Moraen,



I’m aware that the numbers you and I used are ‘made up’. My point is that your game theory argument only works because of the numbers you assumed. But you haven’t explained why we should assume those numbers. There are plenty of examples of financial institutions that decided that the payout was much lower and decided not to get involved with subprime at all. So why did those institutions get it right and others did not. In fact many of the banks that did better are the small community banks that lend to poor neighborhoods!



And, of course, the key point we are debating is CRA. You still haven’t explained why CRA was supposed to make so many want to lend to subprime. Was CRA such a great business for decades prior to 2007?   

For this post to make sense, you need to differentiate between:

1. Lend sub-prime to people who can reasonably afford to pay off the loan.
2. Lend sub-prime to people who have no chance of paying off the loan.
3. Lend sub-prime to speculators who can reasonably afford to pay off the loan.
4. Lend sub-prime to speculators who have no chance of paying off the loan.

I believe #1 is the intent of the CRA.
It was numbers 2, 3, 4 that caused the collapse (especially #4). 

[quote=gabe]Moraen,



I’m aware that the numbers you and I used are ‘made up’. My point is that your game theory argument only works because of the numbers you assumed. But you haven’t explained why we should assume those numbers. There are plenty of examples of financial institutions that decided that the payout was much lower and decided not to get involved with subprime at all. So why did those institutions get it right and others did not. In fact many of the banks that did better are the small community banks that lend to poor neighborhoods!



And, of course, the key point we are debating is CRA. You still haven’t explained why CRA was supposed to make so many want to lend to subprime. Was CRA such a great business for decades prior to 2007?   [/quote]

I did say why we are assuming those numbers.  Because you will garner greater returns short-term if you make those sub-prime loans.  Just like you would garner lower returns (in your scenario) long-term.

What it means is that if the standards are now lax, it is MORE beneficial in the short-term to make those loans.  The lax lending standards were caused by CRA.

[quote=Still@jones]For this post to make sense, you need to differentiate between:

1. Lend sub-prime to people who can reasonably afford to pay off the loan.
2. Lend sub-prime to people who have no chance of paying off the loan.
3. Lend sub-prime to speculators who can reasonably afford to pay off the loan.
4. Lend sub-prime to speculators who have no chance of paying off the loan.

I believe #1 is the intent of the CRA.
It was numbers 2, 3, 4 that caused the collapse (especially #4). 



[/quote]

Intent and execution are two different things.  Not to pick on you, but it was your intent to make a lot of money at Jones.  And a lot of other people for that matter.

Goldman Sachs (NYSE:GS) Claims Didn’t Need Government Bailout

December 5th, 2009 • Related • Filed Under • by Gary





Goldman Sachs (NYSE:GS) CEO Lloyd Blankfein said in an online Vanity Fair article recently that the company didn’t need a government bailout, and would have survived without it. President of Goldman Sachs, Gary Cohn, said it stronger, stating the company had cash and “would not have failed.”



Goldman spokesman Lucas van Praag confirmed that Goldman indeed did have a lot of cash on hand they had raised, which would have allowed them to weather a long-term financial storm. “We had cash and funding that would have allowed us to survive for quite a long time,” he said.



Faltering Treasury Secretary Timothy Geithner took issue with the statement because the government is attempting to interfere with the pay of banks and financial institutions; even those that have paid back the TARP money like Goldman already has.



Geithner’s argument on Bloomberg Television went like this: “The entire U.S. financial system and all the major firms in the country, and even small banks across the country, were at that moment at the middle of a classic run, a classic bank run.” He said this is the reason the financial system in the U.S. would have collapsed. “None of them would have survived,” he stated.



The reason the argument in stemming around whether the firm needed to be bailed out or not is because of the idea the government thinks it has a say in the matter if that was the case. The argument at this point is irrelevant, as whether they did or not will never be known.



Let’s look at Geithner’s thoughts on the bank run idea making it necessary to bail out everyone and see if it can stand up.



First we need to get the idea out of our head of a bunch of people stampeding the bank to get in line to draw out their money. That could and did happen to a small degree, but what scared the government is in just a couple of clicks on the Internet people can make their bank runs today, and in a very short time empty the deposits in a bank.



The problem with Geithner’s reasoning as I see it is if people do take out, i.e., transfer their money, from their bank, it’s going to be transferred to somewhere other bank or financial institution. Most aren’t going to take their money out and hide it in the equivalent of their mattress.



If one bank gets clobbered, another bank somewhere else will benefit from it. What should we or the government care if one poorly run bank suffers and another benefits. In a true free market the best business survive and the others fall by the wayside. That’s the way it should be.



But by Geithner’s reasoning, the money would have to be completely be taken out of the banking system in order for his scenario to have had to happen. It makes no sense whatsoever. If people were making a run on the banks, they were going to put that money in a bank they better trusted, probably a local or regional one they knew better.



What was really happening is the banking cartel with its large players were in jeopardy of losing their financial and, consequently, political power, if consumers voted to use another bank; which they were in fact doing.



Much of this on the part of Geithner is more than likely political posturing, as the recent debacle in trying to find a CEO for Bank of America (NYSE:BAC) has proven no one is going to take a position like that with the government interfering with pay and other elements of the business.



The government and lawmakers are under fire for the outrageous bailouts and what they have cost taxpayers, along with the extraordinary deficits being run up, which will ultimately savage us all with high inflation.



So they continue to make it look like executive compensation was the reasoning behind the economic and banking crisis, rather than the Federal Reserve and its monetary policies, along with the over-extension of Fed Chairman Ben Bernanke in bailing out companies beyond the authority and purpose of the institution.



This doesn’t include the stupid government policies which force banks to offer loans to many people which aren’t really qualified to receive them, which was a big part of the housing market collapse, and is largely unreported by the mainstream media.



We need a real capitalist system to re-emerge in America, as government interference in this one has basically made into something which is no longer and can no longer be considered capitalism. This is why the government and its mainstream media allies continue to say capitalism has failed. The government interferes in it, resulting in failure, than extracts itself from its role in the minds of people so it can look like free markets and capitalism were the cause of the downfall, and government interference ended up saving the day. It’s a lie, but it’s a lie that many continue to believe.



This is why the poorly run banks should have been allowed to fail. If they indeed did make poor decisions and their bonuses would have brought them down, then it needed to happen, as the free market would have disciplined them; showing their actions and practices were wrong. That’s the only way it can be done, and not through a government theory that can’t be proven one way or another that the financial system would have collapsed if they hadn’t intervened.

STORY: Goldman, Morgan become banks. Both stocks have huge rally on news. Hoping to stop short seller raids.





Question: Why are Morgan Stanley and Goldman Sachs doing this?



A: A major reason the banks decided to convert to bank holding companies was to gain access to a stable source of funding: customer deposits.



Investment banks have traditionally relied on borrowed money, rather than deposits, to turn a profit. But as the economy has faltered, and it’s become harder — and more expensive — to borrow money, they’ve realized the appeal of plain-vanilla deposits.



Morgan Stanley and Goldman Sachs had been mulling the conversion for weeks, but Lehman’s bankruptcy last week — along with Merrill Lynch’s merger with Bank of America (BAC) and the government’s takeover of AIG — accelerated the decision.



Morgan Stanley further stabilized its finances Monday by striking an agreement to sell Mitsubishi UFJ Financial Group, Japan’s largest bank, as much as a 20% stake.



The developments mean that Morgan Stanley’s talks with Wachovia about a potential merger are on hold, according to a person with direct knowledge of the matter but who is not authorized to be quoted publicly.





Q: How is regulation different for a bank holding company vs. an investment bank?



A: Three ways.



First, bank holding companies have stricter requirements about the amount of capital they must hold — that is, the amount of money they have to offset losses. Historically, investment banks have had few restrictions on how much capital they must have.



Second, investment banks haven’t had strong regulatory oversight. Although the SEC has had a watchdog role in investment banks’ activities, bank holding companies generally have far more rigorous oversight from the Federal Reserve.



Finally, there are some things that bank holding companies just aren’t allowed to do — use large amounts of borrowed money to buy and sell securities, for example. Much of the financial crisis has stemmed from exactly that.





Q: How will Goldman Sachs and Morgan Stanley acquire deposits?



A: Now that Morgan Stanley and Goldman Sachs are bank holding companies, they will aggressively try to expand deposits. Initially, at least, they may do so mainly through their existing brokerage and wealth-management clients, much as Merrill has done for years.



But Robert J. Ellis, a senior vice president at Celent, a financial-services research firm, said he wouldn’t be surprised if the firms each struck a deal “within weeks” to merge with a bank, in an effort to quickly build their deposit base. “Our plan is to acquire (deposits) that will impact the balance sheet, but this won’t result in ATMs on every corner,” says Lucas Van Praag, a Goldman Sachs spokesman.





Q: Is the independent investment bank doomed?



A: Not at all, although the large investment bank is now a thing of the past. Many small and midsize investment banks have survived the carnage on Wall Street. If they make it intact through the current crisis, they could do quite well.



“Many smaller boutique firms will carry on,” says Hugh Johnson of Johnson Illington Advisors. In fact, Johnson says, many of the more aggressive people from the big firms may well land in smaller investment banks. “That’s where the risk takers go — those who can’t operate in the new culture at Goldman Sachs and Morgan Stanley will go to small and midsized firms,” Johnson says.



Smaller firms that are able to attract new employees will get another benefit: the business contacts of their new hires. “We see small and midsized investment banks increasing their market share,” says Michael Turner, partner at Fort Lauderdale investment bank Farlie Turner.





Q: What effect will this have on consumers?



A: Gary Stein, a partner with Capital Performance Group, which consults with banks, says more players in the banking world leads to more competition. More competition, in turn, he says, could result in better loan terms for consumers.



Yet the reason such savings may not materialize, says Ellis, of Celent, is that historically, as banks have captured more market share, they’ve also raised their fees. That means, he says, that consumers could ultimately get "less interest on their deposits and pay more interest on their loans."





Q: What does this mean for securities underwriting?



A: In general, very little. Goldman Sachs and Morgan Stanley will still be able to bring new stocks and bonds to market, just as they always have.



But because stocks are in the grip of a bear market, new stock offerings will probably be scarce. At the moment, the new issues calendar is about as empty as the Bear Stearns employee cafeteria. “Given the market’s volatility, it’s not a good time to contemplate new equity issue,” Turner says. And, because the debt markets are in such turmoil, there’s not much demand for new bonds, either. Eventually, however, new issue demand will return.



Yahoo! Buzz Mixx       

[quote=Moraen]

[quote=Still@jones]For this post to make sense, you need to differentiate between: 1. Lend sub-prime to people who can reasonably afford to pay off the loan. 2. Lend sub-prime to people who have no chance of paying off the loan. 3. Lend sub-prime to speculators who can reasonably afford to pay off the loan. 4. Lend sub-prime to speculators who have no chance of paying off the loan. I believe #1 is the intent of the CRA. It was numbers 2, 3, 4 that caused the collapse (especially #4).

[/quote]Intent and execution are two different things. Not to pick on you, but it was your intent to make a lot of money at Jones. And a lot of other people for that matter.[/quote]



hahha, it was my intent to be a billionaire!

[quote=Moraen]

[quote=Still@jones]For this post to make sense, you need to differentiate between:

1. Lend sub-prime to people who can reasonably afford to pay off the loan.
2. Lend sub-prime to people who have no chance of paying off the loan.
3. Lend sub-prime to speculators who can reasonably afford to pay off the loan.
4. Lend sub-prime to speculators who have no chance of paying off the loan.

I believe #1 is the intent of the CRA.
It was numbers 2, 3, 4 that caused the collapse (especially #4). 
[/quote]Intent and execution are two different things.  Not to pick on you, but it was your intent to make a lot of money at Jones.  And a lot of other people for that matter.
[/quote]

While I agree, that’s not my point. Most things in government fail to meet their intent - just look at the repeal of Glass Steagall.

I always expect my current president and current congress to oversee current events and I hold them responsible for averting any current disasters. Trying to blame Clinton, who hasn’t been in office for 8 years and had absolutely no power to effect change, borders on ridiculous. 
 
As for Jones, I’m now blaming Penny Pennington (the lady in the Jones training videos). 

Right.  But what I’m saying is that despite the intent of the CRA, it lead to other things.  Had CRA not been strengthened, 2, 3 and 4 wouldn’t have happened.  It was Bush’s job to weaken it.  Do you think that would have happened?

[quote=Moraen] [quote=Still@jones]For this post to make sense, you need to differentiate between:

1. Lend sub-prime to people who can reasonably afford to pay off the loan.
2. Lend sub-prime to people who have no chance of paying off the loan.
3. Lend sub-prime to speculators who can reasonably afford to pay off the loan.
4. Lend sub-prime to speculators who have no chance of paying off the loan.

I believe #1 is the intent of the CRA.
It was numbers 2, 3, 4 that caused the collapse (especially #4). 
[/quote]Intent and execution are two different things.  Not to pick on you, but it was your intent to make a lot of money at Jones.  And a lot of other people for that matter.
[/quote]

While I agree, that’s not my point. Most things in government fail to meet their intent - just look at the repeal of Glass Steagall.

I always expect my current president and current congress to oversee current events and I hold them responsible for averting any current disasters. Trying to blame Clinton, who hasn’t been in office for 8 years and had absolutely no power to effect change, borders on ridiculous. 
 
As for Jones, I’m now blaming Penny Pennington (the lady in the Jones training videos). 

[quote=Still@jones] [quote=Moraen] [quote=Still@jones]For this post to make sense, you need to differentiate between:

1. Lend sub-prime to people who can reasonably afford to pay off the loan.
2. Lend sub-prime to people who have no chance of paying off the loan.
3. Lend sub-prime to speculators who can reasonably afford to pay off the loan.
4. Lend sub-prime to speculators who have no chance of paying off the loan.

I believe #1 is the intent of the CRA.
It was numbers 2, 3, 4 that caused the collapse (especially #4). 
[/quote]Intent and execution are two different things.  Not to pick on you, but it was your intent to make a lot of money at Jones.  And a lot of other people for that matter.
[/quote]

While I agree, that’s not my point. Most things in government fail to meet their intent - just look at the repeal of Glass Steagall.

I always expect my current president and current congress to oversee current events and I hold them responsible for averting any current disasters. Trying to blame Clinton, who hasn’t been in office for 8 years and had absolutely no power to effect change, borders on ridiculous. 
 
As for Jones, I’m now blaming Penny Pennington (the lady in the Jones training videos). 

Yeah, I took a jump of desperation and hit my nuts on a rock. Oh well, what can you do ? Time to go hit on a young teller I guess.

[quote=Still@jones]
While I agree, that’s not my point. Most things in government fail to meet their intent - just look at the repeal of Glass Steagall.
[/quote] And you think healthcare will be any different?

Dean disses healthcare.

How cool.



Obama admin is now a clusterfukc.



right hates plan

left hates plan

center hates plan



we are very close to these dems running for the hills from Jimmy jr.



healthcare fails to pass…wow



priceless

[quote=Ron 14]

Yeah, I took a jump of desperation and hit my nuts on a rock. Oh well, what can you do ? Time to go hit on a young teller I guess.

Not Wendy, Bob

healthcare   NOPE

cap and gown     SORRY

global warming      nay

save the whales     maybe later



Nobel this. bwhahahahahahahaha



This guy might make Jimmy look like G. Washington

[quote=DeBolt][quote=Still@jones]
While I agree, that’s not my point. Most things in government fail to meet their intent - just look at the repeal of Glass Steagall.
[/quote] And you think healthcare will be any different?[/quote]

Nope! It will turn into a complete cluster-f***!
I’m just ok with that.

Moraen,

I’m aware that the numbers you and I used are ‘made up’. My point is that your game theory argument only works because of the numbers you assumed. But you haven’t explained why we should assume those numbers. There are plenty of examples of financial institutions that decided that the payout was much lower and decided not to get involved with sub prime at all. So why did those institutions get it right and others did not. In fact many of the banks that did better are the small community banks that lend to poor neighborhoods!

And, of course, the key point we are debating is CRA. You still haven’t explained why CRA was supposed to make so many want to lend to sub prime. Was CRA such a great business for decades prior to 2007?   

[quote=Moraen]
[quote=Still@jones]For this post to make sense, you need to differentiate between: 1. Lend sub-prime to people who can reasonably afford to pay off the loan. 2. Lend sub-prime to people who have no chance of paying off the loan. 3. Lend sub-prime to speculators who can reasonably afford to pay off the loan. 4. Lend sub-prime to speculators who have no chance of paying off the loan. I believe #1 is the intent of the CRA. It was numbers 2, 3, 4 that caused the collapse (especially #4). 
[/quote]Intent and execution are two different things.  Not to pick on you, but it was your intent to make a lot of money at Jones.  And a lot of other people for that matter.[/quote]

hahha, it was my intent to be a billionaire!