Economic Ramble

Politics and humor not appropriate for CEO Economic Update

Thursday, June 16, 2011



Monday, October 20, 2008

SEC has been asleep during this crisis, refusing to police the jungle has allowed the situation to get worse.

The SEC allowed the big 5 to take on WAY too much risk in April 2004, changing how much debt they were allowed to hold. What did the SEC say at the time? “We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.” “I’m very happy to support it,” said Commissioner Roel C. Campos, “And I keep my fingers crossed for the future.”

Unbelievable video of the smoking gun of this mess.

The role of Freddie and Fannie in this mess

Get over it, it wasn't the CRA

Again not the CRA

Who were the leaders in lowering the credit standards

2.5 trillion price tag

I set an ambitious goal..that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families . . . George Bush 2002

I've called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. - George Bush 2004

Good Summary...

The proximate cause of the Housing crisis were
1) Ultra-low rates; and
2) Abdication of traditional lending standards, thanks to
3) originators ability to resell mortgages for securitization purposes, and hence,
4) not have to worry about loan defaults.

During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

The final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession. The total cleanup costs are scaling up towards $10 trillion dollars. All due to an excess of deregulatory zeal.

Tuesday, September 23, 2008

The 5 stages of McCain during the economic meltdown.

Wednesday, September 17, 2008

5 proveable lies the McCain/Palin team is telling.

Wednesday, September 10, 2008

McCain sure had some weird body language during his speech his eyes popping was the strangest. Now I know why Barack was on the screen behind him. Very funny vid.

Tuesday, September 09, 2008

Finally someone with some ideas, Joe Biden on the floor of the senate

Wednesday, July 09, 2008

John McCain's flip flops, making John Kerry proud

1) Abortion flip flop

John McCain is on record in support of Roe v. Wade. This is a big reason why he lost the nomination in 1999, he was toxic on the issue.

WASHINGTON (Sept. 13) - Senator John McCain (R-Az.), a leading contender for the Republican nomination for President, said on August 19, "Certainly in the short term, or even the long term, I would not support repeal of Roe vs. Wade," the Supreme Court decision that legalized abortion on demand.

Listen to McCain say it himself on CNN.
"We cannot repeal Roe v. Wade right away because that would lead to dangerous back alley abortions by thousands of young women across the country."

To secure the 2008 nomination he has painted himself as 100% pro-life, but if he puts Rudy, or Bloomberg on the ticket, he's back to his old ways.

2) Taxes

Voted against Bush's tax cuts in 2001 and did so again in 2003, he additionally derided them as giving too much to the rich at the expense of the middle class, and on top of that he said it would explode the deficit. (He was correct on both counts) now he supports extending those same tax cuts. No mention of the middle class or the deficit in his reversal. Here's the conservative Wash Times take on his flip flop.

McCain campaign says "No new taxes", McCain says payroll taxes might go up.

3) Torture

You'd think a man who'd been tortured himself for years, wouldn't change his mind on the subject, but you'd be wrong.

In 2005, McCain said it was wrong to torture even the most senior al-qaeda leadership even in a ticking time bomb situation.

At the White House... "to make it clear to the world that this government does not torture and that we adhere to the international convention of torture, whether it be here at home or abroad. And so we have worked very closely with the Senator and others to achieve that objective"

So when a bill comes to the Senate in February 2008 to ban torture, McCain votes for it right? Nope. He votes against it. As flip flops go, they don't get any bigger than this.

4) Offshore drilling

In 2000 McCain was against off-shore exploration and drilling, now he's for it.

Drilling in ANWR

In 2005, John McCain was one of the few Republican Senators to vote against drilling. His vote was critical as the vote was very close. It passed by 51-49

Today? It's not a full flip flop but on June 18, 2008 at a Town Hall meeting at Missouri State in response to drilling in ANWR he said "I would be more than happy to examine it (the drilling issue) again,” McCain said.

5,6,7) Flip flopping on his former enemies

Jerry Falwell, an "agent of intolerance"

Grover Norquist, a "crook and a shill for dictators"

Sam and Charles Wyly, secretly funded Bush's dirty campaign again McCain , all forgiven now

8) Can't remember his favorite football team

Of all the flip flops, this one is the one that cuts the deepest at the neighborhood BBQ. In the book "Faith of my Fathers" and in a Newsweek interview. McCain said his favorite team was the Green Bay Packers. And why not? In 1967, the Packers were titletown with Lombardi at the helm. So as a POW McCain recited the names of the Packer greats while under torture.

Last week in Pittsburgh, McCain was asked. What do you think of when you think of Pittsburgh. McCain responded "Oh my favorite football team the Steelers, you know when I was a POW I recited the names of the Steelers when under duress."

Ah yes the 2-12 '65 team, the 5-8-1 '66 team and the 4-9-1 '67 team. Those Pittsburgh teams most have made quite an impression on the Virginia native who you'd think would have rooted for his hometown Washington Redskins team.

So which is it Mr. McCain? You can't remember your favorite football team, or your favorite team changes depending on what city you're currently in?

9.) Gay Adoption

July 13, 2008 I don't believe gays should be allowed to adopt.

July 15, 2008 I do believe gays should be allowed to adopt.

A 2 day flip flop, this may be a Guinness Book Record!

10) Afganistan

Nov 2007, McCain "No new American troops needed in Afgan, more NATO troops"

July 6, 2008 Obama says he will send thousands to Afgan, McCain, nope Afgan is fine NATO and Pakistan have to handle it.

July 14, 2008 Obama says he will send 2 brigades to Afgan.

July 15, 2008 McCain jumps on the bandwagon, "2? I will send 3 brigades to Afgan"

July 15, 2008 about 1 hour later McCain " I won't send 3 brigades, I'll send some, NATO will send some"

Ah the rare flip-flop-flip and all within 1 day. A new record.

Well I only came up with 10 flip flops, but here's more:

10 flip flops in 2 weeks

A list of 61 McCain flip flops

Frank Rich has a number of flip-flops not discussed elsewhere

McCain's sense of humor. Not a flip-flop, but as an insight into character it deserves a spot

Killing innocent civilians is funny

Bombing is fun and funny

Rape and bestiality is funny (yeah way back in 1986, so McCain was "only" 50)

Making fun of the way 18 year old Chelsea looked ('cause picking on kids is classy)

McCain's temper

Sure launching f-bombs at folks might be considered cool, but calling your wife a C*** in front of 3 reporters? He claimed at age 56 he'd had a long day, good thing at age 72 the Presidency doesn't call for long days...

McCain's Military Expertise

"I know how to win wars" Sorry no link to prove this record

Actual military acumen?

Finished almost dead last in his class at Annapolis 894th out of 899

After 5 plane crashes, McCain left the Navy 1 week after his patron was gone (His Dad)

His best man at his wedding Sen. Cohen said "He knew his career in the Navy was limited"

McCain slapped around in funny Paris ad

See more funny videos at Funny or Die