Housing Crisis Visualized

Italian Subprime Follies

The Italian government is designing measures to boost the economy. Amid the measures announced there is a still vague resolution trying to boost young people mortgages with a full guarantee, it seems they are thinking to give triple-A ratings to mortgages contracted by young people with temporary or occasional jobs if they want to apply for a first house mortgage, government will back up all claims acting as a guarantee to such mortgages which normally would never be approved by banks.
Does it sound familiar? Well if details will be confirmed it could be another subprime bubble in the making allowing banks to recapitalize their shattered finances with interests on loans that have a high probability of default given the precarious financial status of the borrowers but that nonetheless as in the subprime crisis will be wrapped of a sovereign guarantee.
It will certainly boost a vast range of fraudulent activities and insane speculations which will allow banks to recapitalize themselves and developers to get rid of empty estates for a while until the bubble will explode with the same consequences we have witnessed in 2008 during the subprime crisis.

The men who crashed the world

The new series on Al Jazeera explores in 4 episodes  how greed and recklessness led to financial collapse.

In the first episode of Meltdown, we hear about four men who brought down the global economy: a billionaire mortgage-seller who fooled millions; a high-rolling banker with a fatal weakness; a ferocious Wall Street predator; and the power behind the throne.
The crash of September 2008 brought the largest bankruptcies in world history, pushing more than 30 million people into unemployment and bringing many countries to the edge of insolvency. Wall Street turned back the clock to 1929.
But how did it all go so wrong?
Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place.
Also, London was competing with New York as the banking capital of the world. Gordon Brown, the British finance minister at the time, introduced 'light touch regulation' - giving bankers a free hand in the marketplace.
All this, and with key players making the wrong financial decisions, saw the world's biggest financial collapse.

Financial costs of banking crises

An Interesting chart from Standard & Poor's on the cost of bank bailouts, hardly surprising that Ireland has trashed more than 30% of its GDP in keeping alive Irish zombie banks but a surprising result is South Korea which appears to be facing the same faith of Ireland on this aspect.