems to be disappearing. Millions are being generated from tv rights etc, but none of it seems to filter down to grassroots level (I hate that word, but whatever). Like a bunch of sheep we are herded to big stadia to watch the big games, or as less and less of us can afford it, we are driven to watch it on large screen tv’s though foxtel. I know there’s Auskick and the rest, but what about at the late teen level, where I think young men are at there most socially vulnerable? Sport has become a self perpetuating money spinner, paying only the elite (which of course includes a compliant media). Doesn’t matter, I suppose, the disaffected are in the loungerooms watching it so they don’t offend our eye. We just seem to blindly accept all of this and neither party, least of all the one that purports to hold community values as such, seems to give a crap.

  32. The elite few vs the average many. We have to abandon this type of competitive and adversarial ‘survival of the fittest mentality, in my opinion.

    The fact is not all men (or women) created equally, in terms of potential, talents etc) however, every effort should be made to ensure equal rights according to their needs.

    The gap between rich and poor also remains a concern.

  33. James

    Sport has become self perpetuating, but with all of the screaming over the years that the Government get out of telling us what to do and not to own anything I don’t consider sport to be something of immense importance to the population as a whole. Don’t get me wrong sport is a wonderful thing for our community spirit and teaching our children the hard knocks of losing and playing a good game.

    The things I think are of importance to both partys are the essentials to all families which are the basics to existence.

    1) Shelter ( home own or rental)
    2) Job ( but not at any cost to a persons dignity)
    3) Power and Water ( should not be in private hands as they are a necessity)
    4) Food should be available to all at a certain quality level not have some sections of the community unable to afford meat which is essential for iron and protein.

    Most other things are not necessities and as such can take a back seat until the essentials are fixed. one step at a time instead of adhoc policies on the run as soon as a monority screams louder.

  34. Shane

    Reminds me of Maslow’s Hierarchy of Needs.

  35. Shane, you forgot one thing, social interaction. That’s where the sport comes in. It’s not the game itself, or even necessarily the fitness etc, it’s the social interaction. It’s the identity it gives its participants and supporters. And the community support. Just ask the drought stricken farmers and the psychologists. The most common advice given was for farmers to spend some time down at the footy club. People need people. This blog keeps telling me I’ve made a duplicate comment, so I’m adding this sentence to see if that will fix it.

  36. James – removed the double post…. 🙂

  37. James

    I come from a drought stricken farming family, we walked off our farm in 1980 with my father selling our shepp for $2 a head. The main advice for farmers to spend time at the local footy is not just the interaction it is also the exercise as it ois a proven fact that exercise release happy endorphins whihc reduces the effects of anxiety and depression. Believe it or not there are a lot of farmers who do not do that much exercise, rather they drive in thei utes and tractors and headers and this is not the exercise which produces good endorphines.

    But I do agree social interaction is a necessity in life, we are social animals. But once a gain a social thing that used to be loved by all has been changed by capitalism into a money making enterprise

  38. Sorry everyone exercise does not stop fools like me typing dyslexic 🙂

  39. This is not very encouraging news, Soros is renowned for moving markets whenever he opens his mouth.

    BILLIONAIRE businessman George Soros lobbed criticism overnight at the US administration’s “ill-conceived” handling of the global banking crisis, reserving especially harsh words for Treasury Secretary Henry Paulson.

    “This $US700 billion plan, if it had been better constructed, if they had thought about it earlier, if they would deal with the housing situation — the damage would be less,” Mr Soros told CNN in an interview broadcast Sunday.

    “The Paulson plan was ill-conceived,” he said.

    “It was basically the same kind of financial engineering that got us into the trouble that they wanted to use for getting us out of it. And it was just the wrong thing,” he said.

    The legendary financier added: “The market is now collapsing. He just is not able to … come to terms to what needs to be done.”

    Mr Soros, one of the world’s richest men, also had criticism for the overindulgence of US consumers.

    “We have gotten into the habit of consuming 6 to 7 per cent more than we are producing. And that game is finished. That was part of the bubble,” he said.

    “America, as the centre of the globalised financial markets, was sucking up the savings of the world. You know, China was buying government bonds.

    “This is now over. The game is out,” he said, adding that the time has come for “a very serious adjustment” in Americans’ consumption habits.

  40. I’ve got to add, John Mc and others, I sort of get offended seeing so many people quote George Soros in relation to all of this. He may or may not be right, but it’s kind of like Jack the Ripper lecturing prostitues not to walk the streets alone at night. He speaks of crying wolf, well he is in actual fact, the wolf!!

  41. James

    The interesting thing about Soros, and I’ve read quite extensively on him, is that his boom-bust model of markets explains very clearly how bubbles form and how they ultimately break.

    He, in recent years has become very heavily involved in lobbying for reforms to the global financial system.

    I know, I was a little wary at first, however, his integrity and passion for a much more equitable system has long convinced me that his intentions are noble.

  42. James

    I can’t quote George Soros because I don’t know who he is. Ignorance on my part I suppose but never the less the truth.

    Most of my comments are my own observations, opinions and experiences.

  43. John, if he put just 8 of the 9 billion dollars that he has from doing exactly what he preaches against, he may have more cred IMO. It’s really easy from his mansion to lecture and the like. But someone has lost from the billions he has made.

  44. Hey James, my experience, observations, study and instinct are all I have to go off. Perhaps you are right, but I’m willing to back my own judgment as to whether someone is credible or not.

  45. Just got home and was skimming through the posts and read monority and read it as moronity.

    Monority is to me a minority of one.

    Moronity is to me people in position of power that display lack of common sense.

    I wonder if those words exist in the dictionary…if not they should in this day and age…interesting.

  46. Just got in (from a hard day at the beach with friends – the market has had quite an impact on them)…

    23. nic t | October 13, 2008 at 12:34 pm

    nic, I assume bvy your post that you agree with mine.

    Just on the off-chance you don’t (some of your comments can be mis-interpreted:

    News companies look for a quick dollar not good reporting…

    “Journalists” (those that can spell) either can’t or won’t challenge or undertake invetigative journalism…Watergate was cracked by two journalist who were working in their own time and passionate about politics…and had been told not to waste their employers time.

    James, agree vis a vis sport – put simply its all about separating the punters from their money – we have become a society obsessed with making a quick buck any way we can at anyone elses expense – very American – very un-Australian – we are rapidly losing our national identity.

    As for retirees, James, Alan Kohler expands quite nicely on my earlier comment – he takes a bit longer to say it than I did but the essence is pretty much the same – the retirees will get screwed and the government wil have to pay out more.

  47. “Personally I blame ‘the christians’”badass reb

    While your putting the boot in reb, give ’em one for me…although I’m not sure that it really pertains to the issue.

    But seriously, Great Thread guys. Excellent sequence of comments from james, shane, Mace McPhilbin, TB, nic t etc..
    Thanks for the insight people.

  48. …and you might want to read this link…the last line is intersting…,27753,24487603-5012424,00.html

  49. “a hard day at the beach with friends…”

    and you expect sympathy…?

    Just as well you’re getting your teeth extracted tomorrow, or I’d be inclined to come round there and pull them out myself!!

  50. Hello HD,

    Are you still in contact with Jobby…?

  51. TB,

    What was the water like…not too cold?

    I’m thinking of taking the girls to Bribie on Sunday for a frollick in the water and a counter lunch at the pub across the road.

  52. “…and you might want to read this link…the last line is interesting…”

    It was spot-on TB. It’s called “keeping your nerve”. It’s valuable weapon.

  53. Badass reb.

    My only contact with jobby is though here mate; haven’t seen him here for a while though. Maybe he is still recovering from his weekend in the heart of depravity???

    I did, quite a while back now, send my contact details to Senor Dunlop to pass on to jobby (mainly so I didn’t irritate the fuck out of y’all by crapping on about Death Metal on Weekend Talkback at Blogocracy) but I assume Tim didn’t forward it because he hates my guts! just kidding. Nope, dunno what happened there.

    Jobby, if you’re out there…Pig Destroyer are coming to tear you a new one dude.

    Sometimes, life outside of the intertubes permitting, it is hard to find the time to post. Very impressed with this site though. Please explain to a technological caveman, the number of hits for the site denotes the number of people who’ve had a look?

    8600+ seems llike a hell of a lot.

  54. Ummm, “through here” works better…

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