That sounds to logical and reasonable. It's better to give banks the money so that they can continue making risking investments and loans. That way legend killer can let them off the hook and blame everyone else.
That sounds to logical and reasonable. It's better to give banks the money so that they can continue making risking investments and loans. That way legend killer can let them off the hook and blame everyone else.
So who is them? Who are the banks? Who are the owned by? Where will people get money? What will the cost be going forward?
Capt Caveman
Lifer
- Jan 30, 2005
- 34,543
- 651
- 126
Do some more research. Too bad, insurance is required. If you think that all is affected by the crisis, you are very naive. Anybody (people with excellent credit, businesses, etc) that wants to borrow money is affected. Commercial development has stopped in many places due to the lack of available credit. Credit requirements have been tightened for everyone. Less development means less work for a lot of people. People even with fixed mortgages aren't able to afford their payments.
A few of many examples:
Growing mortgage crisis spreads to jumbo loans
U.S. mortgage crisis spreads beyond subprime loans
Commercial markets take a punch, but not a total knockout
Fallout from mortgage crisis snarls plans for Uptown hotels
MORTGAGE CRISIS SPREADING TO CREDIT CARDS - American lending landscape changing
Shadow victims of the mortgage crisis: renters
Bad news for jumbo mortgage loans
Wake up, Fern- Try this chart-
http://www.frbsf.org/images/pdfcharts/el98-23a.pdf
From this article-
http://www.frbsf.org/econrsrch...wklyltr98/el98-23.html
Or this, from 10 years ago-
http://query.nytimes.com/gst/f...F937A25757C0A96E958260
It's not like this has ended, at all, with the merger of the biggest players meaning that their control of assets is really much, much larger than your raw # of banks would indicate. I suspect it looks like the income curve for the country, with those at the very top having a very disproportionate share... and they're the ones who want to get bailed out...
The potential for conflicts of interest are huge in the "modern" scheme of things, where commercial banking, investment services of all kinds and insurance are offered under the same corporate umbrella, indeed, in the same office under the same roof...
Failure to recognize that is to fail to recognize the nature of the problem itself...
http://www.frbsf.org/images/pdfcharts/el98-23a.pdf
From this article-
http://www.frbsf.org/econrsrch...wklyltr98/el98-23.html
Or this, from 10 years ago-
http://query.nytimes.com/gst/f...F937A25757C0A96E958260
It's not like this has ended, at all, with the merger of the biggest players meaning that their control of assets is really much, much larger than your raw # of banks would indicate. I suspect it looks like the income curve for the country, with those at the very top having a very disproportionate share... and they're the ones who want to get bailed out...
The potential for conflicts of interest are huge in the "modern" scheme of things, where commercial banking, investment services of all kinds and insurance are offered under the same corporate umbrella, indeed, in the same office under the same roof...
Failure to recognize that is to fail to recognize the nature of the problem itself...
The only moral hazard in bailing out the borrowers is that it also bails out the lenders. As for blame the borrowers where doing what was in their own best interest I don't blame them that some bank is now losing money. It isn't their problem. The banks let the borrowers play a game of heads I win tails you lose.
Well, at least now you're solidly emplanted in the doof category. Your knowledge of finance mirrors your knowledge in physics (airplane + treadmill stupidity).
It creates a moral hazard for both parties if they get bailed out for making stupid decisions. I blame everybody, since everybody was greedy, everybody signed contracts they knew were bad, and everybody should share in the punishment. It is *everybodys* problem.
As pointed out above, this is something affecting more people than just "greedy bankers".
You people and your nihilistic teenage angst needs to be restrained.
I actually blame the borrowers more...why?
A VAST majority of these issues are not because people wanted a home to live in forever...it is because of all the nincompoops who watched too much TV and tried their hand at the 'flipping' game.
They got these lowball variable rate mortgages, thought they could fix the house up and sell it before the rate ballooned. But they didn't.
Now they blame the banks for putting pressure on them to sign on the dotted line....bullsh*t.
Dunno how many of you have bought a home but the process does not happen overnight. It can take weeks or MONTHS before you get a loan and get your home and all that time they could have backed out but did not.
This whole mess is because they they think they see how easy it is to buy, fix up and sell a house on tv that anyone can do it.....obviously not, now we all get to feel the pain.
A VAST majority of these issues are not because people wanted a home to live in forever...it is because of all the nincompoops who watched too much TV and tried their hand at the 'flipping' game.
They got these lowball variable rate mortgages, thought they could fix the house up and sell it before the rate ballooned. But they didn't.
Now they blame the banks for putting pressure on them to sign on the dotted line....bullsh*t.
Dunno how many of you have bought a home but the process does not happen overnight. It can take weeks or MONTHS before you get a loan and get your home and all that time they could have backed out but did not.
This whole mess is because they they think they see how easy it is to buy, fix up and sell a house on tv that anyone can do it.....obviously not, now we all get to feel the pain.
And if the bank didn't have such idiotic mortgages then the borrowers wouldn't have been able to get them. From the borrowers point of view there is no risk with a zero down mortgage if sell the house for lots of money good for them. If they can't well just walk away and the bank take the hit.
You blame everyone but you are willing to let the source of these bad loans continue on making the same old mistakes. The sign of insanity is when you continue to make the same old mistakes over and over again and never change. If you want to stop banks from giving those who do not have the ability to sustain and pay off a loan some money in the future then don't bail banks out period. This way they understand that they won't be saved by the tax payers for making obviously stupid/greedy mistakes. Just like you wouldn't bail out relative who has a bad gambling addiction and refuses any sort help.
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
I suppose it could be unfair to renters. Being evicted before your lease doesn't strike me as fair. I'm somewhat doubtful that can happen here in NC, I do see it happens in CA. (Additionally, I'm somewhat curious why you evict a paying tenant unless a purchaser is handy).
I see nothing necessarily "unfair" about people having to work harder to find jumbo loans. (Aren't the Fanny/Freddy limits being raised anyway?)
I see nothing "unfair" about a decline in the pace new real estate projects.
I see nothing unfair about people who chose a variable rate loan now having problems because interest rates rose.
I do see Wall Street shooting itself in the foot to some extent by tightening credit, thus creating the circle whereby demand will not keep up with supply causing failing prices - rinse repeat etc.
I do see this from a self-centric POV. My loans are low fixed interest rate. My lines of credit are tied to prime. I do not forsee this affecting me directly. I purposefully arranged my affairs this way. I do not wish to subsidize those who choose risky means and now must pay for it. Too do so upsets the risk/reward concept. They chose risk in an effort to get higher reward.
I understand that there will be an economic slow down as the pace of (over) building is corrected. I do not wish to artifically continue it (overbuilding). I support moves to cushion the impact (slow it), just not subsidy, or in this case the government acquiring the loans even at a discount. It is simply not a proper government function.
IMO, this is another (inevitable) speculative cycle, an example of which I have seen many times. I do not see this contraction caused by anything unfair.
Fern
which is why the borrowers are more at fault.
I agree that the banks did play a role in this, however it is the mentality of the borrowers that think it is ok to take someones money, invest it and if it doesn't work..."ooops!...oh well."
Which is bullsh*t. The problem is that the banks are not going after people....there used to be a time when you would get your wages garnished for not paying your bills....seems to me that if this was enforced more, people would not be so willing to just walk away.
After all who wants to be paying for a house you don't live in 5-10-15 years down the road?....that has a tendency to inspire people to buy what they can afford and stick with it.
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
What leads you to believe that?
I've always been required to provide a personal guarantee for any real estate mortgage I've taken out.
If I defaulted I'd fully expect to have them come after me.
Actually, that happened within the last couple of years. I was a very minor investor in a property that went belly up. I handled the case myself and got it dropped.
I do recall that it appeared the bank sold the default to a third party. They were the ones who came after everone.
I'm curious why the banks would just let the people skate. I can only imagine them not pursuing if it looked hopeless to collect - just unneccessary legal fees etc. Even so a judgement would seem easy to get, and that could possibly be sold (See, I've just created a new asset based business model! Packaging and selling securities backed by bundled default/judgements.
So there is a silver lining to this cloud.)Fern
No shit sherlock, where have I ever said something opposing your post. Your only posting what you do because you like your post count, other than that you're not adding anything.
To some extent, particularly wrt speculators, then, yeh, the buyer shares the blame in no small way.
OTOH, most buyers aren't financial experts, nor do they claim to be. 30 years ago, buyers could have confidence in the idea that nobody would lend them more money than they could reasonably repay, something that went right out the window some while back...
Why? Because all the players in the financial chain above them disclaimed any sort of fiduciary duty to their own organizations, and to the next guy up the ladder, often by command of their own executives...
Lenders and their sales agents assumed the attitude of used car salesmen, where burying the customer under a few thousand extra won't kill anybody, but it'll fatten up their share... and the customer can still come through. Even if they don't, your organization can absorb the loss... when you bury the customer under a few hundred thousand extra, it's a whole different ball game... and when you do it over and over again on borrowed money, yourself, you're courting disaster...
Tell ya what, guys- I'll go for the buyout plan, if the govt gives 'em 25 cents on the dollar, which is more than many of these toxic securities are currently selling for, then resell for 50 cents on the dollar, carry the 30 yr fixed rate note on 5% down. It's an opportunity for the taxpayers to actually make money...
The big banks are talking about taking a "haircut", when what's more appropriate are some old fashioned tar and feathers... all over their naked bodies, with special attention to the tender bits...
OTOH, most buyers aren't financial experts, nor do they claim to be. 30 years ago, buyers could have confidence in the idea that nobody would lend them more money than they could reasonably repay, something that went right out the window some while back...
Why? Because all the players in the financial chain above them disclaimed any sort of fiduciary duty to their own organizations, and to the next guy up the ladder, often by command of their own executives...
Lenders and their sales agents assumed the attitude of used car salesmen, where burying the customer under a few thousand extra won't kill anybody, but it'll fatten up their share... and the customer can still come through. Even if they don't, your organization can absorb the loss... when you bury the customer under a few hundred thousand extra, it's a whole different ball game... and when you do it over and over again on borrowed money, yourself, you're courting disaster...
Tell ya what, guys- I'll go for the buyout plan, if the govt gives 'em 25 cents on the dollar, which is more than many of these toxic securities are currently selling for, then resell for 50 cents on the dollar, carry the 30 yr fixed rate note on 5% down. It's an opportunity for the taxpayers to actually make money...
The big banks are talking about taking a "haircut", when what's more appropriate are some old fashioned tar and feathers... all over their naked bodies, with special attention to the tender bits...
Useless. The banks will only pay the politicians to deregulate again. This cycle is familiar from before. Crash ---> regulate ---> good times ---- > deregulate ----> crash...
You may have a point, GrGr- history does have a tendency to repeat itself. OTOH, we had a good run at it over the time period of New Deal regulations, and even the most foolish learn when pounded repeatedly...
I
You make it sound as if US finances is a cardhouse waiting to implode. Are things that bad?
The US can survive rough times. I think the current bubble mentality is insane; the US believes it can do whatever and there is never any real consequence. Inflate to infinity, recreate old Trusts and Ponzi schemes under new names, invade those too weak to defend themselves, start arms races, militarize etc. Reinflating the bubble economy would be just more of the same that has brought us to this point.
The US is following the same curve England did pre WWI as the old Empire declined. I think it is better for the US to take the hit now, while it is still manageable, than to push it into the future (through a bail out). Then when the inevitable crash eventually comes will be even bigger and hit far harder.
But maybe you are right and bailouts are the only option to a systemic wipe out of US finances. But I don't think we are at that point yet, are we?
Things are pretty bad out there and I don't think people realize this. I work in securitization, an area that will probably get a lot of attention in the future, since it partially allowed the mortgage market to take off. It's also a bad finance market to be in right now, layoffs everywhere, the viability of it being questioned, and losses across the whole finance market.
I specifically work in the asset backed commercial paper market (ABCP), where we take long-term assets and fund them in the short-term market. This is the same market where the Structured Investment Vehicles (SIVs) funded. The sivs funded higher risk assets with the short-term funding and were punished by the market heavily.
Essentially, banks set up "conduits" which issue ABCP, while we negotiate bonds from issuers. Issuers can be from the smallest equipment leasing company, to the biggest student loan companies. All of them need short-term funding, until they can issue "term" bonds, whereby investors buy bonds that go out 1+ years.
Now, the ABCP market, for 20+ years, was healthy. It sustained some dings, where funding costs were higher, but nothing like now. Traditionally, the market funded at Libor + 0 spread. LIBOR is what the English banks charge eachother for funding (akin to the Federal Funds rate). This was great for issuers, since they could fund short-term at very low costs. The conduits (except for many SIVs) are supported by the host-banks, through letters of credit and liquidity agreements (Liqs/Locs). It was thought that nobody would allow a conduit to sustain a loss to commercial paper, so the CP funded at risk-less rates. They usually funded at 30-120 days long, very short term.
However, starting in August, the market dried up. What used to go for LIbor + 0%, now goes for Libor + 50bps (.5%), or more. This is because people do not want to buy riskless paper for anything but a premium over riskless rates.
You see this everywhere, bonds that are essentially riskless, now go for massive premiums, all of which will eventually either get eaten through reduced profitability, or passed to consumers. Keep in mind, that this is a $1Tr market, just ABCP, the securitization market is trillions upon trillions of dollars.
For example, I recently saw a credit card securitization bond price for Libor + 1.1%. Last year it priced at Libor + .05%. This is a AAA bond that if it were to sustain losses, it would equate to 40% consumer defaults, something that would only happen in the most severe of Great Depressions.
So, since it's not about risk, since these are riskless assets, it's about something else. That something else is liquidity. The financial sector, as a whole (issuers, banks/underwriters, investors) are leveraged. They are also loathe to let go of money in a pending economic downturn. Thus, they make you "pay up" for getting funding (liquidity). Things *ARE* pretty bad out there, it just hasn't hit the middle-market yet, since it takes a while to filter down. You will see this hurt the economy pretty badly.
If banks fail, this will only get worse Credit will dry up, people will become more risk-averse, the economy will certainly contract, and we will go into a severe recession. That I am sure of.
If we bail out banks, something which I am loathe to do, it presents a moral hazard. I certainly think there needs to be regulation and increased capital requirements. I also think the mortgage market needs a massive overhaul.
What should be done? I really don't know. I think doing nothing and letting banks fail is a bad idea. I think bailing them out presents massive problems. I think bailing consumers out present the same problems.
Personally, I'd like to see the banks get some help, but only enough to keep them on life support until these write-downs are re-recognized and assets come back up. If that happens I would like to see them give up quite a bit, including increased regulatory oversight, capital requirements, and perhaps some prosecution.
On the consumer side I would like to see some people get help, but much the same as the banks, not much.
It's a big fricking mess that everybody created, and I mean *everybody*. Responsible borrowing and lending went out the door for greed and I think it's too little to just chastise people.
As far as changes, I definitely think that there needs to be a borrowers bill of rights passed in congress. The banks/lenders got their legislation in 2005 and it's an un-even equation right now.
Don't be fooled, I am as big of a financial darwinist as you'll ever find. However, I can see the harm letting the financial market fail. It *WILL* hurt everybody and cause massive problems.
People who think that the banks should be allowed to fail on their own, are the same who say idiotic things like "we will turn xx country into a parking lot" or "all corporations are bad" or "it's greedy bankers". Without realizing the ramifications of their points. It's narrow minded and idiotic to take such a tunnel vision on everything. It's very indicative of how stupid some of our population is.
Very true. I think a lot of people focus on the negatives than the positives. However, I think that everybody drank the kool-aid here and the deregulation that occured in the last 20 years isn't as responsible as the other changes in the RE market are.
Lemon law
Lifer
- Nov 6, 2005
- 20,984
- 3
- 0
Well there you have it---Better to have periods of stability, rather than No stability.
Without some common sense Federal regulation, we will never have stability.
Lets also face another fact, a good deal of this crisis was caused by an irresponsible few. Who got in, over hyped and over sold dubious mortgages, and then sold those temporarily performing mortgages to sucker bankers before the ARM kicked in, leaving others holding the bag because they got out before the bottom dropped out. Its those irresponsible bastards that played the system, and its those irresponsible bastards we should be going after because they have taken their money and run away from a mess of their making.
Without some common sense Federal regulation, we will never have stability.
Lets also face another fact, a good deal of this crisis was caused by an irresponsible few. Who got in, over hyped and over sold dubious mortgages, and then sold those temporarily performing mortgages to sucker bankers before the ARM kicked in, leaving others holding the bag because they got out before the bottom dropped out. Its those irresponsible bastards that played the system, and its those irresponsible bastards we should be going after because they have taken their money and run away from a mess of their making.
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