Lehman down. $631 billion dollars out of pocket.

[Ddrak]

So no one wanted Lehman and the Fed wasn't bailing them out. Railroad bankruptcies didn't kill it, Depression didn't kill it, stupid home loans killed it. I feel bad for people who had their retirements wound up with them (which will be a lot), but can't feel bad for the firm itself.

I'm betting 2-5 more banks go down before the whole thing is done, and market liquidity is going to keep being a problem as credit falls to pieces all over the place.

Dd

[Klast Brell]

I believe that this was inevitable. For a while firms were raking in huge amounts of money. I'm positive they saw what thin ice they were on. But I also know that the pressures of modern business practices demand that they play along.
If they had not joined the scramble to milk that cow for all it was worth they would not have been making the big money while the rest of their competition reported huge profits. Failing to make money when everybody else is getting fat and happy is going to piss off all the people who would otherwise be getting their pockets lined. And those people are the ones who have the power and the influence over the company.
http://finance.google.com/finance?client=ob&q=NYSE:LEH
The stockholders would have freaked if Lehman did not play ball. Management would have been tossed out on it's ear and a new board put in place who was willing to make profits.
And that's the problem with unregulated Laissez-faire markets. Those without ethics get rich. Those with ethics go out of business.

[Embar Angylwrath]

And that's the problem with unregulated Laissez-faire markets. Those without ethics get rich. Those with ethics go out of business.

First, banking is certainly not a Laissez-faire market. Suggesting that indicates you have no real concept of the banking industry. The banking industry is one of the most heavily regulated and scrutinized industires. There is tons of oversight.

Also, you're taking a blip on the economic timeline, and applying it to the whole US economy as a whole. What is happening today in the banking and investment segment is not the sole measuring stick for the concepts and practices of the US economy.

[Lurker]

First, banking is certainly not a Laissez-faire market. Suggesting that indicates you have no real concept of the banking industry. The banking industry is one of the most heavily regulated and scrutinized industires. There is tons of oversight.

Most of the blame for our current crisis can be traced directly to the Gramm-Leach-Bliley Act, pushed by Greenspan, passed by the Republicans, and signed by Clinton. That bit of de-regulation repealed the Glass-Steagall Act.

So thanks for the current shitpile goes to the Senate Republicans, Alan Greenspan, and ultimately Bill Clinton.

[Klast Brell]

I'm sorry embar. Clearly when I used the words Laissez-faire and unregulated you believed I had some naive idea that our economic system had been converted in to an anarcho-capitalist Ayn Rand paradise. How silly of me. Next time I'll write a 3000 word essay detailing my thought with every possible bit of minutia so you won't be confused.

[Embar Angylwrath]

I don't think so Lurker. The "blame", if you want to call it that, is to be placed at the flawed processes of mortgage review and approval. Just because parts of the industry consolidated, doesn't mean the consolidation caused the mosrtage crisis.

There were many factors involved, and you can't honsetly lay the blame, or the majority of the blame, on a piece of legislation.

[Harlowe]

The legislation helped create an environment ripe for it. I think you can blame it on simple greed and companies taking irresponsible risks wanting to suck on the cash cow du jour. Executives also make insanely inappropriate paychecks, even when they run the company into the ground. Stanley O'Neal collected a cool $161m leaving Merrill Lynch I think at the beginning of the year.

Thanks for screwing shit up, here's your Golden Nutcup.

[Embar Angylwrath]

I'm sorry embar. Clearly when I used the words Laissez-faire and unregulated you believed I had some naive idea that our economic system had been converted in to an anarcho-capitalist Ayn Rand paradise. How silly of me. Next time I'll write a 3000 word essay detailing my thought with every possible bit of minutia so you won't be confused.

Look up the definition of Laissez-faire. How about you find a word that fits, instead of expecting us to know what you mean when you can say what you mean. You're not the most balanced individual when it comes to market perspective, and based on your history here, it isn't a stretch at all to take you at the face-value of your post.

When you say "unregulated", I interpret that as "unregulated". I don't interpret that as "one of the most highly regulated industry sectors in the nation". I would use the term "intensely regulated". But hey, if you see "unregulated" and "intensely regualted" as the same thing, please do yourself a favor and go punch your school teachers in the throat.

[Klast Brell]

OK fine Embar. When I said unregulated I meant that some regulations had been removed, not all regulations. Likewise when I used the term Laissez-faire I did not mean an economic system 100% free of governmental interference. Only that the governmental interference had decreased.
That was implied, but not explicitly stated. I apologize for confusing you. I used a number of metaphors in that post. I expected that you would take these statements as metaphors as well. To clear the rest of it up when I said the following things:

firms were raking in huge amounts of money: I did not mean they were using garden tools to move large amounts of hard currency from one location to another.


thin ice they were on: I did not mean that the employees management or buildings were placed on sheets of frozen water with insufficient structural integrity.


to milk that cow: I did not mean a Holstein, Jersey, Guernsey, or other breed of cattle.


big money:I was not referring to the physical dimensions of the check.


getting fat and happy: I did not meant that their weight or pants size was changing.


pockets lined: I did not mean that a layer of fabric was being stitched


play ball: I did not mean that they were engaged in a game of baseball


tossed out on it's ear: I did not mean they would be thrown bodily to land on the side of their head.

[Partha]

HOF. Win.

[Harlowe]

Okay that was fucking funny.

[Select]

Haha, yes! Too literal ftl.

[Kulaf]

What caused this was greed. Top to bottom.....comsumer to lender to invester.

Everyone should have the oppotunity to own a home.......wow......what a lovely thought. A dream if you will. The backbone of the "American Dream". Ahh but how......how do you make that a reality.

Let's make people come in with 20% down. That was the old mantra......but that's pretty hardcore......houses cost a lot of money. How many people looking at a 250k house can come in with 50k down? Probably not to many.

So to make it easier for "everyone to own a home".....the government and the banking industry came up with new rules.......new loans........new guarantees. Rather than letting a lower demand for homes temper the market.......they made the demand greater by allowing people who had no business buying a home get one.....and come in with little to no out of pocket investment.

What is one of the first things your parents taught you about possessions? If you earn it, buy it with your own money......you will value it a lot more than if it is given to you. How much is at stake for a couple that walks in with no money down and just based off their credit alone (A "no doc" loan) get into a 200+k house? I personally dealt with at least two couples that had previously declared a BK because they walked away from a mortgage. Just stopped paying and moved out.

Now if you did have 50 grand of your own money at stake......you think a little bit longer and harder about how much house you can actually afford......and what you are willing to do to hang on to it.

So expect a return to a time when only A paper borrowers can get a loan. Expect to come in with no less than 10% down......and expect an assload of reuglatory changes to make sure this crap doesn't happen again.

[Embar Angylwrath]

Haha, yes! Too literal ftl.

Hahaha, lolol...

You're a drama-whore cunt. Don't take that literally though. By drama-whore, I mean a well-adjusted person who doesn't need to be the center of attention and relate everything back to herself. And by cunt, I mean someone who isn't as irritating as fiber glass in the ass-crack.

[Ddrak]

Kula's pretty much right on the money with that assessment.

There's going to be conflicting pressure on the government though - people still want the "American Dream", and there'll be votes in being an enabler for lowering that bar again even if it does get shoved back up. At the same time, I think there'll be a lot of real estate that's going to be unsellable for quite a while.

Dd

[Harlowe]

I had already said it was greed, but it's not a matter of it being greed from the bottom up. People wanting homes, you know a roof over their head that they own, isn't greed - it's the American Dream. It's greed from the top and stupidity from the bottom, but then we are blaming the victims.

If you give people the impression they are capable of owning a home and are eligible for loans, they are going to buy one. Everyone wants a place to live that is their own. Now here is where the banks/lenders come in - THEY are the experts, they are the ones with the money, they are the ones that should know if you should own one or not. If you are financially stable enough to own one and if your credit is good enough so that you show some fiscal discipline. Now if they don't qualify, if they don't have money to put down, WHY WOULD YOU GIVE THEM A LOAN?? If you offer something to people giving them the impression they can and should do it, they are going to. Especially if they are stupid or uneducated. Blaming people that shouldn't own a home for owning one, when those with the expertise and with the money are saying "sure you can!", is ridiculous.

Well sure you can blame them, but it isn't a matter of greed, unless you are incredibly cynical and lacking even a modicum of humanity. It's not a luxury boat, it's a place to live - your most basic necessity next to a job and food.

Personally I put 20% down and have over 80k in equity already in it, but I was building a savings for this purchase for probably 10 years, but I don't think people are remotely greedy for wanting a house and being misled by lenders because they are naive about financing.

[Ddrak]

I didn't think Kula's point was to blame those being offered the loans, it was more to say that people's desire to own a house is really the driving force that was played by the market to everyone's detriment.

I also think that the idea of "trusting" the banks is fairly naive. In fact, the proverb that a fool and his money are soon parted seems pretty apt.

The root cause is simply the banks not properly (or even coming remotely close) to measuring risk on loans.

Dd

[Select]

D'aww, Embar. He got to you that bad you're lashing out at one of the people who laughed?

[Select]

Agreeing with Dd on this. Easy prey or foolish all because they wanted the American Dream. Some people have a vision of that dream on a grander scale and without ethics.

[Harlowe]

I didn't think Kula's point was to blame those being offered the loans, it was more to say that people's desire to own a house is really the driving force that was played by the market to everyone's detriment.

I also think that the idea of "trusting" the banks is fairly naive. In fact, the proverb that a fool and his money are soon parted seems pretty apt.

The root cause is simply the banks not properly (or even coming remotely close) to measuring risk on loans.

Dd

Embar

Ddrak
I'm not saying that they weren't naive, in fact I said "stupid". But who is more stupid, the naive person thinking they can afford a house payment they can't, or the financial institution that gives them a loan anyway. The proof is in the results - these institutions are going bankrupt & struggling, people are defaulting on their loans. It's the lender's money and they are being irresponsible with it, they are failing and seemingly expecting the government to help bail them out. I think people that can't afford their houses should lose them and I think lenders with irreponsible lending practices should fail. Companies with better practices will fill in the gaps.

Oh no, we gave money to people that had no savings & poor credit - now they aren't paying their loan off!! SHOCK and AWE!

See what I mean?