Worse, the majority of the banks' problem loans today are collateralised with odd-shaped plots that are difficult to develop.
True, lending was collateralised, mostly by land and shares, the price of which, until this decade, always seemed to go up.
Michael Werner of Sanford C. Bernstein, an investment bank, is relaxed, pointing to official figures claiming that 75% of property loans are collateralised, compared with only 38% of loans to manufacturers and 24% of those to utilities.
(For those who are still baffled, they are Collateralised Debt Obligations and Structured Investment Vehicles).The lesson of the year, in retrospect, was that our complex, interlinked global financial system has its drawbacks.
This was such good business that for a while Peru's government debt was collateralised with deposits of dried faeces.Jarvis, Baker and Howland islands, which are at the centre of the new reserve, were claimed by America under the Guano Islands Act of 1857.
Retail loans are mainly collateralised, and used to finance purchases of cars and houses.
Deep down they are probably more concerned about threats from new forms of competition, such as covered bonds (on-balance-sheet instruments that enjoy a AAA rating because they are well collateralised) and home-loan securitisation trusts, which serve groups of banks.
Rating agencies are slashing collateralised-debt obligations (CDOs) faster than you can slaughter turkeys.
Then, there were no collateralised-debt obligations or credit-default swaps.Yet the minister was justified in seeing parallels between America's crisis and the emerging-market episodes.
