Romney doing well

[Archaea]

Originally Posted by Cali Coug

Pray tell, what is your "sensible solution" to the mortgage mess that would not involve a "centralized plan" but would rely on "libertarian philosophy?" And what, precisely, do you see that Obama did that exacerbated the problem?

I'm sure we have something in common other than religion....

First, we should NOT have bailed out the banks which made the bad loans and we should have eliminated the government mortgage guarantees. This would have created incentives for the financial institutions to sit down with homeowners so that all parties share in the disaster and would have stabilized home prices.

If we were hell bent on spending money, money should have been paid to modify principal, not to force the banks to foreclose.

Both options would have stabilized the home prices and kept homeowners in their homes instead of turning them over to predatory investors. Obama's solution is the absolute worst solution.

[MikeWaters]

You want the govt. to prop up a bubble housing market? And renege on its financial guarantees of some mortgages?

[ChinoCoug]

Originally Posted by Archaea

First, we should NOT have bailed out the banks which made the bad loans and we should have eliminated the government mortgage guarantees. This would have created incentives for the financial institutions to sit down with homeowners so that all parties share in the disaster and would have stabilized home prices.

If we were hell bent on spending money, money should have been paid to modify principal, not to force the banks to foreclose.

Both options would have stabilized the home prices and kept homeowners in their homes instead of turning them over to predatory investors. Obama's solution is the absolute worst solution.

you're willing to let credit dry up? just asking.

[MikeWaters]

I don't think the electorate is going to be as nearly anti-Obama as people might think if the economy turns around at all. Right now it is generic GOP 46 Obama 42. And that is without the baggage the real GOP candidate will have, as well as terrible economic circumstances.

I can't even imagine the electoral carnage if the GOP trots out someone BSC like Bachmann.

[Cali Coug]

Originally Posted by Archaea

First, we should NOT have bailed out the banks which made the bad loans and we should have eliminated the government mortgage guarantees. This would have created incentives for the financial institutions to sit down with homeowners so that all parties share in the disaster and would have stabilized home prices.

If we were hell bent on spending money, money should have been paid to modify principal, not to force the banks to foreclose.

Both options would have stabilized the home prices and kept homeowners in their homes instead of turning them over to predatory investors. Obama's solution is the absolute worst solution.

Look, I understand the visceral reaction against bailing out banks. It not something anyone relished- including its proponents. But you have to realize that is precisely what it is- an emotional reaction that ignores economic realities.

Allowing the banking market to collapse would have destroyed the economy. There would have been no credit available to anyone. Business for all intents and purposes would have ground to a halt, first in the US then spreading globally. Millions more would have lost their jobs. The deficit would have exploded far more than it has (few bother to note that one of the largest contributors to the deficit right now is the lack of tax revenue because so many people aren't paying income tax or payroll taxes). Our nation's balance sheet would have been in a far worse state than it is now, and it's not even close. No matter how you slice it, that path was more than just ill advised, it would have been the height of irresponsibility and naivete.

I honestly don't know what basis you have for thinking that path would have "stabilized home prices and kept homeowners in their homes" (unless by "stabilized" you mean eventually stabilized at near $0 prices). Far from it. Housing prices would have absolutely plummeted. With no new loans available, there would have been a glut of real estate on the market that nobody could possibly buy (nor would they want to). With home values plummeting, walking away from a mortgage would have become the instant preference for most Americans with mortgages. Who in their right mind would elect to continue paying on a mortgage of, say, $300,000 if their home was worth $95,000? That election, made on a large scale, would have again whacked the bank balance sheets further demolishing the financial industry. With no credit available anywhere, many more businesses would have gone under (you wouldn't believe the percentage of businesses who have a line of credit to meet payroll obligations each month- possibly even your own as this is a very common practice with law firms).

With millions losing their jobs and even more walking away from debt obligations they have to pay, bankruptcies would have skyrocketed. Bankruptcy protection works well as a backstop, but it can't operate if its use becomes a general rule. Lender and borrower would have been in bankruptcy court. And who ultimately would have paid the bill? Uncle Sam. Who would have paid for the food stamps, welfare, Medicaid, and other government programs for all the people who were hungry, homeless, and without insurance? Uncle Sam. And who funds Uncle Sam?

The decision to bail out the banks was made by a Republican president and continued by a Democrat. You know why? Because no matter who was in power, the alternative to the bailout was simply too terrible to even consider.

[Cali Coug]

Originally Posted by MikeWaters

I don't think the electorate is going to be as nearly anti-Obama as people might think if the economy turns around at all. Right now it is generic GOP 46 Obama 42. And that is without the baggage the real GOP candidate will have, as well as terrible economic circumstances.

I can't even imagine the electoral carnage if the GOP trots out someone BSC like Bachmann.

Couldn't agree more.

[Archaea]

Originally Posted by Cali Coug

Look, I understand the visceral reaction against bailing out banks. It not something anyone relished- including its proponents. But you have to realize that is precisely what it is- an emotional reaction that ignores economic realities.

Allowing the banking market to collapse would have destroyed the economy. There would have been no credit available to anyone. Business for all intents and purposes would have ground to a halt, first in the US then spreading globally. Millions more would have lost their jobs. The deficit would have exploded far more than it has (few bother to note that one of the largest contributors to the deficit right now is the lack of tax revenue because so many people aren't paying income tax or payroll taxes). Our nation's balance sheet would have been in a far worse state than it is now, and it's not even close. No matter how you slice it, that path was more than just ill advised, it would have been the height of irresponsibility and naivete.

I honestly don't know what basis you have for thinking that path would have "stabilized home prices and kept homeowners in their homes" (unless by "stabilized" you mean eventually stabilized at near $0 prices). Far from it. Housing prices would have absolutely plummeted. With no new loans available, there would have been a glut of real estate on the market that nobody could possibly buy (nor would they want to). With home values plummeting, walking away from a mortgage would have become the instant preference for most Americans with mortgages. Who in their right mind would elect to continue paying on a mortgage of, say, $300,000 if their home was worth $95,000? That election, made on a large scale, would have again whacked the bank balance sheets further demolishing the financial industry. With no credit available anywhere, many more businesses would have gone under (you wouldn't believe the percentage of businesses who have a line of credit to meet payroll obligations each month- possibly even your own as this is a very common practice with law firms).

With millions losing their jobs and even more walking away from debt obligations they have to pay, bankruptcies would have skyrocketed. Bankruptcy protection works well as a backstop, but it can't operate if its use becomes a general rule. Lender and borrower would have been in bankruptcy court. And who ultimately would have paid the bill? Uncle Sam. Who would have paid for the food stamps, welfare, Medicaid, and other government programs for all the people who were hungry, homeless, and without insurance? Uncle Sam. And who funds Uncle Sam?

The decision to bail out the banks was made by a Republican president and continued by a Democrat. You know why? Because no matter who was in power, the alternative to the bailout was simply too terrible to even consider.

You are ignorant of the situation. This is exactly what has happened with the solution implemented. You are simply dead wrong. That was the scenario by the banks for the politicians and what we got was banks reaping high profits with all the other fallout you just described.

Both made the decision incorrectly because both consulted the banking industry.

Go see the documentary, "Inside Job."

My solution would have stabilized the industry as it would have also placed the banking industry at risk so that they would have managed their own risk. In this instance, you simply are ignoring the facts and apparently have no familiarity with the financial quagmire.

[Cali Coug]

Originally Posted by Archaea

You are ignorant of the situation. This is exactly what has happened with the solution implemented. You are simply dead wrong. That was the scenario by the banks for the politicians and what we got was banks reaping high profits with all the other fallout you just described.

Both made the decision incorrectly because both consulted the banking industry.

Go see the documentary, "Inside Job."

My solution would have stabilized the industry as it would have also placed the banking industry at risk so that they would have managed their own risk. In this instance, you simply are ignoring the facts and apparently have no familiarity with the financial quagmire.

Respectfully, Arch, what I described most certainly is not "exactly what has happened." While the "bailouts" didn't solve every problem, they weren't designed to solve every problem and nobody that I am aware of argued that they would. You are correct that many of those who helped precipitate the financial crisis wound up profiting from the government's involvement and that such involvement does create perverse incentives for future actions. That sucks. No question. It was also unavoidable under the circumstances. You argue that the banking industry would have "managed its own risks" by allowing the system to collapse. That's not true at all. The banking industry was entirely incapable of managing risk when the crisis was occurring. The time for management is BEFORE the crisis, not during.

The lesson that should have been learned is that we ought to be taking more steps now to ensure banks ARE managing their risk (though ironically, I suspect you are opposed to those federal efforts as a matter of principle).

If you were to argue that the US could have received a better deal from the banking industry than it got, you would also be correct. Of course, receiving the best deal possible wasn't the goal. Keeping the economy alive was and in the sake of expediency, dollars (lots of them) were left on the table, essentially rewarding banks further. That also sucks. That said, I also suspect you are opposed in principle to the government demanding the types of deals that would have been better economically for taxpayers- again ironically.

Now that much of the dust has settled from the worst of the crisis, two things at least are clear. First, intervention kept the economy afloat, and that's a very good thing. Second, the direct dollar cost to taxpayers as a result of the intervention was very low (and may actually result in a profit in the aggregate). Given the result (alive economy) and the direct financial cost (low), we ought to be pretty pleased with how things turned out.

There's a lot of opportunity for this situation to serve as an example for future bad conduct by financial actors and we need to work on limiting those opportunities now. If we don't, however, the fault won't be on those who directed the bailouts but on those in power today and in the future.

[Archaea]

Originally Posted by Cali Coug

Respectfully, Arch, what I described most certainly is not "exactly what has happened." While the "bailouts" didn't solve every problem, they weren't designed to solve every problem and nobody that I am aware of argued that they would. You are correct that many of those who helped precipitate the financial crisis wound up profiting from the government's involvement and that such involvement does create perverse incentives for future actions. That sucks. No question. It was also unavoidable under the circumstances. You argue that the banking industry would have "managed its own risks" by allowing the system to collapse. That's not true at all. The banking industry was entirely incapable of managing risk when the crisis was occurring. The time for management is BEFORE the crisis, not during.

The lesson that should have been learned is that we ought to be taking more steps now to ensure banks ARE managing their risk (though ironically, I suspect you are opposed to those federal efforts as a matter of principle).

If you were to argue that the US could have received a better deal from the banking industry than it got, you would also be correct. Of course, receiving the best deal possible wasn't the goal. Keeping the economy alive was and in the sake of expediency, dollars (lots of them) were left on the table, essentially rewarding banks further. That also sucks. That said, I also suspect you are opposed in principle to the government demanding the types of deals that would have been better economically for taxpayers- again ironically.

Now that much of the dust has settled from the worst of the crisis, two things at least are clear. First, intervention kept the economy afloat, and that's a very good thing. Second, the direct dollar cost to taxpayers as a result of the intervention was very low (and may actually result in a profit in the aggregate). Given the result (alive economy) and the direct financial cost (low), we ought to be pretty pleased with how things turned out.

There's a lot of opportunity for this situation to serve as an example for future bad conduct by financial actors and we need to work on limiting those opportunities now. If we don't, however, the fault won't be on those who directed the bailouts but on those in power today and in the future.

It almost sounds as if you received your talking papers from the banking industry, but from independents outside the banking industry, you are sadly mistaken.

We did not need to deal with the banking industry and the worst may not be over.

First, the problem was initiated by the concern for the subprime mortgage industry to be mandated by the Presidential concern, Clinton's, about a lack of lending to minorities, who weren't credit worthy.

Second, the banking industry created a subprime and became very greedy. The subprime group should never had been mandated.

Third, real estate valuations became based upon the ability to finance, not intrinsic value as taught through the Chicago theory of finance.

Fourth, the industry created incentives for ARMs which were harmful.

Fifth, the industry solicited and received government funds to foreclose, which has collapsed the real estate values to below 1990 levels in some areas. And with the retention of REO's, the prices will remain soft for years to come. If these foreclosures had not taken place, prices would not have collapsed and we would not have need to infuse as much fluidity into the capital markets.

You are either reading the banking industry's talking points or Obama's but they are both dead wrong. In Las Vegas, which also resembles, Arizona, Florida and Southern California, the banks hold massive quantities of R.E.O. and also have a massive number of other property to be foreclosed upon. Because of the idiotic "solution" promoted by the banking industry and acquiesced in by Obama, the inventory of real property is years. The problem is not almost at the end, and I don't see the economics of encouraging foreclosure. You haven't explained yourself, and the silly belief that saving the banks some how saved massive unemployment or in any manners stabilized home prices.

None of Obama's programs are worth much or are of any value.

This is not a study and I am aware of them, but here's an anecdotal criticism of the HAMP program. 10542 South Jordan Gateway, Suite 300, South Jordan, UT 84095 | Phone: (801)407-8555

[Cali Coug]

Originally Posted by Archaea

It almost sounds as if you received your talking papers from the banking industry, but from independents outside the banking industry, you are sadly mistaken.

We did not need to deal with the banking industry and the worst may not be over.

First, the problem was initiated by the concern for the subprime mortgage industry to be mandated by the Presidential concern, Clinton's, about a lack of lending to minorities, who weren't credit worthy.

Second, the banking industry created a subprime and became very greedy. The subprime group should never had been mandated.

Third, real estate valuations became based upon the ability to finance, not intrinsic value as taught through the Chicago theory of finance.

Fourth, the industry created incentives for ARMs which were harmful.

Fifth, the industry solicited and received government funds to foreclose, which has collapsed the real estate values to below 1990 levels in some areas. And with the retention of REO's, the prices will remain soft for years to come. If these foreclosures had not taken place, prices would not have collapsed and we would not have need to infuse as much fluidity into the capital markets.

You are either reading the banking industry's talking points or Obama's but they are both dead wrong. In Las Vegas, which also resembles, Arizona, Florida and Southern California, the banks hold massive quantities of R.E.O. and also have a massive number of other property to be foreclosed upon. Because of the idiotic "solution" promoted by the banking industry and acquiesced in by Obama, the inventory of real property is years. The problem is not almost at the end, and I don't see the economics of encouraging foreclosure. You haven't explained yourself, and the silly belief that saving the banks some how saved massive unemployment or in any manners stabilized home prices.

None of Obama's programs are worth much or are of any value.

This is not a study and I am aware of them, but here's an anecdotal criticism of the HAMP program. 10542 South Jordan Gateway, Suite 300, South Jordan, UT 84095 | Phone: (801)407-8555

I'm not sure how what you just wrote relates to what I wrote. I was discussing the government's reaction to the crisis. You are discussing what you believe caused the crisis but don't say anything about why the government reaction was inappropriate (except to conclude that it was).

At the risk of totally blowing your mind, you ought to be aware that there is a substantial amount of evidence that the CRA had little to nothing to do with causing the crisis (though it has an awful lot to do with fueling talking points). I assume you are referring to the CRA in your points above (correct me if I am wrong) when you refer to what the government did to promote lending to minorities (although you mention Clinton, and the CRA was enacted in 1977- long before Clinton). Clinton was president when Glass-Steagall was repealed, but that has nothing to do with minority lending. Not to mention I would assume you would favor repeal of Glass-Steagall given your arguments that the government should do less, not more.

Here are a few studies and articles on the topic, if you are interested:

http://www.minneapolisfed.org/public...ay.cfm?id=4136

http://prospect.org/cs/articles?arti...ubprime_crisis

http://www.businessweek.com/investin...me_crisis.html

http://prospect.org/cs/articles?arti...investment_act

http://www.newamerica.net/blog/asset...l-not-cra-7222

This isn't to say the government didn't make any missteps which contributed to the crisis, but it is to say there is little to no evidence to support what I think is your contention about the CRA causing the crisis.

If I misunderstood you, please clarify.