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#2061989 - 04/09/13 03:02 PM Re: WSJ article on N2 [Re: Dave Horne]
EssBrace Offline
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Registered: 12/01/09
Posts: 2423
Loc: Suffolk, United Kingdom
Some people talk from absolute, extreme positions. Nothing is as simple as theJourney or Ojustaboo suggest. In trying to present a more balanced view of Thatcher for instance I would come across as defending her, which is inconsistent with my view of her and her policies. So I'm not going to do that. But the Thatcher thing is very much more complex and nuanced than is being portrayed here.
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#2062065 - 04/09/13 05:13 PM Re: WSJ article on N2 [Re: EssBrace]
Temperament Offline
Full Member

Registered: 09/19/10
Posts: 424
Loc: Hun,EU
Originally Posted By: EssBrace
Some people talk from absolute, extreme positions. Nothing is as simple as theJourney or Ojustaboo suggest. In trying to present a more balanced view of Thatcher for instance I would come across as defending her, which is inconsistent with my view of her and her policies. So I'm not going to do that. But the Thatcher thing is very much more complex and nuanced than is being portrayed here.

Just my own trouble. I feel myself in a left-wing company often as the right devil, and in right-wing circles as the liberal enemy.
And I can understand a lot - so perhaps 80% in both argumentations - and that is the problem, it is the question of perspective, which one should be able to freely move. Like in real life.

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#2062068 - 04/09/13 05:21 PM Re: WSJ article on N2 [Re: Dave Horne]
ando Online   content
3000 Post Club Member

Registered: 11/23/10
Posts: 3668
Loc: Melbourne, Australia
The action in this thread is very heavy.

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#2062072 - 04/09/13 05:35 PM Re: WSJ article on N2 [Re: ando]
spanishbuddha Offline
2000 Post Club Member

Registered: 11/08/09
Posts: 2434
Loc: UK
Originally Posted By: ando
The action in this thread is very heavy.

....and the tone varies a lot.

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#2062074 - 04/09/13 05:41 PM Re: WSJ article on N2 [Re: Dave Horne]
Ojustaboo Offline
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Registered: 07/18/11
Posts: 155
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Deleted


Edited by Ojustaboo (07/29/13 06:34 PM)

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#2062078 - 04/09/13 05:50 PM Re: WSJ article on N2 [Re: gvfarns]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: gvfarns
You can argue that there ought to be more unions, but at least in the US you can't blame anyone in politics for it.

Reagan busted the air traffic controllers union personally. Which set a tone of intimidation, yadda, yadda.

Originally Posted By: gvfarns
Workers just don't want to be in unions the way they used to. Unions are kind of an old-economy thing.
<snip>
Workers have simply stopped supporting unions of their own free will.

The individual worker is almost powerless, so unless you want to end up virtual slave labor there is absolutely no substitute for collective bargaining. Countries do it when they enter into treaties with each other against other countries, companies do it when they form alliances, why is is it such a quaint thing in your eyes when workers do it?

Unions are the only reason we have basic human rights in the workplace anywhere, and the the demise of unions in the US probably has more to do with companies moving their manufacturing overseas where labor is non-unionized, and therefore cheaper and more easily exploitable. When I worked at a major telecom equipment manufacturer they got rid of all of the union jobs by getting rid of all US manufacturing. I suppose those workers were happy to see those decent paying union jobs go, relieved to no longer be yoked by the crushing oppression of the cruel, evil union.

Originally Posted By: gvfarns
In most cases it's because the unions do more harm then good (there are very few controls to keep them from becoming corrupt...far fewer than there are in government or business).

Master! The barbarian union hoards are at the gate and they want you to pay me a living wage! Lordy, can't a good slave be free to be happily enslaved anymore?
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#2062081 - 04/09/13 05:56 PM Re: WSJ article on N2 [Re: Dave Horne]
pv88 Offline
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Registered: 08/31/10
Posts: 2702
[Edited]

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#2062089 - 04/09/13 06:29 PM Re: WSJ article on N2 [Re: pv88]
maurus Offline
500 Post Club Member

Registered: 05/21/11
Posts: 847
Originally Posted By: pv88
Question for all:

When you die where do you believe you are going?

Well, let's try. The things I leave behind, my writings, my love, the little of music I could say to have given to others, my possessions, the memories others keep of me, even the parts of my dead body - who knows where they will be going. Many places, I am sure. It's for others to decide. But I myself? Certainly: Nowhere. At least that is my conviction, and my hope.

Now that might inspire some music. Even on an Avant Grand...

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#2062103 - 04/09/13 07:08 PM Re: WSJ article on N2 [Re: gvfarns]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: gvfarns
There is political partisanship and rhetoric, and there are the rants of the paranoid schizophrenic. To me it feels like you blur the line, TheJourney. Maybe I have just never met anyone as extreme as you are (or at least as you talk) so I'm caught off guard.

I get the feeling the leftists you've been exposed to are of the milquetoast / straw man variety. Not your fault I suppose, flaming centrists in any almost other country are labeled hard left in the US. Anyone might be confused.

If you are open to new ideas you might try A People's history of the United States by Howard Zinn. Though I have to say that it's an eye popping, harrowing read, not exactly light bedtime fare, and I personally couldn't make it past the first 1/4 or so for health reasons.

Originally Posted By: gvfarns
I just get tired of people anthropomorphizing firms and assigning moral blame to them. Firms have never, and will never, have a heart. That is to be expected. If you are set on finding one in them, you can expect to be frustrated forever and you will never find a solution to the ills you perceive to be caused by them.

But companies, like Soylent Green, is people! No anthropomorphizing necessary. When groups of people do evil things they aren't evil? Particularly when they're doing it for profit (evil^2)? I don't see how economic theory relieves anyone of the responsibility of their actions.

Which leads me to another notion: the most dangerous social construct mankind ever invented is the diffusion of responsibility. If one person does wrong we all pretty much agree that he should get the full blame. If ten people are equally guilty of a single wrong we start scratching our heads and do our best to single out an instigator. And when I put part of my savings in a bank that invests part of it in a company that exploits child labor in some far off land, I have so little blood on my hands that maybe I don't even notice it.

When some borderline paranoid schizophrenic points out the blood, people with all the comforts in the world, who live like pampered kings of old, get defensive and start rationalizing, saying things like "it's dog eat dog" "I earned that money fair and square" "the world as we know it would disappear without an investor class" "emerging economies have to start somewhere" "you gotta break a few eggs to make an omlette" "hard work builds character" "maybe those 5 year olds enjoy working 18 hours a day" "my great Uncle worked in the mines when he was 8 (before the unions)" etc.

Our psyches are chock full of defense mechanisms that tend to make us look better to ourselves than we really are. It's no wonder that many first worlders don't understand how complicit they are in most of the world's woes, they naturally avoid self educational opportunities that might make them feel the pain of guilt. Which we lefties seem to be shouldering the brunt of lately, there is no equivalent to "liberal guilt" on the right - indeed it is used as something of an epithet, a sign of weakness.
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#2062121 - 04/09/13 08:15 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
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Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: dewster
But companies, like Soylent Green, is people! No anthropomorphizing necessary. When groups of people do evil things they aren't evil? Particularly when they're doing it for profit (evil^2)? I don't see how economic theory relieves anyone of the responsibility of their actions.


Point taken. Individually, some of those people are culpable, if they are breaking laws. But the organization doesn't have a mandate to be kind or provide for the needy or whatever. If the individuals in the company break no law and they maximize the company profit, they have done nothing wrong. If the outcome is not what we want, then the laws and property rights were not set up right. Employees work for companies of their own free will. People buy from companies of their own free will. There's not a lot of room for guilt.

Speaking of guilt and compulsion, I disagree with the idea that it's unions that keep us paid well, and so do the people dropping out of unions like so many autumn leaves. Companies pay employees according to their marginal productivity. If the company doesn't pay enough or doesn't provide enough benefits, the correct option is to leave. If there are no comparable outside options, it means you were overpaid. If we were as critical of companies for paying people whose productivity is far below their pay grade as we are for what we perceive to be the opposite, we would have far more negative feelings toward these companies. But it's not actually possible for a company to pay someone below their productivity unless they can effectively compel them to stay.

Back in the 1980's there were a few actual government actions against unions (and also many in favor). But they didn't make a difference. The big exodus from unions came later. Let me be clear, I don't think unions are useless. I can imagine circumstances when they can be useful (for example, if the employer is getting monopoly power or maybe in an industry at the bottom where people's marginal productivity is not enough to sustain life). I don't agree that unions require government support to stay alive where they are needed, and I don't believe a law that compels employees in an industry to join the union whether they want to or not is moral. Those are the laws many industries have now.

Unions and other government-sponsored productivity killers drive companies out of business or make them scale back. This decreases demand for employees and puts workers in a worse situation to negotiate a good salary. In that way unions can and often do harm workers in an industry more than they help.

Parenthetically, one reason people don't like unions is that they are horribly rife with corruption. Many union bosses make obscene money, skimmed from employees and the employer by compulsory means, and are neck deep in various types of crime. Sometimes that crime is a means to enforce their union agenda but other times it's just a way to enrich themselves. They put both executives and politicians to shame in terms of corruption. In the case of politicians, the corruption sometimes goes goes hand in hand, though. The politicians write laws that force people to pay the unions, the union bosses use employee money to donate to the politicians' campaigns, whether the employees want to or not.


Edited by gvfarns (04/09/13 09:19 PM)

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#2062266 - 04/10/13 04:08 AM Re: WSJ article on N2 [Re: ando]
Dave Horne Offline
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Registered: 07/07/04
Posts: 5282
Loc: Vught, The Netherlands
Originally Posted By: ando
The action in this thread is very heavy.


Does that mean I'm entitled to a cut of the ad clicks? smile
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#2062305 - 04/10/13 07:01 AM Re: WSJ article on N2 [Re: Dave Horne]
MacMacMac Offline
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Registered: 09/24/09
Posts: 3879
Loc: North Carolina
Unions come and unions go, and there are some common reasons:

1. Market factors. Union power rises when labor demand exceeds the supply.

2. Politics. Union power rises when labor leaders pay politicians to enact legislation favoring the union.

Which acting force do you prefer: market factors or politics?

I prefer market factors. These are honest and predictable, while politics is rife with corruption ... yet one more reason to keep government out of our lives.

Unions have declined in America because so much labor has been shifted offshore. A former boss of mine said, back in the 80's: "We're safe in our jobs because there will always be manufacturing." How very wrong!

Labor employment generally moves to the lowest cost source. Manufacturers demand lower costs. And so do we as consumers.

This is nothing new. And it involves no evil intent. It's just basic human nature.

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#2062306 - 04/10/13 07:05 AM Re: WSJ article on N2 [Re: Dave Horne]
Dave Horne Offline
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Registered: 07/07/04
Posts: 5282
Loc: Vught, The Netherlands
Manufacturers demand lower costs. And so do we as consumers.

And stockholders demand greater returns and that also drives the businesses to cheap labor countries.
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#2062370 - 04/10/13 12:33 PM Re: WSJ article on N2 [Re: gvfarns]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: gvfarns
Parenthetically, one reason people don't like unions is that they are horribly rife with corruption. Many union bosses make obscene money, skimmed from employees and the employer by compulsory means, and are neck deep in various types of crime. Sometimes that crime is a means to enforce their union agenda but other times it's just a way to enrich themselves.

I would apply this more to corporations. You can make huge piles of cash being a CEO, complete with severance package that rewards you handsomely if you screw up really badly, forgiven "loans," etc. And when is the last time union misdeeds plunged the world into a global recession? Investment firms seem to do this at least once per decade, on purpose, for-profit, and en masse, which very negatively and very directly impacts a lot of people, and which usually gets "cleaned up" via a big dip into public funds.

Looking on-line I'm amazed at the number of anti-union sites, hawking their scare tactics. They report plenty of union crimes, which seem mostly embezzlement by treasurers. Not saying that's OK to do, but this is a problem wherever money pools and is by no means exclusive to unions. With the general fuss I was expecting more in the way of broken bones and buried bodies. What I can't find is statistics on union corruption, preferably with a comparison to corporate corruption. Lacking that, I wouldn't be surprised if this is another installment of the welfare queen ooga booga, where a few bad apples are conflated into systemic corruption so intractable that it has become necessary to burn the village in order to save it.

Lots of talk here about the evils of big government. The relationship between government and business I believe is this (correct me if I'm wrong): the SEC monitors markets and businesses (markets aren't all that magical as they don't seem to work very well without a lot of external oversight and policing - a function paid for with my tax dollars). There is a danger of any business getting so large that it dominates markets and starts bullying people around, and the SEC can employ antitrust laws to break up such companies. AT&T was broken up for this reason. Smaller government simply can't stand up to misbehaving large corporations, if nothing else they'll be outspent in court (yet another publicly incurred cost). I don't see any alternative to big government when it comes to keeping corporations from becoming "too big to fail". Hate big government all you want, but what other entity has the power to reign in and control the huge misdeeds large corporations commit on a fairly regular basis?

Also, I don't think the use of the term "state's rights" or the equivalent thereof is all that wise. It's a heavily loaded term linked to opposition of federally mandated racial desegregation in the 40's.
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#2062395 - 04/10/13 01:34 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
3000 Post Club Member

Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: dewster
I would apply this more to corporations. You can make huge piles of cash being a CEO, complete with severance package that rewards you handsomely if you screw up really badly, forgiven "loans," etc. And when is the last time union misdeeds plunged the world into a global recession? Investment firms seem to do this at least once per decade, on purpose, for-profit, and en masse, which very negatively and very directly impacts a lot of people, and which usually gets "cleaned up" via a big dip into public funds.


Corporations do indeed have poor governance at times--both in terms of the decisions the executives make and the compensation they take. In recent years this has become a bigger problem as the hurdles to takeovers have prevented the market-imposed discipline we saw in the 80's--and executive pay has gone up as a result. The LBO's of the 1980s were widely characterized by the ignorant as nefarious when in practice they were a way of freeing corporations from inept fatcats who had captured the executive suites and board of directory chairs. If the government actually wanted to change the income distribution and improve corporate governance, they would stop impeding takeovers and instead impose constraints on corporate charters so that the board of directors represented the stockholders and the CEO answered to the board of directors--executives are employees of the shareholders and should be paid their marginal productivity just like the other workers. Really if you just outlawed poison pills and dual-class shares you could just about get there. That may happen some day, actually. Politicians are pretty dumb but some of their aides are smart and there's no reason for one side to particularly oppose this type of action.

Let' be clear about the financial crisis we are in now, though. It was not caused by, nor did it enrich, investment bankers, brokers, or any other major group on wall street. It was the consequence of a housing bubble caused by government policies to try and push people into homes they can't afford. The guys in NY were given orders from the government (and financial incentive) to facilitate this. The very smart banks stayed out of it for the most part or at least didn't take positions in the resulting securities themselves (Goldman) the less smart banks got way into it, assuming the government would bail them out if need be, which it didn't (Lehman). Later the government did bail out some corporations, some of which are quasi-government agencies anyway. Stupid, stupid corporations. Of course, they had implicit guarantees that they would be bailed out and that always causes firms to take big risks.

Too big to fail is a problem caused by (and only by) implicit government guarantees, which come through arbitrarily some times and not others. It's actually an interesting economic problem because sometimes a bailout actually is worth it in the big scheme of things, but the promise of a bailout makes companies go crazy and take risky positions.

Without the government trying to regulate the market, there is no such thing as too big to fail and corporations/banks don't take insane risks similar to those that caused them to go under when the housing bubble popped*.

The government definitely causes many, many of the economic and social problems we have today. That isn't to say it's intentionally evil, but it is incredibly inept, has a proclivity to aid a small group at the expense of the whole, and is immune to market forces and laws that keep other organizations in check. In principle, voters should keep it in check but that requires more knowledge and motivation than voters have. For the most part voters are dogmatic, not rational, and respond to ads or inherit bias from the media (which leads us back to where we started).

* Ever since it popped, the government has been trying like crazy to get the bubble going again, presumably to enrich those who own houses (who tend to be more wealthy/old and vote a lot) at the expense of those who would like to buy (who tend to be more poor/young and don't vote).


Edited by gvfarns (04/10/13 01:51 PM)

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#2062405 - 04/10/13 02:07 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
3000 Post Club Member

Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: dewster
Also, I don't think the use of the term "state's rights" or the equivalent thereof is all that wise. It's a heavily loaded term linked to opposition of federally mandated racial desegregation in the 40's.


In my opinion, the fact that a correct principle was almost applied to keep something bad alive a couple of generations ago is not a valid reason avoid the principle or the language today.

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#2062446 - 04/10/13 04:17 PM Re: WSJ article on N2 [Re: gvfarns]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: gvfarns
Let' be clear about the financial crisis we are in now, though. It was not caused by, nor did it enrich, investment bankers, brokers, or any other major group on wall street.

Hmm. So these guys can wreak all kinds of havoc, leaving Fannie Mae and the public holding the bag, and we can't blame them? I fear that next you'll say Enron was squeaky clean (or at worst amoral).



My feeling is that this fiasco can be traced back to deregulation, not over regulation.

I must say, I'm very impressed with your ability to blame literally everything wrong in this world today on government. It's quite a skill.
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#2062473 - 04/10/13 05:20 PM Re: WSJ article on N2 [Re: MacMacMac]
patH Offline
500 Post Club Member

Registered: 03/09/13
Posts: 597
Loc: Germany
Originally Posted By: MacMacMac
I prefer market factors. These are honest and predictable

They would be; if humans were all of the type homo economicus.
But in my opinion the homo economicus is as real as the New Socialist Human, imagined by the leaders of the now defunct GDR.

The homo economicus is a model; but most humans don't just make rational decisions. Which is why the market is not predictable.

Anyway: As long as we can choose our pianos, society is not doomed.
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#2062511 - 04/10/13 06:34 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
3000 Post Club Member

Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: dewster
Originally Posted By: gvfarns
Let' be clear about the financial crisis we are in now, though. It was not caused by, nor did it enrich, investment bankers, brokers, or any other major group on wall street.

Hmm. So these guys can wreak all kinds of havoc, leaving Fannie Mae and the public holding the bag


Fannie Mae and the government were the source of the problem. The investment bankers were at most accessories to the crime. If you can call it a crime to do what you are told by the government and not break any laws.

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#2062515 - 04/10/13 06:38 PM Re: WSJ article on N2 [Re: patH]
gvfarns Offline
3000 Post Club Member

Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: patH
The homo economicus is a model; but most humans don't just make rational decisions. Which is why the market is not predictable.


For the model to work, it's not a requirement that all humans make rational decisions, only that those who make irrational decisions suffer their own consequences. If rational agents are acting as well, they should be the marginal investors/sellers/purchasers, absent trading restrictions imposed by--you guessed it--the government. smile

Also jut a nit pick, predictability in the market is a consequence of a market break-down and irrational behavior. Unpredictability in the market means it's working great and constantly reflecting all available information. Probably you didn't mean it that way, but we might as well be correct in what we say.


Edited by gvfarns (04/10/13 06:39 PM)

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#2062527 - 04/10/13 07:07 PM Re: WSJ article on N2 [Re: Dave Horne]
gvfarns Offline
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Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
I just watched that video and I have to say, if you came away with the idea that investment bankers are the bad guys, you looked at the pictures of fat people in ties too much and listened to the content too little.

As I watch that, I see two groups of people you can blame (though they aren't breaking the law per se):

1. The homeowners buy homes they can't afford or are not worth the money in an attempt to speculate and then walk away. Who's to blame? The speculators (i.e., home owners). Who gave them incentive to take that risk (by loan subsidization through tax breaks and low interest rates)? The government.

2. Investment managers took too great of risks on behalf of their clients. That's not a crime per se, but it wasn't smart. Of course, clients are supposed to understand risks they take with their money. If you lose money in your 401K because you bought something very risky, it's your fault.

It also omits a couple of relevant issues:

1. Mortgage securitization is almost 100% done by the government. They were the pioneers and they are the ones that do almost all of it. So if you think securitization itself is evil, the finger points at the government.

2. The video inexplicably indicates that bankers get caught in the middle as a matter of course. The actual problem was that they wanted a piece of the action as well, so they used their own money to buy up some of the securitized loans, and thus felt the pain at the same time as the investors. Bad idea, but they did suffer their own consequences (except the ones that got bailed out by the government. Thanks government.).

The crisis can actually be boiled down to a few things:

* Exuberant public speculating on rising housing prices as a get rich scheme or to have a house they can't afford.

* Government encouraging that speculation through various policies. Government loves nothing better than to increase home ownership among poor people housing, even if they can't afford it.

* Investment bankers playing the role the government, public, and banks require them to.

In the face of these facts, it's incredible that anyone can blame the bankers. I suppose it's walmart's fault if you max out your credit cards on a spending spree? Or maybe it's Visa's fault? Many liberals would say one of those two. Doesn't make it true.


Edited by gvfarns (04/10/13 07:31 PM)

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#2062530 - 04/10/13 07:25 PM Re: WSJ article on N2 [Re: Dave Horne]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
From http://en.wikipedia.org/wiki/Fannie_Mae (standard disclaimer)

Quote:
In 2000, because of a re-assessment of the housing market by HUD, anti-predatory lending rules were put into place that disallowed risky, high-cost loans from being credited toward affordable housing goals. In 2004, these rules were dropped and high-risk loans were again counted toward affordable housing goals.

The intent was that Fannie Mae's enforcement of the underwriting standards they maintained for standard conforming mortgages would also provide safe and stable means of lending to buyers who did not have prime credit. As Daniel Mudd, then President and CEO of Fannie Mae, testified in 2007, instead the agency's underwriting requirements drove business into the arms of the private mortgage industry who marketed aggressive products without regard to future consequences: "We also set conservative underwriting standards for loans we finance to ensure the homebuyers can afford their loans over the long term. We sought to bring the standards we apply to the prime space to the subprime market with our industry partners primarily to expand our services to underserved families.

"Unfortunately, Fannie Mae-quality, safe loans in the subprime market did not become the standard, and the lending market moved away from us. Borrowers were offered a range of loans that layered teaser rates, interest-only, negative amortization and payment options and low-documentation requirements on top of floating-rate loans. In early 2005 we began sounding our concerns about this "layered-risk" lending. For example, Tom Lund, the head of our single-family mortgage business, publicly stated, "One of the things we don't feel good about right now as we look into this marketplace is more homebuyers being put into programs that have more risk. Those products are for more sophisticated buyers. Does it make sense for borrowers to take on risk they may not be aware of? Are we setting them up for failure? As a result, we gave up significant market share to our competitors."

Quote:
Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment... and the continuous availability of mortgage credit under a wide range of economic conditions." (HUD 2002 Annual Housing Activities Report) Then in 2003–2004, the subprime mortgage crisis began. The market shifted away from regulated GSE's and radically toward Mortgage Backed Securities (MBS) issued by unregulated private-label securitization conduits, typically operated by investment banks.

As mortgage originators began to distribute more and more of their loans through private label MBS's, GSE's lost the ability to monitor and control mortgage originators. Competition between the GSEs and private securitizers for loans further undermined GSEs power and strengthened mortgage originators. This contributed to a decline in underwriting standards and was a major cause of the financial crisis.

Investment bank securitizers were more willing to securitize risky loans because they generally retained minimal risk. Whereas the GSE's guaranteed the performance of their MBS's, private securitizers generally did not, and might only retain a thin slice of risk.[34] Often, banks would offload this risk to insurance companies or other counterparties through credit default swaps, making their actual risk exposures extremely difficult for investors and creditors to discern.

From that it seems to me that the antics of private securitizers precipitated the fall. A market failure due to under regulation. Credit default swaps were part of the problem - when is insurance not insurance?

And say what you will about buyer beware, but when we bought our house there was so much going on and not going on at the closing that I pretty much had to trust the lawyer, who I didn't know from Adam. They could have easily pulled a fast one on me. Pushing ARMs, interest only loans, balloon payments, and other confusing instruments on the general public strikes me as pretty crooked. It really kills me that the poor got blamed for making bad decisions when it was the banks that were completely abdicating their role as loan originators, and generally preying upon the public by foisting overly complex loans they must have known had no chance of payback. Rich people took these loans too and walked away when they went underwater, but we don't hear about them much.
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#2062535 - 04/10/13 07:37 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
3000 Post Club Member

Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Originally Posted By: dewster
And say what you will about buyer beware, but when we bought our house there was so much going on and not going on at the closing that I pretty much had to trust the lawyer, who I didn't know from Adam. They could have easily pulled a fast one on me. Pushing ARMs, interest only loans, balloon payments, and other confusing instruments on the general public strikes me as pretty crooked.


Put me down on the side of whoever dislikes lawyers and loan officers.

I'm just saying in the whole chain I don't see the investment bankers particularly bearing the blame. They had customers on one side wanting to put money into subprime loans and customers on the other side offering them. Loan officers and mortgage companies made the bad loans. Stupid money managers (whose job it is to understand risks and protect their clients) bought them. If the bankers hadn't facilitated the transaction, someone else would have. Probably the government.

Regarding regulation, I'm not altogether against it, but I think before deciding whether the government should have prohibited the situation, we should first ask whether the government shouldn't have encouraged it quite as enthusiastically as they did (and continue to do).


Edited by gvfarns (04/10/13 07:45 PM)

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#2063108 - 04/11/13 08:29 PM Re: WSJ article on N2 [Re: gvfarns]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: gvfarns
Put me down on the side of whoever dislikes lawyers and loan officers.

I'm not saying this to be merely contrarian, but lawyers are generally OK by me. If it weren't for redress in the court system, private individuals would have quite a bit less power to change anything large corporations do. Which I imagine is why the powerful seem to hate the courts with a passion - it's one of the last semi-level playing fields left.

Originally Posted By: gvfarns
Regarding regulation, I'm not altogether against it, but I think before deciding whether the government should have prohibited the situation, we should first ask whether the government shouldn't have encouraged it quite as enthusiastically as they did (and continue to do).

Making the financing of housing affordable is a laudable goal, but I don't think home ownership is for everyone. It is usually the largest investment one makes, and the fairly non-liquid aspect can tie one to an area too long in the event of job loss, etc. And the market can obviously be heavily manipulated and crashed, impacting hapless owners through no fault of their own. But I do think home ownership can be a stabilizing influence on communities by giving the people living there a long-term and very real stake in an area.

What I don't understand is why banks and the like are still privately held. If anything is a public good it's our currency. Why do we pay middle men for the luxury of using our own monetary system? If value is actually created through interest, why not have that come back to all of us and help fund the system? I mean, who died and put bankers in charge? If I wasn't taught differently in school I might think I'm living in an oligarchy.
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#2063125 - 04/11/13 08:57 PM Re: WSJ article on N2 [Re: dewster]
Scott Hamlin Online   content
500 Post Club Member

Registered: 08/11/12
Posts: 573
Originally Posted By: dewster


What I don't understand is why banks and the like are still privately held. If anything is a public good it's our currency. Why do we pay middle men for the luxury of using our own monetary system? If value is actually created through interest, why not have that come back to all of us and help fund the system? I mean, who died and put bankers in charge?



Read "The Creature from Jekyll Island", all your
questions are answered... in short it's what's
good for "them".....
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#2063176 - 04/11/13 11:05 PM Re: WSJ article on N2 [Re: dewster]
gvfarns Offline
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Registered: 04/16/07
Posts: 3484
Loc: Pennsylvania
Our legal system cuts both ways. Some people and causes lose out because lawyers cost a lot, so it would seem that the rich benefit. At the same time any person or organization with assets will be subject to frivolous lawsuits right and left because the system is exceptionally (unreasonably) generous if you win and there's a lot of randomness in who wins. Certainly we need a legal system, but I don't know that I'd call it a level playing field for either side. Still, you can appreciate that we need a legal system and dislike lawyers as a group.

Originally Posted By: dewster
What I don't understand is why banks and the like are still privately held. If anything is a public good it's our currency. Why do we pay middle men for the luxury of using our own monetary system? If value is actually created through interest, why not have that come back to all of us and help fund the system? I mean, who died and put bankers in charge? If I wasn't taught differently in school I might think I'm living in an oligarchy.


I guess I can't understand what you are getting at. Only one bank really controls our currency, and it's a wholly owned subsidiary of the government (the fed). The other guys take deposits from people looking to save and lend it to people looking to borrow, giving the interest to the people who lent minus a commission. That's basically what you describe.

Investment banks do the same kind of thing, it's just that the people and organizations that want to save through them have such huge chunks of change that it's often more efficient for the bank to just pass ownership of the securities directly through to them without calling it a deposit.

Banks, whether commercial or investment, really do nothing more special than create an efficient place for people wanting to save to give money to people who want to borrow. They don't have any significant power over the currency or anything else of importance, regardless of how they are drawn in cartoons. That would be like saying the guy who runs the quicky mart down the street has power over the price of gas. He's just a retailer. In fact, if he unilaterally raised or lowered prices by just a few pennies, he'd be out of business. He has no power whatsoever. Bankers are basically in the same boat.

The only significantly sick thing in our banking system is the fact that the government willingly bears any risks they take. This makes the banks themselves want to take risky positions in the assets they handle instead of just doing their job as market makers. Bail outs are one mechanism for this, but FDIC insurance is the bigger one. All the surviving big investment banks have now converted into commercial banks in order to take advantage of this free money from heaven. On the other hand, lack of FDIC insurance caused even bigger problems in the past than we have now, so on this one you can't just chalk the problem up to stupidity on the part of the government. It's a pretty difficult problem--the government has a tiger by the tail.

As a nation, the US is the least bank-oriented of all developed nations: we use markets where many other countries use extremely large and versatile banks for financing. That's why US markets are so much more developed than they are in other nations. Markets are less efficient than banks for many types of transactions, but they put borrowers and lenders directly in contact with essentially no middle man so there's no one to blame. I suppose that's kind of the direction you'd like to see things go, and it's a reasonable one.

Certainly having the government facilitate financial transactions instead of markets and banks is the worst idea ever. I could easily imagine that knocking the world back to the stone age, causing mass poverty and even starvation across the globe. The government has no fear of risk whatsoever, doesn't respond to changes in the economy, doesn't care about the truth in the data, is highly inefficient, and is very easy for the unscrupulous to take advantage of. And believe me, if the government was in charge, you would see unscrupulous people come out of the woodwork to take advantage on a truly unprecedented scale.

If the government took over the work banks and markets do today, those of us who survived the associated apocalypse would never understand how anyone called anything previous a financial crisis.


Edited by gvfarns (04/11/13 11:45 PM)

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#2063225 - 04/12/13 12:33 AM Re: WSJ article on N2 [Re: gvfarns]
pv88 Offline
2000 Post Club Member

Registered: 08/31/10
Posts: 2702
Originally Posted By: gvfarns
If the government took over the work banks and markets today, those of us who survived the associated apocalypse would never understand how anyone called anything previous a financial crisis.


This may very well play out in the near future sooner than we think as the truth concerning our existence hangs in the balance.

Other factors include:

1) One world government

2) One world currency

3) Slavery to system

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#2063317 - 04/12/13 06:47 AM Re: WSJ article on N2 [Re: Dave Horne]
theJourney Offline
3000 Post Club Member

Registered: 02/22/07
Posts: 3946
Loc: Banned
Glenda Jackson on Thatcherism

http://www.youtube.com/watch?v=XDtClJYJBj8

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#2063328 - 04/12/13 07:42 AM Re: WSJ article on N2 [Re: theJourney]
EssBrace Offline
2000 Post Club Member

Registered: 12/01/09
Posts: 2423
Loc: Suffolk, United Kingdom
Originally Posted By: theJourney
Glenda Jackson on Thatcherism

http://www.youtube.com/watch?v=XDtClJYJBj8



Come on, get serious. She was a lone voice in parliament so you cite her as some sort of reference?
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#2063350 - 04/12/13 08:42 AM Re: WSJ article on N2 [Re: Scott Hamlin]
dewster Offline
4000 Post Club Member

Registered: 12/07/09
Posts: 4354
Loc: Northern NJ
Originally Posted By: Plinky88
Read "The Creature from Jekyll Island", all your
questions are answered... in short it's what's
good for "them".....

Hmm. The book looks interesting, but the first reviewer at Amazon says this:

"The biggest problem in modern banking, according to Griffin, is and has always been the creation of fiat money. Fiat money is money that is "declared" money by the government. It is not backed by anything but promises and deceit. All societies were sound financially when they used gold or silver to back their currency."

I don't have any issues with fiat money, and precious metal backing strikes me as fundamentally flawed - you don't want the value of your currency jumping around with the availability of some scarce resource. And you need the ability to print extra money at times in order to stimulate the economy. Not enough available money can create all kinds of havoc.

I have more trouble with how they distribute that extra printed money. For stimulus purposes it should probably be dropped from helicopters onto the general population, but instead it is given away essentially free to banks. Then we have to have complex government initiatives that attempt to direct it towards the public, with market-based shysters looking for every immoral, quasi-legal, not-yet-regulated-because-we-couldn't-have-anticipated-such-brazen-for-profit-behavior loophole to direct it their way instead.
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