Comments on: Is the Fed up to examining your trillion dollar bet?

By: Don

Don — Wed, 04 Feb 2009 12:45:25 +0000

After 911 I was under the impression that financial markets would be closely monitored for unusual transactions and trading activities through the use of data mining and algorithmic models. My basic argument is that oversight should be systematic and computerized. Without even knowing any specifics about account holders, aggregated data would have indicated problems. Instead we have a lot of old technological illiterates around a table discussing obscure, academic and largely unproven notions of economic stability. It has been my great pleasure to take their cash.

By: Damian Palmares

Damian Palmares — Wed, 04 Feb 2009 01:36:30 +0000

Oops, wrong debate…sorry.

By: Damian Palmares

Damian Palmares — Wed, 04 Feb 2009 01:35:57 +0000

Let them fall…here’s more proof of the hoarding going on…. http://www.forbes.com/2009/02/03/banking -federal-reserve-business-wall-street-02 03_loans.html

What do you expect from that industry? It’s time to let them fail and move on.

By: Damian Palmares

Damian Palmares — Sat, 31 Jan 2009 20:26:37 +0000

I knew some honest brokers and still do that still have their offices open but it seemed to me, in that business, there were more dishonest brokers then there were honest ones. World Savings, I believe was their name, used to push the option ARM loans like crazy, if it’s the same one I’m thinking about and Wachovia may have purchased them after they went bankrupt…I’m pretty sure they went bankrupt because that was one of their largest portfolios.

By: Jay Jones

Jay Jones — Sat, 31 Jan 2009 20:10:06 +0000

Two comments :
1) Fed examiners go after setting up fences for loan/debt portfolios. We also need investigators to go after the thieves. There is too much of an assumption that everyone was acting above board.

2) Neither the lender nor the borrower should escape from carrying the burden of the bad debts. Both sides were feeding the frenzy of these loans. In addition, there are 3rd parties, other than the banks, who have not only benefited in the high volume of transactions, but have also increased the SERVICES FEES beyond what was used to be OK. They were as complicit in the scheme as the banks. Real Estate agent fee of 6% on a $300K transaction at fair value vs 6% on an overvalued $500K property.

By: Damian Palmares

Damian Palmares — Sat, 31 Jan 2009 20:04:21 +0000

I think this fraud is at a much higher level than most people would want to believe or even think about. How could our Fed not have seen what was going on, unless there were other agendas behind this financial meltdown, but I am accusing no one of anything directly, merely voicing my opinion. One of the reasons I left the mortgage industry to go back to school was because of the amount of fraud and forgery that was happening at a broker level; it was almost a daily occurrence and it was looked upon by managers and other brokers I have worked for in numerous offices as “this is how it’s done”. I never took part, I never sold an option ARM because I knew the general public wouldn’t know what to do with this financial weapon and would not put their savings elsewhere but spend it and keep paying a min payment or interest only thinking their house would keep going up in value, which people wont listen…they hear 10% increase per year in house value but don’t look to the future when the bubble collapses. I have closed several NINA, no doc loans but only to small business owners who had a valid business and income but had written off most of their paper revenue on personal returns and wouldn’t qualify without bringing in business tax returns and the rate was close to the same. However, I stayed away from those loans as much as I could, while they were being pushed by fellow brokers to ordinary people who could not qualify for a home loan based on income but had the credit qualifications. I stuck with fixed rate refinances, mostly sub-prime to A paper once they were able to qualify for A-paper. I saw this coming 4 or so years ago and have been waiting for it to actually happen not in a good way but because I knew eventually it would all come undone. I think the Federal Reserve shouldn’t be private either and I also think nationalising the banks wouldn’t be such a bad idea until we can sort this situation out and sell them back to the public after the financial sector has been reformed. People need to be held accountable, including mortgage brokers and originators that were fraudulent in their activity and investors as well. I say we go after them all and teach them a lesson, Wall Street included.

By: Simon Smelt

Simon Smelt — Sat, 31 Jan 2009 19:29:15 +0000

Interesting insider’s perspective.
Having spent a lot of time on governance and regulatory issues, I thought the discussion and proposed solutions skipped some key points. In particular:
- How clear are the instructions to banks and to examiners, with what oversight and what reporting streams?
- What exactly are the incentives on the examiners?

Unless there are clear instructions, reporting, oversight and good incentives, any examination system will tend to suffer from client capture and turn mushy over time. The privacy of the system doesn’t help - it becomes a club. I understand that publically identifying weaker banks will make it more difficult for them to recover, but there are other techniques to bring a little fresh air into the room.

By: Jonathan Cole

Jonathan Cole — Sat, 31 Jan 2009 18:46:22 +0000

While I applaud the author’s detailed inside account of the inadequacy of the regulatory process, it does not get to the heart of the matter. This melt-down was precipitated by a criminal hands-off policy that was publicly stated and demonstrated by the executive branch and the the Fed directors. If the leadership is cheerleading for looting and plundering, why would anyone expect the lowly regulators to spoil the party?

Until criminal charges are brought against the very top leadership, this debacle will continue. Since that is unlikely to happen by the complicit Democrats, hold onto your seat, we are in for a very bumpy ride.

The only solution to this fiasco is what John Stewart, the news comedian suggested. Give the bailout money directly to the household debtors for use in paying of their debt. Turn the debt over to a “Debt Resolution Corporation”. Allow the debtors to pay off with reduced payments over a longer period of time with an additional premium tacked on for the privilege.

Sad commentary when the most intelligent solutions come from the comedians!!

By: JRaymond

JRaymond — Sat, 31 Jan 2009 18:19:31 +0000

1)”Economics is the dismal science”
2)Government exists for those who work for it, not so much for those it is meant to serve. Fed examiners? Whatever.
3)I’m sure glad the SEC put Martha Stewart in jail.

By: Mearsheimer

Mearsheimer — Sat, 31 Jan 2009 15:33:23 +0000

“This significant risk trend was missed by the Fed and its examination force.”

“examination force?”!! The top man, Greenspan himself, said everything was fine and dandy with the “financial weapons of mass destruction.”