Obama, Hoover, and our descent

That is a logical conclusion, except in this case McCains choice of Palin as VP invalidates that logic. She is the deal breaker, she is stupid, uninformed and confident as hell. An ambitious confident idiot is not what this country needs and the dangers she would present as president are unimaginable. At the best she would be a puppet for some faction of the party at worst she would make her own decisions. Decisions based on a lifetime of no experience and no common sense or education. Read the transcripts of her interviews, there is not an intelligent statement anywhere in any of them. And if McCain is this careless to chose her as a running mate, how can we trust his decisions as president. You know the answer, we can't trust McCain and we can't take a chance with Palin. No matter what you think about Obama he must be elected, it is the safest choice.

 

That rules out Obama for me.

 

Bullshit Lucrum, there isn't one argument you can make for Palin, you know it, I know it. And you know Obama isn't stupid or uniformed and you also know that Palin is. Your problem with Obama is you disagree with him. And disagreement is a plenty good enough reason to be against Obama, that isn't the argument I was making. Even with your disagreement with Obama he still would be the safer vote for you over a possible Palin presidency. Just hold you nose and vote for Obama, it will force the republicans to run a half way decent ticket in four years. It's like buying insurance no one wants to spend the money but the consequences of what might happen under Palin are unacceptable. The worst we can get with Obama will be better than we've had the last eight years, but the worst we could get with Palin is unimaginable. I honestly don't know how anyone with an average IQ and even a hint of an open mind would chance Palin. Partisan politics is contagious I understand that and religion demands obedience, but this is the time to see with an open mind to consider the consequences.

 

Bullshit!
Actually I guess I should say, opinion.
Which is all I see here.
Too late anyway, truth is I voted early.
And while I don't care for McCain and never did. "Holding my nose" just wasn't going to be enough to get me to vote for Obama.

 

No. CDSs were invented in response to an Asian Financial crisis. They are no longer used to "hedge" as they were meant to, but have become a tool to bet...

but what was happenning between 2003 and now to cause the CDS market to explode by a factor of 10? I'll give you a clue, it wasn't an Asian financial crisis.

No again. That wasn't the ROOT of the problem. How can you think that? If this was just a couple "lenders" funding risky borrowers that wouldn't be a big deal. There has always been a place in the market for junky, speculative, high risk loans. This isn't the root of the problem, its a symptom of a much much larger problem that exists in our markets. It's the same problem our government has as well as America in general, and without getting into it, it has to do with irresponsibility and leverage.

the root risk is the borrowers (subprime) defaulting on their loans, if they don't do that, then no CDS crisis. If these loans are not made in the first place, no CDS explosion on mortgage securities.


Ok, this is where you don't know what you're talking about, but it is a common misconception around here. Fannie mae held around $55 billion in subprime loans in a $600 billion subprime market. So FNMA held less than 10%. Yes Fannie was a problem you are right, but for some strange ass reason you think the responsibility lies outside of the unregulated secondary market...I hope now you know better. Once again, when I was a broker hardly any loans were conforming. The restriction were far more lax on the open market, outside of fannie mae.



GSEs own or guarantee 40% of all mortgages in the US (most all of the subprime), and are about 5 Trillion on the hook in liabilities. You call that small?? I'm sorry but I don't think you have a clue. I know the guarntees were assumed (implicit), but that assumption has turned out be all too real.

The stimulus for the whole subprime mess was government policy, it simply would not have began wthout Clinton's meddling.


...As the Clinton administration’s top housing official in the mid-1990s, Mr. Cisneros loosened mortgage restrictions so first-time buyers could qualify for loans they could never get before - contributing to the the great housing and financial crisis that began 10 years later...

...In the United States, capital requirements played an important role in stimulating mortgage securitization. A paper by Paul S. Calem and Michael LaCour-Little points out that mortgages originated and held by banks are put into an arbitrary risk classification that requires more capital than similar mortgages originated by third parties but held as securities. Freddie Mac and Fannie Mae are regulated differently, and for all but the riskiest loans Freddie and Fannie face lower capital requirements and hence lower costs.[77]

Even more surprising is the way that capital requirements favor private mortgage securities (securities not issued by Freddie Mac or Fannie Mae). Those securities, even when backed by high-risk mortgages, can obtain attractive risk ratings from credit rating agencies through use of tranches that only are subject to losses if a substantial proportion of loans goes into default. FDIC capital regulations[78] give a lower risk weight to highly-rated mortgage securities, which may be backed by loans with little or no down payment, than to loans originated within the bank with down payments of up to 40 percent. These relative risk ratings embedded in capital requirements are the opposite of actual experience.

If capital requirements were identical between banks and Freddie/Fannie, then it is unlikely that Freddie Mac and Fannie Mae would have grown to dominate the mortgage market....


...The U.S. Department of Housing and Urban Development's mortgage policies fueled the trend towards issuing risky loans.[94][95] In 1995, Fannie Mae and Freddie Mac began receiving affordable housing credit for purchasing mortgage backed securities which included loans to low income borrowers. This resulted in the agencies purchasing subprime securities.[96] Subprime mortgage loan originations surged by 25% per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of these loans in just nine years.[97] In 1996 the Housing and Urban Development (HUD) agency directed Freddie and Fannie to provide at least 42% of their mortgage financing to borrowers with income below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. In addition, HUD required Freddie and Fannie to provide 12% of their portfolio to “special affordable” loans. Those are loans to borrowers with less than 60% of their area’s median income.[98] Naturally, these targets increased over the years with the 2008 target being 28%. At a hearing in 2003, Barney Frank explicitly stated that Fannie and Freddie’s government privileges were conditional on their willingness “to make housing more affordable.” The only way to achieve the low income loan targets while dramatically increasing lending was to erode underwriting standards. Fannie Mae aggressively bought Alt-A loans, where these loans may require little or no documentation of a borrower’s finances. As of November 2007 Fannie Mae held a total of $55.9 billion of subprime securities and $324.7 billion of Alt-A securities in their portfolios.[99] As of the 2008Q2 Freddie Mac had $190 billion in Alt-A mortgages. Together they have more than half of the $1 trillion of Alt-A mortgages.[100] The growth in the subprime mortgage market, which included B, C and D paper bought by private investors such as hedge funds, fed a housing bubble that later burst. In 2004, HUD ignored warnings from HUD researchers about foreclosures, and increased the affordable housing goal from 50% to 56%. These securities were very attractive to Wall Street, and while Fannie and Freddie targeted the lowest-risk loans, they still fueled the subprime market as a result.[101]

A September 30, 1999 New York Times article stated, "... the Fannie Mae Corporation is easing the credit requirements on loans... The action... will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough... Fannie Mae... has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers whose incomes, credit ratings and savings are not good enough for conventional loans... Fannie Mae is taking on significantly more risk... the government-subsidized corporation may run into trouble... prompting a government rescue... the move is intended in part to increase the number of... home owners who tend to have worse credit ratings..."[102]

On September 10, 2003, U.S. Congressman Ron Paul gave a speech to Congress where he said that the then current government policies encouraged lending to people who couldn't afford to pay the money back, and he predicted that this would lead to a bailout, and he introduced a bill to abolish these policies....[103]

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

 

anyway, subprime is off topic.

There is nothing new in Obama's ideas, same old liberal crap- tax the rich, buy your voters.

I wish there was some hope in this, however it's all too predictable. 3% is a big lie, 3% doesn't come close to paying for the promises and problems, it's much bigger than that.

There is one and only one way out, as it is has always been, and that is strong economic growth coupled with controlled gov't. There isn't a single example I can think of where taking money from productive people and giving it to unproductive people helps growth. From productive to productive- maybe in theory, but that's not what we are talking about here. Obama's ACORN buddies are not the economically creative types for instance, but they are the deserving heros of the left. Soon we are looking at 1/3 to 1/2 of the households in the US being retired/disbaled. Add up the SSI, Medicare, Medicaid, mortgage subsidies soon I bet, EIC, etc. Go ahead and add all that shit up and now we get to pay for bailouts too. Is there even a whisper from the demos about it? All I can hear is 'fair share, blah blah... this is a mean country... blah blah...we gotta help these people... stimulus relief... tax cuts for people who don't pay taxes...free money for everyone, crank up the presses!!' We are getting killed by all this populist, I should say socialistic, appeal to the lowest common denominator.

On question to Obama backers: If 3% cap gains increase is good, why not 30%?
why not 100%? hell yeah, at an effective tax rate of 100%, we would be out of the woods in no time.

What is the 'fair' percentage and why?

 

but what was happenning between 2003 and now to cause the CDS market to explode by a factor of 10? I'll give you a clue, it wasn't an Asian financial crisis.

You said that the subprime crisis was why they were invented and that was wrong. Obviously you didnt listen to the audio file. Anyways, you seem to be implying that the primary reason for the explosion in popularity is hedging some kind of risk. You don't seem to understand that the reason the market is larger than worldwide GDP is because you don't have to own the bond or be exposed to its risk to buy a CDS on it, and thus profit from its implosion CDSs have become a massive tool for speculation. Granted the subprime mess is why so much speculation was happening, but you seem to be saying that the government (or just democrats) somehow forced companies into making risky loans, so they in their desperation turned to CDS to hedge risk and thats why the market exploded. Thats not true.

the root risk is the borrowers (subprime) defaulting on their loans, if they don't do that, then no CDS crisis. If these loans are not made in the first place, no CDS explosion on mortgage securities.

I can see how you could make that argument, but if you listened to the audio you would know that a CDS crisis is inevitable. It is nothing but a huge, unregulated, casino. Why do you think the fed bailed out AIG? Because if one link in the chain fails, EVERYONE fails. This is due to a process called "netting". Without getting too much into it, hese major companies are all tied together via CDSs. Company A holds hundreds of billions in risk, but thats ok because its insured by company B which holds hundreds of billions in liabilities, but thats ok because its insured by company C which holds hundreds of billions in liabilities, company C is doing fine though because its insured be company A. Do you see the problem? Since CDSs arent regulated no one h as any idea of the solvency of the company who they just bought this "insurance" from. Companies A, B, C just happen to be major companies that affect the whole financial sector.This is the real crisis.

GSEs own or guarantee 40% of all mortgages in the US (most all of the subprime), and are about 5 Trillion on the hook in liabilities. You call that small?? I'm sorry but I don't think you have a clue. I know the guarntees were assumed (implicit), but that assumption has turned out be all too real.

For some reason you seem to be implying that GSEs are subprime. Thats far from the truth. Do I call $5 trillion small? No...why would I call that small? The vast majority of FNMAs loans were ALT-A. FNMA holds around $50 billion in subprime, and $450 billion in Alt-A. Let me ask you this, what seems more risky, subprime or alt-a? You may think its subprime, but I promise an Alt-A disaster is on the horizon. I don't think you understand that hardly any of the difficult loans brokers funded were conforming. Some were yea, and we were happy when they were. But the very difficult loans weren't conforming. A loan can;t even be above $300k or so if you want to deal with FNMA. And you mentioned before that "I just didn't have to deal with FNMA", thats true, but when we were shopping lenders and loan products we were well aware of which programs had conforming guidelines and which ones didn't. No doc loans are non conforming, no income loans are non conforming, no asset loans are non conforming, no ratio loans are non conforming. All the really nifty products were non conforming.

You could be right in that HUD's catering to low income borrowers started all of this, but what you don't understand is that the problem grew into something entirely different. The secondary market is not a victim, they were not unwilling and in fact they were coming up with more aggressive, more risky products every day. You seem eager to blame democrats for their role, and maybe rightly so, but I wonder if you will begin to see how deregulation facilitates pure insanity in the secondary mortgage market, and CDS market. They were doing all of this completely independent of FNMA or other GSE's. If you don't believe me then look and FNMA's guidelines, you will find that GSE guidelines were far stricter than anything I had to deal with. I've funded loans in excess of $700,000 (which alone disqualifies it from FNMA) with just a credit score. The 1003 (loan app) had the name, SSN and address of the applicant. The income fields blank, the asset fields black, the employment fields blank. You think I could do anything even remotely that risky with FNMA?

 

LOL yeah I voted early too, I hate waiting in line and I wasn't sure I would be in town tomorrow. I personally think Obama is the better choice for our country even before McCain picked Palin. But I was considering McCain because I though there was a chance in the short term I could save some on my taxes under McCain. If McCain would of picked someone with a brain I would of had to make a decision for my personal gain and what I think would be the best for the country. I think I would of voted for Obama anyway but I just sent a check to the IRS last week for $8200 and have to send in another check on the corp. this week, so my protect my money side might of took control. But Palin invalidated all that, she is that big of a risk. And I realize I could be wrong about Palin but given all the evidence we have I don't think there is any other conclusion but she is too dangerous a risk for us.