Upside Down Mortgage

Archive for July, 2009

Government Mortgage Help For Unemployed

Question: Are Obamoonies losers?

A lot of young single women vote democrat - they're too ugly or fat to get a husband, so the government is their husband - in the form of Obama - Ekkkkkkkk!!!! Squeeeeeeeeeelll!!

Besides the totally clueless students (Oooooo Obama! Get me free tuition! I'm too stupid for a scholarship, and too lazy to work! I need CHANGE Obama, lots of it!) there's the unemployed ( wahhhhhh whimper they sent my job to india!) and the people who need mortgage bailouts (I didn't know what I was signing, Saint Obama! Can you change it for me?) In general: "I need change Obama! meaning free everything, because I'm a looooooooser! And while you're at it, stop the army from killing those sweet al qaeda guys!

Answer: Actually, I believe that college should be free..Just because you want free college doesn't mean that you are lazy...Some people can't get scholarships, as most scholarship programs will easily chose the "poorer" student over the "comfortable" student..Ummm, also, for some people, they try to get grants and other things, but are rejected because their parents make to much, but their parents might also be refusing to pay for their education...SO, if you have ever gone to a $20,000 a year + University, you would know the hardships of your fellow students who work full time and go to school full time trying to pay their way through college... Why should the people who can afford higher education be the only ones allowed to go? Is it a fair assumption that because you can't afford college you are automatically dumb or lazy??? HELL NO!! And for that matter, at the beginning you said that

"A lot of young single women vote democrat - they're too ugly or fat to get a husband, so the government is their husband - in the form of Obama!!"

Too general of a statement....You obviously never got a scholarship, because your writing skills are horrible.

My advice to you: Go to college and take some Rhetoric's classes, some debate classes, and at least pass English 100...Watch a few debates, really listen to what's being said, and then form your opinion...because the world isn't like you're describing it...unemployement isn't always because someone is lazy and higher education isn't something only the wealthy should be able to afford.

Obama signs economic stimulus plan

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American General Finance Subprime

"A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits." Matt Taibbi in Rolling Stone.

It's always a bit fun to read conspiracy theory articles every now and then from a magazine like Rolling Stone. As expected there are many flaws, but there are also a few grains of truth.
Full article is of some interest, but deeply flawed. Focus is on naked short-selling and how this killed Lehman and Bear. Some assertions are true. Short-sellers of all stripes did bring pressure to Bear on both Lehman and Bear. There can be little question that each firm's demise came sooner as a result. The author of the article acknowledges that it would be absurd to blame the credit crisis on Lehman and Bear. However, a heavy-handed focus on naked short-selling does much to obscure the fact that Both Lehman and Bear had substantial toxic risk on their balance sheets (as did others financial giants). Lehman had been the target of rumors at intervals in the past -- rumors it was able to dispel. The reason short-selling succeeded, with those who shorted the stocks profiting was because the rumors about both firms were entirely true. No one outside Lehman and Bear had precise numbers, but at least at Lehman, management had a track record for aggressively counter-attacking, and ib some cases dealing the shorts a bloody nose. "Hedgies" like David Einhorn were correct in contending that Lehman's losses were worse than those the firm announced publicly. No, both Bear and Lehman's collapses resulted from imprudent real estate risk concentrations that went bad.

In the interest of balance, I do agree with the authors contention that the SEC was not conducting sound oversight. In "The Murder of Lehman Brothers" I point out that SEC enforcement staff wee stripped of powers and that there was a tacit "do not enforce" order in place. Indeed, since the book's publication, SEC independent Inspector General, David Kotz' report on Maddoff confirms this in spades.

I also agree that the Obama administration's appointments in finance have included people who at least interms of background (Wall Street execs, with the usual heavy-weighting toward Goldman) are a disappointment. Even if one assumes these officials will act responsibly, the mere appearance of potential conflict of interest is problematic if we are to restore confidence in the government's ability to impartially oversee financial markets. Few Americans believe that Wall Street influence in Washington is on the wane -- and they are right.

There are also assumptions made about a nefarious March 11, 2008 meeting at the Fed that included all the major financial players (including Lehman's CEO Fuld), but no one from Bear Stearns just days before the collapse. The author implies that there was at least some discussion about an imminent Bear Stearns collapse. What is problematic about this contention is that the collapse of Bear would only cause rumors and shorts to move from Bear to Lehman, and Fuld would have known this. Not long after this meeting, Fuld flew to India on Lehman business, only to cancel a major event and rush back to NY days later when the Bear crisis emerged. Fuld would not have left for India if he knew he would be rushing back to New York to work with other top execs to dispel rumors about Lehman if the dialogue at the 3/11 meting indicated Bear would soon be a goner.

The author also oversimplifies and misleads in saying that Paulson killed Lehman. While I believe Paulson's decision that Lehman file for bankruptcy was a mistake, I do not believe this was done to further concentrate Wall Street power at Goldman, his former firm. It appears far more clear that he initially sought a Lehman solution that would avoid the use of taxpayer dollars and instead brokered a Barclays Capital purchase of Lehman with losses on balance sheet assets backed by other major financial firms - similar to arrangements for the soft-landing for Long-Term capital Management in the late-1990s. The UK FSA did not approve this, at least according to the public record, due to technical stock exchange rules preventing this. At this point, largely based on a strong belief in "moral hazard" Paulson considered the only choice to be bankruptcy. The contention that Paulson would have done this to eliminate a Goldman competitor both ignores his efforts to prevent a bankruptcy. What is most stunning about Paulson's final decision on Lehman is that he failed to anticipate the collateral damage. Can we really believe that a man with Paulson's ego would sacrifice his legacy for such a gambit. Indeed, when the fallout of the Lehman became clear, he completely changed course, calling for the rescue of all other major financial institutions.

Finally, the author takes a swipe at the rating agencies - describing their role in the crisis as corrupt. While no one disputes that ratings on subprime and related securitizations were disastrously inflated, and many believe this resulted from conflict of interest, there is nothing yet public that substantiates this contention. Clearly the ratings were wrong. The reasons for this are not yet clear. Nothing can be ruled out. At the same time, there is an utter lack of public clarity as to why the rating agencies all failed so entirely in rating these risky real estate securities. Faced with numerous law suits, the answers will not come quickly. The agencies can noi more easily speak up than can the disgraced executives of Lehman and other firms currently surrounded by lawyers.

amazon link

About the Author:

Author: "The Murder of Lehman, An Insider's Look at the Global Meltdown"

Source - Wall Street's Naked Swindle - Lehman Brothers & Bear Stearns

Niall Ferguson: The Financial Crisis -2/6

Financial Crisis Subprime

Question: GLOBAL FINANCIAL CRISIS AND SUB PRIME MORTGAGE QUESTION. who is to blame?

To what extent did the subprime mortgage disaster have on the global economic crisis? What signs were there to indicate an impending crisis? Who is to blame for these events? Is the United States Governments actions and strategies to improve the economy valuable?

Answer: The sub-prime mortgage disaster caused the global economic crisis. Sub-prime mortgages significantly weakened global financial institutions which caused the credit freeze of last fall/winter.

There were many signs that housing was going to go bust at some point. The fact that many mortgages were sub-prime at the height of the housing bubble was a sign. The fact that housing prices had deviated so significantly from their historical trend was another worrisome sign. So were loans with no downpayments. Shows like 'flip that house' are another sign that it has gotten out of control. Areas where real estate prices went up more than 100% in a few short years were another sign.

Many people share blame for this. Individual borrowers taking out loan they either didn't understand or couldn't afford were a problem. That wouldn't have been such an issue if there weren't mortgage brokers pushing unaffordable loans with huge yields to themselves and neither of these would have been an issue if banks had been sane and had real underwriting standards and understood the risks associated (and charged accordingly) for the loans they were writing.

Individual borrowers were greedy (not all obviously, but some were).
Mortgage brokers were greedy (not all obviously, but some were).
Banks were greedy (most, but not all).

The US government's actions in late fall/early winter and then continuing in spring were completely necessary. If the credit markets had remained that frozen we would have slid out of control. I'm not saying it was the perfect plan or that they couldn't have done it better, they probably could have (like not letting Lehman go under - that one really precipitated problems), but it was also a big help.

good luck!

Subprime US Banking Financial Crisis Explained Part 3