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Ughhh Alan Greenspan (FED) did boost the money supply after 9/11 which in turn lowered interest rates in an effort to prevent an economic downfall due to fear after the attack, and it is common thought that this is when the bubble started,so sure you can blame him...But from what i understand as far as making lending standards a joke goes you don't have to look much further than your democratic congressmen who pushed the idea that everyone should have the right to own a home, and pressured banks to lend to people who under traditional lending practices would not qualify. Traditional meaning at least 10% down if not 20% and the home your buying valued at about 3 times your yearly income(not 100% sure on this guys) so if you make 50k you could buy a house around 150k. So as lending practices weakened more and more people started qualifying and buying so naturally prices went up, then people started speculating buying more than they could afford on easy credit pushing prices even higher. When their teaser rate 0-2% interest rate expired and the market rate kicked in mortgage payments for the default douches increased. Those in over their heads defaulted, those speculating defaulted, equity lines started to vanish , and now you have strategic defaults. Strategic default is basically walking away from a bad investment, so even though you can still afford your mortgage payment it doesn't make much sense to when you can buy your neighbors house which is exactly like yours for much less than you owe on yours.
3 years ago it was almost shameful to tell people i rented, cause every motherfucker with a pulse was buying a house. Now all these douche bags that over looked common sense in order to "improve" their living standards lost ,so because it happened to so many people were supposed to have sympathy? Sorry dude fuck that. I've seen too many people who didnt take risks by getting involved in buying a house they couldnt afford suffer due to all this bullshit...
I'm sure it's way more hip to hate on "the man" but I honestly don't think there was enough outrage or blame for the default douche bags.
Their stupidity/irresponsibility fucked the real estate market and economy and the idiots who borrowed to much deserve at least half of the blame.
In the 70's and 80's our required Economics classes taught us that paying more than 1/5 your monthly income towards rent/mortgage was untennable and a horrible financial move. This was based on one person's earnings, YOURS. Your spouse may leave, or die... it's up to YOU. Back then banks would turn down mortgage applications based on joint finances, same reasons. People didn't even TRY to buy a house without 20% down and NOT just to dodge the mortgage insurance costs. Up until the 90's there was one way you got your ducks in a row and bought a house. That's not to say that mortgage law wasn't still complex but it was fairly straight forward. Banks advised, mostly, on the highest wage earner, NO combined incomes, no unicorns or rainbows. Everybody back then worried about possible default. (I know, not exactly true but I'm trying to cut the treacle and make a pojnt).
Here come the 90's, zero down, cash back! Sure it's a consumer's wet dream but do you think consumers had anything to do with the policy implementation? C'mon, really? In the 80's they'd have laughed you out of the bank. In the 90's everyone decided it was the other guy's risk and just signed on the line... that's not even good business at the five and dime, that's just the drugs talking. In the 2k's it's all about pointing fingers and that obviously doesn't help.
My opinion, this comes back to the bankers who should have known better (and probably did). The banks told themselves they'd be able to collect from a majority of these idiots when THESE PEOPLE WERE IDIOTS. Not only idiots, but idiots with misleading info from the lending institutions. Further, that misleading lending info got piped right back into the lending institutions themselves and perpetuated another generation of irresponsible lending. I mean CHRIST! Anyone who looked at the mortgage abandonment rate in Riverside, CA in 1995 should have been able to predict the bubble and the iminent burst but... The little guy thought 'fuck it, the banks will have to pay' while the banks thought 'fuck it, the little guy is gonna have to pay'. Net result: WE ALL PAY! That little guy and that bank combined to yank about $50 a month out of ALL of our wallets. This is before the bubble burst. I only look to the government now that I realize all their talk about 'oversight' and 'regulation' was a huge pile of horseshit. Nobody got looked at, nobody was sanctioned, it was a giant clusterfuck and the government overlooked it, deregulated it, fucked us all. The safety net was never there.
That's how this all ends up on the government's doorstep. Really it was the banks.
Very true. If there wasn't some facilitation via deregulation or lenders relaxing their standards on what was an acceptable risk, none of these subprime mortgages would have gone through.
What happened was that the lenders and the people backing the lenders saw that there was a lot of potential profit in playing the market off of these loans and commodities futures. However, as any gambler will tell you there's no such thing as a sure thing, and once things started going south it snowballed into the crash that they knew was inevitable...but by that time they had cashed out so they stood to lose nothing on the deal.
Goldman Sachs was one of the biggest high rollers at the table, and they were in position to clean up on both sides of the deal if they played the game a certain way...and play it they did. Do I hold them directly accountable? It really depends...it's one of those things where they should have anticipated the worst case scenario but for whatever reason (greed? hubris?) they chose to look the other way.
But as some people will point out, they're in business to make money, and you have to break a few eggs to make an omelet.
ENDUT! HOCH HECH!
Last edited by shai hulud : 10-25-2009 at 12:10 PM.
Reason: Added content
The banks lost out in a big way due to write downs of assets and capital. The houses were massively over-valued so when they took possession of them after the borrowers defaulted they realised that what they thought was worth $500k was only worth $300k. Most banks around the world didn't win in this deal. My friends working for RBS have all lost their jobs, other guys I know that are getting transfered around are being asked if they have friends they can stay with instead of being put up in hotels, etc. There's still a lot of hurt being felt out there. Which is what I kind of think you are saying but that this is where the problem lay. I'm not sure it's really that simple, TBH. Yo may blame the Fed as they kept interest rates low to avoid the post 9/11 crash. You may blame the borrowers that thought that working at the local 7/11 checkouts was a good enough income for a $400k loan. You may blame the initial lenders for not giving a shit that their mark was at extreme risk of defaulting. Yo may blame the valuers that told Ma and PA Normal that their house was worth $600k and that their equity in that house could be working much better for them elsewhere (in another over-valued house)..., and you can blame Ma and Pa for being so easily sucked in. You can blame the secondary debt purchasers for buying bad debt and also believing the inflated asset values...., etc. Or you can just blame the govt for not treating us like idiot children that cannot be trusted not to FUCK IT ALL UP and regulating our behaviour.
Get my drift?
Once again, I believe that everyone from the borrower to the regulators deserve varying amounts of blame for what happened. Everyone bought in to it to some degree or another, that makes them also liable for blame in my books. The real pricks were the initial lenders that sold off the debt, made their money and got out without suffering.
I met one at a party about 4 months ago and he spent all his profits on cocaine and was now running through Asia getting by on shitty kitchen sink drugs escaping the people in the US who wanted to break his legs. Gave me a small feeling that justice had been served in this case at least.
Last edited by christo-f : 10-25-2009 at 03:15 PM.
There's no question that the responsibility needs to be shared. I'm not letting the people who took the loans off the hook by any means...it was clearly too good to be true and you'd think people would know better in spite of what the "professionals" told them.
But some people- usually those with poor impulse control- are going to try for the brass ring when it's sitting right there in front of them, and they tend to justify it after the shit hits the fan by saying things like "Everyone else was doing it" and "I was told it was a sure thing." Well, like my dad says- "If you want a guarantee, buy a washing machine."
My point was that most of the people I know that work at Goldman Saks are on point and not blood sucking vampires.
Also if you're going to be pointing fingers, making accusations and judging people why not be fair or more honest about it.
Everyone who defaulted is basically just as bad as every corporation that failed or got bailed out.
It's easy to put an evil face on a large corporation and say they are evil and fucked up on purpose or were just stupid.
Not so easy when there are real faces, of people you might be able to relate to, when your finger is pointing at them saying the same thing.
Do I think everyone who defaulted is evil or retarded? No. Of course not, shit happens.
I do think a good number of them should have either known better or just tanked on purpose when what they owed cost more than the house though.
Hopefully it's a lesson learned and won't repeat itself until a generation of lenders and borrowers as dumb as we are comes back around in the distant future.
I have no doubts that you know some good people that work for GS...but I'm guessing they're not shot callers.
Yes, there's plenty of blame to go around but the greater amount should still fall upon the investment banks. They knew damn well that what they were doing was incredibly risky and to compound that they were doing it with other people's money.
Also, this isn't just about subprime mortgages, it's also about commodities speculation and the leveraging of the derivatives market....and obviously the last two can't be blamed on dumb home buyers.
knew damn well that what they were doing was incredibly risky and to compound that they were doing it with other people's money.
One of my close friends I no longer hang out with because he married a pretentious gold digger wife is a VP at Sacls.
Another close friend who got laid off was an art director over there. This thread kind of struck a nerve when people bitched about the bonuses.
She copped a huge bonus right before getting laid off and also right after buying a new condo.
If it wasn't for that so called ridiculous bonus she'd be fucked and would have defaulted herself.
When I first moved here to NYC I pretty much only hung out with my now ex wife's yuppie Asian friends.
You'd be surprised how down to earth many of the GS Execs. are, not every investment banker fits the stereotype.
Granted there are many douches in any company but for the most part they were cool to me being blue collar myself.
The argument that you are making is for big government and regulation of commercial transactions. It's like you are saying that people are too stupid to manage themselves so the government should regulate our financial decisions to save us from our own stupidity.
That's the end product of what you're saying here.
.
No that is how you are misinterpreting what I am trying to say. I'd like to introduce you to my friend...reading comprehension.
Clearly though on this massive scale it is beyond a group of people just making bad financial decisions. If you disagree that's fine. Everyone is entitled to their own opinion.
The last part? What I am talking about educating people. Specifically lower class people who normally wouldn't receive that education. So you know they could make clearer more thoughtful decisions. Are you arguing that this would further hurt the problem? I highly doubt that at all.
Just like to add. My last statement in my previous post about pragmatics had nothing to do with what I said in that post in the beginning regarding GS and this whole financial mess. That is why the post was seperated. So any sort of attachment that I do not have faith in working class people (which is exactly what I am) is completely detached from what I was trying to say. Basically the opposite.
I also think it's funny how you are basically judging GS's buisness based off a few people you knew who worked for the company.
Great.
Also thank you Shai great points.
"They must find it difficult...Those who have taken the authority as the truth, rather than the truth as the authority." ~ Gerald Massey.
"To doubt everything or to believe everything are two equally convenient solutions; both dispense with the need for thought." ~ Jules Henri Poincaré
Last edited by ILOTSMYBRAIN : 10-26-2009 at 07:07 PM.
A relative of someone I work with was telling her family that the very next day after the first ever big bail out, three guys came into the swanky Manhattan restaurant where she worked. Not only was it super fuckin' expensive but they ordered some of their best bottles at $1,300 a pop. She checked with them to make sure they knew the price tag on the drinks. They ordered more... the result was a $3K lunch which they put on their Goldman-fuckin-Sachs corporate credit card.
No that is how you are misinterpreting what I am trying to say. I'd like to introduce you to my friend...reading comprehension.
..........
I've told myself before that I wouldn't discuss matters with you because not only are you obviously not too bright but you hardly pay attention to what other people write and you're just a fucking idiot, basically.
Most people here can carry on a civil conversation with those coming from differing view points, you cannot, you have to have a smart mouth that I'm pretty fucking sure would stop if your young and stupid self were face to face with at least half the people you talk to here. Don't know why the fuck I even bothered replying to your childish shit in the first place.
Learn how to discuss rather than argue, stupid child.
A relative of someone I work with was telling her family that the very next day after the first ever big bail out, three guys came into the swanky Manhattan restaurant where she worked. Not only was it super fuckin' expensive but they ordered some of their best bottles at $1,300 a pop. She checked with them to make sure they knew the price tag on the drinks. They ordered more... the result was a $3K lunch which they put on their Goldman-fuckin-Sachs corporate credit card.
Fuckin top notch cunts right there...
If you are pulling in millions of dollars a year for your company that isn't too uncommon for them to give you a huge expense account and encourage you to take big clients out to expensive lunches dinners and whatever. There are hundreds of restaurants in NYC that specialize in just that. It seems hard to understand but I'm actually surprised the woman working at the restaurant found this unusual. I'd be happy they came through and dumped some loot into my workplace instead of going out talking shit on the table that I mad a huge tip off of, but that's just me. Anyway I could think of all kinds of shit that might seem weird but it's not like they didn't pay the money back to the government and it's not like they are government workers or some shit.
An example of what it's like to deal with billionare money. I've heard of the interest payoffs some of the private traders come up on. Like your client wants to buy 300 million worth of something, the money will sometimes be routed through your own account during the transfer, (this transfer takes only seconds to do) you get 300 million sitting in your account for like 7 seconds. You can come home with 20 - 30 grand in interest for a couple trades like that. They had a word for that type of come up but I forgot what they called it. Not to mention the commissions and other normal shit these guys can make in a day.
Just trying to throw out an example of why $3000 on lunch ain't really shit. It's very commonplace here, even during a recession. I've heard of way bigger tabs at restaurants. Percentage wise based on some of the incomes these guys have it's really not much different than a small business owner footing the bill for a $300 lunch for his employee's. Most of the disgust people have is purely based on classism. Even though they might drop some loot like that it's still a private company out to make a profit. If it's unwarranted the company probably wouldn't be giving them a corporate card in the first place.
We have to learn to tolerate the ridiculous bonuses that these amazing people continue to give out to themselves.
It would help if you actually read the article but I'll break it down for you.
If a company wants the best and brightest it needs to pay a competitive salary.
The money in an employee bonus can either a. go to the stockholders, or b. go to employee's.
Seeing how a stockholder is probably much wealthier than an employee that money is getting spread around.
Not to mention being spent in whatever local economy thus improving things for the general population.
Now, if a company is singled out and told "you no longer can give bonuses" they would have to do something or fail.
a. They could not get good employee's because it sucks to work for less pay and only the scrubs would stick around. The company may fail loosing all it's top earners to other businesses.
b. They could restructure that bonus money into the salaries, only problem with that is if they have a bad year they loose even more money that way.
In a bonus system the bonuses grow and shrink on that company's overall earnings.
c. they could say, well fuck this, lets move the headquarters to a country outside of the U.S. where we have the freedom to make our own salary decisions.
In any case the rest of us would be screwed on way or another, either by having a business fail or move out.
Like I said, none of us our actually entitled that money in the first place unless we are stockholders. It's a private business.
My problem isn't with GS wanting to attract the best people to work for them.
My problem is that these people were given 10 million dollars of TAX PAYER MONEY!
I am under the impression that this money hasn't been given back yet.
If I am wrong I am sorry. I jumped to conclusions. However if I am right, and they haven't. They should be working to pay back the people who helped keep them in business before throwing large sums of money at themselves.
I did read the article, and I understood it. Thanks for your breakdown. It really helped me a lot! I also understood a through c. Which brings me to...
C is very interesting. Because Goldman Sachs apparently is going to be given $321m dollars from NYS because we (Micheal Bloomberg) apparently promised them a new facility at ground zero by the end of this year. Which of course due to the idiots that are controlling that is no where near to be completed. So...$321m dollars of our state's money is now heading towards them.
Boy am I happy that GS is still in down town!
"They must find it difficult...Those who have taken the authority as the truth, rather than the truth as the authority." ~ Gerald Massey.
"To doubt everything or to believe everything are two equally convenient solutions; both dispense with the need for thought." ~ Jules Henri Poincaré
Last edited by ILOTSMYBRAIN : 10-28-2009 at 07:12 PM.
Very true. If there wasn't some facilitation via deregulation or lenders relaxing their standards on what was an acceptable risk, none of these subprime mortgages would have gone through.
What happened was that the lenders and the people backing the lenders saw that there was a lot of potential profit in playing the market off of these loans and commodities futures. However, as any gambler will tell you there's no such thing as a sure thing, and once things started going south it snowballed into the crash that they knew was inevitable...but by that time they had cashed out so they stood to lose nothing on the deal.
Goldman Sachs was one of the biggest high rollers at the table, and they were in position to clean up on both sides of the deal if they played the game a certain way...and play it they did. Do I hold them directly accountable? It really depends...it's one of those things where they should have anticipated the worst case scenario but for whatever reason (greed? hubris?) they chose to look the other way.
But as some people will point out, they're in business to make money, and you have to break a few eggs to make an omelet.
you and smart are making good points.
the thing you are missing is that in the days when people put down 20% and bought a house with a monthly payment that was 25% of their income... the government did not like this. they thought it was racist and instituted policies to allow for the down trodden minorities to be able to buy houses via 'sub prime loans.' the federal government wanted sub prime loans.
you both act like some one turned off a switch, which 'deregulated' the lenders and they all of a sudden started making silly loans. in a free market this would never of happened. why would you make a loan that you would not get paid back on? you would lose money. they made these loans because they were guaranteed by the government not to lose money. regulation had nothing to do with it... government policy, coupled with easy credit from the artificial manipulation of the money supply and interest rates by the FED created false signals to the banks that credit was cheaper than it should of been. couple this with a government that says they will bail you out if you dont get your loans repaid. federal deposit insurance for instance, in its self creates a false sense of security allowing banks to lend more recklessly than they normally would. there was total 100% guarantee that if banks got burned on loans, they would be bailed out by the tax payers. private profit, socialized risk. this phenomenon is what is called moral hazard.
add to this people lining up to buy houses with 110% financing with home values sky rocketing due to the easy credit. banks would gladly loan the money when houses were doubling every year. it was a win win. you can thank the fed and the regulatory apparatus for this illusion. then of course you housing boom with situations like...you lose your job and cant pay your mortgage... no big deal. just buy a vacation house. problem solved. no need to save either. your house is an atm. when the charade came to an end, the problem is blamed on 'deregulation.' its hilarious. what 'deregulation?' the federal government WANTED subprime loans. they wanted everyone to own homes. this is the aim of fannie mae since its inception. the 'right' of every american to own a home.
after the horses ran away, now they want to shut the barn door. now we need 'regulation.' what regulation was repealed back when banks wanted 20% down and enough income to cover your mortgage payments? the only thing that changed was the cheapness of credit and government policy aimed at creating the housing bubble.
and now everyone wants to trust the people who said this system was in capable of collapsing and that houses never lose value, to fix the problem.
what a joke.
"Underlying most arguments against the free market is a lack of belief in freedom itself."
My problem isn't with GS wanting to attract the best people to work for them.
My problem is that these people were given 10 million dollars of TAX PAYER MONEY!
I am under the impression that this money hasn't been given back yet.
If I am wrong I am sorry. I jumped to conclusions. However if I am right, and they haven't. They should be working to pay back the people who helped keep them in business before throwing large sums of money at themselves.
I did read the article, and I understood it. Thanks for your breakdown. It really helped me a lot! I also understood a through c. Which brings me to...
C is very interesting. Because Goldman Sachs apparently is going to be given $321m dollars from NYS because we (Micheal Bloomberg) apparently promised them a new facility at ground zero by the end of this year. Which of course due to the idiots that are controlling that is no where near to be completed. So...$321m dollars of our state's money is now heading towards them.
Boy am I happy that GS is still in down town!
I hear you there, it's such a fucking waste to promise "hey stay in town, if we can't accomplish the impossible will just give you 321 million."
That said, they had to basically do whatever they could to entice them into sticking around.
$321 million isn't shit compared to what the city would loose in tax revenue if they were to set up shop someplace else.
Not to mention having all the salary money being spent here locally by the employee's and then taxed again.
They're going so fucking slow in ground zero it's a joke, they breached the top of the pit last year and only added about 50 feet of bare steel since then.
It's a shame with all the vacant office space in Manhattan that all this effort is being put into rebuilding something at the WTC.
If they were smart they'd just cover that shit over with a park or something until it made sense to rebuild there.
Let Sacks move uptown or into all the empty spots down there like in the world financial center which was almost completely vacant.
the thing you are missing is that in the days when people put down 20% and bought a house with a monthly payment that was 25% of their income... the government did not like this. they thought it was racist and instituted policies to allow for the down trodden minorities to be able to buy houses via 'sub prime loans.' the federal government wanted sub prime loans.
you both act like some one turned off a switch, which 'deregulated' the lenders and they all of a sudden started making silly loans. in a free market this would never of happened. why would you make a loan that you would not get paid back on? you would lose money. they made these loans because they were guaranteed by the government not to lose money. regulation had nothing to do with it...
You betray yourself too soon. You say some other stuff further on that, while arguable is still admirable but... for this^^^... no.
Regulation had everything to do with it. As always I support the 20% down strategy to avoid mortgage insurance but I've also espoused constantly the 15% of monthly income standard becaus 25% is borderline for lending but if you keep you ducks in a row and your spending humble you can make a 30% payment and shave decades off the ass end utilizing the amortization scales. HUGE down payment, LOW monthly payment at the shortest term you can get. You're better off taking a 30 year loan that you can pay off twice as fast than a 15yr loan that you have to pay close to double fees on per month.
It's not a switch thing, more like a leash thing. The lenders pulled, the holders demurred. The promise, which is the blackest sort of one world ugliness, is that gullible consumers, presented with the correct bait would indemnify themselves forever. Debt slaves, they are out there, they are being exploited and they are too dumb to save.I don't just mean too dumb to save their own money, I mean, too dumb to bail out and if a credit institution put their future in the hands of these idiots then they should also be beyond reprive.
why did this sub prime crisis not happen back when credit was tight, you needed a real down payment and had to be able to make monthly payments? because the market determined the 'regulation.' during this period the government thought banks were being greedy, racist, and not helping minorities and were holding out lending money, even though they were making proper risk assessment because credit was more expensive than when greenspan lowered it to next to nothing.
i still stand on the point that no one turned off a switch deregulating the mortgage market which in turn let credit institutions 'exploit' the consumer.
so what are you suggesting? government mandates on how much lenders can lend, how much people can borrow, how much down payment, etc? why do you need this, when if you had a free market with free interest rates not manipulated by the FED, and no govt insurance/bailout/moral hazard scenario, NO bank will lend money they will not get back?
as i said before, the government had a dream. the dream is that everyone has a 'right' to own a home. look at how they insure risky loans with FHA, fannie, etc. that is because the market wouldnt make those loans.
i support your first paragraph. sure, you should put down as much as possible and have your monthly payment consume as little of your monthly income as possible. you dont think banks know this? this is the way it was for years, before the FED induced boom, with the government winking in your corner. hell, paying for the house in cash is best. should we also mandate this?
main point... the entire thing wouldnt of happened without artificially low interest rates and the federal regulatory apparatus that guaranteed banks would not lose.
"Underlying most arguments against the free market is a lack of belief in freedom itself."
I disagree that the fed lowered interest rates in a bid to help minorities buy houses.
I also feel like if you get into buying a anything, especially a house and don't research, it's on you.
The fed has little to do with government pipe dreams of spreading the American dream.
Their main concern is protecting the interests of "big banking" and large financial institutions.
I'm pretty sure the interest rate bullshit came from trying to fend off the effects of the dot com bubble burst, and post 911 economic fear.
Lining their assets up and bracing for the impact instead of just taking it on the chin and getting it over with.
While other investments were failing the housing boom drove the economy for that time.
Economic failure sucks, but sometimes it's better to tighten the belt than keep borrowing.
They chose when they would tighten the belt and knew it was coming the entire time.
agreed. i didnt mean to imply that the FED lowered interest rates to help minorities buy houses. but i am saying the federal gov. housing sector created a state of affairs to do so, created moral hazard, insured and guaranteed these silly loans.
you are correct.... the recession is the cure. no one wants to accept that.
"Underlying most arguments against the free market is a lack of belief in freedom itself."
Re: Goldman Sachs -
10-24-2009, 02:43 AM
