Wow! That’s fucking brilliant! And here, all along, I thought the problem was that mortgages were being written based on unreasonably inflated housing prices. I thought the problem was that they were being written with exploding rates. I thought the problem was that they were being written to people who were already overextended and didn’t have much chance of paying them back. I thought the problem was that they were being written with unfair terms, and I thought the problem was that irresponsibly signing mortgage documents that left them margin for error.
But, no! All those mortgages were fine! The housing bubble had nothing to do with it!
It was all about “inventing new securities that are inadequately or not-at-all-backed.”
That’s the whole thing!
You are a fucking collossal twit. You are like Gonzomax level ignorant. Just fucking stupid. Jesus Christ.
I used to make and trade CMOs in the early and mid 90s. They evolved into CDOs and whatnot, so…
You’re fucking kidding me, right? C’mon. Be a LITTLE BIT fucking responsible for what you say. I know it’s the pit, but its no reason to just make up fucking lies. And, this is either a straightforward, or else you are just too stupid and lazy to give a shit and check out what you are saying.
How about a fact check?
This thread is about Bank of America. Off the top of my head BAC was about $50 a share and earned about $15 billion in 2007.
Today, they are about $6/share and they are on target to earn… nothing for the full calendar year of 2012.
So, that’s a 90% drop in stock price and a 15 billion dollar drop in earnings.
So… No. I would not really say the profits are on “the same level or trajectory.”
:rolleyes:
2009, 10, and 11 have sucked (as I’ve just demonstrated,) and I think we’ve already established that you have your head completely up your ass concerning CDOs and CDSs.
Indulging in such stupidity is what’s turned you into the hateful lit twit you’ve demonstrated yourself to be here.
You have demonstrated nothing but your own ability to pretend that the industry for which you work is a blameless group of saints.
As I said. It is my opinion that the primary driver for the entire subprime mortgage boom–and the timeline bears me out!–is financial sector greed-mongers discovering they could wrap up subprime mortgage shit in CDOs labeled “Grade AAA beef” and the markets would lap it up like a dog in front of a litterbox.
And your ad-homs are hilarious, considering YOUR conflict of interest in this matter is so large it can be seen from orbit (second only to your ego).
If you put aside 10 million dollars in loss reserves and only end up losing 5 million than you later book the 5 million you ended up not losing as a profit in a subsequent quarter.
Some of that is because a lot of these toxic CDOs ended up not being so bad when you looked at them without panic goggles on.
I thought you were familiar with GAAP, so you understand what it is you are looking at when you look at those #s, right?
Exactly what do you mean by Financial Sector in that report? Hmmm. BAC? Citigroup? Hmmm. Do you think that financial sector might include more than just evil banks trading evil CDOs?
Gonzo has opinions , too and they are about as informed. Interesting how you just totally ignored the substance of the argument.
Let me ask:
It’s all about “the People who made CDOs” who are to blame?
Not the people who sold irresponsible or usurious mortgages to people who could never pay?
Not to the people who signed their name to mortgages they couldn’t pay?
Not to HUD which was requiring 50% of mortgages to be written to those below median income in order to qualify to be packaged and guarranteed by FNMA and FHMC?
Not to Barnie Frank and Congress who said the current situation was not a bubble and that we don’t dare do anything to try to slow things down in '06?
A bubble in the housing market had nothing to do with it?
The government keeping rates artificially low in the wake of 9/11 and the 2001-2002 recession which allowed the housing and construction market to take off and become a bubble because that was the only thing stimulating the economy, that had nothing to do with it?
In your opinion it is just maybe like 100 guys that made some stuff up and sold it that took down our entire economy? Nothing else had anything to do with?
I am hateful. I am filled, to the brim, with hate.
I have been watching the greedy destroy this country in the name of better profits (for themselves) since I’ve been old enough to be aware of the larger world. And I was brought up as a rural, Catholic Republican in a swing state–I’ve been exquisitely trained in how to hate effectively.
The greedy fucks who destroyed my economy with half-assed trend-following venture capital? With shady, ill-backed, worthless securities that exist solely to generate profit for some fuckers in nice suits? The people who think a 15-20% profit growth rate is sustainable and desirable, while holding average wage growth in the low single digits?
Yeah, I have hate.
You’d better hope there aren’t a lot more like me out here, Scylla, because people who learn how to hate don’t make excuses not to vote.
For the record, I hate most of Congress too. But most of your examples were specifically people who were enabling a vast, unprecedented growth of subprime mortgages. The bubble wouldn’t have existed in housing without the demand created by vast numbers of new borrowers who were able to buy when they could not before.
Something was making those mortgage underwriters make all those subprime loans, Scylla. You’re telling me it WASN’T significantly based in the fact they could suddenly unload them because big finance had a new way of making them look like “not shit”?
As for HUD and Frank, you know as well as I do that if it wasn’t profitable to listen to them, the banks et al would have found some way to draw back the number of mortgages issued.
As for pinning any significant quantity of blame on the general public who signed these mortgages, that just makes me hate.
Let me tell you something–the general public doesn’t know jack and or shit about finance, law, or any number of specialities.
Up until the last couple of years, the average person who was wondering if he could afford a mortgage would go to the loan officer and mortgage consultant at his local bank, and say, “Hey, can I afford this house?” And that banker would smile, and ask a bunch of questions about income and outstanding debt and typical expenses, and give the person an answer that was reliable and honest–my dad got his last house mortgage this way, and I got mine that way last year (through a credit union). However, starting around 2002ish, that friendly neighborhood banker started all of a sudden saying “Yes, you can TOTALLY do a no-down-payment mortgage. ARMs are PERFECT for everyone! Absolutely, you can afford a $2,000 payment on a $40,000/yr salary! Housing prices NEVER go down!”
If I go to a lawyer, and he advises me incorrectly or fraudulently on a matter of law, do you hold me responsible or my lawyer? At least with a lawyer, you have a potential to have a pattern of interactions with them over several years to determine their skill and trustworthiness–with a mortgage officer, that’s what, once every five or ten years at most?
What I don’t get: there are tons of local bansk and credit unions who are doing jst fine-and they offer no-cost checking, and zero cost debit cards.
How are they able to do this? Simple-they sed prudent guidelines in lending-like reqiring people to put 20% down on a mortgage, and running credit checks, etc.
B of A wants its honest cstomers to pay for the sins of its management-I say, go to hell. Join a credit union, and let BofA roast in its own excrement.
Power corrupts, and money is power. How are we to insure that our credit unions and small banks don’t succumb to the same corruption? How do we make sure that our Organic Local Bank isn’t CitiGroup in a pony-tail wig and a tie-dye shirt?
Or at a level they could not before. What you have just said is true.
There were two factors. From 1995 through about 2005, the major factor was HUD which through Fannie Mae and Freddie Mac was getting subprime mortgages guaranteed. Because there was a requirement that a certain amount of mortgages needed to be written on individuals who’s median income was below 50% of National we ended up with this weird inverted market where a big mortgage written on a guy who couldn’t really afford it, or barely afford it was worth more to the bank and might actually get a lower rate than Dr. Beeper’s big old house that he could easily afford. It’s pretty complex, but for the time being just accept this is true to hear me out.
The reason this happened was because the government thought is was good both for the economy, and for underprivileged people in general to promote home ownership for the lower half of the income matrix.
In other words the government created this artificial demand for low end mortgages at low rates that was largely subsidized by the government and mortgages on wealthy people.
I can’t stress enough that this was absolute genius. It was a great situation for the bottom half of the income matrix, for the economy, and even the wealthy were getting a break out of the deal since the guarrantees by FNMA and FHMC allowed securitization and lower rates for them (not that they necessarily deserved or needed it, but it’s nice when everybody benefits.)
After 2001-2002 or so, it was feared that this housing boom was the main driver of the economy, the main thing keeping us out of a very bad recession or depression. So, even though things showed signs of heating up, the government actually accelerated the demand for the subprime mortgages through FNMA and FHMC. The economy got better and the housing market continued to improve.
This kept going this way until 2005 or so. Pretty much all the blame or all the credit can be put onto the government up to this point.
What we have is a somewhat overheated housing market, and a completely artificial market for subprime mortgages that has been created by the government’s mandates to FNMA and FHMC. Things are already looking bubbly in hindsight.
(I’m doing my level best here to give a good faith description of what happened. I’m simplifying some things, but the essential gist is accurate.)
At this point, somebody made a very interesting discovery. Here was this huge market for subprime mortgages that was guarranteeed by FNMA and FHMC, but if you thought about, and you were careful, and you were smart, you didn’t need these quasi governmental agencies to guarranty your mortgage pools, you could do it yourself, just as well, if not better!
The trick was that you could break up and combine other CMOs or CDOs in such a way as to guaranty what would otherwise be an extremely risky component. I’ll give you a made up example. Let’s say I can buy a 10 year zero coupon treasury for 50 cents on the dollar. If I put 5k into it I know I will absolutely get 10k back 10 years down the road, right?
Now though, I can use that to create a security. I can promise my investors that at the very least they will get their money back in 10 years. At best, they might make a fortune. What I do is I invest half in the treasuries and the other half in high risk high return securities.
Maybe you make a killing, but at least you get your money back and it’s guaranteed, right?
This is the way the early CDOs worked. The risky parts were guaranteed by the conservative parts and the return was much higher than the artificially low rates the government was holding to stimulate the economy.
These were complex combinations of mortgages, treasuries, credit default swaps, and various tranches of CMOS or GNMAs FNMAs fHMCs, but… they actually worked. They were real and they did what they said they would do.
They worked too well, so well the rating agencies rubber stamped anything like them without really checking. People had no fear of them, no skepticism. Finally, people stopped checking to see if they really were what they said they were.
This created opportunity for some bad securities to start creeping in since nobody was checking. And, they did.
When the market started to correct in August 2007, suddenly people started to check and become alarmed at how many of these securities weren’t really quite as good as they supposed they were. They started doing the due diligence now that they should have done before they bought, and they became alarmed.
The market crashed. It didn’t matter whether the CDOs were the good ones, or the bad ones. Suddenly, there was no market for them. Or, if there was, they were trading at 10 cents on the dollar.
These bad CDOs, bad CDS’, they weren’t a large part of the market. They didn’t have to be. Yes, they were stupid, fraudulent and probably criminal, and the agencies were culpable for failing to do their due diligence and letting them slide, but they weren’t and didn’t have to be a big part of the market. The market was already bubbly and primed to fail.
This in no way excuses the those that made the bad securities. But, in reality, they were just one piece of the puzzle in this issue that had been brewing for a decade or more. Sadly, there actions have poisoned the entire sector.
Yes. But they made sure it was profitable. Morthages that could be guaranteed got lower rates. If half of an institutions mortgages were from lower incomes than they could guaranty all of them, and all of them would qualify.
So, if you wanted to be a competitive provider of low rate mortgages to high end customers, you needed to make sure you were meeting your subprime quota as mandated by proxy by HUD.
See?
Well, if you sign something promising to do something that you are not going to do, or are incapable of doing, I think that you are fucking up and are too be blamed.
Caveat Emptor is a long standing legal tradittion. I don’t believe that a creditor should be predatory or take advantage of a lendee, but, at the same time, the lendee shares responsiblity for their own actions.
Well, I think your timing is off, but, essentially this is pretty accurate. Why did this happen though? Well, first you had the government creating this artificial incentive that made shitty mortgages really valuable.
Blame the government for that.
Next, you had Bankers and mortgage originators without scruples, who didn’t care, and who took advantage of people because of this incentive
Here’s the thing, though. Everybody was selling mortgages. Local banks, big banks, thrifts, credit unions, you name it… they all pushed this toxic shit on investors.
What’s insane is that you absolve the originators, the local banks, and only blame the big banks. There is a lot of guilt here to go around.
Next, you had the idiots who signed their names to mortgages that left them no margin for error. Again, I don’t beleive in predatory practices, but on the other hand people have a responsibility to pay attention and take care of themselves and no what they get into before they sign.
Your lawyer. He has a fiduciary relationship with you.
Nope, you got this wrong. The lawyer is a fiduciary. This is a different and pretty specific relationship that only applies in limited circumstances. A mortgage originator or loan officer is not a fiduciary.
So, when did you catch on? Was it a co-worker? “Gee, Scylla, I’m cashing some pretty fat checks on this crap, but its bad stuff, my ethical sense is challenged.”
Did you say anything to us about it, did you say something like “hey, if your pension fund is investing in any of these things, you should talk to them about it, tell them get out while the gettin’s good”?
And *caveat emptor *is crap. You wouldn’t accept that its ok for some guy to take your money because he’s bigger and stronger, why is it ok for him to rob you because he’s smarter? Its a good Latin phrase, another good Latin phrase is cui bono, who benefits? That money went into somebody’s pocket, it didn’t just go poof! gone! Whose?
You hasten to point out that there would be no jobs without the financial sector. Is that why they do it, a sense of obligation, a need to do good for the working stiff? Back in The Day, a lot of people went to law school to “work within the system for change”. Does this same idealistic sense of moral good motivate our recent crops of bright young MBA’s?
You are eager to dilute the blame down to a point where, for all practical purposes, it ceases to exist, its all just a big ol “oopsy-daisy!” “Well, you shouldn’t have signed those papers, you fucked up, you trusted us, its your fault, too!”
Seriously? Cui bono, Scylla. Who benefited? Who spoke up? Were you a whistle-blower? Know anybody who was? If you do, what became of them? And what of us, what are we becoming? France is chefs and painters, Ireland, poets and singers, Italy is opera. America is salesmen.
No. Everything I did and I was involved in was proper. That’s why I still have a job. I don’t even know anybody that did anything wrong, besides Stan O’neil. And, he should be in jail instead of rich and on Alcoa’s board.
But hey, sometimes the guilty need to walk away with 100 million and a seat on the Board of Directors of fortune five hundred companies, right?
Now, that’s kinda funny. On the attack, you never use a rifle when a shotgun is handy, you fire off fifty pellets as if you expect someone to catch and return each and every one. Asked a series of uncomfortable questions, you answer the one you want to, and change the subject.
Lehaman Brothers. I think you said. So, the reason they sank was because they were too morally strict, then? And you still have a job because the industry fired all the miscreants? Even the ones who were bringing in buttloads of money? And billions of dollars turned to shit, and you never knew a thing about it?
Well, then, what good was all your education and experience, if you were just as big a dupe as the people who lost their shirts? Never had a clue? Not an inkling, nobody said word one about it to you? You offer a detailed and exculpatory analysis of what happened, but while it was happening, you knew nada?
Perhaps when you offer us expert advice, wouldn’t we be wise to keep that in mind? All of that hard work and education, and you didn’t know D for diddly squat.
I think you give yourself a lot of credit to say that I found your questions “uncomfortable.”
Yeah. I left Lehman in '93
Like I said, I left Lehman in '93
THis is cute. How small do you think the world is? Do you think there is like, you know, 5 of us in the financial services industry and we all know each other?
You find it difficult to believe I worked in the industry but wasn’t aware of any fraud?
You either miss the point or evade it. You offer your expertise as authority, you call people idiots and fools for not deferring to that authority, and yet, pressed to it, you knew nothing about it, happened on a different planet, so far as you are concerned.
You offer us a story at odds with the more common narrative, and claim your own expertise as authority, and then turn around and tell us of a pristine innocence and ignorance. Having a hard time understanding how you can so blithely claim two contradictory propositions to be incontrovertible fact, and all who say otherwise are stupid.