Yesterday, a Senate inquiry heard from consumer advocate Denise Brailey that in the past 6 weeks she has seen 400 low-doc or no-doc loans and each one had been fraudulently tampered with. Many were loans to the unemployed.
Today, the inquiry heard how the Westpac bank had lent $440,000 to a 98 year old nursing home resident so she could invest in a Queensland property developer. The developer who allegedly offered a 15 per cent return, has now collapsed.
Senator Williams said in the hearing, “I’m very concerned about these low-doc loans.”
» Westpac ‘lent’ $440,000 to 98-year-old, Senate hears – The Australian, 9th August 2012.
» Westpac ‘lent’ $440,000 to 98-year-old – News Limited, 9th August 2012.
I don’t know why anyone is supprised by this. Think about it – you don’t get a housing bubble this big by prudent lending.
@ G. Kelly
If the USA housing market collapsed at an 85% mortgage debt/GDP ratio totally swamped by sub-prime & fraudulent loans then Australia at 87% mortgage debt/GDP will trump the USA and do 2% better
http://www.debtdeflation.com/blogs/2012/08/02/australian-house-prices-update-june-2012/
The simplest description on the planet… “You never know who’s swimming naked until the tide goes out.”
― Warren Buffett
J.K. Galbraith had some wordly wisdom about this in the 1930’s
“In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.”
PETER_W, if you consider total housing debt to GDP Ratio;
Housing Debt: ~$1.26 Trillion
GDP: ~$1.36 Trillion
Debt Ratio: 92.64%
I know I’ve included another (or different) factor to mortgage debt, equally as scary no doubt. That J.K. Galbraith paragrapgh quotation is stuff horror movies (realities) are made of, as brilliant as it is.
@ BotRot
The bezzle in Australia is massive and it’s larceny on an unprecidented scale
Equity in housing is not money
The entire housing/banking system will have a catastrophic collapse
Save your deposits and you will be abe to pay cash for the median home one day, because the banking system will be begging you to take it off their books.
@ everyone
credit = deposit
These are simultaneous binary accounting entries that occur in a banks accounts
When these numbers become a fixed quantity
Equity in housing = deposits