“Who’s knocking on our door ?” the CFO of a huge investment bank asked.
“Why it’s the government Banking Auditor. It’s his day of the week to ask us to mark our assets to market.”
“Are we in shape for his visit?”
“Uhm, Yes and no. Sorta good news, bad news.”
“What’s the good news?”
“We’ve done the math and we figure our remaining mortgages on the books, good and bad, are worth $43 billion, so we’re okay.”
“What’s the bad news?”
“Uhm, well, nobody will buy any mortgage paper at the moment and some righteous auditors have been saying, no valid quotes, no value.”
“That’s absurd. That would mean we have negative equity.”
“Shhh! He’s leaving. Bernanke’s got him on the phone.”

_____________________

The Crooked Citizen takes a Mortgage

John and Jane, brokers, sit in their mortgage originator store front office. They spy a couple reading their window adverts.
“Come in, come in. And how are you lovely folks today?”
“Good.” “Good.”
“May we ask you if you rent or own?”
“Ah, you rent. $900 a month and it’s tight. We see.” (They huddle a moment.)
“Folks, we’ve assessed your case and our thinking is if you sign right here for a thousand a month mortgage, we’ll see that you get a quarter of a million dollars to get that home you have your eye on. How’s that?”
“Don’t you have to write down all your credit card debt?” “No. Your application looks great, just as it is.”
“And what will your mortgage and mortgage rate be at the end of the initial term? No one can say for sure but the standard operating procedure is that you come back and refinance with the new higher value of your home”. “Everybody does, just SOP, right Jane?”
“SOP, everybody does.”
“You’re curious how we get paid. Well, it comes from the lender’s part of the deal. It isn’t a lot but we get to put good folks in great homes. That’s a big reward right there.”
“All set? See ya later. You’re welcome, thank you.”
John and Jane high five, laughing!
“What a couple of con artists those two are, borrowing a quarter mil on their credit record.”

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”

Not me – Andrew Jackson

These people are shameless knaves, and because the US public has normalized dishonesty, their mischief is brazenly described as “reform.”

This means that the regulatory reform response to the current mess will come in two stages, if it happens at all:…”

Well, the current admin was able to re-corral a whole lot of goodness in to DHS as well as revamp the Intelligence [sic] collection folks structure, so it would be unwise to wonder if it will happen, just how bad it will be. Perhaps if the ‘regulators’ had a capitalistic incentive that surpassed the revolving doors and favors, or even just saw some real punishment happen with what they do find now, they would be mo properly motivated. Remember, if they pull off Paulson’s plan right the ice trucks will be there* when needed.

Repentance is called for, but also a rediscovery of serviceable old words relegated to the attic of political correctness. Words like WICKEDNESS, THEFT, LYING, and CIVIC DUTY need a good airing and reintroduction into common parlance.

What amuses me in these discussions is the resolute insistance on the invariant character of American homo economicus, as though his/her character has not deteriorated markedly since Reagan. We have gone from Great Society to Grifter Society in one generation.

I personally think these are the kinds of functions for which we the people elect a gummint, rather than wheels within wheels of private-sector guarantors of accountability, the gears of which always turn out to be a bit too greasy.

hh—I’ve heard marching around outdoors with a giant sign that says “repent the end is near” is good fun AND sometimes provides a suntan to boot. You may want to look into it.

Secondly, you may be using a technical definition of irrational, but as someone who was involved in the real-estate business first-hand during this period I don’t think the behavior qualified for the more general definition. Consistently lowering interest rates caused a surge of qualified buyers, driving up demand and correspondingly prices. It may have been myopic to think 15% annual appreciation was here to stay, but that’s more an example of information imbalance than irrationality.

Finally, what is your assessment of things like prosper.com?

It was probably this conflict that led the agencies to grant triple-A ratings to products that turned out not to deserve them – CDOs of ABS (especially mezzanine ABS), SIVs, CPDOs etc.

This means that the regulatory reform response to the current mess will come in two stages, if it happens at all: first, some new formal regulations or institutions will be put in place; and later on, someone will have to implement those regulations and inhabit those institutions. Both stages will matter in constituting the full regulatory response, although it is usually the first stage that gets most of the attention.

WWII was about four times more damaging than WWI in global fatalities, but a nuclear exchange involving even a few hundred warheads will kill a vastly greater number of people. The selfish gene has conserved traits of predation and destructive ideological problem simplification that are disastrous when coupled with the magnifying effects of global electronic and nuclear technologies. As we built increasingly powerful, unstable, and dangerous technologies, we have failed to build a better human beast, and our beastly instincts may well destroy us.

Paying less attention to me makes me feel smarter.

I blame that stupid energy drink and the fingers that type dumb things when I clearly intended to type smart things.

I actually don’t think this is just about movement conservatism. There were a lot of celebratory neoliberal assumptions about markets that got broad creedence across the whole political spectrum.

Second, if you just mean—I pay an auto mechanic to fix my car, sure, but the point is it’s not in my interest to have the auto mechanic NOT tell me my brakes are out such that I die in a horrible accident. for one thing, I won’t go back again afterward, obviously, for more services. In the case of the ratings agencies, it is actually in the payer’s interest for the payee to say “wow, things are just great!” and the payer will therefore go back again and again for the same sunshiney message that enables them to sell their crappy bonds at a higher price than they warrant.