2009.10.25
Radmacher: Regulating the finance industry
America should listen to this Cassandra
Dan Radmacher
Radmacher is editorial page editor of The Roanoke Times.
The problem with prophets is it's so difficult to tell who the genuine ones are until after the fact. Sen. Byron Dorgan, D-N.D., for instance, turned out to be a genuine prophet in an article he wrote back in 1994. The problem was that no one realized it until the global financial system teetered on the brink of collapse 14 years later.
In that 1994 article in Washington Monthly, Dorgan warned that the trading of new, complex financial instruments called derivatives could lead to a "real financial conflagration -- one that would make us nostalgic for the days of the $500 billion savings-and-loan collapse."
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yes I remember when the community reinvestment act was forced upon bankers to give loans to people that they KNEW couldn't repay them...yes, FORCED...I know first hand..get the govt out of my back pocket, I do not need a nanny as I am quite old enough to decide for myself and need no govt nanny state to protect me from all the terrible big bad banks and insurance companies....oooooo scared shiver shiver
Comment by pammala — October 25, 2009 @ 9:59 am
Community banks were never forced to lend to people they knew couldn't repay them. That's a lie that's been often repeated but never proven.
Comment by Dan Radmacher — October 25, 2009 @ 10:59 am
I worked there dan it was forced
Comment by pammala — October 25, 2009 @ 11:00 am
fortunately I hated the banking industry so I moved on to bigger and much better things...but believe me son, it was told to us to let these loans go thru..you cannot make me think otherwise when I was there.
Comment by pammala — October 25, 2009 @ 11:02 am
@2Community banks...
a very large bank is what I am talking about
Comment by pammala — October 25, 2009 @ 11:03 am
1 That's a lie
I am not a liar dan, I really think that was low class of you
Comment by pammala — October 25, 2009 @ 11:04 am
Pam,
If it's true, prove it. Show us the code that said banks had to lend to people who they knew couldn't pay back.
I didn't say you originated the lie, and I didn't say you were repeating it knowing it was a lie - so I was not calling you a liar. Sorry if you took it that way.
But it is a lie. If I'm wrong, then prove me wrong.
Comment by Dan Radmacher — October 25, 2009 @ 11:25 am
I am saying that you cannot tell me that a former boss advised us in a meeting to allow certain loans to go thru. I am not going to tell you the bank as I do not think it is your business to know. It isnt necessary as it was a common thing among bankers...at least the crappy ones, hence no longer there !
Comment by pammala — October 25, 2009 @ 11:28 am
it isnt 'Pam', btw, it is pammala which has nothing to do with the name "Pam" ..lol, it happens to be an abbreviation for something, which is weird as well
Comment by pammala — October 25, 2009 @ 11:29 am
Pammala,
I do not dispute that banks made such loans, nor that people at those banks told workers to let such loans through. Banks thought they could make money off such loans by packaging them, slicing them up and selling them off.
What I dispute, and what you have not proven, is that the government condoned, much less coerced, such a foolhardy strategy.
Comment by Dan Radmacher — October 25, 2009 @ 11:49 am
Did Dorgan predict Fannie Mae would buy all these bad loans hand over fist and become the great enabler? It burns me up that government was the real perpetrator of this crisis while they present themselves as the savior, and the electorate is too stupid too to know the difference.
Comment by Suzie — October 25, 2009 @ 11:50 am
Dan,
Pammala worked at a bank and saw it first hand. You're saying she didn't. That means you're calling her a liar. You don't like it when people do that to you. I think it's out of line.
Comment by Suzie — October 25, 2009 @ 11:52 am
@12 Agree Suzie and I dont care if he believes me or not...a lot of people know the truth and others can live their little fasntasy all they want, it still doesnt change the facts..and I dont have to prove anything to anyone Dan.
what admin began this, carter and it blew up with clinton
Comment by pammala — October 25, 2009 @ 1:08 pm
Oh please Dan. Do you really expect us to believe you are that naive? Of course there was nothing written in the legislation that directed banks to give bad loans, just like there was nothing in more recent statutes or policies and procedures directing that "Friends of Angelo" be given special treatment, but it did happen, and the government did condone it.
The CRA didn't say the banks had to make bad loans. However, subsequent legislation invoked CRA ratings and set limitations on banking operations based on these ratings. In other words, in order to achive a high CRA rating, banks had to make a certain amount of loans to people in what were traditionally recognized as low income neighborhoods. If a bank didn't have a high enough CRA rating, the government would restrict their ability to engage in other interstate banking. So the banks were thus motivated to achieve a high CRA compliance rating. How do you get a high rating? Well by giving a lot of loans to people who live in low income areas. Who lives in low income areas? Why people with low incomes of course. And who is more likely to default on loans? People who don't have incomes sufficient to ensure they can pay the loan back. Are you starting to see the picture?
Sure, it wasn't written into the legislation that "banks shall knowingly make bad loans." No, instead the CRA and subsequent regulation just set restrictions on other banking activity if a bank didn't give enough loans to low income borrowers and thus the government not only condoned but encouraged, if not strong armed, banks into making risky loans. To argue otherwise is just more ploitical spin in an effort to make sure no blame for the current economic mess is laid at the feet of the Democrats. After all, elections are so much easier to win when you can play on people's financial fears and point at the evil Republicans and say "it's all their fault."
Comment by Another Chris — October 25, 2009 @ 2:28 pm
Dan,
I like what a columnist in the Parade magazine stated about the stock market being a giant ponzi scheme.
Back before deregulation, a company had to have a real money value to sell stock. Today, the value of the company, and the stock are determined by who buys and sell the stock.
http://www.parade.com/askmarilyn/archive/Sundays-Column-04-05-09.html
http://www.parade.com/askmarilyn/archive/Sundays-Column-02-22-09.html
Here's a discussion (now closed ) on it.
http://www.nonags.com/forum/forum_posts.asp?TID=2140
Comment by joe Mostowey — October 25, 2009 @ 4:11 pm
Banks made loans because they were selling the mortgages as fast as they could make them to the Hedge Funds. Fannie Mae was packaging them, but that was becasue the Hedge Funds were demanding them. At the time there was no where else to get 6+ percent on your money with collateral backing. When the Hedge Funds decided RE was overvalued, they bailed out of mortgages and went into oil futures. The RE market crashed, the banks crashed because they did not anticipate the Hedge funds bailing and oil prices went wild. When the hedge funds decided oil futures had gotten to high, they bailed on that and oil prices dropped like a rock. Hedge funds then went into cash and began short selling equities like Lehmen Brothers, Citi Corp, and Wachovia.
Fortunately, Obama's Administration has put limits on short selling, saved the banks, and has been negotiating with Hedge Funds to stop manipulating the market.
That is what happened in 2008,banks made bad loans because they were making 3 to 7 percent on every loan made and then selling them immediately backe dby AIG so they thought they had little risk. They were wrong.
Comment by Richard — October 25, 2009 @ 4:42 pm
Regulation of the finance industry is coming and is needed. Currently, the only people making money in the industry are the dealers and the Hedge funds, not the average investors. The market has been manipulated for years (8). Hedge Funds have so much money that they can manipulate the market anytime they want. ALl of it is unregulated, offshore so untaxed, and out of Gov't control. Each time Congress or the SEC has suggested regulation, the money buys off COngress and regulation is stopped. It is one thing to pool money to buy investments, it is quite another to pool so much that the markets can be manipulated.
Comment by Richard — October 25, 2009 @ 4:55 pm
Valuaaion and studying a company has little to do wiwth stock prices anymore. A stock is worth what the market says it worth and is generally manipulated by large investors up or down. Wall Street has been playing pension funds, mutual funds, and individual investors as dupes for years. Mutual funds are stuck in the marketbecause of their investment agreements. They can't go to cash, so when the market falls they have to stay in. How silly.
What is even worse is the new market trend by advisors to get you to pay them 1 = 2 percent to manage your money and then they buy mutual funds with your money. You are paying a money manager a fee to have money managers in the mutual fund manage your money for a fee. In other words, you are payig twice for the same service. It is a rip. Then the dealers take a cut and you have 4 - 5 percent in costs before the investment makes a dime. 4 -5 percent is a good earnings and you are giving it away.
Comment by Thinkbiggeer — October 25, 2009 @ 5:49 pm
Pammala, do you really believe your local bank amaking a few bad loans caused this revcession?
Comment by Richard — October 25, 2009 @ 9:12 pm
Richard,
I don't believe "my" local bank making bad loans caused the recession. I think thousands of local, national and international banks making bad loans led to the burst of the housing bubble, which, coupled with skyrocketing gas prices from falsely inflated oil prices triggered a chain reaction that led to the crisis.
I think some moderate regulation is needed. The problem is the radical left-wing that is now in control of the government equates regualtion with a full government takeover. They are just willing to do it gradually.
Take healthcare for example. Initially the argument was that reform was needed to control cost and the government option was only to be that, an option. It would just keep the playing field level and inject some healthy competition into the field. No one would be required to join the government plan. In fact employers who did not provide insurance to employees would be penalized. Concerns that the government would allow employers to drop coverage, thus constructively forcing workers in droves to choose the tax-payer subsidized, lower priced government option were dismissed as paranoia. However, now it seems those predicting that eventuality may not have been quite so paranoid.
http://www.msnbc.msn.com/id/33470039/ns/politics-health_care_reform
It makes me wonder which promise is next to be broken.
Comment by Another Chris — October 25, 2009 @ 9:53 pm
@19 no Richard I do not but the still international financial institution where I was formerly employed sure helped it happen - along with govt insistance... and the stupid people that ALSO knew they couldnt pay it back.
Comment by pammala — October 26, 2009 @ 9:02 am
Your International Bak made those loans because they could sell the and make a profit. They stopped caring about the buyer of the loans. They also figured the property would increase in vlue and the buyer could always forclose and resell the properrties at a profit. How is that any different than the individuals buying the property they could not afford. ALl parties were betting on the RE market to continue to go up. ALl parties were guilty, However, the individuals buying the house did not cause the recession. The banks not doing their ob of making good loans but rather greedily seeking a profit on selling the mortgages led to the recession. They ran the RE market up and then the bubble burst.
Quit blaming poor people for the banking crisis.
Comment by Richard — October 26, 2009 @ 9:21 am
@22 and it all began with carter...not blaming poor people at all. blaming the democats for starting his stupid banking mess
Comment by pammala — October 26, 2009 @ 6:45 pm