http://www.digtriad.com/news/watercooler/article/178031/176/Florida-Homeowner-Forecloses-On-Bank-Of-America
Love it!
:)
Now there's a windmill worth tilting at!
Bet the homeowners and their lawyer still haven't been able to get the smile off their faces.
Oh to be a fly on the walls of the Bank of America executive offices when the branch manager called with that news!
Oh how I wish we all could have been there to give Bank of America our complete support they so well deserve.
The scary part is how many people get screwed by banks.
Quote from: peternap on June 05, 2011, 07:25:00 PM
The scary part is how many people get screwed by banks.
And how many people screw the banks-----then it's all passed on to the rest of us.
Scary part is how many are happy to screw anyone and anything at anytime.
It's a jungle out there.
...or how the banks get bailed out with taxpayer money but the taxpayers are still liable for the debt.... but that doesn't stop the rip off artists at the bank from walking home with big bonuses..... I think it's a conspiracy, RW.
I hate the banks. Yes it is a personal issue.
Quote from: glenn kangiser on June 05, 2011, 08:57:12 PM
...or how the banks get bailed out with taxpayer money but the taxpayers are still liable for the debt.... but that doesn't stop the rip off artists at the bank from walking home with big bonuses..... I think it's a conspiracy, RW.
It's a conspiracy without conspirators, without masterminds. Take the large percentage of our population that are financially illiterate---add a generous handful of businessmen who have been trained and incentivised to focus no further than the next quarterly report, garnish with government policies based on utopian ideologies which deny the history of human nature, cheered on by media reporters and pundits, also financially illiterate and ignorant of basic economics. They baked up a sweet pie eagerly gobbled up by the foolish and the clueless. The housing and general credit bubble was not unique. The history of the world is filled with similar "bubbles"-----The common thread is the neverending ability of humans to believe that; "If you will agree to lie to me, I will agree to believe you." Everything will be great----Tell me what I want to hear and i will do business with you, vote for you, deny obvious principals, deny my lying eyes, believe that, this time, it'll be different----we're all going to get rich!
A few do, vast majority don't and, like a drunk the next morning, they all swear they won't be fooled like that again and now we've got to hunt down the guilty conspirators. It's our way of setting up our excuse for falling off the wagon to help blow up the next bubble----those clever conspirators will just let us believe what we really really want reality to be---the dream lives on.
I guess that's what fiat money is for --
We all pretend it is worth something... trade it for goods ...trade it for work... borrow it from the banks - they take their profits from their computer generated money and the system keeps running.... the dream is fake like the money.
But it is there until some one, or some other country quits pretending...
The most interesting part of the story that I found was it took them only one hour to decide to cut a check for the full amount.
Great summary rwanders.
Banks never pay until you sue them or get them by the short hair. I think it's some kind of unwritten rule. I lost count how many times I had to use a lawyer to get paid by a bank. Usually putting a lein on house they are about to close on will get the job done.
Just for fun, pay off a credit card and send them an extra $20 bucks. See how long it takes them to issue you a refund. After 30 days call them up and tell them there is a $39 late fee and you expect to be paid 29% APR. ;D ;D ;D
d*
What really amazes me is how many people think living from paycheck to paycheck is ok. Have one son who thought he was doing just fine as long as he could pay his bills as they came in. Took him a long time to value what his mom and I tried to get in his head----"Live beneath your means" He thought living on the edge of a financial cliff was just fine---but, miss one paycheck and you're over the edge. He finally got past that fantasy and now he actually is ok.
It's not just the "poor folk" who do that. I worked with technicians making 100,000+ salaries who were still on the paycheck to paycheck lifestyle. My wife was the acct super and the payroll office would get frantic calls if their checks were even a few hours behind schedule. Several were even families where both mom and dad were knocking down $100,000+ each and never saved a dime.
Being duped makes life tough----but it's even tougher when you're duping yourself.
I submit that every citizen of the US was duped.
By a Federal Reserve that promoted 'loans to everyone'
And the bankers gambling with the 'securitized debt portfolios' or what ever they called them.
we (the American middle class) were 'sold down river' by the banksters
and no one seems to be pissed off enough to go after the bastards
QuoteI submit that every citizen of the US was duped.
By a Federal Reserve that promoted 'loans to everyone'
And the bankers gambling with the 'securitized debt portfolios' or what ever they called them.
we (the American middle class) were 'sold down river' by the banksters
and no one seems to be pissed off enough to go after the bastards
Well stated Windpower!
Windpower, you are wrong----not all of us were "duped". Most of us actually recognized the bubble for what it was---some hoped to get in and out with their fair share of the loot and some of us just watched in amazement as normally intelligent humans ignored reality in favor of fantasy.
I am surprised that you assign no responsibility to the borrowers----if they did not know what they could afford (in the real world) then, I submit they were either truly idiots or deliberately choosing to act like one. Twenty-somethings buying $500,000 starter homes in CA, NV and FL?-------give me a break----A fool and his money are soon parted---true then and still true today.
Where were their parents? Did they even try to impart a little financial knowledge to their sons and daughters while they were younger? I realize I'm assuming mom and dad had learned a little financial wisdom themselves. Failing that, perhaps they expected the government to hold their kids' hands, read the loan terms for them and finally pick them up when life pulls the magic carpet from under their soft little tushes. Some of life's lessons can be harsh when we try the OJT method.
It's so soothing to blame the bankers, the government, anyone but ourselves when we make bad choices in life-----I don't give anything like a pass to lenders and buyers of securitized debt derivatives. They were acting recklessly and without the excuse of financial ignorance to blame--old fashioned greed was the driver for them.
Looking around for scapegoats for ignorance only serves to perpetuate ignorance.
RW
^^^^^^ Well stated.
My education was in finance, and my father's family was in banking, so I probably had a comparative advantage over many of my peers. When we bought our first house, our goal was to limit the payment to 20% of gross income. At the time the industry ratio was 28/36. Our house payment was under $600 a month including taxes and insurance. It was a fairly nice, smaller home. My father was very conservative. My grandfather and my great-uncles and my aunts were very conservative also. My siblings and I were raised with financial sense. It didn't make it all the way through the family....
My youngest cousin and her husband bought a house in SoCal in about 2005. They called me for advice, and I told them not to buy. Actually, I begged them not to buy! She was a nurse and he was a fireman. He was in the union, and she was an RN with a Masters. They earned over $100,000 with his OT, and her shift pay. They bought a $750,000 house with almost nothing down. I don't remember the exact numbers but the payment was close to 50% of their gross income at a low floating rate. Within a year they were complaining that it was too much, but they held on and didn't actually lose the house until last year.
Their rational for buying was that houses would always go up, and if they didn't buy they would never be able to afford a home. If they couldn't afford it, they would just sell it and bank the profit in a couple years. They didn't want to move to the suburbs because the commute was too far and expensive, so they decided to stay in the area they grew up in. My uncle bought his house in 1965, when ocean view property was $35,000, and never moved. My cousin's expectations were a little too high.
I talked with them during the foreclosure process, and tried to help them out of their problem, but there really was not much to do. Between the time of purchase and when they lost the house, they had a child, bought an expensive $45,000 SUV to haul him around, and the economy tanked. Their rate reset to higher than market rates, but there was no way to refi or modify. They had negative equity. He lost his OT due to budget cuts, and she lost her shift pay because she had to care for the kid. The few times I talked with them they blamed the bank. He blamed the fire department and the union for losing his OT. She blamed the illegals for ruining the economy. They both blamed Arnold and George W. I resisted the urge to say anything, but I sure wanted to. They were warned by me and their uncle, as well as their father. They made a bad decision. Made worse decisions after they bought the house. I blame them, and only them. Ironically they are renting in the same area, and their rent is only about $500 less a month than their old house payment. They dumped the beast and she is driving my aunt's old Toyota, and he still has his small truck. For them, the $1000 a month was the difference between surviving or not. They still live beyond their means, save nothing but don't care because of his union pension (which is NOT safe), and otherwise live the good life in SoCal. There are probably a million stories just like theirs. Last time I talked to my brother, who keeps in touch with them, the gas prices were really hurting them. They are still on the edge.
I don't doubt that some lenders were unscrupulous, or that some buyers truly didn't know what they were signing. I still blame them. When the government quits underwriting paper, the secondary market will dry up. Banks will be forced to hold their paper, and the lending standards will tighten dramatically. The money supply will contract, and house prices will fall. Unsecured credit will dry up, and families will be forced to live off today's earnings instead of their Visa. This will further contract the money supply, lowering the GDP and increasing unemployment in the short-term until the market finds equilibrium. Oh wait, that is happening now...
Good post!
One of the areas of my formal education was also in Finance (undergrad). I can't tell you how many times I went through the same discussions with people. Many people were in the same fields with decent pay, but little financial education. Some asked for my advice, some took it. Many though responded that the banker told them they could afford it and it was the norm. My different perspective is the bankers and brokers giving them the money knew or should have known the individuals could never afford it. It was their job and they had the education to know it.
One group (home buyers) guided by opportunity and greed foolishly overbought and ended up broke and homeless.
Another group (banks, government, wall street) also guided by greed and opportunity, cleverly, knowingly, and collectively orchestrated a scheme that would bankrupt America and it's citizens while creating vast fortunes for themselves. Plenty of people at the top of the food chain were well aware of the consequences of these actions and yet chose the cash.
So, many folks went haywire with misguided credit opportunity and paid the price. A few sold America down the river for fun and absurd profit. Which party is the guilty one?
Anyway that's how I see it.
It would be interesting to know how many mid to lower level bank and mortgage lenders have joined their customers in the foreclosure or short sale system. I would submit that their knowledge of personal financial principles (and compliance with them) is probably not any better than the general population.
There are many snake oil salespersons yelling out bad advice on personal finances it's no wonder they find so many disciples among our ignorant population. There are some good mass market $$$ gurus out there too. i.e. Suze Orman, Clark Howard, Dave Ramsey who offer basic and generally good advice. Hucksters telling us that buying gold coins will save us all are just that, hucksters selling a commodity that undergoes regular boom and bust cycles. Avoid those pushing whole or universal life insurance and variable annuities----they are not giving good advice, just seeking large commissions.
The best thing you can do for your kids is to get some knowledge of basic financial subjects and, as a family, make it a regular task to bring the kids and for god's sake, your spouse, to the desk or table and make sure they know the realities of your family finances. make sure they know where $$ comes from and where it's going. Tell them the sad stories of foolish choices and good ones you may have made in the past---they will surprise you years later when they recite these examples to their own children. Knowledge of the financial realities of life and how to avoid it's minefields may be the most important gift you can give them---truly a gift that goes on giving their whole life. Your religious faith may be it's only competitor.
In a country full of the financially blind, those with sight are truly kings and probably relatively prosperous too.
Quote from: dug on June 08, 2011, 10:12:00 AM
One group (home buyers) guided by opportunity and greed foolishly overbought and ended up broke and homeless.
Another group (banks, government, wall street) also guided by greed and opportunity, cleverly, knowingly, and collectively orchestrated a scheme that would bankrupt America and it's citizens while creating vast fortunes for themselves. Plenty of people at the top of the food chain were well aware of the consequences of these actions and yet chose the cash.
So, many folks went haywire with misguided credit opportunity and paid the price. A few sold America down the river for fun and absurd profit. Which party is the guilty one?
Anyway that's how I see it.
There is a third group that may have more responsibility for the mess than the banks. That's the mortgage brokers.
They worked hand in hand with the banks but pushed things like taking second mortgages to pay the down payment on the first. The seconds were always sky high. I saw some as high as 18%.
The banks knew what they were doing but looked the other way.
The worst for peddling crazy loans were the independent mortgage brokers but some were bank-run companies like washington mutual-----WAMU (both now gone). Very high percentage of their loans were id'd as fraudulent by auditors after they collapsed---was as high as 84% in some of their offices.
Alaska had little of that craziness---and has essentially not suffered a recession or house value losses like the other states. It's one of only a few states that are not in the hole now----have close to 40 billion in investments and cash stashed away.
I worked as a mortgage banker for a quarter of a century, retiring in December of 2006 (how's that for timing?).
I had a front row seat to the catastrophy. We all saw it coming. At least those of us with any sense of history and financial common sense.
There is more than enough blame to go around, bankers, wall street, consumers, lack of gov't oversight.
One of the greatest myths I see perpetuated, by the idealogically driven, is that somehow poor people caused the economic collapse with their carelessness. When in fact it was the poor that were used as a means of generating huge profits by the financial industry. While nobody has clean hands, the poor were used as a means to generate loan paper to meet the ever increasing demand for CDO's. The pool of qualified buyers wasn't big enough to meet the demand for loans generated by the CDO market, so lending standards had to be lowered.
We all knew it was going to end in a train wreck. As a matter of fact, there was a joke among my friends in our office whenever we received new loan guidelines (which were continually lowered to satisfy the demand for loans from the CDO's) . The refrain was, "this is gonna end badly" and we would all shake our heads.
It all could have been stopped by prudent gov't regulation. But we all know how the suggestion of any form of gov't regulation is received in this political environment. Even now, after the catastrophe has taken place, very little has been done to prevent the next one.
It actually "started" because of government regulation. Regulations and laws passed to fill a social agenda. The "poor" people were just part of the problem. There were lots of solid middle income families who borrowed more than they could afford. My cousin and her husband made over $100,000 per year.
As a banker you were familiar with the ratios and guidelines that were in place since the early 1960's. The "25% of gross" rule or the "2.5 times salary" were benchmark guidelines. Lending somebody 5 or 6 times their income was foolish. As a professional banker you knew this.
The demand for CDO's existed because in many cases investors viewed them as a government-backed paper. The government created demand by artificially supplying buyers. Some bankers were dirty. There was fraud during the frenzy. But the government was the one dropping the food into the tank. Artificially low interest rates and federally-mandated lax lending standards, along with Freddie and Fannie waving a "get out of jail free" card on the sideline were as much to blame, if not more, than all the other parties combined.
I'll lend you my neighbor's money all day long. I don't even care if you pay him back. Just give me my commission up front. If you want to borrow MY money, we got to have a little talk first...
Quote from: archimedes on June 09, 2011, 09:29:11 AM
It all could have been stopped by prudent gov't regulation. But we all know how the suggestion of any form of gov't regulation is received in this political environment. Even now, after the catastrophe has taken place, very little has been done to prevent the next one.
Interesting that Obama administration is now concerned that the new tighter lending standards are pushing low-income and minorities out of the market. Since before the election the Democrats have pounded Bush and the bankers. About three weeks ago Obama commented that certain provisions of Dodd-Frank is going to hurt the low-income and minority buyer. I try and stay non-partisan but when I heard that, I was stunned. A year ago he bragged about how it would end fraud and abuse and protect America from the big, bad bankers. A year later, forcing banks to keep 5% of their own paper, requiring income verification and a history of paying your bills is somehow discriminatory.
From the WSJ:
"Advocacy groups like the N.A.A.C.P. and the National Council of La Raza, a Latino civil rights organization, are working with others to fight rules they say could make home loans less affordable for minority and working-class Americans."
"Most people don't have 20 percent to put down," said Janis Bowdler, a project director in La Raza's office of research, advocacy and legislation. "These rules will so significantly deter the ability of first-time buyers to break into the market that we will see a real decline in home ownership."
"It is more likely that the credit restrictions that result will disproportionately fall on lower-income borrowers," said Robert R. Davis, an executive vice president for the American Bankers Association. That, in turn, puts banks in a bind, because it gives the appearance of violating fair-lending practices.
One thought as we discuss the issue is how important resources like this board will become as the nation moves forward. I think the number of people building their own small home will increase dramatically over the next five years.
All this nonsense about discrimination is just a cover for banking deregulation. I'm not a fan of more laws but banking is something that really needs to be regulated to protect the people. Sadly it's not the people being protected under the current system but rather the banks. If the government really wanted to help poor people own houses they would finance them intrest free.
Quote from: ScottA on June 10, 2011, 08:15:34 AM
I'm not a fan of more laws but banking is something that really needs to be regulated to protect the people. Sadly it's not the people being protected under the current system but rather the banks.
I couldn't agree more. And
I'm a banker!Quote from: Native_NM on June 09, 2011, 09:09:43 PM
It actually "started" because of government regulation.
Completely false.
Glass Steagall never should have been repealed. Additionally, it was the lack of gov't oversight of the financial industry that led to the recent economic crisis.
Quote from: Native_NM on June 09, 2011, 09:09:43 PM
The government created demand by artificially supplying buyers.
This completely defies every law of economics. That by artificially creating supply that you create demand?????? What??? Nonsense.
You've got it completely backwards. You've got the tail wagging the dog, rather than the other way around.
Lastly, even back as far as the late '70's the income ratios were 28/36, not 25%
Quote from: archimedes on June 09, 2011, 09:29:11 AM
One of the greatest myths I see perpetuated, by the idealogically driven, is that somehow poor people caused the economic collapse with their carelessness. When in fact it was the poor that were used as a means of generating huge profits by the financial industry. While nobody has clean hands, the poor were used as a means to generate loan paper to meet the ever increasing demand for CDO's. The pool of qualified buyers wasn't big enough to meet the demand for loans generated by the CDO market, so lending standards had to be lowered.
I had heard this from some of my friends that had gone into the industry, both as mortgage brokers and on Wall Street. Money was pouring in, not just from the government (Fannie and Freddie), but from overseas. The overseas money dwarfed our own. Asia (China, Malaysia, Indonesia, etc.), Europe (Germany), and the Middle East (Saudi Arabia) needed an investment to trade in their dollars for that they had accumulated over the years. Most of these CDO's had nothing to do with Freddie or Fannie. There was an implicit belief built into the financial system though that because of the government sponsored organizations prices could only slide so far. Yes low interest rates partially contributed. The CDO's had AAA rating and were paying better interest rates than Tbills so they looked like the better investment. NM, Don't get me wrong, there were massive problems with Freddie and Fannie. They were definitely part of the problem, but only a part. Archimedes, Your statement about the lower standards is similar to my point. There was a higher up executive or banker that should have known better, but when the money was dangled in front of them, they lowered standards to make money.
Archimedes, I agree that Glass-Stiegel should never have been repealed. The initial argument basis of the law was to separate riskier investment banking from the rest of the financial market. The argument made when repealing it was that when there were problems in investment banking people took their money out of it and put their money in safer investments (savings accounts). The exact converse of this argument is that when there are troubles in the investment banking market, there is nowhere to hide. There are no safe assets then and the whole financial system become exposed to the risk of investment banks. Through the consolidation process a few banks have much of this country's assets under their control. If any went bankrupt it would take down the U.S. dollar and financial system. Hence, too big to fail.
I haven't been following this thread but ask: Has anyone mentioned the CRA? If not, then why not?
I contend a discussion about this issue without the CRA included is like armchair generals discussing a lost war without ever including the leadership. Pointless.
Archimedes,
I think the fact that Keynsian hocus-pocus defies the laws of economics is what has the Republicans so upset. The success of the stimulus, for example, was predicated on the government artificially increasing the money supply (via debt) to artificially increase the supply/demand curve away from its current position, which was unfavorable as the market tried to return to equilibrium on its own. When Greenspan lowered interest rates below the market rates after 9/11 to stimulate the economy, he created demand in sectors of the economy that would not have been there without his actions. The fake supply of easy mortgage money (which was artificial on at least two fronts) created the demand for housing which facilitated the bubble.
"Stopping" legislation [repealing] is the same as "starting" on the other side. The argument is not Red or Blue, but right or wrong. I agree we shouldn't have repealed certain legislation, nor should we have enacted other regulations that forced the market outside of equilibrium. Keynes was last relevant in the 1930's, yet the politicians still look at him as some kind of mystical OB-1. He is more likely Darth Vader.
No, I didn't mention the CRA. It was only for FDIC regulated institutions. 70-80% of CDO's came from institutions totally outside of the FDIC jurisdiction, such as investment banks. While I agree that the CRA also promoted banks to make bad loans, the dollars just didn't bear out. CRA cdos were a small percentage of the investment market, especially when compared to Fannie and Freddie. If those were the brunt of the bad loans, the government could have written the check and moved on. I heard the last estimate that there was only a total of $100 billion (going off of memory) in CRA loans in total. Compared to the Trillions of dollars spent so far. CRA loans were meant to overcome the policy of redlining based upon houses in geographically poor neighborhoods. So most CRA loans were in low income urban areas. The real disasters of the housing collapse were in middle income suburban neighborhoods in California, Arizona, Nevada, and Florida, far outside the urban inner cities where most CRA loans were made. So the CRA certainly didn't help, but the numbers simply don't play out as a large factor.
1000th post, I spend way too much time on here.
Squirl,
You've hit the nail right on the head. Cheers d*
What percentage of the all mortgages do the GSE's control? Whether CRA loans, subprime, conventional, or the corner loan shark, the GSE's bought trillions of the loans. This freed the banks from the liability and allowed them to lend more than their balance sheet would otherwise afford. Everyone agrees on that point. They created an artificial supply to fill a SOCIAL agenda. It's not Red or Blue. It's just fact.
Sorry Native_NM but it was never about a social agenda. It was about making money. To be more exact it was about creating money out of thin air, which each and every one of these loans did. They needed to create all this new money to cover up the de-industrialization of America which took place at the same time as the home building/buying orgy. Now we are seeing class destruction as all that money is being removed from the system with nothing to replace it. A very clever transfer of wealth scheme is becoming clear.
Scott
that is it exactly
we are seeing the greatest transfer of wealth in the history of the world
For round figures. Fannie and Freddie held 90% of all GSE CDO's. They have around 2 Trillion on the balance sheet and another 3 trillion in CDO's they had packaged and sold. This is 15-30% of the 14 Trillion mortgage market. The other 70-85% is out of private investment banks and funds. If it was simply them, Lehman brothers would never have gone bankrupt, AIG would never have gone bankrupt, Meryl Lynch would have gone bankrupt, the rating agencies would never have gone bankrupt, the insurance companies would never have gone bankrupt, and all other banks wouldn't have needed a bail out. If the Fannie CDO's were the only bad ones the banks would just go back to Fannie (AKA the federal government) and get paid. The problem was most of this paper was generated far outside of the GSE sphere, so when the dominos fell, they didn't end with Fannie. Again, don't get me wrong Fannie and Freddie were definitely part of the problem, but the motivation was different. They were private organizations with stockholders (trading at $60 a share!) and bankers. As the money poured in from overseas, investment banks started making all the profit by lowering their standards. This wasn't going to sit well with the shareholders of Fannie or the bankers that controlled it. They lowered their standards too. Not for social reasons, but to make ass loads of money (and they did). They got away with it through political ties, corruption, and no oversight whatsoever.
I strait numbers, the GSE's held 35% of the subprime mortgages directly, and control (directly or indirectly) 90% of the US mortgage market.
That is a pretty exaggerated figure. Where does it come from? If it were 90% you are saying they have control of almost $13 Trillion in mortgages. That defies almost every financial publication I have ever seen. If they control all of it, no one would have needed a bail out. Why would all the investment banks go bankrupt if the subprime loans were out of GSE's? When borrowers stopped paying, they just would have gone back to those GSE's for payment. Anyone that could get payment did. They cashed every GSE mortgage right back in for full payment.
http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm
No one was forcing bankers to make hundreds of billions of dollars for a social agenda. I think we just have a different perspective. I may be misinterpreting this, but I am under the belief that you believe the government and the laws controlled the financial markets and the extremely wealthy to give their money to the poor and middle class. I am of the perspective that the extremely wealthy controlled the government to profit off of everyone, especially the middle class, and left the government holding the downside in the end.
Its a fact. I stated "control (directly or indirectly)".
I own a minority interest in a company (~21%), but I effectively have "control" based on the ownership percentages of the other minority shareholders. The next largest shareholder is barely a 5% shareholder. Sadly, it is a small company so I don't get any salary of even any dividends to speak of. But I technically "control" it, and if I had the time or resources I could probably do something with it. Until then, I keep my day job. Everyone of the few employees makes more than I do from it. They at least draw a salary.
The GSE's are no different. Look at how the banks packaged the CDO's. Tranches based on the quality of the loans, with government-backed mortgages mixed into each tranche to mitigate risk. They don't have to own or underwrite 100% of the loans outright to "control" the market. There is a huge multiplier effect. Add back the derivatives and other government voodoo and the GSE influence is far larger than the $8 trillion of off-balance sheet liabilities attributed to the GSE's.
Somewhere in the bits and bytes of my computer is a link to the article that discusses their ownership and control influence. It was probably the WSJ or the Economist, as those are the two I read the most.
Informative article in WSJ today. Discusses impact of GSE's on housing market. Seems they now control 9 out of 10 mortgages.
I have not read the article, but that information would seem in line with the intent of the bail out. They bought, or partially invested in most unsecured non GSE investment bank loans so there wasn't a run on the banks and a complete collapse of the U.S. dollar and financial system.
Native_NM do you have a link to the article? I can't seem to find it on there site.
I thought you would be interested in the following story from The Wall Street Journal.
Government Stays Glued to Mortgage Market
http://online.wsj.com/article/SB10001424052702304186404576389863819100854.html
The Wall Street Journal for iPad provides a new way to experience the Journal's award winning coverage, blending the best of print and online. Special features include:
http://www.wsj.com/ipad
The article said that GSE are behind 9 out of 10 "new" mortgages. This is a far different from 90% of "all" mortgages and cdo's of the past 30 years let alone the past 10. Especially the critical 2003 through 2005 beginning of the mortgage crisis. As a matter of fact it states that they dominate the home mortgage security market after private lenders left. Many of the numbers and citations are the same as what I referenced above.
" offer guarantees to make investors whole if borrowers default." If the bad loans were mainly through them in the beginning of the crisis there would not be large scale bankruptcies. Only Fannie and Freddie would have gone under. Hence: "During the past decade, investment and mortgage banks jumped in and began issuing their own mortgage-backed securities. These private-label bonds, issued by the likes of Bear Stearns and Countrywide Financial, comprised riskier loans."
I do love how they define "fair value" and or who the "average buyer" is. Notice they never say when the median household income makes enough for the median home price. Incomes would have to rise or prices fall first.
Yes, new mortgages. I earlier stated they controlled directly or indirectly 90% of the mortgage market. Now they directly control 90% of the mortgage market.
I guess it is a definitional difference. The "mortgage market" to me is all outstanding mortgages. It appears to you the "mortgage market" is just what is being issued today.
Quote from: Native_NM on June 14, 2011, 09:07:26 AM
I strait numbers, the GSE's held 35% of the subprime mortgages directly, and control (directly or indirectly) 90% of the US mortgage market.
You're playing fast an loose with the statistics.
The GSE's
on average held about 25% of the sub prime mortgage market - never 90% or anything close. And they were late comers to the market, never able to effectively complete with the private sources of money. Before the real estate melt down they held about 80% of the
prime or "A" paper market - but that's been the case for generations.
They now have upped the % of the prime "A" paper market to about 90%
only because no one else is lending. And virtually no one is doing sub prime loans.
If you think the real estate market is bad now, pull Fannie and Freddie out of the equation and see what happens. They are making very high quality loans
now which is the way it should have always been. And was the way it used to be when they functioned very effectively for generations.
Fannie saw the profits that were being made by private sub prime lenders and tried to get in on the game late. They never should have participated at all. But that decision was based on greed
not on a social agenda.
Now that Fannie and Freddie are gov't owned, and the profit motive of the directors is removed, and underwriting standards are kept high like they used to be, then they could function well indefinitely.
Quote from: archimedes on June 22, 2011, 09:12:25 AM
Now that Fannie and Freddie are gov't owned, and the profit motive of the directors is removed, and underwriting standards are kept high like they used to be, then they could function well indefinitely.
I heard on the radio this morning that there is a hearing because of people complaining. That 90% that they are lending on is with a 20% down payment. Certain people think that the government should keep the high lending standards, but lower the down payment, because the average borrower needs to come up with $40,000 cash at closing.
When I started in mortgage lending, ages ago, 20% down was the normal requirement.
The underwriter who trained me always said that, to him, the most important factor in determing the credit worthiness of a loan was that 20% down payment. And that it should be the borrowers own money, not a gift, or a loan from some other source. He wanted to see the blood sweat and tears of the borrower invested in the deal.
Somehow over the years we moved away from that common sense principle - and that has made all the difference.
Archimedes, absolutely right.
When we get stuff that is "free"-----What is it's value to us? I think it will have no real value and many will act accordingly.
I contend that the mindset of the Keynesian's (easy money) is at the root of the issue as well as the "I'm a free market person as long as we regulate it" people.
For example, the FED (a banking cabal instigated by banks and government and designed to fool American's into agreeing to do something they already did not want and knew was bad -- but that's a longer story then anyone could post) controls the money supply (therefore there is no free market) and the banks (we do not have free market banking) and ensures that banks can't fail (unless they want them too -- which was the case for small/rural banks etc back in the beginning). Meanwhile, the Federal Government (note: the FED is NOT government but rather private with a cool name that makes it sound Federal) pushes policies like the CRA which it can claim 'help the poor' but guarantees the Free Market isn't and gives them a tool to control banks in other areas. For example if a bank wanted to open a branch in NM somewhere it was easy to tell them "well sure, but what is you CRA score?" -- thereby forcing them to play ball....if they didn't, they might not get that new license (Note to the confused: FREE in FREE Market means the bank could bloody well tell them to shove off and open a bank anywhere they bloody well wanted) etc...then using GCE's be sure to buy bad paper from the banks to encourage them to loan more to anyone and everyone under the old axiom "everyone needs to own a home" and sooner or later things will go south.
What we really needed was no FED, no central bank what-so-ever and a truly FREE Market. It is a historical fact that when we did not have a central bank that only regions were impacted by banking fiasco's while today, with the FED (central bank) we are assured of national impact. Furthermore, when left to their own devices people are usually smart enough to figure out what they should or should not do and most learn.
By this I mean that some people will always get hurt by making bad decisions but when you allow the Free Market to well, be free, sooner or later people begin to wizen up. In fact, today this seems to be evident with the large amount of people NOT getting into credit, the increased amount of 'preppers' (a relatively new term describing people who no longer trust the system and begin to build large pantries and save etc to protect themselves) as well as the large amount of people paying down debt etc.. Even in our decidedly NON Free Market system people figure it out and find ways to protect themselves.
So, blame the banks if you like, however they are not the main problem but rather a portion of it because I assure you that without the FED and Government bailouts they would be far far more conservative and this would not have happened.
Blame the citizens who did stupid things but in reality they aren't the problem either. They have been poorly educated by a broken government education system and would not allow themselves to live so carelessly as they have (for the most part) if you removed the Government bailouts for them also (Food Stamps, Welfare, Unemployment Insurance etc etc etc).
Blame the Government if you will, however never forget that you were warned 230 years ago by some very wise men that Government was and is a necessary evil and must be kept small, but you allowed it to grow huge and well beyond it's legal means while demanding more and more bailouts for yourself. Those politicians seeking re-election merely gave the people what the people asked for just as Ben Franklin predicted "When the people find that they can vote themselves money, that will herald the end of the republic."
History repeats itself and the only real question is whether or not you are willing to see it and realize it and do something about it. This history has been in the making for over 100 years.
To that I make this claim: those who do not believe that the free market (that means NO bailouts, NO FIAT money, NO government control of the banks, NO FED, NO social programs etc etc) will, does, did and can work are the problem.
The Austrians were right, the Keynesian's are wrong, the FED must go, all social programs must go and the American people must accept the FREE market in it's entirety or agree to be subjects to the huge and growing government bureaucracy that will forever create bubbles, take more, and drive the population into more and more subjugation.
"They that can give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety." Ben Franklin.
Jarhead, though my heart is with you and the Libertarian philosophy, it, taken to its extreme form will bring many problems. Just as the military (Ex-Army Officer) requires both discipline and leadership or it turns into an unpredictable mob, unfettered freedom in the civilian world can/will result in chaos and, like the jungle, a tyranny of the claw and fang.
While I think I have enough fang left to survive, I wouldn't really like to be forced to put it to the test against those with much younger and sharper ones.
Quote from: rwanders on June 23, 2011, 01:48:10 PM
Jarhead, though my heart is with you and the Libertarian philosophy, it, taken to its extreme form will bring many problems. Just as the military (Ex-Army Officer) requires both discipline and leadership or it turns into an unpredictable mob, unfettered freedom in the civilian world can/will result in chaos and, like the jungle, a tyranny of the claw and fang.
While I think I have enough fang left to survive, I wouldn't really like to be forced to put it to the test against those with much younger and sharper ones.
But we may not be far apart actually.
You see I do not believe in anarchy and believe the founding fathers had it right the SECOND time. With the articles of confederation they were too close to anarchy and the young nation would have torn itself apart had they not created the Constitution. However, today, we no longer truly honor that and thus we've moved so far away from the Liberty it protects in the name of safety we've made Franklin a truth sayer or profit if you will.
I believe the answer is right under our noses if we care to look and it involves a study of history -- our own history, and seeing where we went wrong so we can fix it.
I can certainly agree with that, Jar. The norms of our society do evolve--sometimes for the good and sometimes not. Revisionist history always seems to make villains of those who were previously our treasured role models and our descendants will, no doubt, view you and I as villains too. Human nature seems to be the only unchanging element on earth.
Jarhead, how do you square your belief system with the fact that the current economic crisis that we are dragging ourselves out from was cause by a colossal failure of the free market to regulate itself.
The crisis was caused by the deregulation and unregulation of the financial industry, promoted by the desciples of Ayn Rand et al.
Archimedes, I don't want to speak for Jarhead, but I understand the economic argument even if I don't agree with it. Some argue that the extreme swings of the boom/bust cycle of capitalism are just part of life. There are winners and there are losers. If you study history you can see these cycles through most capitalist industrial societies since the beginning of the industrial revolution. My problem with the argument is it fails to take into account the human factor of these cycles. As the cycles became more severe as our economy became more complex people decided they didn't want to ride that roller coaster anymore. The argument also fails to account for the negative externalities, that a handful of individuals can create. If and when a group or market can cause an entire currency collapse, it doesn't just affect them, it affects all of society. If their choices can affect all of society, in my view, society should have the ability and desire to regulate that behavior. When one person's freedom encroaches on another's, that is where the law and government come into play.
Quote from: archimedes on June 24, 2011, 10:26:33 AM
Jarhead, how do you square your belief system with the fact that the current economic crisis that we are dragging ourselves out from was cause by a colossal failure of the free market to regulate itself.
The crisis was caused by the deregulation and unregulation of the financial industry, promoted by the desciples of Ayn Rand et al.
Which free market would that be? Please explain exactly what you think 'FREE' in Free market stands for.
Quote from: Squirl on June 24, 2011, 12:13:20 PM
Archimedes, I don't want to speak for Jarhead, but I understand the economic argument even if I don't agree with it. Some argue that the extreme swings of the boom/bust cycle of capitalism are just part of life. There are winners and there are losers. If you study history you can see these cycles through most capitalist industrial societies since the beginning of the industrial revolution. My problem with the argument is it fails to take into account the human factor of these cycles. As the cycles became more severe as our economy became more complex people decided they didn't want to ride that roller coaster anymore. The argument also fails to account for the negative externalities, that a handful of individuals can create. If and when a group or market can cause an entire currency collapse, it doesn't just affect them, it affects all of society. If their choices can affect all of society, in my view, society should have the ability and desire to regulate that behavior. When one person's freedom encroaches on another's, that is where the law and government come into play.
Ahhh....no. Sorry but what you described is EXACTLY what has been happening since the creation of the Federal Reserve System. In fact, my friend, the FED was sold to the American people on the basis that it would put a stop to any 'free market' cycles and in fact not only created more but bigger and bigger cycles (Boom, Bust cycles) in an ever increasing cycle.
Fact is, you do not have, can not have, will never have a truly 'FREE MARKET' as long as you have a central bank. Now, if folks would read the history of banking in America they would learn that starting with Hamilton the idea of the 'central bank' was pushed to 'control' banking (thereby preventing it from being FREE) and while the first 'BOA was abolished (because it was a dismal failure) as well as the second (again a dismal failure) the last, the FED, has not been but continues to prove in the failure of governments to control markets -- again, a market cannot be 'free' if it is controlled, thus claiming the free market failed is akin to blaming little green men from capturing Elvis and taking him to planet Zion to live with the jabawacks of some such BS.
In the end it is nearly impossible for anyone to make an argument against the free market because it hasn't been allowed to flourish in any way since the creation of the FED and really, before then wasn't often allowed to be free. To actually understand the concept one must accept first what liberty and freedom really are, then understand that anarchy isn't the answer anymore then socialism is (though anarchy is closer to the answer IMHO).
Liberty is the freedom to fail, and people will always fail. It's simply nature folks and you cannot protect everyone from themselves. Allow freedom to flourish and yes, some will fail however the vast majority will succeed.
Even under a free market people will be poor by the way, but this is because some people simply choose to be poor -- ya I know, you probably don't believe that but history shows that even when given all the opportunity in the world some people choose to sit on their rear ends and complain. SO be it. This is why Franklin made the statement about 'leading them out of their poverty or making them difficult in it' (paraphrasing).
Now, to those who like to make the claim that free market types fail to acknowledge or accept human nature and that human nature means that evil people will do bad things, ect I say this: are you serious? Have you actually heard yourself? What? Do you actually think human nature changes when you have socialism? Are you really that naive? Really? That statement alone suggests someone hasn't been very objective or thoughtful.
The difference between a free people and socialism (etc) is that socialist countries produced the likes of Hitler (National Socialist Party of Germany), Mao (Communist Party of China), Lenin and Stalin (Russian socialists) etc etc etc...those guys killed millions.
Name me one leader of a truly free nation that has killed one tenth that of those leaders and I'll call you a liar. This is your human nature, your evil people in power doing evil things (Killing tens of millions of people). That doesn't mean bad people don't exist in freedom, sure they do, however they never attain the power the same evil people do in socialist (etc) countries do. Think about that.
Furthermore, in a truly free society (I'm talking one that respects natural rights the laws that come from them) people are classless (something the left would like to see changed in their continued 'class' warfare) and the poorest of the poor may rise to achieve great wealth through hard work, innovation, entrepreneurial spirit, luck (yes even luck can play a part and often does), etc. Carnegie is an example there as well I believe Levi, Webster (perhaps though I'd have to go back and check) and maybe even Rockefeller (original)...I think JP Morgan came from a rich background so couldn't be included though he attained great heights. Not to mention that Washington, Jefferson, Franklin and others attained fame and fortune the same way (without privilege).
There is plenty of proof should someone actually take the time to read well documented history and original writings.
Anyway, I've gone long here but suffice to say that anyone that thinks the free market failed recently clearly doesn't have the same definition of 'free' that can be found in Websters and is only listening to the ideologues and partisans on the left who spout that nonsense. As well as anyone who thinks controlling the markets is the answer (along with central banking) because they clearly haven't noticed the ever increasing booms and busts created by the fed -- even more so since the change to purely FIAT currency.
Liberty = Freedom to Fail.
Most American's are afraid of failure and unwilling to be free to do so. I personally would relish the freedom to fail and believe that Franklin was spot on "They that can give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety.".
BY the way, before you get lost in the whole 'I'm not talking about socialism' response consider this:
There is 'Freedom and Liberty' and then there is everything else -- which isn't that.
Thus is doesn't matter if you speak of socialism-lite, or progessivism, or communism, or fascism, or just plain old government control and regulation (which has been, by the way, moving slowly and painfully towards socialism).
You cannot have freedom and government control. It doesn't work.
The founders had the answer, but today the American population in large part have no idea what that answer was or is and speak only from hearsay and rumor because of this.
Read and you will succeed, the answer is there and it means your freedom as well as a well ordered nation (actually Union of free states -- as in 'These United States'. Remember that?).
I think history completely discredits your ideological beliefs.
But you're entitled to your opinion.
I thought you would be interested in the following story from The Wall Street Journal.
Tighter Lending Crimps Housing
http://online.wsj.com/article/SB10001424052702304569504576405660006330644.html
The Wall Street Journal for iPad provides a new way to experience the Journal's award winning coverage, blending the best of print and online. Special features include:
Quote from: archimedes on June 24, 2011, 07:28:40 PM
I think history completely discredits your ideological beliefs.
But you're entitled to your opinion.
Perhaps sir, you could then enlighten me.
The same congress who chastised the bankers for tough lending standards in the 70's leading to the "deregulation" of the iending industry by way of the CRA and the GSE's further chastised the bankers in 2008 when the bubble popped leading to additional regulation are again chastising the same bankers because the "new" lending standards are too stringent which prevents the poor and minorities from owning homes. I think that about sums up the last 30 years. d* d* d*
d*
So------let's keep on dancing.
Freedom's just another word for nothing left to lose... Janice Joplin
http://www.youtube.com/watch?v=rL44Z6B5X1Y
The Truth will set you free... if you are willing to lose your life you will find it...