Is Obama serious?

[rydawg]

Originally Posted by Setec Astronomy

So should we skip the bailout and get some new executive talent into the financial institutions?

Yes.

[JuneBug]

Reagan had it right - Bush I and II f..ked it up. But, unless we change from the great assisted living, government over you from cradle to grave then we're doomed to be as screwed up as England and France - talk about bad times now, just wait till unversal healthcare - wanna see how well your government can run healthcare - go to Walter Reed or any local VA hospital. This whole concept of the government taking money and spending it on "social" programs started with FDR and if it wasn't for WWII - he would have been remembered much less fondly. Then ol LBJ - with the "Great Society" and the war on poverty - talk about a wastefull war. I don't care what party you belong to or who you vote for, but just remember - if the givernment was a business it would fail in a day and be illegal in most things, personal responsiblity is the only way we're going to move forward, less government for me!

[MSOsr]

Let's say you're a car salesman and your paycheck is dependent on your selling cars. If a bank will finance a sale to some schmuck that you know can't afford the car, are you going to slit your own throat and forego the deal? NO......happens every day. The dealership finds a bank, the schmuck signs the papers, the dealership and salesman get paid, and the bank is left with the soon-to-be bad debt.

In the Carter administration, gov't passed the Community Reinvestment Act, that had the goal of encouraging the banks to lend money for renewal of the slum areas of town. It didn't work, because there were problems with asbestos, chemical dumping, etc., so low income people had no avenue to enter home ownership.

Mid 1990s, Clinton took the bull by the horns and used the Act to essentially require affirmative action in lending. Banks were required to have certain "scores" for their lending practices to minorities and lower income citizens before the government would allow them to expand/merge with other banks.

Freddie and Fannie were standing by to buy up the risky loans made to heretofore "bad risks". They securitized the book of loans and sold them as investments, making more money for every one they sold. So what did they do? Bought up more and more loans to sell.

The "time bomb" to this scenario was that home prices had to keep escalating. That way, when the "bad risk" missed payments, he could sell the house and get some equity out of it and satisfy his debt. However, once fuel prices and other economic factors got involved this year, Mr. "bad risk" couldn't find buyers for his inflated-priced house, because there were too many of those houses on the market.

SO.....we ended up with record foreclosures, because the "bad risks" had negative equity. Those losses funneled from banks, through Freddie and Fannie, and to everyone who bought the "securities", destroying our economic prosperity.

Was "greed" involved? Sure, but economically sensible greed, just like the car salesman. If you didn't have to take the risk for the buyer not paying, why not keep selling to maximize your income?

In 2003, Bush promoted a restructuring of Freddie and Fannie, to tighten up their risk taking. It didn't get the 60 votes needed.

In 2005, McCain sponsored legislation to tighten up Freddie and Fannie, and the Democrats (Barney Frank, in particular) excoriated him, saying "there is nothing wrong with them" and insinuating that Republicans just didn't want minorities to have houses. Democrats fillibustered the bill.

Now, Frank, Dodd and the boys who took the big campaign contributions from Freddie and Fannie are blaming Republicans? The free market worked....gov't intervention, requiring banks to make loans they had previously shunned, caused this problem.

Mike

[dave40co]

Originally Posted by MSOsr

Let's say you're a car salesman and your paycheck is dependent on your selling cars. If a bank will finance a sale to some schmuck that you know can't afford the car, are you going to slit your own throat and forego the deal? NO......happens every day. The dealership finds a bank, the schmuck signs the papers, the dealership and salesman get paid, and the bank is left with the soon-to-be bad debt.

In the Carter administration, gov't passed the Community Reinvestment Act, that had the goal of encouraging the banks to lend money for renewal of the slum areas of town. It didn't work, because there were problems with asbestos, chemical dumping, etc., so low income people had no avenue to enter home ownership.

Mid 1990s, Clinton took the bull by the horns and used the Act to essentially require affirmative action in lending. Banks were required to have certain "scores" for their lending practices to minorities and lower income citizens before the government would allow them to expand/merge with other banks.

Freddie and Fannie were standing by to buy up the risky loans made to heretofore "bad risks". They securitized the book of loans and sold them as investments, making more money for every one they sold. So what did they do? Bought up more and more loans to sell.

The "time bomb" to this scenario was that home prices had to keep escalating. That way, when the "bad risk" missed payments, he could sell the house and get some equity out of it and satisfy his debt. However, once fuel prices and other economic factors got involved this year, Mr. "bad risk" couldn't find buyers for his inflated-priced house, because there were too many of those houses on the market.

SO.....we ended up with record foreclosures, because the "bad risks" had negative equity. Those losses funneled from banks, through Freddie and Fannie, and to everyone who bought the "securities", destroying our economic prosperity.

Was "greed" involved? Sure, but economically sensible greed, just like the car salesman. If you didn't have to take the risk for the buyer not paying, why not keep selling to maximize your income?

In 2003, Bush promoted a restructuring of Freddie and Fannie, to tighten up their risk taking. It didn't get the 60 votes needed.

In 2005, McCain sponsored legislation to tighten up Freddie and Fannie, and the Democrats (Barney Frank, in particular) excoriated him, saying "there is nothing wrong with them" and insinuating that Republicans just didn't want minorities to have houses. Democrats fillibustered the bill.

Now, Frank, Dodd and the boys who took the big campaign contributions from Freddie and Fannie are blaming Republicans? The free market worked....gov't intervention, requiring banks to make loans they had previously shunned, caused this problem.

Mike

Well put Mike and 100% true!
Google "Community Reinvestment Act" and see he is right.
By the way Obama's campaign is full of ex Freddie and Fannie guys.

[Setec Astronomy]

Originally Posted by MSOsr

Banks were required to have certain "scores" for their lending practices to minorities and lower income citizens before the government would allow them to expand/merge with other banks.

There's the problem right there. A favorite catch phrase of politicians is that "the engine of our economy" is small business, yet businesses are allowed to combine and merge until they are "too large to fail", and even in the shadow of a bailout for them, ML and Wachovia get bought up. The bigger the big businesses get, the harder it is for those "engines of our economy" to survive. Try and run a pharmacy against Walgreen's and CVS, a hardware store against Lowe's and Home Depot, or an airplane company against Boeing. Even Toys R Us couldn't compete against Wal-Mart, how's the corner toy store going to?

And if there are 10 financial institutions instead of 100, and one of them is poorly managed and gets messed up, that's 10 times the impact to Wall St. and Main St.

[Bunky]

Most of the facts here are rarely 100% true. They are often copied talking points from either side without the full context. It just makes the story easier to tell rather than having shades of group (we cannot allow complex thinking).

If something did not get through Congress it took a bunch of republicans and democrats to stop it.

[qwertydude]

What I don't get is why people rail against universal healthcare so much. It is no nightmare scenario that inevitably ends up with substandard healthcare. Our primary education is socialized, our police, our fire department. We just don't call it that. Now if your house is burning down and you called the fire department and they asked for your fire insurance policy carrier and number for preapproval, and asked if you want full service or a smaller more affordable bicycle fireman with a super-soaker, your house would have burned down by the time you could get anyone there. It's the same thing with healthcare. But we seem to put a priority over material possessions than human lives. Sure you can go to any emergency room but take a look at your bill and even relatively minor injuries can ruin you for life. 2/3 of bankruptcies are caused by medical bills in California. There are a few things that the free market is terrible at providing medicine is one of them, unregulated utilities was another. If you can tell me straight to my face that someone working hard to get by and can't afford health insurance doesn't deserve medical treatment for a disease that can kill him then I'd have to say there is no hope for you and there will never be any changing of your mind. Heck even the AMA says our system is broken.

[Setec Astronomy]

Originally Posted by qwertydude

Heck even the AMA says our system is broken.

Another industry more and more dominated by big insurers and big medical groups. I guess what is so funny about this to me is that here at Autopia the majority of the people who make their living detaling are one-man operations and decry the "big business" practices of the dealers and other high-volume operations and their crap results, but turn around and defend the big business practices as it applies to other things.

[JuneBug]

The problems of health care are complex, but I'll try to explain my view of what's wrong: people to expect that we can fix anything - just pop the latest pill and you are good to go - never mind the side effects they munble through at the end of the commercial and if something goes wrong - no problem - just sue the doctor. Got plenty of lawyers standing by, call now blah blah...OK - Tort Reform! and there needs to be a review board that police doctors - they are bad doctors just like bad teachers, dentists etc. I get sick of hearing about the poor pitiful uninsured, the hospitals treat and write off millions each year on deadbeats, illegal aliens, etc. It's goes back to choice - do you finished school or decide you were too cool, did you decide to go bling bling and have 22" wheels, 3 cell phones and cable? Poor *******, no wonder you can't afford health insurance. Don't worry, mammy Clinton will be back in 2012 to take up the cause.

Socialized or government run - yeah, that works - look at the schools - and see how great they became after "every child left behind Bush" took over. Reagan wanted to get rid of the dept of education - he was right, the federal government has no right to run the schools. Find it in the US Constitution where they do - along with a lot of other "rights" they seem to have over us.

But, hey - if you'd rather have Big Brother look after you than think for yourself, socialism - here we come.

[jfsully]

Todd you and I pretty much agree on something....(good to know, DF tells me you are actually a nice guy)

Tod is correct about McCain's warnings a few years ago and the Bush administration tried to warn Congress numerous times over the last 8 years. They were ignored as Barney Frank and those like him said we have to give mortgages to the people even those they cant afford them.

This is NOT a Wall Street bailout , it is a financial recapitalization. The money doesn't go to bailout "rich Wall Streeters: but to re-liquify the packaged loans so that again money can be loaned and the economy grows. The money will be used to buy packages of loans that will free money up to be loaned. The situation may even allow the public to make a profit (even without the equity kickers proposed) WAMU failed because of many issues, panic and misinformation being just two.

One issue not understood by the public is the issue of "mark to market". Because of that accounting issue, if the only bids for a package of loans are ridiculously and artificially low, all companies must mark their like assets (the loans) to the ridiculous level. This causes financial ratios to be out of whack and hastens the failure of the institution.

An example is if Todd and I both have a $1 paper bill. I have to have coin change for my dollar and JuneBug is the only person around and he only has one quarter. Todd has to have change (at least the quarter) and gives his $1 bill to June Bug for the quarter. Mark to market means I know have to price my $1 at .25 even though I wont sell my $1 bill for .25.

The system has frozen , there is no secondary ,market and there are few loans available. When its passed (and in some form it will be), you will be able to identify the thawing of the credit markets by following the LIBOR rate and seeing that drop (its not at ridiculously high level).

[jdoria]

Originally Posted by Setec Astronomy

CEO's always made a lot of money, but it was more like what the President of the US makes, $400,000. Can you really justify any CEO making 250 times that? It should be noted that people like Gates and Jobs for many years made $1 in salary, and made their money from the value of their stock increasing. Besides, these are people that started their own companies, arguably their own industries, they are entitled.

This one always interests me. It takes two to negotiate a salary contract. These CEO's arent writing checks from the shareholders dividends themselves. Some "BORED of Directors" decided their company was in need of leadership agreed to pay the CEO $56,000,000 per year unconditionally.

I remember a guy at a bank making $120,000,000 per year running a global desk back in 03, just an employee, not a "C" level.

[Setec Astronomy]

Originally Posted by jsatek

This one always interests me. It takes two to negotiate a salary contract. These CEO's arent writing checks from the shareholders dividends themselves. Some "BORED of Directors" decided their company was in need of leadership agreed to pay the CEO $56,000,000 per year unconditionally.

I remember a guy at a bank making $120,000,000 per year running a global desk back in 03, just an employee, not a "C" level.

It's kind of amazing how the boards have just rolled over and allowed this, it started with that Coke guy in '85. I still feel like I'm in that "They Live" movie, it's all around but nobody will say the emperor has no clothes.