I spent the whole of last week working on my bailout application. No, not the one where I convert myself into a bank holding company, blame everyone but myself for my problems, and claim a piece of the trillion dollar bailout pie. My bailout application was simple - a plea to the bank which gave me my education loan to defer repayment for another six months. Don't ask me what gives me the confidence that things will be any better in six months! In my current life, postponing the problem is as good as solving it.
I am, however, the perfect bailout candidate, and I have plenty of things other than myself to blame. Specifically, these are:
· Lehman, for going bankrupt.
· The US government, for failing to bail out Lehman.
· The banks - see below.
Why the banks are to blame for my predicament
I blame the banks for my precariously leveraged position. They readily offered unsecured debt at attractive terms to fund my business school expenses. They also encouraged me to benchmark my loan against the Euribor, which continued rising while all around me (think GDP, S&P, interest rates) was falling.
It helped that the top business schools around the world have (or, should I say, had) guaranteed loan programmes.
These were designed to attract the best international talent. The loans didn't require co-signors or lien against property. They were unsecured and based solely on your admission to the business school.
In my school, the bank giving the loan insisted that all international students take out an insurance policy covering them in case of any 'unforeseen' events. The exorbitant insurance cost (almost 10% of the tuition fee) was conveniently added to the principal. Given that I had limited funding options in my home country, my arms were tied. The only way I could get into the school was by taking the student loan and swallowing the terms of the insurance policy.
The insurance illusion
The policy and the unsecured nature of the loan gave me the false confidence that I would be relatively safe even if the headwinds became rough. Little did I know!
After being made redundant at Lehman, I wrote to the insurance company and asked them to cover my loan repayments until I found another job. Much to my surprise, they quoted fine print in the policy which stated that I had to claim unemployment benefits in my country of work to claim insurance. However, UK unemployment benefit is accessible only to people who have worked for over two consecutive years in the country. I could feel the train wreck hitting me head on.
After negotiating with the bank for over two months, we have finally come to an agreement: I can defer principal repayments for six months. For now, my contract job helps me pay the bills. But if things do get worse, me and my friends from FIG might buy an almost bankrupt US bank (idea courtesy of Aegon) and join the real bailout circus.