Sub-Prime-Mess (SPM) and the Impact

Manish Jaiswal

Consulting Insurance

Interesting Story in BusinessWeek on Sub-Prime-Mess (SPM) !!!

It appears to me that Sub-Prime-Mess (SPM) is a good topic for any one to put a spicy comment, so why exclude me. On serious note, SPM genesis is with Home Equity Credit extended to millions of Americans for the paper Over-valuation of a House. Home Mortgage Companies / Banks gave loans to practically every one (read un-affordable interest rate to payback), with the belief, that their Home is a Golden Goose now, so why not to take additional loan, when it is available on a platter. Brokers made tons of money by bundling these loans and eventually off-loading it to higher stake holders. Surprisingly, this Home-Equity Concept is available in developed world only i.e. USA , UK . This financing phenomenon is not there in China or India, a super growth economy today. It is a simple story of selling credit without real asset backing, which was the fundamental of any banking or lending transactions during ancient times. We enjoyed the so-called matured evaluation of financing techniques of America, so, why cry now. It had to happen and it is happening now. Only Govt. intervention (Fed etc.) could save this collapse, which fortunately is happening. The SPM should be a thing of past soon, but for sure, with the death of Easy Credit in Markets across the world. Some body has to pay for this mess.

Manish K. Jaiswal