moyers with simon and kaptur

Yes very good, posted under Brandeis.

as it related to housing, i felt it ought to be highlighted rather than obscured.

agree, the bickering obscures it. please stop

no

SIMON JOHNSON: They persuaded us to allow them to take incredible risks. And then they pushed all the downside, all those losses onto us, the taxpayer, at the same time as really hammering hard all the people who were duped, essentially, into taking out loans. People lost their houses. It's an absolute tragedy. This combination cannot go on. And yet, the opportunity for real reform has already passed. And there is not going to be not only is there not going to be change, but I'll go further. I'll say it's going to be worse, what comes out of this, in terms of the financial system, its power, and what it can get away with.

Crux of the Moyers talks about Asymetric risk profile of the banks. Heads banks win, Tails tax payers lose. Now that the mortgages went bad, the risk gets transferred to tax payer(via FHA, Fannie Mae, etc). And the people persuading treasury and Fed to not regulate and bail out the banks are the Big Financial Oligarchs themselves. Great piece, but this is not so much about real estate as it is about Financial Regulation.

really? this was my favorite portion.

BILL MOYERS: What's your explanation as an economist. And a student of this financial system as to why the banks are taking so long to help the homeowners when Congress has allocated funds for that purpose?

SIMON JOHNSON: I'm afraid that it's pretty obvious and it's very tragic. That they have no interest in helping the homeowners. They make money with what they're doing. Bill, they'll expected a lot of these mortgages they made to default, okay? It was in their models. A high default rate. Now, they didn't expect house prices to come down so much. That's where they got their losses. But they absolutely made these loans expecting they would have to foreclose on people. And figuring they would make money on that.

SIMON JOHNSON: These are very smart, very profit-oriented people. I can assure you, if there was money in it for them. They would be negotiating you know, very various kinds of re-schedulings of these loans. They don't want to do it. They it's not in their interest. It's not where the money is. Follow the money. The money is where Jamie Dimon says it is. Jamie Dimon says, 'You ain't seen nothing yet,' in terms of his lobby in Washington. He's on the record as saying, he's this is his big initiative right now.

Ill be back on this one, but I have to go see moore's movie first. i work in the derivatives market, so ill be give my unbiased view as well.

My jaw is dropped. Wow!

The William Black interview done back a while on Moyers is a good follow-up...

I love how it ends.....Simon Johnson's come reply to Marcie Kaptur.. Of course Louis XIV knew...

MARCY KAPTUR: I don't think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven't delivered. I urge him to get new generals. It's time.

SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, 'If only Louis the Fourteenth knew. I'm sure he doesn't know. If we could just tell him, he'd sort it out.' You know. I'm skeptical.

Hey AR!!

Thank you so much for the Moyers clip: WOW, WOW, WOW, ARG, UGGH! Depressing. Is it fascism where big business & gov collude?

However, they did not mention that the gov pressured banks to make mtg loans to low income/non-credit worthy people. Mtg loans were made to people who should never have taken those loans. Banks could foresee defaults, that's why it was in their models: banks probably always viewed these crappy non-credit worthy loans as future write offs: ie: 80% 1st mtg & 20% HELOC: of course borrower would default. But, Washington did pressure banks to make these loans; however, the banks should have/could have used some self restraint and not created as much carnage as they have. And, in the long run, who got most screwed? the low income/non-credit worthy people: now, they're in debt, bankrupt & just plain broken.

ACK!! the whole thing stinks. It's a sham. puke.

I am not against capitalism. But, this isn't capitalism. It's bankrupt morality. It's evil. It's intentionally destroying people by indebting them when you know that they can't afford the debt. That's evil.

Hi Riversider!

Dwell, Well written!

Also not mentioned is the corruption at fanny may, so the gov is as guilty as the banks. Gov colluding with big business. And what about derivatives? why did the gov allow that to go unregulated? Gov knew what was going on with derivatives. Makes me wonder about Spitzer? A honey pot scheme to stop him from reforming wall street? It's all corrupt.

Hey Riversider!!! Thanks. Jeez, it's depressing living in interesting times.

Yes, the Louis XIV comment: that's what people said about Stalin: "If only he knew what was really happening, he'd stop it". Some would write letters to Stalin, telling him about 'what was going on' and then, Stalin would send his goons to the writer's home & it'd be one more for the gulag.

Let me play a little devil's advocate, and state 'keeping up with the Patels, Levy(s), Kim(s), your next door tranny' is very strong in the USA. Having said that, let's play with the rules in place. No equity => go to bankrupt city. Stop the clunkers, $8k tax credits, eliminate mortgage deductions ( at least helocs deductions) and get a 10 page income / consumption tax on the books.

Why should I bail out these nimwits with helocs and 40 pairs of prada shoes???!!! Can't hang, SELL. Lemming buyers of 2009 thank you for the bailouts and momentary 'full nyc re brokerage employment act of summer 09'.

Hey W67!!

I don't have to 'keep up" with the tranny next door. I AM the tranny next door, so, yeah, I need the prada shoes, size 16.

Oh. One other thing. Here is the thing I see as the problem. Bankers want to make money, people want to finance lifestyle wo working (on the cheap) the circuit breaker should be 'regulation/govt'. Wholly missing in this fiasco.

Clarification: I am not defending the banks. Just commenting that in the Moyers clip, no one said that the Gov allowed this crap to happen {ie: like the SEC was shocked!, shocked, I tell ya, about Maddoff}. I think both the gov & the banks are equally guilty & the finger pointing is a diversion tactic. Both Gov & Wall St need reform, but, I doubt we'll get it. And, in the end, the little guy/avg joe suffers.

Thanks, You might want to check out NPR related story. They discuss the too big to fail firms etc and debate the issue of breaking them up vs controlling them and how large firms can scare the regulators that harsh regulation could make them fail and hurt the system..

http://weblogs.npr.org/templates/story/story.php?storyId=113650178

BLUMBERG: Jamie Dimon is the chairman and CEO of J.P. Morgan Chase, one of the largest financial firms in the world, and I should be clear here. Simon Johnson is using Jamie Dimon here as a symbol of all the heads of all the largest banks and financial institutions in the world: Citigroup, Bank of America, Goldman Sachs, AIG, all these huge, global, interconnected firms that, when they get into trouble, their CEOs can go to the government saying if you don't bail us out, the economy will collapse.

Prof. JOHNSON: It's a bizarre kind of blackmail, right? It's a very sophisticated sort of oligarchy that we've created where they - the power comes from not saying we'll have you all assassinated, but saying, well guys, if you want the second Great Depression, go ahead, make us all fail. That's fine, but it's your call.

BLUMBERG: Diana Farrell is President Obama's deputy assistant for economic policy. She says that within the administration, as they were developing their plan for the financial system, they had many arguments, like the one between Simon Johnson and Charles Calomiris. The problem with Johnson's approach, they decided, is that bigness also has its benefits. Sure, the economy used to be simpler and financial institutions weren't so big and dangerous, but GDP was smaller then, too, and people were poorer. We can discuss a time before we created huge, complicated institutions like CitiGroup and AIG all we want, says Farrell. But…

Acck, the whole thing makes my head hurt. Maybe my pradas are too tight.

So, W67, where do ya see it going? What will this look like in 1 yr & 5 yrs from now?

"Prof. JOHNSON: It's a bizarre kind of blackmail, right? It's a very sophisticated sort of oligarchy that we've created where they - the power comes from not saying we'll have you all assassinated, but saying, well guys, if you want the second Great Depression, go ahead, make us all fail. That's fine, but it's your call."

Riversider,
Of course this was said.

Yeah, an oligarchy, that's what we got. But, to a certain extent, all govs are oligarchies (the rich & powerful flock together in all societies), it's just that we have become one even more so.

Yo Dwell... long time...

herez my take on this fiasco. The sub-prime mess was enough to torpedo our entire worldwide financial system and I am guesstimating it represented 20% of the problem, prime and commercial RE being the other 80%... on top of that the need for structural changes ie getting all these people in "RE" to get into other productive areas of society will mean a long long slog.

So to your question.. I cannot even guesstimate based on the fact we have yet to man up (or tranny up) on the "prime" shit bomb waiting on the sidelines... we've just effectively kicked the can till manana. So shine those shoes save up your lipstick money cause I see the lack of a retail bump in x-mas 09' as the next "?"....

on NYC RE, no doubt, no question, no wavering on $500psf prime...

http://www.washingtonsblog.com/2009/10/simon-johnson-confirms-william-k-blacks.html

In a new interview with Bill Moyers, Simon Johnson confirmed what William K. Black has said about fraud by the financial sector, booms and busts.

As I previously wrote:

Black explained that fraud by a financial company usually involves the company:

1) Growing like crazy

2) Making loans to people who are uncreditworthy, because they’ll agree they’ll pay you more, and that’s how you grow rapidly. You can grow really fast if you loan to people who can’t you pay you back

and

3) The use of extreme leverage.

This combination guarantees stratospheric initial profits during the expansion phase of the bubble.

But it guarantees a catastrophic subsequent failure when the bubble loses steam.

And collectively - if a lot of companies are playing this game - it produces extraordinary losses (more than all other forms of property crime combined), and a crash.

In other words, the companies intentionally make loans to people who will not be able to repay them, because - during an expanding bubble phase - they'll make huge sums of money. The top executives of these companies will make massive salaries and bonuses during the bubble (enough to live like kings even even if the companies go belly up after the bubble phase).

Johnson confirmed that a high housing default rate was part of the banks' models. The financial giants knew they would make huge sums during the boom, and then transfer their losses to the American people during the bust.

Johnson and Moyers also pointed out that the American people are still paying off the S&L bailouts. Specifically, the last payment of the $140 billion dollar bailout will be made in 2013.
And Johnson provided interesting information regarding Goldman Sachs. As everyone knows, Goldman switched to a bank holding company in September, to have access to funds from the Fed at essentially zero percent interest.

But Johnson noted that in August of 2009, Goldman switched again - to a "financial holding company".

What's the difference?

Johnson says that being a financial holding company means that Goldman can borrow money from the Fed at essentially no cost, and then invest it in any thing it wants. For example, Johnson says that Goldman has bought a large share of the stock of a Chinese automaker. If the investment succeeds, Goldman will reap the profits. If it fails, the taxpayers are on the hook.

dwell, it's just sad. and there's culpability enough to go 'round and 'round.

but creating a business model that depends on, or at least discounts hugely, failure is vaguely reminiscent of the Ford Pinto. cost benefit analysis can be very nasty.

i agree that there isn't a great deal of discussion of the lack of regulatory oversight, although i think it is implicit in the discussions regarding G-S, but when one has a half an hour...

for that, elizabeth warren is your go-to gal. bless her. because people were manipulated, horribly.

I dont think mbs were modeled knowing that so much of them would default. If that was the case, bear lehman and merrill would have known and they wouldnt have been buying them hand over fist to begin with. its the securities that moyers et all are talking about which blew up those banks. neither the lady from toledo or the MIT guy really knows whats going on. thats why they believe michael moore. i dont dispute that washington and wall street have very close ties..but who else should be running the treasury?? someone with no finance background or someone who doesnt know where all the bodies are buried ? Imagine if it wasnt an insider...then the banks could really do whatever

marco, yes, they assumed overextension. and they assumed it wouldn't matter because as prices would continue to increase the banks would be able to deal with the REOs without much loss, while making much profit on the originations and the HELOCs that would be necessary for people to remain alive. the securities consist of the mortgages, no? and i'd say that the former chief economist from the IMF has a clue, really.

s&p or moody's, i don't recall which, used different models for their financial analysts and those rating mbs. literally. in the same building, the models had different assumptions.

there was a great article somewhere recently on how many economists have some economic tie to the Fed. the number of consultants on the Fed's payrolls is ginormous.

how about Stiglitz?

Riversider, do you think this investment in the Chinese automaker is a possible appeasement for the Chinese who bought these bad mortgage instruments that they thought were AAA rated? I couldn't help but think that it was payback time for a key investor(China).

Most of the guys who worked the factory floor weren't smart enough. The bankers who worked the ratings agencies to arb the models, more of them knew. But anyone with more than few years experience knew that if 70% of the pool was stated doc or worse..Yea they knew.

And yes, hey had to buy, because compensation favored that. The guy in the mbs dept at Bear or Merrill was not compensated by being risk averse. But the risk committee had no clue, those that did were pushed out...

William Black has some interesting thoughts on the subject.

newbie, not rs but i've got to wonder why anyone would be surprised at this? we've basically sold out our people. corporate america doesn't care if americans are employed. and increasingly they won't care if we consume. globalization, your friend.

btw, they should care, because instability is nobody's friend, but they won't unless forced to do so, and they're not being forced.

and, the chinese are far more savvy than we give them credit for. they knew what they were doing, albeit not entirely, when supporting our debt. they need us to consume even more than we need us to consume.

as dwell said, horrible to live in SUCH interesting times.

NYRENewbie...no idea, but I tend to doubt it.

Solution: start thinking of yourself as a global citizen, relocatable to wherever to further your "line".

We are presently in the eye of the hurricane. The other side of the eye wall will start to hit after the abysmal Xmas season and once the option mortgage recasts/resets really start to kick in. See you in 2012.

except nyc10023 there is almost always someone out there who will do the same job for less. and the corporations love it. so even if you move, with few exceptions over time the standard of living for the vast majority will decline while the standard of living at the very, very top will increase. until?

sounds like a recipe for disaster, to me.

Too simplistic. the truth is for more complicated.
The William Black interview on Bill Moyers is a must see. 1000 times better than the one
referened in the title of this thread.

http://www.pbs.org/moyers/journal/04032009/watch.html

Simon Johnson, the MIT professor in the Moyers interview, plugs his blog The Baseline Scenario. Visited that blog and listened to the radio show which is linked there "The Giant Pool of Money". From this show, it sounded like everyone was milking the system, not just Wall Street. Very interesting if you have time to listen. Here's the link
http://baselinescenario.com/financial-crisis-for-beginners/#stockmarket
http://www.thislife.org/Radio_Episode.aspx?episode=355

Agreed.... however keep in mind a percentage of the people involved could have gone either way, and the incentives made the difference.

rs, what do you think of the premise that people were victims? not just profligate spenders?

i've watched all the moyers, and the charlie rose, and the lehrer videos.

but feel free to be competitive. 1000 times, or 100000 times, or a gazillion times? and i adore william black. as well as elizabeth warren.

Giant pool of money is probably one of the best podcasts out there. Great find NYRENbie

This victim thing is overdone and overplayed. While I'm a firm believer that government can do a better job of regulating AND NEEDS TO it is also true that it needs to be balanced with personal responsibility and accountability.

rs, you're a nasty piece of work. really. this victim thing has had almost ZERO press. remarkably little, despite the fact that MILLIONS are losing their homes and their jobs. thank you for this last post. because it reveals exactly who you are. a fucktard who doesn't care for anyone other than his/herself.

long live Rand. for you, of course.

Im not saying the guy from the IMF doesnt have a clue...he does..obviously hes an an incredibly intelligent and responsible person to have his resume. no doubt. but when it comes to the decisions these desks where making, he doesnt get it at all. some banks and hedge funds chose to load up on subprime for the easy carry and some banks / hedge funds chose to short it. SP and Moodys had absolutely no idea what was going on. they were just collectiong rating fees. people like to make the situation out to be a massive conspiracy with no doubt hank paulson and probaly dick cheney somewhere pulling all the strings. It wasnt.

Banks loaded up on subprime because AAA subprime had the best yield and 0 Risk weighting.

rs: start with your own accountability. go away.

marco, i get what you're saying. but i don't think that's mutually exclusive.

and i disagree. the ratings agencies were culpable.

AAA subprime had the best yield and 0 Risk weighting = easy carry

Marco, point being, even if the portfolio manager knew there was a better investment, he would have had to reserve far more capital against the position. And as far as the rating agencies, not sure what the right words are for senior management who knowingly collectivized the team to collect revenue at the the expense of exercising sound judgment.

exciting day for you...people are responding.

A.R.
Recommend you see watch Mamet's "House of Games".....Describes ~90% of the borrowers.

rs. you have zero compassion for people.

Pejorative compassion? I'd prefer to teach someone to fish.

"exciting day for you...people are responding. "

all started off with duration...been goin strong since 8 am..hahahahah

marco, ha, ha.

riversider, really? you're teaching who to fish? by the way, your concept,not so validated?

this is hifuckinglylarious.

Aboutready, I think Riversider is responding to the podcast

http://www.thislife.org/Radio_Episode.aspx?episode=355

Please listen to it when you have the time. Many people were taken advantage of, but many people were also using the system from the top down. This is really interesting stuff. Forgive me, I'm a beginner on this as well, but the Moyers story spurred me to search further into what Simon Johnson is espousing.

Yeah ok everyone else is to blame.

all started off with duration...been goin strong since 8 am..hahahahah

yea, you learned about duration.. tomorrow we can teach you spread, index effective duration :)

"I love how it ends.....Simon Johnson's come reply to Marcie Kaptur.. Of course Louis XIV knew...

MARCY KAPTUR: I don't think President Obama has the right people around him. The poor man inherited a total mess, globally and domestically. I think some of the people that he trusted haven't delivered. I urge him to get new generals. It's time.

SIMON JOHNSON: Louis the Fourteenth of France, a very powerful monarch, was famous for having many bad things, you know, happen under his rule. And people would always say, 'If only Louis the Fourteenth knew. I'm sure he doesn't know. If we could just tell him, he'd sort it out.' You know. I'm skeptical."

http://www.streeteasy.com/nyc/talk/discussion/14169-why-do-people-stay-in-their-condo-when-theyre-30-underwater

post 66

""and riversider, who really is to blame for the excessive loans? borrowerss may be stupid, but ostensibly their lenders have more info. i'm getting really fucking tired of this argument. the bottom line is that banks should have had a lot at stake, and they should have been at least somewhat careful."

Except no one is willing to admit that Barny Frank is Marie Antoinette, a 2 headed John W. Snow/Henry Paulson were Louis XVI and Alan Greenspan Louis XIV."

LMFAO

Marcy Kaptur tells the truth! Imagine that. A Congresswoman from Toledo, Ohio who goes out in public and speaks the truth.

"BILL MOYERS: You asked on your blog, just this week, a question I want to put to you now, and to both of you. You asked, 'Does this crisis reflect something about the disproportionate influence of a few incompetent investment bankers or a deeper breakdown of capitalism?'' What's your answer to your own question?

SIMON JOHNSON: Well, definitely, this disproportionate influence of some fairly incompetent bankers, that's for sure. That's what we're seeing today. That's what we've seen over the past few months. I think on the issue on the issue of capitalism, we have to take this very seriously. To me, at least, the financial part of our capitalism is very seriously broken. "

I guess I'm jaded, but I think calling them "incompetent bankers" here is talking out of both sides of their mouths. They can't act as if this was orchestrated by these bankers knowing what they were doing, and then call them "incompetent bankers" when they have succeeded (at least it looks like what they are saying) as a "financial "coupe d'etat" with "Wall Street in charge".

Seems to me like they are VERY competent - competent at hoodwinking the current administration and/or the American people into handing them the wealth of the country.

newbie, appreciate your effort to intercede, but this has an extensive history. i'm not saying that certain people didn't overextend for no reason other than an extra bathroom, but do you realize that the median housing purchase is about half a room larger than it was 50 years ago? if you wish to understand my position, search for warren, and on the economic links thread you can watch an hour presentation by elizabeth warren entitled something like the upcoming collapse of the middle class.

it starts out a bit dry, but it has a powerful message. one that rs would prefer to deny.

the people of this country have, largely, been well and truly screwed. and just because/if you're not in that category doesn't give anyone the right to ignore it.

Elizabeth Warren does have a powerful message. She's been preaching her message for many years but the powers that be are not listening. And everyone is screwed, not just this county, because our economy is the world economy, we are so inter-dependent.

Millionaire next door is a great read, if you have not. Each generation after the depression spent and borrowed just a little more recklessly than the past...

The 7 Factors of Wealth

The authors made a list of 7 common factors found in most of the millionaires they surveyed:

1. They live well below their means. This may sound strange to some people, but millionaires budget well. According to the authors “They became millionaires because they are good at allocating resources. They stay millionaires the same way.”
2. They allocate time, money, and energy efficiently in ways conducive to building wealth. From the book: “Millionaires spend significantly more hours per month planning their finances than high-income non-millionaires.”
3. They believe financial independence is more important than displaying social status. Surveys show that most millionaires don’t spend much on shoes, cars, and clothing - it’s the high-income non-millionaires that do.
4. Their parents did not provide economic outpatient care. This means that millionaires often did not receive financial support from their parents.
5. Their adult children are economically self-sufficient. Related to the point above, millionaires did not give financial support to their own children once they reached adulthood. In fact, the research shows that the more money you give your adult offspring, the more they will depend on credit, and the less wealth they’ll accumulate.
6. They are proficient in targeting market opportunities. Most millionaires are good at selling products and services to those who are also wealthy.
7. They chose the right occupation. Most of the surveyed millionaires are self-employed or run their own businesses.

newbie, very true. but some countries deal with issues differently. you're absolutely correct in that we've become a corporatist world, not just a nation.

riversider, f the millionaires. we're talking about people losing their homes. sorry they aren't the efficient planners and money hoarding people you admire.

We're taling about teaching people to manage their money and their finances.
Consider this..
families with multiple cars
families with leased vehicles
families with vacation homes
vacations financed via credit card
buying a home prior to saving for a downpayment

Elizabeth Warren, William Black mke valid points about regulation and corporate governence and risk management, but the individual also needs to take responsibility. Great Book, it's not about millionaires...

7.5 million homeowners are CURRENTLY delinquent on their mortgages. i'll have to look up how many foreclosures have already occured. that 7.5 million likely represents more than 20 MILLION people. let's just lump them all together as one big group of people who couldn't be responsible. and ignore the fact that almost 20% of the population is un or underemployed.

you've got a heart of gold.

it's too late. the banks have already made their money off of the american consumer. now they'll just look elsewhere.

We need jobs. Gov't needs to consider a suspension of the payroll tax. Redistribution of wealth won't solve things. Creating real jobs will. This might be a foreign concept, but the following may be of interest...

Levels of Tzedakah
Certain kinds of tzedakah are considered more meritorious than others. The Talmud describes these different levels of tzedakah, and Rambam organized them into a list. The levels of charity, from the least meritorious to the most meritorious, are:

The eight degrees of Charity:

Giving begrudgingly
Giving less that you should, but giving it cheerfully.
Giving after being asked
Giving before being asked
Giving when you do not know the recipient's identity, but the recipient knows your identity
Giving when you know the recipient's identity, but the recipient doesn't know your identity
Giving when neither party knows the other's identity
Enabling the recipient to become self-reliant

Thanks for posting that Riversider. I knew the middle, but not the ends, particularly the most important is I suppose what parents do for their children - enabling the recipient to become self reliant.

But ... you do the last, and do it with the attitude of the first, ... be cautious to be gracious when enabling self-reliance, don't make the person feel bad they need your help because they might not truly become self-reliant if you've made them feel bad. Just my opinion.

http://www.cross-currents.com/archives/2009/05/04/jack-kemp/

The following quote from the Rambam is a remarkable summary of the life philosophy of Jack Kemp, a man who lived eight centuries after the Rambam:
“Anticipate charity by preventing poverty; assist the reduced fellow man, either by a considerable gift or a sum of money or by teaching him a trade or by putting him in the way of business so that he may earn an honest livelihood and not be forced to the dreadful alternative of holding out his hand for charity. This is the highest step and summit of charity’s golden ladder.”

Riversider, somewhat predictably that's sort of a (repulsively) Rand-omized version of the levels of Tzedakah. A more complete description of the highest level emcompasses an unselfish, unpetty willingness to provide COMPLETE help to the receiver, not merely teach to fish, or to (sink or) swim:

"The highest form of charity is to help sustain a person before they become impoverished by offering a substantial gift in a dignified manner, or by extending a suitable loan, or by helping them find employment or establish themselves in business so as to make it unnecessary for them to become dependent on others."

Oh, I see you provided the more complete version subsequently. Apologies for harshing on you!

From Machiavelli

The wish to acquire is in truth very natural and common, and men always do so when they can, and for this they will be praised not blamed; but when they cannot do so , yet wish to do so by any means, then there is folly and blame.