Via Big Picture the Financial Times has an interactive map which charts the winners and losers of the subprime credit crunch. The three red dots on the Australian continent are Macquarie Bank, Absolute Capital and Basis Capital (Hedge fund).
The lenders try to make this up by having higher interest rates and increased fees for default and late payment. This is a similar use of economic technology as insurance; if the risks are higher to the company providing the service then the costs to the consumer are higher to cover the extra financial risk.
If subprime lenders are having meltdowns on the global market at the moment, it is their own fault and they should go the way of the dodo. They obviously do not have a sustainable business model. Isn't this exactly what the market is supposed to do?
More - Barry Ritholtz has a run down of the amounts the world's reserve banks spent to keep liquidity up and overnight interest rates down. The Australian Reserve Bank injected 4.95 Billion AUD on friday.
To put that in perspective Australia spends 17 Billion a year on its defence budget.
More - Gary Sauer-Thompson asks why there is Reserve Bank intervention, shouldn't the market be left to deal with liquidity issues itself under classic liberalism. He writes, "On that scale? Give me a break. This global market turmoil is more than a liquidity crisis. It looks as if classical liberalism is going to be mugged by economic reality."
More - Peter Martin analyses the issue from the Australian political perspective. He quotes Peter Costello, "So the Australian exposure to non-conforming or sub-prime loans is about one-fifteenth what it is in the United States. In the US the delinquency rate is about 2.5 per cent. In Australia it is about 0.4 per cent, one-sixth."
