Progressive Economics = Poverty

[DSGE]

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

Commercial banks wouldn't have securitized them.

Obviously they would have. Because the did. I mean, just thinking about it, clearly commercial banks separate from investment banks would securitize sub-prime loans because it earns them shitloads of profit. How on earth can you think they wouldn't?

So let's take Lehman Brothers as an example. Lehman was a pure investment bank. So first, if Glass-Steagall is so important then why did Lehman go under? Second, since it didn't own commercial banks or engage in its own commercial banking activities, who sold them the sub-prime mortgages?

The interconnection of the entire financial sector meant that when the mortgage backed securities took a dive, the whole financial industrial wobbled,

and the maldistribution of wealth in our society meant that the financial industry's troubles acted as a trigger to bring on a full-scale recession.

How do those two things logically follow?

The real root problem is the turn away from progressive economics over the last thirty years

What are you defining as "progressive economics"?

 

[CrusaderFrank]

Fannie and Freddie are the binary financial blackholes at the center of the meltdown, they set lower and lower standards until they settled on No Income No Asset.

They gave AAA rating to the worst paper

Most subprime mortgages were originated by private investment banks. They did so voluntarily because they could package them into hard-to-value asset backed securities, get it rated AAA and sell it for a bunch of money. Fannie and Freddie were tame in comparison until near the end when they decided to get in by buying, not originating, asset backed securities.

Fannie and Freddie don't rate securities. Private credit rating agencies do.

So what if "most" subrpime mortgage were originated by private investment banks? What the fuck does that have to do with F/F setting the standards for AAA US guaranteed No Income No Asset paper?

 

[JakeStarkey]

SNIP[ !

Todd and Edward and DSGE make silly statements, with no backing. The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

They could offer facts.

They could show how the era before 2007 was somehow different before 1929 or 1893.

They can't.

They fail.

 

[DSGE]

Fannie and Freddie are the binary financial blackholes at the center of the meltdown, they set lower and lower standards until they settled on No Income No Asset.

They gave AAA rating to the worst paper

Most subprime mortgages were originated by private investment banks. They did so voluntarily because they could package them into hard-to-value asset backed securities, get it rated AAA and sell it for a bunch of money. Fannie and Freddie were tame in comparison until near the end when they decided to get in by buying, not originating, asset backed securities.

Fannie and Freddie don't rate securities. Private credit rating agencies do.

So what if "most" subrpime mortgage were originated by private investment banks? What the fuck does that have to do with F/F setting the standards for AAA US guaranteed No Income No Asset paper?

What standard's do you think they're setting? The lending practices of F/F don't dictate the lending practices of private banks. Just because F/F originated NINA mortgages doesn't mean anybody else had to. And F/F don't get to choose how the AAA rating gets given out. That rating is given by private credit rating agencies. Those rating agencies gave F/F NINA assets AAA because everybody thought (correctly) the federal government implicitly guaranteed F/F. If it were just F/F originating some bad mortgages, there wouldn't have been a financial crisis. How do F/F at all relate to the rampant origination of sub-prime mortgages in the private sector or the fact that assets backed by them were given a default risk free rating by private agencies?

 

[DSGE]

SNIP[ !

Todd and Edward and DSGE make silly statements, with no backing. The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

They could offer facts.

They could show how the era before 2007 was somehow different before 1929 or 1893.

They can't.

They fail.

How about addressing individual statements you have a problem with like the rest of us do rather than offhandedly dismissing three people's contributions?

The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

While you're at it, how about applying your own standards to this statement?

 

[DSGE]

Unlikely without the transfer of resources from one to the other, but even if it did, the meltdown would have been contained in the investment banking side, which would have had a much less severe impact on the general economy.

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

I agree that Glass-Steagall had little to do with the crisis. It doesn't mean it's a good idea though.

Yeah, fair enough. I understand that there are some perverse incentives that occur when commercial and investment banking isn't separated, but I don't really know what the magnitude of that is. So I'm indifferent to that part of Glass-Steagall.

 

[Toddsterpatriot]

Mortgage based derivatives? Like what?

HowStuffWorks "How can mortgage-backed securities bring down the U.S. economy?"

Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.

It sounds innocuous enough, and it is. It's also an excellent and safe way to make money when the housing market is booming. And in the early 21st century, the U.S. housing market was booming. A person who bought a new home in January 1996 for $155,000 could reasonably expect to make a profit of $100,000 when selling it in August 2006 [source: U.S. Census Bureau, CNN Money].

But 2008 wasn't 2006; the housing market in the United States was no longer booming. And it was the mortgage-backed security that killed it.

Mortgage backed securities are not derivatives.

 

[Toddsterpatriot]

You're going to have to justify that further. Investment banks still would have originated all the terrible mortgages that commercial banks securitized. They still would have been packaged into CDOs and held by everybody. There would be no difference if Glass-Steagall was still in effect.

Commercial banks wouldn't have securitized them. The damage to the investment banking sector might have been comparable (although maybe not; would there have been more caution about investing without the extra resources to draw upon?), but there was a whole chain of interacting circumstances that led to the Great Recession. The interconnection of the entire financial sector meant that when the mortgage backed securities took a dive, the whole financial industrial wobbled, and the maldistribution of wealth in our society meant that the financial industry's troubles acted as a trigger to bring on a full-scale recession.

The real root problem is the turn away from progressive economics over the last thirty years, but as far as the immediate trigger within the financial industry itself, the end of the compartmentalization meant that commercial banks were endangered by the problems within the investment banks.

Banks and Fannie and Freddie managed to securitize mortgages while Glass-Steagall was in place.

 

[Toddsterpatriot]

SNIP[ !

Todd and Edward and DSGE make silly statements, with no backing. The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

They could offer facts.

They could show how the era before 2007 was somehow different before 1929 or 1893.

They can't.

They fail.

Still searching for the swiftboat lies?
Or the law that shows a politician can sue if someone lies about him?

 

[Oddball]

SNIP[ !

Todd and Edward and DSGE make silly statements, with no backing. The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

They could offer facts.

They could show how the era before 2007 was somehow different before 1929 or 1893.

They can't.

They fail.

Speaking of making statements with no backing and failing, start listing the regulations that were wiped from the books which directly caused these major economic dislocations.

Be specific, for a change, fail-o-matic boy.

 

[expat_panama]

...Mortgage based derivatives? Like what?

...2008 wasn't 2006; the housing market in the United States was no longer booming. And it was the mortgage-backed security that killed it.

Mortgage backed securities are not derivatives.

Call them 'securities' or 'derivatives', name-calling used for bashing wealth creators has made times hard for all. Let's agree to put the gov't back on it's leash so us wealth creators can get back to work making us all better off.

 

[JakeStarkey]

SNIP[ !

Todd and Edward and DSGE make silly statements, with no backing. The fact remains that with the continuing deregulation of American businesses beginning in the 1980s that major economic dislocations were inevitable and did in fact come.

They could offer facts.

They could show how the era before 2007 was somehow different before 1929 or 1893.

They can't.

They fail.

Speaking of making statements with no backing and failing, start listing the regulations that were wiped from the books which directly caused these major economic dislocations.

Be specific, for a change, fail-o-matic boy.

Typical far right silliness, which stupid statements the which they never back, then demand every one refute them with evidence.

Doesn't work that way.

Make a factual case and we go from there. Otherwise, far right fail.

 

[Toro]

Mortgage based derivatives? Like what?

HowStuffWorks "How can mortgage-backed securities bring down the U.S. economy?"

Mortgage-backed securities (MBSs) are simply shares of a home loan sold to investors. They work like this: A bank lends a borrower the money to buy a house and collects monthly payments on the loan. This loan and a number of others -- perhaps hundreds -- are sold to a larger bank that packages the loans together into a mortgage-backed security. The larger bank then issues shares of this security, called tranches (French for "slices"), to investors who buy them and ultimately collect the dividends in the form of the monthly mortgage payments. These tranches can be further repackaged and sold again as other securities, called collateralized debt obligations (CDOs). Home loans in 2008 were so divided and spread across the financial spectrum, it was entirely possible a given homeowner could unwittingly own shares in his or her own mortgage.

It sounds innocuous enough, and it is. It's also an excellent and safe way to make money when the housing market is booming. And in the early 21st century, the U.S. housing market was booming. A person who bought a new home in January 1996 for $155,000 could reasonably expect to make a profit of $100,000 when selling it in August 2006 [source: U.S. Census Bureau, CNN Money].

But 2008 wasn't 2006; the housing market in the United States was no longer booming. And it was the mortgage-backed security that killed it.

Mortgage backed securities are not derivatives.

A mortgage backed security is a derivative.

A derivative security is any security that derives its value from another security. An MBS is created out of mortgages. Hence, it is a derivative.

 

[expat_panama]

...Mortgage backed securities are not derivatives.

A mortgage backed security is a derivative. A derivative security is any security that derives its value from another security...

--and so all securities are derivatives and when everything is a derivative nothing is a derivative. Our dollars derive their value from their understood purchasing power but we don't have to call it a derivative if we don't want to. Same with a share of stock. Same with a share in a mutual fund owning that stock. Same with a mortgage. Same with a fund that holds that mortgage.

Word fights are for morons. Like I said before, we should just agree to put the gov't back on it's leash so us wealth creators can get back to work making us all better off.

 

[Toddsterpatriot]

HowStuffWorks "How can mortgage-backed securities bring down the U.S. economy?"

Mortgage backed securities are not derivatives.

A mortgage backed security is a derivative.

A derivative security is any security that derives its value from another security. An MBS is created out of mortgages. Hence, it is a derivative.

It doesn't derive it's value from another security, it's a bunch of mortgages (or pieces of mortgages) bundled together.
An option on an MBS derives its value from the MBS, so the option is a derivative.
The MBS is just a bond.

 

[Toro]

Mortgage backed securities are not derivatives.

A mortgage backed security is a derivative.

A derivative security is any security that derives its value from another security. An MBS is created out of mortgages. Hence, it is a derivative.

It doesn't derive it's value from another security, it's a bunch of mortgages (or pieces of mortgages) bundled together.
An option on an MBS derives its value from the MBS, so the option is a derivative.
The MBS is just a bond.

An MBS is a derivative.

Definition of 'Derivative'
A security whose price is dependent upon or derived from one or more underlying assets.

Read more: Derivative Definition | Investopedia

When you buy an MBS, you are buying a security on a pool of mortgages.

A mortgage-backed security (MBS) is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.

Mortgage-backed security - Wikipedia, the free encyclopedia

That is a derivative.

 

[Toro]

Nm

 

[Toddsterpatriot]

A mortgage backed security is a derivative.

A derivative security is any security that derives its value from another security. An MBS is created out of mortgages. Hence, it is a derivative.

It doesn't derive it's value from another security, it's a bunch of mortgages (or pieces of mortgages) bundled together.
An option on an MBS derives its value from the MBS, so the option is a derivative.
The MBS is just a bond.

An MBS is a derivative.

Definition of 'Derivative'
A security whose price is dependent upon or derived from one or more underlying assets.

Read more: Derivative Definition | Investopedia

When you buy an MBS, you are buying a security on a pool of mortgages.

A mortgage-backed security (MBS) is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.

Mortgage-backed security - Wikipedia, the free encyclopedia

That is a derivative.

Thanks for the wiki link for MBS. You may have noticed that the word derivative isn't in the article. Not even once. Try this.....

A derivative instrument is a contract between two parties that specifies conditions (especially the dates, resulting values of the underlying variables, and notional amounts) under which payments, or payoffs, are to be made between the parties.[1][2]

http://en.wikipedia.org/wiki/Derivative_(finance)