and there has been some discussion that perhaps the banks HAVNT been writing things down appropriately in an attempt to 'wait it out' (which may turn out to have been smart in the short term). If thats the case, couple that with impending commercial loan losses, etc. and it could be another ugly round.

Im averaged into my SDS with two tranches although I like to have 4 or 5 so if the market goes on another rally I'll be able to lay another one out there. I need to time things right though because on the down side I need another leg into google nearer to 300 or less. yikes....sold 4 homes this week and 3 the week before so this summer looks good but this may be the greatest of all head fakes - the spring housing rebound. Boy was I wrong on that back in the day.

I don't think all banks will post profits and indeed even with the ones I posted it may be that its a split decision (ie. some quarters up some down) - but overall I'm expecting the banks I mentioned to post a profit for the year.

From todays news Wells Fargo seem to be in rude health at present - put it that way ;)

As a bank regulator where 90% of my time is spent evaluating the smaller community banks, let me just say once again that you're exactly right: Main St doesn't exist anymore. Spreads narrowed considerably thanks to rising cost of funds in an effort to match the large banks and avoid their own potential liquidity problems. Needing extra yield, the smaller banker got sucked into lending into large-scale residential development, whether in or out of area, or riskier commercial loans where all they did was look at a number contained in an appraisal. Very few took the time to say, "Hey this 5% cap rate that is driving this value is not even close to what we have historically seen. Maybe we're not protected at all."

Once the big guys realized that the MBS/CDO market was screwed, the brokers had all this extra inventory that they couldn't get rid of and of course they turned to any of the less sophisticated bankers they could find. These guys still thought things like "AAA" and "investment grade" actually meant something. They were told the yield, duration, Moody's rating, and that's all they needed. It's amazing some of the (now) crap that these tiny banks were holding -- we had a bank in PA that would have failed because of a CMO loss had Lehman not been the issuer (I don't know enough about it but they got back every penny once they went bankrupt).

Most of the Main St bankers want to be Wall St bankers, or at least, like the feeling of being pitched as if they were on Wall St. Is there enough of these guys who don't feel that way all over the country? I don't know. Some banks are doing just fine. Most of these are the banks that didn't have any major growth in their area, whereas damn near each bank we have in the Carolinas is fucked.

The key going forward is making sure that the small guys who do survive this maintain their old practices and don't view it as an opportunity to take advantage of the lack of small-town investment by the large banks. Unfortunately I don't have much faith there.

Great point, reinforces kind of what I had in vaguely mind when I asked SportsDino my question (thanks for the answer SD btw).

It sort of helps bring me around to the flaw I saw with SD's notion of those banks

How many of those small banks, in areas with no major growth, have the resources to actually be the engine to drive innovation, which is a very expensive proposition? How many of those are one big gamble (which is a fair description of a great deal of attempts at innovation) away from going from banks lending "with sane contracts & expectations " and "to a community that they understand" to a poorly run bank that "needs to be exterminated"?

My own experience is that the answer is that few are capable of that sort of leap, trying to be the foundation of funding business innovation instead of sticking to things they understand. They lack the expertise, the judgement, and the overall business sense or experience to make those calls on a consistent enough basis to handle anything more complex than a home mortgage or minor renovation loan. Throw a moderately well done Powerpoint presentation labeled as a business plan at a lot of them & they're ready to open the vault regardless of how good or bad an idea you have. Been there, done that, got the t-shirt and the DVD.

These small reasonably run banks-- the banks I've dealt with from my first car loan in high school through today -- have never shown me anything to indicate that they're remotely equipped to be making decisions that will drive the economy in that way. That's not their role, it's never been the role of 99% of them, and the other 1% are largely proof that even a blind pig can find an acorn on occasion.

Wherever the answer lies (and that's taking the hypothetical leap that there is an answer) I'm convinced it isn't on "main street U.S.A.". The talent pool is simply too small, whether we're talking about banks or industry or anything else related to the economy. That ship sailed in this country a long time ago I'm afraid.

I am VERY worried about the commercial real estate market and its effect on, what used to be, the main st. banks. I think this move up in the markets has been a good bear market rally but I am very very worried about the next few months. I will continue to put on my SDS until I feel like Ive either made enough on the downward leg or Im the idiot who played a downward leg while everyone else caught a bull wave.

SHORT VERSION:
Agreed, we need better talent, but big banks are choking it off more than helping, and small banks in their current incarnation are not enough. We really need specialist banks!

LONG:

You make some good points about the weakness in talent (and of course the difficulty of a small pool making investments in high risk business).

My stance is that we are building up the wrong type of finance talent pool, and that it is encouraged by the 'bigger is better' mentality. If you have a trillion dollars in a pool, are you going to invest it one by one in small town single shops, or are you going to ship it to Wal-Mart or buy serial number 2312387219837 collection of sub-prime (marketed prime) mortgage pile? Investing in anything short of abstract paper is to time consuming for adrenaline junkie traders.

I think we should have the expectation that a small bank should be able to 'know its neighborhood' and be able to evaluate whether a house will reasonably maintain or expand its value over time, or whether a new home-made donut shop has half a chance. They should only give out loans they understand, so if someone wants to start a tech company, and they don't know crap about tech, you give em a polite 'no thanks' and maybe forward them out to an investment bank.

The problem is we don't have very many investment banks that are looking for anything short of a massive IPO. Is there a specialized talent involved in making many types of loans, yes... which is why I would say we should encourage specialist banks and more diverse financial education. In order for that to happen, we need small banks, because sub-divisions within a company are failing to provide that sort of investment. Big banks with big pools are too buy looking for big deals, and often the stuff they tend to is either zero-sum (in order to win someone else must lose) or bubble-dependant (housing inflation, where supposedly everyone is winning until mere time and default risks pops the bubble and anyone still in the game is destroyed). Arguably they fund the giant google's and what not, but even that I am frowning upon. You got a company which basically was given a massive pool of money based on potential, spreading itself all over the place with massive inefficiency in process (in my opinion) because instead of funding specialized tech with a business plan, they just gave a massive pile of funding to an already successful company with one business plan... that needs to spread out everywhere in order to meet the expectations of that massive funding.

Eh, I'm rambling and need to move on to other things at the moment. I do think we need more talent, specialized talent, and have argued for that in other posts on banking. I think the signifigance of that group of talent can only be realized if the big boys are not allowed to dominate everything with their giant pools of money which they feel is only safe to invest in giant piles of abstract contracts or big companies.

I agree if small banks are just more of the same dimwit bankers which are basically paper pushers and suckers that it won't have all that much effect. I'd argue if we expect that to come out of the big Wall street banks though all we will end up with is big time bankers who specialize in exploiting the small-time suckers (small banks and you and me and mutual funds!). We have that right now and they are so depressed over their stack of now worthless paper (that is only surviving due to gov subsidy) that they can't even think of what will happen tommorrow. We could have the next Microsoft or General Electric sitting on the street waiting for funding at this moment not allowed to move because the banks think its too risky to lend right now (only because they did so much incestuous lending that they have inbred themselves to the point of retardation).

Hell, give me a half dozen years and I expect to be the one trying to start my own tech company. I would really hate to dip into my own money to do it (although I've been piling it up just in case, yay evil short monster year)... but if I go that route, if I get in the google situation I would tell them to shove off with their IPO and just keep everything for myself. It seems you can only get a bank to come around after you already got through the hard part and are looking for massive funding (and interference) in your business plan to expand. Any chimp in a suit can make those sort of 'investments'.

For Flasch:
I really hate to hold a short for long (although the couple times I have had been major deals, i.e. BAC and GM). It is really hard to short an entire market for a long time, especially after it has been so beaten. So you might want to monitor that SDS, it is not the sort of thing I would hang on to for multiple quarters. For instance, in both of my cases I held a short for months, I knew BAC and GM were gaming their reports to hide increasing losses, that is was only a matter of time before some really bad news (although they kept sliding during all that time as well). I had a very specific ace in the hole with those companies, that my downward slide was going to be protected as long as they still had not released the dirty truth.

Now that they have released it, both have been up and down so much they are pretty much past the point of prediction. Government interference and market psychology are also meddling factors.

If at a point your SDS goes gonzo green, I would seriously consider taking the money. And I would watch for signs of a true rebound and not get too tied to it, I've seen people say "well I'll clean it up on the next downward movement to save some money" and end up holding it as it steadilly trickled upward and they had to cut their losses.

Shorts can be nasty things, even if they are done through ETFs.

oh, I only plan on holding the short until the market goes to about 770 on the S&P and then sell it, while getting ready to make another tranche into my longs. I feel strongly that the markets are overbought and that the news cycle going forward over the next few wks/month will be resoundingly negative. We'll get up days on some things but even today's WFC news, IMO, is BS because of course theyre making money on their new money. Im not worried about that (or WFC in the grand scheme of things) its the legacy assets and commercial loan loss provisions that are going to be whackalicious.

could be wrong though.

FWIW, GS stock is ahead of where the gov't strike price is.

If, IF, the banks pay back the bulk of the tarp $ and the tield on the loans and warrant returns are high enough we will have made a quick buck for the tax payer AND saved the financial system.

Do I think we're out fo the woods yet? By no means, BUT, I just thought it was neat to point out that some banks are paying it back AND our strike price on GS is above water (mind you some are under water) so that's pretty neat.

Well after digging through what I can of WFC, I think the banks have outsmarted everyone again. They still have massive piles of bad money to shift around, but it seems like they are going to use some of those trillions in bailouts to make these upcoming quarters look rosier. Same old, same old, make yourself look good in the short term, but spread out damage over the long term (they're banking on a major recovery to cover the effects of that damage).

Overall, I think they are being reckless, but the end result is that stock prices on the banks are probably going to retain a good amount of value. Like I worried a while back, once its clear the government is not going to let banks fail, its going to be impossible to short them, and from there its a few mathematical operations away from them configuring their reports to look however they like again (they should really emphasize more than bottom line profit numbers and break down in public where those numbers are coming from).

-----

Er the point was, GS considering refunding a portion of our money is more optical illusion than a statement of the health of the banks. How else do you keep the pork train flowing other than make it appear like it was a great idea? If you gave me 50 billion to work with I sure could manage a 10 billion 'profit' and refund 5 billion of it. Especially if it helps you to ignore the other 45 billion, and keeps up the party line of 'bailouts are good, see it worked for X', so that the government keeps giving money to say, AIG, and AIG forwards that on to other 'clean banks'. Heck, the government is creating its own shadow corps at the moment, wasn't that a part of the Fed/Treasury scheme?

Right now at a high level the amount of money input into the system is a heck of a lot more than their claims of output, and my feeling now is that they are going to funnel some of that money into making the banks look good. Creating a mirage is cheap, what they don't mention is the billions in their portfolio that they are basically liquidating wholesale with government help to remove it from the balance sheet (those losses will still appear somewhere, although most likely in the government debt no one cares about apparently).

hrm, I'd say the point of TARP was to liquify things. It seemed to work and by 'spreading out' the damage over months instead of a week like we were threatened with it ...worked again. I can also see that neither side of this will be remiss to admit that the other side was right or will be. For example, the PPI numbers were negative today indicating the opposite of inflation....however someday, things will tick up and we'll have more inflation than we'd like and people will point at the bailouts a money printing and say they were right too.

I think our main difference is that I'm trying to measure how the guts of the machine are working, for instance I think a more responsible article would be for WFC to focus on how they converted government money to clean up their debt. And if they posted that their 'profit' in relation to several other numbers is kind of puny (i.e. match it against chargeoffs, money coming in as real revenue, and money coming in as government welfare).

Anyhoo, I think to understand the machine is how you make predictions. Everyone else seems to work some voodoo based on symptoms. IMO, that is why you see signs of deflation, whereas I see consumers paying more for everything as a certainty. When it comes it will probably be explained away as rising gas prices, or some other simultaneous symptom, but it was created right now in these past few months.

I also don't think there is something inherintly great about spreading losses over time. Especially with a stock market that jumps on short term news like a crack-smoking chimpanzee seeing a truckload of bananas. There is nothing admirable about a policy of 'make the books look good now, the money will come later and we'll take care of it then'... because they tend to get greedy, and go a whole decade of sweeping it under the rug until it explodes.

I could care less as a long term future-grandma investor buying some bank stock if it goes up 15% a year only to lose 90% of its value in the last year. The net is terrible on that sort of sheninanigans (but that is the vast majority of our investor base, long term low involvement, trusting in the 12% historic return and little else).

I don't want them playing games to make it look like everything is all right, I want them to actually make everything all right! Do we want to avoid panics, yes, short term hysteria for no real economic reason is no better than short term optimism for no real reason... but there is a line that has to be drawn at how much we congratulate them for wasting government funds (and yes most of that money will be lost or paid back with inflated dollars, otherwise aid and mark to market talk would be nonsense).

-----

Yuck, CNBC, here is a mostly rosy article, but it hints at enough things that if you go and research yourself end up looking fairly gruesome (although not end of the world levels):
http://www.cnbc.com/id/30133484

I said this exact same thing in another thread so Im glad to see that we're aligned here.


I'd agree that things are still fucked up hence my short SDS which is almost at the 60 mark where I'd buy a little more.

Anyways, we're going to have to agree to disagree that the short term implosion vs. a 'spreading' out over a longer but still short period of time having drastic effects on the outcome of things being important. Having AIG's orderly unwind or it's gatekeeper status of funneling money throughout the financial world in order to somewhat stabilize the ship doesnt mean that we're not taking on water but what it means to me is that the ship will make it to port whereas with the other options spoken about wouldve had the ship resting at the bottom of the seas while all of the americans and such are screaming bloody murder for someone to save us from the waves.

Of course we'll have inflation but lets agree that when judging the future inflation that people have been crying foul about has not been normal inflation, or even a moderate uptick but HYPER. If we see Hyper inflation, the wheelbarrow effect, I'll be more than happy and saddened to admit that our policies undertaken now have failed in the long run. However as of now I think, as do the FED, and other very smart people who are probably in equal numbers to those on the opposite corner, that the risk is to the deflationary side of things...not the other way around.

Eh, that screen corner seems infested with hype dealers! Note they are the same folk who ran up the problem, insisted nothing was wrong when they all but admit to knowing the opposite, and are benefiting from the handouts.

And it doesn't have to be hyper inflation to cause damage. If you have constant inflation when jobs and wages are stagnant (arguably the past decade) you are basically tearing away at your productive and consumption bases to feed the top heavy finance machine. They do that because everyone just takes it on the chin and doesn't complain when they need to scrape by more (or more often seek out credit). Now that credit might be tightening up we won't have that 'safety' valve....

I don't think it will be a recovery when we've saved the stock price of some high and mighty swindlers and the rest of the country has lost 20% of everything (granted they will be nice and spread our ass kicking over 5 years or so, threatening jobs at every step along the way so people take it).

A more likely scenario than hyper inflation may be a secondary credit crunch wave, or tertiary if that commercial real estate thing ever goes nuclear. Even modest inflation can make it hard for businesses to rally, no one wants to pay more for stuff so they cut back or hold on growth. If we get a financial recovery without jobs (which is all the Fed cares about, finance) we could end up right back here again as the waves of defaults continue.

no no no.

The argument against the bailouts by most (maybe not you) is that by printing the amount of money we were (helicopter Ben) we were sowing the seeds of hyperinflation. Somewhere in between is too easy for both sides to claim as support for their previous hypothesis.

With SD making points better than I ever could, I just figured all I could do was reiterate.

But the short version is that pumping liquidity into the market does nothing if we don't fix the problems that got us here. At best we're dumping it into a black hole and at worst, and more likely, we're just pumping that money straight from the middle class into the hands of the wealthy who created this mess and who will now have even more money to wreak even more havoc. Indiscriminately pumping money into the system because it's broken is more helicopter arms than a lot out there.

SI

I'll admit I was throwing around terms like hyperinflation at one point. I think the argument was, something about deleveraging, and I stated (accurately in my opinion) that they were using 10-30 times leverage, and that printing enough money to 'reinflate' would destroy the economy. We were talking sums ten times the size of the US annual GDP!

I also stated something along the lines of not needing to go to 100 or 1,000,000 times inflation like Great Depression, to destroy the economy. If prices jump ten times, or even just double, I would consider that an event significant enough to shatter our fragile system.

We are going to pay for printing all that money, one way or another. Otherwise during the boom years we would have just printed more money because its so obviously profitable... oh wait, we did, and ended up with a massive crash of our excess printed money and worst, the 10 to 30 times ratio of imaginary dollars on top of that printing spree.

Instead of boom/bust cycles, I'd rather we just wise up and build a sustainable economy. That means boring old returns for the massive pools of money, and really incredibly successful companies if you want to get rich. We're sponsoring the world's biggest gambling machine at the moment, nothing more (Granted I don't mind taking advantage of it myself).

-----

Anyhoo, a secondary point is that I now doubt any serious decline in the banks, and hence the SKF will not rise. Without the banks to play bogeyman, we might have an even better quarter than even I was going to give credit for. So despite my concern for the health of the overall machine, I have a feeling that stock prices are going to be strong.

EDIT: Let me qualify, SKF will not rise back over say 90, we are due for some downswing, but I'm not gonna bet on it.

not if as the waters clear the banks have to raise capital through offerings so they pay back tarp money. the dilution will be a srag on stocks like GS today. I'd agree that I dont see any failures on a large scale, think Lehman, I think they learned that lesson.

The thing I'm finding in my research though is that there is a lot of money they really don't have to repay. They'll sell it off, take some loss, but vast sums can be maneavured into the future... not to mention I don't think they will be too eager to pay back all of their tarp this quarter when they are trying to stage a stock rally.

CPI numbers outside of used cars shined a light on the deflationary pressure. Not that deflation is here on a grand scale but that what the FED said about the risks to the inflation/deflation side of the scale is on the deflationary side. I believe that the FED's actions over the past 6-7 months possibly has guided the ship through the worst although I still think we'll have a stock market sell off towards 700 on the S&P but I do believe the March low will hold, be retested, but hold.

Commentary today is that this most recent market rally has been achieved without "real" money. This is both good and bad:

good in that if "Real" money comes in it could actually solidify the bottom and continue to ratchet up the foundations.

bad in that if the "fake" money is gaming the system than it could all pull out and bear their way to even more money to the retest.

Not that I trust financial commentary at this point any further than I can throw the commentator making it. But if that's true, ooh, ooh, teacher, pick me! I bet I know the answer. It's "B) Same a-holes who got us into this mess gaming the system because loopholes haven't been closed"! Was I right? Do I win a cookie?!?

SI

dunno. It's sad that the game still exists but I cant or dont know when it became a "game" and when that will change.

About the time all the amateurs became heavily involved best I can figure.

It only slows down once some really stiff regulation is put in place which forces a bunch of money out of our banking system and back into the "real" economy. The risk, of course, is that this money is made up anyways so there's no real money to move around.

Elizabeth Warren (chair of TARP oversight committee) was on The Daily Show talking about regulations last night and the boom/bust cycle that was tempered after regulations following the Great Depression and how we've been removing a lot of that starting with Reagan and how we've suddenly gone back into that boom/bust cycle instead of just minor recession/growth periods.

SI

I think Jon hit it on the head. Massive pools of low agility money (grandmas and 401k's stuffing it in there with little oversight, just hoping it magically grows like a tree)... these pools can be exploited against highly active individuals with greater access to information. It gets back to the old quote that if you give banks control over the money supply that they will inevitably control you, first through inflation and then deflation, until all of your labors are forfeit (or some such jazz).

They then decided to create new pools of money to gamble with, highly leveraged mortgages (sponsored by banks, not liberals, the banks needed to have source mortgages in order to create the leverage that they wanted, otherwise they needed to get old fashioned loans like ye olde hedge fund). Anyway, when you have super rich hedge funds that are massively leveraged, they almost needed massively leveraged investments to supply the scale in order for them to turn a profit. Leveraged money is only worth something if it grows, otherwise its just interest-costing debt.

Bah, the simple thing to say is: "Would you not gamble like a mad man if you knew some sucker was waiting out there to take the fall if you lose?" First it was the massive pools of mutual funds and what not. Now it is the government. We have a massive moral hazard now that is going to make the game all that more fun for the assholes. Note, this doesn't include me, while an asshole, I have no massive pool of money or government bailout waiting for me if I make a bad bet. I'm just a plain old gambling junkie. So at worst I'm a deliberately immoral bastard, but well aware of what I'm doing and spending my own money... whereas I feel at these banks/brokers they truly are arrogant and ignorant enough to believe they are entitled to all this.

Isn't that the story of the market over the last decade or more? I mean, it's what caused the '87 crash, wasn't it?

eh, i only had a moment to post. Like I said, I still hold some long positions, in Google, Cisco and my wife's crappy First Solar (I just wanted her to invest in something - so that's what a week's worth of watching Cramer got her) but I am short from this rally and think we go down to below 800 and more in my opinion of being under 700. I could see us holding that mark though...just see nothing to push this market up from here and think, like the NYSE chief that this rally is on short volume, short covering, and seller fatigue.

(I thought I had made this post but it looks like it got lost to the ethers)

Ping SD, he of the patience and ability to sift through earnings reports

Are what we seeing with Citi and GE today more fun book cooking?

SI

http://www.ge.com/investors/events/e...d04172009.html

Like I said in the 'Evil Short Monster' thread, I think banks are announcing profits and that relatively speaking the following I consider to be facts:
- The profit could not exist without government handouts, either directly, or more subtly, through AIG and/or Fed injections.
- The reported profit, relative to corporate welfare, is WELL within the amount of handouts.
- Profit is still down from historical amounts, most of the hype is in comparison to estimates which I considered low to begin with. The good news is companies are starting to make sure that makes it into the news articles, so maybe they are dehyping a bit which to me is more responsible behavior.
- They still have a lot of red on the sheet, they are also acknowledging this in articles (some of the WFC initial reports were VERY MUCH skirting this fact, they have toned down the cheese factor though).
- Mergers are not the source of these profits, despite claims to the contrary that some media put out there. Mergers do offer some unique methods for cooking the books, some of those are being taken advantage of, whereas some of the costs are being pushed into the future.
- Good management is not the cause of these upticks. They are doing nothing but cleaning up their mess and playing around with where they are taking the losses, and using gov dollars to do it. I'm not saying they are necessarilly bad managers, there are a lot of camps that will say this is exactly what they should be doing... I'm just saying don't buy any hype that comes out about these 'good quarters' being the result of their supposed talent.

I linked the GE earnings page, I do intend to dissect this, but nothing is jumping out at me. If anything, I have a hunch that they are relatively taking more losses than other financial types right now... probably to take a greater dose of pain now, but look better later. Of course they are pushing some losses into the future, everyone is, again, its not necessarilly a bad thing, its just a red item on the sheet that has to be remembered.

Without going deeper, what they released is inline with my research... I actually estimated higher because I thought they would push more back into later quarters. Like I said months ago, they are going to whether the hailstorm and remain one of the economic cornerstones.

I am studying banks, I have had JPM in my long portfolio off and on, some banks are relatively healthier, others are going to need more welfare to cover their mistakes. Bank stocks may do fine, but some of it is going to be as a result of government interference, not optimal or preferable in my opinion, but doesn't change the fact that those equities are going to appreciate in value long run. Same phenonmenon as the 'Evil Short Monster' really, would I feel dirty about profiting off of market turmoil... sure, but it ain't gonna stop me.

I will say I'm pissed about the hype machine already starting to spout 'recovery', for instance I saw a particularly sickening Kudlow Report yesterday I believe, which made me want to strangle the guy. Yes, I pointed out potential for a recovery earlier this year, BUT all we have seen so far is indicators... we do not have a recovery until people have jobs. I hate the hype machine, obviously... but jumping the gun on saying "yay we are great again" could actually lead to delays in job growth (if you could 'recover' without actually having to hire anyone, would you be in a hurry to increase your expenses? no... opportunity is key to growth, if you get the results without doing anything, you get lazy, and I want people hungry to hire personally).

Eh, I'm all over the place with too many thoughts. Short answer!

Yes, they are cooking the books. In my opinion Citi is painting a slightly greener picture then their true state, and GE is painting a slightly redder picture than their true state. I still think GE is strong on cash, so their financial unit is not going to sink them. Citi is on the borderline, but I think that there is simply too much government money flowing into the system to let them lose. I still think there will be a delay before some banks become fully profitable, and it will probably show in the relative growth of their stock price relative to the sector.

Definitely agree. Heck, I think we're all in agreement here on this one. I've noticed it really bad over the last week, tho.

SI

OMG Kudlow rode the entire recession down (along with Dennis Kneale) and never, well maybe once admitted, to being in a recession. For them, the recession lasted maybe 2 days and we were out of it.

The guy does seem to be pretty much an idiotic douche bag of the highest degree. I particularly disliked the gangbang of snarky snobs on the one guy (Schilling in this show) who was not acting like the entire world was just peachy. Heck, all the guy was saying is that there is still stuff to look out for (overly simplified, but hardly doom and gloom the world is going to end stuff), and he was treated very disrespectfully, with one of his points basically 'answered' with a downright lie by some guy that just made me feel like punching him in the face just to look at him. It is pointless to watch CNBC at all, oh well, the dangers of channel surfing.

That and Obama's damn dog, who gives a rat's ass?! We've lost enough jobs the past quarter to account for the population of entire cities, and they go into more detail on a decision on which dog to get, than they did over details of the GM plan (which as far as I know, unless you want a ten second sound blurb version, no real data is available on the tv's...). I'm starting to think that not only newspapers, but TELEVISION NEWS, is going to go the way of the dodo within another decade, as the mass populace realizes they can get on demand inane drivel, or ACTUAL NEWS on the internet faster and richer or more entertaining.

1) Exponentially more people understand the dog decision than the GM plan.
2) Exponentially more people can relate to the dog decision than to the GM plan.

ergo

3) Exponentially more would watch discussion of the dog decision in detail than would have watched detailed discussion of the GM plan.

Meanwhile, I'll just throw this little highly anecdotal tidbit in here somewhere.

I'm driving home this afternoon from dropping my son at Scouts and what catches my eye on a recently built (and virtually empty) neighborhood/ subdivision? "100% Financing Now Available - No Money Down"

Have we learned absolutely nothing? (Yeah, that's a rhetorical question)

That is probably true Jon. Unfortunately, whether they can relate to it or not, the information in one case has zero impact upon their lives, the information in the other may be why they are without a job the next day. I could not imagine being complacent as a journalist, never mind the audience being apathetic... how could I report drivel while actually doing my job as a reported I might uncover a piece of information that can actually help people's lives. Like the whole Madoff thing, they reported all the celebs who lost money and other useless bullshit, but imagine how glorius it could have been if a reporter would have sniffed out something fishy going on with this firm and a real news story came out and people paid attention to it? How many millions, if not billions, of dollars could have been saved?

If the media had a brain, maybe it could actually have a heart, instead of trying to pretend it has one with stories about inane folksy crap (like dogs).

I wonder how much of the mortgage problem was due to zero down loans. It seems like responsible buyers could still come in at zero down. I always thought the bigger problem was using ARMs to buy houses where the monthly payment would eventually be higher than you could pay. Of course I posted a while back that people are once again able to get ARMs that will eventually have payments higher than a buyers can afford.

Don't blame me if I want to believe.

Recession's Worst May Be Over, but 'Long Slog' Ahead - Economy * US * News * Story - CNBC.com

Actually, unless you're funding the investigation yourself, your job as a reporter is to report on whatever story you're assigned to.


IIRC, at least a couple did notice over the past few years but nobody really understood what was going on well enough to be sure enough to do anything with the story.


For the media to have a brain to do any good like you're talking about, they'd need an audience with one as well. Otherwise you're just an updated version of the old PBS story, where everyone talks about watching it/liking it/wanting it and nobody watches it.

There is no significant population demanding smarter/harder/deeper news. There would, however, be some interest in more hours of American Idol, you do the math. Media isn't much different than government really, we pretty much get what we deserve in the end.

Funny you should ask ;) It wasn't the core of the problem, but it was still an element.

Found this in a local story out of Maine from earlier this week.
USDA TO THE RESCUE No-money-down mortgages work for rural Mainers

note: the USDA loans reference in this snippet are virtually zero down loans
(like $1k on an $88k house)


I'll throw in at least one more observation of my own here. I see the different foreclosure rates but wonder about the different standards applied to the various types before they begin foreclosure proceedings; i.e. are all 4 types listed equally likely to start the process? My guess is that the answer would be no.

I wish that was more detailed. Does subprime include no income verification? What percentage were ARMs? I still think there's a way to do low or no down payment loans that are responsible. The bigger problem, IMO, is buying a house under terms that hide the fact that you can't afford the payments.

Of course there is the argument that having principle invested makes t less likely someone will walk away, but as often as I've read those kinds of stories I've never seen any numbers as to whether it's more than a minor issue.

Meh, makeup of the financial instruments doesn't really matter, it is the intent. The whole attractiveness of 'no money down' is meant to attract a crowd who probably should not be buying a house anyway. Sure the contract design itself may be just fine, but only if it makes sense for the particular case it is being used. If the only reason is that they are lending to someone who can't scratch up the cash, well they are filling in variables in the whole default risk equation... and I'd venture they have a higher probability of failure.

Statistics really can't be used to prove/disprove this too much. You can hash numbers all sorts of way to make a particular class of loans look like 'oh its really better than 30 year loans', and then dig deeper to find its a question of sample size and definitions (not to mention which cases are excluded for various reasons as many statistics these days seem to come with disclaimers on what they do not contain).

In short, responsible buyers will probably be fine with whatever contract you arrange that makes financial sense. The problem is they are fashioning a lot of these bullshit deals for the very purpose of grabbing up irresponsible buyers (at least as measured by a probability they will default on the loan). Everyone walks into the room wanting to have a nice loan that is paid off and all that jazz (okay, actually probably not, but lets pretend)... doesn't mean shit won't happen, that is why they have risk factored into loan decisions.

not as much, since most of the ARMs actually reset downwards. It was the fall in home values below their loan values that is crushing things since those people that only invested in homes instead of living in them are the one's defaulting on the 3 or 4 they bought PLUS just simply deciding that hanging on to their cash instead of sending it in to the bank, who as Ive said repeatedly havnt helped the massive amounts of people that need it OR that they have claimed to. Investors were extremely attracted to zero down loans ESPECIALLY since many were NINA, so you buy an investment with someone else's money.

Anyways, This road of how we got here has been well traveled and everyone has their opinion.

You know, alot of the exchanges are fascinating but too dense for me and I find myself losing track.

I was wondering if you guys can list it out (i.e. really, a numbered list) with layman commentaries, step by step, with some approx dates/timeline, as to what happened when to cause, worsen/deepen this crisis?

It would be a good learning experience for me. Thanks and sorry for the bother.

wow, i think Id be better off finding a timeline someone else wrote that I somewhat agree with and go from there. IMO it literally goes back, maybe 20 years or so if you want to get really really deep.

Paging SD and Flasch- group project :D

Ooh! Can I have the climactic chapter where on September 16th the buck was broken and we were pretty much hours away from collapsing the global economy?

SI

Glass-Steagall's repeal in 1999 was a huge step. Heck, you could even say the moral hazard introduced from the S&L bailout in the late 80s was a contributing factor.

SI

agreed, The repeal of it was like opening the dam. Things maybe didnt flood overnight but the protection was no longer there.

It would be a cool project, probably if well done would be a best-selling book, say ten years from the 1999 repeal as a central theme to limit the scope.

The problem is so many are out there already doing it and trying to profit, that it is far easier to just point at them then go to all that trouble. I will try and simplify things in future posts though.

As far as I know, the problem certainly was in existance in 1997, which was when I started following financial news. At then I just had a vague hunch of what later became commonly known as the 'bubble', and I was just a teenager with a highly filtered newspaper. Nothing that I have learned since then is really impossible to explain in common sense layman's language, it just is a very long process and you need to buildup a vocab for it.