A Risk Worth Taking

austin, don't be blaming Clinton for the stupidity of the banking industry. Good grief. Did you even read this article?

IF a Auto Maker files for CHapter 11 grab your hat because a Stock Market free Fall will follow.
I look for the stock market to bottom out between 2,500-5,000......THINK ABOUT IT....and get ready!

Community development financial institutions (CDFIs) have been lending to the poorest low wealth communities since the law was enacted in 1995.

CDFIs finance micro and small businesses, homeownership, affordable rental housing, childcare facilities and charter schools. Over 1000 CDFIs operating in the United States manage more than $10 billion in assets, providing much-needed financial services to low-income communities across the United States. CDFIs use capital to leverage social, economic change by giving economically underserved people and communities the opportunity to enter the economic mainstream.

Maybe Wall Street and the financial institutions that are no longer with us should have studied the model that was used to create the CDFI Fund.

Dan, great article!

The problem is there are too many "faux expert talking heads" appearing on cable tv, and walking the halls of the white House & Congress who just don't know enough about the complexities of the US and global economy and such. These people just talk to hear themselves speak and really have very little credibility with regards to the subject matter. And it's not just limited to the subject of economics. It could be with regards to civil rights, foreign policy, health care, education, renewable energy, and the global environment .

I laughed the other day when I heard one talking head, Ben Stein blabbering on CNN's Larry King Live about how Treasury Sec. Henry Paulson didn't have a grasp of the current US economic problems. CHECK OUT YOU TUBE: PETER SCHIFF WAS RIGHT IN 2006-2007. In the clips it shows all these "faux expert talking heads" disagreeing with the President of Euro Pacific Capital, Peter Schiff., who actually knows about the subject matter he speaks about......Americans can no longer afford to listen to people who don't have their facts straight. A mind is a terrible thing to waste! God Bless America

I don't agree

According to Devvy Kidd, "Why A Bankrupt America?" The Federal Reserve pays the Bureau of Engraving & Printing approximately $23 for each 1,000 notes printed. 10,000 $100 notes (one million dollars) would thus cost the Federal Reserve $230. They then secure a pledge of collateral equal to the face value from the U.S. government. The collateral is our land, labor, and assets... collected by their agents, the IRS. By authorizing the Fed to regulate and create money (and thus inflation), Congress gave private banks power to create profits at will. End the Fed.

The whole principle of 'securitization' made the mortgage markets actually insecure. It created what the Doug Adams 'Hitchiker's Guide to the Galaxy' books called SEP - Somebody Else's Problem. When the mortgage gets sold to someone else, or someone else completes the application then it is their problem, not yours. If you are the mortgage broker then someone else's money is funding the purchase. If you are the bank selling the mortgage then someone else will take the loss if it goes bad. If you are buying a CDO you base yoru decision on someone else's ratings. If you are the rating agency, then you rate the CDO based on the insurance company's (someone else) rating. If you are the insurance c ompany then you base your rates on someone else (back to the broker) getting accurate information. Nowhere along this loop is anyone doing their own homework. And when things fall apart everyone sues that 'someone else' for bad information. No one is going to say 'I am responsible for checking things out before I buy.' When this whole process is done without being able to see what is in the CDO in the first place, and multiple investors hold pieces of a single mortgage, and even the mortgage servicer has a hard time telling who holds a mortgage that needs to be renegotiated then you have a real boondoggle.

These banks in the article are running a responsible business. There is no SEP because there is no someone else involved. Another recent article was about mortgage bankers demanding sexual favors from mortgage brokers. That doesn't happen (or not nearly as much) with the internal arrangement because sexual harrassment inside a company is a huge career killer. Sexual harrassment of a broker leaves the broker with no one who will take action on a complaint if the broker did complain. Keep the process internal and you keep the process honest.

I'm glad some one has pointed out the ridiculousness of this Republican argument. I just wish that they would also do an article on who exactly is in foreclosure. Flippers and investors, you know those people that don't actually live in the homes. They have high percentages of foreclosure. And I also know personally, that even with a good credit score and stable income, fixed rate mortgages WERE NOT BEING OFFERED. Some people even tried to get them to no avail.

Thank you for this very timely article. Three things stand out:

1. Because these companies don't sell their mortgages, they stay emotionally invested in the long-term process of helping people meet their financial obligations, not the short-term process of reaping profits but abandoning the customer. These are mortgage companies who speciallize in mortgages, not financial companies who specialize in finance.

2. Turns out Greenspan was right, after all: he couldn't conceive of top managers behaving in a way that didn't safeguard the lending practices, of managers who refused to practice fiscal restraint, so he didn't see the collapse coming - when companies behave responsibly and ethically, everyone profits. When greed is the determining factor, everyone loses.

3. Shame on the WSJ and Fox for pointing the fingers at minorities, the poor, and the Democrats for "forcing" lenders to lend irresponsibily - mortgage companies did that all by themselves, for the worst reasons.

LETS DO THE SUBPRIME WARP AGAIN!
(THE END OF MORAL HAZARD)
(Lets Do the TIME WARP, Rocky Horror Picture Show)
WilliamBanzai7

It's astounding, markets are fleeting
Greenspan's Madness takes its toll
But listen closely, not for very much longer
We've got to regain control

I remember doing the Subprime Warp
Drinking those moments when
MORAL HAZARD would skip past me and the greed would be calling
Let's do the Subprime Warp again...
Let's do the Subprime Warp again!

It's just a AAA CDO to the left
And then a backstop CDS to the right
With your hands on your FLIPS
You bring those TOXIC TRANCHES in tight
But it's the ALT-A thrust that really drives you insane,
Let's do the Subprime Warp again!

It's so dreamy, oh fantasy free me
So you can't see me, no not at all
In another dimension, with fraudulent intention
Well-deluded, I see all
With a bit of a mind flip
You're there in the SHADOW BANKING slip
And nothing can ever be the same
You're spaced out on SECURITIZATION, like you're under sedation
Let's do the Subprime Warp again!