do you "less government" rhetoric lovers think there should be no financial

  • Thread starter Thread starter HybriDSM
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Explain to me how failing to perform on the other side of a swap or a short contract has any bearing on a mortgage market that was already going to pieces? If the counterparty calls and says they want the contract funded because FNMAs are down 20% in the past week and the seller tells them to eat crow, that will not save your payroll nor will it help joe schmoe make the payments on his mortgage & escalade. the counterparty has little if any recourse. they can take possession of a warehouse line full of the same FNMAs that they shorted, but there is little or no cash changing hands. The money that would have otherwise been available would not have gone to your payroll. It would have gone to underwrite a bond deal of which your company would be one small piece of. at some point, 5-10% of the companies in the bond portfolio would have trouble servicing their debts, and because of the leveraging used to make these bonds profitable (because the interest rates offered on the face were artificially low, and without leveraging by the IBanks these companies would not have gotten the loans in the first place), someone is going to eat it, hard. So what? All that means is that the bond deals stop. Bond deals that were not fundamentally viable in the first place, because they offered loans at interest rates that were far too low to make the investors any money. So the investors borrowed money from the federal government or other large institutions at interest rates that were even lower to make up the difference. IOW, the bond deals would have ordinarily resulted in a loss for the investors, but because the federal government subsidized interest rates and the risk of the underlying deals through guarrantees, these losses could be passed along the chain to other banks, investors, the federal reserve, etc. the only people who benefitted are the ones that got rid of the hot potato before it blew up, i.e. before someone stopped paying on the loans.

Anyway, back to the hedge contract. The only thing that happens is that the bank who went long on the contract no longer has the funds to lend GM or BoA mortgage ops another $300 million to play with. Since the industries that these two companies operate in are failing anyway, the effect of derivatives is marginal.

The problem was the funding of nonviable businesses in the first place. If you take this problem away, then the majority of America that in reality is lower middle class will have to return to a lower middle class lifestyle.

And that's exactly what's happening now. IBanking didn't wreck the economy. It took a lower middle class economy and gave it an upper middle class lifestyle for a couple of generations.
 
there was a time when we had no regulation. During that time, if you were lucky enough to even get a job, you worked in the factory or mine or field all day and then you got paid a tiny amount of "credit" to the company store in the little town that the company built to house you. No safety regs, no suing the company for an unsafe workplace. If you died, too fucking bad, there would be 10 more lined up to take your place.

Man, those were the good old days. Regulation sucks!
 
it would have been substantially the same. The money raised to invest into MBS was not in circulation and in many cases didn't even exist, except on paper.

A lot of purchases were made on repo meaning the "buyer" would purchase a traunch for certain amount of money, and collateralize a repurchase agreement with these securities in order to fund the transaction. The counterparty to the repurchase agreement essentially pays for the buyer to purchase the securities from the seller. When the market value of the securities falls, the repo counterparty issues a margin call. The buyer doesn't have the cash or other collateral (especially when the value of MBS are falling across the board, these securities would be useless as collateral), so the repo counterparty takes the securities from the buyer, and the buyer writes them down to zero, i.e. a total loss. The counterparty is out a lot of money because the securities can't be sold or repoed back out for what they were originally purchased for. But that doesn't mean anything for the homeowner who isn't paying the mortgages or the originating bank that hasn't managed to get rid of their shoddy loan portfolio to MBS underwriters.

Nowhere does this make the problems of the originating banks or homeowners any better or worse. It doesn't change the fact that because joe schlub can't take out a 150K HELOC on his 600K neg-am mortgaged home, he's no longer buying the latest and shittiest SUV that GM barfs out. So the GM dealers can't pay their floor plans, GM can't pay its parts suppliers, and they start shutting down. "Joe schlub" gets laid off from his job selling SeeDoos to lower middle class, up to their eyeballs in debt, "Jack Schlubs" and because none of the Schlubs are buying SeeDoos or even affording to pay their property taxes anymore, county tax revenues fall and Joe's wife loses her job as a teacher. Now they're broke and with no savings or employment prospects they stop paying their mortgage and the bank forecloses on them.

The schenannegans in the investment banking sector don't play into any of this... except that because Lehman brothers is folding under a bunch of crappy repos and shitty MBS that they aren't collecting on anymore (Like Joe's), and they don't have any money leftover to lend to shitty businesses like the SeeDoo dealer selling rich man's toys to people who can't afford them.

The culpability of IBanking sector is capitalizing shitty deals, but when these deals finally imploded it makes no difference how leveraged they are.

The economy at all levels is rotten and it's either everybody's fault, or nobody's fault. I tend to lean on the nobody's fault, because most people did not see this coming until it was too late.
 
It has bearing on other lending practices to viable businesses which is why we lost 8 million jobs in sectors that had nothing to do with auto or finance.
 
Most of the economic growth just prior to the recession was financed in the mortgage industry or other funding sources at artificially low interest rates. Retail, tourism, jewelry, electronics, etc. Artificially low interest rates on home loans meant people had more disposable income for consumer goods. Home price appreciation meant people could take out HELOCs or do cash out mortgages/refinances and spend the money on consumer goods. Equity & debt offerings by businesses to fund expansion meant that prices for consumer goods could be held artificially low

Now that these funding sources are gone, demand falls and investment banking is to blame? IBanking is the vehicle by which this cheap credit (and illusory economic growth) got there in the first place.
 
If you think that "less govt" = some kind of anarchy, you aren't really understanding the underlying point.
 
It has a lot to do with it the government starts restricting offshore drilling further.

Or does Exxon even run wells in the Gulf? Either way, their stock took a dump after the spill. Woulda' been smart to have unloaded it.
 
People like him don't grasp the concept that: the more power you give the govt to regulate, the more power they give to the bigger companies because they can afford the lobbyists to buy favors

lol, fucking naive idiots
 
What it did? It was just passed on Thursday.

The main points of the bill are the Volker Rule, the CFPA, the regulation of derivatives, and forcing banks to have enough liquidity. Those are all good things

Now all we need to do is bring back Glass Steagall
 
or just simply can absorb the cost.



New trucking emissions in CA require quarterly tests, and you are required to keep those results for a decade or something. Not to mention replacing every single diesel engine built before 2009.
If you have a 100+ fleet, no big deal. You replace the vehicles every so often and have a large maintance facility.
5 vehicle fleet,
 
Even anarcho-capitalists don't believe in anarchy.

The problem today isn't really big government, it's government that gets in bed with big corporations, small-time farmers, and everyone in between. A friend to everyone is a friend to no one.
 
Yes, regulations don't do shit. Just this morning I passed a group of 10 year olds headed to the mines.

I guess I should have specified "good regulations" instead of just saying bad regulations written by the people that are to be regulated. I could see how you would get confused.
 
So? By definition, if I'm willing to pay more, then it's worth more.

Why should my internet bill stay low because 8 other people are paying more on THEIR monthly plans? I know a lot of people who use the internet for email, news, and not much else. Most people, in fact.
 
DoD isn't really regulation . Besides, defense (at least a minimum amount) is something the govt should be doing, is required to do, etc... That's the whole point of the govt is to protect us from outside forces.
 
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