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BOYCOTT THE TOO BIG TO FAILS!
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swchandler



Joined: 08 Nov 1993
Posts: 5687

PostPosted: Sat Jan 09, 2010 5:28 pm    Post subject: Reply with quote

While there's plenty of blame to be shared by government, banking/mortgage companies, Wall Street, and realtors, I have to say that the many folks over the nation leveraging off the sharply increasing real estate values over the years should take a large share of the blame. It's been really clear to me that for many years escalating real estate values were increasingly moving out of line with people's income. Still though, needless to say, everybody wanted to be on the band wagon of this seemingly ever growing "industry", and that's why the momentum ultimately resulted in this house of cards collapsing.

I know this view on things can be seen as a bit simplistic, but from my perspective, it's so clear. I have to say that most of my life, I wasn't able to afford a home. Over the years, I watched in wonderment at how property values in Santa Barbara, and most other desirable communities, relentlessly climbed to truly ridiculously high levels. It was only when I was retiring in 2004 did I buy a place, and as things turned out, that was edging toward the actual height of the market. Still though, I bought what I could afford, put 20% down, and I totally avoided adjustable rate mortgages in favor of a notable higher fixed rate of interest. At the same time, I totally zeroed my credit card debit.

When I perceived that the house of cards was becoming increasingly shaky, I virtually cashed out on my more risky financial investments, and ultimately lost very little treasure in the financial crash.

So, as I see it, while greed at all levels contributed to the recession, I think that not enough emphasis is being put on the irresponsibility of the average American that was driven by a desire to get rich on increasing property values.

Now, as most of you know by now, I'm definitely not aligned with isobars' take on things. Irrespective of how we got to where we are right now, I'm all for prudent legislation needed to monitor the financial and banking industries. In addition, I'm strongly behind limiting compensation of CEOs and corporate directors of financial and banking firms (along with other publicly owned firms) as a way to stem greed and better support growth, investment, workers and stockholders. Why pad the pockets of the few at the expense of the much larger segment of Americans that also have a stake in the game?
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mac



Joined: 07 Mar 1999
Posts: 4966

PostPosted: Sat Jan 09, 2010 9:57 pm    Post subject: Reply with quote

Check this out for a before the disaster analysis of what the repeal of Glass-Steagall was supposed to do: http://www.federalreserve.gov/boarddocs/speeches/2002/20020208/default.htm
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mrgybe



Joined: 01 Jul 2008
Posts: 2544

PostPosted: Sun Jan 10, 2010 1:32 pm    Post subject: Reply with quote

mac wrote:
Mrgybe--reread this, thinking I might have to apologize. Not quite........if you didn't mean to imply that Freddie Mac and Fannie Mae were causes and side with the anti-regulatory crew that helped stimulate this bubble, maybe you want to be more careful in your writing......I saw no mention in your comments of the various things that stimulated the bubble, including the deregulation and deliberate lack of oversight during the Bush administration.


I respectfully suggest that you take another crack at re-reading my earlier posts.......perhaps more slowly this time. Those possessing more than a passing familiarity with the English language will be unable to concur with your earlier assertion that I stated, or implied, that the mortgage meltdown was ALL the fault of Fannie/ Freddie. I DID say that Fannie/ Freddie played a part in the debacle........one of a number of contributing factors.......to suggest otherwise would indicate a lack of understanding of the mortgage markets.

With regard to the need for regulation, again, if you read my earlier posts more carefully you might be pleasantly surprised!! Maybe you will become an even happier guy!!
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windoggie



Joined: 22 Feb 2002
Posts: 2359

PostPosted: Sun Jan 10, 2010 1:52 pm    Post subject: Reply with quote

mrgybe wrote:
Those possessing more than a passing familiarity with the English language will be unable to concur with your earlier assertion that I stated, or implied, that the mortgage meltdown was ALL the fault of Fannie/ Freddie. I DID say that Fannie/ Freddie played a part in the debacle........one of a number of contributing factors.......to suggest otherwise would indicate a lack of understanding of the mortgage markets.


I just read this out loud with a James Mason accent. Try it.

_________________
/w\
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mrgybe



Joined: 01 Jul 2008
Posts: 2544

PostPosted: Sun Jan 10, 2010 1:59 pm    Post subject: Reply with quote

swchandler wrote:
Irrespective of how we got to where we are right now, I'm all for prudent legislation needed to monitor the financial and banking industries.


You make some good points.........and not in the least simplistic. Large numbers of people ceased to regard their house as a home, but rather focused on the investment attributes of property ownership......we're all probably a bit guilty of that.....some just got way out of their depth. I agree with you that prudent regulation, particularly of the highly leveraged components of the financial markets, is a desirable thing...........I just worry about the ability of Congress to really understand what they are dealing with and to enact legislation without outside influences. Government control of private company CEO compensation..........yikes!!.......that where we diverge. I'm all in favor of a regulatory framework to encourage active shareholder oversight (like Sarbanes-Oxley), but the prospect of the government telling shareholders how much they can pay the people they have hired to run their company isn't something I could support regardless of how distastfull some of the Wall Street bonuses appear to most of us.
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mrgybe



Joined: 01 Jul 2008
Posts: 2544

PostPosted: Sun Jan 10, 2010 2:03 pm    Post subject: Reply with quote

windoggie wrote:
I just read this out loud with a James Mason accent. Try it.


Brilliant!!.........I have a James Mason accent!! Now I really must get on with some work!!
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swchandler



Joined: 08 Nov 1993
Posts: 5687

PostPosted: Sun Jan 10, 2010 3:45 pm    Post subject: Reply with quote

mrgybe,

I understand your concern about the government dictating limits on what corporate executives can earn in salary and bonuses. No doubt, it's a very sensitive subject. However, check out this blowback article that was recently featured in the LAT.

http://www.latimes.com/news/opinion/opinionla/la-oew-spicer8-2010jan08,0,1573040.story
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mac



Joined: 07 Mar 1999
Posts: 4966

PostPosted: Sun Jan 10, 2010 11:50 pm    Post subject: Reply with quote

This is actually constructive. Mrgybe is right, consumer debt was the sector that grew dramatically, mortgage and credit card. But the magnitude of fannie/Freddie complicity is overstated. About 2 Trillion in subprime loans, about 200 billion in Freddie/Fannie. The suggestion posed initially, that laying off mortgage loans on those organizations, has lulled the banking industry into a sense of security, is a pretty good one.

The original thread of the post was consumers should boycott the bad banks, then Isobars told us how awful regulation would be with these socialists in Washington. Well, we've already seen how awful de-regulation in the hands of zealots can be--with the collapse of Enron and the mushrooming of sub-prime loan. the other significant factors--the role of the Federal reserve in stimulating (overheating?) the economy just in time for elections, and consumers, in financing a spending spree on the expectation that they could flip their house. True that consumers and both parties deserve lots of blame, but not quite so pat as Isobars in insisting that it's all the fault of consumers. There was a lot of hard selling of borrowing, and a fair amount of fraud and Federal reserve policies involved in keeping that real estate baloon inflating.

Mrgybe is right, control over compensation doesn't fix that, it is just grandstanding to the angry street. What is needed is some thoughtful regulation, preferably bi-partisan, that reinstalls some level of fiscal controls and separation of investment and commercial banking, without squelching innovation. Might be hard now that the Republicans have decided that they are the party of no.
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boggsman1



Joined: 24 Jun 2002
Posts: 3474
Location: at a computer

PostPosted: Mon Jan 11, 2010 10:27 am    Post subject: Reply with quote

Capping compensation was a brilliant idea. It incentivized the banks to repay the borrowed GOVT $$ ASAP, which they did. Now sit back and watch the Wall Street bonus machine over the next few weeks, and remember, it couldnt have happened without you, the taxpayer, thank you!
BTW- the overall subprime mkt is about $700B , about 5 or 6 percent of total mortgage mkt. HOWEVER, in 2006 subprime origination was 30% of overall mkt. I didnt need to go to Wikipedia to get this data, it sits on my desktop at work.
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mac



Joined: 07 Mar 1999
Posts: 4966

PostPosted: Mon Jan 11, 2010 11:22 am    Post subject: Reply with quote

Incentivized yes, and the true indictment of the "invisible hand" is the structure that would have rewarded massive failure with massive bonuses. But boggsman, what is your opinion of where to go now? While you are right that the subprime business was small in the overall scheme of things, it was huge in the real estate bubble, and went from a tiny business ($35 billion) to a huge business ($700 billion for about 3 years, or $2 trillion, with fraudulent credit ratings in the tranching of what were, in retrospect, very high risk loans.)

Zach Carter, hardly an unbiased source, traces the roots of the repeal of the Glass-Steagall act back to John Dugan and his publication of the Green Book, or "Modernizing the Financial System: Recommendations for Safer, More Competitive Banks." Reform of Glass Steagall was due--what should it have been? And Carter pegs the government commitment at $17 trillion. Is he right? How much of that will come back? And what are the other sectors that brought the Federal risk so high? In response to mrgybe's line of reasoning, was the encouragement of risk taking dramatically increased by the Gramm et all bill, or was it already established by weakening of regulation?

It is clear that if the total exposure of the financial system was anything approaching $17 trillion, it cannot be laid at the doorstep of either imprudent consumers, as Isobars would have it, or at the door of Fannie and Freddie, with their exposure of about $200 billion. What now?
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