Household HSBC Watch

A group which included HSBC Finance Director Douglas Flint said every idea people have concerning the cause of the subprime mortgage crisis is worng. Oh really? It had nothing to do with lax lending standards and greedy mortgage broker? Not according to this group of financial wizards. Forget about CDO, CDS, ABS and the entire alphabet soup of over-securitized and over-leveraged instruments that were pushed on unsuspecting investors by overeager financial institutions. According to Flint’s group the cause is “basic human behavior”. Sorry Doug, but that answer does not fly with anyone half-way intelligent.

“Unbridled optimism on the upside and fear – bordering on panic – on the downside,” is what the report says we can thank for the current economic crisis. Optimism that they will not get caught making bad loans, packaging them as bad paper, and selling investment vehicles around the world is not human behavior, unless there are facilitating factors. Such factors can range from lack of regulation to shady mortgage brokers, salespersons, and appraisers. Lack of supervision coupled with pressure to preform should be considered.

The bottom line is very simple. When bad companies do bad things there is no room for analysis. The answer thus becomes “basic human nature” instead of an admission of guilt. Lawsuits and investigations will follow, at which time the extent of “basic human nature” will be obvious. At Enron and the Bush Administration the crooks were at the top of the leadership ladder. Oh yes — and this group of “basic human nature wizards” was co-chaired by Goldman Sachs Managing Director E. Gerald Corrigan, who once headed up the New York Federal Reserve Bank, and HSBC Finance Director Douglas Flint

They made a number of recommendations about how to reform our increasingly complex financial systems. If they could say so publically it would go like this: Gerald gets the real banking stuff. Doug gets the seedy stuff. Regulators never look at any stuff. Complaints are ignored. They make money, even if banks and investors around the world lose $500 Billion (USD), and it shall never be traced back to Gerald and Doug. Simple business plan, AYE? Now that is “basic human nature” and the reason why HSBC Finance is just as bad as Countrywide but HSBC Finance is not being investigated.