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  1.    #1  
    Study finds bank bailouts profitable for U.S. | Reuters

    Read the above, Reuters report, even at 5 percent, its not a bad return. Thoughts?!?
    Life is short, Play hard, and enjoy every moment as if it was your last.
  2. #2  
    same thing happened with the S&L bail-out years ago. It turned a profit on paper, unless you talk to the people who had their 401k decimated.

    Not only is a 5% return insufficient to make up for all the lives and investments that were harmed by the economic collapse brought on by the banking crisis, but you have to remember that all the money they are "earning" on was borrowed (from China) and the interest on the national debt is much greater.

    And even if that were a good return, the politicians will find a way to spend it on pork rather than use the profit to pay down the deficit...

    IMO
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  3.    #3  
    Quote Originally Posted by Workerb33 View Post
    same thing happened with the S&L bail-out years ago. It turned a profit on paper, unless you talk to the people who had their 401k decimated.

    Not only is a 5% return insufficient to make up for all the lives and investments that were harmed by the economic collapse brought on by the banking crisis, but you have to remember that all the money they are "earning" on was borrowed (from China) and the interest on the national debt is much greater.

    And even if that were a good return, the politicians will find a way to spend it on pork rather than use the profit to pay down the deficit...

    IMO
    While i do feel for those that have thier 401ks damaged, isnt that what investing is all about? You throw the dice and takes your chances?
    As to the interest on the money borrowed being paid, well, and please correct me if I am wrong, the largest part of the money that the US owes is not owned by China, but by Americans. Yes, China owns a chunk, but Americans dwarf that 9 to 1.
    Life is short, Play hard, and enjoy every moment as if it was your last.
  4. #4  
    Quote Originally Posted by xForsaken View Post
    While i do feel for those that have thier 401ks damaged, isnt that what investing is all about? You throw the dice and takes your chances?
    As to the interest on the money borrowed being paid, well, and please correct me if I am wrong, the largest part of the money that the US owes is not owned by China, but by Americans. Yes, China owns a chunk, but Americans dwarf that 9 to 1.
    That would be generally true in the private sector, but not when measuring return on a "government" investment.

    The difference is for the government (of the people) makes monetary gain (taxes or other revenue) because of or in spite of the detriment to its citizens, it isn't about investment goals. I'm not saying that was the intention of TARP, I'm just saying that it didn't help the people that were hurt by the crisis. The people in congress and the banking industry still have their jobs, while regular people have lost savings they wont be able to recover (i.e. retired). And it wasn't private investors that took the losses, it was the pension funds and mutual funds that were supposed to be safe places to invest.

    If the "profit" were distributed to those people, and there were enough of it to make a dent, then it would be meaningful.

    In terms of what China owns, they have enough dollars stuffed in their mattress to buy the louisianna purchase at current real estate prices. That's pretty scary, especially when you consider the personal debt carried by the average american added to each citizen's share of the national debt. My kids (and future grand kids) already owe more than $40,000 each at birth. That isn't sustainable, but off topic. There is an app in the Palm catalog that calculates the national debt, fyi...

    Also off topic, the collapse of BP stock over the gulf spill primarily hurts the same institutional investors as the banking collapse did. remember that when you hear BP demonized as if it is a person. No question some people need to go to jail, but ultimately the stockholders and taxpayers pick up the tab... and they (taxpayers and investors) didn't cause the problem.
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  5.    #5  
    Special Report: The haves, the have-nots and the dreamless dead | Reuters
    another reuters posting a long one.. interesting read..
    Life is short, Play hard, and enjoy every moment as if it was your last.
  6.    #6  
    Quote Originally Posted by evilkaneevel View Post
    401k and stock market investing in general are about trading in a fair environment. This was not a fair environment and this wasnt a normal traqding cycle. This downturn was caused by banks and the banks got out of the way just in time for the American public to take the hit. Who let them? Our Senators and Congressmen.

    Its that simple. You telling me they didnt know the banks would use the money to pay bonuses? No chance. Shouldve done the smae thing as with GM. Make the workers and executives take a pay cut (more substancial one at that) if they want to save their jobs. Wall Street raped America and got away with it. And they're back to doing it again.
    nope i am no tsayin nuttin of the sort.. just pointing out a report or two
    Life is short, Play hard, and enjoy every moment as if it was your last.
  7. Micael's Avatar
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    #7  
    Quote Originally Posted by evilkaneevel View Post
    401k and stock market investing in general are about trading in a fair environment. This was not a fair environment and this wasnt a normal traqding cycle. This downturn was caused by banks and the banks got out of the way just in time for the American public to take the hit. Who let them? Our Senators and Congressmen.

    Its that simple. You telling me they didnt know the banks would use the money to pay bonuses? No chance. Shouldve done the smae thing as with GM. Make the workers and executives take a pay cut (more substancial one at that) if they want to save their jobs. Wall Street raped America and got away with it. And they're back to doing it again.
    I found this article useful:

    From The Times March 19, 2008

    Sub-prime and banking crisis: Who caused this nightmare? The blame spreads

    Suzy Jagger in New York

    Guns don't shoot people, people do. So goes the defence of America's arms lobby.

    In the same way, sub-prime mortgages and the bonds secured by them have not caused the financial and banking crisis that America faces today: it is individuals who bought and sold them who emerge as the real culprits. So who can we blame for Wall Street's mortgage and banking crisis - the nightmare that has seen around $2 trillion wiped off the value of American homes in the past two years? Who can the one family in every 30 in Stockton, California, blame for losing their home? And to whom should Bear Stearns's shareholders direct their anger after Wall Street's fifth-biggest bank almost went bankrupt on Thursday afternoon?

    The culpable are spread across the whole gamut of America's political, economic and banking infrastructure. They trickle down from Capitol Hill with the policies devised at Washington's Federal Reserve Bank and head up the coast to Manhattan's Wall Street chief executives. Downstairs from the chairman's office lie more culprits populating investment bank trading floors, and the maths graduates in front of their Excel spreadsheets, designing ever more complex structured debt products. The blameworthy also sit in the credit rating agencies who endorsed the debt and extend wide across America to the network of thousands of mortgage brokers and lenders who sold bad mortgages over the past decade.

    Sitting at the top of the blame tree, many look to Alan Greenspan, the former Chairman of the Federal Reserve, America's central bank.

    Under Mr Greenspan's leadership, the Fed continued to cut interest rates during the 1990s - the cheap cost of borrowing helped inflate the housing market, with some states such as Florida and California experiencing doubling house prices over a five-year period. Cheap money and surging house prices also created fertile ground for mortgage brokers to push home loans that borrowers could ill-afford, in the hope that property values would continue to rise and homeowners could simply remortgage.

    Pushing the dream of universal home ownership, was former President Bill Clinton, whose policies helped encourage individuals whose low incomes and poor credit ratings should have prevented them from taking on mortgages at all. Chris Whalen, founder of the Wall Street consultancy Institutional Risk Analytics, also blames Washington for the design of America's mortgage industry. He said: “The real father of sub-prime is Congress for setting up Fannie Mae and Freddie Mac. Their existence effectively meant that the Government had the monopoly on mortgages. The banks had to scrabble around with what was left - and what was left were jumbo loans [big mortgages] and bad credit quality debt.”

    He explained: “Because of the way the market was structured, the likes of Bank of America and JP Morgan between 2004 and 2005 were so hungry for mortgage assets, they took market share from Fannie Mae and Freddie Mac.”

    Countrywide and Bank of America, among the US's biggest mortgage lenders, stand accused of predatory mortgage lending, and of being complicit with mortgage brokers, who sold home loans aggressively to boost their commissions. In order to manage the higher risk associated with either very big or very shaky mortgages, investment banks needed a means of trading the debt on. They devised a means of pooling the loans, paying a credit rating agency to rate them, and the pools - from which they could sell bonds - became liquid and tradeable.

    In the 1990s Bear Stearns was the best - now they are perceived as being the worst - at designing these complex pools of mortgages to sell on. Bear Stearns, under the leadership of James Cayne, who resigned as chief executive earlier this year over the toxic securities, was the King of Sub Prime.

    Unlike its Wall Street rivals, Bear Stearns had a cradle to grave model - they sold their own sub-prime mortgages, through their own retail lending arm. Bear Stearns was the market leader in creating new and ever more complex structured debt and selling it on through its extensive fixed income sales teams.

    Joseph Mason, associate professor of finance at Drexel University, argues: “Bear Stearns was the most innovative, and by innovative I mean 'worst', at creating these complex instruments. They had a cradle to grave mortgage structure. They originated it, pooled it and sold it on.”

    Professor Mason also explained that it was the likes of Bear Stearns, Lehman Brothers and Citigroup who, in 2001, tried to find ways of splitting out the worst bits of the mortgage pools and securitising them separately. In turn, they split out the worst of the secondary pools into a higher risk set, then repeated the process into a third pool. “Bear, Lehman, Citi - they were big in this space. It meant that they created a way to sell on high risk debt, which was crucial to be able to securitise further. They fed the bubble.”

    Most of the structured debt products - known as collateralised debt obligations - were typically designed by less than five mathematics experts in their twenties at each bank, armed with a spreadsheet, as part of the fixed income teams.

    Professor Mason argues that not only did the likes of James Cayne not understand either the debt products themselves or the risks they posed, but neither did the banks' heads of fixed income. “The heads of fixed income were more interested in whether they could sell the bonds, rather than how risky they were - whether they would perform.”

    Yesterday, Roland Arnall, the billionaire founder of Ameriquest, once America's biggest sub-prime mortgage lender rescued by Citigroup, was laid to rest. It may be some time before his legacy draws to a close.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  8. #8  
    Please focus on the facts.

    Regardless about how you feel about government intervention, the free market, tax fairness, etc., if the bank stocks were lifted, then the 401k's were HELPED by the TARP. Most of it HAS already been repaid, to the people (or their government).

    As far as the downturn being "caused by the banks," did they hold a gun to anyone's head to make them take out a mortgage bigger than they could pay for a too large home supported by a job in a declining market? Main street caused this crisis (though the banks and government obviously were enablers).

    I want everyone worried about the TARP to look at the estimated cost (now $50 billion or less), then look at what we spend on medicare and other entitlements, especially for the richest segment of America (senior citizens), and see if that thin line is even visible against the real places were we are spending.
    KA1
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  9. #9  
    Quote Originally Posted by Micael View Post
    Pushing the dream of universal home ownership, was former President Bill Clinton, whose policies helped encourage individuals whose low incomes and poor credit ratings should have prevented them from taking on mortgages at all. Chris Whalen, founder of the Wall Street consultancy Institutional Risk Analytics, also blames Washington for the design of America's mortgage industry. He said: “The real father of sub-prime is Congress for setting up Fannie Mae and Freddie Mac. Their existence effectively meant that the Government had the monopoly on mortgages. The banks had to scrabble around with what was left - and what was left were jumbo loans [big mortgages] and bad credit quality debt.”
    How many mortgages did Fannie Mae or Freddie Mac sell to homebuyers (not banks)? Someone, please, explain to people here exactly what Fannie Mae and Freddie Mac do, and stop so much of this factually incorrect or misleading info.

    This paragraph is lazy and misleading. The latest data show that it isn't the low-income folks defaulting on their mortgages, it is the high-earners, who viewed their homes as investments. Face it, tempting as it is to blame the bankers, we are really avoiding looking at our neighbors.
    KA1
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    #10  
    Quote Originally Posted by ka1 View Post
    How many mortgages did Fannie Mae or Freddie Mac sell to homebuyers (not banks)? Someone, please, explain to people here exactly what Fannie Mae and Freddie Mac do, and stop so much of this factually incorrect or misleading info.

    This paragraph is lazy and misleading. The latest data show that it isn't the low-income folks defaulting on their mortgages, it is the high-earners, who viewed their homes as investments. Face it, tempting as it is to blame the bankers, we are really avoiding looking at our neighbors.
    By all means. Please explain what Fannie Mae and Freddie Mac do, and expand on what's factually incorrect or misleading in that article.

    Don't just call it lazy and misleading without sourcing your references.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  11. #11  
    A nice offset for a justified use of credit to stabilize a collapsing economy. At least TARP will be leaving the debt in the near future unlike the costs for a certain war over a oil rich plot of land that didn't actually help us in any way.
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    #12  
    Quote Originally Posted by Orion Antares View Post
    A nice offset for a justified use of credit to stabilize a collapsing economy. At least TARP will be leaving the debt in the near future unlike the costs for a certain war over a oil rich plot of land that didn't actually help us in any way.
    Nice use of space to pull in an unrelated slam.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  13. #13  
    the gov, the fed and the banks are all in cahoots together anyhow

    you can make anything look profitable on paper.
    @agentmock

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  14. Micael's Avatar
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    #14  
    Quote Originally Posted by 65fastback View Post
    the gov, the fed and the banks are all in cahoots together anyhow

    you can make anything look profitable on paper.
    Don't forget the unions.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  15. #15  
    Quote Originally Posted by Micael View Post
    By all means. Please explain what Fannie Mae and Freddie Mac do, and expand on what's factually incorrect or misleading in that article.

    Don't just call it lazy and misleading without sourcing your references.
    From the Freddie Mac homepage (Our Mission - Freddie Mac)
    Our Mission

    Freddie Mac was chartered by Congress in 1970 with a public mission to stabilize the nation's residential mortgage markets and expand opportunities for homeownership and affordable rental housing. Our statutory mission is to provide liquidity, stability and affordability to the U.S. housing market.

    Our participation in the secondary mortgage market includes

    * Providing our credit guarantee for residential mortgages originated by mortgage lenders
    * Investing in mortgage loans and mortgage securities

    They do NOT provide mortgages. Every mortgage they buy is already a done deal (the banks were flipping them). So Freddie may have contributed, indirectly, but before any mortgage goes to them, some homeowner bought a house, and some bank approved. Every time.

    As far as Fannie Mae, their homepage (About Us - Learn more about Fannie Mae and how we can help you | Fannie Mae) states:

    Fannie Mae is a government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets.

    Fannie Mae operates in the U.S. secondary mortgage market. Rather than making home loans directly to consumers, we work with mortgage bankers, brokers and other primary mortgage market partners to help ensure they have funds to lend to home buyers at affordable rates. We fund our mortgage investments primarily by issuing debt securities in the domestic and international capital markets.

    So they do NOT give loans to homeowners. They do prop up banks (and home owners and housing prices) by buying loans that have already been made. And yes, we the taxpayers end up with them.

    But, they are at the END of the chain. Support it, sure, but at the start, someone in main street bought a home too big, that they couldn't afford, in a bad place, working for a bad industry, and in spite of that, some bank approved, knowing they could flip it.

    So before blaming Fannie and Freddie, blame your neighbors, all those damn home buying TV shows, the get rich quick telemarketers, etc. Unless some person, some home owner, initiated a purchase, Fannie and Freddie could do nothing. Nada. Zip.
    KA1
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    #16  
    Quote Originally Posted by ka1 View Post
    So before blaming Fannie and Freddie, blame your neighbors, all those damn home buying TV shows, the get rich quick telemarketers, etc. Unless some person, some home owner, initiated a purchase, Fannie and Freddie could do nothing. Nada. Zip.
    I appreciate the effort you went to, but seriously... if you were taking issue with oh say Fox news, and I was trying to defend them, the *last* place I'd think to go to find something that might convince you that they're ok would be Fox's "about us" webpage. While it may offer some insight.... let's just say that it might be a bit one sided and biased (surprise!).

    This, on the other hand, seems to be supportive data that Fannie and Freddie definitely were part of the problem (notice I said *part, I've never blamed the whole thing on them - you'd know that if you actually read the article I posted previously):

    In 1995, the GSEs like Fannie Mae began receiving government tax incentives for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the Fannie Mae and Freddie Mac with the subprime market.[111] In 1996, HUD set a goal for Fannie Mae and Freddie Mac that at least 42% of the mortgages they purchase be issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005.[112] From 2002 to 2006, as the U.S. subprime market grew 292% over previous years, Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion per year, which included $350 billion of Alt-A securities. Fannie Mae had stopped buying Alt-A products in the early 1990s because of the high risk of default. By 2008, the Fannie Mae and Freddie Mac owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the total U.S. mortgage market.[113] The GSE have always been highly leveraged, their net worth as of 30 June 2008 being a mere US$114 billion.[114] When concerns arose in September 2008 regarding the ability of the GSE to make good on their guarantees, the Federal government was forced to place the companies into a conservatorship, effectively nationalizing them at the taxpayers' expense.[115][116]
    I'm still trying to figure out why you're trying to simply blame my neighbors.... but Freddie and Fannie are dirty man.... dirty dirty dirty!

    My Source
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  17. #17  
    According to your stats above, Fannie and Freddie own "about half", and of that, the "target" ranged from 42% to 52% over a decade. So out of residential mortgages, 25% or so are low income owned by Fannie and Freddie. 75% or so are either not low income, or not owned by Freddie or Fannie. Obviously, 25% or so will impact a market, but you have to ask yourself, what about the other 75%?

    Can I just add another thing to consider, as far as government intervention? Mortgage writeoffs. That probably has a way bigger impact on the market than Frannie and Freddie's 25% low income mortgages (which aren't all defaulting).

    And actually, it looks like the low income folks are even the ones most likely to default:

    Guess Who’s Most Likely to Strategically Default on Mortgages? The Rich - It's Your Money - TIME.com

    So while it is very nice to blame Wall Street, or the Government, maybe, just maybe, the real villian is someone closer to home...

    Just sayin'
    KA1
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  18. Micael's Avatar
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    #18  
    I agree that risky investors riding the wave may have helped fuel some of it, but they were not the root cause. Look to the government and banks for that.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  19. #19  
    once you count the interest the US is paying on the money they had to borrow to fund TARP (all of it was borrwed) then there is still a loss. The notion that tax payers are making money from TARP is just spin journalism. IMHO
  20. #20  
    Quote Originally Posted by xForsaken View Post
    Study finds bank bailouts profitable for U.S. | Reuters

    Read the above, Reuters report, even at 5 percent, its not a bad return. Thoughts?!?
    Darn! Imagine that! Working as planned!

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