Toxic Loans - Part 2

Marcus Halberstram

..so where were we?...ahh yes…the Noughties…a time of excess built on a foundation of credit; money that in truth just didn’t exist…Bankers were living it up in their Lear Jets while the rest of the UK picked bits of pepperoni out of their hairy navels whilst stuffing a Dominos into their cakehole. While they were sat there watching the latest reality guff on their brand new 107 inch plasmas which had been bought on the “never never” Bankers were creating different forms of derivatives (which no one – not even now – really understood how they worked)…but they were making money; that was all that mattered….the great money grab was on, as a trader if you were given “half a bar” as a bonus by your boss you’d be slamming the door behind you in disgust…”greed is good”….”you snooze you lose” ….well in fact we did snooze…in 2007 we slept walked our way into the mother of all financial car crashes. CDOs were the catalyst…NINJA (no income no job) mortgages in the US were starting to go the way of the pear (well there’s a surprise)…these had been packaged up as gold plated loans and an investment bank version of pass the parcel ensued…suddenly the realisation was that these were potentially worthless…confidence evaporated….panic followed…banks lost trust in each other and wouldn’t lend to each other…credit on the wholesale markets dried up a few months….

What did this mean to us?...well at first, it meant we had to get used to the coiffured look and drawling tones of a certain R. Peston popping up in our living rooms every night…that was coupled with the sight of thousands of pensioners crawling out of their tents with a flask of horlicks whilst queuing up at the local Northern Rock branch to get their life savings out. Lloyds bought HBOS…HBOS was toxic….Lloyds becomes toxic…..bad news followed bad news…bailout followed bailout…it was one big almighty belly flop straight into a global recession (…depression anyone?).

Next Week – What does the future hold?

TOP TIP: On standard variable?…get hooked up with a 5 year Fixed Rate sharpish…

31.03.2009. 14:45

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