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How the Credit Crisis came About - English Humour from TwoWolves on Youtube and Reponsible Credit News from DOOD
A VIDEO ABOUT THE SUBPRIME CRISIS

In a video which has already been viewd by close to two million Internet users two actors playing an investment banker and a journalist in a tv interview explain the credit crisis in the UK. This funny production starts with a finance company that sells houses ("just before they fall apart") to poor people in the US with a mortgage that is then packaged and sold via Tokyo in a black box. "What was wrong with it?" is the final question. "Nobody should have asked about the value of the house" is the anwer of the investment banker.

SUBPRIME = USURY

But is this enough? Why is it called a "suprime loans crisis" if it is caused by overpriced homes or understuffed borrowers?

Neither the borrowers were too poor to take out such a credit nor were those houses overvalued. House prices in the UK have gone up by 170% in total. The problem is that most of the credit did neither profit the home owner nor the borrower but the intermediary (up to 9% broker fees), the lender (usurious interest rates), the refinancing agencies (variable rates which shifted the money market risk of rising interest rates to the borrower), package dealer (taking fees) and all kind of loan sharks, debt collection agencies, notaries and others. "Subprime" is only a nice word for usury. It does not tell us how deep below the prime market you have to plunge in order to hit this bottom of irresponsible credit extension.

SUBPRIME DESTROY FAMILIES

There is also another aspect which lacks in this funny video: how are such loans finally collected and what did this to the families which often lived in these homes? Quite often the people did not even buy a new home when they contracted this credit but had to refinance the old mortgage into a subprime credit because usurious credit card debts made them insolvent and unable to pay for the actual instalments of their mortgage.

"EXPERTS" HAVE SHORT TERM EXPLANATIONS

"Experts" mostly allocate the problem either to the investment side ("bad investments, losses for pension funds") or to the transfer of packaged loans ("should not have been sold or bought") instead to irresponsible lending practices which we know from as long time ago as the 19th century usury practices where Dostojewski's money lenders exploited the weakness of people who a were in need. Some even want to blame the psychology of the market. All this is true at a short term perspective because when such bad loans exit we have to deal with them. But meantime the next bunch of bad loans is produced and the present information approach in credit legislation (usurious credit is allowed because consumers could know about it) keeps the doors open.

Of course just like as we have to find a solution for atomic waste which we need to dump somewhere and cannot speculate whether we should not have produced it before bad loans cannot be ignored by those who ask for responsible credit. But why continue with its production? Atomic waste at least stands for energy supply, usurious loans only for the profit of those who should not be rewarded for their doings.

AN INTERNATIONAL OECD SPONSORED RESEARCH INTO UNDERLYING CREDIT PRACTICES IS NECESSARY

More people should get involved into this discussion. What we would need is an international empirical research into "subprime loans" and what they did to families all over the world. The next conference of our partner the International Association of Consumer Law will deal with poverty and contract law in February 2009 in India. This is another opportunity also to discuss credit law and overindebtedness in a country where annually more than 3000 overindebted farmers commit suicide.

While about 200 billion Dollars of tax payers money have already been spend for this crisis which is the part that money lenders put into their pockets before just 1 million Dollar would be enough to mount such a research at the OECD level.

If you want to know more about "subprime loans" in the UK you should go to the News Site of our partner DOOD.

ID: 41280
Author(s): UR
Publication date: 09/05/08
   
URL(s):

Vido on Youtube: What created the subprime crisis?

Debt-On-Our-Doorstep - News
 

Created: 09/05/08. Last changed: 09/05/08.
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