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Started By
Message
Do I have this right..
Posted on 11/24/08 at 10:43 am
Posted on 11/24/08 at 10:43 am
this is an oversimplification but...
The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.
The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
The ratings companies saw all their new issuances starting to suck, but had to still try to rate them so that their clients could move 'em and not falter so the entire ratings system was corrupted.
But bad loans are still bad loans and foreclosures began rolling, the housing market tanked and there was no bad loans to keep the illusion going so the companies holding the CDOs began losing just enough capital to tip them torwards insolvency (thinly capitalized i guess).
Now the gov't is stepping in as a hero to save the industry with its ability to pull money out of its arse, when it was the worm in the foundation to begin with.
The end result is that the necessary deflation of the housing market is cut short, the decrease in the money supply is stalled, and thousands of jobs are saved, but the root cause of the problem is not addressed.
So everyone is crucifying ratings agencies, banks, etc., when they really just reacted to the governments interference in the market.
Now, it is spilling over to other industries as well.
I need to get any gross inaccuracies out because at Thanksgiving some dumbass will ultimately try to say that the problem is: a. George Bush's cocaine addiction, b. Global warming, c. CEO's cigar fetishes, or d. Exxon Mobil's lust for world domination.
The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.
The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
The ratings companies saw all their new issuances starting to suck, but had to still try to rate them so that their clients could move 'em and not falter so the entire ratings system was corrupted.
But bad loans are still bad loans and foreclosures began rolling, the housing market tanked and there was no bad loans to keep the illusion going so the companies holding the CDOs began losing just enough capital to tip them torwards insolvency (thinly capitalized i guess).
Now the gov't is stepping in as a hero to save the industry with its ability to pull money out of its arse, when it was the worm in the foundation to begin with.
The end result is that the necessary deflation of the housing market is cut short, the decrease in the money supply is stalled, and thousands of jobs are saved, but the root cause of the problem is not addressed.
So everyone is crucifying ratings agencies, banks, etc., when they really just reacted to the governments interference in the market.
Now, it is spilling over to other industries as well.
I need to get any gross inaccuracies out because at Thanksgiving some dumbass will ultimately try to say that the problem is: a. George Bush's cocaine addiction, b. Global warming, c. CEO's cigar fetishes, or d. Exxon Mobil's lust for world domination.
2
Posted on 11/24/08 at 10:48 am to bendellee
you've got a lot of it wrong.
Try:
A bunch of mortgage executives form a company. Sweet talk somone into giving them a monster line of credit. They establish relationships with Wall Street firms to buy their paper. They then set up operations centers and hire staff and begin to originate subprime and Alt A loans. They don't have to meet capital requirements for banks. They arent' covered by CRA for the most part. they take their subprimes, bundle them, sell in bulk to wall street or Citi or RFC/GMAC, and make a killing.
Try:
A bunch of mortgage executives form a company. Sweet talk somone into giving them a monster line of credit. They establish relationships with Wall Street firms to buy their paper. They then set up operations centers and hire staff and begin to originate subprime and Alt A loans. They don't have to meet capital requirements for banks. They arent' covered by CRA for the most part. they take their subprimes, bundle them, sell in bulk to wall street or Citi or RFC/GMAC, and make a killing.
Posted on 11/25/08 at 7:33 am to prplhze2000
I think it's both: (and probably much more that is not as obvious)
The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.
The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
The ratings companies saw all their new issuances starting to suck, but had to still try to rate them so that their clients could move 'em and not falter so the entire ratings system was corrupted.
Taking advantage of the situation, a bunch of mortgage executives form a company and sweet talk someone into giving them a monster line of credit. They establish relationships with Wall Street firms to buy their paper. They then set up operations centers and hire staff and begin to originate subprime and Alt A loans. They don't have to meet capital requirements for banks. They arent' covered by CRA for the most part. they take their subprimes, bundle them, sell in bulk to wall street or Citi or RFC/GMAC, and make a killing.
But bad loans are still bad loans and foreclosures began rolling, the housing market tanked and there was no bad loans to keep the illusion going so the companies holding the CDOs began losing just enough capital to tip them torwards insolvency (thinly capitalized i guess).
Now the gov't is stepping in as a hero to save the industry with its ability to pull money out of its arse, when it was the worm in the foundation to begin with.
The end result is that the necessary deflation of the housing market is cut short, the decrease in the money supply is stalled, and thousands of jobs are saved, but the root cause of the problem is not addressed.
So everyone is crucifying ratings agencies, banks, etc., when they really just reacted to the governments interference in the market.
Now, it is spilling over to other industries as well.
The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.
The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
The ratings companies saw all their new issuances starting to suck, but had to still try to rate them so that their clients could move 'em and not falter so the entire ratings system was corrupted.
Taking advantage of the situation, a bunch of mortgage executives form a company and sweet talk someone into giving them a monster line of credit. They establish relationships with Wall Street firms to buy their paper. They then set up operations centers and hire staff and begin to originate subprime and Alt A loans. They don't have to meet capital requirements for banks. They arent' covered by CRA for the most part. they take their subprimes, bundle them, sell in bulk to wall street or Citi or RFC/GMAC, and make a killing.
But bad loans are still bad loans and foreclosures began rolling, the housing market tanked and there was no bad loans to keep the illusion going so the companies holding the CDOs began losing just enough capital to tip them torwards insolvency (thinly capitalized i guess).
Now the gov't is stepping in as a hero to save the industry with its ability to pull money out of its arse, when it was the worm in the foundation to begin with.
The end result is that the necessary deflation of the housing market is cut short, the decrease in the money supply is stalled, and thousands of jobs are saved, but the root cause of the problem is not addressed.
So everyone is crucifying ratings agencies, banks, etc., when they really just reacted to the governments interference in the market.
Now, it is spilling over to other industries as well.
Posted on 11/25/08 at 11:34 am to prplhze2000
quote:
they take their subprimes, bundle them, sell in bulk to wall street
This is the GREAT LIE.
To the OP, look your family straight in the eye across the Thanksgiving meal and tell them:
"Your greed for continued gawdy and unsustainable returns on your 401k funds pushed companies to fashion means of inventing ever higher and higher sales and profits... and many of them invented vapor-returns.
First it was the dot coms, then it was the enrons and worldcomms. But you continued to believe there was a "Return Fairy" out there that printed you money with no risk and consequence.
When it got to housing and securities created to bank on shaking mortgages, it was the end of the road. The market proves there is ALWAYS risk and you need to learn what that is in a real economy and invest your money on that.
IE, you need to return to some basics and look at what you're buying.
Oh, and you fricked yourself."
Posted on 11/25/08 at 1:02 pm to bendellee
quote:No. No. No.
The government told the banks--here are your new lending guidelines, if you don't follow them you are open to penalties/lawsuits.
The Banks said we've got to get this bad shite the gov't forced us to take on off of our books.
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