In message o.uk, Dave
Liquorice writes:
On Sun, 20 Sep 2009 18:23:48 +0100, J. P. Gilliver (John) wrote:

Actually, lending to people who can't pay back is not as financially
daft as it sounds - AS LONG AS you are fairly certain that the price of
what they're borrowing to buy (in this case property) is going to
continue to rise, or at least not fall. Because: when they default, you
get what they _have_ managed to pay, plus the property back to sell.
Cruel and cynical, but lending to those who can't pay is not of itself
financially unsound: it's only lending on something that suddenly
_falls_ in value that is.

Or as happened in the sub-prime mortgage market in the US lending
more than the asset was ever going to be worth. That was the root
cause of the problem and the house of cards has collapsed when these,
effectively unsecured, loans became bad what 2, 3 years ago.

More than it was ever going to be worth - in how long?
--
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** http://www.soft255.demon.co.uk/G6JPG-PC/JPGminPC.htm for ludicrously
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