POWIP Piece of Work In Progress

26Oct/0925

On the economy and causes of the housing bubble.

An intersting discussion of the fundamental nature of the US economy as well as some of the factors that brought about the current downturn.

Do you remember the mea culpa that Alan Greesnspan, Mr. Bernanke’s predecessor, delivered on Capitol Hill last fall? He said that he was “in a state of shocked disbelief” that “the self-interest” of Wall Street bankers hadn’t prevented this mess.

He shouldn’t have been. The looting theory explains why his laissez-faire theory didn’t hold up. The bankers were acting in their self-interest, after all...Think about the so-called liars’ loans from recent years: like those Texas real estate loans from the 1980s, they never had a chance of paying off. Sure, they would deliver big profits for a while, so long as the bubble kept inflating. But when they inevitably imploded, the losses would overwhelm the gains...

What happened? Banks borrowed money from lenders around the world. The bankers then kept a big chunk of that money for themselves, calling it “management fees” or “performance bonuses.” Once the investments were exposed as hopeless, the lenders — ordinary savers, foreign countries, other banks, you name it — were repaid with government bailouts.

Read the whole thing here.

 

But lest you think it's all on the greed-head bankers:

The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

Barney Frank's talking points notwithstanding, mortgage lenders didn't wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so - or else.

Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.

Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.

So there's plenty of blame for all parties involved.  But it's probably a safe assumption that the situation wouldn't have became so widespread and much smaller in absolue magnitude had the government not facilitated it through loose monetary policy and essentially mandated via CRA.

Do yourself a favor and read through the links.

Rocketman

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    • Bob Reed
      October 26th, 2009 - 20:21

      Great! So let me get this straight; the top 7 Tarp recipients will have their compensation reduced by 50%, with the salary components reduced by as much as 90%. But Freddie’s CEO get’s to keep on rolling in the dough. So I guess the fact that the FHA GSE’s are in recievership, saved from utter bankruptcy completely by the taxpayers doesn’t count as much against them as getting a loan from TARP…

      This is criminal. Just as GE, a company that has recieved one of the largest shares of bailout money, 140 billion in funds from Treasury, doesn’t seem to rate compensation reductions either-nor does Goldman Sachs…

      http://dealbook.blogs.nytimes.com/2008/11/12/fdic-to-back-139-billion-in-ge-capital-debt/?scp=2&sq=general%20electric&st=cse

      I guess there are advantages to being a big Obama supporter during the 2008 campaign…

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      • Huck Williams
        October 28th, 2009 - 03:22

        Yes there is, chicken-suited howler, just look at me!

        I was a big Obama supporter and I’ve no compensation reduction!

        You picked the wrong team!

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  2. President Mop
    October 27th, 2009 - 01:45

    thor states what dumb fucktarded hicks you all are regarding financial matters, and how russian whores who recite poetry won WWII in 5,4,3…

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  3. Huck Williams
    October 27th, 2009 - 10:15

    Fuck off, fucktard, Russia’s fallen angels can also recite sweeping passages of powerful verse from Tolstoyian length novels. You disposable plastic fuckin’ capitalist whore, how dare you belittle the economically disadvantaged opportunists of history’s oldest profession!

    Strange, Bob, how you cite so often from the legacy media once a agreeable hack’s opinion piece catches your eye.

    Politicizing the politicizing of FNMA, how quaint.

    Figure out what a CMO is yet?

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    • President Mop
      October 27th, 2009 - 10:32

      The winter weather had more to do with russia holding off the germans than the russians themselves. If germany was able to supply their troops, russia would have lost. But I’m sure you’ll be able to point to some jingoistic russian revisionist that has stated otherwise.

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      • Huck Williams
        October 27th, 2009 - 11:01

        Had nothing to do with the T-34 or the Goliath battle at Kursk.

        http://www.youtube.com/watch?v=o4gsuj_9u6c

        Feast your eyes on the prize, the T-34, ya poseur.

        The Russian winter weather, yup, and if the water in the N. Atlantic hadn’t a been there we’d have landed at Normandy without a casualty, yup, yup.

        You do genius poorly.

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        • agile_dog
          October 27th, 2009 - 12:51

          You, on the other hand, don’t do genius at all.

          The winter weather held up the germans long enough for the russians to get the glorious T-34 (it was the best battle tank of WWII) into action. The germans having to fight (or prepare to fight) wars on both fronts (three fronts if you count North Africa different than Europe) didn’t help them either. Just how much were the russian fighting the japanese at this time? What battles of the Pacific were there between these two countries after 1939?

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        • Huck Williams
          October 28th, 2009 - 03:16

          Do you believe winter lasts for three years in Russia?

          And if you knew beyond your asshole you’d know it was the Springtime mud that was most responsible for bogging down the German mechanized divisions.

          The Russians defeated Hitler and the Wehrmacht. America defeated the Japanese.

          Get reality straight, poodle snapper.

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    • Bob Reed
      October 27th, 2009 - 10:41

      I cited the NYTimes to give the story more credibility with the nay-sayers. A lot of other outlets ran it, but it’s extra “in yo’ face” if so blatant that the NYTimes has to run it…

      I know what a CMO is…

      Any opinion on “Exorbitant Executive Compensation !1!1!!eleventy” at FNMA or GE?

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  4. Huck Williams
    October 27th, 2009 - 11:08

    I believe I posted about the CEO pay at FNMA back in the day when DC was just getting his ire up.

    I’m really not into baby-talking about FNMA, GNMA or the FHLMC.

    It was neither Bwawney Fwank on a broomstick nor the CRA that caused these entities capital to diminish as it did. It was the reduction of housing prices. A fairly mathematical affair to some and a wispy fairy tale of enemy politics to others. I’m of the math persuasion.

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  5. Cowboy
    October 27th, 2009 - 11:53

    I read a book by a Russian once.

    I think Russian literature is long-winded. And sad. But mostly long-winded.

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  6. Huck Williams
    October 27th, 2009 - 12:05

    Try Chekhov.

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  7. agile_dog
    October 27th, 2009 - 12:52

    Try Chekhov

    Citing Star Trek characters? Figures. :-)

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  8. Loki
    October 27th, 2009 - 13:21

    My goodness, whore is still hallucinating about the Soviets winning WW II?

    Dude, seek professional help.

    And learn some history

    Really.

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  9. Loki
    October 27th, 2009 - 13:23

    “I read a book by a Russian once.

    I think Russian literature is long-winded. And sad. But mostly long-winded.”

    Robert Heinlein’s wife Ginny once studied Russian, just so she could read the original, thinking that the translations were too depressing and sad to be accurate.

    Turned out it was 100 times worse in the original.

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  10. President Mop
    October 27th, 2009 - 13:56

    There must be a study determining a direct correlation between the extended time of blowjobs from russian whores, and telling them their grandfathers won WWII.

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    • Huck Williams
      October 28th, 2009 - 02:50

      Maybe your grand daddy told you what you wanted to hear while you went down on him.

      Psst, to spill it in your mouth he’d have told you anything, sonny boy.

      Hahaha, wanna take a swing at me, sonny boy?

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  11. Cowboy
    October 27th, 2009 - 18:17

    . . . oh, and boring. Long-winded, sad, and boring.

    Russian literature is all like Sinclair’s *The Jungle*–except for the happy, fun parts like when the kid drowns in a mud-puddle.

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  12. Cowboy
    October 27th, 2009 - 19:17

    Yes, P.M.!

    And, by the way, about your #15–you left out UNDERAGED “russian whores.”

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