tag:blogger.com,1999:blog-6427940.post5658970476669256001..comments2023-12-05T07:50:19.855-05:00Comments on No Oil for Pacifists: Deregulation Acquitted Again, Part VII@nooil4pacifistshttp://www.blogger.com/profile/16688417615117569825noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-6427940.post-51221056783770782472009-05-30T23:33:48.462-04:002009-05-30T23:33:48.462-04:00bobn:
Your narrative about Canadian banking regul...bobn:<br /><br />Your narrative about <A HREF="http://www.theglobeandmail.com/report-on-business/article1138040.ece" REL="nofollow">Canadian banking regulation</A> seem <A HREF="http://online.wsj.com/article_email/SB124165325829393691-lMyQjAxMDI5NDAxNzYwNTczWj.html" REL="nofollow">overly</A>, perhaps fatally, <A HREF="http://meganmcardle.theatlantic.com/archives/2009/05/canadian_exceptionism.php" REL="nofollow">simplistic</A> (particularly noteworthy is the fact that most Canadian mortgages are fully recourse, with very different consequences for family finances after default). Also, it may be <A HREF="http://www.rttnews.com/ArticlePrint.aspx?id=964193" REL="nofollow">too early</A> in the business cycle <A HREF="http://www.financialpost.com/story.html?id=1616376" REL="nofollow">to be certain</A>.@nooil4pacifistshttps://www.blogger.com/profile/16688417615117569825noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-75496629190816973102009-05-30T02:53:04.184-04:002009-05-30T02:53:04.184-04:00...(continued)...And that's what you don't seem to...<I>...(continued)...</I>And that's what you don't seem to get at all:<br /><br />1) This isn't a short-term thing. <br /><br />2) It did not happen overnight.<br /><br />3) While certainly some Bush policies contributed to it, and proper, overt action <I>might</I> have been able to stop it (unlikely, though, given the political exigencies and the mass of forces in resistance from The Left, most particularly Barney Frank), it was hardly -- not even largely -- Bush admin policies which <I>caused</I> it, despite your almost maniacal determination to promote this absurdist meme.OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-7318636537561035202009-05-30T02:52:51.753-04:002009-05-30T02:52:51.753-04:00> Can we say "Straw Man"? Thought so!...> Can we say "Straw Man"? Thought so!<br /><br />HEY, there's bob's total lack of logic for you!!<br /><br />You can SAY "straw man" all you want. You can SAY "I want sex with Giselle Bundchen", too. Neither has any affect on reality.<br /><br />In other words -- i.e., "logical ones" -- if you're going to SAY "straw man", you have to follow it up with an actual ARGUMENT which makes your case.<br /><br />> But, by mid-2005, rates were back up to much more reasonable levels<br /><br />Cite "reasonable levels", bob. Were the loan rates in the double digits? (one word: "Duh?") If they weren't, how do you figure it's going to stop? Unless the rates are such that <B>it's not profitable to take out a loan and buy property which is rising faster than the rate on the loan</B>, then the rates were not high enough. Stress on that: <B><I>DUH!!!</I></B>.<br /><br />Clearly, you have no grasp of he overarching effects of "cheap money" on any aspect of the economy.<br /><br />So, yeah, I <I>can</I> say "straw man". bob!! And what you did is, indeed, a tour-de-force. Thanks. I understood the principle completely, but in case anyone else was fuzzy on it, you showed a <I>great example</I> of one.<br /><br />Further, once more, you make the imbecilic argument of expecting instantaneous shifts in direction in a massive, ponderous economy:<br /><br />> yet the terrible underwriting continued and worsened significantly by all accounts. <br /><br />This certainly isn't going to just "stop" on a dime, unless there is literally no money out there that's cheap. Since, at whatever percentage it was at was waaaay below the constant rise in home prices (because, "you know, property values never go down". Uh, thanks, but I lived in Orlando, FL, in the early 1970s. YES THEY DO.), the process of making bad loans to stupid people isn't going to stop.<br /><br />It's the CRA, bob. At this point, as you love to harp on, the snowball is LOTS bigger than the little rock that started the thing rolling, but, if it weren't for that rock, the giant snowball wouldn't have existed in the first place.<br /><br />> and includes this graph showing how poorly the later vintages fared.<br /><br />And improperly supplies a suggestion of cause and effect...<br /><br />As things went steadily south starting in 2005, it's hardly surprising that they got worse as the economic situation got worse. <br /><br />Should the loan requirements have been tightened up (oh, to say, the kind of standards that applied <I>before</I> the CRA distorted the market, perhaps??)... Well, DUH. They should never have been relaxed like that in the first place.<br /><br />Sorry, bob. The seedcorn for this isn't Jack's friggin' beanstalk. <B>It did not sprout overnight</B>. It took many, many years before the explosive growth phase you love to point at as the be-all end-all whole of the problem.<br /><br />> So what happened? In 2004, the I-Banks were allowed to "self-regulate" and to increase their leverage from about 12:1 to about 30 or 40 to 1<br /><br />And why should they not? In 2004, Franklin Raines is arguing IN FRONT OF CONGRESS that 1 or 2 percent is <I>completely adequate</I>. And the Dems are falling all over themselves agreeing with him, bob, and instead giving SHIT to the OFHEO bureaucrat (you know, the Bush admin people you keep <B>lying about</B> <I>not</I> doing anything?) trying to actually head off this mess at the pass.<br /><br />> what happened *after* the FRB tightened their rates.<br /><br />Again, bob -- to <I>what</I>? Was it 10%? 13%? 15%? Because it's got to be a LOT higher than any interest rate <B>I've</B> heard of to be able to dissuade people from taking out such loans and turning them around and buying property with them which they expect to continue rising at 12, 14, or 17%.<br /><br />If you can rely on a 2% difference being sustained, that adds up to a LOT of <B>free money</B>, bob.<br /><br /><I>...(continued)...</I>OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-91560686530538390252009-05-28T22:51:36.607-04:002009-05-28T22:51:36.607-04:00OBH:
First, thanks for the heads up on the HTML w...OBH:<br /><br />First, thanks for the heads up on the HTML workaround. I was wondering why it seemed so inconsistent - I suppose my use of markup must have been inconsistent.<br /><br />Second: <I>Or were you thinking of claiming that Bush&co were retroactively responsible for Tulip Mania?</I>.<br /><br />Can we say "<A HREF="http://en.wikipedia.org/wiki/Straw_man_(argument)" REL="nofollow">Straw Man</A>"? Thought so!<br /><br />Third: Alan Greenspan absolutely has a lot to answer for. It is not unreasonable to point at the FRB policy of keeping money so cheap so long as a huge meddling in the economy. It started something going in 2002 through 2004 - no doubt. But the FRB also contributed by refusing to regulate - Greenspan has since declared himself shocked that the management of the banks did not act to protect shareholder value. He thought the market would do that, unregulated - he thought wrong.<br /><br />But, by mid-2005, rates were back up to much more reasonable levels - yet the terrible underwriting continued and worsened significantly by all accounts. Several examples: one report by a former Treasury official, <A HREF="http://www.brookings.edu/economics/bpea/%7E/media/Files/Programs/ES/BPEA/2009_spring_bpea_papers/2009_spring_bpea_swagel.pdf" REL="nofollow">The Financial Crisis: An Inside View</A> notes: <br /><br />"<I>What we missed was that the regressions did not use information on the quality of the<br />underwriting of subprime mortgages in 2005, 2006, and 2007. This was something<br />pointed out by staff from the Federal Deposit Insurance Corporation (FDIC), who had<br />already (correctly) pointed out that the situation in housing was bad and getting worse"</I>.<br /><br />and includes <A HREF="http://3.bp.blogspot.com/_kbGVcdMH3w4/ShsEm9q-pWI/AAAAAAAAAF0/BEwnQcHBMvU/s1600-h/2001-2007-mortgages.jpg" REL="nofollow">this graph</A> showing how poorly the later vintages fared. And on the commercial real estate side, S&P said 2 days ago (5/26), per <A HREF="http://www.calculatedriskblog.com/2009/05/potential-s-cmbs-downgrades.html" REL="nofollow">this CR post</A>, that they expect: <br /><br /><I>"a considerable amount of downgrades in recently issued (2005-2008 vintage) CMBS. Classes up through the most senior tranches of outstanding deals (so-called "A4s," "dupers," or "super-duper seniors") are likely to be affected. <B>Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded</B>. We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages</I>.".<br /><br />So here, in the commercial MBS, as in residential, we see incredibly bad actions increasing after 2004, or thereabouts.<br /><br />So what happened? In 2004, the I-Banks were allowed to "self-regulate" and to increase their leverage from about 12:1 to about 30 or 40 to 1. I simply remain convinced that these events are related - that all this newly "available" money looking for yield, combined with Yield Spread Premium paid to originators (paid more for the toxic loans) caused what happened *after* the FRB tightened their rates.bobnhttps://www.blogger.com/profile/07715238134585125684noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-12942925906971645652009-05-28T13:28:29.208-04:002009-05-28T13:28:29.208-04:00Back OT -- bobn, the key element here is this, and...Back OT -- bobn, the key element here is this, and you bypass it entirely:<br /><br /><I>For some reason, the Federal Reserve convinced itself that it could focus exclusively on the prices of consumer goods instead of taking asset prices into account when setting monetary policy. In July 2004, the federal funds rate was just 1.25 percent, at a time when urban property prices were rising at an annual rate of 17 percent. Negative real interest rates at this time were arguably the single most important cause of the property bubble.</I>-<br /><br />The action of the fed, by making money excessively cheap to borrow, is a <B>guaranteed problem</B>.<br /><br />When I can borrow at 1.5% and put it into an investment growing at 17%, you would be a f***ing MORON not to do so.<br /><br />So it was the actions of the FR, in keeping rates arbitrarily low (that would be a flaw in <I>REGULATION</I>), that caused this.<br /><br />And yes, it was a large part of the cause of the dot-com bubble, too. It's got nothing to do with partisanism in any way, shape, or form. When you keep interest rates excessively low, i.e., "cheap money", but there is a boom market to be invested in, you encourage speculation, and that makes the problem ridiculously worse. <B>Period</B>.<br /><br />Or were you thinking of claiming that Bush&co were retroactively responsible for <A HREF="http://en.wikipedia.org/wiki/Tulip_mania" REL="nofollow">Tulip Mania</A>?OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-76266930224572764052009-05-28T13:19:49.588-04:002009-05-28T13:19:49.588-04:00The above, the period was outside the [b] tag:
t...The above, the period was outside the [b] tag: <br /><br />this[b]. <br /><br />rather than the more obvious<br /><br />this.[b]<br /><br />with brokets "<" and ">" in place of the [], "duh".OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-22402769487172888612009-05-28T13:16:14.420-04:002009-05-28T13:16:14.420-04:00> (Sorry for the deleted comments - Blogger is ...> (Sorry for the deleted comments - Blogger is stealing my white-space after italicized text.)<br /><br />Yah, it's been doing this for a couple months, now. I've bitched in the right places, but something causing problems for thousands of blogger users doesn't seem to have a high priority. <br /><br />I've taken to adding a period after any line-ending html markup:<br /><br /><B>not this.</B>Case in point.<br />.<br />.<br />.<br /><B>but this</B>.<br /><br />Case in point.OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-48728566066655958892009-05-27T21:50:48.629-04:002009-05-27T21:50:48.629-04:00I've tried to provide my take on the issues both h...I've tried to provide my take on the issues both <A HREF="http://nooilforpacifists.blogspot.com/2008/10/finance-iv.html" REL="nofollow">here</A> and <A HREF="http://nooilforpacifists.blogspot.com/2009/04/banking-opacity-and-financial.html" REL="nofollow">here</A>. I might attempt more, or respond further to bobn, over the weekend.@nooil4pacifistshttps://www.blogger.com/profile/16688417615117569825noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-48331955242302308282009-05-27T13:34:21.484-04:002009-05-27T13:34:21.484-04:00Blogger has problems I can't work around.Blogger has problems I can't work around.bobnhttps://www.blogger.com/profile/07715238134585125684noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-82742066116653746432009-05-27T13:33:58.339-04:002009-05-27T13:33:58.339-04:00I'm finding this blog helpful, but I also feel ver...I'm finding this blog helpful, but I also feel very ignorant and not especially qualified to judge. <br /><br />His position is largely that laws in place to regulate financial dealings have been broken, and no one is making any effort to enforce them. To be honest, I'm not sure they're enforceable - at least in a court of law. Look at how long Enron took. Eventually, it did succeed, but the economics here are so arcane...would a jury understand what the laws entailed, and if they were broken? I wonder...<br /><br />http://market-ticker.denninger.net/sueknoreply@blogger.comtag:blogger.com,1999:blog-6427940.post-79148611126144442002009-05-27T13:33:40.348-04:002009-05-27T13:33:40.348-04:00(Sorry for the deleted comments - Blogger is steal...(Sorry for the deleted comments - Blogger is stealing my white-space after italicized text.)<br /><br /><I>the much greater financial regulation of the 1970s failed to prevent the United States from suffering not only double-digit inflation in that decade but also a recession (between 1973 and 1975) every bit as severe and protracted as the one we’re in now.</I>This alone is enough to discredit this writer. 1973 - 1975 had no financial crisis - and the current <B>depression</B> is so far from being over it isn't even funny.<br /><br /><br /><br /><I>The reality is that crises are more often caused by bad regulation than by deregulation.</I>Gibberish. A distinction without a difference when dealing with BushCo, who were "on watch" when the worst happened.<br /><br /><br /><br /><I>Simply by capping leverage at 20 to 1, the Office of the Superintendent of Financial Institutions spared Canada the need for bank bailouts.</I>Oh, so letting the Big 5 I-Banks (which strangely enough no longer exist in anything like theit previous form) expand their leverage from 12:1 to 40:1 wasn't such a good idea? It came from the deregulation inherent in appointing deregulationists as "regulators".<br /><br /><br />Sorry Carl: your philosophy is most certainly not acquitted and quoting gibberish like this doesn't help your case.bobnhttps://www.blogger.com/profile/07715238134585125684noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-1612836175345805872009-05-27T13:30:34.953-04:002009-05-27T13:30:34.953-04:00This comment has been removed by the author.bobnhttps://www.blogger.com/profile/07715238134585125684noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-32536358202234789192009-05-27T13:28:11.120-04:002009-05-27T13:28:11.120-04:00This comment has been removed by the author.bobnhttps://www.blogger.com/profile/07715238134585125684noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-35617591049613710872009-05-27T01:18:23.668-04:002009-05-27T01:18:23.668-04:00It's perplexing...I mean understanding the whole m...It's perplexing...I mean understanding the whole meltdown, it's genesis etc.<br /><br />What I'd really like to see is you boil this all down into one neat blog post, linking to all your other blogs, as to the main reasons why this collapse occurred.<br />Leftists blame capitalism and deregulatio, derivatives, etc, etc.<br />I want to know the genesis, how it happened, why it happened, who let it happen, etc. Can you point to any good articles in this regard?<br /><br /><br />Penguins Sweep Hurricanes. Bring on Detroit. I'm feeling confident.Powerbossnoreply@blogger.comtag:blogger.com,1999:blog-6427940.post-89329102147421429022009-05-26T10:55:37.746-04:002009-05-26T10:55:37.746-04:00good piece, BTW.good piece, BTW.OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.comtag:blogger.com,1999:blog-6427940.post-32470133434271539282009-05-26T10:51:46.870-04:002009-05-26T10:51:46.870-04:00> Human beings are as good at devising ex post ...> Human beings are as good at devising ex post facto explanations for big disasters<br /><br />I believe the term you're looking for here is "ex post fiasco".<br /><br />:oP<br />.OBloodyHellhttps://www.blogger.com/profile/09992539380115488567noreply@blogger.com