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bradd
Bradd  (Level: 193.8 - Posts: 43)
Sun, 15th Mar '09 1:06 PM

A REMINDER

For those interested in the origins of the economic crisis, an excellent TV program will be rebroadcast tonight at 9pm Eastern time on CNBC. Called "House of Cards" it is must viewing for all who wish to understand how we got in this fix.



goddess28
Goddess28  (Level: 92.6 - Posts: 5236)
Sun, 15th Mar '09 1:07 PM

Thanks, will check it out!

foogs
Foogs  (Level: 267.9 - Posts: 848)
Sun, 15th Mar '09 1:19 PM

Also available through Hulu.

Vishnu protect our troops.

collioure
Collioure  (Level: 104.9 - Posts: 9952)
Sun, 15th Mar '09 1:29 PM

Bradd, I've talked with my son about the ratings of those bonds and I will talk again. I'm not so sure the buyers didn't know what they were getting.

spacecat
Spacecat  (Level: 158.7 - Posts: 667)
Sun, 15th Mar '09 4:25 PM

Thanks for the reminder, will be watching. I would have ended up watching the Canadian Championship of Curling (Brier) instead.

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Sun, 15th Mar '09 4:55 PM

Thanks, Foogs, for the info on hulu. I watched it and found it very interesting. In my thinking the problem began with people being able to lie about their incomes and lenders not requiring proof. Kind of the addict and enabler thing. I can understand people might not understand the terms of their mortgages like the adjustable rate thing but do believe they knew what their actual income was.

Sure there were people but believe few that understood the dangerous "bubble' that would eventually burst. My lovely daughter made pretty good money for a period of time as a mortgage broker. She is in no way greedy and actually got my mortgage on my house for me through her company. I had to send the company documents of everything including my income, last 2 years tax returns, outstanding debt, etc. I live in not the ultimate house of my dreams but one I can afford although it has now decreased in value since I bought it. My daughter's company is out of business and she for a time was out of a job. She is a hard worker and now has two jobs making less than what she earned from one.

Seems like it would be logic to start the policing at the beginning by making sure people have the income to make the mortgage payment. The " House of Cards" collapsed because it was built on the assumption that mortgages were safe as people would pay them. Sure there were greedy unscrupulous folks but don't see how keeping from foreclosure for a bit if they can not possibly ever afford what they bought could make sense. Just my take-there is no TOO good to be true....Linda



collioure
Collioure  (Level: 104.9 - Posts: 9952)
Sun, 15th Mar '09 5:18 PM

The House of Cards was surely built on the premise that property values would continue to increase, and Alan Greenspan of all people should have known better.

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Sun, 15th Mar '09 5:33 PM

Yes, Andy, some people in the documentary actually said that housing prices would increase indefinitely actually.

bradd
Bradd  (Level: 193.8 - Posts: 43)
Mon, 16th Mar '09 5:17 PM

Caramel - the problem was not about people lying about their income - it was about bankers writing no-doc loans. A no-doc loan is one that is granted without documentation of income or employment. The banks would write these loans, collect their fees, then sell them further up the line (Freddie Mac etc.). I thought that was pretty clear in the program.

Collioure - If buyers knew what they were getting (bad securities), why would they buy them? (I'm not sure I understood your comment).

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Mon, 16th Mar '09 5:38 PM

Yes, Bradd, I see that the problem was not asking for documentation but that does not excuse the basic initial lie. ( a person was responsible for thasrt lie). The scam just grew from that first lie and many peopkle suffered like my daughter who as a mortgage broker was in no way greedy and both she and the company for which she worked-not a bank- demanded complete documentation I just don't see how it is fair to get away from the initial lie. When the company she worked for went under before most of the rest most likely because they were honest, my mortgage got into the hands of Countrywide. Have had no problem with them on a personal level but know their reputation is tainted and now not at all sure who actually owns the paper-Linda

garrybl
Garrybl  (Level: 280.2 - Posts: 6643)
Mon, 16th Mar '09 5:45 PM

Linda,
I'm genuinely ignorant on this subject: do we know that all the people with bad mortgages lied about their income? Was it equally the fault of the lenders as opposed to people who were told 'Put down your income as XXXXX no one will check'
If that was done whose fault would it be?

Maybe that happened only rarely; but I suspect it did happen... or at least the blame was not all the purchasers fault.

Barry

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Mon, 16th Mar '09 5:49 PM

Guess what I am trying to say is that people initially did not take responsibility by giving a correct figure for their income. Yes, after that, often but not always the greedy jumped into it by realizing that they could write a loan for anyone with a pulse and it grew and grew but it began with that initial personal irresponsibility-just don't know how that can be denied- and believe that is one area the documentary rather glossed over - Linda

collioure
Collioure  (Level: 104.9 - Posts: 9952)
Mon, 16th Mar '09 6:29 PM

Bradd, they knew they were subprime.

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Mon, 16th Mar '09 7:40 PM

Barry, I guess we just once again disagree on fundamental things. The original deceit lies with the false statement of income. Whether they were told it would not be checked or not -THEY LIED to get the "too good to be true". They only other alternative is that they were ignorant and don't believe especially you want to say that. That greed was involved and got worse the higher up it went is obvious but it began on the bottom rung,.. When did we become a society of VICTIMS? I guess I was just not taught to hate people simply because they were rich and never believed it was their DUTY give what they had to me-said we are different and thus cannot discuss this without getting to the f---off level at least between the two of us. Bradd made the original point and seems rational so am open to his or others views- Linda

bradd
Bradd  (Level: 193.8 - Posts: 43)
Fri, 20th Mar '09 3:25 PM

Colliure ---

If the buyers knew they were subprime, why (I ask again) would they buy them? If you're saying something profound here, I continue to miss it. Please explain in simple terms. Thanks.

(I almost posted this on the "Fine Line" thread, but that thread is getting too far off topic).

collioure
Collioure  (Level: 104.9 - Posts: 9952)
Fri, 20th Mar '09 3:51 PM

I need to talk to my son again, Bradd.

collioure
Collioure  (Level: 104.9 - Posts: 9952)
Sun, 22nd Mar '09 6:22 PM

OK, the subprime mortgage bonds were often bundled in several slices such that the riskiest slice would abosrb all the losses up to the par value of those bonds.

For example, if they sliced a bundle into 5 pieces, each 20%, and there were a 30% default rate, the first slice would become valueless, the second slice would lose 50% of its value and the other three slices would absorb no losses.

Ratings were based on experience over the previous ten years - great experience - so everything was rated tops.

Sophisticated investors and fund managers certainly knew what they were buying. Others, probably not.

sandracam
Sandracam  (Level: 149.3 - Posts: 4190)
Sun, 22nd Mar '09 7:09 PM

Well that certainly explains it!

caramel1
Caramel1  (Level: 128.4 - Posts: 21603)
Sun, 22nd Mar '09 7:15 PM

LOL that confused me too. The lying about your income believe both myself and the person who signed something understood it was a lie and fundamentally wrong-the rest of it could have fooled me and a whole bunch of other folks-Linda

collioure
Collioure  (Level: 104.9 - Posts: 9952)
Sun, 22nd Mar '09 7:25 PM

Ladies, that was for Bradd.


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