and all the poverty and misery that results from their actions.

Let me shed a little light on the financial crisis.

Money itself is simply a symbol of trust. It has no other value than to allow one person in possession of some money to pass it on to another person in exchange for something that does have real value – a loaf of bread, or something else that’s really useful, like a house to live in.

Our system of money is now in complete shambolic meltdown because nobody can trust it; it has become unreliable. Why ?

Because it has become unreliable, individuals and businesses are unable to be certain there will be an adequate flow of money for them to continue to function. Business cannot function without reliable flows of money purchasing it’s products from which it then pays it’s workers, who are then enabled to eat and pay their mortgage.

Money was originally ‘invented’ by banks as merely a trusted symbol of exchange to replace the clumsy idea of barter. They have been in control of it ever since. It is important to be an honest person when handling money as there is always a temptation to find an excuse to keep some or all of it for yourself.

Dishonesty has always been around to some extent, and there have always been people whose job it is to handle money not belonging to them, who have stolen some.

Because theft is so damaging and disruptive, society has always sought to achieve a high degree of honest morality in all public dealings of any kind. Without it, all civilisation crumbles into anarchy, chaos and brutality. Dictatorships, violence, famine and death have always been the consequence throughout history.

We have always recognised that banks have to be trustworthy for the system of money to be able to function at all. This is because the banks completely control everything that happens, or can happen to money – how reliable it is and how freely it moves from person to person.

Every time money moves from one person to another, it creates something useful and valuable; real wealth of some sort. Employment, enabling workers to use their wages to eat and house themselves.

Millions of people Worldwide are now losing their jobs, their houses and their wages enabling them to eat and survive. Homelessness and starvation is being forced on them, not because they do not want to work; on the contrary, they are pretty desperate to work. Very few people like to be idle.

The only reason these people’s lives are being wantonly destroyed is because the people and organisations in charge of maintaining the reliability and integrity of money have completely wrecked it.

Wrecked the whole delicate system of trading, rolling back civilisation to poverty and primitive barter as that fragile symbol of trust – money – is destroyed and debased by the very people we all trusted to cherish it on our behalf.

These people are the banks.

In recent times the banks have invented excuse after excuse to construct more and more reasons to take some of our money we entrusted to them for themselves.

Some examples of this, and there are many, might be the quaint idea of inventing something called the penalty charge. This can range from a charge of millions to a business, or a small amount to an individual who fails to precisely control even the pettiest detail of his finances.

This results in banks looking for excuses to ‘justify’ a penalty charge and their artfully constructed self-righteous, twisted, logic then turns their honest customer into an enemy with whom the bank battles with and often then irretrievably harms by wrecking every aspect of that person’s finances.

Every time this little bit of dishonest, fraudulent dealing occurs in some tiny little corner of the financial system, a small amount of trust is destroyed and ripples out far beyond that bank and the customer it is stealing from, magnified beyond recognition as it touches huge numbers of other people.

A good example of the cumulative effect of this is the ‘sub-prime’ mortgage. This is a farce. An artificial construction by banks designed to milk outrageous amounts of money from people unable to defend themselves from what amounts to blatant fraud in a form the law describes as ‘conversion’.

Conversion is simply when you unlawfully ’convert’ property rightfully owned by another to your own use in such a devious manner it cannot be legally seen as obvious common theft because it is disguised. Sounds familiar in your dealing with banks ?

The banks deliberately set out to create this type of mortgage because it is more profitable than the old fashioned type based on honest trust and fair dealing which no longer provided enough profits to fuel the bank’s rapacious greed.

This is how it is done.

A perfectly respectable, reliable, person has an ordinary mortgage with an old fashioned building society – one of those ‘high street’ lenders. That person’s life may be disrupted by common events. It may be divorce, sickness, temporary unemployment, for example. Nothing that would normally destroy people’s financial lives to the extent of being unable to have enough money to keep the roof over their head and feed themselves. Disruption of this sort normally happens to a huge proportion of the population.

What does a modern bank do when such a person become a few months in arrears with their mortgage ? Why, it first of all makes it more difficult for that person to recover their financial stability as the bank imposes arbitrary ‘penalty’ charges which are designed to rapidly mount up into thousands of pounds.

It then ‘black lists’ the unfortunate individual by notifying the credit agencies that they are financially unreliable. This is used as an excuse by any other financial organisation to make life even more impossible for that person by pushing them further and further into uncontrollable debt by using the excuse to milk them of more money by penalising them financially at every possible opportunity; using sanctimonious self-righteousness to blame the unfortunate individual they are manipulating for what the banks are actually doing themselves.

So, someone who may have a loan for only half the value of their house and be only as few as three months in arrears will have re-possession proceedings brought against them by the the bank. They are threatened with eviction and homelessness, with the inevitable consequences of forced unemployment, family breakup, increased debt and even illness.

The bank evicts them, and the house may remain empty so long it loses value as it deteriorates. Or it is likely to be sold at a considerable loss. That former homeowner is now blacklisted as too uncreditworthy to be lent money again by the ordinary high street mortgage lenders.

Curiously, that same bank just happens to wholly or partially own another company which also lends money for buying houses. But this one only lends to people with ‘impaired’ credit. The same sort of people who have just been refused an ordinary, standard mortgage.

People are also refused standard mortgages for infinitely more trivial reasons. They may have a county court judgement of just a few pounds against them. It may be such a frivolously brought claim they may have chosen to simply contemptuously ignore it.

But such a thing and a myriad other excuses are used by the banks to push people into the more profitable ’sub-prime’ mortgage lending arena with one of those subsidiary companies the banks own.

Or they are pushed into this rapacious ‘sub-prime’ lending market by all sorts of other restrictions manufactured by lenders.

A common one is the borrower not earning enough money to afford the ‘high street lender’s loan. Funny how that doesn’t stop the same financial organisation lending the money to the same ‘unreliable’ , ‘uncreditworthy’ person at higher rates of interest and with huge penalties imposed by another partly or even wholly owned lending business subsidiary to the one that refused the fairer loan !

Now the banks have manipulated someone into a position where the banks can produce an excuse to charge more for a mortgage – much more.

Enticed by a low starting rate of interest that escalates after a while to often as much as double monthly repayments and with penalty charges of thousands of pounds if the borrower has to terminate the mortgage in a year or two, the borrower has nowhere to turn.

All the banks collude to stop him obtaining an honest loan costing less. The banks want their extra profits ! And here is a mug who can’t complain and has nowhere to turn to and the banks know it. Don’t they just.

They have carefully manipulated their affairs by jointly creating this stranglehold over money by pooling their resources and their information to enable them to work together to create this extra profitable ‘sub-prime’ lending market. Pretty much exactly the same techniques used by the door to door rip off loan shark illegally charging annual percentage rates of thousands of per cent to impoverished workers.

It is exactly the same process at work. Fraud, theft, manipulation, threats, fear. These immoral sub-prime lenders have much in common with criminal door to door loan sharks and other thieves. Their victims are caught like flies in spiders webs. There is no escape.

But wait. It doesn’t just end there does it ? Having established this wicked system of modern banking that provides such huge profits to the banks, they wanted more. Greed is good they seemed to think. Yes, that’s what they said. Greed is good !

So they started using the same ludicrous types of manipulation on each other as lending between banks escalated beyond reason or comprehension to prop up the fragile system of deceit the banks were busy creating.

The banking system seemed to become more and more like a giant ‘Ponzi’ scheme where banks borrowed money from other banks to repay their own debts before it was discovered they had no money left at all to meet their obligations, because they had lent the lot as they forced increasingly large amounts of loans onto a gullible population who simply couldn’t understand what was going on.

All people could see was the value of houses increasing to levels of un-affordability where everyone was forced to borrow gigantic amounts of money just to have a home to live in.

But, like all ‘Ponzi’ or pyramid selling schemes based on fraud, the banking system was becoming more and more fragile. It was so riddled with double dealing, fraud, dishonesty and mistrust, banks became too fearful of even each other’s reliability to lend to each other anymore. The banks had successfully created a system based on deceit, mistrust and lies which had also spread into the whole wider community of individuals and business.

The Global banking system went into meltdown as money disappeared into the banks from wherever they could grasp it. The biggest con trick of all was persuading Governments ‘to bail them out’ by giving huge amounts of money – hundred of billions of pounds to stop them going bust and then even more of our money disappearing into oblivion.

The banks kept it for themselves where it is actually useless. Money is only useful and only performs it’s function when it keeps moving from person to person. The banks stopped the World money supply from moving.

So, in the same way the banks are the places where money is created to make trade and commerce become possible, so it is that money is destroyed and is now completely vanishing from existence by the banks being able to reverse the process.

That is exactly what the banks have done. It is the biggest fraud in history.

Looking for someone to blame other than themselves, the banks immediately blamed the ‘sub-prime’ borrowers.

The banks claimed it was all their fault because they were unreliable individuals who couldn’t afford to keep up the payments on the loans they should never have had in the first place; mainly because they were too poor to be able to afford them.

All those very bad borrowers had misled the poor innocent banks into lending them money. It was all their fault, the banks said. But they weren’t too poor for the banks to take their money, were they ?

The banks are liars. Sub-prime was deliberately created by the banks as a means to make more money and take advantage of people. and the banks in their breathtaking greed were too stupid to know when to stop, so they still haven’t stopped.

They are still foreclosing on homeowners even if there is loads of equity remaining in the property. Business loans are forcibly being demanded to be prematurely repaid to the banks and further new loans are rare and generally mostly unavailable.

So, the result is World-wide economic meltdown and poverty and misery of all sorts. Word wide trade and commerce is being destroyed by banks being irresponsible, greedy, and nasty.

Thank you very much, the banks.


Consider this.

A little clue it cannot be sub-prime lenders responsible for the gigantic sums of money disappearing into oblivion is simply that the amounts of money now vanishing into a black hole is apparently reaching into trillions -many trillions. It is a sum my calculator cannot understand or even cope with. So I haven’t much hope of understanding it either. Nor have you.

Let’s do some maths. If the average house price is £200 000 and the loan to buy it is 100 per cent, then one million sub-prime borrowers failing to pay a single penny of that back, ever, means a total loss to the banks of 200 000 million pounds or 200 billion pounds.

Of course this calculation is a complete fiction, because usually the banks re-possess the homes and get all their money back and then some. Sometimes, just sometimes, the banks will not be able to sell the homes for the full amount of the loan and there will be a loss. But the banks still won’t lose that money without pursuing the former homeowner for years to recover anything still owed from their wages.

The banks will not be suffering much in the way of loss from re-possessions and I imagine any losses are more than compensated by profit. So where might this loss they all whinge about be ? Search me ! Perhaps they might like to tell us ?

Here is a slightly more realistic calculation which tells another part of the story. The Council of Mortgage Lenders here in the UK say that each re-possessed house costs £35 000 to repossess. So each bad sub-prime mortgage loan is costing £35 000 and not actually the full value of the property at all.

Even that figure is misleading because it, apparently, is what the CML say the cost is, but they carefully bend the truth by omitting to mention that whole cost is usually born only by the borrower and never by the lender, unless the sale price of the property falls below the value of the loan; something almost unheard of here in the UK in normal circumstances.

But, assuming there is that cost of £35 000, and not arguing about who bears it, multiplying it by one million feckless sub-prime borrowers having their homes repossessed makes a total figure of 35 thousand million or just thirty five billion pounds,

Do you recall the hundreds of billions, even trillions of pounds forthcoming recently from Governments to subsidise the banks ? Seems to be a bit of a discrepancy here somewhere, don’t you think ?

Figures of annual repossessions in the UK were running at about 50 000 homes a year until a few months ago. Nothing like that fictional figure of one million used above. So what does fifty thousand repossessions look like costing at the official Council of Mortgage Lenders figure of £35 000 ?

Why, that comes down to only one thousand, seven hundred and fifty million pounds or 1.75 billion pounds; virtually all of which is borne by the borrower and is not a loss to the lender at all.

Frankly, I doubt if lenders even lose ten per cent of that and that would reduce the figure of apparent loss to just one hundred and seventy five million. Tiny, miniature, compared with the eye watering losses the banks are complaining about and the Governments are pumping into the banks to keep them from going broke. As America has about five times the population of the UK you might, roughly, multiply that figure by five to get an approximate figure for the USA. At 1.75 billion it’s nothing like the losses banks are claiming sub -prime mortgages have cost them, is it ?

That’s thousands of millions, or hundreds of billions, even trillions, remember ?

The inescapable conclusion is someone is not telling the truth ! I wonder who that could be ?

I think it might be the banks.

I was always told that people who didn’t tell the truth were called liars.

If the banks are lying, and it looks like they are, then how can they be trusted to be in charge of the money supply ?


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  1. Banking’s Systemic Subprime Subterfuge - MrPennybags Says:

    […] By Guest Author Nicholas Windrum […]

  2. Banking’s Systemic Subprime Subterfuge « Your Mortgage or Your Life… Says:

    […] Banking’s Systemic Subprime Subterfuge By Guest Author Nicholas Windrum […]

  3. Blah Blah Blah Says:


    I’ll try to deal with your last post as best I can on a paragraph by paragraph basis.

    1> You dislike the banks. Great. You admit it. You dislike them because YOU feel they act unpleasantly based on YOUR personal experience. That is your own personal opinion, which may not be consistent with everyone else or everyone elses experience. I’m not trying to vilify you – im mearly trying to see if there is an concession on your part that your absolutist (written as though they are fact) opinions may in some way be wrong. Im trying to debate. I also find it strange that you beleive you can write such comments, and not pick up some critisim.

    2> You state that you have not yet explained as to where the banks went wrong – this would imply that you actually know the reasons, which, i wholly believe you dont (opinions stated as fact again maybe?). You also now appear to agree in principle with the idea of subprime lending, which previously you have indicated you detested. Your argument NOW seems to be sub prime is fine, as long as it is done your way.

    3> I raised an argument about the personal responsibilities of borrowers. Yet you simply wash over such an argument with ‘Whatever the rights and wrongs of the the people who borrowed money – and their responsibilities – it is the extremely naff way the banks treated them which created the credit crunch etc.’

    4> At last! a reasonable and insightful argument! I agree that as a global economy, we are ultimately reliant on a healthy and sound banking system, and that unfortunately, too few banks have too much global exposure meaning that if they got in trouble, the world gets in trouble. But unfortunately, its difficult to see what other mechanisms of banking we can put in place in such a global market. It must be said however that with so much at stake, dont you think that world governments should have had a much more watchful eye on the banking system than they have done? We should also consider the following. Banks (and other parties) didnt suddenly stop lending to each other instantly, it took the wholsale markets may months to dry up – months of warnings for governments to step in, rather than after the horse had bolted. Even after wholsale markets had dried up, the banks were still able to lend based on retail deposits, but unfortunately the demand for money far outstripped that that could be supplied by retail deposits. The demand for money is not the banks fault. Its the people’s fault.

    here has been a lot of grumbling in the press about how the banks became too reliant on wholesale funding. But wholsale funding is the only way to meet demand. Its a cache twenty two. People are now moaning that they cant obtain credit, but wish to deride the banks for operating on wholesale funding to provide them with the credit they want. Retail deposits simply cant satisfy the lending requirement of british economy, as society has moved away from the culture of net saving. That culture is not the banks fault, its the public and the governments fault.

    5> Nursed customer’s who were finding difficult to repay? Seriously, there is only so much nursing banks can afford to do. They them selves have liabilities that they need to pay. At its most basic level, banks borrow money from one customer (net saver) and lend that money to another customer (net borrower) at a higher rate of interest. If the net borrower fais to pay the bank, the bank will be unable to repay the net saver. Would you prefer it that savers are given the rough deal at the expense of borrowers? There is only so much the banks can do. Banks are constantly under competetive pressure to provide good savings rates and low borrowing rates, which essentially lowers the spread that the banks get between the two rates. They cant simply absorb, indefinitely or sporadically customers who do not repay on their borrowing, as it increases their risk of being unable to repay the savers (be they retail or wholesale). If you were a bank, and 5 people deposited £20k each with you for 1 year, which you in turn loaned to a mortgage customer who did not pay you back, are you seriously telling me that you would nurse the mortgage customer through it and not meet you obligations to the 5 savers? do you really think the 5 savers are going to be sympathetic to the borrowers circumstances? of course not! if you deposited money with a bank and they couldnt pay you your money back when you wanted it, you would demand it back immediately, be on the phone to your MP and issue proceedings against the bank in the blink of an eye! you whole argument smacks of hipocrisy! Yes, banks can afford to absorb some delay in repayment from net borrowers, but with out tight controls and policies in place to recover any debt, the banks wont meet their obligations.

    6> not sure i get you point here…?

    7> i do read the papers! And watch the news! But Ive never ever said i thought the banks were blameless, im just making the argument that they are not completely to blame as you have made out!

    8> Ha! you manage to contradict yourself even within the same paragraph (your best yet)! You state that you can see past your hatred, yet, you state that if the banks had acted differently then none of this would have happened. But the same could be said for if the people had borrowed less this wouldnt have happened. If the governments had controled things better, this wouldnt have happned. You clearly cant see past your bank hatred, as you didnt mention even the governmants or people.

    9> “I’m all for banks- and ’sub-prime’ lending”. Blimey. What a result. Rocketone is now all in favour of Sub Prime Lending.

    “But if it was done how I would manage it, there wouldn’t be a problem.” You and i both know that if you managed a subprime lender, with you laxydaisy policies on arrears management, it would have gone under long before this credit crisis was even a conceptual thought.

    10 and 11> What am i supposed to gleam from this story? By your own admission you state you borrowed money for business purposes, but did not have the time to run the business so wound up in debt. Why borrow the money in the first place? Its stories like that, that diminish the sympathy i have for people who fall on hard times – it generally seems to be of their own making. Yes, the bank might have treated you differently back then, times change however. And, id hazard a guess that its because of people who borrowed money to buy luxury items twice the value of their house, who then defaulted on the repayments that caused the banks to change the way they do buiness.


  4. rocketone Says:


    I dislike banks because I have personally witnessed them behaving unpleasantly/badly. Is that reasonable ? Is it unreasonable for someone like you, without knowing the details, vilifying me with absolutely nothing to back it up. Everything I’ve said so far, I think, is verifiable fact, so you can’t slate me for that; but you do. Interesting ?

    It is true I haven’t quite got to the point about explaining where the banks went wrong. I agree that, if they wished, they could take bigger risks by sub prime style lending. Not a problem. It is the way they handled it that is the key to the problem.

    I thought you might pick up what I was on about, but obviously not. Whatever the rights and wrongs of the the people who borrowed money – and their responsibilities – it is the extremely naff way the banks treated them which created the credit crunch etc.

    Consider this simple fact. The banks instantly stopped lending to each other. Ergo, no funds for retail lending. No retail lending, credit crunch. Credit crunch rapidly morphs into economic collapse on Global scale as Global monetary system controlled by small number of transglobal banks. No healthy diversity and competition – see ?

    If the banks had ‘nursed’ the people finding repayment difficult, they would have found most of them quite willing and capable of repaying, albeit a bit haphazardly late, perhaps.

    But the banks were aggressive. This produced a bad result.

    Part of it was the banks sanctimoniously saying they were entitled to holding lenders to the letter of the contract with a spectacular ignorance of the consequences..

    And, of course, more corruption and malpractice seeps out of the woodwork on a daily basis. Read the papers !

    And, yes, I can see past my bank hatred. The fact is their behaviour could have been different, and if so, this would not have happened.

    I’m all for banks- and ‘sub-prime’ lending. But if it was done how I would manage it, there wouldn’t be a problem.

    I once borrowed a fairly large sum of money off what was then called a ‘merchant bank’ to buy an entirely useless luxury item costing twice as much as my house. The plan was to make it pay for itself. Unfortunately, I had to spend all my time looking after a rather child like wife, leaving little or no time for business affairs. So I had difficulty paying the monthly mortgage.

    This old fashioned ‘merchant bank’ trusted me and was not aggressive. Consequently the matter was easily resolved with the asset being sold without rancour or pressure, and the bank being fully repaid. No problem. Utterly different from today’s banking.

    On the other hand, my recent experiences can only be described as disgusting.

  5. Blah Blah Blah Says:


    Unfortunately it seems you are just completely unwilling to see past your bank hatred and acknowledge that it may not soley be their fault. I therefore think, on the whole, its best that we agree to disagree on this, as you dont have time to respond, and i dont have time to bang my head against a brick wall.

    Just a final point, with regards to your comment that ‘It doesn’t really seem to occur to them that it is all about psychology’ – it does, and has. That is what Economics is – the Science/study of human decision making, its interactions, and the control of such interactions.


    If you havent, as you say, studied economics in an great detail – i suggest you do. It will fill in a lot of the gaps you appear to have, and will allow you to be more incisive with you critisisms of the world.

    All the best


  6. rocketone Says:

    I knew I shouldn’t have ignored you. I didn’t mean too. It’s just that I have been rather too busy; but I’ve always been aggravated at not dealing with your arguments and did intend to; but you became too impatient to wait. Sorry about that.

    You see, I have no problem with the concept of subprime lending, no problem with lending in general, in fact. It is the peasant like manner of the lending – in particular the subprime lending – that I find immoral and destructive. And now that I mentioned that word, peasant. it reminds me very forcibly of the quality of personnel I have met in the lending department of banks over recent years. Describing them as peasants is a complete insult to real peasants. Without exception, they have disgusted me. If the banks were populated by a slightly more intelligent type of person, the World would not be in such a huge economic crisis.

    In fact, it is the sole reason for the Worldwide economic crisis. I think this is a pretty good reason to despise the people driving this. I mean, you can’t deny that bank lending in general has, in fact been destructive. It is the nature and structure of that lending that has led to the credit crunch. Please let me know if there is some other cause – other than the idiot nature of various banking practices. As far as I am aware, the rest of the world seems pretty convinced the economic crisis has been caused by banks’ mismanagement of their affairs. There is simply no other visible cause. If there is, let me know.

    If Captain Mannering was still in charge of the banks we wouldn’t be in this mess, would we ?

    I don’t actually pretend to understand the woes of the world. I lost my youthful arrogance some long time ago. It may be that I do understand the woes of the world; But I make no claim to that understanding. I do know that, in the nature of things, I can only understand a relatively small amount of anything. I have never read anything much about economics either, and make no claim to understanding economics as spouted by all the well known economists of history.

    But I do understand something about economics; a little something which explains people’s confusion and the constant jokes about how no-one understands economics – not even economists themselves.

    Economists try to explain it all in terms of some kind of arcane ‘monetary science’, usually involving a bit of maths to put people off the scent. As they make it up as they go along, it doesn’t really make sense to them, let alone anyone else.

    It doesn’t really seem to occur to them that it is all about psychology. Think about it.

    I would really like to address this issue intelligently right now. But it’s the middle of the night, I’m awash with red wine and a huge great meal, and still have a zillion chores to do before I go to bed.,

    I will come back to this – eventually.

    Just one little thought. You say it isn’t the naughty banks fault. If it isn’t, please tell whose fault it is ?

  7. Blah Blah Blah Says:

    Same old Same old eh Rocketone? its completely the naughty banks fault… kinda reminds me of our discussion in December that you failed to reply to (

    Its become very apparent from your writing that whilst you try to make out you understand the woes of the world, and the methods of the banking industry, you dont. Your unabatted grudge against sub prime and apparent lack of realism or understanding about that market is bewildering. I shall dub you Rocketone the Arm Chair Economist. You probably read a book on it and everything. Actually, thats probably giving you too much credit, you probably just scoure the internet and pass of other people thoughts as your own. You must be Wikipedia’s most regular visitor.

    You know what, blame the banks if it makes you feel better. Blame them for you being a Subprime customer. Blame them for the starving children in far away lands. Blame them for global warming (afterall, it was they who loaned money so people could buy more cars, business could expand) – blame them for the snow that hit London recently. Blame them that you are unhappy with your life, Subprime Rocketone The Arm Chair Economist (internet division). Blame them for the fact that you were probably unhappy with your life before the banking crisis. Just dont place any on blame yourself, or anyone else, you intelligent, insightful rounded thinker you..

  8. Donald Mega Says:

    Very informative article, well put together it provided for a great read. Im going to forward this blog to my work study group so that they can read and review this article also. You’ve got a new subscirber!

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