Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Blowing the Whistle on the Mortgage Bubble

pbs.org

Post reply on HN
Print view View original

131–140 of 178 posts

Re: Blowing the Whistle on the Mortgage Bubble

#131

Post by mpyne »

patrickgzill wrote: post #122
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.

I am simply gob-smacked that people who are communicating over the Internet (needs gold, even if you are using fiber for much of the way) via their computers or smartphones (needs gold) don't realize how much gold is used in modern tech. Admittedly, fractions of a gram, but times millions of items! And gold has been used in jewelry, art, decoration as well as monetary purposes for 1000s of years. I would expect at th…

> I would expect at the least, American readers to be familiar with the "Continental currency" and its devaluation to 1% of it previous value

Indeed, we're all taught in high school about things "not being worth a Continental" during the American Revolution.

This doesn't really disprove my point though. No one believed in the government backing the Continental currency (for good reason as it turned out, the Articles of Confederation later gave way to the Constitution).

You're saying gold is valuable, but again, it's because people give it value. Whatever contribution of value gold makes to our electronics is included in the component cost, you could as well be arguing that plastic, glue, or lithium is intrinsically valuable.

And if we theoretically started finding gold nuggets in every square meter of soil in every home in America then guess what: the perceived value of gold would drop. This has happened throughout history: The Roman Empire switched to using gold coins instead of silver in response to an oversupply of silver being found in their new colonies. The finding of gold in the New World caused prices in Europe to shoot up as a result (people had more gold money to spend but the same amount of goods to buy, so the goods simply became more expensive).

Gold, like _everything else_, is worth exactly what people think it is worth.

Re: Blowing the Whistle on the Mortgage Bubble

#132

Post by ScottBurson »

mseebach wrote: post #34
gizmo wrote: post #23

Earlier quoted context omitted.

Ug. So many misconceptions and conspiracy theories, where do I begin? 1. The US and the Eurozone are suffering from very different problems. The debt in the US is likely to stabilize at around 80% GDP (source: http://krugman.blogs.nytimes.com/2013/01/24/tim-geithner-is-... ). European countries are in quite a bit of trouble, but it will most likely take the the form of a slow and painful recovery. Greece has already…

So, for your point 1, neither Krugman nor the CBPP report he links to claims that the debt will stabilise at 80%. It will arrive at 80% with a rising slope, not flatten like the "cuts" scenario. Also, good thing you didn't link to anything containing conspiracy theories: To say what should be obvious: Republicans don’t care about the deficit. They care about exploiting the deficit to pursue their goal of dismantling…

If you don't accept this coming from Krugman, Bruce Bartlett is a moderate voice who says essentially the same thing: http://economix.blogs.nytimes.com/2012/11/20/the-new-republi...

Re: Blowing the Whistle on the Mortgage Bubble

#133

Post by sageikosa »

deveac wrote: post #39
martinced wrote: post #15

"industry insiders were ringing the alarm bells" Just as today many economists are ringing the alarm bells: the governments public debt issues (both in U.S., Japan and many countries in the Eurozone) are going to end up very badly. Many central banks (including in the U.S.) have basically become bad banks. Anyone holding medium and long-term public government debt (like many insurance products) are basically bankrupt…

>"The problem of socialism is that at one point you run out of other people's money". And that's where we're arriving now. Ugh. I try my best not to be snarky on here, but here is the wiki explaining what socialism is: http://en.wikipedia.org/wiki/Socialism Don't worry, you don't have to read past the first sentence to reveal your complete and utter misunderstanding of the term. The trend, over the years, has been ov…

http://mises.org/daily/6277/Socialism

Much better read

Re: Blowing the Whistle on the Mortgage Bubble

#134

Post by pdonis »

patrickgzill wrote: post #36
pdonis wrote: post #20

Earlier quoted context omitted.

the reason these banks aren't prosecuted is because it is basically government policy not to And the reason for that is that it was government policy that created the situation in the first place: wanting everyone to own a home, whether they could afford it or not, and allowing banks to play games to offset the inevitable losses from being forced to give mortgages to people who couldn't afford them. And it was govern…

You are both right and wrong. The total amount of support given to the banks was far greater than the total amount of ALL residential mortgages everywhere in the USA. Total support given in all the various ways was over $10 Trillion, while the total value of all residential mortgages is under $4 Trillion.

support given to the banks

Support given by the government, right? That would make the government, if anything, more culpable.

total value of all residential mortgages

It's true that my previous comment applied to residential mortgages, but as I understand it, the real estate bubble was not limited to residential; it included commercial and industrial real estate as well. Certainly in my local area there has been lots of overbuilding of office and industrial space. So the correct number to compare with the total of government support given is the total of all mortgages, not just residential.

Re: Blowing the Whistle on the Mortgage Bubble

#135

Post by wcgortel »

vec wrote: post #129
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…

As a client, it is perfectly reasonable for me to say to a sales rep "I want X% average return, I'm willing to accept Y amount of risk to get it, and I don't care particularly much about how you give it to me", so long as X and Y are reasonable. My understanding is that the financial institutions were accurately describing the average rate of return but drastically under-representing the risk of these instruments to…

I would agree with you that it's reasonable to expect that to be a conversation that would result in your desired outcome. There are a few technical things at issue.

Again, I agree this is broken. My only point is that saying things are "fraud" is harder than I think you expect.

The problem is that saying "I want X% return with Y risk, show me suitable investments" introduces two problems. The first is that risk is not easily quantifiable[1] and also that there are likely many things that are plausibly suitable for that requirement.

If you are dealing with a salesperson, they are required only to present stuff that has a reasonable likelihood of meeting your goals.

If they're working with someone who is a fiduciary, that fiduciary is required to do the extra analysis, but many people are not lucky enough to work with folks who are held to that higher standard.

In my view, every consumer when transacting with every salesperson should use their own judgment to make sure that the products they are being sold are sensible and suitable for them.

Failing to do that -- to just walk into a store and buy what the salesperson (not your personal shopper or your sister or someone who actually cares) says is best -- is just a bad idea.

I hope that adds some clarity as to where I'm coming from.

[1]Quanta exist, but are not comprehensively descriptive. Any metric will not comprehensively describe risk, especially because there are behavioral factors (your own changing attitude towards risk over time) that need to be incorporated into a thoughtful assessment.

Re: Blowing the Whistle on the Mortgage Bubble

#136

Post by driverdan »

wcgortel wrote: post #88
patio11 wrote: post #2

Worth it just for the email in the middle by a Citi underwriter. http://cybercemetery.unt.edu/archive/fcic/20110310201200/htt... I don't agree with every stylistic choice, but that's some of the best professional writing in the fling-a-firecracker-outside-of-your-silo circumstance that I've ever seen. ("I do not believe our company has recognized the material financial losses inevitably associated with the above Citi…

I sent a similar email to the CEO of my bank in 2007 -- there was a product I was involved in that (it was clear) was not understood by our sales force or by our investors. I'll spare the details, but I was called into his office and reminded that the "e" in email stands for "evidence."

What was your reaction? Did you report this to anyone higher up or any legal authorities?

Re: Blowing the Whistle on the Mortgage Bubble

#137

Post by wcgortel »

driverdan wrote: post #136
wcgortel wrote: post #88

Earlier quoted context omitted.

I sent a similar email to the CEO of my bank in 2007 -- there was a product I was involved in that (it was clear) was not understood by our sales force or by our investors. I'll spare the details, but I was called into his office and reminded that the "e" in email stands for "evidence."

What was your reaction? Did you report this to anyone higher up or any legal authorities?

I retained counsel and ultimately left the firm to work in the investor education department of an NGO. I had a conversation with a regulator, but it was clear that they were neither serious about pursuing it or adequately staffed to do so.

Re: Blowing the Whistle on the Mortgage Bubble

#138

Post by sageikosa »

Nursie wrote: post #21
martinced wrote: post #15

"industry insiders were ringing the alarm bells" Just as today many economists are ringing the alarm bells: the governments public debt issues (both in U.S., Japan and many countries in the Eurozone) are going to end up very badly. Many central banks (including in the U.S.) have basically become bad banks. Anyone holding medium and long-term public government debt (like many insurance products) are basically bankrupt…

That's right, socialists are the ones to blame. Good citizen, you've been well trained to see socialist enemies hiding around every corner. We do not live in a socialist world. If you had any comprehension of what the word meant you would stop using it.

World: socialist. (And in denial) Check!

Just because we haven't obtained the socialist paradise, doesn't mean we aren't living under a socialist order. It's the means that define socialism, not achievement of the goals.

The means are "social" control of the means of production; whether it is by direct seizure of the state, proletariat masses, or small anarcho-syndicalist communes; or indirect by legislation, regulation, licensing, taxation, the SEC, central banks or control of the value of currency and savings; doesn't matter.

And the trend is towards more of that because the goals of most of these initiatives are the goals of distributing goods to (almost) everyone, so that when the private component fails, the social component will expand to rectify the situation.

Re: Blowing the Whistle on the Mortgage Bubble

#139

Post by MaysonL »

wcgortel wrote: post #106
nicholasjarnold wrote: post #93

Earlier quoted context omitted.

I cannot express how angry reading comments like this makes me. Clearly many of these guys at the top (bank CEO's, fund managers, ect.) were systematically defrauding everyone in order to turn a larger profit. Call me naive, but isn't this shit (the massive fraud perpetrated on us by banks) supposed to result in hefty jail sentences?

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…

Go read William K. Black[0] on the subject of accounting control fraud. He's the author of The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry [2005] He was one of the lead regulators during the Savings and Loan crisis. Follow a few of the links on his Wikipedia page. It was fraud: massive and with regulators (led by Alan Greenspan) turning a blind eye.

[0]https://en.wikipedia.org/wiki/William_K_Black

Re: Blowing the Whistle on the Mortgage Bubble

#140

Post by MaysonL »

wcgortel wrote: post #135
vec wrote: post #129

Earlier quoted context omitted.

As a client, it is perfectly reasonable for me to say to a sales rep "I want X% average return, I'm willing to accept Y amount of risk to get it, and I don't care particularly much about how you give it to me", so long as X and Y are reasonable. My understanding is that the financial institutions were accurately describing the average rate of return but drastically under-representing the risk of these instruments to…

I would agree with you that it's reasonable to expect that to be a conversation that would result in your desired outcome. There are a few technical things at issue. Again, I agree this is broken. My only point is that saying things are "fraud" is harder than I think you expect. The problem is that saying "I want X% return with Y risk, show me suitable investments" introduces two problems. The first is that risk is n…

It was fraud, executed at the highest level, with an associated Gresham's law corollary: honesty was driven out of the market as CEOs who failed to follow the "liars loans" trend didn't survive. As I said upthread, go read William K. Black's Wikipedia page, follow a few of the links (his appearance on Bill Moyers was good).
Post reply on HN