OCCUPY

[Shwa]

But it's not just "Joe Average"....Bank of America is still bleeding money over a disastrous acqisition of Countrywide. CitiBank is still not out of trouble either. These are not "small time" lenders. It is false to present circumstances in the US as only impacting average people, because 99% includes people and firms that are far from average. All Americans are part of the "average" in the end, even the rich ones.

When banks "bleed" they don't "feel" anything because banks really don't have "blood" nor "feelings." Because a bank is incorporated, doesn't mean it takes on human bodily functions.

Although, I will admit, that banks often shit on people.

[blueblood]

The problem with the metaphorical fox is that he's going to run out of chickens pretty soon and he'll have to turn to cannibalism.

Nope, he's going to have to live on varmints for a while. Not as nice as chickens

[Shwa]

How exactly were people "hard sold" into borrowing hundreds of thousands of dollars to buy a house? Are you referring to the misguided lefty idealistic legislation to promote home ownership among the lower class?

Absolutely because misguided lefty idealists make for pretty good salesmen, especially if they can sell an unaffordable mortgage to fully-informed righty realists. That is salesmanship!

And those folks who sold debt chits. They are to blame too.

[blueblood]

You see? This is where we agree. Finding and blaming a scapegoat is the literal way of drawing attention to a larger plot and is a well used trick when one must generalize to illustrate a general problem. You have done this yourself, by trying to scapegoat the character of 'Joe Average.'

The dispute now becomes as to how such an adjustment to the 'nature' can be made. A lot of angry people are saying the adjustment must be punitive, at least to start; others are saying legislative to protect vast interests (in one mode or another, i.e. public or private). Others still are saying deregulate and let the market adjust itself.

I doubt anyone wants to repeat this once things equalize, but maintaining such a complex dialogue with so many variables is difficult to keep in the public consciousness. I don't think I have yet to see a comprehensible model that has anything like mass appeal in order to inform people about the dangers certain economic paths take.

For example, we can all argue about capitalism vs socialism vs mixed, etc. Some can argue for one flavour of capitalism over another. But there comes a time when the plot on capitalism becomes so complex that it is much easier to dispense with the details and take the risk. The risks offered - and taken - through the mortgage bubble is an illustration of a certain degree of understanding of the larger forces at work and, let's face it, not too many people are familiar with that level of specialization and end up trusting what the salesman says a little too much. (even the salesman isn't so sure half the time)

So, in the interim, some folks marching and screaming "Greed!" and pointing their fingers might be necessary, at the very least, to raise the issue and keep the issue in the public's mind until some acceptable 'nature' altering means is proposed and/or enacted. To me, this moves the issue out of the domain of ideologues and into a sort of overarching, inclusive democractic process that aims to benefit the public at large.

Ah, but if you read my posts concerning this, I blame everybody. The reason I like to highlite joe average because lots of people highlite the banks.

The problem is we need to get all sides out. Right now we're mainly hearing from the ows.

My solution to this would be to have say kevin o'leary or peter schiff have a long as televised debate on cnn with say michael moore and we get both sides of the story and let the audience pick the winner.

[Shwa]

Ah, but if you read my posts concerning this, I blame everybody. The reason I like to highlite joe average because lots of people highlite the banks.

The problem is we need to get all sides out. Right now we're mainly hearing from the ows.

My solution to this would be to have say kevin o'leary or peter schiff have a long as televised debate on cnn with say michael moore and we get both sides of the story and let the audience pick the winner.

agreed

[Rocky Road]

Quite honestly, the protests we are seeing are a sign of things to come, in my opinion.

There will be more and more of this sort of thing, as surplus dries up and resources become more scarce.

I realize the left and right both see things in certain ways, and I do understand both angles some of the time.

Where we ought to agree is that there are many serious issues that need addressing.

Business as usual - is part of the problem.

How many of you believe the next 20 years will resemble the last 20 years, economically?

Things to consider:

1.) Inflation - Dollar's destruction by hyperinflationary policy.

2.) Debt Expansion - Public and Private. Unsustainable.

3.) Resource Depletion - Oil, Water, Gas, Food, Soil.

4.) Corruption - The further concentration of wealth to the 1%.

5.) Multinational Corporate Policy - Destruction of social programs, governments less able to maneuver for the country.

6.) Environment - Decimation of the Ocean, Rivers, and Air. Climate change.

7.) Mass Extinction - Many of the world's species face extinction.

[bush_cheney2004]

....How many of you believe the next 20 years will resemble the last 20 years, economically?

Things to consider:

1.) Inflation - Dollar's destruction by hyperinflationary policy.

2.) Debt Expansion - Public and Private. Unsustainable.

3.) Resource Depletion - Oil, Water, Gas, Food, Soil.

4.) Corruption - The further concentration of wealth to the 1%.

5.) Multinational Corporate Policy - Destruction of social programs, governments less able to maneuver for the country.

6.) Environment - Decimation of the Ocean, Rivers, and Air. Climate change.

7.) Mass Extinction - Many of the world's species face extinction.

Wow...that's so bad...maybe we should all just shoot ourselves right now. Or choose to overcome adversity just as in the past.

No 'Fraidy Cats allowed.

[Rocky Road]

Wow...that's so bad...maybe we should all just shoot ourselves right now. Or choose to overcome adversity just as in the past.

No 'Fraidy Cats allowed.

I am not scared, but I am concerned. Because like it or not we are facing some pretty daunting challenges.

Not sure I would call it adversity, more like a conundrum.

[dre]

So you think that the average Joe with their sense of entitlement had nothing to do with this and it was all the banks fault?

Really???

Everybody is motivated by "greed" except the average Joe calls it getting ahead.

George w. Bush stated that wall street got drunk. Well who sold the alcohol???

It was bad gov't policy by politicians elected by people wanting more and more to fill their sense of entitlement, the question is why wouldn't bankers make those loans, it's cheap money and the gov't is there to bail everyone out. The market does a far better job of regulating stupidity than a politician.

The problem with blaming your average Joe who over leveraged is that the system is supposed to be able to endure bankcruptcies. Both bankruptcy and sub prime loans have been around for thousands of years.

And youre going to have asset bubbles because of this kind exuberance in any system.

The problem is that asset backed securities and over securitization allowed too much money into the game too fast, as that exuberance spread to pension fund managers and hedge fund managers, and global investors around the world. And THIS is what caused those overly favorable credit conditions.

[blueblood]

The problem with blaming your average Joe who over leveraged is that the system is supposed to be able to endure bankcruptcies. Both bankruptcy and sub prime loans have been around for thousands of years.

And youre going to have asset bubbles because of this kind exuberance in any system.

The problem is that asset backed securities and over securitization allowed too much money into the game too fast, as that exuberance spread to pension fund managers and hedge fund managers, and global investors around the world. And THIS is what caused those overly favorable credit conditions.

And it would have endured the bankruptcies. Houses would be able to be sold for cheap. Didn't we want a cheap housing policy? Bank assets would be liquidated and bought up by other sounder banks or guys wanting to start up banks.

No it was gov't policy of rock bottom interest rates and spending and do gooderness that got us into this. Your going after the symptoms and not the disease. Where did all that money come from to begin with? It certainly wasn't with production. Bush administration had monetary policy to drop interest rates to inflate it's way out of the dot com bubble and everyone stuck it in housing. However the Clinton administration helped create the conditions for the dot com bubble to begin with. How about letting the market set the rates instead of some guy pulling them out of his backside?

[Argus]

So you think that the average Joe with their sense of entitlement had nothing to do with this and it was all the banks fault?

Really???

I'm not sure how you got that from what I wrote. I was pretty clear in saying the protestors were going after the wrong group, that they ought to be holding their government to task, not business.

Everybody is motivated by "greed" except the average Joe calls it getting ahead.

Actually, I posted on that subject too a few pages back.

George w. Bush stated that wall street got drunk. Well who sold the alcohol???

The government.

It was bad gov't policy by politicians elected by people wanting more and more to fill their sense of entitlement,

You might have a point if the government of the day was made up of wishy washy, bleeding heart liberals, but it was made up of Republicans who rarely show much interest in the well-being of anyone who doesn't drive a Cadillac or a Mercedes.

[Argus]

For years, politicians of every stripe have tempted voters with promises of entitlements of all shapes and sizes. Once elected, they drained the public purse to make good on those promises and to reward loyalty. Then came the global crisis, stimulus spending and bailouts to save companies "too crucial to the economy to let fail".

Actually, didn't the last Democratic administration balance the books? I seem to recall there was talk in the air that the entire debt would be paid down in twenty years. Then came the Republicans. The only temptation they offered voters was lower and lower and lower taxes. Those tax cuts, and not entitlement programs, were what threw the US into massive deficits.

[Argus]

This is false, as there have been numerous bank and mortgage lender failures. It is most definitely not one sided.

http://www.mortgagedaily.com/MortgageGraveyard.asp

And how many of the people at the top of those bank and mortgage lenders exited in poverty? How many had to sell their own homes?

How many made millions of dollars and left with golden parachutes?

[Argus]

That's like blaming the credit card company for somebody running up their credit card and having difficulty paying off the interest.

Do you want to exonerate the credit card companies, with their predatory marketing strategies and their efforts at entrapping poor, and often unsophisticated people in long term debt at ridiculously high rates?

[bush_cheney2004]

And how many of the people at the top of those bank and mortgage lenders exited in poverty?

None...that was the point. Thank you for getting it.

How many had to sell their own homes?

Don't know, but how many bought homes they could not afford?

How many made millions of dollars and left with golden parachutes?

Don't know....I suspect very few as these were mostly small local or regional lenders/banks.

[bush_cheney2004]

Do you want to exonerate the credit card companies, with their predatory marketing strategies and their efforts at entrapping poor, and often unsophisticated people in long term debt at ridiculously high rates?

Yes..just as long as you keep "exonerating" the "poor" from any personal responsibility.

[blueblood]

Actually, didn't the last Democratic administration balance the books? I seem to recall there was talk in the air that the entire debt would be paid down in twenty years. Then came the Republicans. The only temptation they offered voters was lower and lower and lower taxes. Those tax cuts, and not entitlement programs, were what threw the US into massive deficits.

Democrats pres with a republican house. Clinton had some of his ideas go up in smoke like obama, then there was the bond market involved as well. Hell if james carville gets reincarnated he wants to come back as the bond market.

The old dotcom bubble is when the bush administration threw open the spigot. The democrat congress down the road didn't do diddly squat. Both parties have their hands in the cookie jar.

[Argus]

But it's not just "Joe Average"....Bank of America is still bleeding money over a disastrous acqisition of Countrywide. CitiBank is still not out of trouble either. These are not "small time" lenders.

And the people who are at the top? How are they suffering? You want to talk about Bank of America? They bought out Merrill Lynch. ML was ruined under the auspices of Stanley O'Neal. He was paid over $40 million a year. He was fired, given a golden parachute worth some $167 million. I should get fired like that! John Thain took over, at $83 million for less than a year on the job. He made sure that ML paid out billions in bonuses to its senior people just before it was sold off to Bank of America.

John Thain now works as CEO of CIT group, earning a miserly $6 million per year - plus options and bonuses.

I weep for these two men and their sad fate.

[blueblood]

And the people who are at the top? How are they suffering? You want to talk about Bank of America? They bought out Merrill Lynch. ML was ruined under the auspices of Stanley O'Neal. He was paid over $40 million a year. He was fired, given a golden parachute worth some $167 million. I should get fired like that! John Thain took over, at $83 million for less than a year on the job. He made sure that ML paid out billions in bonuses to its senior people just before it was sold off to Bank of America.

John Thain now works as CEO of CIT group, earning a miserly $6 million per year - plus options and bonuses.

I weep for these two men and their sad fate.

Are you familiar with breech of contract litigation

A lot of shareholders are suffering, particularly those close to or retiring

Edited October 22, 2011 by blueblood

[bush_cheney2004]

I weep for these two men and their sad fate.

Do you really think the salaries and bonuses for these people would swing the bottom line to the black? Or are you just jealous?

[dre]

And it would have endured the bankruptcies. Houses would be able to be sold for cheap. Didn't we want a cheap housing policy? Bank assets would be liquidated and bought up by other sounder banks or guys wanting to start up banks.

No it was gov't policy of rock bottom interest rates and spending and do gooderness that got us into this. Your going after the symptoms and not the disease. Where did all that money come from to begin with? It certainly wasn't with production. Bush administration had monetary policy to drop interest rates to inflate it's way out of the dot com bubble and everyone stuck it in housing. However the Clinton administration helped create the conditions for the dot com bubble to begin with. How about letting the market set the rates instead of some guy pulling them out of his backside?

No it was gov't policy of rock bottom interest rates and spending and do gooderness that got us into this. Your going after the symptoms and not the disease. Where did all that money come from to begin with?

All that money came from investors around the world. Interest rates played a part but all the FED controls is the overnight rate. As for "do gooderness" this is just an oft repeated falsehood. Almost all of the big sub prime lenders were either trusts, thrifts, or pure mortgage companies, and they were fueled primary by investment banks. None of these institutions accepted FDIC insured deposits and they were not subject to the CRA or any other banking regulations. They were free to set any lending standards they wanted to.

You can just go and follow the money. Between 95 and 2007 the ammount of asset backed securities based on the US housing market went through the roof, and the CDS market went from about 100 billion dollars to over FIFTY TRILLION.

Even if the Fed had started raising rates in 2003 like they probably should have its unlikely they could have cooled the market down without damaging the rest of the economy. And like I said... The Fed does not set mortgage rates, and even if the overnight rate went up, theres nothing saying that all of these non-bank private lenders would follow. They regularly ignore the fed rate and lend both below it and above it.

To avoid the meltdown you would have had to fix some of these structural problems in the financial system. To fix the problem you would have to regulate the shadow banking system, and thats politically a hard thing to do, and even after the meltdown it STILL hasnt been done.

If you want to understand all this stuff you should take a carefull look at the different between how a traditional bank operates, and how the trusts, thrifts, and mortgage companies like countrywide operate.

Once apon a time a banks loans were its future. Mortgages stayed on its books and carrying them to term was part of their core business model. Lenders in this paradigm needed to make good loans to good borrowers.

That paradigm has totally changed. All these lenders were moving most of these loans off of their balance sheet and selling them to global investors. So lenders no long cared about whether they made good loans or not because they were somebody elses problem. Those loans got bundled into asset backed securities by investment banks, insured on credit default swaps and rated as A-OK by a completely corrupt private ratings system where the credit ratings agencies were on the payroll of the exact same folks creating the securities.

As long as you could bundle that loan into a multi layers asset backed security, and pay the ratings agencies to ignore the risk, it was perfectly profitable to origionate a mortgage to a homeless person with no job at all.

Low interest rates could alone could have helped create an asset bubble sure, but without massive over securitization there would have been no money to feed it beyond a certain point.

Edited October 22, 2011 by dre

[capricorn]

Tarps and sandbags needed by Occupy Vancouver to keep tents dry.

http://www.youtube.com/watch?v=fkvBOzjTm7A

[blueblood]

All that money came from investors around the world. Interest rates played a part but all the FED controls is the overnight rate. As for "do gooderness" this is just an oft repeated falsehood. Almost all of the big sub prime lenders were either trusts, thrifts, or pure mortgage companies, and they were fueled primary by investment banks. None of these institutions accepted FDIC insured deposits and they were not subject to the CRA or any other banking regulations. They were free to set any lending standards they wanted to.

You can just go and follow the money. Between 95 and 2007 the ammount of asset backed securities based on the US housing market went through the roof, and the CDS market went from about 100 billion dollars to over FIFTY TRILLION.

Even if the Fed had started raising rates in 2003 like they probably should have its unlikely they could have cooled the market down without damaging the rest of the economy. And like I said... The Fed does not set mortgage rates, and even if the overnight rate went up, theres nothing saying that all of these non-bank private lenders would follow. They regularly ignore the fed rate and lend both below it and above it.

To avoid the meltdown you would have had to fix some of these structural problems in the financial system. To fix the problem you would have to regulate the shadow banking system, and thats politically a hard thing to do, and even after the meltdown it STILL hasnt been done.

If you want to understand all this stuff you should take a carefull look at the different between how a traditional bank operates, and how the trusts, thrifts, and mortgage companies like countrywide operate.

Once apon a time a banks loans were its future. Mortgages stayed on its books and carrying them to term was part of their core business model. Lenders in this paradigm needed to make good loans to good borrowers.

That paradigm has totally changed. All these lenders were moving most of these loans off of their balance sheet and selling them to global investors. So lenders no long cared about whether they made good loans or not because they were somebody elses problem. Those loans got bundled into asset backed securities by investment banks, insured on credit default swaps and rated as A-OK by a completely corrupt private ratings system where the credit ratings agencies were on the payroll of the exact same folks creating the securities.

As long as you could bundle that loan into a multi layers asset backed security, and pay the ratings agencies to ignore the risk, it was perfectly profitable to origionate a mortgage to a homeless person with no job at all.

Low interest rates could alone could have helped create an asset bubble sure, but without massive over securitization there would have been no money to feed it beyond a certain point.

Yes let''s follow the money shall we?

You have gov't monetary policy of low interest rates which essentially allows money to be printed. What's worse is the gov't bonds that foreigners are buying into are at artificially low rates because the demand for "sound" US treasuries is still high. As a result we have a whole whack of money needing some place to go. That destination was houses. For example in 1999 we have Fannie Mae under pressure from the Clintion administration to ease credit requirements on mortgages it bought from banks; there's trouble right there. If those banks and lending institutions were not insured by the FDIC and not under pressure from gov't to keep the affordable housing policy going, those loans probably wouldn't have been made in the first place because they wouldn't be able to be bailed out and thus must make smarter loans. The CRA is one of the many policies used by gov't to push the loose lending strategy such as the department of housing and urban development..

What you are discussing is the mechanics investors and speculators used to make money in the mortgage market. Also interesting to note is that both prime and sub-prime mortgages were defaulting, the problem is your adjustable rate mortgages with teaser rates. When the initial low interest rate expires and gets jacked up, that's when the crap hits the fan and its foreclosure time. Speculative home buyers got hit especially hard with that beauty.

When you have 1% interest rates from 03-04 along with lax lending standards imposed by gov't that's a recipe for disaster. All these people owning houses they shouldn't trying to make mortgage payments and as you've carefully explained we have investors making bets that these people are going to continue making mortgage payments. So many didn't pay that it caused a collapse. You also have to remember that the easy money policy by the gov't finds its way into the speculative market you were talking about by having people who don't know how to play speculative investments in there which is a problem in itself

In Saskatchewan in the 1980's the farmland real estate bubble burst. Now we have banks here regulated up the wazoo, but that did nothing to prevent plummeting land values and save the rural economy, all it did was ensure the banks didn't take a bath, and they didn't - their clients did, and it took 25 yrs. to right the ship.

There's a lot more to this situation than speculators making bets on people paying their mortgages.

[Argus]

Do you really think the salaries and bonuses for these people would swing the bottom line to the black? Or are you just jealous?

I'm pointing out that while the employees lost their jobs, and often enough their pensions, too, and the regular shareholders lost their investments and savings, the people who ran companies into the ground made out like bandits, and walked away with bags full of cash.

And you wonder why there's such anger being directed towards the wealthy leaders of the financial industry...

[dre]

Yes let''s follow the money shall we?

You have gov't monetary policy of low interest rates which essentially allows money to be printed. What's worse is the gov't bonds that foreigners are buying into are at artificially low rates because the demand for "sound" US treasuries is still high. As a result we have a whole whack of money needing some place to go. That destination was houses. For example in 1999 we have Fannie Mae under pressure from the Clintion administration to ease credit requirements on mortgages it bought from banks; there's trouble right there. If those banks and lending institutions were not insured by the FDIC and not under pressure from gov't to keep the affordable housing policy going, those loans probably wouldn't have been made in the first place because they wouldn't be able to be bailed out and thus must make smarter loans. The CRA is one of the many policies used by gov't to push the loose lending strategy such as the department of housing and urban development..

What you are discussing is the mechanics investors and speculators used to make money in the mortgage market. Also interesting to note is that both prime and sub-prime mortgages were defaulting, the problem is your adjustable rate mortgages with teaser rates. When the initial low interest rate expires and gets jacked up, that's when the crap hits the fan and its foreclosure time. Speculative home buyers got hit especially hard with that beauty.

When you have 1% interest rates from 03-04 along with lax lending standards imposed by gov't that's a recipe for disaster. All these people owning houses they shouldn't trying to make mortgage payments and as you've carefully explained we have investors making bets that these people are going to continue making mortgage payments. So many didn't pay that it caused a collapse. You also have to remember that the easy money policy by the gov't finds its way into the speculative market you were talking about by having people who don't know how to play speculative investments in there which is a problem in itself

In Saskatchewan in the 1980's the farmland real estate bubble burst. Now we have banks here regulated up the wazoo, but that did nothing to prevent plummeting land values and save the rural economy, all it did was ensure the banks didn't take a bath, and they didn't - their clients did, and it took 25 yrs. to right the ship.

There's a lot more to this situation than speculators making bets on people paying their mortgages.

You have gov't monetary policy of low interest rates which essentially allows money to be printed.

Thats not where all this money came from though. It came from investors. Printing money through the fractional reserve is done by commercial banks... and these banks were not the problem. They on balance made better loans because they were subject to FDIC regulations.

Heres the 25 biggest sub prime lenders...

1. Countrywide Financial

At least $97.2 billion

2. Ameriquest Mortgage/ACC Capital Holdings

At least $80.6 billion

3. New Century Financial

At least $75.9 billion

4. First Franklin/National City/Merrill Lynch

At least $68 billion

5. Long Beach Mortgage/Washington Mutual

At least $65.2 billion

6. Option One Mortgage/H&R Block

At least $64.7 billion

7. Fremont Investment & Loan/Fremont General

At least $61.7 billion

8. Wells Fargo Financial/Wells Fargo

At least $51.8 billion

9. HSBC Finance/HSBC Holdings

At least $50.3 billion*

10. WMC Mortgage/General Electric

At least $49.6 billion

11. BNC Mortgage/Lehman Brothers

At least $47.6 billion*

12. Chase Home Finance/JPMorgan Chase

At least $30 billion

13. Accredited Home Lenders/Lone Star Funds V

At least $29.0 billion

14. IndyMac Bancorp

At least $26.4 billion

15. CitiFinancial/Citigroup

At least $26.3 billion

16. EquiFirst/Regions Financial/Barclays Bank

At least $24.4 billion

17. Encore Credit/ECC Capital/Bear Stearns

At least $22.3 billion

18. American General Finance/American International Group (AIG)

At least $21.8 billion*

19. Wachovia

At least $17.6 billion

20. GMAC/Cerberus Capital Management

At least $17.2 billion*

21. NovaStar Financial

At least $16 billion

22. American Home Mortgage Investment

At least $15.3 billion

23. GreenPoint Mortgage Funding/Capital One Financial

At least $13.1 billion

24. ResMAE Mortgage/Citadel Investment Group

At least $13 billion

25. Aegis Mortgage/Cerberus Capital Management

At least $11.5 billion

Only ONE of them was a commercial fractional reserve banks. They were not printing money, and they did not accept FDIC insured deposits. They took money from private investors both by selling shares and stocks, and by using investment banks to bundle up all their bogus loans and sell them to global investors.

When you have 1% interest rates from 03-04 along with lax lending standards imposed by gov't

The government did not impose lax lending standards on any of these companies, and the Fed doesnt not set mortgage rates. They arent commercial banks, and they didnt accept FDIC insured deposits. In fact these institutions were created for the PURPOSE of completely skirting regulation. They arent bound by any FDIC regulations what-so-ever.

In fact... raising the rates might have actually sucked MORE money into the market because investors would have gotten higher returns.

There's a lot more to this situation than speculators making bets on people paying their mortgages.

Theres other factors yes, but over securitization is the 800lb guerilla in the room. Without that there was just no money to inflate the bubble to where it got to, and there would have been way way less sub prime activity. Mortgage companies would not have been making these loans if they could not dump them into complexed derivatives and flog them to investors to become someone elses problem. If lenders were forced to keep these loans on their books they wouldnt have been making them, and you would have seen nothing beyond a mild housing bubble.

Edited October 22, 2011 by dre