Who's fault is subprime.............

They are trained and schooled, so that Mr/Mrs stupid/taxpayer/consumer/voter etc, don`t have to take responsiblity for their own actions, they don`t have to think, be skeptical etc, they can just let the few responsible people bail them out everytime they fuck up.
 
don't happen in Europe? they have plenty of financial crisis in their recent history, the only difference is that there the government is usually more involved.

Check out Sweden in the early 90s for one.
 
Quote from Mav88:

don't happen in Europe? they have plenty of financial crisis in their recent history, the only difference is that there the government is usually more involved.

Check out Sweden in the early 90s for one.
More...

Less corruption - more egalitarianism in Europe... i.e less systemic bias of their intervention.
 
less corruption- that's a real laugher. Look at the mess that egalitarianism brought to sweden.

Of all the folks we rationalize guilt upon, the buyer, the broker, fannie, banks, whoever, think about who should have been the biggest 'grownup' here. Whoshould be held to the highest standards of conduct? I vote for elected officials whose job it is to be that way.

We had hearings held and legislation introduced because people saw problems much earlier than 2007, we had all kinds of warnings sounded, however the democrats told us everything was ok and the black politicians screamed racism. I am not clear how anybody an bear more blame than them, do we simply write it off as 'human nature'?
 
All good points....

Let us simplify this a bit further...

Nonregulated, non-exchange traded derivatives are the cause in a nutshell....

Why ?

Ask the question, what would be the state of the financial system had they never seen the light of day?

........................................................

Remedy

Regulate and require only exchange traded instruments....

Adjust the leverage for asset class participation in a collective way.

One can view this this way.

What portion of an asset's price is due to collective derivatives valuation ?

What is the non-derivative related valuation ?

.........................................................

Let's view this another way....

A stock valuation represents prospective products to be sold.

The leverage should only apply to the practical usage of the proposed product to be sold....not the derivative insurance of the product's pricing notions.....

Let's take this a step further to simplify....

Product one justifiable usage valuation range is
from $1 billion to $2 billion, which gives a wide range....

The total derivatives add on.....increase the total collection valuation applying to the proposed product three fold.....

Policy needs to be implemented thus eliminating the funny money portion....namely the derivative component....

If this part of the equation were eliminated or highly restricted, then the US economy would not be going through what it is going through today....

Let's take this a little further....

The real value is in the prospective product to be sold....not the derivative portion.....

Thus when the economy ebbs up and down, then the normal way would be to be reflective of prospective product usage valuation.....not the funny money paper creation called non regulated, non exchange traded derivatives......

.............................

So the next question becomes was easy policy the main culprit ?

It certainly was lax and incorrect....not market normal....but the US could have lived with this erroneous portion, if derivatives were not present.....
.....................................

Lastly, the education of policymakers is of paramount importance.....

At the minimum there has to be leadership available that can explain correct procedures in simple terms....such as Buffett has recently done in the recent Rose interviews.....

The fact is that even thogh there were some warnings earlier which were ignored by the left .....had the left actually understood the true ramifications, the problems could have been headed off at the pass....

This is what good effective leadership is all about....

Today's position proves there was none.....

The talk could have been something like this....

Look ladies and gentlemen....we have a problem....

The asset class dear to us in good economic times could be $10 Trillion in valuation which represents an 8% growth track which will support our obligations.....

However there is a new event that may create problems for us.....

Derivatives have inflated the paper valuation exposure of this asset class to $40 Trillion....

What this means is...that if the economy adjusts itself up and down like it always normally has......

Even with a relatively small downward adjustment in house prices....the equity can be adjusted downward in a levered way, such that all equity of the housing asset class could be wiped out.....

This is what could happen if the derivative portion is not eliminated from the equation.....

Now this is the type of talk that any child, and certainly any politician could understand.....

In other words, even the most extreme leftist equal housing opportunist would get this.....

The other side of the coin is this.....

Reality is .....

Where did the majority of firms such as Lehman come from in recent years ?

The next question is ....what would the bonuses have been with this asset class?

The next question is....

Does this bonus money not represent the created funny money portion of the true asset class?

Then is the conjured valuation real or not ?

The answer is very clear.

Ask Buffett.....
 
I've been selling real estate for 24 years. Whoever changed the banking rules for buying real estate with less than 20 % down is to blame. Home ownership is the cornerstone of our economies and must be rewarded to those that have and understand the discipline of saving. I was constantly wondering thru this unsustainable boom how the average joe 6 packer that had less income than I paid on income taxes was living a better life than I was. It was because it was all borrowed! Because the banking rules were lowered so everyone could buy a house. This drove real estate prices higher & higher and my mortage broker friends were also living the high life because for the last few years 70% of their business was refinancing stupid homeowners homes so they could pay off their credit cards, buy their BMS, Mercedes, etc. Some of my mortgage broker friends live in 6000 sq ft homes worth $2-$3 Million dollars plus driving several exotic imports, not just one, but 2-3 of them in the garage. THESE ARE MORTGAGE BROKERS (salesman) refinancing people who do not have the discipline to save & build equity in their #1 investment call their home! This deregulation of the downpayment requirement has created a LEGALIZED PYRAMID with the housing industry . Yes a pyramid/house of cards ready to crumble. This house of cards exists almost all over the world!

God help us all. We are going to need it.
 
Quote from luckyluciano:

I've been selling real estate for 24 years. Whoever changed the banking rules for buying real estate with less than 20 % down is to blame.
More...

It all started with the DemoCraps political greed. "A house for EVERYBODY.. regardless of qualifications".

Those who couldn't previously qualify for a mortgage loan were more than happy to embrace this idea... and the DemoCraps expected the "grateful new borrowers" to keep the Dems in office at each election.

The worst abuse I heard of was a woman who'd "bought" a house for $150K (probably "zero down, 125% LTV" too... but I didn't hear that part). Over the years, she re-fied several times.. taking out $600K.

Then WALKED on the $750K mortgage!
 
Quote from Mecro:

No DAMN Wrong.

The borrowers are not the ones writing out worthless derivative paper 10x the mortgage.

Why are people so dense here?
More...

+ 1 the vast majority of mortgage holders have jobs and are paying on their mortgage. It was the leverage used by large institutions/hedgefunds which RE-packaged the sub-prime and alt A selling CDO's and CDS's (on banks etc) which became the feeding frenzy that caused this collapse.

....a little bit wordy but "LIBERTAD" has the gist of it
 
Here it is.....for simplicity purposes....

Housing component...

1) Housing

$10,000,000,000,000 valuation

30% of the valuation is due to easy lending practices....
.........................................

Normal Valuation

$7,000,000,000,000

................................................

Housing valuation when combined with derivative contracts....

$40,000,000,000,000
....................................................

When normal lending practices represent 100% of the loans.....

The value of derivative contracts will decline by $12,000,000,000,000

which is more than the total normal housing valuation....
.........................................................
Or when the economy softens and houses decline by 25% from non normal lending practices, derivatives decline by $10,000,000,000,000......
........................................................

If derivatives were never present , perhaps the normal valuation of $7,000,000,000,000 would be proper....and when the economy temporarily declines, the value would become $5,000,000,000,000.....

Down but not wiped out....


.......................................................

Thus the IB sector created over $30 Trillion out of thin air.....

But the assets on the IB books, from which billions were paid out in bonuses, were held mostly in these non-regulated third tier assets....

.....................................................

Now, the government wants to tax those of us who had nothing to do with this....like blaming the 3rd generation of children for the previous holocaust....

At the minimum , policy makers need to direct policy changes to those which created the problems, not those that did not....

But oops.....not many still around to get the money back ? LEH, Bear gone...MER...others........

Let's see...Fuld, Mack, Blankfein, Paulson, the list goes on..... have some of it in their personal bank accounts....

This is no joke....

...............................................

At the end of the day....if the price of a house went to $0....you still have the house.....

If the price of a service contract goes to $0.....you have nothing.....

..........................................

Previous government policy did not regulate .....and ignored the highest value financial component of housing...derivative service contracts....

They ignored $30 Trillion of the $40 Trillion.....

Enough said....
 
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