DC Tom Posted April 10, 2012 Share Posted April 10, 2012 There's nothing wrong with securitizing garbage mortgages, just as long as you aren't selling tranches in your worthless synthetic CDO as a AAA-rated asset and then buying CDSs to effectively short the "risk-free" security you just sold. Bang up job by our ratings agencies, who as it turns out, never once saw any of the underlying mortgages. Seems like that might be a pertinent step in assessing the risk of an asset backed security. I would be willing to bet that if Goldman delivered to Fitch 100 lbs of dog **** diversified with 100lbs of **** from another dog, it would at least get a BBB. The ratings agencies are a joke (one of the reasons the stated plans for privatizing social security won't work - they're based on investing only in a set of "blue chip" investments as determined by the ratings agencies). But their idiocy and negligence don't preclude Bank of America's responsibility to not package 100lbs of dog **** as an AAA-rated investment to begin with. Link to comment Share on other sites More sharing options...
B-Large Posted April 10, 2012 Share Posted April 10, 2012 The ratings agencies are a joke (one of the reasons the stated plans for privatizing social security won't work - they're based on investing only in a set of "blue chip" investments as determined by the ratings agencies). But their idiocy and negligence don't preclude Bank of America's responsibility to not package 100lbs of dog **** as an AAA-rated investment to begin with. This is the exact reason I put my money into physical property. Good times, bad times, mediocre times property for all intent and purposes maintains value. Now if you are retard and overleverage or pay too much, then it is perhaps the worst investment you can make... I have to be honest, I am weary of the financial markets.... my rudimentary understanding of that uber-complex system just does not give the confidence to invest heavily. Call me old fashioned, but I like to be able to fully understand and be able to verify the standing off my investments.... Link to comment Share on other sites More sharing options...
Jauronimo Posted April 10, 2012 Share Posted April 10, 2012 The ratings agencies are a joke (one of the reasons the stated plans for privatizing social security won't work - they're based on investing only in a set of "blue chip" investments as determined by the ratings agencies). But their idiocy and negligence don't preclude Bank of America's responsibility to not package 100lbs of dog **** as an AAA-rated investment to begin with. Agreed. I'm pretty sure it was either Morgan Stanely or Goldman that provided each of the ratings agencies with the model to value the MBS and CDOs they were selling in the first place, garbage assumptions and all. The e-mail record certainly proved that many of these institutions knew they were selling **** at least a year before the market collapsed. Clearly, when you know that the mispriced trash you've been peddling is going to blow up, wipe out investors, banks, and bring financial markets to their knees, the ethical thing to do is find the only company rich and dumb enough to insure your **** CDOs 10x over. Link to comment Share on other sites More sharing options...
DC Tom Posted April 10, 2012 Share Posted April 10, 2012 Agreed. I'm pretty sure it was either Morgan Stanely or Goldman that provided each of the ratings agencies with the model to value the MBS and CDOs they were selling in the first place, garbage assumptions and all. The e-mail record certainly proved that many of these institutions knew they were selling **** at least a year before the market collapsed. Clearly, when you know that the mispriced trash you've been peddling is going to blow up, wipe out investors, banks, and bring financial markets to their knees, the ethical thing to do is find the only company rich and dumb enough to insure your **** CDOs 10x over. But neither MS nor Goldman were writing the mortgages to begin with (they may have been creating mortgage bonds - I never saw any, which at most means they weren't creating federally insured mortgage bonds. And Bear-Stearns and WaMu - who rightfully but quietly blew up - were probably worse offenders than Goldman or MS.). They weren't the ones selling neg-am IOs to the consumer And who else was going to provide the ratings agencies with models? They don't have the horsepower to do their own risk modelling, they have to borrow the industry's - and were probably borrowing models that were perfectly valid at the time (it's notable that Goldman's risk modelling changed sometime in the 2006-2007 time frame, and they reduced their exposure accordingly, and regardless of the ratings agencies' evaluations.) The real problem is that the entire system is a great big game of "pass the buck" - the homeowner, lenders, financials, insurers, government regulators...everyone points to everyone else and says "not it!" Except, for the moment, the financials...because, y'know, "evil..." Link to comment Share on other sites More sharing options...
WorldTraveller Posted April 10, 2012 Share Posted April 10, 2012 A lot of the blame is of little value to analyze. Says who? You? Sorry sir, that's not how it works in the real world, unless of course you decide to preside in a cozy insular world consisting of like-minded indivduals. I clearly stated that wall street wasn't the root of our problems, bad housing, lax regulation with the GSEs and cheap money policies were at the heart of the downturnI. If you just attempted to see things from outside of your comfort zone you would recognize that wall street leveraged the whole sh*t storm. I will give you a very simplistically hypothetical example. Let's say without wall street the housing crisis would of caused a total of 250Billion dollars worth or damage. Meaning that we would of went through the down turn regardless. But with wall streets help, they leveraged what was already a bad situation that resulted in 1 Trillion dollars. The point I'm making is that they made it worse, and I find it to be a bit ummmm, what's the word? Partially displaced, hypocritical, myopic or maybe just willfully ignorant to not show the same level of outrage to wall street as well. Link to comment Share on other sites More sharing options...
B-Large Posted April 10, 2012 Share Posted April 10, 2012 Says who? You? Sorry sir, that's not how it works in the real world, unless of course you decide to preside in a cozy insular world consisting of like-minded indivduals. I clearly stated that wall street wasn't the root of our problems, bad housing, lax regulation with the GSEs and cheap money policies were at the heart of the downturnI. If you just attempted to see things from outside of your comfort zone you would recognize that wall street leveraged the whole sh*t storm. I will give you a very simplistically hypothetical example. Let's say without wall street the housing crisis would of caused a total of 250Billion dollars worth or damage. Meaning that we would of went through the down turn regardless. But with wall streets help, they leveraged what was already a bad situation that resulted in 1 Trillion dollars. The point I'm making is that they made it worse, and I find it to be a bit ummmm, what's the word? Partially displaced, hypocritical, myopic or maybe just willfully ignorant to not show the same level of outrage to wall street as well. 25% of the US economy is now financial services, probably will get bigger. The industry is one of the single largest contributors to elected officials campaigns.... don't expect anything that happens with TBTF Banks and Investment houses to change anytime soon, and don't expect your representative government to assume your interests in the situation. The question becomes: since the same cycles will repeat themselves, the boom and bust, how do you personally come out ahead in the end? Americans need to educate themselves so they do not get on the wrong end of the Financilization of the US economy. Link to comment Share on other sites More sharing options...
Rob's House Posted April 10, 2012 Share Posted April 10, 2012 Says who? You? Sorry sir, that's not how it works in the real world, unless of course you decide to preside in a cozy insular world consisting of like-minded indivduals. I clearly stated that wall street wasn't the root of our problems, bad housing, lax regulation with the GSEs and cheap money policies were at the heart of the downturnI. If you just attempted to see things from outside of your comfort zone you would recognize that wall street leveraged the whole sh*t storm. I will give you a very simplistically hypothetical example. Let's say without wall street the housing crisis would of caused a total of 250Billion dollars worth or damage. Meaning that we would of went through the down turn regardless. But with wall streets help, they leveraged what was already a bad situation that resulted in 1 Trillion dollars. The point I'm making is that they made it worse, and I find it to be a bit ummmm, what's the word? Partially displaced, hypocritical, myopic or maybe just willfully ignorant to not show the same level of outrage to wall street as well. Wow, you took my post really personally. Maybe you should have a smoke. My post wasn't necessarily a knock on you, but rather an explanation of why dredging up moral culpability and "everyone is to blame" garbage, doesn't add a lot of value. As far as "outrage at Wall Street" I have yet to identify who the !@#$ Wall Street is. And saying people on Wall Street are (fill in the blank) is both simple and useless. If the system hadn't been rigged by the Feds the way it was it wouldn't matter if the guys on Wall Street were boyscouts or not because they wouldn't have been able to do it in the first place. And why are you posting under a new screen name? Link to comment Share on other sites More sharing options...
DC Tom Posted April 10, 2012 Share Posted April 10, 2012 I will give you a very simplistically hypothetical example. Let's say without wall street the housing crisis would of caused a total of 250Billion dollars worth or damage. Meaning that we would of went through the down turn regardless. But with wall streets help, they leveraged what was already a bad situation that resulted in 1 Trillion dollars. That supposition is useless to the point of stupid. It doesn't even mean anything. Which makes... The point I'm making is that they made it worse, and I find it to be a bit ummmm, what's the word? Partially displaced, hypocritical, myopic or maybe just willfully ignorant to not show the same level of outrage to wall street as well. ...an absolutely worthless observation. We're supposed to show "outrage" towards "Wall Street" based on some half-assed hypothesis that, if it had a bearing in reality, would still make no sense? Yeah, okay... Link to comment Share on other sites More sharing options...
GG Posted April 10, 2012 Share Posted April 10, 2012 But neither MS nor Goldman were writing the mortgages to begin with (they may have been creating mortgage bonds - I never saw any, which at most means they weren't creating federally insured mortgage bonds. And Bear-Stearns and WaMu - who rightfully but quietly blew up - were probably worse offenders than Goldman or MS.). They weren't the ones selling neg-am IOs to the consumer And who else was going to provide the ratings agencies with models? They don't have the horsepower to do their own risk modelling, they have to borrow the industry's - and were probably borrowing models that were perfectly valid at the time (it's notable that Goldman's risk modelling changed sometime in the 2006-2007 time frame, and they reduced their exposure accordingly, and regardless of the ratings agencies' evaluations.) Technically that's incorrect. Everyone had different models & methodologies - Fed, originators, rating agencies, buyers. But everyone was using the same assumptions, with the pedestrian equivalent of a normal distribution. When losses started coming in outside the normal distribution that's when everyone's models blew up. It's too simplistic to say that the investment banks provided the model, because it's a relatively simple concept - take a risk pool and estimate the repayment probability of that risk pool, and then slice the payments along investor classes from AAA to junk. Very straight forward. The complexity comes in when you vary on your expectations of that risk pool and the hundreds of assumptions that go into the modeling. When 2006 RMBSs started blowing up in 2007 because most of those issues were garbage, everyone panicked over every MBs issued to date, even though their performance was fine. As always, panic caused the collapse. Link to comment Share on other sites More sharing options...
DC Tom Posted April 10, 2012 Share Posted April 10, 2012 Technically that's incorrect. Everyone had different models & methodologies - Fed, originators, rating agencies, buyers. But everyone was using the same assumptions, with the pedestrian equivalent of a normal distribution. When losses started coming in outside the normal distribution that's when everyone's models blew up. It's too simplistic to say that the investment banks provided the model, because it's a relatively simple concept - take a risk pool and estimate the repayment probability of that risk pool, and then slice the payments along investor classes from AAA to junk. Very straight forward. The complexity comes in when you vary on your expectations of that risk pool and the hundreds of assumptions that go into the modeling. When 2006 RMBSs started blowing up in 2007 because most of those issues were garbage, everyone panicked over every MBs issued to date, even though their performance was fine. As always, panic caused the collapse. I knew I was oversimplifying ('cause, y'know, consider the forum). I wasn't suggesting that the regulatory agencies contract Wall Street for their models...but there's plenty of cross-pollenation between private and public in the financial sector (or any sector - we've both rightfully complained about the people who think the best regulator is someone who has NO industry knowledge). And in as much as the ratings or regulatory agencies develop their own models...who's do you think are better? Who pays more to hire better talent? But I disagree at a fundamental level. When everyone is using the same assumptions, the models will all exhibit the same basic behavior, and for any practical purposes are the same. That's speaking as someone who's done plenty of simulation modeling. Link to comment Share on other sites More sharing options...
OCinBuffalo Posted April 10, 2012 Share Posted April 10, 2012 Says who? You? Sorry sir, that's not how it works in the real world, unless of course you decide to preside in a cozy insular world consisting of like-minded indivduals. I clearly stated that wall street wasn't the root of our problems, bad housing, lax regulation with the GSEs and cheap money policies were at the heart of the downturnI. If you just attempted to see things from outside of your comfort zone you would recognize that wall street leveraged the whole sh*t storm. I will give you a very simplistically hypothetical example. Let's say without wall street the housing crisis would of caused a total of 250Billion dollars worth or damage. Meaning that we would of went through the down turn regardless. But with wall streets help, they leveraged what was already a bad situation that resulted in 1 Trillion dollars. The point I'm making is that they made it worse, and I find it to be a bit ummmm, what's the word? Partially displaced, hypocritical, myopic or maybe just willfully ignorant to not show the same level of outrage to wall street as well. Ask B-large about the ability of state and Federal regulators and whether they actually achieve the purpose for which they exist, without causing unintended problems and/or empty cost, and see what he says. Ask him how many full time employees have jobs solely to deal with the regulators....and then ask yourself how that helps the poor get healthcare. Then ask yourself why you are evil for supporting policies that keep the poor from getting health care (Hey, just doing what your side usually does) Arguing against misregulation, the act, or misregulations, the law/Congressional oversight/rules, is not the same as arguing for deregulation. You are acting as though it is. What I find in healthcare is that most of the time, the root causes of a bad regulation are: 1. Poor understanding of both proper quality assurance principles, methods, and how to actually deploy a system based on these concepts 2. Poor execution of the law/rules/concepts by people who are focused gaming the system.... designed poorly due to #1...and is therefore easily gamed, and/or, the good guys being so overwhelmed by the scope of what they are supposed to enforce(see #1), that they simply do what they can, with no hope of improving things. 3. Piss poor attitudes from politicians on both sides, and their staff people, and the bureaucrats, who can't be bothered to actually learn why they are failing, because they can't be bothered to actually learn about the business processes they want to regulate, or mind bogglingly won't admit that they are business processes(um money changes hands for a service, clowns)yet demand that we take their opinions seriously 4. Too many people who supposedly have too little time to understand the problem, but apparently just enough time to make it worse Just because, in your estimation, regulations are needed, that doesn't mean that the government can do it properly. You would be wise to learn to separate those two concepts. They are separate. And, when you add in the ability for good regulations to be F'ed with by bad politicians, and/or political agendas from special interest groups, you begin to get the accurate picture: in a lot of cases, the regulation you want will do more harm than good. Running around calling for regulation, without acknowledging the Federal government's obvious weaknesses and record of incompetence, and accounting for it, solves nothing. Link to comment Share on other sites More sharing options...
GG Posted April 10, 2012 Share Posted April 10, 2012 I knew I was oversimplifying ('cause, y'know, consider the forum). I wasn't suggesting that the regulatory agencies contract Wall Street for their models...but there's plenty of cross-pollenation between private and public in the financial sector (or any sector - we've both rightfully complained about the people who think the best regulator is someone who has NO industry knowledge). And in as much as the ratings or regulatory agencies develop their own models...who's do you think are better? Who pays more to hire better talent? But I disagree at a fundamental level. When everyone is using the same assumptions, the models will all exhibit the same basic behavior, and for any practical purposes are the same. That's speaking as someone who's done plenty of simulation modeling. Agree on cross fertilization. Structured career was Fed/consultant/ - Rating Agency - Investment bank. Link to comment Share on other sites More sharing options...
WorldTraveller Posted April 10, 2012 Share Posted April 10, 2012 That supposition is useless to the point of stupid. It doesn't even mean anything. Which makes... ...an absolutely worthless observation. We're supposed to show "outrage" towards "Wall Street" based on some half-assed hypothesis that, if it had a bearing in reality, would still make no sense? Yeah, okay... Right, Link to comment Share on other sites More sharing options...
BillsFan-4-Ever Posted April 11, 2012 Share Posted April 11, 2012 When will it stop being Bush's fault? When will it stop being Clinton's fault? Even W wants to be removed from his tax cuts. and currently -- When will it stop being Obama's fault? Link to comment Share on other sites More sharing options...
3rdnlng Posted April 11, 2012 Author Share Posted April 11, 2012 When will it stop being Bush's fault? When will it stop being Clinton's fault? Even W wants to be removed from his tax cuts. and currently -- When will it stop being Obama's fault? That is patently false and you either know it and are lying or are an imbecile. Link to comment Share on other sites More sharing options...
BillsFan-4-Ever Posted April 13, 2012 Share Posted April 13, 2012 That is patently false and you either know it and are lying or are an imbecile. Another idiot heard from. The R's blamed Clinton for YEARS and some still bring it up in 2012. that is a FACT You guys blamed Obama days after he was elected for Christ’s sake!!!! that also is a FACT. you imbecile Link to comment Share on other sites More sharing options...
Chef Jim Posted April 13, 2012 Share Posted April 13, 2012 Another idiot heard from. The R's blamed Clinton for YEARS and some still bring it up in 2012. that is a FACT You guys blamed Obama days after he was elected for Christ's sake!!!! that also is a FACT. you imbecile Another hypocrite heard from. Link to comment Share on other sites More sharing options...
Taro T Posted April 15, 2012 Share Posted April 15, 2012 Another idiot heard from. The R's blamed Clinton for YEARS and some still bring it up in 2012. that is a FACT You guys blamed Obama days after he was elected for Christ’s sake!!!! that also is a FACT. you imbecile Isn't it also a fact that 'some' still believe the world is flat? What exactly is your point? As for your last statement, I do believe people waited to blame President Obama for his performance until after he'd been in office long enough to have had enough accomplishments to have earned a Nobel Peace Prize. Link to comment Share on other sites More sharing options...
TPS Posted April 15, 2012 Share Posted April 15, 2012 I can throw out acronyms with the best of them. SEC's Net Capital Rule was not the main cause, nor was it the monster that regulation-heavy pundits cry about. But it certainly helped that SEC was over its head in trying to keep up with financial innovation - both good & bad. You can apply that to anyone directly involved with the mess, except for the guys who were shorting the housing market. So Paulson convincing the SEC to allow GS (and the other IBs) to increase their leverage from 12:1 to 33:1 was minor? Link to comment Share on other sites More sharing options...
TPS Posted April 15, 2012 Share Posted April 15, 2012 Technically that's incorrect. Everyone had different models & methodologies - Fed, originators, rating agencies, buyers. But everyone was using the same assumptions, with the pedestrian equivalent of a normal distribution. When losses started coming in outside the normal distribution that's when everyone's models blew up. It's too simplistic to say that the investment banks provided the model, because it's a relatively simple concept - take a risk pool and estimate the repayment probability of that risk pool, and then slice the payments along investor classes from AAA to junk. Very straight forward. The complexity comes in when you vary on your expectations of that risk pool and the hundreds of assumptions that go into the modeling. When 2006 RMBSs started blowing up in 2007 because most of those issues were garbage, everyone panicked over every MBs issued to date, even though their performance was fine. As always, panic caused the collapse. I'm with you on this one, since the models assumed house prices would not fall past historical price declines. Link to comment Share on other sites More sharing options...
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