The Glass-Steagal Act needs to be re-enacted and then some

[The Rabbi]

If banks had simply lost the value of the defaulted mortgages it would not have been so bad, especially for AIG, They had leveraged those mortgages for many, many times their value and insured this worthless paper against loss. By far the most damaging wave of foreclosures were not the poor people but the investors who walked away from investment properties, where does CRA figure into that?

AIG isnt a mortgage company.
Mortgages were not AIGs problem.

Other than being totally wrong, good post.

 

[occupied]

If banks had simply lost the value of the defaulted mortgages it would not have been so bad, especially for AIG, They had leveraged those mortgages for many, many times their value and insured this worthless paper against loss. By far the most damaging wave of foreclosures were not the poor people but the investors who walked away from investment properties, where does CRA figure into that?

AIG isnt a mortgage company.
Mortgages were not AIGs problem.

Other than being totally wrong, good post.

AIG is an insurer of investments. All that worthless derivative crap was insured against loss with them in spite of the fact that they did not have the reserves to cover them. 100% of this loss was transferred to the taxpayers.

 

[g5000]

"The Glass-Steagal Act needs to be re-enacted and then some"

I'm going to go with "and then some". While repealing those laws enacted by the Republican Congress and signed by Bill Clinton did a lot to dismantle Glass-Steagal, that is not all that needs to be restored.

The only big player in the global credit crisis that would have been subject to Glass-Steagal was Citibank. The other financial institutions I mentioned in an earlier post were not subject to GS.

And so we need "and then some".

The problem is that politicians don't know the first thing about structured finance and derivative products. They grok "bad loans", but they don't know an inverse floater from shinola. They think if you fix the "bad loans" problem, they got the whole credit problem licked. They couldn't be more wrong.

I just want to make a side note here to whoever said the dismantling of Glass-Steagal could not have been the cause of the 2008 crash. Financial derivatives caused a crash in 2005 in the commercial credit markets. They also caused the Asian flu in 1997, and the spectacular implosion of Orange County, California, and the collapse of LTCM which nearly brought down the world in 1998.

It would take me pages and pages to explain how structured finance has created successively bigger and bigger financial crises. But suffice it to say that the "Invisible Hand" has a memory like that of a goldfish. The suckers keep coming back for more, and the crooks and idiots in finance are more than willing to take their money from them because current rules and regulations actually incentivize them to do so.

We'd all like to murder somebody at some point in our lives. But we don't because it is illegal. Chances are, if murder was legal, there'd be a lot more of it going on. Laws and regulations exist to moderate our more animal passions. To protect us from ourselves.

To believe that someone who deals with money, of all things, will always work altruistically for the good of all is sheer idiocy.

The Commodities Futures Modernization Act of 2000 took away some states rights. But I have yet to hear a single Republican or their talk radio and Fox News and CNBC shills bemoaning this fact. No one is stomping their feet abojut the unconstitutionality of it all and crying over the 10th amendment.

The hypocrisy is really, really ripe.

And yet there it is. A law which prevents states and localities from enforcing their laws against bucket shops. If you don't know what a bucket shop is, it is a kind of gambling den that is rigged to rip off investors in the stock market. Instead of fixing horse races, they fix financial markets.

And those investors are you. Did this never occur to you? When you read about investors suing Wall Street firms and Bank of America for over some fraudulent products they were sold, who do you think they are?

It's your 401k manager. It's your insurance company. It's your city treasurer. It's your state's public employee retirement fund manager.

Wall Street has been ripping you off for many years now and if you are defending them and believe they should continue to be unregulated so they can rip you off even more, then you are a stone cold moron.

Section 117 of the CFMA:

This Act shall supersede and preempt the application of any State or local law that prohibits or regulates gaming or the operation of bucket shops

 

[g5000]

If banks had simply lost the value of the defaulted mortgages it would not have been so bad, especially for AIG, They had leveraged those mortgages for many, many times their value and insured this worthless paper against loss. By far the most damaging wave of foreclosures were not the poor people but the investors who walked away from investment properties, where does CRA figure into that?

AIG isnt a mortgage company.
Mortgages were not AIGs problem.

Other than being totally wrong, good post.

It's an entirely correct post. CDOs were crammed with toxic loans created by financial firms' secondary market brokers. Up to 90 percent of the loans in CDOs by 2005 were sub-prime loans, but no one knew that. They assumed that only 10 percent were sub-prime. Once AIG realized they were insuring instruments that were 90 percent sub-prime, they told Wall Street that they were no longer going to sell them credit default swaps (CDS) on them.

But it was too late for AIG. When the CDOs they had sold swaps on began tanking, AIG was on the hook big-time. AIG FP had not posted any collateral for all the swaps they sold. Massive leverage. Infinite leverage. They thought they were getting free money.

That was only the beginning, however. Once AIG got out of the CDS business, Wall Street was in bind. They couldn't hedge their CDOs. But then someone came up with the idea of getting their investors to sell them swaps.

Investors being you.

Your 401k manager was offered tranches in synthetic CDOs. But he was too stupid to realize he was not actually buying a security. He was selling a swap. I can spend a half a page explaining that if you need.

So then Wall Street was able to keep building CDOs, and it as at this point they began betting against their own products. This is when they began deliberately building products they knew would fail. This is when they actively sought the worst possible assets (loans) they could find to stuff into these things. This is when the fraud became especially rampant.

CRA had fuck-all to do with it.

And not one of those bastards is going to jail. Even though we know exactly what they did, know their names, we have their emails, everything we need to prosecute and execute them.

 

[The Rabbi]

I just want to make a side note here to whoever said the dismantling of Glass-Steagal could not have been the cause of the 2008 crash. Financial derivatives caused a crash in 2005 in the commercial credit markets. They also caused the Asian flu in 1997, and the spectacular implosion of Orange County, California, and the collapse of LTCM which nearly brought down the world in 1998.

It was not the cause of the crash.
There were crashes all during the time GS was in force. Continental Bank of IL comes to mind. South American debt crisis of the 1970s also comes to mind.
The incidents you mention would have happened regardless of GS.

Derivatives magnify the power of leverage. That is all they do. Outlawing derivatives takes away the ability to manage risk, something the Left knows nothing about as they have minimal business experience, if any.

 

[g5000]

I just want to make a side note here to whoever said the dismantling of Glass-Steagal could not have been the cause of the 2008 crash. Financial derivatives caused a crash in 2005 in the commercial credit markets. They also caused the Asian flu in 1997, and the spectacular implosion of Orange County, California, and the collapse of LTCM which nearly brought down the world in 1998.

It was not the cause of the crash.
There were crashes all during the time GS was in force. Continental Bank of IL comes to mind. South American debt crisis of the 1970s also comes to mind.
The incidents you mention would have happened regardless of GS.

Which is why I said I would go with "and then some". We need more than Glass Steagal.

[Derivatives magnify the power of leverage. That is all they do. Outlawing derivatives takes away the ability to manage risk, something the Left knows nothing about as they have minimal business experience, if any.

I am not from the Left. And I know quite a lot about derivatives. And I am not saying they need to be outlawed. They need to be regulated.

And "risk management" is a fucking joke. Look how often these "black swans" and "fat tails" are occuring. Only a deluded idiot believes the current derivatives market manages risk. It is amplifying it and creating it!

 

[The Rabbi]

I just want to make a side note here to whoever said the dismantling of Glass-Steagal could not have been the cause of the 2008 crash. Financial derivatives caused a crash in 2005 in the commercial credit markets. They also caused the Asian flu in 1997, and the spectacular implosion of Orange County, California, and the collapse of LTCM which nearly brought down the world in 1998.

It was not the cause of the crash.
There were crashes all during the time GS was in force. Continental Bank of IL comes to mind. South American debt crisis of the 1970s also comes to mind.
The incidents you mention would have happened regardless of GS.

Which is why I said I would go with "and then some". We need more than Glass Steagal.

[Derivatives magnify the power of leverage. That is all they do. Outlawing derivatives takes away the ability to manage risk, something the Left knows nothing about as they have minimal business experience, if any.

I am not from the Left. And I know quite a lot about derivatives. And I am not saying they need to be outlawed. They need to be regulated.

And "risk management" is a fucking joke. Look how often these "black swans" and "fat tails" are occuring. Only a deluded idiot believes the current derivatives market manages risk. It is amplifying it and creating it!

You could completely eliminate risk from the banking system. Of course by definition you eliminate any reward as well. Banking would simply become a gov't monopoly and lots of people would get screwed. You can wait on your auto loan application 6 months.

And no, you don't know jack-shit about derivatives.

 

[g5000]

I have a solid gold credit score. I also make a very comfortable income. No one would ever mistake me for a minority or low income. I am a banker's wet dream.

A couple years ago I went to one of my banks to get pre-approved for a loan so I could go to a distressed housing auction. So the credit crisis was in full swing, right?

And yet the loan officer literally passed the loan approval across her desk to me with one hand and a home equity loan application with her other hand!

I would be buying a house, at auction, in a real estate market which still had years to go to hit bottom and she was offering me an equity loan.

Get it?

When you see all these underwater homes in middle class neighborhoods that are up for sale, take note of the SUVs and boats in their driveways, too. Ask them about the Disney vacations they took.

You'll get over any CRA hangups you have real quick.

 

[The Rabbi]

If banks had simply lost the value of the defaulted mortgages it would not have been so bad, especially for AIG, They had leveraged those mortgages for many, many times their value and insured this worthless paper against loss. By far the most damaging wave of foreclosures were not the poor people but the investors who walked away from investment properties, where does CRA figure into that?

AIG isnt a mortgage company.
Mortgages were not AIGs problem.

Other than being totally wrong, good post.

AIG is an insurer of investments. All that worthless derivative crap was insured against loss with them in spite of the fact that they did not have the reserves to cover them. 100% of this loss was transferred to the taxpayers.

That's about 90% wrong. AIG is an insurance company. The government is getting paid back, and has been paid a significant sum already. AIG shareholders bore most of the loss.
AIG Corporate Information - Restructuring - Key Restructuring Progress

 

[g5000]

It was not the cause of the crash.
There were crashes all during the time GS was in force. Continental Bank of IL comes to mind. South American debt crisis of the 1970s also comes to mind.
The incidents you mention would have happened regardless of GS.

Which is why I said I would go with "and then some". We need more than Glass Steagal.

[Derivatives magnify the power of leverage. That is all they do. Outlawing derivatives takes away the ability to manage risk, something the Left knows nothing about as they have minimal business experience, if any.

I am not from the Left. And I know quite a lot about derivatives. And I am not saying they need to be outlawed. They need to be regulated.

And "risk management" is a fucking joke. Look how often these "black swans" and "fat tails" are occuring. Only a deluded idiot believes the current derivatives market manages risk. It is amplifying it and creating it!

You could completely eliminate risk from the banking system. Of course by definition you eliminate any reward as well. Banking would simply become a gov't monopoly and lots of people would get screwed. You can wait on your auto loan application 6 months.

Banking would become what it was in the past. You go to a bank to get a loan, they do due diligence, and they approve or disapprove your loan based on your risk. Defaults would return to pre-hysteria levels and credit would tighten up.

Just remember, Chase bought JP Morgan, not the other way around.

[And no, you don't know jack-shit about derivatives.

You are the fool parroting the CRA meme, not me. And I have not seen you debunk a thing I have said. You are just butt hurt that I destroyed the CRA meme.

Let me know if you need anything else explained to you.

 

[PrometheusBound]

The banking industry will not like it, but it will cut down of predatory lending and the abuse of CDOs. Also the credit rating agencies need to be regulated.

I confess that the problems are so complex, and the nature of the market changing so rapidly that I don't really know what regulations need to be enacted.

The shadow banking system is so large and politically connected that I'm not sure how to put it down.

The problems got really shitty when regulation of derivatives was opposed and defeated, thats what allowed the out of control shit with CDOs. The repeal of the last parts of the Glass Steagal Act, signed into law by Bill Clinton, was the last straw. These big banks now are allowed unregulated risk taking and speculation and multiple conflicts of interest. That sets the stages for the kind of bullshit that happens that we saw. deregulation of the financial sector was the worst shit to ever happen, started by Reagan all the way up to Bush. Dodd Frank is weak at best.

Those whose rulers impose ideological dreams on them live in a nightmare. This free market anarchy is as bad as the other side's Communism.

 

[The Rabbi]

Which is why I said I would go with "and then some". We need more than Glass Steagal.



I am not from the Left. And I know quite a lot about derivatives. And I am not saying they need to be outlawed. They need to be regulated.

And "risk management" is a fucking joke. Look how often these "black swans" and "fat tails" are occuring. Only a deluded idiot believes the current derivatives market manages risk. It is amplifying it and creating it!

You could completely eliminate risk from the banking system. Of course by definition you eliminate any reward as well. Banking would simply become a gov't monopoly and lots of people would get screwed. You can wait on your auto loan application 6 months.

Banking would become what it was in the past. You go to a bank to get a loan, they do due diligence, and they approve or disapprove your loan based on your risk. Defaults would return to pre-hysteria levels and credit would tighten up.

Just remember, Chase bought JP Morgan, not the other way around.

I remember the S&Ls went tits up because they were holding 30 year mortgages at 6% when interest rates were 18%.
Securitization changed the industry and it isn't going back. It makes for more liquidity, lower rates, better deals all around.

[And no, you don't know jack-shit about derivatives.

You are the fool parroting the CRA meme, not me. And I have not seen you debunk a thing I have said. You are just butt hurt that I destroyed the CRA meme.

Let me know if you need anything else explained to you.

You've never supported a thing you say either. The CRA wasnt THE cause of the crisis. Artificially low interest rates were the prime cause. But you'd be a fool to think CRA didnt cause problems in the past and still does.
If I need to know how to swab down a toilet seat I'll make sure to consult you. That seems to be your area of expertise.

 

[KissMy]

No you fucking liar, show me instances of when the government threated banks into giving out loans, especially bad, subprime loans. The evidence is out there-in favor of my position of our course which I have posted, where is your evidence bitch?

Here ya go, asshole.
UPDATED: Obama Sued Citibank Under CRA to Force it to Make Bad Loans | Media Circus

I await your apology.

Underneath all the hyperbole in that link I see no evidence the lawsuit resulted in bad loans.

Nice try.

The Trillion-Dollar Bank Shakedown

The CRA allowed ACORN "organizations to collect a fee from the banks for their services in marketing the loans. The Senate Banking Committee had estimated that, as a result of CRA, $9.5 billion had gone to pay for services and salaries of the organizers."

April 1998 - HUD announced a $2.1 billion settlement with AccuBanc Mortgage Corp. for alleged discrimination against minority loan applicants. Affirmative Action Lending The funds would provide poor families with down payments and low interest mortgages. "Discrimination isn't always that obvious," said Secretary Cuomo in announcing the AccuBanc deal. "Sometimes more subtle but in many ways more insidious, an institutionalized discrimination that's hidden behind a smiling face." Before the camera, Cuomo admitted the mandate amounted to "affirmative action" lending that would result in a "higher default rate."

The institution would "take a greater risk on these mortgages, yes; to give families mortgages who they would not have given otherwise, yes; they would not have qualified but for this affirmative action on the part of the bank, yes. It is by income, and is it also by minorities? Yes. "With the $2.1 billion, lending that amount in mortgages which will be a higher risk, and I'm sure there will be a higher default rate on those mortgages than on the rest of the portfolio."

[ame="http://www.youtube.com/watch?v=Lr1M1T2Y314"]The Financial Crisis[/ame]

Bill Clinton signed H.R.5660 the Commodities Futures Modernization Act of 2000 into law.
Bill Clinton signed S.900 the Financial Services Modernization Act of 1999 into law.