Inquring Minds Or No?

[kenberg]

Another quick one to try to answer your questions, Ken.

 

From Sheila Bair:

 

The Community Reinvestment Act — or CRA — is a federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.  It has largely been criticized by conservative members of the GOP as promoting predatory lending practices

 

“Point in fact,” she said, “only one in four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending. The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules.”

 

Bair said CRA has always recognized there are limitations on the potential volume of lending in lower-income areas due to “safety and soundness” considerations, and that’s why the CRA never set out lending targets or goals. However, the CRA isn’t without imperfections, and now is the time to put more emphasis on the qualitative aspects of lending in CRA examinations, she said.

 

The last quote sort of nails it - without any lending targets, quotas, or goals that had to be met, how could CRA be "enforced" or cause poor loans to be made?

The above is absolutely the sort of material I have in mind. It is always wise to say "that's the theory, how did it work in practice?" but this, for me, is a good start.

 

Roughly (and I may never get past roughly) I see responsibility as something like this:

 

First and foremost, when loans are made someone's signature goes at the bottom and he represents some institution. It seems to me it is a fundamental principle of accountability that the lion's share of the responsibility falls here. In childhood terms, every mother tells her son "It doesn't matter if Johnny told you to throw the rock, you are the one who threw it".

 

Next: ***** happens. Our elected representatives are supposed to be minding the store and act before a problem becomes a disaster. Holding hearings after the disaster is, or should be, embarrassing to them. I am entitled to be confused about what is going on. Members of the Senate Banking Committee are not.

 

 

After these two fundamental groups, we can look at the supporting cast. We might ask Johnny if he did indeed suggest throwing the rock.

 

The Wikipedia article mentioned powers that go with the CRA relating to such thing as applications to open a new branch. These powers can be used reasonably or they can be used with a heavy hand. I trust that more or less everyone, at work, or in dealing with the gov, or somewhere, has had an experience where we are told something along the lines of "Gee, I wish I could think of some way to get you to do what I want. Let's see... Oh yes, you are applying to open a new branch..." Something like that. Government agencies are given to such things and then they can say "Oh, I never said he had to.." So it all depends on how it actually played out.

 

 

The 1 in 4 number (so x/y is around 0.25) also is very useful. It is some reason to say the impact of the CRA was not huge.

 

 

All subject to fact checking.

 

 

Here is an incident from fifteen or twenty years ago the, in retrospect, seems like the beginning of trouble. My bank had a sign up that an investment representative would be there at such and such an hour. I went. As often happens, it was crap. A young woman who perhaps was good at selling things but who had no discernible knowledge about finance attempted to get our business. She explained, for example, that common stocks were the ones everyone knew about and preferred stocks were the ones people liked better. My bank lent its lobby and its prestige to this event. Not good. That particular bank is out of business but it seems it was just ahead of its time.

[kenberg]

I do not have any problem with rating agencies taking or not taking fees.

 

The problem I have is that the ratings agencies were rating bonds created by those who paid them fees to have the ratings done (an inherent conflict of interest).

There are various groups who have seen their reputation plummet as this unfolds. Bankers, obviously. Certainly these rating services must be one of them as well. We are of course used to a level of bullshit in our lives. If I go to the bookstore I can read a jacket and see a quote from author X of related fiction saying that the book in question is a marvelous read filled with memorable characters. Often the blurb was written by a publicist and the quoted author never saw the book he recommends, much less read it.

 

Perhaps if the rating agencies put in prominent placement a statement: "This report bought and paid for by the entity we are rating. Contact us at www.glowingreport.com if you are issuing bonds" then we could all rest easy.

[jtfanclub]

Fact: CRA was an act ideologically motivated to pressure banks to extend loans to people who previously would have been considered unacceptible risks. Noncomplying banks were to be threatened with loss of FDIC backing.

 

This is true. Note that unacceptable risks often had nothing to do with their credit rating. Unacceptable risks included:

 

-Skin color

-Age

-Religion

 

Certainly some people, Obama among them, used the CRA to pressure banks to lend to people trying to buy homes in black neighborhoods even if they didn't have a sufficient credit rating. Banks probably lost a small amount of money on these pressure loans. I consider these small losses for the good of the city to be a tax, same as if the city had charged the bank.

 

Fact: Consequently

 

This is the one I gotta hear. Yes, the government required that few people get small mortgages in the inner city. Consequently, banks just started giving out $500K mortgages in California for houses worth half that? Consequently, they started committing fraud?

 

How in the world is there consequence here? What about the CRA forced banks to lie? Why would the bank want to lie about a CRA loan? ACORN and others are happy when a middle class black man can get a mortgage. Why would the bank want to lie to make his income appear higher? Then the bank wouldn't be given credit for giving out loans to middle class black men.

 

The Consequently is the horrifying word in this post. "On 9/11/1977, we decided to have the crosswalks repainted. Consequently, on 9/11/01 two planes were crashed into the Twin Towers in New York. We have decided to never have the crosswalks repainted again and sent apologies to all victims of the 9/11 attacks".

 

Fact: the government- executive, legislature and bureaucracy

(including the FDIC)- looked the other way while standards were

being jettisoned: mortgage lending became de facto an unregulated

industry.

 

Yes, the laws were deliberately slacked in 2003, and the agencies didn't regulate the industry. Changing the bankrupcy laws also made it profitable for banks to drive people into bankrupcy (or so some people in the banking industry throught). This is, you know, TWENTY FIVE YEARS after the CRA passed. I mean, you have an event that occurred in 2006. Do you think maybe the Consequently is more likely to apply to the bankrupcy laws and the deregulation that occurred in 2003 and 2004 than a 30 year old bill which, for its first 25 years of its life, did exactly what it was intended to do?

 

But is was CRA which opened the floodgates, and we are now reaping

the whirlpool, with no end in sight.

 

Yes, those floodgates opened in 1977. And nothing came through them.

 

Subprime mortgages have been about 4% of all mortgages, since the 50s. In 2004, they skyrocketed to 21% of all mortgages. But you seriously think it was a law written in 1977 that 'opened the floodgates'?

 

Come on. Do you actually believe this stuff?

[Winstonm]

This is true. Note that unacceptable risks often had nothing to do with their credit rating. Unacceptable risks included:

 

-Skin color

-Age

-Religion

 

You may have said this differently and I missed it but...

 

I take a minor exception to this as it is my understanding that the CRA was not about requiring unacceptable risk be taken but to prevent a bank from taking deposits from some place like South Chicago but only lending in Manhatttan.

 

In other words, it was not to force risk taking but to avoid de facto discrimination.

 

As you point out, though, the difference seems to be in how you define unacceptable risk. I believe the original poster believed the CRA required subprime lending to bad credit risks - which is not true.

[Al_U_Card]

Kind of equal opportunity credit?

[kenberg]

This is true. Note that unacceptable risks often had nothing to do with their credit rating. Unacceptable risks included:

 

-Skin color

-Age

-Religion

 

You may have said this dirrerently and I missed it but...

 

I take a minor exception to this as it is my understanding that the CRA was not about requiring unacceptable risk be taken but to prevent a bank from taking deposits from some place like South Chicago but only lending in Manhatttan.

 

In other words, it was not to force risk taking but to avoid de facto discrimination.

 

As you point out, though, the difference seems to be in how you define unacceptable risk. I believe the original poster believed the CRA required subprime lending to bad credit risks - which is not true.

Some of this, and perhaps I am repeating myself, comes down to how trustful or distrustful you are of government agencies. No one writes a law requiring people to make bad loans. And I doubt anyone (or at least very few) dispute that banks took shortcuts in defining good loans so that skin color had a strong effect on your ability to get a loan. The CRA, something I had not known of, was passed as I now understand it to correct abuses. Good intentions, at times, have bad side effects. Did they here? I would not be too quick to conclude either way although you make a reasonable but not airtight case for it being unlikely.

 

Years back, the stereotype of a banker was that he was a very boring person. If you are putting money in a bank, boring is good. If you want excitement, buy some stocks. Or maybe pig bellies. Banks are supposed to be boring. The banking industry has definitely become less boring of late. The cause of this could be debated.

[y66]

What causes ideology to trump facts?

 

Maybe it's the same thing that causes addicts to deny facts. Who doesn't prefer their own reality?

[mike777]

"Banks are supposed to be boring. The banking industry has definitely become less boring of late. The cause of this could be debated."

 

 

Disintermediation.

 

Basically competition was opened up and the banks had to learn to compete for your business. When I was a child we had nowhere else to go for a savings or checking account or loans.

 

 

Up until 1980 or so if you wanted a loan for a house or a car or a business you went to the bank. If you wanted a savings account or a checking account you went to the bank.

 

After 1980 you could get loans cheaper, faster without a bank. I never bought a house or a car with a bank loan and I worked for banks. The years I did not work for a bank I did not have a bank checking or savings account. I used my brokerage account.

 

Today banks basically have one advantage over other institutions and that is the checking account. The FDIC insurance provides a competitive advantage with a source of cheap funds to loan out. Keep in mind this makes everyone want to be a bank with FDIC insurance and have access to cheap funds. For the investment banks they needed access to the Discount Window when they found out they could no longer stop a run on their source of funds. These are investment banks that survived the Great Depression and WWII.

 

Changing the Depression era laws allowed banks to trade for their own accounts and become investment banks which also made for more risk.

[kenberg]

Mike's description certainly matches, and at least partly explains, my experiences as described earlier.

 

1970: I bough my first house (townhouse, actually). I borrowed money from a bank. I sat in the office of the bank, working with the bank's loan officer, while we closed the deal. The bank held the mortgage until it was paid. No bundling or passing it off to anyone. The interest rate did not go down (not quite accurate, there was a mortgage insurance add-on for the first couple of years while equity was built up). The interest rate also did not go up.

 

 

2005: I moved (there were several moves in between). My needs were simple and everything worked fine. But compared to 1970 there were many players and I found the set-up a bit wild. I planned to pay off the mortgage in relatively short order so I didn't much care about the arrangements as long as they were honest and there were no prepayment penalties. So: Confusing but OK.

 

I'm not so sure this new approach is an improvement in life. I am not very interested in financial things but I believe I am better informed, and possibly even a little smarter, and definitely considerably older, than many people who buy houses. It's good if we can understand what is going on without first taking a year course at the local community college. I can readily see how a young, inexperienced, and not too bright buyer might get a little flummoxed. Even without the predator lurking in the woods. And they are never far away.

 

Well, the world evolves. Adapt or die.

[Winstonm]

Changing the Depression era laws allowing banks to trade for their own accounts and become investment banks which also made for more risk.

 

Mike, what would you say were the benefits and detriments of the repeal of Glass-Steagall?

[USViking]

USViking

 

Fact: Your facts are crap.

Let's see what you claim as "fact".

 

CRA was an act ideologically motivated (you have proof or are you simply repeating unverifiable spin?)

The ideology I refer to is ever-increasing US Federal government

efforts to reduce povery. Is there any doubt that ideology as been

ascendant since the 1930s? Is there any doubt that CRA is a manifestation

of that ideology?

 

The effort has after three generations never come anywhere near

solving the problem, so there is ground for contending that even

if the ideology is sound, attempts to put it into practice have been

mismanaged, and need overhaul.

 

To be completely fair about it CRA is also a manifestation of a less

contentious ideology, that of Federal government efforts to reduce

discrimination. The two ideological motives are often coupled in one act.

 

Here is Ben Bernacke speaking of CRA on 3/30/07:

 

http://www.federalreserve.gov/newsevents/s...ke20070330a.htm

...Public and congressional concerns about the deteriorating condition of America's cities, particularly lower-income and minority neighborhoods, led to the enactment of the Community Reinvestment Act. In the view of many, urban decay was partly a consequence of limited credit availability, which encouraged urban flight and inhibited the rehabilitation of declining neighborhoods. Some critics pinned the blame for the lack of credit availability on mainstream financial institutions, which they characterized as willing to accept deposits from households and small businesses in lower-income neighborhoods but unwilling to lend or invest in those same neighborhoods despite the presence of creditworthy borrowers...

If Bernacke is not talking about ideology, then what is he talking about?

 

 

 

to pressurebanks (again, an unverifiable allegation - not to be confused with data.)

Here is Bernacke again, from the same link:

(emphasis added)

The CRA reaffirmed the long-standing principle that financial institutions must serve "the convenience and needs," including credit needs, of the communities in which they are chartered. The obligation of financial institutions to serve their communities was seen as a quid pro quo for privileges such as the protection afforded by federal deposit insurance and access to the Federal Reserve's discount window (FFIEC, 1992). Indeed, the Bank Holding Company Act, passed in 1956, had already required the Federal Reserve Board, when ruling on proposed acquisitions by banks or bank holding companies, to evaluate how well the institutions involved were meeting community needs, consistent with the requirements of safety and soundness.

"Quid pro quo"?- that expression hovering over the issue from

the mouth of an authority such as Bernacke sounds like pressure

to me, what does it sound like to you?

 

 

 

to extend loans to people who previously would have been considered unacceptible risks. (Nowhere in the CRA does it require banks to increase or take unacceptable risk. Show us the data instead of spinning a tall tale.)

That is very nice of CRA, but the fact is that CRA's reason for

being was to promote increased lending where the banks themselves

showed no sign of willingness to take initiative, correct?

 

Why the banks' reluctance other than their perception that the risk

was not worth it?

 

 

 

Noncomplying banks were to be threatened with loss of FDIC backing. (There was no provision for penalty in CRA).

You may be correct and I in error here.

 

I have not been able to locate texts of all legislative changes

to the original act, and I was relying on links which described

CRA penalties without sourcing the information.

 

However, CRA does not need to have penalty provisions of its own:

in a "quid pro quo" environment noncompliance is certain to trigger

penalizing governent reaction, whether in the form of new legislation

or new bureaucratic regulation.

 

 

 

Your statement shows more about your prejudices than about any actual fact. But I press on, anyway, hoping an open minded individual will miraculously emerge.

So far I think I have been on solid factual ground

with the narrow exception of the CRA penalty question.

 

 

 

This entire "fact" you claim is simply a series of non-verifiable allegations that comprise a single talking point made from inferior logic - (1) the CRA was designed to help the poor obtain credit; (2) subprime loans caused the crisis; (3) therefore, the CRA is at fault.

What a bastardization of logic and what total crap!

(1) is true, (2) is true: no runaway foreclosures and no

toxic Wall Street securities tanking for a trillion dollars

absent subprime lending (3) would be true if CRA was

the prime initiating motive force behind (1) and (2).

 

However, to be completely fair I agree I probably overstate

my case by singling out CRA. There has been much other

mismanagement by federal government act and omission

and many citizens who have taken unscrupulous advantage.

 

 

 

You quote this from The Big Picture, as some kind of proof of CRA culbability???

No, I quote it in support of my observation that lending standards

did not exist.

 

 

 

Listen again - the CRA only appled to depository institutions. It DID NOT apply to mortgage brokers and other middlemen. It did not require 120% LTV ratios. It did not require AAA ratings on subprime CDOs.

I explicitly drew attention to "other actors", but you are right

to emphasize a critical part of the problem that I mentioned

only in passing.

 

 

 

Fact: You are doing exactly what my post implies is done - spouting ideological talking points with no statistical evidence to verify the claim. Interesting.

Ideology exists as fact of politics and statistical data

is not needed to prove so.

 

Acts of Congress such as CRA provide evidence for the

legislative and executive branches' ideologies.

 

 

 

 

By the way, Barry Ritholtz of The Big Picture has been adamant that CRA is not responsible for the crisis. Here is what Barry Ritholtz has to say: (emphasis added)

CRA is part of the problem whether Ritholtz and others

reaize it or not: Well intentioned US Federal Government

acts are returning grossly less value than they consume,

and CRA an example.

 

If the individual states were left to their own devices I believe

we would be in better shape than now.

 

Unfortunately, the spirit of true Federalism is dead, and all states

now plead for all dollars Federal in a never-ending circle jerk

of loads my money, and yours, to Washington DC and then back

to the state capital nearest you, but not back to you and me,

unless you are a Federal Dollar beneficiary of some kind (I am not).

 

Acts like CRA then suggest strongly how we use the dollar largesse,

and we take the path of least resistence, and obey.

 

 

 

The purpose of the exercise is to figure out what worked, what didn't work, and then fix the problems so they won't again occur - apolitically. Unfortunately, the WingNuts turn this exercise into spin to defend ideology.

We know what happened: (1) subprime lending, (2) zero regulation,

and (3) promiscuous mortgage securitization

 

cast us into the the whirlpool we now reap.

 

I haven't heard a peep from our government about what it intends

to do except pour money into the problem.

 

Typical, huh?

 

In my opinion (1) subprime lending should be returned to the

0.5 - 1.0% or so level where it apparently was throughout

the entire history of our banking system prior to the 1990s,

(2) rigorous mortgage qualification standards should imposed

by the goverment (government must play some role) on all lending

institutions, and (3) other standards should be imposed the

Wall Street securities hogs.

 

 

 

And they don't let facts stand in the way of a good scapegoat.

Why is it so difficult for the WingNut to say: You know what. I may have been wrong?

Simmer down.

 

I have made a few concessions. Perhaps you might consider

tightening a few nuts of your own.

 

Namely: You yourself should accept that even if CRA is not

the whole problem, then it is part of the problem, and that

the problem is ideological.

 

I do not know about you, but 40 years of my taxes have supported

the ideology of Federal Government intervention on behalf of the poor.

 

These efforts did result in pressure to expand mortgage credit to them,

and did play a part in today's crisis.

 

BTW I am aware of the fact that a significant amount of subprime debt

is carried by consumers who are definitley not poor, but who wanted

to buy more house than they could reasonably afford, so they can be

added to the cast of irresponsible actors in this fiasco.

 

It has reached the point where the numerous irresponsble actors might

make ME poor, not that I have ever been remotely close to wealthy.

 

When there are so many people upon whom to vent my fury

why should I pick only on poor little CRA?

[Winstonm]

Simmer down.

 

I have made a few concessions. Perhaps you might consider

tightening a few nuts of your own.

 

You are right. Thank you and I apologize.

 

I am probably picking on you unfairly as representative of those who push the idea that the CRA was totally at fault AND their own ideology was blameless.

 

Again, it is not fair to place you in this category as you did not make that claim. Sorry for being so touchy.

[Winstonm]

Nice timing - this just popped up. Nobel prizewinner Joseph Siglitz:

 

You’ll hear some on the right point to certain actions by the government itself—such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.

 

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

[goobers]

http://www.federalreserve.gov/newsevents/s...er20081203a.htm

 

They lent money to people who would not have been considered before, which is not equivalent to saying they took excessive risks. They simply used a different method of evaluation. As someone else already pointed out in the thread, their rate of default is low.

[mike777]

Nice timing - this just popped up.  Nobel prizewinner Joseph Siglitz:

 

You’ll hear some on the right point to certain actions by the government itself—such as the Community Reinvestment Act, which requires banks to make mortgage money available in low-income neighborhoods. (Defaults on C.R.A. lending were actually much lower than on other lending.) There has been much finger-pointing at Fannie Mae and Freddie Mac, the two huge mortgage lenders, which were originally government-owned. But in fact they came late to the subprime game, and their problem was similar to that of the private sector: their C.E.O.’s had the same perverse incentive to indulge in gambling.

 

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.

Yes, I would phrase this as I did in earlier posts. Are free capital markets smarter than the central government, in the long run, in risk management and capital allocation decisions? If they are then this is the role and issue that owners should be, should be, holding the feet of the CEO to the fire. Some will fail and others should win resulting in "creative destruction".

 

The purpose of the free capital markets is to allow them to find the winning decisions of risk management and capital allocation. OTOH if the Utility, the banking system, keeps needing a central government bail out what does that mean? After all central governments, even in our lifetime, have been destroyed.

 

 

Just a thought here but perhaps what needs to be done is a way to allow important companies to fail without the entire system failing? To put it in otherwords:

1) shareholder equity in car companies and banks should be allowed to be wipedout/destroyed?

2) debt holders take control of the company and become new owners?

3) debt holders write down debt to a lower sustainable level?

4) company rises as a Phoenix from the ashes? Or for example companies that make typewriters and carbon paper vanish or recreate themselves? Anyone remember IBM select typwriters? Kodak analog cameras?rotary telephones?

[Winstonm]

Just a thought here but perhaps what needs to be done is a way to allow important companies to fail without the entire system failing? To put it in otherwords, shareholder equity in car companies and banks should be allowed to be wipedout?

 

Precisely. Even then you might need some government intervention to prevent too big to fail institutions from being created.

[kenberg]

http://www.federalreserve.gov/newsevents/s...er20081203a.htm

 

They lent money to people who would not have been considered before, which is not equivalent to saying they took excessive risks. They simply used a different method of evaluation. As someone else already pointed out in the thread, their rate of default is low.

It at least appears that this was a serious attempt to get to the truth. One portion that I found significant:

 

>The final analysis we undertook to investigate the likely effects of the CRA on the subprime crisis was to examine foreclosure activity across neighborhoods grouped by income. We found that most foreclosure filings have taken place in middle- or higher-income neighborhoods; in fact, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.

 

 

We all have our ideological orientation. I reflexively distrust government agencies that are heavily staffed by people who know a lot about regulations and little about the industry that they are regulating. But I am really liking this thread as I see it as a chance to rise beyond ideology to get at facts.

 

Also, I found the quote from Geenspan remarkable. I was aware of some public soul searching on his part but I had not seem this exchange.

 

Every nation has its myths, usually with some basis in truth, but they should not go unexamined. Reality has a way of making you wish you had looked a little closer.

[Al_U_Card]

While walking, should you stumble, no big deal. If you are on a tightrope....that is another story.

 

The housing bubble was highly speculative in nature. No amount of surity (in an essentially unsure situation) will make the situation any more secure. A tightrope is always a tightrope. Having a safety net is the least one can do and our friends in the financial services industries figured that the fed and good ol' John Q. would pick up the pieces....so here we are.

[Winstonm]

http://www.federalreserve.gov/newsevents/s...er20081203a.htm

 

They lent money to people who would not have been considered before, which is not equivalent to saying they took excessive risks.  They simply used a different method of evaluation.  As someone else already pointed out in the thread, their rate of default is low.

It at least appears that this was a serious attempt to get to the truth. One portion that I found significant:

 

>The final analysis we undertook to investigate the likely effects of the CRA on the subprime crisis was to examine foreclosure activity across neighborhoods grouped by income. We found that most foreclosure filings have taken place in middle- or higher-income neighborhoods; in fact, foreclosure filings have increased at a faster pace in middle- or higher-income areas than in lower-income areas that are the focus of the CRA.

 

 

We all have our ideological orientation. I reflexively distrust government agencies that are heavily staffed by people who know a lot about regulations and little about the industry that they are regulating. But I am really liking this thread as I see it as a chance to rise beyond ideology to get at facts.

 

Also, I found the quote from Geenspan remarkable. I was aware of some public soul searching on his part but I had not seem this exchange.

 

Every nation has its myths, usually with some basis in truth, but they should not go unexamined. Reality has a way of making you wish you had looked a little closer.

Thank you, Ken.

 

That is my position, as well. I obviously have my biases - but I try not to be poisoned by them and I try to be as objective as I can.

 

I think this nation has lost this quest to always place truth above ideologue, that somehow winning became more important than playing the game truthfully.

[Al_U_Card]

Just an aside, AIG (poster child for bail-out largesse) started the year with a stock price around $60.00 and is currently treading water at $1.75.

 

Just curious as to how much the company was valued at when the cash injection was arranged...

[Winstonm]

Just an aside, AIG (poster child for bail-out largesse) started the year with a stock price around $60.00 and is currently treading water at $1.75.

 

Just curious as to how much the company was valued at when the cash injection was arranged...

And AIG just went back today saying they need another $10 billion.

 

But according to Paulson, et al, they are too big to fail.

[Winstonm]

For those of you who may not know, yesterday, 12-9-08, the auction of 4-week U.S. treasuries paid a yield of 0.00% for the firt time ever.

 

That's right. Hard-earned cash was turned into treasury bonds that paid no - zero - nada interest rate.

 

That's getting a little weird - especially as the bid-to-cover ratio was 4.2 (This means they could have sold 4.2 times as much due to demand.)

 

 

Any thoughts?

[kenberg]

Any thoughts you say? How about this:

 

Q: What's the difference between me and Hank Paulsen?

A: Neither of us understand the situation, but I am aware of the fact that I don't.

 

I am no more qualified to tell Hank Paulsen how to rescue the economy than I am to tell Bob Hamman how to make 6NT. But I am getting very nervous with this "rescue plan of the week" stuff. To use an expression form the 60s that had a brief resurgence of fame during the election: You don't have to be a weatherman to know which way the wind is blowing.

[Winstonm]

There are some significant terms being bandied about by other than what used to be known as the tinfoil hat crowd (They are now known simply as prescient.)

 

Bernanke is talking about quantitative easing - a method utilized by Japan in their fight against deflation with only moderate success.

 

Real economist have even allowed the "D" word (depression) to creep into discussions.

 

The world for the past 30 years has abused credit and debt - and like the line from the movie Independence Day, Payback's a bitch.

[kenberg]

I see the myth of our special nature as being particularly harmful. Religious folks see it as God watching over us. But the non-religious are not immune. We have a special destiny or we are the city on the hill, or the world's last best hope or something. No, we are folks. No better, no worse, then the French, the Chinese, the Brazilians, whatever. If we want things to go well for us we need to get down to work, same as they do.

Not exactly on topic I know, but I am more than a little worried about where we are headed and I think some confrontation with realism is long past due.