Thnx, CR..........Good Show as always......332 comments on the last and as always, impeccable timing.

I'm baaaack! Is the "fail" discussion reaching "epic" proportions? That last thread was one of the longer ones in a while.

Lots of "ignoring" going on in Asia right now.

patientrenter,

Securitization is dead, the banking system is still reeling, the public is not credit-worthy... and the government is attempting to force credit down people's throats.

I think the system would establish appropriate lending standards all on it's own if it were not for government involvement. Instead you have FHA financing up to $700K on 3% down.

Heck, we wouldn't have gone down this path at all were it not for government meddling.

Basel 2, most of the bailout was guarantees or TARP for depositary institutions. But let's throw in AIG, for example. It's not a bank, but it was a counterparty to many banks. The bailout money that went into AIG was mostly for the benefit of those banks. And the money that went to pay FNMA loan guarantees and support FNMA bond prices? A lot of the owners of those bonds and loans are pension funds and other institutions investing as agents of the public. So the money that was pumped into the system mostly went to the general public, with smaller amounts going to the banksters and other people we all love to hate, because the amount they have and got is a lot per person, and any amount is probably too much.

can't help myself on this one... time for a bit of:

Glengarry Glen Ross
written by David Mamet

In this scene, Blake (Alec Baldwin) is confronting the employees of a tough Chicago real-estate office, Shelley Levene (Jack Lemmon), Ed Moss (Ed Harris) and George Aaronow (Alan Arkin) while their unsympathetic supervisor John Williamson (Kevin Spacey) looks on. If you would like, this monologue I'm sure can be edited into one incredibly long one, if you want to take out the lines from the other actors.

Put that coffee down!! Coffee's for closers only. (Levene scoffs) ... I'm here from downtown. I'm here from Mitch and Murray. And I'm here on a mission of mercy. Your name's Levene?
...
Moss: I don't have to listen to this shit.
Blake: You certainly don't pal. 'Cause the good news is -- you're fired. The bad news is you've got, all you got, just one week to regain your jobs, starting tonight. Starting with tonights sit. Oh, have I got your attention now? Good. 'Cause we're adding a little something to this months sales contest. As you all know, first prize is a Cadillac Eldorado. Anyone want to see second prize? Second prize's a set of steak knives. Third prize is you're fired. You get the picture? You're laughing now? You got leads. Mitch and Murray paid good money. Get their names to sell them! You can't close the leads you're given, you can't close shit, you ARE shit, hit the bricks pal and beat it 'cause you are going out!!!
Levene: The leads are weak.
Blake: 'The leads are weak.' Fucking leads are weak? You're weak. I've been in this business fifteen years.
Moss: What's your name?
Blake: FUCK YOU, that's my name!! You know why, Mister? 'Cause you drove a Hyundai to get here tonight, I drove a eighty thousand dollar BMW. That's my name!! (to Levene) And your name is "you're wanting." And you can't play in a man's game. You can't close them..
(Blake flips over a blackboard which has two sets of letters on it: ABC, and AIDA.)
Blake: A-B-C. A-always, B-be, C-closing. Always be closing! Always be closing!! A-I-D-A. Attention, interest, decision, action. Attention -- do I have your attention? Interest -- are you interested? I know you are because it's fuck or walk. You close or you hit the bricks! Decision -- have you made your decision for Christ?!! And action. A-I-D-A; get out there!! .
Moss: You're such a hero, you're so rich. Why you coming down here and waste your time on a bunch of bums?
...
You know what it takes to sell real estate?
(He pulls something out of his briefcase)
Blake: It takes brass balls to sell real estate.
(He's holding two brass balls on string, over the appropriate "area"--he puts them away after a pause)
Blake: Go and do likewise, gents. The money's out there, you pick it up, it's yours. You don't--I have no sympathy for you. You wanna go out on those sits tonight and close, close, it's yours. If not you're going to be shining my shoes. Bunch of losers sitting around in a bar. (in a mocking weak voice) "Oh yeah, I used to be a salesman, it's a tough racket." (he takes out large stack of red index cards tied together with string from his briefcase)
.... These are the new leads. These are the Glengarry leads. And to you, they're gold. And you don't get them. Because to give them to you is just throwing them away. (he hands the stack to Williamson) They're for closers.
I'd wish you good luck but you wouldn't know what to do with it if you got it. (to Moss as he puts on his watch again) And to answer your question, pal: why am I here? I came here because Mitch and Murray asked me to, they asked me for a favor. I said, the real favor, follow my advice and fire your fucking ass because a loser is a loser.
(He stares at Moss for a sec, and then picking up his briefcase, goes into inner office with Williamson)

FNM is selling securitized mortgages to the FED; otherwise, securitization is dead and gone. Sure, you might see a few dollars in it, but I doubt it'll ever reach even 10% of it's former glory.

Basel 2, I am all for anyone benefiting from backstops paying the price - regulation, risk charges, capital requirements, size restrictions.... But I'd prefer a model that limits size (e.g through progressive capital requirements) and limits the backstops to one that pulls everyone in under the taxpayer guarantee umbrella.

The guilt goes from ignorant fraudulent flipper all the way to Alan Greenspan. Everyone along the way was in on the scam,-- the regulators--the rating agencies--the builders--Goldman==everyone. And for awhile, it was good--so very good. Now, it's bad, so very bad, and everyone claims ignorance--winks--and looks for the next way to cheat the system. Many have the nerve to hide behind religion--a higher calling. As a country, we are morally bankrupt--the banks, the churches, the government, the public servants. Now, bankrupt financially also--a circle of doom--of self destruction. I'm looking for a country to emigrate to--thinking New Zealand.

Don't laugh--but my friend emailed that we lived in Fuckland, and I saw Auckland--it was either a sign--or too much red wine.

The borrowers were flipping houses; the lenders were flipping loans.

I've struggled to characterize the "fee as yield" phenomenon. However, it isn't quite economic and it isn't quite finance. So, I'm not sure where that puts us.

Somewhere in the high velocity, margins at scale land of "cost accounting toward mass suicide", I reckon.

(Sorry for the run-on, still can't quite make it simple enough. You'd have to watch a loan committee in a time series, I guess.)

Auckland home prices are a lot higher now than they were 10 years ago, Mel. I don't know if you'll escape what we have here that you don't like. But it is a nice place, old-fashioned.

As for what business the lenders were in when they were passing along the risk to others, I'd say they were merely agents of the true lenders, who were the people providing the money. It's a fee-for-service model. The true lenders didn't realize their own role, and still don't. However is at risk of the loss is the real lender, and needs to be the one in charge of managing the risk.

The fraud was institutionalized.I was a loan broker for a week when a major account rep bluntly stated that he woud help me fix any problems with income his underwriters found.I was talking to a friend who is a hard money lender and real estate broker in santa clara today and we agreed that a cursory investigation of real estate brokers,not salesman,brokers,would cause half of them to lose their licenses.My friend and I were first discussing a hard money loan of his that went bad,fast.He made the loan to a high flying society real estate broker/developer in carmel...and the broker was arrogant and stupid enough to have misstated some important facts on his loan application.The good news is that my friend will be made whole,soon.the bad news is that this kind of fraud was so pervasive and accepted that a lot of those being called on their behaviour are genuinely shocked ad angry.

I came by to drop a little weirdness, then slink away.

Behold the Chu-Chu Rocket commercial

Lending continues to slow as bankers and borrowers refrain from taking risks, in a bearish sign for the economy.

The total amount of loans held by 15 large U.S. banks shrank by 2.8% in the second quarter, and more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses, not new loans, an analysis by The Wall Street Journal shows.

Loans by U.S. Banks Shrink Amid Lingering Economic Fears - WSJ.com

Dispersion and/or diversification isn't the issue.

To securitize, you have to acquire ( $ ) loans that were already originated ( $ ), bundle & split them ( $ ), rate them ( $ ), sell them ( $ ) and manage them ( $ ). Once you subtract those costs from the value of the original loan there simply isn't enough return vs. risk to warrant investor interest, period.

hhoeft
thanks for the YouTube link... that's such a classic
scene... it would be great if Mamet wrote something on
the banksters..

just reading the other thread, Spitzer was taken out, plain and
simple. people were aware of his problem. pity. he's from a rich family
and doesn't seem to get animated over making money...
his point is well taken - the regulators had the tools they just didn't use them.
reminds me of when it was discovered that Agnew was involved in campaign money
abuses while Gov of Maryland, five years into his VP term. (many people knew,
they held it back until the right time until Nixon was weakened to a point that
he could only appoint Ford not John Connelly to replace Agnew...)

Bubble names--this one should be named Alan--Greenspan deserves as much.

I wrote before that my brother was involved in the S&L stuff in Texas in the early '80s.
he had two partners straight out of Glengarry Glen Ross. one of the things they did
was go to S&L 'A' and flip the bad loans to S&L 'B' a few steps ahead of the audit.
he's always been ethically challenged and didn't see anything wrong with this...
they did a bunch of other BS too but I wasn't interested in hearing it...

Other than mini-bubbles associated with ill-advised government incentives, there are only a few more truly major bubbles out there. The first is the dollar / big government, and once that goes the next will be precious metals, followed eventually by energy.

Rich,

What... you do not think the new, friendlier Fed is genuine?

@TJ

for all intents and purposes, once the gubmint bubble pops, all the rest won't matter.

patientrenter,

Servicing a securitized loan isn't any different on the front end but is totally different on the back. Instead of remitting the entire payment to one party you're allocating funds to hundreds, maybe even thousands, of investors based upon a complicated formula that favors upper tranches, adjusts for overall portfolio performance, etc.

p.s.: That's why I said "manage" vs. "service", because the servicing would be the same but the securities management would be an additional function beyond that.

"Asian stocks gain on profit hopes" Bloomberg crawl

RockyR,

Don't know. Easy to predict the explosion, hard to predict the aftermath.

Either government contracts to live within it's means and the world gets a little "bigger", or government goes totally socialist and therefore micro-manages (and thus steadily sucks the life out of) the economy.

I'd like to add, that dryfly is my currency/ current accounts guru. Please, all hail the man from Minnersorta.

just called to cancel an x-box live membership. got connected to a call center in what sounded eastern europe. they wanted to know as much information about me to cancel as they did to sign me up. microsoft are bunch of a-holes.

TJ - we are already experiencing the beginning of the second of your two options.

RockyR,

Not anywhere to the degree it can be, and that is truly scary.

As long as collateral is good, everyone makes out fine.

That's just it; there isn't any collateral that fits the bill any more. Again, the GSE's had huge numbers of very vanilla paper on well-qualified borrowers and stable collateral. Where do you find that now? RRE? CRE? CC? Auto loans? You need the quantity, quality and uniformity; none of that are or will be available for a generation.

(insert US Constitution here)<i/>

Jeez, poke myself in the eye re: patriotism.

crabsofsteel...
good explanation, in a dim corner of my brain a tiny light bulb
glows...

'"Not true (no offense). You're good at something, and, I'm good at something. We'll trade. That's economics."
hmmm... i can go along with that... '

even said, we aren't talking bubblenonmics at that point. we are still talking survival.

1.food, 2.water, and 3.oil

1.Big farm
2.Local munis
3.Foreign dollar holders

Which of these groups wants to fight when it feels so good to negotiate?

hk - i'd say 3. there isn't much we have to trade to sustain us for more than a few months/years with foreign dollar holders. particularly when those dollars aren't worth that much. remember, we've made a pretty weak and misguided attempt at imperialism over the past 50-some-odd years.

There will be a water bubble--sooner than most people realize. And water wars.

Given the surface is 70% water, any water shortage is an energy shortage in disguise.

At risk of a copyright violation, here is a letter to the editor of Barron's. I could not have said it better myself. Sorry to hit and run, but I have to get ready for tomorrow. Enjoy. I subscribe to Barron's and find it valuable. Your mileage may differ, but I recommend it and no, I do not work for or receive any money from Barron's. I just thought this was a cool letter.

Inflation's Price

To the Editor:
Regarding the Editorial Commentary concerning the potential inflationary impact of the government's actions to stimulate the economy ("Beware of Rotting Money," July 13): As you point out, the consequences of the efforts will, in all probability, result in considerable wealth destruction and long-term harm to the economy. I disagree with the inference that a lack of understanding of this consequence underpins the actions of the government and its advisors. When intelligent people do dumb things, the reason always lies in the fact that they have a different set of priorities and values.

Politicians are in the business of running for office. They are not in the business of optimizing the performance of the economy or preserving the wealth of their political opponents. They are not necessarily opposed to optimizing the economy or letting their political opponents keep wealth, provided there is no near-term (as in next election) political advantage in preventing it.

The supporters of the programs that will lead to wealth destruction in fact have a political agenda. They see inflation as a convenient tax on wealth accumulation and creditors that requires no overt political action to accomplish, and eases the pain of their spending programs. They wish to minimize income inequality going forward via taxation, and to confiscate at least a portion of the prior income inequities via inflation. These are the steps needed to achieve a European-style welfare state where individual economic outcomes are more influenced by government policy than individual initiative.

If this is the primary objective, the policies being pursued make a great deal of sense. One must create the entitlement burdens when one can and leave the aftermath to others. Once enacted, such entitlements cannot be reversed. If this requires people to sacrifice economic freedoms and see past wealth accumulation confiscated in the process, it is a small price for the majority of voters to pay in the name of their idea of fairness.

The populist theology of the left wing of the Democratic party gave us the 1970s and they will now give us the 2010s. The biggest irony is that, in the absence of the short-term, mindless greed of the financial community, these ideas could not have found their currently fertile ground.

James H. Plonka
Griffon Financial Services
Midland, Mich.

"It's hard to be social on a comment board, I hope I haven't been too demonstrative."

ha! not at all! you're good

Merle Hazard Video: Bailout