Posted on 02/06/2009 2:52:48 PM PST by PurpleMountains
Today the African-American lady who is the mother of one of the victims of the bombing of the U.S.S. Cole refused to meet with Obama in the wake of the throwing out of the case against the Jihadist bomb-master due to a recent Executive Order by Obama regarding Guantanamo.
What else have we seen in just two weeks? What else can go wrong?
(Excerpt) Read more at forthegrandchildren.blogspot.com ...
How about Dick Cheney instead?
Agreed. Obama is gonna be a savior compared to Bush........
I saw the properties those people held. Pipes, toilets and sinks ripped out. A bunch of illegal aliens ran away with the inside to do what with? They use toilets in Mexico.
Will Obama make your life whole? If you say yes, I already hid my money from him. Apparently, many others did too.
Hey! Let’s give the guy a ch...nah, never mind.
AIG oversold insurance (derivatives) on risky loans...this permitted investors to make incredibly dangerous investments-less risk...We have given AIG $160,000 billion dollars to date and more is on the way. You could have paid off every bad loan with 1/10 of tarp and fed money already used...BS-this is the Wall Street bankers latest excuse.
The truth is Wall Street crashed the economy with a little help from our government. Under a Democrat president and a GOP congress...the bucket law was done away with...this allowed Wall street to create derivatives (against the laws in most states before this happened) these POS financial products went off like an H bomb in our economy per Warren Buffet.
It was equally hazardous for federal entities like Freddie Mac and Fannie Mae to facilitate arbitrage deals with improperly bundled mortgage packages (CDO's) whose risk was impossible to truly gauge, not that anyone cared as long as the tax-and-credit-expansion power of the government was implicitly underwriting them. These practices encouraged financial service companies to engage in dangerous speculation using highly-leveraged assets whose value was largely predicated on the promise of Uncle Sam holding the bag when and if they blew up.
And that's what happened. The point is that in a truly free market, financial companies would NEVER have been willing to take the risks they did - because those risks were not underwritten with their own money, but with yours and mine. And that is why it is so wrong and immoral to bail them out now. The people who deserve to be in jail are the Congressmen who passed the laws and the lobbyists who paid them off.
Derivative used to be outlawed-buck shop laws...they should be again as they encourage risky investment and are not regulated.
Lehman insured Freddie and Fannie you know. I include CDO’s as well. All of this nonsense needs to be stopped. Buck Shop laws were there for a reason. As for mortgages...you could pay off every bad mortgage with 1/10 of the money spent-TARP and Fed money...more bailouts to come-including bad bank. This is where the banks get to transfer their toxic assets to the taxpayer.
Brokers like Lehman used their trading leverage to market these assets aggressively, and why not? It seemed foolproof, that is, as long as real estate prices continued to rise and long-term interest rates remained stable. High-risk borrowers simply refinanced whenever the payments got to be too much, using increased home equity as collateral, and the new mortgages were bundled and sold off almost immediately to finance other investments.
A Fool's Paradise it was, of course, dependent on the Federal Reserve's printing presses and taxpayer pocketbooks, should The Unthinkable happen. In this case, the "unthinkable" was in reality a very routine occurrence: a correction in real estate prices. These prices were driven to lofty levels by speculation that was itself created by government policy. High American business taxes (the highest in the free world), increasing energy prices (no drilling, no nuclear power), and a non-level playing field in international trade made US equity interests far less attractive than real estate as an investment.
When the Boom busted, the whole house of cards fell apart rather quickly, in part because no one believed it was happening, but also because the multiple layers of leverage built into the market could not be unwound fast enough to stop the snowball effect.
Lessons learned, one would hope. When the government gets involved in the business of financial risk management, honesty, trust and transparency are the first things to fly out the window. The incentive systems that result from government mandates create two classes of people: crooks and victims. Some will gladly volunteer to be the first if they think they can get away with it (right, Bernie Madow?) but no one wants to be in the latter class. Unfortunately, that's exactly where most end up.
Does that state it plainly enough?
We operated just fine without derivatives until 2000, when the modernization act under Clinton overturned the bucket shop laws. I understand that these product do offer liquidity. However, the banks chose to do this. They chopped the mortgages up and firms like AIG granted ‘insurance’ for increasingly risky investments including the mortgages and other investments which have nothing to do with mortgages and without sufficient capital to cover their losses... if you keep these derivatives, and I don’t think you should, they must be regulated to make sure they are backed by sufficient capital just like any insurance company. Warren Buffet called these things H bombs...and they sure went off in the world economy...Iceland is bankrupt, England is almost bankrupt as is the United states. I think modern financial business should think long and hard about this...perhaps the old ways were better.
You could take every bad mortgage and pay it off...you would not use 1/10 of TARP or the FED spending ...this is not about mortgages. It’s about wall street making terrible investments without sufficient capital relying on derivatives (insurance) to cover their losses...too bad there was insufficient capital to cover the losses.
Well, I guess I need to find a better shortcut way of explaining then. Do you have a concise sentence you can offer?
It’s hard to be concise when explaining this. First, it’s not all about mortgages. We can see this as every bad mortgage out there would not add up to 1/10 of TARP and Fed money spent. Credit derivatives were offered to investors to cover risky investments...this included some mortgages and also loans to companies like Ford as well (companies needing restructuring) as well as other risky investments. Credit derivatives were basically an insurance policy...insuring risk...this allowed various banks, businesses and even governments to take huge gambles...leveraging themselves 60-1 in some cases. I think Lehman started the downward spiral when it manipulated oil prices driving them up...this caused some losses. The problem was AIG and Lehmans were not properly capitalized. When some investments failed they could not cover the losses...this caused investor panic who began to sell these things...Lehman fell and the rest is history. If Lehman was bailed out, we might not be in this situation, but it would be waiting for us down the road. Derivatives would not have permitted before 2000 because there used to be a ‘bucket shop’ law which outlawed this type of financial product which encourages gambling and not sound investment practices.
Some of the smartest people on the planet thought they had found a way to make debt risk dissolve into the global economy while still making enormous profits? If I understand this correctly, they failed...
You understand it perfectly...remove the risks from themselves and place it in the economy...you are concise...wow...great post (tipping my imaginary hat).
You are very kind. I’m just trying to figure out how to make it understandable to non-financial people (like me.)
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