Iraq is nearly over. BTW we won.

[Pico and ME]

Oh yeah...vamping a rant always deserves a 2nd go around.

[tw]

Originally Posted by Shawnee123

They KNEW KNEW KNEW they would get bailed out no matter how badly they effed it up.

Getting bailed out was not even in their mind. As America graduates more bean counters and less product people, this mindset of decisions based on spread sheets sees no risk.

Our current administration contributed massively to this. For example, previously, investment banks could only hold 12 times debt for one dollar. They got the administration to permit 30 dollars debt for one dollar. Some may have been in the $40 debt to $1 equity. Why? This administration believed the economy was healthy only because spread sheets showed higher profits. That is the myth even promoted by Carly Fiorina in HP - or why bean counters make the worst leaders in industry and government.

NINJA - issuing mortgages without any Income or Job Apparent? That too comes from new rules due to a myth that all deregulation is good. Where regulations must be largest are where (historically) the greediest and dumbest congregate. Finance industry. Look sometime in the WSJ at the full page of stock brokers prosecuted every month. Criminal mindset is highest among these people which is also why every stockbroker earns well over $200,000 annually. Bean counters doing no work (No Income No Job Apparent) were making massive incomes.

They knew nothing because they did not have to know. Unfortunately, the people who created this mess will mostly walk away richest. That stock broker that does almost nothing complains that he lost 40% in this crash? So now he is worth $60million instead of $100million. Woe is he?

[Undertoad]

Our previous administration also contributed by putting lawyers in charge of Fannie Mae. No lawyers in charge of finance, please.

A few appropriate scapegoats of the current scandal are Franklin Raines and Jamie Gorelick.

[tw]

Originally Posted by Undertoad

A few appropriate scapegoats of the current scandal are Franklin Raines and Jamie Gorelick.

Both were gone when the major problem in Fannie and Freddie were created. Sub-prime loans that once never exceeded 10% of the loans were suddenly increased to something like 25% of all loans starting 2004 - after Raines and Gorelick were long gone.

Major problem with so many institutions were the large number of sub-prime and other (ie NINJA) loans that were implemented about 2004 to *stimulate* a sagging economy even to people who should not have had those loans. We are now paying for that economic boom recreated only by throwing money at the economy - after Raines and Gorelick were gone. A problem created by the George Jr administration need to *stimulate* the economy.

[xoxoxoBruce]

Originally Posted by tw

Getting bailed out was not even in their mind. As America graduates more bean counters and less product people, this mindset of decisions based on spread sheets sees no risk.

But shouldn't these trained bean counters, more than anyone, see the risk of the voodoo acounting practices that have pervaded Wall Street?

[tw]

Originally Posted by xoxoxoBruce

But shouldn't these trained bean counters, more than anyone, see the risk of the voodoo acounting practices that have pervaded Wall Street?

Those trained bean counters were doing voodoo accounting because they could and because it was ordered by top management. Without any law enforcement to help them say "No", then bean counters even in AT&T, MCI, Enron, etc all had no choice but pervert the spread sheets. Yes, even AT&T was on the verge of bankruptcy when Sandy Weil was discretely told this by a lesser AT&T executive that AT&T could not meet their short term loan obligations.

BTW, how to get promoted? I will never forget that corporate president on the deck, while drunk, saying "____ makes the spread sheets say what they have to say." ____ knew why he had the #2 job. 85% of all problems are ...

[Undertoad]

Originally Posted by tw

Both were gone when the major problem in Fannie and Freddie were created.

Leaving the organization just before and just after a major accounting scandal, leaving it leaderless until 2 weeks ago.

[tw]

Originally Posted by Undertoad

Leaving the organization just before and just after a major accounting scandal, leaving it leaderless until 2 weeks ago.

Leaving Fannie and Freddie to do what George Jr has been doing for the past seven years? Pumping government money into the economy. We are now reaping those economic stimulus packages including a feast of free mortgage money and 30 to 1 debt to equity ratios.

Let's see. Raines and Gorelick left in 2004. George Jr's people could not find anyone to take the job for four years? Oh. With all those White House lawyers rewriting science, then no lawyers were available to replace Franklin Raines and Jamie Gorelick? Apparently.

[Undertoad]

As near as I can figure out, we're both right.

Like modern airline crashes, the crash can't be pinned down to any single failure, but a perilous combination of them. Starting with the S&L failure, the community reinvestment act, the sudden need for backed securities and the eagerness of the congress to give it to them, the greed, the nest of backed and unbacked securities behind the mortgage market. The desire to put more money in the market. The desire to get poorer Americans into home ownership. The Countrywide "special loans" and lobbying and wheeling and dealing to preserve their setup and keep getting rich. Fannie Mae pushing ARMs because it was the only way they could keep growing. (By 2004 92% of FNMA-backed loans were ARMs) The sudden SEC deregulation was the final burst of too much water over the hull.

Nobody was smart enough to predict the combination of failures and everybody wanted to protect their phoney-baloney jobs. One obvious truth is that government can't really be trusted to ensure securities too far, because there's too much money and power to be gained; and thus we could expect the sort of wheeling and dealing where everybody could get a little richer and blame was spread around thin enough not to point the finger at any single entity.

[tw]

Demonstrated are some basic facts.

Any effort to fix an economy by throwing money at it; the economy will only take revenge with even more severe consequences.

Whereas money can be used to address isolated problems, the only solution for an economy in recession is to let companies go through bankruptcy early so as to fix their #1 problem - top management.

Deficits do matter.

Enron style accounting is still alive and well. The greatest reason credit market seizure - nobody could trust anyone else's spread sheets. Industries get the regulation they deserve. Historically, finance industry regulation was and should be massive since no other industry so worships "Greed is good" and so overpays their top management for doing so little.

Tax cuts without spending cuts simply guarantee even higher taxes or other equivalent economic punishment in the future. Warren Buffet was correct. There is no free lunch even though our government said otherwise six years ago. How many forgot $8billion of free money to the airline industry with no strings attached and no repayment required. How many saw increasing debts, saw current profits as high, and therefore assumed everything would be OK ten years later?

Always go to highest levels to find why all those other guilty parties exist.

Ross Perot said that if any company did accounting routinely done in the federal government, then all corporate officers would be jailed immediately.

Any industry that will not innovate until required to by government regulation deserves to be sold to foreigners OR terminated with the stockholders getting exactly what they deserved. There never was any reason for government to protect the auto industry, big steel, or airlines. Only thing that saves a company is the same thing that is the only purpose of that company - product innovation.

[tw]

Originally Posted by Undertoad

Nobody was smart enough to predict the combination of failures and everybody wanted to protect their phoney-baloney jobs.

These problems were predicted. For example, The Economist front cover showed a falling brick labeled housing prices. Everyone knew the economy would be hurt by the housing market. Housing prices at 40% too high must eventually fall and typically fall hard - especially when government was trying to protect those high prices rather than address the problem. From the Economist of 16 Jun 2005:

Perhaps the best evidence that America's house prices have reached dangerous levels is the fact that house-buying mania has been plastered on the front of virtually every American newspaper and magazine over the past month. Such bubble-talk hardly comes as a surprise to our readers. We have been warning for some time that the price of housing was rising at an alarming rate all around the globe, including in America. Now that others have noticed as well, the day of reckoning is closer at hand. It is not going to be pretty. How the current housing boom ends could decide the course of the entire world economy over the next few years.

This boom is unprecedented in terms of both the number of countries involved and the record size of house-price gains. Measured by the increase in asset values over the past five years, the global housing boom is the biggest financial bubble in history (see article). The bigger the boom, the bigger the eventual bust. …

Enron made it obvious how corrupt accounting had become. But we did nothing for how long? Few would admit how massive mortgage backed secuirities had so contaminated the financial markets. The few who openly acknowledged it included a Senior VP of Merrill Lynch (who got fired for being honest) and Goldman Sachs (who hedged sufficiently to protect themselves).

Everyone know NINJAs were widespread. Everyone knew these problems would come back with negative consequences (those not blinded by greed). However nobody knew 'when'.

I remember a girl who asked about investing in the market in August 1987. It was obvious that the market would suffer a big downturn. The only problem - as I told her - was that I could not say if it would occur next month or next few years. The downturn was that obvious and inevitable. I recommended waiting to invest after the crash. That became the October 1987 crash. Nobody could predict 'when' the obvious would occur.

These problems were obvious. What people cannot say is when the inevitable will occur.

Bankruptcy is averted by perverting the spread sheets. This only permits a simpler problem to get worse - ie Enron. The sooner a symptom of bad management becomes obvious, then less damage results. Unfortunately, the past decade plus had simply subverted regulations that require honest spread sheets. This became most obvious when Harvey Pitts (SEC Commissioner) refused to accept a doubling of his budget by Congress. The 'powers that be' wanted 'less regulation'. Those same 'powers' literaly has to be embarrassed when Oklahoma filed suite against Enron - forcing the 'powers that be' to concede and prosecute Skilling and Lay.

Deregulation to permit spread sheet games has only made it even harder to predict "when".

[classicman]

Maybe this fits better in this thread - whatever. I'm sure the left will label it as right wing propaganda and the right will say its the absolute truth. As usual, I'm caught right in the middle. Like most of this stuff, I'm sure there is some truth to some of it. Everyone's too busy pointing fingers at each other to solve the problems.

[xoxoxoBruce]

Originally Posted by tw

These problems were predicted.

I agree. People were talking, (and writing) "The Real Estate Bubble", for a hell of a long time. Everyone knows that "bubbles" inevitably pop, so like you said, it was just a matter of when.

But that said, the general public was mostly unaware how the mortgage market was polluting the other financial institutions, although the people whose business is the money game, and those that are supposed to be keeping an eye on them, sure as hell should have known what was happening.

[classicman]

Getting back on topic - sorta

Life Returns to Iraq's Streets

[Sundae]

Thanks Classic.
It always helps to see the human face of people affected by conflict.
That chemists shop with the same brand of hair-dye I've used in the past really made me stop and think.

I hate the fact that different sects of the same religion kill eachother. Whether it's Sunni and Shi'ite or Catholic and Protestant. I hope those caught up in it manage to resolve their differences and rebuild their country - physically, politically and emotionally.