Who's to blame for the financial crisis? Why ...
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Ed Gadziemski wrote:
Er, there's this thing called user profiles. You might want to learn how to check them out.
There is this thing called "taking others at their word" ... part of which involves assuming that people really do mean to say what they actually say (and this happenes, incidentally, to be a different thing from your apparent tendency to assume that you can misrepresent what others have said and the misrepresention becomes the fact). This is what you said[^]:
Ed Gadziemski wrote:
So you're saying the credit problem is because colored people were allowed to buy houses? How many porch monkeys bought houses, and how many of them are in default or foreclosure? Must be an awful lot of heebie-jeebies sitting on the corner who used to be sitting on porches. C'mon, Mike. I'm not going to call you a racist, but consider this: There are only $120 billion worth of mortgages in foreclosure. Our government wants to hand out $700 billion to Wall Street and odds are that it won't be close to enough. The math don't add up, so throwing out accusations without facts to back them up is beneath you.
You are either: 1) The Second Coming of Oakman (and the First is still with us); or 2) Barely able to function independently in a modern society. Take your pick, it's all the same to me.
- I've known Mike Gaskey longer than you have been alive. 2) Mike can defend himself if need be. Your "assistance" is not required.
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Oakman wrote:
Agreed, but if that mortgage broker knows or even strong suspects that your abi;lity to pay down the loan is non-existent and he sells the mortage to someone else - who is to blame then? And when that third party - who is just as aware of the chicanery as the original broker - in turn sells that loan and many more like it. . .well you get the idea. Ultimately a whole bunch of crooks were allowed to pull their scams, because the cops (Treasury, Federal Reserve, Congress) were being paid off.
When did risk become a commodity to be profited from? There are many people in many positions that have contributed to this situation. What I would like to know is how these debts, when repackaged as various derivative products were able to be classified as investment grade rather than speculative securities. To my mind that is where the regulators have let the market down.
Josh Gray wrote:
What I would like to know is how these debts, when repackaged as various derivative products were able to be classified as investment grade rather than speculative securities.
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer. I've heard that somewhere down the line, it is hedge funds that do this, and they are able to do it since they are relatively unregulated. I must admit I don't find that very convincing.
Cheers, Vıkram.
"You idiot British surprise me that your generators which grew up after Mid 50s had no brain at all." - Adnan Siddiqi.
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- I've known Mike Gaskey longer than you have been alive. 2) Mike can defend himself if need be. Your "assistance" is not required.
Ed Gadziemski wrote:
- I've known Mike Gaskey longer than you have been alive.
Doubtful. And quite irrelevant, in any case.
Ed Gadziemski wrote:
- Mike can defend himself if need be. Your "assistance" is not required.
I'm not defending him; I'm mocking your intellectual dishonesty. It's a hobby.
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Josh Gray wrote:
What I would like to know is how these debts, when repackaged as various derivative products were able to be classified as investment grade rather than speculative securities.
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer. I've heard that somewhere down the line, it is hedge funds that do this, and they are able to do it since they are relatively unregulated. I must admit I don't find that very convincing.
Cheers, Vıkram.
"You idiot British surprise me that your generators which grew up after Mid 50s had no brain at all." - Adnan Siddiqi.
Vikram A Punathambekar wrote:
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer.
Because of the implicit (and sometimes explicit) promise that the taxpayers of the US would pick up the tab when the inevitable happened. Government is *rarely* the answer and is almost always the problem.
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Vikram A Punathambekar wrote:
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer.
Because of the implicit (and sometimes explicit) promise that the taxpayers of the US would pick up the tab when the inevitable happened. Government is *rarely* the answer and is almost always the problem.
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Ilíon wrote:
promise that the taxpayers of the US would pick up the tab
And those of us outside the US that make a crust from the derivatives markets thank you kindly ;P
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Ed Gadziemski wrote:
- I've known Mike Gaskey longer than you have been alive.
Doubtful. And quite irrelevant, in any case.
Ed Gadziemski wrote:
- Mike can defend himself if need be. Your "assistance" is not required.
I'm not defending him; I'm mocking your intellectual dishonesty. It's a hobby.
Ilíon wrote:
I'm not defending him; I'm mocking your intellectual dishonesty. It's a hobby.
Your arrogance is awe-inspiring.
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Ed Gadziemski wrote:
- I've known Mike Gaskey longer than you have been alive.
Doubtful. And quite irrelevant, in any case.
Ed Gadziemski wrote:
- Mike can defend himself if need be. Your "assistance" is not required.
I'm not defending him; I'm mocking your intellectual dishonesty. It's a hobby.
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Ed, absolutely everything you linked to is true - on the other hand, in 2005 John McCain tried to move heaven and earth to rein in Fannie and Freddie - he was totally stymied by Chris Dodd (D) Chairman of the Banking Comittee.
Jon Smith & Wesson: The original point and click interface
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Oakman wrote:
Agreed, but if that mortgage broker knows or even strong suspects that your abi;lity to pay down the loan is non-existent and he sells the mortage to someone else - who is to blame then? And when that third party - who is just as aware of the chicanery as the original broker - in turn sells that loan and many more like it. . .well you get the idea. Ultimately a whole bunch of crooks were allowed to pull their scams, because the cops (Treasury, Federal Reserve, Congress) were being paid off.
When did risk become a commodity to be profited from? There are many people in many positions that have contributed to this situation. What I would like to know is how these debts, when repackaged as various derivative products were able to be classified as investment grade rather than speculative securities. To my mind that is where the regulators have let the market down.
Josh Gray wrote:
When did risk become a commodity to be profited from?
:laugh: You're joking, right? What do you think the futures markets are for?
Josh Gray wrote:
There are many people in many positions that have contributed to this situation. What I would like to know is how these debts, when repackaged as various derivative products were able to be classified as investment grade rather than speculative securities. To my mind that is where the regulators have let the market down.
That's where the bulk of the problem lies. The other problem is that the culture of "living on credit" and "keep up with the Joneses" in the U.S. desperately needs to change. Yet another phenomenon that needs change in the U.S. financial industry is the idea that when the market convulses the government is there to effect a bail-out at the expense of the taxpayers.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
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Josh Gray wrote:
If people had the brains to not spend what they cant afford to repay there wouldnt be the bad debt to repackage and sell
The Savings & Loan mortgage bubble of the 1980s morphed into the tech stock bubble of the 1990s which morphed into the housing bubble of the 2000s which morphed into the commodities bubble of 2007 - 2008. Rampant credit-fueled speculation and massive, systemic over-valuation of assets is what the world's economy has run on the past 30 years. If governments and businesses and people had the brains to not spend what they can't affort to repay, we'd still be wearing loincloths and living in caves.
Ed, it's nice to talk about over-valuation and speculation, but then I'm going to ask you what's the fair market price of all these assets? How do you propose to value them? Furthermore, studies on speculation (and I mean, really, what is excessive speculation while we're at it?) usually are inconclusive which leaves you with one of several choices: 1. Speculation isn't excessive 2. Speculation has marginal effects at best 3. Our definition of excessive speculation is wrong The thing you are forgetting is that speculators are needed in order to maintain proper operation of the futures and stock markets. Indeed, the futures market requires them in order to function.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
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True. But America in general has developed this mentality that debt is not only OK, but the normal thing to do. That coupled with a strong desire for instant gratification and a complete lack of not only restraint but any concept or thought to restraint, and you have lots of problems we're now seeing. 400 lbs inconsiderate people trading in their SUV every two years for a brand new one, with a cell phone in one hand and a large fries and a jumbo milkshake in the other. The lifestyle we've fashioned for ourselves really is destructive, and now that that's finally evident, it's way too late. And I don't know what made us this way, but it's something I fight with daily even knowing that it's an issue. I know a lot of people who have no clue that it's even an issue, they grew up with it and don't know any other way to be. Maybe Rome really is a good analogy for where we are headed...
Visit BoneSoft.com for code generation tools (XML & XSD -> C#, VB, etc...) and some free developer tools as well.
BoneSoft wrote:
True. But America in general has developed this mentality that debt is not only OK, but the normal thing to do. That coupled with a strong desire for instant gratification and a complete lack of not only restraint but any concept or thought to restraint, and you have lots of problems we're now seeing. 400 lbs inconsiderate people trading in their SUV every two years for a brand new one, with a cell phone in one hand and a large fries and a jumbo milkshake in the other. The lifestyle we've fashioned for ourselves really is destructive, and now that that's finally evident, it's way too late.
This is a large component of the problem - this idea that unrestrained consumption at any cost is an acceptable and normal thing to do.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
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Vikram A Punathambekar wrote:
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer.
Because of the implicit (and sometimes explicit) promise that the taxpayers of the US would pick up the tab when the inevitable happened. Government is *rarely* the answer and is almost always the problem.
Anarchy in the USA. ;P
A human being is part of the whole called by us universe, a part limited in time and space. We experience ourselves, our thoughts and feelings as something separate from the rest. A kind of optical delusion of consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest to us. Our task must be to free ourselves from the prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty… The true value of a human being is determined primarily by the measure and the sense in which they have obtained liberation from the self. … We shall require a substantially new manner of thinking if humanity is to survive. (Albert Einstein, 1954)
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So you're saying the credit problem is because colored people were allowed to buy houses? How many porch monkeys bought houses, and how many of them are in default or foreclosure? Must be an awful lot of heebie-jeebies sitting on the corner who used to be sitting on porches. C'mon, Mike. I'm not going to call you a racist, but consider this: There are only $120 billion worth of mortgages in foreclosure. Our government wants to hand out $700 billion to Wall Street and odds are that it won't be close to enough. The math don't add up, so throwing out accusations without facts to back them up is beneath you.
Ed Gadziemski wrote:
So you're saying the credit problem is because ....
Not at all. What I tried to communicate is that the concept of credit worthiness went by the way side. In my somewhat sheltered life I have bought 4 homes, completely paid the mortgage for 2 and sold the other 2. On each occasion I had to pony up a 10% to 20% down payment and my credit was heavily scrutinized. Each of the homes I reference in the preceding was purchased before the loosening of credit requirements and at no time did I purchase any that would consume more than 20% of my income. I have watched advertisements for loans that were 125% of the assessed value and have seen people take out loans with low entry rates with 5 year balloon payments and I've scratched my head saying, "you're nuts". And sure enough, they were. Very few of those with mortgage problems understood the old adage, "if it sounds too good to be true ...". Our current crisis is I believe a function of the above, multiplied by the fact that these goofy mortgages were subsequently bundled into derivative securities and it would have been (I think) impossible to know the weakness that existed in the underlying product - the mortgage. So ... we have willful ignorance on the part of the mortgagees and stupidity on the part of the investor. I don't think either you or I have any way of understanding the depth of the problem and I'm not sure what I think of any bail out. On the one hand if credit markets don't work our economy goes agrarian. I fairly well agree with the Democratic position that the guys at the top shouldn't get any compensation (ie., pay checks and bonuses), but at the same time I think anyone in default or foreclosure proceedings should not get relief either. I would have replied last night, but there's a charity thing I do on Monday evenings.
Mike - typical white guy. The USA does have universal healthcare, but you have to pay for it. D'oh. Thomas Mann - "Tolerance becomes a crime when applied to evil." The NYT - my leftist brochure. Calling an illegal alien an “undocumented immigrant” is like calling a drug dealer an “unlicensed pharmacist”. God doesn't believe in atheists, therefore they don't exist.
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Michael Martin wrote:
The Mortgage Broker. Under the Trades Practices Act (I'm sure that's it, crammed so much crap into my head in 3 days if trainnig for the new job I can't now determine which way is up) it is illegal for anyone to sell a loan to someone they know cannot pay for it.
In Australia yes but I doubt if its ever enforced. And what about the letters Amex keep sending me saying Im preapproved for $20K? I've never had any dealings with them and there is no way they can know my finantial position. Whats the new job?
Josh Gray wrote:
there is no way they can know my finantial position.
That implicitly reduces the risk of your loan. If they had any knowledge of your position, it would probably be negative.
A human being is part of the whole called by us universe, a part limited in time and space. We experience ourselves, our thoughts and feelings as something separate from the rest. A kind of optical delusion of consciousness. This delusion is a kind of prison for us, restricting us to our personal desires and to affection for a few persons nearest to us. Our task must be to free ourselves from the prison by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty… The true value of a human being is determined primarily by the measure and the sense in which they have obtained liberation from the self. … We shall require a substantially new manner of thinking if humanity is to survive. (Albert Einstein, 1954)
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BoneSoft wrote:
True. But America in general has developed this mentality that debt is not only OK, but the normal thing to do. That coupled with a strong desire for instant gratification and a complete lack of not only restraint but any concept or thought to restraint, and you have lots of problems we're now seeing. 400 lbs inconsiderate people trading in their SUV every two years for a brand new one, with a cell phone in one hand and a large fries and a jumbo milkshake in the other. The lifestyle we've fashioned for ourselves really is destructive, and now that that's finally evident, it's way too late.
This is a large component of the problem - this idea that unrestrained consumption at any cost is an acceptable and normal thing to do.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
I think it's the core of most of our problems. And we have several generations raised in that mindset. And to make things worse, our entire economy is built on the concept, consume consume consume. I don't see a way to turn that around either, short of an extraordinary catastrophe. As much as I'd hate to see it, maybe we need another depression.
Visit BoneSoft.com for code generation tools (XML & XSD -> C#, VB, etc...) and some free developer tools as well.
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I think it's the core of most of our problems. And we have several generations raised in that mindset. And to make things worse, our entire economy is built on the concept, consume consume consume. I don't see a way to turn that around either, short of an extraordinary catastrophe. As much as I'd hate to see it, maybe we need another depression.
Visit BoneSoft.com for code generation tools (XML & XSD -> C#, VB, etc...) and some free developer tools as well.
BoneSoft wrote:
I think it's the core of most of our problems. And we have several generations raised in that mindset. And to make things worse, our entire economy is built on the concept, consume consume consume. I don't see a way to turn that around either, short of an extraordinary catastrophe. As much as I'd hate to see it, maybe we need another depression.
I am of the belief that prior to catastrophes there are warning signs that can be observed (conditional on knowing what signs to look for). I think we've seen a few recently that suggest the current system doesn't work too well. The correction has come fast, but I'm not sure everything is resolved yet. I wonder if the majority of people today are of the opinion that nothing catastrophic can happen in the 21st century - the West has been pretty stable in the aftermath of WWII, but Spanish flu, depressions, etc... aren't all that improbable. I wonder if it's partly due to a mindset of "that was then, this is now" so we don't have to worry. I think when a society becomes excessively complacent, it's time to worry.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
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Vikram A Punathambekar wrote:
That is exactly what I don't understand either, Josh, and nobody can give me a satisfactory answer.
Because of the implicit (and sometimes explicit) promise that the taxpayers of the US would pick up the tab when the inevitable happened. Government is *rarely* the answer and is almost always the problem.
Ilíon wrote:
Government is *rarely* the answer and is almost always the problem.
For once, I agree with you. :)
Cheers, Vıkram.
"You idiot British surprise me that your generators which grew up after Mid 50s had no brain at all." - Adnan Siddiqi.
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Ed Gadziemski wrote:
So you're saying the credit problem is because ....
Not at all. What I tried to communicate is that the concept of credit worthiness went by the way side. In my somewhat sheltered life I have bought 4 homes, completely paid the mortgage for 2 and sold the other 2. On each occasion I had to pony up a 10% to 20% down payment and my credit was heavily scrutinized. Each of the homes I reference in the preceding was purchased before the loosening of credit requirements and at no time did I purchase any that would consume more than 20% of my income. I have watched advertisements for loans that were 125% of the assessed value and have seen people take out loans with low entry rates with 5 year balloon payments and I've scratched my head saying, "you're nuts". And sure enough, they were. Very few of those with mortgage problems understood the old adage, "if it sounds too good to be true ...". Our current crisis is I believe a function of the above, multiplied by the fact that these goofy mortgages were subsequently bundled into derivative securities and it would have been (I think) impossible to know the weakness that existed in the underlying product - the mortgage. So ... we have willful ignorance on the part of the mortgagees and stupidity on the part of the investor. I don't think either you or I have any way of understanding the depth of the problem and I'm not sure what I think of any bail out. On the one hand if credit markets don't work our economy goes agrarian. I fairly well agree with the Democratic position that the guys at the top shouldn't get any compensation (ie., pay checks and bonuses), but at the same time I think anyone in default or foreclosure proceedings should not get relief either. I would have replied last night, but there's a charity thing I do on Monday evenings.
Mike - typical white guy. The USA does have universal healthcare, but you have to pay for it. D'oh. Thomas Mann - "Tolerance becomes a crime when applied to evil." The NYT - my leftist brochure. Calling an illegal alien an “undocumented immigrant” is like calling a drug dealer an “unlicensed pharmacist”. God doesn't believe in atheists, therefore they don't exist.
I agree that the concept of credit worthiness went by the wayside. However, laying it off on poor people and minorities as some are trying to do is incorrect. The first wave of defaults has already crested and is receding. That is the wave of poor people and minorities that purchased since 2003 or 2004 and have already been foreclosed out of the market. What most people don't realize is that the second wave consisting of white people and people of middle and upper-middle incomes is just starting, and it will make the subprime defaults look like a day at the beach. Also, as you note, the derivative securities are actually the root of the Wall Street problem. Subprime mortgage defaults only comprise about $120 billion and a bailout of that amount or less could have cleared every penny of every mortgage in foreclosure. But Wall Street took a relatively minor problem and created a $49 trillion (yes, $49 trillion) of derivatives, which is 7 times the amount of every single mortgage, the good bad and ugly, in the United States (!!!!) by buying and selling worthless paper amongst themselves and in world markets. Personally, I've never paid a large downpayment. I've always used VA loans with $0 down and have always paid off my houses. I've had to jump through hoops to qualify, especially being self-employed, but I've always bought houses that I could afford to live in. As far as the Democratic position, I agree with the compensation limits, but given what I said above, that real, live actual mortgagees are only responsible for $120 billion of exposure while Wall Street created $49 trillion of funny money, I wouldn't have any heartburn if every bad mortgage was paid off and Wall Street was told to piss up a rope.
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Ed, it's nice to talk about over-valuation and speculation, but then I'm going to ask you what's the fair market price of all these assets? How do you propose to value them? Furthermore, studies on speculation (and I mean, really, what is excessive speculation while we're at it?) usually are inconclusive which leaves you with one of several choices: 1. Speculation isn't excessive 2. Speculation has marginal effects at best 3. Our definition of excessive speculation is wrong The thing you are forgetting is that speculators are needed in order to maintain proper operation of the futures and stock markets. Indeed, the futures market requires them in order to function.
...that mortally intolerable truth; that all deep, earnest thinking is but the intrepid effort of the soul to keep the open independence of her sea; while the wildest winds of heaven and earth conspire to cast her on the treacherous, slavish shore.
73Zeppelin wrote:
what's the fair market price of all these assets
A good place to start with real estate would be the current tax assessor value. Have a national re-evaluation of properties and use the modified assessed value. Studies on speculation are typically done by those who benefit directly or indirectly from speculation so I discount their value. What I do know is that when Congress closed the Enron Loophole recently, the price of oil dropped 33% within a matter of days. Now that stocks are looking iffy, capital has flooded back toward oil and other commodities. We've gone from one speculative bubble to another in the past 30 years, whether it be real estate, gold, silver, tech stocks, real estate (again), oil, corn, you name it. While some speculation is required for futures markets, it is possible to have too much of a good thing and we have certainly done so.