Sunday, September 28, 2008

shadow boxing

Point of order: 1] Was kind of hurt when i write about relationships I get more comments than when I write about loot or the economy. 2] Congrats Chipper Jones.

I just took the last 50 minutes or so reading the Emergency Economic Stabilization Act of 2008. I knew something would have to be on paper today, before the Asian markets opened. I’m really disappointed in this and I am willing to point fingers at both the GOP and the Democrats. First it aint comprehensive and there is no assurance we will be compensated after the said five years outlined in the bill. Im still confused, i mean why do I gotta bail out folks for there intentional disregard of the law, why am i being punished for others stupidity? Fuck insuring Wall street, substituting our tax dollars for more worthless paper in the form or insurance premiums. Am I that stupid? Then if the big willie we put over the loot to watch the corporations, decide to steal or do foul wall street shit, the bill dont even allow for the judicial branch to intervene. Cant even take folk to court. Now that is Bush-esque (loving the bankers, speculators over the regular folk). Dont even talk about dealing with laws that put us in this place like the Commodity Futures Modernization Act of 2000 . Rejected a stock transfer tax of 2.5% that would have made Wall street pay for some of this. It still promotes the wealth up to the top jones.

In a few words, this is a piece of shit. They say it is needed, that this legislation is necessary for the survival of the American financial market. They say that some action must be taken I just don’t know if this is the action required to fix the problem. They talk as if it is the do all and be all to deal with our economy. But I don’t see it, I mean; they don’t even know if it will work, at least I don’t. Add to that that if it doesn’t, what will be next.

My problem if passed or not, it is still a 50% chance it will still get worse. I just don’t know how u can come to a dollar figure for a bail out and u don’t know the real value of said assets that the bail out targets. It like paying protection money to a gangster or the Mob; knowing as long as other mobsters are out there, if they aint around (or bought up) they can’t provide no protection at all. From what I read, don’t say nothing about how to deal with the additional 230 billion this will add to the national debt alone and it won’t be effective until January 2010.

Then these sneaky bastards did all of this behind closed doors as if the folks who gone have to foot the bill, me don’t need to know how they plan to spend my loot. So much for state rights, guess they don’t exist anymore. It aint rocket science, Goldman was likely on the other side of the default swaps and these swaps in general were nebulous if they existed at all. All I can see that this bill does is cover up the past stupidity of our elected leaders – it covers up their actual legislative failures.

Like I say, they act like this will work or that they know it will, I aint so sure. I figure two things are possible. The first is a run on the dollar at home, im sure a few more banks gone topple over. I mean 57% of our treasury bonds, in the form of debt is own by foreigners. We can’t stop them, say like OPEC nations from getting together, what makes us so sure them folk wont hook up and be like,” let’s stop buying US Treasury bonds and lets sell them all?” And the way I understand Treasury bonds, they the mid point between what we spend as a country and what we save. Number two would be as I have written before – deflation and ask Japan how that shit can be.

I really think that they should have let the economy fall, then regular folks who don’t care, or who wont read the 106 page bill would have to start saving and get they shit together. Like I said they say it is gone work, I just don’t see it as being that certain. I do know that we some resilient folk – after all we still Americans but them folk on capital hill is way out of touch and out of line for this. I guess that’s what Meth was methaphorically describing in Shadow Boxing. Welcome to the shadow government. And Im gone read it again a few more times, i had to stop shit made me mad jones. vote

81 comments:

MacDaddy said...

I agree. It's crap. In fact, it's a giveaway to people who suckered people into signing for loans they knew they couldn't afford. The democrats could end up being blamed the most for this bailout of rich white boys filled with greed and with no soul.

NoRegrets said...

Just hearing the blurb about it on the radio made me angry. It's kinda like the ultimate 'gotcha' that was played by wall street.

Maybe you need to segue your readers into the economic stuff. Write a thesis on how the economy right now is like a bad relationship.

uglyblackjohn said...

You know that it HAD to be passed before the quarter ended. Otherwise people would have seen all of the messed up stuff that went on behind closed doors and before our eyes.

SjP said...

Haven't had a chance to read it yet - but, I trust you and I'm sure you're right. But will read and - like Sarah Palin - get back to ya.

Kellybelle said...

I can't begin to understand economics. I have been listening to marketplace podcasts trying to see. I do know little thought was given to the little people.

Do you think the world would gang up on us? Take us down a peg--payback for the Reagan years and whatnot? We stil got nukes.

sista gp said...

downloaded it, not printed yet, but will let you know what I get out of it.

got a new post up...no more games

RealHustla said...

Torrance, people are in denial, trying to go on about their daily lives hoping it will all pass quickly without them ever feeling any effects (myself included). when there's not even enough loot in the land to keep critical structures maintained properly. When the lights go out and stay out maybe then they'll come to your blog as a source for some answers. However they'll have to choose wisely since they'll only be able to depend on the battery power left in their laptops, so keep mixing it up a bit.

The.Stranger said...

Hi i'm new to the blog world. I completely agree with you. We dnt know if these loans are going to bail us out of the recession that has been going on for the last 8 years and the democrats hav a lot of cleaning up to do

msladydeborah said...

I have to agree with you on this one. I was not pro the bailout because we are saving the very folks who conducted risky business from the start.

I wonder what would really happen if the economy just crashed down to flatline?

What affect would that really have on the nation as a whole? Are we really as tough as the folks who weathered the first crash and the depression that followed? Could we really endure until things got straightened out again?

I started reading the draft. I stopped because a sistah needs her rest.

What concerns me is this: If this plan does not work and things do not pan out, then what?

I also believe that every one of the individuals who have lead us to this point need to be fired. And sent home without a dime. Or to jail depending on the nature of their business dealings.

Big Cheekz said...

hope i don't sound too ignorant, but i don't understand why the gov't is making the moves that they are at a time like this. i tried reading the document you linked to but i started to get a headache.

Curious said...

Isn't this what we do? Whenever there is a problem that affects business or rich people, we throw money at it, let it fall on the backs of the middle class and hope it goes away. We've been doing this since, well since I've been paying taxes. What is it that people are saying now? We have a financial system where corporations are allowed to make and keep as much of their profits but their losses are passed off to the public. The American version of socialism.

This happened during the S&L crises in the 80's and I consider the bailout of the airlines and the hush money paid to victims after 911 as the same thing and now this. The true legacy of a Republican Administration.

I'm starting to think that maybe Archie Bunker was right when he used to sing, "Mister we could use a man like Herbert Hoover again."

laughing808 said...

another good post

I found section 111 executive compensation and corporate governance interesting in that they are limiting for institutions that purchase 300 mill or more.....go figure......

while I understand that something needed to be done to help the financial industry, but this magnitutde is very disturbing. There should have been much more oversight and governance and greater limits on executive compensations.

Tasha said...

wow . i really don`t anything about this topic . i feel so ignorant right now, i mean i watch the news & i don`t understand it completely.

President Anthony Taurus said...

Mannnnnnn I just wrote about this. I do think there's an economic crisis. The problem comes down to the reality that people aren't able to pay for their homes, loans, and other debt.

The question is why.

Republicans are blaming Jimmy Carter and Bill Clinton for somehow forcing lenders to throw away loans on low-income (black and hispanic) people who can't afford them. That's bullshit. Since when do you know a business to make an effort to give money away?

The problem with that argument is, if that's the case how long would it take low-income people to default on a loan they couldn't afford in the first place? 6 months at the most? or 30 yrs if it was Carter's fault and 10 years if it was Clinton's fault. You can see why the Republican's arguments are bullshit.

Democrats are blaming Republicans for lack of regulations allowing shitty loan agreements which I do believe.

But, no one is mentioning the millions of jobs that were lost since Bush took office. How are people supposed to pay for loans and buy things if they've got no job. That's why people are defaulting on their loans.

It's not low-income, it's no income.

That's the mantra right now. Quote me on that.

AprilSTL said...

Sounds like game to me. Bush actually went on for 12 whole minutes about this and in the end sounded like a pimp trying to convince his hoe that this time when he gets all the money he's not going to the casino and blow it all. Are we Bush's bitches?

I'm totally against this overseer getting any money to bailout his flunkies. He should've had a stronger pimp hand and we wouldn't be in this mess. LOL

For real though. Isn't this throwing good money(my money)after bad?

Where are the lines that dictate which one of those corporate officers are going to the FED?

50% Chance and 100% Game

Keli said...

No need to be hurt...everyone can relate to relationships...no matter what's their view on the economy or politics.

Katrina said...

I dont understand anything about economics and I wish I did. I wish it wasnt so complicated and full of lies and cheats.

Hope your weekend was amazing!!!

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Katrina said...

I'm with Tasha on this lol

Katrina said...

lol Thanks for commenting on my new picture! You also have a new one! Your daughter looks absolutely precious!!

And dont worry, I will keep reading your blog! :)

Linda said...

Point of order 1: Why would you be hurt? It just shows that everyone still believes in love, but they have lost all faith in politics ;)

Like myself, may I add....
greetings from the netherlands!

Aretha said...

I really need to read the entire bill. I'm so torn on this issue it makes my head hurt.

Angel said...

In short - It’s a mess worldwide! Here in the UK the same crap and I don’t wanna pay for the greed and mistakes of others!!

KELSO'S NUTS said...

JONES: It's a sick joke is what it is. There has been only one bit of good for the US economy that has come from the bank crisis: the banks themselves found themselves playing the role of a responsible Federal Reserve purely by accident. Until this plan was initially proposed, banks were in a huge hurry to cover their winning USD short positions to prettify their balance sheets made ugly by the CDO losses in time for at the latest their annual reports for fiscal 2008. That's why the dollar got stronger and gas prices at the pump went down. Not because of the stunning vision of John McCain and his oil drilling plans.

Both the way this package is to be distributed and the distribution of it in the first place in this fiscal and monetary environment guarantees that the ~700 BN is not enough to help but is more than enough to hurt in terms of the 57% of US GUVVIES held out of American hands. Nobody holding US paper likes huge deficits. That's for sure.

I think that there's some element of marketing in all this. There is a severe misperception in the US that somehow the "stock market" is of paramount importance. But because it's the only market Americans care about because they don't understand their other exposures, it's important to support that index. $700 BN could do that because it would take a lot of the senior-instrument holders' pressure off financial services companies' equity.

Two points that everyone should be aware of. (1) The stock markets are a drop in a bucket compared to the f/x, straight debt and swap markets. Jeez, I think the minimum purchase order for a stock is $100. The minimum for a swap is $100 million.

(2) In a corporate structure, value is composed of debt and equity. These are ranked in order of "seniority", i.e., who gets paid off first if a company goes azz-over-tea-kettle. It goes: Senior Debt/Mezzanine Debt/Junior Debt/Convertible Bond/Preferred Stock/Common Stock. The stockholder is the LAST TO GET PAID. And he or she doesn't have to get paid at all because all the other non-common stock instrument carry an implicit call option on the ASSETS (the other side of the ledger which equals the sum of "DEBT" + EQUITY) of the company if it goes tits-up.

There is no shortage of companies, btw, which are more heavily weighted to debt instrument financing as opposed to equity financing.

Wow, so all the corny stock shows will be raving about the Dow going up 300 or 200 or whatever when it does this week and that's all this package is good for and it's not worth shit.

Barney Frank and Ron Paul had a much cheaper and more responsible way to do it and Paulson just told them to "F-off."

So, now, the run on the USD resumes. The bull-market in every foreign currency and every commodity resumes again. Paulson has thrown more gasoline on the fire with this and the Fed keeps cutting and cutting and cutting. And they keep fighting and fighting and fighting in the Middle East.

It's effing bedlam.

I had an argument with No_slappz about Venezuela on a different post of Torrance's. Everyone is free to make up his or her own mind about Hugo Chavez but one thing is for certain. The Chavez government is COMPULSIVE about fiscal prudence and fighting inflation through monetarism. The guy is way more Margaret Thatcher than he is Fidel Castro, for better or for worse. So, how does a supposed "communist" like Chavez know the basics of sound economic policy and these Republican "capitalists" are running the US economy and foreign policy like Stalin's USSR?

CRUSHED said...

I'm not in agreement with this plan at all as well. I can't say that I'm on top of all of my politics, but at the same time what happened to the help for the folks who got foreclosed on? They just let that situation go quietly until it wasn't in the news anymore, but you turn around and help out the people who were scheming to f people over in the first place. Now that's some real BS

OG, The Original Glamazon said...

Yes this is like the ultimate in rewarding the total disregard for the American people and greed of this administration. I remember when administrations lined their pockets in the cloak of darkness.
Now don't get me wrong this situation is not just greed on Wall, Main was greedy or at the least impatient.

I hope this will wake a few people up. I don't know if this will work or if we need this bill, at this point it don't really matter because its about to happen.

The new relief for homeowners goes in effect on Wed, maybe that will help as well.

-OG

blackgirlinmaine said...

I'm with you 100%. This bailout is a gamble and frankly the idea of letting credit flow so more people will access money they can't pay back just seems like a bad idea.

In my limited understanding if we let shit crash and burn, it would get us back to living the way we did oh 20-30 year ago. Remember when you only bought what you could afford? Shopping was a national past-time, we lived simpler more reasonable lives.

Problem is we are used to living in a world where our eyes are bigger than our stomach.

If I were to wholeheartedly favor a bailout, it would be for the common man. Not rich folks who rode high for years than crashed..

mrs. mary mack said...

*grimacing* My head hurts from all of this...but I say if these nuts can come up with a plan than the fools down here in Dallas ISD need to do the same.

Writing about relationships-people can relate more, that's obvious from the comments you have here.

Rich said...
This comment has been removed by the author.
Torrance Stephens - All-Mi-T said...

MacDaddy
a shame aint it

NoRegrets
maybe u are right but i only write what i be thinking at the momment

uglyblackjohn
i was thinking b4 asian markets opened and as of today it aint help with wachovia

SjP
dont bother aint worth the read

Kellybelle
i would if i owned all that debt and remembered what america did to me and mine

sista gp
so i read too fast lol

RealHustla
ok i will but the soft stuff is boring - what will be next, me posting a pic of me up in the buff LOL

The.Stranger
thanks for the love folk im gonna chk u out asap and so true

msladydeborah
i think letting it crash is the best way to clean house and thats self correcting - they making it all worse

Big Cheekz
none of us do

Curious
u right and i really dont wanna agree with archie - lol

laughing808
i was trying to figure it out but kept finding holes - and thanks

Tasha
now is as good a time as any to start sister

President Anthony Taurus
i left a response for you on your post folk - good look. but clinton has some of the blame too

AprilSTL
now thats what is really real


Keli
thanks babe thought it was me


Katrina
not really babe - send me a woman and mybe then




Katrina
thanks all yawl women love my lil momma and not me booo hooo lol


Linda
me too, i call it poly-tricks


Aretha
glad i aint make your head hurt

Angel
i read about the second bank to be nationalized over ther and thanks for the love from across the watre


KELSO'S NUTS
true man is all i can say - america is not a socialst country


CRUSHED
can u say covering THEY azz


OG, The Original Glamazon
babe that was sexy and i could not have said it better - maybe jackie, kelso,babz or curious but not me

blackgirlinmaine
and all they say is that aint nothing else they can do - duh - pay all the mortgages in america off with 7-00 billion


mrs. mary mack
im sorry for making your hrad hurt pls forgive me

Rich
with ya jones, now that is self correcting

Rich said...

I'm with you, let it fall. It's not going to help the people who have already lost homes. It's not going to help those facing foreclosure now, it's not going to clean up the common man's credit. So how the eff does that help most folk.

Regular folk still have to dig themselves out of the mess they are in, pay down doubt, and increase their savings. This changes nothing for those who ARE NOT capable of being players in the game.

It's a joke.

no_slappz said...

torrance,

The federal rescue plan is aimed at "price discovery".

What is the value of the defaulted assets?

The answer is found by conducting an auction. In this case, a very large auction.

A similar auction occurred to resolve the Savings & Loan Crisis. It worked remarkably well and the final bill to taxpayers was a small fraction of initial estimates.

Early estimates put the cost of the S&L Crisis in the range of $250 billion to $500 billion. When it was over, the bill was about $120 billion -- in dollars from the 1990s.

We are starting the bidding at $250 billion for assets in the current crisis. Do you think people will buy houses today at 50% of the price they sold for a year or two ago?

Meanwhile, local real estate values increase when employment opportunities increase. Hence, every region of the country where energy -- oil, gas, coal -- resources are found can enjoy improving home prices IF Congress gets out of the way and allows full exploitation of US reserves.

Coincidently, there is oil near the regions where real estate problems are the worst -- Florida and California.

Thus, it makes good sense to get additional oil money flowing into the economies of those states.

Aunt Jackie said...

Well I don't see what the big deal if one topic garners more attention than another.

Clearly you enjoy writing about to economy and I would imagine you do so for you. I am less inclined to comment on your economic posts as to me it appears as though you are having a discussion with youself, agreeing with yourself and then admiring your thought process.

Relationships are something we can all chime in about

no_slappz said...

torrance, you wrote:

"Im still confused, i mean why do I gotta bail out folks for there intentional disregard of the law, why am i being punished for others stupidity?"

If you are being honest, then you must admit the people getting bailed out are the borrowers who defaulted on their loans.

BuelahMan said...

Hey,

It was because of this post that I took the time to read the bullshit being thrown at us in a fear-mongering frenzy. It is long but worth the time invested.

We are being led to the Dollar's slaughter. Is there just a coincidence that Brown is calling for a new global monetary unit/system?

Our criminal government intends to bail out the rich assholes who fucked us and bring the dollar down to nothing simultaneously. They are trying to force the NWO on us and many of us Americans are scared into doing whatever idiocy they want us to support.

Stop being god damned sheeple, people.

Call your reps and tell then, Hell NO" to this bail out.

Fuck them and feed them fish heads.

Torrance Stephens - All-Mi-T said...

no_slappz
y not pay the mortgages then

Aunt jackie
point well taken regarding relationships, and all my writing is for me, but i do want to know if i am the only one who thinks as such

BuelahMan Fishheads are too good for them

Nicki Nicki Tembo said...

It's not comprehensive by design. It's supposed to have the outward appearance of stabilization, look like an effort to address the crisis, smell like an effort to address the crisis but in fact it's a MUGGING of the American people. Or should I say a continuation of the mugging we've been subjected to for the last twenty years.
Additionally, we can't grow or inflate our way out of this one. There exist no corporate failures or collapse of prices or drastic decline in economic activity like we had in the 30's.
The fall can't be averted, only delayed.

no_slappz said...

torrance, you wrote:

"y not pay the mortgages then"

Who? Who should pay the mortgages?

Obviously the people who borrowed the money should pay the mortgages. But they refused. They defaulted.

By defaulting, many of them lost their houses to foreclosure. The houses are worth a lot. But they are worth less than amount owed by the defaulting borrowers.

What do You think should be done?

fairlane said...

Isn't it ironic that the "capitalists" have consistently had their asses saved by "Socialism?"

In a truly "Free Market," these businesses are left on their own to sink or swim.

The "capitalists" want it both ways.

The freedom to do whatever they want, with absolutely no risk or consequence.

Too bad we're not afforded the same.

Torrance Stephens - All-Mi-T said...

Nicki Nicki Tembo
well said and if i may translate for the laymen - you can put all the air u want in a tire with a hole in it and it will never inflate

no_slappz
the people aint make 0 down mortgages, nor did they make these derivative or create mortgage backed securities. and i working on my own proposal as we speak. The bill saves the house and senate and the fat cats who did the aforemention - i aint get no contribute from fannie may or bear sterns, did u?

fairlane
it shole is, it shole is

no_slappz said...

torrance, you wrote:

"the people aint make 0 down mortgages,..."

What are you saying? What people? In fact, huge percentages of people who defaulted on their mortgages made Little or No downpayment.

You find virtually No defaults among people put 20% down to buy homes.

You wrote:

"...nor did they make these derivative or create mortgage backed securities."

You have completely misunderstood the derivatives and mortgage-backed securities. Without derivatives and mortgage-backed securities, homeownership in the US would include far fewer people.

If every buyer were required to provide a 20% downpayment, far fewer people would own homes.

The Credit Default Swaps are Insurance. They work when the system endures defaults at historical levels. Like any insurance program, if there are too many claims, the insurance fund goes broke.

You wrote:

"The bill saves the house and senate..."

Saves the Senators and Representatives? From what? They are doing their jobs. However, this job is necessary to compensate for the time-bomb created by the 1977 Community Reinvestment Act.

You wrote:

"...and the fat cats who did the aforemention..."

Did what? Give mortgages to people who refused to repay their debts?

Maybe it's news, but lots of people have borrowed through the subprime loan conduit and repaid their loans.

Furthermore, based on your comments, you think it's possible for financial companies to profit even if borrowers default. They can't, as the recent collapse of several big Wall Street firms and banks proves.

You asked:

"...- i aint get no contribute from fannie may or bear sterns, did u?"

What does this statement mean? Really. Can you explain it? It makes no sense at all to me.

Soulstress said...

I agree w. previous posts....we all can relate to relationships. At least ppl are commentin:)

I havent read the plan but where exactly is this money comin from...we got plenty of folks strugglin but they got money to help out banks and such?!?!?!

Exquisitely Black said...

IMHO, people tend to understand matters of the heart far more than they would matters of the wallet. Not that we as Americans are masters at either - (ie divorce rates and credit card debt).

Much easier to comment on stuff that doesn't require research :-)

Keep the economic posts coming though, it matters.

T.C. said...

my problem is it does nothing to really "fix" the economy...the tax laws are still set up to hound the middle class and give breaks to the weathly...the middle class isn't the focus of this...wall street is and it does nothing for the economy as a whole and in the long run...just does the same thing we been doing...keeping the rich rich...well the middle class become lower middle class and eventually the working poor and the poor aren't even recognized

Anonymous said...

I'm surprised Bush and these greedy white boys haven't blamed the failing economy on colored folks.

Don't they always cast blame on some "minority group".

The supreme white man is never in the wrong, right?

Let's see, history has proven time and time again that the white man blames everyone, but himself, for his fear, hate and insecurities.

The white man has blamed the Jews for his shortcomings, he's blamed Blacks, Muslims and now, its the fault of the homeowners. Yes, it all makes sense, middle class homeowners are responsible for keeping our economy strong. Blame the middle class homeowners, while these greedy, evil white men continue to get rich while us poor folks pay for it.

Good piece folk. Read Michael Moore's take on it too when you have a chance...he makes solid points as well:

http://www.michaelmoore.com/words/message/index.php?id=235

no_slappz said...

anonymous,

The current mortgage problem has occurred because people who borrowed money for houses defaulted on their debts.

They have refused to repay the money they borrowed.

If someone who owes you money refuses to repay you, do you tell them it's okay, forget about the debt? Or do you expect them to pay you what they owe you?

rainywalker said...

I agree Raw Dawg let it fall and we take our chances. What they put together was a turkey picker and I ain't got no feathers.

RealHustla said...

Hmmmmmmm.

Nicki Nicki Tembo (oh so limbo) said...

I knew it wouldn't be far off before no slappz parroted the CRA fallacy. Let's set the record straight: CRA only applies to commercial banks (FDIC insured), not many of the lenders we see at the heart of the current financial crisis. CRA had been in full swing approx 25 yrs before this crisis erupted. Deciding whether to approve bad loans or make a profit was never an issue with the banks covered under CRA. CRA over the last several years had began to lose it's relevance, only 1 in 4 subprimes were made by these institutions under this law yet for the lenders not under CRA the law didn't make them lend, greed did.

Jay Midnyte said...

So who thinks the government/banks and the Federal Reserve is just so incompetent and stupid and really doesn't know what to do?

And who thinks the government/banks and the Federal Reserve are making a few last minute attempts to rob the taxpayers before they let the depression/hyper-inflation (whatever may come) hit?

T.Allen-Mercado said...

Torrance, you know I'm a fan of your musings. I did rather enjoy the relationship post, it was refreshing where the state of the nation's economy is anything but.

The bail out plan is something I'm still struggling to get my head around. It isn't that I can't comprehend the "how" part of it, it's the "why" that has me stumped.

Anonymous said...

No slappz, I do agree that some blame needs to be put on the individuals that got mortgages with zero or little down, but what about the financial institutions that lent this money to those individuals? There should have been stricter standards in place to not let people get loans with not enough down or not enough income. You made a great point that those who put down 20% generally don't default on their loans. Which means those individuals saved enough money to purchase their home. All these schemes to get people into homes they can't afford perpetuated the GREEDY system that was destined to fail. What's wrong with people not being able to buy a home they shouldn't be buying anyway because they can't afford it?

-the donalg

no_slappz said...

anonymous, you wrote:

"but what about the financial institutions that lent this money to those individuals?"

They loaned money to people with poor credit scores. They loaned the money because the Law demands it.

To protect the lenders against losses, the borrowers must pay for mortgage insurance if they buy a house with less than 20% down. That is supposed to save lenders if the borrowers default.

The insurance works if a small number of people default. But there is never enough money to go around when large numbers of people break their promises to repay their debts. It's that simple.

You wrote:

"There should have been stricter standards in place to not let people get loans with not enough down or not enough income."

That's true. But guess what? Who gets left out when buyers are required to put down 20%?

Demands from lenders for 20% downpayments were deemed Racist.

That was the outcome of the 1977 Community Reinvestment Act. After that, we went down the slippery slope of allowing people with worse and worse credit to obtain mortgages. The standards for mortgages bought by Fannie Mae and Freddie Mac were lowered -- under Clinton -- to accelerate homebuying among blacks and hispanics.

The standards for issuing subprime loans were reduced. There was a time when subprime borrowers had to put down 40% if they wanted a No-Documenation loan.

But that requirement disappeared when government-funded agencies began supply the downpayment money to the borrowers.

You said:

"All these schemes to get people into homes they can't afford perpetuated the GREEDY system that was destined to fail."

Who was greedy? The lenders loaned money to people who refused to repay it. Am I crazy to believe that people should know how much debt they can handle?

Home-buyers became speculators in real estate because they did not have to save 20% and prove to lenders and themselves they were serious about homeownership.

Instead, due to laws that forbid with-holding credit from people with no money, lenders found ways to provide funds to them. But, to no one's surprise, they did what people with bad credit always do -- they defaulted.

Why not? They had no exposure to loss.

You wrote:

"What's wrong with people not being able to buy a home they shouldn't be buying anyway because they can't afford it?"

Nothing.

However, once the charge of racist lending is raised, the game changes.

If lenders go back to the old policy of expecting 20% down, you will see a big drop in home-buying by blacks and hispanics. Then the charges of racist discriminatory lending will fly again.

clnmike said...

lol, the posts about the money effects us all.

Nicki Nicki Tembo said...

no slappz I call bullshit! As the Washington Post has highlighted that several years ago 49 state attorney generals were embarking on a campaign to curtail this predatory lending hustle. The lending miscreants found the Bush Admin. more than willing to take up their cause. A clause from a century old banking act was invoked and several other rules instituted that in effect prevented the states from carrying out their consumer protection laws. The gov't even brought lawsuits against the states for these actions citing that they were defending consumer's access to credit. This brings us back full circle to CRA. If CRA was such a terrible thing why was this admin. fighting for similar access on behalf of non-commercial banks as late as 2003 (the height of this crisis)?

Bigg Syyno said...

I gatta say this is quite an Original Post. Great Work. And yeah i do agree. These People are really shitting on the democrats. A good example of white America.

Jersey Girl said...

I'm with you on this. I just posted about it today, 'cause I don't know what to think about it. In many respects, it's like punishing the people who made good choices and rewarding those who made bad ones. Giving these corporations 700 BILLION dollars doesn't make me feel good - how are we supposed to trust that they'll magically start making good decisions when it's their bad decisions that got them in this mess in the first place? I just don't get it.

no_slappz said...

nicki nicki, you wrote:

"Let's set the record straight: CRA only applies to commercial banks (FDIC insured)..."

First, do you know of any other agency insuring banks in addition to the FDIC?

Second, I realize you know nothing about the banking business due to your preceding claim. The Savings & Loan Crisis changed the landscape in ways that you do not understand.

You wrote:

"...not many of the lenders we see at the heart of the current financial crisis...."

Are you kidding? Wachovia and the long list of other banks that sliding downhill. They are commerical banks.

Of course the investment banks have already begun to disappear. Lehman, Bear, Merrill. If Glass-Steagall were still in effect, things would be worse. Thus, that piece of deregulation was a big help to the economy.

You wrote:

"CRA had been in full swing approx 25 yrs before this crisis erupted."

Again, like many others, you are confusing the cause with the final outbreak of a disease.

The CRA forced lenders down the slippery slope of giving deadbeats money.

You wrote:

"Deciding whether to approve bad loans or make a profit was never an issue with the banks covered under CRA."

There was never an issue about profit. It was always was and always will be the goal of lending.

However, the CRA and related legislation required banks to originate loans if they wanted to maintain high CRA ratings. The secondary market for mortgage loans allowed them to sell the lower quality loans to investors.

You wrote:

"CRA over the last several years had began to lose it's relevance..."

The preceding sentence demonstrates your total lack of knowledge regarding banking.

You prove it by stating:

"...only 1 in 4 subprimes were made by these institutions under this law..."

Subprime loans are as old as lending itself. That's something I am sure you do not know. Second, most people who take subprime loans have repaid them or are repaying them.

Do you have any idea about the default rate occurring among subprimes underwritten by commercial banks versus other originators?

You wrote:

"...yet for the lenders not under CRA the law didn't make them lend, greed did."

Only a nitwit would believe that lenders can make money lending money that is not repaid.

Meanwhile, you do not seem to realize that if a "underserved neighborhood" is served by mortgage banks, then the commericial banks benefit because the presence of the mortgage banks means the neighborhoods are getting the lending services the law demands -- even if the residents feel they have no obligation to repay borrowed money.

no_slappz said...

jersey girl,

The "corporations" are NOT getting money from the government. The money is to be spent acquiring the mortgage loans that borrowers refused to repay.

The defaulting borrowers are getting the bulk of the benefit of the $700 billion. Congress is at work attempting to repair the problem resulting from the large number of people who welshed on their loans.

You should at least blame the people who are at fault -- the deadbeats.

KELSO'S NUTS said...

There were a lot of interesting ideas out there OTHER than Paulson's throwing gasoline on the fire.

I liked some of what Barney Frank and Ron Paul were proposing in using a government credit line to establish a liquid two-way market in distressed repackaged mortgage securities.

Personally, I would have no trouble with a very low floor of 2c or 3c. I'd accept all risk of default as ultimate beneficial lender of tiny portions of a lot of properties but in accepting the risk, I'd be required to accept anyone's ability or inability to pay the underlying mortgages. I think I could do so well in this that I'd be willing to take on super-distressed packages of mortgages on homes in "redlined" areas bearing all risk for each discounted package of mortgages on Miami, Orange County, Marin County or LA County oceanfront.

NOBODY would get kicked out of their homes and I would not need the 2004 Bush Bankruptcy Police to get me my money because I want the risk in exchange for the deep discount.

Hey, a free-market solution in which "speculators" can do their thing with their own money and nobody has to go without shelter. A "both" solution instead of "either/or" with no hating involved. What a concept!

I could do this for myself in tiny size.

I could easily raise a fund from banks throughout MERCOSUR to manage portfolios of these under those conditions under the condiditon that the banks in the MERCOSUR zone would only be required to give me their USD to manage. They will only part with USD right now.

Jay Midnyte said...

KELSO
Ron Paul actually takes his job seriously

Kenya said...

It pisses me off that they are rushing this thing. It's like they haven't learned anything. Rushing is how we got the USA PATRIOT Act with Americans being spied on and how we got this costly war. We don't even know the extent of this crisis. What other banks are going to fail? Does anyone even know.

And they want to give these rich irresponsible folks $700B with no strings attached. The CEOs of these companies are getting double-digit millions of dollars in salary and double-digit million of dollars in bonuses. If the companies can pay them that much maybe they should bail their own arses out.

brran1 said...

It IS on the banks because they shouldn't have given loans to people who obviously could not afford to pay them back OR people who's credit was BS. What's the point of the whole Credit Rating System if you're gonna give loans to every Tom, Dick and Rakeem that applies for one?

And it is ironic that the Dollar is falling so fast when there have been talks of a North American Currency, which would be similar to the Euro...

Tigress said...

I've been watching so much news trying to figure out what's going on that I'm sick of it. It reminds me of something I heard in a movie once that rang true. People in Washington are so afraid of not knowing they'll agree just to avoid coming off as the only one who doesn't know.

It wasn't until I started watching the news that I heard the flip side of not approving the bail-out. They been on the nay-sayers without asking why they didn't vote for it. Now I know why they didn't vote for it and I don't blame them.

Politicians are very good at pushing the fear factor down American's throats and we get scared and don't ask questions. "WE" need to start asking questions first before we put our John Hancock on anything. That's what they people did by saying no. I can't blame them for that. Most of them were saying give me something that makes sense.

Torrance Stephens - All-Mi-T said...

no_slappz
from what i rtead, i stand my ground - THEY DONT KNOW IF IT WILL WORK. they wanna go home and say they tried

T.C.
it is simply grand standing

Anonymous Anonymous
good look and it shows Bush aint even got no clout w the GOP


rainywalker
now that will be self correcting

RealHustla
i messed up again babe?

Nicki Nicki Tembo
dont let slapppz get yo bp up u will get used to him lol

Jay Midnyte
me, me me, call on me teacher lol

T.Allen-Mercado
im sorry but this is more serious to me sister



clnmike
and how

Nicki Nicki Tembo
applause from me

Bigg Syyno
thanks folk

Jersey Girl
we always get our foot cut off ala kunte kinte


slappz
u coming kind of hard lol - u talk like this bill is click your heel 3 times and it is all solved magically lol

KELSO'S NUTS
well said but u know how we get down over in this camp. is the market free is my query

Jay Midnyte
point well taken

Kenya
be pissed baby your tax dollars deserve such

brran1
collateralizing debt will lead to our down fall like the roman empire

Tigress
dont believe the hype i dont listen to tv folk, i read and make my own conclusions

Jersey Girl said...

Yep, the corporations ARE getting the money. The government is proposing to buy all of the toxic debt back, thereby leaving the each company without substantial, unpaid debt. That means they profit. It's not like the government is going to buy those mortgages and then excuse them...the people who owe money to big business now for their homes will still owe it - just to the government. We don't get our debt excused, THEY do. How that's not profitting on the backs of the taxpayers is beyond me.

There is enough blame to go around. People who made bad choices are just as much to blame as the lenders who convinced them they really could afford a McMansion. We had our home built. Signed the contracts 5 years ago this month. We were approved for about 200K more than we knew we could comfortably afford, so we said "thanks but no thanks" and decided to live within our means. But with the mindset of many people, they want what everyone else has, in their eyes...a big house, big yard, big car etc. They figured that an ARM wouldn't come back to bite them in the ass, and we knew it absolutely would. Same thing with the interest only, sub-prime and 80/20 loans. If you have to be creative to afford something, you can't afford it. But people didn't look at the reality of their bank account, only what they hoped it would be in the future, and now they're paying for it. They are as much to blame as the lenders, and while I don't want to see anyone lose their homes, I also don't feel like I should be punished for making a good decision while they get rewarded for making bad ones.

I have a good friend who works in big business/finance. I asked him for his perspective on this. When he has a chance to detail it, I'll post it.

Jaimie @ Just Kiss 'N Makeup said...

i read all your posts man, i like many of the political ones ill try n comment them more =)

no_slappz said...
This comment has been removed by the author.
no_slappz said...

jersey girl, you wrote:

"Yep, the corporations ARE getting the money."

You seem to have no understanding of debt. If the owner of a house has a mortgage, he is legally obligated to send a monthly mortgage payment to the holder of that debt. It does not matter who holds the debt. The borrower is legally responsible for his monthly payment.

You wrote:

"The government is proposing to buy all of the toxic debt back, thereby leaving the each company without substantial, unpaid debt."

The government is proposing to buy the debt for much much less than the amount owed.

That means the holders of the debt will take HUGE losses when the debt is sold to the government.

That is why Bear Stearns, Lehman Brothers were bankrupted and why Merrill Lynch was sold in a fire-sale to Bank of America.

You said:

"That means they profit."

With this statement, you are saying it is possible to earn a profit while losing billions of dollars. If it were possible to earn a profit by losing money, we'd all have more money than we would ever need.

You said:

"It's not like the government is going to buy those mortgages and then excuse them..."

But that's exactly what's happening for the people who defaulted. The government -- the taxpayers -- are buying the defaulted mortgages at a big discount from the original amount borrowed. The debt comes with the house, which is the collateral that will also be sold to repay the outstanding debt.

You said:

"...the people who owe money to big business now for their homes will still owe it - just to the government."

If that were true, things would be fine. But it's not true.

The people who defaulted owed money to the organizations that either originated or owned their loans. That list includes banks, mortgage companies, Fannie Mae, Freddie Mac and others in the financial services industry. Most had mortgage insurance that was expected to pay off their mortgage if they defaulted.

They defaulted and they are forfeiting their homes to settle their debts. That's it for them.

You said:

"We don't get our debt excused, THEY do."

We? "We" are the people who borrowed money to buy homes. "We" are the people who defaulted. "We" are the people whose debt is to be bought by ALL taxpayers, which means "We" are the people getting the benefits.

"They" are the companies collapsing in bankruptcy because borrowers defaulted on debt "They" now own.

Meanwhile, a key component of the Rescue Plan is a change in bankruptcy law to permit the modification of mortgage terms as well as the amount of principal owed.

Thus, passing the bill may result in allowing the defaulters to get the interest rate on their mortgages lowered AND get a reduction in the amount of money they must repay.

By that I mean if a borrower defaulted on a $200,000 mortgages, the bankruptcy court might reduce the face value of the mortgage from $200,000 to $100,000 if he's able to support a mortgage of that amount. Nice deal. A $100,000 gift from ALL taxpayers to the defaulting borrower.

You asked:

"How that's not profitting on the backs of the taxpayers is beyond me."

Beyond you? It shouldn't be.

Jay Midnyte said...

Yes Mr. Stephens, please answer my previous question:

"So who thinks the government/banks and the Federal Reserve is just so incompetent and stupid and really doesn't know what to do?

And who thinks the government/banks and the Federal Reserve are making a few last minute attempts to rob the taxpayers before they let the depression/hyper-inflation (whatever may come) hit?"

Jersey Girl said...

Sorry, No Slapzz, but in order for you to be right, these economists and professors/Nobel Laureates have to be wrong:

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

No offense, but somehow I think they know a tad more than you do. And as they said, investors took risks to earn profits, so they must bear the losses, not the taxpayers.

Torrance Stephens - All-Mi-T said...

Jay Midnite
It is not that it is as if they act as if something is better than n othing, which tells me being prudient is not as important as panicing, i just think they have not thought this out and that time is relative and that the bill is nothing but mere PANIC

no_slappz said...

jersey girl,

Based on your belief that borrowers who default on mortgage loans are NOT the cause of our current problem, it's clear you think it's okay to borrow money and refuse to repay it.

If Congress accepts your view -- and it might -- that means for years to come it will be very difficult for you to borrow money.

Since you believe borrowers can refuse to repay debts, you have to accept the consequences. In the future lenders will only lend to people who can get by without a loan.

The old joke about banks will become true again. That's the joke about banks only lending money to people who don't need the loan.

In the future it will take downpayments of at least 20% before mortgages are approved.

Even in the new housing market where prices have fallen, a huge percentage of first-time buyers will have to wait years before they have enough downpayment money to receive a mortgage.

Meanwhile, you still seem to believe that the bankruptcies of Bear Stearns and Lehman Brothers, and the fire-sale of Merrill Lynch, the near collapse of AIG, the failure of Washington Mutual and IndyMac Bank, and the near failure of Wachovia are the outcome of earning profits.

Jersey Girl said...

Again, if hundreds of the world's top economists and Nobel Laureates disagree with you, then I'd say perhaps you're wrong. There's no point in arguing about it. I'll take their word over yours, and Bush's, any day.

It's not like the US has 700 Billion dollars laying around, itching to be spent. We will be borrowing this money from China. Who will be paying for years to repay this debt? Tax payers. Let's hope the Chinese government is as forgiving about debt as the US government seems to be.

no_slappz said...

jersey girl,

First, will you lend me some money?

I want to borrow money from someone who believes I am not required to repay it.

Second, you have misread what the economists are saying. Maybe you are in over your head.

Anway, how about that loan? How much will you lend me?

Lovebabz said...

I do think Gov't can make adiference for the greater good. I think we have to remember that those in elected office are just like you and I (not Torrance and Not Kelso). They have an enormous task. I think to do nothing would be a difficult pill to swallow, and I also know they cannot not give the President a blank check.

I do not know what the final answer will be.

A New Man said...

I have some reading to do...and a bone to pick with the dummies in the White House!

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