OCCUPY

[blueblood]

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...

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.

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.

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.

It's still the policy of cheap money that led investors into this house of cards. Had interest rates been at proper levels, those investors would either be saving or have their money invested elsewhere because the interest rates would have sent the signal that taking out mortgages isn't a good idea. Then there is some investors taking advantage of cheap money to plow it into speculative investments in the housing market.

Those lending agencies were under pressure from the federal gov't to make it easier to extend loans to people who shouldn't have loans. The politicians were doing what they were elected to do.

Speculation provides liquidity and sends clear market signals. That's not the problem, the problem is a boat load of cash caused by bad gov't policy and foreign investors investing in the US as its the safest bet in the world. Mortgage companies wouldn't have been making those loans if interest rates were at proper levels and there wasn't gov't policy of home ownership.

Your beef is the vehicle that investors used to help prop up the bubble. My beef is that there shouldn't have been that large amount of money around in the first place and government policy that helped guide said money into that vehicle. My final beef is that some of these people need to smarten up, you can't afford a 400,000 dollar loan with a salary less than 50K. It's bad policy to try and keep inflating prices and trying to keep prices continuously rising, prices should be allowed to rise and fall as the market sees fit. You are correct in that these bankers/speculators became extremely complacent and continued to bet on the housing market while ignoring basic fundamentals and they took a bath because of it.

[dre]

It's still the policy of cheap money that led investors into this house of cards. Had interest rates been at proper levels, those investors would either be saving or have their money invested elsewhere because the interest rates would have sent the signal that taking out mortgages isn't a good idea. Then there is some investors taking advantage of cheap money to plow it into speculative investments in the housing market.

Those lending agencies were under pressure from the federal gov't to make it easier to extend loans to people who shouldn't have loans. The politicians were doing what they were elected to do.

Speculation provides liquidity and sends clear market signals. That's not the problem, the problem is a boat load of cash caused by bad gov't policy and foreign investors investing in the US as its the safest bet in the world. Mortgage companies wouldn't have been making those loans if interest rates were at proper levels and there wasn't gov't policy of home ownership.

Your beef is the vehicle that investors used to help prop up the bubble. My beef is that there shouldn't have been that large amount of money around in the first place and government policy that helped guide said money into that vehicle. My final beef is that some of these people need to smarten up, you can't afford a 400,000 dollar loan with a salary less than 50K. It's bad policy to try and keep inflating prices and trying to keep prices continuously rising, prices should be allowed to rise and fall as the market sees fit. You are correct in that these bankers/speculators became extremely complacent and continued to bet on the housing market while ignoring basic fundamentals and they took a bath because of it.

Those lending agencies were under pressure from the federal gov't to make it easier to extend loans to people who shouldn't have loans. The politicians were doing what they were elected to do.

No they werent. They did EXACTLY what they wanted to do. Those lenders were origionating sub prime loans because while the bubble was being inflated between 1997 and 2006 there was a SHITLOAD of money to be made doing it. The reason there was so many of these loans is because the lender didnt have to keep them on the books. It could package them up and sell them as products with the help of ratings agencies that were paid to ignore the risk in the derivatives market.

Your beef is the vehicle that investors used to help prop up the bubble. My beef is that there shouldn't have been that large amount of money around in the first place.

The only reason all that money was around is because that vehicle (abs's) globalized the US housing market, so that instead of just the Jones and Petersons putting money into the market, you now had global investors, pension funds, and hedge funds betting up housing prices.

You are correct in that these bankers/speculators became extremely complacent and continued to bet on the housing market while ignoring basic fundamentals and they took a bath because of it.

They did not take a bath. They knew exactly what they were doing and they made a mountain of cash. They knew full well their behavior would crash the system eventually, but they also knew they could squeeze a whole lot of milk out of that cow before it finally fell down dead. The only thing they bathed in was gigantic tubs full of cash.

This whole thing was a GREAT SUCCESS for the people that caused it. They made a gigantic mountain of money, and when the scam finally went sideways the public picked up the tab.

[blueblood]

No they werent. They did EXACTLY what they wanted to do. Those lenders were origionating sub prime loans because while the bubble was being inflated between 1997 and 2006 there was a SHITLOAD of money to be made doing it. The reason there was so many of these loans is because the lender didnt have to keep them on the books. It could package them up and sell them as products with the help of ratings agencies that were paid to ignore the risk in the derivatives market.

The only reason all that money was around is because that vehicle (abs's) globalized the US housing market, so that instead of just the Jones and Petersons putting money into the market, you now had global investors, pension funds, and hedge funds betting up housing prices.

They did not take a bath. They knew exactly what they were doing and they made a mountain of cash. They knew full well their behavior would crash the system eventually, but they also knew they could squeeze a whole lot of milk out of that cow before it finally fell down dead. The only thing they bathed in was gigantic tubs full of cash.

This whole thing was a GREAT SUCCESS for the people that caused it. They made a gigantic mountain of money, and when the scam finally went sideways the public picked up the tab.

So there was no government pressure and no pressure from Freddie and Fannie??? Riiiiigghhttt. There is adequate literature that supports that claim. You aren't seeing the forest for the trees. You are looking at how people took advantage of an environment government policy gave them. Those global investors were betting in other things as well, and at the time it looked like a safe bet because of ridiculously low interest rates, favorable policy towards housing, and every tom dick and harry popping up a house with access to incredibly cheap money. Those mortage speciialists had to compete with banks. Had the market set interest rates, housing would have been going along at a more sustainable clip.

The shareholders at the bank took a bath. To say that they purposely crashed the system is flat out ignorant. They made the bet as long with 95% of everybody else that the housing system was solid and wouldn't crash. The threat of litigation ensured the CEO's feathered their nest.

[jacee]

So there was no government pressure and no pressure from Freddie and Fannie??? Riiiiigghhttt. There is adequate literature that supports that claim. You aren't seeing the forest for the trees. You are looking at how people took advantage of an environment government policy gave them. Those global investors were betting in other things as well, and at the time it looked like a safe bet because of ridiculously low interest rates, favorable policy towards housing, and every tom dick and harry popping up a house with access to incredibly cheap money. Those mortage speciialists had to compete with banks. Had the market set interest rates, housing would have been going along at a more sustainable clip.

The shareholders at the bank took a bath. To say that they purposely crashed the system is flat out ignorant. They made the bet as long with 95% of everybody else that the housing system was solid and wouldn't crash. The threat of litigation ensured the CEO's feathered their nest.

Some small banks went down, but Goldman Sachs made a bundle for shareholders on the hedge fund that counted on the mortgages failing, someeone got the houses and banks got balouts too. They made money three times on by letting the mortgages fail.

And they got an industry award for it.

No sympathy for banks ...

Edited October 24, 2011 by jacee

[bush_cheney2004]

No sympathy for banks ...

None is needed....sympathy is worthless for rich or poor, but it is all you have to offer I guess.

[Moonlight Graham]

So there was no government pressure and no pressure from Freddie and Fannie??? Riiiiigghhttt. There is adequate literature that supports that claim. You aren't seeing the forest for the trees. You are looking at how people took advantage of an environment government policy gave them. Those global investors were betting in other things as well, and at the time it looked like a safe bet because of ridiculously low interest rates, favorable policy towards housing, and every tom dick and harry popping up a house with access to incredibly cheap money. Those mortage speciialists had to compete with banks. Had the market set interest rates, housing would have been going along at a more sustainable clip.

The shareholders at the bank took a bath. To say that they purposely crashed the system is flat out ignorant. They made the bet as long with 95% of everybody else that the housing system was solid and wouldn't crash. The threat of litigation ensured the CEO's feathered their nest.

Would agree that is was the fault of all players - Banks, investors, government, and consumers - who contributed to the housing/credit crash? Yup consumers should have been more careful, yup US gov't policy was horrible, and yup banks pushed predatory lending on customers using deceitful tactics.

If someone gets conned, they must be blamed for falling for it, but the con-man has to take blame too.

[blueblood]

Would agree that is was the fault of all players - Banks, investors, government, and consumers - who contributed to the housing/credit crash? Yup consumers should have been more careful, yup US gov't policy was horrible, and yup banks pushed predatory lending on customers using deceitful tactics.

If someone gets conned, they must be blamed for falling for it, but the con-man has to take blame too.

That's been essentially my point the entire time. I however must emphasize the other side as people always tend to blame one side (the bankers). Like the saying goes, pigs get slaughtered.

[dre]

So there was no government pressure and no pressure from Freddie and Fannie??? Riiiiigghhttt. There is adequate literature that supports that claim. You aren't seeing the forest for the trees. You are looking at how people took advantage of an environment government policy gave them. Those global investors were betting in other things as well, and at the time it looked like a safe bet because of ridiculously low interest rates, favorable policy towards housing, and every tom dick and harry popping up a house with access to incredibly cheap money. Those mortage speciialists had to compete with banks. Had the market set interest rates, housing would have been going along at a more sustainable clip.

The shareholders at the bank took a bath. To say that they purposely crashed the system is flat out ignorant. They made the bet as long with 95% of everybody else that the housing system was solid and wouldn't crash. The threat of litigation ensured the CEO's feathered their nest.

So there was no government pressure and no pressure from Freddie and Fannie??? Riiiiigghhttt. There is adequate literature that supports that claim.

No there isnt. People claimed that legislation like the CRA forced lower lending standards, but if you go and read the thing it just aint there. And as I said... those big subprime lenders were not even subject to the CRA and any FDIC regulation. They were COMPLETELY FREE to either make these sub prime loans or not.

Besides, why would the government need to force a lender to do something profitable? They were making a shitload of money selling these mortgages while housing prices were going up. They did it because they WANTED to and at the time it was GOOD BUSINESS.

The shareholders at the bank took a bath.

Yeah? And how much money had investors in all these institutions already made during the period between 1996 and 2007 while the bubble was forming?

They made the bet as long with 95% of everybody else that the housing system was solid and wouldn't crash.

No they didnt. They knew exactly what was coming. We know this for certain because we caught a bunch of these people short selling their own securities!!! Get it? While investment banks were promoting these securities to investors, and tell them how great they were, the very market makers that had created those securities were betting on them to fail.

Those mortage speciialists had to compete with banks. Had the market set interest rates, housing would have been going along at a more sustainable clip.

No they didnt. Subprime lenders lend to people that cant borrow money from commercial banks. Thats what the SUB PRIME market is, and thats why there was only ONE commercial bank in that list of the Top 25 sub prime lenders I showed you.

Had the market set interest rates, housing would have been going along at a more sustainable clip.

The "Market" DID set the interest rates for all those lenders. They charged whatever rate they wanted to charge, and since their businesses were capitalized by investors not commercial banks the Fed overnight rate is completely irrelevant to them. These lenders were already charging way more than the fed rate.

[blueblood]

No there isnt. People claimed that legislation like the CRA forced lower lending standards, but if you go and read the thing it just aint there. And as I said... those big subprime lenders were not even subject to the CRA and any FDIC regulation. They were COMPLETELY FREE to either make these sub prime loans or not.

Besides, why would the government need to force a lender to do something profitable? They were making a shitload of money selling these mortgages while housing prices were going up. They did it because they WANTED to and at the time it was GOOD BUSINESS.

Yeah? And how much money had investors in all these institutions already made during the period between 1996 and 2007 while the bubble was forming?

No they didnt. They knew exactly what was coming. We know this for certain because we caught a bunch of these people short selling their own securities!!! Get it? While investment banks were promoting these securities to investors, and tell them how great they were, the very market makers that had created those securities were betting on them to fail.

No they didnt. Subprime lenders lend to people that cant borrow money from commercial banks. Thats what the SUB PRIME market is, and thats why there was only ONE commercial bank in that list of the Top 25 sub prime lenders I showed you.

The "Market" DID set the interest rates for all those lenders. They charged whatever rate they wanted to charge, and since their businesses were capitalized by investors not commercial banks the Fed overnight rate is completely irrelevant to them. These lenders were already charging way more than the fed rate.

Yes, the government did lower lending standards. All the big FDIC insured banks got the CRA, then there was other gov't intervention, saying no there wasn't and ignoring the facts on that won't make it go away. What you aren't realizing is that those mortgage specialists have to compete with those same FDIC lenders, how do you do that - by offering stupider mortgages. Gov't market distortion at work. Also those subprime lenders are also competing to go after normal income people to increase their market share.

They forced the lender because of political pressure from constituents. Banks have made fortunes since the 1400's, you don't make fortunes by being stagnant. Banks tend to be very good at adapting to whatever environment they are in, as is the case in Canada and the US during the housing boom.

I take it you haven't much experience with a commodity market, those speculators do a massive amount of research when they go into investments, part of that research involves looking at market conditions, For a long time market conditions told those speculators to go long on housing, then they look at conditions for example at Lehmans financial statements and look at how cash flow dried up and income still rose, then they decided to short the market. There is nothing wrong or crooked with that, and thank goodness they did otherwise a lot more wealth would have got wiped out.

The Fed overnight rate would have made money in the overall economy harder to come by and thus lending institutions would have been more prudent in their lending practices, as there would be less money in the economy to go after consumption which is what owning a house generally is. I don't think a bank is going to be around long enough when the fed is charging 5% and the lender is going subprime. As for the lenders charging way more than the fed rate, that means the money is more expensive to the client and is a signal not to borrow. A higher fed interest rate would have sent the signal to save money, and more money would have found its way into government bonds. It was the teaser rates on those loans that put the ninja clients over the barrel, if they had trouble paying for the low part, they got cooked when the rates rose. And they had to charge those high interest rates because of the risk of the client.

[dre]

Yes, the government did lower lending standards. All the big FDIC insured banks got the CRA, then there was other gov't intervention, saying no there wasn't and ignoring the facts on that won't make it go away. What you aren't realizing is that those mortgage specialists have to compete with those same FDIC lenders, how do you do that - by offering stupider mortgages. Gov't market distortion at work. Also those subprime lenders are also competing to go after normal income people to increase their market share.

They forced the lender because of political pressure from constituents. Banks have made fortunes since the 1400's, you don't make fortunes by being stagnant. Banks tend to be very good at adapting to whatever environment they are in, as is the case in Canada and the US during the housing boom.

I take it you haven't much experience with a commodity market, those speculators do a massive amount of research when they go into investments, part of that research involves looking at market conditions, For a long time market conditions told those speculators to go long on housing, then they look at conditions for example at Lehmans financial statements and look at how cash flow dried up and income still rose, then they decided to short the market. There is nothing wrong or crooked with that, and thank goodness they did otherwise a lot more wealth would have got wiped out.

The Fed overnight rate would have made money in the overall economy harder to come by and thus lending institutions would have been more prudent in their lending practices, as there would be less money in the economy to go after consumption which is what owning a house generally is. I don't think a bank is going to be around long enough when the fed is charging 5% and the lender is going subprime. As for the lenders charging way more than the fed rate, that means the money is more expensive to the client and is a signal not to borrow. A higher fed interest rate would have sent the signal to save money, and more money would have found its way into government bonds. It was the teaser rates on those loans that put the ninja clients over the barrel, if they had trouble paying for the low part, they got cooked when the rates rose. And they had to charge those high interest rates because of the risk of the client.

Yes, the government did lower lending standards.

Well if you can prove it then Id love to hear. But Iv looked for evidence of this myself, and challenged about a dozen other people that parroted this claim, and its always crickets.

What you aren't realizing is that those mortgage specialists have to compete with those same FDIC lenders

Again... no they dont. They have completely different clients. The entire purpose these businesses emerged was to cater to a market where FDIC insured banks wont do business. And those CRA bound FDIC Insured commercial banks? Turns out they were the most responsible lenders out there.

The Fed overnight rate would have made money in the overall economy harder to come by and thus lending institutions would have been more prudent in their lending practices, as there would be less money in the economy to go after consumption which is what owning a house generally is.

That would not have made an iota of difference to the loans being made by all the thrifts, trusts, and mortgages doing all that sub prime lending. They were charging way way more than the fed rate anyways. Thats why theyre called "SUB PRIME".

The Fed overnight rate would have made money in the overall economy harder to come by and thus lending institutions would have been more prudent in their lending practices, as there would be less money in the economy to go after consumption which is what owning a house generally is

Again you have to follow the money. You dont seem to understand where the vast majority of it came from. Money created by commercial banks subject to the fed rate and rules was not being used for subprime loans. This money was raised entirely from private investors and in many cases the rates being charged were 8 or 10 times the fed rate anyways.

Heres a decent primer on how those sub prime loans got capitalized.

If the housing market had only been dealt a decent hand - say, one with low interest rates and rising demand - any problems would have been fairly contained. Unfortunately, it was dealt a fantastic hand, thanks to new financial products being spun on Wall Street. These new products ended up being spread far and wide and were included in pension funds, hedge funds and international governments.

And, as we're now learning, many of these products ended up being worth absolutely nothing.

The asset-backed security (ABS) has been around for decades, and at its core lies a simple investment principle: Take a bunch of assets that have predictable and similar cash flows (like an individual's home mortgage), bundle them into one managed package that collects all of the individual payments (the mortgage payments), and use the money to pay investors a coupon on the managed package. This creates an asset-backed security in which the underlying real estate acts as collateral. (For more insight, read Asset Allocation With Fixed Income.)

Another big plus was that credit rating agencies such as Moody's and Standard & Poor's would put their 'AAA' or 'A+' stamp of approval on many of these securities, signaling their relative safety as an investment. (For more insight, read What Is A Corporate Credit Rating?)

The advantage for the investor is that he or she can acquire a diversified portfolio of fixed-income assets that arrive as one coupon payment.

Thanks to an exploding real estate market, an updated form of the ABS was also being created, only these ABSs were being stuffed with subprime mortgage loans, or loans to buyers with less-than-stellar credit. (To learn more about subprime, read Subprime Is Often Subpar and Subprime Lending: Helping Hand Or Underhanded?)

Subprime loans, along with their much higher default risks, were placed into different risk classes, or tranches, each of which came with its own repayment schedule. Upper tranches were able to receive 'AAA' ratings - even if they contained subprime loans - because these tranches were promised the first dollars that came into the security. Lower tranches carried higher coupon rates to compensate for the increased default risk. All the way at the bottom, the "equity" tranche was a highly speculative investment, as it could have its cash flows essentially wiped out if the default rate on the entire ABS crept above a low level - in the range of 5 to 7%. (To learn more, read Behind The Scenes Of Your Mortgage.)

All of a sudden, even the subprime mortgage lenders had an avenue to sell their risky debt, which in turn enabled them to market this debt even more aggressively. Wall Street was there to pick up their subprime loans, package them up with other loans (some quality, some not), and sell them off to investors. In addition, nearly 80% of these bundled securities magically became investment grade ('A' rated or higher), thanks to the rating agencies, which earned lucrative fees for their work in rating the ABSs. (For more insight, see What does investment grade mean?)

As a result of this activity, it became very profitable to originate mortgages - even risky ones. It wasn't long before even basic requirements like proof of income and a down payment were being overlooked by mortgage lenders; 125% loan-to-value mortgages were being underwritten and given to prospective homeowners. The logic being that with real estate prices rising so fast (median home prices were rising as much as 14% annually by 2005), a 125% LTV mortgage would be above water in less than two years.

Like I said... its true that interest rates played a part but the 800lb Guerilla in the room was these market makers, subprime lenders, and bribed credit ratings agencies.

The claim that that these loans were made because the government mandated lower lending standards is utterly and completely bogus. None of the big sub prime lenders were subject to any banking regulations at all (except for 1).

[dre]

There is nothing wrong or crooked with that

Bullshit there isnt! They were intentionally marketing products to investors that they knew were going to fail, and were betting on to fail. If you dont think thats crooked you have issues.

[Bonam]

Bullshit there isnt! They were intentionally marketing products to investors that they knew were going to fail, and were betting on to fail. If you dont think thats crooked you have issues.

I dunno if it's really "crooked". It comes from a different mindset. In the long term, markets and investments go up, and everyone can mutually benefit. But many people in the financial world are traders, not long-term investors. When you're trading, on the short term (less than decades), it's essentially a zero sum game. For everyone that makes money, someone else has to have lost it. Naturally, the mindset becomes very competitive, and anything that isn't illegal is typically viewed as fair game.

Further, buying insurance or hedging your position on something is quite different from "knowing it will fail". How many of these top 25 companies you've mentioned do you think specifically knew the bubble was going to pop in 2008?

Realistically, everyone knows that almost any investment will "fail" on some time scale or another. When you invest in the markets, you know the value of that investment will go down in the future. You know there will be future crashes where it might in fact lose lots of value. Yet you might still believe its a worthwhile investment, and you might advise a client to that effect.

How many of these top 25 really knew that the value of all the bundled products they were selling was literally going to go to zero, rather than just correcting and recovering later as all markets so often do?

I think you need some more specific evidence if you really want to widely accuse all these mortgage lenders of being "crooked".

Don't get me wrong, the aggregate effect of these practices was certainly harmful to the economy, harmful to many individuals, and we should find ways to make sure such a scenario does not unfold again. But I'm not convinced that all of the companies involved had evil in their hearts while doing this.

[jacee]

I dunno if it's really "crooked". It comes from a different minds

...

Don't get me wrong, the aggregate effect of these practices was certainly harmful to the economy, harmful to many individuals, and we should find ways to make sure such a scenario does not unfold again.

But I'm not convinced that all of the companies involved had evil in their hearts while doing this.

Some win big, some lose ... it's a huge ponzi scheme, a house of cards. And we've allowed it, rewarded.

And we all have to work together to fix it.

Pension funds will be supporting a huge bunch of us for the forseeable future.

So what laws do we need ?

Edited October 24, 2011 by jacee

[bush_cheney2004]

Some win big, some lose ... it's a huge ponzi scheme, a house of cards. And we've allowed it, rewarded.

And we all have to work together to fix it.

Pension funds will be supporting a huge bunch of us for the forseeable future.

There were no complaints when pension funds were riding high and reaping the benefits of an overheated market with crazy stock valuations, but when it all crashes down there are cries of corruption and malfeasance?

You want safety? Then accept far smaller returns to go with much less risk.

[Tilter]

Would agree that is was the fault of all players - Banks, investors, government, and consumers - who contributed to the housing/credit crash? Yup consumers should have been more careful, yup US gov't policy was horrible, and yup banks pushed predatory lending on customers using deceitful tactics.

If someone gets conned, they must be blamed for falling for it, but the con-man has to take blame too.

Ya think?

When an unemployed person can obtain a 99% no money down mortgage on a 500,000 buck house the system has failed and the buyer has lost any intelligence he may have been credited with before his stupid purchase.

[jacee]

Ya think?

When an unemployed person can obtain a 99% no money down mortgage on a 500,000 buck house the system has failed and the buyer has lost any intelligence he may have been credited with before his stupid purchase.

where are all these $500k subprime houses? The ones I saw being sold off en masse (in Florida) were definitely low end.

[WWWTT]

Ya think?

When an unemployed person can obtain a 99% no money down mortgage on a 500,000 buck house the system has failed and the buyer has lost any intelligence he may have been credited with before his stupid purchase.

Thats almost like blaming the victim of a crime!

Its very possible that some of those people actually thought they could not afford to buy a house with such a small down payment but were convinced by the loan company/bank to go ahead with the purchase.

Happens all the time!

WWWTT

[treehugger]

These people have been asked numerous times what they were protesting about, and every time they basically said they didn't really know, nothing specific etc. They are partially dressing like the hippies from the past and they are wannabees who don't have a clue what they want. It's time all of the governments are putting a stop to this.

GET OUT OF MY COUNTRY, YOU LOSERS!

[cybercoma]

It occurs to me that some people seem to use the excuse that businesses must chase profits and do whatever is in their economic best interests. They're amoral afterall. However, when people do the same thing by agreeing to free loans, fully expecting their property values to continue increasing as they have "always" done, they're irresponsible scum. Why wouldn't the consumers also be profit seeking and do whatever it is that's in their own financial interests? If they could get free credit, why wouldn't they? If they could get a loan beyond their means, but the value of the home is expected to increase by all available knowledge, why wouldn't they? We seem to waive off these decisions when corporations or banks make them as just the way business is done. However, it's inconceivable when consumers do business in the same way?

I find this logically inconsistent on both sides of the spectrum because it works vice versa. If we're going to condemn homeowners for not being "responsible" borrowers, we must also fault the banks for not being "responsible" lenders. If we fault corporations for seeking profits by any means necessary, we must also fault the consumers for seeking more by any means possible (ie, taking loans they can't pay back). If not this, then we must accept that the notion of by-any-means-necessary is just how economics works. Should we accept this position then it is the responisibility of the government to create responsible regulations that do not allow for people to harm one another in their financial transactions. It's up to the government then to ensure organic solidarity, such that the various parts of society do not go to war with each other.

[Moonlight Graham]

That's been essentially my point the entire time. I however must emphasize the other side as people always tend to blame one side (the bankers). Like the saying goes, pigs get slaughtered.

Good then we agree. It's just that you have been defending the bankers etc. more than the others, or should I say blaming the others more than the banks etc.

Not sure if this is your argument, but they should occupy wall street AND Washington. And i'm not sure why there are so many "occupy" movements in Canada, our corps & investors & politicians aren't saints, but Canadians didn't cause this recession. Maybe they should get on some buses and go down to NYC and Washington.

Edited October 24, 2011 by Moonlight Graham

[Shwa]

These people have been asked numerous times what they were protesting about, and every time they basically said they didn't really know, nothing specific etc.

Cite?

They are partially dressing like the hippies from the past and they are wannabees who don't have a clue what they want.

They are already getting what they want, for free.

It's time all of the governments are putting a stop to this.

Yes, outlaw peaceful protests. Now I see where you are going with this...

GET OUT OF MY COUNTRY, YOU LOSERS!

YOU FIRST!

Edited October 24, 2011 by Shwa

[dre]

I dunno if it's really "crooked". It comes from a different mindset. In the long term, markets and investments go up, and everyone can mutually benefit. But many people in the financial world are traders, not long-term investors. When you're trading, on the short term (less than decades), it's essentially a zero sum game. For everyone that makes money, someone else has to have lost it. Naturally, the mindset becomes very competitive, and anything that isn't illegal is typically viewed as fair game.

Further, buying insurance or hedging your position on something is quite different from "knowing it will fail". How many of these top 25 companies you've mentioned do you think specifically knew the bubble was going to pop in 2008?

Realistically, everyone knows that almost any investment will "fail" on some time scale or another. When you invest in the markets, you know the value of that investment will go down in the future. You know there will be future crashes where it might in fact lose lots of value. Yet you might still believe its a worthwhile investment, and you might advise a client to that effect.

How many of these top 25 really knew that the value of all the bundled products they were selling was literally going to go to zero, rather than just correcting and recovering later as all markets so often do?

I think you need some more specific evidence if you really want to widely accuse all these mortgage lenders of being "crooked".

Don't get me wrong, the aggregate effect of these practices was certainly harmful to the economy, harmful to many individuals, and we should find ways to make sure such a scenario does not unfold again. But I'm not convinced that all of the companies involved had evil in their hearts while doing this.

I dunno if it's really "crooked". It comes from a different mindset. In the long term, markets and investments go up, and everyone can mutually benefit. But many people in the financial world are traders, not long-term investors. When you're trading, on the short term (less than decades), it's essentially a zero sum game. For everyone that makes money, someone else has to have lost it. Naturally, the mindset becomes very competitive, and anything that isn't illegal is typically viewed as fair game.

Well I guess it just depends how you personally define crooked. If a car salesmen sells me a car without disclosing the fact that its packed full of defective parts, and then pays an automobile inspector money to ignore the problems and give the car a TRIPLE AAA report, then I figure hes already commited fraud. So now since he knows that he sold me a lemon, he makes a few extra dollars in profit by betting his friend 50 bucks that piece of shit wont get me home. My guess is most people would think thats crooked.

And thats why companies like GS and ML are being looked at for securities fraud. It really is just garden variety fraud. Well see what happens though.

How many of these top 25 really knew that the value of all the bundled products they were selling was literally going to go to zero, rather than just correcting and recovering later as all markets so often do?

NO no you misunderstood. Those top 25 are tertiary lenders. They arent the market makers, and they arent the ones creating the securities. They would just origionate mortgage contracts and sell the income streams those contracts represented to companies like Merril Lynch and Goldman Sachs. Those companies definately knew these loans were risky and that unless realestate prices kept increasing they would start to fail in big numbers, but like I said... securitization changed the risk management model. It was profitable to origionate even doomed loans because you werent going to keep them on your books anyways.

Realistically, everyone knows that almost any investment will "fail" on some time scale or another. When you invest in the markets, you know the value of that investment will go down in the future. You know there will be future crashes where it might in fact lose lots of value. Yet you might still believe its a worthwhile investment, and you might advise a client to that effect.

Well... You would lose money if short sold investments you thought were worthwhile. They obviously saw problems with these securities, and chose to not disclose them to investors. The SEC considers this securities fraud, as do the other financial institutions that bought these securities. Its going to be fun few years for the market makers.

Edited October 25, 2011 by dre

[blueblood]

Well if you can prove it then Id love to hear. But Iv looked for evidence of this myself, and challenged about a dozen other people that parroted this claim, and its always crickets.

Again... no they dont. They have completely different clients. The entire purpose these businesses emerged was to cater to a market where FDIC insured banks wont do business. And those CRA bound FDIC Insured commercial banks? Turns out they were the most responsible lenders out there.

That would not have made an iota of difference to the loans being made by all the thrifts, trusts, and mortgages doing all that sub prime lending. They were charging way way more than the fed rate anyways. Thats why theyre called "SUB PRIME".

Again you have to follow the money. You dont seem to understand where the vast majority of it came from. Money created by commercial banks subject to the fed rate and rules was not being used for subprime loans. This money was raised entirely from private investors and in many cases the rates being charged were 8 or 10 times the fed rate anyways.

Heres a decent primer on how those sub prime loans got capitalized.

Like I said... its true that interest rates played a part but the 800lb Guerilla in the room was these market makers, subprime lenders, and bribed credit ratings agencies.

The claim that that these loans were made because the government mandated lower lending standards is utterly and completely bogus. None of the big sub prime lenders were subject to any banking regulations at all (except for 1).

Chirp Chirp Chirp *cricket noises

My link

And then there's the book meltdown.

I don't think your following the money, those speculators have to have a reason to dump all sorts of money in the housing market. Did you think those speculators arbitrarily put a boatload of cash into the housing market on a whim? the forbes article clearly states that it was low interest rates which initially inflated the bubble. The speculation market you are talking about is acting like adrenaline. The article also clearly states how the government did clearly play a role with the HUD, the CRA, Fannie/Freddie, the Fed, and whatever back room shenanigans they could come up with.

Another interesting tidbit is that those 25 mortgage lenders you like to trot out only accounted for slightly more than 5% of mortgages during the housing boom. So I don't know what how you think that 5% of all mortgages caused the system to collapse.

I'll go with the guy who accurately predicted the housing bubble, Peter Schiff. He blames the government and was one of few people to call the housing bubble. Following the money it simply starts with the Fed and their low interest rates. Your speculation theory was chasing the money, not causing the initial inflation of the bubble. It wasn't just sub-prime, it was the entire mortgage market.

It seems to me forbes magazine shot your argument full of holes, sorry.

[blueblood]

Good then we agree. It's just that you have been defending the bankers etc. more than the others, or should I say blaming the others more than the banks etc.

Not sure if this is your argument, but they should occupy wall street AND Washington. And i'm not sure why there are so many "occupy" movements in Canada, our corps & investors & politicians aren't saints, but Canadians didn't cause this recession. Maybe they should get on some buses and go down to NYC and Washington.

Yah, that sounds right, head to both places if they want to protest. I think there are enough occupy protests here in Canada for the same thing as the USA, uni grads are realizing that some of their degrees don't necessarily get them employment and naturally they are frustrated. I can't blame them for being frustrated because of the expense they paid to get said degree. How would you feel if you just got your degree and the only job you could get that paid well was roughnecking out in Alberta, oh and you get to work with someone who barely has their grade 12? I understand them being frustrated, but at the same time, if they are so upset about people in the finance sector making a killing, why didn't they take finance while they were at uni and join in the party? Had some of those kids taken management, commerce, economic or finance classes at uni, they would know how things are done and might not be so frustrated, and knowing how things are done could work around it and spend their time finding work instead of protesting.

[dre]

Chirp Chirp Chirp *cricket noises

My link

And then there's the book meltdown.

I don't think your following the money, those speculators have to have a reason to dump all sorts of money in the housing market. Did you think those speculators arbitrarily put a boatload of cash into the housing market on a whim? the forbes article clearly states that it was low interest rates which initially inflated the bubble. The speculation market you are talking about is acting like adrenaline. The article also clearly states how the government did clearly play a role with the HUD, the CRA, Fannie/Freddie, the Fed, and whatever back room shenanigans they could come up with.

Another interesting tidbit is that those 25 mortgage lenders you like to trot out only accounted for slightly more than 5% of mortgages during the housing boom. So I don't know what how you think that 5% of all mortgages caused the system to collapse.

I'll go with the guy who accurately predicted the housing bubble, Peter Schiff. He blames the government and was one of few people to call the housing bubble. Following the money it simply starts with the Fed and their low interest rates. Your speculation theory was chasing the money, not causing the initial inflation of the bubble. It wasn't just sub-prime, it was the entire mortgage market.

It seems to me forbes magazine shot your argument full of holes, sorry.

I already pointed out why you cant pin too much of this on rates. First of all they dont apply to any of the tertiary lenders that triggered the crisis. Furthermore the rates were not reduced until after Bush was elected... Housing prices had already almost tripled between 1996 and then.

So go ahead and explain... How did the reduced rates heat up the realestate market 5 years before they even came into existance?

http://www.seodisco.com/images/home-values.gif

Sorry... rate reductions came after the market was already super-heated.

You know what DOES correlate with the timeframe though? The growth of CDSs, CDOs, and the rapid expsansion of derivatives and securitization. You know... the credit default swap market that grew from nothing to 50 TRILLION dollars over the exact same timeframe housing prices increased?

And the only crickets that came around here were when I asked you for proof of your claim that the government forced low standards on lenders, and you produced absolutly no supporting evidence. Because thats a myth of course. Iv read the CRA and it just aint there. Iv looked for it in FDIC regulations and its not there either... and even if it was none of the big lenders accepted FDIC deposits.

Edited October 25, 2011 by dre