American Unemployment Rate Approaches 10%

[PDH]

I have nothing really to add to this thread, but in the spirit of reaching 1000 posts asap I have to report my personal unemployment level is 0%.

[crazy canuck]

I have nothing really to add to this thread, but in the spirit of reaching 1000 posts asap I have to report my personal unemployment level is 0%.

This "can do" spirit deserves recognition but a poster attempting to raise their post cound to escape the level of Timmay Taint.

[viper37]

And so are laws like the Community Reinvestment Act that force lending to unqualified people. 

I'd juste like to point out that these loans reprensent a "big" total of 15% of all the subprime market.  And not all of them defaulted on their loans.

[Berkut]

And so are laws like the Community Reinvestment Act that force lending to unqualified people. 

I'd juste like to point out that these loans reprensent a "big" total of 15% of all the subprime market.  And not all of them defaulted on their loans.

Not all of them need to in order to make a huge impact. Are you arguing that if the degfault rate is not 100%, then that somehow matters? Would 99% matter? 90% 50%?

The basic idea is the basic problem - that the government has a role in incenting financial institutions to make loans outside what is financially prudent. They exerted considerable pressure in a variety of forms on banking institutions to change their lending habits to allow people to get loans who would not qualify otherwise.

[DGuller]

And so are laws like the Community Reinvestment Act that force lending to unqualified people. 

I'd juste like to point out that these loans reprensent a "big" total of 15% of all the subprime market.  And not all of them defaulted on their loans.

Good luck.  "CRA caused the bubble" is a very convenient truth for people whose religion tells them that the market can do no wrong and the government can do no right.

[Berkut]

And so are laws like the Community Reinvestment Act that force lending to unqualified people. 

I'd juste like to point out that these loans reprensent a "big" total of 15% of all the subprime market.  And not all of them defaulted on their loans.

Good luck.  "CRA caused the bubble" is a very convenient truth for people whose religion tells them that the market can do no wrong and the government can do no right.

Indeed, the fact that the CRA and laws like it might have contributed to the mortgage and sub-prime crisis is such a less rigorous argument than "Reagandidit!"

It simply cannot compete with that kind of intellectual analysis!

Someone please respond to this post so DG can pretend not to read it and respond indirectly.

[Valmy]

The basic idea is the basic problem - that the government has a role in incenting financial institutions to make loans outside what is financially prudent. They exerted considerable pressure in a variety of forms on banking institutions to change their lending habits to allow people to get loans who would not qualify otherwise.

I thought the basic problem was trillions invested in bonds based on the subprime mortgages, not that the subprimes themselves were the problem.

Because surely there are not so many subprime mortgages that they could even come close to doing the sort of damage that has been done.

That is not to say that subprimes were a good idea and shouldn't be stopped of course.

Heck if me and my uneven credit and middling job can get a good mortgage (though I granted I did have lots of cash for a downpayment) I would hate to see what sorts of people get subprimes.

[DGuller]

I thought the basic problem was trillions invested in bonds based on the subprime mortgages, not that the subprimes themselves were the problem.

Because surely there are not so many subprime mortgages that they could even come close to doing the sort of damage that has been done.

You're challenging another convenient truth, though this one was accidental, whereas the CRA bit was an engineered deflection.  The house of cards built by Wall Street was the true disaster in the bubble, as I mentioned earlier.

[Berkut]

The basic idea is the basic problem - that the government has a role in incenting financial institutions to make loans outside what is financially prudent. They exerted considerable pressure in a variety of forms on banking institutions to change their lending habits to allow people to get loans who would not qualify otherwise.

I thought the basic problem was trillions invested in bonds based on the subprime mortgages, not that the subprimes themselves were the problem.

Because surely there are not so many subprime mortgages that they could even come close to doing the sort of damage that has been done.

I guess that depends on how you define "basic". Certainly the leveraging is a necessary condition to the disaster, but then, so are the shitty loans to begin with. Of course, you also need a ready source of investment capital looking for somewhere to go, and lax enough oversight laws. Lots of necessary conditions.

Laws like the CRA are hardly the sole driver of sub-prime mortgages, but to pretend like they had nothing to do with it is a bit silly. Actually, it is a bit political, but I guess that is the same thing.

[Berkut]

I thought the basic problem was trillions invested in bonds based on the subprime mortgages, not that the subprimes themselves were the problem.

Because surely there are not so many subprime mortgages that they could even come close to doing the sort of damage that has been done.

You're challenging another convenient truth, though this one was accidental, whereas the CRA bit was an engineered deflection.  The house of cards built by Wall Street was the true disaster in the bubble, as I mentioned earlier.

Actually, what you mentioned earlier was how it was all Reagan's fault for deregulating everything. Because you are so objective and non-political.

[Barrister]

Actually, what you mentioned earlier was how it was all Reagan's fault for deregulating everything. Because you are so objective and non-political.

Does DG really blame Reagan?  I thought the big financial deregulation happened under Clinton's watch.

[Berkut]

Actually, what you mentioned earlier was how it was all Reagan's fault for deregulating everything. Because you are so objective and non-political.

Does DG really blame Reagan?  I thought the big financial deregulation happened under Clinton's watch.

I don't know if he really does, or whether he was just making one of his little political tantrum he is so fond of... But he did say:

I definitely think that since Reagan's financial deregulation (and all subsequent movement in that direction), a lot of our gains have really been on the backs of one bubble after another after another.  What we thought was increasing efficiency and flexibility turned out to be just a way to ignore the risks we've taken.

Not only is the current crisis Reagans fault, but every single financial "bubble" since he was President.

I guess that means the dotcom bubble was his fault as well. Damn him!

[Admiral Yi]

In related news:

WASHINGTON (MarketWatch) - A group of 10 large financial institutions were given the go-ahead by the Treasury Department on Tuesday to repay $68 billion in funds they received as part of the government's almost $200 billion bank bailout program.

"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner in a statement.

J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and eight other institutions were approved to repay billions of dollars in government money they received, in part because they have issued long-term debt.

The banks that have been allowed to pay back the funds are J.P. Morgan Chase & Co., (JPM, Trade ), Goldman Sachs Group Inc., (GS, Trade ) , Morgan Stanley (MS, Trade ), American Express (AXP, Trade ), Bank of New York Mellon (BK, Trade ), State Street (STT, Trade ), US Bancorp (USB, Trade ), BB&T Corp. (BBT, Trade ), Capital One Financial Corp. (COF, Trade ) and Northern Trust (NTRS, Trade ).

However, the repayments represent the creation of a two-tier banking system. Ten other financial institutions, including Bank of America Corp. (BAC, Trade ), Citigroup Inc., (C, Trade ) and Wells Fargo (WFC, Trade ) have a longer road to recovery.

After undergoing federal stress tests released in early May, the Treasury Department called on this group to show how they would raise $74.6 billion in private capital in order to withstand a further economic downturn. The banks submitted plans for raising capital to the Federal Reserve on Monday, and the Fed said it will begin working with the institutions to make sure their plans are implemented quickly. See complete story.

As part of the bank bailout program, known as the Capital Purchase Program, the 10 institutions eligible to repay TARP have the right to repurchase warrants the Treasury holds at fair market value.

The 10 financial institutions already paid $1.8 billion in dividend payments to the Treasury over the last seven months, bringing the total of all dividend payments to $4.5 billion.

Proceeds from the repayments go to the Treasury's general account, which is used to reduce Treasury's borrowing and reduce the national debt. The funds could also be used to provide further capital to troubled financial institutions as part of the TARP program.

Other smaller banks have also returned bank bailout funds, bringing the total in returns to $70 billion.

As part of the program, J.P. Morgan is eligible to return $25 billion in TARP funds, Goldman Sachs, $10 billion, and Morgan Stanley, $10 billion.

BB& T plans to repay $3.1 billion in TARP funds it received, according to a statement from the institution Tuesday. U.S. Bancorp announced plans to buy out $6.6 billion in TARP capital, the bank reported Tuesday.

Other eligible institutions include American Express, $3.4 billion, Bank of New York Mellon, $3 billion, and State Street Bank, $2 billion.

[DontSayBanana]

What about a system where capital is allocated into a liquidity pool, a leveraging pool, and an operational pool, with allocations determined by the risk presented by officers within the firm?

I have no idea what you are talking about.

Essentially, I'm talking about requiring that the companies show they can cover their asses with a rainy-day fund or something similar before going public; I was talking about a dedicated fund to cover temporary market downtrends (the liquidity thing; I just couldn't think of how to phrase it) and another to cover potential creditor claims- I'm convinced the publicly traded companies should be akin to institutions, and not constantly wobbling on the edge of bankruptcy.

[alfred russel]

What about a system where capital is allocated into a liquidity pool, a leveraging pool, and an operational pool, with allocations determined by the risk presented by officers within the firm?

I have no idea what you are talking about.

Essentially, I'm talking about requiring that the companies show they can cover their asses with a rainy-day fund or something similar before going public; I was talking about a dedicated fund to cover temporary market downtrends (the liquidity thing; I just couldn't think of how to phrase it) and another to cover potential creditor claims- I'm convinced the publicly traded companies should be akin to institutions, and not constantly wobbling on the edge of bankruptcy.

That is utterly unworkable.