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Thread: US close to NATIONAL bankruptcy

  1. #151
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    Face it, the Bush administration allowed the banks to do whatever they wanted, stripped away most of the lending safeguards and oversight in order to make as much giving out loans to people with no business buying a McMansion.

  2. #152
    Elite Member MohandasKGanja's Avatar
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    It's not just the Bush Administration. I haven't seen too much mention in this thread of Fannie Mae and Freddie Mac's complicity in this mess. Two supposedly politically neutral institutions populated by both Republicans and Democrats, and which absorbed/encouraged a huge amount of irresponsible loan and investment activity with virtually no regulatory oversight.

  3. #153
    Elite Member louiswinthorpe111's Avatar
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    Ok, here's a quick rundown of what happened in the lending industry to create the mortgage crisis. It wasn't just one thing that toppled it. It was a series of decisions that happened around the same time. And, seeing as how I am a Mortgage Broker, I am going to supply everyone with my expertise.

    1) Sub-prime mortgages began in 2001-2002. They were in response to a bill passed by Bush to get more people, particularily minorities, into homes. I don't remember the bill or the exact year, and I am currently too lazy to look for it on the internet.

    2) Investment banks like Bear Stearns begin buying up the subprime notes and are selling them on Wall Street. Sold as securities, purchased into stock portfolios, mutual funds, etc... At the time, due to the interest rates on these loans, the rate of return was high.

    3) Bear Stearns mainly bought the loans underwritten by New Century Mortgage, based in CA. Most of the stuff New Century wrote was garbage, but Bear Stearns didn't really check because they were making a shit ton of money. There are a flood of other bad lenders, whom I could list, that all sold their loans to investments banks. Ownit Mortgage, whom was equally crappy, was owned by Merrill Lynch.

    3) Independent brokers, such as myself, started putting EVERYONE into subprime loans, even good credit people. Why? Because by nature, Loan Officers are some of the laziest damn people I've ever met. Subprime was easy as far as less requirements you have to deal with, and the interest rates were great, and subprime paid higher commissions than regular loans.

    3) Everyone, brokers, lenders, investment banks, the general public, got greedy as fuck and started to take advantage of the system.

    4) In Oct 2005, Bush passed the bankruptcy reform law causing 2 things. 1) Making it harder for people to file for BK. 2) The credit card companies put their 2 cents in and the minimum payments for all credit cards double. So if a person has 3 credit cards with the minimum payment of $100 each, they are now $200 each, making their monthly payments $600 per month instead of $300 per month. This is important, because it correlates to what happens next.

    5) in 2005-2006, the FED begins to raise interest rates too much, too quickly. So the people that got mortgages in between 2002-2004, start to see their interest rates jump. This causes their payments to go anywhere from $200+ per month.

    6) So now with and extra $500+ per month in bills added to their expenses, coupled with higher gas prices, which leads to increases prices in goods, people quickly are unable to pay their bills, and the defaults begin.

    7) The defaults begin and companies that are holding the note, like Bear Stearns, Lehman, Merrill Lynch and the like, are suddenly not getting the return on their investments like they were.

    8) Bear Stearns admits in spring 2006, that all the mortgage notes they were buying and packing on Wall Street are garbage.

    9) The collasp begins of lenders like New Century Mortgage.

    10) The investments banks start getting saddled with debt, resulting in BK.


    Let me know if there are any questions or in anything above is unclear. Clinton really had nothing to do with it.
    Last edited by louiswinthorpe111; September 17th, 2008 at 10:48 AM. Reason: spelling

  4. #154
    Elite Member sluce's Avatar
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    Thank you for that very clear insider insight!

  5. #155
    Elite Member MohandasKGanja's Avatar
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    I think my only issue with louis' explanation is that it doesn't show Fannie/Freddie's involvement as much. Excerpts from Paul Gigot of the Wall Street Journal:

    "Fannie helped to make Countrywide as profitable as it once was by buying its mortgages in bulk. Mr. Raines [former head of Fannie Mae] -- following predecessor Jim Johnson -- and Mr. Mozilo made each other rich. Which explains why Mr. Johnson could feel so comfortable asking Sen. Kent Conrad (D., N.D.) to discuss a sweetheart mortgage with Mr. Mozilo, and also explains the Mozilo-Raines tag team in 2003."

    "Fannie Mae and Freddie Mac are unique in their thuggery, and their response to critics may help readers appreciate why taxpayers are now explicitly on the hook to rescue companies that some of us have spent years warning about."

    "My favorite point in his Feb. 20, 2002, Bernstein Research Call was this rebuttal to our point that 'Taxpayers Are on The Hook: This is incorrect. The agencies' debt is not guaranteed by the U.S. Treasury or any agency of the Federal Government.' Oops."

    "In the wake of Freddie's implosion, Republican Rep. Cliff Stearns of Florida held one hearing on its accounting practices and scheduled more in early 2004. He was soon told that not only could he hold no more hearings, but House Speaker Dennis Hastert was stripping his subcommittee of jurisdiction over Fan and Fred's accounting and giving it to Mike Oxley's Financial Services Committee. 'It was because of all their lobbying work,' explains Mr. Stearns today, in epic understatement."

    "As studies have shown, about half of the implicit taxpayer subsidy for Fan and Fred is pocketed by shareholders and management. According to the Federal Reserve, the half that goes to homeowners adds up to a mere seven basis points on mortgages. In return for this, Fannie was able to pay no fewer than 21 of its executives more than $1 million in 2002, and in 2003 Mr. Raines pocketed more than $20 million. Fannie's left-wing defenders are underwriters of crony capitalism, not affordable housing."

  6. #156
    Elite Member witchcurlgirl's Avatar
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    Sorry, but these things would not have been allowed under Glass-Steagall....which Clinton signed into law in 1999. Yes, it was sponsered by Phil Graham, but there was no majority and clinton didn't veto. So the blame is shared.

    This repeal allowed commercial lenders to underwrite and trade instruments such as mortgage-backed securities........

    Without this, these companies would not be involved in the mortgage mess

    There were many warnings that this would happen back in 1999 when the repeal was done. If you Google, you'll see article after article from 10 years ago saying this is exactly what would happen, and that it would even affect the Insurance industry- AIG for example.
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  7. #157
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    i woke in the middle of the nite and couldn't get back to sleep i was so disturbed by our economy. What if our cash becomes worthless?

    I've read that credit card companies may be next when it comes to ppl being unable to pay down their credit. big suprise, we put our lives on credit

    and what about life insurance companies who have such huge holdings in real estate like malls, which from my experience and reading have been losing tenants across america due to the slow down in the economy (no one shopping for shit cuz they have no money!) etc. etc. and there's a mall glut in to add to that!

    its all very frightening. wat if we're soon burning our dollars in the fire place to stay warm like the germans did during WWII when their currency was worth shit?!!!!

  8. #158
    Elite Member Lobelia's Avatar
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    Quote Originally Posted by sluce View Post
    That is not what was said. The economy is tanking due to bad leadership. When the economy tanks people lose jobs and then lose their insurance. When people lose insurance they no longer get the medical/mental health care they need. In crawdad's case he is most concerned with making money and the tax breaks he gets under the republican policies. He is putting his personal interests in front of those of his clients.
    Actually, a relatively small percentage of his clients have private insurance. Most have medicaid. The insurance clients are seen pro-bono because private insurance pays little to nothing for most of the services provided by master's level clinicians in this state. The profit margin isn't great, especially when you factor in all the pro bono work done, so yeah, I can see where he would be interested in tax breaks & making some money to keep up the buildings and give bonuses to hard-working employees. You're making erroneous assumptions about somebody you don't know, but you're doing it based on what you're reading in this thread, so it's understandable.
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    Elite Member Sweetie's Avatar
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    ^ Sounds like a story from the bible, Alice. The end times.

  10. #160
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    Quote Originally Posted by Sweetie View Post
    ^ Sounds like a story from the bible, Alice. The end times.
    the end of america? such a damn shame, i dont want us to be a bad example b/c i thought the premise of this country was great; a nation of immigrants who became the world super-power. (of course not counting what we did to get there; murder of the natives, African slave shipments and usage), but u get my drift....

    should i move to a better country? or will the rest of them fall after america?

  11. #161
    Elite Member Sweetie's Avatar
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    ^ No, no. I was talking about money being useless and the mark of the beast.

    haha

  12. #162
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    oh, well bear w/ me, im an atheist i dont know shit about the bible except the 4 gospels cuz i had to take a religion class in college and thats the one i chose

  13. #163
    Elite Member lurkur's Avatar
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    Looking for a country with high elevation and non-fascist government...

  14. #164
    Elite Member louiswinthorpe111's Avatar
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    I did not mention Fannie and Freddie in my analysis. Here's what's happening with the mortgage end of Fannie and Freddie.

    Right now, the majority of mortgages being done are FHA loan. Because those loans are not necessarily credit score driven, have nice low interest rates, and allow for higher loan to values. My business is exclusively FHA right now. Fannie and Freddie are the only ones that purchase FHA loans. FHA loans are government backed loans.

    The main problem with Fannie and Freddie is that Lyndon Johnson privatized the companies back in the late 60's. This made the companies a combo of a private and government enterprise. They have a weird set of rules where they don't have to disclose financial difficulty.

    The reason why the bailout occurred is since Fannie and Freddie are the only one buying the FHA loans, their liquidity was running short. So essentially, no one would be able to get a mortgage because the banks would not be able to sell them to Fannie and Freddie. Due to the bailout, Fannie and Freddie now have their liquidity problems answered and lending can continue. It virtually stopped in July, because banks didn't know what was happening to Fannie and Freddie, and didn't want loans.

    In researching the Glass-Stegall Act, I am in agreement that this aided to the current situation. However, if points 4 and 5 did not occur in the timing that they did, I do not think we would be in the dire situation we are in. I would not be a great situation, but 4 & 5 were a major factor in the crisis and have increased the severity.

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    "If you are not outraged, then you are not paying attention," Heather Heyer's facebook quote.

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