The moral to this story is you don't have to be samert to work on Wal Street. In fact, all you have to do is act like you know alot and demand big bonuses.

I've got receipts and a picture of my prom date.

Being simply put, they were betting that CA was local (not a bubble) and they lost their asses.

Ewww, Archstone. Sucks to live in their apartments... rent hikes every year.

Was Lehman one of the early people to stop Subprime loans or am I mis-remembering (August)?

All these venerable wall street firms are about to learn what happens when you can't pay the piper.

How HUD Mortgage Policy Fed The Crisis
Subprime Loans Labeled 'Affordable'
How HUD Mortgage Policy Fed The Crisis - washingtonpost.com

I was reading through CR archives waiting/on the plane.... happened to have August 2007. Everyone was rejoicing back then that Ben didn't cut the rate during the August meeting, and the banks weren't going to get their bailouts.

Trying to remember what happened forced me to look at Fed rate policy... it's like roller coaster.

From Jan 2001 to June 2003 dropping the rate from 6.5% to 1% and holding it there until June 2004. From June 2004 to June 2006 raising the rate from 1% to 5.25% and holding it there until September 2007. September 2007 to now cutting from 5.25% down to 2%. What's up with that? I'm an EE (by degree) but that's no way to exert control over this system...

from FFDIC's link

"Judith Kennedy, president of the National Association of Affordable Housing Lenders, said that while Fannie and Freddie nurtured unregulated subprime lenders, an estimated 30 percent of subprime borrowers could have qualified for safe, lower-cost prime loans."

for the love of pete, some people just got to go to jail

I'm an EE (by degree) but that's no way to exert control over this system...

Actually, it is.

Think of it as a control system for an airplane autopilot. If the plane goes into a stall, it's fatal. So anytime you are nearing a stall, a drastic correction occurs.

In the economic situation, deflation is a stall: There's no monetary way to pull out once you are in it. So when a whiff of deflation was detected in both in 2001 & 2007, rates dropped precipitously.

You also need to know that 5-6% is on the low side historically, but near the midpoint.

So putting it all together, when you are close to 7% rates, you can model the system like an engineer: Assume it's a two-pole system and apply a lead or lag filter as appropriate. But when you are far away from 7%, you are correcting for something that has serious instabilities.

I loved engineers when I was a kid. Then I found out that most of them didn't drive trains. Now I think they are a bunch of lying bastards.

Now I think they are a bunch of lying bastards.

You're absolutely right.
And this sentence is a lie.

Elvis, yep, it's easy to ignore those details when you're betting with OPM.

Has anybody else read the Bloomburg article about the IBs creating a clearinghouse for credit default swaps and other previously OTC derivatives? Too little, too late?

Who is this GWB you speak of and why didn't his parents spank him?

Argento,
I heard there is flooding in the midwest and 7-11 is discontinuing the Slurpee due to potential brain freeze lawsuits.

I looked at few archstone apartments a few months ago. They are marketed as some sort of luxury apartment but they are complete crap. In Thousand Oaks they built a complex that is rather expensive right next to some low income housing. All the complexes I looked at had a lot of vacancies. I could only conclude the company was ran by Monkeys....low and behold it is!

Land values have probably fallen closer to 80% in parts of the Inland Empire. I've heard of bids right now at 20 cents on the dollar for some of these properties.

You know, what alot of people don't realize is to a large degree, it's not the cost of land that determines the cost of a house. Rather, the price of a house, minus the cost of construction yields the price of raw land. So if the price of houses goes down 20% and the cost of construction was 60% of the price of the house, than the price of raw land goes down 50%, until the price is determined by it's value for other uses, perhaps agriculture.

6% on the wrong side of the IQ bell curve.

You also need to know that 5-6% is on the low side historically, but near the midpoint.

Okay, that makes a lot of sense. I thought the "stability" point was 3%, since you know for the past 8 years (my historesis) rates haven't been up to 7%. So basically we're in a plane that keeps stalling, and throttle up just enough to get stablity again... but then we stall again.