If you think the biggest risk to the banking system is “confidence,” then you have been listening to Skeletor too much.

The banks biggest problem is their business practices over the past decade and their belief that they could make endless amounts of money on the FACT that real estate always goes up. They loaned money to idiots that could never pay it back, and then levered-up those mortgages into financial products that they sold around the world. They also kept enough for themselves that makes most of them insolvent.

The only thing between us and financial oblivion is all the banks, with the tacit approval of the US Treasury, keeping their mortgage assets marked to a ficticious value that has no relationship to the true market price. They are burning cash faster than is comprehensible and the FEDERAL RESERVE is almost to its limit in liquefying the banks to prevent price discovery of all their MBS assets.

Oh yeah, the ALT-A mortgages have not hit the market yet.

There is more to this than just confidence. This is a very real problem and the biggest news story of the past 12 months has been the intentional obfuscation of the true condition of the banks to create a false sense of confidence.

Eventually this confidence (if it can be sustained) will trickle back into lending practices which should give buyers a little more to work with.

P.S. (RE: the title of the post “Sorry Ardell, I just couldn’t resist.)”

It was my first comment to Eleua when the IndyMac news broke. YES…we all DO give a RA about banks this week.

Public servants? By bailing out the people who took out exotic loans (few) and punishing the taxpayer (many) this is somehow a solution? This is about the only solution I hear from the Democrats right now, that and passing an additional stimulus package.

I said mostly public servants. I said they also pander to lobbyists. I said they can now do nothing that is not palatable to the other side (which is nasty stuff only). Nowhere did I say they are saints, or the best deal for the public. If the voting public really wanted the best system, they’d demand vote prioritization, so we’d have more competition among parties in Congress, rather than just two parties that can easily collude with special interests.

It’s easy to believe that Congress will screw you no matter what; that’s the lazy perspective. Upon closer inspection one major party is obviously far better than the other major party, even if both are far from the best possible.

140k of which 100k is insured…
I don’t want to tell her to do something stupid either. She was the one to originally ask me if she should bail out of Wamu. Heck I’m no expert, just a caring friend.

That’s the whole point. They have both sold out, and both sides of the isle. The system is headed for a massive reset and that is much needed. Everyone should brace themselves and position themselves accordingly.

Great solutions, I have so much faith.

matthew: One of the few decent decisions Bush has made is to threaten the veto of this bill.

I agree, if there’s no ulterior motive (like something unrelated he wants attached to the bill).

You have a very idealized view of the Democrats. The fact is that the Democrats will either 1) do what the Republicans want because its similar to what the large amount of Democrats with corporate masters want or 2) Won’t do what the Republicans do not want, because they are cowards and think Hannity might say something mean and they will lose re-election. Either way the Republicans win, at least when they controlled congress it was less frustrating getting screwed.

The problem with this theory of who is taking advantage of who in this recession is that there isn’t a recession happening:

Things are rosy in Cuba too! As always! If we’re not in a recession, then we need a new word to describe what the man in the street is definitely experiencing.

The House and Senate are both controlled by Democrats…

That’s a common sentiment, but it’s really more of a stalemate, since the Democrats don’t have enough control. To get anything done they have to do something palatable to the other side. Guess what’s palatable.

Do you really think things are going to be better if the Dems control the White House?

When “better” is changed to “better than if the Republicans retained control” then yes I think the odds of that are very high. Things may well be worse because the next party in power will have a monumentous disaster to deal with. One major party is mostly private servants, the dark side. The other major party are mostly public servants, the light side. Both groups pander to whomever will help get them in office, a necessary evil in the case of the light side, lest our democracy end.

If anything the divided government keeps things somewhat balanced.

I’d rather there be multiple light-side groups keeping one another balanced, which would require instant run-off voting or some other form of vote prioritization. We’re not there yet.

“Today’s data on May international trade prompted several economists to boost their tracking estimates of second quarter GDP growth. Macroeconomic Advisers boosted its estimate to 3.3% (annual rate) from 3% as did HSBC. Morgan Stanley raised its estimate to 3.9% from 3.8%. GDP grew just 0.7% in the first quarter.”

http://blogs.wsj.com/economics/2007/07/12/trade-data-boosts-second-quarter-gdp-estimates/

Attempting to prevent recession is exactly what caused this mess. Instead of a recession we got two gigantic bubbles.

A bubble was to be expected, because profit & power was maximized that way. Had the recession not been prevented, who would be in power now? One group always takes the way out that benefits them and screw the rest & future generations. Now they will benefit from letting the postponed recession happen, be manipulated for maximum gain, and, most importantly, be blamed on the next group, so that power can be had again.

Institutions should be allowed to fail.

Yes. But they won’t be, not entirely, which goes to “So how bad could this get?”

Why privatize the gains and socialize the losses?

Exactamundo! But wait, that’s too political for this forum! Stop that talk!

I don’t follow your logic saying that war is analogous to an economic cycle. War is preventable, that much is true. But the economic cycle is inevitable.

This could be a whole thread. You already pointed to one solution, which is don’t let the losses be socialized. For example, CEO bonuses based on quarterly results could be outlawed, in favor of bonuses based on the long term. Then it would be harder for them to dump losses on employees (e.g. vanished pension) and taxpayers (e.g. superfund cleanup site).

Our representatives currently think it’s a good idea to bail out people that took out loans they can’t repay. The House and Senate are both controlled by Democrats and a Democrat (along with BofA) authored the bailout bill. One of the few decent decisions Bush has made is to threaten the veto of this bill. Do you really think things are going to be better if the Dems control the White House? If anything the divided government keeps things somewhat balanced.

I wasn’t making a statement, just proving the point that both liberals and conservatives are to blame for the mess we are in.

That is a political statement, no different tham blaming one group more than another. Something that happened 7.5 or more years ago is just an excuse in my book. Why not blame Lincoln while were at it?

The Tim asks, “So how bad could this get?”. Well, the prediction depends on who’s in power, and what they have done so far. Given what I have witnessed, things will get far worse then they need have. I do not buy the argument that the representatives have little control over the monetary policy. I think the goal is to squeeze the common person as much they can possibly be squeezed and still have them show up for work, so that the few can buy bigger yachts. If you believe that the party that has the stranglehold now creates recessions on purpose, then you may come to a different conclusion about how bad it can get.

Attempting to prevent recession is exactly what caused this mess. Instead of a recession we got two gigantic bubbles.

Bailing people and institutions out causes moral hazard. Institutions should be allowed to fail. Why privatize the gains and socialize the losses? Golden parachutes should not be the norm and company stockholders should be given more power and influence over top level decision making.

I don’t follow your logic saying that war is analogous to an economic cycle. War is preventable, that much is true. But the economic cycle is inevitable.

Governments can not prevent recessions. Possibly delay them but ultimately corrections will occur. That foolishness is exactly the problem. Constantly wishing away malinvestment instead of letting the system properly flush itself.

The system will not be allowed to properly flush itself. Isn’t that obvious? And if that can be prevented, then why not recessions too? The people who have been given the ball to do with as they please are manipulating the situation to their advantage, as usual. They profited on the way up, and they’ll profit on the way down, all by design. I think recessions are just as preventable as war. But then plenty of people think that war is inevitable too.

I wasn’t making a statement, just proving the point that both liberals and conservatives are to blame for the mess we are in. Both Clinton and Bush promoted the home owner/American Dream society. Both encouraged lending money to people that had no business receiving loans. Look at the campaign contributions for most candidates on both sides and you will see that their pockets are lined with Wall Street money.

The blame is on both sides of the aisle, but perhaps you are aligned too far with one side to see this.

If a few exceedingly poorly managed mortgage houses and highly overpaid stock brokers go under, so be it.

That doesn’t work, and that’s been clear for a decade at least. The strategy for financial institutions now is to become “too big to fail”, by making gigantic bets with a relatively small amount of capital underlying those bets. Then the gov’t must step in, or else the economy is harmed more. It’s clear that further regulation is needed.

Markor with another wingnut political thread hijack. Nice work once again. …
President Clinton signed the bill that repealed Glass-Steagall in 1999. Amazing what 200 million spent in lobbying (Citigroup) will get you. …

The pot calling the kettle black. You just used me to make your own political statement. Also I only responded to others’ political posts above. Can’t we all just get along and ignore what caused this mess already? Folks, IndyMac not being on the FDIC’s “troubled bank list” has nothing to do with the rich getting richer. That they got richer from that omission was just a coincidence. Nothing to see here.

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html

“Since when is it the government’s job to prevent anything bad from ever happening? People lined up on their own to get in on the largest Ponzi scheme ever conceived, that of ever increasing housing prices. I for one do not want to have to get the government’s permission to borrow or lend because some lowlife in CA is handing out 500K mortgages to illegal immigrants.”

Jon, I tend to agree with you in principal, but these are the institutions that have now turned their grubby little faces to the government and are looking for a handout. If they want help from the public then they are going to have to put up with some regulation.

Maybe you should do a little research before pointing a finger at one side over the other. President Clinton signed the bill that repealed Glass-Steagall in 1999. Amazing what 200 million spent in lobbying (Citigroup) will get you. This allowed commercial banks and investments banks to merge and is one of the largest reasons for our current banking problems.

Both sides are equally to blame for the fall out. Barnie Frank, Nancy Pelosi, Chris Dodd, and plenty of other morons on the hill have been arguing for raising caps on Freddie and Fannie, bailing out homeowners, and throwing money at the problem. Chris Dodd in particular is OWNED by Wall Street. Take a look at his campaign donations, he is also a “friend of Mozillo” and saved 100k on financing on his house from CFC.

They are all corrupt. Don’t let your ideology blind you.

SWEET!!! MORE FREE MONEY!!!!

I knew Congress would save us!

My preference is to live in a country where people are free to innovate, take risks, and enjoy the consequences thereof, positive or negative. I don’t mind a few rules about mercury, or some constraints on issuing federally guaranteed loans, but restrictions designed to insure strict monotonic growth in the a country of 300 million free individuals seem likely to prevent innovation and do more harm than good. If a few exceedingly poorly managed mortgage houses and highly overpaid stock brokers go under, so be it. Likewise for people who pay hundreds of thousands for a tiny patch of arid land hours from the nearest job. Aside from those people, there just isn’t a recession right now.

http://www.youtube.com/watch?v=pKv6RcXa2UI

Let’s get back to inventory –

It’s been stuck at 13203 for a few hours now….

People who blame the Republicans for all the problems are half right.

If we are to be unpolitical here, that should include as well comments suggesting that a party is not overly to blame.

Since when is it the government’s job to prevent anything bad from ever happening?

Since when should it not be the government’s job to prevent bad things from ever happening, that are in government’s control to prevent? Mercury poisoning of rivers, for example. Recessions are firmly in the government’s control to prevent.

If anyone should be blamed, its Angelo Mozilo. He and Countrywide popularized the exotic mortgages. That is at the heart of this mess. When a guy making 50k a year could walk in and get a 600k mortgage, it artificially increased prices…and now we’re paying the piper

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

The root cause of the bubble lies squarely on the shoulder of the monetary policies of the federal reserve, both Clinton and Bush have exacerbated the problem, but the Fed is enemy #1.

I have to disagree. Bubbles are more the result of general sentiment, and generational patterns, than they are due to government policy. Sure, governments can exacerbate bubbles, but policymakers themselves are just representations of the cultural trends. When everyone is feeling bullish they will elect bullish leaders, who will appoint bullish bureaucrats.

Whenever you get far enough away from the last major economic downturn (the great depression, in this case), people start to feel invulnerable, and take unconscionable financial risks. No matter how strict a regulatory regime is put in place over the next few years I don’t think it will do much to prevent the next major bubble 80 years from now.

The root cause of the bubble lies squarely on the shoulder of the monetary policies of the federal reserve, both Clinton and Bush have exacerbated the problem, but the Fed is enemy #1.

I said it’s okay if we ignore the root causes of the housing bubble and other economic woes. Monetary policy is political too–please don’t mention it again. You’re offending me. I want to be ignorant of anything underlying this housing bubble.

Leave your political ideology off the bubble forum please. The root cause of the bubble lies squarely on the shoulder of the monetary policies of the federal reserve, both Clinton and Bush have exacerbated the problem, but the Fed is enemy #1.

You can’t join a single discussion on this website without bringing politics into the fray. You obviously have an axe to grind that would be better served on some left wing web forum.

Most union contracts are seeing nominal salary gains but major cost concessions for health care and pensions.

Pensions they’ll not see anyway, or they’ll see just 35 cents on the dollar after it’s been raided and the fed takes control of it.

Wait, union talk is political. Scratch that from the list of discussion topics too then.

OK – this is when it gets ugly. Let’s leave the politics out.

Yep, let’s keep ignoring the root causes of the housing bubble and other economic woes. That’s okay, people doing that en masse is doing wonders for my net worth.

wage inflation exists for people who are in demand and those who belong to a union.

Some of the biggest middle class unions are taking huge hits right now. UAW is losing thousands of workers every month as GM, Ford, Chrysler, and their tier 1 suppliers (TRW, Visteon, Delphi, Lear, et al) all lay off union workers and close plants. There’s major downward price pressure on the UAW and IFPTE to compete with the new plants in right-to-work states. Most union contracts are seeing nominal salary gains but major cost concessions for health care and pensions. Airline unions (pilots, flight attendants, et al) are getting slaughtered, too. The only unions gaining ground are service unions, and I think we all know where service jobs rank on the proverbial salary pole.

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