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Should the "too big to fail" be nationalised?

Should the "too big to fail" be nationalised?


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I agree, many other politically popular entities, like those using union labor (auto industry and state/local gov'ts), got included in the spending binges known as TARP and the "stimulus" packages, but the initial justification for this economic madness was mostly the mess caused DIRECTLY BY the "housing bubble" popping and the economic instability created by "sub-prime" mortgages; without that factor much of the rest would never have happened, as it was neither the emphasis of nor the largest part of the bail-out/stimulus craze.

I can agree with that. My whole thing is, if the government doesn't entangle itself where it shouldn't be in the first place, **** like these bailouts wouldn't become a necessity.
 
I additionally have to point out that I was a design engineer in the computer industry. I had enough income etc., as you point out, to participate in the housing bubble. Many of my peers did.
I guess I should add that I'm participating in the housing bubble, sold one near the top, bought three near the bottom. Freedom.

Then you simply made a bad bet, nobody to blame for it but, yourself. If a deal sounds too good to be true, then it usually is. Many buy bad "investments" but that is simply salesmanship. 15% of the folks will not ever buy anything new, 15% of the folks will buy darn near anything and the rest (70%) is simply salesmanship. ;-)
 
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I think it is the height of naivety to say special interests don't write laws, Medicare part B comes to mind. Insurance companies keeping their anti-trust exemptions, and a slow drip drip drip of undercutting the banking firewalls.

FYI by the time the crash hit most of those in Congress responsible for the unspooling had retired to big fat payday jobs as guess what, consultants/lobbyists/fund managers. A bit too late to vote the bums out of office. :)

And those who write the laws do get turned out, to become one of the consultant/lobbyist/ fund managers mentioned above. Once more it is naive to think government and big business have a very incestuous relationship. (remember the 'conservative' stink over Obama using lobbyists/consultants in his administration?) While it is possible to find a needle in a haystack as well as a good fed chairman, treasury sec, chief of staff who never worked for a major corporation/financial institution/stock brokerage house/shadow banking firm/ you get the idea....

I don't think it is a zero sum game that it is all government or all special interest capitalism... nor greedy consumers and poor loan applicants.

It is very telling some think it is...
 
Interesting theory, and one that should be quite easy to "prove". Which members of congress voted for these changes, how much did they get in campaign cash (or other favors) from the banking industry and why do their district/state voters not care about these "corrupt" voting patterns? Perhaps they may include the likes of Barney Frank or other solid blue dudes that have no fear of being denied re-election? That would be "shocking" would it not? That it was the very liberals that cried the loudest about those "greedy bankers" that were the very folks that allowed these "compassionate" and "less discriminatory" lending laws to be "abused" by those mean old greedy bankers. ;-)
Partisan blame - when it's true - doesn't bother me in the least.

The Republican Congress wanted to let the banks merge and Clinton signed the bill. That doesn't change the facts of the situation now, does it?!? The banks pushed for that change or Congress wouldn't have given a rats ass. It was a mistake that needs correcting as quickly as possible.

I don't know what the other crap you posted is about. The Pres pulls the strings at Freddie/Fannie as much as anyone. He also pulls the strings at the SEC.
 
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I think it is the height of naivety to say special interests don't write laws, Medicare part B comes to mind. Insurance companies keeping their anti-trust exemptions, and a slow drip drip drip of undercutting the banking firewalls.

FYI by the time the crash hit most of those in Congress responsible for the unspooling had retired to big fat payday jobs as guess what, consultants/lobbyists/fund managers. A bit too late to vote the bums out of office. :)

And those who write the laws do get turned out, to become one of the consultant/lobbyist/ fund managers mentioned above. Once more it is naive to think government and big business have a very incestuous relationship. (remember the 'conservative' stink over Obama using lobbyists/consultants in his administration?) While it is possible to find a needle in a haystack as well as a good fed chairman, treasury sec, chief of staff who never worked for a major corporation/financial institution/stock brokerage house/shadow banking firm/ you get the idea....

I don't think it is a zero sum game that it is all government or all special interest capitalism... nor greedy consumers and poor loan applicants.

It is very telling some think it is...

Quite a clever cop-out, to assert that they (in congress) all do it, when the discussion surrounded WHO, by name, supported the "sub-prime" mortgage lending laws that led DIRECTLY to the housing bubble and need for the bail-outs. Barney Frank led the charge and MOSTLY liberals wanted these housing lending law changes in the name of "fariness" and "helping minorities" get more into the home ownership market. After the mess that it created (the housing bubble) finally collapsed, the cry was that "greedy bankers" caused it, not that well meaning liberal politicians, who simply failed to see (or intentionally ignored) that lending money to those very likely unable to repay it was at the root of the problem. The next, very similar case, is with gov't backed student loans; I predict that bubble will soon burst as well.
 
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Quite a clever cop-out, to assert that they (in congress) all do it, when the discussion surrounded WHO, by name, supported the "sub-prime" mortgage lending laws that led DIRECTLY to the housing bubble and need for the bail-outs. Barney Frank led the charge and MOSTLY liberals wanted these housing lending law changes in the name of "fariness" and "helping minorities" get more into the home ownership market. After the mess that it created (the housing bubble) finally collapsed, the cry was that "greedy bankers" caused it, not that well meaning liberal politicians, who simply failed to see (or intentionally ignored) that lending money to those very likely unable to repay it was at the root of the problem. The next, very similar case, is with gov't backed student loans; I predict that bubble will soon burst as well.
Links?

Or is this just copy/paste from a right-wing website?
 
Partisan blame - when it's true - doesn't bother me in the least.

The Republican Congress wanted to let the banks merge and Clinton signed the bill. That doesn't change the facts of the situation now, does it?!? The banks pushed for that change or Congress wouldn't have given a rats ass. It was a mistake that needs correcting as quickly as possible.

I don't know what the other crap you posted is about. The Pres pulls the strings at Freddie/Fannie as much as anyone. He also pulls the strings at the SEC.

WOW. So now we change the subject to an entirely different banking law change (conveniently involving the GOP congress), rather than stick to the point at hand, adding the "sub-prime" mortgage lending laws, which was done by a demorat congress.
 
Once more it is naive to think government and big business have a very incestuous relationship. (remember the 'conservative' stink over Obama using lobbyists/consultants in his administration?) While it is possible to find a needle in a haystack as well as a good fed chairman, treasury sec, chief of staff who never worked for a major corporation/financial institution/stock brokerage house/shadow banking firm/ you get the idea....

Academics, consumer advocates, people other than entrenched big Wall Street banks. The folks generally pulled to man those positions come from a handful of large Institutions that don't really represent anything other than the interest or views of a small minority of bankers in the US.
 
WOW. So now we change the subject to an entirely different banking law change (conveniently involving the GOP congress), rather than stick to the point at hand, adding the "sub-prime" mortgage lending laws, which was done by a demorat congress.
I'm sorry, what are those links again - I seem to have missed your first posting.


I was talking about merging investment and savings banks. If that didn't happen the rest wouldn't matter.


And, yes, when financial instruments are improperly rated then laws have been broken. When banks are promoting instruments while shorting them then there's a conflict of interest - generally illegal.
 
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We had just such regulation PRIOR TO the legalization of "sub-prime" mortages. This "private" industry is regulated as much, if not more, than any other, and with good reason. You can not have it both ways here, either the regualtions were changed for the worse (as I assert) or the banks broke the law (as you seem to assert). I wonder who is rght?
I have pointed out that a large portion of the loans didn't need the change in regulations to allow them. The short sale house we hope to sign on today had a 1st and 2nd mortgage. We are pretty certain that the second was used to buy a 'new' car. It was granted not because it was legalized or required by law, but rather because the 'bank' thought the value of the house was going up over the term of the loan. I'm sure there were rewards, e.g. bonuses at the bank for getting the loans. This is positive feedback on a time base that is not long enough for actual control. No regulation change was needed to allow the 2nd mortgage. I suspect that no regulation change was needed for the first. It was the second that pushed the seller over the edge.
 
Quite a clever cop-out, to assert that they (in congress) all do it, when the discussion surrounded WHO, by name, supported the "sub-prime" mortgage lending laws that led DIRECTLY to the housing bubble and need for the bail-outs. Barney Frank led the charge and MOSTLY liberals wanted these housing lending law changes in the name of "fariness" and "helping minorities" get more into the home ownership market

Why do you put fairness and helping minorities in quotation marks? Redlining is real and it's been shown countless time that minorities from certain areas were discriminated against. When credit history, income etc were accounted minorities were less likely to get a loan and when they did get a loan were at higher rates. This has been a major issue since the 60's.
 
Links?

Or is this just copy/paste from a right-wing website?

Wikipedia "sub-prime mortgage crisis" is the most comprehensive and least politically biased link that I can offer (for now). ;-)
 
There is a significant federal regulatory system already in place for banks and investment houses. Has been since the beginning of our nation. Every time the government builds a mouse trap, the mouse gets smarter and figures his way out, leading the government to design and build an improved mouse trap, rinse, repeat.

A series of politicians wanted to make it easier for Americans to own their own homes. Surprise, they went overboard and opened the flood gates a little too far. The housing bubble was as a result of some (good intentioned? greedy?) politicians who mis-designed the regulatory environment to allow more homes for the people. At the very least, they all should have been fired on the spot and replaced, as it is, we're trying to fix the problem with the same crop of fools who created the problem.
 
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Then you simply made a bad bet, nobody to blame for it but, yourself. If a deal sounds too good to be true, then it usually is. Many buy bad "investments" but that is simply salesmanship. 15% of the folks will not ever buy anything new, 15% of the folks will buy darn near anything and the rest (70%) is simply salesmanship. ;-)

You're sorry I made a bad bet? I sold, FISBO, our Phoenix house near the peak (Some commercial property also, but that was another winning bet.) As we purchased another in Michigan from a distressed stupid seller, a pawn shop owner, where house values didn't bubble up much. Then we have purchased two homes in the Phoenix area for far less than construction costs. The one we are closing on this week has gone up about 8% over our offer, about 7 weeks ago, that beat 12 others. And today's value is still way less than today's construction cost for the same home. We now have 3 homes for the approximately the amount we sold one for.
 
There is a significant federal regulatory system already in place for banks and investment houses. Has been since the beginning of our nation. Every time the government builds a mouse trap, the mouse gets smarter and figures his way out, leading the government to design and build an improved mouse trap, rinse, repeat.

A series of politicians wanted to make it easier for Americans to own their own homes. Surprise, they went overboard and opened the flood gates a little too far. The housing bubble was as a result of some (good intentioned? greedy?) politicians who mis-designed the regulatory environment to allow more homes for the people. At the very least, they all should have been fired on the spot and replaced, as it is, we're trying to fix the problem with the same crop of fools who created the problem.

Good post. We are going down that same road, paved with equally good intentions, for student loans now. The prevailing gov't logic is that more is better in nearly every area, with special gov't "help" being offered for those that can not afford any "good" thing. We somehow "know" that green/alternative energy is "good" so that is the next big push for gov't "stimulus". The gov't must eventually learn, from repeatedly getting burned, that "venture capital" and "helpful" regulation (artificially slow down fossil fuel use and production) are not going to "git-r-done" and simply allow the private market and real "experts" to slog along on the tried and true path that has made this free, capitalist country accel in the past. By rewarding and subsidizing failure (welfare), or trying to push for future "next generation" magic technology (green/alternative energy), funded through the taxation of current success, is not the magic gov't bullet that will get us "forward". The vast majority of our great technological leaps were not gov't initiated, but resulted from the direct, or byproducts of, private industry attempts to improve things to gain competitive advantage.
 
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Wikipedia "sub-prime mortgage crisis" is the most comprehensive and least politically biased link that I can offer (for now). ;-)
Everything I see in there is how I remember it - nothing new for me. I have no clue what kind of "sub-prime legislation" you are talking about and I've read quite a bit of stuff surrounding this issue. It would take a full-time job to read it all, so I'm no "expert", but I've never read anything about these "sub-prime mortgage lending laws" you've been yakking about ---- so cough up with the links because Wiki isn't backing up your claim. In fact ...

Although a number of politicians, pundits, and financial industry-funded think tanks have claimed that government policies designed to promote affordable housing were an important cause of the financial crisis, detailed analyses of mortgage data by the Financial Crisis Inquiry Commission, Federal Reserve Economists, and independent academic researchers suggest that this claim is probably not correct. Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations.
 
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I can agree with that. My whole thing is, if the government doesn't entangle itself where it shouldn't be in the first place, **** like these bailouts wouldn't become a necessity.
The bailouts were not a necessity, we could have suffered through it much more without the bailouts. The reward systems in business operate much faster than the screw-ups become apparent. We can operate in a 'natural' unregulated environment that oscillates significantly, or we can try to regulate to reduce the magnitude of of the oscillations. Note that with the unnatural introduction of computers and the internet we have a system that has a feedback loop time that beats the physical world. Building is faster but slower than what computers are allowing. New regulation is very slow.
 
There is a significant federal regulatory system already in place for banks and investment houses. Has been since the beginning of our nation. Every time the government builds a mouse trap, the mouse gets smarter and figures his way out, leading the government to design and build an improved mouse trap, rinse, repeat.

A series of politicians wanted to make it easier for Americans to own their own homes. Surprise, they went overboard and opened the flood gates a little too far. The housing bubble was as a result of some (good intentioned? greedy?) politicians who mis-designed the regulatory environment to allow more homes for the people. At the very least, they all should have been fired on the spot and replaced, as it is, we're trying to fix the problem with the same crop of fools who created the problem.
That system had been in place and working just fine for 30 years under three different presidents before GB and his "let the banks govern themselves" policy came on the scene. Let business run itself and it's like a stampede - this time right over a cliff.
 
Everything I see in there is how I remember it - nothing new for me. I have no clue what kind of "sub-prime legislation" you are talking about and I've read quite a bit of stuff surrounding this issue. It would take a full-time job to read it all, so I'm no "expert", but I've never read anything about these "sub-prime mortgage lending laws" you've been yakking about ---- so cough up with the links because Wiki isn't backing up your claim. In fact ...

Surprise of all surprises, the gov't claims that the gov't is not at fault, and can prove it using gov't data. LOL.
 
The bailouts were not a necessity, we could have suffered through it much more without the bailouts. The reward systems in business operate much faster than the screw-ups become apparent. We can operate in a 'natural' unregulated environment that oscillates significantly, or we can try to regulate to reduce the magnitude of of the oscillations. Note that with the unnatural introduction of computers and the internet we have a system that has a feedback loop time that beats the physical world. Building is faster but slower than what computers are allowing. New regulation is very slow.

I meant perceived necessity. I forget that vocal tone doesn't translate well with text.
 
Surprise of all surprises, the gov't claims that the gov't is not at fault, and can prove it using gov't data. LOL.
If you don't trust government financial data - and I mean BLS, IRS, etc type data - then you're completely gone as far as talking about ANYTHING financial in this country. Everyone trusts the government numbers because in most cases the government is the only entity that collects that kind of data.


But, hey, you don't have to take my word for it. I got that from YOUR link, not mine. I asked for YOUR link and you provided one. Don't cry to me about it being bias, wrong, or anything else - it was YOUR link!
:lamo
 
[x] They should be allowed to fail.

An entire 10 page thread and only one person with serious common sense :) (ok - there were a few more)

But the notion that they're *too big to fail* is merely a myth conjured by said CEOs, politicians, and the unfortunate individauls who were laid off. But *why* were they believed to be 'too big to fail'

It's not that they were *too big to fail* - it's that thet grew *so big like a fat vine on a tree that they had no where else to go but down when they folded a smidge* . . . like a house of cards.

Why did 'they fail' - was it because they weren't capable of supporting theirselves? No - regardless of what people say, that's not it. Most businesses that folded or risked folding had grown to this enormous size BECAUSE They were quite capable - and then that's when they got full of theirselves and topheavy.

1) Poor management - instead of providing a cusion for ails in the future - they padded the pockets of their CEO's
2) Instead of staying reasonably-sized and relatively controlled - they grew to match a fat, prosperous market - so when the market slimmed (coupled with the previous issue) they sort of doomed theirselves.
3) Too many towns relied on one single source of revenue to support them - towns and counties can encourage varied growth in many ways; failure to do so leaves a small town solely reliant on one source.

These are the three real main factors. . . the overall source of the problem. . . .everything else is sidelined - completely unrelated - or in and of itself it's own 3-point issue (politics, government, etc)

Businesses fold all the time = when a furniture store closes another business will pick up some of those few remaining customers and benefit. . . meanwhile = being out 5 employees, no one's really thinking that they were *that important* . . . size matters in this issue - and too big = will fail if handled improperly.
 
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Everything I see in there is how I remember it - nothing new for me. I have no clue what kind of "sub-prime legislation" you are talking about and I've read quite a bit of stuff surrounding this issue. It would take a full-time job to read it all, so I'm no "expert", but I've never read anything about these "sub-prime mortgage lending laws" you've been yakking about ---- so cough up with the links because Wiki isn't backing up your claim. In fact ...

The Communities Reinvestment Act didn't really have that much effect on the Mortgage Bubble. It allowed Clinton to put the pressure on lenders to make more loans to minorities and individuals who were marginally qualified, but there were 2 bills enacted, which actually caused the crash.

1. The Gramm–Leach–Bliley Act ------ Basically the law that stipped the Glass Steagall Act, which was enacted as a result of banking, market practices that led to the Great Depression

And another Bill Sponsored by Gramm

2. The Commodities and Futures Modernization Act of 2000 ------ This law virtually wiped out all regulations on the Derivatives markets. As of now its estimated to be somewhere in the neighborhood of $500 Trillion (world-wide) in shaky derivatives.

And these laws are still very active and all that happened to cause the crash is in the process of happening again. Why? Because the banking, market, and insurance industries now own our government. If they didn't then the crash wouldn't have occurred. And if when they crash again...we'll be forced to pick up the tab again. It's called Corporate Welfare.
 
Everything I see in there is how I remember it - nothing new for me. I have no clue what kind of "sub-prime legislation" you are talking about and I've read quite a bit of stuff surrounding this issue. It would take a full-time job to read it all, so I'm no "expert", but I've never read anything about these "sub-prime mortgage lending laws" you've been yakking about ---- so cough up with the links because Wiki isn't backing up your claim. In fact ...


Your reading was rather selective then, since the paragraph IMMEDIATELY preceeding your quote gave you the answer. Here is MORE of the SAME "causes" section (from MY source) that you cleverly "cherry picked" your quote from the middle of:

In 1982, Congress passed the Alternative Mortgage Transactions Parity Act (AMTPA), which allowed non-federally chartered housing creditors to write adjustable-rate mortgages. Among the new mortgage loan types created and gaining in popularity in the early 1980s were adjustable-rate, option adjustable-rate, balloon-payment and interest-only mortgages. These new loan types are credited with replacing the long standing practice of banks making conventional fixed-rate, amortizing mortgages. Among the criticisms of banking industry deregulation that contributed to the savings and loan crisis was that Congress failed to enact regulations that would have prevented exploitations by these loan types. Subsequent widespread abuses of predatory lending occurred with the use of adjustable-rate mortgages.[44][120] Approximately 90% of subprime mortgages issued in 2006 were adjustable-rate mortgages.[3]

Although a number of politicians, pundits, and financial industry-funded think tanks have claimed that government policies designed to promote affordable housing were an important cause of the financial crisis, detailed analyses of mortgage data by the Financial Crisis Inquiry Commission, Federal Reserve Economists, and independent academic researchers suggest that this claim is probably not correct.[1] [121] Community Reinvestment Act loans outperformed other "subprime" mortgages, and GSE mortgages performed better than private label securitizations.

Increasing home ownership has been the goal of several presidents including Roosevelt, Reagan, Clinton and George W. Bush.[122] In 1995, the GSEs like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income borrowers.[123] In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.[124]

From 2002 to 2006, as the U.S. subprime market grew 292% over previous years, Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion per year, which included $350 billion of Alt-A securities. Fannie Mae had stopped buying Alt-A products in the early 1990s because of the high risk of default. By 2008, the Fannie Mae and Freddie Mac owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the total U.S. mortgage market.[125]
 
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