Getting out of this economic mess...

[Pooka]

I have heard several commentators say, "Housing got us into this mess; housing will have to get us out."

It seems to me that homeowner's desires to borrow aginst their homes so they could use the money now and have it paid back by someone else when they sold was one part of it, and the fraud committed by appraisers and mortgage brokers that allowed them to collect fees for doing a bit of paperwork was the other part. (I am not forgetting the part played here by Wall Street; I just lump them in with the 'paperwork' crowd.)

Unless we as a nation can somehow harness the powers of greed and fraud again, in a good way of course, I think that only increased production is going to turn the economy around.

Now is the time for companies to forget short term gains and begin to think long term again. Sadly, the stock options and bonuses will not be there for the decision makers for a few years, but we all have to do our part. If you need proof of this take a look at the oil companies. Those that think long term are posting record profits while the short term, get that stock price up there companies, are laying people off.

Am I anywhere near right on this?

[aklim]

Originally Posted by Pooka

and the fraud committed by appraisers and mortgage brokers that allowed them to collect fees for doing a bit of paperwork was the other part. (I am not forgetting the part played here by Wall Street; I just lump them in with the 'paperwork' crowd.)

Now is the time for companies to forget short term gains and begin to think long term again.

Unless the appraisers were knowingly appraising the house at 100K when it will sell for 80K, I don't see where the fraud was at. As to the mortgage brokers, what fraud did they commit?

Not up to the companies. It is up to the shareholders. If the shareholders are not willing to take a short term hit in exchange for a long term gain, they are only following orders. Besides, 10% isn't really a record profit as the media likes you to think.

[75Sv1]

I would agree that companies that looked 10 years down the road, ten years ago, are the ones that will survive. What companies report to the stock holders isn't always what they report to the IRS. Even financial gurus have to do their homework to seperate the liars from the fibbers. The housing market is just like Enron. People took the money before it was there. It ended up being a Ponzi scheme. Those that took a relistic view of their ability to pay, will probably survive. Those that didn't, better hope that the Gov. bails them out along with AIG. There will be colateral damage though.
Tom

[JollyRoger]

Originally Posted by Pooka

I have heard several commentators say, "Housing got us into this mess; housing will have to get us out."

It seems to me that homeowner's desires to borrow aginst their homes so they could use the money now and have it paid back by someone else when they sold was one part of it, and the fraud committed by appraisers and mortgage brokers that allowed them to collect fees for doing a bit of paperwork was the other part. (I am not forgetting the part played here by Wall Street; I just lump them in with the 'paperwork' crowd.)

Unless we as a nation can somehow harness the powers of greed and fraud again, in a good way of course, I think that only increased production is going to turn the economy around.

Now is the time for companies to forget short term gains and begin to think long term again. Sadly, the stock options and bonuses will not be there for the decision makers for a few years, but we all have to do our part. If you need proof of this take a look at the oil companies. Those that think long term are posting record profits while the short term, get that stock price up there companies, are laying people off.

Am I anywhere near right on this?

Housing essentially replaced manufacturing as the basis for our national wealth. In the past, we built factories that produced products that could be sold on the international market, and they attracted foreign capital and profits derived from foreign sales, increasing the net asset value of the US. As manufacturing declined, we found we could attract foreign capital by selling our debt. The debt was bundled into securities, and foreign suckers would buy it thinking it was debt from the most credit worthy and wealthiest nation in history, when in fact it was just all paper pretend money stacked on more paper pretend money. The titans of finance would pocket the fees, and I think for the most part, they have been the big winners, leaving their stockholders and the American public to hold the bag for the unicorn palace they built.

Now that we have essentially screwed the world and ourselves, our debt instruments based on the US housing market will never be trusted again, they will be the Hyundai Motors of the world finance market, no matter how good a car they build, it will always be a Hyundai, the car that broke down all the time back in the 90's.

The underlying fundamentals of the US housing market, minus the unicorns and fairies, is not good. Ageing baby-boomers own most of the private homes, valued at prices that the younger demographic (which now consists of illegal aliens, US citizen fast-food workers, and a construction work force that soon will have nothing to do) will never be able to afford, in fact, we are finding that out as young people and minorities default left and right after being sold houses that, well, they couldn't afford.

Commercial real estate is over built all over the country, a fact that will become even more apparent as the Great Bush Depression wipes out small business and makes start-ups impossible. Real estate is like, so "over".

What happened in America is we simply did not take care of business. The year 2000 was a very, very important year for the US economy, and what needed to happen just didn't happen. The US Government came under control of the Unicorns and Fairies faction , and they were aided and abetted by the Fairy King, Alan Greenspan, who lived in a world where derivatives did not need to be regulated, and the Easter Bunny came every April. Between that and Bush placing every fox in charge of every regulatory henhouse he could find, and his need to build a safe world for his pals the Oil Oligarchs, we were screwed.

At the same time, the bleeding off of the US money supply to foreign control in the form of our insatiable desire for foreign oil became official US government "free market" policy. What should have happened was the cold cruel world instead of Fairy Kings. Oil should have been taxed, and the proceeds gone to build a new roboticized manufacturing base that would bring solar, wind, liquified coal and nuclear techonolgy to the world, a base that would use as capital the money that we sent to Saudi Oil Fascists and Chinese Junk Peddlers. You want to know what would lead us out of this recession? There's your answer: cut the playing around, and do the hard stuff we need to do as a nation to quit being the equivalent of dope addicts in a world where our heroin is cheap foreign oil and Chinese junk.

[Pooka]

I can't put my finger on any appraisers that defrauded anyone, but a mortgage broker I knew was very upfront about his part in all of this.

The last time I saw him, which was about four years ago, he was leaving town. He showed me two duffel bags full of cash and he said it was $800,000. He said that someday the law would catch up with him, but until then he was going to be 'homeless'.

I could not understand what he was talking about at the time and thought he was nuts, but looking back on it now it seems he knew what he was doing all along. I don't know where he is now, but I hope he's not working at a bank. I also hope he was wrong about committing a crime as I would hate to think of thousands of otherwise normal people like him spending years in jail.

Thankfully it is not up to me to determine if any fraud was committed or not, but I think as this is looked into by others a lot of wrongdoing is going to come out. That's what took place after the S & L scandles of the 1980's and is likely going to take place again.

Pooka

[aklim]

Originally Posted by Pooka

I can't put my finger on any appraisers that defrauded anyone, but a mortgage broker I knew was very upfront about his part in all of this.

The last time I saw him, which was about four years ago, he was leaving town. He showed me two duffel bags full of cash and he said it was $800,000. He said that someday the law would catch up with him, but until then he was going to be 'homeless'.

I could not understand what he was talking about at the time and thought he was nuts, but looking back on it now it seems he knew what he was doing all along. I don't know where he is now, but I hope he's not working at a bank. I also hope he was wrong about committing a crime as I would hate to think of thousands of otherwise normal people like him spending years in jail.

Thankfully it is not up to me to determine if any fraud was committed or not, but I think as this is looked into by others a lot of wrongdoing is going to come out. That's what took place after the S & L scandles of the 1980's and is likely going to take place again.

Pooka

He might have but my point is that I don't see it as a general pattern.

[JollyRoger]

The fraud that needs to be looked into is how in the he|| mortgage derivatives and credit default swaps got rated as AAA investments, it is that one act that is at the heart of the scam and is the one thing that caused millions to be fleeced out of all their money, and whoever is responsible makes Maddoff look like an amatuer. We are hearing nothing about it in the press. Why? Any idiot could figure out that if real estate values declined just a few points, the value of these investments would be impossible to correctly value. If there had been proper regulatory safe guards in place, it never would have happened, but even without safe guards, the act of valuing these investments as AAA was irresponsible, unethical and probably prosecutable as fraud. Someone somewhere was making money on the back end in these rating scams, who was it, and why aren't they going to jail?

[Pooka]

I hope you are right. I really do.

As far as the stockholders demanding the short term gain... I know you are right about that. I cannot remember his name, but there was some guy that ran a fund that bought large positions in companies. It was said of him, "If he buys into your company your stock WILL go up or he will find a new set of managers."

Is there any way around this sort of thinking? Do companies just need to go private if they hope to survive long-term?

Pooka

[DieselAddict]

Originally Posted by JollyRoger

The fraud that needs to be looked into is how in the he|| mortgage derivatives and credit default swaps got rated as AAA investments, it is that one act that is at the heart of the scam and is the one thing that caused millions to be fleeced out of all their money, and whoever is responsible makes Maddoff look like an amatuer. We are hearing nothing about it in the press. Why? Any idiot could figure out that if real estate values declined just a few points, the value of these investments would be impossible to correctly value. If there had been proper regulatory safe guards in place, it never would have happened, but even without safe guards, the act of valuing these investments as AAA was irresponsible, unethical and probably prosecutable as fraud. Someone somewhere was making money on the back end in these rating scams, who was it, and why aren't they going to jail?

It does seem the AAA ratings of risky securities is at the heart of this crisis. A few months ago the NOW show on PBS talked about this and how the management at Standard & Poor and maybe other credit rating agencies pressured analysts to take C-rated securities and turn them into AAA through complex math formulas, but since then I haven't heard anything on this. I hope there's some sort of investigation going on, but maybe not.

[tankdriver]

Originally Posted by JollyRoger

Housing essentially replaced manufacturing as the basis for our national wealth. In the past, we built factories that produced products that could be sold on the international market, and they attracted foreign capital and profits derived from foreign sales, increasing the net asset value of the US. As manufacturing declined, we found we could attract foreign capital by selling our debt. The debt was bundled into securities, and foreign suckers would buy it thinking it was debt from the most credit worthy and wealthiest nation in history, when in fact it was just all paper pretend money stacked on more paper pretend money. The titans of finance would pocket the fees, and I think for the most part, they have been the big winners, leaving their stockholders and the American public to hold the bag for the unicorn palace they built.

Not housing. Credit. Our national wealth is based on loaning people money.



Fraud was committed by mortgage brokers when they pushed people into loans they knew the people couldn't afford. Underwriters were at best extremely incompetent when they approved the loans, and I think it could be considered fraud. Underwriters and the rating companies are the two groups who are supposed to, and should have, called shenanigans. In between the two, brokers, et al. shenaniganned on top of the mortgage broker shenanigan.

[Medmech]

Originally Posted by JollyRoger

The fraud that needs to be looked into is how in the he|| mortgage derivatives and credit default swaps got rated as AAA investments, it is that one act that is at the heart of the scam and is the one thing that caused millions to be fleeced out of all their money, and whoever is responsible makes Maddoff look like an amatuer. We are hearing nothing about it in the press. Why? Any idiot could figure out that if real estate values declined just a few points, the value of these investments would be impossible to correctly value. If there had been proper regulatory safe guards in place, it never would have happened, but even without safe guards, the act of valuing these investments as AAA was irresponsible, unethical and probably prosecutable as fraud. Someone somewhere was making money on the back end in these rating scams, who was it, and why aren't they going to jail?

Agreed 100%. Crooked brokers account for a fraction of a percent in comparison.

[aklim]

Originally Posted by tankdriver

Fraud was committed by mortgage brokers when they pushed people into loans they knew the people couldn't afford. Underwriters were at best extremely incompetent when they approved the loans, and I think it could be considered fraud.

They stuck a gun to their head? They made mentally incompetent people sign contracts? What? When you sign a contract, the numbers are there in plain sight, are they not? If so, it is YOUR responsibility to read the contract and understand it. In fact, there is a 3 day recession period. Besides, why should the mortgage broker care since the loan is guaranteed?

[DieselAddict]

Many of them were naive borrowers who trusted their lender's recommendations. And who reads every single word of fine print before signing a document? I sure don't, even though I do try to read & understand what I'm signing. I've even heard of cases where a borrower's actual income was purposely hidden by the agent because it would disqualify the borrower from the loan. In another case the salary of a widow's dead husband was used to qualify her for a new mortgage, even though the widow was upfront about her situation. Pure reckless greed for short-term gain, that's what cases like these were all about.

[Botnst]

A fool and his money are soon parted. Not to excuse crooked lenders. Jail the bastards. Just don't saddle me with the bill for one persons illegal behavior and another person's gullibility.

[DieselAddict]

Originally Posted by Botnst

A fool and his money are soon parted. Not to excuse crooked lenders. Jail the bastards. Just don't saddle me with the bill for one persons illegal behavior and another person's gullibility.

I feel the same way, but the actions of these fools and crooks can potentially drag down fiscally responsible people like myself. In that case, some appropriate "help" for some of these people might be justified. One always has to look at the entire cost of doing or not doing something. I'm glad we now have a president who sees shades of gray rather than just black and white.