As described by the Institute of Chartered Accountants in Australia. If you’re still confused about what happened, it’s a good primer. Look for the chart and the narrative as it follows the mortgage from Mr. and Mrs. Jones to their local bank, and their local bank to an investment bank and upward. And what happened. The chart is a keeper.
Some commenters justly note that the presntation leaves out the crucial role of Fannie and Freddy in amplifying the disaster. Maybe I can find material that will complement the shortcomings of this primer. But even as is it does show the interrelatedness of the financial world and illustrate how pursuing an apparent social good like “affordable housing” can really lead to a nightmare. What formerly prevented failed social engineering schemes from having a global impact was the disconnectedness of command economies. They were self-limited in the amount of havoc they could cause. But in a world linked by vast financial systems and information architctures the consequences of an ill-conceived plan can cascade progressively. The problem with relying on more regulation to solve the problem is that it puts the very same political class which generated the problem in charge of preventing it.
Thank you, I’m sending that link to my Mother.
“Acorn Squash.”)
Then came the Community Reinvestment Act. Passed in 1977 to prompt banks to lend money in underserved communities, the CRA allowed community groups to file complaints that could hold up or even scuttle bank mergers. As one nonprofit umbrella group observed: “To avoid the possibility of a denied or delayed application, lending institutions have an incentive to make formal agreements with community organizations.”
Acorn became among the most successful at exploiting the law, especially after the Clinton administration set up tough new CRA standards. In 1993 Acorn crafted a $55 million, 11-city lending program administered by it and financed by 14 major banks eager to avoid CRA woes. In 1998 Acorn activists disrupted Federal Reserve hearings on the proposed Citicorp merger with Travelers, waving red umbrellas, a corporate symbol of Travelers, and then later protested Citigroup’s acquisition of Associates First Capital Corp. Eventually Citigroup signed an agreement to provide mortgages through Acorn counseling centers, including home loans to undocumented aliens in California.
In 2000 a U.S. Senate subcommittee estimated that such CRA deals had directed at least $9.5 billion through nonprofits, making the CRA the second-most important funder of social advocacy groups next to the government itself.
Arrgh! “Page is unavailable.”
As far as I could tell, Wretchard, (at this late hour) no reference was made to the Governments Role in intimidating Private Companies into ignoring traditional lending practices and taking on unqualified risky customers to keep the Feds, or Acorn, as their agents, off their backs.
Somehow, the meddling social engineers of fairness and Social Justice escape notice to the point that in short order they will gain controls of all the levers of power, courtesy of a duped electorate demanding Change!
I’m afraid that the impact of Fannie and Freddie are missing. Twenty years ago this couldn’t happen, the impact of the democrat congress and president is missing. Guess what these laws are still on the books. Don’t pay your taxes if they aren’t repealed.
“The IASB does not want
to eliminate professional judgment because doing so would
lead to the same ‘bright line’ rules that exist in US GAAP.
Experience has shown that ‘bright line’ rules encourage
structuring of transactions to accomplish a particular
accounting objective. Only through interpretation can the
IASB itself reign in diversity in practice or wilful blindness to
the principles in its standards. (This is where regulators need
to exercise their responsibility and influence as well.)”
US GAAP has evolved over the past half century from a succinct set of accounting principles to a vast cookbook of accounting rules. By following cookbook recipes to the letter, accountants and auditors are able to apply less and less professional judgment and instead point to compliance with accounting rules as proof that they have done their jobs.
Investment bankers hate accounting principles but they love rules. All they have to do is follow the letter of the rules and the watchdogs are prevented from calling bs on their deals.
Returning to the use of accounting principles would be a good thing, but I don’t know how this could happen as long as auditors are paid by the companies that they audit.
This morning the local paper has an article about the poor folks who now have mortgages for more than their house is worth. But the math does not always add up.
One example is a family that bought a house for $114K, refinanced it for $160K and now it is worth $79K. Okay, so what happened to the $46K+ they got when they refinanced? It probably went to buy new cars and boats and vacations and large screen TVs.
People were using their homes as cash cows to pay for luxuries based on the idea that the prices would just keep going up and that they could always refinance. Others were flipping homes and making 20% by just sitting on them for a year or two.
ACORN, and Fannie Mae and Freddy Mac and Franky Gay, and Chris Dodge all had something to do with this. But the fact is, a lot of individuals did very stupid things.
It has been reported recently that 5,000,000 of the sub-prime mortgages went to illegal aliens. The banking system didn’t seem to care since that would have impeded their quest for profits.
The system, as described, in the report is much too complex. We should go back to the old system where local bankers made mortgages to the community. Selling the mortgage should be limited to one at a time and have to stay in the local region.
A local banker would be able to mark to market the M/M Jones mortgage every day.
Exactly rab!
Local people w/a knowledge of the *real* risks and opportunities, as opposed to sophisticated abstractions that work wonders right up until the fecal matter hits the fan.
Great post; great link. It’s about to be forwarded to a bunch of folks I know.
Catastrophic failures never have a single cause; they are the result of multiple errors, each of which in isolation would not be fatal. Challenger’s O-Rings were flawed from the beginning, as were NASA’s review processes, but the cold weather ate up the last bit of Design Margin.
The subprime mess is no different. Borrowing short term on a long term asset; purchasing too large of a house for one’s budget; wiring around the traditional underwriting process; packaging mortgages and assuming low covariance between the components; assuming that rating agencies were properly assessing the risk of the package; assuming the insurers were properly capitalized.
Still, at the end of the day, while individual players in the saga may fail, it still appears likely to me that there is enough total capacity to absorb the losses without a complete meltdown. The problem we are facing is primarily a liquidity issue – there has to be enough fluid in the lines for the energy to flow to where it can be absorbed.
We’re in for a hard recession regardless what happens next. And a lot of this dysfunctionality needs to be fixed. But if the Fed continues to pump cash into the system, we are not likely to enter another deflationary spiral, aka Great Depression, IMHO.
L3
rab,
I second Doug. Subsidiarity is the key, although there will also be a need for spreading of risks across the system. But this can be accomplished without a government-guaranteed purchaser like F&F, and their corrupt political entanglements.
This also supports the idea of coming reverse migration. With no house, bad credit, and poor job prospects, many of these illegal aliens will return home. Demand will fall due to the recession, but supply will shift as well.
L3
RWE,
A lot of the stupid things people did would not have been possible prior the Feds and their agents (ACORN) pressuring Banks into lowering standards, under the cover of protecting the underprivileged, but these new standards also enabled Mr and Mrs Stupid (and/or Greedy) to do things that were previously simply not available opportunities.
RWE,
Precisely so. That is why consumption will fall, i.e. a recession. And it will hurt.
L3
Stanford recently had an ad-hoc panel with finance and law school faculty . Here’s the link:
http://www.gsb.stanford.edu/news/headlines/teach-inSept.html
Two interesting observations:
Jim Van Horne, one of the greatest finance professors of his generation, pointed out there have been 16 recessions in the past 200 years, and all of them were preceded by an asset price bubble. He pointed out that this is not the worst bubble, but it is a bad one. But this is the greatest amount of government intervention since the 1930s.
Monika Piazzesi, an economist at the National Bureau of Economic Research, said that one of the big questions is whether the finance industry is “special.” She said most macroeconomists do not think it is any different than any other industry. However, there is a small number who think it is special, and therefore requires both strong regulation and government support. The leader of this group is Ben Bernanke.
Food for thought.
L3
Not a word about the role of Fannie Mae and Freddie Mac, the two US Government Sponsored Entities responsible for half of the mortgages in the US? In a policy intended to increase low-income home ownership, these two quasi-government entities were directly responsible for encouraging sub-prime mortgages by guaranteeing them to the securities market. While one can certainly blame the investment banks for trusting the government guarantees, an article purporting to discuss the subprime crisis in the USA that doesn’t even mention the GSE’s role and the politics behind it is not credible.
Indeed, Kasmir!
““Surely there is a more direct way to address the problem,” Singleton said.
One way would be to invest in the banking sector, essentially offsetting the “liquidity discount” now in the market.
He said government should get an equity stake in that case “on the part of the American taxpayers” and not “give away that liquidity discount.”
– Leo’s Link
It’s still a failure to model risk, namely assuming all risks are independent.
Doug,
The equity investment idea is a good one, but only if one accepts the “special case” argument about the financial industry.
I have to admit skepticism about the “specialness” of financial services. Living in Houston, I have heard similar arguments most of my life from people arguing that energy is special. I suppose if I lived in the midwest, I’d have heard arguments that agriculture is special. In Hollywood, the media business. Detroit, autos. And so on.
It appears to me that what makes the finance business special is that it is concentrated in New York, where the media lives. And when David Gregory’s wife’s is at risk of prosecution, why that’s a national emergency!
L3
Help me out here. Is that report really worth reading or is it the load hogwash I think it is? It must be CYA time for Socialist Accounting Clerks the world round. See, it could not have been the massive politicization of the Financial Markets — no-no-no-no-no! Where are Fannie and Freddie? Do we dare overturn that rock? Apparently, we did not have to spend $200 billion bailing them out. What about their trillions of dollars of “dicey” paper? All of it with an implicit guarantee from the Federal Government — with “implicit” fast becoming “explicit.” Is that explained? Because I do not want to read twenty pages of garbage — written to “misdirect” the public — not on a Sunday. That will just make me angry.
You see, there is enough blame to go around and around and around and around without end. Apparently, there is no connection between the Political Class in Washington pushing “affordable housing” and the sudden appearance of mass mailings offering homes to people who could not get one — not even close — in the traditional manner.
People struggling to buy homes do not give money to politicians. Real estate speculators do. People who cannot afford to buy a home and have maxed out their credit cards do not know how to game the system — accountants do.
To get people to buy a $350,000 house they can’t afford, you have to get them to sell the $120,000 house they can afford for $150,000 to someone who cannot afford that house. There’s a Fannie loan in there somewhere. And a government sponsored “Cartel of Caring” that, as usual, victimizes the folks it pretends to help. No wonder the Socialists are circling the wagons.
Myself, I put it down to the Evils of Capitol-ism. Affordable Government, anyone?
While CRA spurred Acorn’s growth, the “living wage” is the group’s most successful local issue. In the early ’90s, advocates persuaded Baltimore to require city government contractors to pay salaries substantially above the federal minimum wage; the campaign caught the attention of Acorn just when the Gingrich Congress was coming into power with a conservative agenda. Stymied in Washington, Acorn decided instead it would work city by city, starting in the most liberal places, to enact local wage legislation. Partnering with Wayne State University’s publicly funded labor studies program, Acorn set up a national living-wage center to help coordinate campaigns. Some 125 municipalities have since passed living-wage legislation.
The movement is not always what it appears to be. Though Acorn touts living-wage laws as a way to lift the working poor into the middle class, the vast body of academic work on wage laws shows that they end up hurting the poor by forcing businesses to eliminate some low-wage jobs. Acorn’s own leadership understands this principle perfectly.
When California regulators sued Acorn for not paying its own workers the minimum wage, Acorn argued that this would endanger its mission—because it would have to hire fewer workers. (!)
Inside Obama’s Acorn
- Stanley Kurtz
“when David Gregory’s wife’s is at risk of prosecution, why that’s a national emergency!”
Since Finance is, at its roots, the “money now for more money later” business, it requires a predictable regulatory environment to function. Sovereign governments absolutely have the crucial role in providing sufficient stability for effective financial commerce in their jurisdictions.
That said, politics is infinitely more complex than finance. At least in the business world, there’s a score keeping system. Few governments are democracies, and even in those purporting to be, the vast bureaucracies that accumulate are alas accountable in no so simple way as a P&L.
So we see in the US that the the folks responsible for the social policy interventions in the GSE’s that led directly to the disaster are profiting politically from it, and are eagerly exploiting the mess to achieve even more of their redistributionist policy objectives.
hdGreen:
Pricing Homes out of affordable range by mandating financing for people who could not afford Homes!
Your Government at work to serve you!
Let’s look at the downstream impact of this mess. It appears that the actions taken by the Federal Government to moderate/ameliorate the problem are going to a)raise taxes on the “rich” and b)inflate the currency.
If the Dems win, the “rich” will be paying more. However, the Dems consider anyone making over $55K/year “rich.” Plus, you can’t get much in taxes from people who don’t pay anything, which is most people who make less than $40K/year.
What will happen is that the Dems will be hammering the middle class with more taxes just as the value of their dollars is collapsing. This will be just like the Carter years except the political landscape is even more polarized. Biden has already come out and said that failing to pay more in taxes is “unpatriotic.”
The half of the country that votes Republican already thinks government at all levels wastes too much money. Jack the taxes up and there will be a commensurate increase in a)tax avoidance strategy usage, and b)outright tax cheating.
This last is poison to a system that depends so heavily on voluntary compliance. The Dems may get more money out of the people but they’ll do it only by hiring more IRS auditors and using harsher enforcement. This won’t be popular except with the poor, who don’t pay taxes anyway.
The bottom line is that government is set to become a lot more unpopular than it already is. My prediction is that a Dem win in November will soon a)produce the most bitterly divided/polarized America since the Civil War, and b)make Obama the most hated POTUS ever. America is in for some ugly times ahead. Our enemies are rubbing their hands with glee.
What a hole those Chartered Accountants have left in their report! Not a word of mention of Fannie, Freddie or the CRA and its mandatory lending to high-risk ‘buyers’.
Even Wikipedia (not your average conservative organization) has the following:
Additionally, there is debate among economists regarding the effect of the Community Reinvestment Act, with detractors claiming it encourages lending to uncreditworthy consumers[75][76][77][78] and defenders claiming a thirty year history of lending without increased risk.[79][80][81][82] Detractors also claim that amendments to the CRA in the mid-1990s, raised the amount of home loans to otherwise unqualified low-income borrowers and also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages.[83][84]
A September 30, 1999 New York Times article stated, “… the Fannie Mae Corporation is easing the credit requirements on loans… The action… will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough… Fannie Mae… has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people… borrowers whose incomes, credit ratings and savings are not good enough… Fannie Mae is taking on significantly more risk… the government-subsidized corporation may run into trouble… prompting a government rescue… the move is intended in part to increase the number of… home owners who tend to have worse credit ratings…” [93]
They even name names:
Gerald P. O’Driscoll, former vice president at the Federal Reserve Bank of Dallas, stated that Fannie Mae and Freddie Mac had become classic examples of crony capitalism. Government backing let Fannie and Freddie dominate the mortgage-underwriting. “The politicians created the mortgage giants, which then returned some of the profits to the pols – sometimes directly, as campaign funds; sometimes as “contributions” to favored constituents.”[95]
On April 18, 2006, home loan giant Freddie Mac was fined $3.8 million, by far the largest amount ever assessed by the Federal Election Commission, as a result of illegal campaign contributions. Much of the illegal fund raising benefited members of the United States House Committee on Financial Services, a panel whose decisions can affect Freddie Mac,[96] but also benefitted Republican politicians in general.[97]
Some lawmakers received favorable treatment from financial institutions involved in the subprime industry. (See Countrywide financial political loan scandal). In June 2008 Conde Nast Portfolio reported that numerous Washington, DC politicians over recent years had received mortgage financing at noncompetitive rates at Countrywide Financial because the corporation considered for the officeholders under a program called “FOA’s”–”Friends of Angelo”. Angelo being Countrywide’s Chief Executive Angelo Mozilo.[98] On 18 June 2008, a Congressional ethics panel started examining allegations that chairman of the Senate Banking Committee, Christopher Dodd (D-CT), and the chairman of the Senate Budget Committee, Kent Conrad (D-ND) received preferential loans by troubled mortgage lender Countrywide Financial Corp.[99] Two former CEO of Fannie Mae Franklin Raines and James A. Johnson also received preferential loans from the troubled mortgage lender. Fannie Mae was the biggest buyer of Countrywide’s mortgages.[100]
So the Australians have a good ear for the interconnections of mortgage securities, but are tone deaf (deliberately?) to the political driving forces for the catastrophe.
OT: This story is making its way up the info food chain: its now in the washington times: Obama supported Odinga’s run for the presidency in 06-07 as they are both from the Luo tribe there. Odinga an east german communist trained politician — was favored to win until it came out that he in return for their backing he had promised the moslem minority that he would institute sharia law throughout all of Kenya.
http://www.washingtontimes.com/news/2008/oct/12/obamas-kenya-ghosts/
“So the Australians have a good ear for the interconnections of mortgage securities, but are tone deaf (deliberately?) to the political driving forces for the catastrophe.”
They think like accountants. I am an accountant and that is pretty much how I think.
Accountants look at systems and try to imagine how they can be gamed by thieves. Whether the thieves are customers or employees or sales executives or CEOs or leaders of the Congressional Black Caucus is beside the point to accountants who assume that anyone with an opportunity to steal will do so. I know that this is a wonkish perspective, compared to a world view that looks for villains so that they can be punished. Certainly it is a good thing to punish villains. But when looking post mortem at a financial debacle it is the job of accountants to consider systems of accountability and financial control so that those systems can be fixed.
Don’t get mad at accountants when they don’t talk about hanging folks from lamp posts. You are assuming that they don’t want to string folks up just as bad as you do, and you may be wrong in that assumption.
Building Socialism is a process of Trial and error — same trials result in the same errors which result in the same trials: trials for the population at large and trials for political opponents (called wreckers or haters).
So, have Socialist learned anything from this sordid history? Yes. They’ve learned to create “Socialism with a Capitalist Face.” That way when their schemes blow up in our face — they can blame the Capitalist.
Those huge bonuses? When responsibility meant having the authority to build an institution you could be proud of, you didn’t need huge bonuses. Now that “responsibility” means taking the blame for the latest collapse of a Socialist scheme — large bonuses are demanded and received by a very different sort of sordid capitalist.
How is it stupid if Mr. & Mrs. Greed E. Van Stoopid end up having their house (even if it’s only worth $79K now) AND their new boat AND their new huge plasma screen entertainment center AND their new smug green Prius?
Won’t the house rebound in value down the road a little bit, which means the Von Stoopids will still have all their new toys and their house? Of course, their retirement fund may have bit the dust, but really, in a society based on instant gratification and keeping up with the Joneses my guess is that won’t hurt too much for the von Stoopids.
So in comparison with the Masters of the Universe on Wall Streets, they suddenly become Mr. & Mrs. Notso Von Stoopid.
The report is not quite accurate in its description of how tranches in a CDO work. It says that better loans are pooled into the “Excellent” tranche, and worse ones into lower tranches. This is not generally true. Typically in a single CDO all the loans would have the same or similar credit quality. What made a tranche “Excellent” vs “Bad” was that the payments from the entire pool went first to the buyers of the “Excellent” tranche, while the lowest tranche absorbs the loss from the very first of the defaults.
Here’s the Bolshevik the Democrats tried to pull with the first version of the TARP bill, aka the Paulson bailout. They tried to steer 20% of the profits from the resale of any assets straight to ACORN. Which would have made them about the size of Exxon-Mobil. That’s a lot of money to buy brown shirts for community organizers. You can buy a lot of voter registrations with a couple hundred billion dollars.
Doug: EXACTLY!
I am convinced that most of the problem comes from the “flippers” and other speculators. A poor family that now is paying on a house that is worth much less has not had their payments go up much, if at all. So they will likely keep on paying if they can. Someone who bought a 2nd or 3rd house just so they could sell it and make a fast buck is not gonna keep paying on a place where they paid $200K and it is only worth $100K now is going to walk away from it – they can’t break even in the hear term and in the long term the loan probably is an unsurvivable deal.
Leo III: Maybe you could clarify some things.
If people bought a house for $200K, no money down, and it is now worth only $100K, I believe that the lender generally has the right to ask for the $100K difference right now?
But does Mark to Market mean that the lender has to put that property down on his assets in any case as $100 K instead of $200K even if the borrower does not pay them the $100K difference?
And if a bank goes out of business do all of the loans get called in?
Any idea how much of the problem is due to things like those 50,000 unsold new condos in places like Miami? Those are not bad mortgages; they were never mortgaged to buyers. But no doubt the builder borrowed money to build the places and now they are worth very much less than their planned sales price – and can’t be sold at all for some time to come.
One of things mentioned in this washington times article that’s not being mentioned much in the US press is that the credit crises in the US is being driven by foreign banks in places like China and Brazil which won’t lend the US money any more.
http://www.washingtontimes.com/news/2008/oct/12/global-creditors-end-us-spending-spree/
the consequence of countries like china and brazil being creditor nations while the USA and Europe are debtor nations may will be a reshuffling of the world order
http://www.washingtontimes.com/news/2008/oct/12/financial-crisis-reshapes-world-order/
RWE,
As I understand it, a first mortgage is non-recourse to the borrower. If the borrower defaults on the loan, the only recourse for the lender is to foreclose on the property. The logic is that they will then kick out the defaulting borrower, sell the house to some creditworthy person, and write off any difference (and if there’s a surplus, they have to pay the difference to the defaulting borrower, though that never happens).
Now, second mortgages or home equity loans, as I understand it, are different. They are recourse, and stay with the borrower even if the house is foreclosed on.
So, in your example, I think the “no money down” loan was generally split into two parts: a traditional 90% loan-to-value subprime mortgage ($180,000), and a 10% “downpayment loan” ($20,000). The first part is non-recourse, the second is recourse.
When the value of the house falls to $100,000, nothing necessarily happens. There are not “mark-to-market” triggers in mortgage loans. As long as the borrower keeps paying the note, everything is (sort of) hunky-dory.
But when the borrower goes into default, and the senior (first-mortgage) lender forecloses and auctions the house for $100,000, that lender takes an $80,000 write-down. The lender subtracts $180,000 from its assets (loan receivable), subtracts $80,000 from its earnings (which decreases equity), and increases cash by $100,000. The home equity lender ($20,000) gets nothing from the foreclosure, but isn’t necessarily flushed (more below).
The tricky part is the impact of mark-to-market. The lender is supposed to now write down “similar” loans by 44%. But what’s similar? No two houses are exactly alike. Maybe this house fell in value because the guy who owned it painted swastikas all over the exterior. Maybe the guy didn’t maintain his house. Maybe it was across the street from a liquor joint. Or, the bottom has fallen out of the market and every house value within a 3 mile radius has fallen by half. There’s a lot of information that’s needed to fairly value this asset, and the impact of that foreclosure. This lack of information to fairly value the assets is what was being discussed on another post. Transparency is part of the problem, but the sheer volume of data that is known and in need of processing is just as important.
Anyway, out of an abundance of caution, the senior lender writes down every subprime mortgage, and the cascade begins. Instead of an $80,000 loss, the lender may be facing an $80 million loss. Yikes.
With respect to the $20,000 home equity loan, the borrower is still on the hook, although in reality they will call a debt resolution service and negotiate that down to $10,000, paid over 3 years. The home equity lender eats the rest.
If the bank goes out of business, the loans will probably get transferred to another bank, along with the bank’s deposits. If the loans are bad, the FDIC may make up the difference. If the loans are good, the bank may be required to pay for the loans.
I’ve not seen independent confirmation of 50,000 unsold units in Miami. If it’s true, it will be a drag on the real estate market there for years. If you like vacationing in Miami, it will soon be a good time to buy!
Hope this helps.
L3
RWE,
One more thing:
Where I wrote “out of an abundance of caution,” you could also substitute “because of threats from regulators.” From what I know, regulators all but run the credit underwriting process at banks during this kind of credit crunch. It’s not the top issue now, but there will be a point where there’s plenty of capital, but banks will be afraid to loan any because regulators have their foot on the throat of the bankers.
But it will be a few months/couple of years before this becomes an issue. So we should probably save these complaints for a later time. After all, the regulators are here to save the day!
L3
RWE,
We vacationed on Chingoteague Island, VA this year. It’s a tiny, sleepy little place whose greatest appeal is its off-the-beaten-path nature. On a tour of the bay in a crabbing boat, we saw a huge new condo complex of hundreds of units, complete with at least 80 immaculate, new yacht-size boat slips. All the condos appear to be empty, there’s not a boat in sight in the entire private marina. For the asking price of one of the condos, you could buy almost any house on the island. Somebody is holding that bag, for sure. I’m hoping it’s not going to be us, John Q. Taxpayer. Reminds me of the dot.com crash.
rab:
“It has been reported recently that 5,000,000 of the sub-prime mortgages went to illegal aliens. The banking system didn’t seem to care since that would have impeded their quest for profits.”
Reported where? Could you please provide a source? With only 300 million people in the US, 5 million illegals (+ more for family members!) seems preposterously high to me.
Great summary.
Here it is in comic book (barely) form.
http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1
*language warning*
Four points: (1) The vast majority of home buyers receiving subprime loans were neither innocent or naive. They were smart enough to know that they were getting a house, whether their “dream house” or not, for basically nothing. Many have stopped all payments on the mortgage, taxes, insurance, and upkeep, and stayed in the house for months upon months. When they leave, many take the appliances and copper plumbing with them. They’ve made money on the situation. (2) It is an absurd statement that mortgage delinquencies are higher than in the ’30′s. Look at the statistics. (3) Along the same lines, I have not seen an adequate explanation as to why the “excellent” and the “so-so” tranches are causing problems. The default rates on standard mortgages are up, of course, but still a small percentage of the whole. (4). I think you’ll find that the problem is massive leverage throughout the system….the leverage of the homebuyer, the leverage of the investment banks buying the loans (inc. FNMA, etc.) and the leverage of the end buyers of the CDO’s.
Wretchard, this report will not do. It blames investment banks, auditors and unnamed regulators while not even mentioning CRA, Fannie/Freddie, Barney Frank or ACORN!
Read meat, your base demands, not primers that fault greedy capitalists.
Coyolt-
I’ve this reference a few times in the past week, don’t remember where. I just googled it and came up with this:
http://newsbusters.org/blogs/warner-todd-huston/2008/10/09/calling-old-media-five-million-illegals-have-illegal-mortgages-u
The source appears to be HUD
Coyotl,
Your greatest contribution to this thread has been to serve as a junior example of the Great Obama. With his cunning but without the subtlety; with the demagoguery but without the fluency and the fundamental emptiness without the baritone to give it resonance. But otherwise the perfect miniature.
This report is a complete white wash and a misdirect away from the real culprits. The sub prime crisis would not be possible at all, if not for the roles played by the Community Redevelopment Act, ACORN, the Clinton Administration, Fannie and Freddie.
There are bad players in all businesses. Duh! If the government purposely writes a regulation that encourages fraud and theft, guess what? Fraud and theft will occur.
There are however, other bad government actors in this mess. In my Los Angeles County, (number one in foreclosures in the US), LA City and LA County over the last twenty years limited the housing stock increase to just over a hundred thousand units, created impossibly expensive building regulations, and at the same time, encouraged millions of illegals to come here and live.
Home prices and rents already high, went through the roof.
This price increase was not the work of speculators. It was simply the result of the law of supply and demand. In a growing market with high demand, the marketplace will force upward the average housing price so it will closely equal the replacement cost of housing minus depreciation. The risk premium and the costs of development are so high, o make the economics work, the sales price of tiny 600 sf new condos in good areas now have to be around $750,000, which would require slightly over $43,000 in annual payments to afford a 80% mortgage even with $150,000 down. But the average household income in the US is only slightly over $50,000 a year, and much less for an illegal. There is an incredible mismatch between costs and what is affordable. The market is way, way out of whack.
Even with these horrible household economics, in LA there is still a severe scarcity of housing in safe areas. There are few foreclosures and hardly any real deals in nice areas still.
The great amount of foreclosures are in the poorer areas. This is where the fraud occurred. My house in a nice area was never appraised for more than 75% of its market value over the last ten years. But after checking out a number of foreclosures in really scary areas for clients, these often undesirable homes were appraised and granted loans at way over 50% of their value and appraised at a cost per square foot higher than that occurring in some really nice areas.
What you had was one system of regulation in nice areas and another in poor areas. This biased system of regulation could not have happened without the approval of state and local government.
All the elected officials with power in LA are Democrats or are controlled by Democrats. Many of the most powerful have extensive connections to Washington and the same folks who ruined Freddie and Fannie. They have created laws and pressured the business community to create many unsustainable situations just like happened in the sub prime mess.
I happen to be a minor elected government official serving in an advisory capacity. I know a bunch of these guys. Almost all are corrupt. They pull a lot of crap that the public never finds out about. Every time I a raise too big a stink about their many destructive policies and actions, the City Attorney’s office or someone else above me comes down on my head.
For those of you who think an Obama Administration won’t be a nightmare, you got another thing coming. I’ve seen how these type of guys operate and it ain’t pretty.
@coyotl
@rab
It would appear that Phoenix radio station KYFI started this rumour based on a comment by a retired ICE agent.
KFYI
HUD Mum on Illegal Mortgages
Leo: Thanks. I was thinking of the case where a road is widened and the municipality takes part of homeowners’ property and pays him $2K. The bank that holds the loan then assesses the house as having lost $5K in value and asks for that $5K. I have heard where it was feared this would happen, but I don’t know if it actually has. I wondered if it would happen with a general devaluation of the market but without a default and I guess that it does not happen then. So, basically nobody (except maybe the taxpayer) has to cough up the $100K in lost value.
As for the Miami case, there was a report in the Orlando Sentinel about a year ago that said that Miami had 20K more new units than had been sold and expected to have 50K new units a year later – like about now. I have no interest in vacationing there!
Tony: I have not been to Chicoteaque but I have talked with people there a number of times, work-related, a good friend of mine spent 3 months there this year preparing for a rocket launch from Wallopps. I am not surprised about the condos. The same situation exists on the island where I live.
Nahncee: Yes, if the stupid people just hang in there they should be all right. They are no worse off than before, really, and some in the article say they look at it just that way. But they should stop complaining and looking for a bailout. They’ll no doubt vote for Obama to express their ire.
The people really going nuts in all of this are the municipalities and counties. They could count on a increase in property taxes every year, from both new construction and increases in valuations. Now that all disappeared and even reversed. Here, they are charging people slightly lower property taxes – and then adding on huge essential services fees to bring the amount we have to pay up to more than it was before the houses went down in value.
“The problem with relying on more regulation to solve the problem is that it puts the very same political class which generated the problem in charge of preventing it.”
Yes, and the problem is also that history is written by the victors. The Clintonistas look back on the Community Reinvestment Act and avoiding war with North Korea, and handling the WTC bombing and the Cole bombing and the Kohbar towers bombing and the African Embassy bombings as legal matters, and the Dot Com climb – all as victories. As in “Everything was fine on 19 Jan 2000 and then that idiot Bush took over.” As in “Everything was fine at 0754 Honolulu time on 7 Dec 1941 and then that idiot Cordell Hull pissed off the Japanese during discussions in Wash D.C.”
I am afraid this will go from the current bad to worse.
What Paulson & Co are doing is to put a finger into a really mushy dike. Im not sure the CDS’s discussed earlier are worth anything. Some argued they’re worth 8c/$ Who knows? They will bankrupt some and hurt others and some will evade damage. Thats the way it works.
What’s not happening is any effort to fix the fundamental problems. Some are trying to buy down the mortgages or reissue them at lower rates. Others are trying to recap the holders of the “bonds”. Meanwhile the banks who cause credit to flow are paralyzed because their asset base has no value since they cant sell paper to anybody since nobody trusts their paper. Banks cant lend to each other since banks cant trust banks. Tom cant meet payroll because he cant get short term money. Dick cant buy Toms product for the same reason. Toms balance sheet went to hell because his inventory cant be sold. Now he really cant get short term money. Tom’s toast.
Has any body fixed whats broken or offered to? Will Obama/pelosi/reid reconfigure or repeal the CRA? Appoint a Special prosecutor to investigate F&F and the rest of it? Appoint a board to liquidate F&F?
I dont see any of this happening since it will offend several of the interest groups that elect these people. And their election is whats really important.
“…most macroeconomists do not think it is any different than any other industry. However, there is a small number who think it is special, and therefore requires both strong regulation and government support.”
Control the money supply and you control the people.
It has been established that the World Bank computers and databases have been broken into during the past year. Also, every day for the last six trading sessions EXACTLY one hour before close of the markets in New York massive computer generated trades would come in to roil the markets.
Cloward-Piven, al la Soros and the Russians, anyone?
Fred, any particular reason you’re plunking for Russia and not China or Saudi Arabia?
wretchard:
“Coyotl,
Your greatest contribution to this thread has been to serve as a junior example of the Great Obama. With his cunning but without the subtlety; with the demagoguery but without the fluency and the fundamental emptiness without the baritone to give it resonance. . .”
Cunning indeed, Wretchard, subtlety without need. Obama, he savvy, I credit him with that, as I thought he had little chance last year and he’s navigated artfully until the storm seems to have broken his way. He’ll never get my vote. And don’t overinflate the man’s abilities. At best he’s a tenor.
Speaking of demo-demo-demogoguery: you wrote last week or so that Obama was to be blamed for unleashing the vicious kooks and thugs of his party/movement — the “getting in your face” tactics were what the Obamessiah called for and the results would be his responsibility. I cringed at that, for I knew how the MSM would play those results. McCain/Palin have called for the “gloves to come off” and now the racists and assassins have been unleashed. Do you think this is accurate, or does it only go one way, that is solely for the other side?
Here’s Dana Milbank for the Washington Post, Oct. 7th:
“Of course, it’s not only gloves and heels; headgear has a role, too. “Okay, so, Florida, you know that you’re going to have to hang on to your hats,” she said at a morning rally in Clearwater, “because from now until Election Day, it may get kind of rough.”
Say it ain’t so, Sarah!
Sen. Lindsey Graham, a McCain confidant, told The Post’s David Broder that the campaign would “go down in history as stupid if they don’t unleash” Palin. Well, the self-identified pit bull has been unleashed — if not unhinged.
. . . “This is not a man who sees America the way you and I see America,” she told the Clearwater crowd. “I’m afraid this is someone who sees America as imperfect enough to work with a former domestic terrorist who had targeted his own country.” The crowd replied with boos.
McCain had said that racially explosive attacks related to Obama’s former pastor, the Rev. Jeremiah Wright, are off limits. But Palin told New York Times columnist Bill Kristol in an interview published Monday: “I don’t know why that association isn’t discussed more.”
Worse, Palin’s routine attacks on the media have begun to spill into ugliness. In Clearwater, arriving reporters were greeted with shouts and taunts by the crowd of about 3,000. Palin then went on to blame Katie Couric’s questions for her “less-than-successful interview with kinda mainstream media.” At that, Palin supporters turned on reporters in the press area, waving thunder sticks and shouting abuse. Others hurled obscenities at a camera crew. One Palin supporter shouted a racial epithet at an African American sound man for a network and told him, “Sit down, boy.”
McCain’s swoon is largely out of his control, the result of an economic collapse that ignited new fears Monday when the Dow Jones industrial average closed below 10,000 for the first time in four years. That’s why his lead in Florida polls, which once reached as high as 15 points, has turned into a three-point deficit.
But the campaign has reacted with recriminations (the St. Petersburg Times reported that the Florida Republican Party chairman, after questioning Palin’s aptitude, was told that he couldn’t fly on her plane) and now Palin’s rage.
The angry GOP vice presidential nominee even found a way to blame the market decline on the yet-to-be-enacted tax policies of the yet-to-be-elected Obama.
. . .
The reception had been better in Clearwater, where Palin, speaking to a sea of “Palin Power” and “Sarahcuda” T-shirts, tried to link Obama to the 1960s Weather Underground. “One of his earliest supporters is a man named Bill Ayers,” she said. (“Boooo!” said the crowd.) “And, according to the New York Times, he was a domestic terrorist and part of a group that, quote, ‘launched a campaign of bombings that would target the Pentagon and our U.S. Capitol,’ ” she continued. (“Boooo!” the crowd repeated.)
“Kill him!” proposed one man in the audience.
NahnCee,
Well, when I think of computer hacking I think of the long deserved reputation that Russia has in that achievement. But, you know, Communist China has some accomplishment there as well.
The Saudis are to f***ing dumb to pull that caper off. And I think the sand monkeys kind of like the idea of a U.S. missile defense system, as they are not fond of the Mullahs in Tehran having the hydrogen bomb on ICBM’s.
I’m not normally inclined towards conspiracy theories, but the timing of so many events with our upcoming election is uncanny.
rab:
“Coyolt-
I’ve this reference a few times in the past week, don’t remember where. I just googled it and came up with this:”
Rab, clearly you didn’t read the link you posted, if you did you would see:
“** UPDATE**
I found why KFYI pulled the original piece. It turns out that they mistook the opinion of a HUD official as an official HUD announcement. KFYI stands by the essence of their original report, but had to clarify that their source was talking on his own and not as an official of HUD.”
Yet another crazy datum to be debunked on the Belmont Club comments. Wretchard, aren’t ya glad, in the J.S. Mills liberal sort of way, to have me around. Never know what trickster will come up with the truth!!
By the way, the points made in the accounting piece are further expounded on in the video at:
http://www.dailymotion.com/swf/k2GEzYKbv1P6IUHSpY
“…a first mortgage is non-recourse to the borrower.”
WRONG. However, the collectability of any deficiency judgment (the judgment against the borrower[s] after net value of the real property has been deducted from the total debt owed) is very suspect. The deficiency judgments will enter and then be sold at a discount to companies that will chase the debtors into bankruptcy. How that will work with mortgages to illegals, I don’t know.
mac -
Your instincts are in the right place, but please take care to be less scattershot with your words about who pays taxes and who doesn’t.
I’ve hung out on conservative blogs for at least 6 years now, and if there’s one whopper I hear more frequently than all the others, it would have to be how “only the rich pay taxes.”
Even though I know the writer is referring to federal income taxes, the sloppy generalization still gets my goat every time. Maybe because I’m a moderate-income Gen X’er who is being eaten alive by FICA, Medicare contributions, state income taxes, borough taxes (I live in Tax-sylvania, after all), and the taxes on just about every service imaginable. I already work two jobs and am looking to take on a third, so I can save for a house downpayment. Payroll taxes are the single biggest drag on my finances, no competition. And believe me, I notice how much gets whacked out, every single paycheck. It’s reason #1 why I’m a staunch small-government conservative. (Even though my Dem friends are always telling me, “But you vote against your interests!” No, I reply, I’m very much voting for my interests: like the man said, “the power to tax is the power to destroy.”)
Whenever I hear other conservatives spout off about income taxes and completely ignore the payroll tax issue, I automatically know that they make a helluva lot more money than I do. Which is cool. I hope to be in their income bracket someday and am grateful to live in a country where this is possible (up through 11/4/08, anyway).
But we conservatives shoot ourselves in the foot when we ignore the elephant in the room with regard to taxation on the lower-middle class and middle-middle class. Casting this as a class-warfare issue (the rich pay taxes and the poor don’t) not only (1) plays right into the hands of the socialists, but also (2) signals to moderate income earners that the speaker doesn’t have a clue as to their situation because he left their income bracket behind a long time ago. All they hear is the conservative defending “the rich.” The conservative may be right on point of fact, but he has just tossed that listener’s sympathy, and therefore vote, into the lap of a Democratic candidate the next election cycle.
Hard as it is to believe, there are still a LOT of people out there who have not made the connection between government size & power, and why they are having such a hard time getting ahead even though they’re working their asses off. Let’s face it, neither the educational establishment nor the mass media is going to connect the dots for these people. Conservative word-of-mouth is how this is going to get done if it gets done at all. Unfortunately for at least a generation now, we’ve been oh so much better at the foot-in-mouth than the word-of-mouth.
OT for this thread – sorry. But I had to say something & not let the nnn-th remark on this topic pass by.
3Case,
Thx for the clarification, and sorry for the misinformation. My experience is more on the commercial side, where the loans we are involved in are non-recourse. I wonder what the effective difference is – at the end of the day, how much of a discount is applied to these deficiency judgments?
Regardless, I’m pretty sure that marking these mortgages to market does not create an immediate additional liability for the borrower. Is that your understanding as well?
L3
Insufficiently Sensitive:
What a hole those Chartered Accountants have left in their report! Not a word of mention of Fannie, Freddie or the CRA and its mandatory lending to high-risk ‘buyers’.
Mind you that Wretchard’s excellent contribution is submitted by our gracious host as a Primer. I found it enormously helpful.
That Australians in the accounting trade can do this and NOT have all the answers about which American politicians are guilty is hardly surprising.
Look, you have the OZ Primer, and where the structural flaws as they see it in the USA and International credit and accounting oversight systems exist w/o layering over it with speculation. On which Reaganites destroyed what regulatory oversight or how which Democrats Forced, yes forced investors to buy up poison paper..
If you want to add to the Institute of Chartered Accountant’s your own little boxes and lines of cash and stuff going to and emenating from them, by all means do so.
Right now, people are thinking “Party of Free Markets!, Wall Street, tax cuts for the rich, and Bush’s Ownership Society” and rightly sticking it to Republican asses – notable McCain and the slaughter they will get in Congress….
Later, they will also see the Democrats lesser culpability with matters like Freddie and Fanny.
Hopefully, they will also see the supreme corruptability of the Congressional Committee system, how unaccountable creatures like Dodd, Barney, Rangel, Phil Gramm, DeLay, Byrd, Ted Stevens, and Armey are to consequences since they sit in secure districts yet affect the whole nation.
It should open up Americans to think about “untouchables” that because Our System is failing so much in modern times, we keep deferring until the house comes down around our ears because we cannot deal with the failure and rot until we are pinned on our asses spitting out shingle fragments and wondering “How did this happen while I was obsessing about abortion and Travelgate?”
“Untouchables” like the grave flaws in the “Sacred Parchment” (the US Constitution) making America growingly more ungovernable, corrupt, rudderless, unaccountable to The People, and unable to be competitive and get vital national policy done. Lacking means to have Executive check on Congressional debt, lacking means to get necessary stuff done absent 10-year delays while the New Sanhedrin of lawyers squabble..
And add the “untouchables” of failing health care systems, runaway entitlements that are time bombs as big or bigger than the fiscal meltdown the American system permitted to fester until a systemic plague happened..
Everyone knows anonymous sources are the most trustworthy. But apparently the HUD official is not eligible for whistle blower protection. He should talk about how “capitalist over housing for the wealthiest two percent” contributes to global warming.
I see Coyotl and Journalists have become quite sensitive of late.
I was talking to a couple Democrat friends the other day and one said “Sarah Palin is a whore.” I said, “You’re saying that is a disqualification?”
Turns out I should have complained to the New York Times about my potty mouth friend hurling invectives. Of course, they would have called me a redneck and said, “Palin is a whore.”
Photo Discovered Of Obama With Fellow Chicago Socialist Party Members
Hat Tip, Deuce.
—
Obama’s African Hubris
Former Clinton aides currently working for Obama were the “mutual acquaintances” who directed Dick Morris to Kenya to advise the Odinga campaign in November of 2007, shortly after Odinga visited with Obama in America. Morris was an extremely divisive factor in the Kenyan elections, as a foreigner, a white man, and the creator of an antagonistic “have vs. have nots” campaign platform for Odinga’s ODM. He also suggested the current campaign of civil disobedience to protest the election result, including a “Million Person March”, a la Louis Farrakhan and the Nation of Islam.
When things got out of hand following the election, Obama called Odinga repeatedly, but Mwai Kibaki, the leader of the Government would not return his calls as he perceives Obama to be biased toward his Luo relative Odinga in the conflict. Obama is featured prominently in ODM campaign posters, slogans, and songs in Kenya, and the plaintive phrase “A Luo will become President in America before a Luo will become President in Kenya” is often heard.
“Right now, people are thinking “Party of Free Markets!, Wall Street, tax cuts for the rich, and Bush’s Ownership Society” and rightly sticking it to Republican asses – notable McCain and the slaughter they will get in Congress….”
—
Better to have a Racist, Marxist President, and Socialist Pelosi and Corrupt Wimp Reid, C-4?
…by all means, join the MSM and hold harmless the Politicians, the Founders and enablers of this corruption.
Oaths of Office be Damned!
Bogie Wheel:
I am afraid that the “everyone pays payroll taxes” point so often brought up by the Left is more than a bit ridiculous, especially when used as a justification for not cutting tax rates. In the first place, the “rich” pay payroll taxes too, and they pay more of them, too. In the second place, these are also the same people on the Left who profess such concern over “Saving Social Security.” So complaining about the fact that everyone has to pay into a system that benefits themselves personally is absurd – especially if you are simultaneously wringing your hands about where are you going to get the money to keep the scheme going until you and your buddies are out of office.
Fred, Russia is a runner-up in my list. I’d plunk for Saudi Arabia first in that (1) they can buy the expertise needed, (2) they are proving amazingly adept at turning our systems against us in their attempts to overthrow the west and install Islam (using Wall Street against us is the same sort of mindset as using lawsuits and the courts), and (3) they have enough liquid money to spare to pull it off.
China would be my second choice in that most of the hacking stories the past few years have involved China and I also believe they have the funding to manage it. And it’s such an inscruitable ju jitsu-ey way to attack your enemy.
Russia would be third on my list because I just don’t seem them as being that devious and I’m not at all sure Putin could put together enough rubles to manage it.
If it’s Soros, then that puts him up there with Dr. No cuddling a white Persian cat and cackling over his evil plans to take over the world, and I just can’t go there while being sober.
Doesn’t Soros’ History render him suspect, Nahncee?
NahnCee,
You underestimate the determination, the cunning, and the resources of Georgy Soros.
Let me restate: THE BIG PRIZE IN THIS ELECTION IS THE ELIMINATION OF THE U.S. BALLISTIC MISSILE DEFENSE PROGRAM.
Who is most incensed about it? In order: Russia, Iran, and China. I have not heard Saudi Arabia say squat about the missile defense shield. I don’t deny that Islam has its sight on us (reminder: Wahabbism IS traditional Islam, not some mutation of it).
Soros wants to remake the United States into a country like the social-democratic E.U. (of course, there is nothing really democratic about the E.U.). So, he wants his hand picked man in the White House and a filibuster proof House to make short work of it.
He has vowed to do these things.
As for your insult of my sobriety, I’ll be a gentleman and not return your mockery. But it’s duly noted.
“…how much of a discount is applied to these deficiency judgments?”
After the S&L meltdown in the early ’90s, the deficiency judgments were bundled and sold by bid. I remember 20-30 cents on the dollar as the sales price with buyers starting to make money if they could clear 40 cents on the dollar while they tried to get 60-70 cents. There’s a lot of “legwork” in dogging down such judgments.
Regardless, I’m pretty sure that marking these mortgages to market does not create an immediate additional liability for the borrower.
I can’t see how. However, I cannot see how the market mark could be found right now.
There is a world of difference between residential and commercial mortgage paper. I have never seen a non-recourse provision in a standard residential mortgage, but have seen such a provision in commercial deals.
Wall Street early voting choices:
UYG or SKF?
(double long or double short financials)
On the Soros side, and I am not sure why this gets so little attention, but the Democracy Alliance (2004) is I believe a “527 group” that is credited with (some of) the Democratic success in state and federal elections in 2006. In my view, Soros is a “shadow player” with substantial financial “dark pools”.
[Fred – kick back a little RE the light taps from posters who are more than capable of a deadly double whammy punch – If I were to hazard a guess, I think the curly hair had more to do with NahnCee’s comment than anything else – the Soros threat being eerily reminiscent of Jimmy Carter’s Rabbit episode ::))
Coyotl, thanks for wasting everyone’s time with your “Palin thugs on the loose” propaganda. The Milbank article has already been Fisked into oblivion. I’m too lazy to get you a link right now, but a clever fella like you should be able to find it. Bottom line, it’s bull.
Meanwhile, have a little look see at what your side is up to, and then let’s see who the thugs are. (Warning: not for the squeemish or easily offended.)
http://michellemalkin.com/2008/10/12/crush-the-obamedia-narrative-look-whos-gripped-by-insane-rage/
And apocryphal or not, the guy who shouted “kill him” about Ayers is entirely right. Ayers should have swung from a rope decades ago.
Was Goldman Sachs shorting it’s own stock while trading CMO’s?
Inquiring Feds want to know.
NahnCee: Fer Hevins sake. It was Ernst Stavro
Bloefeld craddling that white Persian cat. Dr No perished both in the book and in the first movie—-right after I finished ogling Ursula Undress, er, Andress in that bikini that auctioned for $600,000 in the mid 1990s.
And besides, the Beretta 25 with the skeleton grip was in the chamois skin holster. The Walther PPK was carried in the Berns-Martin triple draw.
Now be a dear ands fetch me my martini. Extra dry. Shaken, not stirred.
(Hard getting good help around here, ever since Moneypenney retired.)
—Here’s the Bolshevik the Democrats tried to pull with the first version of the TARP bill, aka the Paulson bailout. They tried to steer 20% of the profits from the resale of any assets straight to ACORN. Which would have made them about the size of Exxon-Mobil. That’s a lot of money to buy brown shirts for community organizers. You can buy a lot of voter registrations with a couple hundred billion dollars.
Brilliant analysis Teresita. Horrible, frightening powerplay.
Hello there Wile E Coyotl.
You are no match for the Road Wretchard.
BEEP-BEEP!
Everybody, I have a modest suggestion:
PAY ATTENTION TO FRED!
A defense against ballistic missiles is vital
both to our survivial and to that of Western Civilization in particular.
We no longer have the muscle-bound USSR, true. But whoever does not like us has to have (a) ballistic missiles that (b) are given a free ride or they cannot succeed.
Their other nasty tricks must be taken seriously but these remain inadequate to overun us if they lack those fast-moving missiles. (Like the Viet Minh at Dien Bien Phu would have been without 105 howitzers.)
Fred has put his finger on the key “stealth” issue of this campaign. Pay attention!
Unsk,
Very good information and perspective you’ve given us. I am very worried about what is going to happen to our economy and our foreign policy and deterrence posture. As a gun owner, I am well aware of the Left’s and of Obama’s hostility towards private gun ownership. He gets an F from the NRA. Well deserved one too. And as a veteran of the Left from many years ago, I am privy to the unguarded comments and opinions I used to hear from fellow travelers about WHY they want to see the 2nd Amendment circumvented or circumscribed in such a way as to render it ineffective. Ditto for what they think of the 1st Amendment. They only support the 1st Amendment as long as it enables them to get power. Once they get power, they intend to suppress opposition any way they can.
This Democratic Party IS NOT THE SAME ONE I GREW UP INTO. It bears no resemblance whatsoever to the party that housed John Kennedy and Scoop Jackson. One of the final acts before the curtain came down was their banishment of Sen. Joe Lieberman. A lot of people missed the significance of that.
I sometimes wonder if the Cloward-Piven strategy was also at work in encouraging the millions of illegals to come in and crash the system. I live in New Hampshire, not California, so I have not seen first hand how devastating it must have been for that state, and others out West. It was just too tempting to people in both parties: cheap labor and, if slyly done, more votes for Democrats. I’m sure ACORN has seen to that.
It is just stunning to contemplate the fact that the most Far Left government we’ve ever had is about to take over in January. And those of us who have seen our retirement investment portfolios ravaged by the effects of the sub-prime mortgage mess are angry that our pockets have been doubly picked. Yep. The more I look at the Cloward-Piven strategy the more I understand what the Left has been doing. And knowing these people as I had known them, they are fully capable of this kind of unscrupulousness.
Thanks, Dave, for supporting my shrill, shrieking Cassandra imitation. What most frustrates me is the fact that neither McCain nor Palin have picked up on that Obama/Joe Cirincione position about missile defense. They picked Sen. Biden for a lot of reasons, but I’ll bet this one was right at the top of the list. Sen. Biden opposed the concept back in the Eighties and he is still, along with Sen. Levin and Sen. Fiengold, lobbying to get rid of it. There are powerful people in the U.S. and overseas who want this program GONE. And Obama is one of them.
He truly does not understand the world we are in. He thinks, like Biden, that ballistic missile defense makes the world more unstable.
Folks, we are in big trouble. I’m not comfortable at all playing this role of the worrywort Cassandra, because I know it casts suspicions on my personality. But I cannot remain silent when the lives of many millions of human beings hang in the balance.
I told you folks what a small man Fernandez was, how he demands you genuflect to him. Now he is attacking Coyolt in total disproportion to Coyolt comment.
Yeah , he’s a great guy. He wouldn’t take me on. He knew I’d make a fool of him. In fact I did!
“He truly does not understand the world we are in. He thinks, like Biden, that ballistic missile defense makes the world more unstable.”
That’s assuming that he actually does think, and hasn’t been bought and is being told what to do. If Soros /KSA /China /Russia can buy and demolish Wall Street then wouldn’t buying their very own United States President be relatively cheap in comparison?
Habu – coyotl is an idiot. You hadn’t been, until recently. Think what a position you’ve put yourself in when your allies consist of benj and coyotl. Is that REALLY how you want to see yourself?
NahnCee,
I’ve been in and out of this forum, so I am unaware of what this feud between Habu and Wretchard is all about. Nothing personal against Habu (I don’t get into other people’s fights, if I can help it), but maybe he and Wretchard should e-mail each other and square this one away, out of sight of the rest of us.
Fred, but to Biden’s credit, he did have that great idea after 9-11:
—
“Don’t you think now might be a good time to give Iran $200 Million, no strings attached?“
One thing Unsk left out is Mayor Tony Villar’s traveling all over the country picking up special interest money for his next campaign.
Also that he gives away taxpayers Dollars to Gang members, and rents Expensive Public Buildings to Mexican Advocacy Groups for $1/year!
…also that Villar and Bratton refuse to face up to all the senseless murders of innocent children that occur as a direct result of their Special Order 40 Sanctuary City Policy.
fred said:
“It has been established that the World Bank computers and databases have been broken into during the past year. Also, every day for the last six trading sessions EXACTLY one hour before close of the markets in New York massive computer generated trades would come in to roil the markets.”
Rather than a political conspiracy theory, how about some kind of half-assed greed based conspiracy theory, i.e. someone deliberately roiled the markets in an attempt to make money.
I can’t buy into the Soros theory because Soros doesn’t control enough money (he would have to bet billions of his own money to be significant). Also the events have been so nonlinear that little is predictable. Case in point, the US stock market has been plunging while the US dollar has been appreciating (gold has been dropping). Who could predict that? If the Soviet Union was still in business, I might be willing to believe they destabilized the world’s market. The Chinese could conceivably cause this. However the Chinese like making money and this market crisis is causing them to lose money. There are no obvious winners.
peterike:
“Coyotl, thanks for wasting everyone’s time with your “Palin thugs on the loose” propaganda.”
Peterike you totally miss the argument. The MSM is not on my side, I’m simply a coyote. Wretchard has argued that Obama — by telling his supporters to “get in their faces” has unleashed the kooks — the thugs, the worst moonbats of the Dem party.
The MSM has taken that meme and flipped it. Palin has declared that the “gloves will come off” and now she’s widely derided as responsible for the racists and the assassins. I’m not saying this, everyone on the MSM is, all over the NYTimes, the WaPo, Slate, ABC, CNN, Time, and the New Yorker. (Here’s George Packer, who Wretchard has shown some RESPECT for):
“A number of people are afraid that the ugly tactics of the McCain-Palin campaign are going to incite violence, maybe assassination. Joe Klein, Andrew Sullivan, McCain’s former adviser John Weaver—even the ultimate sober-sided moderate David Gergen last night on CNN. I hope they’re wrong. It’s a big leap from hateful talking points and shouted epithets to vigilantism and the lone gunman. What’s undeniably true is that Republican rallies and the incendiary language of party leaders are stirring up the darker, destructive mob passions that have a long history in American politics. ”
What I want to hear from Wretchard, who will most likely duck the question, is whether he believes this. Whether he believes that Obama is responsible for the Left-wing thugs and McCain responsible for those on the Right? Or, does it only work one way?
Don’t blame me, I’m just a mangy canid hunting for tasty grub.
Coyotl, look at Michelle Malkin’s blog to see just how you are being played by the Dems and their MSM allies about this. The left and the Dems (ok redundant)have been using ugly ‘fascistic’ tactics for years. A few on our side complain and it gets blown up but the left’s stuff is ignored.
Their plan seems to be to intimidate the right into silence. Are you gonna let it work?
BTW: the URL for Malkin’s report is:
http://michellemalkin.com/2008/10/12/crush-the-obamedia-narrative-look-whos-gripped-by-insane-rage/
Although Chartered Accountants paper was interesting, I have to agree with Doug, Kasmir, Insufficiently Sensitive, Unsk and others that leaving out Fannie and Freddie, and the political power of the CRA makes the it superficial.
As I indicated in a prior post Fannie and Freddie are akin to the lender of last resort (and are trend setters).
Having these two GSEs looted by Barney Frank and his buddies is one of main factors of this financial meltdown.
Unsk notes: In my Los Angeles County, (number one in foreclosures in the US), LA City and LA County over the last twenty years limited the housing stock increase to just over a hundred thousand units, created impossibly expensive building regulations, and at the same time, encouraged millions of illegals to come here and live… Even with these horrible household economics, in LA there is still a severe scarcity of housing in safe areas. There are few foreclosures and hardly any real deals in nice areas still.
I feel for you and would bet if Obama and his friends win there will be considerably less safe areas in LA [I left LA 10 years ago for that reason].
Quite frankly, the dems have ruined CA and it is time for them to go.
L3, if you do mortgage business in CA you must know it is a non-recourse state. This helps some and hurts others. It’s unknown what the net financial effect is.
Stephen said: Don’t get mad at accountants when they don’t talk about hanging folks from lamp posts. You are assuming that they don’t want to string folks up just as bad as you do, and you may be wrong in that assumption.
You are correct.
Here is where I must partially disagree:
“The IASB [International Accounting Standards Board ] does not want to eliminate professional judgment because doing so would lead to the same ‘bright line’ rules that exist in US GAAP…”
US GAAP has evolved over the past half century from a succinct set of accounting principles to a vast cookbook of accounting rules. By following cookbook recipes to the letter, accountants and auditors are able to apply less and less professional judgment and instead point to compliance with accounting rules as proof that they have done their jobs.
Yes and no.
The IASB[International Accounting Standards Board IASB] which the Chartered Accounts follow has the same problems.
First they state: “Accoucounting by the investors in CDOs and other securitized assets under IFRS and US GAAP is essentially the same…”
[But, the international standards are better. Sniff.]
Next they recommend some mushy rule copied from Global Public Policy Committee.
“The GPPC [Global Public Policy Committee] reminds companies of the definition of fair value…that require the use of observable prices from an active market when available.
“…The GPPC rejects the view that prices during a market slowdown implies that the prices are ‘irrational’.
[But, it does not talk about a market panic or meltdown. Nor does it help a trader glued to a trading screen in a fast market]
“The GPPC also provides its views on the use of a valuation model. Specifically, it reminds companies that, if it uses a model, the model must ‘factor in current market condition, including current credit spreads, and the relative liquidity of the market [Page 19]…”
[Well, which is it the mark to market or a model? That is nice talk but little help to people are stuck in a panic and confused whether to using their models or bogus quotes]
In short, they do a lot Monday morning quarterbacking and second guessing. They show there hand in the first few sentences:
“To understand the current credit crisis in the United States and its effects on the financial statement of banks… and investors in mortgage-backed securities around the world [Page 1].
{So the US is bad guy and all the other players stooges or buffoons?}
CDO investor do bear the primary risk from these investments. Many of these investors are not skilled in analyzing and assessing the risks in securitization.[Page 10]
{OK, they just high paid financial saps and Chartered Accountants could to better at the trading desk? I am doubtful}
The whole paper smacks of a contest between Chartered Accountants and US Accountants – but leaves out the moving parts of government sponsored mortgage companies, politics, trading systems and other players with agendas (such a dump and panic schemes for personal gain).
Let’s look into who caused the collapse of Fannie and Freddie, who caused the run of Indymac and make sure that they are sanctioned – then clean up the mess.
[Back to my other point]
Stephen said: Returning to the use of accounting principles would be a good thing, but I don’t know how this could happen as long as auditors are paid by the companies that they audit.
That’s a touchy issue.
But, I don’t think having the government “audit” companies or pay auditors would be a good idea.
The reason is obvious. Say, one of Obama’s buddies gets laid-off at Boeing. Guess who is going to get raked over the coals when the “government auditors” come in. Boeing shareholders and the supervisor that fired Obama’s buddy.
This becomes a slippery slope. Say, the Dems control the government. Two companies, one owned by a Republican and one by a Dem wants to build a skyscraper. They both submit their financial statements to the bank. The “auditor” looks them over. The Dem gets the loan and the project.
Last, it could go down to the individual. A Republican and a Dem and bidding on a nice home. They both submit their personal financial statements. The Dem gets the loan.
Government auditors or auditors paid by the government have their place – but not in industrial or individual finance decisions – just too much chance of partisan tricks.
What made it all possible was Fannie and Freddy giving guaranteeing all those bad loans, taking all the risk out of it for the banks, thus starting this whole process.
Courtesy of Clinton and ACORN lobby.
This crisis is the logical outcome of policies promoted by ACORN/Obama.
What made it all possible was Fannie and Freddy guaranteeing all those bad loans, taking all the risk out of it for the banks, thus starting this whole process.
Courtesy of Clinton and ACORN lobby.
This crisis is the logical outcome of policies promoted by ACORN, and Obama is and always was their point man.
This truth needs to be shouted put on every corner of every city right now.
Why McCain/Republicans are timid on this? Do they want to lose these elections intentionally?
(sorry for premature post above)
A Power That May Not Stay So Super
At the heart of the troubles, both short term and long term, is debt.
Debt helped create the housing bubble and has now left almost one of every six homeowners with a mortgage larger than the value of their home.
Debt built up, and then laid low, modern Wall Street, where firms borrowed $30 for every $1 they owned. And in the coming years, debt will constrain the United States government, as it copes with the combined deficits created by the Bush administration’s policies, the ever-more expensive financial rescue and the biggest item of all, Medicare for the baby boomers.
In essence, households, banks and the government have already spent some of their future earnings. The current crisis marks the point at which the bills begin to get paid. Whereas Britain lumbered under the weight of imperial overreach, as the historian Niall Ferguson has written, the United States will be shackled primarily by its financial overreach.
Bingo Willy48.
Forcing Freddie and Fannie to subsidize their constituents was extremely helpful to the dems and damaging to conservatives.
Now that the dems have trashed the financial system they want the tax payer to pay the bill – not some low income democrat.
It’s financial class warfare at its worst.
Acorn, Ayers, Barney Frank, Obama, and his buddies should be under investigation – and most of them should do some jail time.
Angel Island Fire
Wretchard I know that you are not seeking an echo chamber but for my nickel your hospitality has gone to far. The baiting, trolling and hostility are making the threads unreadable. Those who simply want to stop the conversation and prevent dissemination of information and analysis can do so by disrupting with either long off topic passages cut and pasted from Talking Points Memos or similar sources or by resorting to a string of ad hominem attacks.
In fairness if PJM had a better interface then it would be easier to post links rather than text passages without ending up in moderation. Perverse consequence of a poorly implemented spam filter.
Election AND Financial stress showing up everywhere.
Fannie: FDR started it, LBJ privatized it (enter private shareholders to provide market pressure to guide ON earnings per share), JEC signed the CRA (enter opposite pressure to guide OFF earnings per share), WJC provided the muscle (ACORN contract ON American to compete with Gingrich contract WITH America), and everything is in place to await any dangerous future republican revival (such as GWB’s economic growth and ‘ownership society’ threat to create too much private wealth to maintain sufficient number of ‘needy’ voters), so it could be exploded under the economy at just the right time to put the democrats back in control (as Jack Nicholson’s psycho said in The Shining, “forever and ever and ever”).
THANKS a LOT, capricious gods belly-laffing atop Olympus, now we see why there’s democrats –the hilarity is always so tragic.
So buddy what do you really think?
Kidding. So the political chess game trumped the financial regulatory cesspool esp re over-to-highly-leveraged finance (derivative) vehicles? I see it as a one-two punch or, without the time element, government policy was driven by a financial vehicle without emission caps. Whatever your view, financial leveraging was a distinct (apolitical) player, was it not? If not real estate, then something else, say health care, would have found receptive introduction through structured finance with similar fate.
“Let’s look into who caused the collapse of Fannie and Freddie, who caused the run of Indymac and make sure that they are sanctioned….”
THAT will NEVER happen! Dems don’t do perpwalks and are never held accountable; contrast the treatment of Scooter Libby with that of William Jefferson (D-LA). If the Dems follow current form it will be the Dodd-Frank Joint Committee investigating the collapse of Fanny and Freddie. After all, if the trick worked for Jamie Gorelick, it ought to work for Teddy’s mashin’ buddy and the chickenhawk.
@3Case,
Teddy’s mashin’ buddy and the chickenhawk
Please enlighten me, I don’t get the reference.
You know 3Case, that’s my real argument. The political reform is unlikely to happen – not in any meaningful way. But if you divide the problem into a political component and a financial component, that opens the door to regulatory reform to strengthen the robustness of the financial vehicles – another line of defense against unsustainable social policy.
i agree, slade –these fateful outcomes could not be planned in advance. It’s gotta be more of the old Hellenic axiom, “character is fate”.
Evidence, tho, of the gods screwin’ around: the assistant sec of treasury, who just finished a speech where he has indemnified shareholders against wipeouts in the money center banks DoT is preparing to recapitalize, is named Kashkari. If that’s not enough, his name is Neel Kashkari. Those who have been kneeling (to pray) will get to kari off some of their kash.
Premarkets are way up –4 to 5% across the indexes –and Libor is falling –now 4.75 (vs Friday’s 4.82). Things are looking up for the nonce –except that the only big stock down in premkt, Boeing, is down big on union strike –that’s okay, Boeing is only our number one exporter, at a time when we survive on our exports and die on our trade balances. Machinists for Boeing ought to make not ten times what equally talented Asian machinists make, but eleven.
Buddy – he’s also bald!
Will any of us have any hair left???????????
My dear family pulled out last week. I am in for the full monty. It’s not over yet. I fully expect the bottom to hit the expected 7000 range. Reading between the lines, I think the analysts do as well. Nobody is comfortable. I hear repeatedly we want the markets to return to “normal” where metrics matter. This means the markets are still “broken”.
The money line from the article above is:
Mr. Obama’s judgment is seriously called into question when he backs an official with troubling ties to Muslim extremists and whose supporters practice ethnic cleansing and genocide. It was Islamic extremists in Kenya who bombed the U.S. Embassy in 1998, killing more than 200 and injuring thousands. None of this has dissuaded Mr. Obama from maintaining disturbing loyalties.
http://www.washingtontimes.com/news/2008/oct/12/obamas-kenya-ghosts/
How can 80 dollar Oil not be a good reason not to bail at this point? Best reason for pessimism:
Obama, Pelosi, Reid, Dodd, and Franks.
—
Begala:
Bringing up Ayers is “incindiary”
…partnering with an unrepentent Domestic Terrorist who murdered US Citizens is just fine, than, you.
…as is indoctrinating students to Hate America.
Washington Times description of how the debacle happened.
EDITORIAL: The road to disaster
http://www.washingtontimes.com/news/2008/oct/13/the-road-to-disaster/
“Thank You”
This is like being back in college again playing strip poker.
The Dems have now positioned themselves to take over/nationalize three major industries: financial, healthcare and oil. The first based on their own destructive actions. The second based on false compassion and fraudulent stats (45 million uninsured!). The third based on pure venom (greedy oil companies!).
They already have effective control of the media, but they will also reign in what’s left of that with a revised “Fainess Doctrine” (such a Big Brother term!). So their control over media will extend further and more officially.
They will effectively control a huge chunk of the Gross National Product, and two key enabling factors, credit and oil, without which everything else grinds to a halt. With that leverage, they can go on to blackmail any industry they want into compliance and defacto state control. Agriculture will probably be next (some of it under the guise of animal welfare, which is something I have sympathy for and I think is a disgrace, but not as a pretext for state takeover).
Yes, this can all happen and happen quickly, as such things usually do.
Maybe we should take a survey here about what people expect Obama’s first “black swan” legislation will be. I’m betting the first thing they ram through is the Fairness Doctrine, because once they silence talk radio they’ve got a nearly clear playing field. And shortly after that we’ll start to hear talk about adding judges to the Supreme Court, though the mechanics to make that happen are daunting.
“even the ultimate sober-sided moderate David Gergen ”
—
The Ultimate Laugh Line of the Day.
Gurkin is such a pathetic joke, exceeded only by MSM’s descriptions of him as advisor to Republicans, etc etc.
Ingraham does a great impression of his mumbling, weasely, ways.
—
Coyotl,
Describing an unrepentent, Murderous, Domestic Terrorist as a Respected Professor is just fine, right?
@peterike – the Democrats are not smart enough to destroy financial services. And I’m not being flip. That was fully driven by Wall Street banking industry who “worked the problem”. F&F tagged along for the ride.
peterike,
The present number of Supremes will do just fine when the aged and infirm are replaced by Barry’s Choices.
…shudder.
lotm,
Teddy’s mashin’ buddy = Chris Dodd…alluding to the well-buried stories of the ill treatment of women, here and in some counties in Ireland, by the senior Senators from MA and CT.
the chickenhawk = Barney Frank…alluding to the also well-buried story of the operation of a gay prostitution ring from the Congressman’s townhouse by a former lover (not the later one who wheelbarrowed cash out of Fannie/Freddie before the, ahem, chickens came home to roost), which prostitution ring purportedly provided the services of underage boys.
In a political sense, the Democrats excel at creating the institutional “infrastructure” as a delivery mechanism, train stops like ACORN. They do not excel at structuring the financial vehicles. I stop at calling that a Republican skill set because it is largely apolitical in my view – the money guys play the system like political agnostics.
You insist on stating it in reverse, Slade.
CRA and F&F preceded CDO’s, and in fact propelled their use.
…have no idea why you do that, even when we concede that they racked up the bigger numbers.
Coyotroll…I like it.
Ever done a sweat lodge?
Check out the Wall Street Journal analysis of the Obama ” Tax Cuts”, linked at Hot Air.
These “Tax Cuts” are really welfare grants to the victim class. The sleight of hand redefinitions, reinterpretations, hidden clauses and other fine print maneuvers will be the way of the Obama Era. All done with a happy face.
The self absorbed clueless independents and Rinos like Mc Cain will never catch on. In fact, they will cheerfully support this rot.
Those are investments in our future, Unsk, just like LA’s taxpayer paid payments to active Gang Members.
veng:
“Coyotl, look at Michelle Malkin’s blog to see just how you are being played by the Dems . . .”
Veng, Malkin has compiled a thick file of left-wing idiocy and thuggishness. It’s revolting. Have these moonbats and violent radicals been incited by Obama? (Q1)
The MSM is compiling videos and reports of racist and right-wing thugs seeting with hate and violence. Are McCain/Palin to blame for inciting them through “taking the gloves off”? (Q2)
(Q3 -A) Should an ethical actor adhering to principle denounce both sides, or is one being factually more egregious to a point where the other can be safely ignored?
(Q3-B) How would one prove such a fact, through a statistical compilation of incident, or based on severity of threat (bombings, assassination threats taking precedence)?
Yrs in ethical inquiry,
Canid Vulgaris
Question for Unsk:
Are you supporting Moore for Mayor, and Jamiel’s Law.
Slade, take a step up from the transactional mechanics, and look at it as a stock–the difference between the value of the national housing stock at its 52 week high vs its 52 week low was fully margined, times the leverage. If you play stocks on margin, your 10 shares allows you to buy 5 more on margin. if the share price falls, you get a margin call to maintain your debt account at the 50%. Send more cash, or they sell enough of your shares to get you back to 50% debt. b
@Doug – Neither CRA nor F/F contributed to the explosive growth of CDO’s in the 2001-2008 time frame – it was technical (see below). After the technical improvements, following their role in S&L scandal, the vehicle became truly toxic. As I said above, properly regulated financial vehicles can act as a last line of defense against bad policy. I absolutely don’t want to argue over it:
Collaterized Debt Obligations
Market history and growth
The first CDO was issued in 1987 by bankers at now-defunct Drexel Burnham Lambert Inc. for Imperial Savings Association, a savings institution that later became insolvent and was taken over by the Resolution Trust Corporation on June 22, 1990.[2][3][4] A decade later, CDOs emerged as the fastest growing sector of the asset-backed synthetic securities market. This growth may reflect the increasing appeal of CDOs for a growing number of asset managers and investors, which now include insurance companies, mutual fund companies, unit trusts, investment trusts, commercial banks, investment banks, pension fund managers, private banking organizations, other CDOs and structured investment vehicles.
…
A major factor in the growth of CDOs was the 2001 introduction by David X. Li of Gaussian copula models, which allowed for the rapid pricing of CDOs. [5][6]
According to the Securities Industry and Financial Markets Association, aggregate global CDO issuance totaled US$ 157 billion in 2004, US$ 272 billion in 2005, US$ 552 billion in 2006 and US$ 503 billion in 2007.[7] Research firm Celent estimated the size of the CDO global market to close to $2 trillion by the end of 2006.[8]
Neither CRA nor F/F contributed to the explosive growth of CDO’s in the 2001-2008 time frame – it was technical
cr@p. Try to be clear and fail. After the technical modeling improvement, the use of CDO’s as a “structured financial vehicle” for asset-backed securities became more attractive. That’s when the opportunities presented by the CRA/F/F became more relevant.
Obviously there is correlation. My only point is to break the divide so financial vulnerabilities can be addressed in a policy-free venue and hopefully by political agnostics.
Strong financial markets can withstand the assault of bad policy.
And that’s my last word. I never meant to go this far with it.
I understand that Buddy but I don’t see the point. So the housing industry was “fully margined” (“times leverage”) right up to the end of a bear market. Not wise.
The persistence and ultimately the timing of the Democratic-propelled acceleration during the 2000′s being heinous and reprehensible. The alleged oversight of a fully margined industry at the predictable end of a cycle being – nonexistent. That part explains the “bubble burst” cycle. My position is that this is not a simple “bubble burst” phenomenon.
It seems to me if the leverage had been capped, the magnitude and the global exposure would have been contained – which in turn would have diminished the fear and credit freeze etc etc. leading to what appears to be a global nationalization of finance industry. That’s way more than a cycle.
And that’s really it for me. “This” appears to be much more than a simple bubble.
About those right-wing lunatics at the McCain and (especially) Palin events:
X, Y, or Z percentage of them are in fact provacateurs. No estimate as to precise percentages or numbers as there is too little information to refine.
However, these appear few in number and will most likely stay that way. The reason is that the modal moonbat does not want to be anywhere near Sarah Palin or people who like her. Trying to get them to be plants is rather akin to inviting a Wahabi to a greased pig contest.
The other (alleged) lunatics are (with few exceptions) an expression of an inevitable backlash.
I hardly need to rehash the leftist hyperbole of the last 8 years. Suffice it to say that the generality of the public has been insulted to a fare-thee-well.
As if that were not enough, here comes Sarah.
She grabs center-stage by force of personality. The moonbats go ballistic.
(Wouldn’t you just love to know what both Barack and Michelle Obama say about her in private?)
Sarahs popularity is based on the accurate perception that she is just like us. So what tack does Palin Derangement Syndrome take?
SHE IS EVIL! SHE IS EVIL BECAUSE SHE IS JUST LIKE YOU. AND DER BARACK-FUEHERER WILL ELIMINATE ALL EVIL. YOU WILL BE ELIMINATED AND WE WILL ALL LIVE HAPPILY FOREVER.
That is why the backlash is becoming manifest.
Slade; Would it not be accurate to say that
debentures were being peddled as CDOs?
If so, that is the essence of the fraud perpetuated.
Off to work. See you all this PM.
sertainly the primer is informative as far as it goes. for those looking for the connection of the mess with fannie/freddie/acorn/obama, this is a good starting point:
http://www.powerlineblog.com/archives2/2008/10/021764.php which links to a newspaper article. here is a snippet–
FOR years, ACORN had combined manipulation of the CRA with intimidation-protest tactics to force banks to lower credit standards. Its crusade, with help from Democrats in Congress, to push these high-risk “subprime” loans on banks is at the root of today’s economic meltdown. …
As ACORN ran its campaigns against local banks, it quickly hit a roadblock. Banks would tell ACORN they could afford to reduce their credit standards by only a little – since Fannie Mae and Freddie Mac, the federal mortgage giants, refused to buy up those risky loans for sale on the “secondary market.”
That is, the CRA wasn’t enough. Unless Fannie and Freddie were willing to relax their credit standards as well, local banks would never make home loans to customers with bad credit histories or with too little money for a downpayment.
So ACORN’s Democratic friends in Congress moved to force Fannie Mae and Freddie Mac to dispense with normal credit standards. Throughout the early ’90s, they imposed ever-increasing subprime-lending quotas on Fannie and Freddie.
Dave said:
“About those right-wing lunatics at the McCain and (especially) Palin events: X, Y, or Z percentage of them are in fact provacateurs…. However, these appear few in number and will most likely stay that way. The reason is that the modal moonbat does not want to be anywhere near Sarah Palin or people who like her. Trying to get them to be plants is rather akin to inviting a Wahabi to a greased pig contest.”
I agree. The pissed-off right-wingers at the Palin events are almost certainly genuinely angry people. They are not moonbat ringers.
There are excellent reasons to be angry:
1) We (the American People) have hosed our own economy. The gatekeepers of our economy tasked with protecting us from our own greed and stupidity have failed in their responsibility.
2) The MSM has behaved with incredible irresponsibility towards the Messiah. He is largely unvetted. In stark contrast, the MSM launched a slanderous attack against Sarah Palin that was an egregious example of character assassination.
3) The American people under the hypnotic spell of the Messiah and the falsehoods of the MSM are on the verge of electing someone with no obvious ability to serve as President and who has long associated himself with criminals, terrorists and hard left radicals. The Messiah is a cunning liar, a demagogue and unfit to hold public office.
4) The United States is entering a period of extreme peril. We face a deteriorating world economy, Peak Oil and the continuing threat of Islamic fascism. It is imperative that we have a competent person serving as President, i.e. McCain.
If this situation hasn’t pissed you off then you aren’t paying attention.
@Dave:
Would it not be accurate to say that
debentures were being peddled as CDOs?
If so, that is the essence of the fraud perpetuated.
So that puts the malfunction back onto the mortgage industry which generated essentially debt with no assets or collateral, aside from the house, which gets abandoned sans the copper plumbing and the kitchen sink. That “debenture” debt gets repackaged into a CDO and voila instant collateral by virtue of the financial instrument.
I would agree that’s fraud (on the face of it – the strength of the legal case I don’t know), but it seems to me nobody here wants to blame the use of over-leverage in the structured “derivative” vehicles, which was my only point.
Had things been run at a lower temperature – not the 30:1 (up to 60:1 in Germany), the “correction” would have been less steep – a more classic bubble.
I contend that is not the complete explanation for what we’re seeing now. Since when does a bubble freeze credit markets? Since when does a bubble take 50% out of the entire market (not quite there yet but I predict it’s coming)? Since when does a bubble cause markets to lose complete connection with the prediction metrics? Since when does a bubble warrant nationalizing the financial services sector?
The point in pursuing this line of thought is that I would like to see some built-in protection to reduce exposure to industry-specific hic-cups for investors with conservative diversified portfolios. My family went through Edwards & Jones which you professionals will recognize as a very conservative outfit. They had a white bread equities portfolio that got slaughtered – in one month. Good stocks of well managed and well capitalized companies are in the toilet because of one industry and – my thesis – the irresponsible use of leveraged financial instruments.
The government failure of oversight is egregious, but I am so cynical at this point I doubt near-term adjustments or indictments, let alone a simple loss of re-election.
Simply getting control of leverage would have provided some protection for the conservative portfolios. At a minimum, it would have mitigated loss.
Anyway, I really don’t want to belabor the point but I don’t believe the political fixes are particularly doable. I do think that the finance industry can implement some “fixes” that will strengthen overall market stability to use a generic concept that requires refinement. But to take all of this sector-specific correction out of middle America’s retirement plans is just breathtaking hubris.
Just a footnote. Risk can’t be mitigated be eliminating leverage, which is not my argument. But leverage can be capped and limited to specific vehicles. In the old days they were called “junk”.
Regarding (way back) @rab:
The system, as described, in the report is much too complex.
Although I too would prefer these multiple layers collapsed, the biggest problem is that CDS are actually unregulated _insurance_ policies.
Without being certain, I believe these are recent creations, as are most derivatives; therefore the probability would be that overly optimistic formulations of the risk, would be obfuscated by the desire to make money. Traditional insurance formulas are regulated, stable and tested; the risk of each policy is largely isolated from the risk of others. CDS derivatives are more dependent on each other, changes within one impact the others, due to changes in the underlying valuation; a cascading effect.
Further, a derivatives combined world value of >$50 TRILLION (maybe >$200 Trillion), doesn’t pass the smell test, assuming this value represents credit risk aversion devices. Ie., a web of debt risk aversion pretending to protect a multiple of the actual wealth of all the players, is nothing but an illusion (self-realizing at that).
Analyst on CNBC looking forward to return of the days when LIBOR wasn’t a household word.
There’s a punch line in there somewhere.
“…essentially debt with no assets or collateral, aside from the house, which gets abandoned sans the copper plumbing and the kitchen sink.”
The major appliances are usually missing, too; particularly any under 5 years old.
Slade –sorryy for that goofy post addressing you –it’s incomplete, that part was just the set-up for an actual (if terribly trivial) point –the whole post disappeared while i was typing it –i thought it was lost –i never re-wrote it as this mkt was going crazzzzy upside and i had to dance around with a lampshade on my head. anyhoo –that’s whut that wuz –
That’s OK Buddy. I understand the lampshade part. Been there. Done that.
RWE,
I just missed by a week the failed launch at Wallops. I was no more than three miles away across the bay with a clear view. I didn’t know then what I do know now – you can schedule your vacation via the NASA Launch Schedule. Not sure how to book passage to Kwajalien, but a lot of the sites are local, like Wallops. All those huge, sky-facing radars and the NASA Museum with the rockets outside should have been a tell-tale, but you never see that advertised along with the crabs, ponies, ‘teagers and sunsets.
http://www.nasa.gov/missions/highlights/schedule.html
For a clue as to Fannie Mae’s publicly stated mission statement and to Pelosi’s and Feinstein’s support of that mission, look to their press release from 1995.
The money paragraph:
“The primary goal of the Fannie Mae Foundation is to support national and local nonprofit organizations working to provide decent and affordable housing in communities throughout the United States. The Foundation plans to make $14 million in grants in 1995. Its solo source of support is Fannie Mae, a congressionally chartered, shareholder-owned corporation and the nation’s largest source of home mortgage funds. The company has committed to provide $1 trillion in targeted lending for 10 million homes by the end of the decade. The targeted lending will serve low- and moderate-income families, minorities, new immigrants, residents of central cities and other underserved areas, and people who have special housing needs.”
source: http://findarticles.com/p/articles/mi_m0EIN/is_1995_May_2/ai_16888514
Folks–FYI:
10/11/08 post from John Reilly’s blog, “The Long View”:
“The Crystallization of the West and the Election of 2008″
http://www.johnreilly.info/11Oct08.htm
Mr. Reilly has given some real _deep_ thought to the current financial crisis, and its implications for the election and for America’s international relations. I thought you folks here might find them interesting (not to mention informative).
Ben Stein: “How to Ruin the US Economy”
“Bueller…Bueller…Bueller….”
Doug-
Walter Moore and Jamiel’s Law would be great. However, so far, he has very little name recognition and traction. That may change under Obama next year.
The city, county and state are all deep in the red this year; I can only imagine what will happen in a real recession with Obama in. LA City was by itself 400 million in the red. This coming year that deficit will grow to over a Billion dollars . And LA City provides virtually no services as it is now. My area really only gets Fire Protection and Trash pick up with not much in the way of Police Protection. I wouldn’t be surprised if all three, the City, County and State, had to file for bankruptcy protection this coming year.
Back to Moore. It’s hard for an anyone but a City Hall insider to win. The game is completely fixed. The Media will not cover him. The Public Employees unions will overwhelm him in spending, and then there is the matter of the LA County Registrar of Voters.
Back when the Valley, Hollywood and San Pedro tried to secede in 2002, the Registrar played a big part. In Hollywood, the Registrar of Voters “consolidated” Hollywood’s eighty precincts with 120 outside of Hollywood, so no one could see how each precinct voted. So all the key precincts of Hollywood and the Valley that the City valued the most showed a yes vote of less than 30% when internal polling and community support were overwhelmingly supportive. Now that Democrat Democracy at work!
Edgewise just above recommends john reilly’s blog –i took a look and it IS very, very good. remember that old work ‘eclectic’? Use the link, then click up one to the homepage –take a look –it’s a historio/politico/anglospherico/economico’s delight –
Indeed it is, Mr. Larsen. Been visiting his site since ’95. Informative and entertaining.
Anyhow, what did you think of Mr. Reilly’s post?
The guys in congress that we want to fix this problem are the same people who started this problem. Do we really think that these rich CEO’s of banks really care that I owe more on my house than it’s worth? Do the lefty illuminati politicians in DC care? I don’t think so! Remember McCain is the one who saw this problem coming ages ago and tried to warn our politicians–to deaf ears it fell.
Thanks for your point of view. With all the issues about mortgages it’s good to see other people’s opinions and what they have to offer as far as advice goes.