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What's with Wall Street? Pages: 12Last

NickD on Thu September 18, 2008 8:16 PM User is offline

Was a general manager, a constant challenge to keep the books balanced following a simple rule of thumb, more money had to come in then go out. If less money came in, had to make very quick adjustments to control the amount of money going out. If more orders came in, had to hire more people to get those orders out.

So how can an 85 Billion corporation just seemingly over night be worth only 8 billion, and that AIG CEO that only operated that company for three months, get canned but still get paid 5 million in severance pay? Didn't anybody see that coming? Or did they know in advance the government would bail them out, well not the government, congress has no say in this, just the president and the Federal Reserve. And is this money actually lost or is it in somebodies pocket? Why isn't there an investigation?

Something is fishy here, and all of us are getting screwed, really screwed.

MikeH on Fri September 19, 2008 12:49 PM User is offline

NickD, I absolutely agree. I have sent emails to both of my U.S. Senators, President Bush, Senator McCain, Gov Palin and many others demanding that a Special Prosecutor be appointed to go after all of the CEO/CFOs involved. How can a CEO that participates/formulates fraud no be held accountable? I would love to have a job where I can work for 3 years or less and walk away with over $100mil. Somehow, I think I could retire on that!!!

HerkyJim on Fri September 19, 2008 2:29 PM User is offline

Say Nick, just think of it as you're buying lots of houses and cars and boats and trips to Europe, but not actually being able to enoy them. Wait until Uncle Sam (taht's you and me) get to pay the taxes on them too, wwen have to bail out the states to allow them to pay for unemployment benefits, Medicaid, inflated pensions, etc. etc. etc. You can live beyond your means forever, or at least until there are no suckers left or all the suckres are broke. We're the suckers and we are broke. What's the deficit coming up? Only almost 500 billion bucks. I'd say we're broke already...

HECAT on Fri September 19, 2008 3:22 PM User is offline

Press Release

The U.S. Federal Government buys U.S. Corporate America! Lower prices and dividend checks for all!

I think the atoms collided and did create a black hole, its called the toilet we are all spinning in.

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HECAT: www.hecatinc.com You support the Forum when you consider www.ackits.com for your a/c parts.

FLUSHING TECHNICAL PAPER vs2.pdf 

NickD on Fri September 19, 2008 4:39 PM User is offline

Listened to one AH expert say they reason for this is that as home prices were increasing, people were getting 2nd and 3rd mortgages on their homes and buying stuff they didn't need, lost their jobs and couldn't pay for it thus killing the banks.

What a load of BS, and is this guy really an expert or a BS artist acting as a cover man. First off the banks would foreclose on these homes and the homes would be theirs, and if the only way they would lose 90% of their value is if they sold these homes for 10% of their value. Anybody see homes or vehicles for sale at 10% of their value?

Beginning to think that PBS radio as well as the media are all part of this cover up, because all of it you see, read, or hear, is pure 100% unadulterated BS.

The real key is that money is power and the more money you have the more power, and just a few are managing to get most of it. One retort would be to quit using money, then it would be worthless. If one of these rich bastards wants food to eat and you are working your can off to grow it, just say sure, come over and clean my septic tank and I will give you a meal, your money is worthless here. Then these criminals would have to work like anyone else.

TRB on Fri September 19, 2008 5:26 PM User is offlineView users profile

Quote
Originally posted by: NickD
What a load of BS, and is this guy really an expert or a BS artist acting as a cover man. First off the banks would foreclose on these homes and the homes would be theirs, and if the only way they would lose 90% of their value is if they sold these homes for 10% of their value. Anybody see homes or vehicles for sale at 10% of their value?

I disagree with you here Nick. OK so they foreclose on these dead beats that bought too much. Banks now have the house and do what with it? Banks are not willing to hold a house for a year or so to make ends meet. In the mean time they basically are making payments on these houses. You add that up times all the houses in question and that's a big chunk of change each month. But don't think I feel sorry for the banks. They and the realtor's made a killing writing all this paper. They should be the ones taking the hit for the way they conducted business. I also feel the people that bought too much should bear some responsibility.



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NickD on Fri September 19, 2008 7:12 PM User is offline

I do not disagree with calling these people deadbeats, idiots is more like it, and idiots like that is what drove the housing market up. Ha, looked at some homes with an offer to buy it at fair land value minus what it would cost to tear down the house on it and move it away, a pile of crap. Realtors, somebody else will pay the over inflated price, and they are correct, some idiot will buy it.

But nevertheless, regarding the banks, and current market value, they possess these houses, and therefore they have assets. But my understanding is they do not have any assets and that money is just gone. Gone where?

Correct me if I am wrong on this.

TRB on Fri September 19, 2008 7:33 PM User is offlineView users profile

Here is my take on it Nick. You assume someone is willing to buy the house at market value. What is market value compared to what the loan was written for? Many of these homes have dropped in value and a bank is not willing to sit on it until it comes back. If many homes are now on the market do to so many forecloses! This again will drive the price down!! Buyer will have more options and bank will have less to cover the amount of debt on the loan. Sure is nice to run up a tab buying a new home, 52 inch TV and a Iphone for every kid in the house. Then bail on the loan take the property and have the government (you and I) pay for it. The people that wrote and approved these loans should be paying for this disaster!



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NickD on Fri September 19, 2008 8:19 PM User is offline

Practically all of our banks here and savings and loan associations want 20% down on a home mortgage.

TRB on Fri September 19, 2008 9:19 PM User is offlineView users profile

But that means little when the house was appraised at $ 300K 3 years ago now it's appraised at $150K. Plus you have an outstanding loan for $275K.

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When considering your next auto A/C purchase, please consider the site that supports you: ACkits.com
Contact: ACKits.com

gruvtubes on Fri September 19, 2008 10:21 PM User is offlineView users profile

It's the subprime lending business that is mostly responsible for this for the people with not so great credit. " You too can own your dream home" just agree to pay this adjustable rate mortgage. As home values inflate with buying power up across the board intrest rates go up now the payment has skyrocketed and then comes the tax bill when the taxes went up and the escrow doesn't cover and they can no longer afford these homes. Foreclosures start rapidly increasing, house prices tumble and people are stuck with a loan for 250,000 on a home valued at only 150,00 and many simply walk away.

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If it doesn't fit force it. If it breaks it needed to be replaced anyway!

gruvtubes on Fri September 19, 2008 10:55 PM User is offlineView users profile

You can bet one thing though. When this trillion dollar bailout takes place and the money magically reappears in the banks it's back to business as usual, with endless credit card offers, high risk loans and over-leveraging. This will put huge inflationary pressure on the already weak dollar. Federal Reserve Inc. will own my great grandchildren there's no doubt it. Just bend over and spread em. It's the Patriotic thing to do!

I wonder how many wake up calls Americans will sleep through? Ron Paul was absolutely the only logical choice. These clowns running make me sick!

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If it doesn't fit force it. If it breaks it needed to be replaced anyway!

NickD on Sat September 20, 2008 7:49 AM User is offline

This is way over my head, all I know is some maintenance insurance company has been trying to sell me a two year protection plan on my 04 Cavalier for 1,600 bucks when my dealer tells me the car is only worth 3,000 bucks on a trade in. Then it's only powertrain insurance, if a fuse blows or the struts or brakes wear out, I am screwed. had to spend 35 bucks for a couple of new remotes, 40 bucks for new strut bearings, and just yesterday, 68 bucks for new front rotors and pads. Hardly worth to pay to get the old rotors turned anymore. Seems like five minutes ago, it was a new vehicle, ha, has 50,000 miles on it already.

With AIG seems like they also sell insurance, but not for car repairs, but for security investments, company supposingly has trillions of dollars in assets, needs a mere 85 billion bucks to pay off security investment claims that went sour, couldn't get money from other banks even with trillions in assets, so the Federal Reserve gave them a loan for 85 billion bucks for two years at 11.75% interest. But then the Federal Reserve claims they now own 80% of that company. Doesn't quite add up and has the power to hire and fire all chief executives. But a company with trillions of dollars in assets would go bankrupt for a mere 85 billion.

And somehow the failed housing market is getting the blame for all this like these companies.

"

NEW YORK, September 10, 2008 (AFP) - Global banks and brokerages have written off a total of 512 billion dollars linked to the US subprime real estate crisis. Following are the largest losses to date, based on reports from the companies:

- Citigroup: 55.1 billion dollars

- Merrill Lynch: 52.2 billion

- UBS 44.2 billion

- HSBC 27.4 billion

- Wachovia 22.7 billion

- Bank of America 21.2 billion

- Washington Mutual 14.8 billion

- IKB Deutsche Industriebank 14.5 billion

- Morgan Stanley 14.4 billion

- JPMorgan Chase 14.3 billion

- Lehman Brothers 13.8 billion

- Royal Bank of Scotland 13.8 billion

- Deutsche Bank AG 10.2 billion

- Credit Suisse 10.1 billion

- Wells Fargo 10.0 billion

- Credit Agricole 8.6 billion

Some 260 billion dollars in losses have been absorbed by US firms, with 227 billion by European companies and 24 billion by Asian banks."

I really do not understand why the price of real estate is going sky high, when I built my home in the early 70's we used plywood for sheathing that cost five bucks a sheet, today they are using that glued together wood chips that cost five bucks a sheet, no increase in price there. The real killer in home ownership has been property taxes, was paying around 250 per year, that has shot up to over $5,000.00 namely because it goes up each year with inflation. Recently energy costs have skyrocketed that is equally the cost of property insurance.

The reason for inflation is our government, setting up trade policies, kicking out our industries, not keeping the buck here and just printing more money to make up the difference. Feel our government is our major enemy. And companies that try to make money with money, well, that is a high risk business, what happened to good old fashion work?

mk378 on Sun September 21, 2008 12:44 PM User is offline

Easy subprime loans increased the number of "qualified" home buyers, thus driving up the price of houses. Prices were further inflated because loans were so easy, sellers could charge more than conservative estimates of the house's value, and someone would still write the loan.

These bankers, brokers, etc. deserve to reap what they've sown and hit rock bottom. It's absoultely nuts for the goverment to cover the down side and still leave them unlimited up side. It is only going to get worse if this goes through.

The unfortunate truth is that the whoe economy is propped up on borrowed money. Especially the federal spending. They haven't even started to worry about paying it back yet. Eventually the Chinese will be foreclosing on the White House.

bohica2xo on Sun September 21, 2008 2:04 PM User is offline

Wall Street disaster, housing meltdowns... How did we get to where we are today?

Lots of people keep asking “how could this happen?”. To find the answer, you must look back to the 1970's.

If you bought a home or business before 1977, you did it the old fashioned way. This means that you had to have a 20% down payment, and had to produce proof of earnings. Your loan amount was based on your net income. If your payment would exceed 25 to 30 % of your net income, you simply did not qualify. Time to look for a more modest home.

Banks were responsible for the depositors funds, and were not likely to lend you any money on a property that was not going to accrue value. You could not get a loan on a property or business that was not going to be worth more than the value of the loan in a few years. This was simply responsible protection of the depositors investments. If you put money in a savings account at 3%, they loaned money on properties at 6%. If the mortgage holder defaulted, the bank could recover the investment by selling the property.

In 1977, the federal government passed the “Community Reinvestment Act” or CRA. The practice of protecting investors and banks by not loaning money on risky property had been given a new name - “Red Lining”. The federal government had bowed to the wishes of the liberals, and forced the banks & thrifts to loan money on property that could (and did) cost them money. Banks were forced to comply with the wishes of others, rather than the good financial strategies that had governed their actions for the better part of a century.

The next big change happened in 1995. The Clinton administration asked for (and got) sweeping revisions to the CRA. These revisions took effect 1/31/1995, and substantially increased both the number and value of loans to low income borrowers. The growth of lenders like Countrywide exploded. Companies like Countrywide are considered “secondary market” sources for mortgage loans. They do not stabilize loan risk with savings deposits like an ordinary bank would.

The Clinton revisions also allowed the “Securitization” of CRA loans with subprime mortgages. The first securitization of CRA loans happened in 1997 – at Bear Stearns. The fox was finally loose in the hen house. Securitization is simply bundling & re-packaging cash flow producing assets into securities – which are then sold to investors. No longer backed by savings, subprime mortgages flowed like water. “Stated income” or “No-Qual” loans became common. By the end of 2005, there was more than 8 TRILLION dollars in “securitized” debit, with more flooding in every day.

The stock market has been called the “world's largest dice game” by some. Trading big pools of home mortgages, some of them full of near failure debit certainly qualifies for that title. Debit that was once handled by conservative bankers is now being tossed around by the party boys on Wall Street. The same kind of people that brought you Enron are in the driver's seat.



So who started this mess?

Jimmy Carter. The same man that was responsible for the Savings & Loan meltdown. Carter opened the door by lifting the caps on S&L lending, and extending the FSLIC coverage. When Carter left office 3,300 of the 3,800 S&L's in this country were losing money. Between the S&L regulations, and the CRA, he had laid the groundwork for this mess.

But the real damage was done by Bill Clinton. The sweeping overhaul of Carter's CRA insured an eventual failure. Irresponsible mortgage practices had already been seen to be a disaster – the 1990-1991 recession was the result of the tinkering with the S&L's. The inadequate net worth regulation that caused the S&L failures was completely ignored. So called “Credit Enhancement” allowed the securitization of mortgages that no investor would ordinarily touch.

In 2005 the Bush administration tried to overhaul the regulatory processes of the two giants guaranteeing the subprime loans – FannieMae & FreddieMac. He wanted to move supervision of the two entities under a new division at the US Treasury Department. This was opposed by people like Barney Frank (D-MA) and Mel Watt (D-NC), and generally along party lines. It eventually failed to go forward. This plan was probably “too little, too late” but might have cushioned the blow somewhat.

© 2008

This article may be reproduced freely as long as it is used in whole without editing.

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"Among the many misdeeds of the British rule in India, history will look upon the act of depriving a whole nation of arms, as the blackest."
~ Mahatma Gandhi, Gandhi, An Autobiography, M. K. Gandhi, page 446.

Edited: Sun September 21, 2008 at 2:05 PM by bohica2xo

Karl Hofmann on Sun September 21, 2008 3:18 PM User is offlineView users profile

Ha! When I first started in business, if you wanted to borrow from the bank you had to make an appointment to see your Bank Manager, don your suit and tie and demonstrate to him that you were able to pay it back.

Mortgages were strictly 3 1/2 times your annual salary plus 1 1/2 times your spouses salary and at least a 20% deposit and things worked just fine, house prices increased at a steady but not excessive rate and folk saved for what they wanted.. Then Banks started to lend 5 and 6 times joint incomes, no proof of earnings and gave 110% mortgages... Handing out cash like it was smarties and naturally people took advantage of all that nice cheap cash... House prices rocketed and folk stopped seeing their houses as homes but more as their own personal piggy bank to fuel their unrealistic lifestyle.. Buy now pay later, then stick it on the credit card. I'm not too sure just how we got there but we did and like all credit booms, we maxed out.

Fair enough the people should take some of the blame for being irresponsible and believing the word that the good times would last forever but the Banks and credit companies have brought this upon themselves and I have no sympathy for them... They played the game and lost... Or have they? Lots of Government cash flowing to them at the moment..

In the UK the government cannot allow any bank to go tits up.. The Bank that marked the end of the good times over here, Northern Rock is now recognised as the the safest bank in the country as it has now been nationalised.

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Never knock on deaths door... Ring the doorbell and run away, death really hates that!

bohica2xo on Sun September 21, 2008 4:44 PM User is offline

Karl:

It was the same here, back when I bought my first home. A 20% down payment was considered the minimum, and they wanted to see the paper trail - a savings deposit, etc. No "gifts" from mommy or other BS that was actually a borrowed down pyment. Your example of 3.5x the gross income is close to the same it was here. a D/E ratio anyplace near .4 would disqualify you. Mortgages went before a comittee for approval, and your application was carefully considered.

It is sad to hear that things went the same way in the UK. I always pictured british bank managment as a stable thing, run by people that knew better. What went wrong over there? Was there no government oversight? Just seems like they made the same mis-steps we did, under a completely different government.

B.

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"Among the many misdeeds of the British rule in India, history will look upon the act of depriving a whole nation of arms, as the blackest."
~ Mahatma Gandhi, Gandhi, An Autobiography, M. K. Gandhi, page 446.

NickD on Sun September 21, 2008 11:08 PM User is offline

How Wall Street Traders Fuel the subprime meltdown appears to be a more accurate account than what you copied and pasted, Brad. A high risk scheme to earn more money taking an unqualified high risk to make even more money that backfired big time. Not considering high risk mortgages and perhaps thinking that bankers are far more conservative. Find it difficult to believe that any government official can cause bankers to become sloppy. Like walking into Las Vegas with a hundred thousand bucks and thinking you will be walking out with a million.

mk378 on Mon September 22, 2008 12:19 AM User is offline

It was a bubble. The key was the securitization angle. When mortgages had to be matched with real money deposited in a bank, there was a limit to how much could be lent. Once that requirement was out of the way, brokers could do as many loans as they could, whatever terms they could, as long as some speculator was ready to buy it. And those investors were willing to buy any loan because the prices of houses were rising so fast. Even if (when) it went into foreclosure, there was still a profit to be made. In fact a lot of the loans which had an introductory period of interest only payments or an introductory low APR were clearly set up with hopes to cause a foreclosure later.

NickD on Mon September 22, 2008 7:02 AM User is offline

Worse than going to a loan shark, surprised they don't come over and break your legs rather than foreclose, really cautioned my two sons to read and triple read their loan contracts, one had 50% down, the other 25% down with fixed rate loans over the period and optioned for a 15 year payback.

Other places popping up are these paycheck loan places, have three in town already, state is talking about making them illegal, but so far just talk, can really get creamed for a four day loan. Yet another even by supposingly reputable banks are 300 dollar limit credit cards issued to college kids, if they go a buck over that limit, can be hit with a 60 buck over limit charge and they do that rather than rejecting that one buck purchase. If that isn't paid within the month also get hit with a 30 buck late charge, so now the kid owes 391 bucks, if not paid, then owes another 90 bucks the next month. Over a year with no further use of the card, kid can owe an additional 1,080 bucks for going over that one buck! No laws against that either.

Unbelievable the number of credit card offers our daughter received when we enrolled her and wonder if the college is equally responsible as they somehow released all those student names.

bohica2xo on Mon September 22, 2008 10:01 AM User is offline

Actually Nick I wrote that, and the facts have been checked at multiple sources - including reading the CRA.

Your link describes the actions of the wall street players - once Carter & Clinton had removed all of the controls & given them securitization of mortgages. Interestingly enough Baer Stearns was the first to securitize - and the first to fall.


'378
A "bubble" sounds a lot nicer than what I want to call it. More of a multiple goat-copulation that will cost the taxpayer dearly to clean up - and I am not so sure we should be. The socialisim of the CRA was intended to provide low income families with homes. How is that working out? My low income (19,500 annual) neighbor bought that house for 218k - 3 years ago. It is empty now, bank owned. She simply could not make the 2900.00 per month payment after the loan adjusted. Had none of her own money in it either, (110% loan, zero down, first time buyer, single parent) so there was no reason to take care of it.

People are stupid. We have rules & laws to keep them from doing stupid things. The CRA was like removing all of the stoplights in a large metropolitan area - so everybody could get to work quicker.


B.

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"Among the many misdeeds of the British rule in India, history will look upon the act of depriving a whole nation of arms, as the blackest."
~ Mahatma Gandhi, Gandhi, An Autobiography, M. K. Gandhi, page 446.

NickD on Mon September 22, 2008 10:37 AM User is offline

With our two party system, typical to blame one or the other and that's all we hear, blame. Going back 32 years, about 50-50 with either democrats or republicans being in charge. Neither reversed the damages caused by the others and just caused even more damage. So are things going to be much different with this coming election? Still can't get a straight answer from either party why our 99% domestically produced heating and electrical costs is keeping pace with the price of foreign oil. So as far as I am concerned, both parties are on the take.

anonymouse on Tue September 23, 2008 4:16 AM User is offline




The truth about money


Secrets of the Federal Reserve

Edited: Sat September 27, 2008 at 1:33 PM by anonymouse

MikeH on Tue September 23, 2008 3:14 PM User is offline

Urban Myths, hyperbole and distortions

NickD on Tue September 23, 2008 10:13 PM User is offline

Listened to yet another expert on this subject, briefly twenty years ago, a mutual trust existed between a client and a bank, client knew the banker and the banker knew the client. Even at that for a home mortgage, still required a 20% down payment with a good credit history to get that loan, and the client had to trust the banker in case he missed a payment that his home wouldn't be foreclosed upon. Then suddenly, Wall Street guys looking to make more money with their money started buying these loans as low risk much higher interest bearing investors. Okay so far?

But what was missing is why a bank would even want to sell these mortgages, I mean a bank stays alive by paying 3% earnings on depositor investments and makes money by loaning it out at 6%. A bank would never stay alive if they were just paying out interest on savings that need those loans. He never got into why a bank would do this. Only thing I can guess is that they sold, say a $100K mortgage for maybe $120K to make some quick cash.

Certainly would ruin the trust between the client and the banker if his mortgage with a sizable equity in his American dream was sold to a gang of money hungry investors, and perhaps giving the banks an opportunity to make a quick buck by sellling these mortgages, not just one or two at time, but a package. But it sure backfired on the investors.

Still the money is not lost, for one all these bankers made a profit on selling these mortgages as well as realtor's, builders, and even seller's, the Americans that also fell for this scam also got screwed in the process, fairness dictates, they should pay it back and not the US taxpayers, I certainly didn't gain anything by this, but will be paying for it. That expert did make a point of this, the rest of us our getting screwed and screwed royally. This expert is against our government from bailing these companies out claiming we are hearing more lies that bailing these companies out will protect some of us, but also said, no one will listen to him.

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