My view on why our economy is pure shit.

[samjones]

fair value pricing was simply a way for banks to knowingly misrepresent the value of the assets on their books to be able to loan more money to finance a bubble.

The housing crisis was in many ways just an accounting scandal.
When they asked Robert Rubin how come he didn't know his bank was virtually bankrupt he said, any mention of the mortgage securities was off balance sheet and referenced only by a foot note at the back of any statements he saw.

After Enron, SOX, was supposed to fix that. It failed 100% with financial clarity.

The solution is new accounting standards that are accurate and understandable to a HS graduate.

This is a government function that they have failed on very badly. There is no capitalism without good accounting.

Wild to see you arguing for more regulation, Ed. I think it's unfair to characterize SOX as a failure. Just too little, too late. By the time the SOX provisions really started kicking in the damage was done. We'll still be able to judge SOX more fairly, possibly as a success as time goes on, but before we can do that there has to be a ton of development of the concept of corporate governance both at home and abroad.

That's unlikely because American Capitalism traditionally views regulation as bad and corporate governance as just another cost center. It's a check box -

[ ] Implemented sound accounting practices.

And any effort to view these concepts in a more nuanced way is bound to take a back seat to increasing market share and raising stock prices. Corporate Boards are not comprised of people who come from the support areas...... They're a bunch of rich guys who just want to get richer.

In any case, I respectfully do not agree with you that scandalous accounting practices caused the housing crisis of '08. The systemic over-valuation of real estate by the banking and investing industry was mostly above-board from a legal perspective. An entirely different type of legislation will be required to prevent this from happening in the future. Nobody's talking about that.

 

[Uncensored2008]

Wild to see you arguing for more regulation, Ed. I think it's unfair to characterize SOX as a failure. Just too little, too late.

SOX is akin to a builder noticing that using a 20 oz. framing hammer to drive finishing nails leaves dents in the paneling. So to solve this, a mandate to use a 16 pound sledge hammer is passed.

By the time the SOX provisions really started kicking in the damage was done.

You underestimate SOX, the damage it does is massive.

We'll still be able to judge SOX more fairly, possibly as a success as time goes on, but before we can do that there has to be a ton of development of the concept of corporate governance both at home and abroad.

SOX is the heavy hand of the government, doing far more damage than good.

That's unlikely because American Capitalism traditionally views regulation as bad and corporate governance as just another cost center. It's a check box -

[ ] Implemented sound accounting practices.

And any effort to view these concepts in a more nuanced way is bound to take a back seat to increasing market share and raising stock prices. Corporate Boards are not comprised of people who come from the support areas...... They're a bunch of rich guys who just want to get richer.

Ah, so hand it to government. A bunch of rich guys who have board with mere wealth and found POWER to be more alluring.

Great plan!

[/quote]In any case, I respectfully do not agree with you that scandalous accounting practices caused the housing crisis of '08. The systemic over-valuation of real estate by the banking and investing industry was mostly above-board from a legal perspective. An entirely different type of legislation will be required to prevent this from happening in the future. Nobody's talking about that.[/QUOTE]

Isn't it accounting that is in the business of valuation of items?

 

[samjones]

Isn't it accounting that is in the business of valuation of items?

So black and white..... unable to impose the quality of nuance on anything.

I wouldn't say that most of the accounting practices that led to the housing bubble and the crash that folllowed were "illegal" or unusual. In fact, mark to market was imposed on Fannie and Freddie. They had no choice. The other practices of moving subprimes off the balance sheet and securitizing those loans and selling them to people who didn't understand their value...... while therer were certainly illegal acts that happened, I wouldn't say that any of those things were illegal in and of themselves.

 

[Uncensored2008]

So black and white..... unable to impose the quality of nuance on anything.

Thanks Humpty - words mean precisely what you wish them to mean at any given moment, got it.

I wouldn't say that most of the accounting practices that led to the housing bubble and the crash that folllowed were "illegal" or unusual. In fact, mark to market was imposed on Fannie and Freddie.

They are unfortunate victims... Poor dears. Frank Raines only wanted to do what was right, but was FORCED to engage in all that nasty fraud...

BTW, I never said that the practices were illegal. When the legislature is in bed with the crooks, theft is legal. Ask Frank and Dodd.

They had no choice.

Of course not.

{Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit.}

» 6 ex-Fannie, Freddie executives charged with civil fraud over risky subprime mortgages » News -- GOPUSA

They were forced to lie, millions of dollars in bonuses were at stake.

The other practices of moving subprimes off the balance sheet and securitizing those loans and selling them to people who didn't understand their value...... while therer were certainly illegal acts that happened, I wouldn't say that any of those things were illegal in and of themselves.

And?

 

[samjones]

So black and white..... unable to impose the quality of nuance on anything.

Thanks Humpty - words mean precisely what you wish them to mean at any given moment, got it.

I wouldn't say that most of the accounting practices that led to the housing bubble and the crash that folllowed were "illegal" or unusual. In fact, mark to market was imposed on Fannie and Freddie.

They are unfortunate victims... Poor dears. Frank Raines only wanted to do what was right, but was FORCED to engage in all that nasty fraud...

BTW, I never said that the practices were illegal. When the legislature is in bed with the crooks, theft is legal. Ask Frank and Dodd.

They had no choice.

Of course not.

{Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit.}

» 6 ex-Fannie, Freddie executives charged with civil fraud over risky subprime mortgages » News -- GOPUSA

They were forced to lie, millions of dollars in bonuses were at stake.

The other practices of moving subprimes off the balance sheet and securitizing those loans and selling them to people who didn't understand their value...... while therer were certainly illegal acts that happened, I wouldn't say that any of those things were illegal in and of themselves.

And?

And???? And I'm simply pointing out that the problems that got us into this mess are still with us and aren't really being talked about.

And they never will be, because all anybody really wants to do is rant about government interference with the free market and how much they hate the fact that CRA forced some banks to loan very little money to very few minorities.

Conversations about the root causes are simply washed away by Ron Paul nutjobs who have no agenda other than an immediate return to the Stone Age.

It's too bad.

 

[Uncensored2008]

And???? And I'm simply pointing out that the problems that got us into this mess are still with us and aren't really being talked about.

The "problems" that got us into this mess are rampant fraud and corruption. That we have two of the biggest frauds behind this, Frank and Dodd, as the supposed guardians of the hen house, does indicate that the problems persist.

And they never will be, because all anybody really wants to do is rant about government interference with the free market and how much they hate the fact that CRA forced some banks to loan very little money to very few minorities.

It's all designed to funnel money into the gaping maw of looters. Government interference in the market is the means of looting. Without government involvement, men like Dodd, Frank and Raines have nothing to sell to crooks like Angelo Mozilo.

It's VITAL that we increase regulation, so that more favors can be sold by the Dodd's and Frank's of the world. Hell, if the market is left to the invisible hand, then sure, you won't have the crashes of 2008, but how will congress scoop billions into their pockets?

Come on, think about the crooks - they NEED government regulation in order to operate!

Conversations about the root causes are simply washed away by Ron Paul nutjobs who have no agenda other than an immediate return to the Stone Age.

It's too bad.

Looting is oh so cosmopolitan! Only a Neanderthal would object to regulations designed to aid the transfer of wealth from the market to the looters.

 

[samjones]

And they never will be, because all anybody really wants to do is rant about government interference with the free market and how much they hate the fact that CRA forced some banks to loan very little money to very few minorities.

It's all designed to funnel money into the gaping maw of looters. Government interference in the market is the means of looting. Without government involvement, men like Dodd, Frank and Raines have nothing to sell to crooks like Angelo Mozilo.

This just lacks any semblance of logic or consideration.

Barney Frank and Chris Dodd (gone and gone) were in cahoots with (I assume you mean in cahoots with Angelo Mozilo) to illegally profit by passing legislation that would entice Countrywide (gone) into selling homes in CRA areas (that they probably weren't required to sell in any way) so that they could sell those bad loans to Frank Raines (Fannie - gone (let's face it)) and this scheme enriched all of them....Even though they were all already incredibly rich and powerful before anyone ever heard of a subprime loan or CRA and even though this was the undoing of all of them, you still maintain that they were looting..... something..... from someone........


Yeaaahhhhh...... See, this is the problem with talking to the Ron Paul whackjobs. They make zero sense.

 

[EdwardBaiamonte]

And they never will be, because all anybody really wants to do is rant about government interference with the free market and how much they hate the fact that CRA forced some banks to loan very little money to very few minorities.

It's all designed to funnel money into the gaping maw of looters. Government interference in the market is the means of looting. Without government involvement, men like Dodd, Frank and Raines have nothing to sell to crooks like Angelo Mozilo.

This just lacks any semblance of logic or consideration.

Barney Frank and Chris Dodd (gone and gone) were in cahoots with (I assume you mean in cahoots with Angelo Mozilo) to illegally profit by passing legislation that would entice Countrywide (gone) into selling homes in CRA areas (that they probably weren't required to sell in any way) so that they could sell those bad loans to Frank Raines (Fannie - gone (let's face it)) and this scheme enriched all of them....Even though they were all already incredibly rich and powerful before anyone ever heard of a subprime loan or CRA and even though this was the undoing of all of them, you still maintain that they were looting..... something..... from someone........


Yeaaahhhhh...... See, this is the problem with talking to the Ron Paul whackjobs. They make zero sense.

who can say with a straight face that the liberals' intention to subvert the Republican free market in order to get people into homes the Republican free market said they could not afford did not cause the current crisis?

 

[samjones]

It's all designed to funnel money into the gaping maw of looters. Government interference in the market is the means of looting. Without government involvement, men like Dodd, Frank and Raines have nothing to sell to crooks like Angelo Mozilo.

This just lacks any semblance of logic or consideration.

Barney Frank and Chris Dodd (gone and gone) were in cahoots with (I assume you mean in cahoots with Angelo Mozilo) to illegally profit by passing legislation that would entice Countrywide (gone) into selling homes in CRA areas (that they probably weren't required to sell in any way) so that they could sell those bad loans to Frank Raines (Fannie - gone (let's face it)) and this scheme enriched all of them....Even though they were all already incredibly rich and powerful before anyone ever heard of a subprime loan or CRA and even though this was the undoing of all of them, you still maintain that they were looting..... something..... from someone........


Yeaaahhhhh...... See, this is the problem with talking to the Ron Paul whackjobs. They make zero sense.

who can say with a straight face that the liberals' intention to subvert the Republican free market in order to get people into homes the Republican free market said they could not afford did not cause the current crisis?

In as much as I can say with a straight face that the cart does not come before the horse...

The current crisis subverted liberals' intentions to get people into homes.... and I will agree with you that extending home ownership to all socioeconomic classes was (and still is) a liberal goal.

Blaming this crisis on subprime loan failures makes about as much sense as blaming this crisis on high unemployment or on fallling tax revenue.....

The crisis came first. When you systemically overvalue an asset there will ultimately be a price to pay.

 

[EdwardBaiamonte]

The crisis came first.

the crisis was caused by liberal subversion of the Republican free market

When you systemically overvalue an asset there will ultimately be a price to pay.

so?????????????

 

[samjones]

The crisis came first.

the crisis was caused by liberal subversion of the Republican free market

The "crisis" happened during the 6 years when Republicans held the White House and both houses of Congress.

So let's just consider that theory another crock of fucked up bullshiit

The banks loved the subprimers because the subprimers were profitable. Pure and simple. When the bubble popped (for everybody) the subprimers walked away from their homes. The rest of us just ate the loss. CRA is a drop in a subprime bucket floating in a housing bubble ocean.

It's the scale that you don't understand.l

 

[EdwardBaiamonte]

The "crisis" happened during the 6 years when Republicans held the White House and both houses of Congress.

So let's just consider that theory another crock of fucked up bullshiit

A liberal is as easy as a child, always.

You've got in office confused with in power. BO had a supermajority and could not get a public option or cap n trade, remember??? W wanted to privatize SS, remember??? 100% of the energy to prevent liberals from subverting the Republican free market in order to get folks into homes they could not afford was Republican and has been since Jefferson founded the Party in 1791. Moreover, since independents decide elections you've got to expect that few politicians will be able to break hard left or hard right regardless of their real positions.

Senate Banking Committee, Oct. 16, 2003:

Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.

 

[Uncensored2008]

This just lacks any semblance of logic or consideration.

Ah, the Horse Laugh fallacy.

Does the statement that the fraud engaged in was designed to funnel money to looters actually lack logic?

Well, no - but since you have not rational retort, you pull out a trusty logical fallacy, and appeal to ridicule.

Whether you agree or disagree with my statement, whether I am right, wrong or it is a matter of opinion - you're reply was logical fallacy.

Barney Frank and Chris Dodd (gone and gone) were in cahoots with (I assume you mean in cahoots with Angelo Mozilo) to illegally profit by passing legislation that would entice Countrywide (gone) into selling homes in CRA areas

A straw man fallacy.

What I mean is what I write.

What I wrote is that without government interference, then bureaucrats and legislators have nothing to sell to corrupt business interests.

Try dealing with the message instead of fabricating an argument and assigning it to me because you think you can defeat it.

 

[Uncensored2008]

In as much as I can say with a straight face that the cart does not come before the horse...

The current crisis subverted liberals' intentions to get people into homes.... and I will agree with you that extending home ownership to all socioeconomic classes was (and still is) a liberal goal.

Blaming this crisis on subprime loan failures makes about as much sense as blaming this crisis on high unemployment or on fallling tax revenue.....

The crisis came first. When you systemically overvalue an asset there will ultimately be a price to pay.

Still claiming that banks set the selling price of property, Sam?

I thought we put this bit of nonsense to bed weeks ago.

Your claim is absurdity, and laughable. The seller has an asking price, which the buyer can counter. The asset value is the final, negotiated price the two agree upon. The bank's role is to provide financing. They have NOTHING to do with setting the sale price of the property. The most the bank can do is refuse finance if they view the price greater than than the appraised value, making the risk too great.

 

[Uncensored2008]

The "crisis" happened during the 6 years when Republicans held the White House and both houses of Congress.

Now you know that simply isn't true, Sam.

Why do you attempt to peddle this partisan crock of fucked up bullshit?

So let's just consider that theory another crock of fucked up bullshiit

I wish you would - you know full well that what you claim is false.

The banks loved the subprimers because the subprimers were profitable.

Front end sales, Sam. As long as the local lender has underwriters, they naturally will seek as many sales as possible - it's how they make money.

Your attempt to paint them as "sinister" and evil is infantile.

Pure and simple. When the bubble popped (for everybody) the subprimers walked away from their homes. The rest of us just ate the loss. CRA is a drop in a subprime bucket floating in a housing bubble ocean.

More falsehoods, Sam.

CRA and it's counterpart, GLB - set the blaze that burned the market down. That the flame from the match was small compared to the resultant conflagration is irrelevant. Shall I just link back to where I defeated your silly claims?

It's the scale that you don't understand.l

He understand just fine. You deny causation for partisan reasons, despite all facts proving you wrong.

 

[samjones]

Still claiming that banks set the selling price of property, Sam?

Nope - only how much they're willing to loan on the property and how much value they ascribe to it for their books.

I'm not so stupid to think that what a bank will loan on a property is necessarily the same as what the selling price of a property ought to be.

I'll stick a fork in you now, you're done....

 

[samjones]

The "crisis" happened during the 6 years when Republicans held the White House and both houses of Congress.

So let's just consider that theory another crock of fucked up bullshiit

A liberal is as easy as a child, always.

You've got in office confused with in power. BO had a supermajority and could not get a public option or cap n trade, remember??? W wanted to privatize SS, remember??? 100% of the energy to prevent liberals from subverting the Republican free market in order to get folks into homes they could not afford was Republican

HUD got us into this mess - really. HUD told Fannie to make those mid-low income loans. GWB didn't need to work with that pesky congress or really do much of anything other than call up Al Jackson and tell him that he thought there were too many risky loans being made......

period.

GWB didn't. He just sat there and watched prices rise and rise and rise while his banking friends were getting rich off the subprimers.

6 years or Republicans in the White House and in both houses of Congress. The Dems weren't even at the party and you're trying to accuse them of screwing the pooch.

*IN* *FACT*, things started getting a little better after the Dems took Congress back in 2007..... Not much better, but subprime lending dropped and the prices of homes were returning to a normal level.... then everything fell off the cliff.

Basically, there's no way GWB and the Republicans are going to get away with disavowing responsibility for this mess.... sucks being them.

If only all our houses were paid for with gold.

 

[Uncensored2008]

Nope - only how much they're willing to loan on the property and how much value they ascribe to it for their books.

If the value on the books is greater different than the appraised value, they are engaging in fraud and can be prosecuted.

Again, you're talking in circles because you don't really grasp the talking points you're reciting.

I'm not so stupid to think that what a bank will loan on a property is necessarily the same as what the selling price of a property ought to be.

What "ought" the selling price be?

See, you dance around because the words and concepts you toss about are not your own. What the SOURCE of your bullshit is proposing, is that the government set the value of real property. Now I'm guessing that you personally don't really support this, which is why you keep tripping over your dick. Your arguments don't match your conclusions, because they aren't really your arguments.

I'll stick a fork in you now, you're done....

No doubt Sam, you're;

 

[samjones]

Nope - only how much they're willing to loan on the property and how much value they ascribe to it for their books.

If the value on the books is greater different than the appraised value, they are engaging in fraud and can be prosecuted.

Mark to market accounting changes the value on the books from day to day based on market conditions, no?

Historical value accounting would take a more conservative (small "c") approach to valuing homes. Would have prevented the bubble and the need for the bailout.

 

[itfitzme]

So, lets see how it worked.

We live in a capitalist economy. And home ownership is one of the few ways for people to store the value of their hard work and see that it continues to retain that value.

The value of property has a history of continuing to retain value and the expectation of the future is based on past experience

But, there is a crap load of money in it, in an economy that is so efficient that people are fighting to make sure they have a job. And everyone wants to get rich.

Being able to leverage off of one home, to purchase a second, third and fourth becomes a method of making money. There was a lot of flipping. And flipping has no vested long term interest.

Of course, when a piece of property turns over, there is an industry called real estate agents that benefit at 6% total for each sale. They have no long term vested interest.

Mortgage companies, that put the purchaser together with the lender, make a commission off the transaction. The more transactions, the more money. So they have no long term vested interest.

Our capitalist economy has a history of successfully aiding growth and new home purchases by reselling mortgages to businesses for the purpose of freeing up the capital of the originator.

The lender then gets rid of the loan and has no long term vested interest.

These mortgages are packaged and resold, becoming an investment opportunity for others. At that level, they become just another security. They are no different than any other stock, just another investment with little long term vested interest.

And, of course, a whole market exists for day trading, trying to catch those day to day fluctuations, buying low and selling high

In order to mitigate risk, credit default swaps were created that provided insurance against the possibility of the original loan defaulting.

Then the market began to saturate and values didn't climb as history suggested. The flippers, having no long term interest and no downside on default, began walking away from those second and third mortages.

This began to cascade as defaulting mortgages began to cut of credit and supply of credit shut down demand for properties.

People, who were in it for the long haul, had taken out seconds to pay of credit card bills. Now saturated with payment, unable to either flip themselves, not a short term plan, but the typical moving up sort of thing, were stuck. So they quite purchasing.

And demand fell for consumer products. Unemployment rose, people with mortgages they couldn't get out of lost their jobs and defaulted.

Just like the fractional reserve banking system relies on the money multiplier to increase the flow of money, the process reversed, now it became a defaulting on credit multiplier.

And as all those repackaged and resold mortgage backed securities lost value.

But that's okay, after all, they were protected by the credit default swaps.

Except, gosh darn it, only a few very big, to big to fail, banks owed on all of them.

Oh, and don't forget, on the way up credit card companies were thrilled to hand out revolving credit to happy little home owners. But as they began to default, the credit card companies raised rates on "similar" demographics, or anyone they could justify. And seeing as our entire economy depends on the accumulation of revolving credit, demand fell for consumer product.

And in a perfect storm of defaults, freezing credit markets, falling demand, rising unemployment, valueless securities, and all that, basically insurance policies due all at once, the entire thing just tanked together.

An economy that relies on the accumulation of credit to fuel the economy is primed to collapse when accumulation of credit shuts down.

Something like that.

But hey, that is how capitalism works. It has worked like this since before the U.S. was ever created. When fewer people got to be part of the game, it wasn't quite so susceptible. But life wasn't any better then either. Now, every one can be a capitalist. You to can own a home, you to can be a landlord. At least you can hope. With a hard work, a little luck, and the willingness to spend less than anyone else, the fortitude to not be part of the herd and have a credit card, the smarts to pick up food at the food bank (it's free you know) rather than waste your money at Food max, over the decades you can accumulate enough capital to buy that first piece of property.

With a little luck, you will be ready to purchase when home prices tank again. It'll happen. That is how capitalism works. And if you do it right, you buy a house, you put your wife as the owner of the second one, you put the third under the name of your kid. And now you have a property management business. And, as prices rise again, you leverage off the first mortgages to get that fourth, fifth and sixth piece of property. Some you rent out rooms in. It's a pain because you have to do the upkeep, but you get a shit load. Others you rent out the whole thing to some couple unfortunate to end up with a girl and a boy (gotta have a room for each and a two bedroom apartment won't cut it.)

And now your set. Your kids collect the rent, you do the management, and your set for retirement.

Something like that, eh?