History of the current financial crash

[The Real Bingo]

Quote:

Originally Posted by sharder8

Hey!!!!

Where's MTA's, Chuckies, Prex's, SJ's, or ScottW's, response in this thread???

Come on guy's, you've all been blaming the other guy . . . so why not provide some proof that this info is wrong about your party or Bush????

Not even a response from Theo!

Harder

I haven't really heard anyone - from either side - come up with an idea of how to fix the problem. I'm talking about both legislators and citizens. Citizens look for the legislators to know the problem, then to fix it...not to bicker like little kids over whose fault it is and who is better equipped to fix the problem.

That kind of nonsense doesn't matter. Fix the problem, don't talk about fixing it.

Another issue is the timing. I think a swift fix - if not well thought-out (which it probably wouldn't be) - is imprudent. We all know the government takes forever to do something, and even then they do it wrong. Time needs to be taken to deliberate - much damage has already been done, and another week or two - or even a month - wouldn't be the end of the world.

Thirdly, I don't think many people - especially our "leaders" - know what the hell the problem is. It is so complicated, and it's apparent that only "insiders," who do this stuff for a living, have any idea what the cause is.

I think money is needed to get out of the mess, but I don't think the Treasury secretary should have carte blanche, using his own discretion, to fund further future bailouts, which would apparently not be reviewable by Congress.

I could go on and on, but I'm tired and I want to get to bed.

[sharder8]

Quote:

Originally Posted by The Real Bingo

I haven't really heard anyone - from either side - come up with an idea of how to fix the problem. I'm talking about both legislators and citizens. Citizens look for the legislators to know the problem, then to fix it...not to bicker like little kids over whose fault it is and who is better equipped to fix the problem.

That kind of nonsense doesn't matter. Fix the problem, don't talk about fixing it.

Another issue is the timing. I think a swift fix - if not well thought-out (which it probably wouldn't be) - is imprudent. We all know the government takes forever to do something, and even then they do it wrong. Time needs to be taken to deliberate - much damage has already been done, and another week or two - or even a month - wouldn't be the end of the world.

Thirdly, I don't think many people - especially our "leaders" - know what the hell the problem is. It is so complicated, and it's apparent that only "insiders," who do this stuff for a living, have any idea what the cause is.

I think money is needed to get out of the mess, but I don't think the Treasury secretary should have carte blanche, using his own discretion, to fund further future bailouts, which would apparently not be reviewable by Congress.

I could go on and on, but I'm tired and I want to get to bed.

All valid points Bingo . . .

But the point of this thread, was to lay the blame for what happened . . . where it happened, and who's responsible.

Harder

[Chuckiechan]

Ok, I'll bite.

Basically, both houses are in agreement on the big parts of "The Plan". Mc Cain will go to Washington and deliver the Republcan vote in support of the bill.

Bush will sign it. Mc Cain is the hero.

You are entirely right that is is both parties. The problem is that loan standards were lowered in the interest of getting more people into ownership of homes. IE - loaning to poor people who didn't have sufficient provable income to afford the house - undocumented income such as tips, juniors paper route, and a dependance on overtime income, combined with no down payments and a bidding war for houses.

When the economy faltered due to oil prices, hours worked fell, full timers went to part time, and forclosures soared.

The liquidity crisis is basically as follows: The difference between the mortage owed and the price of the house sold at forclosure has to be answered for. This "gap" is money that was used as leverage for other loans. When it evaporated, so did the foundation of the loans that were leveraged against them.

Simply put if I loan you money and then sell the note to a bank, and they re-loan it, and the original loan defaults, both loans are are "unfunded" to (nearly) twice the original loan. That's the way banks work. They borrow from you, sell the note to Fanny or Freddie, then use the proceeds to loan to me.

This problem started years ago, and the blame can be laid at the feet of Fanny and Freddie for lowering loan standards. Everyone else is caught up in having "paper" leveraged against "value" that has disappeared.

The choice is simple: Let the banks fail, and suffer a moribund economy for four or five years, or bend over and spread 'em and be dug out in 18 months.

The 700 billion is the maximum exposure. These loans are going to be bought up by the government, and gradually re sold as they become "healthy" either by refinancing or by being paid off.

Again, the media is at fault for explaining this critical difference. Instead, the leave it to sound as if the Treasury is writing a unsecured check to wall street. We need information to make good choices, and for the most part the media isn't supplying it.

Neither choice is perfect, but "perfect is the enemy of good".

And BTW, the hotel I'm in has internet problems, so I just have to watch you guys knife each other. This is a remarkably unpolitical issue. It is too big, and too serious to politicise, beyone sound bites for the media to keep the respective "bases" happy.

[outlaw2001it]

Why does Paulson need $700 Billion? He even says it's not going to cost that much...so why even take it? Give Paulson $200 - $300 billion to start, and if he needs more give it to him. Any bank that wants the money...Exec's don't get a bonus...tough s*** it's taxpayers money.
We are doing right now what we told the rest of the world not to do...bail out companies.
Even though this is not a bailout (per Paulson)...the rest of the world thinks it is.
As for who's to blame...Dems/Reps are not the finance professionals (as we can see now) so don't blame them...blame Greenspan (no one else). He had the power to stop all of this repackaging of loans, and everything else that F. Mae/Mac were doing...but he never did. He's the professional...he's the one the world/U.S. looked to for financial solutions (even today). The Dems/Reps are puppets when it comes to our economy...they don't know s*** (just like right now). That's why we have somebody that knows something about economics running it, and not somebody who takes votes, and throws our money away...because they can.

FT.com / Comment & analysis / Comment - Greenspan’s sins return to haunt us

Hirsh: Greenspan's To Blame for Wall Street Woes | Newsweek Voices - Michael Hirsh | Newsweek.com

[Chuckiechan]

Quote:

Why does Paulson need $700 Billion? He even says it's not going to cost that much...so why even take it? Give Paulson $200 - $300 billion to start, and if he needs more give it to him.

It's more like a line of credit, or a budget if you prefer.

He has a 700 billion authorization.

Quote:

Greenspan (no one else). He had the power to stop all of this repackaging of loans, and everything else that F. Mae/Mac were doing...but he never did.

[outlaw2001it]

So why does he need $700 billion...this is what is turning the politicians/people off. We can finance 2 Iraq wars with $700 billion.
Anyway I understand about the repackaging of loans...however they went to far doing it. They had their hand in the cookie jar all over the world. Greenspan never tightened the requirements...he just stood aside as this housing bubble took off, and F. Mac/Mae repackaging loans to god knows who...and now it's biting us in the a$$. Telling everybody that housing was a sure fire investment because prices would not fall. Well guess what they did. So who's to blame for the mess we are in...Greenspan.

[Disley]

I'd like a simple explanation of how these businesses have lost a trillion dollars or more.

[outlaw2001it]

I'm a loan company and you come to me for a loan. No problem, I give you the loan, and then in return I sell the loan to F. Mac/Mae. They in return guarantee the loan (so if you default...I still get my money), and they resell my loan as a bond, they in return they take that money, and reinvest it in a high interest account of some kind (3-5 years - if not more). If the whole equation works out perfectly...you get a house, I get my money, F. Mac/Mae gets rich, and the person that bought the bond gets their money within 5 years or so.
In this case...too many people defaulted on their loans. The loan companies couldn't get all their money from F. Mac/Mae (who are now paying out the a$$), and the the people holding the bonds could be/are screwed. With all of the mortgages defaulted world wide the amount of money is in the trillions, and these lenders don't have the money to cover the debts.

[Hey-Todd]

G - R - E - E - D

[outlaw2001it]

Exactly, and now we're going to pay for it...big time.