On Thu, 09 Oct 2008 11:16:01 -0500, Dave wrote:

Generally accurate, but with two exceptions.

Really? Please quote the clause in the Community Reinvestment Act that
told investment banks to leverage their position in subprime CD0s to
suicidal heights. This mess isn't because of the CRA, it's because of
greed, and Wall Street group-think. Subprime mortgage defaults are only
the visible cause. A healthy bank can withstand a 25% default rate in
the subprime sector, leverage that risk to 33-1, as one bank did, and
it's bye-bye. Greed and bad business practices brought on this mess.

On Thu, 09 Oct 2008 13:51:07 -0500, Dave wrote:

On Thu, 09 Oct 2008 13:26:02 -0500, said:

Really? Please quote the clause in the Community Reinvestment Act that
told investment banks to leverage their position in subprime CD0s to
suicidal heights. This mess isn't because of the CRA, it's because of
greed, and Wall Street group-think. Subprime mortgage defaults are only
the visible cause. A healthy bank can withstand a 25% default rate in
the subprime sector, leverage that risk to 33-1, as one bank did, and
it's bye-bye. Greed and bad business practices brought on this mess.

I think you'd best go take a nap while those who know something about
the topic have this discussion.

Like the management of Bear Stearns, Merrill Lynch, Lehman Brothers, AIG?

wrote in message
t...
On Thu, 09 Oct 2008 13:51:07 -0500, Dave wrote:

On Thu, 09 Oct 2008 13:26:02 -0500, said:

Really? Please quote the clause in the Community Reinvestment Act that
told investment banks to leverage their position in subprime CD0s to
suicidal heights. This mess isn't because of the CRA, it's because of
greed, and Wall Street group-think. Subprime mortgage defaults are only
the visible cause. A healthy bank can withstand a 25% default rate in
the subprime sector, leverage that risk to 33-1, as one bank did, and
it's bye-bye. Greed and bad business practices brought on this mess.

I think you'd best go take a nap while those who know something about
the topic have this discussion.

Like the management of Bear Stearns, Merrill Lynch, Lehman Brothers, AIG?


I think we should all take a listen to President Ronald Reagan's words...

http://www.youtube.com/watch?v=IqfedYAAGEI

--
"j" ganz @@
www.sailnow.com

said:
Really? *Please quote the clause in the Community Reinvestment Act that
told investment banks to leverage their position in subprime CD0s to
suicidal heights. *...... *A healthy bank can withstand a 25% default rate in
the subprime sector, leverage that risk to 33-1, as one bank did, and
it's bye-bye. *Greed and bad business practices brought on this mess.


Dave wrote:
I think you'd best go take a nap while those who know something about the
topic have this discussion.

Looks like he he does know something about it....

....something you'd rather sweep under the rug in the rush to blame
those evil libby-rull Democrats!

DSK

...something you'd rather sweep under the rug in the rush to blame
those evil libby-rull Democrats!

Dave wrote:
Nope. I blame the failures of the investment banks on their own stupidity in
over-leveraging their capital and their undue concentration of assets. The
guvmint should have let all of them run to the bankruptcy courts if they
couldn't continue to meet their obligations, instead of bailing them out.

OK, good so far.

The only problem I have is that if we simply let the banks fail in an
economy that has grown increasingly dependent on credit.... addicted
to it, you might say.... then failure will spread quickly thru every
level of the economy. Bank failure was one of the tripwires of the
Great Depression.

But apparently Thunder doesn't know the difference between a bank and an
investment bank. No one who did would mention CRA in the same sentence with
investment bank. That's why I suggested he take a nap while those who know
something about the subject discuss it.

I think I got it.

We have a financial crisis caused by the CRA and commercial banks
giving mortgages to unsuitable lenders. But the investment banks have
nothing at all to do with the CRA and they're the biggest part of this
crisis.

Maybe you can explain just a little further Dave. You may be making a
leap of faith here that I can't follow....

DSK

wrote in message
...
...something you'd rather sweep under the rug in the rush to blame
those evil libby-rull Democrats!

Dave wrote:
Nope. I blame the failures of the investment banks on their own stupidity
in
over-leveraging their capital and their undue concentration of assets.
The
guvmint should have let all of them run to the bankruptcy courts if they
couldn't continue to meet their obligations, instead of bailing them out.

OK, good so far.

The only problem I have is that if we simply let the banks fail in an
economy that has grown increasingly dependent on credit.... addicted
to it, you might say.... then failure will spread quickly thru every
level of the economy. Bank failure was one of the tripwires of the
Great Depression.

But apparently Thunder doesn't know the difference between a bank and an
investment bank. No one who did would mention CRA in the same sentence
with
investment bank. That's why I suggested he take a nap while those who
know
something about the subject discuss it.

I think I got it.

We have a financial crisis caused by the CRA and commercial banks
giving mortgages to unsuitable lenders. But the investment banks have
nothing at all to do with the CRA and they're the biggest part of this
crisis.

Maybe you can explain just a little further Dave. You may be making a
leap of faith here that I can't follow....

DSK

Many investment banks bought huge amounts of the mortgages and packaged them
into "Collateralized Mortgage Obligations" ("CMO"), slicing and dicing the
packages into multiple tranches and then selling the various tranches to
investors, including banks, private investors, and hedge funds. The MBA's
on Wall Street kept getting wilder and wilder until no one knew what they
were buying anymore, or what the CMOs were worth. When rates went up and
mortgage holders with adjustable rate mortgages started defaulting some of
the higher yielding tranches (riskier tranches) cash flow became impaired
and investors started asking hard questions. The answers scared them and
they quit buying. Market values fell, mark to market rules required write
downs, and now we are in free fall.

"jlrogers±³©" wrote:
Many investment banks bought huge amounts of the mortgages and packaged them
into "Collateralized Mortgage Obligations" ("CMO"), slicing and dicing the
packages into multiple tranches and then selling the various tranches to
investors, including banks, private investors, and hedge funds. *The MBA's
on Wall Street kept getting wilder and wilder until no one knew what they
were buying anymore, or what the CMOs were worth. *When rates went up and
mortgage holders with adjustable rate mortgages started defaulting some of
the higher yielding tranches (riskier tranches) cash flow became impaired
and investors started asking hard questions. *The answers scared them and
they quit buying. *Market values fell, mark to market rules required write
downs, and now we are in free fall.


Yep, looks right on the mark to me... but how is it the CRA's fault?
Just because everything from gas prices to warm beer is always blamed
on the nearest handy Democrat?

Looks to me like the crash was caused by greed & stupidity, helped
along by some concurrent bubbles popping.

As a private individual, if I buy an investment without carefully
researching it's true risk, then it's my fault if it goes south. I
take the hit. If dozens of investment banks do the same thing, to the
tune of squajillions of dollars, then it drags the rest of us down...
a bail-out to avoid massive bank failure may be in the best public
interest (although my vote would be to take the first round of bail-
out money from the pockets of those CEOs)... it's sure not the fault
of some muddle-headed doo-gooders who decades ago said, "hey wouldn't
it be nice if banks offered nice mortgages to poor people?"

The proble is that we Americans have a whole slew of unhealthy
addictions. Addiction to oil and addiction to credit are the two
biggies. Our borrow-and-spend government is merely a reflection of the
fact that the U.S. has a negative savings rate. The "average" US
household carries about $10K in credit card debt and our total average
indebtedness is over $150K per person. I've pointed this out as a
problem many times (even though it's not the way I manage my own
finances) long before the current banking/mortgage/credit crisis hit
the headlines.

We are addicted to oil and credit. Both are very destructive habits
that we *will* break in the near future... one problem we have is that
oil companies and financial companies are both profiting heavily from
these bad habits, just like cigarette companies profit from addiction
to nicotine. It's going to be either a fight break free or a complete
wreckage of the nation when we hit bottom.

Fresh Breezes- Doug King

wrote in message
...
"jlrogers±³©" wrote:
Many investment banks bought huge amounts of the mortgages and packaged
them
into "Collateralized Mortgage Obligations" ("CMO"), slicing and dicing the
packages into multiple tranches and then selling the various tranches to
investors, including banks, private investors, and hedge funds. The MBA's
on Wall Street kept getting wilder and wilder until no one knew what they
were buying anymore, or what the CMOs were worth. When rates went up and
mortgage holders with adjustable rate mortgages started defaulting some of
the higher yielding tranches (riskier tranches) cash flow became impaired
and investors started asking hard questions. The answers scared them and
they quit buying. Market values fell, mark to market rules required write
downs, and now we are in free fall.


Yep, looks right on the mark to me... but how is it the CRA's fault?
Just because everything from gas prices to warm beer is always blamed
on the nearest handy Democrat?

Looks to me like the crash was caused by greed & stupidity, helped
along by some concurrent bubbles popping.

As a private individual, if I buy an investment without carefully
researching it's true risk, then it's my fault if it goes south. I
take the hit. If dozens of investment banks do the same thing, to the
tune of squajillions of dollars, then it drags the rest of us down...
a bail-out to avoid massive bank failure may be in the best public
interest (although my vote would be to take the first round of bail-
out money from the pockets of those CEOs)... it's sure not the fault
of some muddle-headed doo-gooders who decades ago said, "hey wouldn't
it be nice if banks offered nice mortgages to poor people?"

The proble is that we Americans have a whole slew of unhealthy
addictions. Addiction to oil and addiction to credit are the two
biggies. Our borrow-and-spend government is merely a reflection of the
fact that the U.S. has a negative savings rate. The "average" US
household carries about $10K in credit card debt and our total average
indebtedness is over $150K per person. I've pointed this out as a
problem many times (even though it's not the way I manage my own
finances) long before the current banking/mortgage/credit crisis hit
the headlines.

We are addicted to oil and credit. Both are very destructive habits
that we *will* break in the near future... one problem we have is that
oil companies and financial companies are both profiting heavily from
these bad habits, just like cigarette companies profit from addiction
to nicotine. It's going to be either a fight break free or a complete
wreckage of the nation when we hit bottom.

Fresh Breezes- Doug King

CRA was the catalyst. In the old days mortgages to be sold to Freddie and
Fannie had to meet rigorous criteria with respect to specific financial
ratios (e.g., loan to value, income to loan amount), verifications with
respect to employment, income, and net worth. Rates were fixed, so the
borrower could depend on a fixed payment. The requirements were so strict
it took "forever" to close a loan.

CRA was the beginning of removing the standards. Adjustable rates was the
killer.

CRA

On Fri, 10 Oct 2008 12:27:33 -0700 (PDT), wrote:

"jlrogers±³©" wrote:
Many investment banks bought huge amounts of the mortgages and packaged them
into "Collateralized Mortgage Obligations" ("CMO"), slicing and dicing the
packages into multiple tranches and then selling the various tranches to
investors, including banks, private investors, and hedge funds. Â*The MBA's
on Wall Street kept getting wilder and wilder until no one knew what they
were buying anymore, or what the CMOs were worth. Â*When rates went up and
mortgage holders with adjustable rate mortgages started defaulting some of
the higher yielding tranches (riskier tranches) cash flow became impaired
and investors started asking hard questions. Â*The answers scared them and
they quit buying. Â*Market values fell, mark to market rules required write
downs, and now we are in free fall.


Yep, looks right on the mark to me... but how is it the CRA's fault?
Just because everything from gas prices to warm beer is always blamed
on the nearest handy Democrat?

Looks to me like the crash was caused by greed & stupidity, helped
along by some concurrent bubbles popping.

As a private individual, if I buy an investment without carefully
researching it's true risk, then it's my fault if it goes south. I
take the hit. If dozens of investment banks do the same thing, to the
tune of squajillions of dollars, then it drags the rest of us down...
a bail-out to avoid massive bank failure may be in the best public
interest (although my vote would be to take the first round of bail-
out money from the pockets of those CEOs)... it's sure not the fault
of some muddle-headed doo-gooders who decades ago said, "hey wouldn't
it be nice if banks offered nice mortgages to poor people?"

The proble is that we Americans have a whole slew of unhealthy
addictions. Addiction to oil and addiction to credit are the two
biggies. Our borrow-and-spend government is merely a reflection of the
fact that the U.S. has a negative savings rate. The "average" US
household carries about $10K in credit card debt and our total average
indebtedness is over $150K per person. I've pointed this out as a
problem many times (even though it's not the way I manage my own
finances) long before the current banking/mortgage/credit crisis hit
the headlines.

We are addicted to oil and credit. Both are very destructive habits
that we *will* break in the near future... one problem we have is that
oil companies and financial companies are both profiting heavily from
these bad habits, just like cigarette companies profit from addiction
to nicotine. It's going to be either a fight break free or a complete
wreckage of the nation when we hit bottom.

That is all right on. Indebtedness has been encouraged for maybe 15
years now. IMO the 401k, which allowed Wall Street directly into the
paycheck of many workers, was the beginning of the problem.
The new money allowed inflation of stock prices, and made everybody
happy with the magic money of "created wealth."
But it took consumer spending and indebtedness to maintain the facade
of equity wealth.
That's a simplistic outline, and the whole truth is really complicated
by other elements, like shipping manufacturing overseas, which
increased stock prices at the expense of more worker indebtedness.
We've really been living in a financial fantasyland for many years.
A long-running Ponzi scheme.
But the worst mistake is that most of those in charge - gov and
business - abandoned their fiduciary responsibilities.
A vast fleet of ships with drunken captains.

--Vic

Vic Smith wrote:
But the worst mistake is that most of those in charge - gov and
business - abandoned their fiduciary responsibilities.

Bingo.
It's as much an epidemic of irresponsibility as a fiscal crisis.


A vast fleet of ships with drunken captains.


I like that analogy.
Many people who have no clue what it means to be a Captain think
everything is going fine.
And many more think it's fine because it's a lot of fun as long as
you're one of the drunks!

DSK