#3846528, By bainbrge This is starting to get a little scary

  • bainbrge 7 Oct 2008 21:21:51 1,687 posts
    Seen 6 months ago
    Registered 12 years ago
    Khanivor is obviously playing devils advocate again but he is 100% correct that overleveraging is the root of the current crisis.

    Lost_soul - default rates are rising across prime books as well, even more so on 'sub prime'. The worrying thing to me is that even the building societies that are supposed to be so conservative have invested heavily in sub prime mortgages in the UK, and rising arrears rates are going to rapidly wipe out capital (same goes for the banks of course but more people have realised this already).

    Obviously, default rates will continue to rise if the credit markets remain frozen - it is quite shocking that even companies such as AT&T in the US were unable to issue CP beyond overnight. Imagine what all the owner managed businesses with short term credit facilities are going through; if you are reliant on HBOS (for example) for the ongoing funding of your business you are in big trouble. Once 'main street' starts to fail through lack of credit, unemployment and thus defaults will rocket in a self perpetuating spiral.
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