Wall Street May Be Bailing on the Bailout

Reader Comments
Back to blog

Arrgh, PMassey, you've posted 2 dumb comments. To set you straight:
Deregulation has nothing to do with the current credit crisis.The current issues revolve around investment banks and the decline in their asset value.It has nothing to do with the deregulation of standard retail banks to allow them to compete nationwide and offer different types of banking products.This deregulation was undertaken to make American retail banks competitive with foreign retail banks.Again, one has nothing to do with the other, unless you are a benighted Democrat partisan believing what Chris Dodd and Barney Frank say.Incidentally, if blame is to be placed, those are the shoulders upon which to place it. Dodd and Frank took below market loans from Countrywide in exchange for...I don't know, could it be looking the other way on Fannie and Freddie's advocacy for and purchase of crappy mortgage loans? Let's also put some blame on the Carter administration, for pushing the Community Reinvestment Act on us in the 1970's. I may be a lone voice in the wilderness, but taxpayer subsidized money, which is what a Fannie and Freddie bought mortgage constitutes, is not, in my opinion, a civil right. If a person can't afford a house, and he or she wants one, then he or she needs to get off their butt, get a better job, save some money, and be responsible with what they earn. Good credit will follow, and a mortgage will follow that.
ExxonMobil and Halliburton make money because that's what corporations do. With respect to EM, its absolute profit is huge because the size of the company is huge. But its marginal profit rate, expressed in terms of percentage, is not so huge. Google, Microsoft, and my local pool builder make enormous profits in terms of percentage (like 20% profits), but not so much in terms of absolute dollars. Why? Because they aren't as big as EM. Apples and oranges - look at % not $ to see who's really making $. Point 2: EM takes huge risks. It is entitled to huge rewards. We should let it make all the money it can, because WE ALL WIN. Who else is going to send people and money and technology to go to every crappy place in the world to bring you the energy you need to power your computer? They get oil off the bottom of the ocean, for heaven's sake. Third point: do you have a pension? Do you own a share of a mutual fund? If so, in all likelihood, YOU OWN EXXON MOBIL. A small piece, yes, but every mutual fund in America holds a ton of EM stock. If they win, you win. Energy stocks are the only thing PAYING pension checks right now.
And if you think Obama has character, I'd like to find the rock you've been living under and crawl under myself. I could use a break from reality. Why don't you do a little reading on Obama and Tony Rezko? How did Obama get that fancy house, and the nice empty lot next door? Why did Mrs. Obama get an enormous raise once her husband got elected to the Senate? Why did her employer get a huge earmark from Obama right off the bat?

J. Coyote of UT 11:57AM September 25, 2008

PMAssey-Please check your facts before posting ridiculous comments.
There is no "thievery in high places," other than at Freddie and Fannie. Banks made bad loans to people who could never pay them back. Why? Because they didn't have to keep the debt on their books. Fannie and Freddie would buy it. When local banks used to service these loans, and be on the hook if it wasn't paid back, they didn't make risky loans. Fannie and Freddie's participation in buying every mortgage a bank could get written created a housing bubble.Housing prices went up, because more people were trying to buy them. Supply and demand. Those mortgages then got put in giant pools, and pieces of those pools got sold as securities. This lessened the risk, since each share comprised a fraction of each loan, making it less likely that anyone would get stuck with a bad loan. Greenspan's policy of cheap money made the problem worse; speculators came into the market, trying to buy and flip houses at a proft, because it was so cheap to borrow money. Housing prices went up even more, since the speculators were trying to buy these assets too.
Once the people who never could pay those big notes started defaulting, which was inevitable, housing prices started coming down. Due to mark-to-market accounting rules, entities holding securities backed by mortgage loans (and therefore the house itself) had to write down their assets. No assets, no credit (or money is harder and more expensive to borrow). It's a house of cards that resulted in Lehman's assets not being worth much and it not being able to borrow from anyone else to keep going. No thievery, just placing bad bets.Hindsight is always 20/20.
I think the author of this article has pointed all of this out very well. I'm not sure why you don't get it. There is no "thievery" I can see other than the early 2000's anipulation of Fannie and Freddie's books, which drove Raines and Gorelick out of Fannie, and the friends of Angelo loans made to certain Democratic congressmen who chair committees with oversight of Fannie and Freddie. How will Obama "address" these two things? Kick Chris Dodd out of office? What regulation will save hedge fund managers and investment bankers from not having a crystal ball? The answer is, he can't. Every American should think twice about who they let manage their money for them. These guys were hired to manage and invest mutual fund money, pension money, etc., and they were trying to get the best return possible (since if their clients make money, they make money). If you don't like their strategy, don't let them have your money. Invest it yourself.
What does Cindy McCain have to do with anything? Cindy McCain has done more to help the poor and downtrodden worldwide than any first lady in recent memory. I have to go back in my mind to Eleanor Roosevelt to find a more giving woman. If we're going to talk about denying half-siblings, why is George Obama living in a hut in Kenya on $36/yr?

J. Coyote of UT 11:18AM September 25, 2008

Do you really think that Obama - with connections to the people who screwed up Fannie Mae and Freddie Mac - is going to clean house? stop hallucinating and putting your fantasies on a guy who couldn't even take care of his own constituents in Chicago and never sticks his neck out for a belief

Rachel of VA 4:53PM September 24, 2008

Yes, jail is a reasonable alternative than nice bonuses. These are bright people; they knew what they were doing. It's time for prison time.
Yeah, thanks Republicans. Thanks a whole bunch. Love the deregulation of the mortgage criteria.
Love too the performance of Exxon Mobile which lined the pockets of Mr. Bush.
Love too the Haliburton which lined the pockets of Bush.
Believe me, Mr. bush is not losing sleep over any of this. He's a bit dumb but he doesn't reall ycare about that either. He cares about his $$... doesn't seem to even care what history will have to say about him. Just his $$.
It's time for Obama, people. Give a man that seems to have inherent character a chance. Please. It's your life and mine here.

Pmassey of 3:56PM September 24, 2008

all I can say is i've learned a lot - one, that people aren't necessarily like me... that is, I have some places I wouldn't go. Don't need to be tempted to know that.
We need regulation for these crooks in high places. They make me sick stealing my hard earned $$. Disgusting.
I think Obama can and will address the thievery in high places. Do you people really want more of the republicans - bush, now mccain. You know what kind of person Ms. McCain is - one that denies her own flesh and blood. And, McCain married her. You want that type person protecting your well being!?

PMassey of 3:51PM September 24, 2008

Obama enough is enough your words - bail out people not wall street. We were screwed twice once on mortgage fraud and then on gas anipulation.
Time to take a stand on something.
You want this job then take a stand on something

Nevermind of OH 2:01PM September 24, 2008

"I think a simpler solution would be for the SEC to immediately and temporarily suspend mark-to-market accounting rules for mortgage-backed assets".
Yea that is smart, send out the vultures (short sellers) who would feed on teh over-valued markets this would create. How would value and risk be understood by investors under such a plan when they would have little to no transparency to the true carried liabilities?
Wasn't Enron in part an issue about how liabilities were accounted for or not accounted for? Now the solution is, simply ignore the liabilities of our banking institutions? A better solution is Jail.

Dave of MA 11:21AM September 24, 2008