[synaesthetic]

Quote:

Originally Posted by Agnostic /img/forum/go_quote.gif The banks will be forced to lend. One way or another.

This is what got us into this situation in the first place.

A bunch of idiots in government forced banks to loan, to people who could never pay it back.

Because they have this strange idea that owning a house should be a right.

 

[VicAjax]

Quote:

Originally Posted by synaesthetic /img/forum/go_quote.gif This is what got us into this situation in the first place. A bunch of idiots in government forced banks to loan, to people who could never pay it back. Because they have this strange idea that owning a house should be a right.

sorry, but this isn't true.

the CRA is a scapegoat. the sub-prime mortgages are almost entirely sold by banks operating outside the CRA requirements.

 

[marvin]

Quote:

Originally Posted by VicAjax /img/forum/go_quote.gif sorry, but this isn't true. the CRA is a scapegoat. the sub-prime mortgages are almost entirely sold by banks operating outside the CRA requirements.

The CRA wasn't the only instrument the government used.

 

[VicAjax]

Quote:

Originally Posted by marvin /img/forum/go_quote.gif The CRA wasn't the only instrument the government used.

what else did they use to "force" the banks to sell predatory loans to ignorant Americans and repackage the debt as investment products?

 

[synaesthetic]

I'm not saying they were innocent. A lot of them abused the distortions in the market caused by government interference, and made billions off those distortions.

Economy is a self-organizing system; if you muck about in it, all you're going to do is create problems that would otherwise not exist. And shady and unscrupulous people will find ways to exploit these distortions, forcing you to regulate further, creating more and more distortions, requiring further regulation. It's an unending cycle.

Total lack of involvement is the only way to do it. Deregulate, yes, but also, do not bail out. Let natural selection take its course. You can't have your cake and eat it too.


Quote:

Originally Posted by VicAjax /img/forum/go_quote.gif what else did they use to "force" the banks to sell predatory loans to ignorant Americans and repackage the debt as investment products?

I'm sorry but I can't blame people for taking advantage of another person's stupidity.

Rule number one--if you don't understand or agree with a contract, don't sign it. It's that simple.

This sense of entitlement, this lack of responsibility attributed to the consumer is something that irritates me. Why has the bar been lowered so far? Why do the hardworking people that don't overreach themselves and live outside their means get ignored, but the idiots who went out and bought a McMansion on a subprime loan with no way to pay it back get pity and sympathy?

 

[AlanY]

This problem would have occurred sooner or later even if subprime hadn't happened. Subprime and all the various politics surrounding it is a distraction from more fundamental issues.

The core issue is this: the major banks had all become leveraged like hedge funds. When you're 33x times leveraged like Bear or Lehman, a 3% loss will wipe you out.

If that loss hadn't started with real estate, it would have eventually started somewhere else. As an example, Iceland's collapse has very little to do with real estate, but they had the same problem Wall Street has... enormous leverage ratios that become ferocious on the downside.

People thought various derivative instruments would contain any damage, but it turns out that through mispricing of risk in every contract, leverage issues effectively became worse. The system developed into an inverse debt pyramid (like a Ponzi scheme). No amount of cash can reinflate a Ponzi scheme, and we're in a very similar situation.

 

[synaesthetic]

You're exactly right. The problem lies in my previous post.

You cannot create something from nothing. Years ago, Akio Morita said something to the same effect about the American economy. Our economy is a fake economy, a paper economy, where money is made by moving figures from Column A to Column B.

It just creates the illusion of profit.

In the best case scenario we would go back to being a manufacturing economy again as we once were years ago. China's embraced a manufacturing economy, and they're doing very well right now. We're not doing so hot.

 

[VicAjax]

Quote:

Originally Posted by synaesthetic /img/forum/go_quote.gif I'm not saying they were innocent. A lot of them abused the distortions in the market caused by government interference, and made billions off those distortions. Economy is a self-organizing system; if you muck about in it, all you're going to do is create problems that would otherwise not exist. And shady and unscrupulous people will find ways to exploit these distortions, forcing you to regulate further, creating more and more distortions, requiring further regulation. It's an unending cycle. Total lack of involvement is the only way to do it. Deregulate, yes, but also, do not bail out. Let natural selection take its course. You can't have your cake and eat it too.

it's very easy to say that, an entirely different prospect to do it. if i could get a mulligan, i'd be perfectly happy attempting a libertarian experiment, because it's never been put into practice anywhere, ever. but that's a dangerous game.

and even so, there must be "law" governing corporate behavior, and by definition that means "regulation," at least to the point that illegal activities are punished in accordance with said law.

then we get into the thick briars of corporate crime, which is difficult and expensive to prosecute.

corporations are by definition amoral entities; their behavior is defined almost entirely by the bottom line. crimes will be committed, individuals will be hurt, and perpetrators will rarely be punished.

so in this libertarian utopia... what does deregulation ultimately mean?

 

[VicAjax]

Quote:

Originally Posted by synaesthetic /img/forum/go_quote.gif I'm sorry but I can't blame people for taking advantage of another person's stupidity. Rule number one--if you don't understand or agree with a contract, don't sign it. It's that simple. This sense of entitlement, this lack of responsibility attributed to the consumer is something that irritates me. Why has the bar been lowered so far? Why do the hardworking people that don't overreach themselves and live outside their means get ignored, but the idiots who went out and bought a McMansion on a subprime loan with no way to pay it back get pity and sympathy?

now you're blaming the idiots who bought the mortgages... but that's not my question... i want to know how, as marvin insinuates, the government forced banks to sell these ridiculous loans.

i agree that stupid people generally hold responsibility for overextending and getting greedy and stupid with their money. but it is certainly possible to hoodwink individuals into signing shady contracts with oblique language and strong-arm tactics.

 

[VicAjax]

Quote:

Originally Posted by AlanY /img/forum/go_quote.gif This problem would have occurred sooner or later even if subprime hadn't happened. Subprime and all the various politics surrounding it is a distraction from more fundamental issues. The core issue is this: the major banks had all become leveraged like hedge funds. When you're 33x times leveraged like Bear or Lehman, a 3% loss will wipe you out. If that loss hadn't started with real estate, it would have eventually started somewhere else. As an example, Iceland's collapse has very little to do with real estate, but they had the same problem Wall Street has... enormous leverage ratios that become ferocious on the downside. People thought various derivative instruments would contain any damage, but it turns out that through mispricing of risk in every contract, leverage issues effectively became worse. The system developed into an inverse debt pyramid (like a Ponzi scheme). No amount of cash can reinflate a Ponzi scheme, and we're in a very similar situation.

absolutely. it's possible, however, that this would not have happened if banks weren't allowed to be publicly traded. the addition of shareholder pressure to show year-to-year revenue growth and push stock prices higher is a strong motivator to make riskier and riskier moves.

and if you think about it, buying stock in a publicly traded bank isn't investing... it's meta-investing. once upon a time, public companies (funded by banks) pretty much produced hard goods, whereas banks don't produce anything except (if they're lucky and good) more money.

and then, when banks start selling investment packages based on nothing more than real estate debt, you add yet another layer, and so it becomes meta-meta investing.

it's a ridiculous, unsustainable shell game.

 

[synaesthetic]

The government should only act to protect the individual rights of its citizens. If a business is engaging in practices that are in violation of these rights, then it should get involved.

It should not attempt social engineering by giving certain businesses advantages over others because it is politically or socially expedient.

The government's problem is it acts for itself more often than for its citizens. The government has no rights, it has only duties, and it is failing those duties pretty spectacularly right now.

I'm just as upset about the current "privatize profits, socialize losses" behavior as anyone, but I also don't believe we should punish success to elevate failure either. This general cloud of hatred for the rich smacks of wealth envy. "Because I'm not rich, nobody else should be either."

It's very worrisome that this sentiment is so prevalent. Not to mention businesses who are assailed by heavy-handed regulation and draconian tax law will simply pick up and relocate elsewhere, further damaging the economy.


Quote:

Originally Posted by VicAjax /img/forum/go_quote.gif absolutely. it's possible, however, that this would not have happened if banks weren't allowed to be publicly traded. the addition of shareholder pressure to show year-to-year revenue growth and push stock prices higher is a strong motivator to make riskier and riskier moves. and if you think about it, buying stock in a publicly traded bank isn't investing... it's meta-investing. once upon a time, public companies (funded by banks) pretty much produced hard goods, whereas banks don't produce anything except (if they're lucky and good) more money. and then, when banks start selling investment packages based on nothing more than real estate debt, you add yet another layer, and so it becomes meta-meta investing. it's a ridiculous, unsustainable shell game.

Precisely. Goes back to "something from nothing."

Were the government not involved, were there no humongous inflation-causing bailout, these banks would be learning the hard way. But thanks to that, they're sitting pretty and taking $500,000 vacations.

"ur doing it wrong."

Damn I need that Jean Luc-Picard headache jpeg for these banks. For reals.

 

[subtle]

Quote:

Originally Posted by Hi-Finthen /img/forum/go_quote.gif The End for American Capitalisim??? washingtonpost.com

I sure hope so.

 

[F107plus5]

oops; wrong thread!

....sorry!

 

[synaesthetic]

Quote:

Originally Posted by subtle /img/forum/go_quote.gif I sure hope so.

 

[subtle]

Quote:

Originally Posted by synaesthetic /img/forum/go_quote.gif