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| Government control of private business.....
Posted: 11/5/2009 8:50:33 PM | If I were advising the President today. I would have him look closely both at what Ronald Regan and Bill Clinton did as economic policy. I think if you worked on the weakness's of the each's policy and bloster each with the strenghts of the contrasting President you could have a very sucessful economic policy. I think Clinton had the top Marginal Rate too high. I think that W. just looked at the tax cutting side of the Regan and didn't see the other tax policy that he did, as well as his directed spending. Regan did some creative accounting to sure up the general fund. Regan was great for the 1980's but I think 30 year's into the future you don't have the same circumstances therefore, you have to apply you best knowlegde to jumpstart the economy.
I'm rambling now time for bed. More tomorrow if I have something to add to the converstation.
Cheers. | |
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| Government control of private business.....
Posted: 11/5/2009 11:33:32 PM | 
Thorb, they not only favor the rich, they favor the rich taking extremely risky chances, in order to garner huge profits. And, worse, any "downside" to the risk would have to be borne by the American taxpayers.
CDOs (Collateralized Debt Obligations) were based on putting a "legitimate face" on subprime loans. The Keyword here is subprime loans. Lenders were realizing huge commissions on every transaction.
Subprime loans are risky, but having realized commissions on every transaction, lenders could now turn to CDS (Credit Default Swaps), a form of "insurance" against the risk taken. The problem being that little, if any, reserves were actually present, in case the loans went bad. The CDS holders were simply banking on the chance that they would not have to "own up" to any losses.
The problem? CDSs are unregulated, unlike regular insurance, which must have a "reserve" in case the risk is realized.
Further complicating the scenario -- the CDOs were rated as "prime investments" (AAA) by rating agencies that were bozos.
So, the "rich," having realized huge profit from commissions, and now being faced by the fact that the CDS (Credit Default Swap) holders did not have the reserves to make "good" on the defaults, were now rescued by "Joe Six Pack," the taxpayer.
What a way to make money.
I'm not ignoring the fact that the CDOs represents folks who felt that they were entitled to $250,000 houses on $40,000 salaries. Bozos on both the side of the lenders and the lendees.
And now, we all have to pay for it.
Trickle down or not; most hard working Americans, who live within their means, were royally screwed. | |
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| Government control of private business.....
Posted: 11/6/2009 4:33:53 PM | | I've actually seen how sub-prime loans work. This was for an automobile ,not a home, however, the example will work. While selling Cars in 2006, many banks were courting sub-prime buyers. The more sub-prime loans the happier the banks were, and the better the dealership did. Some of these banks are some you've heard of Captial, Citi, etc. Each of these banks had there own underwriting standards on who and under what circumstances they would lend to a potential buyer. I've seen FICA scores as low as 480 being picked up by SLM (Sallie Mae). If you couldn't get a customer financed, send them to Sallie Mae so you can make your deal. And is it any wonder they were in such financial distress? SLM, would make risky loans because they knew that the Federal Government would pick-up on the Default. Everyone, knew the system was rotten, even the Congress, but chose not to do anything about it, as long as money was being made. Some other lenders would just ask for proof of residency. As for myself, I didn't care as long as I was making my bills. I had my own worries at the time. Point is that CDO's and CDS aren't as cut and dry as you make them out to be. Sometimes you had to boost income via, Child Support payments, or Disablity etc. However, those in Finance knew the party was over, at the end of 2006 early 2007 when the underwriting got stricter. So, the financial crisis wasn't as all of sudden as we were lead to believe. | |
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