Trophy Wife Economics

Slightly off topic. but I think it is time to exert some political pressure, so that we can see some executives of a certain Canadian telcom manufacturer being marched off to prison.

This new generation of robber-barons have looted and pillaged our economy, at the expense of seniors and hard working middle class folk.

Come on PMSH, lets see some of these scumbags doing the perp walk they so richly deserve!

And I am talking Millhaven max, not the country club at Beaver Creek !

VOTE REFORM !
GO ARMY !

I enjoy Capitain Capitalism but I am always disappointed that he does not take his analysis one step further. How did these people gain access to all these loans in the first place? Why was there so much money floating in the system? Until people realize that our monetary system is being controlled and prices (interest rates) are being fixed by a small group of people we will never solve the problem.

Here is a (lengthy) piece from David Einhorn. Einhorn was one of the first to call out the banks, but he also heaps a ton of blame on the rating agencies and the SEC. Note particularly the date - April, 2008 - that the piece was written. That's months before Lehman, AIG, Merrill and others failed. Einhorn himself was vilified as a short seller but he was one of the few who actually did their due diligence, and dug until he got enough data to realize what a house of cards was being built. His Greenlight Capital fund returned over 27% per year for 10 years up to Dec. 31, 2007 (I haven't seen the results for 2008, but since he was short most of the financials, I suspect he had another good year).

http://www.foolingsomepeople.com/main/about-david/recent-talks.html Choose the Grant's Investment piece (second on the list).

Here's a great CNBC documentary called "House of cards" that outlines the ecomomic collapse from beginning to end. About 2 hours long total...........

http://www.youtube.com/watch?v=T3OiPgLnpWk

The Captian is or was the type of bankers we used to have here in the west, the type that could tell if a person would pay back the loan or not. The new type of bankers look at someone with 2 or 3 million in assets that is putting down 30% on a needed bale feeding truck, and says no, while a rank kid can come through the door and want a flashy pickup, and the same clown cuts him the loan, true story. I hope all those greedy shortsighted bankers go broke.

bartinsky:

Let me take the bankers' side. Yes, that farmer may have $2 or $3 million in assets, but what are most of them? His land and buildings are probably the bulk, with some used farm machinery. If for some reason, the farmer has a couple of bad years (I don't know, locusts, drought, too much rain in the fall - take your pick), what is the banker going to seize to pay off the loan? No court would let him take the whole farm, and it's not practical to subdivide it into smaller areas. Who would the bank sell a few acres to? Used farm machinery? From my understanding, there's not a huge demand for that.

On the other hand, that flashy pickup? The bank can repo that in a second, and still probably get a pretty good price on it. So from the banker's point of view, if the farmer defaults, the bank will have to spend a lot of money and time trying to get their money back. If the kid defaults, no problem; they take his keys away and have a saleable asset. So long as the kid put some money down, and makes a year's worth of payments - and what's more important to a teenage boy than his wheels? - the bank probably comes out ahead.

I'm not saying the farmer doesn't have every honourable intention of paying the loan; I'm saying circumstances beyond his control can devastate his income, so that he can't.

I used to work in the leasing business - we would avoid restaurants like the plague. The owner might be a great cook, have a good business plan, and yet most places still fail within two years of opening, and the resale value on leased restaurant equipment sucks. Most leasing firms (except maybe GE Capital) only have limited funds, so you want to deploy them where you're pretty sure you're going to get paid back.

To a very real extent, we've avoided the mortgage crisis they have in the US because the big banks would never grant a "NINA" (no income, no assets) mortgage that Countrywide sold so many of in the US. Any Canadian loan officer worth his salt knows that granting such a loan, if it went bad, would cost him his job. Unfortunately, I'm beginning to see ads for NINA mortgages here in Canada. I'm sure they're offered at very high interest rates, and then they'll be marketed as MBS/CDO's to people who are hungry for yield. When the defaults start coming in - as they will - those same people who were enticed by the 17% yield I've seen advertised will suddenly see the value of their securities plummet, and it will be an income trust fiasco all over again. People who were too stupid to diversify or didn't understand what they were buying will get burned, and they'll blame the government. Personally, I think Flaherty should issue a statement that mortgage brokers offering these securities will not be bailed out, and that buyers should make pertinent inquiries before investing. Of course, even if he did, they wouldn't, and he'll still get blamed for them falling victim to slick salesmen.