Ur banks are belong to us

[Beckwin]

I don't see anything wrong with trying to add some more order to the wild west of financial markets.

Guartz sees the wild wild west as the pinnacle of society in american history.

[evilbau]

Third time I've posted this:

http://docs.google.com/TeamPresent?doci ... true&pli=1

For you people who STILL don't understand the origins of the subprime meltdown.

RSG Investment Bank == Bear Stearns, for the uninitiated.

third time you posted it, first time I read it. Pretty much sums it up. would be interesting to extend it to show the root cause, the 'why' the mortgage banks were able to drum up so much business, its an interesting chain of events too, imo, originally stemming from the tech bubble, that created market conditions perfect for real estate speculation and incredible growth for originators.

[guartz]

http://www.moneycafe.com/library/fedfunds.htm


Take a little time to chew that over guys.

Here, look at it again.

http://www.moneycafe.com/library/fedfunds.htm

[evilbau]

your point?

[Athas]

What's mine is mine, what's yours is mine.

Fixed.

[guartz]

your point?

Root cause, as you say.

[Beckwin]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

[guartz]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

No, not unless they can see into the future.

[SwampdonkeyPLD]

I'm still curious about one aspect of the sub-prime mess. 96 percent of all mortgages are paid on time and only two to three percent are in foreclosure, lower than in the 80's. How does that translate into the mess of today? I know part of the mess is that the sub-prime loans were repackaged into securities, but 2-3% seems like a small amount to cause the whole problem.

Also, the bailout of JP Stearns, won't that just encourage other banks to take risks because they know they will be bailed out by government, er taxpayers?

[Beckwin]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

No, not unless they can see into the future.

I thought the housing market bust at least 8 months ago, if not more.

[BIGSTIC]

I'm still curious about one aspect of the sub-prime mess. 96 percent of all mortgages are paid on time and only two to three percent are in foreclosure, lower than in the 80's. How does that translate into the mess of today? I know part of the mess is that the sub-prime loans were repackaged into securities, but 2-3% seems like a small amount to cause the whole problem.

Also, the bailout of JP Stearns, won't that just encourage other banks to take risks because they know they will be bailed out by government, er taxpayers?

Same questions as me. Seems to me the only people who lost alot were speculators and well thats the price you pay to play the game.

Also why didnt the mortgage companys do like the credit card companies? Lower the intrest and just try to get back what you can. I mean hell a little money is alot better than zero money and a bunch of houses to take care of. Guess thats whay I am in construction and not banking.

[evilbau]

your point?

Root cause, as you say.

Yes, you are right, but I say root causes, I don't look for the first person to blame (i.e. the Fed) and end the analysis there, because that is incredibly shallow. It is true it is because of the cheap credit, but it was a reaction to the tech bubble bursting and does not explain the chain of events leading to the growth of the mortgage industry and real estate speculation. Cheap Credit doesn't just automatically equal sub-prime mortgage creation.

As my workday is winding down, I will attempt what is my (admittedly amateurish) analysis of events.

1. Following years of 90's growth, people on Wall Street still want better ways of making money. Enter tech speculation.
2. Despite no solid financials, speculation continues, Greenspan warns people but who listens when they are making money?

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

3. Tech bubble crashes, US facing recession, possibly depression.
4. To attempt a 'soft landing', Fed cuts rate, VERY effective, we only experience about 6-8 months of negative growth.
5. Homeowners see the low rates and want to take advantage of it, they begin to re-finance their mortgages.
6. Although it existed, the ARM (adjustable rate mortgage) is not widespread. In an attempt to maximize savings, people get this type of loan because it has very low payments. It is attractive to the banks because they aren't locked into the low rates (which even they know won't last). Commissions/Points earned on refi are starting to look really good...
7. Predatory lending starts advertising ARMs using the low payments as a selling point, people too blind to see the endgame.
8. All this mortgage originating activity leads to a rush of mortgage banks. Their business is in volume of loans, not actual properties, this encourages flipping. Consumers trying to either flip themselves or jump on the bandwagon only feed into the cycle.
9. Mortgage banks start taking it really far with no doc loans, 100% financing (80/20 second, or HELOC second), cash on close, and all the tricks we now know to keep the originating machine going.

Enter slideshow.

There is a case to be made that Greenspan is at fault at #4, but if he didn't, and we hit a hardcore recession, then 9/11 happens, who knows what the health of our economy would have been.

[finitek]

Once again you can thank the media for "spinning" this "mortgage crisis" out of control.
Many lenders lowered their standards for lending in the seeming "boom" of real estate several year ago.

The reality people were taking mortgages they could not realistically pay in the long term. Along with the boom in people attempting to "flip" property for a profit and taking on more debt than ever, the fault of this really lies in the the lenders crappy practices.

I am not denying the Fed is up to some insidious shit, but there isn't much we can do other than write the appropriate representatives and make noise that way.

[sunb1ind]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

Lol since when does the Federal Reserve 'react' to anything?

I'm going to go out on a limb and guess that guartz is just highlighting the power that the reserve just got handed to, on top of their already established stranglehold on the govt/country... How are you guys missing this again? lol Sounds like someone needs to brush up on the part of American History that can't be called a conspiracy(unless you're illiterate): The "Federal Reserve - A private bank and you!".

When asked what his greatest accomplishment had been during his two terms as President, Andrew Jackson replied "I killed the Bank."

- I love that quote.

[guartz]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

No, not unless they can see into the future.

I thought the housing market bust at least 8 months ago, if not more.

err, it started due to low rates, busted at high rates.

dot.com similar,

1994 similar,
etc.

not a hard pattern to follow.

[evilbau]

I'm gonna field a guess and say the Fed was reacting to the housing market, guartz.

No, not unless they can see into the future.

I thought the housing market bust at least 8 months ago, if not more.

err, it started due to low rates, busted at high rates.

dot.com similar,

1994 similar,
etc.

not a hard pattern to follow.

I think you are looking at it the wrong way. Cutting rates is in response to various economic stimuli to stimulate growth. They raise rates to curb inflation and wean us off cheap credit. The Fed has very limited tools to affect the markets, the people at fault are those that abuse the cheap credit, and lax regulations regarding securities and underwriting.

I don't think The Fed gets enough credit for weathering those storms, essentially translating those recessions into growth. Countries such as Indonesia and Thailand couldn't in the East Asian financial crisis.

[guartz]

Oh I obviously misinterpreted their benevolent acts with something else. I'm really sorry evilbau. They are just reacting, not controlling!

"The Fed has very limited tools to affect the markets"

Of course. Constricting money supply for the entire nation has very minimal bearing on the markets, anybody who thinks otherwise is fooling themselves.











I mean, do you guys really think like that?

geez.

[Correction]

I'm still curious about one aspect of the sub-prime mess. 96 percent of all mortgages are paid on time and only two to three percent are in foreclosure, lower than in the 80's. How does that translate into the mess of today? I know part of the mess is that the sub-prime loans were repackaged into securities, but 2-3% seems like a small amount to cause the whole problem.

Also, the bailout of JP Stearns, won't that just encourage other banks to take risks because they know they will be bailed out by government, er taxpayers?

One word. Leverage.

A lot of those mortgages were paid for with debt, and when the price of real estate collapsed the loans taken out to pay for those mortgages also went into default.

Dominoes, etc. etc.

A lot of it is also just panic, because of the 'magic' applied to the value of CMOs, an insured security, turned out to be complete bullshit, money came out of investment banks like mad and went straight to commodities (hi 2 u price of oil and precious metals).

[evilbau]

way to twist words.

Limited tools = few in number. I never said they don't have far-reaching effects. You aren't even understanding the point I'm making.

Seems so simple, low rates = speculation, high rates = bubble burst. You are attributing the conditions of that time with the rates, when they are set as a reaction to the times. They will raise rates when the markets have stabilized to curb the inevitable inflation (i am referring to the current state of the market). If they did it now it would worsen the recession, and would probably bankrupt many companies due to cash flow issues. Seriously, try to understand the bigger picture, try to consider what would have happened if they did the opposite of what they did or if they did nothing.

Maybe analysis is too hard? I imagine it is much easier to put on the tinfoil-hat instead.

[sunb1ind]

Oh I obviously misinterpreted their benevolent acts with something else. I'm really sorry evilbau. They are just reacting, not controlling!

"The Fed has very limited tools to affect the markets"

Of course. Constricting money supply for the entire nation has very minimal bearing on the markets, anybody who thinks otherwise is fooling themselves.











I mean, do you guys really think like that?

geez.

I don't understand either man, the Federal Reserve story is as old as it is obvious. I have friends who can't stand NWO, CFR, and shit like that, no matter how much evidence there may be, BUT they most definitely know how the Fed Reserve dictates our inflation/depression and ultimately our value of the dollar. Some of this is just common sense. What do you guys still believe in the gold standard backing? lol I mean shit they CONTROL the interests rates, bond rates, and who it gets them... this isn't new, its how we've come to accept it.

I think some people need to go read up on my man Andrew Jackson and quit watching their CNN.