• Welcome to OGBoards 10.0, keep in mind that we will be making LOTS of changes to smooth out the experience here and make it as close as possible functionally to the old software, but feel free to drop suggestions or requests in the Tech Support subforum!

Goldman paying 3.15 BILLION to settle stinky mortgage claims

Colonel Angus said:
Yes... destroying the capital markets and taking down the entire economy would have been well worth teaching those greedy banks and hedge funds a lesson!!!!111
Click to expand...

he's being hyperbolic, but consider the contrapositive

we didn't effectively punish the banks, and did quite the opposite

we re-enabled them to continue making the same mistakes again while neither the purchasing power of individual consumers nor the general consumer education about personal finance increased to adjust
 
No doubt the moral hazard issue is legitimate, but when the other option is Economic Armageddon, I will take the risk of moral hazard every day of the week and twice on Sunday.
 
So we continue to bail them out time after time after time again?
 
Colonel Angus said:
No doubt the moral hazard issue is legitimate, but when the other option is Economic Armageddon, I will take the risk of moral hazard every day of the week and twice on Sunday.
Click to expand...

right, but that's kind of a strawman

i realize that brasky was suggesting it, and again i think he was being hyperbolic

so i think the only reasonable thing to do would be to change up incentives a little bit

if you're going to completely re-enable mistakes to be made, you have to at least de-incentivize predatory lending, mishandling grading, mortgage-backed securities, and other problem spots

but like chrisL and others have already pointed out, that's only one side of things

we've absolutely got to do a better job informing and educating potential borrowers

my student loan wasn't predatory by any means, but i wish i had more counseling at the beginning of things to help me plan for things like adjustment, deferment, repayment strategy, etc.

i want to learn more about responsible borrowing, but it seems like it's harder and harder to find good information about responsible borrowing from someone without a skin in the game
 
Colonel Angus said:
Yes... destroying the capital markets and taking down the entire economy would have been well worth teaching those greedy banks and hedge funds a lesson!!!!111
Click to expand...

Maybe not taking all the banks and hedge funds down wasn't the answer, but there should be a wing in Leavenworth or a supermax filled with bankers, traders, mortgage brokers and others involved in the most massive fraud and theft in US history.

The amounts they stole and the lives they ruined or impacting badly makes what mafia and drug kingpins who are sent to supermax look like a walk in the park.

Their greed and lawlessness almost took down the entire world's economy. Obama deserves an F- for his pussy non-response to this.
 
ChrisL68 said:
That's not accurate.

Group 1 had no wealth to transfer to the bank. The reason they are walking away from their mortgage is because they were underwater. If they had wealth in the property, they would sell it, pay off the loan and pocket their equity.


Here is the timeline.

Lender loans Group 1 person $500K
Group 1 person buys house for $500K (They have no wealth right now. They own an asset worth 500K and have a liability worth $500K)
Broker gets a fee from Lender. There is clear evidence that brokers got more fees for riskier loans (points etc.)
Lender securitizes and resells loan on the market. Buyers are largely institutional investors (i.e., my 401(k) and yours) and Freddie and Fannie (the taxpayer, at least after they were bailed out).
Lender makes big profits.
Executives at Lender take huge bonuses.
Rating agencies rate stinky bonds AAA. Get paid.

Group 1 person either makes interest only payments or mostly interest payments for a couple of years (basically renting money)
Market crashes and house value falls to $350K.
Group 1 person walks away with ruined credit history and hands over keys to lender.

Institutional investor, Freddie, Fannie, taxpayer, and MAYBE original lender in the rare case loan was kepttakes $200K loss after selling costs. On a national scale this was the 100s of billions of dollars in mortgage write-offs that have been recorded.

Taxpayers and shareholders of Lenders (again, my 401(k) and yours) absorbs most of the loss. Brokers keep their fees. Lenders keep their fees. Lawyers and ratings agencies who packaged bonds keep their fees. Executives of all of the above keep their yachts.

Now the lender might have changed as the debt instrument was sold, but the person who owns the debt is the person who lost all of the wealth.
Click to expand...

Major missing steps here.

You are choosing to emphasize one side of the transaction and completely and totally disregard the other side. Applying this exact same logic to Bernie Madoff, whose victims all were getting returns they damn well should have known could not have been true, Bernie should be a free man with a nice yacht, and all his victims should be SOL. After all, they didn't lose most of that money, they never really had it!

It's just intellectually dishonest.

Again - profits were privatized, losses were socialized, to the original borrowers, the taxpayers, and everyone's 401(k).
 
That's quite a strawman you just posted right there. I have already indicated that the lender might have changed hands, but ultimately the lender of record is the one holding the bag.

And where did I ever indicate that somebody who commits fraud should be able to walk away scott free?

I was responding to PH's contention that wealth transferred from the borrowers to the bank, which really isn't what happened here for the most part. The financial basics of the transaction between borrower and (ultiimate) lender are accurate.
 
Last edited:
ChrisL68 said:
That's quite a strawman you just posted right there. I have already indicated that the lender might have changed hands, but ultimately the lender of record is the one holding the bag.

And where did I ever indicate that somebody who commits fraud should be able to walk away scott free?
Click to expand...

It's not about fraud. It's about who bears the consequences for the excesses of the property and lending bubble. What I have been pointing out for the past 3 pages is that of all the humans (as opposed to entities) involved - borrowers, employees of the lenders, and the investors/taxpayers who own the lenders or own the loans - only 2 groups have paid for those excesses.

The borrowers paid in lost homes, wrecked credit, and pain and suffering.

The investors and taxpayers absorbed the losses (including the recent settlements and fines) because they are the owners of the lenders and loans. Note these are the people who had the least culpability for any of this.

The human beings working for the lenders, who made the decisions to underwrite these crappy loans, who made the decisions to chop them up and find a slick way to securitize them so they could make big fees and bonuses, who personally authored the documents that misrepresented the quality of the loans - have suffered no consequence at all. They are the only ones who reaped durable gains from the whole mess, and they so far have not been held accountable for their role, nor will they ever be.

I guess you just refuse to assign any culpability for the property and mortgage bubble to the employees and agents of the lenders. In fact, you keep insisting that the lenders are the victims. If so, I draw a distinction between the investors/taxpayer who OWN the lenders, and who actually bear the burden of the losses, vs. the employees and agents of the lenders, who were in cahoots with the borrowers that you want to blame for everything. Why do you not agree that these human beings have any responsibility for what happened?
 
Colonel Angus said:
How do you know the example in your first paragraph applies to the "majority affected"? Please provide support to back this up.

And what was out of their control? Buying a house??? Did someone hold a gun to their head forcing them to take out a mortgage?
Click to expand...

My opinion is culled from years of reading what I can about this issue. Am I wrong?

What was out of their control was that these mortgages were packaged together and sold upstream, overrated, and then not insured sufficiently by AIG and others because "it will never happen."

This caused the massive domino effect that tanked the economy and cost more jobs which in turn caused more foreclosures which cost more jobs...
 
Last edited:
Dude, I don't know how many times you want me to say it, but I will say it again.

People should have gone to jail over this.

Part of the problem is that when fraud is so pervasive is that it becomes very complicated to make prosecutorial decisions. The Madoff situation was easy because there was one bad guy to go after. Here where do you begin and where do you end?

Do you analyze individual transactions for fraud?
Are you going to prosecute borrowers who signed under penalty of perjury that the information they provided during the underwriting was accurate?
Are you going to go back to loans that were settled before the crash

Can you prosecute the big guys at the brokers for fraud if you don't do this legwork?
 
ChrisL68 said:
Dude, I don't know how many times you want me to say it, but I will say it again.

People should have gone to jail over this.

Part of the problem is that when fraud is so pervasive is that it becomes very complicated to make prosecutorial decisions. The Madoff situation was easy because there was one bad guy to go after. Here where do you begin and where do you end?

Do you analyze individual transactions for fraud?
Are you going to prosecute borrowers who signed under penalty of perjury that the information they provided during the underwriting was accurate?
Are you going to go back to loans that were settled before the crash
Click to expand...

So, your answer is, something should have been done, but it's hard, so let's not bother.

You are probably aware that people have gone to jail for fraudulent mortgage applications, including that ultramarathon runner guy here in GSO.
 
Deacon923 said:
So, your answer is, something should have been done, but it's hard, so let's not bother.

You are probably aware that people have gone to jail for fraudulent mortgage applications, including that ultramarathon runner guy here in GSO.
Click to expand...

No, I think they should have done something even if to just make examples out of some people.

But I understand that with limited resources they couldn't go after everybody who committed a crime.

Do you have any other arguments you want to ascribe to me that I didn't make?
 
ChrisL68 said:
No, I think they should have done something even if to just make examples out of some people.

But I understand that with limited resources they couldn't go after everybody who committed a crime.

Do you have any other arguments you want to ascribe to me that I didn't make?
Click to expand...

It's enough for me that you acknowledge that the people working inside the lender bear some responsibility for all this. Worthwhile discussion.
 
Deacon923 said:
It's enough for me that you acknowledge that the people working inside the lender bear some responsibility for all this. Worthwhile discussion.
Click to expand...

They definitely do. Fraud is fraud.
 
Deacon923 said:
Sure, they walked away - with wrecked credit histories, thousands of dollars in payments down the tubes, nothing in their bank accounts, and a huge amount of stress and suffering. Perhaps you think they should also be thrown in a debtor's prison to make sure they learned their lesson?
Click to expand...

"Thousands of dollars in payments down the tubes" - so everybody gets free rent now too? There was zero value for living in those houses?

And wrecked credit histories - holy shit how much better examples can you get of people who should not have access to credit again? That's exactly what credit rankings are for. You made a ginormous dumbass basic credit decision that caused you to fail and bail on the biggest credit acquisition of your life, and together with similar folks managed to crater the economy, but meh, you still deserve an 800 credit score because everyone should definitely lend you money again. Let's give you an Amex, why the hell not?

Debtors prisons, no. But we shouldn't have gone all the way to the other end of the spectrum and given away tax incentives and income forgiveness. We just continue to incentivize stupid decisions.
 
Last edited:
"If you want me to take a shit in a box and mark it guaranteed, I will, I've got the time."
 
2&2 Slider To Leyritz said:
"Thousands of dollars in payments down the tubes" - so everybody gets free rent now too? There was zero value for living in those houses?

And wrecked credit histories - holy shit how much better examples can you get of people who should not have access to credit again? That's exactly what credit rankings are for. You made a ginormous dumbass basic credit decision that caused you to fail and bail on the biggest credit acquisition of your life, and together with similar folks managed to crater the economy, but meh, you still deserve an 800 credit score because everyone should definitely lend you money again. Let's give you an Amex, why the hell not?

Debtors prisons, no. But we shouldn't have gone all the way to the other end of the spectrum and given away tax incentives and income forgiveness. We just continue to incentivize stupid decisions.
Click to expand...

I'm not sure we're disagreeing. These people made bad decisions, they took their medicine. My whole point on this thread is not that the consumers should get help or free rent or good credit scores whatever. They have had consequences, as they deserved. My point is that the people inside the banks who preyed on the greedy stupid consumers should have consequences, too. And they have not and never will.

ETA: just to be perfectly clear, I am trying to get past the paradigm of "consumers innocent banks greedy". The story of 2001-2007 was "everybody greedy and shortsighted". I also agree that government policy had a role in encouraging that behavior, but that doesn't make it right - on anyone's part.
 
“These CEO’s, man…If you’re that ruthless, you’re a scary dude. I tell you, now when I walk past a little gang banger, I don’t even blink. But if I see a white dude with a Wall Street Journal, I haul ass. Before I walk past the Arthur Andersen building, I cut through the projects. If you cut through the projects, you may just lose what you have on you that day. I ain’t never been mugged of my whole future."

-Comedienne Wanda Sykes
 
awaken said:
“These CEO’s, man…If you’re that ruthless, you’re a scary dude. I tell you, now when I walk past a little gang banger, I don’t even blink. But if I see a white dude with a Wall Street Journal, I haul ass. Before I walk past the Arthur Andersen building, I cut through the projects. If you cut through the projects, you may just lose what you have on you that day. I ain’t never been mugged of my whole future."

-Comedienne Wanda Sykes
Click to expand...

word
 
You must log in or register to reply here.
Back
Top