2nd Term Part X - A link to a fore gone conclusion

[Kepler]

Re: 2nd Term Part X - A link to a fore gone conclusion

Kep - Yes in the cases of selling debt that you'd personally rated as junk but marketed as high quality, I agree on legal consequences of that.

OK. That is my principle point of wanting to shove glass shards up their rectums.

I agree with you you should always be on the lookout for scams (I was born in NY -- this is inscribed on the lintels of our cribs). So, for example, when my wife and I applied for a loan we were approved for up to $1M. Did we buy a $1M house? We did not -- we bought a house for a quarter of that.

Right now Dr. Mrs. and I are shopping for a CFP. I wonder what they were saying at the time of all this monkey business. They couldn't be financially literate and think the market was going to keep going up forever, right?

[Rover]

Re: 2nd Term Part X - A link to a fore gone conclusion

Sure you can look at the borrower, but why is the lender even offering a loan like this to someone they know can't afford it? If the borrower can't pay it back, it's the lender that's SOL and has to either garnish wages (if able to) or liquidate the collateral to try to recover what they lost, and in many cases, isn't able to do that. And before you tell me they sell off the loan, every transaction must have a buyer and a seller, including that one.

The lender is assuming (wrongly as it turned out) that housing prices will keep going up, and if the borrower can't pay, no big deal. Repossess the house and then deal it. A bad business assumption, but again if we put people in jail for that you're going to be building a lot of new prisons.

Kep - Yes in the cases of selling debt that you'd personally rated as junk but marketed as high quality, I agree on legal consequences of that. Much like on some occasions lenders changed the stated income of the borrower without their knowledge to make the loan go through. However, this are limited examples that are a drop in the bucket to the overall problem. People will always try to scam you. Doesn't always have to be Nigerians trying to move gold through customs. People will try to sell you products you don't need, or get you to gamble away your money at a casino, or buy a too expense car or jewelry, etc. They will always tell you its a good idea. Your job, and I hope you're teaching your kids this, is to sniff out scams and live within your means. The American people as a whole didn't do that, and as maybe Scoobs said, even those of us who didn't partake in that ended up paying the price of our greedy neighbors.

Yes, banks and the govt could have done better. The source of the problem was the American people.

[St. Clown]

Re: 2nd Term Part X - A link to a fore gone conclusion

Sure you can look at the borrower, but why is the lender even offering a loan like this to someone they know can't afford it? If the borrower can't pay it back, it's the lender that's SOL and has to either garnish wages (if able to) or liquidate the collateral to try to recover what they lost, and in many cases, isn't able to do that. And before you tell me they sell off the loan, every transaction must have a buyer and a seller, including that one.

FNMA loan default bailouts. The banks knew that there was this automated protection against default, so they felt safer and safer while making aggressive loan decisions. Combine that with a greedy and lazy public, in terms of understanding what is and is not an affordable home, and you have a recipe for disaster.

In short: On the supply side we privatized gains while socializing the losses. On the demand side, we convinced everyone that it's their right to own a larger home (or own one at all, in some cases), and then we allow for bankruptcy to clear the sheets should they proved to have made a terrible misstep.

Speaking of which, my next door neighbor from when I was a kid, he married a woman who worked for a financial company that handled the mortgage defaults. Prior to the crash, his wife told me that her business was booming, that they kept hiring on more and more staff. There were signs everywhere that this was coming.

[FlagDUDE08]

Re: 2nd Term Part X - A link to a fore gone conclusion

If you don't understand the terms of a loan....DON'T SIGN THE F'IN DOCUMENT!!!!

For over 100 years the middle class has been in the home ownership game, maybe even more than that, and this never happened before. People got too greedy and addicted to credit. You shouldn't need govt regulators to give you the horse sense our parents and their parents had when they purchased a home. Don't buy something you can't afford. What a novel concept. This passing the buck I'm seeing out here is absurd. Kep, when Handy is more reasonable than you are, its time to check into the sanitarium.

But a larger point is the ridiculous concept put forth by a lazy press and eaten up by conspiracy theorists that there was no shared pain the financial industry over the crisis. Gimme a fukin break. There's been huge pain in the industry from bigwigs on down. No, nobody went to jail because if making stupid business decisions got people lugged half the country would be in the clink. Massive job losses for starters. Yes some were deserved (mortgage industry is much smaller now as it should be) but some not. A lot of people who had nothing to do with the crisis got turfed. Furthermore, most financial institutions not named AIG paid back all the money and then some on top of that so that the Govt had made a profit on the bailout.

Its too easy to craft a story that fits a pre-conceived narrative. Its the government's fault for making banks give inner-city loans. Appeals to the racists. Its Wall St's fault. Its the regulators fault.

Nobody, NOBODY, got forced to take on a loan that they couldn't afford. Don't enter into a financial commitment, be it a credit card, loan, or any other monetary transaction, if you are clueless about the terms.

Sure you can look at the borrower, but why is the lender even offering a loan like this to someone they know can't afford it? If the borrower can't pay it back, it's the lender that's SOL and has to either garnish wages (if able to) or liquidate the collateral to try to recover what they lost, and in many cases, isn't able to do that. And before you tell me they sell off the loan, every transaction must have a buyer and a seller, including that one.

[Kepler]

Re: 2nd Term Part X - A link to a fore gone conclusion

For over 100 years the middle class has been in the home ownership game, maybe even more than that, and this never happened before. People got too greedy and addicted to credit.

You can say exactly the same thing on the other side. Credit was extended too easily on bad risks, and then bonds which were garbage were bundled and sold fraudulently as AAA. When the banks figured out they owned garbage they bet on defaults while continuing to fraudulently sell the bonds. And then there were no consequences because we bailed out the lender.

For Pete's sake, that's criminal. It's not a bad business decision -- it's a great business decision. All you need is a government bribed into compliance to give you all your money back, while your clients lose all of theirs.

These people were finks who ruined hundreds of thousands if not millions of lives. Of course the industry has found a rationalization so that it can pass the buck, but nobody else is fooled. These guys were engaged in fraud, and that's illegal. They should be rotting in federal PYITA prison.

[Rover]

Re: 2nd Term Part X - A link to a fore gone conclusion

If you don't understand the terms of a loan....DON'T SIGN THE F'IN DOCUMENT!!!!

For over 100 years the middle class has been in the home ownership game, maybe even more than that, and this never happened before. People got too greedy and addicted to credit. You shouldn't need govt regulators to give you the horse sense our parents and their parents had when they purchased a home. Don't buy something you can't afford. What a novel concept. This passing the buck I'm seeing out here is absurd. Kep, when Handy is more reasonable than you are, its time to check into the sanitarium.

But a larger point is the ridiculous concept put forth by a lazy press and eaten up by conspiracy theorists that there was no shared pain the financial industry over the crisis. Gimme a fukin break. There's been huge pain in the industry from bigwigs on down. No, nobody went to jail because if making stupid business decisions got people lugged half the country would be in the clink. Massive job losses for starters. Yes some were deserved (mortgage industry is much smaller now as it should be) but some not. A lot of people who had nothing to do with the crisis got turfed. Furthermore, most financial institutions not named AIG paid back all the money and then some on top of that so that the Govt had made a profit on the bailout.

Its too easy to craft a story that fits a pre-conceived narrative. Its the government's fault for making banks give inner-city loans. Appeals to the racists. Its Wall St's fault. Its the regulators fault.

Nobody, NOBODY, got forced to take on a loan that they couldn't afford. Don't enter into a financial commitment, be it a credit card, loan, or any other monetary transaction, if you are clueless about the terms.

[St. Clown]

Re: 2nd Term Part X - A link to a fore gone conclusion

Were you smart enough to see the bubble and move your investments accordingly? I'm really curious about this -- it's an open question for everyone. I was not, yet I was completely convinced as early as 2005 that the housing market was a classic bubble. When my house went from 250 to 400 in 2 years I thought, "this is absurd -- there is literally no value underneath that additional assessment." And in the 5 years prior to my closing the house had gone from 125 to 250. On paper. I always knew that was paper profit and it was going to drop, but I didn't think that would materially affect my investments and I wasn't even close to suspecting that when it dropped it would trigger the collapse of the entire economy.

In a limited scope, yes. It became glaring when my mom's house sold for almost $300K, a relatively modest home on a third-acre plot in the far flung suburbs. At the same time, I was purchasing a house a little further away, brand new construction, that I picked up for about a $30K discount, more than 10% of its original price. This was in 2005, showing that the housing market had become oversaturated in supply. I was glaringly ignorant on tranches and how the derivatives market worked in general.

[St. Clown]

Re: 2nd Term Part X - A link to a fore gone conclusion

I was well well well diversified so I didin't think I had to move anything. What I didn't realize is that every mutual fund I had, no matter what it's name was or target was, was heavily invested in the banking industry. So, they lie to you too. Unless you read the fine print of your investments you don't know, and even if you do it probably doesn't matter. I wish I was one of those "smart" guys.

Your mutual fund company cannot lie to you about the underlying investments in any of its funds. They are required to fully disclose its top 20 investments, which is the minimum number of investments to be recognized as a mutual fund, and it's all available within the funds' prospectuses. These days, you should be able to find a full list of every investment held EOD by each fund, thanks to electronic recordkeeping and information access, though I doubt most fund companies have actually implemented this.

[Kepler]

Re: 2nd Term Part X - A link to a fore gone conclusion

I was well well well diversified so I didin't think I had to move anything. What I didn't realize is that every mutual fund I had, no matter what it's name was or target was, was heavily invested in the banking industry. So, they lie to you too. Unless you read the fine print of your investments you don't know, and even if you do it probably doesn't matter. I wish I was one of those "smart" guys.

I don't think there were many. I was in the same boat as you. I guess the best news was I wasn't terribly shocked, since I just assume by nature that things I don't understand are being run by profiteers and my interest doesn't count at all. At some point I fully expect the 1% (really, the .01%) to just steal it all, up stakes, and fly off to their new wonder planet and leave us all with a rock stripped of all resources. Because monkey brains can justify anything in the name of "entrepreneurship."

[ScoobyDoo]

Re: 2nd Term Part X - A link to a fore gone conclusion

Were you smart enough to see the bubble and move your investments accordingly? I'm really curious about this -- it's an open question for everyone. I was not, yet I was completely convinced as early as 2005 that the housing market was a classic bubble. When my house went from 250 to 400 in 2 years I thought, "this is absurd -- there is literally no value underneath that additional assessment." And in the 5 years prior to my closing the house had gone from 125 to 250. On paper. I always knew that was paper profit and it was going to drop, but I didn't think that would materially affect my investments and I wasn't even close to suspecting that when it dropped it would trigger the collapse of the entire economy.

I was well well well diversified so I didin't think I had to move anything. What I didn't realize is that every mutual fund I had, no matter what it's name was or target was, was heavily invested in the banking industry. So, they lie to you too. Unless you read the fine print of your investments you don't know, and even if you do it probably doesn't matter. I wish I was one of those "smart" guys.

[Kepler]

Re: 2nd Term Part X - A link to a fore gone conclusion

And, yes, this is one of the guys who looked at the numbers every day and was smart enough to see it was vapor. Didn't matter though. My accumulated wealth went down with the ship along with many others.

Were you smart enough to see the bubble and move your investments accordingly? I'm really curious about this -- it's an open question for everyone. I was not, yet I was completely convinced as early as 2005 that the housing market was a classic bubble. When my house went from 250 to 400 in 2 years I thought, "this is absurd -- there is literally no value underneath that additional assessment." And in the 5 years prior to my closing the house had gone from 125 to 250. On paper. I always knew that was paper profit and it was going to drop, but I didn't think that would materially affect my investments and I wasn't even close to suspecting that when it dropped it would trigger the collapse of the entire economy.

[ScoobyDoo]

Re: 2nd Term Part X - A link to a fore gone conclusion

Of course people didnt need to take out loans for houses they didnt need or couldnt afford. The banks were horrid, but none of this happens if people were smart enough to think for 5 seconds. (or you know, read the mortgage they sign) The average rube was the mark at the table, the guy who has never played poker before invited by his buddies to play who then wonders why he leaves with empty pockets.

That doesnt excuse what the banks did, but a fool and his money...

There was predatory lending going on. People can't be expected to read the leagelease on 500 forms and understand it. They relied on the experts they were talking to and the experts were telling them to do it. And as Kepler said, the watchdogs and the RATING AGENCIES especially were flat out lying to everybody. Lying is hard to see if you don't have a clue what you're looking for.

Add that to the President and his "push" for his "ownership" society economic agenda and you had a perfect storm.

<------And, yes, this is one of the guys who looked at the numbers every day and was smart enough to see it was vapor. Didn't matter though. My accumulated wealth went down with the ship along with many others.

[Kepler]

Re: 2nd Term Part X - A link to a fore gone conclusion

Thank you Handy (did I just say that?). Yes banks and the gubmint could have done better, but at the end of the day, nobody put a gun to your head and forced you to take out a loan you couldn't afford. The American people were along for the ride.

Except all the watchdog organizations from the SEC down to the ratings agencies and the financial media were in on the game. I don't blame most of the people for signing for a loan that all these "experts" were telling them they qualified for. None of the entities that were charged with regulating the industry did their job and the banks got away with outright fraud.

I'll grant you people were suckers, believing the banks' claims of the equivalent of a Nigerian prince scam, but at the end of the day you put the scam artist in jail, and none of the perps went to jail. Far from it, they walked away even richer by pocketing tax payer relief funds as bonuses, and they're free to do it again now. Moral hazard, baby. We should have lined up everybody in management for Goldman, JP Morgan Chase, BofA Merrill, and Citigroup against the wall at 11 Wall Street and applied a Second Amendment remedy. Not so much to punish the criminals, but to deter future misconduct.

[Rover]

Re: 2nd Term Part X - A link to a fore gone conclusion

Of course people didnt need to take out loans for houses they didnt need or couldnt afford. The banks were horrid, but none of this happens if people were smart enough to think for 5 seconds. (or you know, read the mortgage they sign) The average rube was the mark at the table, the guy who has never played poker before invited by his buddies to play who then wonders why he leaves with empty pockets.

That doesnt excuse what the banks did, but a fool and his money...

Thank you Handy (did I just say that?). Yes banks and the gubmint could have done better, but at the end of the day, nobody put a gun to your head and forced you to take out a loan you couldn't afford. The American people were along for the ride. Hell, they were driving the bus. That's why this recession is the deepest in 80 years, and the hardest to get out of. If you make 30K a year, or even 200K, maybe you can't afford to live in Bill Gates' neighborhood. Maybe you shouldn't borrow money to do so, even if someone is dumb enough to give you a loan (or doesn't care because they then package and sell it). I don't expect politicians to point out this truth, but we ought to not forget it.

But for the other factors, you can't pull an AIG anymore and take the opposite position of every single hedge out there with no collateral. Financial institutions also can't run entirely on short term loans - you are required to have enough liquid capital to function if you're getting squeezed. Getting back the point, with the understanding that the new laws in place have changed the landscape (going back to a previous time, there's no more Enron's in large part to Sarbanes-Oxley), what new changes does Bernie want? Break up big banks for example. How? What are they being asked to divest, and what is the goal?

[FlagDUDE08]

Re: 2nd Term Part X - A link to a fore gone conclusion

I would argue they would have been through proxy. The problem with the crash was the "way" the banks were loaning out money. If the loan institutions had been separated from the risk takers then, I would argue, the high risk loan BS that went on never would have happened. Home values wouldn't have soared, but they likely wouldn't have crashed either.

The Banks were making so much money off of loan processing that they failed to even think about the validity of the loans themselves. That should be, and should have been a criminal act.

Don't forget the government had a gun to their head to make them process the loan, 'cause War on Poverty and stuff.