Saturday, November 28, 2009

World's biggest liar loan

By now you've probably seen headlines like "Dubai defaults on 150 billion dollar debt". One interesting thing I seem to be picking out of the news is that Dubai structured these deals so shell companies like Dubai World took out the mortgages, not the government itself, so the only option the lenders have is to foreclose on the properties in local or Dubai courts (snort!). At which point the lenders hold the keys to large empty buildings and vacant lots with half-completed skeletons, *if* Dubai even bothers actually giving them the keys. It makes you wonder WTF these lenders were thinking, because the paper they’re holding explicitly states that the mortgages are *not* backed by the income of the government of Dubai, indeed states no source of income at all for how the loans are going to be repaid. It’s like the whole liar loan fiasco here in the USA, except writ large with international banks!

– Badtux the Amazed Penguin
(but who should not be so amazed by financial institution stupidity by now, I suppose)


  1. But you don't have to worry about it having any effect on you because you saw it coming and prepared for it.


  2. Right. I studiously avoided buying stock or making loans to anything even remotely related to Dubai.

    And I am completely insulated, because I have total control over the finances of the world.

    JzB the WTF trombonist

    WV: pedrot. Either a green gemstone, or the world's worst case of athlete's foot.

  3. Or you could make lots of loans to Kazahkstan with the same results! Who knew Borat was a banker?

    But seriously, Tux, you're thinking like a normal person here, not a bankmaggot. Normal people look at a loan and ask "Will this ever get paid back?" Top-tier maggots say "What kind of bonus will I get for writing this deal? It will improve the quarterly figures, and I can book the forward earning now. Who cares if the deal collapses in two years? I'll have made my nut. The bank will take a huge loss, but I'll have moved on by then. Or we can get the government to bail us out. It's all good -- FOR ME!"

    There you have one of the paradigms of modern banking...


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