Washington Mutual went under. Seized and sold.

[Fragony]

Dear holy baby Buddha and the nine incarnations, after all this there are still some people who think regulation is from Satan?

Regulation is what got you into this mess, if nobody had forced banks to loan money to people who can't pay it back none of this would have happened. You will just have to suck it up and get used to a more dynamic enviroment.

[Koga No Goshi]

Regulation is what got you into this mess, if nobody had forced banks to loan money to people who can't pay it back none of this would have happened. You will just have to suck it up and get used to a more dynamic enviroment.

You are off your rocker. Completely. The banks were forced to do NOTHING. This was greed and opportunism and reckless, unregulated speculation that the housing market was going to inflate forever. This was banks not even doing BASIC CREDIT CHECKS or verifying the income of anyone who walked in and said I make 400,000, give me a loan for that 680,000 dollar house.

You are, just.. wrong. I'm sorry but you are.

[PanzerJaeger]

You are off your rocker. Completely. The banks were forced to do NOTHING. This was greed and opportunism and reckless, unregulated speculation that the housing market was going to inflate forever. This was banks not even doing BASIC CREDIT CHECKS or verifying the income of anyone who walked in and said I make 400,000, give me a loan for that 680,000 dollar house.

You are, just.. wrong. I'm sorry but you are.

Again, look into how Barney Frank ran the Financial Services Committee, especially in respect to Fanny/Freddie.

[Fragony]

You are off your rocker. Completely. The banks were forced to do NOTHING. This was greed and opportunism and reckless, unregulated speculation that the housing market was going to inflate forever. This was banks not even doing BASIC CREDIT CHECKS or verifying the income of anyone who walked in and said I make 400,000, give me a loan for that 680,000 dollar house.

You are, just.. wrong. I'm sorry but you are.

That's the socialist triumph version, they weren't allowed to refuse a loan. Not even our crypto-communist government would come up with such a pearl of equality goodness.

[Koga No Goshi]

That's the socialist triumph version, they weren't allowed to refuse a loan. Not even our crypto-communist government would come up with such a pearl of equality goodness.

Dude.... sub prime lenders. Sub prime meaning less than prime. You go to your normal bank where you do checking and savings, and they would check your income and credit and expenses before giving you a loan.

Subprime: we give loans to people who really shouldn't have them. In fact lots of times we don't even check the numbers!

Subprime should not have even existed, if there had been regulation. Or it should have been MUCH more strictly structured in how it could give out loans to people who only marginally qualified. It most certainly should never have allowed any old company to give out loans and then pawn them off.

This was the banking equivalent of "convenient store medical treatment." With no one checking credentials or doing blood tests or anything. And it had predictably similar results.

[Fragony]

Dude....

Where's my money http://en.wikipedia.org/wiki/Community_Reinvestment_Act

poof

[Ice]

Dude.... sub prime lenders. Sub prime meaning less than prime. You go to your normal bank where you do checking and savings, and they would check your income and credit and expenses before giving you a loan.

Subprime: we give loans to people who really shouldn't have them. In fact lots of times we don't even check the numbers!

Subprime should not have even existed, if there had been regulation. Or it should have been MUCH more strictly structured in how it could give out loans to people who only marginally qualified. It most certainly should never have allowed any old company to give out loans and then pawn them off.

This was the banking equivalent of "convenient store medical treatment." With no one checking credentials or doing blood tests or anything. And it had predictably similar results.

That's exactly what happened. In fact, I want to share with you a simple stick figure play of how the entire thing started.

http://www.slideshare.net/guestd5ab5...ubprime-primer (A few bad words, but I think it's pretty good. My econ 351 professor takes credit for this. A class full of juniors and seniors found it pretty funny).

Anyway, I don't really care about the ideological aspects of the bailout. At the end of the time is it worth putting up a possible 700 billion to save the entire broad economy while opening up the possibility to actually make cash in the long term or do we say "screw this" and let everyone fail? I'd go with the former. I'm not sure many of you really understand how much some of these companies are intertwined in the overall economy.

[Xiahou]

Subprime: we give loans to people who really shouldn't have them. In fact lots of times we don't even check the numbers!

Correct me if I'm wrong. But they wouldn't have made those risky loans had Fannie/Freddie not been so eager to snap up those mortgages and repackage them.

So, a question:

If WaMu's bad paper (and a mini-run by depositors) made it "unstable" according to regulators, and JP Morgan could afford to fold WaMu's bad paper into its own operation - presumeably at something less than a net loss... do we taxpayers really have to still pump $700Bn of unearned cash into this system? Might the behind-closed-doors dithering on the bailout, actually have been a good thing, and that bailout now be moot? Might the market just correct itself (leaving shareholders flat, of course)?

Shhh, you can't ask questions like that.

[Fragony]

Anyway, I don't really care about the ideological aspects of the bailout. At the end of the time is it worth putting up a possible 700 billion to save the entire broad economy while opening up the possibility to actually make cash in the long term or do we say "screw this" and let everyone fail? I'd go with the former. I'm not sure many of you really understand how much some of these companies are intertwined in the overall economy.

Don't dismiss the ideoligy because it is basicly nationalising these banks that will be under firm governmental control, it's essentially creating a shadow government, 700 billion, good for us europeans, bad for you.

[Puzz3D]

Don't dismiss the ideoligy because it is basicly nationalising these banks that will be under firm governmental control, it's essentially creating a shadow government, 700 billion, good for us europeans, bad for you.

Exactly! The bailout is going to be bad for US citizens as the resultant inflation will devalue the dollar causing the standard of living to decline in coming years.

[Koga No Goshi]

Don't dismiss the ideoligy because it is basicly nationalising these banks that will be under firm governmental control, it's essentially creating a shadow government, 700 billion, good for us europeans, bad for you.

We've already got that. We've spent billions and billions and billions and billions off the budget on all kinds of unregulated contractors and mercenary corporations who are accountable to no one, least of all the taxpayers, in no-bid contracts. So don't get all dramatic acting like this is the barbarians coming over the 7th hill. You ideologues had no problem with shadow government and huge unaccountable spending for the last 8 years.

For the record, I'm against the bailout. But because I think the people who perpetrated this fraud- and unlike you, I do not consider them innocent victims of regulations they had to follow, it was JUST the opposite, taking advantage of a situation where there was insufficient regulation-- should not walk away pretty. Unfortunately I think the CEO's and execs already did, and now the only ones who will REALLY suffer if we don't do the bailout is our economy, and thus normal people who had nothing to do with the crisis, and perhaps low end employees of some bigger firms. So, this situation is already a we're screwed and lose-lose, whatever happens. Which is PRECISELY what happens in any environment of Rich Privilege and deregulation.

[gaelic cowboy]

Regulation is what got you into this mess, if nobody had forced banks to loan money to people who can't pay it back none of this would have happened. You will just have to suck it up and get used to a more dynamic enviroment.

No one forced the banks to lend they did this because some guy lets call him bob came on the wheeze of packaging debt for sale but it wasn't a case of like for like. Taking good solid debt packages from people who could pay they added in some medium risk and then some really risky ones this all gets chopped up packaged and repackaged till eventually the bubble of debt surrounding it is many multiples of the original.

Of course nobody now has a clue what is going on it and then it becomes a case of don't be Johnny last in the pyramid. This really comes down to having unsuitable interest rates as savings are eaten by inflation you must invest in equity with potential to grow however the lower the interest rate the bigger the equity gamble it must be to cover it. This in itself is not evil however possibly it should have been harder for banks to chop good bad and middling debt together and sell it the risk factor was obviously totaly wrong on these packages.

In engineering we learn that current flows through the path of least resistance so regulation has really merely diverted the flow of money into another area where it built up and eventually burst. However its wrong to say taking away all regulation would ease pressure on the system as a whole this runs into the problem that a market needs regulation to be free and fair. With out laws how can we sell a contract and be confident of payment in two years time how do we do any of the things we take for granted. People used to think that because Great Britain said it didnt interfere in business in the empire days it was true complete lies. Britains navy maintained safe oceans for trade it armies ensured stability for investment its laws allowed people to plan. Regulation is required the problem is we cant stop busts and we just have to realise that as time goes on the bigger the boom the bigger the bust simple really but painful in reality.

Regulation is what got you into this mess, if nobody had forced banks to loan money to people who can't pay it back none of this would have happened. You will just have to suck it up and get used to a more dynamic enviroment.

Banks are not forced to lend because thats number one a lie banks lent because they were chasing even more equity the key is return on investment not the amount made. If I invest ten thousand and make twenty my return is twice my initial stake this is where these NINJA loans and sub prime ideas looked good the amount seemed to suggest high return on investment. Then by selling it all supposedly the original bank was covered however as I already stated they sold it in a new form disguising it's risk or maybe they just didn't know cos it had been repackaged many times over. We must also remember sub prime does not mean unable to pay it means your not a proper person to lend to your not prime. This can be because of court judgments irregular working arrangements etc


appoligies in advance for my simplified ecomonic points I have a fair idea what going on but that seems to be all anyone has.

[Fragony]

Banks played their part, but if you don't want reckless behaviour you shouldn't shape odd conditions.

Social-enginering meet reality.

[gaelic cowboy]

Most likely the consensus in future times will be the Interest rates were too low for too long its likely Alan Greenspan will suffer hugely in terms of reputation for this debacle. Ecomonic theory would have suggested raising interest rates long before this happened but political reality demands low ones this disconnect between the economic reality and the political is the problem. This unfortnately cant be solved by less or more regulation as it is entirely a human problem.

[drone]

Banks played their part for sure. What many people fail to realize is that during the run, banks actually encouraged bad loans. This way they got paid for closing costs, took in a couple years of payments, then foreclosed on the home and sold it for even more money to the next sucker. A great business model all around, until the house prices stopped going up.

JP is loving life. They offered to buy WaMu back in March but were turned down. Now they got them at a bargain. This is actually a good thing though, this keeps WaMu's insured deposits from getting hit, so the FDIC fund remains intact for now. A WaMu failure would have taken about half of it, IIRC.

[KukriKhan]

So, a question:

If WaMu's bad paper (and a mini-run by depositors) made it "unstable" according to regulators, and JP Morgan could afford to fold WaMu's bad paper into its own operation - presumeably at something less than a net loss... do we taxpayers really have to still pump $700Bn of unearned cash into this system? Might the behind-closed-doors dithering on the bailout, actually have been a good thing, and that bailout now be moot? Might the market just correct itself (leaving shareholders flat, of course)?