Disillusioned in Davos
larrysummers.com
larrysummers.com
He is surprised that bankers are in a hurry to put themselves in a position to make money?
I wouldn't worry though, the market will regulate itself and if it doesn't, there's always tax payer money just around the corner, all financial institutions have to do is make sure they're on the right side of the tide (e.g. not Lehman, but Goldman).
A problem seems to be that it's based on trust (do I trust this person enough to loan them money), and once it is based on trust, that trust will be abused.
For example: mortgage backed securities and other innovations were a huge disruption to the traditionally boring banking business.
Nevertheless, I think the point I made in my previous comment is true.
Failure to rate them properly (giving them AAA ratings) led governments, banks, pension funds, insurance companies and other "safe" investors to invest vast sums, making that money available for subprime lending, leading to poor (nearly nonexistent) lending standards and the housing bubble, and when the bubble burst, forcing the government to eat private losses to prevent financial ruin.
But by bundling many such NINJA loans into complicated investments that few understood, mortgage writers were able to fund these loans with money from most risk averse investors.
Would anyone have been fooled by individual NINJA loans with AAA ratings?
Would anyone have been fooled by individual NINJA loans with AAA ratings?
This question betrays a gross misunderstanding of how mortgage securitization works. It's perfectly legitimate to construct AAA mortgages from arbitrarily bad loans, provided you've accurately quantified how bad they are.
I said not many - meaning, in particular, not the risk averse investors who control vast sums of other people's money and demand top rated securities.
Countrywide was making a profit off the resale of the loans, removing short term profits from the corporation, leading to personal gains even after the scheme failed, and Countrywide's CEO agreed to pay a "$22.5 million penalty to settle SEC charges that he and two other former Countrywide executives misled investors". Countrywide wasn't your typical investor.
> This question betrays a gross misunderstanding of how mortgage securitization works.
Your comment betrays a misunderstanding of what happened. People were fooled by the complexity.
I said nothing about the ability to construct accurately rated loans. The fact is that the MBSs and CDOs did fool many people, including the rating agencies.
And you didn't answer the question. How many would be fooled by a simple, individual, AAA rated NINJA loan?
And you didn't answer the question. How many would be fooled by a simple, individual, AAA rated NINJA loan?
The question is meaningless. Individual loans aren't rated (at least not on the same C-AAA scale that bond-like instruments are). Portfolios of loans are, as are securitized loans.
People were "fooled" by portfolios of loans in the exact same way they were fooled by securitized loans - they chose optimistic parameters for the nightmare scenarios. That's not complexity, that's just guessing wrong about one or two simple numbers.
And when the SEC sued, the CEO agreed to repay investors "$45 million in disgorgement of ill-gotten gains", but reportedly, because of an indemnification agreement, Countrywide the corporation (actually the corporation's new owner BofA) was forced to pay $20 million of that as well.
Hard to see that as anything but a scheme to "mislead investors".
* -- http://www.ribbonfarm.com/2010/07/26/a-big-little-idea-calle...
Obama's government, for his entire term, kept injecting 0% loans into banks. Again, and again, uh-oh, "taper tantrum", even more, and again, and again, and again, and again.
That wasn't enough, of course, Obama, in order to stop the still bleeding banks, he also made it far, far easier for Wall Street to "invest" in far undervalued real estate, which they gladly did of course, and made huge profits on. And half of middle America is paying 2-3 times (yes, times) the rent they'd otherwise would be paying as a result.
And while Obama may not have created the debt slavery of student loans (which is what undischargeable loans were considered since the beginning of the modern era until, apparently, 2005), man did he expand it. It is a truly incredible amount if you look at it, the amount Obama discharged it by.
Are we so sure that market self-regulation, which has flaws, is going to be worse than Obama's government regulating the banks every move, and giving them more and more, and then even more money every time a regulation even slightly misses it's purpose, which is very often ?
And what did he use the government's percentage of all this extra money for ? Well to finance 2 wars and various skirmishes around the globe.
"Surprisingly" this lead to an acceleration of income inequality in the US. We don't know this for sure, but from history we know that the odds far exceed 99.9% that all this money was malinvested, and has not in fact made life in the US better. I mean, we're not 100% sure of course, but come on. Put another way, if this is the debt acceleration that resulted in wise investments, then people 50.000 years from now will be learning in kindergarden how smart not just Obama, but all of America was during this period. But ... that's not the case, and this money was mishandled, wasted and outright lost, I'm sure, in at least some cases. So very soon we'll be penning in the 3rd very surprising massive crash of the economy in the computer age into the history books.
Obamacare is not financially viable. Sorry to point out the obvious, but it didn't matter who was elected. Hillary was going to repeal Obamacare as well. I realize this goes against public perception and her promises (except when she was speaking to wall street), but aside from the fact that it's a necessity, there were democrat-leaning press articles about it for the past year and a half. Yes she would probably have masked it and distorted the change, but it just can't survive.
You'd think liberals would have issues with this guy. But he's really eloquent. And I have to say, he is. I really admire this about Obama. Of course comparing him with Republican candidates one might point out that he usually successfully finishes sentences successfully, very much unlike republican presidents. Also, compared to other democrats he's great. Clinton is passable (his wife is a better speaker in my opinion, but nowhere near as good as Obama). But even viewed by himself he is a great orator. I actually enjoy listening to his speeches even when I've just spent hours researching how the information in them is (partially) misleading. But boy, he can pick the one positive statistic out of a sea of bad news and make you feel good about the country and the world. Man, do I want this guy to help me run a company. He is also a very open and direct symbol of the values of America. Equality for one. He is black. Equality in other ways : he was certainly not part of the establishment of American politics, he was a small-time community organizer from Chicago ... and it is actually possible to grow from that into president. Wow ! Well done ! Again something very admirable.
I would like to stand by what Hillary said after the election about Obama "boy, will we miss him. Boy, for the next 4 years will we miss him". I will. Very sorry to see you go, Obama. America's standing in the world got serious bonus points just because of you and that was great !
But when it comes to what he's achieved ... I have to say, I'm not happy. Not happy at all.
It's not just bankers, it's almost every kind of business and political entity.
Moreover, we shouldn't be so cynical.
They are the government that the people elected, and it's time to move forward.
They have already shown themselves to be not particularly ideological on many issues, and willing to work on a lot of stuff.
Clearly, there will be boundaries and hopeless causes, but it'd be unwise to push arbitrary antagonism.
Example: the Affordable Healthcare Act will be repealed, which is sad, but you know, it was far from perfect, and the current administration if very sensitive to the optics of 'taking away people's healthcare' - and some of the limited proposals have some positive elements, such as 'buying across state lines' (I know that one is complicated ...).
Obviously, if you're in the business of stopping CO2 emissions, it's going to be painful, but on many fronts, there's opportunity for progress, even if you don't like the new government.
The extreme action would be an intervention. This will only be done if 90% of the US population is suffering and asking for help. Even if there would be camps where people would be murdered, the world will not interfere.
An isolationist policy very likely allows the rest of the world to refocus. By making the US less dependent on the world, the world will become less dependent on the US. The ties between Europe and Asia will become stronger and I'm curious what that will bring.
Remember this when Silicon Valley leaders lick his boots.
#fakenews?
The story linked from that remark is about the cost of the F-35, with no mention of a personal vendetta ("getting on the wrong side of the new President").
Hannah Arendt mentioned something like this in an interview, how many of the intellectual friends (or maybe rather acquaintances; intellectuals, anyway) she had had in Germany were very apt at coming up with all sorts of "high minded" things about Hitler. You know, cutesy salon talk, theories, predictions. She found this grotesque, obviously.
I am often reminded of this when reading HN. And frankly, I find this circus about Trump mostly circus. I mean, what is the difference between him and other presidents or people who ran? That he is openly gross? That he doesn't sugar coat me-first fascism? That he makes the underbelly visible? You know what's worse than talking shit about women or foreigners? Killing them in the thousands and millions. But oh boy, just nobody say "pussy", nobody be a racist, and of course, nobody call anyone a Nazi or something. America, the country where it's leadership this and excellence that, with glorification of the military as bookends. Where people excuse pushing for putting the whole of humanity into a little glass bottle and smashing it on a rock with the fact that this or that isn't unleashed on Americans, or not on Americans yet, or to lesser degree, yet.
This becomes even more obvious when some people do what they consider making a moral point. Like that Streep Oscar acceptance speech. All that compassionate work Hollywood is doing, awww. Are those baby shoes, or is that really the best you've got?
Even the post by Summers essentially boils down to:
> It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity.
If that is your main concern, I'm not impressed. If your problem is that you might get put in a train cart, and not that others have already been put in one and tortured to death at their destination, while their murderers still show off the gold they extracted from their teeth at gala dinners, you are not measurably better, not compared to others. You're the front organization, compared to which the more radical inner circle can consider itself more hardcore, you're the fake representation of an outer world, to steal another thought from Arendt which I do think applies.
And it's a bit like using terrorism or pedophiles to push totalitarianism -- how could anyone criticize that? How could anyone criticize people criticizing Trump for being racist or whatever? Well, they're the good cop to the bad cop, made more effective by having no clue that's what they are. They mean well, which makes it more important to insist on the point.
Good luck I guess.
I said it's circus to be upset about the words of someone when you're not equally or more upset about the equal or worse actions of people you're chummy with.
Let's say you're married to a murderer you never criticize, and then get upset when the neighbor is talking about killing a bunch of people, because that is immoral -- then you have double standards and I can't share your antics. I might condemn that neighbor when you're not around, but not in agreement with you.
That's what I'm saying, and I'm not also saying "he's not going to kill anyone, and even if he did, that's fine because your husband started it", and I never would. Which is exactly why that kindergarten stuff gets projected on me.
Even IF you were right, and I was displaying "exactly" what I criticize -- so? Is anyone deluded enough to think they can hide behind me?