They still don't get it..........

They still don't get it..........

PostBy: mikeandgerry On: Fri Mar 12, 2010 2:28 pm


http://finance.yahoo.com/news/ALL-BUSINESS-Los-Angeles-gets-apf-21128764.html?x=0&sec=topStories&pos=4&asset=&ccode=
This link is broken, either the page no longer exists or there is some other issue like a typo.


Liberal thinking certainly does border on insanity. That classic definition of insanity, that is, doing the same thing over and over and expecting a different result, is demonstrated in the thinking of the LA city council regarding banks and banking.

The article says the low bank rates are not enough. The city council says that the banks that "got us into this mess" have to help us out by stemming foreclosures. They "have to make more investments in our community or risk losing the cities deposits and investments". Then the article goes on to say that the city will go farther than the federal Community Reinvestment Act does in regulating banks (ostensibly to make more loans to people who can't pay them back).

Wow. Stupid is as stupid does.
mikeandgerry
 
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Re: They still don't get it..........

PostBy: samhill On: Fri Mar 12, 2010 3:06 pm

I don`t know mike, what I read was "responsible local investment". No where did I read where it says to make loans to people who can`t pay them. I think what they were doing before was irresponsible investment so that they could be bundled & sold to make themselves look good & get easy cash. Then again I might have read incorrectly.
samhill
 
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Re: They still don't get it..........

PostBy: jpete On: Fri Mar 12, 2010 4:23 pm

Sam, you aren't taking into the account the effect of fractional reserve banking. Between that and the insane regulations, the government induces moral hazard.

Getting mad at bankers for making money is like getting mad at the dog for licking itself. I's just what they do. It's their nature. And all the regulations in the world aren't going to stop it.

What's needed is for the government to get out of the way and let the market weed out the good banks from the bad. If a banker knows going belly up is a real possibility, do you think they will continue to lend to people with no chance of paying it back?
jpete
 
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Re: They still don't get it..........

PostBy: samhill On: Fri Mar 12, 2010 5:04 pm

I`m sorry I didn`t think of that, just because it didn`t work before is no reason it won`t work now, lets just let the banks run rampant its good for the country.
samhill
 
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Re: They still don't get it..........

PostBy: Paulie On: Fri Mar 12, 2010 5:26 pm

Every game needs a ref. Look what happens when you do not have one...... :o
Paulie
 
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Re: They still don't get it..........

PostBy: topper On: Fri Mar 12, 2010 6:08 pm

actually - none of them get it - left - right or center! they all need the boot!!
topper
 
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Re: They still don't get it..........

PostBy: mikeandgerry On: Fri Mar 12, 2010 7:58 pm

samhill wrote:I don`t know mike, what I read was "responsible local investment". No where did I read where it says to make loans to people who can`t pay them. I think what they were doing before was irresponsible investment so that they could be bundled & sold to make themselves look good & get easy cash. Then again I might have read incorrectly.


You read selectively. I read that the council is upset that the banks are foreclosing on bad mortgages. They want that to stop or they threaten to remove their money from the bank. It's called meddling and intimidation. That isn't the government's job.

The housing bubble was caused by the government meddling in the free market. The problem won't be solved by more meddling.
mikeandgerry
 
Stoker Coal Boiler: Axeman-Anderson Anthratube 130-M

Re: They still don't get it..........

PostBy: mikeandgerry On: Fri Mar 12, 2010 7:59 pm

Paulie wrote:Every game needs a ref. Look what happens when you do not have one...... :o


I don't mind a ref, I do mind a self-appointed director of operations.
mikeandgerry
 
Stoker Coal Boiler: Axeman-Anderson Anthratube 130-M

Re: They still don't get it..........

PostBy: mikeandgerry On: Fri Mar 12, 2010 8:00 pm

topper wrote:actually - none of them get it - left - right or center! they all need the boot!!


I would agree that all have taken the opportunity to meddle but big government control is the natural realm of the left.

We need to go far, far to the right. Libertarianism would be a good place to start again.
mikeandgerry
 
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Re: They still don't get it..........

PostBy: samhill On: Fri Mar 12, 2010 8:27 pm

What they want is for the banks to offer to remortgage at affordable rates that stay in the community, true that the people that got these rates should have known better but there is also truth in lending. The biggest problem was with the slick talking real estate agents that get their commission & are gone & then the lenders that package a few good loans in with bad & sell them to investors & guess what ,get their commission & with every transaction the terms change. When I bought my first house I made every payment to the same savings & loan that held my mortgage the only payment change was the tax increases which were bad enough. Whats so wrong with paying back (with Int. thats agreed upon by both parties) to the place that you borrowed from, its not something new, its been going on for centuries, selling those loans is whats relatively new. If you buy a new Ford you don`t expect that in a year or so you`ll have to pay more to GMAC because they bought your loan.
samhill
 
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Re: They still don't get it..........

PostBy: Richard S. On: Fri Mar 12, 2010 8:35 pm

samhill wrote:I think what they were doing before was irresponsible investment so that they could be bundled & sold to make themselves look good & get easy cash.



When deregulation happened the ticket to the show was a good CRA status. Groups like ACORN used this as cudgel to beat the money out of them. The banks were funneling mortgage money and paying groups like ACORN billions... that's billions with a B. There's a great article here written in 2000:


The Trillion-Dollar Bank Shakedown That Bodes Ill for Cities

The Clinton administration's get-tough regulatory regime mattered so crucially because bank deregulation had set off a wave of mega-mergers, including the acquisition of the Bank of America by NationsBank, BankBoston by Fleet Financial, and Bankers Trust by Deutsche Bank. Regulatory approval of such mergers depended, in part, on positive CRA ratings. "To avoid the possibility of a denied or delayed application," advises the NCRC in its deadpan tone, "lending institutions have an incentive to make formal agreements with community organizations." By intervening—even just threatening to intervene—in the CRA review process, left-wing nonprofit groups have been able to gain control over eye-popping pools of bank capital, which they in turn parcel out to individual low-income mortgage seekers. A radical group called ACORN Housing has a $760 million commitment from the Bank of New York; the Boston-based Neighborhood Assistance Corporation of America has a $3-billion agreement with the Bank of America; a coalition of groups headed by New Jersey Citizen Action has a five-year, $13-billion agreement with First Union Corporation. Similar deals operate in almost every major U.S. city. Observes Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, which has $220 million in bank mortgage money to parcel out, "CRA is the backbone of everything we do."

In addition to providing the nonprofits with mortgage money to disburse, CRA allows those organizations to collect a fee from the banks for their services in marketing the loans. The Senate Banking Committee has estimated that, as a result of CRA, $9.5 billion so far has gone to pay for services and salaries of the nonprofit groups involved. To deal with such groups and to produce CRA compliance data for regulators, banks routinely establish separate CRA departments. A CRA consultant industry has sprung up to assist them. New financial-services firms offer to help banks that think they have a CRA problem make quick "investments" in packaged portfolios of CRA loans to get into compliance.
Richard S.
 
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Re: They still don't get it..........

PostBy: samhill On: Fri Mar 12, 2010 8:46 pm

I`m not too savey with all this but I know there was a lot of money being made by different banks, R.E.agents, investors & like Richard pointed out organizations & like everything else that goes up under a false economy sooner or later its got to come down.
samhill
 
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Re: They still don't get it..........

PostBy: Paulie On: Sat Mar 13, 2010 1:11 am

topper wrote:actually - none of them get it - left - right or center! they all need the boot!!

No doubt! It would be good to fire them all and start over. Term limits, no money from ANYBODY, no lobbyist, get back to
Governing For The People.....let the money and interest chips fall where they may.....
Paulie
 
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Re: They still don't get it..........

PostBy: mikeandgerry On: Sat Mar 13, 2010 1:22 am

Sam, you are right about the false economy and you are right that the banks, investment banks and insurance companies were involved in a greedy way. The enabling of that excessive greed was three fold by the government:

First, the CRA enabled ACORN to push banks to make risky loans.

Second, in the late nineties, the Glass-Steagall act was repealed blurring the distinction between banks, insurance companies and brokerages. That enabled derivatives and mortgage backed securities to take hold in the market place.

Third, the increased risks of mortgage lending pushed the free market to attempt to diversify those risks. That was accomplished by investment banks buying mortgages at a discount and bundling them into a product called an MBS or mortgage backed security. Where it got flaky was when investment houses bundled the mortgages, they sorted the mortgages by risk category rather than packing them in diversified bundles. They quickly sold off the good bundles but couldn't find a market for the bad ones. They held those for awhile but didn't like what they did for their balance sheet. So, they devised a new entity called a QSPE or qualified special purpose entity. It was a shell trust. They moved the crap off of their balance sheets to keep their books looking good on the parent company. This enabled them to make more bundles. Eventually the risky bundles got called back to their books when they defaulted. That is when the implosion began. The federal government failed to regulate those things.

Along with all of this, the house of cards regarding credit default swaps (essentially an insurance policy without reserves) began to topple AIG and Bear Stearns and Lehman Bros, among other things. Also, the Freddy and Fannie companies were staggering under the weight of their bad lending burdens.

It is and always has been the constitutional role of the government to regulate the business of banking and money creation and even commerce itself however, it is not their role to make markets.
mikeandgerry
 
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Re: They still don't get it..........

PostBy: jpete On: Sat Mar 13, 2010 9:15 am

Paulie wrote:Every game needs a ref. Look what happens when you do not have one...... :o

What better referee than your own self interest?

Do you have someone follow you around to tell you not to play in traffic and to keep your hands out of open flame?

Banks like to stay in business. It is the best way to make more money. If they do dumb stuff and bankrupt themselves, that hinders their ability to make money.

But because of government intervention, the have no fear of going out of business, especially if they have been deemed "too big to fail". The game now becomes to get to that point. So they gamble big.

The way the rules are now, it's "heads they win, tails we lose" for the taxpayer.

And your solution seems to be more of what has already failed colossally.
jpete
 
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