HSBC leaders in the UK think the U.S. subprime disaster has subsided. Mr. Geoghegan acknowledged that some homeowners are still having difficulty repaying their mortgages, and the situation in the U.S. is complicated by market volatilities resulting from the upcoming presidential election and inflationary pressures. Presidential election? How about a doubling of gasoline prices as a more realistic reason? This is what Geohegan actually sees at HSBC Finance, whether he admits it to the general public or prefers double-speak instead. HSBC gets a feather in their cap for helping troubled homeowners. Within 60 days the same homeowners are in trouble again.
Subprime borrwers are required to pay some amount during the rescue process. As fuel prices rise and it takes much more of the household budget just to get to work, the real shock of increased fuel, food, and hardgoods has taken effect. Reduced product demand means layoffs, where subprime borrowers often find themselves vulnerable. Their budgets, which were strapped to begin with when they fell behind the first time, are even more out of balance. Many of the people HSBC “helped” will immediately be in trouble again, and this time they will not receive help. Geohegan knows it. The way in which Geohegan says it must not be too blunt, otherwise he is telling the real truth in a way that everyone can understand it.
The truth is that fixes were temporary, bailouts were political necessities, and troubled hojmeowners know they do not have the cash to effect a bailout again. Will HSBC roll over bad loans to hide the fact? Remember, the SEC already caught Household International doing that very thing, and issued a cease and desist order. Geohegan is saying things might be under control, but maybe not. What Geohegan is really saying is the situation is getting worse, not better. All Americans are being hurt. HSBC Finance borrowers are vulnerable and will be in trouble again, and so will HSBC.
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