Further Northern Rock Revelations
An editorial on the Wall Street Examiner hammers the nail on the head when it comes to the British banking disaster. Here’s an excerpt:
Readers will recall the Bank of England’s Meryvn King proclaiming that financial bail outs would not be forthcoming as they simply encouraged moral hazard behavior. However, with a bank run on Northern Rock well underway, the BoE was forced to both eat their words and lose their credibility with a rescue package. Next comes a story that can only be called scandalous in a stupid Beavis and Butthead kind of way. We now learn that Northern Rock continues to make crazy, outrageous loans, and is also planning on a nice dividend and executive bonus payout. Apparently other UK banks are acting more prudently, as Ponzi credit offerings to consumers are slashed.
While many in Britain have pointed and laughed at the American housing crisis, many are now realizing that banks worldwide have equally contributed to the current credit meltdown. Easy loans have been bought up by banks as a method of earning easy interest. This worked as long as housing prices were racing upwards. Increased defaults and downward shifting prices have made mortgage loans of any kind a risky investment, and to put it lightly, the gravy train is over.
Now that homeowners are failing to payoff mortgage loans, bank’s former indiscretions and corrupt practices are becoming clear.
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