Horrible News: Lehman Brothers Bankrupt and Merrill Lynch bought by BAC

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Originally Posted by Koga No Goshi

Pointing out that both parties have received money from Freddie and Fannie falls a little flat if you can't show that the Democrats have ceaselessly worked for deregulation of the financial markets just as the Republicans have. There's blame on both sides but to pretend that the blame is equally bipartisan despite the Republicans basing their whole ideology around free market deregulation and the Democrats basing theirs around responsible protection of American workers and accountability together with a robust marketplace, is just like Wall Street privatizing the profits of operating off the books and then publicizing the liabilities and making the taxpayers cough up a bailout. It's a crooked equation.

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You seem gleefully unaware of the existence of Barney Frank... among other democrats who played key roles in the current situation. :dizzy2:

You gotta love the land of the free.

Can't get a job because blue collar manufacturing has been dissassembled and moved to China? Can't survive and feed a family on the money that the mall will pay for casual staff? You're a scrounging low-life and the few thousand a year you claim on welfare is bringing the country to it's knees.

Pi55ed away the entire economy by inflating an economic bubble that made you and all your cronies multi-millionaires? Well that's serious and *requires* collossal public money and a comfy seat on the board of whatever "non-partisan" (read as: don't worry boys, we'll all get a cut so play nice) committee that will oversee it all.

This my org friends is capitalism. When unemployment and the depression really hit in 2 years - you just wait to see how the unemployed are villified.

The first article I've read on this subject that made any sense.

[Global Insight] just released an economic forecast that assumes Congress does nothing:

Although the U.S. financial crisis is bringing sweeping changes to Wall Street, parallels to the Great Depression are overblown. The U.S. economy is far more resilient today, thanks to income support policies, federal deposit insurance to prevent banking panics, and flexible exchange rates. From 1929 to 1933, real GDP contracted 27%, prices fell 25%, and the unemployment rate climbed from 3% to about 25%. Even in our pessimistic alternative forecast, the peak-to-trough decline in real GDP is just 1.5% and the unemployment rate peaks below 7.5%.

Me: I'm sorry. Spending $700 billion (which is really $2.5 trillion since you are borrowing the money) to stop a recession—no worse that what we saw in 1990-91 (one quarter of -3 percent growth and one quarter of -2 percent growth) or even 2001 (one quarter of -1.4 percent growth)—seems nutsy. If they want to get this thing passed, Paulson and Bernanke better be more explicit about the risks.

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Originally Posted by Idaho

This my org friends is capitalism. When unemployment and the depression really hit in 2 years - you just wait to see how the unemployed are villified.

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Equality industry is to blame, not capitalism, or do you think banks like loaning money to people who can't pay it back? They had to because of the Carter administration. Bravo, way to go.

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Originally Posted by Fragony

Equality industry is to blame, not capitalism, or do you think banks like loaning money to people who can't pay it back? They had to because of the Carter administration. Bravo, way to go.

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The problem is that the banks thought that the rising prices for real estate would cover their risk sufficiently.
If banks beleive the risk is limited they will be very keen on loaning money to customers with a lower credit rating as they will charge them a higher interest rate.
The second issue was that further "selling" these loans to other banks who thought they would make a great deal they rather multiplied the risk instead of minimizing it.

The "equality industry" might have to take part of the blame - pure greed is responsible for a good chunk of the blame though.

BTW, you also see a trend here in Germany that banks are offering loans equivalent to 100% or even slightly above the value of a house (20 years ago banks would not have done such a thing).
The banks certainly were not forced to do so - they do so because the want to get the business and the higher interest rates, thinking that they have the risk under control - which now turns out to be a mistake, at least in some countries.

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Originally Posted by Sasaki Kojiro

Well you're right in that this isn't the election thread and I was treating it as such. When it comes to voting obviously degree of crookedness is important.

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Thank you. Lets keep this thread about the crisis and how it happened/how we can fix it. Maybe we can learn something. If you feel the urge to rip into Obama (who most likely had little to nothing to do with it) or McCain (who doesn't focus on economic policy) - shoot it over to the election thread unless it directly applies.

I just don't beleive that this is a Republican or Democrat issue - it has resulted from the gluttonous failure of the US financial system and political short sightedness.

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Originally Posted by Ser Clegane

The problem is that the banks thought that the rising prices for real estate would cover their risk sufficiently.

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Mistake yes but out of all mistakes the most forgivable, let's not forget what really happened here, disastrous government interevention into something that needs to be unregulated to function properly.

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Originally Posted by Fragony

Mistake yes but out of all mistakes the most forgivable

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I guess we have to agree to disagree on this one. Please keep in mind that a number of banks went down the gutter not primarily for giving the actual loans but because they thought they could make a lot of quick money with asset backed securities based on these loans.
Greed - and too much money on the market from investors that were not happy with single digit returns on their investment.

I can only imagine the fun sound-bites we would be getting now if Ron Paul was the GOP nominee at the moment. :bounce:

To add one point:
The greed was not just on the banks' side - certainly also a lot of people who took the loans to buy a house they realistically could not afford are to blame.
If you make such a big investment you should not just rely on what the bank is telling you what you can afford but perhaps also take the time to sit down and to realistically calculate what you can really afford without making wild assumptions about how things will only go up in the next 20 years...

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Originally Posted by Ser Clegane

I guess we have to agree to disagree on this one. Please keep in mind that a number of banks went down the gutter not primarily for giving the actual loans but because they thought they could make a lot of quick money with asset backed securities based on these loans.
Greed - and too much money on the market from investors that were not happy with single digit returns on their investment.

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Fair enough I guess, but do bear in mind that company's need a steady cashflow and have to make due when presented with insecurities, and they got mightily burdened by the restrictions that got slapped on them. Government should have sticked at what they do best, doing poorly, and stop summoning what they can't control.

The greed was not just on the banks' side - certainly also a lot of people who took the loans to buy a house they realistically could not afford are to blame.

Yes. Good thing I could run to daddy when I made the same mistake.

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Originally Posted by Fragony

Mistake yes but out of all mistakes the most forgivable, let's not forget what really happened here, disastrous government interevention into something that needs to be unregulated to function properly.

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:yes: In the US, you had GSEs, which are inherently anti-free market, buying up and repackaging lousy mortgages -giving them the appearance of being government backed- with approval and even encouragement from their supporters in congress.

Unsurprisingly, investment banks and other financial institutions eagerly bought up these repackaged mortgages, thinking them a sure money-maker. And banks eagerly made mortgages to unworthy debtors, knowing that Fannie/Freddie would take the mortgage off their hands.

I've seen more people driving mercedes benz and BMW over the past 5 years than ever before in the entirety of my life. I know that they can't afford it. If you lied or through ignorance took out loans that you could not afford to pay back, I understand the temptation of salesmen, but you deserve to burn. You eat food you can't afford, drive a car you can't afford and live where you can't afford; you've slathered yourself in BBQ sauce and throw yourself on the grill. I have contempt for these people and feel sorry for thier kids.

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Originally Posted by TuffStuffMcGruff

I've seen more people driving mercedes benz and BMW over the past 5 years than ever before in the entirety of my life. I know that they can't afford it. If you lied or through ignorance took out loans that you could not afford to pay back, I understand the temptation of salesmen, but you deserve to burn. You eat food you can't afford, drive a car you can't afford and live where you can't afford; you've slathered yourself in BBQ sauce and throw yourself on the grill. I have contempt for these people and feel sorry for thier kids.

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Replace the word "people" by the word "nations" and we're all likely to roast soon.

Edit; sorry I'm back after two weeks of hollidays in my homeland, by the ocean (a trip in which I've burned much gas I can't afford...) And I'm really pleased to read about what you, US citizens, proud members of the most important communist country on earth (well, North Korea IS an important country but does not use a tenth of the money USA uses for communism), think about this marvellous events. Could everyone read TuffStuffMcGruff's post and replace the word "people" by the word "nations", please? He said everything I'd like to be able to say en anglais. Especially the last sentence: I'm sorry for our kids....

Stuff like this does not inspire confidence:

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Well then, by all means, allow us to hand you a bottomless budget and unchecked power. Who can resist such reasoning?

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Originally Posted by Fragony

Equality industry is to blame, not capitalism, or do you think banks like loaning money to people who can't pay it back? They had to because of the Carter administration. Bravo, way to go.

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Absolutely they loved it--- loan officers and banks took the commission fees, and then sold off the mortgage to someone else (most ended up owned by Freddie and Fannie.) They weren't getting rich off giving bad loans to people who couldn't pay them, they were just getting rich off the COMMISSION FEES for signing the loans, and then throwing away having to collect the loan itself.

I would not be entirely against some form of regulation that if a bank issues a loan, THEY have to be the one to collect it, unless the person who took out the loan chooses to refinance with another company. That would force banks to take responsibility for the loans that they give and not simply give a bad loan, knowing its bad, collect the commission fee and then dump the loan on the Feds or the taxpayer, ultimately. Which is exactly what happened in this case.

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Originally Posted by TuffStuffMcGruff

Thank you. Lets keep this thread about the crisis and how it happened/how we can fix it. Maybe we can learn something. If you feel the urge to rip into Obama (who most likely had little to nothing to do with it) or McCain (who doesn't focus on economic policy) - shoot it over to the election thread unless it directly applies.

I just don't beleive that this is a Republican or Democrat issue - it has resulted from the gluttonous failure of the US financial system and political short sightedness.

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I agree it's not a Democrat or Republican issue, with the caveat that Republicans have been insisting deregulation is the solution to all ills in the marketplace. So I think that Republican voters need to keep that in mind in light of all the crises--- NOT just this one, Enron and the energy scandals and many others are the direct result of this laissez faire ideology and I think the GOP has some soulsearching to do about whether or not they are going to continue to ideologically hardline on this, or admit that yes, uncontrolled marketplaces result in uncontrolled greed with zero responsibility. And change. If that doesn't happen, and people keep voting Republican, we're just going to see this go on, and on, and on.

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Originally Posted by Koga No Goshi

I agree it's not a Democrat or Republican issue, with the caveat that Republicans have been insisting deregulation is the solution to all ills in the marketplace. So I think that Republican voters need to keep that in mind in light of all the crises--- NOT just this one, Enron and the energy scandals and many others are the direct result of this laissez faire ideology and I think the GOP has some soulsearching to do about whether or not they are going to continue to ideologically hardline on this, or admit that yes, uncontrolled marketplaces result in uncontrolled greed with zero responsibility. And change. If that doesn't happen, and people keep voting Republican, we're just going to see this go on, and on, and on.

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I appreciate that you recognize this as a bi-partisan issue, but I don't know any Republicans who believe in de-regulation in the way you are referring. I know Republicans who want to remove or re-write crazy regulations that obstruct progress and are hypocritical (ie. the offshore drilling issue and other domestic energy supplies), but I don't know anyone who thinks that cooking books and selling criminally underestimated risk is a good idea.

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Originally Posted by TuffStuffMcGruff

I appreciate that you recognize this as a bi-partisan issue, but I don't know any Republicans who believe in de-regulation in the way you are referring. I know Republicans who want to remove or re-write crazy regulations that obstruct progress and are hypocritical (ie. the offshore drilling issue and other domestic energy supplies), but I don't know anyone who thinks that cooking books and selling criminally underestimated risk is a good idea.

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Well as far as voting Republicans, yes, you are probably right that the majority don't think things like safety regulations or fraud regulations are bad. But the leadership of the party, and the corporatists, and the elites, absolutely do believe that there should be no regulation and they don't believe it, I think, REALLY because they think the marketplace would be a utopia without regulation. I think that's an ideology piecemealed together after the fact to make the package look nice. I think it's really just a matter of big corporate owners don't like to have to spend money to make sure their factories don't put out 5x more pollution than they should be, or spend money on payroll taxes, or spend money doing credit checks when they want those commission fees, or ANYTHING that in any way gets in the way of making maximum short term profit. (There is ample evidence to believe that they don't care if the whole thing collapses tomorrow, they operate on a by quarter profits basis, look at all the CEO's who inflated stocks temporarily, parachuted out with multi-million dollar goodbye packages, and the company ran aground six months later.)

And regarding drilling, the oil companies are simply lying if they act like regulation is the reason they can't do more. They have millions of acres they could already drill on and AREN'T. Because exploration and finding the oil and setting up the infrastructure costs a lot of money. They have no vested interest in seeing America less dependant on foreign oil, they could care less, they barely refine any oil themselves anyway, they just distribute it. Oil being rare and high priced works in their favor, because it has inelastic demand. Now, if what you're implying is that companies should have to follow absolutely no safety or environmental regulations whatsoever (this is, incidentally, the reason that whole ridiculous Alaska Independent/Secession party exists, it is not a redneck organization, it is oil elites who want to break off so that they dont' have to follow Federal environmental regulations) then that I disagree with. But I think even if you got rid of those you would not see oil companies drilling much more than they are.

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Originally Posted by Koga No Goshi

Well as far as voting Republicans, yes, you are probably right that the majority don't think things like safety regulations or fraud regulations are bad. But the leadership of the party, and the corporatists, and the elites, absolutely do believe that there should be no regulation and they don't believe it, I think, REALLY because they think the marketplace would be a utopia without regulation.

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Who believes that? You are calling these people fiscal anarchists - these people who revere guys like Teddy Roosevelt for busting trusts and monopolies. These people who have dedicated their lives to the federal government and writing its laws are against protecting people and industry from natural and negative occurrences? I don't buy it. Republicans are not all financial libertarians - I am not one. I like balance and if that balance needs de-regulation, I seek it - if it requires new regulation, I favor that. I don't like our debt culture or irresponsible lending practices and I've always believed that variable rates in the way they've been implemented are corrupt and predatory in nature.

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Originally Posted by TuffStuffMcGruff

Who believes that? You are calling these people fiscal anarchists - these people who revere guys like Teddy Roosevelt for busting trusts and monopolies. These people who have dedicated their lives to the federal government and writing its laws are against protecting people and industry from natural and negative occurrences? I don't buy it. Republicans are not all financial libertarians - I am not one. I like balance and if that balance needs de-regulation, I seek it - if it requires new regulation, I favor that. I don't like our debt culture or irresponsible lending practices and I've always believed that variable rates in the way they've been implemented are corrupt and predatory in nature.

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We know they're not fiscal anarchists because look at them now. These were people who paid HUGE MONEY for deregulation and now are crybaby capitalists running for a bailout. No one is forcing a bailout on them. I see in this thread and others that Spino and other koolaid sippers are already trying to reinvent this as a Democratic idea. They are insisting the world is going to end without one. These are people who spend the last 30 years and millions of dollars paying lobbyists to get themselves deregulated. The Democrats didn't force deregulation on them. And then when they run the market into the ground suddenly all those laissez-faire, no government intervention! arguments cease and it becomes please, please sir, can I have some more? This is hypocrisy. And if you, personally, believe in regulation, you are a wise person. But you do not represent the leadership of your party or what they have been working for tirelessly for the past 30 years. You probably don't have 30 million a year to give to the Republicans for your agenda to get airtime in legislation. Wall Street did. :)

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Originally Posted by Fragony

Mistake yes but out of all mistakes the most forgivable, let's not forget what really happened here, disastrous government interevention into something that needs to be unregulated to function properly.

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Unregulated financialism was what got the world into this there was nothing wrong with selling debt to people who could not pay for it

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Originally Posted by Lemur

The first article I've read on this subject that made any sense.

[Global Insight] just released an economic forecast that assumes Congress does nothing:

Although the U.S. financial crisis is bringing sweeping changes to Wall Street, parallels to the Great Depression are overblown. The U.S. economy is far more resilient today, thanks to income support policies, federal deposit insurance to prevent banking panics, and flexible exchange rates. From 1929 to 1933, real GDP contracted 27%, prices fell 25%, and the unemployment rate climbed from 3% to about 25%. Even in our pessimistic alternative forecast, the peak-to-trough decline in real GDP is just 1.5% and the unemployment rate peaks below 7.5%.

Me: I'm sorry. Spending $700 billion (which is really $2.5 trillion since you are borrowing the money) to stop a recession—no worse that what we saw in 1990-91 (one quarter of -3 percent growth and one quarter of -2 percent growth) or even 2001 (one quarter of -1.4 percent growth)—seems nutsy. If they want to get this thing passed, Paulson and Bernanke better be more explicit about the risks.

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Keeping one very important part of the economic sector, namely banks alive is quite useful, unless you want a considerble depression and when handled properly the state will actually gain most of it back when they sell out the sanitasied parts that they took over originally.

Of course, considering the finincial record of the Bush adminstration, a blank check would probably cost the state $2-3 billions (that's trillions for your Americans ~;p ) and end up even worse off.

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Originally Posted by TuffStuffMcGruff

Who believes that? You are calling these people fiscal anarchists - these people who revere guys like Teddy Roosevelt for busting trusts and monopolies. These people who have dedicated their lives to the federal government and writing its laws are against protecting people and industry from natural and negative occurrences? I don't buy it. Republicans are not all financial libertarians - I am not one. I like balance and if that balance needs de-regulation, I seek it - if it requires new regulation, I favor that. I don't like our debt culture or irresponsible lending practices and I've always believed that variable rates in the way they've been implemented are corrupt and predatory in nature.

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That "free-market is holy" group in the goverment did show its face in the Iraqi rebuilding, so they are certainly existing and connected... That or they were unleashed to cover up some "friendly" profits, wich I guess would count as malice instead of stupidity.

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Originally Posted by Ironside

That "free-market is holy" group in the goverment did show its face in the Iraqi rebuilding, so they are certainly existing and connected... That or they were unleashed to cover up some "friendly" profits, wich I guess would count as malice instead of stupidity.

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Right. Almost everybody believes in the free market. The degree or ratio of freedom/not freedom is the real question.

I'm sorry to hear that some sort of compromise bill is being reported. I really, really don't want to see anything hasty thrown together here. I just want to grab the Congress, shake them by their collective shoulders and yell, "Don't just do something! Stand there!"

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Originally Posted by TuffStuffMcGruff

Right. Almost everybody believes in the free market. The degree or ratio of freedom/not freedom is the real question.

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Even if it's a minority, it's still the minority presently in control of the GOP, and since the Republicans don't exactly have a problem with revolts among their voting base (well except Harriet Meiers, which was really strange seeing as how no one seemed to mind any other ideological but completely inept Bush appointment) the distinction is rather meaningless. Pepole can say they disagree with x till the cows come home but if they keep voting for a cadre of elites who advocate the opposite, well...

(Edit: By minority I mean the "financial anarchists", or "crybaby capitalists" as you choose.)

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Originally Posted by Lemur

I'm sorry to hear that some sort of compromise bill is being reported. I really, really don't want to see anything hasty thrown together here. I just want to grab the Congress, shake them by their collective shoulders and yell, "Don't just do something! Stand there!"

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I would love to see that too. But don't forget that McCain is refusing to participate in the debates until a bill is reached. So basically democracy is being held hostage. ;)

The first waves of deregulation in the 80's were necessary. In the 70's we had lots of anti-competitive regulation. For example, airlines and trucking companies were not permitted to go wherever they wanted. There was price fixing. Farm quotas (you cannot plant more than x acres of wheat). And, many other stupid regulations. Here is an example of good deregulation.

http://en.wikipedia.org/wiki/Airline_Deregulation_Act

The system of regulation in Britain was even dumber. Maggie did a darn good job.

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Originally Posted by Koga No Goshi

I can see why Republicans always want to just insist to everyone that all the parties are all equally corrupt. It works in their favor, since by and large, Republican politicians and the GOP are MUCH more in the pockets and in line with the interests of large corporations and the ultra-rich than the Democrats are. So insisting over and over again that they're all equally corrupt and crookish lets the Republicans continue to do what they're doing while insisting it's nothing out of the ordinary, and no worse than their opposition party.

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Good thing I am not a republician then - I can blame all parties with equal contempt .

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Pointing out that both parties have received money from Freddie and Fannie falls a little flat if you can't show that the Democrats have ceaselessly worked for deregulation of the financial markets just as the Republicans have. There's blame on both sides but to pretend that the blame is equally bipartisan despite the Republicans basing their whole ideology around free market deregulation and the Democrats basing theirs around responsible protection of American workers and accountability together with a robust marketplace, is just like Wall Street privatizing the profits of operating off the books and then publicizing the liabilities and making the taxpayers cough up a bailout. It's a crooked equation.

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Explain the fillbuster of the Democratic Party against the attempt to do some reform to the two agencies back in 2005. However you are correct there is a very crooked equation being done in this situation, however the democratics dont base their efforts around protection of American workers and accountablity when one begins to look at which memeber of congress take money from which special interest groups.

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Are you a Nader supporter now? Because if you are, I fail to see why you are defending the Republican Party. You're not getting Sasaki's point apparently--- Republicans have always insisted that both parties are corrupt because it creates a general apathy, because low voter turnouts benefit Republicans running for office, and because they are far more corrupt and far more in the pockets of large corporate and elite interests than the Democratic party is, on the whole. Look at who Chevron and Exxon and Wal Mart are giving money to. Look at who has paid Wall Street lobbyists working in their campaign while calling himself a "reformer." As soon as McCain worked "drilling" into his campaign speeches the oil contributors quadrupled the money they were giving him. But I'm sure Obama, with his fancy talk about alternative energy and windfall profits taxes and such, is equally enslaved to big oil lobbyists right? He's just pretending.

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LOL defending the Republican party - not at all notice I said that they have a greater responsibility because they were in the leadership role, I refuse to give the Democratics a pass on their responsiblity in the creating the situation. One can point out how many democratics get big money contributions from Special Interests to include corporate interests also. Now as before if you want to discuss the candidates go to the election thread, To ignore the fact that both parties have a somewhat similiar and equal responsiblity in this mess is extremely naive, just like ignoring the fact that the crisis was started because of bad consumer debt in regards to mortages is a goofy stance to take.

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Yes yes, all equal same old same old, both sides are just as corrupt nothing to see here, there is no man behind the curtain.

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LOL someone is upset with the process - how funny. I find politicians are basically corrupt because I am a cynic that doesnt prevent me from casting my vote to whom I think has the best course for the country. Unfortunately for the United States no politican or government official has a solution that actually solves the issue - only delays it for another day.

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Originally Posted by Redleg

Explain the fillbuster of the Democratic Party against the attempt to do some reform to the two agencies back in 2005. However you are correct there is a very crooked equation being done in this situation, however the democratics dont base their efforts around protection of American workers and accountablity when one begins to look at which memeber of congress take money from which special interest groups.

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You really want to get into a list of who takes money from big corporations? Go look up even the most basic information about where most of McCain's money vs. where most of Obama's money comes from. And as for attempted reforms, in 2005 Congress was Republican controlled and they were still threatening vetoes and nuclear options left and right. They controlled Congress and you're blaming the Democrats for non passage of a regulation?

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LOL defending the Republican party - not at all notice I said that they have a greater responsibility because they were in the leadership role, I refuse to give the Democratics a pass on their responsiblity in the creating the situation. One can point out how many democratics get big money contributions from Special Interests to include corporate interests also. Now as before if you want to discuss the candidates go to the election thread, To ignore the fact that both parties have a somewhat similiar and equal responsiblity in this mess is extremely naive, just like ignoring the fact that the crisis was started because of bad consumer debt in regards to mortages is a goofy stance to take.

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Both have responsibility, Clinton did some deregulation too. Both parties have done deregulation. But it is still b.s. to say they're same same same everyone's equal blame. Deregulation is practically the religion of the right. Any argument that the Democrats are just as on board with the deregulation obsession as Republicans have been for the past 30 years is just absolute falsehood.

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LOL someone is upset with the process - how funny. I find politicians are basically corrupt because I am a cynic that doesnt prevent me from casting my vote to whom I think has the best course for the country. Unfortunately for the United States no politican or government official has a solution that actually solves the issue - only delays it for another day.

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Believing both parties are total crap so we might as well just make a superficial decision putting aside ideology and platform is the reason we had two terms of Bush. And that worked out GREAT.