Goldman-Sachs

[billvon 2,475]

>not what I said

Ah, then you did the old RushMC trick and didn't respond to my post. Instead you imagined a post you'd like to respond to and answered that. Foolish of me to expect a straight response from you I guess. But perhaps I can do the same here:

>The did what they had to do to survive under gov threats

Yes, it's unfortunate that Bush threatened them.

[Bertt 0]

You're on to something - you can't violate a regulation that doesn't exist.
How's this for starters ??

1) regulate Credit Default Swaps as insurance products.

2) let a mortgage originator sell all the mortgages he wants, but they have to be sold individually, not bundled into securities.

You don't have to outrun the bear.

[jcd11235 0]

Quote

Quote

>For the most part the sub prime mess is the govs fault

The subprime mess was caused by:

1) dumb people getting loans they could not afford
2) shortsighted bankers setting up absurd (and fragile) debt instruments
3) foolish banks who would loan to anyone with a pulse

Take away any one of those three and it would not have occurred.

#3 was the direct result of regulations requiring banks to provide mortgages to poor people.

The Community Reinvestment Act required no such thing.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[rushmc 18]

Quote

>not what I said

Ah, then you did the old RushMC trick and didn't respond to my post. Instead you imagined a post you'd like to respond to and answered that. Foolish of me to expect a straight response from you I guess. But perhaps I can do the same here:

>The did what they had to do to survive under gov threats

Yes, it's unfortunate that Bush threatened them.

Started befor bush and he tried to change the regs (as you well know) and the Dems stopped it saying there is nothing wrong

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 18]

Quote

Quote

Quote

>For the most part the sub prime mess is the govs fault

The subprime mess was caused by:

1) dumb people getting loans they could not afford
2) shortsighted bankers setting up absurd (and fragile) debt instruments
3) foolish banks who would loan to anyone with a pulse

Take away any one of those three and it would not have occurred.

#3 was the direct result of regulations requiring banks to provide mortgages to poor people.

The Community Reinvestment Act required no such thing.

Ah, maybe not directly But the regulators and the Dems did

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[jcd11235 0]

Quote

Quote

Quote

Quote

>For the most part the sub prime mess is the govs fault

The subprime mess was caused by:

1) dumb people getting loans they could not afford
2) shortsighted bankers setting up absurd (and fragile) debt instruments
3) foolish banks who would loan to anyone with a pulse

Take away any one of those three and it would not have occurred.

#3 was the direct result of regulations requiring banks to provide mortgages to poor people.

The Community Reinvestment Act required no such thing.

Ah, maybe not directly But the regulators and the Dems did

Incorrect.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[Bertt 0]

Guys, poor people don't cause housing bubbles, or internet stock bubbles, or any other price bubbles. They don't have enough money. And I'm pretty sure the CRA didn't require Washington Mutual to get involved in the Atlanta real estate market.
Even if the CRA is the only cause of the financial crisis, that would still lie at the Republicans feet.The big run-up in CRA loans occurred during the early 2000's simultaneously with mortgage lenders' production of huge numbers of sub-prime loans which they sold. Characterizing these as CRA loans was more a way to justify the loans than any need or requirement to make the loans.
Here's a quote from an article in Forbes on the subject. Note the dates:

Quote

Washington Mutual, for example, pledged $1 trillion in mortgages to those with credit histories that "fall outside typical credit, income or debt constraints," and was awarded the 2003 CRA Community Impact Award for its Community Access program. Four years later it was taken over by the Office of Thrift Supervision. In 2004 Bank of America ( BAC - news - people ) agreed to provide $750 billion in CRA loans to applicants with poor credit who had previous difficulty obtaining a mortgage. By 2008 Bank of America was reporting that CRA loans represented only 7% of its portfolio but 29% of its losses

You don't have to outrun the bear.

[Bolas 5]

Quote

Guys, poor people don't cause housing bubbles, or internet stock bubbles, or any other price bubbles. They don't have enough money. ]

It doesn't matter how much money you have when there's credit available to anyone (NINJA mortgages). Throw in the government securing the losses...

The housing bubble was caused by bad government policy and regulations which led to a worse idea that was unfortunately highly profitable in the short term so it spread.

If it made economic sense to provide loans to people with lower income, no credit, or bad credit, why were banks sued/fined to provide more of them and the government securing the loans?

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[Bertt 0]

Can you elaborate on that last sentence?

You don't have to outrun the bear.

[Bolas 5]

Quote

Can you elaborate on that last sentence?

Sure. Banks lend money to people. They choose whom to lend by credit scores and income because they want to only loan to people who wil pay them back. If they have concerns that a person may not pay them back (no credit, bad credit, or lower income) they charge a higher interest rate to compensate for that person defaulting on the loans. This can be done on smaller purchases such as cars, but harder to charge that level of interest on houses.

The argument was "Houses appreciate in value, so a bank could loan to anyone and if they failed to pay, just foreclose on the house and resell it." Foreclosures are costly and take time. They are not measures taken to maintain profit or even break even.

Banks determined that the risk of these loans was not worth the reward.

* First the government offered to buy some of the loans to limit the bank's risk.
* When positive reinforcement wasn't enough in came the lawsuits and other measures.

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[jcd11235 0]

Quote

If it made economic sense to provide loans to people with lower income, no credit, or bad credit, why were banks sued/fined to provide more of them and the government securing the loans?

They weren't.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[Bertt 0]

Good enough. So, back to the figures I posted above: That explains 29% of BoA's losses. What about the other 71%? Why did the bank make those loans?

You don't have to outrun the bear.

[weekender 0]

Quote

You're on to something - you can't violate a regulation that doesn't exist.
How's this for starters ??

1) regulate Credit Default Swaps as insurance products.

2) let a mortgage originator sell all the mortgages he wants, but they have to be sold individually, not bundled into securities.

1) I'm not sure how to regulate CDS's more. I know very little about them to be honetst. my best guess is limit the amount that can be sold vs your ability to pay them. I would not be surprised if these rules already exist and the amount of defaults were just never predicted. If thats true then adjust the model to reflect the new reality. I'm talking out my ass though, i know nothing about it.

2) i really doubt that would work. In order for there to be enough money to loan, banks must move the loans off the books. Investors have no interest in individual loans, historically speaking. They must be packaged up to limit risk. yes, it seems odd that the derivative was created to limit risk when in reality they are what brought down the industry. There is no easy solution but it would be smart to start by limiting the amount any one investor can buy. also, limit the amount of CDS's they can buy. They will be far less leveraged if they cannot hedge. I doubt BEST, LEHM and MLCO would have been so long the mortgages if they didnt believe AIG would pay their loses.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[michalm21 0]

Quote

Quote

Can you elaborate on that last sentence?

Sure. Banks lend money to people. They choose whom to lend by credit scores and income because they want to only loan to people who wil pay them back. If they have concerns that a person may not pay them back (no credit, bad credit, or lower income) they charge a higher interest rate to compensate for that person defaulting on the loans. This can be done on smaller purchases such as cars, but harder to charge that level of interest on houses.

The argument was "Houses appreciate in value, so a bank could loan to anyone and if they failed to pay, just foreclose on the house and resell it." Foreclosures are costly and take time. They are not measures taken to maintain profit or even break even.

Banks determined that the risk of these loans was not worth the reward.

* First the government offered to buy some of the loans to limit the bank's risk.
* When positive reinforcement wasn't enough in came the lawsuits and other measures.

Is this something you mostly just made up or did you get it from faux news?

[jcd11235 0]

Quote

I'm not sure how to regulate CDS's more. I know very little about them to be honetst. my best guess is limit the amount that can be sold vs your ability to pay them. I would not be surprised if these rules already exist and the amount of defaults were just never predicted. If thats true then adjust the model to reflect the new reality. I'm talking out my ass though, i know nothing about it.

Credit default swaps should be treated just like insurance. If a company sells them, that company should have to set aside sufficient reserves to just like an insurance company selling an insurance policy. This would reduce counterparty risk. If a party wants to purchase them, that party should have to show an insurable interest. This would eliminate the practice of netting, where companies would buy and sell identical credit default swaps at different rates, pocketing the difference.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[Bolas 5]

Quote

Quote

Quote

Can you elaborate on that last sentence?

Sure. Banks lend money to people. They choose whom to lend by credit scores and income because they want to only loan to people who wil pay them back. If they have concerns that a person may not pay them back (no credit, bad credit, or lower income) they charge a higher interest rate to compensate for that person defaulting on the loans. This can be done on smaller purchases such as cars, but harder to charge that level of interest on houses.

The argument was "Houses appreciate in value, so a bank could loan to anyone and if they failed to pay, just foreclose on the house and resell it." Foreclosures are costly and take time. They are not measures taken to maintain profit or even break even.

Banks determined that the risk of these loans was not worth the reward.

* First the government offered to buy some of the loans to limit the bank's risk.
* When positive reinforcement wasn't enough in came the lawsuits and other measures.

Is this something you mostly just made up or did you get it from faux news?

The voices contributed too...

Stupidity if left untreated is self-correcting
If ya can't be good, look good, if that fails, make 'em laugh.

[shah269 0]

Say it with me.
"Big banks like Israel can do no wrong! Big banks like Israel can do no wrong! Big banks like Israel can do no wrong! Big banks like Israel can do no wrong! Big banks like Israel can do no wrong! Big banks like Israel can do no wrong! Big banks like Israel can do no wrong!"
See don't you feel better?
They can do no wrong! Right?

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[Gravitymaster 0]

Israel is a big bank?

[Bertt 0]

Now that makes sense. So much that it might have happened if not for this:http://www.motherjones.com/politics/2008/05/foreclosure-phil
In an article in the Wall Street Journal on Feb. 20, 2009, Phil Gramm wrote this:
"Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis. That market has never lost liquidity and the default rate has been low, given the general state of the underlying assets. In any case, the CFMA did not deregulate credit default swaps. All swaps were given legal certainty by clarifying that swaps were not futures, but remained subject to regulation just as before based on who issued the swap and the nature of the underlying contracts."
This was after AIG Financial Products brought AIG to the brink of bankruptcy through the mismanagement of AIGFP's credit derivatives market, and AIG was saved by a large government bail-out.

You don't have to outrun the bear.