Bail-out plan failure
- Thread starter S O F I
- Start date
Looks like it wasn't all "uneducated" people complaining.
Commentary: Bankruptcy, not bailout, is the right answer - CNN.com
Playing golf while it is still decent weather outside
Commentary: Bankruptcy, not bailout, is the right answer - CNN.com
Playing golf while it is still decent weather outside
Except that this guy doesn't know much about what's going on, apparently.
Fannie and Freddie were not authorized to back subprime mortgages. They were government-sponsored enterprises, and as a result, were regulated in many respects. This regulation precluded them buying subprime mortgages.
Where the problems with Fannie and Freddie came in was where there were no regulations and extraneous factors.
First, their balance sheets were not regulated. They could be highly leveraged, have an unsafe level of risk by having too high of a debt-to-equity ratio. Hence, even if they lost a little bit, they would be in serious danger of failing because they have no assets to back it up.
Second, rating industries such as the Standard and Poor and Moody's were corrupting the market, likely reacting to immense pressure from investors to get deeper into the housing market. They started rating a tremendous number of mortgage-backed securities as "Alt-A"--not quite subprime--even when they weren't.
Hence, many subprime mortgages were valued as "Alt-A," qualifying for Fannie and Freddie backing when they shouldn't have been. Since some started getting through into their highly leveraged systems, the defaults that they did end up seeing killed them.
Not to say that Fannie and Freddie weren't negligent in certain ways, but neither of them nor the CRA--which only government-sponsored enterprises were required to follow--had much of anything to do with creating this crisis. This crisis is a private sector problem the Fannie and Freddie happened to be involved in.
Fannie and Freddie were not authorized to back subprime mortgages. They were government-sponsored enterprises, and as a result, were regulated in many respects. This regulation precluded them buying subprime mortgages.
Where the problems with Fannie and Freddie came in was where there were no regulations and extraneous factors.
First, their balance sheets were not regulated. They could be highly leveraged, have an unsafe level of risk by having too high of a debt-to-equity ratio. Hence, even if they lost a little bit, they would be in serious danger of failing because they have no assets to back it up.
Second, rating industries such as the Standard and Poor and Moody's were corrupting the market, likely reacting to immense pressure from investors to get deeper into the housing market. They started rating a tremendous number of mortgage-backed securities as "Alt-A"--not quite subprime--even when they weren't.
Hence, many subprime mortgages were valued as "Alt-A," qualifying for Fannie and Freddie backing when they shouldn't have been. Since some started getting through into their highly leveraged systems, the defaults that they did end up seeing killed them.
Not to say that Fannie and Freddie weren't negligent in certain ways, but neither of them nor the CRA--which only government-sponsored enterprises were required to follow--had much of anything to do with creating this crisis. This crisis is a private sector problem the Fannie and Freddie happened to be involved in.
I have a question for you business heads - I lost 20% on the stock market. Should I take my money back right now and put it onto a basic bank account or should I wait and hope for a run of luck? I think I placed my money there at the worst possible time - I did it in september 07 :/ I had hopes that it'll get better but instead I kept losing more and more.
I've been reading blogs of economists, and a few econ papers, trying to figure this whole thing out. The consensus is that this is going to get a lot worse before it gets better. The bailout probably won't help, and is a rather curious idea to begin with. We're probably going to have to completely revamp our banking system, and this will take several years. I've heard estimates ranging from "it's probably not going to be better than Japan in the 1990s" to "this may be a New Great Depression." I'd imagine that it will be closer to the "Japan in the 1990's" type of crisis, but that's just my own intuition.
So, I'm not qualified to offer financial advice, but I will say that Economists aren't exactly the most optimistic bunch these days.
So, I'm not qualified to offer financial advice, but I will say that Economists aren't exactly the most optimistic bunch these days.
It depends on a lot of factors. What are the reasons for the stock drop? If you invested in a company, is it losing value because it's under performing or is it because of consumer fears created by this now global financial crisis? Is the amount of money you invested significant or more along the lines of just testing out the market? If the latter, you should probably try to stick it out because most likely stocks will bounce up. Again, depends. You didn't provide much info lol.
You guys are aware that "your" crisis is actually "the worlds" crisis?
The problem did start in America, but Americas financial impact on the world has fucked up everybodies banking system. Iceland is completely fucked, like big time broke. All the banks in the UK are pretty much in insolvency, and are now being Nationalised.
Its amazing, this shit was sparked because of Mortgages, an investment there to aid giving us all a home.
The problem did start in America, but Americas financial impact on the world has fucked up everybodies banking system. Iceland is completely fucked, like big time broke. All the banks in the UK are pretty much in insolvency, and are now being Nationalised.
Its amazing, this shit was sparked because of Mortgages, an investment there to aid giving us all a home.
Right now a significant amout of my money is invested in funds owned by a bank which manipulates them (I don't know what it's called in english lol). They play with 30% of them on stock and other 70% is invested in all kinds of other bonds and securities.
All I know is that right now my balance is worse than -20% since last year and gets worse with every day. I have no idea if I should take them back and place on a normal (8% interest rate) bank account or keep them and keep hoping that the situation will change soon.
All I know is that right now my balance is worse than -20% since last year and gets worse with every day. I have no idea if I should take them back and place on a normal (8% interest rate) bank account or keep them and keep hoping that the situation will change soon.
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