Tuesday, October 28, 2008

Is this country run by idiots? Bailout of whom, exactly?

Rhetorical question.

On October 18, 2008, I read an interesting article in the Guardian.

It was so interesting that I blogged about it that day.

The title was Wall Street banks in $70bn staff payout.

The subtitle, even more interesting, was Pay and bonus deals equivalent to 10% of US government bail-out.


Unfortunately no one here in the States pays much attention to foreign media (they are libs) nor to my blog (the article is here, 10% of bailout money goes to... bankers' pockets, the original Guardian article is here).

So only now, 10 days later, do the voices of outrage emerge in the American media and blogosphere.

Meanwhile those who read my blog (and/or the Guardian) are way ahead.

But there is another interesting news happening now.

Associated Press: White House to banks: Start lending now.

WASHINGTON (AP) -- An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans.


"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said. While there are limits to Washington's power to affect banks' behavior, the White House decided it was time to use its bully pulpit.

"They (regulators) will be watching very closely, and they're working with the banks," Perino said.

Ohh, big words, sexy mama!

The White House is telling the banks to betta start lending money, or else! (said in a nasal gangster style from 1930's bad movies).

And, them regulators will be watching veeeerrrrry closely (said in a bad movie Nazi voice inflection - think Dr. Strangelove).

There's only one snag in all of this - you see, while the Europeans loaned err gave their banks money there was a stipulation that the money be used for certain things and not allowed to be used for certain things.

In America, we let the free market decide because government regulation is evil and socialism and commie and lib and... well, you get the picture.

So, in Yoo Ess of Ey, the president and his advisors and the FED decided to just... give the money to the banks.

Without any stipulations.

Without any rules.

Without any oversight.

"Here, take this money!", they said. Hell, they even forced banks that DID NOT want to take his bailout money to take it - because it would make the banks that did take it look bad. So the public now cannot spot which banks are bad and which are solvent and well run, as they all took the money - whether they wanted to or not.

So what is the money used for?

Again, quoting Guardian, "Pay and bonus deals equivalent to 10% of US government bail-out package"

So the bailout money is to reward the CEO's, bankers and their ilk for a job well done!

Congratulations - the bonuses this year for the bankers, managers, CEO's, CFO's are bigger than last year's!

So, other than making rich bankers even richer for a job well done, what else is the bailout money used for?

Associated Press: Uses for $700 billion bailout money ever shifting, dateline OCtober 25 2008.

WASHINGTON (AP) -- First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets.

Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again.

But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.

Three weeks after becoming law, and with the first dollar of the $700 billion yet to go out, officials are just beginning to talk about helping a few strapped homeowners keep the foreclosure wolf from the door.

As the crisis worsens, the government's reaction keeps changing. Lawmakers in both parties are starting to gripe that the bailout is turning out to be far different from what the Bush administration sold to Congress.


Lets see.

The reasons for the action keep changing, first being one thing, then the other, and finally people are realizing that they were sold a piece of bullshit.

This remind you of something?

WMD... reasons for Iraq War 2... meet the bailout.

Hello!

Bank executives hinted they might instead use it for acquisitions. Sen. Christopher Dodd, chairman of the Senate banking committee, said this development was "beyond troubling."

Sure enough, a day after Dodd, D-Conn., made the comment, the government confirmed that PNC Financial Services Group Inc. was approved to receive $7.7 billion in return for company stock. At the same time, PNC said it was acquiring National City Corp. for $5.58 billion.


Awwww, Doooddsy-woooobsy democrat from Conn. made some mewling noises.

Awwww, this development is "beyond troubling".

Can you remember Doooddsy-woooobsy what were the conditions of this money - our taxpayer money, MY GODDAMN FUCKING TAX MONEY - being given to the bankers?

Gee, you can't remember?

Me neither.

Because there weren't any.

Because the free market will sort it all out - no socialism for us Amrkans!

Business don't need no stinking rules or regulations, and we should trust the banks to do the right thing.

Wait a second here.

Who made this crisis?

Lets see... let me think for a second... was it perhaps... the bankers?!

So, to fix what they fucked up, we, the people of Yoo Ess Ey, decided to give you trillions of dollars... with no questions asked.

"Here, take this money!".

So, the money is used to pay the bankers bonuses, and it is also used to buy other banks.

Because if there is one thing that the crooked thieves - sorry - bankers and "investment" bankers have learned, it is that the government WILL bail out business entities which are too big to fail.

Or at least, the business entities that the government decides are too big to fail.

How big is the "not allowed to fail"?

No one knows.

So what is a banker to do with all this money that he was given?

Lend it to prospective homebuyers?

But everybody and their cat already got a loan. Who is left - the fuckers who couldn't get a loan even when EVERYBODY was getting one. That means that whoever is left now REALLY cannot be loaned money.

So, again - what is a banker to do?

Simple, of course.

Buy as much shit as possible, to make the bank bigger and Bigger and BIGGER!

Then, when the economy continues going straight to hell, the government will not allow that bank to fail - after all, they are "too big to be allowed to fail!".


So lets sum up.

The bailout money is used to pay bankers' salaries and more importantly bonuses, to the point that 10% of the bailout money is used to pay the bankers.

The bailout money is also used for banks to acquire other, smaller banks (many of whom are solvent and don't want to be taken over, BUT the big banks have all this cash now and they can simply move in and do a hostile takeover - nothing to stop them - enough cash is on hand).

So, we found out what the bailout money is used for.

What isn't it used for?

"An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans."

Oh, that's right!

The bailout money is not used for lending money - the whole point of the bailout!

5 comments:

Anonymous said...

Goy,

The real cause of the crisis (and you KNOW THIS, but its politically inexpedient from a libs point of view to state it in polite company) is that in the late nineties, Clinton and company badgered and hectored banks to change their lending practices so that more people could afford homes.

I KNOW 4 people in the business, and one is a owner of a title company.

You have never seen such uncreditworthy schmucks getting loans as has been happening in the last 10 years. People with NOTHING down, People who had to finance their closing cost. The new laws, pressed for by Clinton, made new mortgage products legal to sell and therefore pushed by mortgage lenders.

Some of these loans were "the drug dealer loan". The DDL, as its known in the biz, is where you have a third down payment. Other than that they only asked you your name and SS#. Therefore if you were a racketeer of some kind with no job, but could put 50 down, you'd get a loan on a 150K house no questions asked. You could then go about your business of selling funny cigarettes to low-lifes with your connection unimpeded and have a house to do it from.


The interest-only loan, which was good for getting people in houses that they REALLY could not afford because it lowered the payment. Since houses always go up in value (right), this could never backfire and leave them upside down, RIGHT? Lots of these fuckers thought they'd buy a house, live in it for a few years, and flip it and make a lot of money on it---and if they had extra money, they'd invest it on the stock market. Some of these thought they'd be doing well in business (my taco stand is going to kick ass in a couple of more years, or whatever piss-ant business I run) and then I'll be able to afford this McMansion. Wrong. These fuckers paid nothing but interest for 3-5 years and then lost everything.



ARM loans. These we have always had with us, but never have so many shitheads (thats what you are called in the mortgage biz if you default, a shithead) been able to access them. ARMS are for professionals who get transferred alot, whose wealth is primarily in stocks and other securities, not in equity. A corporatero from Company Z can be stationed in Atlanta for 2 years and get an ARM on a McMansion in a minor-gated community, and be transferred again just as the ARM starts going up. He writes off the interest, and moves to another ARM in Baltimore or whereeverthefuck he is transferred to. That is who this loan was really for. SOMETIMES it really is for a businessperson just starting a new business who will be making more money in two years if the ARM goes up (they almost always go up, and if they go down, the lender "forgets" to lower the ARM ordinarily---thereby fucking you).


We used to have to have 10-20 percent down to buy a house, but since double-digit IQ'ed poor people could never budget to save their life, this was called unfair (and racist). So the guuvvmmeeennnnt''' has changed all that and moved it down to where some houses can be bought for no money down, meaning a buyer isn't "invested" in the place at all. If he cant make the payments, or lied to get the house and wasn't a good candidate for it in the first place, he can just walk away. He was merely renting it anyway. He didn't have any money in it.


The bank is left holding the note in all these cases, and if the value of the house goes DOWN like it is NOW in this nation, they are fucked. These things, packaged up and sold in bundles as bonds, dont pay worth crap if anywhere near 10% of them in a package defaults, and with interest rates at historically low levels, they REALLY cant afford for many to default and still beat inflation.


PSSSSTTTTTT>>>>>>>>>>>>>>The Fed is printing money to prime the economy, driving inflation. This means those low-yielding-low-interest rate (5-6.5%) loans REALLY are a shitty deal for the investment class now, and the GUUUUVVVVVVMMMMMMEEENNNT'' has rode in to save THEIR ASS by buying them all up.



However Goy, you sentimental lefty-love-all-of-humanity-big-hugger-of-the-people-you, all of this would have been avoided if we didn't change the laws and design them to get uncreditworthy people into these homes.


But other things also drove this bubble. Cheapo illegal labor made builders and developers PINE to build every damned house they could. There profit margin on the houses was larger than ever before because of this, and they just couldn't help themselves. Guys who used to make 10% on a house they sold were making twice that on labor savings. You bet your ass they overbuilt.

Signing up illegals to buy mortgages and looking the other way is leaving one on a cliff if they walk out of it and take their mattress cash back to ole Mexico. Thats happened a lot. What do they give a fuck if their credit rating here is shit. They arent' coming back. 10 Mexicans can buy a house through a straw buyer, stay in it for a few years while they save their ass off (about 50K is all they need to live high on the hog in Mexico for years) and they LEAVE (after not paying the note for the last five months or so.


A lot of Mexicans were also subletting these houses (renting rooms out to illegals), so if they get caught, or the economy turns to shit, they just walk out on the mortgage also. They MADE THEIR MONEY.


Lots of first time homebuying blacks flat out pay the note "when they have the money". This is what you get when you let uncreditworthy people buy expensive things like houses.


Lots of "white trash" prole types also got into homes they had no business getting into, and fail to pay the note for the same shitty excuse reasons that the blacks did. I.E. I got arrested, my parole officer is a dick, the bitch left me, I got busted. Yada fucking yada.


The left and neo-cons answer will be ......................drum roll please...............more immigration and more homebuyers. Theyve got to prop back up the prices of these houses. New buyers is the only thing that is going to do it, and our younger homebuying generations domestically would be getting smaller, not larger, without it. So expect this to be a legislative thrust early in the new presidency. We need about a good 3 million new buyers in the next few years, and the only place to get them is from elsewhere.



These aren't the answers you like to hear, but I AM THE ONE WITH PALS IN THE BUSINESS, and this is what they tell me.





Funny story----My favorite loan officer, and personal buddy, was going to get hooked up with a black pastor and look into loans for first time buyers in his church. The pastor hooked him up with an older deacon at the church who knew a couple of young adults looking to buy a house. M pulled the credit on the deacon because he wanted a house too (shockingly this old coot still had an apartment). That deacon hadn't paid a bill on time in years. Late on his rent, late on the E-bill, late on the phone bills. This is a fucking deacon in the church, suit and tie. If youve gotten a car repossesed lately, have your electricity cut off twice a year due to non-payment, have been kicked out of your cheapo apartment complex or are late every month with your rent----YOU SHOULD NOT BE ABLE TO BUY A GODDAMNNNED HOUSE. But our GUUUUVVVVVMMMMMMMEEEENNNTTTT''''''
says basically that youre being discriminated against by the big bad mortgage lender who wont open a branch in your ghetto, er' neighborhood (excuse me), so we have to make a loan to you, even though my 15 year old cousin would be a better credit risk.


So you see Goy, the investment banks just bought the packaged up turkey mortgages that were made because of our fucked up laws. WaMu and Countrywide in particular would buy anything put on the wire (if you dont know, most loans are sold---if you get one at HYZ mortgage company that "shops" to get you the best rate, this means they put the loan out on the wire and see if anyone is stupid enough to buy it, if one will, youre approved by the underwriter because the L.O. is twisting their arm very hard to say yes so he can get his commission). Once Countryfuck(wide) or WAMU buys the loan, they might even be able to get Freddie or Fannie to back/buy it if it really sucks. These massive grocery bags of paper shit get traded based on the interest rates that were charged on them, because investors want that 6% because it beats inflation of 2% and they are too goddamned lazy to do any work, but want their money to work for them, so they --_WANT__ this bullshit to fly and convince themselves that it will. In other words, they dont look in the bag, they just buy it.

The house of cards fell. However, these loans would not have sucked so much ass if the laws had not been tinkered with. To his credit, Juan McCain and even Senor El Presidente' Bushole wanted to reform some of these laws back in 2003, but Bawney Fwank's lispy ass would have none of it---and the bubble just got bigger still, with home values going through the roof on cheapie-paper-mache' houses still.


As in all bubbles, this one burst, and now homes have lost value, many are upside down even if they have been in these turds (er' homes) for five years or so.



Bad laws hurt everybody.




Go ahead, and call me heartless, asshole, cruel, racist (I really love that one), insensitive (I love that one even more), etc. But thats the unadulterated truth my loan officer buddy (I was the best man at this guy's weddding and talk to him all the time) told me in a very lenghtly conversation just two weeks back. Our title-company pal has some juicy stories also (you know, new homes sold with leaky crawlspaces, particle board used in framing, paid-off inspectors looking over literal holes in garages, anything to make the developer happy and the polished turd' sold).

American Goy said...

Hi ISteve!

:-)

I believe that you are onto something.

But while Clinton the the centrists REALLY did want to help the disadvantaged, why did bush 'w', the free market champion, make a speech about how "EVERYBODY DESERVES A HOME".

Remember that?

I was dumbstruck that a republican would say something like that - I mean, everyone DOES NOT deserve a home... common sense.

So, what gives?

Simple.

To keep the bubble economy going, the government kept pressuring the banks to loan out more and more, and the banks HAPPILY obliged. It kept the bubble going and made the country (fake) rich and made many elites (real) rich.

Yes, it was a conspiracy, but in the open.

So please, no "it's all niggas fault!".

Think on it - did Miss Johnson with 5 kids who bought a house in the ghetto REALLY cause this WORLDWIDE calamity?

Mmmmm, put your thinking (and tin foil) cap on :-)

Anonymous said...

Goy,

I'll agree that Bush was somewhat complicit, but HE DID want to reign it in back in 2003, but Barney Frank said no.


The bottom line is this: we made it too easy for people to buy houses Goy, and that led to many new buyers which spurred much more building (by new-Americans who turned around and bought some homes thereselves). Home values doubled in five years in some places.

Something is worth what someone else will pay for it, when the defaults started, and the well of new buyers dried up...........the home values fell, leaving many buyers upside down on their mortgages (the ones who hadn't already defaulted). Why WOULDNT they just walk away? Who can blame them.

If we had required that people have 5% down, had paid their rent on time for 18 months, and had 3 bills that they had paid on time for at least one year (electric, phone, water for instance), had a job for at least one year and a running car..................then they should qualify for a note that wasn't over 33% of their income. None of this shit would have happened. You can trust me on that. The bubble wouldn't have happened.



Goy,
Renters are not worse off than homeowners for the first 10 years of a 30 year mortgage, and we both know it. They are just paying interest, and the mortgage-interest tax deduction isn't jack shit. Having a roomate in a 2 bedroom apartment beats getting a 30 year on a paper-mache starter home while you pursue an education during that time anyway.......so you can make ENOUGH money to afford a home that is an investment.


Mine's paid for hoss..............none of this shit is going to effect me one way or the other unless I sell (a possibility as my formerly fairly remote local is turning into a city by the day with development encircling me).


Im not blaming it on blacks.......or even hispanics. If you want the truth poor blacks are probably the biggest victims in all of this mess as many are losing their houses after having paid nothing but interest for four-to-five years with nothing to show for it but a WORSE credit rating. Hispanics are getting the same thing as many cant find more construction work since the slowdown. Its a real shame.



I could go on and on about the unfairness of how the system or real-estate is "rigged" in favor of the lending class, but I wont.

I will however repeat on truism, our big-money elite is basically lazy. They'd rather lend money to earn-inflation-beating interest than anything else. They have been able to concoct an economy where poor-working shmucks have to buy everything on time (credit card swipes at fast food windows now Goy). This is just the way they want it. The working poor and over-burdened middle class pay interest on everything they buy with the cards or off their home-eq. loans. The bad laws passed by Clinton allowed this to get started and was the genesis of it. This wasn't a problem during the middle nineties.

The mortgage shops were just doing what they do, making loans in accordance with the laws at hand. If you dont loan that guy in front of you (although you personally wouldn't lend him 20 bucks), LendingTree, Countrywide, BankofAmerica, etc. WILL lend him that money, get those points, get that commission, sell that loan to WaMu. So youve got to play ball.

Even WaMu Goy, is looking to buy up loans to package for their investors. The more the buy up, the more investors they can sell them to. Its as simple as that. That is how those larger shops make their money. Its like a taxidermist Goy, ashamed that some amateur fisherman is bringing in a measley 5 lb. bass to have stuffed for his wall (which is embarrassing), but some other taxidermist will stuff it and paint it with glow-purple if the fisherman asks for it, so whaddya do man? You play ball and stuff the little fish, even though its below your sporting dignity and is something you wouldn't have taken a picture of with your camera phone before releasing it. You gotta pay your OWN house note.




Please God Goy, never put me in a position to even pseudo defend Bush again. I really despise that man---personally.


Have a great weekend. Your site is as illuminating as ever.

American Goy said...

Never defend bush - that man is a glorified 'tard.

Thanks for the compliment re: my site. I do what I can.

To go deeper into the rabbit hole: I do not think it was bush 'w' or that gay guy barney frank or democrats or republicans...

The powers that be WANTED the bubble to continue as long as possible, to let the good times roll - because important people were cashing in.

Same with the oil price bubble.

These bubbles were not "free market" created - they were created by unscrupulous people in power.

Yes, I am doing the conspiracy bit again, but I really think am onto something here.

I'll rethink, reorganize my thoughts and my hit this full blast in my future posts.

American Goy said...

Also:

"I will however repeat on truism, our big-money elite is basically lazy. They'd rather lend money to earn-inflation-beating interest than anything else."

Abso-fucking-lutely.

Wouldn't you?

If you had a choice - do nothing and be very very rich, or invest and take risk and possibly be a little bit richer - what the fuck would you do?

That is why trickle down economics will never, have never, and never did work.

Respectfully,
AG