I will tell you why: Basic stupidity, fraud, incompetence and greed. The most important factor by far is incompetence - incompetence that leads straight to number 11 Downing Street. Both the Bank of England and the FSA (Financial Services Authority) have made mistakes, but they both answer to the Chancellor, and it is he who should be protecting this country from financial ruin. He failed to do so.
We all knew what was going on. Self Certification, lending 4 or 5 times salary, lending over 40 or 50 years and a massive increase in the buy to let market. We all knew these were dodgy mortgages. Even people like me with no financial education could see that many thousands of people who could not afford a mortgage where being duped into massive debt. I remember the dread of going to see my Bank manager for my first mortgage 20 years ago. I wore a shirt and tie, I had six months pay statements, I had to prove employment, I had to have proof of where I lived, I could borrow a maximum of two and a half times my salary and most importantly - if I had been overdrawn during the last six months, I could forget buying my first house. That was a safe loan for a Bank to give. If the banks still behaved in the same way today, we would most certainly not be in this terrible mess.
This time bomb has been ticking away for at least five years. Gordon Brown has been fully aware of the danger, but he failed to act in the interest of the people of this country.
From the FSA website December 2005:
The area of self-certification mortgages and in particular the potential for abuse of self-certification mortgage products during the mortgage sales process was identified as an early priority by the FSA. The potential for abuse of the self-certification of income has been well publicised in recent years, with two programmes broadcast by the BBC in October 2003 and February 2004 alleging certain abuses.The above is an introduction to a review carried out by the FSA into Self-certification mortgages back in 2005. The review seems to have been carried out in a reasonably professional manner. Many faults in the system were identified. However, absolutely nothing seems to have been done about it. The FSA found widespread bad practice (including fraud), and what did they do? they issued "feedback" - Well pump bloody pump.
Gordon Brown - you are to blame for this mess - you and no one else.