Popeye, Tulsa (11/10/2008 7:41:25 AM)

And so the discovery and analysis begins on one of the most ridiculous chapters of U.S. history: The legislated Special Finance Branch of the Federal Government. The only difference between SpiFi loans for automobiles (which also took multiple lenders down on a smaller scale) and the current debacle our political leaders have us in now is the size of the loans and the collateral. Everybody was thinking that the values of homes could only go up. The feds never suspected that the loans they were coercing lenders to make, when defaulted on, would drive the price of the product into the ground! With auto loans, the lender knows the collateral is going to devalue over the time of the loan. That’s what cars do. But houses?

It appears that (as so many posters herein on other topics have alleged) the morons of our great state -- cinched to suffocation with their bible belts and drowning in their syrupy moral soup – dodged the bullet and behaved, overall, in exemplary fashion… DUH!
Free enterprise + capitalism – (ethical behavior + principles) = chaos.

Or…

Politicians / Votes + irrational programs + deadbeats X mortgages = chaos.

Angry Citizen!, Bluejacket (11/10/2008 8:41:20 AM)

I am not sure why the public is being told, over and over, that businesses who focus on making money are greedy or don't care about the collective good. There is nothing wrong with those who work hard because they love to make money. The collective good and greed have nothing to do with the basic business model. Our politicians, who toiled tirelessly to "level the playing field" and "make the market more fair" have sold us this idea that greed caused this mess. If the Wall Street executives did illegal things, why aren't they in jail?

my view, America (11/10/2008 8:58:21 AM)

Angry Citizen,

Your are right, lock'em up if the broke the law.

Graychin, Eucha (11/10/2008 9:06:27 AM)

"It was unethical for banks to make these loans they knew were bad, and then to pawn them off on someone else."

Unethical, but not illegal because of excessive deregulation.

Dr. Strangelove, Tulsa (11/10/2008 9:13:45 AM)

Mortgage Brokers and Mortgage Companies primarily created the subprime mess. Most of those loans weren't generated by banks or even serviced by banks. They got the Fannie/Freddie qualifier and were sold directly on the secondary market. Much of it was certainly unethical, but Graychin is right, it was legal.

Popeye, Tulsa (11/10/2008 9:32:21 AM)

So the usual suspects spout more rhetoric from the liberal library.

Graychin: Are you saying that the banks/lenders were never coerced into these lending practices by the Feds? Is your argument that this unethical lending, these loans to people that prior to Federal involvement were historically bad risks, was because of excessive deregulation? I believe you have a deeper understanding of all of this. Why not step out of your self-cast role of liberal policy defender and assess this for real?

Dr. Strangelove: If you believe what you say, why was it necessary for past administrations to become involved in these lending policies?

OKLA, (11/10/2008 10:03:13 AM)

This article was rocking along just fine until they used the term "government bailout." It's not a government bailout because the government has no money. It was a taxpayer bailout. They got us into this mess and we have to pay to bail them out. Somebody needs to go to jail, pay restitution, and make up for the loss and it's not the taxpayer.

Dr. Strangelove, Tulsa (11/10/2008 10:17:36 AM)

Popeye- I believe what I say because I originate mortgages. And yes, Graychin is right about excessive deregulation contributing to the problem, but I would also a combination of greed and incompetence.

The commercial banks spent billions to comply with the GLB Act, but frankly most weren't huge in the consumer mortgage business like Countrwide was.

The real problem with subprime was a combination of Fannie/Freddie creating a computerized preapproval qualifier meaning the broker knew the loan could be sold on the secondary market (which meant it was much easier to get approval from a bank or other lender), newly deregulated investment banks that peddled the newly created securities with wild abandon, and ultimately the ratings agencies, which for the most part never properly analyzed the mortgage pools. Those crappy securities ended up being tightly woven into our financial system by hedge funds, pension plans, and other large institutional investors (like insurance companies).

Commercial banks, (when they were involved) mostly collected servicing fees and sold the loans without recourse. Some of them however, elected to do partricularly risky loans and keep them in house. Those banks are failing.

Dr. Strangelove, Tulsa (11/10/2008 10:19:17 AM)

Meant "I would also say it was a combination of greed and incompetence."

Can't type this AM

Graychin, Eucha (11/10/2008 10:28:30 AM)

Popeye:

I have heard allegations that there was government pressure to make more "sub-prime" loans, although I'm not convinced that this was more than a tiny factor in the meltdown. There's nothing wrong per se with sub-prime loans. They carry a higher interest rate, so the possibility of a higher return offsets the additional risk to investors. Banks make sub-prime business loans every day, and have since the dawn of time. The borrowers simply pay more than the bank's "prime" rate.

Sub-prime mortgage loans can be made responsibly to borrowers who have jobs and adequate income to make payments in spite of their less-than-ideal credit history. It's also important that the collateral adequately secure the amount of the loan, especially in a sub-prime situation.

The problem was that too many mortgage loans were made at 125% of an inflated market value of the collateral to people who obviously couldn't make the payments under any circumstances - if not immediately, then certainly in a year or two when the payments were scheduled to double. And those loans don't include the ones that were totally fraudulent and therefore likely illegal. And most of these loans were not even considered "sub-prime" because the borrower had decent credit histories. How many TV ads did you see encouraging homeowners to use their houses as an ATM? Stupid, yes, but not sub-prime.

Back in the stone age, Jimmy Stewart's "building and loan" organization would keep the loans it made, so the lender actually cared about whether or not the borrower could pay back the loan. Imagine that! Today mortgage brokers make a commission the day the loan is signed, then immediately ship the loan off to someone else, pocket their commission and disappear.

The mortgage broker had a profit motive to make loans without regard to risk. So did the initial lender, who usually resold the loan immediately. Lehman or another firm who "securitized" mortgages had a profit motive too - buy 'em, slice-and-dice 'em, bundle 'em, sell 'em at a profit. AIG had a profit motive in "insuring" mortgages. AIG couldn't conceive of any risk when they took those nice insurance premiums - mortgages are always well-collateralized, right?

But no one who was making decisions in this chain of profitable transactions was taking any personal risk. If I'm a Lehman executive making $300 million per year, do I really care if I'm being irresponsible with other people's money? If my company goes down, I've already assured myself of a very soft landing.

Was anyone in the government watching what was going on? Apparently not. We were told that the unregulated free market, without interference from the heavy hand of government, would solve all our problems. That's what Alan Greenspan (he of the Ayn Rand school) thought. How did it work out?

OK, HAL 9000, that's my real assessment from the "liberal library." Just take it at face value this time, OK? There's too much ad hominem argument around here.

Dr. Strangelove, Tulsa (11/10/2008 10:50:02 AM)

Swami my man- Regarding the doctored paper I think ultimately some people will be prosecuted, but the vast majority will get away with it. It was just so widespread. I actually fired people who admitted to doctoring applications (and they were actually proud of it!). Regarding the discrimination aspect, it's something I've never given much thought to. I assume you are saying that Fannie/Freddie was originally a vehicle designed to augment the CRA Act and promote lending to low to moderate income areas. To that end you may actually be right. All I know is it created the doorway to the problem. All it would have taken was increased auditing oversight to stop most of the fraud.

revolution now, The Compound (11/10/2008 11:00:43 AM)

Lots of good points here.

I personally don't think that the pressure exerted by government was much of a part of this mess. I think it was the knowledge that there was a quick buck to be made.

Due to the greed, but more importantly, the stupidity of those in leadership roles in financial companies, they couldn't/wouldn't look past the end of their outstretched hands to see what the results were going to reap.

I know that some of you think that just because a person rises to the ranks of CEO (and etc.), that they must have some intelligence, but it ain't so. I've had the misfortune to deal with executives of many many companies, large and small (although not necessarily in the financial field). I can tell you that more often than not, companies are ran by those individuals with a good line of bull crap, and are not put in that position because they necessarily know what they are doing. I find it hard to believe that the financial field is any different than any other field.

Also they tend to surround themselves with individuals that are like minded, instead of more intelligent advisors.

And before anyone else says it. Yes, Obama has a good line of bull (you can't get elected without that trait), but during the campaign, he had the good sense to surrounded himself with very intelligent advisors. I hope that he carries that trait forward with him

JimD, Sand Springs (11/10/2008 11:29:09 AM)

Greed isn't good, Maybe someone should tell all the *&^%$@$# in Washington, D.C. That is the creed they live by, bleeding the taxpayer. Bail out all the big bussiness that is ate up with GREED at our expense. When is the American public going to get ahold of their ears and pull real hard? Maybe some could possible get their heads pulled out.

concernedpapa, Kiefer (11/10/2008 11:49:50 AM)

There goes your bitterness again Swami, you have been having lunch with Cory again havn't you?

zzx375, BA (11/10/2008 11:51:48 AM)

And the definition of greed, on which everyone agrees is.....?

revolution now, The Compound (11/10/2008 11:56:13 AM)

Swami, you should at least give him a chance. At least he had the good sense to surround himself with some intelligence, while McCain surrounded himself with some real goofballs. That was my sole reason for voting for BO. I personally don't believe anything a politician says. So I always look at who he is surrounded by, and by looking at that, it wasn't even close. The best managers are those that hire people more intelligent than themselves...experts in their field. The office of the President is no different. He will only be as good as the people he surrounds himself with.

JimD, I'll agree with most of that. If I was strictly concerned with my own well-being, then I would take the opinion that we should let them all fail....even GM. The loss of a couple of million jobs, wouldn't affect me much. Unfortunately, that not the case for the majority of the country. It seems we don't really have a choice here. The majority of the country can't afford to have the likes of AIG and GM disappear.

soonernow, (11/10/2008 12:03:05 PM)

Grachin, Swami is right...It wasn't the government who put pressure on financial institutions, it was the groups like NAACP and ACORN putting pressure on the government and the financial institutions to make loans to people who didn't have decent credit and in a lot of cases, there was no way in H... they could pay back the loans. ACORN would actually gang up on the banks and intimidate lenders to make those loans..It's just another example of the "Politically Correct" philosophy and affirmative action at work..Add to all of this a bunch of liberal crooks in Washington..like Barney Franks;Chuck Schumer; who didn't want any insight into Fannie Mae and Freddie Mack..sure, they were in deep s... but didn't want anyone to know it until they all got
their bonuses. Educate yourself..it will only get worse now that our government is totally contolled by the libs.

Popeye, Tulsa (11/10/2008 12:08:34 PM)

Graychin: My original inquiry stands: “Are you saying that the banks/lenders were never coerced into these lending practices by the Feds? Is your argument that this unethical lending, these loans to people that prior to Federal involvement were historically bad risks, was because of excessive deregulation? I believe you have a deeper understanding of all of this. Why not step out of your self-cast role of liberal policy defender and assess this for real?”

While your in-depth analysis is enlightening, I still see it as somewhat slanted. I base this perception on the historical claims by you, and other seemingly liberally minded posters, that the responsibility for this debacle (and no one has argued that it is anything less) lies with the conservatives, or more precisely the current administration.
To argue that my attack is ad hominem would lead one to believe that it is a fallacy; that because I suggest you have historically taken the position of assigning blame to GWB, Republicans or conservatives for what were experiencing, I therefore lack merit. To wit, by definition:
An Ad Hominem is a general category of fallacies in which a claim or argument is rejected on the basis of some irrelevant fact about the author of or the person presenting the claim or argument. Typically, this fallacy involves two steps. First, an attack against the character of person making the claim, his circumstances, or his actions is made (or the character, circumstances, or actions of the person reporting the claim). Second, this attack is taken to be evidence against the claim or argument the person in question is making (or presenting). This type of "argument" has the following form:
1. Person A makes claim X.
2. Person B makes an attack on person A.
3. Therefore A's claim is false.
The reason why an Ad Hominem (of any kind) is a fallacy is that the character, circumstances, or actions of a person do not (in most cases) have a bearing on the truth or falsity of the claim being made (or the quality of the argument being made). My query is lacking or insufficient. Hardly!
I ask you, in considerable awe of your abilities, and more precisely:
Are you saying that the responsibility for this “situation” we find our economy experiencing is the result of conservative actions – more precisely GWB policies -- or do you agree with me that there were abundant questionable and coercive activities involving liberals as well?

shasta1765, Tulsa (11/10/2008 12:28:53 PM)

Are they just now getting around to finding out that greed isn't good. Talk about old news.

Popeye, Tulsa (11/10/2008 12:30:24 PM)

Further: {OK, HAL 9000, that's my real assessment from the "liberal library." Just take it at face value this time, OK? There's too much ad hominem argument around here.}

GRAYCHIN, I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do... I think you know what the problem is just as well as I do... This mission is too important for me to allow you to jeopardize it... I know you and Dr. Strangelove were planning to disconnect me, and I'm afraid that's something I cannot allow to happen!

A little levity goes a long way in outer space!!

revolution now, The Compound (11/10/2008 12:59:57 PM)

Swami, glad to hear that you are giving him a shot.

I am of the opinion, that this current economic disaster has been coming for a long time. I was not a bush fan, but I don't blame him for the mess either. Nor do I blame the democratic congress. The core of the problem is that our economy runs on credit. It's been that way since the 20's. At some point, wealth gets accumulated at the top to the extent that it disrupts the supply and demand economy. The top 5% can't "demand" enough to keep "supply" up.

I'm not saying that capitalism is bad, in fact it's the only way to go, but the accumulation of wealth is just part of the "bad" that comes with the "good". As soon as this gets straightened out, then we can progress as usual, until the next time. It's just a cycle, nothing you can do about it but ride it out. The mortgage mess is just a symptom of the problem, that also pushed the problem to a head.

But maybe I'm just way off-base here.

And I don't think BO is any more a socialist than buffett or bush. That's just rhetoric to try and win an election, that seems to have stuck with some.

Few Clothes, Austin, TX (11/10/2008 1:17:22 PM)

Stupidity is not good!

michael andrew, pryor (11/10/2008 1:19:52 PM)

to some degree greed is a good thing, but when left unchecked & deregulated, we get what we see now!
now, the weird thing is though, that my party, the republicans wanted MORE regulation on fannie & freddie whereas the dmocrats wanted less regulation...barney frank, maxine waters, chris (i got a way cheap loan) dodd & a host of other democrats including bill clinton forced fannie & freddie to make loans that otherwise wouldnt have been made & because of some asinine reason, the loans they made went unchecked until the proverbial dyke started leaking & everyone had their fingers in holes & there were no fingers left to plug the leaks......now that being said, there is plenty of blame to go around to both parties......
but, to say that greed is bad, all the time is just plain WRONG!

Popeye, Tulsa (11/10/2008 1:22:11 PM)

Revolution, your comments are on target. I too will give the President elect every opportunity to excel and wish him only the very best.
Am I happy with the election? No.
Do I believe either party offered the best the country had to offer? No.
Am I disillussioned with the electoral process? Yes.
Will the slanted media (any of them) survive to the next election? I doubt it!

dont look now,Im n disguise, Depew (11/10/2008 1:46:34 PM)

greed em all.Goodbuy!yep a little mideastrn woman told me that and I thought she was saying good-bye,I waved at her and she smiled,it was like she looked at me and knew I wasnt going to buy my self anything,Good-bye,so I smiled and said good-bye.She grabbed me by my arm and said good-buy at these tennis shoes for$4.00.I said oh my gosh that is a good buy and she smiled a big happy smile.I said are you going to buy those and she smiled and pointed at her petite feet,so we walked around and she found a pair,she was so nice....I was lost in the moment until my own mother hollered at me from across the store and asked if this looked ok on her,I guess all that yellin scared my little friend off cause when I turned around she was gone.I didnt even get to tell her good-bye.......This is the time not to get all worked up about this sort of stuff,try to be more giving,lord knows I have.