ContraryGuy on November 07, 2011, 07:33:49 pm
Sam did make the point that without government backing and bailouts, banks would be more conservative and engage in less high-risk loans and investments.  

Banks would be more conservative.  But in the event of an economic crisis, some of the loss would be born by their depositors, thus their incentives to be conservative are inefficiently weak.  Thus banks are apt to be insufficiently conservative.

However, the incentives for regulators are worse than those of bankers, since regulators get political gain by directing loans to favored or politically well connected groups, and do not suffer any losses when such loans go bad.  Thus, from the lead up to the recent crisis, we have a great pile of documents where regulators demand that banks lend more recklessly, and threaten banks that are insufficiently reckless.

Having political authorities breathing down bankers necks to make sure the bankers lend responsibly, cannot work even if the political authorities have good intentions, since they are unlikely to know what loans are responsible, and the political authorities are unlikely to have good intentions.   We have a pile of documents from the lead up to this crisis revealing bad intentions.

Post hoc penalties, dire penalties for bankers going bankrupt, can work, and in the past have worked.  Regulating banks to lend safely cannot work, and is exactly what caused the present crisis.

Reminder to self: do not feed the astro-turfing troll.  Make him work for his seven figure salary.

sam on November 08, 2011, 01:08:30 am
Underclass Mexicans are not generally in the habit of financing the purchase of apartment buildings and shopping centers.  
And how much money did the banks lose on apartment buildings and shopping centers?   What happened to Mortgage backed securities backed by apartment buildings and shopping centers?

When the banks loaned to build apartment buildings and shopping centers, they demanded that the investor put some serious money down, and had adequate income.  So though the investors lost money, the banks rarely did.

When the banks loaned to Mexicans, they made million dollar loans to people with no assets and no income to buy a house no money down.  On that, the banks got smacked big time.

People kept saying that the other shoe is going to drop, that soon the disaster on residential mortgages is going to repeat on commercial mortgages, on loans for shopping centers and offices.  But it never did.

And the reason people kept making this ludicrous prediction, endlessly repeated, never fulfilled, is that they were in denial about the fact that the dud loans were, for the most part, made on the basis of race, and went bad because they were made on the basis of race - went bad because the recipients were, for the most part, no damned good - lazy, feckless, and stupid.

Lending standards were lowered for everyone, but the reason that they were lowered for everyone, is that they needed to be lowered for the race based loans.

Similarly, when a computer science class affirmative actions lots of women into the class, they stop teaching pointer arithmetic for everyone, both male and female, because most of the females cannot do it.  In the same way, the banks lowered standards for everyone, but the primary beneficiaries of this drop in standards were the recipients of race based loans.

sam on November 08, 2011, 02:54:22 pm
And "no regulations" does not equal "no oversight" -- in a free market I can choose not to do business with a capitalist who violates my preferences.  And you can choose to do business with him if you don't mind his practices.

Presumably you would not deposit your money in a bank that made irresponsible loans, because you would doubt that you would get your money back.

Suppose, however, that the banker, and all of polite respectable society, lied to you that the loans were responsible, when they were not   This happened in the lead up to this crisis, and I cannot entirely blame the regulators for that, because similar lies have led to banking crises a hundred years ago, though not on such a gigantic scale, not on a scale capable of causing extensive economic disruption.

Suppose that one day the lies are exposed, everyone rushes to withdraw their money from the offending banks, and suddenly, the offending banks have no money to repay their depositors, which is pretty much what happened from time to time in the days before the fed,

You know my solution to that problem.  What is yours?

Apollo-Soyuz on November 08, 2011, 08:09:17 pm
I think the current financial mess happened because of governmental collusion and protection, and that it is not an example of a truly free market at all. 

more than likely the "current financial mess" is still current because the banks were nationalized and never were allowed to fail, and debt was papered over instead of being written off as a loss back in 2007.

ContraryGuy on November 14, 2011, 01:23:59 pm
And "no regulations" does not equal "no oversight" -- in a free market I can choose not to do business with a capitalist who violates my preferences.  And you can choose to do business with him if you don't mind his practices.

Actually, neither you nor I will ever do business with a Capitalist, unless we too become rich.

We will do business with his or her employees, who have as much say in how the business is run as a grocery bagger in a supermarket.
We can choose not to do business with his or her business, much like people are doing with Bank Transfer Day, but such movement is usually so tiny that it doesnt impact the Capitalists desires for whatever practices they are engaged in.
Occasionally, such movement will act to reverse a small decision, such as some fee or other, but such movement will never be large enough to cause large-scale decision reversals.
There is just too much money to be made; and even if there was a stockholder revolt and the person(s) responsible for irresponsible policies and decisions were removed without pay, any successor would revert to irresponsibility once oversight were slackened.

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You know my solution to that problem.  What is yours?

Well, its certainly not killing Mexicans and poor people; or leaving them to starve, penniless and homeless.

I have decided I do not wish to live in an anarchy.  My life is full enough as it is, and I just would not have any additional time to sit on the porch with a shotgun until the non-An-cappers got the message.

sam on November 14, 2011, 02:20:58 pm
Actually, neither you nor I will ever do business with a Capitalist, unless we too become rich.

We will do business with his or her employees, who have as much say in how the business is run as a grocery bagger in a supermarket.

We can choose not to do business with his or her business, much like people are doing with Bank Transfer Day, but such movement is usually so tiny that it doesnt impact the Capitalists desires for whatever practices they are engaged in.


What is not tiny is that people choose the best prices and the best service.

Compare arbitration provided by Visa, with arbitration provided by the courts.  Compare McDonalds with the Department of Motor Vehicles.

Compare a scout camp, with an Occupy Wall Street camp.  (Occupy Wall Street being as much a branch of the state as the courts and the Department of Motor Vehicles)

The difference is like the difference between South Korea and North Korea, like the difference between Nationalist China and Maoist China, like the difference between West Germany and East Germany.

Observe how US government housing projects are pretty much the same as Soviet housing was, and completely different from private housing.

Food and  clothing are provided by capitalists, education and police protection by the state.  Everyone gets enough food and clothing.  Not everyone gets police protection.  Everyone gets schooling, but schooling frequently fails to be education, so not everyone gets education.

« Last Edit: November 14, 2011, 09:25:02 pm by sam »

mellyrn on November 15, 2011, 08:46:49 am
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I have decided I do not wish to live in an anarchy. 

You've decided you don't want to live in what you imagine (despite our best efforts) an anarchy to be. 

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I just would not have any additional time to sit on the porch with a shotgun until the non-An-cappers got the message.

But you do have time to work solely to fund the State, before you can have any for yourself -- something like four+ months of every year, if you're statistically average, which is about 1/3 more than the average medieval serf owed to his lord.

You have time -- 12 years of it -- to spend learning that which an ordinarily-motivated homeschooler can learn in 4.

You have time to serve on fake juries -- fake because of being prevented from exercising their full, true power and serving instead merely to legitimize that which they are meant to scrutinize.

You have time to stand in line to vote in "elections" and imagine that you are a citizen rather than a subject.

You have time to drive below -- maybe well below -- your competent driving speed in deference to the State's additional income streampublic-safety directive.

Should the draft be reinstated, you'd have time to be conscripted to be some armchair warrior's real, live toy soldier . . . which could wind up being the last of all the time you'd ever have.

And you presumably have time to be falsely arrested just so State tools can meet their quotas:
http://tinyurl.com/cba3qp9

Those are just off the top of my head; I'm sure I'll think of some more by the time I hit "post".

ContraryGuy on November 15, 2011, 11:33:54 am
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I have decided I do not wish to live in an anarchy. 

You've decided you don't want to live in what you imagine (despite our best efforts) an anarchy to be. 

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I just would not have any additional time to sit on the porch with a shotgun until the non-An-cappers got the message.

But you do have time to work solely to fund the State, before you can have any for yourself -- something like four+ months of every year, if you're statistically average, which is about 1/3 more than the average medieval serf owed to his lord.

You have time -- 12 years of it -- to spend learning that which an ordinarily-motivated homeschooler can learn in 4.

You have time to serve on fake juries -- fake because of being prevented from exercising their full, true power and serving instead merely to legitimize that which they are meant to scrutinize.

You have time to stand in line to vote in "elections" and imagine that you are a citizen rather than a subject.

You have time to drive below -- maybe well below -- your competent driving speed in deference to the State's additional income streampublic-safety directive.

Should the draft be reinstated, you'd have time to be conscripted to be some armchair warrior's real, live toy soldier . . . which could wind up being the last of all the time you'd ever have.

And you presumably have time to be falsely arrested just so State tools can meet their quotas:
http://tinyurl.com/cba3qp9

Those are just off the top of my head; I'm sure I'll think of some more by the time I hit "post".

It gives you some idea of what I know an anarchy to be like that I am wiling to put up with (not approve of, merely tolerate) everything you said instead of deciding that anarchy is better.

mellyrn on November 15, 2011, 12:05:30 pm
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what I know an anarchy to be like

Oops, my bad!  When and where did you live in one?

happycrow on November 16, 2011, 08:30:06 am
And how much money did the banks lose on apartment buildings and shopping centers?   What happened to Mortgage backed securities backed by apartment buildings and shopping centers?....People kept saying that the other shoe is going to drop, that soon the disaster on residential mortgages is going to repeat on commercial mortgages, on loans for shopping centers and offices.  But it never did.

And the reason people kept making this ludicrous prediction, endlessly repeated, never fulfilled, is that they were in denial about the fact that the dud loans were, for the most part, made on the basis of race, and went bad because they were made on the basis of race - went bad because the recipients were, for the most part, no damned good - lazy, feckless, and stupid.

You can keep making the assertion 'til the cows come home.  *I'm* the guy who assembled te loan packages, and I can tell you race was a complete non-factor -- the one and only factor was the race to obtain and hold the greatest possible market share.  Whether the market share as crap or not didn't seem to matter.  That *stupid* "race policy" was a factor in mbs did not mean it was so in *C*mbs.

And yes, I still think the other shoe's out there to drop -- loans with fraudulent appriasals hit the value of pensions, and a number of other indices, and I know for a fact that at least when *I* couldn't take the lack of ethics any more and left, the bank was holding onto lots o crap loans they couldn't even sell in an mbs environment.  But given all the *other* catastrophes going on in the world of finance, it wouldn't surprise me if cmbs turned out to simply be a blip.  Certainly the gutting of the dollar and "race to hyperinflation/QE-infinity" going on, combined with the partial default that already entails, takes the pressure off the loans quite a bit.

sam on November 16, 2011, 02:21:14 pm
the dud loans were, for the most part, made on the basis of race, and went bad because they were made on the basis of race - went bad because the recipients were, for the most part, no damned good - lazy, feckless, and stupid.

You can keep making the assertion 'til the cows come home.  *I'm* the guy who assembled te loan packages, and I can tell you race was a complete non-factor

A complete non factor that was nonetheless carefully recorded.

Race was a complete non factor in that you would make the same loan to a white deadbeat or a hispanic deadbeat, regardless of race, but it was a big factor in who was being recruited to receive these loans.

-- the one and only factor was the race to obtain and hold the race to obtain and hold the greatest possible market share.  Whether the market share as crap or not didn't seem to matter.  That *stupid* "race policy" was a factor in mbs did not mean it was so in *C*mbs.

A moment ago you said race was a non factor, and now you say it was a factor.  (Both statements being true in different senses)

Why then did they lose money mostly in mbs, where race was a factor, and not lose much in Cmbs, where race was not a factor?

the bank was holding onto lots o crap loans they couldn't even sell in an mbs environment.

And you have just confirmed one of the anecdotes that I was sure I could make.

So, why would the bank want a larger market share of crap assets?

Race to the bottom in frantic pursuit of ever larger market share makes sense if after you make a crap loan, you sell the loan to a bigger idiot, makes sense if you are getting market share in making crap loans then selling the crap loans to bigger idiots, but after 2005 November, the supply of bigger idiots largely dried up, and yet many banks continued make crap loans with their own money all the way into 2007

Therefore, the banks were not making crap loans for the sake of selling them to bigger idiots.  And no one wants to maximize market share in giving their own money away.

From 2005 November to 2007, the mbs market was undead, and yet the loans continued, primarily from Countrywide and WaMu.

Race was a complete non factor in the sense that anyone, regardless of race, was eligible for million dollar no money down loans, despite having no income, no job, and no assets, but surely you noticed the people arranging these loans tended to speak Spanish, that these loans were primarily marketed to people of particular races.

Similarly, when elite universities act to get sufficient females in their computer science courses, they frequently stop teaching either sex to program computers.  In that sense, gender is a complete non factor, but obviously gender was a factor in the decision to stop teaching people to program computers in computer science courses, and similarly, though race was not a factor in loaning money to particular individuals, it was very much a factor in the decision to lower standards, and the decision to market loans in particular ways.  

When people say that affirmative action does not consist of applying lower standards to women and non asian minorities, but of searching more aggressively for women and/or non asian minority candidates, often they are lying, but often they are telling the truth in the sense that what they mean is that after they searched more aggressively, and collected a bunch of recruits that could not meet standards, they lowered standards for everyone.

And thus we are increasingly seeing computer science courses that both males and females pass without any real ability to program computers, just as we see ninja loans made to both deadbeat whites and deadbeat hispanics - but primarily marketed to hispanics.

In order that women can pass in computer science, to some extent they graduate students on the basis of possession of a pussy, and to some extent, they give up teaching stuff that women are seldom capable of doing, give up teaching it to men or women.

And similarly, in order to lend money to hispanics, they go out and recruit hispanics, and lower loan standards for everyone, both white and hispanic, to levels that the hispanics they recruit can meet.  In that loan standards were often lowered for everyone, race was not a factor, and in that computing science standards were often lowered for everyone, gender was not a factor.

« Last Edit: November 16, 2011, 03:09:59 pm by sam »

happycrow on November 16, 2011, 04:23:16 pm
Sam, no offense, but it really helps if you actually read what I post.  I haven't contradicted myself at all:  race was a factor in MBS because Congress and Fannie/Freddie said "make race a factor in MBS."  You've discussed this at length.

Race was *not* a factor in CMBS because no such factors existed in those markets -- rather, they were simply corrupt and riding a classic bubble, chasing market share because that and other metrics determined how much individual players got at bonus time.  And the bonuses were *nuts,* by the way -- the admins were routinely picking up 5k for theirs, if that tells you how far into bubble-mentality folks were.

Where have banks lost money on MBS??  I'm assuming is a rhetorical question on your behalf -- if you don't know when banks lost money on that, you're not conversant enough with the issue to be in this conversation (helpful hint: them Countrywide folks you mention in your post). 

That said, we're not entirely on different pages here.  I'm no fan of affirmative action in any of its forms, but see little reason to really engage it as a topic.  I'm also not a fan of seatbelt and open-container laws -- no surprise, since I'm hanging out here, right?

sam on November 17, 2011, 01:09:35 am
race was a factor in MBS because Congress and Fannie/Freddie said "make race a factor in MBS."  You've discussed this at length.

Race was *not* a factor in CMBS because no such factors existed in those markets -- rather, they were simply corrupt and riding a classic bubble, chasing market share because that and other metrics determined how much individual players got at bonus time. 

Quite so.  CMBS was a plain old fashioned capitalist bubble, not evildoing by regulators.

It was also fueled by conflict of interest - that those receiving the bonuses failed to do due diligence on behalf of their customers - evildoing by capitalists, which worsened the madness of crowds that leads to bubbles.

But when the CMBS bubble burst, the banks did not lose the gigantic quantities of money they lost in MBS.

I am not arguing that capitalists are perfect angels, just that regulators are usually worse than those they regulate.

Finance is based on trust, trust can be violated, and frequently is.

I have never argued that bankers are nice people who should be free to do as they please.  I have instead argued that those that borrow short and lend long, and find themselves unable to pay their depositors, should be hung, or suffer debt slavery,

happycrow on November 17, 2011, 09:03:24 am
I think the current financial mess happened because of governmental collusion and protection, and that it is not an example of a truly free market at all. 

more than likely the "current financial mess" is still current because the banks were nationalized and never were allowed to fail, and debt was papered over instead of being written off as a loss back in 2007.

Ding ding!  Give that man a prize.  If the dollar hadn't been badly-devalued to bail out the banksters, the number of bank failures would have been significantly greater (and Sam, please, if you don't think banks lost money in CMBS, you're either trolling or just plain don't know what you're talking about), and the rest of us would have gotten on with life after a short but very sharp recession similar to the S&L crisis of the 80s.  Sadly, our political class is more or less owned by the banks and wasn't going to let that happen.  Gotta admire Iceland....

mellyrn on November 17, 2011, 10:13:49 am
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Gotta admire Iceland....

AMEN to that!