Disqus - Latest Comments for frit

Re: How Fraud Fueled the Mortgage Crisis

frit — Wed, 15 Oct 2008 04:07:13 -0000

Acorn and Obama kept on clarifying that there would be errors in such a large scale voter registrative drive.

The big deal is the high defect rate, which indicated very poor quality control in the voter registrative process.

If a private company produce goods and products with defect rate of over 3%, it will have risk of closing their business due to high consumer returns, high compensation claims.

Acorn produce services with extremely high defect rates, lawmakers continue to grant or allot tax payers' money to them.

I wonder whether Acorn's voter registration registering in extraordinary high percentage of demorcrats among the registration, and whether the Acorn is higher than national ratio by a large degree consistently.

Re: More on the ‘Absurd’ Blame Game

frit — Wed, 15 Oct 2008 04:16:10 -0000

Buyers buy the CDO based on an understanding that the credit rating or history of the low income borrowers were checked and approved by the mortgage lenders.

Malpractice may occur if lending less subprime loans are "illegal and discriminatory", which may cause mortgage lenders to take higher risk to comply with the powerful lawmakers' request.

When bank managers were harrassed to make loans to a low income borrowers, and were "harrassed" by a community organization group which have strong connection to the community, and the lawmakers, most of them would surrender to their request to avoid clash with lawmakers, and the persons behind such a powerful group.
Can the police and the top management protect these poor bank managers. May be they did not want to lose their jobs because their knew senior management of the banks had very close relationship with the lawmakers.

Is this corruption. Don't mention it.

Re: Low Income Borrowers Made Scapegoat Amid Crisis

frit — Wed, 15 Oct 2008 04:30:41 -0000

Citi was sued in 1995 by Acorn, with Obama on mount. Citi had big trouble in subprime loans.
Household International (now HSBC) was sued in 2002 by Acorn. HSBC had trouble in subprime loans.
After the ligtigations, Citi and HSBC worked closely with Acorn to make lots of loans to low income persons.
Did Countrywide had close work relationship with Acorn to make subprime loans?

HSBC was a little bit lucky that their UK Headquarter called it an end on subprime loans in early 2007, announced to their shareholders that they would stop expanding their US business in 2007, after noticing the abnormal increase in delinquency rate. Look at how good, in terms of bad debt ratio and capital ratio HSBC have had during the financial crisis 2007 and 2008. HSBC is a very conservative bank for many year, they did not blame any party. But they stop their business expansion plan in US and would focus on emerging markets. Reason? They fear of something in US banking environment.

HSBC would not make any provocative statement on this issue. Their strategy change in 2007 meant something. Obviously you have not study the reasons behind HSBC strategy change.
If this is caused by simple greed, HSBC can manage the problem.
If this is caused by something HSBC cannot manage, what do you think HSBC was afraid of?

Re: Attacks on ACORN Just Keep on Coming

frit — Wed, 15 Oct 2008 07:23:51 -0000

Based on reports from other website, the mentioned Immigration Rally in Miami in 2006 was co-sponsored by Acorn and other organizations. Are you sure that Mccain was invited by Acorn to attend the function? Are you sure that Mccain endorsed Acorn's behaviour in other areas because he attended a function which was held by Acorn? Are you sure that a lawmaker shall not attend a function which had Acorn's participation, though this lawmaker wanted to have deeper understanding or communication with the attendance on a particular subject.

The big deal in the voter registration is the high defect rate. For a big company which produced goods or services with higher than 3%-5% defect rate, the Quality Control Re[port must be reject the produced goods and services. 'For an organization which have long history of producing high defect rate in voter registration, the most appropriate punishment is a permanent ban of such organization in rendering such services.

Otherwise, you will encounter lots of goods and services which are poisoned. Like the poisoned milk produced by China.

The ones which provided funding for an organization to render services should have high expectation on quality control of such services. Without proper requirement and oversight, the word like to be used by politicians, these politicians are ridiculous.

Re: Lehman CEO: Why Weren’t We Bailed Out?

frit — Wed, 15 Oct 2008 08:11:01 -0000

The answer not to bailout of Lehman, while lending money to AIG is simple.

AIG had adequate assets for sale with valuation much higher than $850 billion lent by the Fed.
AIA, plus many subsidiaries of AIG, worth a lot of money, and a lot of companies might have interest in bidding for AIA .

What did Lehman have to repay the temporary loans lent by AIG at the brink of their collapse.
Lehman did not worth it.

Why UK and European banks were in trouble? They had extraordinary low capital ratio.
Think about it, if UK wanted to raise the capital ratio of their banks to 11%, and UK finally got over 50% or 40% ownership of some banks, one bank had capital ratio of around 5-6% (significantly less than 8% requirement for the one which UK have over 50% ownership) and the other had capital ratio of around 6-7% (for the one which UK have over 40% ownership). In other words, these banks might be as speculative as Bear Sterns and Lehman.Brothers.

UK need to inject capital to so many banks because the bank supervision of such banks was so loose that so many big banks did not have adqeuate captial at the same time. US can let Bear Sterns and Lehman Brothers to end their business because a lot of banks still have adqeuate captial ratio.
For the ones which fail to meet the capital ratio requirement, Washington Mutual, IndyMac, Wachovia were the examples. Fed and FDIC did pretty good jobs here.

This banking crisis occurred because the fools from UK, France, Germany, Italy and ECB had the guts to go out of the conference room on a particular Saturday without a solid proposal to save their own financial system. Germany was right to reject the proposal to form a fund save the whole Euro Dollar financial system, as the taxpayers should not be responsible to pay for liabilities of other countries. However, they can form some kind of assurance to the financial markets, to assure the safety of the deposits of depositors in their banks, by offering a common scheme of deposit insurance, and to flood the banks with Eurodollars funding, to alleviate the difficulties in borrowing money in Libor and all inter-banks lending.

Hence, this financial crisis is the failure of UK and EU in handling their own crisis in a prompt manner.
Germany devised their own rescue plan on the following Sunday, UK had announced rescue plan on Tuesday, Italy rescue plan on Wednesday, while the stupid France need to wait for Friday G7 Meeting, Saturday/Sunday G20 meeting to devise rescue plan. Can the stupid French completed this assignment by phone on Monday or Tuesday?

If the big 4 European countries had a rescue plan similar to that agreed in the G7 or G20 meeting, during their first Oct Saturday meeting, the extent of this crisis would not be so extended.

In 1907 bank run crisis, JP Morgan was reported that he invited bankers to have a meeting in his library.
When the bankers entered the library, he locked the door with key, and told everybody that no one can go out of the room if no solution could be devised to save the crisis. This is the right manner for the fools of Europe when they held that meeing.

Re: Attacks on ACORN Just Keep on Coming

frit — Wed, 15 Oct 2008 08:53:27 -0000

Based on the hard working of Obama supporters in driving the banks to make lots of loans to low income persons, and the hard working in driving the voter registration, Obama obviously will have A-team to render Special Service to ensure lawmakers to pass the bills and policies he initiated.
Special Service is important for a leader like Obama to make sure that Democrat lawmakers to listen to and obey to him.
He learned a lot from Alinsky, communist parties and socialist parties around the world, and he had his own way in driving the people to fulfil his own dreams, american dreams for the supporters who followed him since 1980s, or 1990s.
The most important thing is "share the success" of high income groups, and big companies. (will share price growth and 401K negatively affected?), and "spread the wealth around" to, hopefully the americans, not the citizens of all socialist countries. (However, US had history in making huge loans to latin america, and incurred big bank loss in latin american crisis).
Incidentally, Carter had stagflation.
Clinton paved the way for loose regulation and foundation work for mortgage backed securities with subprime loans on Fannie Mae, Freddie Mac, and latin american crisis 1990s.
Look forward to see what mess the Special Service and Obama can do to US. May be less interest in Treasury bills from captialist countries to finance his bill, and a rise in interest rate, credit crunch from unloading of Treasury bills by international investors and other countries for lack of confidence.

May be Obama's mentor's word will come true., God D AmeriKKKa.

Re: More on the ‘Absurd’ Blame Game

frit — Wed, 15 Oct 2008 23:07:25 -0000

To clarify whether CRA led to this subprime mess, the following questions should be asked and answered.
1. Did the practice of CRA punish the banks which had less exposure to subprime loans, by charges of "discrimination", or "predatory lending" for charging higer interest rates or fees for low income persons which conservative bankers thought to have higher risk, and hence demand higher interest rates or fees to cover their risk.

2. Did the court cases against Citi in 1995, Household International (now HSBC) in 2002 paved the way for their rapid expansion in subprime loans business.

3. How many big names finanical institutions in subprime loans mess were seduced and had close work relationship with community organization groups to make subprime loans. JP Morgan Chase Q3 reported that charged off rate of subprime loan was 7.5% in Q3, 2008, while charged off rate of prime mortgage was 1.5%. i.e. if interest rate for prime loan is 5.8%, the interest rate for subprime loan should be at least 11.8% (=5.8% + 7.5%-1.5%) to cover the additional risk. Would a bank which charged 12% interest rate for high risk low income persons be charged with "predatory lending" under the present laws and enforcement team of some community orgnaization groups?

4. If Countrywide made large values of subprime loans, would other banks which made less subprime loans in their mortgage portfolior being the target of "descriminatory practices" and be sued for predatory lending for charging shocking "12% or more" for high risk low income persons. (Based on JPMC Q3 2008 financial report, 12% or higher interest rate should be required to justify the risk in subprime loans.

5. Based on the default rate of prime mortgages in 1980s S&L crisis, what would be the reasonable estimate of default rate of subprime mortgages in the down cycle of property maket. Remember, there will be a down cycle of property market every 5-10 years. Were the interest rate charged by Citi 1995 or Household International 2002 to low income persons were "predatory", in terms of the risk exposure discovered in this financial crisis. Remember, the court cases against these 2 banks had Obama and Acorn on mount.

If the practice of CRA did not impose negative inflence on bank management's decision to expand their subprime loans, then the blame on the practice of CRA was wrong.

Failure to mention the loopholes in CRA which were manipulated by some community organization groups to drive so many participants to this subprime loans is not good analysis.

Besides, international investors who bought CDO had no idea that there were so many frauds in the practice of financial industry, so many politicians' push of subprime loans for their own political interest. They count on rating from S&P and reputatble rating agencies to value the financial instruments. There were not full disclosure of such risks in sale of CDO.