Financial meltdown in 2008 was avoidable and plenty of blames to go around

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Craig234

Lifer
May 1, 2006
38,548
350
126
The real issues here more involve simply when the economy allows much activity that is problematic to happen, creating powerful interests vested in continuing it.

It's true whether it's a massive defense industry that causes more excessive defense spending - even if that causes unnecessary wars to justify it - or the finance industry with many billions relying on bad activities, as with our system that has bloated the industry to go from 10-15% of the economy's profits to 40%.

We need to face the fact that a weakness of democracy is that an industry with hundreds of billions to gain by bad policy is a lot more able to lobby for its interests than the citizens. And when those interests pay for a massive propaganda industry to befuddle the public with attacks the people trying to do the right thing, it works.

We can rightly criticize the Soviet Union for its really bad economic policies.

But we can be rightly criticized for our own really bad policies when it comes to corporate corruption of our system, as well, we are broken also.

We didn't think so, because other advantages propped us up as wealthier, but look at our debt now, and global competition, the trends since Reagan.

Our primary advantage in the world now is military strength, and that's a pretty lousy thing to have to use for our benefit.

Things like allowing unlimited corporate donations into the 527's in elections is exactly what we did not need.

Goldman Sachs and Wall Street already seem to largely run our government's Treasury Department under both parties - I remember the story of a Bush administration insider saying he heard Bush on the phone to his Treasury Secretary yelling that he's the President, 'you have to tell me what you're doing'.

Rome continued to have the trappings of a Senate after the Caesars had become dictators. We fall into a similar trap with our own corporate corruption, where the trappings are there, presented by the corporate media every day, but the policies are corrupt and the people are the ones who will pay the price to protect the powerful - inevitably weakening the US while its international class of elites' loyalty lies with their class counterparts around the world.

We can do better - there were large investigations into corruption such as WWII suppliers, hundreds of convictions from the Savings and Loan scandal, for example.

Sorry, brainwashed Libertarians, but government representing the public interest is the only counter that could work to the corrupt concentrated private powers.

There are plans to gut the very scope of government so that it can't play that role, protecting the private interests, if we don't fix some of the corruption.

Save234
 

dawp

Lifer
Jul 2, 2005
11,347
2,710
136
hehe, I'm going to do things the renegade way with my home purchase. It's called saving up all my money and paying CASH. No mortgage, no brokerage, no realators. I'm finding a home builder to build what I want and how I want on a plot I purchased outside an HOA. I pay cash and wipe my hands of it all.

even paying cash is no guarantee that you wont be foreclosed on. I read last year that one person who did just that was foreclosed on by Bank of America.I don't think I'd but a home right now until this mess gets sorted out.

http://articles.sun-sentinel.com/20...ense-attorney-foreclosure-case-jumana-bauwens
 

drebo

Diamond Member
Feb 24, 2006
7,034
1
81
even paying cash is no guarantee that you wont be foreclosed on. I read last year that one person who did just that was foreclosed on by Bank of America.I don't think I'd but a home right now until this mess gets sorted out.

http://articles.sun-sentinel.com/20...ense-attorney-foreclosure-case-jumana-bauwens

That's ridiculous. I can't believe that people aren't going to jail over this shit. It's fraud, plain and simple.

That said, there are plenty of people who should be forclosed on. Unfortunately, because of the fraud and negligence as evidenced in those stories, it's unlikely anything will be done.
 

YoungGun21

Platinum Member
Aug 17, 2006
2,546
1
81
It's not a hugely complicated fix.

1. Ban taking out insurance of any form on bonds, securities, or assets you do not own.

2. Ban trading the same stock, or bond in a 24 hour period.

3. Ban trading "commodities or other assets in excess of $25,000,000" more than once in a 24 hour period.

4. Ban creating subsidiaries to create a loophole. Create serious fines for violations.

5. Ban creating shares of things you do not physically own.

This removes the vast majority of the largest problems. It is all common sense and should have been implemented decades ago.

Lol. No. Learn some finance first. The average stock position held for the past year was 11 seconds. SECONDS. You think there is any way that you can ban high frequency trading when that is how the system works? Ban transactions over $25 million? Get real.

Everyone in this thread needs to read The Housing Boom and Bust , it will tell you exactly how all of this happened. Not a long book, and I finished it in just a day of reading.
 

piasabird

Lifer
Feb 6, 2002
17,168
60
91
The government has done nothing to prevent it from happening again. Maybe the banks should have to pay an unemployment tax for all the people they put out of work.

How about we start downsizing the banks and force them to break up into smaller banks. Do away with too big to fail. It was the government that kept approving all the bank mergers. Then the government called investment firms banks. We should not have bailed out investment firms.
 
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Texashiker

Lifer
Dec 18, 2010
18,811
198
106
Lol. No. Learn some finance first. The average stock position held for the past year was 11 seconds.

A few months ago there was a news program - 60 minutes or 48 hours - about how these powerhouse trading companies are looking to invest in super computers that can trade millions of shares in seconds.

The article gave an example of buying 1 million shares of something, waiting a few minutes for it to go up .03 cents, and then selling that same 1 million shares. 1 million X .03 = $30,000 made in just a few seconds, and there were an unknown number of those transactions going on every few seconds.


The government has done nothing to prevent it from happening again. .

Why should the government do anything? A large part of it is "buyer beware" - its people buying houses they can not afford, or taking out flexible interest loans, putting up their house for a loan,,,,,,,.

My wife likes to watch these home buyers tv shows - and most of the homes on there cost 200,00+. There is no way my wife and I can afford that kind of home.

On one show, a couple was talking about buying a house, and they had every penny accounted for. They had no flexible money to even go out to eat. Those kinds of financial decisions are stupid, but the banks make the loans anyway.

So which one is more stupid, making a loan that people can not afford to pay back, or someone buying a house they can not afford?
 
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YoungGun21

Platinum Member
Aug 17, 2006
2,546
1
81
A few months ago there was a news program - 60 minutes or 48 hours - about how these powerhouse trading companies are looking to invest in super computers that can trade millions of shares in seconds.

The article gave an example of buying 1 million shares of something, waiting a few minutes for it to go up .03 cents, and then selling that same 1 million shares. 1 million X .03 = $30,000 made in just a few seconds, and there were an unknown number of those transactions going on every few seconds.

That very much happens. These people are called Quants (short for their field, Quantitative Finance) and they work at hedge funds, quant shops, investment banks, and prop. trading firms. They are math whizzes. High frequency, low latency trading is their game. Derivatives.

If you're wanting to blame them for the crisis, well... you can't.
 

Phokus

Lifer
Nov 20, 1999
22,994
779
126
Lol. No. Learn some finance first. The average stock position held for the past year was 11 seconds. SECONDS. You think there is any way that you can ban high frequency trading when that is how the system works? Ban transactions over $25 million? Get real.

Everyone in this thread needs to read The Housing Boom and Bust , it will tell you exactly how all of this happened. Not a long book, and I finished it in just a day of reading.

That book was god awful. The author is a shill (Thomas Sowell) and blamed the government (specifically the CRA and Fannie/Freddie), when the CRA had little or nothing to do with it and Fannie/Freddie weren't even able to keep up with private sector loans. Most of the shitty subprime loans were made by non-bank lenders and mortgage brokers that were not subject to the regulation that Sowell bitches about:

http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html

Federal Reserve Board data show that:

More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.


Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1CBIzUKW8

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.

Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1CBJHEdio
Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1CBJ9EKnN

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods.

Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.

Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."

Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.



Read more: http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1CBJRExJX
 

Texashiker

Lifer
Dec 18, 2010
18,811
198
106
If you're wanting to blame them for the crisis, well... you can't.

Blame the traders? Na, I blame the people who bought a home and could not afford it, and I blame the banks for making loans to people that can not afford to buy the homes.

There is a lot of blame to go around - its like peanut butter, just spread it all over the place.

Personally, I blame the home buyers and the banks equally.

If you can not afford to buy a home - dont do it, even "if" the bank is willing to loan the money.

If your a bank - do not make loans to people that can not afford to buy.

What really got the market into ruins, were companies buying the home loans. If the loans could not be sold and the banks had to sit on them, then they would have stopped loaning high risk people the money.

Its like a set of steps, and the last step was off the ledge.
 
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Engineer

Elite Member
Oct 9, 1999
39,230
701
126
I blame it on Home and Garden Channel (damn house flippers) and high gas prices (as the final straw)....

not really but those hurt.
 

Craig234

Lifer
May 1, 2006
38,548
350
126
Try these books:

http://www.amazon.com/gp/product/047...huc__sim_01_02

http://www.amazon.com/gp/product/156...huc__sim_01_03

http://www.amazon.com/gp/product/159...huc__sbs_02_01



As soon as the financial crisis erupted, the finger-pointing began. Should the blame fall on Wall Street, Main Street, or Pennsylvania Avenue? On greedy traders, misguided regulators, sleazy subprime companies, cowardly legislators, or clueless home buyers?

According to Bethany McLean and Joe Nocera, two of America's most acclaimed business journalists, the real answer is all of the above-and more. Many devils helped bring hell to the economy. And the full story, in all of its complexity and detail, is like the legend of the blind men and the elephant. Almost everyone has missed the big picture. Almost no one has put all the pieces together.

All the Devils Are Here goes back several decades to weave the hidden history of the financial crisis in a way no previous book has done. It explores the motivations of everyone from famous CEOs, cabinet secretaries, and politicians to anonymous lenders, borrowers, analysts, and Wall Street traders. It delves into the powerful American mythology of homeownership. And it proves that the crisis ultimately wasn't about finance at all; it was about human nature.

Among the devils you'll meet in vivid detail:

• Angelo Mozilo, the CEO of Countrywide, who dreamed of spreading homeownership to the masses, only to succumb to the peer pressure-and the outsized profits-of the sleaziest subprime lending.

• Roland Arnall, a respected philanthropist and diplomat, who made his fortune building Ameriquest, a subprime lending empire that relied on blatantly deceptive lending practices.

• Hank Greenberg, who built AIG into a Rube Goldberg contraption with an undeserved triple-A rating, and who ran it so tightly that he was the only one who knew where all the bodies were buried.

• Stan O'Neal of Merrill Lynch, aloof and suspicious, who suffered from "Goldman envy" and drove a proud old firm into the ground by promoting cronies and pushing out his smartest lieutenants.

• Lloyd Blankfein, who helped turn Goldman Sachs from a culture that famously put clients first to one that made clients secondary to its own bottom line.

• Franklin Raines of Fannie Mae, who (like his predecessors) bullied regulators into submission and let his firm drift away from its original, noble mission.

• Brian Clarkson of Moody's, who aggressively pushed to increase his rating agency's market share and stock price, at the cost of its integrity.

• Alan Greenspan, the legendary maestro of the Federal Reserve, who ignored the evidence of a growing housing bubble and turned a blind eye to the lending practices that ultimately brought down Wall Street-and inflicted enormous pain on the country.
 

HomerJS

Lifer
Feb 6, 2002
39,950
33,606
136
Blame the traders? Na, I blame the people who bought a home and could not afford it, and I blame the banks for making loans to people that can not afford to buy the homes.

There is a lot of blame to go around - its like peanut butter, just spread it all over the place.

Personally, I blame the home buyers and the banks equally.

If you can not afford to buy a home - dont do it, even "if" the bank is willing to loan the money.

If your a bank - do not make loans to people that can not afford to buy.

What really got the market into ruins, were companies buying the home loans. If the loans could not be sold and the banks had to sit on them, then they would have stopped loaning high risk people the money.

Its like a set of steps, and the last step was off the ledge.

You do realize neither the mortgagers or mortgagees packaged up these bad loans into risky derivatives and traced such.
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,330
126
We can learn from up north. The Canadian government puts limits on how much leverage their banks can use and has much more stringent lending standards and they largely avoided the subprime mess. Of course that means regulation and regulation means soviet style communism for conservatives.

We used to not have bankers take so many risks when these banks were partnerships and not public companies. Bankers know they can make risk free bets when it's not THEIR equity/investment that's at stake.

We used to have a law that prevented that.
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,330
126
It's not a hugely complicated fix.

1. Ban taking out insurance of any form on bonds, securities, or assets you do not own.

2. Ban trading the same stock, or bond in a 24 hour period.

3. Ban trading "commodities or other assets in excess of $25,000,000" more than once in a 24 hour period.

4. Ban creating subsidiaries to create a loophole. Create serious fines for violations.

5. Ban creating shares of things you do not physically own.

This removes the vast majority of the largest problems. It is all common sense and should have been implemented decades ago.

6. Existing laws concerning fraud apply to banksters too.

7. Reinstate Glass-Stegal
 

shira

Diamond Member
Jan 12, 2005
9,500
6
81
From New York Times = http://finance.yahoo.com/news/Financial-Meltdown-Was-nytimes-923562801.html?x=0


There you go. Plenty of blames on everyone (D and R parties, banks, Wall Street firms, regulators, low interest rate, Fannie and Freddie, credit rating agencies, bumbling incompetence, greed, stupidity, etc......and so on ..).

I thought we already knew for sure that the meltdown was brought to us courtesy of all the poor people and their sub-prime mortgages. Wall street and the banks cannot possibly be to blame, since they are a part of the free market, and the free market can do no wrong.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,686
136
While derivatives were left un-regulated by congress during the Last year of the Clinton Admin, they'd always been un-regulated. And they weren't that big of a deal, either. Total investment in derivatives was relatively small. Yes, the collapse of LTCM in 1998 was a problem, something that Greenspan's FRB managed to contain.

I'll agree that it wasn't a good decision, but people at the time didn't have the benefit of hindsight. It was one of those "leave it alone and we'll see what it looks like down the road" kind of things.

Down the road, when it was obviously getting out of hand, along with the housing bubble, The Bush Admin exploited it, making the "Ownership Society" & a booming stock market cornerstones of their 2004 reelection campaign.

http://query.nytimes.com/gst/fullpage.html?res=990CEED7103EF932A25751C0A9669C8B63

http://www.angrybearblog.com/2008/09/otc-derivative-growth-since-1998.html

Once reelected, they let 'er rip, acted as cheerleaders for Wall St.
 

charrison

Lifer
Oct 13, 1999
17,033
1
81
Interesting for those trying to blame poor people and their mortages

Not so much blaming the poor, but the regulations put in place to help them were put into to play for everyone. Congress kept pushing weakened lending standards to make housing more affordable.
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,330
126
Not so much blaming the poor, but the regulations put in place to help them were put into to play for everyone. Congress kept pushing weakened lending standards to make housing more affordable.

That didn't have anything to do with big banksters taking a piece of dog shit, dipping it in chocolate, and selling it to people as Godiva. That is called fraud.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,686
136
Not so much blaming the poor, but the regulations put in place to help them were put into to play for everyone. Congress kept pushing weakened lending standards to make housing more affordable.

Congress played a part, but the Bush Admin was the prime mover, along with Greenspan's FRB.

It's a given that Wall St will rob anybody and everybody, given the chance, and the Bush Admin gave it to 'em, and cheered them on.

Ownership Society!

http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html

http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html

http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/

I've posted these links before, many times, but you apparently refuse to even click 'em, denial being what it is...
 

charrison

Lifer
Oct 13, 1999
17,033
1
81
Congress played a part, but the Bush Admin was the prime mover, along with Greenspan's FRB.

It's a given that Wall St will rob anybody and everybody, given the chance, and the Bush Admin gave it to 'em, and cheered them on.

Ownership Society!

http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html

http://economicsofcontempt.blogspot.com/2008/03/cutting-through-red-tape-with-chainsaw.html

http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/

I've posted these links before, many times, but you apparently refuse to even click 'em, denial being what it is...

The housing bubble was well underway before bush even took office.

Actually I have read lots of links and there are lots of players involved, from both sides. but if blaming bush makes you feel better....
 
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jackace

Golden Member
Oct 6, 2004
1,307
0
0
How to impliment the lessons learned will be the harder problem.

We avoided this from the very start, and I don't see anything changing.

In many industries a failure of this size would have seen top execs and managers losing their jobs and having a HUGE black mark on their records. Many of whom would have never worked in the industry again. In the Government, regulatory, and banking sectors we didn't hold anyone responsible, and instead forced the rest of the country bail out the people responsible. We even let the people responsible keep their jobs, and be "part of the solution".
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
Blame in this order:

1) Government for encouraging home ownership by guaranteeing mortgages
2) People for buying homes they can't afford
3) Lenders for lending money to those who can't afford it
4) Wall st for packaging them up and selling them
4a) Ratings agencies for not rating them correctly
5) Investors for buying up mortgage securities
6) Wall st for creating derivatives and using leverage to bet on mortgages
7) Investors for taking the other side of the betters
8) Government for encouraging home ownership by guaranteeing mortgages
rinse repeat
 

Craig234

Lifer
May 1, 2006
38,548
350
126
Blame in this order:

1) Government for encouraging home ownership by guaranteeing mortgages

No need to read further to know this post attacking a perfectly good policy is anti-government ideology crap, as good as blaming the S&L crisis on FDIC.