loweyecue wrote:

GustavBahler wrote:

loweyecue wrote:

GustavBahler wrote:

loweyecue wrote:

GustavBahler wrote:
I strongly disagree with your take on Mike Whitney who wrote that piece on the foreclosed homes. Whitney was one of the few writers who was sounding the alarm bells to the housing bubble years in advance, the danger of those toxic CDO's, and also called the meltdown on Wall Street long before it happened as well. He is no conspiracy theorist.

The banks are intentionally keeping millions of foreclosed homes off the market to prop up prices so yes they are dictating the price so we have to pay for their mistakes, and it looks like its a two tiered system. Equity firms pay pennies on the dollar for properties in secret agreements and we have to pay an artificially inflated market value. They should release these homes to the general public and let the market set the price instead of these back room deals.

Ok so I don't follw the logic here. Are banks just supposed to SELL foreclosures at the lowest possible price? What would drive them to do that instead of holding on to the mortgages to see if they can ge better value? Banks are in teh business of making money like everyone else, not saying I like what hey do, but I don't expect them to do something out of the goodness of their hearts. And if they just flooded the market with foreclosed properties that would collapse home prices all over the country and it would penalize homeowners who kept paying their loans throughout the crisis by now suddenly lowering the value of their homes to probably below what hey owe. What am I missing?

GustavBahler wrote:
I don't like the idea of these firms getting preferential treatment. I'm looking for a home right now and I don't appreciate wealthy investors getting to buy properties at steep discounts with sweetheart financing. Even money many of them are the same characters who caused this meltdown. Don't like the non-disclosure agreement as well. Its like the administration is trying to hide something.

As far as the "too big too fail" banks, They are bigger than they were before the meltdown. Politicians were literally threatened with martial law if the no strings attached bailout wasn't approved. What did they do with all the money they got from the govt?

I don't like the secrecy either but equity firms had nothing to do with the mortgage meltdown and ensuing crisis, if they benefited from it it was purely as by product of what went down. Private Equity firms didn't write subprime loans.

I am never going to defend TBTFs, if you see my first post and subsequent discussions with Knickshot you will see I was arguing against he repeal of Glass-Steagall act which as Holfresh pointed out started in 1990 and ended with the Three Stooges Act.

I usually like Krugman and have very little knowledge of Iceland. I would guess multiple years of Austerity measures isn't exactly going to be very popular, probably even less popular than the bailouts. My take on the bailouts was that Paulson messed up and didn't set restrictions on what the banks could do with the money. But the bailouts worked in the sense they prevented the total collaps of the banking system.

I'm not suggesting dumping them all of them at once. I agree its a double edged sword. I was speaking mostly about Fannie Mae which the government seized and are now giving some firms sweetheart deals, if its a choice between them and average citizens, I say give the public a chance to buy them first.

Those private equity firms packaged and sold those toxic CDOs which were composed of subprime loans (among other loans) which brought down the market. They might not have made the loans but they packaged them and sold them to unsuspecting customers. As far as austerity, we've had it. Hundreds of thousands of government workers have been laid off, police and fire departments being cut, govt services across the board have been cut back while the banks were made whole. And they have their eyes set on SS and Medicare.

I agree about glass steagall. What also did in the economy was the Commodity Futures Modernization Act (thanks Clinton) which made sure that derivatives would stay deregulated. This is a great documentary about Brooksly Born who tried to warn people about the danger of not regulating those derivatives.

http://www.pbs.org/wgbh/pages/frontline/warning/view/

Have to disagree about Private Equity - These are firms like Mitt Romney's Bain Capital and they exist for the sole purpose of doing LBOs and focus on undervalued assets.

Systemic crises also are commonly related to the collapse of very speculatively-valued assets, as seen
most recently in speculative mortgages and the securities and derivatives based on those mortgages.
The investment focus of private equity funds on potentially undervalued firms should largely preclude a
systemic crisis arising from the collapse of overvalued assets. At a minimum, our dataset does not suggest
speculative bubbles in the assets purchased by these large private equity funds during the period
examined here. Private companies do not have standard price-earnings ratios, since there is no public
market price for each share; but the most widely used measure of the ratio of value to earnings in privately-
held firms, the “enterprise-value multiple” (EVM), averaged a moderate 9.5 for 63 large transactions
undertaken by eight large U.S. private equity firms from 2002 to 2005. Some observers claim that several
private equity purchases in the last two years have been overpriced but data for 2006-07 are incomplete
and cannot provide the basis for a credible analysis.

http://www.sonecon.com/docs/studies/RoleofPEinUSCapitalMarkets-FINAL.pdf

CFMA was again written and passed by a republican congress, Clinton was lame duck president who signed it. Not saying he is not to blame, just pointing out that "deregulation" is part of the right wing agenda.

Have to disagree with your disagreement

http://www.bloomberg.com/news/2012-06-13/private-equity-has-too-much-money-to-spend-on-homes-mortgages.html

If you look at some of the names on the list in this article, some of them are same players who sold CDOs during the boom and are now buying tens of thousands of foreclosed homes.

As far as Clinton, it was his treasury secretary (Rubin) who convinced Clinton against regulation.

I don't know which firms listed here wer responsible for selling CDOs, I have no doubt they are buying homes now. I just dont see them as main culprits of the meltdown. We can agree to disagree.
For me the following are the main reasons for the meltdown-

1. Subprime loans - 80% of which were originated by non bank lenders and small banks outside the purview of the minorities related law from 1973. - this was greed's finest hour
2. Faliure of the FED to step in and keep the housing bubble from going out of control and their wilful denial of the problem in the deregulated swaps markets and worst of all Greenspan's move to start the repeal process of the Glass Steagall act in 1990
3. Failure of ratings agencies like Moody's, S&P and Fitch - they were in a wink wink arrangment with the banks to relabel junk mortgages as "AAA" rated which allowed te entire new cottage industry in CDOs and MBS' to develop.
4. Complete lack of any type of regulation of Credit Default Swaps and other derivatives
5. Repeal of GSA - allowing Retail Banks to firts act like and then merge with Investment banks - allowing them access to huge pools of savings money for speculative investments

Might have linked the wrong article loweyecue, here are some more

http://www.motherjones.com/politics/2012/05/carrington-hedge-fund-foreclosure-rental

Back before the housing bubble burst, sending America's economy into a tailspin, hedge fund manager and former CitiGroup banker Bruce Rose was marketing himself as the guy who single-handedly invented subprime mortgage-backed securities. Indeed, Carrington Investment Partners, part of a cluster of related companies founded by Rose, competed with the big investment banks to package and sell mortgage debt to investors. Now Rose and his companies are positioning themselves to feed off the tail end of the meltdown their business practices helped create, joining a foreclosure-to-rental trend that some experts say could hurt homeowners even more.

Earlier this year, Carrington announced a partnership with another hedge fund to buy nearly half a billion dollars worth of foreclosed single-family homes and convert them into rental properties.

He was with Goldman but its another example of someone who helped cause the crisis and is now profiting from it.

http://mobile.reuters.com/article/idUSBRE86I1AJ20120719?irpc=932

Former Goldman Sachs Group Inc. (>> Goldman Sachs Group, Inc.) executive Donald Mullen, one of the architects of the subprime mortgage trade, is trying to raise at least $500 million for a fund that will buy foreclosed homes with an eye toward renting them out.

Mullen, who until January was head of the credit and mortgage business inside Goldman's securities division, began marketing his Fundamental REO Access fund in earnest about a month ago, said seven people familiar with the matter, but who did not want to be identified because they do not work for the upstart fund.

Its my understanding that it was Lehman's exposure in CDSs which triggered its collapse and the meltdown, should have pointed those out as well. We might disagree about which of those factors was more important. Its kind of a chicken and egg situation, but you have nailed the causes, even if we might have different opinions on which one was more important in triggering the meltdown.

http://www.cepr.net/documents/publications/private-equity-2012-02.pdf

Now, that doesn't mean a handful of people in the banks later went on to pvt equity to feed on the shadow inventory of foreclosures created by the meltdown. My argument was based around the "model" of operations of a Pvt equity firm which is focused strictly on LBOs.

http://www.americanbanker.com/issues/176_38/carrington-dual-role-servicer-investor-1033417-1.html

Carrington Capital Management, a former subprime securitization specialist, salvaged an impressive amount of money from its low-ranked residential mortgage-backed securities, thanks to the unusual strategies of its servicing affiliate.

mrKnickShot wrote:

loweyecue wrote:Knickshot - thanks for the video link. Have you watched the movie "Too Big To Fail"? It's also pretty well done. http://www.hbo.com/movies/too-big-to-fail/index.html

There's a few things about the mortgage crisis and bailout people either lose track of or don't understand:

- The three idots act (Gramm-Leitch=Bliely)repealed Glass-Steagall Act of 1933, Clinton of all people signed that into Law - It was pushed by Republicans in both chambers and had some Democrat support as well in the house, senate democrats tried to block it and warned against bailouts and TBTF - Looong before those things actually happened
- This resulted in DEREGULATION which allowed the banks to go hog-wild in the derivatives market with MBSs, CDSs, and gawd knows what else - Result subprime crisis
- The CRA of 1977 had little or nothing to do with the crisis - 50% of subprime loans were made by non bank lenders, and additional 30% by smaller banks niether of which were even remotely affected by the CRA
- Even with a partial run on banks a lot of Money Market funds had "broken the buck" - letting that continue would have been disastrous and led to total panic
- Without the bailout the system would have completely collapsed - Total complete utter meltdown
- The bailout WORKED - it acheived it's primary objective - Saving us from unmitigated disaster
- The Banks didn't want the money - some them were strong armed by Paulson & Co into taking the bailout
- The governmnet didn't throw away money - they got it back and actually made money
- Paulson FAILED to put restrictions on how the money could be used - THIS WAS THE BIGGEST ISSUE WITH THE BAILOUT
- The banks took the money, wrote off toxic assets at cents on he dollar, then bought them back at much lower price and repackaged and SOLD THEM AGAIN - Banks made a TON of money from the bailout
- Other banks bought treasuries which still paid higher interest rates with the money, and they just ate the margin
- The bailout money was SUPPOSED to have been put back into the economy by the banks to promote job growth instead they sat on it and used it to trade in the same assets multiple times to make even more money for themselves - This was made possible Paulson's shortsightedness - RESULT - NO JOB GROWTH

It is not a function of how much money was thrown into the bailout, the jobs creation didn't happen because of how it was handed over with no constraints or restrictions

Loweyecue, I finally got around to watch Too Big To Fail as well as brush up my knowledge of the GSA. I see the connection to GSA as you had mentioned. It is quite scary and I must admit that I agree with your take on GSA and how it relates to the Too Big Too Fail Paradigm.

The problem is that being that there is no way to dismantle/demonopolize these institutions, we are inevitably screwed. The government at some point will decide/vote against a bailout and an that institution can cripple the economy.

Are there any proposed solutions to dismantle these Too Big to Fails? I don't think there is a viable plan.

Some senators/congressmen have suggested re-instating GSA or some version of it that still separates the retail from investment sides. But the banking cartel with their puppets in Congrees and the Fed will fight tooth and nail to oppose it. If Romney gets elected we will see even more deregulation which will make the situation even worse.

For me a good starting point would be regulating the derivatives markets and putting restrictions on any money that is FDIC insured so they can't use it for speculative investments. That way we are not on the hook for the downside risk while the CEOs line their pockets at our expense.

Similar regulation of LBOs were also proposed. But don't think those went anywhere either. If you want to learn about those watch "Barbarians at the gate".

During a private reception with wealthy donors this year, Mitt Romney described almost half of Americans as “people who pay no income tax” and are “dependent upon government.” Those voters, he said, would probably support President Obama because they believe they are “victims” who are “entitled to health care, to food, to housing, to you name it.”

Bonn1997 wrote:

holfresh wrote:Romney stepped in it yet again...

http://thecaucus.blogs.nytimes.com/2012/09/17/romney-faults-those-dependent-on-government/?hp

During a private reception with wealthy donors this year, Mitt Romney described almost half of Americans as “people who pay no income tax” and are “dependent upon government.” Those voters, he said, would probably support President Obama because they believe they are “victims” who are “entitled to health care, to food, to housing, to you name it.”

He can't open his mouth without putting his foot in it.

And that's not all...The guy who hosted/sponsored this event that Romney made this particular statement had a much publicized sex party in The Hamptons this past summer...Wait til the values base get wind of this...This is sure to get some air play the rest of the week...It's only Tuesday...

arkrud wrote:

holfresh wrote:Romney's father was born in Mexico..There is another video of Romney saying he would have had a better chance to win if his father was born to Mexican parents...

It is troubling that people tend to wote based of race/nation not based on the professional qualities of the candidate.
We all are Americans... I hope. So the nation and race of the President should be irrelevant.

holfresh wrote:

SupremeCommander wrote:the only thing I think both sides can agree on is that Ben Bernanke is a friggin idiot

Why is Bernanke an idiot??...And what democrats think he is an idiot?

I hope you're a joking... but his unprecedented quantitative easing program, which amounts to currency devaluation, and a regressive socioeconomic policy

SupremeCommander wrote:

holfresh wrote:

SupremeCommander wrote:the only thing I think both sides can agree on is that Ben Bernanke is a friggin idiot

Why is Bernanke an idiot??...And what democrats think he is an idiot?

I hope you're a joking... but his unprecedented quantitative easing program, which amounts to currency devaluation, and a regressive socioeconomic policy

U do know this guy is most responsible for saving the world from a global depression more than any other single individual...He made calls on the economy when everyone else was thought the U.S. was turning the corner...Why do u care about currency devaluation??...U buying a BMW??..Inflation is low and the Euro is trading at 1.3000..It helps our Companies be competitive overseas...Have u seen earnings the last 4 quarters???...Republicans are pissed because he is not allowing the economy to actually collapse so it would have a politically adverse affect on the President...The guy has done a yeoman's job is directing monetary policy through these difficult times...