Banking Crisis Explained

[Faun]

Young Chuck moved to Texas and bought a donkey from a farmer for $100.00. The farmer agreed to deliver the donkey the next day.


The next day he drove up and said,
'Sorry son, but I have some bad news, the donkey died.'

Chuck replied, 'Well, then, just give me my money back.'

The farmer said, 'Can't do that. I went and spent it already.'

Chuck said, 'OK, then, just bring me the dead donkey.'

The farmer asked, 'What ya gonna do with him?

Chuck said, 'I'm going to raffle him off.'

The farmer said 'You can't raffle off a dead donkey!'

Chuck said, 'Sure I can. Watch me. I just won't tell anybody he's dead.'

A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.'

The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him back his two dollars.'

Chuck now works for the BANK.

[naveen_reloaded]

nice one ...

i think the same chuck is working in airtel and tata.... KILL HIM GUYS !!!
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nice one ...

i think the same chuck is working in airtel and tata.... KILL HIM GUYS !!!

[Liverpool_fan]

Nice one.

[gopi_vbboy]

He he nice

[Kl@w-24]

LOL!!

[victor_rambo]

The crisis is gonna worsen. The unemployment in India and Us ius only going to increase in the near future. Banks are gonna collapse in India too.

[Liverpool_fan]

^ ^ ^
Banks collasping in India? Dude...that will NOT happen. The RBI norms are way too strict for repeat of events in the U.S...
The unemployment problem unfortunately may very well compound on the other hand...

[thewisecrab]

http://www.snotr.com/video/2327
That video does sort out the info you'll need for figuring out the crisis.

Basically, Banks in US lent money to people who couldnt repay them. Many bought lavish goods, houses, cars etc with that loaned money.

Ultimately, since they could not repay the loan, the bank had buy back all the goods bought by the individual.

But, at the same time, the property prices, cost of lavish services, etc. dipped steeply, leading to the bank getting back less money compared to what they had given on loan, leading to a loss.

This took place on a huge scale, causing many banks to collapse under their own folly.

[victor_rambo]

Basically, they relied upon the real-estate collateral to recover the loan given to sub-prime population(those without a good credit history--such that repayment of loans is doubtful). Govt. also encouraged the banks to lend sub-prime loans. Soon, many investment companies saw the sub-prime loans as lucrative and a no. of derivatives were also created. Portfolios were bought and sold without anybody realizing the actual size of losses. In the meanwhile, the supply of real estate(houses esp.) increased and this lead to sharp fall in their prices. Thus,....

[Faun]

^^Deman and supply royal screw up

[mehra.rakesh]

Originally Posted by ichi

Young Chuck moved to Texas and bought a donkey from a farmer for $100.00. The farmer agreed to deliver the donkey the next day.
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Chuck now works for the BANK.

n00b... that isnt the reason for the crisis .... sorry but isn't funny (if it ever was meant to be)..and if its the real explanation you were very wide off !!!!!!


And possibility of loan defaults is very real in india !! It is also very stupid to launch the 8% home loan scheme from SBI(for 1 yr fixed rate @8% and after that floating rates) in these times .....But bank collapse is a statistical impossibility ....

[i dont exist]

But bank collapse is a statistical impossibility ..

you are wrong......

[iinfi]

Originally Posted by ichi

..........

Chuck said, 'I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00.'

The farmer said, 'Didn't anyone complain?'

Chuck said, 'Just the guy who won. So I gave him back his two dollars.'

Chuck now works for the BANK.

profit of 998 dollars not 898!!
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oh ... minus the initial $100 for the donkey ...ohk .. that makes it $898
fair enough.

you need an account every penny in these recession times you knw
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oh ... minus the initial $100 for the donkey ...ohk .. that makes it $898
fair enough.

you need an account every penny in these recession times you knw

[Faun]

Originally Posted by mehra.rakesh

n00b... that isnt the reason for the crisis .... sorry but isn't funny (if it ever was meant to be)..and if its the real explanation you were very wide off !!!!!!


And possibility of loan defaults is very real in india !! It is also very stupid to launch the 8% home loan scheme from SBI(for 1 yr fixed rate @8% and after that floating rates) in these times .....But bank collapse is a statistical impossibility ....

lolwut? this is chit chat

[mehra.rakesh]

well ,,, this story explains it better ....
chuck moves to texas and wants to buy a donkey for his fields ...Now chuck was a hard worker and he figured that if he toiled in the field for 18 hours ,, he cud make enuf money not only to repay the loan but also take out his girlfriend to the fancy french restaurent .......

but no bank is ready to lend him money for his donkey ... But one fine day a texan comes along offering him the loan of 100 bucks for his donkey but at 3 times the interest rate for a normal bank with the donkey as the mortage....

suddenly all the texans realised that there were a lot many chucks roaming around the country .. so they borrowed money from the banks that refused the loan to chuck and gave it to chuck !!!!!

This arrangement worked fine for all the parties ,,till the day when a mysterious disease killed all the donkeys ...now chuck couldnt pay the installments and the texans got really angry and thus shot chuck... but they realised it too late that the donkey was dead ... Now the donkey meat was very popular with the chinese (cannibals ,, eating their brothers!!!) .. but when there was a lot of donkey meat in the market its price fell like anything ..


Okay i dont know why i wrote such a long story ,,, hoping u guys get the drift ..!!!!!!!!!

[Faun]

Originally Posted by mehra.rakesh

well ,,, this story explains it better ....
chuck moves to texas and wants to buy a donkey for his fields ...Now chuck was a hard worker and he figured that if he toiled in the field for 18 hours ,, he cud make enuf money not only to repay the loan but also take out his girlfriend to the fancy french restaurent .......

but no bank is ready to lend him money for his donkey ... But one fine day a texan comes along offering him the loan of 100 bucks for his donkey but at 3 times the interest rate for a normal bank with the donkey as the mortage....

suddenly all the texans realised that there were a lot many chucks roaming around the country .. so they borrowed money from the banks that refused the loan to chuck and gave it to chuck !!!!!

This arrangement worked fine for all the parties ,,till the day when a mysterious disease killed all the donkeys ...now chuck couldnt pay the installments and the texans got really angry and thus shot chuck... but they realised it too late that the donkey was dead ... Now the donkey meat was very popular with the chinese (cannibals ,, eating their brothers!!!) .. but when there was a lot of donkey meat in the market its price fell like anything ..


Okay i dont know why i wrote such a long story ,,, hoping u guys get the drift ..!!!!!!!!!

Everything is fine but what with bold part ?

[amitabhishek]

Another take on the crisis, got it few days back over email...its funny

Financial Crisis explained in simple language


Linda is the proprietor of a bar in Cork. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Linda's bar. Taking advantage of her customers' freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda's bar. However they cannot pay back the debts. Linda cannot fulfil her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The suppliers of Linda's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor. The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests). The funds required for this purpose are obtained by a tax levied on the non-drinkers

[mehra.rakesh]

Lolz ichi ,, u made pains to read the whole thing !! Thanx ....
Regarding the bold part ..well americans are donkeys !! and the chinese are dumb as americans when it comes to money and banking .in fact i am surprised none of them shared the fate of Lehmann ... and i ate donkey meat (:-yuck) in china back in 2007 and puked ....

Hence i refer to them as cannibals .i know its really stupid but cant help it ...??!!
TO EVERYONE DONT JUMP A GUN AND START CALLING ME AS RACIST...

[amitabhishek]

Originally Posted by mehra.rakesh

well americans are donkeys !! and the chinese are dumb as americans when it comes to money and banking .

Americans cannot be dumb (nor donkeys), they've invented Unix and iPhone.

[mehra.rakesh]

^^ i am pretty sure that every there must be a unix haters club even in the remotest parts of africa (i hate it too) where there is no electricity ... and if u think that iphone was an INVENTION ,,, then u must be a fanboy or an american no difference

the only thing americans are really good at is in figuring out how to make money ...
trust them to make money even out of sh!t ....

Hence u should be Japanese when working for money,,an american when making money ,,and indian while spending money ...

[krates]

Originally Posted by amitabhishek

Americans cannot be dumb (nor donkeys), they've invented Unix and iPhone.

Originally Posted by mehra.rakesh

^^ i am pretty sure that every there must be a unix haters club even in the remotest parts of africa (i hate it too) where there is no electricity ... and if u think that iphone was an INVENTION ,,, then u must be a fanboy or an american no difference

i think there was sarcasm in amitabhishek post ....

[Kundoh]

Yeah I heard this one from my boss before. Still enjoyable to read.