1. Garrett wrote:

Ok, doc, you want to help out those people that are in trouble because of unscrupulous lenders. Fair enough. How many people is that? How do you determine which people got screwed by someone else or screwed themselves? Once the government cookie jar opens up, everybody’s gonna line up.

Did SOME financial institutions do wrong? No doubt. But more financial institutions were pressured into writing bad loans to people that had no business getting those loans. The lending institutions wrote the notes because they guessed the loans would be secured by the federal government. It now looks like they were right.

Barney Frank, Chris Dodd et al bare a lot of culpability. Their policies and lack of fiscal oversite over Fannie M and Freddie M were the iceberg that the credit industry hit. But it’s too easy to blame greedy Wall St.

Barney Frank must be really horny, because he’s been f*cking a lot of us.

2. Blaxx wrote:

Can someone explain to me what this whole crisis thing is all about? I still don’t completely understand exactly what the hell is going on, I just open the newspaper each day to more quotes from banks and so on. What exactly is the cause? What is its effect on us? etc.

Is it just a case of banks giving out too many loans or does it run deeper than that.

3. Garrett wrote:

Start with liquidity at the macro level, Blaxx. Some lending institutions are getting stuck with bad loans. If they’ve got too much exposure in that line of banking, it’s tough for them to raise capital and in turn, it’s then tough for them to give their customers loans.

There’s a lot of blame to go around. Ironically, all the cries for governmental oversite overlook the fact that it was government oversite of the banking industry that played a part in creating this mess.

I believe a reporter for the NY Times, believe it or not, wrote about the problems of an unchecked Fannie Mae and Freddie Mac back in 1999 or so. The federal government made this bed, now they’re bitching about the dirty sheets.

4. Blaxx wrote:

So basically its centered around the financial institutions and it ripples out to the rest of the stock market like dropping a pebble in water?

5. Garrett wrote:

By and large. There was easy money for both lending institutions and individuals to take advantage of.

The smarter financial institutions, HSBC for example, limited how much of their residential loan portfolio was in the sub-prime market. As a result, they can eat the loss. Others, though, went big-time into the sub-prime area and are paying the price.

6. Garrett wrote:

FYI, NY Times article:

query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1

7. Garrett wrote:

Here’s the best quote from the article:

‘From the perspective of many people, including me, this is another thrift industry growing up around us, said Peter Wallison a resident fellow at the American Enterprise Institute. ‘If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.’

Wow. Bulls-f*cking-eye. Nice shooting, Mr. Wallison. He wasn’t the only person that sounded the siren, but those calls were ignored.

8. Blaxx wrote:

Seems like you’re all over this issue Garrett

9. Garrett wrote:

It’s such a royal f*ck up. Some folks like to use it as an example of the evils of capitalism. I prefer to use it as an example of the pitfalls of government trying to do too much.

Capitalism and government each have something in common:

People. The human condition can f*ck up both.

10. gigi wrote:

I so can’t stand O’Reilly!!!! Marc, are you eating Wheaties or working out or something? Cuz…cuz you was lookin’ kinda aight in that shot. Keep it!

11. gigi wrote:

I meant keep it up!

12. Jamie wrote:

Professor Hill:

Regarding your appearance on Bill O’Reilly 09/25/08 – How about you set up a charitable, non-profit fund for those who can not afford houses of their own?

You empty all your bank accounts – savings, checking, 401k, early withdrawal from IRA etc. and deposit all YOUR money into this charitable acct.

Then you appeal to the general public to donate into that charitable, non-profit fund (by the way the donations will not tax deductible).

What ever money you collect this way, go ahead and use it to provide the “QUALITY Housing” for who ever you think is qualified to receive YOUR help.

Stop coming after MY money. I may donate into your fund but DO NOT hold a gun to my head, you fr**k*ng IDIOT.

You stupid jerk. Why don’t you lecture your brothers and sisters to go to school, get good education, get good jobs, save money and BUY whatever house they want to buy. No body is stopping them.

Also tell your brothers and sisters to not have sex out of wedlock, tell your brothers that if they father a child; take care of that child for 18 years and instill good values in them.

Tell your brothers and sisters to get off welfare and look for jobs.

You say – “People were baited by unscrupulous lenders….” – Hey, Marc, you MORON – People who are old enough to buy a house should be able to read the closing contract and evaluate the risks and rewards of home ownership. Educators like you are not doing your job if you think that unscrupulous lenders are taking advantage of the people.

You talk about – “…providing people quality public housing…” What does that mean? – Here is my answer to some knucklehead liberal like you – When I was born, I don’t recall signing any paper that says; I have to provide quality public housing to others when I grow up and start paying taxes. Who were you lecturing about providing Quality Public Housing? What are you waiting for? Set up the fund, use your OWN money and start building apartments. Better yet, why don’t you go to downtown this weekend and bring couple of homeless people to YOUR home. Let them live with you.

You want to “reward responsible behavior” – No Marc, When you BECOME responsible, the rewards follow. No One has to reward the responsible behavior. By behaving responsibly, no one is doing me a favor. My tax dollars should not be used to reward the behavior that is expected of others. You are expected to drive on the right hand side. When you do; no one rewards you for that. You studied hard and got your Ph.D. and you are living good life now. You rewarded yourself.

Marc, are you getting my message? No body owes any thing to any one in this world. There is no Free Lunch.

If you want my money, wait for me to donate, do not hold a gun to my head.

I don’t know why Bill continues to interview you. You are a waste of airtime.

I pity your students. You are probably corrupting their minds and creating yet another batch of sore losers. Take your liberal thinking and shove it up your you know what. Stop thinking that you can take productive Americans’ money and distribute to the lazy and stupid bastards.

Let me know when you set up that non-profit fund and donate all your money into it. I might donate a few bucks for your liberal cause. People like you make me SICK.

Jamie

13. ann wrote:

@Blaxx…the big investment firms- esp Merrill Lynch- are in trouble because they invested their folks money in funds that included mortgage loans. When buyers default on their home loans it affected those individuals who had mortgage securities in their portfolios.

14. Tanya wrote:

Exactly right Ann.

15. Tanya wrote:

“it was government oversite of the banking industry that played a part in creating this mess.” – Garrett

You couldn’t be more right!

16. Tanya wrote:

Blaxx,

Here’s the long and short of it:

Billy-Bob Clinton is to blame!

President Clinton signed law to repeal the Glass Steagall Act when I was in High School. (I knew back then it was going to cause problems.)

The Glass Steagall Act was established to alter the dynamics of the relationship between the banks and the investment firms. The Glass Steagall Act was to prevent another Great Depression.

Billy-Bob repealed the Act (against the advice of Paul A. Volcker – former chairman of the fed) and put the economy and the banks and investment firms relationships in the same place it was before the Great Depression.

Duh!!! Of Course it would cause another Depression, and hence, here we are, in a recession, soon to be depression.

We need to repeal the repeal on the Glass Steagall Act and let the free market fend for itself.

I’m against extensive welfare, I’m against socialism, and I’m against communism. This 700 billion dollar bail-out is bull shit and it’s NOT gonna work!

17. Tanya wrote:

Blaxx,

Here’s the long and short of it:

Billy-Bob Clinton is to blame!

President Clinton signed law to repeal the Glass Steagall Act when I was in High School. (I knew back then it was going to cause problems.)

The Glass Steagall Act was established to alter the dynamics of the relationship between the banks and the investment firms. The Glass Steagall Act was to prevent another Great Depression.

Billy-Bob repealed the Act (against the advice of Paul A. Volcker – former chairman of the fed) and put the economy and the banks and investment firms relationships in the same place it was before the Great Depression.

Duh!!! Of Course it would cause another Depression, and hence, here we are, in a recession, soon to be depression.

We need to repeal the repeal on the Glass Steagall Act and let the free market fend for itself.

I’m against extensive welfare, I’m against soc., and I’m against commU. This 700 billion dollar bail-out is exactly that, and it’s bull shit and it’s NOT gonna work!

18. Tanya wrote:

But hey, as a young professional, I’m LOVING this economy!!!

I have no dependents, and no major liabilities. I can handle my mortgage with ease and my whip lease is paid in full until 2011!

Shares are at a record low, so I’m cleaning up on my naked stock purchase. The housing market is in the shitter, so I’m going to buy a few investment properties for dirt cheap! Then I will have NOOO problem finding renters, b/c all those people who lost their homes are looking to rent now.

For a young professional, this is paradise!

This is the natural cycle of the economy; there has to be a dip in order to reach the peak! To all the young people with discretionary funds, enjoy!

19. Miss Martin wrote:

I agree with the conservative republican congress people who are not for this bullshit as bailout. IMHO, let the “great depression pt.II” begin please.

Either let’s have socialism of EVERYTHING OR let’s ABOLISH the effing federal government all together. This ‘amerikkka’ can not continue ‘as is’…this shit is officially broken. period.

federal government SHOULD do everything (since they want to participate in fascism) or there just simply should be NO federal government at all.

20. Logic wrote:

So we should rejoice and take advantage of the misery of others huh Tanya?

“it was government oversite of the banking industry that played a part in creating this mess.” – Garrett

That’s ridiculous! In fact, its the complete opposite of what really happened. No government regulation of these investment banks, mortgage brokers, and the like that has caused this. Left unchecked, the greed of those who saw an opportunity to take advantage of consumers, ran rampant

21. DCI74 wrote:

Come on Garrett, what government oversight are you talking about? The complete lack of oversight is one spoke in this financial wheel of chaos. If there were government oversight why would there have to be a provision in this bailout bill to put a cap on executive packages? If there were oversight how can the CEO of WaMu leave with damn near $20 million for 3 weeks work? Gtfoh with that nonsense.

22. Tanya wrote:

Logic,

Of course I don’t think anyone should rejoice in the misery of others.

I’m just pointing out the silver lining in this cloud. Taking advantage of low stock prices and below market value homes is NOT taking advantage of people; it’s recognizing an opportunity for growth.

23. Tanya wrote:

Logic & DC,

“No government regulation of these investment banks, mortgage brokers, and the like that has caused this.” – Logic ”

The complete lack of oversight is one spoke in this financial wheel of chaos.” – DC

I don’t believe in government intervention in the free market. I’m one for lazifare.

However, I think it is necessary for the government to set certain rules/regulations in order to prevent the unscrupulous from committing crimes and hurting innocent and unlearned individuals.

Logic, There was regulation. The Glass Steagall Act was that regulation the banking and investment firms needed.

DC, The Glass Steagall Act was the “oversight” the industry needed.

But b/c President Clinton repealed the Act that regulation was REMOVED, DONE AWAY WITH. President Clinton took away the very necessary “oversight” that was needed to prevent the exact economic environment we presently find ourselves in.

So you see there was regulation and “oversight” – The Glass Steagall Act. But Clinton (the government), overly interfered, and established this nonsense – Gramm-Leach-Bliley Act. So Garret was right in his statement, b/c the gov’t did too much by repealing the Glass Steagall and creating the Bliley Act.

The Bliley Act opened this wild free-for-all that Congress created, and now Congress is trying to fix it with a pay-off. This 700 billion dollar bail out is Congress paying for its mistake – The Gramm-Leach-Bliley Act.

If this bail-out passes, the worst is yet to come. But hey, you learn by trial and error, right!

24. DCI74 wrote:

Yep and none of that worked which is why we’re in this mess right now. I also don’t feel like the government should be involved in every aspect of the free market but if the government wants to regulate then it has to be more than just lip-service. Don’t tell me what you’re doing show me what you’ve done and that’s what I feel I’ve been getting from these politicians. Dumbass McCain said in the first part of the debate regarding the crumbling markets “we could all see this coming.” Really smart ass? Then what in the hell did you do about it if you and your cohorts saw it coming? When he says stupid stuff like that it makes his 28 years on the Hill look like a joke. It must be nice to have a rich wife that way you just have to pretend you have a real job versus actually doing something substantive.

25. Tanya wrote:

Just want to say that I’m glad they REJECTED the 700 billion dollar bail-out!

26. Tanya wrote:

DC,

I saw this coming when Clinton repealed The Glass Steagall Act. I mean DUH!!!

We need to re-establish it, and I think Congress is going to realize that now.

Bill Clinton is to blame for this one! And the fact that Congress refused the bail-out, gives me hope that everyone will realize that as well.

27. Tanya wrote:

OMG – the Dow just dropped over 700 points!!! That is insane!

28. Logic wrote:

You still glad Tanya? They will pass it, they have to to keep confidence in the system.

29. Tanya wrote:

Yes! The more the Dow drops the cheaper stock becomes, and the more I can purchase!

I have no doubt that they may pass something. But it wont be the 700 billion dollar welfare check, and for that I am glad.

30. Tanya wrote:

They are thinking about increasing the FDIC insurance to 250, that would make life a lot easier. I’m for that!

31. Tanya wrote:

Marc,

Your boy Kucinich was just on Fox Report with Shep, and Kucinich said he voted against the bail-out and is in favor of the principles of the Glass Steagall Act. (I’m going to have to take a second look Kucinich, I like how he thinks!)

I know you’re ignoring me , but I’m sure others are as interested as I am in what your position is on all of this; can you do a piece on it this week???

32. R.oB. wrote:

Marc,

I agree with you that regulation is needed here because of the excesses of a few affect a great many innocents. Regulation should be structured to align interests so people will act in each other’s interest naturally. Anything else really is doomed social engineering.

But greed run amok in many forms is a leading cause this crisis. I list a few at the risk of oversimplification.

Moral HazardMortgage backed securities (MBS), collateralized debt obligations (CDO), and collateralized mortgage obligations (CMO) are all financial instruments (contracts) designed to package up debt risk and distribute it to investors. The problem was the risk was not properly priced and there was tremendous moral hazard to do so. Large asset values generate large fees (and bonuses). So you can imagine how that went down on Wall Street.Bad Risk AllocationIt’s hard to quantify the risks of mortgages. There’s credit risk, repayment risk, interest rate risk, economic risks, and so on. There was a breakdown between the risks assessed and how they were priced in the MBS’s. Investors (including institutions) bought or held assets that were not priced commensurate with the risks involved. But these assets, especially the high yield (high interest rate), were so juicy to investors because they goosed up their relatively lower return fixed income (bonds, etc.) portfolios. Investors were trying to get something for nothing and were happy to play musical chairs as long as the music didn’t stop. We all know how that story ends…A.I.G.Misaligned InterestsThis is more anecdotal since I never saw the mortgage industry up close. I remember when countrywide went belly up and a former loan officer in their employ was on NPR complaining about people who should have known they were in over their heads with some of the ARMs and other wild and crazy instruments they signed on for (Neg Am, interest only, etc.). I felt like slapping her. If I were her boss and heard that crap coming out of her money I would have fired her on the spot. As a loan officer, it is her job to assess and take on good credit risks so the loan makes money. Any fool will take your money. You are a fool when you give it to him without having a proper sense you’ll be paid back. So how could she do just that? Easy. Write the loan, get paid a commission, and the initial lender immediate sells the mortgage on the market to be packaged up in an MBS, CDO, or CMO. She nor her employer has no interest, no stake in the loans success. They’ve transferred it. Bank of America didn’t hold mortgages it merely serviced them (billing). While interning in Charlotte a friend over at the investment bank explained how they’d package up mortgages they would write, package and then sell on the open market. Those instruments were huge. Plenty of fees and no risk to BofA since investors bore that.

Another Glass-Steagal won’t fix this. (I’m surprised at you Tanya the GOP is dereg “free” market city!) These assets were bought and sold on the open market. It wasn’t like investment banks were writing mortgages and holding them. Such an act has no chance anyway. Goldman was granted a waiver to begin holding deposits I believe so it could shore up it’s balance sheet, Buffet’s investment notwithstanding.

I like the principles that Obama laid out in this “bailout.” The devil is in the details of course. I hope we see regulation that basically makes sure we see a coupling of risk and reward in the system. CEO pay has skyrocket and there is little evidence they are priced to value. Affordable housing for the indigent is another problem entirely since that is a public rather than normal good. You can’t have the market support such an endeavor without tremendous risk and distortions. Socialism and capitalism don’t mix well.

Peace, Marc.