Capitalism

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Originally Posted by Lyle

Well the market has already lowered prices on houses, it has already weeded out most of the bad loans, people are out of their homes they couldn't afford and people are out of jobs they abused. Once there is an upturn in the economy which could be in a year, could be sooner people will be ready to buy those houses, hell people are already ready to buy those houses to sell later and make profit on.


Government will of course regulate (too late) but what it really needs is to have and use oversight which it had the opportunity to do before the shit hit the fan (with OFEO an oversight committee created to look over Freddie Mac) but certain politicians blocked the oversight of Fannie and Freddie.
http://www.youtube.com/watch?v=YL36nwCSYUM

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F anf F had nothing to do with this Lyle. They're just a cog in the system, and were actually prevented from buying the dodgy subprime stuff by government regulation. Fannie lost 56% of her business in less than two years from 2003 onwards when the GOP allowed (freshly unregulated) mortgage firms to sell mortgages direct to (freshly unregulated) investment banks and similar financial institutions. F and F are only ever mentioned because they're the only way (other than an irrelevant 30 year old Jimmy Carter Act) that the GOP can tie this to Democrats, when in fact not one of the decisions that caused the current mess was made by a Dem, all being made by Republicans.

Once Wall Street got their hands on them they turned them into securities. But these securities still shouldn't have been allowed on the market except as junk bonds. Instead Wall Street firms bribed the (freashly unregulated) credit ratings agencies to give them a high rating. I'll go and get some of the evidence that's come out of the current hearings about this. Somebody emailed it to me but I junked it. There'll be a lot of this over the next months and it might be wort starting a thread for it.

Unemployment will rise more once taxes are raised.


The free market is just going to ride it out buddy...eventually things will turn around, they always do. Government may try to expedite the process but they are spending too much money as it is. And eventually we'll all make the same mistakes all over again and by we I mean the government.

Feel free to explain your side buddy

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Originally Posted by Lyle

Unemployment will rise more once taxes are raised.


The free market is just going to ride it out buddy...eventually things will turn around, they always do. Government may try to expedite the process but they are spending too much money as it is. And eventually we'll all make the same mistakes all over again and by we I mean the government.

Feel free to explain your side buddy

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Unemployment will rise but not because taxes are going up. Again, that's just more GOP bs you've swallowed. When Clinton raised taxes on top earners and cut them for the middle class, dire predictions about the collapse of the US economy were made by the GOP. Instead the economy grew faster than under any president for decades and Clinton created 22 million jobs. Bush cut taxes, economic growth and revenues collapsed and he created four million jobs. Obama wants to return tax rates to the Clinton era.

Following on from my previous post, here's how the abandonment of regulation caused the current meltdown :


Here's an IM conversation between Rahul Dilip Shah and Shaun Mooney, a pair of analysts at the credit rating agency Standard & Poor's, chatting via IM back in 2007 about a deal involving securities that were made up of chunks of unregulated mortgage loans :

RDS: btw: that deal is ridiculous
SM: I know right ... model def does not capture half of the risk
RDS: we should not be rating it
SM: we rate every deal
SM: it could be structured by cows and we would rate it


Credit rating agencies rate the creditworthiness of bonds and various types of securities. They gave securities constructed of the very worst subprime loans a AAA rating, the same as US government bonds have. A AAA rating allows these bonds to be held as part of banks' asset bases, the capital base they must maintain to remain solvent. Great move, eh? This AAA worthless paper is now causing the meltdown in global financial markets.


Number two :


Among the documents uncovered by the committee was an internal board presentation delivered by [Raymond] McDaniel to Moody’s [credit rating agency] directors in October 2007. According to the presentation, he told his board: Analysts and managing directors “are continually ‘pitched’ by bankers, issuers, investors.” At times, he conceded, “we drink the Kool-Aid.”




Number three :


Mr. Waxman’s committee also cited an internal e-mail exchange between S.&P. [credit rating agency] employee [Frank] Raiter, who had been asked to rate a collateralized debt obligation [AAA worthless paper] called “Pinstripe,” and Richard Gugliada, an S.& P. managing director. Mr. Raiter had requested highly detailed data about each individual mortgage loan, known as loan level tapes, to assess the creditworthiness of the loans in the security, but Mr. Gugliada wrote: “Any request for loan level tapes is totally unreasonable!!! It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.”
Mr. Raiter responded: “This is the most amazing memo I have ever received in my business career.”

...your failure to say the Democrats had any hand in this is amazing. I know the Republicans had their part in this but it wasn't all them...not by a long shot.

But of course I won't ever try and tell you anything different than you already believe

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Originally Posted by Lyle

Unemployment will rise more once taxes are raised.


The free market is just going to ride it out buddy...eventually things will turn around, they always do. Government may try to expedite the process but they are spending too much money as it is. And eventually we'll all make the same mistakes all over again and by we I mean the government.

Feel free to explain your side buddy

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I'm just trying to understand your side for now, to be quite honest I am still formulating my view of macroeconomics which is ultimately what we are talking about here. I haven't seen a correlation between unemployement and higher taxes, perhaps you can send me a link that shows that to be a fact. I still don't see how "the free market riding it out" is fixing the problem.

So far for me it is important for me to distinguish between capitalists and businessmen.

Capitalists are people like your boss and my boss, millionaires, self made men, creating business and opportunity for others by provided goods and services. I can't speak for you, but I really admire what my boss has made.

Businessmen are people like CEOs of fortune 500 companies that ultimately rely completely on the work, idea's and funds of others. Unlike your boss and my boss, they don't fail, just take a look at the recent news and ask yourself how a CEO can make an 8 digit bonus for losing a company money. Fundamentally this is where the problem with wealth distribution, this is not the American dream, this is an abuse of control.

As a liberal nothing is in stone for me, I must be convinced however to believe, and as of now I don't see how the free market "waiting it out" is helping to fix the problem.

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Originally Posted by Lyle

...your failure to say the Democrats had any hand in this is amazing. I know the Republicans had their part in this but it wasn't all them...not by a long shot.

But of course I won't ever try and tell you anything different than you already believe

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Show me exactly what the Democrats did to create the crisis, using facts and evidence. Don't just post a youtube of some guy blocking regulation on F and F. Explain to us exactly what part F anf F played in the crisis -- using facts and evidence now.

Just look at their fucking business models, they bough bad loans repackaged them and sold them off....they garunteed money to mortgage bankers and with Clinton demanding banks do more sub-prime loans (under threat of penalty) the banks eventually tried to make money off of F and F by making their commission and then getting money from F and F they KNEW they weren't going to get from the borrower.


But I guess that won't be enough for you....it never is

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Originally Posted by Lyle

Just look at their fucking business models, they bough bad loans repackaged them and sold them off....they garunteed money to mortgage bankers and with Clinton demanding banks do more sub-prime loans (under threat of penalty) the banks eventually tried to make money off of F and F by making their commission and then getting money from F and F they KNEW they weren't going to get from the borrower.


But I guess that won't be enough for you....it never is

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Your above post makes no sense whatsoever. Your description of the relationship between banks, mortgage companies and Fannie and Freddie is one I've never seen before and as somebody who's worked in the financial industry for decades I can confidently say has no basis in reality. I can't even understand what you're trying to claim there.


Again Lyle, the current crisis originated in a bunch of bad loans made after 2002. Nothing to do with Clinton. Clinton called for banks to lend more to minorities (no penalties were ever threatened, if you claim they were provide facts and evidence) but so has every president since Carter including the current one. lending to monorities is actually good business for banks, very profitable. What happened after 2002 was that regulations on mortgages and what could be done with them were scrapped, resulting in a slew of bad loans.

Bush scrapped laws that made mortgage companies keep the mortgages they made for 30 years and allowed them to sell these mortgages on. This ended the mortgage peoples' need to make safe loans and resulted in an explosion of them. To sell the loans the mortgage companies gave tow or three year teaser rates that meant the mortgage payment was often less than rent money. Once the loans reset to the real rate the mortgagees' defaulted en masse causing the securities contrucrted of these loans to become toxic, worthless, causing the current mess. Here's a graph that explain this nicely. Note that the explosion in resets coincides exactly with the start of the current meltdown.

http://farm4.static.flickr.com/3279/...212949.jpg?v=0


Here's a picture of the GOP fuckwits using a chainsaw and tree shears in a photo op trumpeting them scrapping mortgage and bank regulations, taken in 2002 :

http://farm4.static.flickr.com/3107/...e038da.jpg?v=0

....you want to think the Democrats did nothing to create this go right ahead. Barney Frank, Frank Raines, Christopher Dodd, Chuck Schumer etc.....oh they were all innocent which is why they got so much money out of Fannie and Freddie

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Originally Posted by Lyle

....you want to think the Democrats did nothing to create this go right ahead. Barney Frank, Frank Raines, Christopher Dodd, Chuck Schumer etc.....oh they were all innocent which is why they got so much money out of Fannie and Freddie

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Again, explain exactly what these people did to precipitate the current crisis. Using facts and evidence.

Explain what Fannie and Freddie did please will you....all knowing Kirkland

They createe more ability for the mortgage market to provide mortgages. They buy them from mortgage companies and banks so that the banks can lend more and so more people can buy homes. They're private companies though implicitly backed by the Federal government. They guarantee half the US mortgage market. But they didn't create this crisis. The crisis was created around them as the mortgage companies actually started avoiding them from about 2003 onwards and selling direct to Wall Street. Fannie lost 56% of her market share of the mortgage market in two years. They were actually prevented from buying the worst of the debt due to some remaining government regulation, but not enough unfortunately.

In 2004 the GOP staged a piece of Kabuki theatre by pretending to get tough on financial excess. While agreeing with Wall Street to allow them to leverage up their asset:debt ratio from a relatively normal 15:1 to levels over double that, half the reason they're all bankrupt and owned by the government now, they cracked down on the only part of Wall Street that don't pay them much campaign contributions, F and F. There was never any danger that the GOP bill demanding tougher regulation would ever pass and in fact Bush blocked it eventually*, but it allowed the GOP to look tough on Wall Street excess while in reality doing the exact opposite.

So F and F were a bit part player in the whole thing which would have happened quite happily if they'd never existed.

*Facts and evidence re. the eventual bill :

H.R. 1461 fails to include key elements that are essential to protect the safety and soundness of the housing finance system and the broader financial system at large. As a result, the Administration opposes the bill.

And:


The Administration strongly believes that the housing GSEs should be focused on their core housing mission, particularly with respect to low-income Americans and first-time homebuyers. Instead, provisions of H.R. 1461 that expand mortgage purchasing authority would lessen the housing GSEs' commitment to low-income homebuyers.
http://www.whitehouse.gov/omb/legisl...r1461sap-h.pdf



Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
Federal Reserve Board data show that:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.




McClatchy Washington Bureau | 10/12/2008 | Private sector loans, not Fannie or Freddie, triggered crisis

F and F bought up bad loans and repackaged them and then sold them off to investors...plain and simple that's what they were there for yes it provided the banks room to loan more but looking back that too was also bad given how the banks decided to loan out money.

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Originally Posted by Lyle

F and F bought up bad loans and repackaged them and then sold them off to investors...plain and simple that's what they were there for yes it provided the banks room to loan more but looking back that too was also bad given how the banks decided to loan out money.

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That's not exactly what they do, but even if it was what they did it was irrelevant as far as the overall market goes. If F and F had never existed every single bad loan would still have been made and every single bad security would still have still have been created, rated, etc., and we'd still have the current crisis because of it. The only reason the GOP keep talking about them is that it's the only way they can link any of this mess to the Democrats.

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Originally Posted by killersheep

Questions:

1) I haven't seen a correlation between unemployement and higher taxes, perhaps you can send me a link that shows that to be a fact.

2) I still don't see how "the free market riding it out" is fixing the problem.
As a liberal nothing is in stone for me, I must be convinced however to believe, and as of now I don't see how the free market "waiting it out" is helping to fix the problem.

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Ok, killasheep, this is for you.

Answers:

1) Taxation is one of the tools govt. use to cool down overheating economy (aside from collecting money, of course). As such, it does tend to negatively affect employment though that's not it's primary intention. So the answer is yes and no at the same time.

2) Yes, the free market does usually tend to clear itself up over the long run but if let alone, it does so in a very messy way. It's just like flooding out a mound of garbage down into a city - the garbage will scatter all over but eventually with much rain flushing it, it'll all flow down into the sea.