US Financial Quagmire Bringing Out the Scammers

coondoggie contributes this snippet from NetworkWorld: "You could probably see this one coming. With all of the confusion and money involved you knew there would be cyber-vultures out there looking to cash in. Well the Federal Trade Commission today issued a warning that indeed such increased phishing activities are taking place. Specifically the FTC said it was urging user caution regarding e-mails that look as if they come from a financial institution that recently acquired a consumer's bank, savings and loan, or mortgage. In many case such emails are only looking to obtain personal information — account numbers, passwords, Social Security numbers — to run up bills or commit other crimes in a consumer's name, the FTC stated."

Comments

well ...

[Average_Joe_Sixpack]

I've heard Americans are so broke they are now scamming Nigerians

Re:well ...

[svnt]

There you are!

Hey guys, he does exist! You betcha!

Re:well ...

[oldspewey]

Is this some new form of the "your mamma's so fat ..." joke?

Re:well ...

[Anonymous Coward]

Yo country so broke, it got a title loan.

Well, if anyone wants to repo that car its up on blocks in front of Amos Moses Milsap's house about 45 minutes southeast of Thibodeux, Louisiana.

Re:well ...

[Anonymous Coward]

I've heard Americans are so broke they are now scamming Nigerians

Did you see the latest?

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am ministry of the treasury of the republic of america. my country has had crisis that has caused the need for large transfer of funds of 800 billion dollars us. if you would assist me in this transfer, it would be most profitable to you.

I am working with mr. phil gram, lobbyist for ubs, who will be my replacement as ministry of the treasury in january. as a senator, you may know him as the leader of the american banking deregulation movement in the 1990s. this transactin is 100% safe.

This is a matter of great urgency. we need a blank check. we need the funds as quickly as possible. we cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. my family lawyer advised me that i should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, ira and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov
so that we may transfer your commission for this transaction. after i receive that information, i will respond with detailed information about safeguards that will be used to protect the funds.

Yours faithfully minister of treasury paulson

Re:well ...

[smallfries]

Dude, I ain't even from Iceland...

Re:well ...

[Anonymous Coward]

Giggity giggity goo!

Re:well ...

[FLEB]

That's a list, not a run-on.

Re:well ...

[SpaceLifeForm]

Kudos sir or madam.

There exists no moderation high enough to do you honour.

(disregarding the next post that has the link)

Re:well ...

[terbo]

Isn't that how they initially became Americans in the first place? (ducks)

Re:well ...

[Whiteox]

I like your modality.

Re:well ...

[flyingfsck]

You got the 'all lower case' right, but what is up with all the punctuation?

Re:well ...

[Anonymous Coward]

No, we became Americans by giving all you Eurotrash punks the finger and saying we wanted something better. And we never stopped.

Re:well ...

[mcgrew]

I don't know about my fellow Americans, but I'm so broke I'm writing postcards on the back of stamps.

I'm so broke me and my girlfriend got married for the rice.

I'm so broke that I just went into McDonald's and put a small fry on layaway.

I'm so broke, the bank asked for their calendar back.

Re:well ...

[Anonymous Coward]

And look at all the nice things you've got. You've got the DHS, the NSA, George Bush (senior and junior), the largest prisoner population in the world (even China has less people in jail, and they have something like 5x the population), the highest rate of obesity in the world (from all the nice food you've got) and... and...

Re:well ...

[ORBAT]

You're so broke, you couldn't afford decent jokes. *badump chhh*

*illegal* scammers

[Anonymous Coward]

As apposed to the mortgage brokers, sub prime lenders, financial institutions,ceos that got us into this mess and will walk away loaded and scott free.

Re:*illegal* scammers

[Anonymous Coward]

Na, just taa paar ta buy anather Ah.

Re:*illegal* scammers

[quizwedge]

Don't forget that it wasn't just the mortgage brokers, but the government requiring banks to loan to people who normally wouldn't qualify for a loan and couldn't afford to pay it back.

Re:*illegal* scammers

[Anonymous Coward]

since we're nitpicking here... the dollar sign goes before of the amount, not after.

Re:*illegal* scammers

[Anonymous Coward]

Don't forget that it wasn't just the mortgage brokers, but the government requiring banks to loan to people who normally wouldn't qualify for a loan and couldn't afford to pay it back.

To solve this mystery, we need to look at who ended up losing money out of the fiasco, and who ended up making money. For example, a lot of people who bought houses have now lost everything. Many people's retirement savings are way down. And a lot of those banking and finance types are still getting millions of dollars in bonuses. So somebody must be making a lot of money out of this. If the ones making lots of money are the same people who are in charge, then it's going to get pretty ugly.

Reserve banks all over the world have slashed interest rates, billions of dollars have been spent on bailout packages, and yet, stock markets keep crashing. Capitalism might be a fine system when it's working well, but when it fails, as it does periodically, large numbers of people suddenly lose a lot of money. You've got to wonder if somebody was able to know when the crash was coming, if they could manipulate events so that they came out of it better off.

Re:*illegal* scammers

[vux984]

Don't forget that it wasn't just the mortgage brokers, but the government requiring banks to loan to people who normally wouldn't qualify for a loan and couldn't afford to pay it back.

Trotting this out are you?

Its true the government did require to make loans to people who wouldn't otherwise qualify, but that's not really the issue at all. They were forced to assume some extra risk by legislation, any remotely thoughtful person would realize that the banks should have MITIGATED this EXTRA risk, by covering it elsewhere.

To give you an example, if I run a bank, and the government says, you have to lend money to joe, and I know Joe can't afford it, and will probably foreclose, I don't just "do it and blame the government when joe forecloses", I set the interest rate on ALL my customers a little higher to ensure that when Joe forecloses I'm not bankrupt.

Thus the government requiring the banks to lend to people who they would otherwise not to, is no different than any other regulation placed on banks, all of which costs them money to satisfy, and in each case they simply pass the cost onto their customers.

Instead, in this case, they just blindly did it, and worse, they then created mortgage backed securities full of these risky loans and then did the most colossally stupid thing... the thing that caused the REAL collapse of the economy... they LIED about how risky these were, leading them to be GROSSLY overvalued.

Re:*illegal* scammers

[Anonymous Coward]

Well I think capitalism is not the problem. The capitalists running it are. I would venture to say that the American bailout coming so close to the election, and Paulson not staying on afterwards, is no coincidence.

Re:*illegal* scammers

[quizwedge]

I think there's plenty of blame to go around....

I don't think the government should have forced banks to make loans they were pretty sure would fail. Part of that is my belief in limited government; part of that is that it contributed to the housing bubble and all bubbles have to burst.

Fannie Mae and Freddie Mac should never have bought those bad mortgages in droves like they did. Having a flippant attitude of we'll buy up the mortgages and if they fail, well, we'll just get more money from the government was utterly and completely irresponsible.

The banks shouldn't have lied about the risk of the mortgage backed securities. I can't fault them too much for selling off the bad mortgages to Fannie and Freddie. They are a business and their job is to maximize profits. Having the person who made the loan having no interest in if the loan failed or not was stupid for the economy, but that's more or Freddie and Fannie buying the bad mortgages. But you're right, the banks do deserve some of the blame for lying about the securities.

Finally, having bought a house about 10 months ago, I know first hand that there is a lot of paperwork to go through. My wife and I knew what kind of loan we wanted and had done our homework to know what we could afford before we started looking at houses. While it's not popular in an election year to blame the constituency, personal responsibility comes into play. Yes, the people who signed for loans they couldn't afford bear some of the blame as well.

My point is that people are looking for the one "bad guy" to blame. Pointing fingers at one part of the problem while ignoring the rest won't get us out of this mess.

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[penix1]

Don't forget that it wasn't just the mortgage brokers, but the government requiring banks to loan to people who normally wouldn't qualify for a loan and couldn't afford to pay it back.

Let's make a deal Monte. I won't blame the banks when they actually eat the losses they incurred. So far they haven't. The executives of AIG (not a bank I know but still part of the Golden Parachute Club (TM)) for example went on a spa trip to the tune of half a million dollars right after getting their corporate welfare check.

Re:*illegal* scammers

[FooAtWFU]

And the government who did their best to subsidize and encourage it!

Remember? It was back in the Clinton era, and there was a Fannie Mae accounting scandal, and in lieu of the serious reforms they were like "oh yeah yeah we'll be Nice instead and try to extend home ownership to even more Americans, even lower-incme ones!" Yay Subprime!

And, of course, bad money drives out the good. We're lucky there were as many responsible or quasi-responsible banks as there were. And three cheers for two candidates (four candidates?) who don't know one thing between them about how to actually manage an economy.*

(* Try not to! Trying to get Reality to conform to your will is likely to make it worse.)

Re:*illegal* scammers

[Anonymous Coward]

since we're nitpicking here... the dollar sign goes before of the amount, not after.

Unless you's one o' them thar Europeons. Some of them thar Europeon folks put thar punktuashun in funnee plases.

They shuldun be mekin fun o' us over heer for ower spellin' or nuthin' else no how. They's all laffin' 'bout ower banks collapsin'. Now they got thar banks a' collapsin' too. How'd'ja like them thar apples huh?

Re:*illegal* scammers

[jlarocco]

But that's the problem. How do you mitigate the risk of "No chance in hell of ever getting the money back"? Which is basically what the government wanted them to do in many cases. The answer is, you package it up, sell it off to somebody else, and let them worry about it.

I'm not making excuses for the banks, though. As far as I can see, the government, the banks, and the people taking out the crappy loans were all equally responsible. It's a shame they're the ones who will be least hurt by the chaos they've caused.

Re:*illegal* scammers

[omeomi]

If somebody takes a loan they can't afford and loses their house to forclosure, it's their own fault. When a bank gives out enough bad loans that the bank goes out of business, it's the bank's fault. But when the entire system goes haywire to the point that people who had nothing to do with it are losing money and jobs, it's the government's fault. Blaim the government. And then go vote in somebody better.

Re:*illegal* scammers

[Wildclaw]

What I think the grandparent wants to say is that even though the goverment was wrong in its regulations, the market should be able to route around such damage. The interesting discussion is why the market wasn't able to handle the situation adequatly.

Personally, I am of a very strong opinion that the main fault in the current system is lack of transparency. It is far too easy for companies to hide bad and insecure assets which is highly negative for the market that is supposed to make informed decisions regarding the value of those companies.

Re:*illegal* scammers

[tedu_again]

I don't think the words "executives" or "spa trip" mean what you think they mean.

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[m.ducharme]

Wait a minute, the government REQUIRED banks to loan money to bad credit risks? You want to provide a citation for that one?

Re:*illegal* scammers

[quizwedge]

I agree that the Golden Parachute Club is ridiculous. And for AIG to take that trip, just shoving it in our faces. I think that the execs that take the bailout money should not get their massive severance or salary. My understanding is that the bill that passed at least attempts to limit that. I won't claim to know what the solution is (I've wondered what would happen if we did just let it all come crashing down), but I certainly am not in favor of setting up a system where you get to keep it if you win and get bailed out if you lose.

Re:*illegal* scammers

[mosb1000]

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Re:*illegal* scammers

[quizwedge]

Sure... The one I read (admittedly partisan): http://ibdeditorial.com/IBDArticles.aspx?id=306370789279709 The one I skimmed enough of to see that it backs me up: http://www.nypost.com/seven/02052008/postopinion/opedcolumnists/the_real_scandal_243911.htm?page=0

Re:*illegal* scammers

[hrvatska]

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

The end of that article offers evidence that the CRA had a minimal impact on the problem with subprime mortgages.

"Some commentators note that CRA regulated loans tended to be safe and profitable, and that subprime excesses came mainly from institutions not regulated by the CRA. In the February 2008 House hearing, law professor Michael S. Barr, a Treasury Department official under President Clinton,[63][26] stated that a Federal Reserve survey showed that affected institutions considered CRA loans profitable and not overly risky. He noted that approximately 50% of the subprime loans were made by independent mortgage companies that were not regulated by the CRA. Another 25% to 30% came from only partially CRA regulated bank subsidiaries and affiliates. He stated that institutions fully regulated by CRA made "perhaps" one in four sub-prime loans. Referring to CRA and abuses in the subprime market, Michael Barr stated that in his judgment "the worst and most widespread abuses occurred in the institutions with the least federal oversight". [64] According to Janet L. Yellen, President of the Federal Reserve Bank of San Francisco, independent mortgage companies made "high-priced loans" at more than twice the rate of the banks and thrifts; most CRA loans were responsibly made, and were not the higher-priced loans that have contributed to the current crisis.[65] A 2008 study by Traiger & Hinckley LLP, a law firm that counsels financial institutions on CRA compliance, found that CRA regulated institutions were less likely to make subprime loans, and when they did the interest rates were lower. CRA banks were also half as likely to resell the loans.[66]"

"Assistant Professor of Law Alan M. White[67] notes that some abuses blamed on CRA actually occurred under the George W. Bush administration, because the Housing and Urban Development and Office of Federal Housing Enterprise Oversight allowed Fannie Mae and Freddie Mac to fulfill their affordable housing goals â" which are not technically part of the CRA â" by buying subprime mortgage-backed securities.[68]"

Re:*illegal* scammers

[Anonymous Coward]

Watch the documentary The Moneymasters.

It'll answer your question.

The link to Google video is on this blog:

http://mittiprovence.blog.fr/

Re:*illegal* scammers

[damburger]

Perhaps because goodhart's law applies to prices as well as other economic measures. Using a price to represent the risks associated with a package of loans was doomed to failure from the start.

Re:*illegal* scammers

[damburger]

Well, that puts to rest any arguments that it was the fault of 'big government' meddling with the almighty market. Maybe its time to reassess a few things.

Re:*illegal* scammers

[damburger]

That has already been refuted above: http://it.slashdot.org/comments.pl?sid=991171&cid=25324879

But it doesn't matter either way. Either the market created this problem through being unable to truly represent the value of things through prices (which would make on of its most dearly held tenets wrong or at least overstated), or the market would never have supplied bad loans without government interference, which knocks down another pillar of capitalist thought because a market in itself would not be able to elevate the standard of living of its poorest members (something that is claimed it will do, frequently, to justify why we allow the governments we do).

The whole principle of the thing is in trouble, and that isn't a fringe opinion anymore. Lots of people are starting to ask questions that would've been unthinkable only a year or two ago. Why else would Bush have to go on TV and actually state 'democratic capitalism is the best thing EVAR'?

Re:*illegal* scammers

[mcvos]

Well I think capitalism is not the problem. The capitalists running it are.

But that's what you get with unregulated capitalism: capitalists running the system.

What surprised me a bit is that suddenly lots of people are pointing out that Karl Marx's analysis of capitalism was correct (though his ideas about government are still wrong). And not just in left-wing magazines, but in big capitalism-oriented newspapers. Apparently we're experiencing the end of Reagan/Thatcher-style neoliberal capitalism.

Re:*illegal* scammers

[wiz_80]

One argument is that the lack of transparency was a response to over-regulation in the banking sector. I work for a company which provides software services to help companies with compliance. Banks and other financial organizations queue up to spend millions of dollars on our stuff, because the alternative is spending tens of millions at some body-rental place to get people to do it by hand, or facing fines of hundreds of millions and up.

This means that there is lots of incentive to minimize the activities that are covered by regulations, and invent new forms of trading which are not. The problem is, of course, that nobody really understands these new forms, especially when all of the players have large incentives to distort the data in the first place.

I just hope the problem stays mainly confined to the stock market, and doesn't migrate beyond that into the "real" economy.

Re:*illegal* scammers

[Anonymous Coward]

I say line the Wall Street executives and associates up against a wall on Wall Street and shoot them in the head. Public executions have always been an effective means of controlling behavior.

This message brought to you by the gun manufacturers of America.

Re:*illegal* scammers

[TaoPhoenix]

You missed the language difference.

Nigerian Scammer:
"Please I have to contact you at greatest urgency. My leader indisposed is unavailable to do his banking needs. You must help us at the early greatest convenience."

CEO:
"Due to the times of economic pressure resulting in fiscal laterality affecting us all, we can no longer continue to engange in a linear profit graph. Instead we have to diversify the standard deviation of the wage spread across the human resources of our organization."

Re:*illegal* scammers

[electrictroy]

Not so fast. The Glass-Steagall Act of 1933 was passed by the government to prevent EXACTLY this type of crisis from happening. It forbade banks from investing in stocks or other high-risk funds (like mortgage "securities"). The people living at that time knew the depression would never end as long as banks kept collapsing, so they passed these acts to restore stability & confidence.

It was repealed in 1999 by a near-unanimous Congress, and with the signature of William Jefferson Clinton.

So yes you can lay the blame on the government. Had they left the old Depression Law in effect, this entire mess could have been avoided. We'd still have a housing bubble burst, but the investment banks Lehman Brothers, Bear Stearns, et cetera would still be alive and well and doing business as usual. Americans would be confident that the banking system was stable & their savings safe.

The 1999 repeal of Glass-Steagall was a huge, huge mistake.
And it's going to cost us dearly.

Re:*illegal* scammers

[electrictroy]

The end of that same article also provides evidence that the CRA *did* have negative consequences
(especially in conjunction with the repeal of Glass-Steagall Act).

"Economist Stan Liebowitz wrote in the New York Post that a strengthening of the CRA in the 1990s encouraged a loosening of lending standards throughout the banking industry.[47] In a commentary for CNN, Congressman Ron Paul, who serves on the United States House Committee on Financial Services, charged that the CRA with "forcing banks to lend to people who normally would be rejected as bad credit risks."[55] A Christian Science Monitor editorial also mentions the Community Reinvestment Act and the government-backed Fannie Mae as being laws responsible for pushing banks and mortgage brokers into granting easy credit and subprime loans to those who could not afford them.[56]

"In a Wall Street Journal opinion piece, Austrian school economist Russell Roberts wrote that the CRA subsidized low-income housing by pressuring banks to serve poor borrowers and poor regions of the country. Jeffrey A. Miron, a senior lecturer in economics at Harvard University, in an opinion piece for CNN, goes so far as to call for "getting rid" of Fannie Mae and Freddie Mac, as well as policies like the Community Reinvestment Act that "pressure banks into subprime lending."[57]"

Re:*illegal* scammers

[edmicman]

To give you an example, if I run a bank, and the government says, you have to lend money to joe, and I know Joe can't afford it, and will probably foreclose, I don't just "do it and blame the government when joe forecloses", I set the interest rate on ALL my customers a little higher to ensure that when Joe forecloses I'm not bankrupt.

Why not? If I know Joe isn't going to pay me back, but some 3rd party is forcing me to loan him, why should my other customers pay for that 3rd party's incompetence? I agree that there's plenty of blame to go around to everyone involved, but I don't see why banks should have to cover being forced to give loans out to bums.

Re:*illegal* scammers

[damburger]

Yes, but the repeal of that act would've been classed by your typical market fundamentalist as a reduction of government interference. At the time, I am sure they cheered quite loudly.

Re:*illegal* scammers

[Hognoxious]

The one that contains the phrase "in a manner consistent with safe and sound operations"? That means they need to have a vault and a stereo, presumably?

Seems some people think that if they repeat the mantra - that government made the banks lend to bums - often enough everyone will believe it.

Re:*illegal* scammers

[hrvatska]

There's an article at in the NY Times that describes why Fannie got so deep into subprimes. Among the biggest reasons were market and shareholder pressures. Fannie was seeing a larger and larger portion of its business being picked off by non-GSE competitors. Companies that originated mortgages, such as Countrywide, were making it clear that unless Fannie bought more of the riskiest loans from them they would start selling to Wall Street. In the new world of mortgage-backed securities Fannie was no longer essential to banks, savings and loans, and other originators of mortgages. Additionally, large investors in Fannie, such as hedge funds, were pressuring it to take greater risks in return for greater profits. It would appear that far from Fannie driving the market to accept bad mortgages, the inverse was actually true.

Re:*illegal* scammers

[nexttech]

Excellent Point,
I find it incredible how much of a good ol boy club the financial industry is. Politicians are members of this club.
America needs to recognize politicians for what they are, Just a bunch of dirty used car salesment.

Re:*illegal* scammers

[hrvatska]

It's not so much that the CRA had no effect, but that its affect on Fannie and Freddie was not nearly as great as some are claiming. The CRA certainly had some role in all of this, but with the advent of mortgage backed securities, and Wall Street's enthusiasm for these securities, Fannie and Freddie were in a position of becoming irrelevant if they didn't start accepting more high risk mortgages from companies such as Countrywide. Have a look at the NY Times article that describes how market and investor pressures helped to push Fannie into accepting risky mortgages.

Re:*illegal* scammers

[electrictroy]

Perhaps, but even free marketers (like myself) think there has to be *some* interference with the market. After all, you can't have Bill Gates ordering "hits" on Steve Jobs just to eliminate competition. ;-)

Likewise you have to introduce legislation like the FDIC and Glass-Steagall to provide stabilization.

Re:*illegal* scammers

[nomadic]

Don't forget that it wasn't just the mortgage brokers, but the government requiring banks to loan to people who normally wouldn't qualify for a loan and couldn't afford to pay it back.

No, that's not what happened. The banks and mortgage companies were actively trolling for mortgages from anyone they could get, and they didn't care if the person couldn't pay the mortgage because those banks and mortgage companies weren't at risk: they were immediately pooling and selling the mortgages up the chain to someone else. That's why the companies that weren't subject to the CRA were making the same kinds of loans.

Re:*illegal* scammers

[nomadic]

But that's the problem. How do you mitigate the risk of "No chance in hell of ever getting the money back"? Which is basically what the government wanted them to do in many cases.

The CRA never mandated giving loans to people who wouldn't be able to pay them back. I dare you to find me a provision in the CRA that mandates that.

Re:*illegal* scammers

[nomadic]

Ron Paul is completely unreliable. He's hardcore libertarian so whenever he talks about these sorts of things there's an inherent dishonesty; he will never admit the free market failed, so he will always be scrambling to come up with an alternate, no matter how implausible. Besides which, he's shown himself to have a very faulty understanding of how the economy works, with a penchant for advocating fringe weirdness.

Re:*illegal* scammers

[david_thornley]

They told me that if I urged my Congressman to vote against the bailout, the stock market would just keep falling.

By George, they were right!

Re:*illegal* scammers

[ultranova]

Instead, in this case, they just blindly did it, and worse, they then created mortgage backed securities full of these risky loans and then did the most colossally stupid thing... the thing that caused the REAL collapse of the economy... they LIED about how risky these were, leading them to be GROSSLY overvalued.

Stupid ? It's a bloody genius thing. They crashed the economy, made sure that their own assets are safe - as they are with government bailouts - and will undoubtedly use those assets to buy lots of stock once the ongoing crash brings the rates low enough. Everything gets blamed on the government - the libertarians and other armchair economists will take care of that - while the masterminds laugh all the way to the bank, which they also own.

Re:*illegal* scammers

[electrictroy]

He's on the Congress' Financial Services Committee. He didn't get there by being stupid. (shrug). And if you still don't like him, then I suggest you read Walter E. Williams work. He's an economics professor at George Mason University in D.C. and he's no dummy either:

http://www.gmu.edu/departments/economics/wew

BTW:

I always find it amusing that pro-socialists think "he's a weirdo" is a persuasive argument. Sorry but that doesn't really sway me to your viewpoint. ;-) Next time try a logical argument based on reason; I will listen to that. CONVINCE me that your viewpoint is the correct viewpoint. I won't listen to "he's a weirdo" non-arguments.

Re:*illegal* scammers

[hesaigo999ca]

this is where i totally agree with vigilanteism

Re:*illegal* scammers

[nomadic]

I will listen to that. CONVINCE me that your viewpoint is the correct viewpoint. I won't listen to "he's a weirdo" non-arguments.

I don't have to convince you of anything.

But let me ask a simple question; if it was the mean ol' government forcing these noble banks to make loans to people who wouldn't pay them back...

Why were so many of these bad loans made by banks that weren't being told to make them by the government? Why were so many of these loans made that had zero connection to either Freddie Mac or Fannie Mae? Why won't any of you the-free-market-always-works types answer these questions?

Re:*illegal* scammers

[ultranova]

He's hardcore libertarian so whenever he talks about these sorts of things there's an inherent dishonesty; he will never admit the free market failed, so he will always be scrambling to come up with an alternate, no matter how implausible.

This is true for anything anyone holds strong believes in. For whatever reason people attach to alternative solutions to a pragmatic problem - resource allocation, also known as economy - with fervour usually reserved for religious ideas. It is quite stupid, and arguably does more harm than religious fanaticism.

It is good for some rather amusing drama, thought, when these same economic fanatics call people "sheeple" when they won't vote for someone who's clearly nuts. Libertarians are especially good here, with their absolutely serious rants about personal responsibility and general tough guy chestbeating about how anyone who doesn't want to live in a jungle where only the fittest survive is a pussy who's sucking from the public teats, but I suspect commies were much the same back in their day. And of course it also serves a useful function by makings sure by making it absolutely clear even to the dumbest voters that said nutcases are, indeed, nuts and shouldn't be voted for.

Re:*illegal* scammers

[Anonymous Coward]

You've got to wonder if somebody was able to know when the crash was coming, if they could manipulate events so that they came out of it better off.

I believe the name you're looking for is Soros.

Re:*illegal* scammers

[mosb1000]

They always put this kind of thing in legislation so that they don't have to consider the argument of practicality that the industries being regulated invariably make. They also add an agricultural exemption if there is any chance it could affect agriculture.

But the reality is that these kind of regulations cause industry to behave in a way that they wouldn't normally. In the case of banking, it means that they made loans they wouldn't normally have made.

I will never understand why legislators are so keen to say that their laws change people's behavior, but then are so quick to deny that they have negative consequences. You can't remove the negative consequences by simply writing "this law shall have no negative consequences".

Re:*illegal* scammers

[jvkjvk]

Well, sorry to say that your quotes don't back you up very much, unless your only point is that the CRA had "some negative effect". The gp was on about how the CRA's effect was negligible, not that it had *no* negative effect.

I would agree that CRA loans are likely to have some negative consequences in that some of the borrowers were more risky, but it doesn't seem to follow that this is the trigger or even the main player in this crisis. At most, it appears that due to the stupidly greedy practices of banks (which i will get in to in a second) it was a contributory factor.

So what if Ron Paul charged that the CRA forced banks to lend to some people who normally would be rejected? The implication is that the CRA is the cause of our current crisis. The question is - is that true? This is a statement by a politician with vested interests and intellectual capital in smaller federal government. Of course he's going to say such things.

Your other quotes also just state that CRA pressured banks into loans for low income borrowers and low income regions, not that the CRA loans are a major factor in the meltdown.

The parent post, OTO... less that 1 in 4 sub prime mortgages from CRA lenders... CRA loans statistically less risky loans... CRA loans less likely to be sold...

So, unless you have some additional information I'm going to have to call this one BUSTED.

It's not really the foreclosures that sunk us, it's the fact that the effect of those foreclosures was incredibly magnified by bad risk management practices in leveraging these mortgages for more profit.

The banks and investment firms are squarely at fault. In the every increasing drive for profits, they both bought and sold essentially worthless commodities ( that they didn't even understand!!! ) at greatly inflated prices. I'm not talking about the mortgages themselves - I'm talking about all the paper that is layered on top of those. That's where the Billions in losses come from. They took risks (or some would say willfully ignored the precipice they were stepping off) and now expect (and have got!) taxpayers to pay for the risks they took.

The housing market was due for a correction. Almost all that commercial paper was predicated on a straight line projection of housing prices (and I don't mean down). When it went down, all those homes lost a bit of value. The problem is that bit of value is leveraged, possibly as high as 10,000 in some cases, due to all the commercial paper that was written on top of them.

You might be able to argue that the banks didn't know what what was going on was bad - but they in fact did know. Everyone in the game knew, after a while. But since you could just package up those bad debts and sell them to someone else you made money. Even the people buying knew, or should have but as long as the gravy train was rolling no one really cared that much. It's only when the music stopped and banks and investment firms could no longer pass the buck that the house of cards collapsed.

It's only when they actually looked at what they had been buying and selling that the reality hit them - that they have been trafficking in tulip bulbs. So I should cry for them or find some scapegoat, when they are the ones that raked in enormous profits during the boom, but when the risks those profits were tied to turned out to be a certainty of failure I should forgive their stupidity? Nope, don't think so.

This is why banks won't lend to one another. They all know that the other bank could have been even more stupid or greedy than they were. They don't know how much of the other bank is now tulip bulbs and don't want to find out that after having lent them $500M.

And now, the government is going to come in and buy up all those tulip bulbs. The bill should have just stopped at buying the underlying mortgage and killing all the derivatives off and forced the banks to fully declare actual assets. I fear what's going to happen is that instead all we the taxpayer will get are virtual tulip bulbs for our $1T+.

Re:*illegal* scammers

[thealsir]

The thing is, it's impossible to say. The fed manipulated the interest rates to be too low anyway, which was one of the things that started this mess. It was artificial, bad thing, regardless of other market regulation.

I could see a totally free market degenerating into anarchy but the basis of the argument is sound.

Also, what makes Ron Paul such a crackpot? You still haven't answered the question.

Re:*illegal* scammers

[operagost]

To give you an example, if I run a bank, and the government says, you have to lend money to joe, and I know Joe can't afford it, and will probably foreclose, I don't just "do it and blame the government when joe forecloses", I set the interest rate on ALL my customers a little higher to ensure that when Joe forecloses I'm not bankrupt.

We know this, but do you honestly think it's okay to penalize responsible people so that bad risks can get loans? We got rid of endless welfare for the same reason: because a bunch of willful slackers were living off the dime of responsible citizens.

Re:*illegal* scammers

[operagost]

Requiring banks to give loans to people without SSNs or even proof of employment is essentially the same.

Re:*illegal* scammers

[deets101]

Yes, the people who signed for loans they couldn't afford bear some of the blame as well.

Wrong, the people who signed for loans they couldn't afford bear 100% of the blame. Just because the government forces banks to lend you more money doesn't mean you have to. I could have gotten a much larger house in a better neighborhood, but I bought within my means.

Re:*illegal* scammers

[operagost]

The funny thing is, we have laws against murder that keep Bill Gates from knocking off the competition. Regulating the market is like giving a fish a bicycle. He didn't need the bicycle, and to make up for that stupidity you have to give him artificial legs, inflate the tires for him, mount special waterproof lights and horn, and build underwater bike trails.

Re:*illegal* scammers

[operagost]

Ron Paul is completely unreliable. He's hardcore libertarian so whenever he talks about these sorts of things there's an inherent dishonesty; he will never admit the free market failed, so he will always be scrambling to come up with an alternate, no matter how implausible.

That's called "poisoning the well."

Re:*illegal* scammers

[mcgrew]

Clarence Page rebutted this ignorance yesterday. You folks might want to shut off that Rush Radio and read a newspaper once in a while.

Nice try, but the CRA's villainy has been wildly exaggerated.

First, the CRA applies only to banks and thrifts that get federal insurance. It does not even apply to three-fourths of the institutions that made subprime loans, the high-interest loans at the heart of Wall Street's credit collapse.

Also, nothing in the CRA requires banks to offer subprime loans, interest-only loans, no-money-down loans or any of the other gimmicks that inflated the now-fizzling housing bubble. Quite the opposite, the law calls on lenders to meet the credit needs of the communities in which they are chartered, "consistent with the safe and sound operation" of those lenders.

Contrary to the myths, studies show that most CRA borrowers pay their bills on time and become successful homeowners.

That's why the law has worked well for three decades, long before the recent Wall Street mess.

No, it makes more sense to blame the explosion of unregulated mortgage originators, an industry that grew in the housing boom, partly financed by Fannie Mae and Freddie Mac, now taken over by the government.

Pressured by the Clinton administration, lenders in 1999 began to relax the credit requirements for minorities and others whose incomes, credit ratings and savings were too low to qualify for conventional loans.

But that pressure did not come in response to the CRA. Fannie Mae, Freddie Mac and independent mortgage brokers had no CRA obligation or much federal regulatory oversight. Yet they account for most of the subprime-lending boom in the late 1990s.

And remember this: While subprime loans went to large numbers of non-whites and low-income borrowers, studies show that these recipients were outnumbered by upper-income and white borrowers.

One study by Compliance Technologies, which consults to lenders, found that more than half of subprime loans that originated at the height of the lending frenzy two years ago went to non-Hispanic whites--and about 40 percent went to borrowers whose annual income was at least 120 percent of their local area's median.

"Fannie and Freddie didn't have to be led to the water to drink," Judith A. Kennedy, president of the National Association of Affordable Housing Lenders, recently wrote. "They ran."

Yet the CRA is a convenient target for conservatives. It was created under pressure from "community organizers," a group ridiculed at the Republican National Convention. What's so bad about helping communities to organize? The GOP never said.

Re:*illegal* scammers

[quizwedge]

I think there's plenty of blame to go around... see my post at http://slashdot.org/comments.pl?sid=991171&cid=25323837

Re:*illegal* scammers

[quizwedge]

I didn't specifically state the CRA. The CRA wasn't a problem for years. It wasn't until our government during the time of the Clinton administration got involved with the CRA and CRA-related things. From your own quote:

Pressured by the Clinton administration, lenders in 1999 began to relax the credit requirements for minorities and others whose incomes, credit ratings and savings were too low to qualify for conventional loans.

Now, I'm not trying to sling mud against either party. BOTH have gotten us into the trouble we're in now. Clinton just happened to be president while this trouble started.

Re:*illegal* scammers

[quizwedge]

I still think it's only part of the blame. The people who signed loans they couldn't afford were greedy and stupid, but so were the banks that lied about the level of risk in their mortgage backed securities, as were Fannie and Freddie for buying way more risky mortgages than was wise. By only assigning part blame, I'm not saying that the people who signed loans they couldn't afford were right, just that there are others that need to be blamed as well.

Re:*illegal* scammers

[vux984]

Why not? If I know Joe isn't going to pay me back, but some 3rd party is forcing me to loan him, why should my other customers pay for that 3rd party's incompetence? I agree that there's plenty of blame to go around to everyone involved, but I don't see why banks should have to cover being forced to give loans out to bums.

Here's an equivalent example. Lets say you ran a store and searched anyone who you suspected of shoplifting, and then they passed a law saying you couldn't do this. Now, this law is going to cost you money... you KNOW some people are going to get away with shoplifting because of it.

So what do you do? Do you raise prices to cover the loss you are being 'forced' to incur, or do you go bankrupt and then whine at the government that its their law that caused you to go under?

Most businesses would have coped just fine, and we'd have no sympathy for the business that couldn't figure out how to stay afloat.

Look, I agree that forcing banks to loan to people who couldn't afford it was a STUPID law, but it didn't CAUSE banks to go bankrupt, the banks did that on their own, by utterly failing to cover the losses the law forced them to make; and indeed they made the problem worse by lying about the risks they were taking on.

Re:*illegal* scammers

[mcgrew]

True. Clinton presided over a Republican congress and senate, and the Clinton years were the best I've seen, and the first President I voted for was Nixon.

Re:*illegal* scammers

[vux984]

We know this, but do you honestly think it's okay to penalize responsible people so that bad risks can get loans?

No. I'm not arguing that it was a good law.

But seeing as it was the law, the banks should have been properly covering the risk they were being forced to take.

That said, I do think there are a lot of bank categorized 'bad risks' out there that aren't really 'bad risks'. Remember, they weren't merely lending money to poor people with steady jobs and a history of paying their rent to buy a home they could afford the mortgage on even after their 1-year promo-interest rate expired. That would have worked out mostly ok.

Instead they were irresponsibly loaning it out to who had no way of paying it back. They didn't verify their incomes at all, and they offered them interest only loans structured so that even if they could pay them now, they wouldn't be able to pay them when the interest rates reset, and because they were interest only the owner never had any equity, so if the price ever fell it would foreclose, etc, etc, and they KNEW they were doing this.

Re:*illegal* scammers

[vux984]

Requiring banks to give loans to people without SSNs or even proof of employment is essentially the same.

Legally maybe, but not practically. Its not like they had to loan money to EVERY one without an ssn or proof of employment, and I'm sure you could have found people without an SSN or a proper job who yet still were responsible and had reliable income.

(e.g. a mexican nanny who'd been getting paid under the table for 2+ years has neither ssn nor 'proof' of employment; but would have been a prime candidate for a loan she could afford.)

Re:*illegal* scammers

[ITJC68]

I must say this is the best comment I have ever read on this forum!! You sir are exactly spot on. You can't point the finger at one person or political party for this fiasco. The issue now is how does this country get back on the right track and not force hard working people out on the street? I am not saying let them keep the house if they don't pay because that will cause alot of people to do the same. Hopefully someone or some party will come out of this will the right ideas on how to regulate banking and lending to prevent this runaway lending practice and prevent the taxpaying public from having to buy up these bad loans. Regulation is not more bogus red tape legislation that will go nowhere or full of hot air either. I am watching my parents life savings starting to evaporate and all I can say is this is not fair for people who live on a fixed income, worked all their lives and are just trying to get through retirement. These CEOs and others upper management leaving or getting let go from these institutions with huge benefits should be outlawed. It is nothing more then theft.

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[Valar]

I can back that up. You are absolutely right, it isn't affordable housing efforts that killed us-- it was greed.

As someone who works at a financial institution (one of the top 10 banks in the USA), I can personally testify that it is not equal housing/equal credit or CRA that is causing the increased default rate. After all, the government regulations mostly just require banks to not make credit decisions on the basis of descriminatory metrics. For example, I can't say that 25 year olds have to have better credit scores than 50 year olds, or people from a certain neighborhood can't have loans. I CAN, however, turn down people with bad scores.

Our internal models show that the bad loans we have don't correlate with income. What they do correspond to are all of the risk indicators that banks should have been watching carefully (thankfully, we were): DTI, strength of collateral, credit score. In other words, it isn't lack of income, because we were only making small loans to people with small income-- it is loans where people out did themselves.

Furthermore, the only real government programs that allow people with no money down and back credit to get mortgages are through government secured mortgages. The government doesn't come to you and say "You have to give mortgages to people who can't afford it, and screw you if they can't pay." Instead, they say "You can give mortgages to people who wouldn't otherwise qualify IF they meet certain criteria, and we will protect you from the risk if they default." As far as the bank is considered, this is actually LESS risky than your average customer. That's the whole point. Incentives for the desired behavior.

The fact is that the myth that HUD/CRA/EH/EC caused the credit crisis, is just that, a myth. Everyone I've heard say it either a) has no experience in the finance industry, b) is a CEO trying to blame someone else for their problems,or c) is a TV personality trying to find the latest and greatest reason why we should just ship those pesky poor people somewhere else so that we don't have to look at them any more.

Re:*illegal* scammers

[Anonymous Coward]

Ummmm, they DID cover it, by

a) Selling the crap to Fannie and Freddie, and
b) Securitizing the crap and making it into CDO's, and
c) Insuring the resulting derivative crap at AIG, and
d) Further insuring the resulting derivative crap with Bear Stearns, Lehman Brothers, Merrill Lynch, et al.

Do any of the above names sound familiar?

The root of the problem is that the government required banks to put the crap into the financial system to start with. Then, when Alan Greenspan told the Senate Banking Committee that Fannie and Freddie's practices posed serious risk to the financial system back in 2005, a party-line vote killed any chance of imposing adequate oversight.

How do you lay that at the feet of lying bankers?

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[doctorcisco]

"Why were so many of these bad loans made by banks that weren't being told to make them by the government?"

Which banks were those, exactly?

"Why were so many of these loans made that had zero connection to either Freddie Mac or Fannie Mae?" Because the CRA doesn't require sale to Freddie/Fannie. It does require sub-prime lending.

Yes, there was plenty of greed involved. But that, by itself, would not have caused the current train wreck. It's not as if bankers and investors suddenly got greedy in the last 10 years. It's just that in the past, their GREED required sound loan underwriting. Then the feds decided they were being mean to poor people, hence the CRA.

The CRA led to lowered lending standards for every borrower -- if a 600 FICO is good enough for the poor, it's good enough for middle class people living way above their means also, and its illegal discrimination to have one standard for the one group and another for everyone else.

Do you understand yet? The free market HAD good lending practices precisely BECAUSE the bankers were greedy. The government decided to tell them to "loosen up." What the gov't demands, it generally gets.

doc

Re:*illegal* scammers

[sumdumass]

I don't think you quite understand the situation.

To give you an example, if I run a bank, and the government says, you have to lend money to joe, and I know Joe can't afford it, and will probably foreclose, I don't just "do it and blame the government when joe forecloses", I set the interest rate on ALL my customers a little higher to ensure that when Joe forecloses I'm not bankrupt.

For the GSE's the government set the max interest rates that could be charged as well as set requirements for 45% of the risky loans to be to Very low income people and another 35% or so to be to low income people. Low and Very low have legal definitions of between 60% and 80% of the area median income levels. Also not that a median isn't an average, it is a halfway point on a defined set of elements.

We also have the problem with FHA and other various government programs (USDA) that were buying repossessed homes from the GSE's which created an artificial shortage and increase in prices. This is the reason why when things went down hill, it hit so hard. The $100,000 house that Joe couldn't afford in the first place was going for $150,000 which meant that the bank couldn't even get their money back after Joe defaulted.

Thus the government requiring the banks to lend to people who they would otherwise not to, is no different than any other regulation placed on banks, all of which costs them money to satisfy, and in each case they simply pass the cost onto their customers.

That short sightedness is the reason we are in this mess. The interest rates in a lot of cases where dictated and with the ARM loans, the amount of securities were lower then the amounts invested. The GSE's helped hide this because their obligations where a lot higher then regular banks and they were either underwriting the loans directly or buying them from the banks so that the banks could continue operation.

I don't think you understand the serious complexity of this. The banks, Fannie and Freddie as well as several of the other investment banks started having to rely on someone buying these risk based loans in order to continue operation. This is the environment that the government created.

Instead, in this case, they just blindly did it, and worse, they then created mortgage backed securities full of these risky loans and then did the most colossally stupid thing... the thing that caused the REAL collapse of the economy... they LIED about how risky these were, leading them to be GROSSLY overvalued.

They did nothing blindly. You can't get this big of an intertwined mess without direct and purposeful actions. Those actions, some of which were previously illegal were made legal and directed by the government.

Once the elections are over and the politicians quite blowing smoke up our asses in vein attempts to look innocent in this, you will start seeing more damaging details coming around and the complexity will show more of it's true nature and direction. It will be more detailed and you will see it for what it is worth.

Re:*illegal* scammers

[nomadic]

Which banks were those, exactly?

I should have said "lenders" instead of banks. My point is completely the same, of course.

This gives a good analysis of the sub-prime loan/CRA relationship.

Yes, there was plenty of greed involved. But that, by itself, would not have caused the current train wreck. It's not as if bankers and investors suddenly got greedy in the last 10 years. It's just that in the past, their GREED required sound loan underwriting. Then the feds decided they were being mean to poor people, hence the CRA.

So you're asserting that the CRA somehow weakened lending standards so the banks suddenly didn't need sound loan underwriting? Because that's the only way what you're saying has any consistent logic. And of course, that assertion would be wrong. I dare you to find anything in the CRA mandating lenders to lend to high-risk borrowers. Unfortunately these CRA arguments usually go nowhere, because I'm usually the only person in the argument that's actually read the CRA.

Do you understand yet? The free market HAD good lending practices precisely BECAUSE the bankers were greedy. The government decided to tell them to "loosen up." What the gov't demands, it generally gets.

Since when? The government may demand things, but unless they actually make a law mandating certain behavior businesses will ignore it if it's to their advantage.

And I think you have a fundamental misunderstanding of what the CRA is. It didn't lower standards and it didn't say that banks were required to lend to high-risk borrowers--all it said was if they're doing business in a neighborhood, they must provide loans to people in that neighborhood. The thing is, loans made under the CRA were made more responsibly than the standard sub-prime loans, had lower rates than other sub-prime loans, and were less likely to be rolled into

I mean, look at it logically; independent mortgage companies aren't subject to the CRA. Why then were all these independent mortgage companies making subprime loans?

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[daver00]

Ron Paul is a crackpot because he advocates a commodity backed currency which history has proven is an unstable and frankly stupid idea. It is simplistic economic thinking: "Money needs inherent value, fiat money has no inherent value." Bullshit I say, if I can use it to trade it has value. What happens say when said commodity goes through a production boom? Or vice versa? Or when foreign interests manipulate this commodity, and thus your currency, outside of what is comfortable or realistic. How do you work out international currency trading when different markets won't agree on the value of your commodity?

In fact if you really think about it, it makes absolutely no sense whatsoever to tie the value of your economy to something shiny we dig out of the ground, or any other commodity. It makes no sense at all. Exactly what reflection of demand for currency, or gdp growth, does a commodity have?

The other crackpot theory is that fractional reserve banking is wrong, and the extension of this: creating new currency according to demand is wrong. Ron Paul would force massive deflation on the world just to save your savings accounts. It is this whole "inflation is evil, deflation is good" belief system that is the source of his crackpottery. It is a plain dumb idea that won't work.

Re:*illegal* scammers

[penix1]

Wrong, the people who signed for loans they couldn't afford bear 100% of the blame. Just because the government forces banks to lend you more money doesn't mean you have to. I could have gotten a much larger house in a better neighborhood, but I bought within my means.

You see this one trotted out all over the place and it completely ignores the fact that most of those that got into trouble had one or more of the following happening to them:

1.) Pushy mortgage brokers looking for that hefty commission out and out lied about the effects of the ARM they were peddling. Many older folk were duped into getting an ARM under the guise of lower payments (short term being left out of the discussion). When the ARM balloned, they were left in the dust. Many of these people were duped to an ARM from a slightly higher fixed rate.

2.) Most Americans can't afford to be out of work for any length of time and outsourcing caused huge shifts in employment. While you were employed making $GOOD_MONEY you could afford that house. The economic downturn caused loss of $GOOD_MONEY that snowballed the foreclosure bubble. As that unravelled more jobs were lost causing more foreclosures. Wash, rinse and repeat.

3.) There was too much incentive for banks to approve these shady loans because they weren't the ones getting stuck with them. They sold them to the brokers trading them on the market. It didn't hit the banks until their credit was cut off because the red ink on the books much higher up couldn't be gotten rid of. Add to that Fannie & Freddie buying the things up like popcorn thinking they had real value the lower banks assigned which really was an inflated price.

4.) Housing values really shot through the roof way beyond the actual value of the property. A house that sold for $45,000 in 1990 sold for $250,000 in 2002. Most of that "value" was solely on paper further worsening the situation. As these values get reevaluated, expect people to become upsidedown in their loans owing more than the property is truly worth.

In short, I think the banks who issued the OK on the loans bears much more of the responsibility for their predatory lending practices. After all, they are the ones paid to know the ins and outs and are supposed to ensure the person making the loan FULLY understands what they are getting into. In short, greed clouded their judgment.

Re:*illegal* scammers

[pertelote]

To give you an example, if I run a bank, and the government says, you have to lend money to joe, and I know Joe can't afford it, and will probably foreclose, I don't just "do it and blame the government when joe forecloses", I set the interest rate on ALL my customers a little higher to ensure that when Joe forecloses I'm not bankrupt.

While that is truly good business, the problem with these bad-from-the-get-go mortgages is:
1. Banks A, B, C and D "make" 25 mortgages this week.
2. Next week all 100 of these mortgages are sold to a broker of "Mortgage Backed Securities."
3. Broker E stacks the 100 items in a neat 10 x 10 block and slice them against the grain, creating 100 new units with a little slice of each of the 100 old units in it.
4. Broker E sells these new derivatives to 100 investment banks and pension funds.
5. When 10 percent of the original mortgagees stop paying, instead of four banks having to cover a few bad loans, the damages is spread as widely as possible to create as much havoc as we have seen.

True fiscal conservatism (close to hiding the money under the mattress) is likewise too extreme, but when handling a highly volatile substance (these "neutron loans") some caution would have been a much better plan of action.

Re:*illegal* scammers

[thephenom99]

Only insurance companies get paid by law as a requirement (insurance premiums). Banks entice, there is no law making it mandatory for you to pay banks. The insurance industry relies on it's clients not to file claims, of which, they "flip" the clients money by loaning it out (they are so prominent they issue mortgages, now). The insurance industry waited for FEMA instead of immediately handling the claims they are responsible for. How else could America have a record number of hurricanes and insurance rates go down? The insurance industry paid hardly any claims. It is Americans that suffered from corporate America (the auto industry and yes, banks too) moving the good paying jobs over seas for their CEO's record profits. Yes, and there is one last very true note, Bush bails out the banks and A-- insurance with emergency relief, but signed into law, years ago, a law that makes it extremely tough for the average American to file bankruptcy. What about the little guys bailout? No, spa $400,000.00 treatment for the American that lost his and or her job due to outsourcing over seas.

Re:*illegal* scammers

[Hognoxious]

You can't remove the negative consequences by simply writing "this law shall have no negative consequences".

I'm sure that's true. I just don't see how you can interpret the quoted part of the law as saying anything close to that.

Re:*illegal* scammers

[doctorcisco]

"It didn't lower standards and it didn't say that banks were required to lend to high-risk borrowers--all it said was if they're doing business in a neighborhood, they must provide loans to people in that neighborhood."

Let me get this straight. You believe that the CRA did not lower underwriting standards? You appear to be a minority of one.

I can tell you, from personal knowledge, that you are simply wrong. I worked at Fannie in Chicago as an IT guy for a while in the late '90's. I cannot tell you how much advertising material I saw assuring higher risk people in marginal neighborhoods they could get a loan. The CRA was invoked. The standards were lowered. In fact, one man in particular, who worked in the financial area, was concerned that Fannie was buying these lower quality mortgages. He was in no position to do anything about it, but he did not think it was smart.

Independent mortgage companies made crap loans because banks, Fannie, Freddie, etc. were willing to buy them. Why would they NOT make the loans, when there were buyers eager to pay for them?

The point is not that the CRA directly caused all the bad things. It lowered standards for poorer borrowers. That lowered underwriting standards for everyone else. And contributed substantially to our present mess.

Re:*illegal* scammers

[doctorcisco]

P.S. The Community Reinvestment Act WAS AND IS a law. And the only way to lend in marginal neighborhoods is ... to make marginal loans. It's interesting how your point of view prevents you from grasping something so very simple.

Re:*illegal* scammers

[nomadic]

I can tell you, from personal knowledge, that you are simply wrong. I worked at Fannie in Chicago as an IT guy for a while in the late '90's. I cannot tell you how much advertising material I saw assuring higher risk people in marginal neighborhoods they could get a loan. The CRA was invoked. The standards were lowered. In fact, one man in particular, who worked in the financial area, was concerned that Fannie was buying these lower quality mortgages. He was in no position to do anything about it, but he did not think it was smart.

Being an IT guy and seeing advertisements doesn't qualify as "personal knowledge." Find me the clause in the CRA that states that underwriting standards were lowered. In fact, the CRA specifically states:

(1) assess the institution's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of such institution;

Three things you should note: (1) that "safe and sound operation" is still mandated, (2) that banks have to meet the need of low-income neighborhoods, not low-income people, and (3) that they only had to do this in neighborhoods WHERE THEY DID BUSINESS.

They were still expected to invest prudently. There can be low-risk borrowers in low-income areas, and these were the people they were expected to target. Up to this point the banks had been avoiding entire neighborhoods, mostly as a result of institutionalized racism. And finally, if they don't want to offer loans in a certain neighborhood, fine. They shouldn't set up a branch there.

Independent mortgage companies made crap loans because banks, Fannie, Freddie, etc. were willing to buy them. Why would they NOT make the loans, when there were buyers eager to pay for them?

Exactly my point; their willingness to buy them did not arise from the CRA, but rather the mortgage companies' greed and the larger banks willful ignorance.

The point is not that the CRA directly caused all the bad things. It lowered standards for poorer borrowers. That lowered underwriting standards for everyone else. And contributed substantially to our present mess.

That does not follow. In fact, if the banks were really forced by the CRA to offer loans to credit risks, then the mortgage companies (who weren't subject to the CRA) would be advantaged; they could undercut the banks on loans to high-income, low-risk borrowers because they wouldn't have the same losses from defaulting CRA borrowers to balance out, and thus could offer lower interest rates.

Re:*illegal* scammers

[nomadic]

P.S. you obviously have very little experience in "marginal" neighborhoods. REAL marginal neighborhoods don't have banks. If there are banks in a neighborhood that's a sign there are depositors. Where there are depositors, there is money.

Re:*illegal* scammers

[doctorcisco]

Your faith in your viewpoint is charming. Can you cite a reputable source in the banking/mortgage industry who does *NOT* believe that the CRA led to lower credit standards?

Sure, the CRA says, "You are required to lend to these marginal neighborhoods, but you also must not lower your underwriting standards." The problem is that this was and is not possible on the scale the regulation enforcers would consider adequate.

You also don't consider the fact that if you can resell the loan to Fannie/Freddie, you don't really care what sound underwriting is; you care what Fannie/Freddie are willing to buy. Alan Greenspan specifically testified to the Senate Banking Committee in 2005, that they needed much closer regulation, because they were putting "the financial system of the future at substantial risk."

But it's clear you won't be convinced. I just wanted to say that your opinion is not shared by ignoramuses like Alan Greenspan.

doc

Re:*illegal* scammers

[doctorcisco]

P.S. I *LIVE* in a "marginal neighborhood" in Aurora, IL.

Cyber-vultures. Brilliant.

[Samantha Wright]

So does that make the victims of such scammers cybernetically carrion? As in "brain-dead"? Because that makes way more sense in the face of such a silly buzzword.

Re:Cyber-vultures. Brilliant.

[Farmer Tim]

Surely "cyber-vulture" is a buzzard word...

Re:Cyber-vultures. Brilliant.

[TeknoHog]

Is that an African or a European buzzard?

But what about the real scam?

[gillbates]

That allows investment bankers to pawn off responsibility for their misdeeds on the American public?

So I'm supposed to pay an additional $10k in taxes to finance the bad decisions of those who foreclosed on middle class Americans? And if I have to pay it over time (as Congress proposed), I'll end up paying even more (because Congress will borrow money to finance the bailout).

I would say that I've got that money in my 401k, but I doubt it's worth anything now.

I've got a better idea. Start printing money. Yes, devalue the currency to the point where I can settle my mortgage for a few hours worth of work. If bank CEOs can get bonuses for shafting even the Americans who were smart enough to avoid bad lending practices, we should be able to just print the money to pay off our debts.

Re:But what about the real scam?

[PunkOfLinux]

Yeah, but then your retirement becomes essentially worthless...

It's wrong that we're paying for their mistakes, and we will be paying for that for YEARS to come.

This is not capitalism - by influencing the market (especially so heavily) and giving money to institutions just because they're 'a huge part of the economy' we gave up capitalism. These people fucked up - by the tenets of capitalism, if they can't survive this on their own, LET THEM FAIL. Oh, boo hoo, a tough few years. Better than going even further into debt just to bail out a few rich pricks who made the mistake of doing things where the benefits were far outweighed by the costs and potential risks.

Re:But what about the real scam?

[Quasar1999]

I was going to mod you, but I couldn't find '+1 really bitter but ultimately on to something'.

Sadly your idea of printing money to devalue it to the point where you can easily pay off your debts would work, but only if the US was self-sustaining, which it isn't. And I doubt you'd get the Chinese to agree to devaluing the US Dollar much more, they seem to have a very large amount of US dollars in their hands... some sort of insane trade deficit? They'd probably invade the US to over-throw the government and attempt to stop the devaluation of the currency (and their investment). Somehow I see world war 3 coming out of this royal fuck up by the US.

It's times like these I'm so happy to live in Canada, and look forward to enjoying the nuclear winter that's inevitibly coming sooner rather than later.

Re:But what about the real scam?

[slashtivus]

I'm not trolling you, but you do realize that economically the US and CA are very much tied to one another? You don't have to like it, but it really is the truth: If the US crashes so do you.

Re:But what about the real scam?

[qbzzt]

Yeah, but then your retirement becomes essentially worthless..

Your retirement is worthless. We aren't raising enough kids, so the economy won't be able to support us retiring.

Re:But what about the real scam?

[qbzzt]

They'd probably invade the US to over-throw the government and attempt to stop the devaluation of the currency (and their investment). Somehow I see world war 3 coming out of this royal fuck up by the US.

China doesn't have the navy to invade the US. It may or may not be able to nuke the US, but if it does, their investment in Chinese cities will be devalued.

Our (I'm in the US) standard of living will probably drop, once we can't buy valuable stuff from China for dollars is doesn't cost us anything to produce. But it won't be apocalyptic.

Re:But what about the real scam?

[Ravon Rodriguez]

Real assets are the only hard currency left.

>
Not true, once the dollar is valueless, gold will be the currency to own

Re:But what about the real scam?

[Maudib]

The bailout isn't a bailout. The bankers who screwed up are for the most part being wiped out, along with the investors. Please see AIG, LEH and BS stock prices and you will see that the company owners and the company employees are being entirely wiped out. The "bailout" is preventing the guys who screwed up and are wiped out from wiping out everyone else. Its about liquidity and fear. Good companies are being destroyed due to too much fear and too little liquidity. It isn't a lie when the Fed says that most of what will be bought with the $700 million will be good or profitable. So the feds loose a couple hundred mil on this. Several trillions are being wiped out every week in the stock market.

Re:But what about the real scam?

[Anonymous Coward]

The difference is that we're hearty lumberjacks that can survive the rough cold wilderness with nothing more than our bare hands, while the U.S. is mostly a bunch of pussies that would assume the fetal position if they missed an episode of American Idol.

Re:But what about the real scam?

[Fluffeh]

It would all be funny and right in your post, if your country (or any for that matter) could continue to exist without a banking and finance group. If any other sector that wasn't needed made such a monumental cockup it would simply self implode and everyone would be "sorry about that mishap, but lets move on". Because however that banking (and insurance, and healthcare and other such operations) are so vital for a country, yes, you do have to cover for their mistakes with your taxes. If you don't it will be much worse.

Should the managers and bankers that allowed it to get to this level be punished? Certainly. In Australia when we had a major insurance company meltdown we put the blighter in jail for it. If I were American, I would be expecting the prison population to be filled up with bankers and lenders in the near future.

Re:But what about the real scam?

[PunkOfLinux]

That's what socking money for retirement is aimed at - self-sufficiency.

Re:But what about the real scam?

[smallfries]

Who is holding all your debt right now (and they got nukes, so it counts)?

Re:But what about the real scam?

[minus-sign]

Every time I hear about the financial crisis I think of the CarMax commercial. Don't know if you've seen it but there's a guy sitting behind a desk, not even looking as his little rubber stamp thumps down rhythmically to his mellow voice mumbling "approved, approved, approved, approved" as one loan application after another whisks by. The problem is less to do with the few "rich pricks" that might take a short walk out their 20 story window when the market implodes. I agree that the credit institution is passed the point of "out of control"; that they have inflated house prices to the point where no one can afford the American dream if they don't sell their soul--well, lease--to creditors. This country lives on credit nowadays. It seems like the vast majority of our population has forgotten how to save. Instant gratification; its the next big killer behind obesity and smoking. Which makes it all that much more unfortunate that I, you, and a lot of taxpayers are going to end up paying for someone else's house because they could and were encouraged to borrow beyond their means. Those are the idiots tax payers will be bailing out in the long run. Now...is the answer going to be found by a bunch of professional politicians who wouldn't know a payroll from a pig in a poke? No. Let me be clear: H-E-double-hockey-sticks NO. But an election year has a tendency to get the wrong spoons stirring the soup. Those loans should have defaulted. No one living in a doublewide trailer needs a H2. When they reach that point where they just can't pay anymore, then...they should lose that H2 or (if they really want it that bad) live in it. But nobody really wants to hear that kind of talk.

Re:But what about the real scam?

[Quasar1999]

30% of our economy is directly tied to US importing our goods. However, most of our product is raw natural resources, which there always will be a demand for. That said, the US economy crashing and burning will take us down a ways, but not as far as you'd think.

Re:But what about the real scam?

[Maudib]

While things are certainly going to be bad you have badly misread what is happening.

(1) The liquidity crisis is actually preventing inflation and there is a good chance that we could even witness some deflation if things don't change. Economic downturns are not necessarily couple with inflation, in fact we could even see deflation during this recession.

(2) Treasuries (U.S. Debt) have become even more valuable. Yields are almost effectively zero while prices are sky high. This is because everyone is so afraid of the markets that they are running to pick up the safest instrument available: U.S. debt. You really think China or anyone else will dump treasuries? Where would they put the money? Europe? China? Russia? Europe is as screwed as we are while Russia and China are even worse.

(3) The U.S. Dollar has actually been gaining value lately, likely due to point #2.

(4) "Buy land, seeds, guns and ammo cause Darwin is going to come knocking for the slow and trusting. Real assets are the only hard currency left." This is a nonsensical point. In order for "Real Assets" to trump cash it is likely that we would need a total failure in the rule of law, at which point having bought land or seeds would be meaningless as anyone with a gun would simply take them. Logic points to a couple years of slow or negative growth, not the collapse of society. I bet you spent Y2K in a basement.

You can have your land and seeds, I am going to start accumulating value stocks at all time lows.

Re:But what about the real scam?

[FooAtWFU]

This is not capitalism - by influencing the market (especially so heavily) and giving money to institutions just because they're 'a huge part of the economy' we gave up capitalism.

We messed up before that - when the government decided that they wanted Fannie Mae to subsidize home ownership for all sorts of people, even lower-income types. Remember those good old intelligent progressive Clinton-era policymakers? And bad money drives out the good. We're just lucky more banks weren't overzealously subprime.

So our solution to a government-market-intervention failure is MORE INTERVENTION! Yay us! P.S. Obama will make everything better with his anti-free-trade policies and assorted miscellaneous subsidies to politically favored industries and assorted other intervention! (Alternatively, McCain will make it all better with... i got nothin', sorry.)

Re:But what about the real scam?

[HornWumpus]

Gold is a real asset.

If you can hold it, fire it, drive it, farm it or work it then it's a real asset.

Currency is too useful, a new reserve currency will arise.

Re:But what about the real scam?

[Wildclaw]

Which is the whole point of working and creating more efficent factories so you need less kids to support you. Of course, that only works when you

* Are actually concerned about increasing efficency and not about how to best fool other consumers into buying vanity toys and consumption services.
* Allow ordinary workers to get a decent share of the products produced.
* Actually have workers and the country save and invest in improvements.

Re:But what about the real scam?

[Anonymous Coward]

Real assets are the only hard currency left.

>

Not true, once the dollar is valueless, gold will be the currency to own

You're not real bright there are you sonny boy? Did you look at what the parent poster said to buy?

If things go to hell in a handbasket I'm sure you'll enjoy having your gold... right up until the point where someone decides it is their gold instead of yours.

Things get real bad then gold won't matter one fucking bit for a good, long time.

Re:But what about the real scam?

[jank1887]

It's all about too little liquidity. But where did their money go? It went into the Mark-to-Market system, or at least got tied up in the related regulations.

Basically, these banks have tons of cash tied up in different types of loans, which have a certain estimated street value. Then *BAM*, bank X finds out it overvalued a bunch of those loans because the risk was MUCH MUCH higher than it had either pretended or been made to believe. All of a sudden Bank X more-or-less goes out of business because of that major cock-up.

Now for the kicker. Bank X just had to devalue tons of 'loan assets'. They're having a fire sale on derivatives. This becomes a huge problem for Banks A, B, C, W, Y, and Z. Why? Because they have a lot of similar loan assets, which might or might not have been similarly overvalued (or under-risk-assessed). According to SEC Mark-to-Market regulations, these banks have to set aside enough cash to cover the difference between their assets' "fair market value" and Bank X's "going out of business sale" rock bottom prices, whether or not those items were actually improperly valued.

All of a sudden, all that money that these banks would have been lending to each other and to businesses gets locked down by the accounting system. Hence, a lack of banking liquidity, and there's the mess we're in.

So, when they talk about all this bailout money to 'buy troubled assets', they're referring to the bank assets that are currently tying up the banks' lend-able cash reserves. Taxpayers buy them, and some of them may be perfectly good assets. Some might be crap.

Some people suggest the SEC should relax the mark-to-market reserve regulation. not sure I completely support that. It's there to do what it is doing now, prevent banks from giving away all of their cash reserves to the point where they can't make good on loans that go bad. There could be a lot of loans going bad, but it's hard to tell when and how many really are bad. Getting rid of mark-to-market would allow even the 'good banks' to drive themselves out of business. if that happened en masse, it would be like a nuclear event hitting wall street instead of just the current quagmire.

I would just like to know more about how all of these loan and derivative or hedge assets are valued in the first place. Is it that hard to re-rate all of these loan products that were sold as lower risk than they really were? There seems to be this persistent uncertainty about banks not being sure which assets are good and which are fool's gold.

Re:But what about the real scam?

[Anonymous Coward]

I was reading the Canadian magazine Macleans coming back from Toronto the other day. Their (Canada's) economy is doing rather well right now. Their government didn't let homebuyers get into the crap they did like here in the US. No "$0 down, variable rate!" crap. And they're a very resource rich nation which helps considerably. About the only sector of their economy hurting is the automotive industry because they sell lots to the US.

ps: I was in Toronto looking at houses :)

Re:But what about the real scam?

[IanHurst]

I don't want to knock Canada, cause I think you guys are pretty cool, but you understand, when the largest economy in the world crashes, natural resource prices go along with it.

The other thing is while Canada is loaded with natural resources, so is the USA. In the nightmare world where the USA runs out of better ways to make money, it will turn to natural resource extraction too, and that is not going to have a good effect on Canada's extraction industry.

Again, not knocking Canada - great country, great people. But our fates are tied. Usually that's pretty cool, and sometimes, like now, it the pits.

Re:But what about the real scam?

[HornWumpus]

Reading long term dollar stability into the current treasury price is silly.

What I see is a panicky mob stampeding into treasuries as that's the only 'safe' place left to park capital.

This supply/demand imbalance is driving yields to zero. But that's a fickle crowd and they are mostly buying short term treasuries (yield curve etc.)

Treasuries aren't if fact making anywhere close to real inflation (CPI calculation methods etc. I'm sure this is old ground for you to.)

Let's just hope treasuries aren't allowed to be the next bubble. That's the one with teeth. The one that wrecks the dollar.

The SS trust fund train wreck if not sooner. Do you really think the Chinese won't at some point stop buying up all those Treasuries? IIRC 2015 China is China's biggest market, 2017 SS Trust fund 0 point (where it's supposed to be maxed out and start generating payments). The Chinese bankers know these projected dates (or better ones).

Land and guns are always good to own. Especially now you can't go wrong if you can pull it off.

I spent Y2K drunk as a skunk but not worrying. Where are we?

Pacific rim value stocks at all time lows.

Re:But what about the real scam?

[PunkOfLinux]

I really think it's wrong to blame the people who took out the loans. Yeah, they did some bad stuff when they got loans they couldn't afford, but look at the climate around them. Easy credit, a 'buy now!' economy, and outright deception by the lenders all led to their action. Should they be punished? Yes. Should those responsible for the conditions that led to this be punished? Even more.

Yeah, sure, people got mortgages they couldn't afford - it happens all the time; it's just that now, with the combination of their stupidity biting them in the ass, and the sale of securities backed by useless mortgages, the financial institutions are totally boned. Problem is, they could have VERY easily avoided this. Their own greed led to this - let it be their end.

Why are we bailing them out? So they can stick three more cocks up our ass? I mean, mine's already sore...

Re:But what about the real scam?

[Maudib]

Well on the subject of Social Security, thats one place where I give a degree of respect to the "Starve the beast" argument. The baby boomers got us into this, if SS goes tits up then I am ok with that- we can just cut benefits. Its not that I want seniors to starve, I just don't think that they are entitled to more then cat food given the mess they have given us. It won't even require legislation to do, we will just re-rig the CPI and let inflation over a few years take care of the rest.

"But that's a fickle crowd and they are mostly buying short term treasuries"

The treasury bubble dooms day scenario requires the collapse of government, at which point we are all dead anyway. \\

"Land and guns are always good to own."

Tell that to the people that bought land anytime in the last 7 years.

Re:But what about the real scam?

[jagdish]

The difference is that we're hearty lumberjacks ...

So you sleep all night and work all day?

Re:But what about the real scam?

[qbzzt]

If we were willing to accept the standard of living of our grandparents, we could probably have an average work week for 10 hours.

But most of us are not, we like our toys too much.

Re:But what about the real scam?

[Detritus]

Don't blame the baby boomers for the Social Security mess. It was doomed as soon as Congress discovered that they could buy votes by increasing the benefits. This started before the baby boomers were even born. That's why you should never leave a politician and a bag of money alone in the same room. They just can't help themselves, that money is whispering "spend me, big boy".

Re:But what about the real scam?

[Maudib]

Well what you describe is only part of the problem though. The 700billion is supposed to offset the damange of mark to market, but banks still aren't lending. They have the money, but they are charging a premium for it to other banks. This lockup is totally fear oriented, no one wants to be the first to lend overnight.

I abhor the idea of the treasury buying a bank to get around this, but as a threat it is a good play. Banks can start lending again or play Russian roulette and risk being nationalized. This is such a cock-up, its unreal.

Re:But what about the real scam?

[Detritus]

Lots of ordinary Americans benefited from the real-estate bubble, not just the obvious scammers and thieves. Think of all the people who sold their houses at greatly inflated prices. Think of all the people who have been "livin' large" by cashing out the equity in their houses. How do you recover that money? You can't. Some people profited and society at large gets stuck with the bill when the bubble bursts.

Re:But what about the real scam?

[jank1887]

really? they have the money?

The bill was just approved and signed last week. Please show me anything that says money has left the gov't coffers yet. Banks still can't lend if all their cash is tied up with mark-to-market.

Re:But what about the real scam?

[Rakishi]

This is not capitalism - by influencing the market (especially so heavily) and giving money to institutions just because they're 'a huge part of the economy' we gave up capitalism.

Oh for the love of god, shut up or learn what the fuck you're talking about. The government been controlling the economy for the past century and been doing it heavily since at least the great depression. The federal reserve and various laws have never allowed capitalism to exist in a pure form for a damn good reason.

Don't bitch and complain when the government continues to do what it has done for a century. It should have kept this mess from happening in the first place but it didn't and now it's trying to prevent it from spreading. It's probably a lot better than the alternatives given how many recessions happened in the 19th century (not to mention the direct reasons for the federal reserve to have it's present amount of power).

These people fucked up - by the tenets of capitalism, if they can't survive this on their own, LET THEM FAIL. Oh, boo hoo, a tough few years. Better than going even further into debt just to bail out a few rich pricks who made the mistake of doing things where the benefits were far outweighed by the costs and potential risks.

The rich? Who do you think will really be in trouble when the economy implodes and unemployments goes through the roof? The rich who have stable savings in 50 different forms or the poor who live paycheck to paycheck? Maybe the middle class who just lost any ability to borrow money and had their retirement disappears?

This is to bail out the economy and not a bunch of rich people.

Re:But what about the real scam?

[Warll]

I'm sure you guys have a lot of resources, but really can you beat this: http://en.wikipedia.org/wiki/Athabasca_Oil_Sands

"contain about 1.7 trillion barrels (270Ã--109 m3) of bitumen in-place, comparable in magnitude to the world's total proven reserves of conventional petroleum."

Re:But what about the real scam?

[ballwall]

Apples to oranges, but maybe:
http://en.wikipedia.org/wiki/Oil_shale_reserves#North_America

Re:But what about the real scam?

[Nightspirit]

No, but we do have 32b in Utah, which will last us at least a couple years.
http://en.wikipedia.org/wiki/Tar_sands#USA

Re:But what about the real scam?

[bitrex]

These people fucked up - by the tenets of capitalism, if they can't survive this on their own, LET THEM FAIL. Oh, boo hoo, a tough few years. Better than going even further into debt just to bail out a few rich pricks who made the mistake of doing things where the benefits were far outweighed by the costs and potential risks.

It's known as the US system of quasi-capitalomarxism called "Socialism for the rich, capitalism for the poor."

Re:But what about the real scam?

[mjwx]

his is not capitalism - by influencing the market (especially so heavily) and giving money to institutions just because they're 'a huge part of the economy' we gave up capitalism. These people fucked up - by the tenets of capitalism, if they can't survive this on their own, LET THEM FAIL. Oh, boo hoo, a tough few years. Better than going even further into debt just to bail out a few rich pricks who made the mistake of doing things where the benefits were far outweighed by the costs and potential risks.

This is the true free market, not as Smith and others have envisioned it but the real free market.

What most libertarians don't understand is the fact that you cant participate in a market without changing it, much as the old scientific premise goes, you cannot study an environment without changing it. This leads to the understanding that an environment (the market in this case) is entirely influenced by those participating in it, those who are more powerful in the environment (the rich in this case) have more influence than those lower down the food chain (us, in other words). There is no great and all knowing invisible hand, it is in fact the quiet visible hands of those who have the most vested interest in how the market runs. What popper regulation ensures is that the people (via government) have an equal hand in saying which way the market is guided. To paraphrase a quote "the Free Market isn't free", we still have to pay a price for a fair and equitable market, this price is not so much monetary as it is vigilance. We need to keep an eye on the market to make sure it is not abused or used against the average person, then the market can hope to be as free as possible.

The people behind the risks lent too greedily, could not foresee the troubling economic times over the possibility of profit (some people did, I predicted at the beginning of the Iraq war that the entire cost would eventually be passed onto the US taxpayer, I just didn't think it would take this long). they didn't make the wrong decision in so far as lacked the foresight to understand the full consequences of those decisions. The measures they too to attain profit were extreme, had this been done 10 years ago before they would not have mattered so much as the economy did not have such a massive debt and could have handled such a failure. But much like the ardent Libertarian they didn't see how their grand dream could go arwy and thus proceeded with extreme actions.

The banking system cant just be "allowed" to collapse, whist I agree that those responsible (who lent too greedily) should be held accountable those who are currently being "rescued" should be imprisoned or otherwise punished until they have repaid their debt to society but this wont happen, and to paraphrase a Comic/Movie quote "if the Americans are looking for someone to blame, they need only look into the mirror", it was through ignorance and complacence (blind acceptance of the invisible hand) that your economy is now held hostage by a few very rich banks. If the banking system is allowed to collapse it will be tough on the rest of the world but we'll get over it, it will however be the end of the United States of America in its entirety, the US will become a hyper-inflationary dictatorship like Zimbabwe where corruption will reign and unemployment will be beyond the capacity for any semblance of an economy to be able to support it (OK, if you're lucky a highly unstable quasi-democracy like the Philipines, but there will still be serious levels of unemployment and corruption). Now as an Australian I can honestly say I don't want that to happen (Australia is in one of the best positions to ride out a global recession, second only to Canada) not just for the recession in Australia but because no American deserves that to happen to them or to the US itself (I even apply this to the libertarians that are not doubt going to berate me for my stance on the free market)

Re:But what about the real scam?

[damburger]

This has already been refuted by someone else: http://it.slashdot.org/comments.pl?sid=991171&cid=25324879

If you want to know what your ideal market would look like, look at the 19th century. Unfettered capitalism is human suffering and wage slavery, and that is a historical fact.

Re:But what about the real scam?

[Capt James McCarthy]

Though I agree this is not going to be a fun time watching my retirement funds shrink, the last number I seen that this would cost the US would be 2 trillion dollars. That is roughly 9% of the GDP. Bad, yep. Unrecoverable, not even in the least.

The bigger issue yet again is people. If folks lose confidence in the markets, they will fail regardless of the money that is or isn't there.

Keep your chin up. The US has been through worse and will get through this as well. Yes, it sucks for those of us not having influence in this. And there is plenty of blame to go around. So I say instead of crying too long about it, we pay the tab, fix the rules, and forge ahead.

Re:But what about the real scam?

[fbjon]

Natural resources will still have almost the same value as before the crash. It's not like manufacturing will disappear anywhere.

Re:But what about the real scam?

[Hognoxious]

when the largest economy in the world crashes, natural resource prices go along with it.

Say what? China's having a recession?!?!

Re:But what about the real scam?

[marcosdumay]

(1) is a short to mid term factor, no rush lasts for the long term. How the dollar will be valued 2 or 3 years from now depends on the fundamentals, but I have no clear idea of what they are.

(2) is mostly a consequence of (1). Zero yelds makes now a very nice time to sell US treasures :), and about "China or anyone else will dump treasuries?", well, Brazil and Mexico are already doing so. Investing the money on Brazil and Mexico, respectively. I can't tell you for sure that it is a good bet, but the Brazilian Central Bank earned a big amount of my trust at the last years. From the 4 biggest US treasures holders, Japan is holding, nobody can really know what China is doing, Russia is holding and Brazil is selling. Nobody seems to be buying.

Now, about your "stocks at all time lows", I bet you didn't do much hystoric researching, did you? They are still quite far from all time lows, and still have a quite hight P/E, even considering the lucrativity they had last year, before the US entered in a ressecion.

Re:But what about the real scam?

[pretygrrl]

dear sir.
thanks for the thoughtful comment. likely it will be ignored along w. other voices of reason.

Re:But what about the real scam?

[pretygrrl]

Some people profited and society at large gets stuck with the bill when the bubble bursts.

i agree mostly, except i would say ALL not SOME americans profited. construction workers profited with higher wages. lown mowers profited by higher demand. home depot clerks profited w. higher bonuses.
all in all, each $1 that goes into a house sale gets multiplied 4 times in terms of multiplier effects.
so this is just a hang over. we all collectively had a bit too much fun. we will adjust. we will recover. we are human therefore we can and will adapt.

Re:But what about the real scam?

[PunkOfLinux]

Uh... I was talking about the rich being the ones who fucked up. Probably should've worded that better...

Re:But what about the real scam?

[Hognoxious]

Who is holding all your debt right now (and they got nukes, so it counts)?

Even if the USA didn't retaliate in kind, I don't see how nuking them would help China get its money back.

Re:But what about the real scam?

[IanHurst]

During the Great Depression, manufacturing disappeared all over the place. Manufacturing requires customers. When a $14 trillion economy tightens its belt, manufacturing sinks and resource prices go along with it. Supply and Demand, right?

And, recall, smaller collapses have brought gigantic commodity price drops in recent history. The crises the Asian Tigers had in the 90s left Oil down at $25 a barrel. It's $90 now. And the USA dwarfs them. You can only insulate yourself from a demand collapse of that scale so much.

Canada's economy is more tied to the USA's than probably any other nation on Earth. The good news is it's got a pretty responsible government and a well developed safety net, and that'll help a lot while the USA gets its shit together over the next several years.

Re:But what about the real scam?

[IanHurst]

I know you're just being snarky but I have to respond, the American and EU economies still dwarf China's. You can see trends that put them ahead of us in absolute numbers some time in the future, but the graph is usually labeled in decades. I'm not a China basher - I think they're doing great - but it's going to be some time before they're rocking the world in the way the US and Europe have over the last centuries.

Re:But what about the real scam?

[IanHurst]

No, but the point is we're sitting on half a continent of resources and when we've got nothing better to do, we'll extract them. Even if Canada has more and does a better job of it, the addition of ours to the market, and the demand collapse the world will experience from this crisis, is going to ruin resource prices for a while.

When the Asian Tigers fell apart in the 90s, Oil hit $25 a barrel. That's a long way down from where it's at now, and this crisis is so much larger than that one, I don't have the words to describe it. It's not going to be pretty, no matter who you are.

Re:But what about the real scam?

[Hoi Polloi]

So what you are recommending is a population pyramid scheme?

Re:But what about the real scam?

[Hognoxious]

Yes, I was joking. But just wait a while...

(Joking again. I hope).

Re:But what about the real scam?

[Maudib]

"Zero yelds makes now a very nice time to sell US treasures :),"

This is only true when there is some place else you feel safe putting it. Right now such a place just does not seem to exist.

"Nobody seems to be buying"

Thats why yields are nearly negative and prices are sky rocketing right? On the contrary, EVERYONE is buying, it is one of a very few places left to stash money. Everyone pulled there money out of the Markets last night in Europe and China. Much of that went into treasuries.

"Now, about your "stocks at all time lows", I bet you didn't do much hystoric researching, did you?"

The market is not at an all time low, but many value stocks certainly are or are close.

Re:But what about the real scam?

[qbzzt]

The US could handle a much larger population, but no - I don't want people who don't want children to have them, or have more than they want. What I recommend is to give up on the idea of retirement, at least until you're too sick to even use a computer.

Re:But what about the real scam?

[bryanp]

It's times like these I'm so happy to live in Canada, and look forward to enjoying the nuclear winter that's inevitibly coming sooner rather than later.

This would be the same Canada who sends 90% of their exports to the US? Good luck with that.

Re:But what about the real scam?

[meringuoid]

If you want to know what your ideal market would look like, look at the 19th century. Unfettered capitalism is human suffering and wage slavery, and that is a historical fact.

That's no different to what we have today. Do you think grinding, desperate poverty and Dickensian labour conditions have gone away? We've just outsourced them. The child labourers are no longer in the mines and mills of Yorkshire - they're in the factories in east Asia. The starving are no longer in Ireland - they're in Africa.

We never abolished poverty; indeed we denounced as Communists anyone who ever tried. Instead we arranged the world economy so that, unlike the Victorian rich, we would never have to look the poor in the face as we went about our rich daily lives.

Re:But what about the real scam?

[kencurry]

Lots of ordinary Americans benefited from the real-estate bubble, not just the obvious scammers and thieves. Think of all the people who sold their houses at greatly inflated prices. ...

Even though this is way oversimplified, play that thread out a little: Some folks who took out home equity loans when they home tripled in value, spend money on SUVs, vacation ETC. Meant that car co's, hotels, resorts, had demand, hired people made more money etc. -> this drove economies in US and elsewhere. Yes, economies overheated, generated bubbles, which are now dissipating. This is painful, but will correct. What is happening in the market place is a panicked reaction to this, cash hoarding -> i.e, fear has seized up global economy. The Fear will eventually subside, those companies who were strong enough will go on, those governments who were wise enough will have better leaders making better decisions, and will grow. In the end, a better situation will emerge.

Re:But what about the real scam?

[mcgrew]

It's called "inflation" and when the government just prints money, the working stiff loses. In a recession like the '70s (or in the coming depression) it was called "stagflation". If you'd been employed during the 1970s when the US Government had to pay for the Viet Nam war, you'd know this.

Inflation raises everyone's taxes without Congress having to pass a tax increase. Congresscritters love it.

You WILL know it, because guess what? They're going to have to pay for Iraq.

Your paycheck doesn't go up anywhere NEARLY as fast as prices.

Be careful what you wish for.

Re:But what about the real scam?

[joss]

We can live without almost the entire banking sector. What we can't live without is money. Print the money, let the sector fall, fuck em.

Re:But what about the real scam?

[wizardforce]

a lot of that damage to the stock market happened because of uncertainty about whether the bailout would pass... to the tune of trillions of dollars... that's right.. the uncertainty over the 700 billion dollar bailout bill probably caused far more damage than it could have ever prevented. the feds don't lose a few million over this, *we the people* lose *billions* over this especially considering all the pork and tax cuts that were lodged up the bill's arse when it was passed... had these companies thought that they'd only lose a few million on this debt the govt. is buying up they wouldn't be in danger of failing... the fact that they in all probability will fail shows that this bill is a lot bigger than you're giving it credit...

Re:But what about the real scam?

[mcgrew]

The bankers who screwed up are for the most part being wiped out

Bullshit. The banks maybe, but the bankers themselves won't go hungry. Warren Buffet and his ilk will never, ever have to worry about where their next meal will come from, but YOU MAY.

My journals jave been uncharacteristically SFW lately, the economy's on my mind since the mortgage company put the screws to me; I've taken in three women as boarders. One paid her rent already.

Hoover for President! Tuesday August 26, @10:01AM
More Hoover (damn!) Tuesday September 16, @02:20PM
I hate it when I'm right Monday October 06, @12:57PM
All hope abandon, ye who enter here.- Dante Alighieri (1314) Wednesday October 08, @08:46AM
All hope abandon part 2 Thursday October 09, @10:50AM

Today's, Black Friday, isn't about the financial mess, but about a different kind of depression so I won't link it.

BTW, there's only one "o" in the verb "lose". There are two "o"s in the verb "loose". The two verbs are not synonyms, but the feds loosing money is actually gramattically correct, but may not mean what you wanted it to mean. Was that a sly play on words? "Loose the money and let fly the dogs of war!"

Re:But what about the real scam?

[Radhruin]

In the current environment of massive liquidation, sure, we're in a deflationary period if anything. But what happens once the market is sufficiently deleveraged given that all of the world's banks have been printing money non-stop? Historically speaking, the answer is inflation.

Re:But what about the real scam?

[Anonymous Coward]

Has China started buying Zimbabwe securities and currencies?

If not, there is no reason to panic.

Re:But what about the real scam?

[deets101]

You can have your land and seeds, I am going to start accumulating value stocks at all time lows.

I would look hard at real estate and seed farm stocks!

Re:But what about the real scam?

[Maudib]

Warren Buffet didn't screw up. Investors in BS, LEH and AIG have seen those holdings wiped out. Most of the employees of these companies (LEH especially) had much if not all of their wealth tied up in the stock. Yes, people who sold prior to the collapse are ok, but most didn't. Most of them have seen their life savings destroyed.

The "bailout" does nothing to change that. The idea that investors aren't being punished for poor choices is just ludicrous. The bailout is assisting companies that are several degrees of separation away from the root cause. However, lets posit for a second that they aren't. What do people suggest, we let the foundations of the financial system collapse? Unless you are living on the fringe of the sanity bell curve, you probably would be very unhappy with the consequences we will all suffer if this thing goes down.

Re:But what about the real scam?

[marcosdumay]

From the top 4 lenders, nobody seems to be bying. Of course, somebody is, and lots of people. Otherwise Brazil couldn't even sell their stocked treasures.

The Dolar, and treasures are surely worth something. I have no idea of how much, and most people don't have the liquidity for waiting it to be settled, but those 4 governemnts have, and they are betting on it being just slightly devalued or just slightly overvalued (the case of Brazil).

Re:But what about the real scam?

[Maudib]

We let the people who screwed up fail. The question now is if we let everyone else fail. If you let these banks fail, then the dominoes will eventually hit you and you too will fail. Sorry but if these banks go under, you and I will go with them.

Re:But what about the real scam?

[squallbsr]

We bailed out these CEOs and corporations with Corporate welfare, where-then is the incentive for them not to do the same thing again in the future. Especially since the govt has demonstrated there are no consequences for large enough corporations.

Re:But what about the real scam?

[smallfries]

Try reading the context that I replied to:

The Chinese can pound sand. We'd still wipe them out in a shooting war and they know it.

Re:But what about the real scam?

[mcgrew]

The investors are being punished, the employees are being punished, but the CEOs and boards of directors, the ones who caused the mess in the first place, will not even be inconvenienced in the slightest.

Torches, ropes and pitchforks, I say.

Re:But what about the real scam?

[Anonymous Coward]

You can have your land and seeds, I am going to start accumulating value stocks at all time lows.

the problem being we are not anywhere near all time low valuations. try 3 or 4 pes for companies with profits!

extrapolating bubble economics into infinity is not smart... look at a 20 year chart fo the nikkei index... 20 YEARS off its highs it is hitting 20 year lows.

Re:But what about the real scam?

[Anonymous Coward]

The bailout isn't a bailout. The bankers who screwed up are for the most part being wiped out, along with the investors. Please see AIG, LEH and BS stock prices and you will see that the company owners and the company employees are being entirely wiped out. The "bailout" is preventing the guys who screwed up and are wiped out from wiping out everyone else. Its about liquidity and fear. Good companies are being destroyed due to too much fear and too little liquidity. It isn't a lie when the Fed says that most of what will be bought with the $700 million will be good or profitable. So the feds loose a couple hundred mil on this. Several trillions are being wiped out every week in the stock market.

don't believe the hype...

you call lehman's ceo fuld "wiped out" after he pocketed $350 million over the last 5 or so years? if only i could be wiped out like that.

aig sales execs just spent almost $500k on a week of partying AFTER the government bailed them out. well, i guess they were "wiped out," but off all the extravagant booze!

the truth is that this bailout is just that. goldman had $20 billion at risk in aig, goldman's ceo met with paulson (a former goldman ceo) and they walked out to announce the $85 billion bailout and aig wrote goldman a $20 billion check shortly thereafter. the goldman ceo was bailed out. the aig execs are bailed out. they still mint salaries and bonuses. yes, lots of investors were wiped out, but management, the ones ultimately responsible, were not wiped out. they still collect millions in compensation. maybe 10s of millions.

as for making a profit, it won't happen. the underlying cause of this mess is a credit bubble.

the pin pricked it - poof - gone.

when you adjust for inflation, housing prices won't see their former levels in our life times

in fact, they will keep going down. if i can afford my $500k mortgage and the identical house is selling for $250k, how long will I pay double? how long until I walk away and pay half as much? what happens to all th epaper backed by the $500k loan when that person walks away at a $350k loss? will it make money?

Re:But what about the real scam?

[PunkOfLinux]

I have to say bullshit. And if that really is the case, we deserve to fail. We shouldn't be that dependent on that.

Re:But what about the real scam?

[HornWumpus]

How does the SS Trust fund go bust without taking the treasury market with it? They will be trying to sell an additional 2.5 trillion just to cover the treasuries being redeemed by SS (assuming they just try to float it). Granting the 700 billion we're dealing with today makes the 2.5 trillion look a little less scary. Then again if 700 billion over the next few years causes this much chaos what will 2.5 trillion after 2017/2018 look like? (I don't know what the annual burn will be, can't seem to find that number.)

I'd say if someone bought land seven years ago they are still fine. If they bought it in the last year they are setup to profit nicely. (In whatever currency is in use, Yaun? FreeBucks?)

Rural land never ran up that far in the first place. The truly screwed bought houses in 'hot' markets three years ago.

I'm not prepared to just roll over and die because a currency collapses. I am collecting recipes for cat.

Re:But what about the real scam?

[Hognoxious]

That doesn't answer the question.

Re:But what about the real scam?

[smallfries]

I see that you are one of the hard of thinking. Let's go through this slowly for you.

You asked a question about a rhetorical statement. I've explained to you what the statement was retorting to. Your question has no value because nobody was suggesting that China nuking America would help them get their debt back. Despite this you are still after an answer?

The answer is that you are a thief of oxygen. Perhaps you should sit quietly and try to understand what people are saying before you try and take part in the debate again.

not just phishing mails..

[owlnation]

Also, look out for legitimate emails from banks -- they are probably being sent by scammers too.

Yep.

[Shadow Wrought]

One of the scammers was so brazen he came right to my doorstep! Said he needed a "contribution" so he could "go to Washington" and "fix this mess."
Yeah, right! I fell for that one four years ago!

Re:Yep.

[TubeSteak]

One of the scammers was so brazen he came right to my doorstep! Said he needed a "contribution" so he could "go to Washington" and "fix this mess."
Yeah, right! I fell for that one four years ago!

We call those guys "incumbents"
Your default position this election season should be not voting for them.

Don't listen to campaign promises, look at the incumbent's voting history.

A solution to the financial crisis

[igny]

Paulson's plan is nothing. Throwing $700bln into the financial system... pfft. I am willing to negotiate my plan with Bush and his administration. All I have to do is to realize my loss, and all the stocks will rally to the sky. It will also solve bankruptcy of several big corporations in which I have big (err, now small) positions. I have done so many times in the past, I single-handedly stopped dot-com collapse, helped to avoid a complete meltdown after 9/11, last fall I helped Dow to regain $14k. Unfortunately I have decided to invest a lot in May 2008 again and doubled down just recently. Now the market awaits for me to close all my positions.

Scammers?

[iminplaya]

Hell, the elections bring 'em out every two years.

Bringing out Scammers??

[arthurpaliden]

Hell, it was started by scamers, they wore three piece suits but they were still scammers.

Re:Bringing out Scammers??

[carlzum]

Dear Investment Bank,

I am the victim of a terrible phishing scam. Over the past few years I've deposited 10% of my earnings into an account the scammers claimed was managed by your company. But when I checked my balance last week I discovered they had made off with my money.

It's a sophisticated operation with hundreds, possibly thousands, of people posing as customer service agents and financial advisers. They have 800 numbers, mail quarterly statements, and run a very legitimate looking website.

Please help me track down these parasites and recover my money. My wife and I were depending on that money to buy food and medicine when we retire.

Sincerely,
Every American with a 401K

Bernanke

[areusche]

Dear BENJAMIN BERNANKE,

I am the Chairmen of the Nigerian Treasury. I have recently come into the possession of inheritance from the Esteemed Master Defenestrator . Unfortunately I cannot use take possession of his honorableness's inheritance locally. I therefore must move it into a foreign account. For the sum of 700 (SEVEN HUNDRED) BILLION UNITED STATES DOLLARS (USD$) I can deposit this into your banking reserve system. You may keep 15% (fifteen percent) of the total amount for your troubles.

We look forward to your correspondence. Please make your time.

Sincerly,

Chuck Norris

Re:Bernanke

[evanbd]

Ben Bernanke, is that you?

Loving it!

[Anonymous Coward]

That's right everyone! Keep pointing the finger and making accusations that you can't back up. The Republicans and Democrats love you keep you small minded fucks bickering and buying into their bullshit. If we could have Photobucket images on here most of these posts would look like campaign posters for dumb and dumber.

Dagnabit

[the eric conspiracy]

There goes my strategy for recovering my stock market losses!

Make it an even trillion!

[Anonymous Coward]

Dear Mr. Norris,

Why don't we make it an even $1,000,000,000,000 (ONE TRILLION) dollars? We can use the extra $300,000,000,000 (THREE HUNDRED BILLION) dollars to buy up mortgages so that taxpayers lose money when the loans default, instead of the banks. My economists are convinced that it's a great way to prove that I'm actually a Socialist who understands the economy so that those loony liberals elect me instead of that one.

I look forward to your reply, my friends.

Sincerely,

John Sidney McCain

Bad spending and bad lending.

[EmbeddedJanitor]

America as a whole, citizens and government, have a "charge it" mentality.

Government don't want to tighten their belts because that's an instant turn off to the voters. Nope, rather rack up more debt and hope that you die or leave office before the shit hits the fan.

Re:Bad spending and bad lending.

[XMode]

If the shit hasn't already actually hit the fan, its now so close that its stench is getting blown around for all..

Comment removed

[account_deleted]

Comment removed based on user account deletion

Of course, it was caused by scammers.

[jcr]

As long as we put up with fiat currency, this kind of thing is bound to happen over and over.

-jcr

Re:Of course, it was caused by scammers.

[Konster]

Always a bad move basing a currency upon poorly made Italian cars.

Re:Of course, it was caused by scammers.

[p0tat03]

Fiat currencies haven't caused our problems. Rampant speculation on the housing market has. Let's not forget the Tulip Mania a few hundred years ago (when currency was gold-backed!) that resulted in much the same thing.

The problem is a lot of people took on a lot of big risks, and they lost. And now the taxpayer is on the hook.

The problem is also because we *all* started believing the same lie: that there is a free lunch. We all started buying up house after house, stretching ourselves thin with impossibly large mortgages, in the hope that we can score a quick buck by flipping it later. Nobody ever thought about the fact that there's *no value being created* anywhere in the system to justify rising house prices. Nothing.

People used to invest in things that have real value. You invest in a company because they create a compelling product that people will buy. But of course, nowadays (especially if you look at the tech industry), companies with no discernible profitability, or products of questionable usefulness, are still getting funded because of boneheaded investors who are not interested in long term growth, but rather their exit strategy.

Like the housing bubble that's killing us right now, the tech bubble will soon burst. Get your money out of the markets now, or at least into companies that create actual products with actual demand.

Re:Of course, it was caused by scammers.

[jcr]

Fiat currencies haven't caused our problems. Rampant speculation on the housing market has.

It's the inflation of the fiat currency, providing an endless pool of credit to lend that made that speculation possible. If banks were constrained to lend their depositors' money instead of being able to re-lend their credit from the fed, then the interest rate would provide an indication of scarcity of capital to lend. It's trivial to inflate a fiat currency. It's rather more difficult to inflate coinage.

-jcr

Re:Of course, it was caused by scammers.

[daver00]

You understand it, but make exactly the wrong conclusion. The problem is complex, but there are obvious explanations to parts of it. Me I see two elephants in the room: firstly, you Americans are stupid, plain stupid, no offense but seriously the fact that such a vast number of people invested in such obviously bogus loans under the premise that "houses always go up in value" is mind boggling. Furthermore your government was too stupid to regulate this activity in the first place. But more importantly as you realise this is a problem of excessive liquidity causing a rather large asset price bubble. The excessive availability of capital is a failing of regulation again, not fiat currency. Your reserve bank under Greenspan and Bernanke thought: maybe, while the whole (sensible portion of the) world is out pursuing inflation targeting monetary policies, the USA could go on its own tangent arguing that if you take care of the stock market with free flowing liquidity that everything else would follow. Well that really turned out great.

Now all of this has nothing to do with fiat currency and everything to do with your bankers, government and general populace being plain stupid. Sorry mate but if it walks like a duck and quacks like a stupid duck...

Re:Of course, it was caused by scammers.

[jcr]

First of all, you''re on pretty thin ice when you decide to insult millions of people in one go. That makes YOU stupid.

Secondly, you gloss over the fact that fiat currency is easily debased, and that the practice of inflating the money is precisely what made the bubble possible. Yes, the lenders and the real estate speculators are also culpable, but if they had to operate in a sound money environment, there is a limit to how far out on a limb they could go, because the cost of credit would actually rise with increased demand for credit.

-jcr

Re:Of course, it was caused by scammers.

[daver00]

No, my whole point is that while debasing currency made it possible, that does not imply that fiat currency HAS to cause bubbles like this. It was entirely in the hands of regulators, stupid ones.

And shit dude lighten up, just look at the facts, if somebody takes on a loan they can obviously not afford, under spurious assumptions, that makes them kind of stupid right? then when millions do it, it kind of makes you wonder. As you even say, debasing currency to cause excessive inflation and asset price booms with free flowing credit is again stupid, right? Finally, you government is stupid, no? Not an insult my friend, an observation.

I'm Australian by the way, we insult people as a rule, but its all in good nature just relax man. I don't think you guys are ALL stupid.

hmmmmmm

[qzulla]

From TFA:

Perhaps the concern is unfounded as this PC World article notes. The article states that more than half of us are deleting messages from banks and financial institutions without even thinking twice. Experts say recipients who receive these e-mails believe that all the messages are part of phishing e-mail scams.

So more than half of the 16 bazillion people are ignoring them?

My guess is that five bazillon are responding.

Think about that.

Fake numbers but you get my point.

qz

Re:hmmmmmm

[zippthorne]

I don't see you think you need a disclaimer that a "bazillion" is anything but a fake number.

Oh... I see what you're saying....

Yeah sure.

[jotaeleemeese]

China invading to stop the dollar losing value.

The Canadian pot is obviously top drawer quality.

That has nothing to do with the problem.

[jotaeleemeese]

The problem is lack of regulation of complex financial instruments and how political campaigns are financed in the US.

The corrupt lobbying of US politicians ensures that regulation is as light as possible.

Re:That has nothing to do with the problem.

[Mesa MIke]

Seems more like it's too much regulation that's caused the problem.
Banks were basically forced by regulation to lend money to people who wouldn't qualify, absent the coercion.

Re:That has nothing to do with the problem.

[SpaceLifeForm]

You are an idiot. Please go fuck the reicht-wing talking point you rode in on.

Re:That has nothing to do with the problem.

[Mesa MIke]

Very likely that I am indeed an idiot.
Won't argue with you on that point.

But, can someone at least point to the specific acts of deregulation that led financial institutions to start giving out sub-prime mortgages to under qualified recipients?

Re:That has nothing to do with the problem.

[jcr]

Seems more like it's too much regulation that's caused the problem.

Yes, the chief one being that we're all required to accept federal reserve notes.

-jcr

Re:That has nothing to do with the problem.

[jcr]

You are an idiot.

He grasps the situation, and you do not.

Please go fuck the reicht-wing talking point you rode in on.

Wow, that was clever! I bet you're a big hit at your local ignorant pinko coffee house, aren't you?

-jcr

does too

[rubycodez]

money created from debt is the problem, our particular type of fiat currency has that problem too. a pyramid scheme to create increased debt is required for the system to function

Re:does too

[Wildclaw]

Another viewer of "Money as Debt" that has fallen for the deceptive lies that is packaged among the truth.

Debt is not a problem per se. Claims that you can't repay all loans because there isn't enough money is false. It is a complete misconception of how money flows, neglecting to take into account that banks themselves also buy services and products, invest in stuff and occasionally deal with bad investments.

Sure, if banks were to just sit on all money they get from interest, then it would indeed be troublesome. But that is a basic result of bad money circulation which would only hurt the banks in the long run.

What is dangerous is bad debt as in bad investments. As long as most debt is in solid investments, debt is not bad. Of course, most people have a misconception of what good investments are. A luxury house is not a good investment. It is a consumption item. Same with an SUV for most people. A smaller house however is an investment as it makes your life much better at a good cost/benefit ratio, allowing you the ability to work somewhere. Same with a smaller car that allows you to be more efficent at transporting yourself and your family around. Credit Card debt and other smaller debts are pretty much bad all around except for the occasional emergency.

My SOP for Bank E-mails

[istartedi]

1. Delete e-mail.

2. Log in to bank via their web site.

What scares me is that while this guards against the garden variety phishing attack, it can't protect me from an ISP DNS compromise. Running *NIX on your home PC or using a Mac can't protect you from that either, so don't get smug. It's a good idea to find an "obscure" yet stable feature on your bank's site. Phishing sites may not take the time to duplicate it. If you know the bank is based in New York, and you traceroute it to Bulgaria, that's a bad sign too. I have to admit I'm not that paranoid though.

At the very least, 1 and 2 should be SOP for everybody. Financial institutions shouldn't put any kind of hypertext in a mail, and really ought not to even be using HTML mail which was evil right from its inception. I can dream, can't I?

Re:My SOP for Bank E-mails

[arthurpaliden]

Ignore the email. If you really have a problem the bank will freeze your account and phone you to come into the nearest branch and deal with the problem there.

Re:My SOP for Bank E-mails

[istartedi]

This doesn't work so well when the "nearest branch" is in New York, and you are in California. Why have such an arrangement? Because they offer the best rates (or at least they did in the past--with such crappy rates and so much risk, chasing bank rates has become way too important; but I digress). In fact though, for that particular account, there has never been an unsolicited e-mail. If there was, I'd be inclined to wait several days anyway. I've never had a bank e-mail that classified itself as "urgent", and if I did, then indeed I'd be inclined to pick up the phone and make a call.

Re:My SOP for Bank E-mails

[Phroggy]

What scares me is that while this guards against the garden variety phishing attack, it can't protect me from an ISP DNS compromise.

Please stop spreading FUD. SSL certificates protect against DNS compromises, because your browser's database of certificate authorities does not depend on DNS to operate. As long as you use your bookmark (instead of clicking the link in the e-mail) and you see the little padlock icon and you don't get a warning message about a problem with the certificate, you're fine.

I say use a bookmark because https://www.bankofarnerica.com/ and https://www.weilsfargo.com/ look pretty close to legitimate (depending on your font). SSL doesn't protect you from misspellings.

Re:My SOP for Bank E-mails

[Anonymous Coward]

Learn your bank's IP address...

Re:My SOP for Bank E-mails

[RemoWilliams84]

I bookmark my banks site. To bad I mispelled it the first time. www.comassbank.com got my paycheck for 2 1/2 years before I realized it.

Re:My SOP for Bank E-mails

[nmx]

1. Delete e-mail.

2. Log in to bank via their web site.

What scares me is that while this guards against the garden variety phishing attack, it can't protect me from an ISP DNS compromise.

That's what SSL is for. The name on the SSL certificate won't match the address of the site. OR, even if they do make a certificate for wachovia.com (for example), it will be self signed. Your browser will pop up some kind of warning. Firefox will make it almost impossible to proceed (this is what everyone's been complaining about, but now you can see why it's useful).

Re:My SOP for Bank E-mails

[ultranova]

What scares me is that while this guards against the garden variety phishing attack, it can't protect me from an ISP DNS compromise. Running *NIX on your home PC or using a Mac can't protect you from that either, so don't get smug. It's a good idea to find an "obscure" yet stable feature on your bank's site.

Or you could simply use HTTPS to contact the site. If the bank doesn't have HTTPS interface, or if the certificate is self-signed or otherwise fishy, don't use that bank.

Personally, I've decided to forego online banking for now. No reason to risk phishing attacks, when the nearest office is within walking distance :).

Re:My SOP for Bank E-mails

[nasch]

If the DNS is compromised, then wouldn't you be visiting wachovia.com, which is actually some other IP address than normal, and the certificate is for wachovia.com, and so the browser thinks everything is OK? Or is the original IP address for the certificate resolved and cached in your certificate store and compared to the new one? That wouldn't really seem to help, because there has to be a way to change an IP address. Whatever that mechanism is, such as asking the user to confirm the change, the scammer could just do the same thing.

But perhaps I'm missing something here.

Re:My SOP for Bank E-mails

[Anonymous Coward]

The browser doesn't cache anything and DNS doesn't matter because the scammers don't have the private key. If you type httpS://bank.example.com into your browser, the only way someone can make that not display 5000 warning dialogs is by having the private key for the public key that appears in a certificate whose CN is bank.example.com and signed by a CA that your browser trusts.

Re:My SOP for Bank E-mails

[asdfghjklqwertyuiop]

How did this nonsense get modded up to 5? I thought this was a computer geek site.

We've had solutions for this sort of attack for a long, long time now. If you want to access your bank, type httpS://bank every time. Bookmark it if you want. There, now you're safe from DNS spoofing attacks and you don't have to do this silly and insecure "check for an obscure page" garbage either.

Re:My SOP for Bank E-mails

[istartedi]

Oh, you're so right. From now on, I'll just totally go to sleep whenever I see the little lock, and I'll ignore stuff like this or this

Re:My SOP for Bank E-mails

[asdfghjklqwertyuiop]

I'll ignore stuff like this [e-gold.com]

A virus in your machine? If the machine you're typing all your passwords and personal information into is under the control of someone else then checking for an obscure page does not improve the safety of that information.

http://www.velocityreviews.com/forums/t199885-fake-ssl.html

So you - gasp - VERIFY who your SSL connection is with. Make sure you're typing the correct URL - the one your bank writes on your statements, and check the certificate. That's what the lock icon is there for. Bookmark the correct site and use it.

Re:My SOP for Bank E-mails

[istartedi]

Oh come now. Who is going to check a cert every time they hit their bank's web site. Look me straight in the eye and tell me you have all that info jotted down, from the first time you interacted with the bank.

Worse yet, nevermind technical users. Non-technical users will never check this stuff. And frankly, I don't want to check it either. A simple rule like, "don't click links in e-mails" is far easier to follow. Even then, it's been hard enough to stop people from doing that.

Oh, and I suppose I should have linked the google search for "fake ssl" which is where I got that stuff. I'm sure there are better links. Bottom line? I don't put a lot of stock in the lock icon, and I'm not paranoid enough to go through cert checks every time. The people who provide DNS should just fix their stuff. It's their job.

Re:My SOP for Bank E-mails

[asdfghjklqwertyuiop]

Brush up on your 3rd grade reading comprehension skills. You don't have to check it every time. You're not paranoid enough to check the SSL cert once, yet you're paranoid to check an obscure page every time? The people who provide DNS can't "fix" it. There is no security built in to it and probably never will be. Its not their job.

Re:My SOP for Bank E-mails

[istartedi]

OK. I had a brain fart. No need to get snippy about it. However, the brain fart I had was ignoring your suggestion of bookmarking. It's really the same thing I suggested originally, if you think about it. The big quibble everybody seems to have with me here is that a spoofed DNS can break the bookmark. They seem to think that the httpS and a bookmark, and no warnings about the cert means everything is hunky-dory. I maintain that it isn't. It seems like once the DNS is spoofed, it wouldn't be hard to fake httpS and the lock icon, in any number of imaginative ways. I'll leave that as an excersise to the reader.

Note, I'm referring to the ISP's DNS being broken into, not your workstation. Obviously you aren't suggesting that DNS servers should be left wide-open and un-patched. That's what I'm referring to--the recent vulns in DNS.

Now, if httpS implies cacheing of IPs (thus bypassing DNS once you've had one successful exchange) that's ignorance on my part; but I don't feel like I should have been castigated quite the way I've been here. Sure I'm ignorant, but to paraphrase Churchill, "tomorrow I'll be educated, and you'll still be an asshole".

LOL!!! Truth stranger than scammers.

[danwarne]

"I run a merchant bank that went bankrupt and have recently come into possession of $900 billion in US treasury funds......"

Correlating Gov't announcments and the Market...

[NotQuiteReal]

It seems like the biggest scam does start with line "I'm from the government and I'm here to help."

Just like after Katrina, etc

[Haoie]

Except with different motivations. This is still about greed.

What keeps spammers away?

[Anonymous Coward]

Is there anything that won't bring out the spammers?

Retirement

[qbzzt]

That's what socking money for retirement is aimed at - self-sufficiency.

It only works if enough people are producing what you need, so that you can buy it with your stashed money.

If not, then the stuff you need will rise in price, making your stash worth less (= inflation). Presumably this will cause retirees to get back to work, until the system equalizes.

My webmaster@(Site).com address...

[Anonymous Coward]

Has gotten the snot beaten out of it recently by phishers.

First, as a small site owner, I was spoiled by not having to do any complicated email setup. That came to bite me back in the ass, as I had never set up an SPF record or domainkeys support. So, as you might guess, I got a joe-job pulled on me. All of the sudden I'm inundated with bounceback and angry emails from people who think I'm trying to rip them off. Publishing an SPF record quickly solved that problem.

However, now I'm getting about 20 phish emails a day, half are for Wachovia telling people they will lose their money in the merger if they don't install updated sercurity certificates on their computer. I heuristic scanned the EXE from the site and it looks like it's a worm that mass mails itself after setting itself up in the winsock and blocking several antivirus sites (it attempts to also block update.microsoft.com via the HOSTS file- which, to my understanding, Windows won't obey anyways...)

I keep putting the URLs on PhishTank, but it's scary as an actual Wachovia customer (I never gave Wachovia my email address or mentioned anywhere where my email alias is used that I bank there). Still, it's good; it keeps me paranoid. I recognize the fakes going around quickly and, when in doubt, I visit the site directly via HTTPS and login, so I guess every cloud has a silver lining.

Re:My webmaster@(Site).com address...

[ameyer17]

I keep putting the URLs on PhishTank, but it's scary as an actual Wachovia customer (I never gave Wachovia my email address or mentioned anywhere where my email alias is used that I bank there).

So?
Unless scammers can "acquire" some sort of customer list, they just email their crap to as many people as they can and hope they find some gullible-enough customers of whatever bank they're impersonating.

Turd sandwich!

[HornWumpus]

No 'Giant Douche'!

Damn it I'm voting 'Used Condom' (libertarian) even thought they nominated a Republican.

Chuck Noriss

[BlueQuark]

Chuck Norris can pay for the entire global financial crisis out of his pocket change.

Re:Chuck Noriss

[mcgrew]

I don't see Charlie N. on this list. Warren Buffett (but not Jimmie), Larry Ellison, Willie (da pimp) Gates, several members of the Walton Gang, the two Google guys, but no Charles Norris.

The guys in that list are the ones who created this nightmare. Torches and pitchforks all around!

Yeah! Teach that Nigerian scammer to write.

[SlashdotTroll]

I would take my hat off to you, but it's stapled to my head because of prior anticipation of a frisky blow from Hurricane Palin.

Your country is so broke...

[Anonymous Coward]

The mountain roads turn gay on every turn of the road to throw you from your kike.
-John "Jew" Wayne

Uhhh, what?

[Sycraft-fu]

I've seen some dumb shit but this ranks way up there. China would invade the US? How? China lacks a large naval for and you might note that there's a very large ocean separating the US from China. Ok so maybe we assume they simply commandeer commercial ships. Great, except those will all be adorning the bottom of the ocean before they get anywhere near the US. For whatever else you want to say about the US they have a very large and capable military and that includes navy. They'd notice (via spy satellites) thousands of tanks and troops and such being loaded in to ships. Those ships would then have to contend with the world's best attack submarines, with not one, but many aircraft carriers, with a whole bunch of airforce out of Japan and so on. This is before they get anywhere near the US coast and then have to contend with defenses there.

China has no ability at all to invade the US. Their military strength is in manpower and tanks. Impressive, and a good defense, but it doesn't float. They could invade Russia or North Korea or the like if they wanted, but not the US. You can't prep a large military force to move and achieve strategic surprise against a nation like the US that has world wide satellite monitoring. So they'll know you are coming. That means you have to have a way to counter the US Navy, and they don't.

Then of course there's the whole North Atlantic Treaty Organization, NATO thing. An attack on US soil would be operable under that, meaning that most of Europe would be committed to the US's defense.

No, China has no way at all to invade the US. They could nuke the US, if they wished, they do have ICBMs, but of course that would guarantee their country was wiped out since the US doctrine is to just annihilate a nation that does that and the US has way more (and more accurate) nukes.

So seriously, let's try to keep it a little more intelligent on Slashdot.

amount phished = real average intelligence

[eniacfoa]

I think how much money gets phished out of your state is a good indicator of the real average intelligence of your state. I'm from Australia and the state of Queensland is populated by the finest morons in the whole country with $500,000 a month being phished out of the state each month... If any Queenslanders are reading,... woops, what am I saying??? Queenslanders can barely read...

Re:amount phished = real average intelligence

[eniacfoa]

Queensland is also the 3rd most populated state here....so its not down to their population, they are just stupid.

Re:amount phished = real average intelligence

[Whiteox]

I visited QLD once. Then I came back. Strange place.

Money is not equal to wealth.

[zippthorne]

His point is that it doesn't matter how much money you sock away, you can only buy the man-hours of people that exist. Since we're not growing enough new people, the value of your money is going to drop.

The critical number, that was always critical, whether you're talking about Social Security or your trusty mattress, is the ratio of workers to retireds.

Re:Money is not equal to wealth.

[PunkOfLinux]

Hm. Never really thought of it like that. Thanks, I'll keep this in mind when we discuss this crisis in Econ :)

Re:Money is not equal to wealth.

[Hognoxious]

It's like if you had a billion dollars in your pocket and you washed up on a desert island Robinson Crusoe style. It'd be useless if there's nothing to buy, which there would be if there's nobody there to make stuff and sell it to you.

No more capitalism?

[Anonymous Coward]

The problem is not that we have too much capitalism, but that we don't have enough. http://www.service11.blogspot.com/ ( www.service11.blogspot.com )

walk away loaded and scott free

[whathappenedtomonday]

Why walk away now when you can pick up some more before you leave:

"Days after it got a federal bailout, American International Group Inc. spent $440,000 on a posh California retreat for its executives, complete with spa treatments, banquets and golf outings"

general motors ... ford

[savuporo]

A small update of the nice financial situation : General Motors was trading below $5, with market cap of less than 3bn. Its balance sheet shows -55bn negative equity, meaning essentially it should be bankrupt already.

Back in 1998, this stock was above $90, they had a working EV and a series hybrid version of it.

Ford is trading below $2 ...

Re:general motors ... ford

[flyingfsck]

The stock price of a public company doesn't affect their net worth. They got their capital when the stock was originally sold. What it trades for in the market later, doesn't affect them. An absurdly low stock price does make them a take over target, but nobody has any money to do that now.

Re: "No Mod Higher"?!

[TaoPhoenix]

Except we modded him Funny such that Karma=(+0). So he's got all the cheap pseudo-fame but no currency to spend on his next attempt to be insightful that might incur a risk.

How very Wall Street of us.

You are printing money

[Anonymous Coward]

Every one of those dollars borrowed from the Federal Reserve results in $7 more being loaned to banks as that is how money is created.

You are printing more money, this is what the bailout is, $4 trillion in new money loaned to banks, plus $700 billion in buyout of bad assets so the banks can pay for the trillions they owe the Fed.

Of course, you're screwed, it will blow up (again) in your face, just like 2004's bailout and 2001s bailout.

Each bailout with borrowed money simply makes the next one bigger and scarier.

Smaller institutions seek Treasury assistance

[David Gerard]

WALL ALLEY, East Cheam, Tuesday - The global financial crisis may require a multi-billion pound injection of public money over coming days. Smaller institutions are now seeking help, such as the First National Bank of East Cheam.

Founded by Boris Busybody, 77 (IQ), of East Cheam earlier this month, the bank has put in urgent asset warnings with the Treasury. "Holdings are way down. Our assets are incredibly leveraged. Capital ratio's buggered. Our, er, co-la-ta-rul-ised debt obligations have us tied in knots. In knots! It's a tragedy, it is."

Mr Busybody has urged the Treasury to mount a rescue package immediately for the bank. âoeIf we go under, whoosh! It'd collapse the East Cheam banking sector. All them widows and orphans! You wouldn't believe it, honestly you wouldn't. Interbank lending's collapsed. I can't get any of 'em to cough up an overnight liquidity loan. Spare us five million quid, mate? Just till tomorrow. I'll be good for it. With Treasury backing."

Chancellor Alistair Darling responded to Mr Busybody's pleas with an offer to send Peter Mandelson around to discuss the matter. "Oh, er, that's all right then, we'll be fine, fine. Sorrytotroubleyou I'lljustgonow."

Re: "No Mod Higher"?!

[thePowerOfGrayskull]

Except we modded him Funny such that Karma=(+0).

I k eep hearing this - is there an actual source? 'cause I"ve not seen anything to say that "funny" doesn't count for karma (except for periodic random posters stating it)...

Formerly poor countries with exchange controls

[flyingfsck]

Funny - several formerly poor countries with exchange controls (South Africa, India, Indonesia), are now very relieved and richer than their formerly rich open market neighbours.

Re: "No Mod Higher"?!

[MyLongNickName]

Go take a look at a few relative newbs who have a negative karma. Then go look at posting history. Every once in a while, you will see one with ten or so posts, most marked up funny, with an occasional "off topic". If funny lent karma, it would outweigh the odd person who didn't get the humor. I've seen enough of these cases to verify that funny does not give karma.

Fine

[Urger]

Everything brings out the spammers. OK. Can we get real news now?

Re: "No Mod Higher"?!

[Uncle Rummy]

...Note that being moderated Funny doesn't help your karma. You have to be smart, not just a smart-ass.

http://slashdot.org/faq/com-mod.shtml#cm700

Re: "No Mod Higher"?!

[thealsir]

Why does it matter? He posted as an AC, and wouldn't get any karma points from a +5 insightful or whatever anyway.

Insecure authentification.

[Anonymous Coward]

Every time I log in to my bank account the bank sends me a one-time authentification code by sms, that is valid for only a short amount of time.

This effectively prevents phishing attacks. The attackers can acquire my login id and password, but they would not be able to get the authentification code.

Most european banks employ such an authentification scheme. America is behind in so many ways....

Re: "No Mod Higher"?!

[vishbar]

He posted AC, so I don't think he'll get a karma bonus anyway...

Atlas

[Digital End]

When the ratio of leechers and parisites against the working few becomes unsustainable, atlas must shrugg

MMM...

[metalpres]

Talk of scammers really turns me on, GIGGEDY!!

Re: "No Mod Higher"?!

[thePowerOfGrayskull]

Ahh, nice! Thanks! What a foolish place to expect answers, on a FAQ page...

Re: "No Mod Higher"?!

[quenda]

So you can get 8 "+1 funny" and 3 "-1 overrated" and loose karma?

Is it just me.......

[Anonymous Coward]

..... or is just really fucking stupid to lend money to people you KNOW won't pay it back? For crying in a bucket, don't people THINK anymore?

Stupidity + greed = fuckup, plain and simple.

Obv.

[ThatsNotPudding]

Gigity.

Bad moderation

[Anonymous Coward]

It should have been "Insightful"

OTOH... almost anything is funny in the context that you will be dead soon, in the cosmic scheme of things.