kertch

Fannie and Freddie: The Gifts that Keep on Giving

A 57% loss not a real solution? Really? In my neck of the woods (Phoenix, AZ) many home owners have already reached loss levels close to, or in excess of, that number. The only real solution to an inflated asset price is to let it deflate it back down to equilibrium levels. Trying to do otherwise only exacerbates and prolongs the problem, not to mention bankrupts you in the process.


On Dec 28 10:42 AM GreenRiver wrote:

> >Take a house with a $200K ask price today. I wouldn't lend somebody
> $200K for thirty years at 5% to buy it. You'd have to either be crazy
> or the U.S. government to do that (same thing). Take the government
> out of the picture, and mortgage rates might be 14%, and the same
> house would be $85K ask.<
>
> and the seller realizes a 57.5% LOSS. Not a real solution.

Charlie Gasparino: Another Crash 'Has to Happen Again'

Sorry - you are a nut. The current administration could hardly be defined as the right wing lunatic fringe, yet thier policies are just as bad as those of the right. There is now more collusion between big industry and government than ever. Each company in each targeted industry is given the option to literally "buy in" to the administration's plans so that they can be spared any financial pain caused by the legislation. This is exactly what the Nazi's did in Germany, except that companies that didn't go along with the program had thier management changed (Oh, wait - we did that here too!). Don't let your idealogical fog blind you to what's going on right under your nose.

On Nov 06 11:11 AM tarantilla wrote:

> It's nice to see a bunch of right minded comments noted above. However,
> it's easy to predict a "crash". WHEN is another story. And note that
> the government/Goldman Sachs will do all in their power to keep/pretect
> their money, and in the case of "banks", their position of controlling
> the government. Nothing short of major, radical change will shift
> this scenario. Unfortuneately, the right wing lunatic fringe has
> the army, and the money, and will ultimately be used by elite/billionaire/banks
> to remain in power, and "keep order", like in Germany, when the Nazi's
> came. If there IS any "crash" and many are out of work, look for
> this right wing scenario. Sorry if I sound like a nut.

Charlie Gasparino: Another Crash 'Has to Happen Again'

Your comment reflects an ignorant and dangerous way of thinking:

"Not to absolve government, but..." - but of course you would like to absolve government.
"... these dopes would have immolated even without the incentives." - Dopes? These guys gamed the entire U.S. economy and banking system to thier advantatage and walked away with Billions, leaving us with the tab. We got immolated: the shareholders, the bondholders, and the taxpayers, not the bankers. The dopes are us, the ones paying for the mess, believing our "trusted public servants" will keep the "stupid evil bankers" from robbing us. If that's what you think then "moral hazard" is the only card you've got left to play. BTW, you're just the half-wit tinpot calling the kettle black.

On Nov 05 04:33 PM wobatus wrote:

> Not to absolve government, but these dopes would have immolated even
> without the incentives. Moral hazard is such an over-played card.
> Did all the shareholders and bond-holders of LEH really expect to
> get bailed? Well that was wrong, wasn't it? Same with ma and pa Citi
> shareholder. And then we get half-wit tinpot commentary from financial
> illiterates.

Capitalism: RIP

I agree with points made by autboy, jlounsbury, madasiwannabe, and blondino. I think we all are seeing the same truth from different viewpoints. Autboy is correct in that capitalism is an ethical as well as an economic system. The economic underpinnings are transparency and accountability, the ethical underpinnings are truth and responsibility. Yes, we as a nation ultimately caused this problem by being seduced buying into the notion that we can get something for nothing and that govenment would take care of us. I don't believe that all attempts by goverment are generated from benign concerns. There are actually people out there who do want to run our lives (don't believe me? Try smoking a cigarette in a public place). But in the case of the subprime morgage shellgame, the government was not an innocent bystander - it was an active participant. When the govenment took the stance 30 years ago that home ownership is a moral good in and of itself we were set on this path. If the bank failures litter the landsacpe like dead fish on a beach, then Fannie and Freddy are two rotting whale carcasses. We've gotten into a vicious cycle: Bad govenment = bad policy = bad decision making by the public = more bad government to pull our asses out of the fire = more bad policy, etc.
Blondino is right that we need rules. Capitalism is not anarchy. Anarchy is no rules. But what do you call a system where the rules are changed according to the whims of the powerful? I call it Autocracy. That's why I say the difference between the US and Russian economies is a matter of degree. When autocrats change the rules it's usually to benefit the elite, but it's always sold to the rest of us as a way to "save the system". Why should the taxpayer buy worthless subprime paper from banks that no one else will touch? To save the system! So that the banks can go back to business as usual. Anyone find that giant loophole in the Paulson Plan? And finnaly yes, many Americans are irresponsible spenders and borrowers, but who encouraged that? I could go to jail for charging someone 20% interest on a loan - unless I'm a credit card company.
I think it's vital that we clean out the deadwood in congress, but I don't think that term limits are the answer. The only way to insure good government is through educated, informed, and involved voters. Since they no longer teach civics in school, and the media have become political mouthpieces for the parties, we can write off the educated and informed requirements.
I'm with madasiwannabe. The economy has become a party most of us aren't invited to.
All of this discussion yesterday got me thinking. So I came up with another question. Just what is the proper function of financial institutions and how should they operate? Why have a financial system at all? (this is not a retorical question). I don't think most people even have a clue.

Capitalism: RIP

autboy, I did not say that we were in a totalitarian state. I stated that the idea of one party benefitting at someone elses expense is the basic premise behind most currupt regimes and ALL currupt ideologies. So now we are in the same boat as during the depression. After hedge fund managers and bankers made millions with our money and paid us a paltry return, is the govenment going bail them out and with taxpayer money? Should we have to pay again? Should you or I have to pay for the foolish homeowner who bought a home he couldn't afford? When I work I'm taxed, and when I invest I'm robbed. So why work? Why save? Why not just collect checks from Uncle Sam? He'll be there to bail me out when I do something stupid! Obviously this is not capitalism. Nor is it a failure of capitalism. This is a failure of the socialist/capitalist hybrid system we live under today. What good are all of the freedoms of the first amendment when all the wealth you've accumulated over your lifetime is gone, not because of your actions but because of the actions of some privelaged, protected, and connected person. We have instituted a system that encourages and supports a type of sophisticated theft. What difference does it make if it was confiscated or if you were lied to? Why worry about a Gulag when you're living under a bridge? At least they feed you in the Gulag.

So I'll ask you one question - If this is a failure of capitalism, what exactly do you propose we replace it with. Should we just increase the proportion of socialism in the capitalist/socialist system we have? Should we give the goverment who got us into this mess MORE power so that they can get us out? Make no mistake - our transformation into a failure-proof, debt-ridden, blameless society (except for greedy CEO's - obviously they are the cause of every problem) has been strongly encouraged by our own government.

Capitalism: RIP

autboy - Our financial meltdown is no more a failure of captialism than Russia's meltdown is. The difference between Russia's crony capitalism and ours is only a matter of degree. When one party bears the risk and another reaps the reward it's not capitalism. Those are the basic tenants of facism, socialism, and every othe totalitarian ideology.

Capitalism: RIP

Eyes is correct. We need to vote everyone out, both Democrat and Republican. The financial system is completely screwed up and it's the fault of both parties. As long as they can keep riding the gravey train they really don't care what's in the best interest of the nation. The currnet crisis was 30 years in the making. Anyone who thinks that we can legislate our way out of this is as foolish as the those who thought we could legislate our way to prosperity. Well we're going to have to pay - and pay big time! Hopefully all those fools who have less understanding of economics than a turnip will be hit in the face by reality - like a bag of nickles. It took the generation living through the depression 40 years to build this country's wealth through hard work and savings, it taken the "Me" generation only 20 years to blow it.
The one thing that I feel confident enough to predict is the current financial system is in the beginning of its death throws. The huge liabilities incurred by our institutions are not over, and in the end will unfortunely prove fatal. The big question is what will take it's place? Will it be real reform and a transparent system where the government acts as referee and enforcer of market dicipline, or will it be another "New Deal" where the government is not just a participant but the '800 pound Gorilla" distorting the market and changing the rules whenever it sees fit. Right now it appears to be the latter.