House of Cards

[susep]

Now that I finally have a grip on the housing market boom and subsequent global economic meltdown, I thought it would be cool to discuss. 
I saw this insightful documentary on MSNBC last night called "House of Cards".  My impression from that doc. is a few people began refinancing their homes to get quick cash so they could install new pools, swanky patios, new kitchens, whatever...typical American consumerism.  As more and more people caught on to the idea, small mortgage companies began popping up to cover the demand.  These small mortgage companies began making huge profits and w/ big profits needed big banks to give them the credit lines they needed to hook in more home owners.  Soon the banks were getting creative, condensing single mortgages into structured "products" or packages called CDO's.  These CDO's were basically a dozen or more mortgage loans grouped together into a single "product".  These products or loans were then stamped or approved for a desired credit rating.  Typically an AAA loan is the best where BBB is a step down.  As more and more CDO's evolved banks began manipulating their AAA rating system, giving esp. high risk loans an AAA rating.  As the mortgage boom began to slide, banks began peddling these CDO's all over the globe to municipalities, foreign govts. basically anyone they could manipulate into buying.  Just like the naive American homeowner who received cash/capital upfront, the loan itself was inverted, bankrupting those who bought.  The end result was fried lines of credit and huge debts to those who bought the micro mortgage loans and macro CDO's.
In the end the host of the show asked Allen Greenspan, who was the chair of the Federal Reserve Bank during this period, if he thought the events that led to the subsequent collapse was a good or bad thing?  Basically Greenspan's response was it would happen again down the road, maybe not on a sub-mortgage level but the idea that prosperity and a sudden rise in economic expanse is followed by downturn.  He then went on to say how such phenomena stimulates a greater standard of living.  For ex. he said that w/ in the American ideal of life, liberty and the pursuit of happiness, its our society's ideal in promoting home ownership, how could we question one's goal of owning a home(even if they can afford it or not).  Greenspan's remarks were Darwinian imo. 
Your thoughts on the crisis?     

[Hicks]

Matt Taibbi's column on this in the most recent RS is brilliant once again:

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/

We're getting so royally screwed right now it isn't even funny.

[fauxpaxfauxreal]

My thoughts on this are weird.

Since everyone in the business was participating in this (from Homeowners-->Banks-->Speculative Firms-->Hedgefunds, etc) I want to know why in the hell they let the entire market collapse?

Was there no way for the first few firms to set off alarm bells could have rallied the banking industry behind them to find a solution so that it didn't effect the greater market?

I'm not the type of guy that is saying "we shouldn't have done it"... I'm the guy saying "damn, that was sweet when it was working, how can we make it work?".

That said...I'm the guy that was telling people to buy BAC (Bank of america) shares when they were under two dollars.  I would have quadrupled my investment (in the span of like 3 weeks) if I had sold on Friday.

Being intelligent and market savvy with no capital to work with, sucks.

[gah]

My thoughts on this are weird.

Since everyone in the business was participating in this (from Homeowners-->Banks-->Speculative Firms-->Hedgefunds, etc) I want to know why in the hell they let the entire market collapse?

Was there no way for the first few firms to set off alarm bells could have rallied the banking industry behind them to find a solution so that it didn't effect the greater market?

I'm not the type of guy that is saying "we shouldn't have done it"... I'm the guy saying "damn, that was sweet when it was working, how can we make it work?".

That said...I'm the guy that was telling people to buy BAC (Bank of america) shares when they were under two dollars.  I would have quadrupled my investment (in the span of like 3 weeks) if I had sold on Friday.

Being intelligent and market savvy with no capital to work with, sucks.

Problem is exactly that. There is no capital to work with. Now would be the time if you had the money to take a risk....

[sls.stormyrider]

didn't read the RS article - will when I get home.

a couple other items
-mortgage companies took high risk loans, figuring they would make more profit. the usual braking force on crazy mortgages is the secondary market. The people who buy those loans typically won't purchase one if it is too crazy, for example mtge payment higher than salary.
BUT - people took higher risk for greater reward
AND - the secondary purchasers didn't read what they were buying. it was all packaged in a big pile of paper
AND - the credit rating companies gave people with shitty credit good ratings, making the loan look better
AND - many mortgage companies falsified documents, making the loans look good when they actually sucked

add to that, people didn't think about what they were doing (you mean I can really afford a mortgage payment higher than my salary? sure you can, just re-finance). on top of that, many consumers were just getting themselves over-leveraged in a major way.

lots of greedy people not using their heads (at a minimum) and lying / commiting fraud.

even with the encourgement to make loans attractive to lower income folks, without all the BS the financial industry pulled this may not have happened, or at least not to this degree.

one more thing - I met a guy summer 07 who is / was a mtge broker. He was telling me the shit will soon hit the fan with sub - prime loans, no downpayment, and al the games people were playing. He met with Sen Gregg and told him that we better stop this shit, otherwise, we're all in for trouble. Gregg barely gave him the time of day.

[tet]

one more thing - I met a guy summer 07 who is / was a mtge broker. He was telling me the shit will soon hit the fan with sub - prime loans, no downpayment, and al the games people were playing. He met with Sen Gregg and told him that we better stop this shit, otherwise, we're all in for trouble. Gregg barely gave him the time of day.

heard the same thing from a friend - who said that at about the same time, when he quit working at Lehman!   :-o

[twatts]

http://susiemadrak.com/2009/03/19/22/02/spitzer-on-aig-told-ya/

We brought this upon ourselves.  We were being Buffalo Billed and no one cared because everyone was making money hand-over-fist.  People were more interested in Spitzer's Prostitute than they were in his investigation into AIG...

Really, are our country's priorities just all fucked up or what?!? 

Terry

[sunrisevt]

Yes. Yes, they are.

[Marmar]

as long as we have a monetary system where we have to take on debt and then pay interest on said borrwed debt for "wealth", it's a winless battle....

I don't care how many 0's you put into the computer system.....there will NEVER be enough money in the world to pay back all the debt......do we understand this?......no matter how many bailouts, tax cuts, etc......there will NEVER be enough money to PAY OFF THE DEBT.....

For every $ put into circulation, we pay the interest on that $ + principal.....explain how you get out of a hole when you need to borrow money to pay back the money you previously borrowed.....

THE FEDERAL RESERVE SYSTEM along with FRACIONAL RESERVE LENDING HAS GOT TO GO.

THIS IS HOW THE TAKEOVER OF THE UNITED STATES OF AMERICA IS HAPPENING IN FRONT OF YOUR VERY EYES.....as soon as the banks own it all, we're done.....or as soon as the Federal Reserve owns enough stake, we're done because they are a privately owned bank....Folks, it's no longer a conspiracy.....it's your reality.....either wake up to what is going on, or prepare to become a total slave to their system with no rights left at all.....

The time is now....

They've started to monitize the debt...do you know what this means?...Hyperinflation.....the fun is just beginning......then, how to make up for these lost jobs?.....oh yeah, government positions!.....look into it folks, this is what's going down.....it's going to get really ugly.....get comfy in your front row seat at the funeral of the Republic of the United States of America.....

[susep]

THIS IS HOW THE TAKEOVER OF THE UNITED STATES OF AMERICA IS HAPPENING IN FRONT OF YOUR VERY EYES.....as soon as the banks own it all, we're done.....or as soon as the Federal Reserve owns enough stake, we're done because they are a privately owned bank....Folks, it's no longer a conspiracy.....it's your reality.....either wake up to what is going on, or prepare to become a total slave to their system with no rights left at all.....

The time is now....

this video certainly still resonates: