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Thread: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by iliveonramen View Post
    That's not created by the government. That a Reagan initiative to deregulate the banking system. It didn't create those loan types or give them out, it provided the legal ability to do it.

    Let's remember here....this is a chain of responses where I stated the need to regulate the banking and financial industry. We've gone so far into the weeds and off topic that you're posting something that supports my main point in order to disprove something else I said.
    Except that such as Dodd Frank does not regulate Fannie and Freddie, as already mentioned. It was government's use of FF to manipulate the normal lending market that created this mess. Not banks. Not the financial industry. They rode the unnatural and artificial moral-hazard wave created by government.

    While we would agree agree that government has a role, when it came to the Housing bubble, and so much more that ails us, government is the problem, not the solution.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by Eighty Deuce View Post
    Except that such as Dodd Frank does not regulate Fannie and Freddie, as already mentioned. It was government's use of FF to manipulate the normal lending market that created this mess. Not banks. Not the financial industry. They rode the unnatural and artificial moral-hazard wave created by government.

    While we would agree agree that government has a role, when it came to the Housing bubble, and so much more that ails us, government is the problem, not the solution.
    And how did government use F&F to manipulate the normal lending market?

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by Dickieboy View Post
    I believe there is consensus in this position on both sides of the isle, but I could be wrong.
    Consensus on what exactly? I'm sure most would agree that we could pare down some regulations. It all depends on which ones and how we do it. But to make broad generalizations without looking at any specifics would be fool hardly, and too often wrong and inaccurate.

    AUSTAN GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Further, all this rubbish to try to minimize FF, how they had "been around for decades", all avoids the facts that mattered here.
    It's not rubbish...if an institution has been around for decades there has to a catalyst or change that caused the housing crises. If by existing they caused the housing crises which is what you're saying then the amount of time they've been around is relevant.

    It makes all the sense in the world when one looks at what happened, and the timelines. FF created the moral hazard that then increased demand, which began the bubble. Once the bubble got going, the very inflating of the bubble, ie. hyper-inflation in the housing market, then covered many risks, as I explained. You could make a loan that had higher risk of default, as inflation would cover your losses. So FF got back into the market by creating these same higher risk mechanisms that it had enabled others to make.
    If the moral hazard of fannie and freddie were the cause of the housing bubble...the housing bubble was depending on that implicit government backing. When that implicit government backing is not there then there should be no or less demand for securitized mortgages.


    The value of a CDO is the interest on the mortgage. When you buy a CDO you purchase it expecting those interests payments for the life of the CDO. If they default and housing prices are rising sure you can recoup some loss but you still are out a lot of money.

    The CDO was completely based on the idea that foreclosures would not rise to even medium high foreclosure rates. It's no different than bundling junk bonds in the 80's. The whole system was dependent on normal bankruptcy rates among junk rated companies. This is not the first time Wall Street has misvalued risk.
    I cannot make it more clear or more obvious. You can believe the facts, or you can believe the politicians who want more power. Fannie and Freddie, and that ninefold increase, and the government interference in subprimes, created the bubble, beginning in 1998, that became as a beast we had never seen before. Agin, if there is no bubble, then nothing bad follows. Nothing. It was the bubble that then enabled all the trouble.
    We have seen this beast before...margin trading in the 1920's a tulip bulb worth more than a house.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Which matters not a hill of beans. The bubble created all this mess. Bubbles must pop. Even if not a single home-owner defaulted, the bubble was going to pop. Trillions in wealth was going to be lost. 30% of all homeowners were going underwater. And then a bunch of them were going to default, out of common sense.
    The value of CDO's is entirely predicated on the foreclosure rate....
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by AdamT View Post
    And how did government use F&F to manipulate the normal lending market?
    Read the last 20 posts or so. Watch the Cuomo video.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by AdamT View Post
    My intent is really not to discourage a critical review of regulations. I've been in business long enough to know how ****ed up they can be. But at the end of the day someone really does have to sit down and sift through them in order to straighten the mess out.
    Again, we have people. And they should do this. I think J misses my real objection. it is not that J or anyone has to list every single objectionable regulation. It is the argument that them being costly alone is reason to end regulations. It has to be, as you suggest, a balance between cost and need, and sometimes it may well be even more costly to get rid of a particular regulation. but without someone, not memebers of a political discussion forum, researching whihc specific regulations are or are not needed, we are more than likely to make a few mistakes.

    AUSTAN GOOLSBEE: I think the world vests too much power, certainly in the president, probably in Washington in general for its influence on the economy, because most all of the economy has nothing to do with the government.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    While we would agree agree that government has a role, when it came to the Housing bubble, and so much more that ails us, government is the problem, not the solution.
    I agree with you that Fannie and Freddie is a monstronsity and needs to either be private or completely public I do not agree with your view on the extent they caused the bubble.

    I would also agree that Fannie and Freddie obviously played a part in the housing bubble but your view that they are the main culprit is only relevant to the far right and those that are out to protect the ideas of deregulation and demonize government. You can go from former Reagan officials to Fed Chairmans recent and in the past and none of them hold that view. You can look at finding from multiple economists (outside of CATO and Heritage) and resounding the consensus is that CRA was not the cause and that Fannie and Freddie are components and not the cause of the housing bubble. I say this only because you apparently think my veiws stem from power hungry politicians.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by iliveonramen View Post
    It's not rubbish...if an institution has been around for decades there has to a catalyst or change that caused the housing crises. If by existing they caused the housing crises which is what you're saying then the amount of time they've been around is relevant.

    If the moral hazard of fannie and freddie were the cause of the housing bubble...the housing bubble was depending on that implicit government backing. When that implicit government backing is not there then there should be no or less demand for securitized mortgages.
    When an institution goes from being barely of notice, to then growing ninefold in fifteen years, coinciding with the housing bubble, then their ninefold increase is quite relevent, while their existence prior is inconsequential by every measure.

    The value of a CDO is the interest on the mortgage. When you buy a CDO you purchase it expecting those interests payments for the life of the CDO. If they default and housing prices are rising sure you can recoup some loss but you still are out a lot of money.

    The CDO was completely based on the idea that foreclosures would not rise to even medium high foreclosure rates. It's no different than bundling junk bonds in the 80's. The whole system was dependent on normal bankruptcy rates among junk rated companies. This is not the first time Wall Street has misvalued risk.


    We have seen this beast before...margin trading in the 1920's a tulip bulb worth more than a house.
    The "C" in CDO stands for Collateralized. Each piece of property was the collateral behind each note. It is simple math. Each individual loan has a risk, one of the facotors of which is the ability of the collateral to cover a default. When housing is rising at 20% per year, vs. the more normal 3-5% per year, then the risk is less.

    Further, the actual losses were not realized because a few folks defaulted. The losses snowballed when the bubble popped, and values dropped by as much as 50%. which then caused many additional defaults by folks who chose strategic foreclosures, and shortsales. Not usual deadbeats by any measure.

    I would submit that the reason things became such a mess, with so many willing to take on extra risk at every level, was because of the feeding frenzy created by such a bubble. You can find small examples of all the massive mega-bank nonsense in each of our communities. Folks who sold and made a bundle. Good folks who bought and then lost everything. Others who bought five properties, thinking they were like the "fixer-upper" or "flipper" on TV, only to then be in bankruptcy within 1-2 years.
    Last edited by Eighty Deuce; 01-11-12 at 04:44 PM.

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    Re: U.S. Payrolls Gain More-Than-Expected 200,000; Jobless Rate Falls to 8.5%

    Quote Originally Posted by iliveonramen View Post
    I agree with you that Fannie and Freddie is a monstronsity and needs to either be private or completely public I do not agree with your view on the extent they caused the bubble.

    I would also agree that Fannie and Freddie obviously played a part in the housing bubble but your view that they are the main culprit is only relevant to the far right and those that are out to protect the ideas of deregulation and demonize government. You can go from former Reagan officials to Fed Chairmans recent and in the past and none of them hold that view. You can look at finding from multiple economists (outside of CATO and Heritage) and resounding the consensus is that CRA was not the cause and that Fannie and Freddie are components and not the cause of the housing bubble. I say this only because you apparently think my veiws stem from power hungry politicians.
    I believe that you have mis-stated my view, overstating it so as to then demonize it. I maintain throughout that Fannie and Freddie and gubmit started the bubble. Once it got going, they were somewhat shoved out of it, as I noted, and had to become reckless to get back into it. The key to the speculation that erupted in housing is what got it going. Again, it is why they call it a bubble. It grows until it pops.

    I have cited sources from across the spectrum. Most notably, the actual people, actual government reports (not from politicians), etc. We also showed you a bt about "greed".

    The key is to get a bubble started. It is no different than much of the dot-com bubble when evaluating what speculation is. Or your tulip example. Or beanie babies. The key is to start the feeding frenzy. Then just watch. Profit if you will, but someone is going to get burned when it pops.

    The bubble began to inflate in 97-98. Explain that, will you ?
    Last edited by Eighty Deuce; 01-11-12 at 04:54 PM.

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