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jesus christ, is it possible to actually let an institution fail in this country??? (pg. 5)
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| mndeg |
There wouldn't be the problem in the first place if the people or the corporations that sold the loans actually had to keep it on their balance sheets throwing it into a pile called MBS and misleadingly selling it to people/organizations/institutions that don't know any better. I agree that the risk just wasn't there. Capitalism doesn't work properly when there is fraud.
I personally don't think you can hold individuals responsible for having an alt-a mortgage or an option-ARM. The average person doesn't really know anything unless you hammer it into their heads. If they see the opportunity to 'upgrade' their life they are going to take it. |
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| The17sss |
| quote: | Originally posted by mndeg
I personally don't think you can hold individuals responsible for having an alt-a mortgage or an option-ARM. The average person doesn't really know anything unless you hammer it into their heads. If they see the opportunity to 'upgrade' their life they are going to take it. |
I see what you're saying, but we're talking about the biggest purchase of most peoples' lives and there's an inherant responsibility to understand what you're getting into. I don't think they're stupid, I just think they want something so bad that they're willing to take the risk knowing it will probably not work out for them... which is why the standards should be in place to avoid peoples' starry eyes over a new, big house from influencing an awful decision. |
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| Krypton |
| quote: | Originally posted by The17sss
I see what you're saying, but we're talking about the biggest purchase of most peoples' lives and there's an inherant responsibility to understand what you're getting into. I don't think they're stupid, I just think they want something so bad that they're willing to take the risk knowing it will probably not work out for them... which is why the standards should be in place to avoid peoples' starry eyes over a new, big house from influencing an awful decision. |
There's also an inherent responsibility to be informed about politics or the economy...how many people actually give a sh*t? The vast majority of Americans probably couldn't find Iraq on a map, and yet their country has hundreds of thousands of soldiers there...without getting off track here...It is the lenders responsibility to uphold DUE DILIGENCE, in making loans only to those who can be expected to pay the loan back. This due diligence requires consequences for not following such a policy. That requires regulation...which is the exact opposite of what our Republican friends have been doing for the past 10 years to the financial sector. This is there own doing. It is not the fault of the borrower who just wants to buy a house.
Anyways, in good and bad markets, sub-prime borrowers are always asking for a loan. Before, they were told no, 2003-2006, they were told YES YES YES! It is the lenders fault, it is the corporation's fault, it is the deregulator's faults. |
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| Shakka |
| quote: | Originally posted by The17sss
The housing market was totally fine until Fannie and Freddie encouraged all kinds of mortgages that required little or nothing down, resulting in people buying the homes that they could never afford, driving home prices beyond what was realistic. |
You make some decent points, however this one is not correct. Fannie and Freddie did not encourage exotic mortgages. They did, however, insure many of them, which combined with their almost non-existent levels of equity capital (i.e. massively leveraged balance sheets) gave them almost no margin for error when even a small percentage of their book began to sour. This was of course exacerbated by the hybrid/flawed structure of the GSEs which allowed them to maintain such thin levels of capital, while simultaneously being public and pursuing shareholder profits. The two goals are being discovered to be nearly mutually exclusive.
But I digress because the subprime crisis was merely a canary in a coal mine and housing is just the tip of the iceberg of a much larger, more pervasive problem of an overdependence on credit and leverage and a society and an economy that is massively dependent on debt to finance a standard of living that few of us can truly afford.
I know a lot of people that are out of a job today. They will not receive a paycheck and their life savings which was largely in company stock, has been essentially wiped out. Even worse, it will be incredibly difficult for many of them to find new employment soon as the financial services industry that they would look to for employment ain't exactly in a hiring mood right now.
I highly recommend an article written by Warren Buffet several years ago that essentially predicted a lot of what we're seeing today. Anybody that said the subprime issue or the credit crisis was ring-fenced or contained within the last 2 years can eat a dick.
Thriftville Vs. Squanderville by Warren Buffet
I can't wait for another marathon day tomorrow. |
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| The17sss |
| quote: | Originally posted by Shakka
I know a lot of people that are out of a job today. They will not receive a paycheck and their life savings which was largely in company stock, has been essentially wiped out. |
I thought, for example, if you have a 401K and it's being handled by Lehman Brothers it's fine because you own the asset, Lehman Brothers does not. Just because they go south doesn't mean that your 401K goes south with them, right? Or is that how it works depending on how that particular 401K is set up? |
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| daydreamer |
what i want to know is what i do with my MONEY?
do i take out of the bank (chase)?
move it overseas, or just keep it there.
the amount isn't vast, but it also took me a while to put together.
damn U.S. economy. |
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| Groundhog Boy |
| quote: | Originally posted by The17sss
I thought, for example, if you have a 401K and it's being handled by Lehman Brothers it's fine because you own the asset, Lehman Brothers does not. Just because they go south doesn't mean that your 401K goes south with them, right? Or is that how it works depending on how that particular 401K is set up? |
He's talking about Lehman employees and not just traders, but secretaries and the guys who run the copiers. As with many corporations, they can buy their own company's stock as part of their 401(k) rather than mutual funds. Many of these people were paid bonuses, in part, with stock, not cash. In other words, all that money that they made in good years is now worth 1/300th of its value when they got those bonuses at Christmas (or 1/100th of their value at the mid-year, "Please don't quit, we'll survive" bonuses) |
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| Groundhog Boy |
| quote: | Originally posted by daydreamer
what i want to know is what i do with my MONEY?
do i take out of the bank (chase)?
move it overseas, or just keep it there.
the amount isn't vast, but it also took me a while to put together.
damn U.S. economy. |
Do you have more than the 100K FDIC amounts? Or more than $500K in your investment accounts? If not, this really shouldn't be a problem (though their are slight rumblings about FDIC not being able to bail cover everything) |
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| Fir3start3r |
| quote: | Originally posted by atbell
Future generations, nah, were taking this baby right in the balls.
I do find it funny that the 'capitalists' and bankers who scream for deregulation, privitization, and lower government involvement in Toronto are now at the top of the world because of it, literally! The Canadian banks have jumped to the ranks of DB, Barklays, RBS, HSBC and the rest while thier American counter parts have crashed.
As much as there may be tention between banks and the public sector in Canada they've both got to be happy to hold up so well considering. |
Happy they didn't actually take the plunge into the sub-primes full force like their southern brethren you mean.
Don't fool yourself, I know for a fact that they were toying with the idea here in Canada.
CIBC lost of a lot of money due do their fingers the pie down there... |
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| occrider |
| quote: | Originally posted by The17sss
First, I'm not a financial guru but from what I understand, I don't see how can you blame the free market for this. It's government regulated institutions and enterprises that are bringing down the economy in big chunks. The housing market was totally fine until Fannie and Freddie encouraged all kinds of mortgages that required little or nothing down, resulting in people buying the homes that they could never afford, driving home prices beyond what was realistic. What we have now here is not a crash in the home price business or home value business. We have a correction going on because the free market was tampered with here in an obvious way.
The president and the Congress, they both did this, insisted that more mortgages be made to poorer and poorer people which meant that people with few assets and an inability to pay should the economy begin to sour, get loans, and that's exactly what happened. They were trying to hand out the "American dream" a little too much. Wall Street firms are failing because they took on bad mortgages given to deadbeats who didn't deserve them, not because of Bush policies. And who made them do this? It was an act of Congress. Too many of these people in Washington want to pander, and that's exactly what's happening now. The thing that really distresses me is at the end of the day on all this, people are going to end up with a conclusion that capitalism doesn't work, that capitalism is what's flawed here and it's not. When they start talking about regulation like McCain did in Jacksonville, "We need more regulation." No we don't! We need accountability.
When you have the federal government involved in regulation and bailouts and so on it eliminates the whole notion of risk, and it is risk that causes responsibility. So there hasn't been any responsibility in any of this, because the risk in these people's minds hasn't really existed. Capitalism is full of risk. The government isn't. When does the government ever report a down business cycle? The government always grows, does it not? In fact, the government is not allowed to report a down business cycle.
Check out this article from the UK Independant... excellent take on the situation:
http://www.independent.org/blog/?p=186 |
Ummm. What? No. I'm sorry but you are very wrong. Very very wrong. I'm not sure how I should possibly address your post because there's so much to address. How familiar are you with how fannie and freddie interact with the secondary mortgage market? |
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| Q5echo |
:haha: dudes it can't be this bad
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| Shakka |
| quote: | Originally posted by daydreamer
what i want to know is what i do with my MONEY?
do i take out of the bank (chase)?
move it overseas, or just keep it there.
the amount isn't vast, but it also took me a while to put together.
damn U.S. economy. |
If you have less than $100K in a federally insured bank you *theoretically* have nothing to worry about as the FDIC will cover you. If you have more than $100K and are particularly concerned, you can spread your money out into different accounts at different institutions so that you have all of it insured. Lastly, if you want to put it into an investment account and keep it in a super-safe treasury money market account or something, I believe the SIPC insures your balance up to $500k. But these are very gloom & doom type scenarios and you might be overreacting. I just wouldn't personally have much of my money invested in the capital markets right now because it's just not a friendly environment and you're better on the sidelines until the environment improves IMHO.
Edit: Or just read the post a few above mine that I failed to see before I wrote this. Sorry Groundhog! |
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