Max Keiser "Revolt now or be a debt slave"

[Windpower]

http://www.youtube.com/watch?v=YUkNnQE-9B4&feature=player_embedded

[Native_NM]

Windpower,

The bankers are no more collusionary than the politicians.   When the politicians spend money we don't have, it comes from someplace.  Usually that involves the bankers/investors that have it to lend.  If you leased your pasture to a neighbor and he didn't pay the rent or started polluting it with toxic waste, you would take steps to get him off your property and protect your interest.  Your actions would be no different than the banks, just on a much smaller scale.   

I'm not a fan of bankers, but I understand their position.  In the US, if we (the country), lived within our means, we wouldn't have to worry about then, the Chinese, the UK, or Japan, who all finance an equal amount of our debt.  The irony of the situation is a populace that demands services from the government it can't afford, and then complains of the repercussions from the "evil bankers" who are financing the party.

Me, I'm hoping to be completely debt free in five more years.  House, cars, camper, boat - all paid for.

[Windpower]

We are functionally debt free. So we certainly agree there.

But this excerpt from the Financial Crisis Inquiry report  points out how the big money Wall St and banking firms were buying influence  just before the crisis that was caused largely by deregulation of financial institutions (by Congress) and regulators that did not regulate due to political pressure.

(page 18) 
(bold is mine )


quote
We conclude widespread failures in financial regulation and supervision
proved devastating to the stability of the nation's financial markets. The sentries
were not at their posts, in no small part due to the widely accepted faith in the selfcorrecting
nature of the markets and the ability of financial institutions to effectively
police themselves. More than 30 years of deregulation and reliance on self-regulation
by financial institutions, championed by former Federal Reserve chairman Alan
Greenspan and others, supported by successive administrations and Congresses, and
actively pushed by the powerful financial industry at every turn, had stripped away
key safeguards, which could have helped avoid catastrophe. This approach had
opened up gaps in oversight of critical areas with trillions of dollars at risk, such as
the shadow banking system and over-the-counter derivatives markets. In addition,
the government permitted financial firms to pick their preferred regulators in what
became a race to the weakest supervisor.
Yet we do not accept the view that regulators lacked the power to protect the financial
system. They had ample power in many arenas and they chose not to use it.
To give just three examples: the Securities and Exchange Commission could have required
more capital and halted risky practices at the big investment banks. It did not.
The Federal Reserve Bank of New York and other regulators could have clamped
down on Citigroup's excesses in the run-up to the crisis. They did not. Policy makers
and regulators could have stopped the runaway mortgage securitization train. They
did not. In case after case after case, regulators continued to rate the institutions they
oversaw as safe and sound even in the face of mounting troubles, often downgrading
them just before their collapse. And where regulators lacked authority, they could
have sought it. Too often, they lacked the political will—in a political and ideological
environment that constrained it—as well as the fortitude to critically challenge the
institutions and the entire system they were entrusted to oversee.
Changes in the regulatory system occurred in many instances as financial markets
evolved. But as the report will show, the financial industry itself played a key
role in weakening regulatory constraints on institutions, markets, and products. It
did not surprise the Commission that an industry of such wealth and power would
exert pressure on policy makers and regulators. From 1999 to 2008, the financial
sector expended $2.7 billion in reported federal lobbying expenses; individuals and
political action committees in the sector made more than $1 billion in campaign
contributions. What troubled us was the extent to which the nation was deprived of
the necessary strength and independence of the oversight necessary to safeguard
financial stability.
unquote

More here

http://fcic.law.stanford.edu/

[rwanders]

What is the lesson for us as individuals from this debacle?

Is it that our "regulators" were corrupted? Or were they just being what they are; Bureaucrats who sometimes clueless, sometimes just adverse to rocking the boat, often preempted by ideology driven political appointees, rarely the sharpest butter knife in the drawer.


Is it that our faith in the power of government to protect us from the consequences of our behaviors is misplaced?  Are we really so stupid that we didn't see where the housing market was headed? There was no shortage of buyers and borrowers and lenders to take actions that were ridiculous on their face----all hoping to be on the last gravy train to leave the station. How many times have we seen this same play? Over and over, we fall for the same cons------don't need no conspiracy of conmen----we play that role quite well for our own, we hope, benefit. Many always convince themselves that the losers will be someone else during these boom & bust cycles.

When the bubble bursts (as it always does) many of those same people start another great crusade to identify some group of "others", usually the bankers, the jews, the speculators (they couldn't be in that group--were only trying to make a buck before the train derails) anyone but themselves as the rats who took advantage of them.

Where was the government? Why did they let me borrow that money? It's all the fault of (fill name in here) and the government needs to make me whole too.

Few mention the role of personal responsibility------and resent it mightily when anyone else does.

"A fool and his money are soon parted".

True when first said and still true despite all the efforts of all the governments of all times.

[Native_NM]

Windpower,

Nobody forced anyone to make any decision they didn't want to.  The heart of the crisis was mortgages, and the bank's ability to "pass the trash".   Both parties are complicit, but I could post a couple of really fun videos circa 2003 of Barney Frank denying there was any problem with Freddie or Fannie.  He calls the auditors "liars".  I could post a video of a certain black congressman calling a GOP committee "racists" for wanting to reign in the sub-primes and limit access to subsidized  and no-doc loans.  Anyone with any common sense saw this coming.  The GOP made their share of mistakes, and gets no pass from me, but the real estate bust was nothing more than unmitigated greed on the part of the buyers that was subsidized by the taxpayers at the behest of the government.  From a banks perspective, they didn't have much to lose, and in some cases faced fines or scrutiny if they didn't lend.  The mandated easy money increased the supply of buyers, forcing prices up.  Since the banks were able to carve the debt up into tranches, and sell it on the secondary market, and since the government basically said "we will underwrite the paper", the banks did what banks do: lent the money.  It was a no-risk proposition in their mind.  Sorry, but I don't feel sorry for the $50,000/year family who bought a $600,000 house.  One does not have to be a CPA to know it just don't work.  

Many of the key safeguards were stripped away in the name of social justice. That is a fact.   The economists and the accountants and the other career government money guys saw this coming.  They issued reports, screamed warnings from the bell tower, and some even lost their jobs.  In the end, Congress makes the laws.   A good portion of all lawmakers were the same kids who thrived on the attention and liked being popular in High School.  Narcissists and attention whores who love power.  Ron Paul will never get elected because he is too intelligent and pragmatic for the general populace who wants somebody who promises them "Hope and Change" or "Country First" or "No New Taxes", or whatever slogan Madison Ave dreams up.    The only one to blame for the crisis is us.  Except me.

[Windpower]

Let me t get this straight

So If someone is lied to about their mortgage by a banker with a gambling problem -- it is still the fault of the mortgagee

How does that work

The big problem was not the number of people that were duped into a bigger mortgage than they could afford it was the banks selling derivatives on the mortgages (Gambling).

Privatize the profits and socailize the losses

Many bankers went to jail during the 'savings and loan' crisis -- why not this time

From the Financial Times

http://us.ft.com/ftgateway/superpage.ft?news_id=fto090320091244573891

"According to some of its records, between 1990 and 1995 no less than 1,852 S&L officials were prosecuted, and 1,072 placed behind bars. Another 2,558 bankers were also jailed, often for offenses which were S&L-linked too. "


"Yet, in private many lawyers, and some government officials too, seem pretty cynical about just how many jail sentences or fines these initiatives will produce. In part that is because of the sheer complexity of the financial deals in the recent crisis, and the fact that these deals were often deliberately and cleverly constructed to "arbitrage" the law (ie skirt, but not break it).

Another big issue is the sheer number of powerful parties that typically participated in complex finance deals. Few private law firms have the resources or desire to go head to head with numerous Wall Street banks at one time. And government agencies are often short of resources too, partly because some, such as the FBI, have been forced to divert staff in recent years to terrorist financing issues."


The system is broken, many bankers should be doing time at a Federal Prison.

Instead they are continuing to get record bonuses courtesy of the US tax payer. 

It is not the petty scammers that tried to get something for nothing on a home deal (a very small percentage of the problem that could and should have been absorbed by the lending institutions without a catastophe) that caused the 'crisis' it was the derivitive bubble collapsing.

[Windpower]

Inside Job trailer

http://www.youtube.com/watch?v=FzrBurlJUNk&feature=player_embedded#at=95

[Native_NM]

If you owned Windpower Turbine Factory, and the government passed a law that mandated that you sell your $50,000 turbines to families who you knew could not pay you, but promised to underwrite their paper because "even poor people deserve a turbine", I doubt you would tell Uncle Sam "no thanks, I'll just take the loss" when the families started stiffing you.  You would be on the phone with him screaming "Where is my money! You promised to guarantee these loans!"  Tell me otherwise.

Banks are a for-profit enterprise.  Socializing the losses was the stated goal of Fannie, Freddie, CRA, and all the other programs instituted.  When the government says they are going to underwrite something, there is a cost.  My deadbeat sister-in-law once asked me to co-sign.  I refused, because I knew I would be paying for her car.  The bailouts were nothing more than the banks collecting from the co-signer.   

If they were not breaking the law, why should they go to prison?     

[ScottA]

Back in 2001 I wanted to buy a house so I went to the bank. The bank told me I qualified for $127k loan so I went house shopping. I stumbled across a house that was valued at $165k but priced at $147k. The owner where school teachers and one of them was a football coach who had just gotten a good job offer in another town so they needed to move bad. I passed on the offer because I was only qualified for 127k. About 2 weeks later the guy calls me and wants to cut the price to $138k. I decided to see what the bank said since the house was under priced. Amazingly they approved me for $138k. $11k more than I was suposedly able to afford. The bottom line is the banks where letting the normal lending standards slide in order to sell loans. You can blame the buyers but the banks where just as much at fault. It's kinda the same logic that has people sue a bar that gets them drunk then lets them leave in their car.

[Native_NM]

At that price difference the payment was only about $75 a month different.  What about the guys who bought $500,000 houses when they earned $60,000 a year...did they really think they could ever make the payments?  Would the banks have ever loaned them the money in the first place if there was not a government-backed safety net in place?

I'm not a fan of banks, and took it in the portfolio hard when things crashed.  Luckily I had dumped most of financial stocks in 2007, as the writing was on the wall.  I remember asking my broker about BAC in 2007.  At that time the street was still saying buy, as they were paying a strong dividend.  My gut was sell, and it was one of the times it was the right choice.  I scoffed at Apple after the big crash, and could be retired on the beach if I had taken my broker's advice at ~$20/share (before the double split!)  That said, banks took some big risks, and were certainly greedy, but then again they are banks. 

Which leads to a separate topic for another thread:  why is it OK for Apple to make record profits on far-higher margins than Exxon could ever dream of?  Why isn't Congress investigating Steve Jobs?  Just curious...

[ScottA]

I started selling everything in late 2006 even the house I had just bought a few years before. I converted everything we had into currency. Euros, Canadian dollars and US dollars. We packed up and left Dallas and moved back to the lake, to a house I'd had for many years. In late 2007 I started building my cabin for cash. What luck to have done all this at exactly the right time. Someone must be looking over my shoulder. 

[rwanders]

"The big problem was not the number of people that were duped into a bigger mortgage than they could afford......."

Windpower, just how were people "duped into" mortgages they could not afford?  Many, if not all of them, went into the bank and lied about their income and other financial situations----who was being duped then?

I know, i know----the lenders, many were not banks, were willing to believe you if you were willing to lie. Doesn't make the lenders innocent and doesn't make the borrowers innocent either---makes them both stupid though.  Both should have been left swinging in the breeze. Our fearless (fearful) leaders were convinced the financial system had to be protected---we'll never know if they were right or wrong.

I haven't taken out a mortgage on a home for long time----I've paid cash for houses, cabins and cars for long time now----last home loan I ever had required copious documentation of income, debts and personal references plus substantial down payment----when lenders required all that, they were cursed as those "damn bankers----won't give a guy a chance!"

Not apologizing for lenders/banks sins-----if we jail the bankers, how about jailing the borrowers who lied on apps?  Shouldn't be more than a few million of them.

Watch auto/truck loans----they will be next bubble to burst. Still alive has become the lending standard for that segment of our economy. There you are Wind---your next "conspiracy" to dupe innocent (read clueless) buyers. Do you really think our general population is that financially illiterate?   Unfortunately, they appear to be just that----maybe that conspiracy can be blamed on "teachers". Or maybe, just maybe, stupid is as stupid does.

[Native_NM]

I think student loans will burst before auto loans. But they aren't too far behind. The value of trucks plummets as gas prices increase.  The underlying collateral is just not there. 

[rwanders]

NM, student loans----great subject. Can't be discharged in bankruptcies, really draconian penalties for non-payment, steeply escalating interest charges and........wait for it------most are guaranteed by the feds as de facto co-signers (that's you and I).

Students, and parents if they are brave or foolish enough to sign for one of the private loans, are really put in a box canyon then. Your neighborhood loan shark may be a good alternative, less paperwork anyway. however, few can finance a degree without loans of some kind. Diligent research is needed to at least fully understand what your child and you are facing. At least you won't be "duped."

The economic downturn and bad market for new graduates will mean more loans being paid by the co-signers or you and I through our taxes. Remember when the conventional wisdom was that federal guarantees for student loans was a good thing-----now the feds have taken over the subsidized loan programs---banks are out of the business. But the same dire consequences are still in place---except you only have to pay for 25 years---they'll forgive the remaining balance. Isn't that something to look forward to?

Hey, junior---that student loan you want for a degree in basket weaving?  Forgiddabout it!

[Windpower]

All 8 parts of Inside Job here


http://www.youtube.com/watch?feature=player_embedded&v=iFfTcAcGjcU

[Sassy]

Classic fox guarding the hen house...  sad, pathetic...

[Windpower]

good comentary, Sassy

That is the point -- fox  hen house