Nyberg report shows that Brokers had nothing to do with the crash

On page 21 of the report ([footnote 27]- available on BankingInquiry.gov.ie) the following appears:

Mortgage intermediaries began to emerge as a force in the residential mortgage market in the mid-1990’s, initially as a distribution channel for non-branch based mortgage lenders. Due in part to alliances with estate agents they exercised significant control over the “first time buyer” market in particular. This market was viewed by lenders as an attractive market segment and key for customer acquisition and exit financing for development lending.

At the peak of the market in 2005 mortgage intermediaries accounted for about 45% of new residential mortgage loans. Against this background, intermediaries were able to leverage their relationships with lenders pushing for better mortgage terms (and sometimes larger loans). This led to a considerable reduction in bank margins (interest and commission). Many banks sought to compensate by increasing loan volumes to maintain earnings. While these changes impacted on the mortgage market, mortgage intermediaries had only a limited and indirect impact on the banking problems which are the subject of this …

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Nyberg report: pre-published in 2009

The Nyberg report is all over the papers/radio/TV, it is (meant to be) blowing the lid open on the causes and participants in our great property crash, but I don’t know if there is much in the way of ‘new material’ in it, why?

Because in 2009 CentralBanking.com (a publishing house) published a book called ‘Towards a new framework for financial stability’, the authors were all central bankers, economists, regulators and a few practitioners; all said almost 60 authors took part.

In the very first chapter they outline the broad consensus on the causes of the crash, which they say are as follows:

1. A worldwide liquidity glut (too much money floating around) which drove a search for yield and encouraged leverage 2. Errors of monetary policy (rates being too low in early 2000’s) 3. Structural shifts in the financial system & certain innovations (ABS’s/MBS’s/CDO’s) 4. Non bank intermediation (sub-prime lenders) 5. Lower margins (eg: trackers!) 6. Reliance on interbank funding (Ireland Inc.) 7. Deficiencies in Regulation 8. Separation of jurisdiction between Central Banks and Regulators …

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