Hillary Kicks in $5 Million to her campaign

Discussion in 'Politics' started by flytiger, Feb 6, 2008.

  1. I'm not a Ben Stein fan, but he makes a better point than I can about Regulation, or De Regulation:

    http://www.nytimes.com/2008/02/10/b...business&st=cse&sq=ben+stein+regulation&scp=5



    --------------------------------------------------------------------------------

    February 10, 2008
    Everybody's Business
    The Unending Allure of the Free Lunch
    By BEN STEIN
    With usura hath no man a house of good stone

    each block cut smooth and well fitting....

    With usura ... no picture is made to endure nor to live with

    but it is made to sell and sell quickly...

    — Ezra Pound

    YES, I know that Ezra Pound was an anti-Semite and a fan of Mussolini, but he later repented of both and apologized. And for my money, except for Bob Dylan, Pound was the greatest of the 20th-century American poets and sometimes he hit the mark, despite his obvious nuttiness.

    His words on usury, or ultra-high-interest lending and borrowing, come to mind as I contemplate the subprime problems that face this great nation. In a few words, here is what happened in the subprime debacle:

    John Jones wanted to buy a home. He had poor credit. He went to his local mortgage lender, George Smith, and secured a mortgage with a low interest rate at first but then a much, much higher rate down the line. Mr. Smith got the money to make the loan from a regional lender which in turn got the money by offering short- to medium-term loans to investors.

    Mr. Smith, the local lender (along with many others), sold his loans to some large and enterprising investment vehicle. The loans were sorted in some crude fashion so that there were groups with halfway decent credit, poor credit, and really, really awful credit. These were then packaged in immense bundles and sold to domestic insurance companies, hedge funds, banks, wealthy individuals, money market funds and foreign investors, who again were banks, insurers, money market funds or wealthy investors either as individuals or as hedge funds.

    The buyers knew that the instruments they were buying had above-normal risk. But the instruments paid more than prime loans, and those that were really dangerous paid a lot more. (Taking adequate levels of reserves was simply ignored.)

    Yet in a low-interest-rate world, the lenders “reach for yield” (a Michael Milken phrase) to earn more for their owners, book more deals, book more expected profit and get bigger bonuses. Usura is nice if it buys a big house in Greenwich.

    Now, freeze that side of the picture for a moment. Mr. Jones took his money and bought his dream house. (Or was that Mr. Blandings?) The builder and the building suppliers and workers were paid. Mr. Jones and his family moved into the home and enjoyed it. Furniture got sold and painters painted.

    Time passed. It turned out that Mr. Jones bit off more than he could chew. He looked at his mortgage payment. Maybe it had reset to a higher rate. He saw the housing market deteriorating around him. His home was worth less than he paid for it, and he was paying more — maybe a lot more — than he could afford or than he would have had to pay for a comparable rental. He moved out and mailed the keys to the local lender, Mr. Smith.

    Unfreeze the other side of the photograph. Many, many Mr. Joneses are mailing back their keys. Mr. Smith and his like have long since gone out of business. The keys go to the investment bank. But that company does not own the mortgages any longer, except for a few that it could not unload to even the most gullible foreign buyer.

    So now an immense and diverse pool of lenders has a lot of keys to homes and a lot of mortgages that have stopped paying. Many are fiduciary entities. They are required by law to mark down their assets to market value — only they don’t know what market value is. They do have traded indexes in these general arenas. But those indexes, like all traded derivatives, are highly changeable and subject to manipulation.

    Losses are taken. If the entity is public, its stocks and bonds fall (unless it has been clever enough to short the indexes as it sees the deluge coming). Investors lose money. The republic teeters, and legislation is proposed to subsidize borrowers or to borrow money from future generations to pump up the general economy.

    Now, let’s look at what happened here. The money involved in some of the subprime mortgages did not just disappear. It was, at least for a while, in large measure a gift to borrowers with poor credit and allowed them the thrill of owning a home. The money went to home builders, whose stocks did very well and whose sales representatives bought cars and boats. So, for a time, there were some big winners. Fees for selling and packaging the loans went to the local mortgage broker and then to the entities that put together the deals. So they did well, too. And for a year or so, the people who bought the loan slices did well until the borrowers stopped paying.

    Now who is doing badly? The investment banks that did not sell their whole inventory of subprime — and did not sell short — are suffering badly. The banks, insurers, and hedge funds that bought and held subprime securities are hurt. The stockholders of these are hurt drastically. And, to the extent the very rapid falloff in housing and, especially, the climate of fear the news media have whipped up around this whole subject slow down the whole economy, many others are punished.

    What is so infuriating is that it has all happened before. There have been so many blows inflicted on unwitting borrowers and lenders of last resort by clever people who offered a product that offered unusually high rates of return: Milken junk bonds, housing itself, and the loans associated with housing made to less-creditworthy buyers.

    Humans are seemingly wired to believe that they really can get something for nothing, and they pay the price, over and over again. They will especially do so if they are lending and investing with Other People’s Money and if there are short-term incentives for them to hop onto the gravy train. In the long run, they can move on to the next scam.

    BUT something else was missing here. Since the era of Ronald Reagan, we have been told by powerful groups that regulation is bad and that our economy will grow like magic if we take it away. So regulation was removed from savings and loans, and they were looted mercilessly.

    The Glass-Steagall Act was repealed so that large commercial banks could get into selling investments, and we got the near ruin of immense banks. And regulation of the mortgage-based securities was confined to a boilerplate that says everything and means nothing. And the cheerleaders in Washington say, “Now we need even less regulation!” And the Supreme Court, that highest judicial body in the land, just spoke through its cloaks most deep and distinguished, and severely limited the ability of shareholders to file federal class-action suits against investment banks that help a company accused of committing fraud.

    Is anyone ever going to wake up to the fact that there is a lot of larceny in the human heart and that there are a lot of sheep waiting to be shorn and that regulation is not a bad thing? Or will we just lurch from massive meltdown to massive theft and on and on? Is anyone ever going to get it? Anyone? Anyone?

    Ben Stein is a lawyer, writer, actor and economist. E-mail: ebiz@nytimes.com.



    Copyright 2008 The New York Times Company
    Privacy Policy Search Corrections RSS First Look Help Contact Us Work for Us Site Map
     
    #41     Feb 10, 2008
  2. http://news.bbc.co.uk/1/hi/world/asia-pacific/1162550.stm

    Chinese cut off from internet


    Damage to an undersea cable has cut millions of Chinese off from the internet, and the problem could take weeks to fix.

    China Telecom has said that a major cable was cut at about 0800 local time (0000 GMT).

    The company is trying to reroute internet traffic through satellites and other cables, but users who can access overseas sites are reporting slow connections.

    The cause of the damage is not yet known.
     
    #42     Feb 10, 2008
  3. It's Clinton's fault.
     
    #43     Feb 10, 2008
  4. i rather chose mccain over clinton.
    she's a nasty bitch.
     
    #44     Feb 10, 2008
  5. Chelsea. She had the Navy Seals shoot her out of a torpedo tube and she cut 'em with a bread knife. She didn't want 2 billion Chinese she Ma's ass get kicked by the Brotha. And man, is he kicking her ass.


    So the Chinese can't get the net. What's that mean? Is Vivid Video public?
     
    #45     Feb 10, 2008