• The crisis unleashed a year ago by the mortgages garbage in the US has ended up exploding and is taking ahead to the big investment banks.
  • The Bush administration has had to intervene after a black week for the stock markets and the prospect of more bankruptcies.
  • The shockwave has affected markets around the world.
  • The keys to the collapse, its protagonists, those responsible and how it affects us, in 20 questions and answers.
  • The IBEX closed on Friday with the highest rise (8.71%) in its history.
  • Other deliveries of the Microscope : The automotive industry, in the ditch; Garzón: Unearth the memory; The Empire Strikes Back; International justice teaches teeth; The keys to the economic crisis; The monster of Amstetten; The Cyclone of Burma; Eurovision The via crucis de Rajoy.
Un actor frente al Banco de Inglaterra durante un programa de televisión

An actor in front of the Bank of England during a television show. (RTRPIX)

The world financial system has been shaken these days by the explosion of the serious crisis that began a year ago as a result of the disaster of the so-called garbage mortgages, and that for the moment has been already ahead of two of the major banks of investments from the United States (one, bankrupt, the other, sold), and one of the largest insurers in the world, also American, which has had to be practically nationalized to prevent it from going under.

The stock markets have lived through a black week (despite the comeback on Friday and the big close of the IBEX, which ended the day with the highest rise in its history while Wall Street applauds the Treasury's plan against the crisis and closes with a rise in 3.36%), confidence in the banking system has suffered a severe setback, fear has spread in the markets and among investors, central banks have ended up intervening, and the economic crisis may have encountered a new obstacle in its already difficult way out.

What has caused this crisis? How is it serious? Who are responsible? What consequences have you had and will have in the future? How does it affect us? These are, in 20 questions and answers, the main keys to understanding the last great global financial crisis.

1. WHEN DID THE CRISIS BEGIN?

About a year and a half ago, in March 2007, DR Horton, one of the largest construction companies in the United States, gave the first warning: Home sales were beginning to plummet, but the most worrying was the failure of a new market which had been betting many banks for years: subprime mortgages, or subprime mortgages, known in English as 'subprime'. For the month of May there was already a financial company requesting protection for bankruptcy (New Century) and the US Federal Reserve (the central bank of this country) said openly that the mortgage crisis could strike a blow to the national economy.

2. WHAT ARE THE 'SUBPRIME' MORTGAGES?

They are mortgage loans granted by banks on a massive scale (one fifth of the mortgages they sold were of this type) to unsafe and high risk clients, encouraged since 2000 by the good performance of the real estate market (affordable prices, rates of very low interest, 'boom' of construction) and of the economy in general. Many of these clients had doubtful histories at the time of paying their debts, or they lacked in their current accounts of the sufficient money so that, in normal conditions, the banks had granted a credit to them.

Banks started giving loans to clients with doubtful histories or without guarantees of being able to pay

3. WHY DID THEY FINISH A PROBLEM?

When the economic crisis began to show teeth and the real estate market collapsed, interest rates went up (subprime mortgages are at variable interest rates) and life became more expensive. The clients could not pay their debts with the banks, which began to run out of money for loans as the terms were running out. The situation not only affected US banks, but also many European and mid-world financial institutions, including savings banks, which, in turn, had lent money to US banks.

4. WHAT WERE THE CONSEQUENCES?

For the month of August of last year the financial panic had already become generalized, the stock exchanges went into annual lows and, most serious, a dangerous precedent had been set of lack of confidence, both for the banks, which began to be more reticent at the time of granting credits, as for investors, something especially serious for a system that depends more on the forecasts, expectations and fears of these than on the economic reality itself. The investment banks begin to announce losses in chain: in October, the American Merrill Lynch (5,500 million dollars); in November, Wachovia (1.1 billion) and Citigroup (57% less profits); in December, the Swiss Banking Union (10 billion) and Morgan Stanley (9 billion) …

5. WHAT DO MORTGAGES HAVE TO SEE WITH THE FINANCIAL MARKET?

In this case, a lot. With the aim of earning more money, the banks that granted these loans took advantage to sell the corresponding mortgage securities in the financial markets and negotiated with them . These titles were very insecure, very risky, and therefore very profitable in the event that things went well. But when the clients began to be unable to pay, the investors (in many cases, also banks) who had bought these securities began to withdraw them . It is when the liquidity crisis occurs.

When the clients started not being able to pay, the investors withdrew their titles

6. HOW WAS IT REACTIONED?

Both the US Federal Reserve and the European Central Bank and the Central Bank of Japan decided to inject liquidity, that is, put more money into the system. They disbursed, respectively, 2,000, 65,000 and 5,000 million dollars. In addition, the Federal Reserve began to lower the interest rate a little to calm down. In the United Kingdom, for the first time since the 1970s, the Bank of England gave financial support to a bank, Northern Rock. For their part, some of the major US banks made several attempts to coordinate their policies.

7. WERE LEGAL ACTIONS TAKEN?

The US Congress began to investigate in March why the directors of the banks that resigned as a result of the mortgage crisis had received millionaire compensation, and the FBI, in turn, investigated 14 companies related to this type of loans. . Last June, 406 people, including property developers and stockbrokers, were arrested for a mortgage fraud of 1,000 million dollars.

The FBI investigated 14 companies related to this type of loans

8. WHY IS THE CRISIS STILL KEPT ONE YEAR AFTER?

Because there is still a situation of great distrust among the big international financial entities, something that will not end while the collapse of the real estate market continues to increase the problems of the banks, and as long as the real effects of the collapse have not been known (many banks do not they are saying their losses to be able to stay in the market). The hope, on the part of the authorities, that the crisis would end up resolving itself, has not been fulfilled.

9. WHEN DO THE BATACAZOS BEGIN?

On July 13, the US government was forced to take full control of the mortgage bank Indy-Mac (one of the giants of the sector) to prevent it from going bankrupt in the face of the continuous withdrawal of funds by its investors, and two days later the monetary authorities (the Federal Reserve and the Treasury) decided to help two of the most important mortgage institutions in the US, Fannie Mae and Freddi Mac, to prevent their collapse affecting millions of small customers (about 50% of the homes of the whole country). They also saved Bear Stearns .

In September, on June 15, Bank of America bought the investment group Merrill Lynch for 44,000 million dollars, to face the consequences of the imminent bankruptcy of Lehman Brothers, which finally ends up collapsing soon after. Lehman, the fourth US investment bank, which had been operating for 158 years, declared the most serious bankruptcy since 1990, overwhelmed by the mortgage fiasco and after having tried in vain to be bought by the Bank of America and the British Barclays, to be at the price of balance. Spanish investors have funds in this bank worth 300 million euros.

The bankruptcy of the Lehman Brothers bank is the most serious since 1990

In less than six months, three major investment banks have disappeared or changed hands in the US and the two mortgage giants are under the control of Washington.

10. WHAT ARE THE CONSEQUENCES OF THE BANK LEHMAN'S FALL?

We are talking about one of the key investment banks in Wall Street for decades, a bank that, dedicated to the purchase and sale of stocks and immobilized assets, to trade and research, operates on a large scale; a bank that negotiates with governments and large companies, with a workforce of 25,000 people around the world. He does not have current accounts for small clients, but most of our banks have business with him, and now they will have problems to obtain the money they have invested.

11. WHY HAVE YOU NOT RECEIVED HELP FROM THE US TREASURE?

After having rescued Fannie Mae and Freddie Mac (with taxpayer money), the government needed many guarantees when it came to saving Lehman Brothers. These guarantees had to be provided by the bank that was going to buy Lehman (Barclays, in this case), but it did not.

12. WHAT HAPPENED WITH THE AIG INSURANCE COMPANY?

After the bankruptcy of Lehman Brothers and the sale of Merrill Lynch to Bank of America, the third major hecatomb was the collapse of insurer AIG (American International Group). It is the largest insurance company in the US and one of the largest in the world. It ranked 18th in the world ranking of companies. The problem is that this firm not only ensures, for example, private homes, but also covers large companies, including banks. When a bank makes a large investment, AIG insures its losses in the event that the business goes badly. So, now, the mortgage crisis has placed the insurer before a situation of bankruptcy practice, since the money that it has (a lot) is trapped in investments that it can not sell.

To be able to save you need cash, and the only institution that can provide it is the Federal Reserve, that is, the government, who has finally done it: the rescue of AIG, made in the form of a two-year loan, has cost the US taxpayer 85,000 million dollars (60,000 million euros) and has led to the nationalization of the insurance company.

The problem of the insurer AIG, the largest in the US, is that it covered the losses of banks

In Spain, AIG has been operating for 30 years and has just over one million customers. His main business is life insurance. Sources of the company have indicated that the new situation of the insurer does not have to affect the Spanish clients.

13. HOW HAS THE US GOVERNMENT JUSTIFIED YOUR RESCUE?

The measure is controversial, when it comes to using public money to save a private company from bankruptcy that, in principle, has ended up in bankruptcy, in part, due to mismanagement. Also because this type of actions usually end up increasing the State's deficit or translating, in the long run, into more taxes. And, in general, for what it has of state interventionism in a country that pays homage to the principles of capitalism.

The government, with the support of President George W. Bush, has explained that the loan aims to "promote stability in financial markets" (the bankruptcy of AIG would have had serious consequences not only in US banks, but also in many Europeans) and "limit the damage to the overall economy".

The Bush administration justified its intervention to save AIG from the need to "promote stability in financial markets"

In any case, after what happened with AIG, Fannie Mae and Freddie Mac, on the one hand, and with Lehman Brothers, on the other, it seems clear that the Federal Reserve is only willing to help those financial institutions whose bankruptcy puts the system at risk , or when this bankruptcy is more expensive, in the long run, than giving them help.

Yesterday, the Federal Reserve, the Treasury and the US Congress agreed to launch a package of legislative measures in an "expeditious" manner to deal with the crisis, which will focus on solving the failed assets of the mortgage market they have in their hands. balances financial institutions,

14. WHAT HAVE THE CENTRAL BANKS DONE THIS TIME?

Back to inject large doses of money, pulling emergency funds and loans: 50,000 million dollars (about 35,000 million euros) the US Federal Reserve (which, however, has not lowered interest rates), 70,000 million euros the European Central Bank, 25,000 million the Bank of England, 17,000 million the Bank of Japan … The six main central banks announced on Thursday "coordinated measures" against the lack of liquidity, and agreed to inject up to 180,000 million dollars (about 125,000 million euros). These massive injections of money are a double-edged sword: on the one hand, they help banks weather the storm, but on the other they introduce more fear and doubt into the markets as it becomes evident that the problem is of a great magnitude.

15. AND THE BANKS?

The crisis is precipitating mergers and bank purchases to gain strength in a situation that is proving to be the limit for many financial institutions. This same week, the British bank Halifax Bank of Scotland, the largest financial institution in the United Kingdom, has reached an agreement to be bought by the also British Lloyds TSB. The union of both will create a true banking giant. For its part, the second largest US investment bank, Morgan Stanley, is also considering merging with another bank.

16. WHAT HAS THE SPANISH GOVERNMENT SAID?

The Prime Minister, José Luis Rodríguez Zapatero, said that "the Spanish financial system is resisting very well in the face of an international financial crisis" in which "we have seen many countries with financial entities that have been affected in a very serious way, special way the first economy of the world ". On the request made this Wednesday by the CEOE president, Gerardo Díaz Ferrán, for the Executive to inject money in order to alleviate the liquidity crisis experienced by companies (what he called a "parenthesis" in the free market), Zapatero only said that the Government will help companies "in a prudent and sensible manner", also reminding the employers that measures have already been taken through the Official Credit Institute (ICO) to alleviate the situation.

The Spanish financial system is resisting very well. "José Luis Rodríguez Zapatero, President of the Government

17. HOW HAVE THE BAGS REACTIONED?

The effect of the financial crisis on the stock markets has been sudden, partly because one of its main motors, mergers and acquisitions, are seriously reduced when cheap money ends to finance them, as the credits tighten. This has been a black week for stock markets around the world, and especially for Wall Street, which did not begin to go back until Thursday, after the injections of money by central banks. On Tuesday, as a result of the bankruptcy of Lehman Brothers and the sale of Merrill Lynch, Wall Street suffered the biggest drop since the attacks of 11-S, 4.42%, and on Wednesday reacted to the rescue of AIG by the US Treasury with another big drop, this time, of 4.06%. The European and Asian stock exchanges have also chained several days of great losses. In Spain, the Ibex closed on Wednesday with losses of 2.29%, minimum since January 2006. That same day, in Russia, the collapse of the Moscow Stock Exchange forced to suspend operations.

18. WHAT EFFECT HAS THE CRISIS HAD ON THE US ELECTORAL CAMPAIGN?

For the time being, he has given a true turn to the issues he has been talking about in recent days. The controversial, and effective, designation by the Republican candidate John McCain of Sarah Palin as a candidate for vice president has been in the background before the magnitude of the financial crisis. In addition, McCain, firm defender of the minimum possible financial regulation, has had to see how the government of his party companion, President Bush, decided to intervene to save a private insurer. The Democratic candidate, Barak Obama, for his part, has not missed the opportunity to criticize harshly "the failed economy of the last eight years".

In the US election campaign is more talk of the financial crisis than Sarah Palin

19. WHO ARE THE GUILT OF THE CRISIS?

Regardless of the causes that can be found in the global economic crisis, derived from many factors, such as the price of oil or food, and ends up influencing both the purchasing power of consumers and their ability to pay their debts, As in the confidence of financial markets, the current crisis has its own responsibility:

– The bankers: Their policy of making more money by selling risk securities, through mortgages granted to unsafe customers, in a system that, moreover, branches internationally, has proved disastrous.

-The Federal Reserve of the United States: The big drops in the interest rates that it carried out since 2000 contributed in large part to generate the real estate bubble that is exploding now.

-The American Government: The model, advocated by the Administration of George W. Bush, that financial institutions are those that regulate themselves, has been evident. A greater and better system of supervision and control by the Government would have been necessary, especially as regards risk operations.

– Real estate agents: More concerned in many cases to get customers and sell houses at any price, than to ensure that buyers access quality loans or that they were able to afford them.

20. HOW DOES EVERYTHING AFFECT US?

The financial crisis that began a year ago and has broken out now affects the 'real' economy (our pockets and our jobs): The loss of confidence on the part of its investors and the lack of liquidity make the banks tighten conditions of their loans, and that hurts both families (their mortgages will be more expensive) and, mainly, the real estate market, which until now has been the main engine of the economy, at least in Spain. The real estate companies have more problems to obtain credits with which to continue building and they begin to lose money, suspend payments or hire fewer people to work.

On the other hand, central banks are putting more money into the system, but they will also have to end up raising interest rates so that financial institutions can increase the remuneration they receive for the money they lend, and return to the market the resources they have retired during the crisis, which also translates into more expensive loans for families and businesses.

For now, thousands of people in the United States are endangering their homes or their savings.

Poll

What will you do with your investments in the stock market?

I will take out what I have not lost yet.
12.32% (368 votes)
I will hold my investment until better times.
50.6% (1511 votes)
I do not have money in the Stock Exchange.
37.07% (1107 votes)
see survey

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  • Economic crisis
  • Lehman Brothers

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Are you going to ask for a mortgage? Remember to meet these requirements

 

Hipoteca

 

The latest official data, the National Institute of Statistics (INE), indicates that the number of mortgages on housing stood at 29,516 last June, 16.5% higher than the same month of 2016. they sell more houses, again, and they sign more mortgages, again.

In fact, the bank presumes to have learned the lesson of the crisis. The Spanish Banking Association (AEB) says that now they only grant mortgages in a “transparent and responsible” way. And yet there are communities where the payment of the mortgage exceeds the recommended limits; that is, those families enter the risk zone to pay their fees . In the Balearic Islands, Madrid or Catalonia, the mortgage takes more than 30% of the salary.

To describe the basic features of the current mortgage scenario would add that 62.2% of mortgages are signed floating rate and 37.8% fixed rate. The Euribor is still the type to which the majority of variable rate mortgages are referenced. In addition, according to data from El Hipotecador, the new mortgage loans are in an average term of 23 years and most of them of the variable rate (63.2%).

If you are determined to buy a house and you are obliged to sign a mortgage, before you start visiting bank branches try to know if you meet all the requirements . In RN Tu Solución Hipotecaria propose these six as essential.

The documentation
It is important that we provide the bank with all the necessary information about our current situation. Sometimes the impression is everything, and in this first meeting we have to go as if it were a first date.

Make a good purchase
The market value of homes is important so that, in the event that we can not continue paying the mortgage, the bank has the possibility of selling it at a good price and without losing money. It is taken into account from the location of the same, the use due to whether it will be first or second residence or the type of housing.

Normally a continued job stability is demanded over 2 years. Having saved 20% of the purchase.
This factor depends on the type of mortgage we choose, but it is important to bear in mind that most banks will ask us to contribute 20% of the purchase price to start the procedures. The goal is for the consumer to provide a significant value of the total price of the home to demonstrate their commitment to the mortgage loan.

Contribute 10% of expenses s
Although the Constitutional Court considered all mortgage expenses to be abusive for its consumers, and that banks are considering how to distribute mortgage expenses to try to avoid new judicial battles, we are still asked to contribute an amount for the derived expenses. Normally the expenses can be of 10% on the total price of the purchase and include the notary, the property registry or the expenses of appraisal management among others.

Have demonstrable fixed income
The stability of our income is one of the most important requirements. A continuous job stability of more than 2 years is usually requested, and in which the employees or workers with a fixed contract are more valued. On the other hand it can generate more problems if our salary depends on bonuses, commissions, etc.

Become a “friend” of the bank?
The loyalty of the client is something important for the bank that grants the mortgage. For this reason having contracted, or the intention to hire other products that assure our commitment, can be an important factor at the time of validating our mortgage. Normally what helps us to add points is the direct debit of our payroll or having contracted another product such as life insurance.

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  • Mortgages
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Dismantled an illegal casino in the Cobo Calleja polygon in Fuenlabrada, Madrid

Industrial estate of Cobo Calleja, in Fuenlabrada. 

Polígono industrial de Cobo Calleja, en Fuenlabrada

 

Agents of the National Police have dismantled an illegal casino in the Cobo Calleja polygon in Madrid where the arrested used electronic devices, trick cards, hidden cameras and even drugs at meals to win games of Mahjong (Chinese table game).

As reported by the Consistory on Saturday in a statement, have seized 200,000 euros in cash and have arrested nine Chinese citizens of the ‘Monk’s Band’.

Exorbitant loans

 

Another of the activities of the group was to go to important casinos in Madrid to lend money to excessive interests that exceeded 20% per week. To collect interest on the loans, they sometimes used violent extortion, injuries, illegal detentions and serious threats to family members in both Spain and China.

When clients stopped paying high interest rates, they were extorted At the beginning of 2012 and following the arrest of four people responsible for a kidnapping, the presence of a group of highly organized Chinese citizens who frequented important casinos in the Community of Madrid.

There they were dedicated to lending large sums of money at interests of 20% per week to compatriots who had a significant equity in real estate or cash.

After months of research, the researchers identified the members of the organization, called the ‘Monk’s Band’ and discovered their modus operandi.

This consisted of lending money to selected targets that, as soon as they stopped paying high interest rates, were extorted by highly violent methods (injuries, illegal detentions, serious threats to family members both in Spain and in China).

Large sums

It also detected the existence of an illegal casino, located in the industrial estate of Cobo Calleja de Fuenlabrada (Madrid) exclusively for Chinese citizens, where games of Mahjong (Chinese board game) were played daily, in which important amounts circulated. of money.

In fact, at the time of the dismantling of the illegal casino, at one of the tables of the same, an amount close to 15,000 euros in cash was intervened .

Traps

In this casino have been detected numerous devices intended to alter the operation of the gaming tables.

They came to administer drugs to players to more easily appropriate their money. These were devices such as electronic inhibitors, deception cards, hidden cameras, etc. At the same time, it has been proven that the head of the Organization, together with one of its employees, managed to administer drugs to those attending the games mixed with food, with the purpose of appropriating their money more easily in the course of the illegal games.

The investigation has culminated with the arrest of nine people , the head of the organization and the components of the two branches of the same.

The first one dedicated to the selection of the victims in the casinos , the loan and the direction of the activities of said organization; and the second dedicated to intimidating or exerting violence on the aforementioned victims.

The investigation has involved agents of the UDEV and the UDEF of the General Commissioner of Judicial Police and the Provincial Brigade of Foreigners and Documentation of the High Police Headquarters of Madrid.

Check here more news from Madrid.

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  • Fuenlabrada
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