Financial crisis was avoidable...

[kallend 1,644]

www.nytimes.com/2011/01/26/business/economy/26inquiry.html?src=busln


Though the report documents questionable practices by mortgage lenders and careless betting by banks, one striking finding is its portrayal of incompetence.

It quotes Citigroup executives conceding that they paid little attention to mortgage-related risks. Executives at the American International Group were found to have been blind to its $79 billion exposure to credit-default swaps, a kind of insurance that was sold to investors seeking protection against a drop in the value of securities backed by home loans. At Merrill Lynch, managers were surprised when seemingly secure mortgage investments suddenly suffered huge losses.

By one measure, for about every $40 in assets, the nation’s five largest investment banks had only $1 in capital to cover losses, meaning that a 3 percent drop in asset values could have wiped out the firm. The banks hid their excessive leverage using derivatives, off-balance-sheet entities and other devices, the report found. The speculative binge was abetted by a giant “shadow banking system” in which the banks relied heavily on short-term debt.

“When the housing and mortgage markets cratered, the lack of transparency, the extraordinary debt loads, the short-term loans and the risky assets all came home to roost,” the report found. “What resulted was panic. We had reaped what we had sown.”

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The only sure way to survive a canopy collision is not to have one.

[Amazon 7]

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We had reaped what we had sown.”

Amazingly the individuals involved all seemed to reap very very well.

[turtlespeed 212]

You mean like Maddoff andf Soros?

I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama
BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun

[Amazon 7]

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You mean like Maddoff andf Soros?

Try much much harder reptile... I know you can do it.

[davjohns 1]

I'm not sure why the financial geniuses had such difficulty. I heard ads on the radio routinely telling people they should borrow 125% of the value of their home to buy a big screen TV and go on vacation. Meanwhile, I was sinking every extra dollar into my home to reduce my monthly payments. I thought it was pretty clear that someone who owes 125% more than the mortgaged property is now encouraged to default.

But what do I know? The government didn't offer ME a bailout.

I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

[CanuckInUSA 0]

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Financial crisis was avoidable

Yes of course it was avoidable. Imagine if millions and millions of people lived within their means and did NOT put themselves into the record personal debt they found themselves in. But it is so much easier to blame someone else than it is to blame the people who spent more than they made.

Try not to worry about the things you have no control over

[kelpdiver 2]

Every bubble in time was avoidable - going back to the Tulip bubble in 1637. Yet somehow it keeps happening.

[kallend 1,644]

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Financial crisis was avoidable

Yes of course it was avoidable. Imagine if millions and millions of people lived within their means and did NOT put themselves into the record personal debt they found themselves in. But it is so much easier to blame someone else than it is to blame the people who spent more than they made.

Apparently you don't understand the concept of leveraging. You could try reading the report instead of parroting RW propaganda.
By one measure, for about every $40 in assets, the nation’s five largest investment banks had only $1 in capital to cover losses, meaning that a 3 percent drop in asset values could have wiped out the firm. The banks hid their excessive leverage using derivatives, off-balance-sheet entities and other devices, the report found. The speculative binge was abetted by a giant “shadow banking system” in which the banks relied heavily on short-term debt.

...

The only sure way to survive a canopy collision is not to have one.

[kelpdiver 2]

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Apparently you don't understand the concept of leveraging. You could try reading the report instead of parroting RW propaganda.
By one measure, for about every $40 in assets, the nation’s five largest investment banks had only $1 in capital to cover losses, meaning that a 3 percent drop in asset values could have wiped out the firm. The banks hid their excessive leverage using derivatives, off-balance-sheet entities and other devices, the report found. The speculative binge was abetted by a giant “shadow banking system” in which the banks relied heavily on short-term debt.

so what's the "proper" level of leverage?

If the banks only lent for what they had, economic growth would be poor. If they went to 1:$10, it still only takes ~10% loss to wipe them out.

I'm less concerned about leverage as I am about the fact that the loan originators were able to sell off the note for immediate profit, and not suffer if it eventually failed. That encouraged the worst in behavior, and in many cases outright fraud.

[CanuckInUSA 0]

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Apparently you don't understand the concept of leveraging. You could try reading the report instead of parroting RW propaganda.

Since when is NOT spending more money that you make propaganda? Good grief.

Try not to worry about the things you have no control over

[billvon 2,426]

>Since when is NOT spending more money that you make propaganda?

Since the day that even the GOP started supporting homeowners with mortgages.

[rushmc 18]

so what's the "proper" level of leverage?

[turtlespeed 212]

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so what's the "proper" level of leverage?

Might be close to the gov dept vs the GDP?

Apparently 1.5 Trillion or so.

I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama
BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun

[champu 1]

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I'm less concerned about leverage as I am about the fact that the loan originators were able to sell off the note for immediate profit, and not suffer if it eventually failed. That encouraged the worst in behavior, and in many cases outright fraud.

This.

It's surprisingly easy to cross the line and lose track of the whole point of the financial industry. Is anyone actually investing anymore or helping facilitate investments? Or all we all a bunch of day traders treating markets like a drunken weekend in Vegas?

[DrewEckhardt 0]

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Financial crisis was avoidable

Yes of course it was avoidable. Imagine if millions and millions of people lived within their means and did NOT put themselves into the record personal debt they found themselves in. But it is so much easier to blame someone else than it is to blame the people who spent more than they made.

It was a team effort.

People who signed up for more debt than they could afford.

The Realtors(TM) who made bigger commissions selling those homes.

The mortgage brokers who made bigger commissions with larger mortgages.

The banks which make bigger fees by originating bigger mortgages, processing them, and even foreclosing on them.

The appraisers who kept getting business because they agreed with the numbers buyers and banks wanted to mortgage on homes.

The financial industry which made money securitizing the loans.

The bond raters who stamped "AAA" on the resulting bank loans so they could be securitized so the financial companies wouldn't ratings shop and send their fees elsewhere.

Everybody except the buyers and bond buyers won big by getting the buyers into unaffordable mortgages likely to end in foreclosure.

[danornan 65]

It was not that complicated... Money was loaned to people who could not pay it back.... Pretty simple and then the snowball kept rolling....

I read that Canada did not have the same problem because they required people who were borrowing money to be able to pay it back.

What an interesting concept.

Dano

[kallend 1,644]

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It was not that complicated... Money was loaned to people who could not pay it back.....

The financial crisis involved losses many, many times greater than the amounts involved in bad home loans.

...

The only sure way to survive a canopy collision is not to have one.

[happythoughts 0]

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It was not that complicated... Money was loaned to people who could not pay it back.... Pretty simple and then the snowball kept rolling....

I read that Canada did not have the same problem because they required people who were borrowing money to be able to pay it back.

What an interesting concept.

i have never understood that. the absolute worst part?
the policy still exists.

sound banking practices says "if you probably won't be able to pay
back the loan, you don't get one."

political practice ? "we want everyone to get a loan,
so the govt will guarantee those improbable loans"

the beauty of it ? turns out the govt has no money.
it is all taxpayer money.

when the home loan system starts collapsing, who jumps in ? the govt with more taxpayer money...

so, i am paying my home loan. the home loan of a
person who shouldn't have one, and the fat bonus of
the banker who lent the money.

anyone remember the last time ? the S&L scandal ?

the practice continues. stay tuned for our next fiasco.

[Heatmiser 0]

Oh, come on. You guys know it was [url "http://www.youtube.com/watch?v=oHg5SJYRHA0"THIS[/url] guy's fault. All the rest is just smoke and mirrors.

What you say is reflective of your knowledge...HOW ya say it is reflective of your experience. Airtwardo

Someone's going to be spanked! Hopefully, it will be me. Skymama

[kallend 1,644]

www.youtube.com/watch?v=SwRFoxgEcHc

...

The only sure way to survive a canopy collision is not to have one.

[Coreece 190]

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www.youtube.com/watch?v=SwRFoxgEcHc

Awesome...

I love it!

All that was missing was tea and crumpets.

Your secrets are the true reflection of who you really are...

[airdvr 198]

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When the housing and mortgage markets cratered

It's your quote from your post...why do you have such a difficult time accepting that ? The housing crash triggered the whole house of cards tumbling. Why did the market crash? 125% mortgages, liar loans, interest only mortgages. LIBERAL POLICIES which placed pressure on banks to lend to minorities even when the banks knew they would struggle to re-pay.

http://www.youtube.com/watch?v=hxMInSfanqg

Your heroes Barney, Nancy, and Harry are the ones who screwed the pooch. Own it.

Please don't dent the planet.

Destinations by Roxanne

[Amazon 7]

Quote

Quote

When the housing and mortgage markets cratered

It's your quote from your post...why do you have such a difficult time accepting that ? The housing crash triggered the whole house of cards tumbling. Why did the market crash? 125% mortgages, liar loans, interest only mortgages. LIBERAL POLICIES which placed pressure on banks to lend to minorities even when the banks knew they would struggle to re-pay.

http://www.youtube.com/watch?v=hxMInSfanqg

Your heroes Barney, Nancy, and Harry are the ones who screwed the pooch. Own it.

DUUUUDE quick... do something about that hook and sinker dragging around behind you hanging from that recttal oriface

[danornan 65]

Quote

Quote

It was not that complicated... Money was loaned to people who could not pay it back.... Pretty simple and then the snowball kept rolling....

I read that Canada did not have the same problem because they required people who were borrowing money to be able to pay it back.

What an interesting concept.

i have never understood that. the absolute worst part?
the policy still exists.

sound banking practices says "if you probably won't be able to pay
back the loan, you don't get one."

political practice ? "we want everyone to get a loan,
so the govt will guarantee those improbable loans"

the beauty of it ? turns out the govt has no money.
it is all taxpayer money.

when the home loan system starts collapsing, who jumps in ? the govt with more taxpayer money...

so, i am paying my home loan. the home loan of a
person who shouldn't have one, and the fat bonus of
the banker who lent the money.

anyone remember the last time ? the S&L scandal ?

the practice continues. stay tuned for our next fiasco.

It had to START someplace, and here is the beginning..... the rest is just the icing on the cake.

They took bad loans, repackaged them and then sold the "new" money instruments as investments. A house of cards...

Dano

[airdvr 198]

Quote

Quote

Quote

When the housing and mortgage markets cratered

It's your quote from your post...why do you have such a difficult time accepting that ? The housing crash triggered the whole house of cards tumbling. Why did the market crash? 125% mortgages, liar loans, interest only mortgages. LIBERAL POLICIES which placed pressure on banks to lend to minorities even when the banks knew they would struggle to re-pay.

http://www.youtube.com/watch?v=hxMInSfanqg

Your heroes Barney, Nancy, and Harry are the ones who screwed the pooch. Own it.

DUUUUDE quick... do something about that hook and sinker dragging around behind you hanging from that recttal oriface

Way to avoid the issue

Please don't dent the planet.

Destinations by Roxanne