US rate cut towards zero expected

[The Minx]

Oh Greenspan's guilty alright. Every Randroid economist in the States helped make this disaster,

I've seen this used before now on this board.

"Randroid"?

but the people responsible for so many bad loans in the first place were the banks. They dropped standards for getting credit to damn near zero with no verification.

As we've both been here before, I think we have reached an impasse.

[rhoenix]

"Randroid"?

An interjection - A "Randroid" is a follower of Ayn Rand's philosophies, specifically her plans in Atlas Shrugged.

[Cynical Cat]

but the people responsible for so many bad loans in the first place were the banks. They dropped standards for getting credit to damn near zero with no verification.

As we've both been here before, I think we have reached an impasse.

The banks had a responsibility to their depositors to be responsible with their money that they utterly abrogated. If frigid gives me a bunch of money and I loan it out to shady people who I don't check out and don't pay me back, I'm the one guilty of pissing away frigid's money. That doesn't mean the people I loaned money to are off the hook ethically for their bad conduct and stupidity, but the throwing away the money is my fuck up.

The banks just thought they could get rid of the bad debt by selling it to people who didn't know they were getting shit and that this could go on forever. It didn't and now the US financial system is revealed to be full of bad shit that everyone is hiding on their books and no one wants to lend anyone a dime because they're afraid they'll go under and there's no transparency so no one knows who is really solvent and who isn't.

[The Minx]

"Randroid"?

An interjection - A "Randroid" is a follower of Ayn Rand's philosophies, specifically her plans in Atlas Shrugged.

Ah, OK.

The banks just thought they could get rid of the bad debt by selling it to people who didn't know they were getting shit and that this could go on forever. It didn't and now the US financial system is revealed to be full of bad shit that everyone is hiding on their books and no one wants to lend anyone a dime because they're afraid they'll go under and there's no transparency so no one knows who is really solvent and who isn't.

This is really the crux IMO: the lack of transparency. Without information, you can't expect anyone to provide loans or to buy or sell securities wisely.

[SirNitram]

I really don't care whether it was liberals or conservatives who championed sub-prime lending initially. They certainly both supported the practice ardently enough.

There's very few quotes I've uncovered in my studies of this that can be honestly traced to the liberals, outside of things like the CRA which required more transparency, responsibility, and accountability than the subprime lending of the bubble. You can find a few more Democrats, but virtually all those are the few in the pockets of banks.

As for whether more documentation can make them safe, I'm not terribly optimistic. Despite all the write-ups of the practice, you are in the end still using federal tax money to insure lenders who provide loans to those who cannot pay normal loans. These lenders will still need to take loans of their own from prime lenders to make the cash available.

The simple reality that documentation and transparent lending was conducted with none of this bullshit, for centuries. Only when large de-regulatory pushes are used to allow 'exotic' loans and securitization through private sectors, with aiding and abetting by the rating companies, does the system actually break down as we saw in the S&L crisis(Hi, McCain!), this nonsense, and an 1800s crisis all made the same way.

The record is optimistic, if the industry is regulated.

Obviously, the current environment with securities and obfustication in general was not making things safer! One party wanted less regulation while the other wanted more, the result was removal of such regulations that were necessary for oversight, but regulations encouraging or mandating risky practices like this remained. It was, of course, special interest politics in both cases.

Securitization in this case made it worse because of more of the lack of transparency. New, exotic debt-based products were shoved at the ratings agencies, and any honest players there were quickly overruled by their shareholders when the shareholders saw other ratings agencies AAA'ing these junk bonds(That this was done on blind faith, bribes, and dishonesty wasn't factored in), and demanding a peice of the action and profits.

The Madoff 50B Ponzi Scheme(The guy running it's own words describe it as Ponzi) is the ultimate testiment to the idealogical need that created this, a situation where complaints beginning in 1999 and heading forward, were ignored by the SEC. The financial branch of government was headed up by the brilliant minds of Wall Street, because conservatives worshipped them and no one could really gainsay it; they brought home insane money. The fact that this would end in tears was spoken of by alot of people. But the refrain is the same now:

'No one could have anticipated..'

[The Minx]

The simple reality that documentation and transparent lending was conducted with none of this bullshit, for centuries. Only when large de-regulatory pushes are used to allow 'exotic' loans and securitization through private sectors, with aiding and abetting by the rating companies, does the system actually break down as we saw in the S&L crisis(Hi, McCain!), this nonsense, and an 1800s crisis all made the same way.

The record is optimistic, if the industry is regulated.

Depending on the regulation. I guess I have a hard time trusting any authority with a monopoly on power.

Crisis of 1800s? Subprime loans have not been as common throughout history as they are now. Unless we are talking about different things?

Securitization in this case made it worse because of more of the lack of transparency. New, exotic debt-based products were shoved at the ratings agencies, and any honest players there were quickly overruled by their shareholders when the shareholders saw other ratings agencies AAA'ing these junk bonds(That this was done on blind faith, bribes, and dishonesty wasn't factored in), and demanding a peice of the action and profits.

IIRC, the losses were $450 bn from sub-prime loans and $950 bn from securities, of which $500 bn were from sub-prime related securities. So sub-prime related losses were 2/3 of the problem, and securities were 2/3 of the problem.

[SirNitram]

The simple reality that documentation and transparent lending was conducted with none of this bullshit, for centuries. Only when large de-regulatory pushes are used to allow 'exotic' loans and securitization through private sectors, with aiding and abetting by the rating companies, does the system actually break down as we saw in the S&L crisis(Hi, McCain!), this nonsense, and an 1800s crisis all made the same way.

The record is optimistic, if the industry is regulated.

Depending on the regulation. I guess I have a hard time trusting any authority with a monopoly on power.

Crisis of 1800s? Subprime loans have not been as common throughout history as they are now. Unless we are talking about different things?

Not 'subprime'. 'Subprime' is merely the Designated Buzzword to create scapegoats. Subprime lending has, as I've said, existed for ages and worked out fine because it took a pound of flesh.

Exotic means of lending, selling the debt, and other such mayhem, has happened before. It's the banking panic of 1873.

It started when someone got the brilliant idea to mortgage land still being built on, based on the projected value of the completed project. Land prices kept going up. Debt was gobbled up. Cheap, plentiful consumables poured out of America like they do now from China. Shaky debt and undersellling makes the banks start to get unsteady, interbank lending grinds to a halt. Railroads were the worst: They created complex 'debt products' that no one ever found the 'asset' that was collatoral. When the debt went bad, paper-holding lawyers found they were entitled to nothing. The Railroads crashed, and took the stock market with it. Unemployment soared, hitting 25% in areas in the US.

Securitization in this case made it worse because of more of the lack of transparency. New, exotic debt-based products were shoved at the ratings agencies, and any honest players there were quickly overruled by their shareholders when the shareholders saw other ratings agencies AAA'ing these junk bonds(That this was done on blind faith, bribes, and dishonesty wasn't factored in), and demanding a peice of the action and profits.

IIRC, the losses were $450 bn from sub-prime loans and $950 bn from securities, of which $500 bn were from sub-prime related securities. So sub-prime related losses were 2/3 of the problem, and securities were 2/3 of the problem.

I'm not sure on the numbers there. How much do your numbers point to Alt-A?