Back on planet earth and in the present and on European soil, I watched Spanish mortgage lending from close-up, having a Spanish bank manager in charge of regional lending policy within my circle of friends.
I don’t know the finer details of Fanny and Freddie in the US but would imagine it wasn’t much different to what I witnessed here in Spain. At a basic level, people were encouraged to borrow to buy houses irrespective of their ability to repay the loans. It wasn’t uncommon to download bogus qualifications from the internet to support loan applications that were hardly checked anyway. Bank valuations were ridiculously optimistic and 130% mortgages, repayable over 40 years became the norm.
Had property prices kept on rising, none of it would have been a problem, but they didn’t, they started falling. Those clever officials, the analysts, suddenly blessed with amazing hindsight, are now throwing up their hands in horror, just as we are doing right now.
I watched some daft Commons committee questioning the heads of the main British banks, and asking them how it all happened. Sir Fred, the head of RBS at the time, looked them in the eye and shook his head as if to say ‘what don’t you understand?’
He was right. It really wasn’t anyone’s fault, it’s the way the world is.