credit Crunch Titbit

[Alex P]

oops, all my money is in a Spanish bank...

[Marky Mark]

Where does a pension fund come in to all of this crunch Mumbo Jumbo?

Do I need to start hoarding tins and seeds for my old age?

[Marky Mark]

Big tin, little tin, cardboard box!

[Jon H]

Latest victim of the financial crisis is Iceland...













...they couldn't pay the electric bill, so all the food's thawed out

[adrian]

Ugly scenes as disgruntled former employees stage a blockade at the gates of Lehmann Bros HQ:

[img]http://farm4.static.flickr.com/3006/2926046097_670b278c6d_o.jpg[/img]

[Elliot M]

well, i'm shorting Rapha

[Marek]

Marky Mark, depending on the type of pension fund you have it will depend on what type of pension you get:

1. If you have a defined benefit scheme, or at least a good number of years in one then you should get the defined benefit. That being a percentage of the number of years you have worked divided by a factor of either 60 or 80 to get a percentage, then you multiply that by your final salary. So this is kind of guaranteed unless of course your company goes insolvent. If it goes insolvent then you will be paid your pension by the pension protection fund but it will be a lower number, but you would still get something.

2. If you have a defined contribution scheme and it has a lot in equities and you are about to retire, well, you should have had your money in bonds. If you did have it in equities then you are now going to have to work a bit longer to wait for the markets to come back. If you had it in bonds then these should have reacted in a reasonably similar way to the price of annuities (which is probably what you would buy on retirement with your pot of cash). So you would have been somewhat protected.

But to be honest, there are a lot more things to be worrying about, like for example the solvency of countries, Iceland has gone, replace the C with an R and I have a feeling that might be next.

Cheers

Marek....

[Paul H]

I blame all the city workers and their fat bonus.

This is where some of the money is. I think we should take it bake tomorrow

[url]http://www.addiscombe.org/members/phpBB2/viewtopic.php?f=3&t=6399&p=52833&hilit=cervelo#p52833[/url]

[Marek]

I blame greed, and it is not just City bankers greed. If you haven't seen this then it is a very good summary of the situation.

http://www.slideshare.net/roguemonk/the ... is-primer/

Cheers

Marek.....

[Alex P]

Following the problems in the sub-prime lending market in America and
the run on Northern Rock in the UK , uncertainty has now hit Japan .

In the last 7 days Origami Bank has folded, Sumo Bank has gone belly
up and Bonsai Bank announced plans to cut some of its branches.

Yesterday, it was announced that Karaoke Bank is up for sale and will
likely go for a song, while today shares in Kamikaze Bank were
suspended after they nose-dived.

Whilst Samurai Bank is soldiering on following sharp cutbacks, Ninja
Bank is reported to have taken a hit, but they remain in the black.

Furthermore, 500 staff at Karate Bank got the chop and analysts report
that there is something fishy going on at Sushi Bank where it is
feared that staff may get a raw deal.

[Dombo]

[quote="Marek"]I blame greed, and it is not just City bankers greed. If you haven't seen this then it is a very good summary of the situation.

http://www.slideshare.net/roguemonk/the ... is-primer/

Cheers

Marek.....

[Marky Mark]

Cheer Merek, Pensions are still a mystic black hole to me. Am I stupid or in the same boat as most of the UK population?

[Apples]

[size=150]Political hot potato.....but this is where it all started[/size]

Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
[size=150]Published: September 30, 1999[/size]
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

[-Adam-]

So essentially, the combined American intellience thought, hmmm....


What will happen if you lend a sh!t load of money to people who probably won't be able to pay it back?


And the net result, they can't. Is it just me or was that not a fairly obvious outcome!?


So now the whole world is in the sh!t. Great.


That's my understanding of it all anyway, not that I profess to be a financial wizard by anymeans. Buildings and Bikes are far more simple.

[Apples]

Well its been the generation of easy credit.....you can even get it at your local bike shop.