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Post by socal on Sept 19, 2008 6:48:42 GMT -6
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Post by socal on Sept 20, 2008 7:37:13 GMT -6
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Post by Norm "racerhawk" Parker on Sept 20, 2008 10:00:34 GMT -6
I could tell you so many stories about people who dropped their "straight" Medicare package to have a Medicare HMO (run by private insurance). They're shocked to find they have horrible benefits. I hope that people truly understand what they are getting when things become less and less regulated. Deregulation of most industries is generally good, but not without pitfalls. Interestingly, pseuo-libertarians are all for complete deregulation, except when the consequences of said dereg lead us to catastrophe. Enron and the like... Mortgage fallout... Certainly, individuals bear a great deal of blame, but if I didn't make a dumb mortgage decision, why am I now going to have to pay for it? I get called a big government liberal on this board, but some huge government expenditures, including: the 1-3 trillion dollar mistake of a bad war, and the 1-plus trillion dollar upcoming bailout are examples of huge government expenditures that I certainly don't want. I'm going to stat calling the right wing "big government knuckle draggers." There are no athiests in foxholes, and there are no libertarians in a financial crisis. Let's bail!!!
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Post by socal on Sept 20, 2008 18:43:26 GMT -6
With an administration that brought us such wonderful things as Iraq & Katrina, we get these fun tidbits in the Wall Street bailout: calculatedrisk.blogspot.com/2008/09/bailout-proposal.html..... On a slightly related note, I'm not privy to whom Obama was looking to appoint Treasury Secretary, but there have been many articles written about McCain choosing Phil Gramm... whom is the guy more personally responsible for this calamity than anyone else.
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Post by NOTTHOR on Sept 20, 2008 20:40:17 GMT -6
Interestingly, pseuo-libertarians are all for complete deregulation, except when the consequences of said dereg lead us to catastrophe. Enron and the like... Mortgage fallout... Certainly, individuals bear a great deal of blame, but if I didn't make a dumb mortgage decision, why am I now going to have to pay for it? First, Enron was a fraud. Libertarians I know don't believe in revoking fraud as a crime. If you want to link up their role to the California energy crisis, don't forget to mention the price cap that the government instituted. Ya know what happens when government, in its infinite wisdom, sets a price cap too low? Shortages!!! Second, I will contend that government subsidization of the housing market played a substantial role in the current situation. When you subsidize something, you promote overconsumption. The United States is a very unique country on this planet, and I's say we are overconsuming housing. There are two massive subsidies that encourage people to overconsume housing: tax policy and below market interest rates for mortgages caused by the government's backing of Fannie and Freddie. Toss in our incredibly loose monetary policy that further cheapened the credit necessary to buy a house, and you've got a nice mix for a bubble. It's very easy to draw an ideological line with respect to the generalities of the proposed plan. The right will emphatically say "Free market trumps, let 'em go down." The left will emphatically say "Corporate welfare, kill the banks and bankers." They agree on something, no bailout. But is that the right position? I don't know that it is. We are seeing an absolute bottoming out of the credit market right now. The paper the banks hold is completely illiquid and the few trades there have been recently have been at fire sale prices. Mark to market rules then require banks to write all the paper down to pennies on the dollar or zero. There is intrinsic value in a lot of the mortgage paper out there, folks. Sure, there is some toxic Alt-A teaser second mortgage no income no asset verification or other documentation paper, but there is also a lot of good paper, stuff that's sitting out there with a decent equity cushion with responsible Americans as counterparties on it. I have no idea where the government is going to end up buying the paper, but it could make an absolute fucking killing in this market. A wise investor once said "Be greedy when others are fearful and fearful when others are greedy." I don't know if we'll ever in our lifetimes see a week gripped by as much fear as the first 3 and a half days of last week. Rumors said decent mortgage paper was trading for like 7 cents on the dollar. This could be a prime money making opportunity for the government. Let us hope they don't fuck it all up by buying the shittiest tranches out there. What if the government gets a trillion and a half dollars of paper for its $700B investment and then holds to maturity and winds up with well over a trillion bones off the deal? If that's cash going to the government trough that ain't coming out of my pocket, I'm gonna be one happy motherfucker. With respect to helping out the banks, there is a tremendous amount of upside. First, the credit market likely won't get out of this funk until banks shore up their balance sheets. A well functioning credit market is the background of our economy. When AIG can't open a credit facility, you know something's seriously fucking wrong out there. Nearly every company of appreciable size in the country needs overnight, weekly or monthly debt to smooth out its cash position relative to due dates for expenses, without a well functioning credit market, nearly every facet of the economy suffers. The government derives its revenue from taxes. Taxes come from economic activity. With Dubya off starting wars in foreign countries, we're spending money like an Arab teenager, so the government better have one helluva plan to keep its revenue stream robust. You start losing money center banks, you will exacerbate the crisis in confidence we are seeing, and the credit market would further dry up, sending economic activity and tax revenues into the shitter. The gov sees tax collections drop, decides on a hike, and economic activity slips further. I could rant about this mess for hours, this has been a sad week for American capitalism, with the bust of the boom and bust cycle coming full circle, we've seen some of our most venerable wealth generating institutions flushed down the toilet. It's weeks like this where I'm glad I'm not a politician. Whether you're to the right or left of center, your base is gonna be pissed off if you vote yes for the Treasury MBS fund, but there are legitimate concerns about the solvency of some of the money center banks, the independent investment banking industry has nearly died and the biggest insurance company in the country couldn't borrow money just a few short days ago. The revenue that you need to generate for your pet projects is in serious doubt, as tax collections will almost certainly drop as the banks work through their losses. Do you want to go home and be a goon for being pro bailout, or do you want to go home and face the people who lost their jobs because their businesses couldn't borrow money due to the frozen credit market? I don't like the precedent this would set if it happened, but there is a lot more on the line here than ideology and a mindless repitition of your chosen party line.
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Post by Norm "racerhawk" Parker on Sept 20, 2008 21:43:04 GMT -6
Ralph, that was one helluva post.
I had another thought about capitalism, and the over-emphasis on real estate in general.
If there wasn't an artificial, perhaps excessive, tax incentive to own property(ies), then perhaps the real estate market would have had some semblance of balance in the first place? I dunno.
This could be one example of how government does have an influence in the market, and that influence can have both very positive and negative downstream effects.
And finally, O'Kweefe sucks. Sorry, wrong thread. It just seemed relevant.
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Post by socal on Sept 20, 2008 22:20:48 GMT -6
Second, I will contend that government subsidization of the housing market played a substantial role in the current situation. When you subsidize something, you promote overconsumption. The United States is a very unique country on this planet, and I's say we are overconsuming housing. There are two massive subsidies that encourage people to overconsume housing: tax policy and below market interest rates for mortgages caused by the government's backing of Fannie and Freddie. Toss in our incredibly loose monetary policy that further cheapened the credit necessary to buy a house, and you've got a nice mix for a bubble. I hope you didn't just say taxes were too low... I also wanted to bring up something I read recently - that phrased something very succinctly: With this statement- and the real world on my side... how does your sentence of "below market interest rates for mortgages caused by the government's backing of Fannie and Freddie." make any sense? (or were you just on a roll???)
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Post by socal on Sept 20, 2008 22:57:07 GMT -6
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Post by NOTTHOR on Sept 21, 2008 7:36:22 GMT -6
Second, I will contend that government subsidization of the housing market played a substantial role in the current situation. When you subsidize something, you promote overconsumption. The United States is a very unique country on this planet, and I's say we are overconsuming housing. There are two massive subsidies that encourage people to overconsume housing: tax policy and below market interest rates for mortgages caused by the government's backing of Fannie and Freddie. Toss in our incredibly loose monetary policy that further cheapened the credit necessary to buy a house, and you've got a nice mix for a bubble. I hope you didn't just say taxes were too low... I also wanted to bring up something I read recently - that phrased something very succinctly: With this statement- and the real world on my side... how does your sentence of "below market interest rates for mortgages caused by the government's backing of Fannie and Freddie." make any sense? (or were you just on a roll???) Point 1 on taxes, interest on your mortgage is tax deductible. When you talk to a realtor and they are trying to sell you house, they fucking rave on and on about how much you'll save on taxes. Taxes aren't too low, but the deductibilty of interest incentivizes consumption of mortgages. With respect to the term "subprime" and my belief that government interference in the market helped lead to below market interest rates, I think it's a reasonable conclusion. Market participants have for many years considered residential mortgages to be AAA. 3 or 4 years ago, if you were out in the market buying RMBS and someone told you "Hey, they're AAA, backed by MBIA" you'd have no reason to really doubt it. Mortgage paper started out as virtually all AAA, tacitly government baked, then ratcheted down as things other than Fannie Mae REMICs made it out to the market place, though the true credit quality sank, the market didn't really pick up on it. There are informational imbalances in market based transactions, sometimes government interference in the market can correct those imbalances and sometimes it can feed those imbalances. Don't you agree, or are you working under the assumption that government only fixes problems, it doesn't cause or contribute to them? It's also important to note that we're not just dealing with subprime here. Fannie and Freddie are both gone. As you noted above, they aren't subprime. One of Bear's biggest operations and biggest positions was a product known as the "Bear Stearns Fannie Mae REMIC" a product that is necessary to get the securities to the market. So not only subprime is in trouble, the entire market, even for non-deadbeats, is in trouble.
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Post by socal on Sept 21, 2008 13:23:05 GMT -6
Point 1 on taxes, interest on your mortgage is tax deductible. When you talk to a realtor and they are trying to sell you house, they fucking rave on and on about how much you'll save on taxes. Taxes aren't too low, but the deductibilty of interest incentivizes consumption of mortgages. So... you did say taxes were too low. With respect to the term "subprime" and my belief that government interference in the market helped lead to below market interest rates, I think it's a reasonable conclusion. Market participants have for many years considered residential mortgages to be AAA. 3 or 4 years ago, if you were out in the market buying RMBS and someone told you "Hey, they're AAA, backed by MBIA" you'd have no reason to really doubt it. Mortgage paper started out as virtually all AAA, tacitly government baked, then ratcheted down as things other than Fannie Mae REMICs made it out to the market place, though the true credit quality sank, the market didn't really pick up on it. There are informational imbalances in market based transactions, sometimes government interference in the market can correct those imbalances and sometimes it can feed those imbalances. Don't you agree, or are you working under the assumption that government only fixes problems, it doesn't cause or contribute to them? It's also important to note that we're not just dealing with subprime here. Fannie and Freddie are both gone. As you noted above, they aren't subprime. One of Bear's biggest operations and biggest positions was a product known as the "Bear Stearns Fannie Mae REMIC" a product that is necessary to get the securities to the market. So not only subprime is in trouble, the entire market, even for non-deadbeats, is in trouble. Sweet. Let me know if I should stop paying my mortgage.
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Post by NOTTHOR on Sept 21, 2008 14:43:59 GMT -6
Point 1 on taxes, interest on your mortgage is tax deductible. When you talk to a realtor and they are trying to sell you house, they fucking rave on and on about how much you'll save on taxes. Taxes aren't too low, but the deductibilty of interest incentivizes consumption of mortgages. So... you did say taxes were too low. With respect to the term "subprime" and my belief that government interference in the market helped lead to below market interest rates, I think it's a reasonable conclusion. Market participants have for many years considered residential mortgages to be AAA. 3 or 4 years ago, if you were out in the market buying RMBS and someone told you "Hey, they're AAA, backed by MBIA" you'd have no reason to really doubt it. Mortgage paper started out as virtually all AAA, tacitly government baked, then ratcheted down as things other than Fannie Mae REMICs made it out to the market place, though the true credit quality sank, the market didn't really pick up on it. There are informational imbalances in market based transactions, sometimes government interference in the market can correct those imbalances and sometimes it can feed those imbalances. Don't you agree, or are you working under the assumption that government only fixes problems, it doesn't cause or contribute to them? It's also important to note that we're not just dealing with subprime here. Fannie and Freddie are both gone. As you noted above, they aren't subprime. One of Bear's biggest operations and biggest positions was a product known as the "Bear Stearns Fannie Mae REMIC" a product that is necessary to get the securities to the market. So not only subprime is in trouble, the entire market, even for non-deadbeats, is in trouble. Sweet. Let me know if I should stop paying my mortgage. Sometimes I gotta wonder if you can fog a mirror. If taxes were too low, people wouldn't look for ways to lower them through mortgage interest deductions. I'd wait until Pelosi adds the old "To each according to his need, from each according to his ability" rider to the bill, that will probably have something in there that will let people stay in their houses that they couldn't afford in the first place without ever making another payment.
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Post by Norm "racerhawk" Parker on Sept 21, 2008 20:26:21 GMT -6
"the deductibilty of interest incentivizes consumption of mortgages" -BTR
Good point. Is that just a plain fact, or do you consider this inherently good or bad?
I wonder if it is inherently a negative thing. Perhaps there wouldn't be such a rush to buy a house, or houses, if there wasn't such a strong governmental incentive to purchase real estate.
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Post by NOTTHOR on Sept 21, 2008 20:47:11 GMT -6
"the deductibilty of interest incentivizes consumption of mortgages" -BTR Good point. Is that just a plain fact, or do you consider this inherently good or bad? I wonder if it is inherently a negative thing. Perhaps there wouldn't be such a rush to buy a house, or houses, if there wasn't such a strong governmental incentive to purchase real estate. It is what it is. That particular deduction has some good points and some bad points. A good point is that it incentivizes home ownership. A bad point is that by subsidizing the home purchase, it creates overconsumption. A good point is that people can use their home to build up equity for retirement. A bad point is that it further moves people from more dense urban centers with apartment complexes to less dense suburban centers where they have a home with a yard and have to drive 40 miles to and from work. My ideal tax code would be one with very limited deductions or credits. Deductions and credits are the government's way of attempting to change behavior, but those subsidies can lead to adverse consequences.
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Post by cmonhox on Sept 21, 2008 21:56:00 GMT -6
Not to sidetrack this, but there will NEVER be a simplified tax code. Imagine all of the lobbying plus possibly out of work accountants, firms (public accounting firms, tax prep firms-HR Blocks, Intuit), IRS employees, etc.
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Post by Ginger on Jun 3, 2023 8:16:00 GMT -6
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Post by livingintheusa on Jun 3, 2023 10:12:56 GMT -6
On the contrary, Red It’ s the best take you’ve posted in a long time.
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Post by Ginger on Apr 18, 2024 8:28:25 GMT -6
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Post by livingintheusa on Apr 18, 2024 15:59:09 GMT -6
Not to sidetrack this, but there will NEVER be a simplified tax code. Imagine all of the lobbying plus possibly out of work accountants, firms (public accounting firms, tax prep firms-HR Blocks, Intuit), IRS employees, etc. Why hasn’t this guy been banned ?
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