Talk:Banking crisis

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Bailout - The Senate's Turn

One good thing about all tax issues (or money issues, period) being started in the House, is that 100% of the house members are up for election this year. While they may or may not be overly concerned about Joe American and his counter part Jane WorldResident, they do care about keeping thier jobs. The Senate is a different matter. So far, 1 hour into the "debates" on this issue, it is a startling not so surprising, I guess 15 to 1 in favor of the new and "improved" (which is actually WORSE, if you can believe that) bail out of 700Billion AND tax cuts for the richest 5% of Americans. Bend over America, this will definitely hurt.--En attendant Godot_{"«I don't think in any language. I think in images. V.Nabokov»} 17:50, 1 October 2008 (EDT)

Um...the majority of tax cuts in there are for things like renewable energy and rural schools. Also, it included a provision that insurance companies have to include mental health coverage, and it raised the FDIC cap, which was LONG overdue. Most of the individual tax cuts are for the middle class, as well. (I was in the favor of the original bailout, having taken a long look at what's already happening; cities are unable to get bonds bought currently, and many stores cannot lay in additional inventory for the upcoming Christmas season, which is usually the only thing that keeps them solvent.) Researcher 09:10, 2 October 2008 (EDT)

I'm curious why no one can answer this, though. 1)Where is the money actually going to go? Into exactly who's hands? 2) Why 700Billion and not 100Billion, or 100Million or 100Trillion. no one, and i do mean no one, has or can explain the amount, and Pawlson admitted he "pulled it out of his head" cause he "thought it sounded reasonable". I'm beyond caring in any real sense, cause it's going through, we will be saddled with debt like this country has never seen... we will be paying our new debt to the people holding the old debt, and nothing has penalized -- not one thing -- those who speculated on our economy, on our homes, ect. The golden parashoots are still in place, but they will be taxed at 500,000 instead of 1,000,000 whoohoo. I really do not see what is good about this plan that couldn't have been accomplished later, without the 700Billion price tag. I agree that FDIC cap is LONGLONGLONG over due. That's a ten second bill on its own, passed without hesitation in house and senate after this. The "individual tax cuts" do not sit with the middle class, actually. They are cap gains tax cuts, which frankly, most of us in any middle class I know of, do not make. It's 451 p ages long, and the Senate has had roughly 2 days with the plan to understand 450 pages?--En attendant Godot_{"«I don't think in any language. I think in images. V.Nabokov»} 11:28, 2 October 2008 (EDT)

PS, if you haven't read it, and you care... here it is. 451 pages worth [1]

Dow gets a haircut, bailout didn't work so good didit?

Back when they first put the spotted owl on the endangered species list, and the loggers were thrown out of work, I saw whole families living in tents in the woods up in Skamania County where I liked to go hiking in the Columbia River Gorge. Now with all the foreclosures, and rents higher than my mortgage, I expect to see this sort of thing again. Francine 17:13, 6 October 2008 (EDT)

I'm not a fan of the "bailout", but your argument is pretty rash, given that none of the Bailout has been spent yet. Give the plan time to actually be implemented before you say "see, I told you so". Though I agree with you that odds are, it will be a "see, I told you so" moment.--En attendant Godot_{"«I don't think in any language. I think in images. V.Nabokov»} 23:55, 6 October 2008 (EDT)

Francine -- is it possible you consider humans to be more important than spotted owls ???

Surely you don't consider us to be more important than caribou as well -- that would just be soooo speciesist. (Where is PETA's phone number; they must be notified.)

In your next reincarnation, it would be fitting for you to come back as a deer tick.

-- Rem^Beau 23:19, 7 October 2008 (EDT)

Godot: (previous section above) // One good thing about all tax issues (or money issues, period) being started in the House, is that 100% of the house members are up for election this year.

That only works if you have an informed public -- we might have to go back 200 years to get that. Also, who among us feels confident enough of our own view on this issue to vote for someone on that basis?

// While they may or may not be overly concerned about Joe American and his counter part Jane WorldResident, they do care about keeping thier jobs.

TRUTH has been spoken !!!

They belong to a pretty exclusive club, and after they are there awhile, they'll do almost anything to stay, and that is corrupting in itself. I have changed my mind COMPLETELY on term limits -- now i want them.

The hate and ridiculously strong partisanship many of the elctorate feel is NOT reflected on Capitol Hill. It is clear demagoguery for them to whip us up into a frenzy when they are all buddies. They are putting on an act akin to professional wrestling.

// Bend over America, this will definitely hurt.

Oh yeah. The damage has already been done, big time -- the bailout will be anticlimactic and may do as much damage as good. One thing is sure -- more power now resides in the hands of govt and less in the people. Maybe only a Libertarian thinks of that as a bad thing.

-- Rem^Beau 23:27, 7 October 2008 (EDT)

Hmmm. For the record the bailout did stop the implosion of the banking industry, but it also fucked over a ton of homeowners. Mixed record.Longnameislonger (talk) 13:21, 16 April 2012 (UTC)

Banking woo

Read somewhere that some Americans think the banks buy people at birth on the assumption of their future earnings (hence social security numbers). Is there a page on this anywhere? (The illogic of this is obvious - Michael Jackson, John Paul Getty III and JK Rowling would have started off with rather different ratings and look what happened to them).

Sounds like a combination of debt slavery and the "straw man" theory the sovereign citizen movement uses. Nebuchadnezzar (talk) 19:32, 22 February 2011 (UTC)

Free market libertarianism doesn't work

Not true. It would have worked perfectly here, if it were followed hard and fast - these banks and every single fucker who was invested or exposed to them in any way at all would have been fucked. Completely and utterly fucked. And it would have been a whole lot of people - yes it would have been a very nasty correction, but if you live and die by the free market, that's how you have to roll... DeltaStar_{Senior Sysop}^{Speciationspeed!} 01:10, 20 June 2011 (UTC)

Attention needed

Can somebody with some grasp of the economics involved please fact check & tidy this, especially the 2007-2008 section which seems high on hyperbole & low on citations for many of its claim. If we want to look seriously at who is responsible for the crisis, we should steer clear of absurd exaggerations like "mortgages given out to bums" and "pizza delivery boys promoted to loan offices". ₩€₳$€£ΘĪÐ^{Methinks it is a Weasel} 00:09, 14 December 2012 (UTC)

If no one has done any work on it by Monday I'll see what I can do, though make no promises.--Just relax, and stay funny (talk) 00:10, 14 December 2012 (UTC)

Yes, this needs a serious overhaul (as does Greece-baiting and a few others). We haven't seen a word of discussion on EU cutting its budget for the first time in 56 years, meaning the idea of a Keynesian stimulus has been officially rejected, EU policy is to rely on the private sector to sort things out, and deflation (though not necessearily a contraction in the money supply) is here for the first time in several lifetimes. nobs^{Say hello to my leetle friend} 18:02, 10 February 2013 (UTC)

Ok, gave it a start; there's a lot more to be added and subtracted. nobs^{Say hello to my leetle friend} 20:05, 10 February 2013 (UTC)

Enron & Sarbanes-Oxley

I suggest we strip out for now the Enron reference at the start as being a primary cause of the 2007-08 crash; compliance with the Sarbanes-Oxley bill which supposedly fixed the Enron loophole in turned sparked the much larger AIG collapse. I say, gut Enron out of here for now and deal with it later. nobs^{Say hello to my leetle friend} 18:14, 10 February 2013 (UTC)

In fact, the Commodity Futures Modernization Act had virtually nothing to do with the Enron collapse. The bill was signed into law Dec. 31, 2000, and Enron collapsed October 2001, hardly enought time to defraud investor out of more money than the company was worth. Further, Enron stock was overseen by SEC, not the CFTC. The only coincidence is the timeframe. Years later, an "Enron loophole" was discussed in amending the CFMA, but by that time Enron was long defunct and Enron's accounting problems had more to do with reporting to the SEC, not taking advantage of legitmate regulations and reporting requirments to CFTC. All the Enron fraud occured in the mid to late 1990s, not post-CFMA. nobs^{Say hello to my leetle friend} 18:36, 10 February 2013 (UTC)

"No Income, No Assets"

This needs much better clarification. It sounds like lending to bums, but in reality these types of loans go to self-employed business owners who use bank deposits for proof on income, rather than tax returns. nobs^{Say hello to my leetle friend} 21:38, 10 February 2013 (UTC)

"enabled many American lenders to make risky lending decisions, primarily high-interest rate mortgages to the "sub-prime" sector - people who typically have "No Income, No Asset" and no chance of making repayments should they fall on hard times or if interest rates increase."

This language just doesn't work for the above stated reason. It addresses sub-prime lending in the Low Doc, No Doc, Stated income market for business people with high incomes but are not required to furnish business expenses and net personal income. As stated, it's just wrong. And the "primarily" section ignores the fact 2/28 Adjustable Rate Mortgages were equally if not more of a contributing factor, and most of these loans were not made in the sub-prime sector. They typically (for the the better part of 10 years) were only made to borrowers with high credit scores, 620+. nobs^{Anchovies on your Fannie Mae backed mortgage?} 22:51, 10 February 2013 (UTC)

Do we realy need this crap?

==Hypocrisy==

In October 2007 Dubya vetoed the "SCHIP" children's health insurance bill because it would have appropriated $30 billion more than the President requested, on the grounds that spending that much money was socialism, pure and simple. But let his Wall Street buddies get into trouble and all of a sudden we need to give a blank check worth 700 billion dollars to Henry Paulson (and his successors) with the following language, which is actually contained in the three-page proposal sent to Congress, and which has made the "liberals" balk:

"Decisions by the Secretary [of the Treasury] pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Last I checked, W is toast, Pelosi & the Democrats passed the $700 billion, and Obama's Tim Geitner wrote then, and is executing now, the non-reviewable provisions of the Act. It needs to be removed entirely, and if any of it is pertinent, can be included elsewhere later. nobs^{Would you like anchovies on your sub-prime mortgage?} 00:25, 11 February 2013 (UTC)

Yes and No

Some of this information, while relevant and amusing, is loaded with half truths that don't give an accurate picture. I'm not saying wholesale removal, cause the tenor and tone needs to be kept, but more clarification. Here's just a fews examples:

• Many of them lied about their incomes.

while this is possible under certain circumstances, it generallly applies to people with high wp:FICO scores and not the subprime market. What's more, prime lending underwriters allowed for it.

• Loan officers often lied for them by rewriting the application forms.

a distinction should be made between a loan officer, who represents a lender with ability to approve a loan, and a broker, who represents a borrow to a lender. Further, Fannie Mae Form 1003 (Uniform Underwriting Loan Application) requires the loan originator (broker or officer) to fill in certain information borrowers decline to disclose.

• Many of them were just sharks who hit buyers with tons of econo-babble and finance speak to make them believe the mortgage was a good idea.

here's a big half-truth; most of the bad loans were in the re-finance market, and not the homebuyer market. Generally first time homebuyers are the only one's needing a down payment. Refinances do not need money down, nor do rollovers (selling a home and rollingover equity into a new home) do not need a down payment. And Fannie Mae guidelines are careful to require disclosure of source of funds for a first time homebuyer's down payment, because it may be a pre-exiting encumbrance not reported as an outstanding obligation affecting debt to income ratios.

• Sometimes, they just picked up the first bum they could find and threw him into a McMansion, no job or money required!

See all of above, although I'm not denying it wasn't possible, or it didn't happen. nobs^{Would you like anchovies on your sub-prime mortgage?} 19:42, 11 February 2013 (UTC)

Fannie Mae & Wall Street

I think there is a fundemental misunderstanding in the article as to what exactly Fannie Mae is (unless I'm reading it wrong). Two examples:

• When Fannie Mae and Freddie Mac saw their market share being sucked up by Wall Street firms, they loosened lending policies ...
• Fannie and Freddie .... later joined in the fun buying up shitty loans after Wall Street had eaten away their market share...

Fannie Mae is not in competition with Wall Street banks for market share; Fannie Mae guarantees purchase of mortgage bundles from Wall Street banks that issue mortgages conforming to Fannie Mae Guidelines. As such, some sections may need radical excision and rewriting which will significantly alter the POV conclusions in this article. nobs^{Would you like anchovies on your sub-prime mortgage?} 05:17, 12 February 2013 (UTC)

Ok, now we have a better picture of what the original author means by "market share". Fannie Mae did not loose market share to anyone. Fannie Mae, prior to loosening it's guidelines in Sept 1999, had virtually exclusive market share for the "Prime", or "A Credit" borrowers (unless a mortgage was owner-financed). Fannie Mae expanded it's market share by moving into the subprime sector after 1999 (well before repeal of Glass-Steagall, Gramm-Leach, and the CFMA). "Loosing market share", is a contorted way of saying Fannie Mae was loosing out on the growing subprime market. There was no "their market share" in the subprime market until they moved in, and they never "lost" anything to anyone. nobs^{Would you like anchovies on your sub-prime mortgage?} 04:05, 13 February 2013 (UTC)

SEC & banking

This is totally irrelevent to the article:

In the meantime Shrubya gutted the SEC, appointing weak-kneed regulators or ones who would intentionally turn a blind eye. The SEC was so ineffective that Bernie Madoff remarked he was "astonished" that he didn't get caught and noted, "They never even looked at my stock records...If you're looking for a Ponzi scheme, it's the first thing you do."[16]

This refers to the SEC - stock regulators, not bank regulators. Unless someone can show Bernie Madoff invested in banks, or some connection between the SEC & bank regulation or the banking crisis, it needs to go. nobs^{Would you like anchovies on your sub-prime mortgage?} 02:49, 13 February 2013 (UTC)

Deregulation

So "deregulation is bad" is a sacred cow. Was creation of a new entity, FHCs (financial holding companies). and regulatory bureaucracy to oversee them, deregulation? And it's for this reason repealing the repeal of Glass Steagall is impossible.

Or when Fannie Mae de-regulated its own guidelines (dropping FICO scores from 620 to 585 for example) to dole out government cash and subsidized interests rates to borrowers with establihsed records of not meeting their debt obligations? Subprime borrrowers couldn't get financing otherwise (subprime can sometimes be a code word for "minority" and "white trash"). nobs^{Would you like anchovies on your sub-prime mortgage?} 05:39, 13 February 2013 (UTC)

IOW, it took de-regulation to get financing and investment into minority communities because of institutional racism. In those days, they were called "enterprize zones", or later "empowerment zones". Jesus. I'm amazed this embarassing shit sat in this article for nearly five years. nobs^{Would you like anchovies on your sub-prime mortgage?} 05:44, 13 February 2013 (UTC)

@Hipocrite, ok, thus far no big problems, other than, "Non-conforming high-interest rate "sub-prime" loans - people who did not qualify for Fannie Mae loans, were ripe ..."

Once Fannie Mae lowered its guidelines after 1999 (beginning with lowering the FICO score necessary to qualify, from 620 to 585, and eventally 525 I beleive), thise subprime borrowers did qualify for Fannie Mae financing.

Subprime market are also known as "B" and "C" lenders. The Prime market are known as "A lenders" and prime borrowers as "A credit borrowers"; prior to 1999 Fannie exclusively backed the prime market and "A lenders"; after Sept 1999 Fannie Mae began providing financing for B lenders. By 2006 and 2007, Fannie Mae subprime borrowers and lenders began experiencing problems. nobs^{Would you like anchovies on your sub-prime mortgage?} 13:38, 13 February 2013 (UTC)

Please don't invent things based on your history as a right-wing extremist. Provide sources for all your pretend facts. Hipocrite (talk) 14:12, 13 February 2013 (UTC)

I'm not certain what's the problem with this sentence (not added by me, but in been in this article for 4 andhalf years)

' There were also other FHCs made up of hedge funds and other investment firms, that held as big a share of the market as traditional banks, and they were largely unregulated to begin with.

There should be something said about hedge funds. The degree of regulation needed is important: too much and they're no longer hedge funds, not enough and their ripe for fraud. Hedge funds do provide an important source of capital for business and homebuyers with less than sterling credit and no one else to turn to. And some hedge funds are "subprime lenders" who hold their own paper (see UCC wp:Holder in due course), don't re-bundle securities or dump it on Fannie Mae. nobs^{Would you like anchovies on your sub-prime mortgage?} 22:24, 14 February 2013 (UTC)

"that held as big a share of the market as traditional banks." Please don't invent things based on your history as a right-wing extremist. Provide sources for all your pretend facts. Hipocrite (talk) 22:36, 14 February 2013 (UTC)

huh? can cite anything at all in this article to support that claim, you've now stated twice? Or howaboput addressing the question? nobs^{Would you like anchovies on your sub-prime mortgage?} 22:49, 14 February 2013 (UTC)

┌────────────────────────────────────────────────────────────────────────────────────────────────────┘ You have no idea what an FHC is. You have no idea how they are/were regulated. They made no difference at all to the crisis. Hipocrite (talk) 16:52, 16 February 2013 (UTC)

Gramm-Leached allowed for Bank holding companies to aquire insurance companies, i.e., companies with potentially a lot of liability. This isn't rocket science. nobs^{Would you like anchovies on your sub-prime mortgage?} 19:21, 16 February 2013 (UTC)

And again, Hipocrite, ""that held as big a share of the market as traditional banks." WAS NOT MY LANGUAGE. You seem to ignore the fact that original, uncited statement, was true. It only needs sourcing. nobs^{Would you like anchovies on your sub-prime mortgage?} 19:24, 16 February 2013 (UTC)

Repeal of Glass-Steagall, Gramm-Leach and FHCs not a factor?

Is there a reason User:Hipocrite striped this out?

• Morgan Stanley - Reverted to bank holding company status

Reverted, meaning it was a BHC, become an FHC under Gramm-Leach and repeal of Glass-Steagall, bought crappy Fannie Mae subrime loans & AIG default swaps to cover the risk, was bailed out and reverted to BHC status.

Eliminating this, the Fannie Mae & Subprime sections pretty much guts anything and everything we know about the Banking crisis of 2007-08. Maybe User:Hipocrite ought to strip out what a big douche-bag Phil Gramm is, too. Since these factors had nothing to do with the crisis and the evidence has been reverted. nobs^{Would you like anchovies on your sub-prime mortgage?} 19:46, 16 February 2013 (UTC)

Bailout

@BobJohnson with all due respect, this is dumb. The FDIC exists to guarantee the deposits. The FED was created in part for this too, and the fact that it didn't deposits was one of the reasons, perhaps the main reason of the Great Depression. Even Milton Friedman said that the government should keep the system stable, and wrote extensively about this [2]. Being against regulations in general doesn't mean being against every regulation. I'm not following the specific case closely, but the 2008 crisis wasn't so disastrous because the FED and other government agencies did their job. I don't see how Larry Summers' view is inconsistent with his overall centrist positions. A better criticism would be about the bank deregulation as a whole, which we now know was a bloody stupid idea, but (at least some) libertarians understood the importance of bailing out banks in 1960. GeeJayK^{Where all evil dwells} _{Where every lie is true} 13:31, 13 March 2023 (UTC)

FDIC insurance goes up to $250,000 an account. Beyond that, it's not like those who have deposits will be wiped out. SVB may have financial "holes" but the situation doesn't seem terribly dire and much of the problem is more the venture capital panic and lack of diversity then the balance sheet, those Treasuries SVB picked up that paid 2% or whatever are still worth something. Depositors will probably be the first priority so in the restructure, so I'm sure they will get a very high percentage of their deposits over $250,000 (the FDIC limit) as well as the full amount that is insured. In fact, judging from what I can tell, with the current protections, the FDIC is indicating that even uninsured deposits are covered.

To insist in a panic, though, that your deposits *must* be paid back *in full* is IMHO bullshit, especially when you railed against student loan relief a while back. It smacks of lemon socialism, that the rich must be fully protected from all of their mistakes while the poors (or even the middle class) can go fuck themselves. Summers isn't completely wrong about student loans, mind you (some serious restructuring is needed there, largely IMHO with tighter regulations) but making investment in effect a subsidized free ride is also a horrible idea.BobJohnson (talk) 13:56, 13 March 2023 (UTC)

Hey, don't get me wrong here, I'm not defending the rich here or anything, just the stability of the American banking system. I'll admit I didn't much have time to analyze this specific case, so I don't know all the details. The most important thing here is to save the account holders (those idiots at the bank should probably be tried since as far as I'm aware they committed a fraud), otherwise we might have a bank run, a contraction in the monetary base, and other problems. I understand your point, but I believe that the poor will be a lot worse of with another depression. I don't know about the volumes of the accounts, so I don't know if you need to save all of them, but it might be important, see the Diamond–Dybvig model or even our own article on the Great Depression if you want some details on what happens when bank fails. The problem with student debts lie more on the microeconomic realm, I made a thread on the bar about it some time ago, while this SVB shitstorm is more of a macroeconomic problem. Anyway, if you want to keep your criticism on Summers you can go ahead, I'm not going to dispute the edits even if I think they are unfair. GeeJayK^{Where all evil dwells} _{Where every lie is true} 14:07, 13 March 2023 (UTC)

As noted, these type of opinions are not just mine, they were repeated in the cited column and another one [3]. Worse things are said in the social medias, like the r/wallstreetbets. I definitely understand that the "LET THEM FAIL!" approach is also seriously wrong-headed, and a full on bank failure would harm everyone. But, as far as harm of the reverse, well, I do feel that the rise of populism in many Western nations is in part rooted in the perception (which, judging by the stagnant real wages and increasing income inequality, is rooted in a fair bit of reality) that "the system" is actively working against them. It's the one thing that unites the Donald Trump and Bernie Sanders crowds together. Populism honestly can be pretty nasty. Summers' contrasting tweets aren't helping here. BobJohnson (talk) 14:47, 13 March 2023 (UTC)

@BobJohnson I still think mentioning Summers and the student loan debts is a bit of a red herring. As I said before, they are saving the depositors, not the bank shareholders and executives. Also, according to CNBC, the "bailout" won't be funded by taxpayers, unlike this student loans proposal. Additonally, I don't see how the whole thing is relevant to the discussion. I think a better criticism is how the deregulated bank system (something that in part because of Summers, though he criticized the deregulation later), along with the failure of the monetary authorities to supervise tha bank, led to this terrible situation. GeeJayK^{Where all evil dwells} _{Where every lie is true} 17:22, 13 March 2023 (UTC)