The Real Culprits In This Meltdown, no McCain aides listed...

@McGentrix,

McGentrix wrote:

Sub-prime borrower defaults on loan because he should never have been given a loan but because the liberals decided that wasn't politically correct they forced lending institutions to make sub-prime loans.

Well, I have to admit you lost me here. Nobody was forced to make subprime loans. They made them because they are wildly profitable for banks and institutions, and they could make their profit and then pass the risks on to other, bigger institutions. The government does not require that mortgage lenders make zero down, or low/no doc loans, or 1 year ARMs. (I might add that the government does not ask banks to use predatory and deceptive practices to get people to borrow more than they can afford.) Nobody forced these lenders to make high risk, bad decisions. They did it because it increased their bottom lines and they had no direct accountability. Homeowners gambled on the values of their own homes, these lenders and institutions gambled on the values of everyone's homes and on the ability of the borrowers to pay. Then they upped the ante by gambling on the credibility and honesty of the people packaging and reselling these loans. The homeowners lost their gamble and nobody is expecting the federal government to bail them out.

3 Replies

@McGentrix,

McGentrix wrote:

Cycloptichorn wrote:

Wow, good thing I had you around to explain the basics of the subprime mortgage market, McG; I've only been discussing it here and elsewhere for two years now, long before any of you Republicans thought it would be a problem at all. What a stroke of luck on my part, that someone could explain the perfectly obvious.

I guess it is a good thing because you obviously have no idea what you are talking about or are completely unable to read anything I have posted.

Quote:
Quote:

Who really gives a **** what banks and mortgage resellers did with the mortgage after it was made

America gives a ****, because this is why we are having the problems now, ya maroon. You truly don't understand what is going on, do you?

If the rules were still intact preventing the bundling of sub-prime mortgages into securities - thanks Phil Gramm! Good work! - then the losses from sub-prime mortgages would be limited to those businesses who typically deal with mortgages. Instead, a financial shell game was created out of them, and ALL the banks and trading houses got into it. 'what was done after the mortgage was made' is what has lead to our financial crisis. The actual failing mortgages themselves are a pittance compared to the liquidity problems that are facing our markets today. How can you not understand this basic point, McG?

Cycloptichorn

Ok, let me make this simpler for you...

Sub-prime loan is made to sub-prime buyer. (Still with me here? Am I going too fast?)
Sub-prime buyer promises to repay lender.
Lender sells sub-prime mortgage to larger company based on promise from sub-prime buyer.
Larger company collects lots of sub-prime loans from various sources and uses the promises from sub-prime buyers as liquidity. (Have I lost you? Still with me?)
Sub-prime borrower defaults on loan because he should never have been given a loan but because the liberals decided that wasn't politically correct they forced lending institutions to make sub-prime loans.
Now large institution has a piece of paper with no promise behind it but the debt remains and must be repaid.
Large institution goes belly up because they can't afford empty promises...

and you blame this on de-regulation of the finance community and Phil Gramm? Last I knew, he hadn't defaulted on his mortgage.

At least have the integrity to place the blame where it belongs instead of the political hackery that you are attempting now. Oh, wait, you're a liberal. Integrity means nothing more to you then a punchline.

McG, you are either a f*cking moron, or just pretending to be one.

Quote:

Lender sells sub-prime mortgage to larger company based on promise from sub-prime buyer.
Larger company collects lots of sub-prime loans from various sources and uses the promises from sub-prime buyers as liquidity. (Have I lost you? Still with me?)

That part used to be illegal until Phil Gramm got the rules changed in '95 and '99. That's how the losses in the mortgage market spread to businesses which had nothing to do with the mortgage market at all.

If those rules hadn't been changed, the credit-swap market never would have existed at the level it currently does/did - I bet you don't even have a clue what that is, btw - and we would not see our financial services industry exposed to the massive over-leveraging that we see today.

This isn't the first time we've had a housing market bust in American history; in fact, we have one every decade or so. But this is the first time that the housing bust has dragged down our financial sector with it. Why this time, and not before? Because the laws allowing re-packaged mortgages to be sold as securities are different now, and everyone got a piece of the action while they could. That's 'stuff that happens after the mortgage was made.' That's the important part, and yes, Gramm was a huge part in making that happen.

You fundamentally don't understand what the problem was here, if you blame the failed mortgages. The total value of the mortgages that have failed is way, way, way less than the impact on the financial market; how exactly do you explain that, McG?

Cycloptichorn

1 Reply

@FreeDuck,

"Accountability and Oversight" were missing, and now McG wants to blame the people who bought homes they couldn't afford. Funny and ironic at the same time; typical republican mind-set; blame everybody but the people fundamentally responsible.

They're still blaming Clinton for almost everything - after almost eight years of Bush at the helm.

1 Reply

@cicerone imposter,

Of course it is the people who bought homes they couldn't afford.

And you have conveniently used the word "homes" in your usual "milk the udder of human kindness" style, which is, incidently, getting a trifle wearisome in view of your lifestyle, in preference to the more accurate phrase which is "speculation using borrowed money to get rich quick in a rising market." In bigger and better houses.

And also, of course, for eagerly, hysterically this time, voting for politicians who would encourage them to do so and provide the means.

What they should do now is vote for inflation policies. 2,000% inflation would soon see the debt repaid.

In other words if you had money you got screwed and if you hadn't any your on the right side. As long as you have the inflation I mean.

$700 billion is the price of a loaf after a few years at 2,000%.

15% is more orderly though. It's either that or cutting public spending or raising taxes.

1 Reply

@FreeDuck,

FreeDuck wrote:

Well, I have to admit you lost me here. Nobody was forced to make subprime loans. They made them because they are wildly profitable for banks and institutions, and they could make their profit and then pass the risks on to other, bigger institutions. The government does not require that mortgage lenders make zero down, or low/no doc loans, or 1 year ARMs. (I might add that the government does not ask banks to use predatory and deceptive practices to get people to borrow more than they can afford.) Nobody forced these lenders to make high risk, bad decisions. They did it because it increased their bottom lines and they had no direct accountability. Homeowners gambled on the values of their own homes, these lenders and institutions gambled on the values of everyone's homes and on the ability of the borrowers to pay. Then they upped the ante by gambling on the credibility and honesty of the people packaging and reselling these loans. The homeowners lost their gamble and nobody is expecting the federal government to bail them out.

No, the CRA basically forced the creating and widespread distribution of sub-prime loans. The passing on to other financial institutions has no real bearing on the meltdown other then the fact the people investing in them made a bad decision.

You're right though that a lot of the predatory loans were bad and those companies making them should be punished... but that doesn't leave the borrower free from blame. I think we both are in agreement on that.

But, the main culprit here is the fact that the CRA made sub-prime loans available and basically forced upon lending instituions and that borrowers have defaulted on the loans. Not that other companies purchased the loans and lost as Cyc wants us to believe.

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@McGentrix,

No, the borrower is not free from blame, but you must understand that the lenders knew what they were doing, while the borrowers didn't. That's called unethical and fraud in "many" circles.

1 Reply

Community Activist that pressured banks to make a certain % of loans to under qualified individuals is at the very root of this meltdown.

1 Reply

@H2O MAN,

Not...

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

McG, you are either a f*cking moron, or just pretending to be one.

Quote:

Lender sells sub-prime mortgage to larger company based on promise from sub-prime buyer.
Larger company collects lots of sub-prime loans from various sources and uses the promises from sub-prime buyers as liquidity. (Have I lost you? Still with me?)

That part used to be illegal until Phil Gramm got the rules changed in '95 and '99. That's how the losses in the mortgage market spread to businesses which had nothing to do with the mortgage market at all.

If those rules hadn't been changed, the credit-swap market never would have existed at the level it currently does/did - I bet you don't even have a clue what that is, btw - and we would not see our financial services industry exposed to the massive over-leveraging that we see today.

This isn't the first time we've had a housing market bust in American history; in fact, we have one every decade or so. But this is the first time that the housing bust has dragged down our financial sector with it. Why this time, and not before? Because the laws allowing re-packaged mortgages to be sold as securities are different now, and everyone got a piece of the action while they could. That's 'stuff that happens after the mortgage was made.' That's the important part, and yes, Gramm was a huge part in making that happen.

You fundamentally don't understand what the problem was here, if you blame the failed mortgages. The total value of the mortgages that have failed is way, way, way less than the impact on the financial market; how exactly do you explain that, McG?

Cycloptichorn

Let me ask you a question in return as you still can't seem to grasp the issue here...

If the mortgages had not been defaulted, would we be in the mess we are in?

If the mortgages were being paid, what difference would it make who holds the mortgage? The borrower would be paying whomever held the mortgage whether it was their local bank or a worldwide conglomeration.

You want to blame everyone but the people responsible for the mess, typical liberal dogma. It's never the individual, it's always the government or business at fault.

1 Reply

@McGentrix,

McGentrix wrote:

No, the CRA basically forced the creating and widespread distribution of sub-prime loans.

I haven't seen that conclusively shown. I have seen it speculated, but no real evidence that it is true.

Quote:

You're right though that a lot of the predatory loans were bad and those companies making them should be punished... but that doesn't leave the borrower free from blame. I think we both are in agreement on that.

Sure. And when you say borrower, you also mean institutions who borrowed money using IOUs as collateral, right? That's the part Cyc is talking about.

Quote:

But, the main culprit here is the fact that the CRA made sub-prime loans available and basically forced upon lending instituions and that borrowers have defaulted on the loans.

Again, I don't think this is proven at all. These loans were made because they were profitable, not because the government mandated them. And most were not made to the people that the CRA was designed to help.

Quote:

Not that other companies purchased the loans and lost as Cyc wants us to believe.

You are missing a very important ingredient when you dismiss out of hand the repackaging and use as collateral of these bad loans. When I make a loan to someone who can't pay it back, I am assuming the risk of my decision. But when I sell that loan to another party, they are assuming the risk of my bad decision, and I am probably not disclosing just how bad my decision is. The more removed the person holding the debt is from the person making the loan, the less accountability there is for the risk. These institutions assumed great risk for great profit. Now it is time to pay the piper. Blaming the CRA for it is, well, kind of pathetic.

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@Rockhead,

Rockhead, H2O is not worth the read or response; he's an ignore for me.

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@cicerone imposter,

He's REAL close to being my first...

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@spendius,

I have an even better description of the cunning involved but I'll admit it is a bit speculative. It makes an assumption regarding the exponential growth of cunning in Faustian man which, on the principle of synergy in knowledge, is, or ought to be, keeping pace with science generally.

And the CERN project in Geneva gives you a faint notion where science is up to. My speculation, simple as it is, would require cunning of that sort of order to carry through.

It seems rather odd after Mr Galbraith explained how it happened in '29 that it should happen again. One might have thought that majoring in politics and economics would have familiarised everyone with the principles involved during the early part of the first semester. It was once done with Dutch tulips.

What we are dealing with here is a sort of grown-up version of the little girl who when she had opened her fiftieth and last present on her birfday started bawling because there weren't anymore. Calming her down is the only thing to try short of telling her to shift for herself which is not a policy either presidential candidate is proclaiming.

I think you have to be smarter than the average bear to be put in charge of 300,000,000 of the buggers. More cunning. Yogi was pretty cunning. You can't afford to think you have a pile toy soldiers in a toy fort on your plate.

But the real culprits are the voters. They shouldn't submit the hopefuls to the most fiendish test of cunning ever devised by man. As the next one will be in its turn.

They should write in "Bob Dylan".

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@FreeDuck,

Freeduck wrote-

Quote:

(I might add that the government does not ask banks to use predatory and deceptive practices to get people to borrow more than they can afford.)

It has no need to ask. It knows that if it doesn't specifically forbid, like it did with insider trading hohoho, the banks will not only do just that but eagerly and with unbounded enthusiasm.

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@cicerone imposter,

c.i. wrote-

Quote:

No, the borrower is not free from blame, but you must understand that the lenders knew what they were doing, while the borrowers didn't. That's called unethical and fraud in "many" circles.

Is it ethical to fly around the world on a whim constantly spewing out shite over whatever is down below? And boasting about it too. Making out it's clever.

It's more ethical boasting about wanking. Diogenes did that.

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The Rest of the Meltdown Story

1 Reply

@McGentrix,

Mcg, the housing market operates under very well-understood cycles of boom and bust. There literally exists no period in history in which there were not rises and falls in the market.

Eventually, we were going to reach a point where the market would have a significant amount of defaults on mortgages regardless of whether or not we had sub-prime lending. This is a fact.

Building a business model - the trading of mortgages as securities - which relies upon the continual rise of value in homes, and the continued rate of low defaults on mortgages, was foolish; yet that's exactly what they did. Nothing unusual happened in this housing cycle, though it was more pronounced then in the past. What was unusual was that the mortgages that started to go bad were owned by everyone in the market, and not just the traditional mortgage holding banks and companies.

Let's say a scheme was devised, where a financial product was created based upon the stocks of several companies and a bunch of leverage. As long as those companies kept going up in value, the product was in great shape; and for several years that's exactly what happens, and it's very, very profitable, until the entire financial sector has a piece of that action. And then the companies start to falter, as the business cycle asserts itself; suddenly everyone is left holding a pile of massively over-leveraged crap, and owe much more then they have money for; and they can't find anyone who wants to BUY the crap, because nobody is looking to catch knives.

So in this instance, you would blame the companies in question for the overall market failure? Poppycock, I say! Companies go up and down; mortgages and their rates of default go up and down. Housing values go up and down. This is a fact of life.

You are ignoring the fact that the ONLY difference between this cycle and the other ones we've seen before, are the laws which allow the collateralization of mortgage debt. You are ignoring the fact that MANY if not MOST of the problem has stemmed from upper-income buyers and 'flippers,' who gambled on some very, very expensive houses and lost out big time. And it's obvious why you are doing this: because it's easier to just blame the Dems and poor folk then it is to blame the Republicans and rich white folk.

It doesn't show that you have a good understanding of the issue, though. You've latched on to the Conservative-blog 'blame Clinton!' line, as if somehow the banks were forced to re-package the mortgages as securities and sell them off to the financial sector. Please. Even if the subprime loans to poor folk were a bad idea, nobody forced the companies to put those pigs in a poke and sell them, nobody forced hedge funds and financial trading houses to leverage these products 30 to 1, nobody forced them to make such poor investment choices - but someone DID allow them to do it, and that's the Bush administration, and the laws championed by Phil Gramm.

I once again ask you: do you even know what the credit-swap market is? For if you do not, you don't understand the problem at all, and if you did, you wouldn't be going on with the foolishness that you are.

Cycloptichorn

2 Replies

@Cycloptichorn,

The blame Clinton mantra is getting tiresome when most of the evidence coming out on this sub-prime debacle shows otherwise.

1 Reply

@cicerone imposter,

The blame Clinton mantra is getting tiresome to liberals when most of the
evidence coming out on this sub-prime debacle shows Clinton is to blame.

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@H2O MAN,

I get it now, water boy.

Its all the fault of the poor and the minorities...

Get a life, and quit being afraid of real people.

Shocked

0 Replies

The Real Culprits In This Meltdown, no McCain aides listed...

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