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how-the-recession-happened, how accurate?

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    #2
    nesf
    Registered Users Posts: 27,645 ✭✭✭✭nesf


    It's a very simplistic and very inaccurate in parts explanation of the Sub Prime Mortgage crisis in the US which precipitated the international financial crisis. It's actually pretty bad but catchy. What it really fails to explain is counterparty risk, which was a huge factor in the problem.

    It's not useful for understanding the Irish banking issues, we don't have securitised mortgages in this country, the bank that sells it, keeps it so there isn't the moral hazard problem that they had with CDOs in the US where people were selling on mortgages and turning large groups of them them into investment packages.


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    #3
    View
    Registered Users Posts: 3,872 ✭✭✭View


    nesf wrote: »
    It's not useful for understanding the Irish banking issues, we don't have securitised mortgages in this country, the bank that sells it, keeps it ...

    Is that really the case nesf? I thought I saw a comment in one of the papers that the securitisation of mortgages started to come into Ireland at the end of 2005.

    Offhand, I can't see any reason why a bank here couldn't have created a securitised mortgage package which it sold on investors in other Eurozone states given there would be no currency risk involved for such investors.

    Are there legal obstacles which would have prevented the banks from having done so?


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    #4
    nesf
    Registered Users Posts: 27,645 ✭✭✭✭nesf


    View wrote: »
    Is that really the case nesf? I thought I saw a comment in one of the papers that the securitisation of mortgages started to come into Ireland at the end of 2005.

    Offhand, I can't see any reason why a bank here couldn't have created a securitised mortgage package which it sold on investors in other Eurozone states given there would be no currency risk involved for such investors.

    Are there legal obstacles which would have prevented the banks from having done so?

    It's not the standard approach for mortgages here. There was some limited usage of the mechanism towards the end of the boom but it never became standard. I'm not sure whether there's a legal barrier or simply a tradition against it in the market.

    The cause of the Irish recession was a simple housing bubble bust combined with an inability for Irish banks to be able to borrow much money in the international money markets due to the global credit crisis combined with worries about Irish bank exposure to the domestic housing market and developers. Our default rate is far lower than the American one for bankruptcy law reasons (in the States you can just walk away from a mortgage and not owe a penny more, here the bank can pursue you for the remainder of the loan).


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    #5
    terry3111
    Closed Accounts Posts: 2 ✭terry3111


    nesf wrote: »
    It's a very simplistic and very inaccurate in parts explanation of the Sub Prime Mortgage crisis in the US which precipitated the international financial crisis. It's actually pretty bad but catchy. What it really fails to explain is counterparty risk, which was a huge factor in the problem.

    It's not useful for understanding the Irish banking issues, we don't have securitised mortgages in this country, the bank that sells it, keeps it so there isn't the moral hazard problem that they had with CDOs in the US where people were selling on mortgages and turning large groups of them them into investment packages.



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    #6
    Seth Brundle
    Moderators, Politics Moderators Posts: 39,853 Mod ✭✭✭✭Seth Brundle


    surely this failure is the cause of the recession in Ireland?


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    #7
    Fighting Irish
    Registered Users Posts: 7,065 ✭✭✭Fighting Irish


    kbannon wrote: »
    surely this failure is the cause of the recession in Ireland?

    And most of the Irish people


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    #8
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    digme wrote: »
    http://flipsidereality.com/blog/uncategorized/how-the-recession-happened/

    Is this video presentation any use in understanding how Ireland went into a depression.

    We are not in a depression.


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    #9
    anonymous_joe
    Registered Users Posts: 9,255 ✭✭✭anonymous_joe


    kbannon wrote: »
    surely this failure is the cause of the recession in Ireland?

    Nah, that's a crock of shíte.

    You can't blame a politician without blaming the people whose policies he implemented. If people had objected to our lax regulation of banking they wouldn't have voted him in. But they did.


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