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Blowing the Whistle on the Mortgage Bubble

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Re: Blowing the Whistle on the Mortgage Bubble

#41

Post by snowwrestler »

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…

I can't speak to the details of the various and diverse Europe problems, but in the U.S. the debt problem is primarily political. Tax receipts as a percentage of GDP are near historic lows, and GDP itself is inhibited because we are climbing out of a recession.

In plain English--the government is taking a smaller piece of a smaller pie. No wonder our debt level has climbed.

And yet U.S. Treasury bond rates are still extremely low--which indicates that people are still very eager to invest in them. Why? Because despite obvious problems to solve, the U.S. government is still more secure than other options. As long as that is true, we can continue to finance.

So to talk about doom and gloom, you need to make a case for where all the money will go if it abandons the U.S. The typical candidates have been Europe or China. Well, Europe is in even worse shape, and China is heavily dependent on the U.S. for its own growth.

Re: Blowing the Whistle on the Mortgage Bubble

#42

Post by amalag »

xutopia wrote: post #27
jcven wrote: post #11

The best whistle blowing before the bubble popped had to be Peter Schiff telling a huge crowd of mortgage bankers they were about to lose their jobs in Nov 2006: http://www.youtube.com/watch?v=jj8rMwdQf6k

Peter Schiff fascinates me. He's had many right predictions and he's been making money off of these, all while telling the world exactly how he'll do it.

I don't think his investments are making much money. He bet on decoupling while the rest of the world looked to USA as the safe haven. He was right on some things, but didn't make a lot of money like some did in the crash. Like the hedge fund manager who bet on large mortgage defaults.

Re: Blowing the Whistle on the Mortgage Bubble

#43

Post by Shivetya »

josefresco wrote: post #31
jstalin wrote: post #12

Our system is strictly based on confidence at this point. Fiat currency, fractional reserve banking, massive leverage, and more systemic debt than the world has ever seen all rely on the fact that big banks are essentially untouchable. We'll never see prosecutions of big banks or their principles. It would break the entire system.

This is an important point, and one that I personally believe explains why we didn't see prosecutions at the highest level. Geithner was instrumental in guiding Obama away from this heavy handed approach, as he recognized (I think quite accurately) that confidence was really the only thing keeping the system from crashing completely. If Obama had given execs the kind of treatment Larry Summers and the other half of h…

Understand that what Presidents say in public is very different from what they do in private.

Why anyone would expect Obama to carry through such threats when his staff has mostly been from these very same groups is beyond me. If anything its more like, you guys are going on pikes unless you play ball, here let me connect you to my campaign finance coordinator. Geitner protected his buddies. The real collapse would have been the money available to the various campaigns that eat it up directly or indirectly.

Washington is the one percent, they own Wall Street more than Wall Street owns them. They excuse themselves from insider trading, tax issues, and the like. How are the executives at Fannie and Freddie any different from those at other lending groups? Simple, they have/had better political connections.

Re: Blowing the Whistle on the Mortgage Bubble

#44

Post by pitt1980 »

while back I read the Big Short

what I came away with was how durable secrets are

here was this billion dollar opportunity that a bunch of people became insanely rich exploiting

and it wasn't a secret at all

a bunch of people where doing everything they could to tell people how overpriced the housing market was, and the opportunity still persisted

it seems like there is so much noise in the world, that signal becomes indistuinghable

Re: Blowing the Whistle on the Mortgage Bubble

#45

Post by gadders »

arethuza wrote: post #32
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…

Alistair Darling, the UK Chancellor of the Exchequer at the time of the crisis, pretty much did think that the world was going to end - he had the chairman of RBS (one of the worlds biggest banks, possibly the biggest at the time) phone him up and say that he thought they might be able to last 2 or 3 hours . [NB I'm pretty sure I've read they were considering going to what sounded awfully like a wartime "emergency" g…

I doubt if RBS were the largest at the time. They're big, but they're not as big as JP Morgan, HSBC etc.

Re: Blowing the Whistle on the Mortgage Bubble

#46

Post by mseebach »

gizmo wrote: post #37
mseebach wrote: post #34

Earlier quoted context omitted.

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…

You're correct that the debt will continue to go up after 10 years if there are absolutely no cuts and no revenue increases. But 10 years is plenty time to bring the budget in line with GDP growth, and after the depression is behind us there should be bi-partisan interest in reducing the deficit. I'll be very surprised if the US deficit is over 80% of GDP in 10 years. The comment by Krugman about Republicans wanting…

Krugman is as "somewhat hyperbolic" as the GP. In fact, the GP qualifies his theories with "I think", Krugman states them as fact.

Re: Blowing the Whistle on the Mortgage Bubble

#47

Post by snowwrestler »

rauljara wrote: post #7
cremnob wrote: post #3

This documentary didn't reveal anything that wasn't already known. There aren't any criminal prosecutions because it's hard to prove that there was fraud. It then goes on to speculate why Breuer hasn't been able to charge anyone.

That is largely what Frontline does. They sometimes break original stories, but a lot of what they do is building on other people's reporting and compiling the information in a clear and organized fashion. Then they add interviews for depth and insight. They don't try to be breaking news. They try to be comprehensive. I'm a big fan. They aren't perfect (who is), but they take reporting and informing very seriously, a…

I love to watch Frontline, but as they've reported on areas where I know a bit more, it's become obvious how often they trade on outrage rather than detailed information.

For example, in order to really report on why prosecutions did not happen, you would think they would take some time to explain how federal law defines certain crimes. But, they never did that at all--instead they ask people for a sort of gut reaction as to whether something seemed fraudulent. But of course the word "fraud" has a number of very specific legal definitions in a number of different laws.

One could argue that that is ok, because the real point is that the language of the laws themselves allow people to get away with fraud (in a gut-check sense). But again, to make that point they would have had to get specific about what the law does and does not say.

So while I found this episode entertaining and interesting as always, I did not find it illuminating.

edit: forgot a word

Re: Blowing the Whistle on the Mortgage Bubble

#48

Post by davidw »

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…

> PolySci 101. It ain't that difficult. Do I really need to GTFY on HN?

Best just to flag all political articles and rid them from the site, as they pretty much inevitably end up with discussions like this.

Re: Blowing the Whistle on the Mortgage Bubble

#49

Post by logn »

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…

There's a difference between ringing alarm bells over economic trends and government actions that are fully public and extensively analyzed by the public, and ringing alarm bells about unacknowledged criminal behavior inside a public corporation that endangers the clients, investors, and economy. My only beef with these whistle-blowers is that they didn't contact law enforcement (at least per the article).

Re: Blowing the Whistle on the Mortgage Bubble

#50

Post by arethuza »

gadders wrote: post #45
arethuza wrote: post #32

Earlier quoted context omitted.

Alistair Darling, the UK Chancellor of the Exchequer at the time of the crisis, pretty much did think that the world was going to end - he had the chairman of RBS (one of the worlds biggest banks, possibly the biggest at the time) phone him up and say that he thought they might be able to last 2 or 3 hours . [NB I'm pretty sure I've read they were considering going to what sounded awfully like a wartime "emergency" g…

I doubt if RBS were the largest at the time. They're big, but they're not as big as JP Morgan, HSBC etc.

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 which was possibly the worst acquisition in history (paying tens of billions with one ring folder of information for due diligence - what could possibly go wrong!).

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