The real reason behind the U.S. fed gov huge deficits, that main stream news isn't telling us.

reply to post by dolphinfan

The absolute insanity of this entire business is that the vast majority of it could have easily been avoided by simple regulatory reform that the government failed to implement and has still failed to implement.

They call this insanity, the free market.

They execute transactions with the assumption that management is looking at the big picture.

Oh, upper management is looking at the big picture, their big picture, getting a huge bonus, and sticking the blame on anyone but themselves. Blame government, blame lower level employees, or blame the rubes they suckered, it is all the same to them.

The government has done absolutely nothng to push banks to make those investments.

So you are saying that you recognize the role government should fill in regulating banks?

If so, then I have a great deal more respect for you. It sounds like you were one of the guys down in the trenches who feels that you were taken advantage of, and rightly so.

Ah, but here you wander back into fantasy land again.

Talk to a community banker and they will tell you that had the government simply relaxed the market to market requirements (which most bankers think are foolish to begin with) and just let the housing market play out for a few years things would have come back and many many folks would still be in their houses.

Or Not, those home prices usually don't recover for decades after a housing bubble, often they never recover. The good times go, and never come back. It is just as likely that the situation will fester, and get far worse, and lead to the government having even far greater insurance liabilities. Basically, the bankers want to avoid taking any risk at all, when their business is all about risk. If they had never made those loans, that they should never have made in the first place, they would never get into this situation. Once again, you are trying to pretend that the bankers did not ride this ponzi scheme until the end.

The bankers are supposed to be the professionals who know better That is their jobs. Joe the plumber who took out the loan isn't supposed to be a financial wizard. Ah, but when the whole thing collapses, instead of the banker taking responsibility for his job, he wants to blame Joe for taking his advice, or blame the government, or anyone else they can push the blame off onto.

The entire business underscores the problem and that is that the government is simply too big and there are too many things that are fundamentally integrated in practice yet totally disaggregated with respect to government policy and oversight.

This whole mess was created by deregulation of the banking and financial markets, Newts whole free market concept. Glass Steagal had kept this sort of thing from happening for over sixty years. It is no coincidence that a decade after the repeal of Glass Steagal, our economy collapsed from a massive ponzi scheme.

reply to post by dolphinfan


The only reason the Dow has recovered is because the government bailed them out, and is borrowing over a trillion dollars a year to keep our economy alive.

There is no recovery. It is all hot air, based on the belief that we can stick future generations with our debts.

Wall Street has a gun to the head of boomer retirement plans. The seniors, who are the strongest voting block know this.

Boomers arrived on the scene of the strongest economy in world history, created by responsible government regulation of business and high taxes on the super rich. Through sheer greed boomers destroyed all of this, and they leave the next generation with nothing but debt. What a bunch of smucks. They have screwed over every generation that came after them.

You are right, it was never really there to begin with, it was all an illusion, created to sell the con. Those stock numbers aren't really there either.

reply to post by dolphinfan


It is the bankers fault for making a risky loan that had little chance to be paid off, considering the high probability that housing could not continue to rise.

The banker knew full well that they would get their commission, and if it all fell apart, the fed government would be stuck with the bill.

It is called insurance fraud.

The only reason the house price was over inflated is because after that guy looking to buy the home left, another guy looking to buy the same home came in and got the same story. It was the bankers willing to make the these risky loans who drove up the prices in the first place.

The banker taking the risk, should have looked at the guys financial situation in a realistic manner, and only agreed to loan the guy money on what he was reasonable able to afford at the time, NOT counting on home price to continue to rise at unprecedented rates. This is where the bankers stopped doing their jobs, and this decision is what the bankers should be held responsible for.

The guy most able to buy the house should have been the one to get the loan, not the guy most willing to gamble on the future, which is how the bankers ran the scam.

This is how the conversation should have went.

Home shopper to Banker - "I want to buy that $300K house"
Banker - "OK how much do you have to put down"
Home shopper - "nothing, but I hear you have no money down loans"
Banker - "thats right we do. Hows your credit?"
Home shopper - "its not too bad"
Banker - "do you have a job?"
Home shopper - "yes, same job for the past years"
Banker - Ok, based on your income and credit rating, this is how much money I can loan you to buy this home.

If the bankers had done this, than home prices would never have risen like they did. Home prices would have remained relative to wages.

INSTEAD, the banker pulled this con.

Banker - "here is a loan I can put you into. Its zero money down, a three year adjustable rate mortgage, meaning that the interest rate if fixed for three years and then will go up"
Home shopper - "whats the initial payment?
banker - "$1,500/month for the first three years"
Home shopper - "tell me again what happens in three years"
Banker - "the rate will adjust based on current interest rates using a standard called LIBOR. The rate might go up and it could go down"
Home shopper - "what if the rate goes up and I can't afford the payment?"
Banker - "well a couple of things. You could look to refinance the house. You could sell it. The housing market is really good right now and I have clients who are taking advantage of the increase in housing values to pull out equity and refinance into different loans. There are a number of things you can do"

AND housing prices rose not at the rate of wages and salaries, but on pure speculation. The bankers, being the professionals, should have known better, but instead they went with the con, and they should be held responsible for their actions.

reply to post by poet1b


There are certainly massively illegal activities that the investment banks engaged in that should have caused people to go to jail and not the one or two post card folks that have been tossed in the tennis court prison, but big players in real prison.

- firms selling funds and products to clients that they were actually selling short
- firms having their trading desks drive up markets when they are actively betting against them
- firms that had acknowledged inadequate risk management infrastructure in place, both people and technology and did nothing to correct it which amounted to a lapse in fiduciary responsibility
- firms tossing spiff to the ratings agencies, influencing them to cast in a favorable light securities of poor quality. The government knowing this full well and letting it happen because of the spiff they get from the ratings agencies

The challenge with the trash wall street business is that the malefactors in this fiasco were in the hundreds of people, not in the tens of thousands. Financial services is a heavy infrastructure business and there are tens of thousands of folks, margin clerks, systems programmers, computer operators, call center folks and the like who got stiffed during this business. When Dick Fuld who raped Lehman Brothers took his $500M out of the firm and then destroyed the company's stock, when, like most financial services firms, you get no pension of any kind and are expected to fund your retirement with your bonus. The 401K is typically company stock. Fuld destroyed the firm, drove the stock to pennys, wiping out thousands of folks 401k assets and all of these folks lost their jobs. There is absolutely no way that he should not be in prison as well as subject to civil penality. Every dime he has and every physical asset he owns should be taken

Government can do a lot that it is not doing to regulate the financial services industry. First, the government should take over the entire security and debt rating industry. There is simply too many inherent conflicts of interest for private firms to be rating instruments created by the folks who actually pay them. Right in the middle of this blow up the CEO and half the top team at Moodys were kicked out for unethical conduct, yet the government plays on, letting these bodies rate securities, thus having a tremendous impact on the market.

The government could and should mandate a level of risk management oversight, both human and technical that is used in each firm, that infrastructure should be subject to regulatory audit. The government should also mandate an outside risk management professional be appointed to at a minimum the firms audit committee if not the board of directors as an advisor. That person would have a fiduciary role with legislative clout.

The government could give up this ghost of the American Dream of home ownership all together and allow banks to loan money to who they want to loan money to, regardless of the demographics.

The government could set standards on the derivatives markets

They can do a lot. They have done absolutely nothing but make speaches

As far as the housing market. If a bank has a loan for $500K and the house is worth $400K and the person is faithfully paying and has been for years. Perhaps he is even a client of the bank in other areas such as checking/savings. If the person falls on hard times and needs to have the bank work with him, the bank could and in many cases would do so. In their assessment they still have an asset of $500K on the books. The challenge is that the government forces them to adjust that loan and consider it as a $100K liability. That is wrong and stupid business and absent this mark to market and the federal regs on loan portfolios held by banks, far more folks would be in their homes today.

Talk to a banker - what has actually happened is that the house that was worth $350 in todays market after the government forced, via accounting regulations, the bank to foreclose on the home owner has gone from being classified as a $500K asset to a $150 liability. Now that the owner's been kicked out, its not worth $250 because it has been left vacant, fallen into disrepair and is in a neighborhood that looks like a wasteland. The bank would much rather keep the gent in the house to keep up the property which is secured by their debt, again a $500K asset which based on prior payment history they have every reason to expect to realize. The entire business and the potential consequences of accounting regulations in times of a severe correction in the housing market with no available credit were never thought through.

Now, you can't think through every possibility when crafting law, but if the government was a small and nimble entity and you saw this happening you'd say "holy hell, we need to fix this tomorrow to stave off massive folks losing their homes" and you'd do something. The government is so big, sluggish and weighed down by corruption and special interests that they can't do anything inside of two years and that depends on where we are in the election cycle. By the time they do get something, a few million are out of their homes.

If the tea bagger politicians really cared about the people they are supposed to represent, they would be pumping money into the federal Attorney Generals office to go after the crooks who perpetrated this ponzi scheme crime across the county.

The Attorney Generals office could then go after the crooks that perpetrated these cons, and recover some of the of the money stolen from the people of the U.S..

Instead the tea baggers are looking to starve the regulatory agencies of the funds needed to do their jobs.

Maybe the real answer is for the fed to default, and let the whole thing collapse. The dollar becomes worthless, savings and debts become worthless, billionaires will no longer be rich.

Everone is up in arms over the budget. What are they going to do? Whose deal is going to pass? The economy is going to crash!!! There is only ONE out come to all this political posturing. We the people are going to pay the price of whatever they do and there is no way out of it.

reply to post by DAVID64


They're going to do exactly what they always do

Make a bunch of speaches to make everyone look like a winner and a statesman

Kick the can down the road and wait until another set of pinheads get elected and make it their problem

After that blame the new guys

reply to post by dolphinfan


Now you are starting to make sense, glad to see that you recognize that crimes where committed in the upper echelon.

Government could do a lot more, and did a lot more in the past. People want to pile on the government, and blame them for the problems created over the last decade, and ignore that those problems were in fact created by the finance industry, due to a relaxation of government controls.

People want to pretend that government can't be effective, when our government was very effective for fifty years, from 1950 to 2000, and it was after Newts deregulation policies, removing government controls from business, that things fell apart.

Instead of waking up to the reality that free market concepts do not work, they keep trying to shift the blame. Way too many people are brain washed by these right wing radio talk show personalities, who work for the people out to screw everybody. This is the root problem.

The government could give up this ghost of the American Dream of home ownership all together and allow banks to loan money to who they want to loan money to, regardless of the demographics.

The banks are given a privilege under our fractional reserve banking system to distribute the money. Government should clearly have a say in making sure those funds are fairly distributed. It was only after loans began to be made on pure speculation rather than economic realities, that this became a real problem. Maybe government had gone to far in requiring loans to some groups, but that doesn't excuse the speculation that went on during the housing bubble.

The government could set standards on the derivatives markets

They can do a lot. They have done absolutely nothing but make speaches

That is because a sizable amount of the politicians, and their supporters, still believe that government shouldn't set those standards, in spite of what occurred over the past decade, they still refuse to recognize governments role in preventing white collar crime.

I think you make a good point that there should be some special rules for recent home buyers, when a region, or the nation at a whole, runs into hard economic times. Maybe instead of foreclosure, the bank could set aside a 100k of the loan, and the government not count this against the bank, recognizing special circumstances, so that the home owner can keep the home, keep up the value at least at 400k, and still make ends meet financially. If the economy recovers, then the 100k is put back into the loan, but in the mean time, the home owner only pays principle and interest on a 400k loan. Relief should come for both the banker and the home owner.

Once again, if it wasn't for the speculation that caused the housing bubble, this wouldn't have been such a big problem.

Yeah, I agree that our government is too big and bloated, that is what you get when you cut taxes, and rely on deficit spending to finance our government. Worse, is that the people who gain the most from government spending, International Corporations, are paying the least in taxes. The middle class winds up subsidizing these ICs.

Who should pay for the FDA? The Food and Drug corporations, who rightfully should pay for the financing of law enforcement of their industry. Yeah, the cost will be passed down to consumers as it rightfully should be, reflecting the true cost of the goods, and not subsidized by working people, who don't make money from the industry. This would also open the doors to small companies to compete.

Don't pull the fox and the hen line, those corporations are not a bunch of hens.

Our big military presence overseas should be paid for by the corporations who benefit most from that government spending. Once again, let the true costs be reflected in the cost of the services. What should gas prices really be if oil paid for the middle east wars and all the money used to stabilize those regions for the corporations that do business there? People would be driving much smaller cars, and alternative energy sources would be much better enable to compete against gasoline.

Wallmart, other retailers, and the manufacturers using cheap Chinese labor, should pay for the military costs of keeping Asia stable against Chinese aggression. That might make China re-think its actions, and save us all a lot of money. Instead, U.S. workers subsidize the exportation of their jobs.

If corporations had to pay for what it got out of our fed gov, they wouldn't be working so hard to make it inefficient.

Clinton had the right idea with third way economics. Too bad that got thrown out the window.

reply to post by DAVID64


If we weren't forced to subsidize the ICs through federal taxes, and the invisible tax of inflation, that us currently way under reported, we might have a choice as to what we are paying for.

People need to wake up and realize how badly they have been conned.