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I have my own views and have read several opinions and seen the CNBC report by David Faber-"House of Card". A recent Opinion piece in the Friday Feb 20th Wall Street Journal on page A17 by Phil Gramm is a pretty good read. You can find it here if you do not have access to the paper.
Phil Gramm himself was a big part of the problem, through the Commodities Futures Modernization Act and the Gramm-Leach-Bliley Act, both of which he co-sponsored. The CFMA specifically exempted many of these exotic derivatives from regulation or oversight.
But actually, one of the under-reported aspects of this mess was covered by Wired Magazine in an article in its current issue, which describes how financial institutions began using a deeply-flawed Gaussian copula model for risk assessments of complex derivatives around the year 2001. That gave ratings agencies the foolish courage to give AAA ratings to garbage instruments, and led to the runaway growth of the exotic derivatives market - which has been painfully "unwinding" since 2008.
Gramm's article seems more than a little self-serving, especially his defense of GLB at the end. He defends the CFMA with this claim:
Quote:
Yet it is amazing how well the market for credit default swaps has functioned during the financial crisis. That market has never lost liquidity and the default rate has been low, given the general state of the underlying assets.
Which is rather dishonest to say the least! Credit default swaps are only one instrument among many exotic credit products, and notice how Gramm cleverly says that the market "has never lost liquidity," rather than addressing any issue of how much value it has lost, or even attempting to value those assets at all.
The true cause is fiat based monetary system and lose credit markets. The elite can easily make credit easy make the economy boom and then make credit hard to get for a short period which drives asset prices to the floor. It even drives asset prices BELOW their true value because of fear discount and hard to get credit.
If we had gold and silver it would be significantly more difficult to engineer such collapses on a large scale (they would still occur due to herd mentality and misvaluation of risk).
There are many ways to express it, and socialist housing policy passing through corrupt banksters is certainly near the top of the list.
Here's another one:
production - consumption = saving + investment.
The US economy is way out of balance with respect to that equation.
Truly insane is that no policymaker and even few pundits talk about the crisis of production, and Clinton is in China begging for more debt-driven consumption, truly insane.
All the mechanics aside, the main motivator is greed. People bought houses that they couldn't afford assuming they could either endlessly refinance or when they were ready to move sell and make a killing. They were buying with monopoly money and thought it was real. Realators were happy to sell because they got their cut off the loan, and if it failed they were paid. More sales to those they must have known could not pay for the morgage made them more money. At some point a speck of conscionse must have faded. The lenders lent knowing that the default would hit someone else and the banks financed more income from making investments out of worthless loans. Everyone made off great until the whole bubble of soap got to weak and popped.
If anyone along the way had thought about it and said "no", at least it would have been less a disastor. But when the money's flowing then why should you?
Same idea applies to the people who have charged their way to massive debt but never really counted it. Its something for "free". But there really is nothing that doesn't have a cost somewhere down the line.
All the mechanics aside, the main motivator is greed. People bought houses that they couldn't afford....
Bingo!
Everyone is trying to blame bankers now (for the purposes of full disclosure I work for an investment bank) when in reality they should be looking in the mirror
No banker put a gun to anyone's head and forced them to buy homes they couldn't afford
No banker put a gun to anyone's head and forced them to lie on their mortgage application
No banker put a gun to anyone's head and forced them to charge flat screen TVs to their credit cards
No banker put a gun to anyone's head and forced them to default on their debts
etc etc
The public made these choices for themselves and now like infants they are throwing a tantrum and looking for someone else to blame. There is no culture of personal responsibility. "I don't have to read my loan documents to see what I'm signing, they should have told me my mortgage will reset"
Everyone is trying to blame bankers now (for the purposes of full disclosure I work for an investment bank) when in reality they should be looking in the mirror
No banker put a gun to anyone's head and forced them to buy homes they couldn't afford
No banker put a gun to anyone's head and forced them to lie on their mortgage application
No banker put a gun to anyone's head and forced them to charge flat screen TVs to their credit cards
No banker put a gun to anyone's head and forced them to default on their debts
etc etc
The public made these choices for themselves and now like infants they are throwing a tantrum and looking for someone else to blame. There is no culture of personal responsibility. "I don't have to read my loan documents to see what I'm signing, they should have told me my mortgage will reset"
I agree to an extent, but the bankers are the ones who engineered this and started it. They are the ones who create money and hand it out. Unfortunately the sheeple fell for the bait and took it.
The banks decide when to give money and when to stop it. Like now, they have stopped giving out credit (ie cancelling helocs, credit cards, no more option arms, etc).
We need a stable monetary system. The banks are controlling our lives like an emotional roller coaster with this boom/bust economy. I'm tired of it and so should the rest of us.
Housing was only part of the issue. With the Gaussian copula model, investment banks started using everything as the basis for their exotic securities - even and especially other securities already in existence. Remember, a credit default swap is not a mortgage; it's basically an insurance contract relating to some other instrument or risk, and there was no legal limit on how many CDSs could be issued on top of any given security or event. That's how that market attained a nominal value of over $60 trillion by 2007.
Everyone is trying to blame bankers now (for the purposes of full disclosure I work for an investment bank) when in reality they should be looking in the mirror
No banker put a gun to anyone's head and forced them to buy homes they couldn't afford
No banker put a gun to anyone's head and forced them to lie on their mortgage application
No banker put a gun to anyone's head and forced them to charge flat screen TVs to their credit cards
No banker put a gun to anyone's head and forced them to default on their debts
etc etc
The public made these choices for themselves and now like infants they are throwing a tantrum and looking for someone else to blame. There is no culture of personal responsibility. "I don't have to read my loan documents to see what I'm signing, they should have told me my mortgage will reset"
When the BANKS stopped holding the crap the were creating,and pushed it on to Wall Street and the rest of the world as SAFE,SECURITIZED DEBT and bribed the Rating agencies to go along with it,thats when we went on the path to hell.YOU GUYS ARE THE MAIN CULPRITS! Many hardworking, honest people got duped by banks and mortgage brokers,no one reads the fine print when some slickster is blowing sunshine up their a**es.Spare me the fine distinctions of the financial world.Analyst,Broker/Dealer,Financial Advisor,Investment Banker,etc.You are all knee deep in sh**.Don't play the "its not my fault game" here. As far as the culture of responsibility,so far the banks are the only ones taking my money!
Same idea applies to the people who have charged their way to massive debt but never really counted it. Its something for "free". But there really is nothing that doesn't have a cost somewhere down the line.
This is also the way people think about National Health Care, it will be free. Yeh right, just ask any German, Brit or Canadian how much is taken out of their paychecks to support this "Free Health Care".
Sorry off the issue at hand here but is just another economic issue that will get screwed up by more big government.
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Re: Nightbird47
