You can't bullshit an old bullshitter

The world's toughest job?  Being the public relations guy for a bank.  This was a tiny little article in today's paper:

Greece offered universal health coverage until an agreement with its international lenders (banks) stipulated the unemployed must pay for their own treatment.

Isn't this just bringing the unemployed into line with the banking policy of charging customers a hefty fee for bouncing a check?  They're just charging you more of what they already know you don't have any of.  Duh!

A close second might be the PR guy representing Foxconn, the huge Chinese electronics contractor who employs hundreds of thousands of low-wage workers to assemble iPads for Apple.  (Their motto...."The beatings will continue until morale improves.") 

"They actually like working 18 hour days, on account of there isn't anything to do back in the dorm with their 250 roommates."

The Feds are suing Bank of America, accusing them of making home loans without ever even checking borrower credentials, a policy known mockingly within the company as "the Hustle".  They then sold the loans to Fannie Mae and Freddie Mac, where they mostly went straight into default.  

The taxpayers had to assume the loss when Fannie and Freddie failed, and now the Feds are going back on B of A.  How might the bank's PR guy possibly spin this?  "Ahh....umm....the Hustle?....that was just a dance contest we had on casual Friday's, that's all.  We're good."

Another tough one....the PR guy for bankrupt American Airlines.  "If we don't give big bonuses to our senior executives we'll lose our top talent to our competitors."  

Dude, you're BANKRUPT.  You don't HAVE any top talent.  That's why you're BANKRUPT!

You can't bullshit an old bullshitter.  ;)

S

The pot calling the kettle black

Do our politicians really think we're dumb enough to believe our current political / economic mess is ALL the result of "the OTHER" party?  I've done a lot of research on the housing bubble that imploded in 2008 and put us in our current mess and here's what I found:  The whole sordid affair began in about 1993 when Congress, the President, Fannie Mae and Freddie Mac and a few others began the National Homeownership Initiative.  


During the years since then Democrats occupied the White House for 11 years, the Republicans for 8.  Democrats and Republicans evenly split control of the Senate, 5 terms each, and Republicans have controlled the House of Representatives for 6 of 10 terms.  I would pretty much call that a draw.


For either party to claim sainthood, to say with a straight face that if we will trust them with all the reigns of power a bright future will be ours, is disingenuous in the extreme.  Both parties have had ample opportunity to do the right thing for the American people, but instead were all-consumed with extorting campaign contributions and preserving their power. 


Congress, mainly the Republicans, want to scale back government spending.  Fine...no argument from me.  Except they conveniently fail to mention this will put millions of people out of work.  Oops!  All while they point a finger and jump up and down on their soap box asking what the Democrat's plan is to reduce unemployment?  Huh?  Fess up guys....you can't have it both ways!


Are any of you buying the load of crap both parties are selling this election year?  If you are, then let me introduce myself:  I'm a wealthy Nigerian prince, and I need your help!


S

The perfect storm

As we've already established in my last post, the financiers (da banks) had been given the government go-ahead to essentially do whatever they wanted, with the regulators asleep at the wheel.  Here's where the plot thickens:


For years prospective homebuyers went to a mortgage originator in their area for a loan, typically a small independent storefront operation or a bank or Savings and Loan.  The loan was made to a credit-worthy buyer, the loan company made a fee for their service rendered, and the loan was sold to Fannie Mae or Freddie Mac.  (These were government spin-off companies who had implied government backing.)  Fannie/Freddie would in turn pay back the local mortgage originator who would loan it again, make another fee, and sell it, too, to Fannie/Freddie, on and on. Fannie/Freddie would bundle these and sell them to investors world-wide who were anxious to own rock-solid investments in the can't-lose American housing market.


By the early 90's there arose a scheme by Fannie/Freddie and the politicians (of BOTH parties) to expand the number of people who owned a piece of "The American Dream". The financiers made money off the deal, and the politicians gained votes back home, claiming they were the ones who were bettering peoples lives.  Now given a regulatory green-light, the banks wanted in too.  (Fannie/Freddie had limits on the dollar value of the homes they could buy.  The banks didn't.)  The word went out to the loan originators to make more loans and the banks would buy them.  Before long all credit-worthy people who wanted a house had a house, so they lowered the qualifications for credit, income, etc to bring more buyers in. The loan originators pretty much looked the other way on everything because they made lots of up-front money to get loans signed and on to the banks.  They didn't care if the loans were no good because by the time the buyers defaulted they were way down the line and were somebody else's problem.


At the same time the bankers were hiring brilliant mathematicians to play with the numbers.  Instead of packaging and selling 100 homes to investors, why not slice each home loan into a thousand pieces, then sell each investor 1% of 10,000 houses from all over the country?  Investors love diversification.  It also made it easier to slip in some of those sub-prime loans (buyers with poorer quality credit).  Actually a lot of those sub-prime loans. Heck, why not bundle home loans with some commercial business loans, too.  More diversification...yea!  Everything was bundled with everything...the banks became very creative!  Foreign banks saw what was going on and jumped in, too.  Ireland, the UK, and Spain among others had large property bubbles also.  Things just took off.


But to make this work investors wanted assurance that these extremely difficult to understand CDO's (Collateralized Debt Obligations, the homes being the collateral) were as safe as they sounded.  The banks took each new bundle (called a tranche) they put together to the rating agencies, primarily Standard and Poors, Moody's, and Fitch, and had them look them over.  Problem was, this was a new concept and there was no historical data to refer to, so the raters made up new, and as it turned out flawed, mathematical formulas.  They forgot to include the possibility the value of homes might actually go down.  Oops!  And there was massive conflict of interest, too.  The ratings agencies were paid by the banks whose CDO's they were rating (standard practice), and there were lots of CDO's.  With millions of dollars in fees on the line, the raters pretty much said whatever the banks wanted them to say.  Virtually everything was rated "investment grade".


We now have irrefutable evidence that the bankers knew they were peddling investments destined to fail.  But as they were making hundreds of BILLIONS of dollars in fees for their banks and hundreds of millions of dollars in commissions for themselves, they weren't about to stop.  Greed rules!  Eventually homeowners began defaulting in droves, things began to fall apart, and investors stopped buying new CDO's.  Banks were caught holding hundreds of billions of dollars worth of flawed (fraudlent?) loans not yet sliced, diced, repackaged, and sold off.  Many were broke and were forced by the government almost at gunpoint to merge with other banks that were only slightly better off themselves.  To shore things up the government stepped in and "loaned" them hundreds of billions of taxpayer dollars to tide them over.  The mess is still being unwound today.


There was taxpayer outrage of course, so Congress feigned innocence and vowed to slap down the bad 'ol bankers (but of course they still take their calls and their campaign contributions).  Investigations were done, new laws have been written, and the bankers are working their lobbyists overtime right now to shoot the new laws full of loopholes.  Not a lot has actually changed.  Crazy speculation is still going on as evidenced by the failure of MF Global last year and JP Morgan Chase's loss of billions of dollars just last month.  We never seem to learn.


S


As always, factual constructive criticism would be appreciated. If I've erred on something please speak up.

Giddiup cowboy

Yesterday I stopped by my daughter's house for a few minutes and noticed on the way there that all the streets in her community have old west / cowboy names.  This reminded me of a post not long ago by my friend Bruce Taylor pointing out similar street names in the area where he lives. Some examples in daughter Erica's neighborhood:

I guess that's all pretty cool....if you're a fan of those sorts of things.  At the risk of betraying my Texas roots, I must admit I'm not.  I was never into Roy and Dale and Gene and all that "yee-haw" stuff.  

~~~~~~~~~~~~

Some of the things....no, MOST of the things our government does baffles me.  I read today that so far Fannie Mae and Freddie Mac, now wholly owned by the taxpayers after they went bust back in the Meltdown of '08, have spent nearly $100M defending the actions of several of their former executives against accusations of hokus pokus bookkeeping and securities fraud.  And who's making those accusations?  Our government.  We're essentially suing ourselves.

While such "agreements to defend" are common in corporate America, the inspector general of the agency defending the former Fannie/Freddie executives says those agreements went out the window back in '08 when the government took them over, but because we're such nice guys suckers, we're defending them anyway.  And it isn't like these guys are indigent.  Hardly!  (Former CEO Franklin Raines was paid over $90M.)  Let 'em defend themselves!  I sometimes think our government just goes out looking for piles to step in.  *shaking head*

S