The next "capital" crunch

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The underlying reason for our current economic crisis underlies a deeper problem than bad sub-prime loans. Greed. Would you agree?

Only in part.

The lenders were forced to lend to sub-prime customers or face fines and litigation under the CRA. Attempts by the current administration to make changes in 2003 were squashed in Congress.

There certainly was “greed” on the part of those who bought homes they could not afford gambling on the future value of their home to do so.

The “greed” of Wall St has been overblown, IMHO. The “greed” lies squarely in the court of Fannie, Freddie, and those in Washington who enriched themselves at the expense of the taxpayer.

It’s a complex issue, with no one single cause, but Freddie, Fannie, and their Democrat backers are at the center of the bullseye.

I don’t know if it was only the democrats. I’m not into that “point the finger at…” type person. This isn’t helped by all those cutbacks at companies were the “little gut” is sacraficed by the bigwigs who want fatter bonus’s and paychecks.

Once upon a time it was very hard for individuals with poor or little credit history to get a loan for a hosue without a substantial downpayment. This makes sense, after all, as one would much more likely loan a large sum of money to an acquaintance who has a reputation of paying debts than one who hasn’t built up such a reputation.

Then the accusations started. These companies were accused of neglecting and discriminating against certain groups, based on race, socio-economic status, etc. Pressure from government and social groups helped to lower the bar for lending standards.

Suddenly, the reason that bar had been set higher in the first place became obvious as the fall-out began.

Let’s also not forget that government backed the debts of these companies, providing a safety net that wouldn’t have existed in the free market and allowing much riskier loans than should have been given. Walking a tighrope is a lot less fearful when such a net exists below.

So, is greed a factor? Sure. Is it the “underlying reason”? :shrug: Nor is what I’ve written the underlying reason. lot’s of fault to go around, including the reckless ambition of those buying more house than they can afford.

And, though I typically vote Republican, I’d have to say that both families had a hand in building this house of cards.

A Dem controled Congress and white house passed the legislation that led directly to the lending requirements in question and the creation and support of Freddie and Fannie lie there too. Not totally to blame, but as I said in the center of the bullseye.

Do you have examples of this?

Does “Enron” ring a bell?

Enron is not an example “all those cutbacks at companies were the “little gut” (sic) is sacraficed by the bigwigs who want fatter bonus’s and paychecks.”

There were no “cutbacks” at Enron.

Enron is an example of a company committing wholesale *fraud *with the help of their CPA. Collusion was key at Enron, and it was widespread.

Certainly greed was at the center of Enron’s demise. However, Enron is in no way related to the current financial crisis. There’s no evidence of Bear, Lehman, or others committing fraud.

Although, Johnson and Raines from Fannie are dubious at best-- and under FBI investigation. Congress is too busy to investigate these guys, or maybe it’s because they are currently “economic advisors” to a presidential candidate.

I meant little *guy, *not gut. But there were a lot of reports about stuff like this a few years ago. The top dogs getting fat bonuses while the drones got little if anything.

Oh, a few years ago here in town, there was a goodyear tire plant. I’m not sure if it’s still there or not. But once, they went on the news saying there would be no cutbacks. The very next week, there were cutbacks.

Ok, maybe that isn’t what I meant. Enron was the first thing that I thought of in this. :shrug: You’ve heard of the “trickle down effect”? Well, how about trickle UP. I’d like to see that happen. The fat cats give themselves big paychecks, then gripe about the cost of things. Which means, a bigger paycheck at the cost of lower paid employee’s in an attempt to save money. So, the little guys suffer over the same cost of living but on a much lower budget.

Our current budget crises was years in the making. Look at how fast the price of gas has gone up. I can tell you that by living on disability that my income just doesn’t keep up. I’ve been told, by a congresswoman, that the increase for this next year is 3.9%. Big whoopee. Usually under 3% a year. So, ok, it’s more of an increase, but it still doesn’t keep up with inflation.

Ok, Ok, I’ll get of my little soap box for now.

First, if you think that the cost of gas is the result of “fat cats giving themselves a big paycheck”, I’d love to get into that conversation.

But what I’m really interested in hearing is your explanation of why, if the “fat cats” are doing something selfish at the expense of the company (which would ultimately result in reduced productivity and lowered profits OR increased prices and then fewer sales and then lowered profits), who do people chose to pay them this money? Why do people agree to these ludicrous contracts?

Before you can answer that it is because some board of directors are playing the good 'ole boy network, keep in mind that the highest paid CEO’s are in corporations where a few large investment firms (as opposed to individual stockholders) are betting their own money on the success of the company. These individuals, with much more financial expertise than you or I, understand the impact a good CEO makes. They also understand that a good CEO increases the overall productivity of the company, creating jobs and increasing pay down below because a poorly run ship would ruin their investments.

And, despite the very few examples of poorly managed companies and big CEO severence packages, the great whole of the industry paints a different picture (especially when looked at over the long-term, rather than just recent headlines). Say otherwise and we’re committing the same error that anti-Catholics do when they claim all of our priests are pedophyles because of a very few rotten apples.

Does that mean that the CEO is benevolent and selfless? Not at all. It does mean, though, for someone like me (and perhaps you), who doesn’t know what it takes to run a multi-billion dollar company (which puts a lot of people to work), it’s really none of my concern. I simply don’t care how much some CEO’s got paid or what severence package was written into his contract. It’s class envy, which is both a sin and an example of economic ignorace. Drop his salary to a hundred thousand a year if you want and it would be barely noticeable to the price of our goods and services.

Or three or four pennies off the price of your gas.

And much more off your retirement and pension funds, which are mostly like invested in companies like that and depend on a good captain at the wheel, whatever his cost.

I guess my problem is that I don’t trust these “capitans” to run a tight ship. I’ve been in jobs where I was expected to do a certain amount of work done in an certain amount of time, but without the tools to do it. All that at minimum wage.

And there is how our government is being rurn in general. Once in office, I see very little difference between democrats and republicans. “Pork barreling” at it’s best. How much money do you think changes hand up there? Factory farms are pushing smaller farms out, because the smaller farm can’t compete.

I believe it’s that way with just about anything in this country. There’s no such thing as affordable health care these days. At least if you have a low income and don’t have health coverage at work. It leaves you out in the cold.

When my daughter was young, she kept having ear infections. Eventually she had to have tubes put in her ears and her adinoids (sp?) taken out. At the time, I was lucky enough to have health coverage. Of course, our many trips to our regular doctor was covered. And that was many times over before the company would accept the need for a specialist. Now, for the surgery itself. It was on an out patient bases, so I had no copay. Afterwards, I did get copies of all the bills except the one from the surgeon. All the others, for the anesthiologist (or however it’s spelled) , and I can’t remember what all else was there Everything but the surgeons bill. That came to about $1,600. And that was back in 1989. There’s no way I could have afforded it without the coverage.

Roll forward a few years. I’m at another job, minimum wage, no longer getting child support, Can’t afford anything. And how long do you think that lasted? Yes, the higher ups were getting great wages. But I couldn’t afford an apartment and child care. The car I had at the time needed a new muffler. No way I could have afforded that, not when I couldn’t afford insurance half the time.

Then to now. I’ve been on disability for several years now. Well, I started getting Social Security in 1995. My VA check I’ve been getting since 1988. This may sound like much, but let me tell, it isn’t so. In 1988 my VA checks were $68 a month. Today its $117 a month. Big whoopee. It’s going nowhere.

I suppose I could go on and on about this, but I won’t subject you to that. Our governement stinks. So do those companies that seem different. Peons like me, and others on low incomes really have no say in anything that applies to the goverenment. I suppose that would help. But it sure has never applied to me.

Congress will once again meet to work out the budget for next year. There have been a couple of times that I know of when the governemt basically shut down because the people weren’t getting paid. Now, can you imagine yourself When the people who work in the hospitals who need to stay on the job in order to care for the patients. I was an in patient when one of these happened. The director put out that if there anyone who had any needed medication to let him know so he could get if for them.

But that’s politics for you. Same story, second chapter.

Most of the people on this forum aren’t going to be sympathetic, much less empathetic to your current situation. On the politics forum, many people advocate the same trickle down (or supply side economics.) Furthermore, there is a person (who will be unnamed) who is so confident in his financial security that he states (if there is a recession, I am not going to participate in it) who opposed left-wing economics. Your story will fall on deaf ears on this forum, and obviously by the politicians. Sorry to disappoint you.

Your best bet… do not base your vote on a candidate who will allegedly end abortion; base it people who will likely appoint judges who will preserve democracy. I think the political left is inclined to do this, and they do not seem to want to disenfranchise voters. I do not trust the political right on this issue. I am not trying to convince you to vote a particular way, but I think the temptation of disenfranchising the most unfortunate citizens seems to be too alluring for the right. I do not want suffrage to be based on property or the ability to pay.

The poor need political power, and democracy seems to be the best means of securing it. Unfortunately, democratic governments are not always transparent. I read The Open Society and Its Enemies defense of liberal democracy, and I find it a much more palatable political philosophy than the Lockean liberalism that the Constitution is based on.

To me, it doesn’t matter so much on who we vote for. I think that things are only going to get worse. The talk is that we are in a “recession.” It’s starting to look more like depression. And I think someone put in that this was years in the making. Which means that the democrates had their day in court as well as the republicans.

Ok, so I rant about my situation. Has it ever crossed your mind that there are alot of people out there who are in the same situation? Yes, we need representation. But who is speaking up for us? Special interest groups have their lobbyist. Is there any for the poor? Not that I’m aware of. The poor don’t have the money to contribute to campain (sp?) finances. And that leaves us dead in the water.

If you think I’m in this situation because I chose it, think again. I worked for years, only making my problems worse. What was the problem? Mental illness. That’s why I’m on disability now. I’m in therapy (have been for years) and taking medication (again, for years) but the likely hood of me going back to work someday is pretty slim. There are days that I wish I could. I think it’s mostly because there are people like you who think I’m only lazy

I do not subscribe to the notion that most of the poor are lazy. I do not take a Calvinistic perspective to this issue.

Not sympathetic? Isn’t that the main problem here? Politicians are more interested in whatever special interest lobbyist has the best spiel. Who am I suppose to vote for? One is just as bad as the other. Whatever the cause, it’s the little guy who feels the greatest pinch.

Maybe it’s time to be empathetic here. We won’t get anywhere if people like you insist on keeping things the way they are. So you like the democrates. Good for you. It wasn’t that long ago we had a democrate as a president. He sure didn’t make things better. It’s past time to play “politics as usual.”

I was going to mention what I think the greatest gift to America would be. But, from what I’ve seen here, it would “fall on deaf ears.” Why bother trying? Nothing will change. And I suppose to support this ****? Sorry, I don’t.

I’m with Christy on this one, having been in some same type situations over the past years.
Not to name a company but, while there, we were told to ‘bite the bullet’ since the profits were down… we got no raise for 4 years. Heard a lot of gibberish on costs and lack of profit. On year 5 our CEO retired with a nice fat bonus of 4 mil (above his other pay and perks). That 4 mil would of gave every employee a dollar raise each year for the 4 years, we did not even see a dime. Oh, the CEO did thank us for ‘turning the company around’ for the next CEO.
And at another work place, the finances were going in the red (borrowing from savings), so again, no raises for 3 years there while all tried to keep the place afloat. At the end of that time, a merger came down. Two people for each position. My contract was cancelled and I was told that I could leave anytime… as others were also told the same thing. No such thing as seniority, just who was favored by the new administrator. I left. (This was a Church/school campus).
Do you want to hear more?
I have been one of God’s “witnesses” for longer then I’d like. There are things one gets involved with that they have no control, no ability to change, and only have to ‘shake the dust off the sandal’s and move on’. What else can one do?

I am not on disability but feel like it, as Christy has no say about it nor do I. We both are just leaves floating on the river of life, going where the current takes us. We both can put in our 1 in 250 million vote (the lottery has better odds then that) come November, we can write our representatives… but they will vote where they want. And there will be more of the same… only worse.

I look at today. Both candidates are telling us what they will do when they become President. Yet, the President now was not able to do it… and neither of the candidates for President was able to do it. Who is feeding us a line of gibberish??? All of them!!! What really is in the ream of paper that makes up that bill? Not just the few things we have heard about, I bet.

And what about ‘Petters’? He resigned and Sun Country employees will be on 50% of their pay thru December… effective immediately!!!

We are maybe better off then countries that have no say with who get into power… but not by much!

Add ACORN to your list. And if you look in to ACORN you will find that is is very closely tied to Obama.

Careful, this is not the politic forum. We cannot discuss candidates here.

I disagree.

I suppose that inasmuch as sin is responsible for getting us kicked out of the Garden of Eden, sin is also responsible for all that ails us. But sin has always been with us, and will always be. Are you trying to suggest that greed was not present in the 70s, 80s, and early 90s? Or that for some reason greed is much more severe now?

Nonsense. And even if it were true, I don’t think there is much Congress could do about it. However, what Congress did do is responsible for allowing that greed to cause much greater damage than would otherwise have been the case.

Greed isn’t going to go away, and we depend on it for a healthy economy. On the other hand, the actions of greedy people must be regulated to prevent them from damaging that same economy.

Except of course that most of the subprime loans were made by mortgage bankers that were not subject to the CRA. The CRA only covers depository lenders.

Also, the CRA had no ability to force the investment banks to purchase these subprime loans from the original lenders. If the investment bankers knew they were unprofitable loans, then why did they buy them from the originators in the first place?

Here is some data that suggests most of the subprime mortgages went to upper and middle income individuals.

washington.bizjournals.com/washington/stories/2008/07/28/daily54.html

Of the 1.9 million subprime rate loans in 2006, upper-income borrowers had the highest share at 39.37 percent, followed by 27.55 percent for middle-income borrowers and 20.99 percent for moderate-income borrowers.

Low-income borrowers had only 149,173, or 7.57 percent, of 2006 subprime rate loans.

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