 | | 09-26-2008, 04:17 PM |
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#32 |
| Obsessed Fan
Joined: May 2001
Posts: 5,125
| Quote: | UnSilent majority thank you for that well thoughout and articulate post. Although, I do see the value of the bailout I just hope its done like you say. What we need to do is role back the view on regulation vs deregulation. This started not with bush but with Reagan and until we as a country reject Reagonmics we'll be in this mess again in a few years. | You are absolutely right. Deregulation (or a very lax approach to regulation these past eight years) under Bush (II) and Reagan, is precisely what got us into this mess, more so than "Trickle Down" economics.
I won't go into too much detail (because you can research the particulars on your own), but the main thing that lead us to this mess on the Lender's side was not only a lack of regulation, but business people doing very unscrupulous things to get around what little regulations were in place.
The biggest one was underwriters would rate MBS securities higher (in dollar value) based soley on the top tier Prime loans just to make the security appear more attractive to potential buyers. For example, depending on how many loans were bundled, they might list 11 million dollars as the value of the entire MBS. However, in reality the actual value based soley on the prime loans might only be three million. Eight (11-3=8) of that 11 million dollar sale value might be bad subprime mortgages (lower tier) which make up a majority of the loans in that MBS. This is just one way they could inflate the value of these securities. Technically, it's not illegal, but it's not exactly truthful, I.E: ethical in terms of full disclosure to create a fair market.
On a directly related note on how to move forward past this crisis, financial institutions now need to be truthful about how many bad subprime MBS they have been "exposed" (have as their assets on their accounting books) to. This is the main problem, now. Everybody is still nervous and so, they aren't being truthful with one another -- Which is kind of silly because businesses can find out how much bad debt (MBS) a company has been exposed to, yet if you ask that same company they will state there is no quantifiable way to know because MBS are just like every other commodity (they can be sold as whole or in parts). They are flat out lying because somebody... Accountants, CFO, brokers, investors, etc... Knows something because people just don't let huge dollar amounts like that go unaccounted for, no matter what they claim.
On a personal note, I know so much about what is going on with this crisis because I used to work for one of the only companies in the U.S. that monitored MBS and specifically subprime mortgages. We used to do due diligence and try and make sure the subprime loans... At the individual loan/home owner level... Didn't default as bad as they have in the past few years. I worked in this field from 2000 to 2003, and the housing market was very good then... But I also saw some of the things that lead us into this mess starting to happen more and more like people who should not have been given loans (subprime) granted loans, predatory lending, and the increase of non-fixed, or interest-only loans skyrocket just as I moved into another field. So, I saw the early days of this disaster coming, but nobody knew it was going to get this bad. |
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