Skip to content or view mobile version

Home | Mobile | Editorial | Mission | Privacy | About | Contact | Help | Security | Support

A network of individuals, independent and alternative media activists and organisations, offering grassroots, non-corporate, non-commercial coverage of important social and political issues.

Mayday soon

Hildy Johnson | 19.04.2009 15:52

This is an attempt to unravel the causes of and responses to the ´crisis´ in a way that is accesible to the average activist or indeed to the interested person in the street. Hence, the mind-numbing details of particular circumstantial causes and the use of terms designed to be informative to nobody but a select few will it is hoped be kept to a minimum.

You may be wondering just how it was that house prices went as high as they did and maintained this exceptional level for over three years. The main reason was that a way was found to channel the massive flows of redundant capital washing about in institutions like pension funds and council reserve funds into home loans and the other médium-long term financial commitments of households, such as student loans. This was achieved by the process called securitization. In laypersons terms, this involved the recognition that the profit levels of banks and building societies were limited by the traditional system of cash deposits. This was followed by the decision by banks to begin combining some of the loans they made into discreet parcels of debt that could then be sold by them to pension funds and other institutions with surplus capital such as the Chinese government.

Sales of these debt parcels involved the creation of what were in effect shops like the Granite operation set up by Northern Rock. Since the stock of these shops were said to be ´collateralized´ as they were linked to actual concrete assets in the form of housing stock, and since they came with triple AAA ratings their sales soared as did excess demand for them. This led to increased supply of capital coupled with the relaxation of standards used to assess the risks posed by borrowers. A further important point for us is the provision of insurance on the supposedly risky securities. Banks like Northern Rock paid a fee to businesses which were called monoline insurers, to guarantee the value of the debt parcels in the unlikely event of a reduction in their value. This system has to be understood as a global business, it wasn´t just mortgages in the US that were packaged up but ones from all around the World. For example, several Eastern European status are reportedly on the verge of bankruptcy due to the surge in speculative flows of capital. And as the system was able to operate in the shadows of the global economy it was able to easily avoid the glass eye of government regulatory agencies.

Of course the dream of constantly rising house prices had to be remain just that. As US homebuilders competed to build sufficient homes to maintain the bonanaza brought by the new flows of capital it suddenly became apparent in about 2006 that they may have built too many. House prices began a slow decline and with this realization panic hit the securitization market as investors began to have doubts about exactly whom the banks had been lending money to. Stories began to emerge about liar loans, crazy buy-to-let projects and even efforts by organized criminals to set up fraudulent schemes to take advantage of the incredibly lax lending standards. The result was capital flight of the highest order from the new debt products and a drying up of the sources of capital available for new mortgages. From this came two further results a) the banks were left with a load of really, really, really bad loans that they had made and they were also obliged to take back some of this shit from those that had bought it, b) a global property market crash.

So here in the UK the writing is on the wall for house prices despite what the boosters say. From 12 billion in net loans in June 2007 the net figure of lending on housing loans turned negative in February. That is to say repayments are now exceeding new loans. Yet the government is desperate to tell us otherwise and has now taken out a very big and very risky mortgage on the entire UK population. The first objective involves dealing with the immediate problem of the bankrupt banks- the dumping of their bad debts onto the British resident. The second is a more long term objective and involves a bid to save the City of London by bringing the securitization process back from the dead.

So far the UK government has done what the US has been unable to. It has effectively taken the bad debts off the balance sheets of the banks by way of insuring any that generate losses. This policy is like the exact opposite of a no-brainer. The government has taken the place of the monoline insurers who themselves are zombified, to insure products that are already known to be faulty. In addition to this, Brown has pumped capital into the banks with the condition that the government will not interfere (reasoning that since if it did it would probable make things worse). Hello, this is not the start of some kina of soft, touchy feely capitalism as Will Hutton would have you believe. This is neoliberalism on cristal meth.

Now, Brown (Cameron) and his cronies want to reopen the securtization sweet shop by offering to provide guarantees on the new issues so as to entice the pension funds back into the market.

Bank: Hi, we´ve got some new nortgage-backed securities at a special prices of a million quid each.
Pension fund: No thanks, we got our fingers burnt last time with that shit
Bank: Yeah but this time they´re backed by the government so even if they halve in value which they probable will, given the recession, Gordon told us he´ll buy them back at full price.
Pension fund: OK we´ll have a thousand off you then.

Or something like that. According to todays Observer this is to be one of this weeks budgets bullet points. An attempt to show Lab-Con voters that they are at least trying to reflate the housing market. And well they might want to put a stop to falling house prices. A key problem with the current situation is that we are governed by a group desperate to maintain the values of their own estates. To the politicians we can add the media professionals who are desperately trying to quit talking about the crisis and pretend things are getting better, their motivation being that they too own houses.

Where does that leave the rest of us? Those without property or those who own property with the objective of living in it and not using it as a cash generating machine. Those of us that are excluded from the housing ladder will be paying for these attempts to preserve the wealth of others in unprecedented ways. To pay for the governments bank and estate agent bailouts we will see public services cut and taxes rise. To maintain the role of the city of London in the World economy we will be called upon to make more sacrifices.

Tragically, one UK resident has lost his life as a direct result of the crisis and its response. Mr Tomlinsons death can be linked in this way logically back to those US liar loans and Canary Wharf barrow boys like Fred Goodwin. The UK has a private police force set up to protect the interests of the elite. This is so apparent that even the Guardian seems to have woken up from its slumber.

Anyway, its Mayday soon.

Hildy Johnson

Upcoming Coverage
View and post events
Upcoming Events UK
24th October, London: 2015 London Anarchist Bookfair
2nd - 8th November: Wrexham, Wales, UK & Everywhere: Week of Action Against the North Wales Prison & the Prison Industrial Complex. Cymraeg: Wythnos o Weithredu yn Erbyn Carchar Gogledd Cymru

Ongoing UK
Every Tuesday 6pm-8pm, Yorkshire: Demo/vigil at NSA/NRO Menwith Hill US Spy Base More info: CAAB.

Every Tuesday, UK & worldwide: Counter Terror Tuesdays. Call the US Embassy nearest to you to protest Obama's Terror Tuesdays. More info here

Every day, London: Vigil for Julian Assange outside Ecuadorian Embassy

Parliament Sq Protest: see topic page
Ongoing Global
Rossport, Ireland: see topic page
Israel-Palestine: Israel Indymedia | Palestine Indymedia
Oaxaca: Chiapas Indymedia
Regions
All Regions
Birmingham
Cambridge
Liverpool
London
Oxford
Sheffield
South Coast
Wales
World
Other Local IMCs
Bristol/South West
Nottingham
Scotland
Social Media
You can follow @ukindymedia on indy.im and Twitter. We are working on a Twitter policy. We do not use Facebook, and advise you not to either.
Support Us
We need help paying the bills for hosting this site, please consider supporting us financially.
Other Media Projects
Schnews
Dissident Island Radio
Corporate Watch
Media Lens
VisionOnTV
Earth First! Action Update
Earth First! Action Reports
Topics
All Topics
Afghanistan
Analysis
Animal Liberation
Anti-Nuclear
Anti-militarism
Anti-racism
Bio-technology
Climate Chaos
Culture
Ecology
Education
Energy Crisis
Fracking
Free Spaces
Gender
Globalisation
Health
History
Indymedia
Iraq
Migration
Ocean Defence
Other Press
Palestine
Policing
Public sector cuts
Repression
Social Struggles
Technology
Terror War
Workers' Movements
Zapatista
Major Reports
NATO 2014
G8 2013
Workfare
2011 Census Resistance
Occupy Everywhere
August Riots
Dale Farm
J30 Strike
Flotilla to Gaza
Mayday 2010
Tar Sands
G20 London Summit
University Occupations for Gaza
Guantanamo
Indymedia Server Seizure
COP15 Climate Summit 2009
Carmel Agrexco
G8 Japan 2008
SHAC
Stop Sequani
Stop RWB
Climate Camp 2008
Oaxaca Uprising
Rossport Solidarity
Smash EDO
SOCPA
Past Major Reports
Encrypted Page
You are viewing this page using an encrypted connection. If you bookmark this page or send its address in an email you might want to use the un-encrypted address of this page.
If you recieved a warning about an untrusted root certificate please install the CAcert root certificate, for more information see the security page.

Global IMC Network


www.indymedia.org

Projects
print
radio
satellite tv
video

Africa

Europe
antwerpen
armenia
athens
austria
barcelona
belarus
belgium
belgrade
brussels
bulgaria
calabria
croatia
cyprus
emilia-romagna
estrecho / madiaq
galiza
germany
grenoble
hungary
ireland
istanbul
italy
la plana
liege
liguria
lille
linksunten
lombardia
madrid
malta
marseille
nantes
napoli
netherlands
northern england
nottingham imc
paris/île-de-france
patras
piemonte
poland
portugal
roma
romania
russia
sardegna
scotland
sverige
switzerland
torun
toscana
ukraine
united kingdom
valencia

Latin America
argentina
bolivia
chiapas
chile
chile sur
cmi brasil
cmi sucre
colombia
ecuador
mexico
peru
puerto rico
qollasuyu
rosario
santiago
tijuana
uruguay
valparaiso
venezuela

Oceania
aotearoa
brisbane
burma
darwin
jakarta
manila
melbourne
perth
qc
sydney

South Asia
india


United States
arizona
arkansas
asheville
atlanta
Austin
binghamton
boston
buffalo
chicago
cleveland
colorado
columbus
dc
hawaii
houston
hudson mohawk
kansas city
la
madison
maine
miami
michigan
milwaukee
minneapolis/st. paul
new hampshire
new jersey
new mexico
new orleans
north carolina
north texas
nyc
oklahoma
philadelphia
pittsburgh
portland
richmond
rochester
rogue valley
saint louis
san diego
san francisco
san francisco bay area
santa barbara
santa cruz, ca
sarasota
seattle
tampa bay
united states
urbana-champaign
vermont
western mass
worcester

West Asia
Armenia
Beirut
Israel
Palestine

Topics
biotech

Process
fbi/legal updates
mailing lists
process & imc docs
tech