Posted by MataHarley on 28 September, 2008 at 6:07 pm. 11 comments already!



While we in the US concentrate only on our ourselves, and what we always perceive to be our failings, the media fails to point out is that this “rescue plan” is, in some degree, also active in other Euro nations.

In the UK, the Parliament is under discussions about the nationalization of Bradford and Bingley.

LONDON (Reuters) – Britain’s government will nationalize troubled mortgage lender Bradford & Bingley (BB) and is discussing the sale of its savings book and branches, people in the banking industry familiar with the matter said.

The Treasury is leading talks on the rescue of the bank and on Sunday said discussions were continuing. A full statement will be made by Finance Minister Alistair Darling before Monday’s market opening.

The Treasury would have preferred a private-sector rescue for Britain’s ninth-biggest mortgage provider, but rivals appear unwilling to come in as a “white knight” amid a global credit crisis and weakening British housing market.

The BBC said B&B will be nationalized and its mortgage book merged with Northern Rock, the lender taken under state ownership in February.

The government this month brokered the takeover of HBOS (HBOS), Britain’s biggest home lender, by rival Lloyds TSB (LLOY) and is stepping in again.

“We are very clear that depositors and ordinary savers must be properly protected and they will be as part of the arrangements we will set out,” Treasury Minister Yvette Cooper told the BBC.

Britain’s top five banks already stepped in for a “save” of B&B back in June of this year. Did we hear anything about that here in the US? Or did we just concentrate on our own bailouts?

Any of this “save the common man” talk familiar? How much is due to the international banking community, and the US failures? Well, if you read one paragraph in the BNEC account above, they say it was “sparked” by the US economy.

But… my my, some familiar scenarios…

B&B’s 24 billion pounds ($44 billion) of savings and its 200 branches could be sold to a rival or rivals. Spain’s Santander (SAN), which owns Abbey and is in the process of buying Alliance & Leicester (ALLL), was in talks about possibly taking over deposits and branches, an industry source said.

But rivals are reluctant to take ownership of B&B’s book of 41 billion pounds of residential loans — representing 3.4 percent of British mortgages — as many of them are higher risk buy-to-let and self-certified loans and the British housing market is weakening, raising the prospect of rising bad debts.

Obviously the UK was not subject to the US CRA mandates. B&B isn’t a US corporation, subject to US mandates. They were, however, taking advantage of the monetary benefits of increasing homeownership and sales with relaxed lender criteria. And, just like the US, they were increasing the number of subprime loans in their lending portfolio.

Other than the subprime loan package offering, was there anything in common here? Yup… the house price rises. While they, unlike the US who experienced the market repercussions of 911, did play with their interest rates to control home prices, they did not dodge the unnatural rise successfully.

As I pointed out in my “perfect storm” post, the UK is going thru a similar, but slightly less drastic housing crisis. Along with the increase of subprime loans, they too had the housing price increase… a key factor in subprime loans being irrecoverable. When you issue paper on over priced homes, you can’t just replace one defaulting buyer with another.

Below, a repeat of the graph comparing the UK astromonical price increase in the past decade.

Anyone else? How about Belgium. Just days ago, the European financial giant Fortis got partially nationalized. And, because of the size of the nations involved, three nations chipped in to nationalizing Fortis.

But wait… it already had a partial takeover last year! Did this little ditty get fed into the overall global market health? Did we even get a sniff of this event??

The deal will force the bank — which has headquarters in both Brussels and the Dutch city of Utrecht — to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN.

Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.

“We have taken up our responsibility, we did not abandon” account holders, Leterme told reporters.

Under the bailout, Belgium will invest 4.7 billion euros ($6.88 billion) and the Netherlands 4 billion euros ($5.86 billion) in Fortis’ banking operations in the two countries. In return, they each receive 49 percent ownership in those national arms of the bank.

Luxembourg will invest 2.7 billion euros ($3.95 billion) in the bank’s Luxembourg operations, also for a 49 percent stake.

The deal, orchestrated by the three neighboring countries and EU Central Bank chief Jean-Claude Trichet, is meant to restore confidence in the bank before the reopening of markets on Monday after a tumultuous week in which Fortis’ shares imploded.

Anything else in common… doh! It’s those housing prices! Evidently, back in 2000, you could buy a home in Belgium for half the price you could back in 2007. Remember, the UK is a year behind the US in their housing crash. Could Belgium and other adjacent Euro areas be the same?

Fri 28/12/07 – Buying a residence in Belgium today costs two times what it did in 2000. Prices increases during 2008 are expected to remain limited. This is the prediction according to information by Stadim study agency.

The average price for a house in Belgium the beginning of October was €157,200. This is 50% more than four years ago (€102,000) and roughly double the average price in 2000 (€79,600). (VRT) It’s a buyers’ market Housing prices in 2008 are not expected to exceed 5% for houses and 2% for apartments, though in some places increases of 6-8% could be the case.

According to Alain Declercq, an analyst of ERA Belgium, the largest estate agents in the country, “The price increases today have returned to an acceptable level.”

“Price increases were more than 10% a year between 2004 and 2006. This trend could not continue.”

No sheeeet Sherlock. It’s the same thing I’ve been saying here. Everyone is complaining about the housing price “crash”… but the price rise was so fast, so unsustainable, that it was a major contributor to the 2008 “crash”…. that is evidently happening world wide (if not simultaneously).

What they all have in common is the housing price increase beyond historical rises from the decades before. And while I haven’t documented the Belgium subprime loan stats yet, it will not surprise me to find those exotic loan packages make their way to that Euro market as well.

So what’s the lesson? (too late, perhaps…) Easy money = flood of buyers = unsustainable price hikes = economic spiral.

And it’s entirely possible that a “feel good” Congress started this world wide trend… all by themselves. Oh goodie.

So what’s the story? If the other nations were not under a US mandate to force subprime risky loans, why did the other nations follow suit?

Cash… it was a lucrative market. Private enterprise doesn’t need mandates to identify a money making proposition. And once the US identified that market by government mandates, and the other nations saw just how profitable it could be, is it any surprise that it’s a “monkey see, monkey do” scenario?

So what will be the repercussions? First, it looks like whatever the US does now, other Euro markets… busy lecturing *us* on the capitalism “failure”… will be right on our heels. So will we end up with governments, all over the world being socialized property owners on behalf of their citizens?

Oh my… interesting times. Personally, right now, I can’t put my finger on it all. I can see the domino effect. But their ultimate effect on world wide global economy? Uh…. uh…. duh… Dang, I sound like Obama. LOL

Hopefully someone more knowledgeable than I will pick up on this and play “crystal ball swami” on the world’s economy..

No matter what the specifics, this can not bode well for a global opinion of capitalism. Oddly enough… it’s not a free market failure. Because when you trace it back, it all started with government regulation intervention in the US by mandating easy money. From there, it spread like wildfire thru the free market for the demonstrated profits.

What comes now? Anyone’s guess. One thing for sure… the world may just have to back down in values of property. It’s overdue, and needed… in all countries.

UPDATE: One other “common” factor…

Evidently there’s another bank (Bank of Switzerland) and yet another commonality… AIG. Wow… From today’s London Times Online

A few months ago I was seated at dinner next to a banker and, as you can imagine, my watch immediately started going backwards. Minutes crawled by, and as he droned on about derivatives and sub-prime markets in America I began to wonder if it would be poor form to stab him in the eye with my lobster scissors.

Instead I decided to try to will myself to death. But then I was snapped into hair-straightening consciousness when he casually mentioned that the giant Union Bank of Switzerland was in trouble.

UBS? That’s where I’d plonked all my life savings. What do you mean, trouble? Are you saying that because some Mexicans can’t afford to pay their mortgages I’m in danger of losing the fruits of a lifetime’s graft? The answer, when translated and condensed, was yes.

The next day, in a bit of a flap, I rang the bank, which quite understood my concerns and offered to transfer the bulk of my savings to a company I’d never heard of. It was called AIG.

continue reading at link above

Small “global” world, eh? And nothing to do with Fannie/Freddie, Lehman, etal. This all goes back to the already “rescued” AIG.

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