My view on why our economy is pure shit.

[editec]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

WE allowed the decision makers (the lenders) to make decisons about something that they knew they wouldn't be held accountable for (the long term health of the loans they made).

Now that is a formula for disaster.

Why everyone can't see this event for what it is (a truly stupidly designed business model) simply astounds me.

 

[samjones]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

WE allowed the decision makers (the lenders) to make decisons about something that they knew they wouldn't be held accountable for (the long term health of the loans they made).

Now that is a formula for disaster.

Why everyone can't see this event for what it is (a truly stupidly designed business model) simply astounds me.

I don't know who you think "WE" is. *I* didn't allow lenders to do anything.

But, yes, mark-to-market accounting vastly overstated the value of mortgage backed securites and when that balloon popped to pretty much killed Investment Banking and the Auto Industry and it chopped the American economy off a the knees.

I agree. It was a truly stupidly designed business model. Has it changed? I don't think so.

 

[EdwardBaiamonte]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

not if you are a liberal

WE allowed the decision makers (the lenders) to make decisons about something that they knew they wouldn't be held accountable for (the long term health of the loans they made).
Now that is a formula for disaster.

as if were going to get a bunch of soviet regulators to make sure all middlemen and brokers in all industries are held responsible for what people buy and sell!! Its so goofy and liberal as not to be believed.

Why everyone can't see this event for what it is (a truly stupidly designed business model) simply astounds me.

a model where people buy and sell based on what they think is truly stupid??? Are you a communist?

 

[EdwardBaiamonte]

I agree. It was a truly stupidly designed business model. Has it changed? I don't think so.

why doesn't the genius liberal try to find some mortgage backed securities to buy then? Has it changed?

 

[EdwardBaiamonte]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

yes easy, 1) the liberals organized much of the Federal government to get people into homes the Republican free market said they could not afford, 2) after that you can blame huge weaknesses in our accounting methods 3) history itself, which showed that housing prices don't decline and 4) the Federal Reserve for lowering interest rates and not knowing that they were inflating a huge bubble.

 

[EdwardBaiamonte]

WE allowed the decision makers (the lenders) to make decisons about something that they knew they wouldn't be held accountable for (the long term health of the loans they made).

of course that is absurd since the bankers were accountable and mostly went bankrupt as a result!!

 

[samjones]

I agree. It was a truly stupidly designed business model. Has it changed? I don't think so.

why doesn't the genius liberal try to find some mortgage backed securities to buy then? Has it changed?

As far as I can tell it's pretty easy to get into a Mortgage-backed ETF these days.... You agree?

 

[EdwardBaiamonte]

I agree. It was a truly stupidly designed business model. Has it changed? I don't think so.

why doesn't the genius liberal try to find some mortgage backed securities to buy then? Has it changed?

As far as I can tell it's pretty easy to get into a Mortgage-backed ETF these days.... You agree?

the issue was, has it changed?? The liberal said it hadn't changed as if the market hadn't adjusted to a huge huge crisis

 

[itfitzme]

Here are a couple of interesting papers. They detail the role of "flippers" in the 2007 recession and the role of consumer credit in the Great Depression.

Real Estate Investors, the Leverage Cycle, and the Housing Market Crisis[/B], Andrew Haughwout Donghoon Lee Joseph Tracy Wilbert van der Klaauw Staff Report no. 514 September 2011

"We explore a mostly undocumented but important dimension of the housing market crisis: the role played by real estate investors. Using unique credit-report data, we document large increases in the share of purchases, and subsequently delinquencies, by real estate investors. In states that experienced the largest housing booms and busts, at the peak of the market almost half of purchase mortgage originations were associated with investors. In part by apparently misreporting their intentions to occupy the property, investors took on more leverage, contributing to higher rates of default."

------------------------------------

The Great Depression as a Credit Boom Gone Wrong by Barry Eichengreen University of California, Berkeley Department of Economics Kris Mitchener Santa Clara University Revised, August 2003

---------------------------------

Then take a look at consumer credit through the recession. You will need to convert to some sort of acceleration to see how the recession begins shortly after it begins to decelerate. Then, as the recession eases, consumer credit begins to accelerate once again.

However you arrange the causality, speculation in the real estate market and consumer credit played a big role in both the rise and fall.

 

[IndependntLogic]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

yes easy, 1) the liberals organized much of the Federal government to get people into homes the Republican free market said they could not afford, 2) after that you can blame huge weaknesses in our accounting methods 3) history itself, which showed that housing prices don't decline and 4) the Federal Reserve for lowering interest rates and not knowing that they were inflating a huge bubble.

So what do you blame the Conservative Republicans for, in all that?

Just curious as to the objectivity here.

 

[snjmom]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

yes easy, 1) the liberals organized much of the Federal government to get people into homes the Republican free market said they could not afford, 2) after that you can blame huge weaknesses in our accounting methods 3) history itself, which showed that housing prices don't decline and 4) the Federal Reserve for lowering interest rates and not knowing that they were inflating a huge bubble.

bankers-committed-fraud-to-get-bigger-bonuses

In 1988, the Basel Accord established international risk-based capital requirements for deposit-taking commercial banks. In a byproduct of the calculations of what constituted mortgage-related risk (traditional mortgage loans have long maturities and are illiquid), lenders were expected to set aside substantial reserves; however, “marketable securities” that could theoretically be sold easily would not require much in the way of reserves.

To free up reserves for more productive pursuits, banks made a wholesale shift from originating and holding mortgages to packaging them and holding mortgage assets in a securitized form.

That lessened asset-quality considerations and ushered in the new era of asset-liquidity considerations.

Meanwhile, over at the U.S. Commodities Futures Trading Commission (CFTC), the appointment of free-market disciple Wendy Gramm (wife of then-U.S. Sen. Phil Gramm (R-Tex.)) as chairman would result in her successful 1989 and 1993 exemption of swaps and derivatives from all regulation.

These actions would turn out to be consequential in the reign of terror that was to come…

In 1993, with her agenda accomplished, Wendy Gramm resigned from her CFTC post to take a seat on the Enron Corp. board as a member of its audit committee. We all know what happened there. (Wait a minute; I did say she was on the audit committee, right?)

Of course, Enron’s fraud and implosion became the poster child for deregulation run amok.

It ultimately helped spawn Sarbanes-Oxley legislation, which has its own issues, but nonetheless has prevented all kinds of fraud and inappropriate behavior on account of the fact that top executives have to attest to the veracity of, and sign off on, all financial documents and other “stuff.”

Now, don’t lose any sleep over the fact that of all the CEOs and CFOs and other muckety-muck multi-multi-millionaire executives that ran and still run the too-big-to-fail banks and the banks and investment banks that did fail or were merged (because they failed but were valuable to banks who wanted to make themselves bigger so they would never be allowed to fail) ever were charged with any crime under Sarbanes-Oxley.

snip

The Fed, under Chairman Greenspan, along with Robert Rubin and Larry Summers, was methodically deconstructing the foundation of the Depression-era Glass-Steagall Act.

The final breaching of the wall occurred in 1998, when Citibank was bought by Travelers.

The deal married Citibank, a commercial bank, with Travelers’ Solomon, Smith Barney investment bank, and the Travelers insurance business.

There was only one problem: The deal was clearly illegal in light of Glass-Steagall and the Bank Holding Company Act of 1956. However, a legal loophole in the 1956 BHC Act gave the new Citicorp a five-year window to change the landscape, or the deal would have to be unwound.

Phil Gramm – the fire breathing free-marketer, Texas senator, and then-chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs (and loving husband of Wendy) – rode to the rescue, propelled by a sea of more than $300 million in lobbying and campaign contributions.

In 1999, in the ultimate proof that money is power, U.S. President Bill Clinton signed into law the Gramm-Leach-Bliley Financial Services Modernization Act, at once doing away with Glass-Steagall and the 1956 BHC Act, and crowning Citigroup Inc. (NYSE:C) as the new “King of the Hill.”

From his position of power, Sen. Gramm consistently leveraged his Ph.D. in economics and free-market ideology to espouse the virtues of subprime lending, where he famously once stated: “I look at subprime lending and I see the American Dream in action.”

If helping struggling borrowers pursue their homeownership dreams was such a noble cause, it might have been incumbent upon the senator to not block legislation advocating the curtailment of predatory lending practices.

It had nothing to do with people purchasing homes to live in and everything to do with the suddenly securitized mortgage industry, the removal of any regulation in swaps and derivatives and the most basic common sense that you segregate your high risk activities from your commercial deposit bank activities.

And stupid, pig-headed, filthy greed. It always comes down to greed. The world economy doesn't have a seizure over a 6% default rate. It has a seizure when it doesn't know if the financial instruments they have purchased with borrowed money are worth a shit.

 

[samjones]

why doesn't the genius liberal try to find some mortgage backed securities to buy then? Has it changed?

As far as I can tell it's pretty easy to get into a Mortgage-backed ETF these days.... You agree?

the issue was, has it changed?? The liberal said it hadn't changed as if the market hadn't adjusted to a huge huge crisis

The Ron Paul Whackjob apparently thinks that the collapse of most of our economy is change enough to teach us better.

Try again Ed. What has changed from '08 to now? What reforms were put in place? What new policies have been implemented to prevent a repeat of '08 when times get good again?

 

[editec]

WE allowed the decision makers (the lenders) to make decisons about something that they knew they wouldn't be held accountable for (the long term health of the loans they made).

of course that is absurd since the bankers were accountable and mostly went bankrupt as a result!!

Yeah?

Which ones?

 

[IndependntLogic]

Look kiddies...the reason the real estate market melted down is actually fairly easy to understand.

yes easy, 1) the liberals organized much of the Federal government to get people into homes the Republican free market said they could not afford, 2) after that you can blame huge weaknesses in our accounting methods 3) history itself, which showed that housing prices don't decline and 4) the Federal Reserve for lowering interest rates and not knowing that they were inflating a huge bubble.

bankers-committed-fraud-to-get-bigger-bonuses

In 1988, the Basel Accord established international risk-based capital requirements for deposit-taking commercial banks. In a byproduct of the calculations of what constituted mortgage-related risk (traditional mortgage loans have long maturities and are illiquid), lenders were expected to set aside substantial reserves; however, “marketable securities” that could theoretically be sold easily would not require much in the way of reserves.

To free up reserves for more productive pursuits, banks made a wholesale shift from originating and holding mortgages to packaging them and holding mortgage assets in a securitized form.

That lessened asset-quality considerations and ushered in the new era of asset-liquidity considerations.

Meanwhile, over at the U.S. Commodities Futures Trading Commission (CFTC), the appointment of free-market disciple Wendy Gramm (wife of then-U.S. Sen. Phil Gramm (R-Tex.)) as chairman would result in her successful 1989 and 1993 exemption of swaps and derivatives from all regulation.

These actions would turn out to be consequential in the reign of terror that was to come…

In 1993, with her agenda accomplished, Wendy Gramm resigned from her CFTC post to take a seat on the Enron Corp. board as a member of its audit committee. We all know what happened there. (Wait a minute; I did say she was on the audit committee, right?)

Of course, Enron’s fraud and implosion became the poster child for deregulation run amok.

It ultimately helped spawn Sarbanes-Oxley legislation, which has its own issues, but nonetheless has prevented all kinds of fraud and inappropriate behavior on account of the fact that top executives have to attest to the veracity of, and sign off on, all financial documents and other “stuff.”

Now, don’t lose any sleep over the fact that of all the CEOs and CFOs and other muckety-muck multi-multi-millionaire executives that ran and still run the too-big-to-fail banks and the banks and investment banks that did fail or were merged (because they failed but were valuable to banks who wanted to make themselves bigger so they would never be allowed to fail) ever were charged with any crime under Sarbanes-Oxley.

snip

The Fed, under Chairman Greenspan, along with Robert Rubin and Larry Summers, was methodically deconstructing the foundation of the Depression-era Glass-Steagall Act.

The final breaching of the wall occurred in 1998, when Citibank was bought by Travelers.

The deal married Citibank, a commercial bank, with Travelers’ Solomon, Smith Barney investment bank, and the Travelers insurance business.

There was only one problem: The deal was clearly illegal in light of Glass-Steagall and the Bank Holding Company Act of 1956. However, a legal loophole in the 1956 BHC Act gave the new Citicorp a five-year window to change the landscape, or the deal would have to be unwound.

Phil Gramm – the fire breathing free-marketer, Texas senator, and then-chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs (and loving husband of Wendy) – rode to the rescue, propelled by a sea of more than $300 million in lobbying and campaign contributions.

In 1999, in the ultimate proof that money is power, U.S. President Bill Clinton signed into law the Gramm-Leach-Bliley Financial Services Modernization Act, at once doing away with Glass-Steagall and the 1956 BHC Act, and crowning Citigroup Inc. (NYSE:C) as the new “King of the Hill.”

From his position of power, Sen. Gramm consistently leveraged his Ph.D. in economics and free-market ideology to espouse the virtues of subprime lending, where he famously once stated: “I look at subprime lending and I see the American Dream in action.”

If helping struggling borrowers pursue their homeownership dreams was such a noble cause, it might have been incumbent upon the senator to not block legislation advocating the curtailment of predatory lending practices.

It had nothing to do with people purchasing homes to live in and everything to do with the suddenly securitized mortgage industry, the removal of any regulation in swaps and derivatives and the most basic common sense that you segregate your high risk activities from your commercial deposit bank activities.

And stupid, pig-headed, filthy greed. It always comes down to greed. The world economy doesn't have a seizure over a 6% default rate. It has a seizure when it doesn't know if the financial instruments they have purchased with borrowed money are worth a shit.

See here's the thing. edwardbiamonte is obviously biased. But so are you. Both of you point fingers at the side you don't like and claim it is all their fault.
Both sides contributed heavily to the mortgage crisis. LibDems have every bit as much skin in the game as ConservaRepubs on that debacle.

 

[samjones]

See here's the thing. edwardbiamonte is obviously biased. But so are you. Both of you point fingers at the side you don't like and claim it is all their fault.
Both sides contributed heavily to the mortgage crisis. LibDems have every bit as much skin in the game as ConservaRepubs on that debacle.

Not really. The entire thing went down when Republicans had the White House and both houses of Congress. And that was a long time, too.

I agree that the Democrats pushed CRA and subprime mortgages, but if anyone is to blame for making this an economic crisis it's the Republicans.

 

[IndependntLogic]

See here's the thing. edwardbiamonte is obviously biased. But so are you. Both of you point fingers at the side you don't like and claim it is all their fault.
Both sides contributed heavily to the mortgage crisis. LibDems have every bit as much skin in the game as ConservaRepubs on that debacle.

Not really. The entire thing went down when Republicans had the White House and both houses of Congress. And that was a long time, too.

I agree that the Democrats pushed CRA and subprime mortgages, but if anyone is to blame for making this an economic crisis it's the Republicans.

You show the same bias as your ConservaRepub counterparts who try to claim "if anyone is to blame, it's the Dems!".
The Dems didn't just push subprime mortgages, they created an entire industry of zero down or even 125% LTV mortgages. That was the start of the problem.
Then of course, the Repubs deregulated the CMBS market and that added TNT to the fire.

Both sides...

 

[samjones]

The Dems didn't just push subprime mortgages, they created an entire industry of zero down or even 125% LTV mortgages. That was the start of the problem.
Then of course, the Repubs deregulated the CMBS market and that added TNT to the fire.

Both sides...

I gotta tell you - starting a fire is a pretty normal thing to do. Throwing dynamite on a fire.... that's fairly extreme.

 

[EdwardBaiamonte]

I agree that the Democrats pushed CRA and subprime mortgages, but if anyone is to blame for making this an economic crisis it's the Republicans.

Actually it was Democrats who organized much of the government to get people into homes the Republican free market said they could not afford. Yes Republicans were in office but not in power. They did not create Fanny Freddie or Federal Reserve. Any fool knows that 100% of the energy for free market capitalism has since Jefferson resided in the Republican and Libertarian Party.

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.

 

[EdwardBaiamonte]

Both sides contributed heavily to the mortgage crisis. LibDems have every bit as much skin in the game as ConservaRepubs on that debacle.

so perfectly idiotic of course. Independents decide elections so of course politicians have to adopt some of their opponents positions to get elected and govern, but this does not in any way change the fact that 100% of the energy for freedom has been in the Republican party since Jefferson.

 

[IndependntLogic]

Both sides contributed heavily to the mortgage crisis. LibDems have every bit as much skin in the game as ConservaRepubs on that debacle.

so perfectly idiotic of course. Independents decide elections so of course politicians have to adopt some of their opponents positions to get elected and govern, but this does not in any way change the fact that 100% of the energy for freedom has been in the Republican party since Jefferson.

Dude your whackjobbery is showing.
So the deregulation of the CMBS market had no effect?
Because less regulation is always better, right?

Heinous whackjobbery is always easy to spot.