Somewhere along the way, someone failed to notice that collecting bad loans and securitizing them and then securitizing them again (lather rinse repeat) is what got us all in this mess in the first place. It certainly didn't help that we were incentivzing non-market based rates in the ballooning real-estate bubble, but that's not surprising. If you look at the back of the envelope DealBreaker MBS fees calculator its pretty easy to see that a trillion dollars or more poured into "the system" just in fees. Who was going to complain? But, shouldn't we have learned our lesson by now?
Bailing out banks is one thing, and we have our opinions on that in any event, but forcing banks to lend, or otherwise getting into the business of enforcing industrial and lending policy from the floor of the House (or any other political entity) is a dangerous path to take. The likes of Barney Frank have already shown themselves rather poor judges of credit worthiness. What will tip the scales in favor of one or another worthy borrower now? Political influence? Donation appeal? Victim of the week status? Which credit-(un)worthy borrower will the political powers anoint this week?
It is often said that countries get the government that they deserve. Now, with Hope and Change accepting the baton of power today, the prospect of borrowing another trillion or so to build roads and bridges has got the likes of George Soros claiming that the United States is going to have to write down its debt, and we haven't even gotten to our favorite entitlement programs yet. Perhaps we deserve a tax-and-deficit-spend government. For our many sins (flat panel tv gluttony perhaps)?
Or do I have it backwards? What say you, Dealbreaker?
Posted by guest , Jan 20, 2009 12:26PM
Barney Frank. His initials are BF. Fancy that.
Posted by guest , Jan 20, 2009 12:26PM
Yes We Can... (spend our way out of this mess)!
Posted by guest , Jan 20, 2009 12:28PM
I'm still hopeful...bring it on!!!!
Posted by guest , Jan 20, 2009 12:29PM
Does anyone agree Dianne Feinstein is an ole battle axe?
Posted by guest , Jan 20, 2009 12:32PM
JPMorgan Chase said in its conference call last week that it was seeing "no demand for loans".
So if there is no demand for loans, why are we forcing banks to lend again?
If there are 100 red sweaters in the store, and no one wants them, you don't force the store to take in MORE of them. You wait until there is demand before you re-order.
It's pretty simple Econ 101 stuff. Congress is pushing on a string here.
Posted by onetwo , Jan 20, 2009 12:34PM
EP - you just don't get it, do you. This is nothing more than a crisis of confidence. CONFIDENCE I TELL YOU! If Americans would just learn to choose more "hope" and less "I simply don't have the money to pay back these loans" we would all be ok again. If Americans would buy an eighth flat panel, we'll be ok again. If we could just pledge our first born children, instead of our homes, we'll be ok again. (Wait, i think we did that last one).
Remember, pay no attention to the debt behind the curtain...or short treasuries.
Posted by guest , Jan 20, 2009 12:35PM
Flanders: Well, i don't have much experience, but I'll...
Moe: Someone else!
Crowd: Someone else! Someone else!
Homer: I'm someone else!
Lenny: He's right!
Posted by guest , Jan 20, 2009 12:36PM
@6
you lack hope.
Posted by guest , Jan 20, 2009 12:38PM
For the first time this guy looks like he has the weight of the world on his shoulders and the outgoing guy looks as though he wants to shout from the rafter "horay for me, it's over, it's over, it's all his problem now!"
And he is making it our problem.
Posted by Seaman Bodine , Jan 20, 2009 12:38PM
at this defining moment, we can achieve unity as I have said before
as one, we will deliver change to the world
at this defining moment, i am the world, you are my children, and re-education camps will be opened, soon, at this defining moment
hope is a message we can deliver, together, as long as you understand, that change is predicated on my so saying, at this defining moment, that it is deserved, unto being
and so, god bless you america, as it were, you are in fact, now totally fucked
Posted by guest , Jan 20, 2009 12:39PM
WTF NAVY CHANTERS???????? What an advertisement for_______!
Posted by guest , Jan 20, 2009 12:41PM
@10 ROFLMAO
Posted by guest , Jan 20, 2009 12:43PM
Of course you are right. Let's say all of the banks earmark a few billion and lend that out to the tranche of customers who are just missing out on loans today. If those customers have a high default rate are the Democrats going to make the banks whole? Or complain that, once again, the banks put profit ahead of prudence?
On the other hand, regulation, capital requirements, etc., should be counter-cyclical. Greenspan's inability to identify a bubble notwithstanding, the government should encourage lending and investment at the bottom of a cycle and discourage it at the top.
If Fannie and Freddie had been selling off their inventory for the last 5 years - and therefore standing on pristine balance sheets - we would not be in this mess.
Posted by guest , Jan 20, 2009 12:44PM
It was a disappointingly mediocre inaugural speech. Hope this is not a sign of a disappointingly unmemorable presidency.
Posted by Seaman Bodine , Jan 20, 2009 12:47PM
@12
inspiration, as it so is, and will be, often leads the way, as our fore fathers once said, and to that, we nod in acknowledge of those deeds, at this defining moment
Posted by guest , Jan 20, 2009 12:50PM
He's about to find out that running a country takes alot more than effective speechmaking.
Posted by guest , Jan 20, 2009 12:52PM
They switched ties! The prez is wearing the red tie, usual to the ex prez, and the ex prez is wearing the blue tie usual to the new prez. And the ladies are in silver and gold?
Posted by guest , Jan 20, 2009 1:00PM
Jimmy Cayne for Secretary of the Treasury!
Posted by guest , Jan 20, 2009 1:02PM
The really issue is whether all this debt will alter the dollar's role as the world's reserve currency. That is the really, really bad scenario.
http://86andlex.wordpress.com/2009/01/03/the-dollar-a-summary/
Posted by guest , Jan 20, 2009 1:02PM
EP, the securitization issue is a classic agency problem.
Banks were serving as warehouse distribution centers for any loan that came through. They blatantly didn't give a shit because those fees weren't tied to long term outcomes. You're in PE, so let me ask how selective if your entire business became the short term carry, seeing your portfolio turnover in a month's time?
IMO, the old school portfolio model of holding loans on the books can work on a small scale (unless you count the S&L crisis, but anyway).
What really needs to happen is better regulation of the securitization model. Force banks to hold a larger percentage of the loans. This VIE and QSPV shell game shit needs to stop.
Posted by guest , Jan 20, 2009 1:08PM
EP, you are apparently unfamiliar with the virtues of a steady diet of government cheese. It fattens you up and makes you feel good.
Posted by Equity Private , Jan 20, 2009 1:13PM
"EP, you are apparently unfamiliar with the virtues of a steady diet of government cheese."
I have a feeling we will all become familiar with a stead diet of government cheese- in every sense of the word "cheese."
Posted by guest , Jan 20, 2009 1:15PM
@16
amen to that.
Posted by Anal_yst , Jan 20, 2009 1:23PM
I have a solution, and it involves many of you, presumably, purchasing a (relatively) uninhabited caribbean island, developing an economy comprised mostly of distilaries and/or pharmaceuticals, and doing and LBO of the borderline-worthless USA within 5 years time.
Posted by guest , Jan 20, 2009 1:28PM
No finance or legal jobs under Obama jobs plan. You have to be an engineer or know how to operate heavy machinery.
http://endofesq.com/?p=886
Posted by guest , Jan 20, 2009 1:29PM
@24, I'm in but we need to diversify into gambling, the sex trade, and reality TV.
Posted by guest , Jan 20, 2009 1:30PM
@25: Guess I'm out then. All my medication says I can't operate heavy machinery. Oh well.
Posted by Equity Private , Jan 20, 2009 1:32PM
"Posted by Anal_yst, Jan 20, 2009 1:23PM
I have a solution, and it involves many of you, presumably, purchasing a (relatively) uninhabited caribbean island, developing an economy comprised mostly of distilaries and/or pharmaceuticals, and doing and LBO of the borderline-worthless USA within 5 years time."
Are you looking for equity co-investors? We are very interested.
Posted by guest , Jan 20, 2009 1:40PM
@6, we've already pledged our first born children's futures. I think we're now onto our second born...
Posted by guest , Jan 20, 2009 1:41PM
@28 Unlike most LBOs though we must insist that current management (Frank, Pelosi, Reid, etc.) gets the boot. Or better yet rounded up and shipped to Guantanamo.
Posted by FUNdamental , Jan 20, 2009 1:59PM
@anal - can we also harbor and endorse all online gambling sites? If so we shall call this place Eden, and piss off all bible belters.
Posted by guest , Jan 20, 2009 1:59PM
@25
This whole stimulus plan can suck my
"keynesian multiplier"
Posted by guest , Jan 20, 2009 2:53PM
I just wish everyone would stop trying to fix this mess. Its going to take time there is no way to "solve" the problem.
Posted by guest , Jan 20, 2009 2:58PM
@24 -- http://www.privateislandsonline.com/ronde-island.htm
I'll contribute 30,000 Spirit Points towards its purchase.
Posted by Anal_yst , Jan 20, 2009 3:17PM
@26/EP/Fun
How could I forget, gambling and other forms of "adult entertainment" should also be cornerstones of this endeavor. I think we should focus on low capex facilities to preserve the "natural tropical beauty" aspect (read: avoid pulling a "Dubai").
Posted by guest , Jan 20, 2009 3:22PM
if any of you really smart people have other suggestions on how to fix this mess, lets hear them... because right now, everyone seems pretty clueless.
to that end, how about some suggestions?
Posted by ccs , Jan 20, 2009 3:27PM
Too hopeful, didn't change...
Posted by guest , Jan 20, 2009 3:35PM
I have a solution I think we should all head down to Tino's and eat a heaping plate of Cat Poop. Maybe then well get a steak.
Posted by guest , Jan 20, 2009 4:08PM
I guess now since the new asshat is in the white house, we can get on with the train wreck.
Posted by guest , Jan 20, 2009 5:29PM
No government cheese...pork, government pork....
Posted by GustavoP , Jan 29, 2009 1:22AM
Many people were not a huge fan of payday loans but I also know that many people used it when need arises. I found this site a great resource for those who are really rely on payday loans in case of emergencies. North Dakota is one of the states that are safe for payday loans, or at least getting that way. The state legislature is weighing House Bill 1421, which would first establish that fees charged on faxless payday loans couldn’t be legally deemed interest. The bill would also cap the number of renewals and the amount of money that can be lent by payday loan outlets. Another provision of the bill makes waiting a few days between payday loans mandatory. HB 1421 contains a lot of provisions that would prove beneficial for both the lenders and the consumers of payday loans. To read more about HB 1421 and payday loans read articles at http://personalmoneystore.com/moneyblog/2009/01/28/payday-loans-north-dakota/