NY Mag: 10 Years After the Financial Collapse

[JaxJoe]

1 hour ago, PleaseBlitz said:

Additionally, they voted in the decision makers at the time with no interest in regulating the financial markets and LOVED Greenspan for helpin

Greenspan, if I recall, was head of the Fed for Bush 1, Clinton, and Bush 2 so it had nothing to do with who was elected. You make very good and accurate points but you seem to focus on the mortgage side of the crisis. I recall Sec. Treasury John Snow briefing congress in ‘05 on the looming crisis over at Fannie and Freddie. Mortgage lenders and banks used these two GSEs like the FDIC to lower their ‘risk’ involved in sub-prime loans. Yes, we as individuals need to be better educated in simple finance and be more conservative in our decisions. But the crisis of ‘08 had its origins several years prior. Its a chicken-egg argument yet Gov’t, financial institutions, and individual citizens are all to blame. 

 

Also, disparaging remarks against folks in the south and midwest have no basis in this discussion. Trust me, if all citizens in Iowa stopped their loan payments it wouldnt be but a drop in the bucket as there just st isnt enough capital in those states to cause a problem. Its the massive populations from folks in the big cities on both coasts that bear the lion’s share of the subprime credit failures. Heres a reputable article that helps describe the macroeconomic problems that led to the crisis. It’s basically a ‘risk’ issue regarding cash to debt topic every student of finance learns. 

 

In general, @zoony is more correct when he said the crises eclipses politics and demographics. 

 

https://www.nationalaffairs.com/publications/detail/fannie-freddie-and-the-crisis

[Burgold]

On the contrary, there are many who are doing as much as they can to make sure it's a severe and profound a disaster as possible. This isn't the case of those who don't learn from history are doomed to repeat it. This is grab mine now and **** the future.

[PleaseBlitz]

1 hour ago, TD_washingtonredskins said:

 

Edit: Here's a pretty crappy analogy...

 

I am in charge of a garden in some very small community. I ask everyone to come and only take what they need and will eat so that there's enough for everyone and the food won't rot at their homes if they don't get to it. But, instead of stepping in and applying stipulations, I let the people determine what that threshold is (or I set it so high as to not make it realistic). When we run out of food in the middle of winter, is that Joe the Blacksmith's fault more than mine? Is he qualified or expected to worry about the big-picture or just take what he thinks he needs and can manage? I was essentially in charge of making sure that very thing didn't happen. 

 

I know it's simplistic, but it's how I view it. 

 

Here's an even crappier analogy:

I sell drugs.  Heroin, in fact.  I make a great living off of selling heroin to upper crust folks, I don't deal to kids or hobos or whatever (because my **** is pretty expensive).  I don't give a single **** about my clients long or short-term consequences, my intensive is to move product.  My clients KNOW that heroin is bad for them and is extremely likely to lead to a very bad outcome for them in the long run, but they don't care because in the short run, it makes them feel good and all of their friends and neighbors are doing it.  I have to be careful not to get busted but, luckily, I've been doing this for a long time and the cops/local government/DEA are understaffed, don't really understand my business and don't particularly want to bust or otherwise inconvenience my clients who, after all, are voters.  

 

You are saying the drug addicts bare none of the blame.  I'm saying the dealer, addict and government are all at fault.  I understand your POV, I just give more credit to the consumers that they should be able to make better choices, but failed to because they went for the short-term benefits and ignored the long-term consequences to themselves (alone). 

 

That's how I view it.  I think both sides are valid viewpoints, and your posts are, IMO, very well thought out; we just have a reasonable disagreement.  

[Kilmer17]

By allowing banks to be too big to fail, we have now created the situation we are in now.

 

Some will say our economy is great (greatest ever!), others will tell you it's a bubble about to burst.

 

I think it's the latter.  I know who I think is to blame, but that's sort of irrelevant.  The real issue, IMO, is that there is nobody around that can stop it, help it, soften it etc.  

 

So yeah, I AM ABSOLUTELY in "get mine" mode.  I would advise everyone to do the same.

[PleaseBlitz]

20 minutes ago, JaxJoe said:

Greenspan, if I recall, was head of the Fed for Bush 1, Clinton, and Bush 2 so it had nothing to do with who was elected.

 

My post said "they voted in the decision makers at the time with no interest in regulating the financial markets and LOVED Greenspan for helping"  The "and" separates two different points.  Furthermore, I didn't say anything about political party; neither Bush I, Clinton, nor Bush II had any interest in reigning in the mortgage industry.  The reason Greenspan stayed on across 3 administrations is because voters loved his policies, they thought he was making them rich for doing nothing. 

 

Quote

You make very good and accurate points but you seem to focus on the mortgage side of the crisis. I recall Sec. Treasury John Snow briefing congress in ‘05 on the looming crisis over at Fannie and Freddie. Mortgage lenders and banks used these two GSEs like the FDIC to lower their ‘risk’ involved in sub-prime loans. Yes, we as individuals need to be better educated in simple finance and be more conservative in our decisions. But the crisis of ‘08 had its origins several years prior. Its a chicken-egg argument yet Gov’t, financial institutions, and individual citizens are all to blame. 

 

Well, it was a crisis of the mortgage market, not sure what other side there is.  

 

Quote

Also, disparaging remarks against folks in the south and midwest have no basis in this discussion. Trust me, if all citizens in Iowa stopped their loan payments it wouldnt be but a drop in the bucket as there just st isnt enough capital in those states to cause a problem. Its the massive populations from folks in the big cities on both coasts that bear the lion’s share of the subprime credit failures.

 

Generally on this board, when there is a  after a sentence, you should probably take that as a joke.

 

Quote

Heres a reputable article that helps describe the macroeconomic problems that led to the crisis. It’s basically a ‘risk’ issue regarding cash to debt topic every student of finance learns. 

In general, @zoony is more correct when he said the crises eclipses politics and demographics. 

https://www.nationalaffairs.com/publications/detail/fannie-freddie-and-the-crisis

 

Okay, I don't really need one article to summarize this for me, I've worked in the industry for my entire adult life both as a mortgage banker and as an attorney at the top law firm in the mortgage industry.  Zoony did not say that the crisis eclipses politics and demographics and, if he did, I did not disagree, He stated that it was worse for people with families (meaning older people) and I disagreed with that.  

[Larry]

1 hour ago, Kilmer17 said:

It's happening again.  Right now.  Because big banks werent punished.  In fact, they were rewarded and the small local banks got screwed.  

 

And we just got rid of the only law that was passed, to prevent it happening again.  

 

[PleaseBlitz]

3 minutes ago, Larry said:

 

And we just got rid of the only law that was passed, to prevent it happening again.  

 

 

??

[Larry]

21 minutes ago, Kilmer17 said:

By allowing banks to be too big to fail, we have now created the situation we are in now.

 

Some will say our economy is great (greatest ever!), others will tell you it's a bubble about to burst.

 

I think it's the latter.  I know who I think is to blame, but that's sort of irrelevant.  The real issue, IMO, is that there is nobody around that can stop it, help it, soften it etc.  

 

So yeah, I AM ABSOLUTELY in "get mine" mode.  I would advise everyone to do the same.

 

And oh, BTW, when it happens again, we've also made sure that the traditional government safety net of softening the blow via deficit spending will be crippled, because we've taken the step of exploding the deficit before the crisis.  

 

8 minutes ago, PleaseBlitz said:

 

??

 

Probably should have said "laws", but I'm pretty sure that we've successfully gotten rid of both Dodd-Frank and Glass-Steagle.  (sp?)

 

[PleaseBlitz]

8 minutes ago, Larry said:

 

 

Probably should have said "laws", but I'm pretty sure that we've successfully gotten rid of both Dodd-Frank and Glass-Steagle.  (sp?)

 

 

The laws are still in place for the most part, but the current administration is no longer enforcing them for the most part.  Which has all kinds of impacts on the market, a lot of them bad.  It is a weird place for a business, that wants to comply with the law but also needs to turn a profit, to be in the situation where a business practices is probably but not definitely against the law, but at the same time, there is basically zero chance that anyone will ever find out and, even if they did, probably wouldn't do anything about it.  

 

That is where the industry is right now.  

 

Edit:  The above is in reference to Dodd Frank.  I don't know much about Glass Steagall. 

[Kilmer17]

1 hour ago, Larry said:

 

And we just got rid of the only law that was passed, to prevent it happening again.  

 

Sadly it wasnt preventing anything anyway.  

[JSSkinz]

4 hours ago, PleaseBlitz said:

 

I agree with your overall sentiment, but saying that the crisis was caused by a handful of people, and not millions of people, is incorrect.  The handful of people figured out that they could make lots of money in mortgage-backed securities and, at the same time, make credit cheaper (and riskier) for everyone.  But millions of people, making their own decisions, took out those risky loans and either overextended themselves or lied to get homes they couldn't really afford.  The few made it possible, the many (practically all boomers) actually made it happen.  

What about accountability on the consumer?  I watched thousands of wannabe investors from the Northeast let their properties go to foreclosure in Florida because "they no longer had value", these people had the money to pay the mortgages but they basically walked away because we made them the victim instead of holding this portion (which was a sizable percentage) accountable for their actions.

 

You can't buy stock and return it a year later because it lost value. 

 

I remember negotiating a short sale with an asset fund in South Florida, the bank lien was over $1M and I was able to get the client out for $410k on a short sale, while negotiating this client continued to steal the appliances, countertops, and eventually the floating boat ramp before the transaction was complete.  Unless you were inside the banking world you have no idea of the ruthless, disgusting, and childish stuff consumers were doing.

 

This is one example out of hundreds of ridiculous stories I could paint this thread with.

 

I became so disgusted with consumer finance that I moved to commercial finance and wish I had done it a lot sooner.

 

 

[Larry]

4 minutes ago, Kilmer17 said:

Sadly it wasnt preventing anything anyway.  

 

If that were true, then there would have been no need to get rid of it.  

 

[Kilmer17]

1 minute ago, Larry said:

 

If that were true, then there would have been no need to get rid of it.  

 

Other than a middle finger to his enemies?  He's not THAT petty?

 

 

[zoony]

19 minutes ago, Kilmer17 said:

Sadly it wasnt preventing anything anyway.  

 

This x10000.

[PleaseBlitz]

24 minutes ago, JSSkinz said:

What about accountability on the consumer?  I watched thousands of wannabe investors from the Northeast let their properties go to foreclosure in Florida because "they no longer had value", these people had the money to pay the mortgages but they basically walked away because we made them the victim instead of holding this portion (which was a sizable percentage) accountable for their actions.

 

You can't buy stock and return it a year later because it lost value. 

 

I remember negotiating a short sale with an asset fund in South Florida, the bank lien was over $1M and I was able to get the client out for $410k on a short sale, while negotiating this client continued to steal the appliances, countertops, and eventually the floating boat ramp before the transaction was complete.  Unless you were inside the banking world you have no idea of the ruthless, disgusting, and childish stuff consumers were doing.

 

I became so disgusted with consumer finance that I moved to commercial finance and wish I had done it a lot sooner.

 

 

 

Well, I think losing your home and destroying your credit (for awhile) are forms of accountability.  The fundamental deal that lenders make with consumers is that if they don't pay, they don't get to keep the house.  So, given that deal, a lot of consumers made the rational decision to walk away.  They were held accountable to the extent their agreement with the lender required.  I don't think either side is a victim in that circumstance, both sides entered into a contract with certain consequences for nonperformance.  That is the basis of all contract law; contracts allocate risk.  

 

I was in the banking world at that time, and am well aware of the childish things consumers were doing (although your client seems to be particularly bad.  They stole the countertops?  I had one person that I was dealing with steal all of the copper pipes out of a house (it ****s up the whole house)).  Banks did terrible things too (like calling consumers in default and threatening to have them jailed, even though they had no basis for making that threat, or simply ignoring requests for any assistance).  They had to change the law (Fair Debt Collection Practices Act and the Servicing Rules under Regs. X and Z) to crack down on those practices.  Both sides handled it poorly.  

 

In any event, it sounds like you agree with me that the consumers who bought more house than they could afford bare a significant amount of the blame.  

1 hour ago, Larry said:

 

Probably should have said "laws", but I'm pretty sure that we've successfully gotten rid of both Dodd-Frank and Glass-Steagle.  (sp?)

 

 

25 minutes ago, Kilmer17 said:

Sadly it wasnt preventing anything anyway.  

 

20 minutes ago, Larry said:

 

If that were true, then there would have been no need to get rid of it.  

 

 

18 minutes ago, Kilmer17 said:

Other than a middle finger to his enemies?  He's not THAT petty?

 

 

 

6 minutes ago, zoony said:

 

This x10000.

 

What is "it" you all are referring to?

[Kilmer17]

I was responding as if "it" was Dodd Frank.

[PleaseBlitz]

3 minutes ago, Kilmer17 said:

I was responding as if "it" was Dodd Frank.

 

Most of the Dodd Frank mortgage rules are still in place, although a bill (SB 2155) was recently passed and signed into law that weakens Dodd Frank around the margins, although it had fairly broad bipartisan support.  

[Kilmer17]

1 minute ago, PleaseBlitz said:

 

Most of the Dodd Frank mortgage rules are still in place, although a bill (SB 2155) was recently passed and signed into law that weakens Dodd Frank around the margins, although it had fairly broad bipartisan support.  

My point was that Dodd Frank was not preventing the currently inflating bubble.  In fact, I believe it's helping inflate it and will lead to a bigger disaster than would otherwise occur.

[PleaseBlitz]

7 minutes ago, Kilmer17 said:

My point was that Dodd Frank was not preventing the currently inflating bubble.  In fact, I believe it's helping inflate it and will lead to a bigger disaster than would otherwise occur.

 

Oh I see.  I would contend that it is helping to prevent it, but yea, it can't stop it.  Not sure what you would point to as to how it is helping to inflate it.  I would point to the Ability to Repay/Qualified Mortgage Rule as an example of a Dodd-Frank rule that is helping to curb it.  This Rule #1 essentially outlaws "liars loans" (e.g., stated income/stated asset loans where the consumer simply has to claim the income they make without verification).  #2 it creates a regulatory framework that pushed the market to being 90%+ "qualified mortgages" which are either loans that conform to government-mandated underwriting standards (43% or less DTI, no interest only, no balloons, etc) or are eligible for guarantee by Fannie/Freddie/VA/FHA (and subject to their underwriting standards).  The market is starting to move away from that position, but slowly. 

[JSSkinz]

29 minutes ago, PleaseBlitz said:

In any event, it sounds like you agree with me that the consumers who bought more house than they could afford bare a significant amount of the blame. 

I have many more stories just like that, people were constantly robbing/destroying the houses once they skipped, keep in mind I'm specifically talking about investment properties or 2nd homes, not owner-occupied.  You can get traditional financing 2 years out of a short sale/foreclosure/bk so while it was a setback it was only short term for many and they had their main homes (owner occupied) to fall back on.

 

I don't blame the MBS's because the reality is if people didn't continue to leverage themselves there wouldn't have been a problem. The biggest issue with the MBS's was working the short sales and loan mods, they chopped the paper up so fine it was hard to get to the root investors.

 

[Kilmer17]

Dodd Frank keeps small local and regional banks from being able to compete.  Less choices means more big "too big to fail" size banks.

 

My friends in the mortgage industry are already talking about stated income loans being back and and increasing wildly.

 

 

[PleaseBlitz]

1 minute ago, JSSkinz said:

I have many more stories just like that, people were constantly robbing/destroying the houses once they skipped, keep in mind I'm specifically talking about investment properties or 2nd homes, not owner-occupied.  You can get traditional financing 2 years out of a short sale/foreclosure/bk so while it was a setback it was only short term for many and they had their main homes (owner occupied) to fall back on.

 

I don't blame the SMB's because the reality is if people didn't continue to leverage themselves there wouldn't have been a problem. The biggest issue with the SMB's was working the short sales and loan mods, they chopped the paper up so fine it was hard to get to the root investors.

 

 

Realtor?

 

Anyways, I think you and @TD_washingtonredskins should have a cage match. 

[JSSkinz]

Just now, PleaseBlitz said:

 

Realtor?

 

Anyways, I think you and @TD_washingtonredskins should have a cage match. 

 

No, worked for Key Bank and B of A for about 14 years, I ran volume mortgage branches for each. 

 

I think I'm the guy everyone hates, I just wish everyone knew the entire story.

[PleaseBlitz]

3 minutes ago, Kilmer17 said:

Dodd Frank keeps small local and regional banks from being able to compete.  Less choices means more big "too big to fail" size banks.

 

To an extent, if you define a small local and regional bank as including ones with over $50 billion in assets (which is the original Dodd-Frank threshold).  The SB 2155 bill that i referenced changed this to $250 billion in assets, which I personally thought was too big a jump, but nobody asked me.  (For reference, at its collapse, Lehman Brothers had $210 billion in assets).  

 

3 minutes ago, Kilmer17 said:

 

My friends in the mortgage industry are already talking about stated income loans being back and and increasing wildly.

 

 

 

Not legal advice:  You should tell your friends that they are not legal (but i know which company is offering them). 

1 minute ago, JSSkinz said:

 

 

I think I'm the guy everyone hates, I just wish everyone knew the entire story.

 

   I'm a mortgage banker turned corporate lawyer.  

[JaxJoe]

2 hours ago, PleaseBlitz said:

My post said "they voted in the decision makers at the time with no interest in regulating the financial markets and LOVED Greenspan for helping"  The "and" separates two different points.  Furthermore, I didn't say anything about political party; neither Bush I, Clinton, nor Bush II had any interest in reigning in the mortgage industry.  The reason Greenspan stayed on across 3 administrations is because voters loved his policies, they thought he was making them rich for doing nothi

I wasn't trying to be controversial, just adding my 2¢  But, when using the word ‘and’ in the same sentence, it is a conjunction that units two objects, not separates them. As in, ‘I like vanilla and chocolate ice cream.’  I recommend using two sentences for two “different” points. Although I make plenty of grammatical errors on this blog, i simply read your sentence differently than what you were trying to state. Sorry. 

 

2 hours ago, PleaseBlitz said:

Well, it was a crisis of the mortgage market, not sure what other side there is.  

 This is where I disagree. Certainly the mortgage market was a factor but as the article stated, it was depreciating home values and the owners of the mortgage notes, who already had a risky assett with regards to sub-prime loans, were now doubly risky. And when creditors and financeers rate these, the owners get de-rated, credit is slowed or locked, and then it snowballs. But what you call a mortgage crisis, I diferentiate this event from the economic crisis thst lasted from mid ‘08 to ‘15 where the loss in GDP where the entire nation suffered through, was magnitudes greater than the sum of defaulted sub-prime home loans. Now, there are more qualified scholars than you or I that still debate the cause, but no doubt through Gov’t oversight or rather lack thereof, GSEs like Fannie Mae, agressive lenders, ignorant homeowners all played a role. 

 

I can bet we agree on most topics, so I hope you can see my point of view.