Citi and BOA gone with the wind?

[Watcher]

[quote name='Iskaral Pust' post='1728480' date='Mar 21 2009, 07.19']Not to mention that the finance industry has become the Judas goat for the collective greed and irresponsibility of recent years. Did Wall St. invent HGTV, flipping houses, $5000 purses, remortgaging your house to buy a car and a flat-screen TV, and wanting a war but no taxes? All of these financial losses are because regular people took out loans they could not afford. Yes, there should have been better credit under-writing before the loans were given out, but that does not absolve the borrowers who are, by and large, more culpable than the lenders. We can crucify bankers for playing with Other People's Money, but isn't that what borrowers did too?[/quote]

So none of the over 34,000 people that got laid off on Wall Street can fill those guys shoes? There isn't a thousand or so of those people that understand that market?

And the banks are more culpable then the leaders? Who was in charge of Other People's Money? Why weren't the banks doing their due-diligence and making sure that people didn't l take out more loan then they could afford. It wasn't the lay person that invented the interest only or variable mortgage loan. It wasn't the consumer that was increasing their credit card limits or mailing out multiple credit cards to people without verifying their income level. Yes people should be more responsible and take out only loans then then can afford. But just like capitalism is run by greed, people can be unrealistic their ability to pay back the loans. And it is the banks jobs to make sure the people can pay back the loans or credit cards before giving them the money.

[Iskaral Pust]

[quote name='Watcher' post='1728585' date='Mar 21 2009, 13.30']So none of the over 34,000 people that got laid off on Wall Street can fill those guys shoes? There isn't a thousand or so of those people that understand that market?

And the banks are more culpable then the leaders? Who was in charge of Other People's Money? Why weren't the banks doing their due-diligence and making sure that people didn't l take out more loan then they could afford. It wasn't the lay person that invented the interest only or variable mortgage loan. It wasn't the consumer that was increasing their credit card limits or mailing out multiple credit cards to people without verifying their income level. Yes people should be more responsible and take out only loans then then can afford. But just like capitalism is run by greed, people can be unrealistic their ability to pay back the loans. [b]And it is the banks jobs to make sure the people can pay back the loans or credit cards before giving them the money.[/b][/quote]

No, that is not the banks' job. They need to be diligent about credit risk for sure, but they are not our financial keepers. They are not responsible for us, we are responsible for our own choices. If you absolve everyone of any responsibility, then we are just children who must cede all freedom to institutions like banks and govt. This is the land of the free, not the land of the pathetically helpless. Freedom carries responsibility for consequences.

[Watcher]

[quote]No, that is not the banks' job. They need to be diligent about credit risk for sure, but they are not our financial keepers. They are not responsible for us, we are responsible for our own choices. If you absolve everyone of any responsibility, then we are just children who must cede all freedom to institutions like banks and govt. This is the land of the free, not the land of the pathetically helpless. Freedom carries responsibility for consequences.[/quote]

The problem is that the banks almost completely did away with checking if the person could pay back the debt. [url="http://www.thisamericanlife.org/radio_episode.aspx?sched=1242"]This American Life[/url] had a great episode when this crisis started to happen about what was going on that examined this. In the housing market the banks went from carefully checking a persons applications to barely glancing at it. Because someone else was going to buy the debt and everyone thought that someone higher up in the chain was doing the checking. But the models those institution were using were not keeping up with the type of loans being given out.

I think that banks and the other financial institution are a bit more responsible for this crisis because it is their job to ensure that loans can be repaid. As soon as I brought my house I was getting several letters a week telling me I could refinance it through their institute with offers to bundle my credit cards and suggesting what I could use that money on. I received twice as many credit card offers. I never followed up on them but it would've been very easy to have fallen into that credit trap. Now that I think about it, those offers stopped several months ago.


edit to add: Calling it "the bank's job" is an overstatement by me. I didn't mean to imply it is all the banks responsibility, the person who is getting the loan should also be responsible and know they can pay it back.

[The Progressive]

[quote name='AndyP' post='1728164' date='Mar 20 2009, 21.40'][url="http://www.ft.com/cms/s/0/4ff2f77e-1584-11de-b9a9-0000779fd2ac.html"]FT[/url]
Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

“There are three big industries where the US has global leadership: financial services, media and technology. Introducing this 90 per cent tax is like taking one of those industries out the back and shooting it,” said a top Wall Street executive.

In Frankfurt one employee at a US investment bank said the new tax measures would “send [the US] back to the stone age”.

“Commodity traders are already moving to companies like BP where they can make as much money as they used to,” said another banker at a US firm.

Bankers at Deutsche Bank said it could benefit from the proposed legislation by poaching its US rivals’ most talented employees.[/quote]

Pressed for time, so i'll keep this short:

1. Deutsche Bank is also in a world of hurt right now, I seriously doubt if they could poach any talent, giving that they're also laying people off right and left.

2. Those commodity traders must be smoking some really good joints because the bonuses at BP are nowhere as large as what they were used to be raking in. Anyway, let the enema flushes out all the parasites.

3. "stone age"? Oh please, can you say drama queens? Lol, all they have to do is payback the taxpayers bailout and they could do whatever they want in their compensation package.

4. "we’re not like AIG." Yes you are. You were stupid enough to trade in risky and overleveraged derivatives, so kindly shut the fuck up.

5. "exodus of talent"? Lol, with the financial industry shedding tens of thousands of job, it's probably a good thing that a few of these people might be able to find jobs. But to think that some independent boutique shops gonna offer them the same salary and bonuses they're getting on Wall Street is quite laughable.

6. IP and Chataya and antz make some good points about the working midlevel people, but let's get real here, these people aren't the one getting million dollars bonuses that roused public anger.

[Altherion]

[quote name='Iskaral Pust' post='1728580' date='Mar 21 2009, 18.22']Are we children that we can't manage our own finances? Should we take away all money and just have the govt give us our food and necessities? I absolutely can and do fault people who took out loans they could not afford.[/quote]
You are right, morally, the borrowers are at fault as much as the lenders. However, the borrowers behaved exactly as expected given the general level of aptitude for mathematics in the US, while most people presumed that the lenders at least would know better. I'm not sure if during the course of your studies you've ever had to teach a class that wasn't already filtered for a certain level of skill, but I think if you did, you'd see that a large fraction of people appears to be incapable of doing math -- and this is at the time when people are actively trying to cram the knowledge of how to do so into their minds, 5 years later they will be even worse at it, most likely by an order of magnitude.

Are we like children when it comes to finances? No, not all of us... but quite a few people are. The reason they don't usually require the government to take care of them is that they're boxed into a framework where they can't do things that result in catastrophe. They can only buy things with the money they have plus the credit that is given to them and the latter is supposed to be restricted based on how much they can reasonably be expected to pay back by people who understand this. It's a neat system wherein they're essentially free to spend their money as they wish and still function normally, but it breaks down when the lenders aren't being careful.

[Andriy Czarchenko]

[quote name='Pax Thien Jolie-Pitt' post='1728612' date='Mar 21 2009, 19.56']6. IP and Chataya and antz make some good points about the working midlevel people, but let's get real here, these people aren't the one getting million dollars bonuses that roused public anger.[/quote]
How many of those there actually are? Does anyone know how many AIG employees actually got a bonus? 165M is a lot but how it was divided is at least as important as the actual number.

[Jaime L]

[quote]Anything else is to give in to the bullshit American culture of no-one taking responsibility for their own actions and choices, everything is someone else's fault and I should call my lawyer quickly to sue them.[/quote]

Agree with this.

Every party is to blame from the investors, to the lenders, to the borrowers. Personal responsibility is just that, personal. It's not up to anyone else to prevent you from being a fool. People are not going to hold your hand through life. You can blame capitalism, or the credit cards, or a material based society, but at the end of the day, you're the one who got yourself into this mess. And what I find problematic is that even after it's happened on a macro basis, thousands of households being foreclosed upon, I wonder if even 10% believe they are culpable for what happened. I imagine most, like most Americans in general, simply blame the evil lenders or greedy wall street when only a fraction were actually fraudulently induced into their mortgages. How many realize the role they've played in this disaster? How many understand they're not just victims but part of the problem? While I'm generally in favor of populist appeals, we're doing ourselves a disservice by not focusing on the borrowers' culpability more. And to the extent the party I most identify with, the Democrats, continue to direct all their outrage at the corporate world, they set the stage to enable the next generation of foolish borrowers, in much the same way the lenders enabled this set.

But at the same time, different parties are held to different standards depending on the knowledge they bring or should bring to the transaction. The borrowers likely should've known better but even more apparent is that all the enablers on the other side [i]definitely[/i] should have known better. There's a simple rule that if you don't understand what you're getting, don't buy it. And this applies double to Wall Street and the CDOs they were buying and seeling with other people's money. Generally as a consumer, I expect the counterparty, the company I'm working with to have a greater understanding of all the nuances of our contract. After all it's their business. They're doing this for a living. They [i]should[/i] be the experts. By comparison I'm just a tourist in their world. And if the whole thing blows up in both our faces, while I bear responsibility for being party to this, they bear more.

[Ashaman]

Som one can say that math education in the US to some extent have flunked on å grand scale?

[Watcher]

[quote name='Jaime L' post='1728651' date='Mar 21 2009, 11.55']Agree with this.

Every party is to blame from the investors, to the lenders, to the borrowers. Personal responsibility is just that, personal. It's not up to anyone else to prevent you from being a fool. People are not going to hold your hand through life. You can blame capitalism, or the credit cards, or a material based society, but at the end of the day, you're the one who got yourself into this mess. And what I find problematic is that even after it's happened on a macro basis, thousands of households being foreclosed upon, I wonder if even 10% believe they are culpable for what happened. I imagine most, like most Americans in general, simply blame the evil lenders or greedy wall street when only a fraction were actually fraudulently induced into their mortgages. How many realize the role they've played in this disaster? How many understand they're not just victims but part of the problem? While I'm generally in favor of populist appeals, we're doing ourselves a disservice by not focusing on the borrowers' culpability more. And to the extent the party I most identify with, the Democrats, continue to direct all their outrage at the corporate world, they set the stage to enable the next generation of foolish borrowers, in much the same way the lenders enabled this set.

But at the same time, different parties are held to different standards depending on the knowledge they bring or should bring to the transaction. The borrowers likely should've known better but even more apparent is that all the enablers on the other side [i]definitely[/i] should have known better. There's a simple rule that if you don't understand what you're getting, don't buy it. And this applies double to Wall Street and the CDOs they were buying and seeling with other people's money. Generally as a consumer, I expect the counterparty, the company I'm working with to have a greater understanding of all the nuances of our contract. After all it's their business. They're doing this for a living. They [i]should[/i] be the experts. By comparison I'm just a tourist in their world. And if the whole thing blows up in both our faces, while I bear responsibility for being party to this, they bear more.[/quote]

This is what I'm trying to say.

[The Progressive]

[quote name='The Czar' post='1728631' date='Mar 21 2009, 11.13']How many of those there actually are? Does anyone know how many AIG employees actually got a bonus? 165M is a lot but how it was divided is at least as important as the actual number.[/quote]

Only 73 individuals received bonuses of $1 million or more, with one recipient getting a bonus of more than $6.4 million.

[quote name='Chataya de Venoge' post='1728659' date='Mar 21 2009, 12.06']AND the worst thing? [i]They want us, the responsible people, to PAY FOR IT[/i]! To "keep the 'homeowners' [ah, excuse me, "renters from the bank"] in their houses."[/quote]

And a home is foreclosed every 13 seconds. Not everyone is getting a free ride, let alone a temporary lift. The bulk of the help toward homeowners who are under water would only go to those who have been paying their mortgages but got laid off due to the recession.

[Altherion]

[quote name='Chataya de Venoge' post='1728659' date='Mar 21 2009, 20.06']As I have said many times before - anyone with a 6th grade education can understand those documents. Anyone with a 6th grade education should be able to understand "if I can only just make the payment at 5%, if these adjustable rates go up AT ALL, I'm in a world of hurt, better not do that."[/quote]
First, not everybody remembers much of what they learned in 6th grade. Second, anything less clear-cut than your example requires a bit more knowledge than that. For example, the rate is now at 5%, I can sustain the expenses as long as it stays under 7%; maybe 8% in 1.5 years once I get the raise I'm expecting -- what do I do now? The safe thing to do is to stay away from adjustable rates that don't have an acceptable ceiling, but I'm not sure whether this is obvious to everyone and whether or not it is optimal depends on the individual's situation as well as the state of the market as a whole over the duration of the mortgage.
[quote]AND the worst thing? [i]They want us, the responsible people, to PAY FOR IT[/i]! To "keep the 'homeowners' [ah, excuse me, "renters from the bank"] in their houses."[/quote]
It's always the responsible people who get stuck with the bill. We already paid the lenders, I think paying some of the borrowers is almost inevitable.

[VarysTheSpider]

[quote name='Altherion' post='1728693' date='Mar 21 2009, 19.56']We already paid the lenders, I think paying some of the borrowers is almost inevitable.[/quote]
When we bailed out the banks we basically did both, since the banks and financial institutions were all lending to each other. I don't particularly like picking up the bill for the stupid bastard who thought property prices would just magically rise forever, but I have a much bigger problem with bailing out wealthy foreign investors. Somehow I'm not [i]quite[/i] sure they'd do the same for us.

[lokisnow]

[quote name='AndyP' post='1728164' date='Mar 20 2009, 21.40'][url="http://www.ft.com/cms/s/0/4ff2f77e-1584-11de-b9a9-0000779fd2ac.html"]FT[/url]
“There are three big industries where the US has global leadership: financial services, media and technology. Introducing this 90 per cent tax is like taking one of those industries out the back and shooting it,” said a top Wall Street executive.

In Frankfurt one employee at a US investment bank said the new tax measures would “send [the US] back to the stone age”.

“Commodity traders are already moving to companies like BP where they can make as much money as they used to,” said another banker at a US firm.

Bankers at Deutsche Bank said it could benefit from the proposed legislation by poaching its US rivals’ most talented employees.[/quote]

I thought we didn't negotiate with terrorists? They're threatening us with the stone age, clearly time to nuke and liquidate (or is that vaporize in this instance?) the fuckers.

What all these cushy wall street types with their obscene standards of living don't seem to get is that regular americans look at these bonuses as bribery and extortion at best. regular americans can figure out that if we hadn't bailed out the fuckers they wouldn't have got the bonuses because their companies would have collapsed, therefore there's no reason any employee at a company thats run itself into the ground to the point that it would have collapsed (without a lender of last resort) should get a bonus.

To me, the only question is, "would you be getting this bonus had the government not bailed out your company?" if the answer is no, then you don't deserve a bonus post bailout.

The 90% tax is bad only in that it perpetuates the cycle of extortion. The fuckers on wall street extort taxpayers for bonuses and then the government runs an extortionate tax rate on their bonuses. Except the government overreaches itself and applies the extortion to too many people. Those new victims then will act in some manner of extortion in retaliation, and the cycle continues--War with Wall Street, news at eleven.

[Watcher]

[quote name='Chataya de Venoge' post='1728782' date='Mar 21 2009, 14.46']Lev - untrue. The Obama plan (see link) will [b]not[/b] help people who got laid off and can't pay their mortgage because they have no income (ironically, these are the only people for whom I feel sorry). Although Mr. Obama says it won't help those who bought houses they couldn't afford, that's practically the damn definition of how ARMs were used during the boom years.

[url="http://www.npr.org/templates/story/story.php?storyId=100831129"]http://www.npr.org/templates/story/story.p...oryId=100831129[/url]

Yeah, we have to subsidize the fucking idiot losers who couldn't read a contract. Damn morons.

Please pardon my language, but I've never quite felt this upset before.[/quote]

I know I'm just a fucking idiot loser who can't read a contract so can you, in very small words, explain how I caused Bear Sterns, Lehiem Brothers and Merrill Lynch to fail? How the average American consumer caused the banks in Iceland to completely fail. Can you connect the dots between my home loan and why AIG had to accept 170 billion dollars in government bailout money?

Because, and let me point out again that I'm just a fucking idiot, I was under the impression that while the American housing market did start this crisis it was worsen when the house of cards those and other institutions invested in the form of CDO's and other types of asset-backed securities. That those companies leveraged themselves out of all proportion to the assets they were backing. Because from the news programs I listen to it is those investments that got out of hand and is causing this crisis to deepen.

Because it seems you're okay with the government bailing out your industry and keeping you employed, but god help us if some of that money goes directly to the homeowner. Rest assured that I'm going to take comfort in the fact that I'll have your sympathy in several months because it is looking increasingly like my company is going under.

[Iskaral Pust]

Watcher - that's some impressive righteous indignation.

All the losses in this entire debacle stem from people not repaying their debts. The leveraged risk taking by Lehman, Bear Stearns and all the others, just means that they have a bigger share of the loss than they could tolerate. It doesn't mean that they caused the loss.

If American borrowers default on $1trn of debt, then other people are losing that money. Retirement savings, college savings, insurance companies, banks, etc are all collectively losing that $1trn.

If you default on your mortgage, then you are one of the people creating the $1trn loss. That's how you caused Lehman and Bear Stearns to fail, and that's why your future tax dollars are being pledged to bail out the other banks before the financial system collapses and the economy goes into a spiral.

If you have not defaulted on your mortgage or any other debt because you were responsible about managing your debt and keeping a safety-net in case of unemployment (because you are guaranteed to go through several recessions before your mortgage is paid off) then you unfortunately also have your future tax dollars pledged to fix a problem you did not cause. That might make you a little pissed at your neighbor who just got foreclosed, even if it is mixed with sympathy.

There are a lot of people in between. People who took on more debt than they should but who got lucky so far and didn't lose their jobs. So they haven't defaulted either, but they can't quite claim the moral high ground. I hope they are feeling relieved and have learned a lesson.

[ThinkerX]

Oh....there be plenty of blame to go around. Idiots buying more house than they could afford (I still remember when my cousin called me up five years back telling me he was going to buy a half million dollar house on an income of $1900 a month; I had to walk him through it twice before he figured out it would not work). Like Chat, I do have considerable sympathy for the ones who actually did properly qualify for the loans, only to loose much of their income later on when greedy corporate criminals exported their jobs elsewhere.

The fraudulent buyers were aided and abetted by the fraudulent mortgage outfits, touting creative loans that should have been illegal from the outset. But the mortgage slimeballs didn't care - all they were after was their 'cut' when the loan got funded, and the servicing fees afterwards.

But it is the big I-Banks and their financial lackeys that take the gold medal here. These criminal nitwits, by buying loans and marking them up (leveraging) without doing even cursory background checks managed to turn what would have been a larger than normal but still containable real estate scandal into fiscal armageddon. I am *STILL* dumfounded by these people: hey, your ordinary plumber or truck driver or what not getting suckered into a bad loan is one thing - tricky finance is not their thing - but the I Bank idiots spent years learning about all the inns and outs of the financial world. They went to the best schools and studied this stuff in depth...and they *still* committed every stupid juvenille fiscal crime and mistake in the book. For those people, there is no excuse: they had the training and the smarts, they should have seen this mess coming from the very beginning and acted to stop it. Instead they exoanded it, brought in 'help' from the political end to keep the green flowing even after a blowup was completely unavoidable. Even now, as witnessed by the quotes in some of the preceeding posts, they are still trying to continue in criminal ways.

From where I am standing:

House prices in many areas are still way too high. They need to come down by something on the order of 1/3rd to one half. Trying to prop them up does nothing but prolong the pain. I've said it before, I'll say it again: unless there is something unusual about the construction, the location, or the size of the lot, a typical two bedroom house should not ever go for more than $100,000 - $120,000. It starts spiking up past that, and one of those factors is not in play, then some fool somewhere is trying to inflate a bubble. Said fool needs to be hit real hard (several times) with a two by four.

It is probably too late and too difficult to prosecute many of them now, but the mortgage brokers whose dishonest loans helped create this mess need to be blacklisted from the biz.

And as to the corporate criminals...I am thinking along the lines of temporary nationalization of all these institutions, followed by the immediate firing and blacklisting from the biz of the top two tiers of managment. Then with the government being on both the giving and recieving end of these CDO thingees, they can be declared null and void. After that separate the 'gambling investment' from the sane and stable investments, with long prison terms a certainty for the criminally creative types.

Ok Iskaral...did I miss anything?

[Watcher]

[quote name='Iskaral Pust' post='1729022' date='Mar 21 2009, 19.37']Watcher - that's some impressive righteous indignation.[/quote]

Thank you :smoking:

[quote name='Iskaral Pust' post='1729022' date='Mar 21 2009, 19.37']All the losses in this entire debacle stem from people not repaying their debts. The leveraged risk taking by Lehman, Bear Stearns and all the others, just means that they have a bigger share of the loss than they could tolerate. It doesn't mean that they caused the loss.

If American borrowers default on $1trn of debt, then other people are losing that money. Retirement savings, college savings, insurance companies, banks, etc are all collectively losing that $1trn.[/quote]

Isn't it also true that those companies, like AIG, exposed themselves by over-leveraging themselves? Something like 30 to 1 in some cases? And the amount of money in Credit Default Swap (CDS) was just as insanely overmatched? And that is what is driving the crisis now? Even Alan Greenspan expressed dismayed at how out of wack these programs were. The way it was explained to me it was like all these companies were buying fire insurance on home they don't own. Before this started the world bond market was worth 5 trillion but these companies insured them through CDS at over 60 trillion. That's 12 times more then what the original bonds were worth. When Lehman defaulted AIG owed over 400 billion dollars from insuring their bonds, which caused the original government bailout for them because they did not have that much money. To make matters worse each of these companies did something called "netting" which is like short selling stocks. As long as the banks were fine, it worked, but each company owed each other so much that one failed everyone was effected.

I understand that it was people defaulting on their home loans that triggered this crisis. But that was because it was once the safest way to increase your money so a lot of the money was there. But it could've been over speculating on something like tulips or tea instead. This was a crisis waiting to happen because the way the CDS were structured and the way the managers over-leveraged their companies.

If this crisis was just simply people defaulting on their home loans then it would be mostly the homeowners fault. But those financial companies were taking a lot more risks and promising a lot of companies more money then they could realistically cover.

[ants]

Well, since we're trying to play the blame game, it would be remiss of me not to join in! ;)
I've ordered them below, although I should say I hold a bunch very comparable in blame, so I've named them #4.x.

#1 Rating Agencies. These guys were paid for a specific job. And they failed at it. And so far, they don't appear to have suffered at all. If they had done their job and properly rated this stuff, a lot of the heat would have gone out of the market.

#2 The Fed. They are right at the top because like the Rating Agencies, they had a specific task that they utterly failed at. If they had raised interest rates and cut the supply of easy money, there would be a smaller problem now.

#3 The media. Yes, I put them right up here. Because for years they've glorified wall street without any real analysis. They perpetuated the whole capitalist nonsense. They never pointed out any risks. A lot of the perceptions around the housing market that permeated most of the common assumed knowledge was started and/or perpetuated by them. I don't know about the US, but certainly here is Australia you'd have heaps of reports on people successfully buying multiple houses and either flipping or using negative gearing. They never showed the risks in those reports. And they had a string of shows focussing on upgrading houses, or renovating, all using money drawn down from the mortgage. I think the media created a culture that enhanced the issues, and now that things are wrong have stayed populist and wouldn't put in a critical analytical report if their life depended on it. And I think they've avoided all the flack for their role except for Jon Stewart's pieces. Maybe if they were doing more navel gazing I'd lower them down the rankings, but currently I see no intention on their behalf to change anything about the way they do things.

#4.1 The US banks. Not entirely their fault, because yes people should read their own statements. But if I was a stock holder I would bloody well have expected them to test who they were selling loans to better. Now, if they had got all of this off their books I would be more understanding as a shareholder (although not as an unbiased observer), but the idiots then kept some of the most profitable (i.e. risky) components on their own books, or had some clawback arrangements. Idiots. If you were going to keep exposure, you had to understand what that exposure was. They were in a position to identify the risks they were taking, but stuck their head in the sand. Combined with their leveraged positions, it created the conditions for a colossal screw up. They then exacerbated this by all freezing in the gun sights when defaults started occurring an refused to lend money to each other or anybody else.

#4.2 AIG. They knew insurance (I hope). They should have known about systemic risk, reinsurance etc. Yet they were willing to let a small group to sell huge amounts of insurance on assets that had huge systemic risks, with crappy (any?) reserves and no control over how the money was paid out if a claim occurred. And maybe worst - not having this all in its own company that could be left for dead. From any level, as a regulator, shareholder, observer, it was a clusterf***. Their only saving grace is that they are hardly the first to be burnt by these businesses - but that in itself should have been a lesson. Fundamentally, the board/HQ didn't understand the business that was driving a huge chunk of their profits, and didn't do anything to change that. F***wits. I don't expect the traders to change, their incentives were not to. But that is why you have risk and compliance rules, that the board should set/understand. This didn't happen. Thankgod for the Australian regulatory system, do not think that could happen as easily over here for a general insurer. The only reason I don't have them higher is because I don't see them as seriously contributing to the overall crisis. This was just a sideshow to it, and once the US Government decided to bail them out, a pretty insignificant one in respects of the crisis (although not for the US deficit). If they had collapsed, it would be different.

#4.3 Borrowers. They took the money, and either didn't understand the risks or didn't care. Althoughly not individually at fault for the resulting outcome, collectively they screwed over everyone else in their belief that they were justified in following the American dream into a house that big.

#4.4 The Government. They decided that capitalist self interest and self-regulation could go together. It never made sense, and now that has been proven. And part of this problem is the whole stupid state vs. fed aspect. Sorry, in this day and age it has to be all at a total level. Get used to it. Government fundamentally turned a blind eye and accepted the tax revenues and growth, and ignored the regulatory issues. They also did (and still do) used ideology to set tax rates, which created a whole heap of flawed incentives for companies to do the wrong thing. And they should have started addressing the consumption/savings issued mentioned in #5 before this all happened. And what was with the stupid jingle keys laws?

#5 Leveraged households & consumers. Lets not forget the general culture of wanting more more more, and paying for it by credit. Not all of these had mortgages, or have added to the crisis. But the general level of consumption via credit created an issue many of us pointed to for years where if you had a reduction in consumption/credit that it would cause a huge issue as the economies had become geared to that level of expenditure. This also comes back to the (lack) of saving culture. If people had been saving 10% of their salary and not relying on credit cards so much, then they might have been able to keep consuming at a level close to their 'normal' level in the bad times. Instead, they have had to cut back spending a lot, which has deepened the recesion. And lets not even touch on their general refusal to vote in anyone who might actually require them to pay taxes to cover the services they want. For too long, the US citizens have wanted it both ways - low taxes, low credit, low savings and lots of me me me. Who would have thought it wouldn't work out long term?

#6 Leveraged businesses. Obviously there was too many, but they generally knew what they were doing and the investors allowed it. Everyone knew they were doing it, so I don't particularly blame them, but I also don't cry over the fact that they got hit so hard when the short-term debt market got more expensive. But they did contribute to the issues.

#7 Institutions buying the CDOs & Mortgage backed securities. Just wanted to put them here more to clarify that I don't particularly blame them. Could they have agreed better arrangements on the CDOs with AIG? Yes. Could they have done more research into the mortgage backed assets they were buying? Yes. But at the end of the day they accepted the rating agencies views, which I can't disagree with too much. And I can't argue with people taking out insurance - that is a smart move, and AIG was AAA rated. Overall, I think the people who bought these products were generally screwed over more than most, wheras I think a lot of them (espescially European banks) are getting a lot of undue flack. I think its fair to say when you buy a AAA rated asset, you don't expect your asset portfolio to drop like they did. And you expect that AAA rated insurer to be there when you need to make a claim.

[ants]

[quote name='Cobblestones' post='1728525' date='Mar 22 2009, 03.14']What you forget is that the government has different goals than a private investor. It does not need to maximize profit for itself (see the bailouts), so, it could make sense to privatize parts and let them grow in private hands, so mutual funds, 401k's etc. whatnot can grow with stocks from those profitable parts. The goal of government is to have a generally prospering economy, not to generate revenue from ownership of companies. Government can create revenue for itself much easier by taxes.[/quote]
I'm not forgetting anything. You're taking a very American view of Government - and in my mind a stupid one. If it maximises profit, it reduces costs for taxpayers. Its the model used by numerous countries around the world, who invest directly in their own and other countries companies.

You're effectively saying that the government should bail them out, sell at a premium, and let the private market reap the rewards. And the logic behind this is that either you somehow think the taxes from it doing well will be better than directly getting the profits itself and helping the deficit. Oh, and that the profits then go into private investors hands.

How the hell does that make sense????
[quote name='Iskaral Pust' post='1728601' date='Mar 22 2009, 04.44']No, that is not the banks' job. They need to be diligent about credit risk for sure, but they are not our financial keepers. They are not responsible for us, we are responsible for our own choices. If you absolve everyone of any responsibility, then we are just children who must cede all freedom to institutions like banks and govt. This is the land of the free, not the land of the pathetically helpless. Freedom carries responsibility for consequences.[/quote]
I'm not sure though if I would agree with that if I was a shareholder though! Then I think I would say they either should know, or get 100% off the books. Neither of which they did.

[lordofavalon]

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