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Joe Zhang
Byrne Robotics Member
Joined: 16 April 2004
Location: United States
Posts: 12843
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| Posted: 14 September 2008 at 11:58pm | IP Logged | 1
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"My criticism wouldn't have made much sense, if the GSEs were not, in
fact, suffering under a government mandate to buy a certain percentage,
increasing every year, of subprime mortgage securities.
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Does sub-prime automatically equate to low-income ? No. If the GSEs were run with the public trust in mind, they would have rejected these type of loans just as any suspect application.
For decades, the GSEs have been run as profit-driven, private corporations, but with the implicit backing of the Federal Government. This was very good for them, because it helped them re-sell their loans to foreign governments, who considered these as secure as T-bills. This, of course, didn't help much when sub-prime borrowers stopped paying their bills. The buyers fled, leaving Freddie and Fannie stuck with billions in unsellable, potentially valueless loans.
Edited by Joe Zhang on 15 September 2008 at 12:01am
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Michael Myers
Byrne Robotics Member
Joined: 28 December 2004
Posts: 831
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| Posted: 15 September 2008 at 12:23am | IP Logged | 2
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Joe wrote:
| Does sub-prime automatically equate to low-income ? No. If the GSEs
were run with the public trust in mind, they would have rejected these
type of loans just as any suspect application. |
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I don't necessarily disagree; thpugh I 've stated my negative thoughts on GSEs in general. Now, what were the GSEs supposed to do about compliance witrh HUD and the GSE Act, Joe? You see the problem?
QUOTE:
| For decades,
the GSEs have been run as profit-driven, private corporations, but with
the implicit backing of the Federal Government. |
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And with the expectation that the GSEs would fulfill their original role of providing affordable, secondary market loans. THIS was the ostensible rationale of the GSEs at their formulatin, Joe, and this provision was only enflamed by government mandates like the GSE Act.
QUOTE:
| This was very good for
them, because it helped them re-sell their loans to foreign
governments, who considered these as secure as T-bills. This, of
course, didn't help much when sub-prime borrowers stopped paying their
bills. The buyers fled, leaving Freddie and Fannie stuck with billions
in unsellable, potentially valueless loans. |
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No, Joe. The default rate, at this very moment, is just as I've indicated to you. That is, less than 3% default for BOTH GSEs. If it was as you state, then they would have a FAR higher rate of default, right now.
'Night, Joe.
Edited by Michael Myers on 15 September 2008 at 1:53am
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Pete Turley
Byrne Robotics Member
Joined: 14 April 2005
Location: United States
Posts: 111
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| Posted: 15 September 2008 at 12:49am | IP Logged | 3
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Here's something interesting...
Proposed new spending of McCain vs Obama...
http://www.ntu.org/main/page.php?PageID=141
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Joe Zhang
Byrne Robotics Member
Joined: 16 April 2004
Location: United States
Posts: 12843
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| Posted: 15 September 2008 at 3:14am | IP Logged | 4
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No, Joe. The default rate, at this very moment, is just as I've indicated to you. That is, less than 3% default for BOTH GSEs.
========================
Freddie and Fannie lost 80% to 90% of their stock market value within a day or two before the government seized it. Let's say sub-prime mortgages are not a problem. Then what does that say about the trillions of dollars worth of loans owned and securities issued by Freddie and Fannie?
You say it's a matter of "overvaluation" and "market correction". Does that mean market investors have judged that even "prime" loans are worth only pennies on the dollar? Why is that?
Does that mean the house you (or any one of us) live in, which you bought for $150,000 to $300,000 was really worth only $15,000?
This cannot be the case. You can't even get a garage for $15,000.
Sub-prime mortgages has poisoned the daily juggling act GSEs and banks have always had to perform. Lend the money. Sell the loan. Use the money earned to lend some more.
Sub-prime loans were sold to investors (people representing hedge funds, sovereign wealth funds, etc.) packaged with prime loans. Some sub-prime mortgage holders stopped paying, turning the value of entire packages into dirt. The buyers got burned and stopped buying. The entire American banking system is now in serious trouble.
Edited by Joe Zhang on 15 September 2008 at 3:42am
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Joe Zhang
Byrne Robotics Member
Joined: 16 April 2004
Location: United States
Posts: 12843
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| Posted: 15 September 2008 at 3:38am | IP Logged | 5
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Put it another way folks : if Microsoft, Apple, Cisco, Google, Compaq, and others went bankrupt overnight, what would that say about the future of the computer industry? About the future of the entire economy?
It took two, three decades for some of these companies to get to where they are now. In the case of Google and Cisco, they are the beneficiaries of up to four decades of public and private R&D. How many decades would it take for new enterprises to replace them?
The destruction going down in Wall Street is a disaster of historic proportions. Yes, Greenspan and his Federal Reserve created bubbles throughout the 80's and 90's, at the behest of Presidents concerned about their approval ratings. And they created a bubble for Bush, to pad the costs of his worthless Iraq war. It blew up in the worst possible way.
Edited by Joe Zhang on 15 September 2008 at 3:39am
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Scott Richards
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Joined: 22 September 2005
Posts: 1258
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| Posted: 15 September 2008 at 6:59am | IP Logged | 6
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Proposed new spending of McCain vs Obama...
Holy Bejebus!
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Bruce Buchanan
Byrne Robotics Member
Joined: 14 June 2006
Location: United States
Posts: 4797
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| Posted: 15 September 2008 at 7:04am | IP Logged | 7
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Ugh. That's depressing, Pete.
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Michael Myers
Byrne Robotics Member
Joined: 28 December 2004
Posts: 831
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| Posted: 15 September 2008 at 8:38am | IP Logged | 8
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Joe wrote:
| Freddie and Fannie lost 80% to 90% of their stock market value within a
day or two before the government seized it. Let's say sub-prime
mortgages are not a problem. Then what does that say about the
trillions of dollars worth of loans owned and securities issued by
Freddie and Fannie? |
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No, Joe. Default subprime mortgages are a problem. 'Just not a direct problem for the former GSEs and not in the manner you've all along been suggesting with regard to causation and the GSEs. It says exactly what I've said it does: they hold paper short of the value they originally lent.
QUOTE:
| You say it's a matter of "overvaluation"
and "market correction". Does that mean market investors have judged
that even "prime" loans are worth only pennies on the dollar? Why is
that? |
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It is, by definition, a 'matter' of market correction. That correction is fixed on overvaluation of the real estate market. No, Joe, prime loans are not worth "pennies on the dollar" to the absurd extent to which you imply.
QUOTE:
| Does that mean the house you (or any one of us) live in,
which you bought for $150,000 to $300,000 was really worth only
$15,000? This cannot be the case. You can't even get a garage for $15,000. |
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No, Joe. As of July, according to MBA's figures, market overvaluation in America stood at about 15% market average (obviously some areas are more, others less). Where are you getting these notions?
QUOTE:
| Sub-prime
mortgages has poisoned the daily juggling act GSEs and banks have
always had to perform. Lend the money. Sell the loan. Use the money
earned to lend some more. |
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To an extent, yes, for banking institutions.
QUOTE:
| Sub-prime loans were sold to
investors (people representing hedge funds, sovereign wealth funds,
etc.) packaged with prime loans. Some sub-prime mortgage holders
stopped paying, turning the value of entire packages into dirt. The
buyers got burned and stopped buying. The entire American banking
system is now in serious trouble. |
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It's a correction, Joe. I've long ago stated my thoughts on a recession. In my post to Monte, I stated that all the numbers trend towards exactly that conclusion: a recession. 'Just my take, but wait til you see the drop today as the floor gets swept.
The difficulty with your assertions, is that the American economy is still the strongest in the world, and the rest of the world won't see better times until we do. Oh, and that there's not a thing in the world President Bush could have done about it...
Edited by Michael Myers on 15 September 2008 at 8:56am
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Michael Myers
Byrne Robotics Member
Joined: 28 December 2004
Posts: 831
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| Posted: 15 September 2008 at 8:47am | IP Logged | 9
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Joe wrote:
It took two, three decades for some of these companies to get to where
they are now. In the case of Google and Cisco, they are the
beneficiaries of up to four decades of public and private R&D. How
many decades would it take for new enterprises to replace them?
The
destruction going down in Wall Street is a disaster of historic
proportions. Yes, Greenspan and his Federal Reserve created bubbles
throughout the 80's and 90's, at the behest of Presidents concerned
about their approval ratings. And they created a bubble for Bush, to
pad the costs of his worthless Iraq war. It blew up in the worst
possible way. |
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On your first point? About eight months.
On your second? 'Far, far from the worst way imaginable.
And no, it's not yet of historic proportions. We'll see how the market reacts. I will say that the Fed decision was a hugely pivotal turning point; but, only in the sense that it marks such a sharp deviation from longstanding Fed policy. The Feds decision with regard to Lehman Brothers is the right decision; the decision I accused Greenspan of not having the moxy to take under President Clinton. You can either prolong the illness, or administer the remedy.
The Fed securing the GSEs acts to stabilize the entire market in the long run (though I'm loath to admit it), while the remedy is administered on a case by case basis to those firms and individuals who have indulged in moral hazard.
Edited by Michael Myers on 15 September 2008 at 9:00am
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Michael Myers
Byrne Robotics Member
Joined: 28 December 2004
Posts: 831
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| Posted: 15 September 2008 at 8:48am | IP Logged | 10
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Pete wrote:
| Here's something interesting...
Proposed new spending of McCain vs Obama... |
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More spending, anyone?
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Tom French
Byrne Robotics Member
Joined: 07 January 2005
Location: United States
Posts: 4154
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| Posted: 15 September 2008 at 9:07am | IP Logged | 11
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"Charlie, again, we've got to remember what the desire is in this nation at this time. It is for no more politics as usual and somebody's big, fat resume maybe that shows decades and decades in that Washington establishment, where, yes, they've had opportunities to meet heads of state."
-- Sarah Palin, inadvertently describing her running mate
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Joe Zhang
Byrne Robotics Member
Joined: 16 April 2004
Location: United States
Posts: 12843
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| Posted: 15 September 2008 at 9:39am | IP Logged | 12
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The difficulty with your assertions, is that the American economy is
still the strongest in the world, and the rest of the world won't see
better times until we do.
=========================
I'm sorry, but this statement proves to me that you've been drinking the Kool-Aid, just as countless millions of others around the world. This is the same doctrinal nonsense that made me give up two years of a business undergrad degree to pursue computer science. Because as hard as I tried, I couldn't see past the cavernous plot holes in the lies they wanted us to believe in.
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