tag:blogger.com,1999:blog-8243351006478134285.post107039072642873714..comments2024-03-28T14:52:13.218-05:00Comments on Stonekettle Station: Iceberg! Right Ahead!Jim Wrighthttp://www.blogger.com/profile/11259550121437562338noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-8243351006478134285.post-44037209464399101652008-10-01T08:28:00.000-05:002008-10-01T08:28:00.000-05:00Jim, thanks for this clearly written post. The Ti...Jim, thanks for this clearly written post. The Titanic analogy resonated.<BR/><BR/>[complaint] I do understand that something needs to be done, because a repeat of the Great Depression is definitely Not Desired. But I can't help feeling very resentful about the whole situation. I won't say that I'm particularly frugal (my husband would fall on the floor in hysterics if I tried), but even I found the whole concept of 5-year ARMS and balloon payments and interest-only mortgages unpalatable. We bought a house that we could afford. When we had to do some needed renovations, we refinanced for just what we needed and (almost) stayed within budget. I didn't buy a new car or take a trip with that money. I hung up on the telemarketers who offered me great mortgage rates. Emails saying same were consigned to the same place that I put emails from Nigeria. <BR/><BR/>But it just grates on me that we all have to mortgage our future and our kids' futures to prop up the current credit market. And know that while the "fat cats" perhaps won't have as much money, they will still have more than I will see in my lifetime. [/complaint]<BR/><BR/>Not that I have any useful suggestions or any wisdom to share, mind you. I am just grumpy.<BR/><BR/>Natalieneurondochttps://www.blogger.com/profile/12155027993661209263noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-46415598357026324842008-09-30T13:22:00.000-05:002008-09-30T13:22:00.000-05:00Ilya,The brief uptick seemed to be in response to ...Ilya,<BR/><BR/>The brief uptick seemed to be in response to the economic stimulus checks--it was never going to be a long term solution.<BR/><BR/>Additionally, I don't accept that companies deserve bail-outs when these same individuals allowed homeowners to twist in the wind. If bailouts are deserved, they should have started from the bottom up, not from the top down. Back when mortgages started to tank is when action should have been taken. Instead they left homeowners to go into bankruptcy while continuing to allow the financial mismanagement at the heads of the companies that spawned these mortgages.<BR/><BR/>Yes, caveat emptor and all that, but the same should be said of the giant companies and not just consumers. They work in a risky business, and are educated individuals taking known risks. <BR/><BR/>That these risk-takers then presented their risky schemes as safe to uneducated consumers... Yes, individual consumers should take some responsibility for their actions, but that same standard should be held for the companies, and that is not happening what is happening here.<BR/><BR/>Why, if these loans and mortgages are at such terrible risk, can we not work from the bottom up.<BR/><BR/>Other Fed agencies have faced this situation by placing a hold on all bankruptcy proceedings and then working with consumers to keep them in their houses and paying their mortgages.<BR/><BR/>Why is that solution--that bottom up solution--not acceptable while asking the US tax payer to burden the debt taken on my the double handful of risk takers at the top a good solution?<BR/><BR/>As far as trusting Paulson and Bernake, I've been watching this develop for over two years. (Watching the foreclosure crisis hit homeowners, not what was happening at the top of the food chain) I won't say that I expected this crisis, but I was mightly unsurprised by it.Random Michelle Khttps://www.blogger.com/profile/13817444379694818074noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-45381857261930015662008-09-30T13:06:00.000-05:002008-09-30T13:06:00.000-05:00This comment has been removed by the author.Random Michelle Khttps://www.blogger.com/profile/13817444379694818074noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-75703139240663885802008-09-30T12:12:00.000-05:002008-09-30T12:12:00.000-05:00Ilya, I don't know that this conversation will be ...Ilya, I don't know that this conversation will be concluded for a long, long time. And thanks, by the way, for making me think a bit harder about my position.<BR/><BR/>Financial company overlords? So, you're responsible! I always knew you were up to something. :)Jim Wrighthttps://www.blogger.com/profile/11259550121437562338noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-66351018245146793122008-09-30T11:32:00.000-05:002008-09-30T11:32:00.000-05:00While I spent the last couple of hours working for...While I spent the last couple of hours working for my financial company overlords, Jim and Eric basically concluded the discussion. Looks like we are largely on the same page and maybe differ just on the question of urgency. I'm biased in that regard, I admit freely. :(Ilyahttps://www.blogger.com/profile/05379167075203188111noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-3138710947750015912008-09-30T10:51:00.000-05:002008-09-30T10:51:00.000-05:00Ah hell, Eric, I don't actually disagree with Ilya...Ah hell, Eric, I don't actually disagree with Ilya either.<BR/><BR/>I do think that holding up the bailout bill in order to punish those responsible is stupid and contains a major degree of nose cutting. Hell, I'll even go further and say that my desire to take away wealth from the these arrogant rich bastards and put it into the taxpayer's pocket is less like Robin Hood and more like Marxism. And you are absolutely right, many of these people didn't break the law as it exists and there is no justifiable legal reason to take away their personal wealth.<BR/><BR/>However (and you <I>knew</I> I'd have a 'however,' right?) they can't be allowed to get off Scot-free, at least not all of them. And I think we do have indications of criminal wrongdoing both in the S&L industry, who deliberately miss represented the value of those bonds, and in Rating Agencies who gave those bonds AAA ratings - and I think this needs to be pursued (not as part and parcel of the bailout, but certainly the House and Senate Banking Committees need to hold hearings down the line, and I'm sure they will).<BR/><BR/>However, again, I agree that it is stupid to hold up - or even include it in - the bailout bill in order to punish those responsible. The bailout and the the long term fix are two separate things, and should be pursued as such.<BR/><BR/>Get the bailout hammered out and passed, get Wall Street stimulated and the mortgage industry stabilized.<BR/><BR/>At the same time examine the changes necessary to prevent this type of situation in the future - such as Fed oversight of Bond Rating for example, and a return to firm separation between S&L's and Investment Banking - and this bill could include severe penalties for future violations or malfeasance.<BR/><BR/>I will also say that while I understand the need for <I>some</I> nationalization of the financial sector in the immediate future, I think long term government ownership of US financial assets is a major mistake and and one that directly transfers the risk onto the taxpayer. This is unacceptable to me, the risk should be on the risk takers not on the general public.Jim Wrighthttps://www.blogger.com/profile/11259550121437562338noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-59192353620214747412008-09-30T10:13:00.000-05:002008-09-30T10:13:00.000-05:00I'm coming around to Ilya's position--first with h...I'm coming around to Ilya's position--first with his comments at Giant Midgets, then his comments at Reality, and now the ones here at Stonekettle.<BR/><BR/>One of the major rationales I keep seeing for rejecting a bailout is the punishment rationale. I understand the appeal--it's got a visceral grip on, me, too. But when I think about it, and factor in what I know, it seems pretty self-evident to me that punishment is unlikely whether there's a bailout or not. The responsible parties are already protected and/or proofed--they have their millions secured, and many of them will get millions more in "compensation" when their companies are bought out. Sure, some of them will also lose millions on paper--but they're not going to lose their homes or cars over it; they will still be rich.<BR/><BR/>Unless some case can be made against any of these individuals for some sort of fraud or criminal malfeasance, I don't see any of them being held civilly or criminally responsible. And let's face it: it's not going to happen. There may be a few guys you can put on probation or send to prison for lying on a mortgage application, but you're not going to prove the investor or CEO wasn't "a good man whose only crime was naively trusting the reports of those to whom he delegated the daily functions of the business, blah blah blah." It warms the heart's cockles to think of justice being meted out, but give it up--it ain't gonna happen any more than Santy is going to show up on your hearth with a sack of magic weapons, a neato horn and a bottomless healing potion. (Thinking about <I>that</I>: your time would be more productively spent looking for snowy forests in your closets and cupboards than waiting for justice. Sorry to break the bad news.)<BR/><BR/><I>If</I> we're talking about not doing a bailout to try to punish the rich people who are already and will remain rich, and <I>if</I> the only people who will suffer are consumers, low-level industry employees, and other businesess, then what we're really talking about is cutting off our own noses to spite our faces. There may be <I>other</I> reasons not to do a bailout, but I don't see how punishment can be one of them under those circumstances.Erichttps://www.blogger.com/profile/18275812152895151542noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-57301574576707816702008-09-30T09:34:00.000-05:002008-09-30T09:34:00.000-05:00Look at the GDP numbers, Michelle, and you will se...Look at the GDP numbers, Michelle, and you will see that the economy did grow slowly in the first half of the year. Predictions are a fickle business, even for a man as smart as Bernanke.<BR/><BR/>Basically, when you perceive a person being wrong once, you are unwilling to consider that [s]he might be right at other times. I suppose you'd be more receptive if the exactly same proposal came from someone you trust?Ilyahttps://www.blogger.com/profile/05379167075203188111noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-47027398815410626242008-09-30T09:33:00.000-05:002008-09-30T09:33:00.000-05:00Ilya,I understand your point of view. I do.However...Ilya,<BR/><BR/>I understand your point of view. I do.<BR/><BR/>However I stand by my opinion. Here's why:<BR/><BR/>1. Time. I'm not advocating that we delay for the purpose of delay, but I am advocating that we proceed deliberately and not make either hasty decisions so as to <I>appear</I> effective (and thus score political points) or hasty decisions out of panic. We're in an election year, there is a significant amount of grandstanding going on and a real push to <I>appear</I> to be doing something, especially to be the <I>first</I> to appear to be doing something. There is also a high degree of panic in D.C. at the moment. Neither of these conditions are conducive to good decision making. This will be a bill, signed into law, and we'll have to live with it. Now, with that said, I fully appreciate your desire for urgency, I understand that people are losing their homes, I understand that the dollar is slipping and that those invested in the market are losing money - but a few extra moments here, while we find a real solution vice something that <I>appears</I> to be a solution, will save us great deal of grief down the road. <BR/><BR/>2. Punishment. It may appear that I desire revenge, and there is some small degree of that certainly. However, in this case I want those responsible punished publicly and harshly. I want a clear message sent to everybody in the financial industry that those who engage in actions harmful to the rest of us will face serious consequences, that greed and avarice at the expense of others will not be tolerated when it directly effects others. Ilya, thousands suffered in the Enron collapse, thousands more in the Dot Com bust, and etc - it is unacceptable that these people play God with their neighbor's savings, college funds, and retirements. And I want the next batch to think twice about taking such ill-advised risks. Ilya, take a look around, now you're in London and maybe you're not seeing it there, but here - companies like Ditech are <I>still</I> offering interest-only, balloon payment loans. I saw an add for one last night during prime time TV. These people are still at it, and they'll stay at it until a strong enough example is made. <BR/><BR/><BR/>You're right in that I faced a rather large number of crises in my career. However, those officers that get their men home alive, are the ones that take an extra second, even under fire, to make the right decision - vice <I>just</I> a decision - and the ones who hold their men and themselves accountable for their actions.Jim Wrighthttps://www.blogger.com/profile/11259550121437562338noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-9701981313249366272008-09-30T09:00:00.000-05:002008-09-30T09:00:00.000-05:00Ilya, let me quote an article from the February fr...Ilya, let me quote an <A HREF="http://www.iht.com/articles/2008/02/15/business/usecon.php?page=2?pass=true" REL="nofollow">article from the February from the International Herald Tribune.</A><BR/><BR/>"Bernanke said the economy would grow slowly but pick up speed later in response to both the Fed's lower interest rates and the $168 billion economic stimulus package that President George W. Bush signed Wednesday.<BR/><BR/>"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year," he told lawmakers. But in cautioning that his outlook could turn out to be wrong, the Fed chairman left the door open to additional rate reductions.<BR/><BR/>Paulson tried to sound less downbeat. "I believe we are going to continue to grow, albeit at a slower rate," he told the Banking Committee, insisting that the plunge in housing and credit markets was a correction rather than a crisis."<BR/><BR/>These men either failed to see the coming crisis--despite continued warnings from all over--or saw the coming crisis and refused to plan.<BR/><BR/>Neither options encourages me to place trust in them.Random Michelle Khttps://www.blogger.com/profile/13817444379694818074noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-22368376019267322182008-09-30T08:17:00.000-05:002008-09-30T08:17:00.000-05:00Michelle, it makes me awfully concerned about our ...Michelle, it makes me awfully concerned about our collective ability to judge anything when the <EM>source</EM> of the proposal becomes a more important factor in your eyes than its <EM>merits</EM>.<BR/><BR/>Incidentally, I happen to trust Messrs. Bernanke and Paulson quite a lot, despite their unfortunate affiliation with such a derogatory term as "Bush administration".Ilyahttps://www.blogger.com/profile/05379167075203188111noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-59001576686811527392008-09-30T07:51:00.000-05:002008-09-30T07:51:00.000-05:00I've done a lot of research, and put up a couple o...I've done a lot of research, and put up a couple of posts on this already. <A HREF="http://somewhatreal.com/itsme/" REL="nofollow">Browse over</A> and take a look. And there'll be more to come.vincehttps://www.blogger.com/profile/16955307244053931069noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-21771300247884687932008-09-30T07:16:00.000-05:002008-09-30T07:16:00.000-05:00Ilya,Leaving aside the points I made at my place, ...Ilya,<BR/><BR/>Leaving aside the points I made at my place, I'd like to point out that Congress jumping when the Bush administration told them to led to the Patriot Act.<BR/><BR/>It took years to create this crisis. The Bush administration has consistently denied we were even in a crisis until they had their noses rubbed in it.<BR/><BR/>This is not a group I trust to create a sound plan for getting us out of crisis--especially when their continued pushing of deregulation helped get us into this mess.<BR/><BR/>Plus all that other stuff I said. :)Random Michelle Khttps://www.blogger.com/profile/13817444379694818074noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-60888524494541164592008-09-30T06:11:00.000-05:002008-09-30T06:11:00.000-05:00I am disappointed, Jim. I thought you had a bette...I am disappointed, Jim. I thought you had a better solution, but it turns out you are behind the idea of "continuing to look for solutions", whatever that means.<BR/><BR/>The meltdown affects everybody already. I lose money on my investments in otherwise solid companies, you will feel a pinch with reduced interest in your production, a video editor in North Carolina will see the demand for his services decreasing, a florist in New York will not be able to sell her stock, and so on. During the Great Depression, the unemployment rate rose to 25% and the domestic output contracted by some 40%. We are nowhere even close to those levels, but we are sliding in that direction. While we continue to pretend that we can take our sweet time to look for other ways out of the mess because we want to make sure that the rotten perpetrators are punished.<BR/><BR/>FDIC estimated $500Bln of residential mortgages seriously delinquent at present (the figure will rise, of course), which makes $700Bln rather sufficient to deal with buying all of those "troubled assets" that these mortgages are packaged into. So, yes, I, for one, raise my hand to say that the number should be sufficient to stabilize.<BR/><BR/>The recovery from the Great Depression began in 1933 with the Reconstruction Finance Corporation and the Home Owner's Loan Corporation federal cash infusions. In the early 90's, the Resolution Trust Corporation was instrumental in dealing with S&L failures of the earlier decade (it was created a few years later, but it was essentially playing the same role as the currently proposed TARP). We already have a template, which proved to be reasonably successful. I see no reason not to use it right now.<BR/><BR/>Punishing those at fault is not a good imperative for directing your efforts during a crisis. I'm sure that in your career you encountered more crises than I can imagine - and I can't fathom that in those situations you'd choose "whom can we blame for this?" over "how can we fix it?" The Congress so far decided to give in to the sentiment that "the fat cats don't deserve to be saved", disregarding the notion that everyone in the world will be worse off for that. I find that - and your argument in support of that course of action - rather sad.<BR/><BR/>But I have to give you props for presenting your argument more eloquently and forcefully than anything that I can write. My disagreement with you does not diminish my admiration for the way you express yourself.Ilyahttps://www.blogger.com/profile/05379167075203188111noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-71255503520809999902008-09-30T02:06:00.000-05:002008-09-30T02:06:00.000-05:00You know, a lot of this whole things smacks of a l...You know, a lot of this whole things smacks of a lack of due process (oversight, regulation ect. ect.), maybe some of that should be injected into it, I like the idea of bankrupting the jerks who propagated the whole mess, give them a trial, if you can convince 12 people who cant finagle their way out of jury duty that some greedy bastard is a greedy bastard, leave the greedy bastard destitute.<BR/><BR/>On a second note, I just bought my first house about one month ago, I told the bank here is my 20%, I want 30 years, fixed interest. They <EM><B>STILL</B></EM> tried to push some of that exotic loan product crap on me (get a builders loan {interest only} and remodel it, then refinance it) (you know, you can afford a lot more house than what you are buying “yes, but I can still make this payment on unemployment if I had too, and with luck, ill have it paid off in 10-12 years”). WTF.<BR/><BR/>I so wish you could beat sense into people, preferable with a stick. I know of a lot of people around this mess who really need a good whacking. (FYI, I’d have myself whacked once a week, whether I needed it or not).Thordrhttps://www.blogger.com/profile/02483497564571489980noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-66932080509746134372008-09-30T01:00:00.000-05:002008-09-30T01:00:00.000-05:00One of my fantasies is to sell everything and move...One of my fantasies is to sell everything and move aboard a sailboat. (and I get seasick and am barely able to sail, so this is in the realm of TRUE pipe dream)<BR/><BR/>Still, it'd be great to have absolutely no debt, no encumbrances, just a small amount of stuff and my boat. No more mini-McMansion! I could conceivably live aboard at a marina part of the year and hold down contract work - in order to wander the rest of the year.<BR/><BR/>I guess what Beastly is doing now is the land version of that - but for some reason I find the water-based version more appealing, maybe because I can't drive a big ol' RV through any kind of traffic and I find commercial campgrounds appalling.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-53995533872682088402008-09-29T23:22:00.000-05:002008-09-29T23:22:00.000-05:00And as the S&Ls are swirling along toward the ...And as the S&Ls are swirling along toward the drain, let us pause and see what they are clinging to. A future of unemployment below double digits. A housing industry that is going to keep pace with real needs and back off of the $300K plus plush bells and whistle clad monstrosities that everyone must have. Basic needs met for the middle class who are now struggling to hold on to the American Dream which has now been watered down to three hots and a cot and maybe a job to go back to tomorrow. Oh there is more to come and it ain't gonna be pretty.Beastlyhttps://www.blogger.com/profile/05734235111057536747noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-6876745907854139272008-09-29T21:59:00.000-05:002008-09-29T21:59:00.000-05:00Of course the Titanic disaster gave us the modern ...Of course the <I>Titanic</I> disaster gave us the modern United States Coast Guard, in part to ensure that someone was looking out for those damned pesky sneaky icebergs.<BR/><BR/>Wish the analogy went on to having the bastards go down with the ship...<BR/><BR/>Dr. PhilDr. Phil (Physics)https://www.blogger.com/profile/11943336276878704753noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-45690319810207695632008-09-29T21:05:00.000-05:002008-09-29T21:05:00.000-05:00And that's exactly why I used Ismay as an example,...And that's exactly why I used Ismay as an example, instead of the other board members of WSL<BR/><BR/>Excellent catch, spJim Wrighthttps://www.blogger.com/profile/11259550121437562338noreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-24127088196263994612008-09-29T20:20:00.000-05:002008-09-29T20:20:00.000-05:00Jim,IIRC, J. Bruce Ismay survived the sinking by c...Jim,<BR/><BR/>IIRC, J. Bruce Ismay survived the sinking by covering himself in a woman's coat and sneaking aboard one of the lifeboats.<BR/><BR/>Hopefully, if/when a second round of lifeboat filling comes thru for our currently listing ship of state, its my fervent desire to see the J. Bruce Ismay's end up in the drink. And if they float long enough without freezing to death, then they can join the survivors. But most certainly, neither in the lifeboats nor in their shiny G-V's fleeing to that nice beachside home in the Caymans or Rio.<BR/><BR/>SPAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8243351006478134285.post-89917800333327920132008-09-29T18:22:00.000-05:002008-09-29T18:22:00.000-05:00I've got some thing to say, but I need to think th...I've got some thing to say, but I need to think this out for a post of my own. But I will say the Titanic analogy is a good one.vincehttps://www.blogger.com/profile/16955307244053931069noreply@blogger.com