18 Replies to “20/20 Hindsight”

  1. If we weren’t in this mess we’d just be in a different mess, sooner or later. This whole thing stems from the deregulation of the financial industry that Newt Gingrich & Co. foisted on the country with his “Contract On (excuse me, With) America back in the 90’s.

  3. how about this ? any company that wants a bail out has to agree for its board, ceo cio, all the fat cats to take a 50% cut in pay, and no golden parachutes ?????
    Just an idea.
    Will any of this help folks buy oil, or keep there homes, I doubt it.

  6. Even Gingrich(who, as Caprice said, is an architect of our current adversity), in an interview on NPR yesterday, said that the deal stinks;”You have the Fed Chief from Goldman Sachs and the treasury Secretary from Goldman Sachs saying;sign this deal, quick!”
    He said that Congress is designed to go slow for a reason,a nd that anything the Executive wants them to resh into probably won’t hold up to scrutiny.
    So there’s Beelzebub criticizing Satan.
    McCain is desperately trying to run to the left of Obama on this one;pretty damn hilarious given his voting record on de-regulation.
    Get the pitchforks.

  7. I blame HGTV. All those damn “flip the house and make easy money” shows they had a few years ago. So you had tons of people buying houses they cou’dn’t really afford with the intent of not living in them for the rest of their lives but selling them for huge profits in a few years.

    You still see people on HGTV saying they’re only planning on living in the house they’re buying for 3-5 years. why buy it if that’s the case? What happened to the concept of only buying a house that you intend to live in for the rest of your life?

  8. “What we really have here is $460 trillion in derivitives. That’s more than the combined currencies and real estate of all nations.” -it was that statement that paniced an ignorant Congress last Friday. But the thing to remember is that it is not real currency. It’s bets and insurance policies placed on loans at the first level, but then those loans were sold…and another layer of bets and insurance policies were slathered on top. Lather, Rinse, Repeat ad infinitum. In the end if the chips were allowed to fall where they may, I do not believe we’d see a collapse of the US and International economies. What we’d see is a bunch of companies that insure risky loans go under. And the financial traders in the middle that bought, insured and resold the loans would lose their shirts. And finally at the bottom rung, as mortgages and credit gets correctly and properly defaulted, the banks and FI’s would lose much if not all of the profits that they reaped over the last 20 years of deregulation. They are the ones saying that if they do not act, our economy will lose its source of easy credit…but isn’t that what got us into this mess?

    As a country, those who lose in this crash need assistance. Families that purchased 2500 sq ft homes at payments they could only barely afford will need help buying food and paying to rent a house. Jobs will be needed to replace those that are lost, perhaps the financial geniouses simply need “retraining” in new industries. And yes, even the CEO’s and shareholders deserve WIC should they be forced to lose everything. But beyond that, we are only saving the fortunes of the lawmakers (including lobbyists and those they lobby for) and corporate robber barons.

  9. Guys, I’m in debt, could you help me out? I reeeealy need your help. Like, seriously. I’m fucked if you can’r help me.

    But if you so much as suggest I owe you anything for helping me out, that’s it man, I’m not taking your fucking deal. I don’t have to put up with that shit.

    But seriously. Desperate.

  10. I think the people who have these homes ought to keep them. period. The criminals who in implimenting the Shock Doctrine here of which Paulson is one..talk about fox guarding the hen house..ought to be persecuted under the law – Bloomberg is already talking about cutting essential services..i have been calling washington ..Both parties are guilty and its got to stop..

    let it crash and burn , from the ashes we will build a better day – there is NO rush for this , they are using scare tactics..and personally i love the people , the possibility of good government enough to bite the bullet my own self – if it means no SSDI check – well then thats what it means..

    This kind of unfettered speculation and Bullshit on Wall Street which is not main street has gone on too long..the gap between our quality of life i.e. healh care edacution already makes us look like a banana republic.

    The Bail Out could be jobs..legalize Industrial Hemp and EVERY factory in the USA would be up and running again..We could be an export giant..i am sick of both Neo lib and Con Trade Policies and economic/social policies.

    thank you for letting me share…and lets hope the Dems do NOT cave ..this is bullshit – let the companies FAIL let em ! let the people work and keep their MacStupid mansions and their starter homes…when do the people get to win ?

  11. Here’s the problem with doing nothing and letting the stock market take it’s ride on the wild slide down with no intervention. Millions of families WILL lose their homes. Those that can still pay their mortgages now, but have variable interest rates will see their monthly payments skyrocket due to inflation that will occur if nothing is done. Add that to the number of fucking crap mortgages that are already in or near default and you have the potential of a serious, serious recession. That isn’t a scare tactic, it’s economic reality.

    Secondly this isn’t just going to affect wall street investors. It’s going to affect everyone. The hardest hit will probably be our seniors. Millions of retirees have their pensions and their personal investments tied up in the stock market. They don’t have time for the stock market to “bounce back” on its own. With our seniors already facing decisions between paying their bills and paying for doctors and medications, they can’t afford to see what they managed to save disappear. We will see millions of seniors sink into poverty just as the cost of the necessities of life increase even more. Please don’t think they can just go to retirement homes either, they can’t. There’s already a severe shortage and waiting lists that span in terms of years.

    Paulson’s idea isn’t complete crap. The whole blank check thing is, but the idea behind it isn’t completely horrible. What I would like to see is an incremental buyback plan that SLOWLY returns liquidity to the market. What I would like to see:

    1.) A moratorium on home loans and the trading of any investment that is backed by bad loans.

    2.) The gov’t buying 10% of the worst loans, held by any entity, at a time. Each 10% would require Congressional approval and full disclosure by the Treasury as to who, what, where, and why. Also with the understanding that these entities will be buying back these loans after they are converted back into liquid investments, but not at a profit to themselves. (I’m really sick of hearing people say that if there are strings attached to the buyback plan the investors won’t want to sell them. YES THEY WILL. These mortgage products are killing them.)

    3.) The creation of 2 new mortgage products with maturities of 35 and 40 years with a fixed rate or a capped variable rate.

    4.) Either gov’t regulated or gov’t sponsored insurance for homeowners who hold these bad loans that is carried for only the next 12 months or until they can refinance their bad loans into a new product, whichever comes first.

    5.) Tighter regualtions on who loans and how they loan.

    6.) A cap of CEO pay that is equal to a % of the corporation’s profits, awarded only after the CEO’s performance is audited. The cost of the audit coming out of the potential award amount.

    7.) Any former CEO who is proven to have engaged in bundling these products (they knew full well what they were doing), using them to create overinflated profits for the corp, and then bailing out with a heafty prize should be criminally charged and never allowed to hold any financial position ever again.

    There really is nothing we can do about the money the CEOs, or the other asses, received from bundling these products and selling them on the market. We can only try to mitigate the effects of what has resulted from their actions and make sure this doesn’t happen again. I have very little confidence that the plan that Paulson will ultimately get will do anything for those Americans who are in danger of losing their homes. Make no mistake, Paulson isn’t worried right now about them. He’s worried about his buddies. It is up to Congress to make sure that whatever plan is agreed upon considers their constituents as well. Anyone have that sinking feeling? I know I do.

  13. How many women economists do you hear about? How many have we seen being interviewed for their thoughts? It’s still a boy’s club and there’s standing room only for women, but only if you’re willing to stand in the back of the room and keep your mouth shut. Most women with economics degrees can only get jobs in research. Which is good for me. I like research. I just want to do cross discipline research. I want to know more than why women spend the money they do, and on what, given the economic climate. I also want to know how society and their own psychology play into it.

    Don’t worry Helen. I’m not wasting what I’ve already learned. I’m using it towards my broader degree. Hopefully for the betterment of our daughters, nieces, etc… I want a higher purpose.

  15. Why was it unreasonable to expect home buyers to consult an attorney, and turn down variable rate mortgages that they could never afford? Why is someone else responsible for the fact that they made a bad decision?

    Sure, the Wall Street / Mortgage Industry was sleazy as heck, but they didn’t force these mortgages down people’s throats at gunpoint.

  16. Ron Paul says it best in his recent statement on the crisis.

    Every government bailout or promise thereof leads to moral hazard, the likelihood that market actors will take ever riskier actions with the belief that the federal government will bail them out. Bear Stearns was bailed out, Fannie and Freddie will be bailed out, but where will the line be drawn? The precedent has been established and the taxpayers will end up footing the bill in these cases, but the federal government and the Federal Reserve lack the resources to bail out every firm that is deemed “too big to fail.” Decades of loose monetary policy will lead to a financial day of reckoning, and bailouts, liquidity injections, and lowering of the federal funds rate will only delay the inevitable and ensure that the final correction will be longer and more severe than it otherwise would. For the sake of the economy, I urge my colleagues to resist the temptation to give in to political expediency, and to oppose loose monetary policy and any further bailouts.

  17. christinesus, your assessment on what types of mortgage products are causing this mess is woefully incorrect. We aren’t talking about products with market defined variable interest rate. We’re talking about loans with no interest rate (hidden terms that make interest payments a separate payment from the principal), fixed rates that are accrued disproportionately, fixed rates that become non-market variable, and a whole slew of other terms and conditions that require in depth knowledge of legal and monetary terms.

    Some of these loans were actually products created to provide tax shelters for the very wealthy. Unscrupulous lenders repackaged them to increase their loan numbers. These dishonorable lenders used them to allow borrowers, who had limited or no money to put down or questionable credit, to obtain a mortgage.

    Most of these people didn’t understand the VERY intricate logistics of how these loans worked. The lenders often preyed on sectors of the population that have historically had the hardest time obtaining loans, namely single women, the disabled, and racial minorities. After decades of being told they don’t qualify, someone came along and said there was a way. A way for them to have a piece of the American dream. They could become a landowner.

    Also, don’t be so quick to condemn those who are in trouble now soley on them not getting legal advice. In almost every state, an attorney presides over the closing. In fact it’s their job to make sure that the contract meets the municipal, state, and federal guidelines on lending. The silent message often inferred by their presence is one of validation to all the terms of the loan. Why would our multiple levels of government fail to protect us? Why would they allow people to be intentionally set up to fail?

    I have read Ron Paul’s thoughts on this issue and have serious reservations that he has a firm grasp of exactly what has, and is, going on.

  18. De NY Times.

    September 30, 1999
    Fannie Mae Eases Credit To Aid Mortgage Lending
    By STEVEN A. HOLMES

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, 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. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

    ”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

    Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

    ”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

    Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

    Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

    Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

    In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

    Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

    In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

    The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

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