Sourced by OzHouse.org
I have written in my eBooks that the smoking gun proving the banks at fault for the financial crisis was bogus risk management. But I stumbled upon a main-street-average-Joe explanation that is a smoking gun as well.
Readers should pay attention to this proof that the bankers are totally at fault for the housing bubble and crash.
The smoking gun is that the liar loans, which were central to the most intense part of the housing bubble, were imported from the UK, not just to the United States, but to PIIGS nations in Europe as well. The liar loans may have been different slightly in make up from country to country. For example in the UK you had to put money down. In the US you could have a no down, interest only, liar loan!
But, it is pretty clear that the financial system the world over was interested in liar loans for one reason. That reason was to get folks to buy investments in risky CDO’s that made banks large profits through origination fees. This was all about the banks, thought up by the banks, and encouraged by the banks. The banks had an ulterior motive for this behavior. Main street had no clue. One banker said you just needed to fog a mirror to be eligible for a liar loan in the UK.
The truth is, the UK had been allowing these loans for years, in the early turn of the 21st century, before they were deliberately introduced to America in mid 2003. This was not just the behavior of rogue institutions in the UK. Most of the lenders, the brokers of the shadow banking system, encouraged liar loans. Only there they were called self certified mortgages.
The Royal Bank of Scotland, the biggest lender, by far, in the UK, encouraged the loans. These were not rogue groups.
The income multiples remained the same as ever in the UK.Your house could not exceed the 3.5 times income required. Only the income was inflated to meet the 3.5 times requirement. Not only that, but the true income to housing ratio was over 5 times income, due to the self certified permissiveness. The advertising actually encouraged liar loans.