<<nor much reason [for the American voter] to [vote against the banks and the financial institutions].>>
Oh. Then I guess there's no real need for the banks and the financial industry to invest so heavily in campaign financing, is there? Or in lobbying. I guess they don't realize that they're just wasting their money.
<<What is the relationship between the American investor and the American voter? Large overlap . . .?>>
No, I wouldn't think so. Not at all. Most Americans DON'T have investments, many of those who do have only small amounts in mutual funds, the amount of bank or financial institutional holding in the funds probably amounting to double-digit figures at most. But since you raised the subject, maybe you have some numbers you'd like to tell me about.
<<Some of the recent trouble we have had financially stems from regulations and otherwise meddeling by Washington to ease credit terms for the poor.>>
Really? Then maybe you could tell me where in the regulations or "meddling" it is written that home loans have to be made to people who have no realistic prospects of repaying them?
While you're at it, maybe you could tell me where in the regulations or meddling it is written that the banks and financial institutions who make these shit loans are required to bundle hundreds of them together into pools of mortgage obligations and sell them as triple-A securities to other banks and financial institutions?
Maybe while you're at it, you could tell me where in the regulations or meddling it is written that the banks and financial institutions who sold these shit loans as triple-A to other banks also at the same time were required to purchase insurance in the form of credit default swaps against defaults on the now-securitized shit loans?
Maybe while you're at it, you could also tell me where in the regulations or meddling it is written that the rating agencies whose job it was to rate the securitized shit loans gave them all triple-A ratings despite massive defaults in documentation affecting up to 50% of the loans in some bundled portfolios?
The "conservative" explanation for the sub-prime mortgage fiasco is hilarious. It starts with the relaxation of federal rules on single-family home mortgage loans and then totally ignores the avalanche of corporate criminality and fraud that follows - - the bundling and securitization of the loans, the mysterious failure of ALL rating agencies to detect the shit-nature of the bundles, the sale of the shit-loans simultaneously with the purchase of credit default swaps (insurance against default by the seller of the securities.)
<<As it turns out there is some part of the poor that really shouldn't be given credit and can't realise for itself when the point of overextention has occured. >>
LOL. I really don't think that you understand much about the mortgage industry. Mortgages are a product and they are SOLD just like any other product is sold - - that is to say, the lending institution pays a commission to a salesman (broker) to find a borrower who will borrow money from the lending institution. Every lending institution has a "basket" - - a certain amount of funds on hand that has to be lent out as mortgage loans within a fixed period of time. If the institution can't loan out all the funds in its "basket" within the time frame, it's in trouble. So there's always a search for qualified borrowers, and the pool of qualified borrowers at any time is of a fixed size. The salesmen or brokers from each institution fan out into the neighbourhood looking for borrowers. But due to the shitty economy, the off-shoring of manufacturing jobs, there weren't too many borrowers who could service the loans. Enter the "variable rate" or "balloon" mortgage - - in order to empty their "baskets," the lenders began offering variable rate mortgages - - start with 0.01% interest, or even NO interest, or even NO PAYMENTS for a year, house prices will rise, the economy will get better, you'll get a job in a year; in a year, the rates will go up, you'll need to pay money but by then you'll have it. The sucker takes the loan and buys the house and signs the mortgage.
What is in it for the bank? They've got an "asset," the loan itself. As long as it's on paper and not in default (how can it be in default when the poor dumb schmuck doesn't even have to make a fucking payment for a year?) this is a saleable asset. What was in it for the mortgage salesman or broker? Commission. He got his commission paid right off the top (probably by the borrower, otherwise just written into the mortgage and paid by the lender) and as soon as the mortgage was signed, before it could possibly go into default.
The bank then "bundles" the shit mortgage with hundreds of other shit mortgages and now has something to sell to another bank for ready cash. If the whole bundle goes bad, as it inevitably will when the first payments start falling due, the bank doesn't want to get sued by the institution that purchased the bundle, so it buys a "credit default swap" from an insurance company insuring it against the default. Everyone makes money - - the lending bank, the buying bank, the salesman of the mortgage and the insurance company insuring the bundle. The poor dumb schmuck now has a home -- for a while. The shit hits the fan when the first mortgage payments start to come due. Due to the massive scale of the fraud even the insurance companies can't pay up to cover the losses. Banks are going under, insurance companies are going under, homes are being foreclosed . . .
This goes a lot deeper than loosened restrictions on borrowing - - the active fraud and criminality was from the banks, the insurance companies and the rating companies. They were all betting on something they never should have bet on - - the ability of penniless schmucks to pay mortgages that rapacious lenders had conned them into using the illusion of the "variable rate" mortgage and traditional salesmanship.
A whole sector of the banking and lending industry was responsible for the disaster, not just the legislators who loosened the restrictions on borrowing. That just provided the opportunity for the fucking crooks to jump on the bandwagon and take in a shitload of money as long as they could.
<<With less regulation and less expectation for rescue by Unckle Sam ,banks with foolish loan policys would live and die by Darwinistic survival of the fittest rather than Washingtonian survival of the whineyest.>>
Do you not understand that it was BECAUSE of less regulation that the whole teppel schmaltz was allowed to build up in the first place? Lending had to be MORE tightly regulated (prohibiting a lot of the shit loans) not less regulated if the disaster was to be avoided.
I didn't even get into the deregulation of banking that made the disaster even worse, i.e. the erasure of the distinction between investing and deposit banks. Some of the banks like Goldman Sachs that got into the purchasing of sub-prime "bundles" were originally investment firms, but due to deregulation were also allowed to take in deposits. In effect depositors who deposited with Goldman Sachs were stripped of the protection that was formerly enjoyed by all bank depositors. If the bank took deposits it couldn't buy speculative securities like the "bundled" shit loans. Now the restrictions were gone, thanks to deregulation - - Goldman Sachs was free to take in savings deposits, but it was also free to speculate in crazy derivatives and securitized shit loans. All of a sudden, the depositors' money wasn't so safe any more - - it had been exposed to the risks of the investment side of Goldman Sachs. What the banking and lending industry needs is obviously MORE and not less regulation so that savings are no longer subject to investment risks (unless the depositor wants to take his savings and invest them.)