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

[ICantSpellDawg]

https://www.youtube.com/watch?v=VgctSIL8Lhs





I'm all for that.

That is a great video, but it is from Fox news, which means that it is fabricated and never happened.

[Xiahou]

That is a great video, but it is from Fox news, which means that it is fabricated and never happened.

Wait what's this? Barney Frank said that Fannie&Freddie should do more to get low-income families home loans? Who'd have thunk it....

Special Report is the only TV news show I watch with any regularity and I've been waiting for that segment to make it to YouTube. I thought it was striking how the same congressional figures that are now calling for a trillion dollar bailout are most of the same one's who helped coax the mortgage market off the cliff just as recently as a few years ago.

But yeah, it's FoxNews and therefore all lies- please dismiss any video or direct quotes in that clip.

[Koga No Goshi]

Wait what's this? Barney Frank said that Fannie&Freddie should do more to get low-income families home loans? Who'd have thunk it....

Special Report is the only TV news show I watch with any regularity and I've been waiting for that segment to make it to YouTube. I thought it was striking how the same congressional figures that are now calling for a trillion dollar bailout are most of the same one's who helped coax the mortgage market off the cliff just as recently as a few years ago.

But yeah, it's FoxNews and therefore all lies- please dismiss any video or direct quotes in that clip.

The majority of this problem was not people in West Virginia making 34,000 trying to buy a 90,000 dollar house. The majority of this problem was middle and upper middle class white Republicans (generally) getting greedy, already having a house (or two) and wanting a third in high-priced, postured to keep increasing in home value areas that they knew they couldn't afford, but calculated the value to rise so fast that they could turn around and get out of the loan in six months and make a big profit on what they put into it. I work in accounting in southern California and we have all kinds of customers (we're public accounting, so it's mostly individuals, not businesses, and most of our businesses are small sole proprietorships like family run restaurants) ranging from unemployed and disabled or retired to people in the million dollar range. And the people walking away from these mortgages? I don't know of a single one who is a part time janitor or in some way just absolutely doesn't make enough money to try to buy their first home. Every single person I have encountered walking away from a mortgage is someone greedy who did this purely as a houseflipping/short term investment hoping to get rich quick because all their friends were doing it too. And most of them jumped into these subprime loans really quick, and THEN asked advice from their accountants about it. (Much to the eyerolling of many of my coworkers.) The big money was not being made off signing loans for a 68,000 house in Altoona for a low income couple. The big money was being made off signing loans for 600,000 dollar houses in posh areas that people making about 90 or 100k figured they would just pay on the mortgage for six months and then turn around and sell the house for 680,000 and get a year's salary in profit off the deal.

So, in short, don't blame all this damn greed and speculation on low income people who probably have never owned, and still don't own, a single home.

[Xiahou]

I thought you said it was the sub-prime mortgages that were causing the problem?

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.

So, now it's the evil, rich, white GOP homeowners who are to blame?

[Strike For The South]

The Government who made these loans profitable are to blame.

[Koga No Goshi]

I thought you said it was the sub-prime mortgages that were causing the problem?
So, now it's the evil, rich, white GOP homeowners who are to blame?

Someone making 100,000 already paying on their main house mortgage trying to get another loan for a 600,000 dollar house still got it through subprime lenders. There was a LOT of that. People who took loans to buy houses they knew they absolutely could not afford did so to turn around and flip it later at a profit. Not to own permanently as a main house.

Or do you believe only the poor used subprime?

[Xiahou]

Someone making 100,000 already paying on their main house mortgage trying to get another loan for a 600,000 dollar house still got it through subprime lenders. There was a LOT of that. People who took loans to buy houses they knew they absolutely could not afford did so to turn around and flip it later at a profit. Not to own permanently as a main house.

Or do you believe only the poor used subprime?

Ok, so let me get this straight. You're saying it was greedy, predatory sub-prime lenders victimizing rich, greedy, white people that caused the problems we're having now and it wasn't about something more like ninja loans?

[Tristuskhan]

Ok, so let me get this straight. You're saying it was greedy, predatory sub-prime lenders victimizing rich, greedy, white people that caused the problems we're having now and it wasn't about something more like ninja loans?

Have a problem with WHITE people, Xiahou?

[Koga No Goshi]

Ok, so let me get this straight. You're saying it was greedy, predatory sub-prime lenders victimizing rich, greedy, white people that caused the problems we're having now and it wasn't about something more like ninja loans?

It was everything that results from an unregulated mess of subprime lending. But the incredible demand for housing and the rising housing prices was accelerated mostly by the fact that what was going on out there wasn't a huge army of first-time buyers. It was a huge army of people who already had a house seeing the housing market as a way to get way better returns than putting their money in savings, and thinking they could flip a huge profit by keeping a house, waiting for the value to inflate, and selling. Rinse and repeat.

The sort of people I see at work? Not poor young couples with a first time house. Those people largely bought conservatively because if they got screwed by the crisis they were set way back. The people I've seen were people juggling four, five ADDITIONAL mortgages short term, selling one house at an increased value to help them swing paying for the others, picking up another one over in Orange County, selling the one in San Diego, never keeping a house more than six months or so and just keeping it long enough to get a nice profit. If these people had to just pay the mortgages straight through they would have collapsed. And now that the values are all going down that is exactly what is happening to them.

[drone]

Or do you believe only the poor used subprime?

Your experience is confined to Cali. Check out Ohio, Michigan, and other parts of the midwest.

Around here there were a lot of interest-only loans and other shadiness, these were mainly targeted to the wealthier, but the overall high real estate costs in this area (and other major cities) caught everyone. In depressed regions (i.e. historically manufacturing based communities), the poor are the ones getting hit.

[Koga No Goshi]

Your experience is confined to Cali. Check out Ohio, Michigan, and other parts of the midwest.

Around here there were a lot of interest-only loans and other shadiness, these were mainly targeted to the wealthier, but the overall high real estate costs in this area (and other major cities) caught everyone. In depressed regions (i.e. historically manufacturing based communities), the poor are the ones getting hit.

Everyone IS getting hit. Subprime didn't loan to just one demographic. But anyone who at all had experiences with subprime housing lending would be familiar that these people hard sold at the people in between 100 and 400k or so, the people who had enough money to play with but not enough to really afford more houses necessarily, and sold them hard on the deal that they could make money on investing and getting out.

But... yes. It was the poor people. Damn them! They ruined Wall Street!

[Xiahou]

From my "ninja" link earlier:

Take a tour through the Bay area and before long you can see how at the heart of this economic problem is a worrying divide between the property haves and have-nots. In the core of the city itself, on the picture postcard streets that line areas such as Pacific Heights and other smart districts, prices are still healthy, in some cases still rising. But drive over the Bay Bridge to East Oakland and beyond and the mirage of well-being dissolves away. Here the streets turn from Victorian grandeur to lines of shack-like bungalows, and a disturbing number are up for sale.

No matter how you slice it, this is about risky loans being made to debtors with bad credit. The very idea of a NINJA (No Income No Job & No Assets) loan is insane- and yet, you have members of congress still pushing loans for "low-income" families as recently as last year.

[Koga No Goshi]

From my "ninja" link earlier:No matter how you slice it, this is about risky loans being made to debtors with bad credit. The very idea of a NINJA (No Income No Job & No Assets) loan is insane- and yet, you have members of congress still pushing loans for "low-income" families as recently as last year.

Congress passed no law regarding greedy middle class people using the housing market like the stock market as daytraders, yet plenty of that happened too. So let's not reinvent this as purely an issue of poor people buying houses, it wasn't.

[KukriKhan]

And just to muddy up the picture of "who got these sub-prime loans?" a bit more, I'll add that in my neck of the woods, in addition to the "flippers" Koga refers to, were the ninja loans arranged by independent agents, made to immigrants (legal or illegal is unknown; no paperwork was required) who used to rent a hovel for $1,000 a month. Now they could live in a 3br, 3 bath stand-alone house, share it with 3 other families, and pay $600 a month - at least until the ARM adjusted in 2 or three years. Then they might lose it - or not; god provides sometimes, you know.

In the long run, though, what did they lose? A credit rating? HAhaha! They lived in a nice house for 3 or 4 years, before they had to finally move. Which they did. Census Bureau tells that our city population has decreased 8% in the last 2 years - the majority of which were "immigrants". The cash-under-the-table jobs they did for the rich "flipper" crowd went away, when the "flipped" properties got walked away from.

[Mangudai]

http://es.youtube.com/watch?v=H5tZc8oH--o

I wonder if Republicans caused the bank collapses in Japan and Sweeden too?

[CountArach]

A tentative deal is reached

Some good analysis here:

This is a plan that assumes that the government can buy enough bad debt at above market prices to bail out the banking system. Since as long as the government is willing to spend above market prices (and by market I mean “what other banks would pay for this cr*p”) banks won’t sell it to each other, the government has taken on an open ended obligation. If the pile isn’t that large, then a trillion or so may be enough. But if the pile is much larger than that, and it is, then the government will have to keep ponying up money over and over again. It won’t be limited to the original 700 billion, or trillion, or whatever. It will be an ongoing program that the market will become dependent on. Since the fundamental problems of securitization, over-leverage and declining housing prices haven’t been fixed, there’s little reason to believe that the government could get to the bottom of the pile, since, in fact, it will still be growing. (Especially as the economy gets worse and housing prices continue to drop. And they will, since this provides no floor price for real estate.)

In short, while this plan is an improvement on the original Paulson plan, which is saying, well, almost nothing. It’s still a plan that, at the end of the day, won’t work. That doesn’t mean we won’t see some short term benefits. Throw 700 billion bucks at the economy and the financial sector and it will do something. That’s still a ton of money. But it won’t fix the problem permanently, it will only patch it for a time and even during that time, things will continue to get worse. (For example, expect this to cause oil inflation.)

It’s a bad plan that won’t fix the economy or the financial sector. So we’ll be revisiting this issue in 6 to 9 months or so when it becomes clear that the problem hasn’t been solved, and that not solving it is costing a hell of a lot of money which could have been used to actually fix things.

[Banquo's Ghost]

Looks disastrous.

How on earth can it be justified to buy the debt at higher than market value?

[Oleander Ardens]

That is a great video, but it is from Fox news, which means that it is fabricated and never happened.

It is fabricated because it constructs out of isolated statements a story line which pales in confront to a very simple fact. With all the power in their hands: Why didn't they do absolutly nothing about it?

Thus the video is just a laughable effort of a paintjob. Seems that it does the job for some.

[Lemur]

Yeah, I love how it's all the Dems fault in '03 and '05, when the Repubs had a rock-solid majority in both houses of Congress.

[Koga No Goshi]

Yeah, I love how it's all the Dems fault in '03 and '05, when the Repubs had a rock-solid majority in both houses of Congress.

A few months of power with 49 votes in the Senate (who do not vote in lockstep anyway) plus Lieberman and we're supposed to have strongarmed our way into fixing everything done in six years of Rep majority in all branches. Our fault! Our fault! ;)

[ICantSpellDawg]

Yeah, I love how it's all the Dems fault in '03 and '05, when the Repubs had a rock-solid majority in both houses of Congress.

Nobody is blaming it on the dems, are they? It is clearly a bi-partisan failure, but some are trying to pin it on one party or the other. Obama doesn't seem to have played a part and McCain was on the right side of the issue. Would you honestly put more barney franks into Congress?

[woad&fangs]

Bi-partisan failure all the way. But even saying that it is a bipartisan failure is a cop-out. This is an American failure. The people of this country, from NINJAs to CEOs and everyone in between(including the gov) is addicted to spending money they don't have. It would be nice if the country as a whole took a long look at its financial situation but I expect everyone to continue playing the blame game.

[seireikhaan]

Bi-partisan failure all the way. But even saying that it is a bipartisan failure is a cop-out. This is an American failure. The people of this country, from NINJAs to CEOs and everyone in between(including the gov) is addicted to spending money they don't have. It would be nice if the country as a whole took a long look at its financial situation but I expect everyone to continue playing the blame game.

Amen.

[Koga No Goshi]

Bi-partisan failure all the way. But even saying that it is a bipartisan failure is a cop-out. This is an American failure. The people of this country, from NINJAs to CEOs and everyone in between(including the gov) is addicted to spending money they don't have. It would be nice if the country as a whole took a long look at its financial situation but I expect everyone to continue playing the blame game.

The elephant in the room here is that the American middle class is getting squeezed, and has had steadily less disposable income since the 70's. If everyone spent strictly within their means to pay up front we would be facing a financial crisis anyway because of this, as spending would slow way down. I'm not disagreeing with the sentiment of what you are saying, I agree that spending money you don't have, be it individuals, banks, CEO's or investors, is a crap paradigm. But, it is a paradigm. And it has been encouraged and cultivated into a whole culture of credit card, take out equity from your house to pay for things, again because of the squeeze on the middle class. One of the big factors here, besides "individual irresponsibility"? The exodus of good jobs and production out of the country. Bush's response after 9/11? Go shopping. The taking out of debt to keep the economy in decent shape has blame to go all around too, but just saying it's greedy irresponsible individuals overlooks all the people who have benefitted, not just by outsourcing, but then by encouraging the domestic market to keep up the same level of consumerism with less money with which to do it.

I realize the appeal of a simple answer like "people should be more responsible." But if people did that we just would have been in a recession sooner, that's all. What we have been doing, economically, is like trying to improve the value of our house by putting on new storm shutters and paint, while the wood was termite infested. There are underlying problems which have not and STILL have not been addressed.

[Hosakawa Tito]

What I'd like to know is when do they go after the Rating Agencies, like Standard & Poor's, that gave these securities their AAA investment grades? Without those doctored securities, spinning F rated flax into AAA rated gold; banks, insurance companies, and pension funds wouldn't have bought this stuff. There's no way these banks could have gotten away with this fraud without the complicity of the rating agencies to put "lip stick on the pig". There needs to be a perp walk here, and from the looks of it this should be quite a parade.

[Husar]

What we have been doing, economically, is like trying to improve the value of our house by putting on new storm shutters and paint, while the wood was termite infested.

And there you nailed the problem, houses should be made of stone!

[Ronin]

And there you nailed the problem, houses should be made of stone!

you´re making a joke but I always found that strange about the USA, every time I see images from houses destroyed by tornadoes and hurricanes in the US I always see what looks like pretty flimsy wood constructions.....over here houses are made of bricks and cement....no body would even think of building in wood.....not really on topic...but I was just wondering.

[Husar]

it was actually a half joke because I'm thinking the same as you.

[drone]

you´re making a joke but I always found that strange about the USA, every time I see images from houses destroyed by tornadoes and hurricanes in the US I always see what looks like pretty flimsy wood constructions.....over here houses are made of bricks and cement....no body would even think of building in wood.....not really on topic...but I was just wondering.

Just because we still have forests and you don't! It probably has more to do with cost, it's easier and cheaper to build wood frame homes. What is the new home construction rate in Europe compared to the US? Over the past 50 years we have had to build lots of new homes...


Hosakawa Tito is on the right track. Moody's, S&P, et al. rated these securities incorrectly, yet nobody has really put the screws to them yet. They probably didn't really understand what they were doing.

[Big_John]

https://www.youtube.com/watch?v=EoB4BS7CGAw

oh peter.. we hardly knew ye.