[Oe List ...] Tyranny of the Economic

[Lawrence Philbrook]

Dear AM

It is more complex because the banks have also added multiple charges to the 
loans beyond the value of the property - this is partly to maintain their 
profit margin and partly to pay commissions to the sales people.  The result 
is that the "charges" portion on loans have ballooned as banks have moved 
from being safe income institutions primarily connected to long terms loans 
and cash connected vehicles to engines of profit generation - obvious 
evidence is the shift in amount of income involved in bank management 
bonuses over the last 5 years.

In cleaning up the mess I would like to have the management and sales teams 
pay back some or all of those bonuses but I am sure that will not take 
place.

This shift began in the Reagan years when the image of "good" investment 
shifted from 4-6 % per year to 10+ per cent per year.  This may not seem 
like a big shift but to always keep 10+% available to investors and 
expanding bonuses to senior staff has pushed companies to do some pretty 
insane things even in growth economies.  This has been particularly true for 
finance organizations since it means that all loans which used to be based 
on a relatively simple money + transaction fee + interest are now based on a 
complex calculation to which the current interest rate only has an 
incidental impact which greatly limits central bank authority or the 
connection of the loan to actual collateral.

 It also drives the market to shift quickly since everything is measured in 
short term and short term keeps getting shorter.

With respect, Larry


----- Original Message ----- 
From: <oe-request at wedgeblade.net>
To: <oe at wedgeblade.net>
Sent: Saturday, September 20, 2008 8:30 AM
Subject: OE Digest, Vol 53, Issue 54


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