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Blowing the Whistle on the Mortgage Bubble

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Re: Blowing the Whistle on the Mortgage Bubble

#111

Post by arethuza »

gadders wrote: post #87
arethuza wrote: post #50

Earlier quoted context omitted.

From their Wikipedia page: "Before the 2008 collapse and the general financial crisis, RBS Group was very briefly the largest bank in the world and for some time was the second largest bank in the UK and Europe" http://en.wikipedia.org/wiki/The_Royal_Bank_of_Scotland_Grou... Of course, it depends how you decide on the size of a bank... Also they had been on an insane binge of acquisitions, including the ABN Amro deal…

Interesting. They didn't even have a proper investment banking arm, just primarily fixed income, and not much of a bank network outside of the UK.

Here is a good documentary about the fall of RBS and ex-Sir Fred "The Shred" Goodwin:

http://www.youtube.com/watch?v=fg3K-S5GqBo

Re: Blowing the Whistle on the Mortgage Bubble

#112

Post by wcgortel »

SkyMarshal wrote: post #110
wcgortel wrote: post #106

Earlier quoted context omitted.

I mean, you're justified in a way. I don't think it's fraud though. Consumers are equally complicit. What I mean by that is that as the buyer of a product, you usually would go out and read the reviews, kick the tires, etcetera. At this time, many buyers of investments didn't do that at all. Our sales guys didn't understand the product for sure, but if they had a customer who asked the right question they would have…

>Edit: shameless plug. My stealth mode thing should change this a little bit (for certain investors). Plugging a stealth mode startup? C'mon man spill it, you know you want to, and now we're all curious.

My thing takes your investment capital and cohorts it sensibly against your time horizons.

It's new. A lot of what you get from an is along the lines of "Oh, you want this money in seven years huh? You should probably just buy a bunch of bonds." That's crazy. A .15% change in interest rates will wipe out a year's worth of interest on the long bond.

My thing is an invented modification of a CDO/CLO that keeps your global risk sensible while making sure that your short term objectives are preferentially met. It also makes really customized risks available at almost no cost.

It's cool. PM me for details.

Re: Blowing the Whistle on the Mortgage Bubble

#113

Post by JackFr »

ultraswank wrote: post #99
Irregardless wrote: post #55

My reaction while reading most of this was "Why didn't any of you try harder to let someone know? Why didn't you email everyone? Why didn't you call all the people you emailed? Wasn't there ANYONE important who would listen!?" After reading the whole thing, I was a little shocked to realize the answer is "No, there was no one important who would listen." The accountant who essentially documented the impending collaps…

There were people who were posting their stuff on the internet. http://www.calculatedriskblog.com/ was a great resource before the crisis documenting how far off the rails the mortgage business had gone. I wouldn't say it went viral, but it did garner a lot of attention for a finance blog. Paul Krugman even mentioned it on his blog. Of course almost everyone I talked to about it back in 2007 treated me like I just sa…

"Tanta" who cowrote the blog with "CR" sadly passed away a few years ago. She knew more about mortgage backed securities than probabaly everyone at the SEC and the Fed combined. One of her blog entries, "The Ubernerds Guide to Mortgage Securitization" was footnoted in a paper from the Federal Reserve.

CalculatedRisk was a pleasure to read. She and CR were not super bears. They were measured, cautious and thoughtful -- reason to be ignored when everyone else is making money.

Re: Blowing the Whistle on the Mortgage Bubble

#114

Post by gtrubetskoy »

twoodfin wrote: post #109
gtrubetskoy wrote: post #103

This documentary implies that applicants were submitting fraudulant applications, which is not true. Most people (including the Frontline producers, apparently) still do not understand who was defrauding whom here. If you apply for a loan and misrepresent your financial situation, this is not fraud (which is a crime) it's a lie, and lying is NOT a crime. You can say you're a teacher making a million a year and what's…

If you apply for a loan and misrepresent your financial situation, this is not fraud (which is a crime) it's a lie, and lying is NOT a crime. Lying is absolutely a crime if it's considered perjury, and many (all?) loan applications require you to certify the accuracy of statements under penalty of perjury.

Taken out of the context of a loan, you're right.

But borrowing is a special case. Because if the responsibility were entirely on the borrower, then it would be advantageous to the bank that you lie on the application. Then they could take all your material possessions as soon as you fail to make a payment and send you to prison to boot. (Which is not far from what happened with the mortgage crisis.)

This is how loan sharking works, and why it is illegal.

If someone issues you a loan that you cannot repay, it is the issuer's loss, it's as simple as that. If the issuer knew you couldn't repay it, it's not just their loss, but they're also committing a crime.

Re: Blowing the Whistle on the Mortgage Bubble

#115

Post by Rimpinths »

sillysaurus wrote: post #92
liber8 wrote: post #65

Earlier quoted context omitted.

It's not that a special somebody wouldn't have listened. This wasn't as big an information problem as most people make it out to be. As this, and many other articles explain, bankers and underwriters knew bank fraud was widespread. The general public, who took out the loans, knew they were defrauding banks. Wall Street knew the rating agencies were full of shit. But everybody was making a killing as long as real prop…

As someone who is completely ignorant of investment strategies, would anyone explain how to make a fortune off of an impending financial collapse (when you predict the timing perfectly)? That sounds very interesting.

If you're really interested in this topic, Michael Lewis's book "The Big Short" covers this in detail. Great book.

Re: Blowing the Whistle on the Mortgage Bubble

#117

Post by groby_b »

Irregardless wrote: post #55

My reaction while reading most of this was "Why didn't any of you try harder to let someone know? Why didn't you email everyone? Why didn't you call all the people you emailed? Wasn't there ANYONE important who would listen!?" After reading the whole thing, I was a little shocked to realize the answer is "No, there was no one important who would listen." The accountant who essentially documented the impending collaps…

They tried. People didn't want to know. They actively ignored. And no, let's not blame reporting for that.

There were reports on radio/TV - and not exactly places focused on the economy - about the housing bubble issues, and a potential collapse of epic proportions as early as 2005, IIRC. It was bad enough in 2007 that I decided to pull entirely out of the stock market, and I'm anything but a financial expert.

Everybody closed their eyes and hoped it wouldn't be them.

Re: Blowing the Whistle on the Mortgage Bubble

#118

Post by SkyMarshal »

cs702 wrote: post #80

The senior banking executives who ignored the early warnings were making tons of money. The mid-level bankers assembling and selling mortgage securities, who also ignored all warnings, were making tons of money too. The ratings agencies and lawyers giving their stamp of approval to these crazy securities, who also ignored all warnings, were making tons of money as well. The mortgage brokers and originators who were m…

>To find culprits, most Americans need only look in the mirror.

Without looking up the statistics, I doubt it was 'most' Americans, aka 50%+. You heard a lot about 'flipping', but I don't think the majority of the country was engaged in that, even if you include the financial enablers. It had an outsized effect on the entire economy for sure, though.

Re: Blowing the Whistle on the Mortgage Bubble

#119

Post by JackFr »

Nursie wrote: post #107
patrickgzill wrote: post #69

Earlier quoted context omitted.

Gold has an intrinsic value, 1 gram of cotton based paper with some ink on it, does not.

Gold is shiny, the paper is bendy and has a picture of some dude on it. In the absence of other people and their ideas of value, given enough cotton paper I could make clothing or a fire. Given enough gold I could probably make a bludgeoning weapon... Both have fairly minor value in the absence of shared delusion. And even beyond that, what the hell is 'intrinsic' value? Has the universe decreed that there is a prope…

The simple difference is the level of scarcity.

If there is a high demand for fiat money -- observable through a rise in interest rates, a measure of the inter-temporal preference for money now versus later -- the Federal Reserve can print more. If there is a high demand for gold money, at the margins we can produce more, but basically the supply is fixed. This limits the rate at which the real economy can grow.

Many people who favor a return to a "gold standard" do so because they have experienced inflation, but have never experienced a deflation. Deflations in general are more painful than inflations.

Re: Blowing the Whistle on the Mortgage Bubble

#120

Post by JackFr »

SkyMarshal wrote: post #118
cs702 wrote: post #80

The senior banking executives who ignored the early warnings were making tons of money. The mid-level bankers assembling and selling mortgage securities, who also ignored all warnings, were making tons of money too. The ratings agencies and lawyers giving their stamp of approval to these crazy securities, who also ignored all warnings, were making tons of money as well. The mortgage brokers and originators who were m…

>To find culprits, most Americans need only look in the mirror. Without looking up the statistics, I doubt it was 'most' Americans, aka 50%+. You heard a lot about 'flipping', but I don't think the majority of the country was engaged in that, even if you include the financial enablers. It had an outsized effect on the entire economy for sure, though.

No most people weren't flipping, but cash-out refinancings were fairly common.
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