The Federal Reserve is responsible, they are suppose to supervise the banks. But what they did was to enable the commercial and investment banks to behave in a reckless manner. Creating all these unregulated synthetic products, a bunch of hocus pocus.
The way the system to defraud the public is setup. The fed can blame congress and congress can blame the Fed. Congress needs the Federal Reserve itâs there way out when things get messy. Thatâs why they never appose the Fed.
That is not what it is about, so you would be in for a surprise. You might try listening to the beginning at least. Tavakoli talks about Bush's issues, and expands on that in her book: Dear Mr. Buffett. He rewarded the former CEO of predatory lender, Ameriquest, and pushed the housing agenda. But Frank and Dodd pushed lower lending standards. She says it is a bi-partisan problem, among other problems. http://www.amazon.com/Dear-Mr-Buffe...bs_sr_1?ie=UTF8&s=books&qid=1241011988&sr=8-1 <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/WA20Am0pwtA&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/WA20Am0pwtA&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
Remember Greenspan even endorsing them? Claimed they were a good thing... "spreads the risk"... you know.
The comments made earlier about the economy being down for some time is correct.... A significant percentage of total wealth has been lost....nothing more....nothing less.... It is lost....gone.... ............................................................... There is no way that the Fed can replace it.... The building phase requires that the business entrepreneurs have to start and expand in a big way.... The Fed/govt. is not an entrepreneur....is not a manufacturer....is not a business ....period.... The Fed/govt. is a leech/parasite of those who produce goods and services.... ..................................................................... It can be decades before a 5% unemployment rate is seen in the US....if at all.... This will require efficiencies in all areas superceding that of the developing low labor cost competitors.... This is going to take a long.....long time.....if ever.... ....................................................................... The last economy was fake.... It was dependent on legal property rights with respect to debt assignments.... Thus without this re-appearance in the future.... The US must produce a "real economy" commensurate in size of the "fake economy" while also accounting for the current govts. willy nilly printing press.... This is almost impossible to overcome.... In that the already built in biggest component of the prices of all future products will be the tax take....which is on track to exceed 50% of all prices....and this does not include state tax impositions.... Needless to say....the US future is in jeopardy .... Unless the govt. at some point downsizes in a very big way.... And changes the tax take such that product prices can be competitive with China/India prices.... A lot of Americans will be driving Nanos via Tata.... And will consider themselves lucky to have one.... And no....this is no joke... Hopefully Nano will go electric.... ................................................................ Scataphagos is right.... ........................................................... This also means that the two party by advertising/lobbyist system has to be changed as well.... An incredibly steep hill to climb, indeed.... ................................................................. The real wake up call ? The soon to be "FAILED" US Bond auctions.... Just maybe the US govt. will be forced to downsize.... This would actually be a good thing....
He sort of gets it, but he seems to be in the "models killed Wall Street crowd. Here's another point of view: http://www.tavakolistructuredfinance.com/TSF17.html Malfeasance - Not Models - Killed Wall Street TSF - February 24, 2009 by Janet Tavakoli Paul Volcker, former U.S. Federal Reserve Board chairman and member of President Obamaâs economic advisory team, gave a speech in Toronto on February 11 at the Grano Salon Speakers Series on the U.S. economic crisis. He made the mistake of blaming mathematical models instead of malfeasance as the key source of the financial meltdown: âThey thought financial markets obeyed mathematical laws. They have found out differently now. You know, they all said these events happen once every hundred years. But we have âonce every hundred yearsâ events happening every year or two, which tells me something is the matter with the analysis.â Volcker was only partly right; there is something the matter with his analysis. The models would have failed to capture unexpected âhundred year events,â the outliers Mr. Volcker referred to in his speech, but that was not the cause of the U.S. financial meltdown. There were no outliers; there were outright liars. The models crunched misleading data fed to them by Wall Streetâs financiers. The events that keep happening every year or two are the effects of massive unchecked malfeasance. The global meltdown was not caused by an unfortunate mistake; it was caused by malicious mischief. Every problem related to the current financial meltdown was discoverable in the course of competent work. Our financial malaise was caused by bad behavior deliberately hidden behind the opaque veil of models and hard to pronounce financial products like collateralized debt obligations and credit derivatives. There is no innocent explanation, and the problem was massive. Wall Street knew about predatory lending, easy money, risky loans, overleveraged homeowners, misleading loan documents, failed business models, overleveraged hedge fund clients, shoddy ratings on Wall Street deals, and more. Any finance professional worth their salt knew the data being fed the models in no way represented the risk. We have a different problem than bad models. This is a classic case of garbage in/ garbage out, and Wall Street pros selling the garbage out knew what they were doing. As hundreds of mortgage lenders failed, Wall Street sped upâinstead of haltedâits sales of overrated deals. It rushed garbage out the door and into investment funds all over the globe. That would be bad enough, but investment banks lent money against this garbage, andâjust as Archimedes told us it wouldâleverage (borrowed money) moved the world. But not in a good way. WIRED compounded Volckerâs error in its most recent article: "Recipe for Disaster: The Formula That Killed Wall Street" (Feb 23, 2009). WIRED blames a model called the Gaussian copula saying it could not capture extreme âblack swanâ events or âgrey swanâ events that happen more frequently than the model predicted. It is true that Wall Streetâs models are flawed, but even if the models had been changed, we would still have had our financial meltdown. All models are flawed, and the suggested replacement models would not have captured the problem, either. I have been a decades-long critic of the limitations of Wall Streetâs models, but to blame models for our current debacle dodges the real issue: malfeasance. [JT Note I am quoted in the WIRED article: "âCorrelation trading has spread through the psyche of the financial markets like a highly infectious thought virus,â wrote derivatives guru Janet Tavakoli in 2006.â I am a trenchant critic of correlation models, as I wrote to the SEC when I suggested the rating agencies' NRSRO designation should be revoked in February 2007, but I disagree with the articleâs premise that models were responsible for Wall Streetâs demise.] Perhaps Volcker and WIRED offered an explanation that is strictly for the birds, because they cannot interpret what they are seeing. At a loss for a reasonable explanation, they claim this was an unexpected âblack swan.â Richard Feynman, the Nobel Prize winning physicist who worked on the Manhattan Project, would not have been a fan of Volker or WIRED, because he believed in understanding his birds: âYou can know the name of a bird in all the languages of the world, but when youâre finished, youâll know absolutely nothing whatever about the birdâ¦So letâs look at the bird and see what itâs doingâthatâs what counts. I learned very early the difference between knowing the name of something and knowing something.â If you looked at what people were doing, it was easy to see there were no black swans or swans of any color involved. Wall Streetâs bankers behaved like Black Bart, the 19th-century California gentleman stage coach robber who galloped off with Wells Fargoâs loot without ever firing a shot. Washington-based financial regulators and Congressional overseers behaved like ostriches. It seems they only raised their heads when it was time to reverse legislation that protected the mortgage lending market, approve an Ambassadorship to the former CEO of a predatory mortgage lender , have dinner with financiers , or collect generous campaign contributions. The massive creation of phoney securitizations from risky (and sometimes predatory) loans combined with leverage to form a toxic brew in Wall Streetâs financial meth labs. Debt such as this is initially sold at full price. It has no upside, but it has a lot of downside. If you lend (or borrow) money against an asset that will plummet in price, you are in trouble from the start. As the prices of these toxic products inevitably fell, hedge funds and other overleveraged borrowers were forced to sell in what is called âthe great unwind.â Borrowed money and toxic products caused a vicious cycle of selling that is feeding on itself. Wall Street has created such a tangled web of risk for itself that financiers often do not trust each othersâ prices and often do not trust their own prices. Wall Street would be delighted, however, if U.S. taxpayers would suspend their disbelief long enough to allow the U.S. Treasury to take this mess off of their hands. We were told we would make money. How is that working out so far? We have lost hundreds of billions of dollars in market value and the oversight panels have lost track of our money. At the most recent Davos conference, Jamie Dimon, JPMorgan chief executive, remarked: âSome really stupid things were done by American banks and American investment banks. To policymakers, I say: Where were they?" No one in the US has been brought to justice for the enormous financial crime whose consequences are being foisted on the U.S. taxpayers. It is alarming that policy makers like Paul Volker perpetrate the myth of mistaken models instead of identifying the misteps of imprudent and pernicious financial practices. The overwhelming problem in the market is lack of trust and evasive explanations like those offered by Paul Volker and WIRED are misguided. There shouldnât be an ill-suited model at the end of this whodunnit, rather there should be a long list of Wall Street bankers and perhaps a few Congressmen and regulators. To the policy makers, I say: âWhere are you?â <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/WA20Am0pwtA&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/WA20Am0pwtA&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
I agree with a lot of things here, but this one is just way too one sided. Every contract has a buyer and a seller and the reason the for the housing disaster is not because of people that could afford their houses but because of those that could not afford their houses. As I said earlier, if a person cant figure out that if there combined income is 40K that they cant afford a 500K mortgage without the predatory lendor telling them so, then I think we have found the real reason of the collapse, pure outright stupidity. At some point we need to take ownership of the problem because we are 1/2 the problem. Even if you tell all the predatory lendors never ever ever lend to these folks again, I will give you one guess as to what will happen.. Someone will file a discriminatory lawsuit against that firm and probably win. Because as you know, we Amaericans deserve everything.. It's not hard to believe why the rest of the freakin world hates us.. When Clinton deregulated housing (shortly before he deregulated sex) in the sense that he made everyone believe that they have a right to a home, he opened the door. Bush, noticed that and said boys we are going to have a party. Bring in the strippers, and thats that. Im anti government when it has anything to do with the financial world because they will be sure to muck that up but I also will not solely hold them to blame for this when we are equally as guilty. The bottom line for this whole mess is greed and stupidity. It would be nice if on occasion we could look in the mirror and admit that instead of pushing the blame on anyone but ourselves. Ghostdog <Wall Street knew about predatory lending, easy money, risky loans, overleveraged homeowners, misleading loan documents, failed business models, overleveraged hedge fund clients, shoddy ratings on Wall Street deals, and more. Any finance professional worth their salt knew the data being fed the models in no way represented the risk.>
Disagree. I'll say "we the borrowers" are about 2% responsible... Government the rest. If "mortgage lending = strip club"... and the strip club changed its policies to "no cover charge, no drink minimum, no dress code, no age restrictions", then it wouldn't be the patrons' "fault" if they took advantage of the ridiculous "no entry requirements". The borrowers took advantage of the irresponsible lending laws and practices. The government had it FULLY within their control to prevent this mess 100%... and they mucked it up for political greed. The same Democrat party which initiated this mess is now almost 100% in control of the government (final nail in the coffin comes when they have a filibuster-proof Senate, likely in 2010). THAT's what's wrong...
Gee, i thought terms were already limited to one at a time. Apparently these folks are doing a good job. Most of them get elected over and over.