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Warren TARP Report Out

By Big Tent Democrat, Section Economy
Posted on Wed Apr 08, 2009 at 04:18:48 PM EST
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The Web page here. The Executive summary here. The Full report here (PDF).

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    Warren TARP Report Out | 70 comments (70 topical)

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    Watched the video and read the (5.00 / 5) (#1)
    by inclusiveheart on Wed Apr 08, 2009 at 05:05:41 PM EST
    Executive Summary.

    This is as close to a smackdown you'll ever find in a government report.

    It dawned on me yesterday that the debate about what to do really is at its core centered around how deep people perceive this crisis to be - and that a lot of people simply don't understand how deep it really may be.

    It is strange, if you take that point of debate as a starting point, that Geithner doesn't answer his critics by telling them why he thinks this crisis is not as deep as they believe it might be and showing us his models that point to a quick recovery as opposed to a recovery that could take 5-10-15 years.

    If Geithner came out tomorrow and said, "The problems in these banks are not as bad as advertised and they'll be able to recover quickly with 'gap funding'," and provided some supporting evidence to that effect, I think he'd be able to deflect his critics' objections.

    His silence on this front and his obvious desire not to provide specifics leads me to believe that he's avoiding having to admit how bad the situation is which ultimately makes this report all the more damning - since the solution he has latched onto is one that is better suited for a shallow short-term crisis than one that threatens to be deep and long.

    I count 0 for 4 so far (5.00 / 4) (#7)
    by Cream City on Wed Apr 08, 2009 at 06:18:59 PM EST
    for Geithner and Obama on the report's list of the requisites for a good plan.  

    A review of these historical precedents reveals that each successful resolution of a financial crisis involved four critical elements:
    • Transparency. Swift action to ensure the integrity of bank accounting, particularly with respect to the ability of regulators and investors to ascertain the value of bank assets and hence assess bank solvency
    • Assertiveness. Willingness to take aggressive action to address failing financial institutions by (1) taking early aggressive action to improve capital ratios of banks that can be rescued, and (2) shutting down those banks that are irreparably insolvent.
    • Accountability. Willingness to hold management accountable by replacing - and, in cases of criminal conduct, prosecuting - failed managers.
    • Clarity. Transparency in the government response with forthright measurement and reporting of all forms of assistance being provided and clearly explained criteria for the use of public sector funds.

    May the White House improve on all counts, and soon.

    Parent
    That's why I think this report (5.00 / 1) (#13)
    by inclusiveheart on Wed Apr 08, 2009 at 06:56:09 PM EST
    was so damning.

    A lot of people unfamiliar with what happens when there is a banking crisis think that Geithner and Paulsen before him were acting in a manner that was totally consistent with history, but the reality is that the TARP and PPIP plans are quite radical in terms of how the US has approached finacial failure in the past.

    That's the greatest irony of the beating that Black took for suggesting that we do what we always do rather than doing this new fangled stuff that is essentially unproven - or worse was proven to be a bad strategy in Japan already.  It is very weird that Geithner would pick the one failed model out of all of his options - especially given the high stakes of this contraction.

    Parent

    Geither (5.00 / 1) (#49)
    by Ga6thDem on Wed Apr 08, 2009 at 09:41:00 PM EST
    picked this one because it rewards his cronies. That's the only conclusion I can come to. He really could care less about Obama or the country or anybody else I've decided. It has to be that or he's a complete idiot. Take your choice I guess.

    Parent
    Who do you think are Geithner's (3.50 / 2) (#60)
    by Green26 on Wed Apr 08, 2009 at 11:53:51 PM EST
    "cronies"?

    And why are they cronies?

    Parent

    His cronies (5.00 / 1) (#64)
    by Ga6thDem on Thu Apr 09, 2009 at 05:54:36 AM EST
    appear to be the banksters and wall street since he wants to give them a blank check.

    Parent
    That doesn't mean they (none / 0) (#67)
    by Green26 on Thu Apr 09, 2009 at 09:08:27 AM EST
    are cronies. Cronies implies some additional relationship.

    So, in your view, any US regulator or politician who tries to help save the US financial system, without shutting down banks, is a cronie of the banks and Wall St.?

    Parent

    Knowledge is Power (none / 0) (#69)
    by Brookhaven on Thu Apr 09, 2009 at 10:52:37 AM EST
    Someone above mentioned William Black.  Please do yourself a favor and watch this interview that Bill Moyers did with him last Friday.

    Interview with William Black

    Cronie is the polite word for what Geitner's relationship to the Bankers and Wall Street was and is.  But, it is apt nonetheless.  

    Parent

    Faluty Link (none / 0) (#70)
    by Brookhaven on Thu Apr 09, 2009 at 10:55:46 AM EST
    Here is the correct link.

    Interview with William Black


    Parent

    Well (none / 0) (#48)
    by Ga6thDem on Wed Apr 08, 2009 at 09:39:35 PM EST
    don't you know? Geither is really a mole for Dick Cheney? <snark>

    Parent
    There are the stress tests (2.50 / 2) (#19)
    by Catch 22 on Wed Apr 08, 2009 at 07:18:19 PM EST
    So it is not exactly 0 for 4.

    And Warren herself snuck in "sure things are different" - and then move quickly ahead. Well when things are different then past historical solutions don't often apply.

    She also said the panel is not unanimous in it's opinion.

    In the end what did she promise? More reports is all. Sounds like one more big special committee charade to me. Big surprise.

    Parent

    As for unanimity (5.00 / 3) (#29)
    by lambert on Wed Apr 08, 2009 at 07:53:58 PM EST
    The two who dissent totally from the report are -- and I know this will surprise you -- Republicans, and the one who dissented in part is a former Citibank VP. So.

    Parent
    Typical committee (3.33 / 3) (#36)
    by Catch 22 on Wed Apr 08, 2009 at 08:23:38 PM EST
    The banking guy doesn't surprise me. In fact it would not be much of a committee without someone without understanding of the industry. And then of course you have Warren a law professor I believe who probably has little if any understanding of the industry. Not that it is bad not to have any understand as an outside view is needed. But it does not make her an expert either.

    Parent
    Warren knows quite a bit about finance (5.00 / 3) (#40)
    by caseyOR on Wed Apr 08, 2009 at 08:58:13 PM EST
    Elizabeth Warren is a professor at Harvard Law. She is quite knowledgeable about the financial world. She is an excellent choice to chair the oversight committee. And, frankly, I find her much more credible than Geithner.

    We would be well served if Congress and Treasury listened to Warren. She is making more sense than just about anyone right now.

    Parent

    A quick google (3.00 / 3) (#41)
    by Catch 22 on Wed Apr 08, 2009 at 09:06:43 PM EST
    and a look at her book shows she has mostly written about problems on the consumer side of credit. Noteworthy but hardly credentials that would truly understand the complexities of what we are up against.

    I'm not say she can't learn or that she can because I don't know what her capacity is. But her credentials which are about 6 words on the link you provide are nothing. Suzy Orman would be bettered qualified by your criteria.

    Parent

    No, not complexity. Obfuscation. (5.00 / 1) (#44)
    by lambert on Wed Apr 08, 2009 at 09:10:21 PM EST
    Je repete. A shell game or a long con seems complex. But neither is, really.

    Parent
    I think it's about time for someone (5.00 / 5) (#54)
    by Anne on Wed Apr 08, 2009 at 09:59:01 PM EST
    who has the ability to see things from the consumer side of things, considering that millions of consumers are being affected by this whole mess, and I think it is a mistake to think that someone with that ability does not also have an understanding of how the whole system works.

    It seems to me that there are far too many people involved in developing policy and advocating strategy who have a singular focus, or whose experience is limited to one segment of the system; you could call them the financial equivalent of the medical specialist - they're like surgeons, who think the solution is always to cut, or the psychiatrist who thinks it's all mental, or the the endocrinologist who thinks it's all about hormones.

    It's possible - even likely - that a more holistic approach, or at a minimum, a holistic voice, is what's needed to integrate and balance what are often competing interests.

    I hope the Obama administration is listening.

    Parent

    I see nothing in her bio (2.00 / 2) (#59)
    by Green26 on Wed Apr 08, 2009 at 11:49:42 PM EST
    that indicates she is knowledgeable about the "financial world". She's a law professor. She teaches bankruptcy, contracts and commerical law. Her book topics appear to focus on relatively limited things that have little or nothing to do with the financial crisis or the banking system. I see nothing to indicate that she has any business experience or experience outside of academia. I assume she's very smart.

    She was appointed to the panel by Sen. Reid.

    She may or may not be good at what she's doing on the panel.

    Parent

    it's what the smartness is used for that appeals (none / 0) (#66)
    by pukemoana on Thu Apr 09, 2009 at 08:18:53 AM EST
    (speaking for me only)

    Her book topics appear to focus on relatively limited things that have little or nothing to do with the financial crisis or the banking system

    only limited if you think the effect of the financial crisis on the middle class is of little importance.  others might disagree.

    here's the list of publications from her online cv--as you say, it's not business experience, but it's also clearly tied to the effects of business on your average american.  over and above the applicability of her research area (bankruptcy/finance and the middle class) i'd guess that part of her appeal is her ability to convey complex information to a mainstream audience--eg writing books like all your worth, appearing on morning joe or doing those COP videos.

    Parent

    Well, since the experts got us where we are... (5.00 / 6) (#43)
    by lambert on Wed Apr 08, 2009 at 09:09:28 PM EST
    ... I'm happy to have people like Warren who are smart, knowledgeable, and highly unlikely to be indicted later for fraud.

    Parent
    Yeah (5.00 / 1) (#57)
    by cal1942 on Wed Apr 08, 2009 at 10:56:25 PM EST
    having an ex Citicorp guy there is sooo "helpful."

    Why how would we ever get by without the "help" of them slick banker fellers.

    Parent

    Sure (5.00 / 2) (#56)
    by cal1942 on Wed Apr 08, 2009 at 10:52:18 PM EST
    all that transparency stuff is just something that should lie in the dustbin of history.

    And that stuff about closing down the irreparably insolvent and that accountability stuff is all so high buttoned shoes.

    And that clarity business, outdated notion, why should we actually know where the money's going, afterall we're just a bunch of ignorant peasants.

    Parent

    I detected more of a disagreement (none / 0) (#23)
    by inclusiveheart on Wed Apr 08, 2009 at 07:30:06 PM EST
    with the Administration than within the panel.

    Interestingly, Pelosi was just on Olbermann and when questioned on TARP cited that the report's question about whether Treasury's assessment of the depth of this problem is on target - but quickly added that "we need to do something".  

    Parent

    how bad is it? (5.00 / 3) (#8)
    by Jlvngstn on Wed Apr 08, 2009 at 06:29:58 PM EST
    the 8 trillion dollar question.  How much does unemployment and the inability to pay ones bills affect the banks in the next 10 months?  How much does lack of jobs and spending in an economy that is 70% consumption affect businesses that will be shuddering and defaulting on their lines of credit.

    How bad it is depends on how committed the gov't is to bridging the gap vis a vis job creation which will stimulate consumption.

    It will continue to be bad even worse than 1982 which is what they think we are in now and perhaps we are, but the unemployment has spiked down further than 82 and is projected to continue to spiral through the rest of the year.

    Sending good money after bad by addressing 1/4 of the problem.  

    This totally reminds me of the global warming debate and how much we are committed to reducing greenhouse gases.  Asking people to drive less is not answer.  Asking the american public to spend more when they are broke is even dumber.

    Parent

    Actually, how bad it really is (5.00 / 1) (#14)
    by inclusiveheart on Wed Apr 08, 2009 at 07:01:24 PM EST
    should be defined not by what we do to respond, but by how bad it really is because of the mismanagement of funds that got us here in the first place.

    That's another problem with the camps.  Some measure this in terms of the response and others are looking at the mess that brought us to this point.  I think those who choose to ignore the mess and focus on the response are bound to miss some important data relating to what the response really should be.

    I've seen estimates that say that the derivatives market may represent $65 Trillion to nearly $100 Trillion dollars.  If that's what we are talking about then you've got to be a firm believer that these banks are going to win the lottery everyday from now until the next century.

    Parent

    imagine if france, china or russia (5.00 / 2) (#21)
    by Jlvngstn on Wed Apr 08, 2009 at 07:19:49 PM EST
    were the founders of the financial engineering that got us into this mess.  What would our politicians and populace be advocating?  Takeover by force of their banking systems?

    Parent
    The GOP would name French Fries (none / 0) (#34)
    by inclusiveheart on Wed Apr 08, 2009 at 08:00:28 PM EST
    "Expensive Fries" or something silly.

    Parent
    i agree (none / 0) (#18)
    by Jlvngstn on Wed Apr 08, 2009 at 07:15:56 PM EST
    i posted something similar in my next post, thanks

    Parent
    It is not Geithner 's responsibility (5.00 / 2) (#10)
    by Catch 22 on Wed Apr 08, 2009 at 06:42:33 PM EST
    to say how deep the problem is. It is Obama's responsibility. It is his policy. He made the campaign promises. He has the bully pulpit. He is who people want to hear from. It is his hiney that is on the line come 2012.

    He speaks out when he has to deflect political criticism on certain economic issues. There is nothing stopping him from just stepping forward and saying what he thinks - - except himself.

    I wish people would stop blaming and saying Geithner, Geithner, Geithner. This is not about Geithner. Geithner serves at Obama's pleasure. Geithner is doing exactly what Obama wants him to do.

    If people are in the dark about how bad or how not bad things are then it is only because that is the way Obama wants it.

    And my impression as to why he wants it that way is because by keeping everyone in the dark he does not have to accept responsibility. If things don't go as planned a set of bus tires have Geithner's name all over them.

    Blame Obama. Not Geithner.

    Parent

    First of all - the references to Geithner (5.00 / 1) (#11)
    by inclusiveheart on Wed Apr 08, 2009 at 06:50:34 PM EST
    are not about blaming anyone.  As Secretary of the Treasury, Timmothy Geithner has a duty to adequately explain the policy that he has chosen to pursue and that he has counseled the President to support.  He is the presumed expert here.  I am not sure why you are so hot on people focusing on Obama, but in the Wall Street world in which every little word that Geithner utters is taken seriously it is not Obama who they listen to - it is Geithner because they perceive him to be the "expert" and not for nothin' he's overseeing the day-to-day rollout of the plans.

    Parent
    Yeah (5.00 / 4) (#12)
    by Ga6thDem on Wed Apr 08, 2009 at 06:55:01 PM EST
    but Obama has placed his faith in Geither and will be held repsonsible by the voters as much as Geither is. Obama is the one that wanted Geither in that position so it goes down to Obama's judgement too.

    Parent
    Of course Obama is responsible. (5.00 / 1) (#15)
    by inclusiveheart on Wed Apr 08, 2009 at 07:03:52 PM EST
    That to me goes without saying.  But it is for all intents and purposes Geithner's plan.

    Parent
    Your main issue was (none / 0) (#16)
    by Catch 22 on Wed Apr 08, 2009 at 07:09:50 PM EST
    the nation needs to be spoken to, not Wall Street. So please don't change your own criteria. And what the nation as a whole knows about Geithner goes about as far as his name.

    Obama is President. He is who people elected to lead them out of this. A leader leads. A leader communicates. Obama is a good communicator. There is not one legitimate reason for him not to do his job. Nothing is keeping Obama from calling the networks and saying he needs 30 minutes at 6 pm - - except himself.

    It's laughable that during these times one is crying for a Secretary to speak when he would not even make the 6 O'clock news little on stop network programming for a half hour, which this crisis at least deserves. Even Bush spoke to the nation - not his Secretary of the Treasury.

    Sorry but if you are not calling on Obama to address the magnitude of this then you are not serious about anyone addressing it that will actually be heard.

    Can you imagine FDR not stepping forward and addressing the nation? JFK? How about all those pre-election comparisons between FDR, JFK and Obama? The time has come.

    You may want a no-count second fiddle. I want the man himself to step up. The buck stops with him.

    Parent

    Personally, (5.00 / 3) (#20)
    by inclusiveheart on Wed Apr 08, 2009 at 07:19:29 PM EST
    I wouldn't take Obama seriously (nor would many of my finance friens) if he were to attempt to provide the level of detail on the health of the financial system that I would expect in the scenario I layed out.

    You seem to think I am trying to protect Obama or something very ridiculous like that given the fact that I am not an apologist or a cheerleader - I'm told I am a "hater" which is also ridiculous - I'm just a citizen who wants to see my government respond effectively to this situation.

    Parent

    If you (2.00 / 1) (#27)
    by Catch 22 on Wed Apr 08, 2009 at 07:45:54 PM EST
    wouldn't take Obama seriously then you couldn't take Geithner seriously either. So there you have it.

    Just to add some context here I read a few articles that describe Geithner as the quiet type. Abel to communicate well enough to do his past and present jobs that entailed talking 'shop talk' with others in the circle, by not the great communicator.

    He seems to be a technocrat. The kind that would last about 60 seconds tops on TV sets. You are calling on the wrong guy.

    Parent

    Wince. (5.00 / 2) (#30)
    by inclusiveheart on Wed Apr 08, 2009 at 07:56:27 PM EST
    What are you talking about?

    Are there people who really thought that Obama could generate an economic model?  A chart that shows recovery trends?  

    Obama has presented Geithner as the boy genius on the economic front - I'd like to see some of his work - some of his data - supporting his ideas.  I'd like to see some of the information that guides his advice and cousel to Obama.

    But you're free to ask Obama for this information - although I suspect he'll refer you to his Secretary of the Treasury and/or the Fed to provide the data because he doesn't know s...

    Parent

    Oh please! (2.00 / 1) (#52)
    by Catch 22 on Wed Apr 08, 2009 at 09:54:56 PM EST
    Obama is the CEO. Of course he has advisers and Secretaries and the like. My Gawd!

    "Generate an economic model"!! That is such a silly argument. I bet FDR couldn't generate one either. Sheech.

    Geithner is not your 6 o'clock 6 network spokesman. If you think he is then you don't know much about him.

    But you're free to ask Obama for this information - although I suspect he'll refer you to his Secretary of the Treasury and/or the Fed to provide the data because he doesn't know s...

    Again, silly. Like Obama can't get his people to gather info like FDR or JFK did and then have someone write a speech and some notes for Q&A? LOL. LOL - That's all I can say - LOL!

    Just let it go already.

    Parent

    There's an article on Geithner in (none / 0) (#28)
    by Green26 on Wed Apr 08, 2009 at 07:51:58 PM EST
    this week's Newsweek, the one with Krugman on the cover.

    Parent
    It would be (5.00 / 2) (#58)
    by cal1942 on Wed Apr 08, 2009 at 11:01:24 PM EST
    more accurate to blame both.  Obama for failing to pick the right people (it doesn't stop at Geithner) and Geithner for ignoring his charge as a servant of the public.

    Parent
    I don't see this as a smack down (3.75 / 4) (#24)
    by Green26 on Wed Apr 08, 2009 at 07:31:35 PM EST
    at all.

    "If its assumptions are correct, Treasury's current approach may prove a reasonable response to the crisis."

    Treasury's response "could be enough."

    "It is possible" that Treasury hasn't recognized the extent of the problem.

    "..., evidence of success or failure is mixed". I didn't look at the full report, so I don't know if this is expanded on there.

    "...there is disagreement amonth Panel members...." The vote was 3-2.

    "The debate turns on" whether prices reflect reflect fundamental value or whether prices "are artifically depressed by a liquidity discount due to frozen markets".

    "Even in areas of the country where home prices have declined precipitously, the collateral behind mortgage-related assets still retains substantial value."

    "In a liquid market, even under-collateralized assets should not be trading at pennies on the dollar."

    Parent

    Thank you (5.00 / 1) (#53)
    by Catch 22 on Wed Apr 08, 2009 at 09:57:02 PM EST


    Parent
    Maybe not. (none / 0) (#2)
    by oldpro on Wed Apr 08, 2009 at 05:10:22 PM EST
    Fact is, no one really knows 'how bad it is.'  He's just willing to take a big risk (what else is new?), bet on the come and hold his breath hoping for the best and that they can get away with it.  The alternative simply isn't in the playbook.

    Parent
    Geithner has a lot more information (5.00 / 3) (#5)
    by inclusiveheart on Wed Apr 08, 2009 at 05:19:03 PM EST
    than pretty much anyone does about what is happening inside those banks.  In his capacity at the Fed he was dealing with their woes as early as August 2007.  He put them through stress tests last Spring.  He was monitoring Citi and coordinated the first bailout monies.  He actually should have a ton more information than he has shared so far - or he's really, really out of it - in which case we are in even more trouble than I thought.

    Parent
    not to be confrontational (5.00 / 5) (#17)
    by Jlvngstn on Wed Apr 08, 2009 at 07:13:40 PM EST
    but how is it the best minds in finance don't know how bad it is?

    Each month darned near every american runs their budget and knows whether or not they are going to a movie next month and how to cut corners to get there.  Ok, 10% just buy the theaters, but the rest of us know our financial situation pretty well.

    Each business knows their financial situation as well.  We forecast as to how much we are going to make on a regular basis.  the economy is in tatters and businesses are spending less so as we forecast the next few quarters, we have little idea on what to expect from an order perspective unless of course you have a base of recurring revenue which is subject to people paying said bills.

    So the banks don't know how much will default, ok.  We know that the cre market is 8 trillion and the residential 7 trillion.  95% of res loans are current.  Let's say for sake of argument 10% default, the bailout for the banks is 700 bn.  Quite convenient.  Same for cre, 800 billion bailout.

    So the bailout should be 1.5 trillion along the lines of the argument that says "it was bad americans taking loans they could not afford to pay".  Ok, I can live with that.  

    If I have 10% of my clients not pay, I write it off and cut back, it's a way of life as a business owner.

    It is not about home loans or subprime, it is so ridiculous and intellectually fraudulent for the media and gov't to report it that way.  I get no bailout or tax reduction from bad debt and last year i had over 100k in bad debt from companies that simply could not pay.  I can sue a dead horse or write it off and move on.  Or i can fold my business.  Or I can go bankrupt.  Or I can sell my way out of it etc.

    What is appalling here is that we are abandoning americans who want jobs and relief to protect shareholders and our entire financial system who out manured themselves with leverage.  I was stupidly behind the bailout assuming the banks would take the money, write down the losses caused by bad borrowers and then assume responsibility for their bad loans to each other.

    Instead of rebuilding a crumbling infrastructure where schools, bridges, hospitals and mass transit are falling apart, we are rebuilding a financial system that does not produce anything tangible.  We are carrying their bad debt and forcing the people who owe into highly unfavorable bankruptcies.

    OldPro - they know how bad it is, they are simply not willing to tell us which is criminal considering we are paying via taxes and through the personal destruction of bankruptcies and lost homes and lost businesses.  

    They not only know they are hiding it from us.  Or I am one cynical old butthead.

    Parent

    Esay answer (3.50 / 2) (#22)
    by Catch 22 on Wed Apr 08, 2009 at 07:26:24 PM EST
    how is it the best minds in finance don't know how bad it is?

    it's the value of the assets that keeps everyone from knowing how bad it is. For example it the assets were worth 75% of par then we would know how bad it is. If the number were 50% we would know.

    The problem is because of the complexity of the bundled assets they can't be unwound quickly enough. The shortest path to a solution is to try to put a value on them because it is not like they are worthless. The majority of the mortgages in them are good mortgages. So what they are trying to do with the latest pan is to establish a price on them and when they do we will then know just how bad things are.

    Parent

    it isn't the mortgages (5.00 / 5) (#25)
    by Jlvngstn on Wed Apr 08, 2009 at 07:37:38 PM EST
    ten percent again for both cre and res would be 1.5 trillion.

    Is the cds, bloc, hloc, consumer credit.  Cds is 56 trillion.  No offense, but that is probably the most uninformed and horribly worded explanation on securitization i have heard in all the months of this debacle.

    Parent

    You don't think (none / 0) (#37)
    by Catch 22 on Wed Apr 08, 2009 at 08:28:53 PM EST
    mortgages bundled in the CDO's are an issue. Is that what you are saying? And you don't think that the inability to value the assets are a big problem?

    Parent
    the problem is not the mortgages (5.00 / 2) (#38)
    by Jlvngstn on Wed Apr 08, 2009 at 08:38:06 PM EST
    it is the cds between the banks which valued at 56 trillion in 2006 and now valued at ???

    Again, address the issue.  The issue is not foreclosure, do you even know what % of loans are in good standing?  Do you know the value of the res mkt or cre mkt and the rate of failure?  

    Let's have an honest discussion about the validity of the cds market as a real market and how 56 trillion evolved.  AGain, with a 10
    % bad debt ratio on the loans we are looking at 700 bn, 95% of loans are current which means that the problem stands at 5% which is 350bn worst case scenario. Avg us home loan is 260k, which would put the number considerably lower.  

    we are financing creative financial engineering, period.

    Parent

    CDS' would not even be a problem (3.50 / 2) (#39)
    by Catch 22 on Wed Apr 08, 2009 at 08:54:12 PM EST
    if there was not the uncertainty as to what the CDO's values that the CDS' insure were. It is the CDO's value that have basically dropped in price below the CDS trigger point that is the core issue here. Sure you can rail on the bank guys but that fixes nothing. You got to look at the money end of it not the people involved as far as fixing the money problem.

    My mentioning of good mortgages had nothing to do with foreclosures, it had to do with the CDO's being worth more than they currently are. Of course now, just the vehicle of CDO's has put a scare in people and even if they knew how many mortgages were good the CDO still has a stigma to them. It's a complex problem, much more so than you try to depict.

    Parent

    I am not David Li (none / 0) (#42)
    by Jlvngstn on Wed Apr 08, 2009 at 09:08:47 PM EST
    However I do understand and cede the issues of unbundling are complex.  That said, the banks created and sold the cdos to each other, based on known variables of risk and took great liberties with associative risk.   If you are knowledgeable about cdos than you know that the systemic selling of said risk and the rating agencies complicity in not properly valuating that risk, created a cess pool of garbage that continued to sell despite widespread acceptance or knowledge that Mr. Li's formula was wrong.

    They continued to speculate wildly with MBS as they bet that prices would continue to rise.  
    They continued to borrow low and invest high on those bets.  So they are at greater fault than the american public because they were essentially taking out lines of credit on mbs and spending on investments and wild compensation.  They essentially wildly overestimated the re market, borrowed excessively on mbs and spent it at their leisure.

    The only difference in taking out a hloc to buy a hummer and what they did is the person who bought the hummer goes through bankruptcy for their speculation, the banker gets a bailout.  

    Parent

    I'm not going (5.00 / 2) (#47)
    by Catch 22 on Wed Apr 08, 2009 at 09:37:02 PM EST
    to argue bankers with you. I don't disagree with some of what you say. But what is the point talking about it ad nauseam? Like I already said, you can rail on the bank guys but that fixes nothing financially.

    Even Warren, if you watch her video, is concerned with fixing the problem, not how it happened. As she should be.

    Parent

    variety of reasons (5.00 / 2) (#50)
    by Jlvngstn on Wed Apr 08, 2009 at 09:46:29 PM EST
    mostly justice and a level playing field.  People who are defaulting on their mortgages are not all deadbeats, there are millions of bankers who did nothing in this and they hold no fault either.  But the homeowners will suffer far greater than the bankers responsible.  If the borrower has to suffer the indignity of bankruptcy through no illegal or fraud of their own, than the bankers who created the bigger mess should suffer legal consequences for fraud and complicity.

    The amount of money poured into the market and banks on the backs of american taxpayers is an undue burden for our children, talking about it will hopefully end the free lunch.  

    Banks should face bankruptcy just like those who can no longer afford their loans.  Is that moral equivalency or renegade vengeance?  

    Parent

    and thanks for keeping it civil (5.00 / 2) (#51)
    by Jlvngstn on Wed Apr 08, 2009 at 09:47:41 PM EST
    despite my first note to you which was not

    Parent
    Shades of gray, but... . (none / 0) (#68)
    by rghojai on Thu Apr 09, 2009 at 10:45:53 AM EST
    I see value in clarity regarding what happened and how it happened if for no other reason than (pipe dream as it may be) an approach that this mess ain't happening again requires that "this" be understood and defined--how'd we get to here, who is responsible and what price do they pay?

    Too, paying little or no attention to it and not holding the appropriate people accountable only boosts the chances that it or similar will happen again. Some concern that it does feel and will feel too close to condoning it. "Bad bankers! Bad bad bad!!," with a light slap on the wrist if any and a subtle wink.


    Parent

    lastly (none / 0) (#46)
    by Jlvngstn on Wed Apr 08, 2009 at 09:34:03 PM EST
    do you believe that 5% default is a high number?  What is an acceptable default risk % and why is a 5-10% default threatening the western world as we know it?

    You are informed, but obtuse. there is a certain amount of risk written into every security, is it your belief that the defaults greatly exceeded the banks assessment of that risk or is it, in the words of George W Bush "wall street got drunk"?

    Parent

    sorry didn't mean to sound like a dich (5.00 / 2) (#26)
    by Jlvngstn on Wed Apr 08, 2009 at 07:43:01 PM EST
    media and the like are reporting this as a subprime crises and bad loan crisis.  It is a financial engineering crisis caused by what Buffett called financial wmd's.

    Let's stop pretending people who bought "more home than they could afford" or "people lying to get loans" are at the root of the problem.  It is a red herring.  How can you argue with the mcmansions and excess and humvees etc.

    Let's look at the problem of compensation across the board where people were paid substantially on the "worth" of securities that was for all intents and purposes, fraudulent.

    Parent

    Not complexity, obfuscation (5.00 / 3) (#31)
    by lambert on Wed Apr 08, 2009 at 07:56:55 PM EST
    And why? Fraud. That's what Bill Black's telling us.

    Parent
    If there was fraud (4.00 / 2) (#45)
    by Catch 22 on Wed Apr 08, 2009 at 09:19:25 PM EST
    then people should go to jail. If they go to jail that still won't fix the financial problem or the complexity of the problem.

    If an arsonist burns down a ten story building and gets caught and goes to jail you still have no building. Some one going to jail does not rebuild the building. so there are two very different issues here.

    Parent

    I can not believe you really said this (none / 0) (#61)
    by Amiss on Thu Apr 09, 2009 at 12:43:03 AM EST
    If there was fraud then people should go to jail.

    When the highest level of the Government is complicit in commiting the fraud, just like with previous administrations, no one is gonna go to jail. Instead their asses will be covered, thats the law of the land, cya.

    Parent

    Are their any specific examples of alleged (none / 0) (#55)
    by Green26 on Wed Apr 08, 2009 at 10:10:51 PM EST
    fraud by the banks or Wall St. regarding this subject? I'm just curious. I haven't noticed any.

    I have seen references to numbers of investigations, but nothing in those reports even says what's being investigated.

    Parent

    Something like this? (none / 0) (#62)
    by reslez on Thu Apr 09, 2009 at 02:54:05 AM EST
    I've not been keeping tabs of investigations, mostly because there haven't been any high profile ones. I did come across this story:

    Reuters: NJ sues Lehman execs for fraud to recoup state pension funds

    I expect to see more of this.

    Parent

    I wouldn't think that many specifics about (none / 0) (#63)
    by of1000Kings on Thu Apr 09, 2009 at 03:15:25 AM EST
    fraud would be available until the books of all the banks that receive(d) money are opened up for the right people to see...

    who knows how much Enron-ing was going on at these places...we already know it was going on at AIG (an AIG exec was already found guilty of that late last year)...

    when all the banks that receive(d) tarp funds allow their books from the past 3-5 years to be inspected then there will be a place to start the fraud discussion, or a place to totally debunk the idea that anyone was loading up on these CDS only because they could insure them (even knowing that they were probably 'junk' securities--which would be insurance fraud) or were buying more CDS based upon credit given to them on the collateral of the current CDS's they owned (and then again they were probably only able to get more credit b/c of the fraudulent insurance)...

    bottom line is that the numbers need to come out...that SHOULD be a prerequisite for any lending or bailing out from the government to these bankers and insurance companies...

    Parent

    Barney Frank on the COP report (5.00 / 1) (#3)
    by lambert on Wed Apr 08, 2009 at 05:15:48 PM EST
    Here.

    I don't think I got an answer.

    He happens to have a jersey on (none / 0) (#6)
    by Big Tent Democrat on Wed Apr 08, 2009 at 05:36:18 PM EST
    I can't blame him for being reticent.

    Now for the rest of us . . .

    Parent

    No, I'm not going postal on him. Yet. (5.00 / 1) (#32)
    by lambert on Wed Apr 08, 2009 at 07:58:07 PM EST
    But my jersey got wrapped round the axle when the bus rolled over me, so I'm concerned to get his attention by any means necessary...

    Parent
    Perhaps progressives will finally start (5.00 / 1) (#4)
    by MyLeftMind on Wed Apr 08, 2009 at 05:18:52 PM EST
    questioning Pres Obama's leadership on the economic crisis.  MoveOn has finally stopped cheerleading and is now trying to get the public involved in guiding Obama's policies.  They've got a petition asking Treasury Secretary Geithner to replace the leadership at bailed out banks--(starting with Ken Lewis, Master of Bank of America).

    This economic crisis is an opportunity to wrest back control of our government from the plutocrats, hopefully before the whole thing falls apart and we turn in to a Ptochocracy.  What will it take for progressives, especially upper middle class intellectuals, to stop hoping their retirement savings will magically reappear if Obama & Congress continue to bail out the criminals who created this mess?  That false hope is a huge barrier to holding Obama's feet to the fire.

    I'd rather have a leadership change... (5.00 / 2) (#33)
    by lambert on Wed Apr 08, 2009 at 08:00:03 PM EST
    ... as beneficial fallout from criminal prosecution for fraud. That's what Bill Black is saying, and that's what James Galbraith is saying ("Show me the loan tapes").

    Parent
    Lord, she is refreshing. (5.00 / 4) (#9)
    by Dr Molly on Wed Apr 08, 2009 at 06:38:52 PM EST
    So rare to watch someone speak who seems so competent, smart, and concerned for ethics.

    Yes, In Elizabeth Warren I Trust (none / 0) (#35)
    by john horse on Wed Apr 08, 2009 at 08:09:30 PM EST


    Parent
    obscure sarcasm is difficult to interpret (none / 0) (#65)
    by Dr Molly on Thu Apr 09, 2009 at 06:12:02 AM EST


    Parent
    Warren TARP Report Out | 70 comments (70 topical)

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