A Lesson in Economic for Liberals

[Toddsterpatriot]

It was awful. They could suddenly write mortgages. They lost billions!

Are you a complete idiot? How many residential mortgages did Goldman Sachs write before 98? They could suddenly gamble with (invest in riskier instruments for greater profit) your FDIC insured deposit money. You know, like the Savings and Loan collapse.

Here is a thought to chew on. Profit = risk. How profitable should the financial sector that underpins our economy and allows it to operate as one with freely moving capital be?

Are you a complete idiot? Goldman didn't gamble with FDIC deposits. Goldman doesn't have retail bank deposits. Get a clue already.

Retail banks didn't need a repeal of Glass Steagall to write mortgages.
Retail banks lost money on mortgages. They already had an FDIC guarantee.

 

[snjmom]

It was awful. They could suddenly write mortgages. They lost billions!

Are you a complete idiot? How many residential mortgages did Goldman Sachs write before 98? They could suddenly gamble with (invest in riskier instruments for greater profit) your FDIC insured deposit money. You know, like the Savings and Loan collapse.

Here is a thought to chew on. Profit = risk. How profitable should the financial sector that underpins our economy and allows it to operate as one with freely moving capital be?

Are you a complete idiot? Goldman didn't gamble with FDIC deposits. Goldman doesn't have retail bank deposits. Get a clue already.

Retail banks didn't need a repeal of Glass Steagall to write mortgages.
Retail banks lost money on mortgages. They already had an FDIC guarantee.

Retail banks didn't lose money on mortgages. Retail banks sold their mortgages to Goldman who bundled them with non-bank mortgages and sold them all to investors. Some of whom happened to be retail banks.

Non-securitized mortgages didn't bring the economy to it's knees. Investment banks that lied about the worth of the securities they were selling brought the economy to it's knees. It certainly wasn't CRA loans in inner cities and the FM's.

 

[cbirch2]

Retail banks lost money on mortgages. They already had an FDIC guarantee.

actually our entire point is that comercial banks (what your calling retail i assume) did not lose money after the repeal of glass steagal. Because they issued the mortgage to you, and now had a financial asset (your promise to pay them back + interest). Then they sold that asset, your mortgage, to someone else, probably a bigger investment bank.

So the banks issued mortages, immediately sold them, and then used that money to turn around and issue another mortgage to repeat the process with.

In that process the money they make is dependent on the amount of loans they can issue and then sell, rather than on whether or not the loan holder defaults.

 

[Toddsterpatriot]

Are you a complete idiot? How many residential mortgages did Goldman Sachs write before 98? They could suddenly gamble with (invest in riskier instruments for greater profit) your FDIC insured deposit money. You know, like the Savings and Loan collapse.

Here is a thought to chew on. Profit = risk. How profitable should the financial sector that underpins our economy and allows it to operate as one with freely moving capital be?

Are you a complete idiot? Goldman didn't gamble with FDIC deposits. Goldman doesn't have retail bank deposits. Get a clue already.

Retail banks didn't need a repeal of Glass Steagall to write mortgages.
Retail banks lost money on mortgages. They already had an FDIC guarantee.

Retail banks didn't lose money on mortgages. Retail banks sold their mortgages to Goldman who bundled them with non-bank mortgages and sold them all to investors. Some of whom happened to be retail banks.

Non-securitized mortgages didn't bring the economy to it's knees. Investment banks that lied about the worth of the securities they were selling brought the economy to it's knees. It certainly wasn't CRA loans in inner cities and the FM's.

BS. Banks lost billions on mortgages. Not all mortgages are securitized or sold.
Banks were securitizing mortgages even under Glass Steagall.
People not paying their mortgages is what brought the economy to its knees.

 

[Toddsterpatriot]

Retail banks lost money on mortgages. They already had an FDIC guarantee.

actually our entire point is that comercial banks (what your calling retail i assume) did not lose money after the repeal of glass steagal. Because they issued the mortgage to you, and now had a financial asset (your promise to pay them back + interest). Then they sold that asset, your mortgage, to someone else, probably a bigger investment bank.

So the banks issued mortages, immediately sold them, and then used that money to turn around and issue another mortgage to repeat the process with.

In that process the money they make is dependent on the amount of loans they can issue and then sell, rather than on whether or not the loan holder defaults.

Commercial banks lost billions. It was in all the papers.

 

[cbirch2]

Retail banks lost money on mortgages. They already had an FDIC guarantee.

actually our entire point is that comercial banks (what your calling retail i assume) did not lose money after the repeal of glass steagal. Because they issued the mortgage to you, and now had a financial asset (your promise to pay them back + interest). Then they sold that asset, your mortgage, to someone else, probably a bigger investment bank.

So the banks issued mortages, immediately sold them, and then used that money to turn around and issue another mortgage to repeat the process with.

In that process the money they make is dependent on the amount of loans they can issue and then sell, rather than on whether or not the loan holder defaults.

Commercial banks lost billions. It was in all the papers.

When the bigger banks providing them with credit stopped buying mortgages in an attempt to deleverage.

 

[Toddsterpatriot]

actually our entire point is that comercial banks (what your calling retail i assume) did not lose money after the repeal of glass steagal. Because they issued the mortgage to you, and now had a financial asset (your promise to pay them back + interest). Then they sold that asset, your mortgage, to someone else, probably a bigger investment bank.

So the banks issued mortages, immediately sold them, and then used that money to turn around and issue another mortgage to repeat the process with.

In that process the money they make is dependent on the amount of loans they can issue and then sell, rather than on whether or not the loan holder defaults.

Commercial banks lost billions. It was in all the papers.

When the bigger banks providing them with credit stopped buying mortgages in an attempt to deleverage.

Even the big commercial banks lost money on mortgages.

Mortgages they could write even under Glass Steagall.

 

[cbirch2]

People not paying their mortgages is what brought the economy to its knees.

Are you a ******* idiot?

Is it the borrowers fault that the market priced his house artificially high when he bought it, and now he owes $200,000 dollars on a $150,000 house?

Lets say someone takes out a 30 year adjustable rate mortgage. In september 2008 the banks holding those mortgages have trouble getting credit in interbank markets. The rate of those mortgages are dependent on how easily the bank gets credit, so the interest rate skyrockets. Is it the borrowers fault that the interest rate on his mortgage went up?

Or how about when banks issued loans they knew would fail, then mixed those loans with good loans and gave them good ratings.

Quick example. Bond prices are based on risk. So if your issuing a $100 bond, the price the creditor pays is less, maybe like $97. This is essentially implicit interest. Now imagine you have 2 mortgages, one for $200,000 and its great, the borrower will certainly pay it back. The other is shit, its also for $200,000 but the borrow probably wont pay it back, and you know that. You price the good bond at $199,000, the bad bond at $150,000, and combine them into a mortgage backed security. Then you sold them for a combined total of $349,000.

Is that the correct price? No! When the shitty borrower defaults the price becomes $199,000, plus whatever payments the defaulter made so far. The buyer expected $400,000 after all payments have come through, but instead gets more like $200,000 and some change.

And credit rating agencies and government regulators allowed this to happen on a massive scale.

The idea that this is all because of poor people is an absolute myth.

Why did the banks suddenly just decide to lend to a bunch of poor people? arent they supposed to turn away bad borrowers? But they didnt because most of the time they werent on the hook for the mortgage in the first place.

 

[cbirch2]

Commercial banks lost billions. It was in all the papers.

When the bigger banks providing them with credit stopped buying mortgages in an attempt to deleverage.

Even the big commercial banks lost money on mortgages.

Mortgages they could write even under Glass Steagall.

Dude i dont think you know what your talking about. By "big comercial bank" do you mean "investment banks"? They are two things, commercial banks and investment banks. If your talking about glass steagall you should probably be making distinctions between them.

 

[Toddsterpatriot]

People not paying their mortgages is what brought the economy to its knees.

Are you a ******* idiot?

Is it the borrowers fault that the market priced his house artificially high when he bought it, and now he owes $200,000 dollars on a $150,000 house?

Lets say someone takes out a 30 year adjustable rate mortgage. In september 2008 the banks holding those mortgages have trouble getting credit in interbank markets. The rate of those mortgages are dependent on how easily the bank gets credit, so the interest rate skyrockets. Is it the borrowers fault that the interest rate on his mortgage went up?

Or how about when banks issued loans they knew would fail, then mixed those loans with good loans and gave them good ratings.

Quick example. Bond prices are based on risk. So if your issuing a $100 bond, the price the creditor pays is less, maybe like $97. This is essentially implicit interest. Now imagine you have 2 mortgages, one for $200,000 and its great, the borrower will certainly pay it back. The other is shit, its also for $200,000 but the borrow probably wont pay it back, and you know that. You price the good bond at $199,000, the bad bond at $150,000, and combine them into a mortgage backed security. Then you sold them for a combined total of $349,000.

Is that the correct price? No! When the shitty borrower defaults the price becomes $199,000, plus whatever payments the defaulter made so far.

And credit rating agencies and government regulaters allowed this to happen on a massive scale.

The idea that this is all because of poor people is an absolute myth.

Why did the banks suddenly just decide to lend to a bunch of poor people? arent they supposed to turn away bad borrowers? But they didnt because most of the time they werent on the hook for the mortgage in the first place.

Is it the borrowers fault that the market priced his house artificially high when he bought it, and now he owes $200,000 dollars on a $150,000 house?

If the borrower couldn't afford to make the payments and only bought the home because it "had to go up in value", yes, I blame that defaulting borrower for bringing the economy to its knees.

 

[Toddsterpatriot]

When the bigger banks providing them with credit stopped buying mortgages in an attempt to deleverage.

Even the big commercial banks lost money on mortgages.

Mortgages they could write even under Glass Steagall.

Dude i dont think you know what your talking about. By "big comercial bank" do you mean "investment banks"? They are two things, commercial banks and investment banks. If your talking about glass steagall you should probably be making distinctions between them.

The bank up the street from your house that takes your deposits is a commercial bank.
Goldman Sachs, Merrill Lynch and Lehman Brothers are investment banks.
If you don't understand the difference, you should stop showing your ignorance.
The bank up the street lost money on bad mortgages. The bank was FDIC insured.
Glass Steagall wouldn't have kept your neighborhood bank from writing mortgages.

 

[cbirch2]

If the borrower couldn't afford to make the payments and only bought the home because it "had to go up in value", yes, I blame that defaulting borrower for bringing the economy to its knees.

No no no. Your missing the point.

If the buyer bought a $200,000 home, is it his fault if the property drops from $200,000 to $133,000? No, he was forced by the market to over pay by $70,000 dollars. His ability to pay off debt is now worse than it was before, because his most valuable asset has depreciated.

 

[snjmom]

Are you a complete idiot? Goldman didn't gamble with FDIC deposits. Goldman doesn't have retail bank deposits. Get a clue already.

Retail banks didn't need a repeal of Glass Steagall to write mortgages.
Retail banks lost money on mortgages. They already had an FDIC guarantee.

Retail banks didn't lose money on mortgages. Retail banks sold their mortgages to Goldman who bundled them with non-bank mortgages and sold them all to investors. Some of whom happened to be retail banks.

Non-securitized mortgages didn't bring the economy to it's knees. Investment banks that lied about the worth of the securities they were selling brought the economy to it's knees. It certainly wasn't CRA loans in inner cities and the FM's.

BS. Banks lost billions on mortgages. Not all mortgages are securitized or sold.
Banks were securitizing mortgages even under Glass Steagall.
People not paying their mortgages is what brought the economy to its knees.

You really need to stop sucking the partisan tit. The mortgage default rate didn't freeze the credit markets. The inability to trust the value of the securities being held and sold by the investment banks froze the market.

 

[Toddsterpatriot]

If the borrower couldn't afford to make the payments and only bought the home because it "had to go up in value", yes, I blame that defaulting borrower for bringing the economy to its knees.

No no no. Your missing the point.

If the buyer bought a $200,000 home, is it his fault if the property drops from $200,000 to $133,000? No, he was forced by the market to over pay by $70,000 dollars. His ability to pay off debt is now worse than it was before, because his most valuable asset has depreciated.

Is it the bank's fault the value drops?

Your contract doesn't say you only have to pay if the value stays the same or rises.

If your cash flow is unchanged, the value of the house doesn't impact your ability to repay.

 

[cbirch2]

If the borrower couldn't afford to make the payments and only bought the home because it "had to go up in value", yes, I blame that defaulting borrower for bringing the economy to its knees.

No no no. Your missing the point.

If the buyer bought a $200,000 home, is it his fault if the property drops from $200,000 to $133,000? No, he was forced by the market to over pay by $70,000 dollars. His ability to pay off debt is now worse than it was before, because his most valuable asset has depreciated.

Is it the bank's fault the value drops?

Your contract doesn't say you only have to pay if the value stays the same or rises.

If your cash flow is unchanged, the value of the house doesn't impact your ability to repay.

...Do you understand how to write out the balance sheet? Ever taken accounting? The asset side of the balance sheet is shrinking because the market judges houses to be of lower value, while the liabilities side stays the same.

The point is that the market has pushed people into insolvency. They arent simply walking away from the mortgage. The market is pushing them into bakruptcy. As the price drops below its initial value, the longer they keep the house the worse their situation becomes.

Its not their fault. Its not necessarily the fault of the bank that issued the loan either. Its the fault of the housing market collectively. But banks are certainly responsible for other things...

 

[Toddsterpatriot]

Retail banks didn't lose money on mortgages. Retail banks sold their mortgages to Goldman who bundled them with non-bank mortgages and sold them all to investors. Some of whom happened to be retail banks.

Non-securitized mortgages didn't bring the economy to it's knees. Investment banks that lied about the worth of the securities they were selling brought the economy to it's knees. It certainly wasn't CRA loans in inner cities and the FM's.

BS. Banks lost billions on mortgages. Not all mortgages are securitized or sold.
Banks were securitizing mortgages even under Glass Steagall.
People not paying their mortgages is what brought the economy to its knees.

You really need to stop sucking the partisan tit. The mortgage default rate didn't freeze the credit markets. The inability to trust the value of the securities being held and sold by the investment banks froze the market.

Partisan tit?

Idiots like you are on both sides of the political spectrum.

 

[rightwinger]

People not paying their mortgages is what brought the economy to its knees.

Are you a ******* idiot?

Is it the borrowers fault that the market priced his house artificially high when he bought it, and now he owes $200,000 dollars on a $150,000 house?

Lets say someone takes out a 30 year adjustable rate mortgage. In september 2008 the banks holding those mortgages have trouble getting credit in interbank markets. The rate of those mortgages are dependent on how easily the bank gets credit, so the interest rate skyrockets. Is it the borrowers fault that the interest rate on his mortgage went up?

Or how about when banks issued loans they knew would fail, then mixed those loans with good loans and gave them good ratings.

Quick example. Bond prices are based on risk. So if your issuing a $100 bond, the price the creditor pays is less, maybe like $97. This is essentially implicit interest. Now imagine you have 2 mortgages, one for $200,000 and its great, the borrower will certainly pay it back. The other is shit, its also for $200,000 but the borrow probably wont pay it back, and you know that. You price the good bond at $199,000, the bad bond at $150,000, and combine them into a mortgage backed security. Then you sold them for a combined total of $349,000.

Is that the correct price? No! When the shitty borrower defaults the price becomes $199,000, plus whatever payments the defaulter made so far.

And credit rating agencies and government regulaters allowed this to happen on a massive scale.

The idea that this is all because of poor people is an absolute myth.

Why did the banks suddenly just decide to lend to a bunch of poor people? arent they supposed to turn away bad borrowers? But they didnt because most of the time they werent on the hook for the mortgage in the first place.

Is it the borrowers fault that the market priced his house artificially high when he bought it, and now he owes $200,000 dollars on a $150,000 house?

If the borrower couldn't afford to make the payments and only bought the home because it "had to go up in value", yes, I blame that defaulting borrower for bringing the economy to its knees.

A mortgage is a business transaction between two parties. That business transaction goes bad.....both parties suffer

Banks are just as qualified or more qualified to Gage the market and protect their interests from risk.

 

[Toddsterpatriot]

No no no. Your missing the point.

If the buyer bought a $200,000 home, is it his fault if the property drops from $200,000 to $133,000? No, he was forced by the market to over pay by $70,000 dollars. His ability to pay off debt is now worse than it was before, because his most valuable asset has depreciated.

Is it the bank's fault the value drops?

Your contract doesn't say you only have to pay if the value stays the same or rises.

If your cash flow is unchanged, the value of the house doesn't impact your ability to repay.

...Do you understand how to write out the balance sheet? Ever taken accounting?

The point is that the market has pushed people into insolvency. They arent simply walking away from the mortgage. The market is pushing them into bakruptcy. As the price drops below its initial value, the longer they keep the house the worse their situation becomes.

Its not their fault. Its not necessarily the fault of the bank that issued the loan either. Its the fault of the housing market collectively. But banks are certainly responsible for other things...

If your mortgage is $2000 a month and you can afford to make that payment, how does a $100,000 drop in house value make it harder to pay your mortgage?

 

[cbirch2]

Real life example

Imagine you have $10,000 in assets and no debt (so also $10,000 in equity). You use that $10,000 as a 10% down payment on a $100,000 house. When you take out a mortgage you get an asset (the house) and a liability (the mortgage).

You expect your balance sheet to now be $100,000 in assets (a house) and $90,000 in liabilities (the mortgage for the $100,000 house, of which youve already paid $10,000). So thats still $10,000 in equity.

If, however, after you get your mortgage the price of housing drops by 33% (what it has dropped since its high), your balance sheet changes. You now have $66,000 in assets, but still $90,000 in liabilities. So you have -$24,000 in equity.

In other words the housing market pushes the balance sheets into insolvency (0 or negative equity), through no fault of the borrower.

 

[Toddsterpatriot]

Real life example

Imagine you have $10,000 in assets and no debt (so also $10,000 in equity). You use that $10,000 as a 10% down payment on a $100,000 house. When you take out a mortgage you get an asset (the house) and a liability (the mortgage).

You expect your balance sheet to now be $100,000 in assets (a house) and $90,000 in liabilities (the mortgage for the $100,000 house, of which youve already paid $10,000). So thats still $10,000 in equity.

If, however, after you get your mortgage the price of housing drops by 33% (what it has dropped since its high), your balance sheet changes. You now have $66,000 in assets, but still $90,000 in liabilities. So you have -$24,000 in equity.

In other words the housing market pushes the balance sheets into insolvency (0 or negative equity), through no fault of the borrower.

So your equity is -$24,000, how does that hurt your cash flow?
You know you pay your martgage from cash flow, not equity, right?
Think back to your accounting. LOL!