Current Crisis?

Interested in hearing views on what caused or is causing the current problems in the financial markets?

I know the mortgage meltdown but I am asking more of the fundementals of what is happening. Have my own ideas but am interested in others. My portfolio isn't fairing to badly but isn't growing either.

Nemont

Inadequate regulatory oversight on the Investment Banks and the Insurers. The Commercial banks had to keep their assets marked down and had adequate reserves.

The insurers and the Investment Banks were able to just try and keep the ratiing agencies at bay.

I made a bit on shorting MER the last two days, but did not hold the position over the weekend, thankfully, as I can't believe how much of a premium BAC paid for them. Still floored by that. A buddy bought 1500 on Thursday of MER, and at $18 and make make out like a bandit.

Right now, the trade is in AIG or in WM, trying to figure out if they are allowed to fail or if they can survive.....

The rapid artficial rise in home/property values....caused overborrowing and overlending....time to pay the piper... October will be ugly I.M.O.

Greed, stupidity, corruption, and incompetance, in no particular order, have undermined investor's trust in the financial markets.

Greed will undermine ethics, intelligence, or competence Paul. These aren't stupid people who line their pockets and look the other way.

There is nothing wrong with lining one's pockets.

There is something wrong with the Bush/McCain administration allowing institutions to borrow from the Fed, require government bail outs, or otherwise access taxpayer money without performing adequate regulatory oversight.

"These aren't stupid people who line their pockets and look the other way."

You ever listen to Charlie Wrangell, Harley?

Stupid was ment for all the people who signed loan documents with no f-ing clue how the loan was ever going to be repaid.

Bigwhore said:

Stupid was ment for all the people who signed loan documents with no f-ing clue how the loan was ever going to be repaid.

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There are two parties on any contract (or loan), and the bank that was signing the "other" side of the contract is FEDERALLY regulated (in most instances) and was allowed, no, ENCOURAGED by the Bush/McCain adminstration to make these loans.

Don't blame the borrower when it was the banks coming and saying, "here, have a loan, don't bother bringing us any paperwork to verify your ability to pay"......

Stupid was ment for all the people who signed loan documents with no f-ing clue how the loan was ever going to be repaid.

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...the buyer who's thinking, "wow this is too freaking good to be true but shit, I'll bite", the loan officer who had to make another lease payment on the beamer and note payment on his 5000 sq. ft. ARM loan, or the bosses who were bundling p.o.s. paper with a few good loans and unloading them?

No, I don't listen to Charlie Wrangell or Charles Rangel.

Opps! That's what Charlie goes by when in Alaska.......

Jose,

That's the corrupt part. Both parties are equally guilty, and that's why you won't hear much about it.

Jose, seriously, do you not believe a big part of the lending mess can be attributed to our 'growth by any means' economy? Give me the smart version & leave out the spin & condescension.

thanks in advance.

BigWhore said:

Jose,

That's the corrupt part. Both parties are equally guilty, and that's why you won't hear much about it.

Click to expand...

No, sorry, it is the Republican PARTY that is guilty. It was the "feel good", "screw the regulation" stance of the Bush/McCain administration that is guilty. Hard to blame the Democrats for incompetence in the Treasury Department, in the Fed, or in the other Agencies populated by friends of the Bush/McCain administration.

It is ok to quit making excuses for the failures of the Bush/McCain administration, for the 6.1% unemployment, for the $4 gas, for the change from a budget surplus to a budget DEFICIT.

We just need to MoveOn......

noharleyyet said:

Jose, seriously, do you not believe a big part of the lending mess can be attributed to our 'growth by any means' economy? Give me the smart version & leave out the spin & condescension.

thanks in advance.

Click to expand...

Don't put unreasonable limitations on your requests.

Some no-partisan FACTS for Jose.......

Fannie, Freddie spent $200M to buy influence Lisa Lerer
Wed Jul 16, 5:44 AM ET



If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this: Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions.


But the political tentacles of the mortgage giants extend far beyond their checkbooks.

The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.

They’ve stacked their payrolls with top Washington power brokers of all political stripes, including Republican John McCain’s presidential campaign manager, Rick Davis; Democrat Barack Obama’s original vice presidential vetter, Jim Johnson; and scores of others now working for the two rivals for the White House.

Fannie and Freddie’s aggressive political maneuvering has helped stave off increased regulation and preserve special benefits such as exemption from state and local income taxes and the ability to borrow at low rates.

When their stock prices took a dive last week, their government allies extended another helping hand with a plan for the Treasury Department, the Federal Reserve and, possibly, Congress to shore up the companies.

The housing crisis is sure to linger into the next administration, when the mortgage companies will inevitably be well-represented — no matter who’s in the White House.

Fannie and Freddie’s political contacts exist deep in the two presidential campaigns.

At least 20 McCain fundraisers have lobbied on behalf of Fannie Mae and Freddie Mac, netting at least $12.3 million in fees over the past nine years.

Political insiders Arthur B. Culvahouse Jr., picked by McCain to vet his vice presidential nominees, and Jim Johnson, picked by Obama to perform the same function, once worked for the mortgage giants.

And for years, Rick Davis served as president of an advocacy group led by Fannie Mae and Freddie Mac that defended the two companies against increased regulation.

So far this election cycle, Freddie Mac’s political action committee and employees have contributed $555,567 to Senate and House candidates, and Fannie Mae’s PAC and employees have given more than $1.1 million, according to the Center for Responsive Politics.

In total, the two companies have spent $170 million on lobbying over the past decade, according to the Center, although they have scaled back in recent years. Last year, they paid $14.1 million in lobbying fees, a significant decrease from a high of more than $26 million in 2004. The connections of both campaigns to the well-entrenched mortgage companies highlight the difficulties the candidates face in selling voters on an outsider message.

McCain’s campaign denied that its political connections have affected his view on the issue.

“I have written every word that has to do with Fannie and Freddie in this campaign, and I don’t know who the people are that are linked to the companies,” said McCain’s economic adviser, Douglas Holtz-Eakin.

“Sen. McCain has favored GSE reform in the past and continues to favor GSE reform,” Holtz-Eakin said. “That’s unchanged.”

McCain has called the government’s weekend intervention in the struggling companies “correct,” saying he hoped that the action would “preserve the ability of Americans to obtain loans in order to buy a home and be able to afford mortgage payments they’re having to make.”



A spokesman for the Obama campaign declined to comment, noting only that former Fannie Mae CEO Jim Johnson stepped down from his campaign post in June. His resignation came in the wake of charges that he collected more then $7 million in home loans at special, below-average rates.

On Sunday, Obama shied away from commenting on the specific proposals, but cautioned regulators to give top priority to the interests of homeowners.

“That should be our No. 1 priority, not just shareholders, investors or CEOs of companies,” he said.

Fannie and Freddie own or guarantee almost half of the country’s $12 trillion in mortgage debt. Over the past few months, their shares of the housing market have grown as private companies curtailed their mortgage lending in the wake of massive subprime-related losses.

Critics have long argued that both Fannie and Freddie operated with too small a capital cushion to adequately offset financial risk. But the mortgage giants have consistently beaten back congressional efforts to increase oversight, even after a major accounting scandal in 2003 resulted in a $400 million fine for Fannie.

Fannie’s government relations operations dramatically expanded in the mid-1990s, when then-CEO Johnson recruited Washington A-listers Robert Zoellick, who served in the Reagan and Bush administrations; Lawrence M. Small, former secretary of the Smithsonian Institution; and William M. Daley, commerce secretary in the Clinton administration.

Johnson spearheaded an aggressive campaign to create a local grass-roots network of company advocates. Under his leadership, Fannie opened more than 50 partnership offices in cities and rural communities. At the same time, the Fannie Mae Foundation, a private nonprofit financed by the mortgage giant, contributed generously to local charities, arts institutions and housing organizations, giving Fannie influence in lawmakers’ home districts.

Both Fannie and Freddie made large and visible commitments to low and moderate-income housing, quieting criticism from advocacy groups. With the companies in trouble, their political ties are under new scrutiny.

Johnson headed Fannie Mae from 1991 to 1998, leaving with a $21 million payout. Even after he left, Fannie continued to pay him an annual fee of at least $300,000 a year for consulting services and a $71,000 monthly pension, according to filings with the Securities and Exchange Commission.

From 2001 to 2005, Fannie also paid for Johnson’s support staff, communications services and provided him a car and driver.

McCain tapped Culvahouse, the former Reagan administration official, to head his search for a running mate.

Currently a partner at O’Melveny & Myers, Culvahouse lobbied on behalf of Fannie Mae in 1999, 2003 and 2004, according to Senate records.

The campaign connections to the two mortgage companies go far beyond vice presidential vetters.

McCain campaign manager Davis headed the Homeownership Alliance, a lobbying association that included Fannie, Freddie, nonprofit groups, real estate agents, homebuilders and consumer advocates. The group’s stated goal was to increase affordable housing. But it also worked to oppose congressional efforts to tighten controls on Fannie and Freddie.

In July 2003, Davis wrote to the American Banker, taking issue with an opinion piece by Leslie Paige of Citizens Against Government Waste, arguing that Fannie and Freddie should operate with greater transparency.

“Several of Ms. Paige’s assertions bear correction,” Davis wrote, defending Fannie and Freddie on behalf of the group. “The GSEs are subject to an innovative and stringent risk-based capital stress test — the toughest in the financial services industry.”

Other McCain aides with ties to the two companies include economic adviser Aquiles Suarez, who worked as Fannie’s director of government and industry relations; congressional liaison John Green, who lobbied for Fannie from 2004 to 2007; and finance co-chairman Frederic V. Malek, a former Freddie board member.

Jamie S. Gorelick, deputy attorney general in the Clinton administration and a chief policy adviser to Hillary Rodham Clinton, is rumored to be a possible attorney general in an Obama administration. She was vice chairman of Fannie Mae and sat on its board of directors.

BigWhore said:

Some no-partisan FACTS for Jose.......

Fannie, Freddie spent $200M to buy influence Lisa Lerer
Wed Jul 16, 5:44 AM ET



If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this:

Click to expand...

BigWhore,

I didn't read any more than that first line as both those companies have FAILED.

JoseCuervo said:

There are two parties on any contract (or loan), and the bank that was signing the "other" side of the contract is FEDERALLY regulated (in most instances) and was allowed, no, ENCOURAGED by the Bush/McCain adminstration to make these loans.

Don't blame the borrower when it was the banks coming and saying, "here, have a loan, don't bother bringing us any paperwork to verify your ability to pay"......

Click to expand...

Jose are you Flip Flopping? I thought you said it was ok to loan our tax dollars to your illegal cousins without paperwork

It was like .. No soc. security Number.. No problem... No credit report... No problem.. immigration status [ we don't ask] so no problem....

Mr. no paperwork illegal how much do you make? WOW we can loan you any amount you want... Uncle Sam will give you your down pymt and closing costs... No problem... NEXT!:BLEEP:

The Subprime mess killed the structured finance market - drying up access to 50% to 60% of the capital banks used for liquidity. Banks that never lent subprime are now having liquidity problems. The current credit crunch will continue until more liquidity/capital is pumped into the banking system.

I heard if you took all of the banking losses and writedowns - (about $450B rough estimate), and adding back what has been recapitalized - about $300B, $1.9 Trillion in liquidity has left the banking system.

Give me the smart version & leave out the spin & condescension.

Click to expand...

...yes, I realize I limited my request. Thanks for confirming.