You seem to like Harvard profs and think deregulation are the cause of the meltdown, try Walliison on the GSEs or this Miron on meltdown Let's face the evidence is overwhelming, the Federal government, esp. the GSEs with reckless mortgage lending, ACORN and similar "activist" groups and the Fed pumping out money in 2003-2005 caused this problem, NOT a law passed by Congress and signed by Clinton.
This BS has been the Big Lie by Obama and his enablers in Congress. The entire criminal bunch are merely trying to cover up their own guilt. Add to that the stupid statements from Dodd, Frank and, yes, Paulson, stating that the GSEs were in fine shape and it adds up to a conspiracy worthy of a RICO suit. NO company could get away with such nonsense.
Apparently of the 18 banks in the world rated AA+, Australia has four. That is comforting, especially since one of them is looking after my superannuation.
NATIONAL Australia Bank will take a $100 million hit on its cash earnings this year, as the fallout from its exposure to damaged US sub-prime assets intensifies.
The bank revealed last night that it would hedge the counter-party risk of its $1.6 billion synthetic CDOs exposure held in its conduit portfolio.
Quote:
However, the bank has surprised many by insisting that its entire $4.5 billion portfolio - made up of collateralised debt securities backed by corporate, property and private equity loans - remains sound, despite the global market for these instruments crashing...
NAB has already flagged full year write-downs of about $1.01 billion on holdings of asset-backed securities linked to the US housing market.
I have no idea what 'synthetic exposure' means but a CDO is Collateralized Debt Obligation (unregulated packages of US mortgage debts) and one can google the opaque and nefarious instruments yourself.
Its a nest of vipers.
I was reading today that the $700B is Paulson's 'estimate' based on 5% of mortgages failing. What if 10% or 15% fail? Paulson has been wrong on every call, why is he right this time?
Last edited by Track Coastal : 1st October 2008 at 05:17.
Absolutely. If 10% of mortgages fail instead of 5%, the brown stuff hits the rotating air distribution device anyway and the tax payer is left holding a $700B hole.
On CNBC last night at around 0230 local (1230 in NYC) a number of alternatives were aired in how to write these 'toxic assets' off (I do love these new terms that come out every 10 years or so everytime a w*nker banker gets caught with his hand in the cookie jar), including some directly from the SEC and get LIBOR on the move.
However, Mr Goldman-Sachs-Paulson still favours the bailout.
Here is a laugh on some irony, on Milton Friedman's 90th Birthday in November 2002, apparently Blackhawk Bernanke said...
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
Perhaps, just perhaps, Bush and the evil Republicans aren't entirely to blame for the current financial mess!!
Below is a copy of the NY Times Article from 1999 which announces the program which almost ten years later has us in this mess. Note that the mess was forseen.
Fannie Mae Eases Credit To Aid Mortgage Lending By STEVEN A. HOLMES Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders. The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring. Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans. ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.'' Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market. In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's. ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped. Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings. Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites. Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent. Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings. In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
The four pillars of Reagan's economic policy were to:[1]
1. reduce the growth of government spending, 2. reduce marginal tax rates on income from labor and capital,
3. reduce government regulation of the economy,
4. control the money supply to reduce inflation.
(Emphasis added)
If the shoe fits, wear it. (Don't forget the two wars and DHSecurity in reagrads to #1)
Chimbu, thanks for the link. Courtesy of today's Crikey you will find almost the exact sentiments being expressed in cartoon form here.
But I am still lost as to how the ultimate crisis would manifest itself, just as I was mystified when New York went "bankrupt". A public company goes bust, it disappears from sight, leaving behind lots of rueful investors who misread its prospects. (I suspect I'm in the middle of one of those happenings now). New York can't just disappear?
I suppose footage of the Great Depression is the ultimate answer; no jobs, no money, no welfare, mass despair, suicide, increasing crime etc. But that was nationwide and worldwide; while NY was having its more recent problems, lots of other parts of America, let alone the rest of the world, were going hell for leather. What happens when a city economy goes bust? Not much, from reports we received here; life just seems to go on. That article doesn't explain it, neither does my reference to the cartoon.
I find it difficult now, (as no doubt did people in 1928), to imagine worldwide financial chaos, but I suppose from a purely Aus-centric pov if China and India go into their shells and demand for our resources stops, who knows?
In case it escapes your notice, the "free markets" are crashing and the same people that have spent millions (if not billions) on the propaganda that convinced you of the soundness of their theory are now running to the government for a bailout. The "Masters of the Universe" have become Socialists.
Propaganda you say ? Yes, propaganda. From the popular (with the right-wing-Free Marketeers) POWERLINE blog. Note the date.
August 08, 2005
That Hissing Sound Is Krugman
" It must be depressing to be Paul Krugman. No matter how well the economy performs, Krugman's bitter vendetta against the Bush administration requires him to hunt for the black lining in a sky full of silvery clouds. With the economy now booming, what can Krugman possibly have to complain about? In today's column, titled That Hissing Sound, Krugman says there is a housing bubble, and it's about to burst:"
"Krugman thinks the fact that James Glassman doesn't buy the bubble theory is evidence in its favor, but if you read Glassman's article on the subject, you'll see that he actually makes some of the same points that Krugman does. But he argues, persuasively in my view, that there is little reason to fear a catastrophic collapse in home prices.
Krugman will have to come up with something much better, I think, to cause many others to share his pessimism."
What say you Barit ? -- " Paul Krugman is demolished almost daily by Donald Luskin."
What say you Galaxy ? -- "... the hack Krugman.."
For the undecided or just curious, I recommend reading Paul Krugman's blog -- daily. (At least while this crisis is on) He has The Flick. I would recommend you to start with this one if you're looking for an alternative to the bailout.
Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."
"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon."
"The farther backward you can look, the farther forward you can see."
Look, I hate to appear absolutely mercenary, as though money were the only thing that mattered. I mean, given the events of the last week, heaven forbid. But where are all the free marketeers who kep dredging up stats like McCain 60% and a winner in 40+ states when it comes to putting their money where their mouth is?
Come on guys, gambling is the ultimate free market! Tax free and good fun. I'm getting embarrassed about how easy this money is, to the point where I'll offer you a shade of odds. How does 5/4 against sound for McCain? If you want to bet more than $1000 I'll even increase the odds to 6/4.
McCain cannot win. He has come out of this whole banking business looking a complete loser, Obama hasn't had to do anything.
Just PM me if you want a bet, there are enough people around here to vouch for me.
Noooo, you all have this horrible sinking feeling that I'm right, don't you, and that I've been right all along. Even if I'm not allowed to offer an opinion. I'm being a true Republican here, letting the market decide. How come none of the marketeers want to take me up on it?
Unemployment is rising (600,000 so far this year) with a new report due on Friday, Todays ISM manufacturing index report...
Quote:
A key measure of the nation's manufacturing activity fell in September to a nearly seven-year low, nearing a benchmark that indicates a recession, a purchasing manager's group said Wednesday.
The Institute for Supply Management's (ISM) manufacturing index fell to 43.5 in September, down from the August reading of 49.9. It was the lowest reading since the 40.8 measure in October 2001, the month following the terrorist attacks on New York and Washington.
Economists were expecting a reading of 49.5, according to a consensus estimate compiled by Briefing.com.
The tipping point for the index is 50, with a reading below that indicating contraction in factory activity. A reading below 41 marks a recession. The index has hovered around the 50 mark for the past 12 months, with an average of 49.6.
The USA is entering recession, the floating unregulated debt is now rumoured to be a quadrillion (thats 15 zeroes). I still can't see how this bailout to cover 5% of shitty mortgages is going to fix a looming crisis of far bigger proportions..
Default swaps on U.S. bonds have been bought and sold for at least four years, says Simon Mott of CMA DataVision. But the market is still little known. One prominent trader in U.S. debt, when asked about swaps on Treasurys, expressed surprise and started asking co-workers, "Did you guys know that there are credit default swaps on U.S. bonds"? (The other traders seemed to know, though one could be heard saying "it's the biggest joke" in the background.) U.S. government issues are not the only sovereign debt covered by swaps. Large banks such as JPMorgan Chase (JPM, Fortune 500) will match swap buyers and sellers for, say, U.K. debt or Icelandic government bonds.
Isn't the US system organised so that 50% of members of both houses are voted in every two years (for a four year term), to avoid the situation we have with the Westminister system where 100% of members face their electorates at the same time, which theoretically, if not practically, could result in a whole new cast of characters in one hit? It also avoids a complete rout for one party should a single issue be at the forefront (like a major economic meltdown?) at the time of an election.
Wiley-
What you were given was mostly correct, but not entirely.
House members (Congressman/woman, Representative, Member of Congress, M.C. are other names, the last seldom if ever used these days) of which there are 435-ish in total (lower house), stand for reelection every two years (even years on the calendar). They're the ones whose electoral votes in highly populated states make presidential candidates salivate... on account of there's more of 'em in those places. You probably knew that part, but some people don't.
Senators (who technically are also congressmen/women, members of Congress but aren't called that... asked about why that was in grammar school and was told to 'hush'... suspect now it's simply to avoid confusion...) are elected for six year terms. About 1/3 of them are up every two years. There are 100 in total and their electoral votes are evenly distributed about the fifty states, just as they are. Periodically, places like U.S. territories or Washington D.C. rise up and ask why they don't have Senators... it's because they aren't states. When territories realize what a pain in the neck it would be to become a state and how little they would generally benefit from doing so, they usually wind their necks in until they forget about that part and do it again.
Seldom (if ever) will both senators in a single state be up in a given year, though I don't know if there's a rule about it. I think at one time I probably knew the rules if a Senator keels over while in office, but no longer. Massachusetts would probably be the place to watch if you're curious about this. Vultures from both sides of the aisle are no doubt even now circling the offices of the senior Senator from the Commonwealth. Hawaii may be soon after, though there is nothing I've heard regarding the health of either of the Democratic Dans, they're just ancient. Massachusetts and Hawaii are both virtually a lock for Democrats to be voted back in if the incumbent slips his cable, but the power balance on the committee level will shift anyway due to the seniority system. Some people spend a lot of time on this. In any given two-year election cycle, about 87% or so of the whole lot of Congress are up for election, but most House members do indeed get reelected for numerous terms (I believe the percentage is lower for freshmen... who tend to get bounced out a bit easier), so House members essentially spend at least half of their time campaigning for reelection, Senators not quite so much... unless they're running for president or they are considered important in their party and someone ELSE in their party is running for president, which is essentially continuous for our purposes.
I think so. I believe that this is one of the few things constitutionally that need to be changed. All elected officials serve four year terms, half stand for reelection on general elections and the other half on the non-general election years. Term limits for all offices.
Presidents can only serve two terms, so why not everybody else?
Seldom do I disagree with you, con-pilot, but I think we already have term limits for everyone. They're called voters. If we elect someone really great, why limit the benefit of their service? If they're bad, or have sold out to the perks of office, it's in our hands to dispatch them.
Term limits were never discussed in the constitution, and some of the great leaders of the Republic didn't achieve that status, Webster and Clay for example, until they would have exceeded their term limits, had such limits been in place.
As for Obama's 5 point lead, Binoculars and others, even though I didn't anticipate the financial crisis would intervene to reduce the momentum of McCain/Palin, I wouldn't get too confident if I were you. Obama is trailing Kerry, Gore, Dukakis and Mondale versus their Republican opponents at this point in the election cycle. People start to come to their senses in October.
PM me about your current odds, Binos, I may be in the mood to press my position.
If we elect someone really great, why limit the benefit of their service? If they're bad, or have sold out to the perks of office, it's in our hands to dispatch them.
QED
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