House passes bill to loosen banking regulations

[Loren Pechtel]

Agreed.

I don't disagree that it's a problem. But as a former banker, I've always taken the view that people should put some money down when they buy a home. They should have some skin in the game. If not, every time the market corrects, people will bail.

That makes great sense... as long as house prices are reasonable compared to income levels. Where I'm at right now, a modest house or townhouse is going to run around $400,000. That's not fancy, that's not even in a particularly nice part of town - that's just not a dump needing a roof replaced. A 20% down payment on that is $80,000. Median household income here is $50,000. So that's a yeah and a half income! Even if a person is relatively aggressive and saves 20% of their income toward a down payment, they're looking at 8 years before they can afford to buy!

With a $50k income you can't afford a $400k house so the time it takes to get the down payment for one is irrelevant.

 

[Emily Lake]

That makes great sense... as long as house prices are reasonable compared to income levels. Where I'm at right now, a modest house or townhouse is going to run around $400,000. That's not fancy, that's not even in a particularly nice part of town - that's just not a dump needing a roof replaced. A 20% down payment on that is $80,000. Median household income here is $50,000. So that's a yeah and a half income! Even if a person is relatively aggressive and saves 20% of their income toward a down payment, they're looking at 8 years before they can afford to buy!

With a $50k income you can't afford a $400k house so the time it takes to get the down payment for one is irrelevant.

Yay for an economy where only the wealthy can afford a modest house!

 

[Axulus]

That makes great sense... as long as house prices are reasonable compared to income levels. Where I'm at right now, a modest house or townhouse is going to run around $400,000. That's not fancy, that's not even in a particularly nice part of town - that's just not a dump needing a roof replaced. A 20% down payment on that is $80,000. Median household income here is $50,000. So that's a yeah and a half income! Even if a person is relatively aggressive and saves 20% of their income toward a down payment, they're looking at 8 years before they can afford to buy!

With a $50k income you can't afford a $400k house so the time it takes to get the down payment for one is irrelevant.

Yay for an economy where only the wealthy can afford a modest house!

They should get a condo instead. Not everyone should be able to afford a house in any city. It just isn't possible. Houses are an inefficient use of land in a populated city.

BTW, median household income in Seattle is over 80k (for a married couple it is $133k)

 

[steve_bank]

I am buying gold and burying it in my yard. Financial collapse probability is up.

 

[bilby]

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

 

[Tom Sawyer]

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

Wouldn't it be better to buy weapons and then get as much tinned food and toilet paper as you need from others who made poorer purchasing decisions?

 

[steve_bank]

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

Take a look at the meaning of sarcasm. The commercials selling gold as security against collapse. Gold will have value if it is used as currency as in the past.

Most may not realize how close we were to a depression when Obama took office. Big auto including secondary and tertiaty markets is a large part of the economy. If they failed it could have been catastrophic.

We are in a bubble. Deregulation plus the tax bill may be setting the stage for a serious collapse. If growth slows govt may default. Historically the question is not whether or not the bubble collapses. The question is how bad it will be and what we do proactively to ameliorate the degree.

 

[Koyaanisqatsi]

The problem in 2008 wasn't the banks and it wasn't the regulations and it wasn't Bill Clinton or even the mortgage-backed securities themselves. The problem was the credit rating agencies (Standard & Poor's, the Fitch Group and, particularly, Moody's). If they had simply rated the securities properly, none of what followed would have ever happened.

Now, whether or not they knowingly conspired to give higher ratings is another question (as well as whether or not they could do so again), but the fault lies entirely with them.

 

[steve_bank]

The problem in 2008 wasn't the banks and it wasn't the regulations and it wasn't Bill Clinton or even the mortgage-backed securities themselves. The problem was the credit rating agencies (Standard & Poor's, the Fitch Group and, particularly, Moody's). If they had simply rated the securities properly, none of what followed would have ever happened.

Now, whether or not they knowingly conspired to give higher ratings is another question (as well as whether or not they could do so again), but the fault lies entirely with them.

It was in part due to banks under govt policy giving home loans with abandon to those who could barely make payments. An economic downturn caused high levels of defaults.

The banking/finance industry created what they call a derivative product. Buying debt in form of mortgages and selling the paper at a profit. Unrestricted it led to a pyramid type of scheme that collapsed. Followed by another govt program to bailout homeowners who should never had gotten loans.

 

[bilby]

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

Take a look at the meaning of sarcasm.

No drama, I shall get right on to that. Then at least one of us will be able to recognize it.

 

[J842P]

Agreed.

I don't disagree that it's a problem. But as a former banker, I've always taken the view that people should put some money down when they buy a home. They should have some skin in the game. If not, every time the market corrects, people will bail.

That makes great sense... as long as house prices are reasonable compared to income levels. Where I'm at right now, a modest house or townhouse is going to run around $400,000. That's not fancy, that's not even in a particularly nice part of town - that's just not a dump needing a roof replaced. A 20% down payment on that is $80,000. Median household income here is $50,000. So that's a yeah and a half income! Even if a person is relatively aggressive and saves 20% of their income toward a down payment, they're looking at 8 years before they can afford to buy!

The issue there seems to me to be the price, not the lending requirements. If anything, those prices further justify the lending requirements.


I live in San Francisco where the median home price is $1.61 million. Don't ask me what I pay in rent.

 

[Harry Bosch]

That makes great sense... as long as house prices are reasonable compared to income levels. Where I'm at right now, a modest house or townhouse is going to run around $400,000. That's not fancy, that's not even in a particularly nice part of town - that's just not a dump needing a roof replaced. A 20% down payment on that is $80,000. Median household income here is $50,000. So that's a yeah and a half income! Even if a person is relatively aggressive and saves 20% of their income toward a down payment, they're looking at 8 years before they can afford to buy!

The issue there seems to me to be the price, not the lending requirements. If anything, those prices further justify the lending requirements.


I live in San Francisco where the median home price is $1.61 million. Don't ask me what I pay in rent.

The problem is that home values go up and down constantly. And people tend to abandon their homes in a down market when they don't have much of their own cash invested into the property.

 

[Koyaanisqatsi]

The problem in 2008 wasn't the banks and it wasn't the regulations and it wasn't Bill Clinton or even the mortgage-backed securities themselves. The problem was the credit rating agencies (Standard & Poor's, the Fitch Group and, particularly, Moody's). If they had simply rated the securities properly, none of what followed would have ever happened.

Now, whether or not they knowingly conspired to give higher ratings is another question (as well as whether or not they could do so again), but the fault lies entirely with them.

It was in part due to banks under govt policy giving home loans with abandon to those who could barely make payments. An economic downturn caused high levels of defaults.

The banking/finance industry created what they call a derivative product. Buying debt in form of mortgages and selling the paper at a profit. Unrestricted it led to a pyramid type of scheme that collapsed. Followed by another govt program to bailout homeowners who should never had gotten loans.

Yep, but, again, that all was the result of the credit rating agencies not properly rating the securities. All three agencies—separately—came to the conclusion that due to their diversity (i.e., bad amongst the good) that the “good” would mitigate the risks of the “bad” underlying mortgages and therefore gave them much higher ratings than they deserved.

Basically it was like if you have a hundred people in a room and 70 of them have excellent credit and 30 don’t, the 70 will make up for the 30 should any of them default and therefore it’s all good. Which made some sense, but of course was far too simplistic and did not dig down deep enough into the layers upon layers of structure into the various forms of these securities.

That was the essence behind the bundling theory, but what the credit ratings agencies did not take into consideration was the detachment of due diligence that resulted in the allowance of independent mortgage brokerage houses. Banks used to be on the hook for their mortgage loans—and thus performed due diligence on their clients to mitigate against risk of default—but they started farming that out to independent firms, many of which then lied about their due diligence.

So more and more risk accumulated without anyone paying attention until the bubble burst.

But, again, the fault lies exclusively with the credit ratings agencies for not doing their only job; properly assessing risk. If they had, no one would have bought the securities (except for high risk investors) and they never would have been bundled into money market vehicles that the rich used to park their money in for month-end investments and those independent mortgage houses would have all gone belly up (or never formed to begin with).

Iow, if the system had simply operated as it was supposed to, none of this would have happened. So the question really is whether or not the credit agencies were complicit or otherwise paid off, or were they just incompetent? Considering all three came to basically the same conclusion (though an argument was made that Moody’s was the worst of the three), it would appear incompetence was the primary culprit, at least initially.

The evidence of this came too late, but it can be found in the fact that prior to the full-on collapse the agencies did in fact adjust their ratings, but by that time too many people (rich and “middle class” alike) had their money in relatively high yield money market funds so the panic that ensued was far and wide and ultimately cataclysmic.

 

[Playball40]

Pre-Gramm Leach and CMA, people, even low income people seeking FHA or First Time buyers loans DID have to put money down (skin in the game).

Agreed.

I don't disagree that it's a problem. But as a former banker, I've always taken the view that people should put some money down when they buy a home. They should have some skin in the game. If not, every time the market corrects, people will bail.

 

[Playball40]

The government did NOT REQUIRE banks to make bad loans or to completely throw out their lending qualifications.

The problem in 2008 wasn't the banks and it wasn't the regulations and it wasn't Bill Clinton or even the mortgage-backed securities themselves. The problem was the credit rating agencies (Standard & Poor's, the Fitch Group and, particularly, Moody's). If they had simply rated the securities properly, none of what followed would have ever happened.

Now, whether or not they knowingly conspired to give higher ratings is another question (as well as whether or not they could do so again), but the fault lies entirely with them.

It was in part due to banks under govt policy giving home loans with abandon to those who could barely make payments. An economic downturn caused high levels of defaults.

The banking/finance industry created what they call a derivative product. Buying debt in form of mortgages and selling the paper at a profit. Unrestricted it led to a pyramid type of scheme that collapsed. Followed by another govt program to bailout homeowners who should never had gotten loans.

 

[Emily Lake]

Yay for an economy where only the wealthy can afford a modest house!

They should get a condo instead. Not everyone should be able to afford a house in any city. It just isn't possible. Houses are an inefficient use of land in a populated city.

BTW, median household income in Seattle is over 80k (for a married couple it is $133k)

I live in Lynnwood, not in Seattle proper. Median income here is lower... and my condo is over $400K. That's kind of the problem. Condos in Seattle are still unobtainium. Hell, living in Seattle for anyone not already wealthy is pretty much impossible without roommates. Lol, I know a married couple who shares an apartment with another married couple because neither couple can afford an apartment on their own. None of them are minimum wage, it's just that expensive to live there.

- - - Updated - - -

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

Spices and antibiotics

 

[Elixir]

I live in Lynnwood, not in Seattle proper. Median income here is lower... and my condo is over $400K. That's kind of the problem. Condos in Seattle are still unobtainium. Hell, living in Seattle for anyone not already wealthy is pretty much impossible without roommates. Lol, I know a married couple who shares an apartment with another married couple because neither couple can afford an apartment on their own. None of them are minimum wage, it's just that expensive to live there.

- - - Updated - - -

I am buying gold and burying it in my yard. Financial collapse probability is up.

Well gold is basically worthless in a collapsed civilization. You would be better off buying tinned food and soft toilet paper.

Spices and antibiotics

Spices and antibiotics don't keep particularly well... silver would be a better bet than gold, but probably not as good as toilet paper, despite silver's higher dollar-density... ammo might be good.

 

[Emily Lake]

Spices and antibiotics don't keep particularly well... silver would be a better bet than gold, but probably not as good as toilet paper, despite silver's higher dollar-density... ammo might be good.

I thought pill-form antibiotics kept pretty well. Anyway, yes on ammo. Also, the ingredients for gunpowder. Engineering textbooks. Builder's hand-tools. Forge and anvil, and a kiln.

 

[Elixir]

Spices and antibiotics don't keep particularly well... silver would be a better bet than gold, but probably not as good as toilet paper, despite silver's higher dollar-density... ammo might be good.

I thought pill-form antibiotics kept pretty well. Anyway, yes on ammo. Also, the ingredients for gunpowder. Engineering textbooks. Builder's hand-tools. Forge and anvil, and a kiln.

Hmm... "hold on a sec, I know I had another anvil in one of my pockets..."

 

[Emily Lake]

Spices and antibiotics don't keep particularly well... silver would be a better bet than gold, but probably not as good as toilet paper, despite silver's higher dollar-density... ammo might be good.

I thought pill-form antibiotics kept pretty well. Anyway, yes on ammo. Also, the ingredients for gunpowder. Engineering textbooks. Builder's hand-tools. Forge and anvil, and a kiln.

Hmm... "hold on a sec, I know I had another anvil in one of my pockets..."

I usually carry two. It helps keep me balanced.