In 2008 ‘saving the world’ meant handing out taxpayers’ dosh to a thoroughly disreputable rabble of banks and other financial hooligans to try to avert a very serious global crisis which was on track to crash every major world economy.
Our very own then chancellor Gordon Brown (see sidebar below for a little more on Brown) must take great credit for galvanising the fightback, which was a ‘success’ in terms of the global economy did not fall in on itself though it
The irony was that it was the greed of the fucking banks and other financial hooligans who were bailed out with vast sums of public money who were largely responsible for creating the crash.
Yet governments had no choice at all to bale out those fuckwits, who, incidentally, are again up to the same tricks in the current AI saga borrowing farces.
Yet governments had no choice at all to bale out those fuckwits, who, incidentally, are again up to the same tricks in the current AI saga borrowing farces.
When it ends badly as seems increasingly likely, many pension funds and insurance companies who invested in AI companies – or even just in funds that so invested – will pay the bill.
And that means Joe and Josephine Public will eventually carry the can.
But let me repeat: doling out billions of moolah to those hooligans was the only way to try to get the whole show on the road. It was that or see pretty much everyone of the world’s economies collapse.
If that sounds melodramatically apocalyptic, it’s because it was potentially apocalyptic: as the saying is ‘money makes the world go round’ and when the money stops going round, it is curtains for a great many folk.
The bankers and financial hooligans did take a substantial hit. Some like Lehman Brothers, went to the wall.
The essence of the problem was that overnight everyone on the money-go-round had lost trust in everyone else, and the wisest thing to do was to pull the shutters down until further noticed. And that almost crashed the global economy
the the money folk had sold each other the debt on their books – with buyer naturally again insisting on a fee. These debts would be ‘re-packaged / re-bundled’ and sold on again, again for a fee. The problem was that much of the debt had turned bad, but no one new what in a bundle of debt as ‘bad’ and what was not.
There has been a steady trade in debt for centuries when at some point – it is chronicled in a similar film to Margin Call, The Big Short – one of those hooligans came up with the wheeze of reselling debt. Why? Because a fee was charged on every sale and many such sales meant more fees. It was very simple.
His idea was to combine and ‘repackage’ debt and sell it on (and earn a new fee). And included in those debt packages were mortgages.
This was all fine and dandy until little by little sellers and buyers lost track of which tranche of debt was in which package, especially if a particular package had been bought, split up and combined with the remnants of other broken up packages which was then also split up to be repackaged and sold on.
Why did the hooligans bother with all that palaver? Simple – more fees as folk passed Go and trousered even more moolah, which at the end of the day is the sole purpose of it all.
This process carried on, however, without much trouble until 2008 when America experienced a housing crisis and prices fell. The problem was that for several years in America and Great Britain (and for all I know in other countries) in the years when prices were rising steadily and demand for mortgages was strong.
While prices were going up and up and up, folk reasoned that they could push the boat out a little and stretch themselves, buy a house they could no really afford, wait for it to go up in value then sell it again if necessary, pocketing enough to pay of the loan and have a bit over for goodies.
Given the growing demand for mortgages knowing for them there was very little risk, lenders began handing out a mortgage to every Tom, Dick and Harriet who asked for one. Criteria on borrowing were relaxed more and more, and whereas for many years folk saved up for a deposit and took out a mortgage of 60% or 70% o borrowing became ever easier: no deposit and being handed 100% became possible.
Worse, as prices carried on rising lenders would even hand out more than 100% of the price of a house. Nor were a borrowers financial circumstances checked: ‘self-certification’ on income became a norm. Lenders reasoned that if things went tits up and a borrower defaulted, they got a house for peanut and could then sell it. Where was the risk?
The risk was that house prices would not just stop rising but what start falling. Defaults grew, companies avidly building more houses to cash in on the boom were no longer selling and many went but. The house of cards collapsed very fast indeed.
What had this to do with the 2008 crash (and the film Margin Call, I hear you asking)? Well, much of the debt that was continually being repackaged and sold on, repackaged and sold on, repackaged and
sold on (with a fee being paid each time, the whole bloody point of the exercise) consisted of mortgages, some of which had gone bad and the debt was worthless.
But which debt in any given package was ‘bad’. And how did a buyer know the debt package being offered did not contain some of the bad debt?
But let me repeat: doling out billions of moolah to those hooligans was the only way to try to get the whole show on the road. It was that or see pretty much everyone of the world’s economies collapse.
If that sounds melodramatically apocalyptic, it’s because it was potentially apocalyptic: as the saying is ‘money makes the world go round’ and when the money stops going round, it is curtains for a great many folk.
The bankers and financial hooligans did take a substantial hit. Some like Lehman Brothers, went to the wall.
The essence of the problem was that overnight everyone on the money-go-round had lost trust in everyone else, and the wisest thing to do was to pull the shutters down until further noticed. And that almost crashed the global economy
the the money folk had sold each other the debt on their books – with buyer naturally again insisting on a fee. These debts would be ‘re-packaged / re-bundled’ and sold on again, again for a fee. The problem was that much of the debt had turned bad, but no one new what in a bundle of debt as ‘bad’ and what was not.
There has been a steady trade in debt for centuries when at some point – it is chronicled in a similar film to Margin Call, The Big Short – one of those hooligans came up with the wheeze of reselling debt. Why? Because a fee was charged on every sale and many such sales meant more fees. It was very simple.
His idea was to combine and ‘repackage’ debt and sell it on (and earn a new fee). And included in those debt packages were mortgages.
This was all fine and dandy until little by little sellers and buyers lost track of which tranche of debt was in which package, especially if a particular package had been bought, split up and combined with the remnants of other broken up packages which was then also split up to be repackaged and sold on.
Why did the hooligans bother with all that palaver? Simple – more fees as folk passed Go and trousered even more moolah, which at the end of the day is the sole purpose of it all.
This process carried on, however, without much trouble until 2008 when America experienced a housing crisis and prices fell. The problem was that for several years in America and Great Britain (and for all I know in other countries) in the years when prices were rising steadily and demand for mortgages was strong.
While prices were going up and up and up, folk reasoned that they could push the boat out a little and stretch themselves, buy a house they could no really afford, wait for it to go up in value then sell it again if necessary, pocketing enough to pay of the loan and have a bit over for goodies.
Given the growing demand for mortgages knowing for them there was very little risk, lenders began handing out a mortgage to every Tom, Dick and Harriet who asked for one. Criteria on borrowing were relaxed more and more, and whereas for many years folk saved up for a deposit and took out a mortgage of 60% or 70% o borrowing became ever easier: no deposit and being handed 100% became possible.
Worse, as prices carried on rising lenders would even hand out more than 100% of the price of a house. Nor were a borrowers financial circumstances checked: ‘self-certification’ on income became a norm. Lenders reasoned that if things went tits up and a borrower defaulted, they got a house for peanut and could then sell it. Where was the risk?
The risk was that house prices would not just stop rising but what start falling. Defaults grew, companies avidly building more houses to cash in on the boom were no longer selling and many went but. The house of cards collapsed very fast indeed.
What had this to do with the 2008 crash (and the film Margin Call, I hear you asking)? Well, much of the debt that was continually being repackaged and sold on, repackaged and sold on, repackaged and
But which debt in any given package was ‘bad’. And how did a buyer know the debt package being offered did not contain some of the bad debt?
Well, they didn’t: no one did and there was no way of finding out.
Result: the train came to a shuddering halt, everyone lost trust in everyone else and the Fed and the Bank of England had to scramble to keep the banking system from collapsing.
Result: the train came to a shuddering halt, everyone lost trust in everyone else and the Fed and the Bank of England had to scramble to keep the banking system from collapsing.
Margin Call portrays the start of the collapse when an alert risk analyst realises that not only has his bank’s debt holdings gone completely sour but that his bank might well technically already have gone bust. Now read on . . . (as they say).
Margin Call is a film you can watch over and over again (and I have) and it knocks many a ‘thriller’ into a cocked hat. And that even though there is no mystery at all.
It all takes place over about 24 hours as one – fictional bank, but said to be based on Goldman Sachs – goes into action to save what can be saved, at the cost though of pissing off a lot of people who were conned into buying some of their bad debt.
Doesn’t sound like a ‘thriller’ does it, but it is certainly not dry and the skill of its scriptwriter and director, J. C. Chandor ensures it will keep you – or most of you hooked throughout – and not a car chase, gun fight or sex scene within 100 miles.
Margin Call is a film you can watch over and over again (and I have) and it knocks many a ‘thriller’ into a cocked hat. And that even though there is no mystery at all.
It all takes place over about 24 hours as one – fictional bank, but said to be based on Goldman Sachs – goes into action to save what can be saved, at the cost though of pissing off a lot of people who were conned into buying some of their bad debt.
Doesn’t sound like a ‘thriller’ does it, but it is certainly not dry and the skill of its scriptwriter and director, J. C. Chandor ensures it will keep you – or most of you hooked throughout – and not a car chase, gun fight or sex scene within 100 miles.
I am tempted to write that it has a ‘stellar cast’ – Jeremy Irons, Simon Baker, Stanley Tucci, Kevin Spacey and Demi Moore – but oddly I’m afraid to use the word ‘stellar’ might somehow trivialise an excellent film.
If you want an understanding of what went on in 2008, you can do a lot worse. I can also recommend The Big Short, but for my money Margin Call, a ‘smaller’ film in a sense, pips it.
Very highly recommended, and if you do track it down and watch it, and don’t like it, mate that’s on you.
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