Nice summary in Rolling Stone on our economic crisis

[jkjsooner]

I found this to be a good read.

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/

My favorite part


In fact, there was such a crush to underwrite CDOs that it became hard to find enough subprime mortgages — read: enough unemployed meth dealers willing to buy million-dollar homes for no money down — to fill them all.

If you read page 3 it really addresses the root of the problem. (Hint: As much as I dislike govt affordability programs and think they usually cause distortions which erode their original goal, this was not about the CRA or ACORN.)

[Dio]

Being in Rolling Stone, I'm sure there's no slant to this article whatsoever.

[jkjsooner]

Being in Rolling Stone, I'm sure there's no slant to this article whatsoever.


Nevertheless, it's a heck of a read and there's a lot of good information in there. If you bother to read it there's no love for either political party in there. The writer spends quite a lot of time blaming the Democrats for cozying up with the various business lobbies.

I listen to NPR, BBC, Bloomberg almost exclusively in my car and I haven't heard one respected economist who has pushed the idea that this crisis was caused by the CRA. It's pretty well understood that this crisis had it roots in the new/unregulated financial instruments that nobody truly understood and that everyone accepted as fool proof. (I say everyone but of course there were plenty of people yelling about the coming danger.) Low interest rates created a lot of money that flowed into this AAA junk. Finding it hard to find people to take these loans they began lending just about any amount to just about anyone. Afterall, these things were diced and sliced up into tranches so that there was no probability of failure large enough to lose money. (sarcasm) This lead to incredible housing price inflation which lead to even more risky lending.

When you look at the sheer volume of money it is really clear that the government programs could never have funded this mess. Even Fannie and Freddie could not have done this without the naive investors buying their securities.

[jkm, the stolen pifwafwi]

honestly, there isn't much bias in the article at all. the guy comes across as a democrat railing against some greedy bastards. one of the best written articles i've read in forever.

his prediction about cap and trade is right on...

[Vaevictis]

Here's the basic deal guys:

(1) If you let people give mortgages to people who can't pay the bills, and
(2) You let those people package the mortgages for sale to third parties, and
(3) You let third parties bless these mortgage pools with a AAA credit rating, and
(4) You let most of your banking system leverage up to 20:1 or higher ratios using these mortgage pools as collateral, then
(5) You are going to have a disaster.

There aren't too many ways to prevent this chain from happening. Two that come to mind are:

(1) You add regulations to make it hard and/or costly to do this sort of thing, or
(2) You trust banking company executives to look out for the long term interests of their shareholders when they're compensated based on short-term results.

Good luck with (2), by the way.

[jkm, the stolen pifwafwi]

vae,

the gist of the article is that goldman is purposely inflating bubbles to increase their own paychecks. internet bubble, housing bubble, oil bubble, and in the future it will be cap and trade. these guys are less scrupulous than the fellers at enron because their alumni are on all of the regulatory boards.

[Vaevictis]

Yeah, I don't have a copy of the article handy, and they're only printing part of it online.

It doesn't surprise me in Goldman's case. Like I said, good luck with trusting people to look after long-term interest when you compensate them based on short-term performance.

[Vaevictis]

his prediction about cap and trade is right on...


... and as to this, I'm assuming the article is talking about how Goldman wants in on this game.

I know some people who have worked for Goldman in the past. Goldman is practically slavering at the prospect of being the market maker in this area.

[OklahomaTuba]

his prediction about cap and trade is right on...

What is it? (Can't get the entire article).

[jkm, the stolen pifwafwi]

http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs

whoops didn't realize your article is only partial. seriously, this is one article that you have to read. basically, goldman sachs sits on both sides of every crisis.

for example, during the mortgage crisis.

they sold the mortgages to schmucks like us, they then shorted the bonds AND bought insurance on them. they are worse than bookies...

[jkm, the stolen pifwafwi]

so extrapolating to cap and trade, they'll buy up all of the contracts early and sit on them until the price goes up. they'll then have their alternative energy companies gouge the crap out of people because the cheaper power companies can't output electricity. if the gov't mandates that the companies buy paper to produce electricity they make money on the held out paper.

[OklahomaTuba]

Awesome.

Wonder how I can get in on some of that action.

[jkm, the stolen pifwafwi]

my favorite part of the article was their tax liability. 14 million dollars? on profits of 1.5 billion? right after you paid out bonuses worth 5 billion?

oh wait. AIG only paid out to foreign banks so they just held the money over there :D

[jkm, the stolen pifwafwi]

last thing about this before i disappear - basically he is stating that the company has people so firmly entrenched in positions of power that they have a "sixth sense" with regard to gov't regulations. miraculously getting just the right amount of loans before the stress program? knowing just when to use a tax loophole that keeps people from realizing you are paying out tarp funds as bonuses? the ability to get the person who oversees the tarp funds that also happens to sit on your board of directors and owns a lot of stock as well a conflict of interest exemption. etc. thus why he is calling us a gangster society...

[OklahomaTuba]

I would love to ask any of the traders from Semgroup about what they think about goldman.

[NormanPride]

No more on this?

This feels like USC '05. Damnit.

[TUSooner]

Rolling Stone, p.1: Big business sucks!

Rolling Stone. p.2: WOW, look how much dope and booze these artists can buy because their music is so awesomely cool (and ... ahem .. well-marketed) that zillions teenagers and stoned zombies buy it!

Rolling Stone, p.3: Big business sucks!!

Take it with a grain of salt, please. :D

[Ike]

last thing about this before i disappear - basically he is stating that the company has people so firmly entrenched in positions of power that they have a "sixth sense" with regard to gov't regulations. miraculously getting just the right amount of loans before the stress program? knowing just when to use a tax loophole that keeps people from realizing you are paying out tarp funds as bonuses? the ability to get the person who oversees the tarp funds that also happens to sit on your board of directors and owns a lot of stock as well a conflict of interest exemption. etc. thus why he is calling us a gangster society...

this is why they are often called "Government Sachs"

[soonerscuba]

Rolling Stone, p.1: Big business sucks!

Rolling Stone. p.2: WOW, look how much dope and booze these artists can buy because their music is so awesomely cool (and ... ahem .. well-marketed) that zillions teenagers and stoned zombies buy it!

Rolling Stone, p.3: Big business sucks!!

Take it with a grain of salt, please. :Dhttp://www.theonion.com/content/news_briefs/film_about_little_guy

[bluedogok]

Rolling Stone, p.1: Big business sucks!

Rolling Stone. p.2: WOW, look how much dope and booze these artists can buy because their music is so awesomely cool (and ... ahem .. well-marketed) that zillions teenagers and stoned zombies buy it!

Rolling Stone, p.3: Big business sucks!!

Take it with a grain of salt, please. :D
The Rolling Stone is a lot like Playboy, they have some good articles every so often amongst the "other" stuff. Most of them seem to be a pickup of a book or something like that which this article seems to be.

[Fraggle145]

bump as per the democratic overlord thread.