Recommend
10 
 Thumb up
 Hide
38 Posts
1 , 2  Next »   | 

BGG» Forums » Everything Else » Religion, Sex, and Politics

Subject: Ken's Latest Reading Suggestion: All the Devils are Here rss

Your Tags: Add tags
Popular Tags: [View All]
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
I haven't had enough reading time of late, but I have managed to sneak in some. I just finished All the Devils are Here: The Hidden History of the Financial Crisis which covers our latest financial meltdown. Very interesting read and worth a look.

First, it really lays out the different financial instruments that were involved and how they came to be. If you've wondered what a CDO, a CDO squared, or a CDS were they're explained in terms that you can understand.

Second, it goes all the way back. Many point fingers to very different "causes" of this particular meltdown. "Angels" goes back further than most of those - in the days when "sub-prime" hadn't appeared in our lexicon yet, the secondary mortgage market was positively dominated by Fannie Mae and Freddie Mac (the GSEs or "Government Sponsored Entities"). This created a squeeze on anyone else in the financial industry who wanted to issue mortgages and offer them for sale on the market. Although they could try, the prices that they could fetch were far smaller than the GSEs could get because the banks didn't have the unstated (and actually never stated) implied backing of the US government. So their securities or notes would always be viewed as more risky even if they had identical underwriting rules. This drove banks to look for new ways to make money in the mortgage market.

Third, it really lays out how things got out of control. Collateralized Debt Obligations provided the banks a way to get into the game in a big way, but needed more than just presenting them to the market. They also needed someone to say they were good, solid investments. Enter the ratings agencies, who began reviewing these offerings and assigning them ratings, usually AAA (roughly equivalent to US Treasuries) because it just wasn't possible that real estate would go south all over the country at once, was it? Worse, even debts that were individually rated lower or even as junk could be bundled up and land a AAA rating because the odds that all of those would go south simultaneously was so small.

Fourth, it ties this to why sub-prime mortgages were created and how the abuses in the industry not only grew, but were implicitly encouraged. Since the GSEs would buy traditional conforming loans, sub-prime lending became a way for the banks to bypass them and increase their margins. And since the sub-primes paid higher interest or had higher payoffs, they drew investors because the securities that contained them paid well and had AAA ratings.

Finally, we get to "synthetic CDOs." If you net them out, they're really almost gambling more than a security. They are backed by no actual assets, if you buy them you own nothing. What they let you do is decide "Do I think this security will go up or down?" Then place your bet. If you're right, you get money. If you're not, you pay. So unlike options, warrants, stocks, or bonds, it's an investment where you actually own nothing and rely on no underlying collateral or capital as a part of your investment. And since there was no need to actually own anything, banks could issue as many synthetic CDOs as they could find buyers for.

In the end, there really is nobody that comes out of this particular mess looking good. The Fed and US regulators looking over-matched, insufficiently skilled, or too hands-off. The banks look overly greedy, seeking out profits without bothering to really look at the underlying risks or consider whether the aggregation of risk within their company was too significant. The sub-prime lenders look like sleaze balls pushing people into mortgages that weren't good for them because it made them more money or flat out committing/abetting fraud to put people in mortgages (a good number of whom realized they couldn't afford the home so rapidly they never actually took possession of the home even though they'd bought it). Consumers look pretty stupid for turning their houses into ATM machines and refinancing to get at their cash. And the GSEs look like both bullies and fools as they attempted to maintain their hammerlock on the secondary market and ultimately ending up making the same bad bets as everyone else.

The lesson the book reinforced for me was that there is such a thing as appropriate regulation. When the number of mortgage products jumps from 3 to over 600, shouldn't that be a sign that someone should take a closer look at things? When everyone is selling investments that they market as being without any real risk (that's what AAA means), shouldn't that send up a red flag somewhere for someone? I mean, that's one of the signs of a Ponzi scheme, right? When we allow people to get "creative" in the financial markets, we really should pay some attention to what they're doing, particularly as it grows to be a huge part of the market. How the hell did risk management go from being a critical exercise for a bank or financial institution become not only optional, but largely missing?

There are some voices in the book who should have been heard. Entrenched interests in government supported by the banks and the GSEs (which I consider ever so wrong) made sure that they weren't until it was way too late.

Interestingly, there are people that this book "rehabilitated" for me. Notably Hank Paulson who is routinely excoriated for his part in the whole mess. I need to do some more reading, but if this tale is accurate, then Mr. Paulson literally did the best he could with what he had and managed to get what he needed to keep things from getting even worse (and yes, it could have been worse). Perhaps that's fitting since the Treasury just announced that the TARP funds we allocated as a part of the bailout just started turning a profit for the country - we've taken in more than we'd laid out through sales of assets, interest, etc.

The book does give one reason to pause, though. While we have had some banking reform, it seems to fall short. The free flow of capital is critical to our economy, no question. And we should avoid inhibiting it. But by the same token, when that capital is used without considering risk or can be used to basically gamble without anyone actually buying anything from anyone else, shouldn't we take notice of that?

It's interesting that there are few people that you'll read about (and the book covers people and not just events) who really had any criminal motivation or intent. Just people looking to make as much as they could. Love of money is supposed to be the root of all evil. Perhaps our latest crisis demonstrates that aggregated love of money is even more dangerous.
9 
 Thumb up
0.52
 tip
 Hide
  • [+] Dice rolls
Erik Henry
United States
Houston
Texas
flag msg tools
badge
Science without religion is lame, religion without science is blind—Einstein
Avatar
Microbadge: In MemoriamMicrobadge: White Ribbon with Gold Edges (Lung Cancer Awareness)Microbadge: MethodistMicrobadge: Chemical EngineerMicrobadge: Stay-at-home dad
perfalbion wrote:
And the GSEs look like both bullies and fools as they attempted to maintain their hammerlock on the secondary market and ultimately ending up making the same bad bets as everyone else.
Emphasis mine. That seems to imply that Fannie Mae and Freddie Mac were relatively late to the game in writing overly-risky mortgages (which is consistent with what I've heard on the subject too). That would seem to contradict the view that this was all caused by the government forcing the writing of mortgages to low income families so that everyone could own a home. Does this argument get any attention in the book?

(Thanks for the recommendation, by the way.)
2 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Marshall P.
United States
Wichita
Kansas
flag msg tools
"Nothing in Biology Makes Sense Except in the Light of Evolution" - Theodosius Dobzhansky
badge
There is grandeur in this view of life, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.
Avatar
Microbadge: Amun-Re fanMicrobadge: Automobile fanMicrobadge: Hawaii fanMicrobadge: In the Year of the Dragon fanMicrobadge: Power Grid fan
Ken, have you seen the movie inside job?
2 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
Erik17 wrote:
That seems to imply that Fannie Mae and Freddie Mac were relatively late to the game in writing overly-risky mortgages
First, neither body actually wrote mortgages. They bought them from originators, but did set conditions on what they'd buy.

Second, they never purchased sub-prime mortgages directly. But they got their regulator to agree that if they purchased CDOs of a particular quality, that counted against the housing goals set for them. So they ended up jumping into the sub-prime market through the back door, but they jumped in with both feet.

Government policies did help. The existence of the GSEs, for example, effectively shut banks out of the secondary mortgage market which started the chain of events. Housing targets were established that these quasi-private semi-government entities were expected to meet. But ultimately, there was no legislation or act of Congress that forced nobody to do nothin'. This was more about greed and lax oversight than government going too far.
2 
 Thumb up
0.25
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
mdp4828 wrote:
Ken, have you seen the movie inside job?
I haven't. Worth a look?
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Welcome Rolling Stones
Latvia
Bullshit
flag msg tools
Avatar
Microbadge: Super Mario fanMicrobadge: EurogamerMicrobadge: Alfred E. Neuman fanMicrobadge: Copper File UploaderMicrobadge: Parent of big sister and little brother
perfalbion wrote:
mdp4828 wrote:
Ken, have you seen the movie inside job?
I haven't. Worth a look?
True Love.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
The credit default swaps (CDS) are an interesting part. AIG was involved in them heavily.

From my very basic understanding, AIG sold a ton of these CDS pointed to very crappy CDOs. Big packets of NINJA mortgages and toxic assets.
They did, but AIG also bet heavily on CDOs. The AIG story is a very interesting part of the book.

Quote:
Anyway Goldman Sachs had a few smart guys that bet HEAVILY in credit default swaps and they won BIG. Well AIG did not have the money in reserve to cover these big bets.
This is true, though there is quite a bit more to it. GS gets a lot of attention, particularly as things start to go bed.

Quote:
So Paulson being the treasury secretary and ex GS executive had an interest (or his friends did) in seeing that AIG would not fold so GS could collect their big winnings.
This part I don't think is true (and honestly, didn't before I'd read the book - now I just have more support for the idea). What you learn at the end of the book is that the #1 asset running around as things came unraveled was trust. If one bank didn't think it could trust a counterparty, then the value of any assets the counterparty was pledging dropped. Which results in demands for more collateral, which puts stress on the counterparty's financials. And once that starts and gets out (which it always does), that causes ripples because now the bank with the bad counterparty has assets they might not be able to back sufficiently, so...

It really was a house of cards. And AIG had made itself the bottom level of that house. GS absolutely did do better than other banks, and used some tactics that were highly questionable ethically, which damaged their reputation. But the motive you're ascribing to Paulson is off, if you ask me.

Quote:
I don't think they could have let AIG fold, that was how it was spun at the time so idk.
I think the problem here was (this is me talking, not the book) that things were moving so fast and there were so many fires to put out that there simply wasn't time to do effective PR. Particularly when the financial instruments were so beyond what anyone in the public was likely to grasp quickly.

You might enjoy the read - a bit of a different perspective based on your post.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Marshall P.
United States
Wichita
Kansas
flag msg tools
"Nothing in Biology Makes Sense Except in the Light of Evolution" - Theodosius Dobzhansky
badge
There is grandeur in this view of life, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.
Avatar
Microbadge: Amun-Re fanMicrobadge: Automobile fanMicrobadge: Hawaii fanMicrobadge: In the Year of the Dragon fanMicrobadge: Power Grid fan
perfalbion wrote:
mdp4828 wrote:
Ken, have you seen the movie inside job?
I haven't. Worth a look?
Oh, MOST definitely.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
I'll take a gander. Thanks for the recommendation.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jon M
United Kingdom
Hitchin
Herts
flag msg tools
Avatar
perfalbion wrote:
...They also needed someone to say they were good, solid investments. Enter the ratings agencies, who began reviewing these offerings and assigning them ratings, usually AAA (roughly equivalent to US Treasuries) because it just wasn't possible that real estate would go south all over the country at once, was it? Worse, even debts that were individually rated lower or even as junk could be bundled up and land a AAA rating because the odds that all of those would go south simultaneously was so small...

This to me sums up the whole crisis. The ratings agencies giving these things tiple A status. Either they didn't understand them or didn't understand the risks. Either way without that rating these would not have been able to sell in the way they did and the knock on crisis could not have happened.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
Jon_1066 wrote:
This to me sums up the whole crisis. The ratings agencies giving these things tiple A status. Either they didn't understand them or didn't understand the risks. Either way without that rating these would not have been able to sell in the way they did and the knock on crisis could not have happened.
They don't deserve a free pass by any means, but keep in mind that a huge part of what made the crisis such a big hit was the degree of interrelationship between security after security after security. And how losses in one set of securities at one bank/hedge fund could very quickly undermine every one of its trading partners to a huge degree.

There were real failures here, no question. But let's also keep in mind that the government was stupid enough to require AAA ratings on assets purchased by some investors (pension funds and money markets, notably) and not actually regulate their risk management practices at all. So if we were talking about a small number of CDOs backed by assets of a reasonable quality, then this never happens. But when you grow that exponentially and it's all based on the assumption that housing never goes down nationally (which had been true to this point) and you don't have processes in place to find the connections...

In my mind there were 5-10 opportunities for a regulator with any teeth at all to either put the brakes on this or limit the damage. And we managed to miss them all. The point of regulation is to protect the public and there were lots of governments that missed the boat here, the US being front and center since it was the center of the storm.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
I understand the criticisms that were leveled at him, I just don't happen to agree with them. It's also worth noting that GS's "benefits" from AIG happened because they largely got out of CDOs two years before things went south and hedged the positions that they did hold (which AIG helped them do). Now if there's a conflict of interest, I think it's that GS would still put their clients in CDOs or let them be the seller of CDSs, sometimes while they stood on the other side of the trade. But Paulson's decision was to inject liquidity (which it desperately needed) into the market and paid out 100% of all CDSs that AIG had signed. That GS benefited was unavoidable no matter who or what the government bailed out - as one of the leading investment banks in the world that couldn't be avoided.

So I think the controversy is a bit unfair. GS was going to end up seeing more government cash from any action taken, period. Their size and activity made that unavoidable. Whether or not GS should be looked at for breaches of fiduciary duty to their clients might be a more interesting conversation to have (but it's worth noting - the Treasury wouldn't have been the department to do that).

Quote:
I will check it out, as long as it truthful I want to read it.
Copious notations throughout, so you can judge for yourself.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
Round and round the circle again.
AIG got bailed out. Lehman brothers did not.
You're quite right. Neither was Bear Stearns, which was first to go. But when both Lehman and Bear failed nobody had a clue how big this actually was going to get.

Quote:
Could AIG have been allowed to fail? I don't know if that question can be answered. Perhaps a thoughtful independent analysis has been made after the fact. Paulson seems to have thought so and told everyone at the time that was definitely the case. But his opinion was influenced by his former affiliations.
I'm not sure I'm reading this right. Are you suggesting Paulson thought that AIG could fail? Or couldn't. Your phrasing makes it hard to tell.

Either way, unless you've something to support the contention of how his opinion was influenced that comes from the man himself, I don't believe that you're being fair. Paulson came in and was basically handed a shit sandwich for breakfast, lunch, and dinner. As a former CEO of Goldman, he shoulders some responsibility for how we got here - that's "appropriate" finger pointing. As Treasury secretary, I don't think you're on target. One thing that the book is likely to bring home for you is how little regulatory power Paulson actually had. Keep in mind - Treasury has no regulatory authority over banks at all.

AIG failing would have been catastrophic because it would have triggered collapse after collapse after collapse. Perhaps that would have been "good" in that the firms that go us here went belly up. But it certainly would have made the immediate pain worse for everyone. Much, much, much worse.

I suspect this particular debate will go on for quite a while.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
My point is that absolutely true? Could AIG have failed and could that resulting storm been weathered?
There's no question about the answer, though. AIG failing triggers a liquidity crisis at ever other bank in existence. The shortfall would have been massive (I think it ended up being in the vicinity of $180 billion). That's what every bank has to walk away from in terms of capital on the books, so they have to immediately replace it to meet reserve requirements. But nobody has the money to loan to anyone else. Even GS fails if you let AIG go under because all of their counterparties go under.

Quote:
Could the immediate pain been suffered through? I think we would have been much better off today if we just took the lumps right then.
"The immediate pain" would have been the utter collapse of the global financial system. It would have made the Great Depression look like a walk in the park due to the increased scale of the problem.

I think you're underselling the damage that AIG failing could do. Lehman and Bear did enough damage to start the dominos falling. AIG going under would have been a H-bomb.

Quote:
Now that the financial companies know they have the saftey net under them, how are they acting as a result TODAY? The moral hazard is in effect right now.
I agree we need real regulation of the banking industry and consumer protections. But I think you're again overstating things. The crisis we had was bad, but was actually a temporary issue for the financial institutions. If there hadn't been panic + mark to market rules (note that I'm not necessarily criticizing these) then this sorts itself out as the institutions resume trading and can assign value to assets that had frozen to the point that no trading was happening. If this problem had played out over 10 years, it's a blip on the radar. Sadly, that's not how issues like this play out.

Quote:
The CDS market is still waiting for regulation, but AFAIK it's business as usual.
There's nothing inherently wrong with CDS's. Just like there wasn't anything inherently wrong with off-book entities (which Enron made famous). The real damage came from the synthetic CDOs, which then coupled in to the CDS market, which magnified the problem. But a CDS is basically a short-sale for the seller, insurance for the buyer. Those types of hedges have been around forever.

Quote:
I think you would agree that financial markets either need to be regulated or operate without the safety net. They cannot be unregulated but then have the government ready to intervene if things go bad.
I think they need to be better regulated. I am unwilling to say they must operate without a safety net - sometimes that's appropriate. But I will say that I think we should have gotten more for what we gave to keep them afloat.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jeff Brown
United States
Colorado Springs
Colorado
flag msg tools
badge
Avatar
Microbadge: Star Wars Episode VIII: The Last Jedi fanMicrobadge: The Lord of the Rings: The Card Game fanMicrobadge: Marvel Champions fanMicrobadge: Star Wars: The Card Game fanMicrobadge: The Lord of the Rings: The Card Game fan
perfalbion wrote:
It's interesting that there are few people that you'll read about (and the book covers people and not just events) who really had any criminal motivation or intent. Just people looking to make as much as they could. Love of money is supposed to be the root of all evil. Perhaps our latest crisis demonstrates that aggregated love of money is even more dangerous.
As I've been studying the crises this has been what I have seen as well. Most people didn't have criminal intent just greed that went beyond wisdom.

This is also what scares me the most as well.

As you mentioned aggregated love of money is dangerous and I am not sure there are any laws or regulation that can fully protect us from the consequences of it and I don't see any evidence that this is diminishing in our culture.

Inside job was interesting to watch also.
2 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
perfalbion wrote:
mdp4828 wrote:
Ken, have you seen the movie inside job?
I haven't. Worth a look?
It depends on whether or not you will be bothered if you reflexively utter "what the FUCKING FUCK" about a dozen times or so over the space of two hours.
2 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
jeff brown wrote:
As you mentioned aggregated love of money is dangerous and I am not sure there are any laws or regulation that can fully protect us from the consequences of it and I don't see any evidence that this is diminishing in our culture.
Oh, don't get me wrong. I don't think "full protection" is ever an option. There's simply too many ways that things can go wrong. I think what the last crisis revealed was that we had no effective regulation of banks, the regulation we had was far too fragmented, and by not providing some consumer protection and underwriting rules in the sub-prime markets we let things really spiral completely out of control.

We were refinancing at the time that this madness was going on and went through two brokers before we got a note I would sign. One nodded his head as I told him what we wanted (we were taking out a second we'd signed when we'd purchased) - 30 year fixed, willing to pay some points to keep the rate reasonable. When we showed up at signing, the paperwork was for a ridiculous ARM (then they had the gall to come after us for fees when we walked out). The second aggressively pushed us away from the safe mortgage (though qualification was a slam dunk). The third was the one that was actually interested in what I wanted rather than his fees. What the first broker did was unconscionable (but if I didn't actually read everything carefully, I might have signed). The second would have been unconscionable. Why were these asses allowed to operate in a sector that's so important to people? Why were the notes they were pushing me into even permitted (they were horrible, horrible notes that basically required 8-9% appreciation annually to make sense).

There are times to have government sit on the sidelines (availability of alcohol) then there's times not to. I think the "not to" shouldn't include financial markets that can impact us all.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jeff Brown
United States
Colorado Springs
Colorado
flag msg tools
badge
Avatar
Microbadge: Star Wars Episode VIII: The Last Jedi fanMicrobadge: The Lord of the Rings: The Card Game fanMicrobadge: Marvel Champions fanMicrobadge: Star Wars: The Card Game fanMicrobadge: The Lord of the Rings: The Card Game fan
perfalbion wrote:
jeff brown wrote:
As you mentioned aggregated love of money is dangerous and I am not sure there are any laws or regulation that can fully protect us from the consequences of it and I don't see any evidence that this is diminishing in our culture.
Oh, don't get me wrong. I don't think "full protection" is ever an option. There's simply too many ways that things can go wrong. I think what the last crisis revealed was that we had no effective regulation of banks, the regulation we had was far too fragmented, and by not providing some consumer protection and underwriting rules in the sub-prime markets we let things really spiral completely out of control.

We were refinancing at the time that this madness was going on and went through two brokers before we got a note I would sign. One nodded his head as I told him what we wanted (we were taking out a second we'd signed when we'd purchased) - 30 year fixed, willing to pay some points to keep the rate reasonable. When we showed up at signing, the paperwork was for a ridiculous ARM (then they had the gall to come after us for fees when we walked out). The second aggressively pushed us away from the safe mortgage (though qualification was a slam dunk). The third was the one that was actually interested in what I wanted rather than his fees. What the first broker did was unconscionable (but if I didn't actually read everything carefully, I might have signed). The second would have been unconscionable. Why were these asses allowed to operate in a sector that's so important to people? Why were the notes they were pushing me into even permitted (they were horrible, horrible notes that basically required 8-9% appreciation annually to make sense).

There are times to have government sit on the sidelines (availability of alcohol) then there's times not to. I think the "not to" shouldn't include financial markets that can impact us all.
Don't get me wrong I'm not against regulation, I just don't believe it will keep another crisis from occuring, more likely it will just delay it.

I had a similar experience with a mortgage company in an attempted refinance. They kept putting us off when we asked for our copy of the good faith estimate as they promised us very low fees in our refinance. They kept telling us they would eventually get it to us all the way til the day of the closing. They told us to just come in then they would go over it with us. I told them to send us the closing costs or we wouldn't come in at all. They finally told us the actual closing costs and realized that they had added in an extra $2000 in fees from what they orignally told us. They tried to get us for the fees also when we told them there was no way we were going to close with them.

I also got the feeling that this was pretty standard practice for them and they seemed rather surprised when I called them on it.

I agree that this area should be more regulated.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
mightygodking wrote:
perfalbion wrote:
mdp4828 wrote:
Ken, have you seen the movie inside job?
I haven't. Worth a look?
It depends on whether or not you will be bothered if you reflexively utter "what the FUCKING FUCK" about a dozen times or so over the space of two hours.
I did similar things while reading this book. Lots of shakeshakeshakeshake and worse.

Reading reviews, I suspect I'll enjoy parts of the movie, but think it may be a touch slanted. Which is OK. Different perspectives can be good.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
jeff brown wrote:
Don't get me wrong I'm not against regulation, I just don't believe it will keep another crisis from occuring, more likely it will just delay it.
Oh, agreed. We will hit crises. Can't really avoid that and be human. Delaying or softening it is sufficient for me.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Marshall P.
United States
Wichita
Kansas
flag msg tools
"Nothing in Biology Makes Sense Except in the Light of Evolution" - Theodosius Dobzhansky
badge
There is grandeur in this view of life, whilst this planet has gone cycling on according to the fixed law of gravity, from so simple a beginning endless forms most beautiful and most wonderful have been, and are being, evolved.
Avatar
Microbadge: Amun-Re fanMicrobadge: Automobile fanMicrobadge: Hawaii fanMicrobadge: In the Year of the Dragon fanMicrobadge: Power Grid fan
perfalbion wrote:

Reading reviews, I suspect I'll enjoy parts of the movie, but think it may be a touch slanted. Which is OK. Different perspectives can be good.
The movie definitely has an agenda and isn't pretending to be non-biased. And there're places I wish they hadn't gone (cocaine and prostitution). But, I think it's quite valuable to watch these guys (the ones who would consent to be interviewed anyway) get tripped up when their own fantastical version of reality confronts some reasonable questions.

Watching the extended interviews in the bonus section is valuable too.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
Interesting. I'll have to add it to my "watch" list.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jeff Brown
United States
Colorado Springs
Colorado
flag msg tools
badge
Avatar
Microbadge: Star Wars Episode VIII: The Last Jedi fanMicrobadge: The Lord of the Rings: The Card Game fanMicrobadge: Marvel Champions fanMicrobadge: Star Wars: The Card Game fanMicrobadge: The Lord of the Rings: The Card Game fan
perfalbion wrote:
Interesting. I'll have to add it to my "watch" list.
I like how it railed both on Democrats and Republicans.

Both parties have become corrupted in my eyes and I think they discussed that in the movie.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
I'll pass, thanks. I started reading one of Mr. Woods other books at the library and either needed to put it down or find somewhere to vomit. More ideology than history, more screed than fact. I don't need to hear the libertarian take on the crisis (which is what you'll get here) because I've already heard it. And largely rejected it. But then, I largely reject the whole libertarian approach to things so that's not a surprise.

But it'd be interesting to read a review. I'm sure he will have terrible things to say about Greenspan, Bernanke, Geithner, and many, many others. But I'll decline to hand him any of my money.

I mean, I'm open to different points of view, but there is a limit to what my stomach can take.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ken
United States
Crystal Lake
Illinois
flag msg tools
badge
Avatar
Microbadge: Empires in Arms fanMicrobadge: Civil WargamerMicrobadge: Britannia fanMicrobadge: Copper ReviewerMicrobadge: Chicago Cubs fan
pwn3d wrote:
Perhaps you are right. But I still advocate that the wreckage and paper trail be sifted through to see why it was necessary to float AIG.
You don't think they have been?

Quote:
I have read this too, but is it true?
Look at it this way - banks often function based on their ability to put money to work while meeting capital requirements. At the time of the crisis, banks held between 2% and 8% of their assets/risks in capital reserves. Let's pretend that averages to 6%. For every $10 billion AIG couldn't pay, that means the banks lost total reserves backing $166 billion in assets because they'll need to raise that money from somewhere to cover capital requirements. Do the math and you're talking about trillions of dollars of actual exposure in a heartbeat that were being covered by the billions that didn't show. And the banks couldn't raise the money because the they had huge sums tied up in securities that nobody would buy. You ended up with a downward spiral of trust that would have nuked everyone.

The losses may have been measured in billions. But as every bank failed the impact was way, way beyond that. At it's peak, the derivatives market (with lots of synthetic CDOs in it) was over $60 trillion in nominal value. You can't wipe that out without basically cratering the world economy.

Quote:
In my opinion saving it was an H-bomb. It has added something like 3-4 trillion to the debt.
Huh? The AIG bailout looks like it will turn a net profit in the end. The federal government just refused to sell them back some of the securities TARP money bought because they were bidding too low. And TARP just went positive. Further, the AIG bailout peaked at a cost of just shy of $200 billion, if memory serves. That's not chump change, but it's an order of magnitude smaller than what you've got there.

Quote:
I don't think I am. Like I said an estimated 3-4 trillion added to the debt.
You'll have to show me where this number comes from. The total of the stimulus packages is around $1.5 trillion. If you're assigning any of the other debt brought on by deficit spending above that, that's not right. Of that $1.5 trillion, $700 billion was TARP. Which hasn't been fully unwound, but is already netting a profit. And went to more than just banks (GM, notably).

Quote:
I was critiquing the market not the instrument. But now that you bring it up. Warren Buffet described derivatives like these as "financial weapons of mass destruction".
He did indeed. But they weren't always so complex and opaque or his companies would never have opened a derivatives desk. Should we be pissed a Berkshire Hathaway for making their money and then running?

Edited to make a paragraph actually make sense.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
1 , 2  Next »   |