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2011-09-21 07:02:46
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

Dilbert_X wrote:

FEOS wrote:

Learn how the various parties work (or don't) together, then come back.
If you mean political parties - they were irrelevant to the real problem, which was the financial markets.
See below.

Jay wrote:

It would've happened with or without the government requiring a percentage of loans to be subprime. It was a boom, a feeding frenzy, the loan originators were giving out loans to anyone with a pulse, and selling them on to investment banks. The investment banks in turn bought the loans as quickly as possible, and in many cases, hounded the originators into providing more stuff for them to sell.

The real issue for us as taxpayers is that Fannie and Freddie backstopped all of these unsecured loans. Because they had the backing of the US government, they could then be sold by the investment bankers as AAA rated bonds. It really was a perfect storm. Blaming subprime mortgages as the main culprit is like blaming the 4th outfielder on a baseball team for a teams terrible season. Sure, he might have dropped a few balls, or struck out a few too many times, but he's just a small cog in the wheel.
No, I didn't mean political parties. There's more than one use of the term, you know.

@ Jay: What do you think fed the boom? Why do you think Fannie and Freddie were so on fire to underwrite all those loans? It all goes back to using social metrics (a la CRA) instead of financial metrics.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-21 07:58:33
Jay
Bork! Bork! Bork!
+2,006|5615|London, England

FEOS wrote:

Dilbert_X wrote:

FEOS wrote:

Learn how the various parties work (or don't) together, then come back.
If you mean political parties - they were irrelevant to the real problem, which was the financial markets.
See below.

Jay wrote:

It would've happened with or without the government requiring a percentage of loans to be subprime. It was a boom, a feeding frenzy, the loan originators were giving out loans to anyone with a pulse, and selling them on to investment banks. The investment banks in turn bought the loans as quickly as possible, and in many cases, hounded the originators into providing more stuff for them to sell.

The real issue for us as taxpayers is that Fannie and Freddie backstopped all of these unsecured loans. Because they had the backing of the US government, they could then be sold by the investment bankers as AAA rated bonds. It really was a perfect storm. Blaming subprime mortgages as the main culprit is like blaming the 4th outfielder on a baseball team for a teams terrible season. Sure, he might have dropped a few balls, or struck out a few too many times, but he's just a small cog in the wheel.
No, I didn't mean political parties. There's more than one use of the term, you know.

@ Jay: What do you think fed the boom? Why do you think Fannie and Freddie were so on fire to underwrite all those loans? It all goes back to using social metrics (a la CRA) instead of financial metrics.
Fannie and Freddie definitely facilitated it, but the boom was spurred by speculators in the housing industry. How many 'flip this house' tv shows were there in the mid 00's? It seemed like dozens. Everyone was getting into it. Developers were spurring the boom, not subprime mortgages. The market got overheated, and ultimately crashed. Why was there a higher failure in Florida, Nevada and Arizona than anywhere else in the country? Developers overbuilding just like in the 80s. Those are retirement and vacation states, and the large majority of defaulters in those locations were people who bought a second home there (many as investment properties) and the developers who were feeding the frenzy.

What led to the crash in 1929? The boom of the Roaring Twenties when everyone and their brother was investing in the stock market because it seemed like easy money. Same thing happened during the 00s when housing prices seemed to double every five years. It just got overheated way too quickly and there were far too many people who really didn't know what they were doing getting involved.

Last edited by Jay (2011-09-21 08:06:31)

"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
2011-09-21 16:58:33
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

You're looking one layer above the root cause, Jay. Why were developers pushing properties? Because they knew mortgages were easier than ever to get. They don't care once the mortgage is let...they get paid. Before subprime lending, how many of those people would have been able to get that second mortgage for that retirement home in NV, FL, or AZ? Not nearly as many. Where do we see the greatest fallout from the subprime lending (foreclosures)? NV, FL, AZ.

No subprime lending, no overheated market (nothing to feed it), no bubble, no crisis. What led to subprime lending? Grading banks based on social criteria, rather than financials, and Fannie and Freddie supporting that behavior. Remember when reform of those institutions was blocked in the 02-04 timeframe?
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-21 17:40:56
KEN-JENNINGS
I am all that is MOD!
+2,979|6889|949

subprime lending was focused on people buying second/retirement homes?
2011-09-21 19:40:58
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

KEN-JENNINGS wrote:

subprime lending was focused on people buying second/retirement homes?
Did I say it was? No.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-21 20:07:02
Jay
Bork! Bork! Bork!
+2,006|5615|London, England
I know Barney Fwank makes a convenient target, but he really had very little to do with the mess FEOS. Banks lowered their lending requirements voluntarily in order to facilitate MBS creation because they were making a ton of money doing so.

Here, I know it's wikipedia, but short of buying and reading a book, it will have to do ya: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
2011-09-21 20:21:11
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

Jay wrote:

I know Barney Fwank makes a convenient target, but he really had very little to do with the mess FEOS. Banks lowered their lending requirements voluntarily in order to facilitate MBS creation because they were making a ton of money doing so.

Here, I know it's wikipedia, but short of buying and reading a book, it will have to do ya: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
Thanks. I've read plenty already.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-21 20:30:12
Jay
Bork! Bork! Bork!
+2,006|5615|London, England

FEOS wrote:

Jay wrote:

I know Barney Fwank makes a convenient target, but he really had very little to do with the mess FEOS. Banks lowered their lending requirements voluntarily in order to facilitate MBS creation because they were making a ton of money doing so.

Here, I know it's wikipedia, but short of buying and reading a book, it will have to do ya: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
Thanks. I've read plenty already.
What have you read?
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
2011-09-21 20:39:30
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

Jay wrote:

FEOS wrote:

Jay wrote:

I know Barney Fwank makes a convenient target, but he really had very little to do with the mess FEOS. Banks lowered their lending requirements voluntarily in order to facilitate MBS creation because they were making a ton of money doing so.

Here, I know it's wikipedia, but short of buying and reading a book, it will have to do ya: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
Thanks. I've read plenty already.
What have you read?
Multiple articles in multiple economic journals, on multiple sites, plus I've taken a few econ courses, both under and post grad.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-22 01:51:29
Kmar
Truth is my Bitch
+5,695|6858|132 and Bush

Jay wrote:

I know Barney Fwank makes a convenient target, but he really had very little to do with the mess FEOS. Banks lowered their lending requirements voluntarily in order to facilitate MBS creation because they were making a ton of money doing so.

Here, I know it's wikipedia, but short of buying and reading a book, it will have to do ya: http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
Although those loans made up a small amount of total amount of the lending market.. they ended up setting the bar. In order to stay competitive other lenders followed suit.
Xbone Stormsurgezz
2011-09-22 02:08:11
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX

FEOS wrote:

You're looking one layer above the root cause, Jay. Why were developers pushing properties? Because they knew mortgages were easier than ever to get. They don't care once the mortgage is let...they get paid. Before subprime lending, how many of those people would have been able to get that second mortgage for that retirement home in NV, FL, or AZ? Not nearly as many. Where do we see the greatest fallout from the subprime lending (foreclosures)? NV, FL, AZ.

No subprime lending, no overheated market (nothing to feed it), no bubble, no crisis. What led to subprime lending? Grading banks based on social criteria, rather than financials, and Fannie and Freddie supporting that behavior. Remember when reform of those institutions was blocked in the 02-04 timeframe?
Aren't sub-prime and people buying 2nd, 3rd, 4th investment properties two totally different markets?
Fuck Israel
2011-09-22 02:22:49
Kmar
Truth is my Bitch
+5,695|6858|132 and Bush

The greatest fall out in Florida is not grandpa and grandma in their retirement home. It's the no doc loans that originated in average suburbia. That was the sellers market gone wild. ..the one that had realtors writing contracts on the hoods of cars before for sale signs even went in to the ground.
Xbone Stormsurgezz
2011-09-22 02:30:00
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX
Did the Feds poor buckets of water over peoples heads until they signed?

Not sure how its the govts fault exactly.
Fuck Israel
2011-09-22 06:01:19
Cybargs
Moderated
+2,285|6973

Dilbert_X wrote:

Did the Feds poor buckets of water over peoples heads until they signed?

Not sure how its the govts fault exactly.
Lowering interest rates essentially created cheap credit for the banks, which the banks had to shell out a % of their loans as subprime. They effectively lowered real interest rates to 0%.
https://cache.www.gametracker.com/server_info/203.46.105.23:21300/b_350_20_692108_381007_FFFFFF_000000.png
2011-09-22 06:04:59
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX
Banks didn't have to do anything. They simply got greedy.
Fuck Israel
2011-09-22 06:22:13
Cybargs
Moderated
+2,285|6973

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Game theory.

If the banks didn't take the money, they'd lose a lot of money by other banks who lended out more.
https://cache.www.gametracker.com/server_info/203.46.105.23:21300/b_350_20_692108_381007_FFFFFF_000000.png
2011-09-22 06:32:16
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX

Cybargs wrote:

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Game theory.

If the banks didn't take the money, they'd lose a lot of money by other banks who lended out more.
Erm OK

In the same way that if you don't play Russian roulette you stand to lose more than the people playing because they might win something?

Sometimes game theory is a bunch of arse.

Last edited by Dilbert_X (2011-09-22 06:32:40)

Fuck Israel
2011-09-22 06:41:50
Cybargs
Moderated
+2,285|6973

Dilbert_X wrote:

Cybargs wrote:

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Game theory.

If the banks didn't take the money, they'd lose a lot of money by other banks who lended out more.
Erm OK

In the same way that if you don't play Russian roulette you stand to lose more than the people playing because they might win something?

Sometimes game theory is a bunch of arse.
when your faced with losing billions of dollars, you gotta make the right call. feds fucked up more on this one, there are more actors than just major banks in investment.
https://cache.www.gametracker.com/server_info/203.46.105.23:21300/b_350_20_692108_381007_FFFFFF_000000.png
2011-09-22 10:08:18
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Read my link from several posts back that spoke to grading banks on social metrics, rather than financial ones. Yes, they did have to do things that made no financial sense.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-23 02:19:21
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX

FEOS wrote:

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Read my link from several posts back that spoke to grading banks on social metrics, rather than financial ones. Yes, they did have to do things that made no financial sense.
I'm talking about the merchant banks which had no such obligations.

Did German banks have any obligation to buy up packages of US sub-prime mortgages?
Did the US merchant banks, and other investment companies, or even average investors, have any such obligations?

They were greedy and didn't do the right research. How is that the govts fault?

Without their excess greed and inadequate management the whole system would not have been pumped in the way it was.

An interesting fact for the day: Half the UK govts fiscal deficit is due to having bailed out UK banks.
Fuck Israel
2011-09-26 03:53:53
FEOS
Bellicose Yankee Air Pirate
+1,182|6668|'Murka

Dilbert_X wrote:

FEOS wrote:

Dilbert_X wrote:

Banks didn't have to do anything. They simply got greedy.
Read my link from several posts back that spoke to grading banks on social metrics, rather than financial ones. Yes, they did have to do things that made no financial sense.
I'm talking about the merchant banks which had no such obligations.

Did German banks have any obligation to buy up packages of US sub-prime mortgages?
Did the US merchant banks, and other investment companies, or even average investors, have any such obligations?

They were greedy and didn't do the right research. How is that the govts fault?

Without their excess greed and inadequate management the whole system would not have been pumped in the way it was.

An interesting fact for the day: Half the UK govts fiscal deficit is due to having bailed out UK banks.
Merchant banks bought and packaged the mortgages as securities because normally, when mortgages are lent under financial, rather than social considerations (a la subprime), that would make sense. It would be a safe investment, much like a bond. Particularly when you've got Fannie and Freddie (govt entities) telling them "it's all good, they're AAA rated".

No...the govt had nothing to do with it, Dilbert.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein
Doing the popular thing is not always right. Doing the right thing is not always popular
2011-09-26 04:51:16
Jay
Bork! Bork! Bork!
+2,006|5615|London, England

FEOS wrote:

Dilbert_X wrote:

FEOS wrote:


Read my link from several posts back that spoke to grading banks on social metrics, rather than financial ones. Yes, they did have to do things that made no financial sense.
I'm talking about the merchant banks which had no such obligations.

Did German banks have any obligation to buy up packages of US sub-prime mortgages?
Did the US merchant banks, and other investment companies, or even average investors, have any such obligations?

They were greedy and didn't do the right research. How is that the govts fault?

Without their excess greed and inadequate management the whole system would not have been pumped in the way it was.

An interesting fact for the day: Half the UK govts fiscal deficit is due to having bailed out UK banks.
Merchant banks bought and packaged the mortgages as securities because normally, when mortgages are lent under financial, rather than social considerations (a la subprime), that would make sense. It would be a safe investment, much like a bond. Particularly when you've got Fannie and Freddie (govt entities) telling them "it's all good, they're AAA rated".

No...the govt had nothing to do with it, Dilbert.
Such naivety...
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
2011-09-26 05:40:35
Dilbert_X
The X stands for
+1,815|6363|eXtreme to the maX

FEOS wrote:

Dilbert_X wrote:

FEOS wrote:


Read my link from several posts back that spoke to grading banks on social metrics, rather than financial ones. Yes, they did have to do things that made no financial sense.
I'm talking about the merchant banks which had no such obligations.

Did German banks have any obligation to buy up packages of US sub-prime mortgages?
Did the US merchant banks, and other investment companies, or even average investors, have any such obligations?

They were greedy and didn't do the right research. How is that the govts fault?

Without their excess greed and inadequate management the whole system would not have been pumped in the way it was.

An interesting fact for the day: Half the UK govts fiscal deficit is due to having bailed out UK banks.
Merchant banks bought and packaged the mortgages as securities because normally, when mortgages are lent under financial, rather than social considerations (a la subprime), that would make sense. It would be a safe investment, much like a bond. Particularly when you've got Fannie and Freddie (govt entities) telling them "it's all good, they're AAA rated".
FNMA and FDMC told no-one any such thing, the ratings agencies - private entities which rate for money - did so.

And no-one forced the merchant banks to bundle up the loans they knew to be utter shit with good loans to hide the smell for when the agencies re-rated them, and re-rated new bundles of re-rated loans, and re-rated bundles of re-bundled loans, and re-rated bundles of rebundled rebundled loans - and so on - resulting in a system that no-one really had a clue what they were buying and selling - except a select few merchant bankers who knew they were peddling utter shit and were going out paying fat bonuses to create more shit they could peddle.

But of course, its the fault of the Democrats.
Fuck Israel

 

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