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

[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.

 

[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?

 

[5mn_Major]

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

Yes and no on that, with regards to who was allowed to fail and who wasn't. If you listen to BoA, their former CEO states that they was pressured to purchase Meryll Lynch by the federal government, and then hung out to dry as they failed certain federal scrutiny tests because they had insufficient resources available to them due to purchasing Meryll.

I never buy 'the government made me do it' argument. Businesses have 100% control over their decisions. Can anyone picture US Bank making the same decision regarding Meryll? Why wouldn't they have been pressured? US Bank leadership is waay too shrewd.

It reminds me of dumb insurance decisions made by PreferredOne when the entered the exchange and priced themselves way below the market. As executives were facing getting thrown out of the building...they blamed the state. Way to take ownership of poor business decisions.

The government can actually lobby business the way business lobbies the government. There are continuous favors and recommendations going both ways. It doesn't mean either are evil...they just have agendas (with the US government being services for its citizens).

 

[Rover]

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

Clown is recollecting the news story correctly. Paulson let it be known that anybody backing off an arranged govt takeover would be fired, the board would be fired, a new one appointed and the deal would go through. Remember that any time some conservative tries to tell you they're the party of "limited government".

 

[St. Clown]

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

I never buy 'the government made me do it' argument. Businesses have 100% control over their decisions. Can anyone picture US Bank making the same decision regarding Meryll? Why wouldn't they have been pressured? US Bank leadership is waay too shrewd.

US Bank isn't anywhere near in the same league as BoA. Besides that, US Bank already owned a financial investment firm at the time in Piper Jaffray, and the US government wasn't looking to consolidate too many of those companies into their direct competitors.

Besides that, here's this entry from wiki:

On Sunday, September 14, 2008, Bank of America announced it was in talks to purchase Merrill Lynch for $38.25 billion in stock.[51] The Wall Street Journal reported later that day that Merrill Lynch was sold to Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share, or about US$50 billion or $29 per share.[52] This price represented a 70.1% premium over the September 12 closing price or a 38% premium over Merrill's book value of $21 a share,[53] but that also meant a discount of 61% from its September 2007 price.[54] Congressional testimony by Bank of America CEO Kenneth Lewis, as well as internal emails released by the House Oversight Committee, indicate that Bank of America was threatened with the firings of the management and board of Bank of America as well as damaging the relationship between the bank and federal regulators, if Bank of America did not go through with the acquisition of Merrill Lynch.[55][56][57]

Bolding added by me.

 

[ScoobyDoo]

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

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.

True. They don't lie. They just name the fund wrong and describe it wrong. I had a lot of money in my retirement account in a safe "income" fund. I lost the most money out of that one. But, I hear ya. It's my fault. Still my fault. Even if I read it and looked at it now I wouldn't really know what to do. Those who do, great.,

 

[Rover]

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

True. They don't lie. They just name the fund wrong and describe it wrong.

That is patently illegal and has been for decades. If they did that to you, file a lawsuit.

 

[5mn_Major]

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

US Bank isn't anywhere near in the same league as BoA. Besides that, US Bank already owned a financial investment firm at the time in Piper Jaffray, and the US government wasn't looking to consolidate too many of those companies into their direct competitors.

Besides that, here's this entry from wiki:


Bolding added by me.

A couple of things. First, it was BOA's decision to acquire Merrill. It was not the governments decision. So there is absolutely no blame merited there. Second, when BOA decided to back away from the deal...the Fed said that if they were to take over control of BOA that the board would be gone. I think that's the right of any owner even if they are the government and after BOA acquired Countrywide and its track record of making poor decisions, the board should have been fired anyways. And in any event, what would stop BOA management from saying 'stuff it', just walk away anyways. They had complete control over that decision. In the end, for 2009 Merrill generated $3.7B of BOA's $4.2B profits. Seems like they should fire Lewis for wanting to bail on the deal.

In a normal case, I can't imagine this worthy of seeing the light of day. But its a political world we live in and the government is to blame for everything.

 

[unofan]

True. They don't lie. They just name the fund wrong and describe it wrong. I had a lot of money in my retirement account in a safe "income" fund. I lost the most money out of that one. But, I hear ya. It's my fault. Still my fault. Even if I read it and looked at it now I wouldn't really know what to do. Those who do, great.,

Did you pull your money out our leave it in, because it should have rebounded and then some if you just let it be.

The only people who should've been hurt investment wise are those who were near or in retirement and not able to ride it out.

 

[5mn_Major]

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

Just to follow up on my previous post, there are many out there who think that the US should not have bailed out the banks at all. Do we really feel that the US should bailed out the banks unconditionally?

I have no problem with the US influencing the outcome of banks as potential and/or part owners for the gain of the US economy during a time of crisis when major sums of US taxpayer monies was involved.

 

[Kepler]

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

Just to follow up on my previous post, there are many out there who think that the US should not have bailed out the banks at all. Do we really feel that the US should bailed out the banks unconditionally?

I have no problem with the US influencing the outcome of banks as potential and/or part owners for the gain of the US economy during a time of crisis when major sums of US taxpayer monies was involved.

We should have nationalized some financial functions. At a certain level, for the vast majority, finance should be a public utility. The eejits with uncontrollable testosterone levels should be free to play the casino into penury; just don't risk the wealth of people who work for a living.

 

[Handyman]

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

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.

Oh the Banks should do more than just pay a fine, people should have been punished. That doesnt negate the responsibility of the people who took out the loans though.

That wasnt going to happen though when former Goldman guys run the financial part of the government.

 

[Handyman]

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

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.

I agree but still...common sense says if you make 40k you can only afford so much.

 

[mookie1995]

Oh the Banks should do more than just pay a fine, people should have been punished. That doesnt negate the responsibility of the people who took out the loans though.

That wasnt going to happen though when former Goldman guys run the financial part of the government.

"Former"?!?

 

[Kepler]

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

"Former"?!?

Seriously. Goldman is like cancer -- it might be forced into remission, but it can't be cured.

 

[ScoobyDoo]

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

Did you pull your money out our leave it in, because it should have rebounded and then some if you just let it be.

The only people who should've been hurt investment wise are those who were near or in retirement and not able to ride it out.

Oh, I left it in. It's back now. I was able to buy a lot of shares when it was low. Dollar cost averaging.

Even so, the totality is nowhere near what it should have been. The 2000-2010 era of investment was a blackhole of crap.

 

[ScoobyDoo]

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

I agree but still...common sense says if you make 40k you can only afford so much.

Can't wait until you see The Big Short. They highlight what you're saying here with a mile wide highlighter.

 

[Kepler]

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

Oh, I left it in. It's back now. I was able to buy a lot of shares when it was low. Dollar cost averaging.

Even so, the totality is nowhere near what it should have been.

Isn't it? I can't find a full historical map of the DJIA with a 7% trend line / projection, but I suspect if I did we'd probably be right about on beam after the wild swings both up and down.

 

[Rover]

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

Unless Scooby is retiring don't sweat the fluctuations. Stocks traditionally return 10% over time. Buffett says we can now expect 7-8%. Either way that's not bad over 30 years. Using the Rule of 72 (72/expected return) you would double your money in 10 years if you achieve a 7% return.

 

[unofan]

Just to follow up on my previous post, there are many out there who think that the US should not have bailed out the banks at all. Do we really feel that the US should bailed out the banks unconditionally?

I have no problem with the US influencing the outcome of banks as potential and/or part owners for the gain of the US economy during a time of crisis when major sums of US taxpayer monies was involved.

The banks should have been bailed out and then broken up. If you're too big to fail, then you're too big to exist (or should be nationalized). The bailouts were not the problem, the problem was the lack of follow through afterwards to prevent it from happening again.