Where is the US economy headed?

@okie,

What has plumbing have to do with this topic?

0 Replies

@okie,

okie wrote:

Cycloptichorn wrote:

I don't ask anyone's opinion when I need knowledge about something. I look for facts and make my own decisions about what is right or wrong. You should try it.

Cycloptichorn

Interesting. So if you need to know something about how to plumb a new bathroom you may want built, you go to the library or internet or somewhere and try to figure it out yourself? You don't ask a friend that is a plumber or the plumbing inspector in your area for example?

Sometimes I'll ask an expert, but I'll ask for them to explain the steps for me - not simply tell me what they believe is the answer. This is essentially asking them for facts, which you then use to make a decision.

If I have a problem with my plumbing (or engine or whatever) I ask the repairman to explain to me what is wrong, in detail, and then either tell me how I can fix it or how they are going to fix it. I don't simply take their opinion for it generally and trust that it is a good one. That leads to getting screwed by plumbers.

Quote:

You certainly go about a subject different than I do. If I know anyone that has what I believe is great expertise or experience in regard to an issue or subject that I might encounter on this forum, I am going to ask them about it and at least have their opinions thrown into the hopper or mix of what I might be able to learn in regard to the issue or subject. After all, people with experience in an industry lived the issue, perhaps for many years, they didn't simply form an opinion as a political hack or observer.

Oh really? How do you know that's true?

Someone who runs a community bank probably has very little real experience with what went wrong with our economy. It's like asking a Private how the Army should be ran - every asshole's got an opinion, but that's not how we formulate policy or figure out what is really going on.

I want to remind you that I'm still waiting for you to tell me what, specifically, you would have changed in 2006 to prevent the financial crisis, and what that has to do with Fannie and Freddie.

Cycloptichorn

2 Replies

@Cycloptichorn,

Cyclops, face it, none of us know whether some of the stuff given us is absolutely true when we first obtain it, I find myself sorting and resorting, evaluating and re-evaluating the information and my opinions on a continuous basis. However, if the source of the information is credible, it helps a whole lot. That is why for example I never took a guy like Dan Rather very serious at all, and that goes for many others out there now.

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@Cycloptichorn,

Cycloptichorn wrote:

I want to remind you that I'm still waiting for you to tell me what, specifically, you would have changed in 2006 to prevent the financial crisis, and what that has to do with Fannie and Freddie.

Cycloptichorn

I already answered your question, cyclops, essentially saying the financial crisis might not have been averted, but at least a recognition of the problem and some greater call to account the corruption in Fannie and Freddie and more regulation of Fannie and Freddie might have softened the blow. Read it.
http://able2know.org/topic/47327-561#post-4319309

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@okie,

Your answer is not an answer. "Recognition and a greater call to account" doesn't mean anything. "More regulation of Fannie and Freddie" is also no answer. How would you implement "more regulation on Fannie and Freddie?"

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@okie,

okie wrote:

Cycloptichorn wrote:
I want to remind you that I'm still waiting for you to tell me what, specifically, you would have changed in 2006 to prevent the financial crisis, and what that has to do with Fannie and Freddie.

Cycloptichorn

I already answered your question, cyclops, essentially saying the financial crisis might not have been averted, but at least a recognition of the problem and some greater call to account the corruption in Fannie and Freddie and more regulation of Fannie and Freddie might have softened the blow. Read it.
http://able2know.org/topic/47327-561#post-4319309

What 'more regulation' of Fannie and Freddie? That is the part that I am asking you to elucidate. Specifically. In what ways would have greater regulation softened the blow?

See, this is where I think you don't understand what's going on. Y0u have a proposed solution but no idea how that solution would have actually helped. That's not a solution at all.

Cycloptichorn

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

What 'more regulation' of Fannie and Freddie? That is the part that I am asking you to elucidate. Specifically. In what ways would have greater regulation softened the blow?

See, this is where I think you don't understand what's going on. Y0u have a proposed solution but no idea how that solution would have actually helped. That's not a solution at all.

Cycloptichorn

I have already expressed the opinion that the problem had already most likely gone too far to avert a disaster. However, the corruption and cooking of books should have been corrected at Fannie and Freddie and the offenders should have been punished for fraud. That alone would have helped restore some public confidence that the government was policing its own agencies. Also, I don't know if they were still guaranteeing or purchasing bundles of loans, but if so, there should have been greater scrutiny and demand for higher standards for how sound those bundles of loans were. That would have served notice to all the others in the banking industry buying and selling these bundles that at least the feds were tightening the standards for loans, and thus there might have been more hesitance to deal in bundles of loans that were not meeting the standards.

As I've already said, I think it was probably already too late to avert the problem, but at least the recognition of a problem would not have hurt, and it might have helped reduce the damage or extent of financial meltdown. If you have a flat tire, and have already gone maybe a mile or two with the tread starting to separate, do you speed up and keep driving 65 mph, or do you recognize the fact that the tire is beginning to come apart and begin to slow down? The Repubs wanted to slow down, but the Dems wanted to go even faster. The time to avert the problem would have been to have all good tires before starting the trip, but to claim there is no problem when it occurs is frankly silly, cyclops. It is actually more than silly, it borders on criminal.

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@okie,

Quote:

However, the corruption and cooking of books should have been corrected at Fannie and Freddie and the offenders should have been punished for fraud. That alone would have helped restore some public confidence that the government was policing its own agencies

You will recall that at the time the Government was swearing up and down that F&F were not part of the government, that they were private. No one believed them, and of course eventually the government had to call uncle and admit the truth. It is kind of hard to believe a government that will straight up lie, don't you think?

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@okie,

okie wrote:

Cycloptichorn wrote:

What 'more regulation' of Fannie and Freddie? That is the part that I am asking you to elucidate. Specifically. In what ways would have greater regulation softened the blow?

See, this is where I think you don't understand what's going on. Y0u have a proposed solution but no idea how that solution would have actually helped. That's not a solution at all.

Cycloptichorn

I have already expressed the opinion that the problem had already most likely gone too far to avert a disaster. However, the corruption and cooking of books should have been corrected at Fannie and Freddie and the offenders should have been punished for fraud. That alone would have helped restore some public confidence that the government was policing its own agencies. Also, I don't know if they were still guaranteeing or purchasing bundles of loans, but if so, there should have been greater scrutiny and demand for higher standards for how sound those bundles of loans were. That would have served notice to all the others in the banking industry buying and selling these bundles that at least the feds were tightening the standards for loans, and thus there might have been more hesitance to deal in bundles of loans that were not meeting the standards.

As I've already said, I think it was probably already too late to avert the problem, but at least the recognition of a problem would not have hurt, and it might have helped reduce the damage or extent of financial meltdown. If you have a flat tire, and have already gone maybe a mile or two with the tread starting to separate, do you speed up and keep driving 65 mph, or do you recognize the fact that the tire is beginning to come apart and begin to slow down? The Repubs wanted to slow down, but the Dems wanted to go even faster. The time to avert the problem would have been to have all good tires before starting the trip, but to claim there is no problem when it occurs is frankly silly, cyclops. It is actually more than silly, it borders on criminal.

You are twisting yourself in knots in order to avoid the conclusion that the REAL problem here had nothing to do with Fannie and Freddie, and everything to do with the unregulated Credit Default Swap market and corporate greed. Each analogy you present is worse than the last, because - while constantly bitching about one part of the problem (Fannie) you totally ignore the thing which spread that problem to our financial system.

Are you prepared to admit that without the Credit Default Swap, there would have been no collapse of our trading houses and many of our banks? And that GREATER regulation by the Government would have averted the crisis? No matter what was done with Fannie and Freddie, this is the truth, and it was the ONLY thing that would have kept the crisis at bay.

Cycloptichorn

2 Replies

@Cycloptichorn,

Quote:

You are twisting yourself in knots in order to avoid the conclusion that the REAL problem here had nothing to do with Fannie and Freddie, and everything to do with the unregulated Credit Default Swap market and corporate greed

Bullshit, the root of the problem was people buying homes they could not afford, which happened because the government was pushing home ownership and encouraged fraud and mad business practices to get there. F&F greatly contributed to the problem by buying undocumented and fraudulent mortgages, adding to the market for retailers who churned bad mortgages because they were not on the hook for any of it.

Quote:

And that GREATER regulation by the Government would have averted the crisis?

The Government not stopping a select group of State AG's who figured out the problem about 5 years before the crash would have saved us a lot a problems. The Feds not doing their jobs was bad enough, by they compounded the sin by shielding the bad practices from states who wanted to end it.

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@hawkeye10,

hawkeye10 wrote:

Quote:

You are twisting yourself in knots in order to avoid the conclusion that the REAL problem here had nothing to do with Fannie and Freddie, and everything to do with the unregulated Credit Default Swap market and corporate greed
Bullshit, the root of the problem was people buying homes they could not afford

Nope. This did not cause the financial crisis in the slightest. You, like Okie, don't know what you are talking about. 100% incorrect.

Home prices rise and fall, that's part of the cyclical nature of the market. It's normal and somewhat predictable. But, Hawk: how did our financial institutions and trading houses become so heavily invested in mortgages? How did they come to make so many poor investments? Answer that question, and you will see the key to the crisis.

Cycloptichorn

1 Reply

@Cycloptichorn,

Quote:

Home prices rise and fall, that's part of the cyclical nature of the market. It's normal and somewhat predictable. But, Hawk: how did our financial institutions and trading houses become so heavily invested in mortgages? How did they come to make so many poor investments? Answer that question, and you will see the key to the crisis

the over blown derivative market would have caused a crash at some point no mater what, but without F&F and the government being party to bad mortgage practices it would not have been the housing market that caused it, nor would the housing price bubble ever gotten anywhere near as bad as it did.

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@Cycloptichorn,

Ctycloptichorn wrote:

You are twisting yourself in knots in order to avoid the conclusion that the REAL problem here had nothing to do with Fannie and Freddie, and everything to do with the unregulated Credit Default Swap market and corporate greed. Each analogy you present is worse than the last, because - while constantly bitching about one part of the problem (Fannie) you totally ignore the thing which spread that problem to our financial system.

Are you prepared to admit that without the Credit Default Swap, there would have been no collapse of our trading houses and many of our banks? And that GREATER regulation by the Government would have averted the crisis? No matter what was done with Fannie and Freddie, this is the truth, and it was the ONLY thing that would have kept the crisis at bay.

The Credit Default Swap was nurtured, backed, practiced, and financed by Fan&Fred. If Fan&Fred had been terminated in 2007, or at least curtailed then, the Credit Default Swap would have been terminated or at least curtailed then.

2 Replies

@ican711nm,

You continue to ignore that GWB used Home Ownership to cover up for his ill-fated Gulf War's cost of $4 billion a month. It was under his watch that all the financial meltdown occured just as with Hoover in 1929. Republicans are reckless.

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@ican711nm,

ican711nm wrote:

Ctycloptichorn wrote:
You are twisting yourself in knots in order to avoid the conclusion that the REAL problem here had nothing to do with Fannie and Freddie, and everything to do with the unregulated Credit Default Swap market and corporate greed. Each analogy you present is worse than the last, because - while constantly bitching about one part of the problem (Fannie) you totally ignore the thing which spread that problem to our financial system.

Are you prepared to admit that without the Credit Default Swap, there would have been no collapse of our trading houses and many of our banks? And that GREATER regulation by the Government would have averted the crisis? No matter what was done with Fannie and Freddie, this is the truth, and it was the ONLY thing that would have kept the crisis at bay.

The Credit Default Swap was nurtured, backed, practiced, and financed by Fan&Fred. If Fan&Fred had been terminated in 2007, or at least curtailed then, the Credit Default Swap would have been terminated or at least curtailed then.

My god. This is one of the dumbest things I've ever seen. You truly don't have the slightest clue what a Credit Default Swap even IS, who issued them, or why; do you?

I'll give you a clue: the statement you made above was 100% incorrect, again. Fannie and Freddie had nothing at all to do with the Credit Default Swap market. Instead, take a look at a little company called... AIG.

Cycloptichorn

0 Replies

Good evening. The debate here lately has been about assigning blame for our economic turmoil, particularly with regards to the home mortgage industry. Fine. Decisions made 2 or 10 or 20 years ago. Bicker on about that all you want.
The conference Obama has convened looks towards reforms in the future. Cyclops has asked for ideas. Here are a few of mine.
1) Should the notion of home ownership remain a national goal? Politicians, of course, say yes. Many economists and most social scientists probably agree. I am not as convinced. I have written about that but I realize I am in the small minority.
2) Does there need to be some entity, like Freddie/Fannie, that bundle mortgages and sells them to private investors? Yes.
3) Should the government, as it did with Freddie/Fannie, implicitly guarantee those loans? If you believe in (1), then yes. Probably. I don't think investors would buy those bundles otherwise.
But, what could the government do to minimize exposure?
4) Should home buyers who put down less then, say, 20% be required to buy default insurance ? That is, I believe, the Canadian system. You have to have "skin in the game." Putting down 5% is not enough. Without the insurance the originating bank could not sell the loan into the federally guaranteed system.
5) Should home appraisals be based on comparable sales in the neighborhood? Probably not. Certainly not when houses were being flipped at ever increasing values during the bubble and probably not during the collapse. Replacement value amongst other metrics would be more appropriate.

I have no problem with a bank deciding who to give a loan to. I have an employee who bought a townhouse with his lady. The community bank gave him a good loan based not so much on his income, but on his history of good credit, a steady job and his family's long ties here. Could that bank sell that loan to Fannie/Freddie or whatever the successor to those might be? I don't know. Maybe they could with the insurance.

So that is where I am starting from in a discussion of how to reform the system.

Onward and upward.

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@realjohnboy,

rjb, There used to be rules in place for people to be able to buy a home; it started with sufficient income to buy the place, and the majority purchases required some reasonable minimum down payment. ..

When those "rules" were ignored, it created the foundation for everything that happened after those loans were made to unqualified buyers.

We really don't need government regulation so much as to follow the fundamental economic baseline of who should be able to buy a home.

That's where I'm starting from.

1 Reply

@cicerone imposter,

I think I disagree, Tak. If my community bank wants to make a mortgage loan to Andy based on whatever criteria they want to use (income, down payment, credit history, family ties or clean teeth), that is their call.
But, if they want F/F to buy that loan, it must meet certain standards set by the government.

1 Reply

@realjohnboy,

I just hope your bank doesn't have any of my money. Is your bank called "Free Bank?"

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I have been wondering about the percentage of home loans owned or guaranteed by Fannie and Freddie, and it seems like a difficult number for me to find. Some months ago, I thought I found a number something like 40% of all home loans, or trillions. If the following link is anywhere close to accurate, the problem is much much worse than even I suspected or thought. If the link is true, Fannie and Freddie have bought or guarantee 3/4 of the entire total of home loans in the U.S. Could that be true? Perhaps the 3/4 applied to only last year? Regardless, it looks increasingly like the blame is inescapable, cyclops and other libs here, it falls directly into the lap of the GSE's. And as I have already said, the problem may not be in the range of hundreds of billions, but a trillion or trillions. Libs, it is your little darling, your federal government, that is responsible for this. This is criminal, and the least we should do is throw the criminals that cooked the books of these GSE's in jail, people like Obama friend and confidante, Franklin Raines, that raided his company for 90 million while he was cooking the books. All of that while folks like Maxine Waters and Barney Frank claimed they were doing a great job.
Folks, it is an insult to intelligent Americans.

http://www.bloomberg.com/news/2010-06-13/fannie-freddie-fix-expands-to-160-billion-with-worst-case-at-1-trillion.html

"The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.
"

1 Reply

Where is the US economy headed?

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