

Where banks are both safe and profitable - JumpCrisscross
http://www.economist.com/news/finance-and-economics/21586839-where-banks-are-both-safe-and-profitable-tips-ageing-model

======
bjourne
The Economist surely loves Sweden. The reason the banks are so profitable is
that in the last few years they have raised mortgages from about 2% to 4%
across the board. So I and most other Swedes who has borrowed money to finance
their home has been hit with a huge extra monthly interest cost. Meanwhile the
government has lowered the interest rate banks has to pay it to loan money to
record low levels. The gap is what gives them big profits. Big gap, big
profits.

And there are only four major banks so competition is out of the question.
They know it is much more profitable to cooperate instead of trying to steal
each others customers.

In a fair system I would be able to borrow directly from the central bank like
the private banks can. Then I wouldn't have to finance their profits.

~~~
Wingman4l7
Can't you get fixed-rate mortgages in Sweden?

~~~
marvin
In contrast to the US, mortgages in Scandinavia are rarely fixed-rate. The
default is to get a mortgage with variable interest rate. The central bank
publishes the "expected" central bank rate months in advance, just like in the
US.

As pathy said, you can usually change your variable-interest loan into a
fixed-rate loan for 3, 5 or 10 years at a time. Few people do this, because
you can expect to pay more over the lifetime of the loan, as insurance.
Although the percentage has been higher now, since long-term rates were at
record low levels in 2011-2013.

The big killer of homeowners is unemployment, not climbing interest rates. In
Norway, you regardless can't get a loan unless you are currently able to
maintain a mortgage of 5 percentage points higher interest rate than the
current variable rate. So the system is quite safe.

~~~
Wingman4l7
> you regardless can't get a loan unless you are currently able to maintain a
> mortgage of 5 percentage points higher interest rate than the current
> variable rate

Clever! Doubtless this prevents issues like what the US faced in the sub-prime
mortgage fiasco.

------
damian2000
Similar situation in Australia - the 4 big banks are enormously profitable and
safe. There's a range of smaller banks and building societies though, where
you probably have a bit more risk, but a better interest rate on savings.

~~~
nikatwork
This is partly because the Big Four are protected by an automatic government
bailout, while everyone else isn't. This creates an unfair competitive
advantage against the smaller orgs.

The pro is that it creates supreme investor confidence in the Oz banks (and
Oz); the con is that the Big Four are using this unfair advantage to hoover up
all the smaller orgs. Which could leave Oz with a pigopoly of only four banks.

Basel2 helps to even the playing field for the smaller orgs for those that
choose to comply, but I feel the Oz govt needs to start blocking any further
acquisitions by the Big Four.

~~~
contingencies
Oz gov needs to institute IBAN and free transfers.

------
crdoconnor
"Mouthwatering returns and safe" simply means that the risk has been well
disguised (e.g. is off balance sheet / using creative accounting) and it
hasn't blown up yet.

It's the same situation in Australia and Canada. Their time will come.

~~~
nikatwork
_> simply means that the risk has been well disguised (e.g. is off balance
sheet / using creative accounting)_

Basel2 creates end-to-end transparency[1]. It is specifically designed to
prevent hiding risks.

[1]
[http://www.investopedia.com/articles/07/basel2.asp](http://www.investopedia.com/articles/07/basel2.asp)

~~~
zzleeper
Not really, it has tons of flaws, some of which they are now trying to fix
with Basel 3:

[http://en.wikipedia.org/wiki/Basel_III](http://en.wikipedia.org/wiki/Basel_III)

~~~
nikatwork
Basel2 is not perfect, but it's one million times better that what many banks
were using previously (nothing). I work with banks so I've seen it firsthand.

TFA was talking about how successful such systems have been in Sweden and Oz;
let's hope Basel3 is even better.

------
pedrocr
> _That crisis—in which Swedish authorities swiftly wrote down bad assets,
> moved them into a “bad bank” and recapitalised the remaining “good
> bank”—informed many of the bail-outs in the 2008 financial crisis._

I don't know where this came from. The swedish example was brought up many
times during the crisis but always to argue that we should be doing what they
did (wipe out the equity) and not what was effectively done (prop up the
banks).

------
acd
The magazine Economist is part owned by the Rotschild banking family and it's
reporters are attending Bilderberg meetings every year. Articles in the news
paper are not signed so you do not know who wrote them.
[http://en.wikipedia.org/wiki/The_Economist](http://en.wikipedia.org/wiki/The_Economist)
[http://www.zerohedge.com/news/2013-06-03/full-
list-2013s-bil...](http://www.zerohedge.com/news/2013-06-03/full-
list-2013s-bilderberg-attendees)

Loan to deposit ratios, look at the furthest to the left. Danskebank, SHB,
Nordea, SEB are banks operating in Sweden.
[http://www.zerohedge.com/news/2013-03-25/complete-and-
very-d...](http://www.zerohedge.com/news/2013-03-25/complete-and-very-
disturbing-european-bank-loan-deposit-ratios-redux)

If you want to know more about how the FED was started "The creature from
Jekyll island"
[http://www.bigeye.com/griffin.htm](http://www.bigeye.com/griffin.htm)

~~~
pathy
>The magazine Economist is part owned by the Rotschild banking family and it's
reporters are attending Bilderberg meetings every year. Articles in the news
paper are not signed so you do not know who wrote them.

So? Why does it matter if Rothchild's own part of The Economist. Who cares if
they attend Bilderberg, many influential people do. If I recall correctly, it
is a good mix of politicians, Banks & Insurance and media.

As for the anonymous nature of their pieces:
[http://www.economist.com/blogs/economist-
explains/2013/09/ec...](http://www.economist.com/blogs/economist-
explains/2013/09/economist-explains-itself-1)

------
afterburner
I was thinking they'd be talking about Canada, but yes, Sweden is sensible
too.

------
tsotha
Yeah... no. Megan McArdle lays reality out pretty clearly: Banking Without
Risk Is Impossible.

[http://www.bloomberg.com/news/2013-09-19/banking-without-
ris...](http://www.bloomberg.com/news/2013-09-19/banking-without-risk-is-
impossible.html)

~~~
crdoconnor
For anybody who wants to know who Megan McArdle is:

[http://shameproject.com/profile/megan-
mcardle/](http://shameproject.com/profile/megan-mcardle/)

Examples:

>"In August 2007, The Atlantic hired McArdle as a business and economics
blogger. Her first post, titled "Dont panic!" [sic], wrongly predicted that
the liquidity shock that hit the financial system earlier that month was
nothing to worry about: "Having a nasty market contraction does not mean that
your economy automatically goes down the tubes.""

>That same month, in September 2008, McArdle transformed her blog at the The
Atlantic into a feverish Wall Street crisis-management propaganda outlet. She
argued that bankers were largely innocent, blamed government regulators and
homeowners for tanking the economy, and mocked news of a criminal
investigation into Wall Street crimes, writing, "For what, I have no idea."
McArdle also bizarrely claimed that bankers were victims of the real estate
bubble, while blaming borrowers for being greedy profiteers

It's not too difficult to see which team she is batting for.

~~~
tsotha
I don't think I've ever read such a poorly founded hit piece.

~~~
crdoconnor
Which facts in the article did you disagree with specifically?

~~~
tsotha
Look at the snippet you posted and ask yourself if that could possibly by
unbiased writing.

~~~
crdoconnor
So you're of the opinion that it's invalid because the author has an open
agenda, not because it's actually _wrong_?

You don't seem all that concerned about McArdles many biases.

~~~
tsotha
No, the author is wrong. Take this, for instance:

>She argued that bankers were largely innocent, blamed government regulators
and homeowners for tanking the economy, and mocked news of a criminal
investigation into Wall Street crimes, writing, "For what, I have no idea."

What she's writing there shouldn't be particularly surprising to anyone who
actually knows something about the industry (which she does).

~~~
crdoconnor
There is nothing wrong with that sentence in the slightest. I could rattle off
a list as long as my arm of criminal behavior by Wall Street that went
unpunished (and wrecked the economy). What do you think the mortgage
settlement was about? Do you think they asked for (and got) blanket indemnity
against criminal prosecution from Obama for fun?

>What she's writing there shouldn't be particularly surprising to anyone who
actually knows something about the industry (which she does).

She's a shill for the industry. No different to "insiders" who "know about the
content industry" who predict that piracy causes trillions in economic damage.

~~~
tsotha
Oh, rattle away with you "list as long as my arm". But only include behavior
that's actually against the law.

