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  • #76
    Originally posted by slick_miester View Post

    Here's a true story, from ten years ago: one of my wife's cousins worked for a big financial firm that had purchased a great deal of consumer debt. They were stunned to see the sheer numbers that were in arrears. A typical call sounded something like this:

    Bank: I see that you're behind in your new car payments.

    Buyer: Yeah, well I fell behind on my mortgage and my dog got sick, so I fell behind.

    Bank: I see that you borrowed to purchase a very expensive pick-up truck. In fact, it listed at more than twice your annual income, according to your loan application.

    Buyer: Yeah, I couldn't pass it up. The dealer was offering Zero down, Zero% for the first 24 months.

    Does one really need a PhD in Finance or Economics to know not to borrow to buy a $50,000 truck when you're only pulling $22,000 gross -- and you still have a home to pay off on top of it?

    Back then I posted a long yawner about all the folks who made out in the run-up to the housing bubble bursting: bankers, insurers, car manufacturers, real estate agents -- but also labor unions, teachers, local and state and Federal politicians, various social service outfits, pensioners and future pensioners -- not to mention millions of Joe Schmo's. When the money was flowing, everybody stuck his hand out, and not a one of 'em said "please turn off the spigot." It was only when the flow dried up that they all started to b*tch and point fingers -- but as long as cretins like our aforementioned minimum wage debtor was driving around in a shiny new truck all was fine and dandy. I don't see guys like that as victims, as if of fraud, but self-serving morons, in that they'll gladly remain fat and happy as long as the dough is rolling in, but they won't for a single minute consider the possibility of a downturn, much less prepare themselves for it. I can't sympathize with that brand of stupid.
    But here is the difference between the person you describe and the real fat cats...
    When the downturn comes, he will lose his car. On the other hand, all the guys who earned millions for selling loans or for making stupid bets at Wall Street on loans sold to people like him will retain their wealth.
    My most dangerous mission: I landed in the middle of an enemy tank battalion and I immediately, started spraying bullets killing everybody around me having fun up until my computer froze...

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    • #77
      Originally posted by pamak View Post

      But here is the difference between the person you describe and the real fat cats...
      When the downturn comes, he will lose his car. On the other hand, all the guys who earned millions selling loans to people like him will retain their wealth.
      1) That guy deserves to lose his car -- and probably a whole lot more;

      2) actually, a few fat cats did go down the toilet. They didn't know how to manage risk, in the financial sense. What do you think that credit-default swap jazz was about? The moment before the bubble burst, because burst, because credit-default swaps has been so run up, the US' debt-to-equity ratio was estimated to be something on the order of 30-to-1. That mean that for every dollar that was owned outright, sixty were owed. Only an a$$hole failed to see the burst.

      And in financial services, there were a lot of a$$holes -- just like everywhere else. I knew a few of them personally.

      But back to that guy who lost his truck: because he didn't have great resources in reserve, he was all the more obliged to be more prudent. Being poor is not license to be stupid. By any definition, I'm fairly well-off financially. While I can no doubt easily afford to, I've never owned a new car. I;ve always bought used. They tell you in high school that a new car is a poor investment, that it depreciates the moment you drive it off the lot. A dumba$$ from one of Brooklyn's nastiest slums knew that way back when. It's unfathomable that others can get away with feigning ignorance. Don't borrow more than you can pay back. Don't borrow for non-capital items. Don't incur more debt when you're struggling to pay current debt. Does any of this require some kind of special genius? I bet when your folks came from Greece, they were both ignorant as sh*t, and tight as a snare drum with a dollar. Somehow they sent your dumb a$$ to college on nothing more than the income generated by a friggin' coffee shop.

      Alright, I dove into stereotype there ( ) but surely you get my point: millions of people with only minimal educations and minimal incomes managed to lead reasonably comfortable lives without drowning in debt. You and I both know that none of them were magicians. Why is basic fiscal prudence nowadays viewed as Divine Wisdom?
      Last edited by slick_miester; 20 Sep 18, 15:59.
      I was married for two ******* years! Hell would be like Club Med! - Sam Kinison

      Comment


      • #78
        Originally posted by slick_miester View Post

        1) That guy deserves to lose his car -- and probably a whole lot more;

        2) actually, a few fat cats did go down the toilet. They didn't know how to manage risk, in the financial sense. What do you think that credit-default swap jazz was about? The moment before the bubble burst, because burst, because credit-default swaps has been so run up, the US' debt-to-equity ratio was estimated to be something on the order of 30-to-1. That mean that for every dollar that was owned outright, sixty were owed. Only an a$$hole failed to see the burst.

        And in financial services, there were a lot of a$$holes -- just like everywhere else. I knew a few of them personally.
        1 I agree

        2.Way more fat cats (in fact the vast majority) did not go down the toilet despite their practices which destabilized the whole economy. Other times, it was only the companies that went down the toilet while their CEOs were exiting with golden parachutes worth more than the life earnings of the average American family. If the system "punishes" such people in such way, and greed pays off no matter the consequences, they will continue to abuse the system even if they are smart enough to see the upcoming burst.

        p.s. I cannot recall a single person that went to prison for practice like offering risky loans to clients (often without even checking their income level) and then betting against them at Wall Street...
        Last edited by pamak; 20 Sep 18, 16:07.
        My most dangerous mission: I landed in the middle of an enemy tank battalion and I immediately, started spraying bullets killing everybody around me having fun up until my computer froze...

        Comment


        • #79
          in continuation of the above

          https://www.investopedia.com/terms/n/ninja-loan.asp
          What is 'NINJA Loan'

          A NINJA loan is a slang term for a loan extended to a borrower with "no income, no job and no assets." Whereas most lenders require the borrower to show a stable stream of income or sufficient collateral, a NINJA loan ignores the verification process.


          My most dangerous mission: I landed in the middle of an enemy tank battalion and I immediately, started spraying bullets killing everybody around me having fun up until my computer froze...

          Comment


          • #80
            Yes, it's a form of predatory lending. So is a loan shark. I see little difference between the two types. I chuckle at Montel Williams hawking Money Mutual....another predatory loan scheme.

            And yet, all of these loan schemes like that go to my point, that being that what we in America consider poverty today, ain't poverty if you judge it by anything less than decadence. I work the low-income side of town, I'm in the trailer parks every day. And I've spent time in impoverished countries. One thing that strikes me is that the poor in the US in general meet the standard of living of lower middle to middle class in non-western countries. Yes the rich got richer......the poor got richer too. You can talk about income inequality all you want as if it's a magical boogeyman and capable of being corrected by executive or legislative fiat. But unless you're incredibly high, you can't tell me that what passes for the average of 'poverty' in 2018 is in any way related to poverty in 1988 or 1998. The 'poor' in 2018 have a standard of living that's equivalent to what the working class or lower middle class in the US had in the 80s. They have televisions, DVD players, smartphones, cars for every driver in the household, need I go on? Wealth was created.....and the 'poor' have some. Only a fool would think that the rich would or could remain stagnant while the poor advanced.....wealth is being created.....it was created across the board.

            To bring it full circle on the predatory loans. Those companies bank on 2 things. 1) That the people getting the loans are bad at managing their finances. 2) That the people getting the loans have money or assets that can be seized to pay the finance company. They wouldn't loan money if they knew they weren't going to get it back. They're making money hand over fist because there's a class of people in the US who both have money and don't know how to manage it. I would argue that it is the immaturity, irresponsibility, and ignorance of this particular class of people that makes them otherwise appear 'impoverished' to our decadent eyes. Man it's sad you're getting evicted for the third time and your car ran out of gas because you can't afford it......oh, wait, you're wearing 200 dollar shoes, 75 dollars worth of hair and nails, on your third pack of 6 dollar cigarettes today, and bought a flatscreen TV. Maybe, just maybe, your poverty isn't a lack of funds.....maybe it's a personal problem.

            Are there the truly impoverished? Sure. They're rather hard to find unless you know where to look (some of the homeless guys on the corner takes home more than a firefighter does in the same day). But is being broke and being impoverished the same? No.

            Tacitos, Satrap of Kyrene

            Comment


            • #81
              Originally posted by TacCovert4 View Post
              Yes, it's a form of predatory lending. So is a loan shark. I see little difference between the two types. I chuckle at Montel Williams hawking Money Mutual....another predatory loan scheme.

              And yet, all of these loan schemes like that go to my point, that being that what we in America consider poverty today, ain't poverty if you judge it by anything less than decadence. I work the low-income side of town, I'm in the trailer parks every day. And I've spent time in impoverished countries. One thing that strikes me is that the poor in the US in general meet the standard of living of lower middle to middle class in non-western countries. Yes the rich got richer......the poor got richer too. You can talk about income inequality all you want as if it's a magical boogeyman and capable of being corrected by executive or legislative fiat. But unless you're incredibly high, you can't tell me that what passes for the average of 'poverty' in 2018 is in any way related to poverty in 1988 or 1998. The 'poor' in 2018 have a standard of living that's equivalent to what the working class or lower middle class in the US had in the 80s. They have televisions, DVD players, smartphones, cars for every driver in the household, need I go on? Wealth was created.....and the 'poor' have some. Only a fool would think that the rich would or could remain stagnant while the poor advanced.....wealth is being created.....it was created across the board.

              To bring it full circle on the predatory loans. Those companies bank on 2 things. 1) That the people getting the loans are bad at managing their finances. 2) That the people getting the loans have money or assets that can be seized to pay the finance company. They wouldn't loan money if they knew they weren't going to get it back. They're making money hand over fist because there's a class of people in the US who both have money and don't know how to manage it. I would argue that it is the immaturity, irresponsibility, and ignorance of this particular class of people that makes them otherwise appear 'impoverished' to our decadent eyes. Man it's sad you're getting evicted for the third time and your car ran out of gas because you can't afford it......oh, wait, you're wearing 200 dollar shoes, 75 dollars worth of hair and nails, on your third pack of 6 dollar cigarettes today, and bought a flatscreen TV. Maybe, just maybe, your poverty isn't a lack of funds.....maybe it's a personal problem.

              Are there the truly impoverished? Sure. They're rather hard to find unless you know where to look (some of the homeless guys on the corner takes home more than a firefighter does in the same day). But is being broke and being impoverished the same? No.
              Excellent points.

              I have similar experiences in dealing with the poverty-stricken going back to the early 80s, and yeah, they may be at the bottom, but the bottom has moved up from where it was when I started.

              Has anyone mentioned Rent-to-own among the predatory?

              Those guys make Mob loan sharks look like civic pillars.
              Any man can hold his place when the bands play and women throw flowers; it is when the enemy presses close and metal shears through the ranks that one can acertain which are soldiers, and which are not.

              Comment


              • #82
                Originally posted by pamak View Post

                1 I agree

                2.Way more fat cats (in fact the vast majority) did not go down the toilet despite their practices which destabilized the whole economy. Other times, it was only the companies that went down the toilet while their CEOs were exiting with golden parachutes worth more than the life earnings of the average American family. If the system "punishes" such people in such way, and greed pays off no matter the consequences, they will continue to abuse the system even if they are smart enough to see the upcoming burst.

                p.s. I cannot recall a single person that went to prison for practice like offering risky loans to clients (often without even checking their income level) and then betting against them at Wall Street...
                The bony finger of accusation was leveled at the financial services industry holding to traditional criteria, for keeping credit too tight, for not extending loans to those deemed poor risks. And now they're blamed for lending too loosely. Bankers will only extend credit if they feel confident that they'll be covered in case the loan goes south: the borrower's collateral, credit-default swap aka insurance, or a loan guarantee. Fannie Mae and Freddie Mac (F&F) were founded to mitigate risk by guaranteeing home mortgages extended by traditional lending institutions with US Treasury funds. The caveat was that those mortgages had to meet F&F's requirements. Beginning in 1993, in an effort to expand home ownership to those traditionally denied mortgages by traditional lenders employing traditional lending practices, the Clinton administration initiated a series of policy changes meant to loosen credit in favor of those traditionally marginalized demographics. One of the most vocal advocates in favor of looser credit was former Massachusetts Congressman and ranking Democrat on the House Financial Services Committee Barney Frank.

                "I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation."

                (PDF) Laudable Goals and Unintended Consequences: The Role and Control of Fannie Mae and Freddie Mac. Available from: https://www.researchgate.net/publica...nd_Freddie_Mac [accessed Sep 21 2018].
                https://www.c-span.org/video/?c46314...fety-soundness

                Affordable home ownership is clearly a desirable goal. Towards that end F&F had operated under close supervision for many years. For both laudable and crass reasons, political players like Frank moved to loosen F&F's supervision. By so doing, they extended to lenders greater promises of risk mitigation, ie loans turning south. Without those promises, those loans would not have been extended. Lenders would have remained within their traditional, restrictive, parameters.

                Here's how far the deregulation of F&F unbalanced the whole scheme of the secondary mortgage market:

                As a result of that aid and the explicit federal guarantee, Fannie Mae and Freddie Mac were able to continue channeling funds to the mortgage market, even as private financial institutions were faltering. Consequently, in 2009, the two GSEs owned or guaranteed roughly half of all outstanding mortgages in the United States (including a significant share of subprime mortgages), and they financed three-quarters of new mortgages originated that year. Including the 20 percent of home loans insured by federal agencies, such as the Federal Housing Administration (FHA), more than 90 percent of new mortgages made in 2009 carried a federal guarantee.

                https://www.cbo.gov/publication/21992#section0
                - emphasis mine

                Smart bankers are usually too smart to risk their own money. They much prefer to risk other people's money. Starting in the 1990s, the Federal Gov't gave money away, with fewer and fewer strings attached. Had they not, then credit would not have loosened, and politicians counldn't boast to their constituents how their policies made their constituents' home ownership possible. So if someone should land in jail, Prisoner No 1 should be Barney Frank.
                I was married for two ******* years! Hell would be like Club Med! - Sam Kinison

                Comment


                • #83
                  Originally posted by slick_miester View Post

                  The bony finger of accusation was leveled at the financial services industry holding to traditional criteria, for keeping credit too tight, for not extending loans to those deemed poor risks. And now they're blamed for lending too loosely. Bankers will only extend credit if they feel confident that they'll be covered in case the loan goes south: the borrower's collateral, credit-default swap aka insurance, or a loan guarantee. Fannie Mae and Freddie Mac (F&F) were founded to mitigate risk by guaranteeing home mortgages extended by traditional lending institutions with US Treasury funds. The caveat was that those mortgages had to meet F&F's requirements. Beginning in 1993, in an effort to expand home ownership to those traditionally denied mortgages by traditional lenders employing traditional lending practices, the Clinton administration initiated a series of policy changes meant to loosen credit in favor of those traditionally marginalized demographics. One of the most vocal advocates in favor of looser credit was former Massachusetts Congressman and ranking Democrat on the House Financial Services Committee Barney Frank.



                  https://www.c-span.org/video/?c46314...fety-soundness

                  Affordable home ownership is clearly a desirable goal. Towards that end F&F had operated under close supervision for many years. For both laudable and crass reasons, political players like Frank moved to loosen F&F's supervision. By so doing, they extended to lenders greater promises of risk mitigation, ie loans turning south. Without those promises, those loans would not have been extended. Lenders would have remained within their traditional, restrictive, parameters.

                  Here's how far the deregulation of F&F unbalanced the whole scheme of the secondary mortgage market:

                  - emphasis mine

                  Smart bankers are usually too smart to risk their own money. They much prefer to risk other people's money. Starting in the 1990s, the Federal Gov't gave money away, with fewer and fewer strings attached. Had they not, then credit would not have loosened, and politicians counldn't boast to their constituents how their policies made their constituents' home ownership possible. So if someone should land in jail, Prisoner No 1 should be Barney Frank.
                  All bankers play with other people's money, and this is why their greed can be so dangerous in an environment in which there are no consequences for their actions. There are only consequences for the guys who earn minimum wage.

                  It is too simplistic to put the whole blame on a single person or a single institution, when the crisis involved many things unrelated to FF such as the underground (meaning unregulated )market of synthetic CDOs and the sorting (betting) that went out of control.

                  Moreover, affordable housing and FF has nothing to do with NINJA ,loans that were sold to people who were not vetted properly by people who were just interested in getting fat bonuses? FF did not force the private sector to sell such loans. On top of that , the data show that the private lenders were the drivers of the subprime market

                  https://www.forbes.com/sites/stevede.../#7d7141edf92f

                  It is clear to anyone who has studied the financial crisis of 2008 that the private sector’s drive for short-term profit was behind it. More than 84 percent of the sub-prime mortgages in 2006 were issued by private lending. These private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year. Out of the top 25 subprime lenders in 2006, only one was subject to the usual mortgage laws and regulations

                  ...



                  Fannie Mae and Freddie Mac market share declined. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06. More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

                  Moreover, one cannot point at Frank or anybody else to dismiss the fact that banks were betting against their own clients since they knew that they were selling them shitty products.

                  https://www.independent.co.uk/news/b...s-1953406.html
                  Goldman 'bet against securities it sold to clients'

                  US Senate panel condemns investment bank and releases damning internal emails by its officials


                  https://www.nytimes.com/2009/12/24/b...24trading.html

                  Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.



                  If you want to see a good documentary about the financial crisis and the developments in the banking sector, PBS has an excellent one. It interviews the "founders" of the exotic banking products such as CDOs and synthetic CDOs and tracks their development starting from the 1980s and the development of the credit default swaps. It also shows how they remained unregulated up until the financial crisis with the blessing of all politicians, and that of Alan Greenspan who was adamant against regulations.

                  Here is the link for the first part












                  Last edited by pamak; 21 Sep 18, 11:45.
                  My most dangerous mission: I landed in the middle of an enemy tank battalion and I immediately, started spraying bullets killing everybody around me having fun up until my computer froze...

                  Comment


                  • #84
                    ^ Pamak: during the '90s I was working at a major investment retirement firm, then a non-profit, very closely tied to teachers' unions and Democratic political figures. What I saw on my employer's balance sheet alarmed me, and I reported my findings and my conclusions to my superiors, who roundly laughed, and then in very professional terms told me to shut the f*ck up. I knew which way the wind was blowing, so it was pointless for me to take my data to any outside party. While my timing was clearly off -- by ten years -- I was definitely right about the ultimate outcome. No body -- and I mean no body -- wanted to hear that a growing share of the industry's balance sheet was junk. Indeed, a lot of very powerful people wanted to discourage Cassandra's like me -- guy's like Barney Frank, and others, as well. They succeeded. The only way that my account can be dismissed is if one's partisan interests take precedence over reality.

                    I'm not poking at you, and I readily apologize if I made you feel that way. It's just that few people realize what economics is. Economics is not so much about dollars and cents, but as Dubner and Leavitt put it, how people respond to incentives. If such-and-such an item becomes fashionable, those who have the means to produce it will encounter a new incentive. If rubbing yourself with poison ivy makes you sick and covers you in rashes, then you're incentivized to avoid poison ivy.

                    Believe me that I really want to continue this conversation, but duty calls, so please be patient and await the rest of my Nobel winning response.
                    Ευχαριστώ τον φίλο μου για την υπομονή σας.
                    I was married for two ******* years! Hell would be like Club Med! - Sam Kinison

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