29 Apr 10
Originally posted by sh76I agree the statement is self-serving but it remains more or less accurate.
That statement is a bit self-serving on Greenspan's part, since he did nothing to slow down subprime mortgages when he arguably should have.
While I certainly agree that the repackaging and selling of mortgage securities was a major reason for the collapse, it stands to reason that the lack of soundness in the underlying loans was also a major factor.
It is true that the subprime mortgages were more likely to go into default then mortgages made with traditional safeguards. But this alone would not have caused an economic and financial crisis. It was only because so many of the largest financial firms had created such massive amounts of securities sensitive to the mortgage foreclosure rate that the rise in such rate caused a crisis in their capital holdings. Their weakness reverberated throughout the financial sector due to the sector's interconnectedness (which had increased exponentially since the Glass-Stegall repeal among other things). That is what turned what would have been a somewhat serious situation in those holding mortgages (though even if forced to foreclose the mortgage holder retains something of value) to a system wide financial catastrophe.
29 Apr 10
2 edits
Originally posted by MelanerpesAs sh76 has pointed out, the lack of soundness regarding these loans was a major issue, and not just the repackaging and selling these loans. I wholeheartidly support the simplification of such assets so that "bad assets" can't be repacakaged into something more desirable. Of course, if lenders continue to create "bad assets" these problems will not go away. Granted, they may not get as bad as the credit crisis became but they will not go away. Make no mistake, even though Maurauder found a web site defending CRA loans the bottom line is that we cannot continue to make mortgages an entitlement. ALL mortgages need to be reassessed in terms of soundness and risk.
But you harp so continually about the evils of CRA, Fannie, and Freddie, (along with certain things done by Goldman Sachs) while ignoring or dismissing the roles played by anyone else. Perhaps there should be an investigation into what precise roles your villains actually played, and if reforms are needed, then by all means, bring on the reforms.
The ...[text shortened]... ee with? Let's put aside his ideology and focus on just what he's been arguing in this thread.
29 Apr 10
Originally posted by whodeyAn article from December 2008 repeating various conspiracy theories is quite out of date.
http://seekingalpha.com/article/111026-did-geithner-bail-out-goldman-sachs
Like it or not, GS played a pivital role in the Feds decision to bail out AIG. It was more or less a decision to help bail out GS. I've posted this before you know.
We now know who benefited from the AIG bailout and Goldman Sachs was the largest beneficiary but it received a fraction of said money. Tens of billions went to other financial firms and foreign banks. http://www.nytimes.com/2009/03/16/business/16rescue.html
There's little reason to question the motivation of those who say they constructed the bailouts the way they did because they believed that it was the only way to save the financial system. Malignant conspiracies are unnecessary and unlikely.
29 Apr 10
Originally posted by whodeyA) Mortgages were NEVER an "entitlement";
As sh76 has pointed out, the lack of soundness regarding these loans was a major issue, and not just the repackaging and selling these loans. I wholeheartidly support the simplification of such assets so that "bad assets" can't be repacakaged into something more desirable. Of course, if lenders continue to create "bad assets" these problems will not go away ...[text shortened]... tgages an entitlement. ALL mortgages need to be reassessed in terms of soundness and risk.
B) CRA loans were assessed in terms of soundness and risk unlike many of those from subprime mortgage servicers (who knew the mortgages could be easily sold to financial firms to become part of mortgage securities).
29 Apr 10
Originally posted by sh76Someone has pointed out that blaming our financial mess on "greed" is about as astute as blaming a plane crash on gravity.
http://news.bbc.co.uk/2/hi/business/8645945.stm
[i]Mr Levin, chairman of the Senate Permanent Subcommittee on Investigations, said that Goldman had proclaimed a responsibility to its clients, "yet the evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients and our communities".
"Its misuse of exotic a ...[text shortened]... stment banker coming to an end?
If so, what will be the effects on the larger economy?
Our whole financial system is so messed up and congress is at least as much to blame as wall street.
As you watch the wall street executives being questioned by congress, I would encourage all to ask themselves this...
Who in this picture is the lion, and who is the mouse?
After answering that question, consider which of the two you'd want to have more power and authority.
29 Apr 10
2 edits
Originally posted by whodeyI have no problem with the process of repackaging and selling of subprime loans. Just make sure that ALL such securities get the rating they deserve.
As sh76 has pointed out, the lack of soundness regarding these loans was a major issue, and not just the repackaging and selling these loans. I wholeheartidly support the simplification of such assets so that "bad assets" can't be repacakaged into something more desirable. Of course, if lenders continue to create "bad assets" these problems will not go away ...[text shortened]... tgages an entitlement. ALL mortgages need to be reassessed in terms of soundness and risk.
If someone sells you a piece of junk jewelry and they tell you that it's a piece of junk, you'll pay $1.99 for it - No problems.
If someone sells you a diamond and you pay $200,000 for it, and it really is a diamond worth that price - again - No Problems.
If someone sells you the same piece of junk jewelry, but they convince you that it's a diamond, and you pay $200,000 for it - Big Problem.
Too many subprime lenders were able to repackage their junk jewelry and argue that they were diamonds because that's what the ratings agencies said they were, and the big banks believed it. They were in for a big surprise when the truth finally came out.
29 Apr 10
Originally posted by MelanerpesYour last paragraph is wrong. The subprime lenders did not get the mortgages themselves rated; the banks knew what they were getting (or could have known if they wanted too; many had subsidiaries which were subprime lenders). The banks then packaged these mortgages into securities which needed to be rated to be sold on the market. The banks then pressured the rating companies to make them AAA so they would sell.
I have no problem with the process of repackaging and selling of subprime loans. Just make sure that ALL such securities get the rating they deserve.
If someone sells you a piece of junk jewelry and they tell you that it's a piece of junk, you'll pay $1.99 for it - No problems.
If someone sells you a diamond and you pay $200,000 for it, and it real ...[text shortened]... the big banks believed it. They were in for a big surprise when the truth finally came out.
29 Apr 10
3 edits
Originally posted by no1marauderI wanted to keep the analogy reasonably simple.
Your last paragraph is wrong. The subprime lenders did not get the mortgages themselves rated; the banks knew what they were getting (or could have known if they wanted too; many had subsidiaries which were subprime lenders). The banks then packaged these mortgages into securities which needed to be rated to be sold on the market. The banks then pressured the rating companies to make them AAA so they would sell.
The point is that a lot of junk jewelry was being rated as if they were diamonds. Lots of institutions bought that junk thinking they were diamonds.
Ultimately, you had tons of securities being sold that were offering a rather lucrative return while ALSO being virtually risk-free sure-things. When someone is offering you this kind of deal, his name is probably Bernie Madoff.
So perhaps the big institutions should have been wary about ANYTHING with a AAA rating that wasn't an absolutely and completely boring investment. If it seems too good to be true, that by itself should be reason to avoid investing in it. Then again, a lot of big institutions were also bilked by Madoff.
29 Apr 10
2 edits
Originally posted by MelanerpesI suppose part of my beef is that the regime in charge of reform is now INCAPABLE of certain reforms due to partisanship. For example, Fannie Mae and Freddie Mac are "off the table" in terms of blame and reform. Here is an example.
[b]the problem is that you insist on blaming Fannie, Freddie, and the CRA for EVERYTHING that went wrong. Why? Why do you let everyone else off the hook?
http://huffpostfund.org/print/1484
"Of all the companies bailed out by the federal government, mortgage finance giants Fannie Mae and Freddie Mac are shaping up as the deepest money pits. A close look at their past and recent financial finding shows why their losses continue to mount.
Fannie and Freddie effectively became wards of the state in 2008. The Obama administration had promised to reveal its plans for the agencies last month, but Wahsingtons focus on reforming the banking system pushed them to the bottom of the to-do list. Fannie and Freddie are NOT mentioned in either the Senate or House financial regulatory reform bills."
"Treasury Secretary Tim Geithner may reveal some of the administration's ideas on Tuesday when he testifies before Congress about Fannie and Freddie. But in general, the companies' troubles have drawn less attention than the rest of the financial industry. For example, unlike bonus announcements made on Wall Street, Fannie and Freddie's recent disclosures of about $40 million in executive comepensation and bonuses for 2009 caused little stir on Main Street."
"Together the two firms have already tapped $125 billion from government lifelines and the CBO predicts they ultimately will drain $380 billion. That would far exceed the final tabs for rescuing the big banks, the automakers or even insurance behemoth AIG."
"DeMarco's predecessor at the housing finanace agency, Fannie and Freddie's regulator, has acknowledged that taxpayers are unlikely to ever see a full return on their investemetns"
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So this is why Whodey is out here losing his marbles. We have government run agencies who have cost and will cost the American tax payer the most money of any corporation out there. In fact, the banks will pay back their loans with interest, but with Fannie and Freddie, not only will the tax payer not make a profit, they will never pay back what they owe. In addition, Obama and company are fixated with bonuses on Wall Street but not with the two government run agencies that have actually stolen money from the tax payers and will NEVER pay it back. Then to add insult to injury, Obama fosuses on reforming Wall Street who has payed back their debt to the American tax payer but then puts Fannie and Freddie on the back burner.
I guess what further infuriates me is that you had Barney Frank singing the praises of Freddie and Fannie right before the credit crisis as he was having a sexual affair with one of their CEO's, a clear ethical violation. But what is done? Nothing is done. In fact, even though these corporatoins are government run and have direct government oversight, nothing is done to stop the risk taking these two corporations undertook that make private firms risk taking pale in comparison. However, we are then led to believe that what is needed is more government oversight of the private sector? Hmmm. Sounds fishy to me. And did I mention that the CEO of Fannie Mae is involved in the Chicago Climate Exchange along with the rest of these leftist goons?
The sad fact of the matter is that this administration is drowning in corruption and denial. There is no accountability. So is anyone on the left outraged by all this? How about you Maurauder?
29 Apr 10
1 edit
Originally posted by whodeyClearly, you are angry about Fannie and Freddie's role in the crisis. I agree that they should be required to accept their share of the responsibility.
I suppose part of my beef is that the regime in charge of reform is now INCAPABLE of certain reforms due to partisanship. For example, Fannie Mae and Freddie Mac are "off the table" in terms of blame and reform. Here is an example.
http://huffpostfund.org/print/1484
"Of all the companies bailed out by the federal government, mortgage finance giants Fa ility. So is anyone on the left outraged by all this? How about you Maurauder?
In your view, what specific bad things did Fannie and Freddie do?
And what specific measures do you want to see taken to address the matter?
29 Apr 10
Originally posted by whodeyI really don't know where to start. There's so much nonsense in the whodey part of this post that I'm at a loss to try to translate the BS into a rational discussion of these corporations. It's also quite clear that whodey doesn't understand virtually anything in the article he cited.
I suppose part of my beef is that the regime in charge of reform is now INCAPABLE of certain reforms due to partisanship. For example, Fannie Mae and Freddie Mac are "off the table" in terms of blame and reform. Here is an example.
http://huffpostfund.org/print/1484
"Of all the companies bailed out by the federal government, mortgage finance giants Fa ...[text shortened]... ility. So is anyone on the left outraged by all this? How about you Maurauder?
First, the article make abundantly clear that the companies' continued losses flow from decisions made in 2006-07 when they were private corporations that decided to ignore their long held underwriting standards to try to regain market share from other private firms that were securitizing subprime mortgages like crazy. Where whodey gets the utterly deranged idea that "these corporations are government run and have direct government oversight, nothing is done to stop the risk taking these two corporations undertook that make private firms risk taking pale in comparison" is impossible to say. It certainly has no basis in reality.
Second, if our resident lunatic would actually read his own articles he'd find that far from ignoring these agencies, that (look at the last sentence of the article, nitwit) they are likely to be ABOLISHED. Why would they then be part of a financial reform bill?
Third, the government has used these agencies to stabilize the housing market that the big banks were allowed to leave high and dry. As the article makes clear, IF Fannie and Freddie were still not accepting mortgages from lenders and securitizing them, the entire housing market may have completely collapsed. This unfortunately is rather expensive but so would a depression be. And the big banks and financial firms have many other sources of income while Freddie and Fannie are reliant on their investments in housing which were severely damaged in the financial crisis. So it's ludicrous to compare these companies which are fulfilling public purposes at this time to the banks which the government essentially paid off to get out of the housing market (and changed long held accounting rules so that the banks' toxic assets don't look as bad on their balance sheets).
I suggest everyone actually read the article cited to and you'll see how whodey's conclusions are absolute, partisan shill trash.
29 Apr 10
At a hearing in January, Rep. Barney Frank (D-Mass.), chairman of the House committee and a long-time Fannie and Freddie ally, proposed eliminating the companies and starting from scratch. “I believe this committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form," Frank said, "and coming up with a whole new system of housing finance.”
Yes, the last line of that article is most interesting. That evil liberal Barney Frank is proposing to do something that is probably at the very top of whodey's wish list. Who'd have guessed?
29 Apr 10
1 edit
Originally posted by no1marauderThis is classic. Marauder turns a blind eye to the fact that these mortgage giants were CREATED by the government and then magically transformed into private corporations. In essence, they privatized corporations that were backed by the tax payers.
I really don't know where to start. There's so much nonsense in the whodey part of this post that I'm at a loss to try to translate the BS into a rational discussion of these corporations. It's also quite clear that whodey doesn't understand virtually anything in the article he cited.
First, the article make abundantly clear that the comp ted to and you'll see how whodey's conclusions are absolute, partisan shill trash.
http://www.nypost.com/f/print/news/opinion/opedcolumnists/item_Gynog9PkRuomTN7vcR854H
At heart, Fannie and Freddie had become classic examples of 'crony capitalism'. The "cronies" were businessmen and politicians working together to line each others pockets while claiming to serve the public good. The politicians created the mortgage giants, which then returned some of the profits to the pots - sometimes directly, as campaign funds, sometimes as "contributions" to favored constituents.
Because the government was universally believed to guarantee their debt, Fannie and Freddie could borrow at better rates than true private sector firms - and accumulate far greater risks. The politicians and regulators that should have reined them in did not - because the giants bought influence, and because of their apple pie image as "promoting homeownership".
And because government backing let Fannie and Freddie dominate the mortgage underwriting market, private sector criticism was silenced. Local banks that wanted to offer mortgages dared not speak out against them. Large banks dared not complain about the giants government given advantage because they needed to be able to buy securities from Fannie and Freddie.
Homeowners became hostage to a system that depended on securitizing mortgages with guarantees from Fannie and Freddie. That made them part of the constituency opposed to reform.
The essential problem, Fannie and Freddie were private firms, with stockholders who garnered billions from Fannie and Freddie. That made them part of the constituency opposed to reform.
Ever since "privatizatoin" (Fannie in 1968 and Freddie in the 1970's), many politicians knew that the giants were operating in a financially unsafe and unsound manner - and the warning cries grew louder in recent years. Their capital was insufficient - as Paulson told us on Sunday.
Paulson had hoped to get out of office without dealing with this mess. Financial markets pressed the point, however, by bidding down Fannie and Freddie stock and driving up their borrowing costs over the summer.
By delaying action, Paulson effectively eliminated all other options (such as downsizing or privitization) except the present bailout. In July, he announced the fanfare his plan to backstop the two, getting broad authority from Congress to spend taxpayer funds and intervene in the companies. He said he never expected to fire this "bazooka" - but now he has.
If only because of the ambiguity in who would be backstopped - that is, which creditors would be made good; whether preferred shareholders might see their stock retain value - markets were bound to test him.
Shareholders have lost virtually all their value, but that does not solve the problem. Doing so requires getting away from the hybrid structure of private ownership with government backing. Until the government makes it plain that it will not seek to restore the pre-crisis status quo, Fannie and Freddie are the living dead, and markets must fear their return as newly invigorated financial monsters.
Paulson admits he has punted the hard choices to the next administration and next Congress. John McCain has promised to end business as usual in Washington. He is a vocal opponent of the two firms as now structured and has said he wants them to go away. Barak Obama has rightly focused on the conflict between private ownership and government backing. Taxpayers should demand "never again" from both candidates.
Paulson has said downsizing the giants is the one thing that the next administration and Congress MUST do. Once downsized, we can debate whether they should be sold off in peices to true private ownership with NO government backing or made into government agencies.
At the moment, there are too big to fail but also too costly to keep.
-------------------------------------------------------
So once again we see government tinkering by creating mortgage monsters that are "too big to fail" and then setting them loose with taxpayer backing. Its like Young Frankenstien as he sets free his creation to terrorize the populace. In addition, we must turn a blind eye to their government given advantage of being able to borrow at better rates than true private sector firms. So please spare us off all the left winged propagandized talking points drowning in a Marxist quagmire as it sinks in quicksand to the bottom of the deepest government run hell we can ever imagine!! 😲
BTW: I don't think Barney Frand and that CEO from Fannie Mae are still an item if your interested. 😛
29 Apr 10
1 edit
Originally posted by whodeyI do agree that a major problem with Fannie and Freddie was that the government needed to specifically state what the policy was regarding these companies. You had this situation where "it was widely believed" that these companies had government backing, but no one really knew for sure what the situation was.
This is classic. Marauder turns a blind eye to the fact that these mortgage giants were CREATED by the government and then magically transformed into private corporations. In essence, they privatized corporations that were backed by the tax payers.
http://www.nypost.com/f/print/news/opinion/opedcolumnists/item_Gynog9PkRuomTN7vcR854H
At heart, Fannie a y Frand and that CEO from Fannie Mae are still an item if your interested. 😛
I agree that we need to either declare in no uncertain terms that these are private companies with ZERO backing from the federal govt -- or declare that they ARE being backed in some specified way by the federal govt and then require them to pay into a fund to provide bailout money if and when they need it.
I believe that as long as the reform is set forth in a way that doesn't use shrill partisan language, it shouldn't be too difficult to find some sort of Fannie-Freddie reform that 90% of the American population would support.
At the same time, you can't blame all (or even most) of what happened on Fannie and Freddie.
29 Apr 10
1 edit
Originally posted by whodeyA long raving diatribe in favor of government regulation by someone who screams that the government is absolutely useless! The mind reels.
This is classic. Marauder turns a blind eye to the fact that these mortgage giants were CREATED by the government and then magically transformed into private corporations. In essence, they privatized corporations that were backed by the tax payers.
http://www.nypost.com/f/print/news/opinion/opedcolumnists/item_Gynog9PkRuomTN7vcR854H
At heart, Fannie a y Frand and that CEO from Fannie Mae are still an item if your interested. 😛
This cut and paste's basic premise i.e. that Fannie and Freddie took more risk than other players in the mortgage game is absolutely false. In fact, as your OTHER cut and paste showed, they moved into the subprime mortgage market late in an effort to recover market share. For most of their existence (according to Lowenstein): Fannie operated according to strict standards, purchasing only those mortgages that met tests of both size and quality .............. Fannie thus exerted a constructive influence on thrifts which were wary of writing loans that did not conform to Fannie's guidelines and would thus be less marketable". (End of Wall Street, p. 9.)
There was a failure of regulation and undue influence across the board in the financial sector for many years which is why Born's attempt to regulate derivatives was shot down, Glass-Stegall repealed and federal oversight of the entire sector virtually non-existent in recent years. This was because the government was taken over by people who think (like you though more articulately) that "free markets" should not be tampered with by the government. The mixture of this laissez faire political attitude with an increasingly concentrated and interconnected financial sector focused entirely on short term profits which violated a basic financial commandment: Do not borrow short to invest long - led to the fiasco of 2007-08.
As usual your ranting ends with no actual constructive proposals. This isn't very surprising since you have little knowledge of the problem and are simply interested in using Fannie and Freddie as a partisan weapon. Obviously there needs to be some mechanism to buy mortgages from those who issue them so that banks can replenish their capital so more loans can be made, etc. as the economy cannot function without credit being readily available. Also obviously whatever agency or company fulfills that purpose must be required to observe high underwriting standards which will operate (as they used to) as a conservative influence as lenders. It's quite clear that government legislation, regulation and oversight is needed in this area. But it's a bit of a different animal than the issues involved in the present financial reform bill (which concentrate on consumer protection and the regulation of derivatives) and thus should be considered separately.