Funny to see the socialist screamers and free market defenders point to the Stock Market as an indicator of Obama's 'success'. I note that the companies that are 'failing' are the financials (among others) which were run into the ground by excessive greed. So should we save them? or let the market free fall?

I wouldnt begin to know how to answer that, being money market dumb. However, should the user "WashingToneLocian" post here, you may find he has a better "grapple" on the market and its condition and may provide insight

I will point out that markets around the world are falling, whether the country's economy is more "free market" or more "socialist." We have a worldwide liquidity crisis brought about by greed and a "herd mentality" of looking the other way.

Free markets are only "free" when they aren't gamed to someone's advantage. The mortgage-backed securities were gamed and sold to unsuspecting investors around the world who thought AAA ratings really meant AAA.

Basically the world is suffering from the greatest Ponzi scheme in history. That has nothing to do with "free markets" or "socialism."

We have Republican Lew Ranieri to thank for this. He pioneered mortgage-backed ABS in the 80s.
http://www.businessweek.com/magazine/content/04_48/b3910023_mz072.htm

Skip to my Lew Wrote:
-------------------------------------------------------
> We have Republican Lew Ranieri to thank for this.
> He pioneered mortgage-backed ABS in the 80s.
> http://www.businessweek.com/magazine/content/04_48
> /b3910023_mz072.htm


Quite the "Innovator."

Do they profile the asshole who came up with Credit Default Swaps? Maybe he's the "Jesus of Swaps," or some crap like that.

Some say that derivative contracts were conceived by Blythe Masters who was a managing director at JPM back in the 90s (not sure if she's still there). But really, it was a team of risk arbs at JPM that helped craft many of the provisions that stand with ISDA today. Here's a really good piece of marketing collateral that was used to promote them. http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf

Skip to my Lew Wrote:
-------------------------------------------------------
> We have Republican Lew Ranieri to thank for this.
> He pioneered mortgage-backed ABS in the 80s.
> http://www.businessweek.com/magazine/content/04_48
> /b3910023_mz072.htm

That is an absurd allegation. All he did was develop the secondary mortgage market. Sure he added a layer but when the fundamental lending is sound that is no problem. In fact he made mortgages cheaper.

Well, that's the point. We now know today that you can't market a financial product that only works when things are working on all cylinders. If so, then you just have a glorified Ponzi scheme. You need to take into account the risk factors when things aren't working so well.

Ranieri was still voted in the top-20 of people who are most culpable for today's economic mess. He just got too many people to buy into his creation leading Wall Street to act like back-door casinos.

Here's his TIME profile --->

Meet the father of mortgage-backed bonds. In the late 1970s, the college dropout and Salomon trader coined the term securitization to name a tidy bit of financial alchemy in which home loans were packaged together by Wall Street firms and sold to institutional investors. In 1984 Ranieri boasted that his mortgage-trading desk "made more money than all the rest of Wall Street combined." The good times rolled: as homeownership exploded in the early '00s, the mortgage-bond business inflated Wall Street's bottom line. So the firms placed even bigger bets on these securities. But when subprime borrowers started missing payments, the mortgage market stalled and bond prices collapsed. Investment banks, overexposed to the toxic assets, closed their doors. Investors lost fortunes.

dono Wrote:
-------------------------------------------------------
> Skip to my Lew Wrote:
> --------------------------------------------------
> -----
> > We have Republican Lew Ranieri to thank for
> this.
> > He pioneered mortgage-backed ABS in the 80s.
> >
> http://www.businessweek.com/magazine/content/04_48
>
> > /b3910023_mz072.htm
>
> That is an absurd allegation. All he did was
> develop the secondary mortgage market. Sure he
> added a layer but when the fundamental lending is
> sound that is no problem. In fact he made
> mortgages cheaper.

dono Wrote:
-------------------------------------------------------
> Skip to my Lew Wrote:
> --------------------------------------------------
> -----
> > We have Republican Lew Ranieri to thank for
> this.
> > He pioneered mortgage-backed ABS in the 80s.
> >
> http://www.businessweek.com/magazine/content/04_48
>
> > /b3910023_mz072.htm
>
> That is an absurd allegation. All he did was
> develop the secondary mortgage market. Sure he
> added a layer but when the fundamental lending is
> sound that is no problem. In fact he made
> mortgages cheaper.

I don't know if it is absurd.

Theoretically, what Ranieri did made sense and it was really what happened after he left the field that resulted in the disaster we have today. But it was the development of mortgage-backed securities that took these obligations off the books of banks who made the original loans. Once that happened, no one felt accountable for the quality of the loan. That mindset is what has led to the vast fraud and "herd mentality" that took down the market.

To put it another way, Robert Oppenheimer isn't responsible for nuclear proliferation, but nuclear proliferation wouldn't be a problem if he hadn't built "The Bomb."

That's true. You could also argue that the banks were blindly running what was prescribed without proper hedging. Then point the blame at the rating agencies who reaped ENORMOUS fees per each ABS issuance to be an "independent" risk evaluator. Next in line would be Big-4 accounting who provided comfort to the asset portfolios themselves within each trust.

Market Free Fall Wrote:
-------------------------------------------------------
> That's true. You could also argue that the banks
> were blindly running what was prescribed without
> proper hedging. Then point the blame at the
> rating agencies who reaped ENORMOUS fees per each
> ABS issuance to be an "independent" risk
> evaluator. Next in line would be Big-4 accounting
> who provided comfort to the asset portfolios
> themselves within each trust.


You will get no argument from me on the Rating Agencies. The first group that should be facing criminal prosecution are the bastards who run Moody's and S&P. It was out-and-out fraud.

WashingTone Locian Wrote:
-------------------------------------------------------
> I will point out that markets around the world are
> falling, whether the country's economy is more
> "free market" or more "socialist." We have a
> worldwide liquidity crisis brought about by greed
> and a "herd mentality" of looking the other way.
>
> Free markets are only "free" when they aren't
> gamed to someone's advantage. The mortgage-backed
> securities were gamed and sold to unsuspecting
> investors around the world who thought AAA ratings
> really meant AAA.
>
> Basically the world is suffering from the greatest
> Ponzi scheme in history. That has nothing to do
> with "free markets" or "socialism."


I disagree...the doctrine of "caveat emptor" is used to describe a purely capitalist/free market system when the government fails to protect consumers. The fact that companies and people in socialists countries were victims and perhaps benefactors of capitalism gone wild does not make it less a product of the free market.



Edited 1 time(s). Last edit at 02/27/2009 07:55PM by Vince(1).

> To put it another way, Robert Oppenheimer isn't
> responsible for nuclear proliferation, but nuclear
> proliferation wouldn't be a problem if he hadn't
> built "The Bomb."

Robert Oppenheimer..now there was a great american victimized by great amerikans.

Does anyone have a reference to link Lew Ranieri directly to the republican party?

Vince(1) Wrote:
-------------------------------------------------------
> Does anyone have a reference to link Lew Ranieri
> directly to the republican party?


If you look him up on the Federal Election Commission report, you'll see he has give a ton of money to Republicans...

http://www.fec.gov/finance/disclosure/norindsea.shtml

He has given a bit to Democrats, but nothing compared to his donations to the Republicans.

WashingTone Locian Wrote:
-------------------------------------------------------
> dono Wrote:
> --------------------------------------------------
> -----
> > Skip to my Lew Wrote:
> >
> --------------------------------------------------
>
> > -----
> > > We have Republican Lew Ranieri to thank for
> > this.
> > > He pioneered mortgage-backed ABS in the 80s.
>
> > >
> >
> http://www.businessweek.com/magazine/content/04_48
>
> >
> > > /b3910023_mz072.htm
> >
> > That is an absurd allegation. All he did was
> > develop the secondary mortgage market. Sure he
> > added a layer but when the fundamental lending
> is
> > sound that is no problem. In fact he made
> > mortgages cheaper.
>
> I don't know if it is absurd.
>
> Theoretically, what Ranieri did made sense and it
> was really what happened after he left the field
> that resulted in the disaster we have today. But
> it was the development of mortgage-backed
> securities that took these obligations off the
> books of banks who made the original loans. Once
> that happened, no one felt accountable for the
> quality of the loan. That mindset is what has led
> to the vast fraud and "herd mentality" that took
> down the market.
>
> To put it another way, Robert Oppenheimer isn't
> responsible for nuclear proliferation, but nuclear
> proliferation wouldn't be a problem if he hadn't
> built "The Bomb."


The bomb was designed to destroy. The secondary mortgage market was designed to make investing in mortgage backed securities possible. Bogus underwriting was not part of the design as far as I know. In fact, it was the reliance on solid underwriting that made these instruments attractive. You see its more like he invented a truck - I hardly blame him for the fact a group of drunk idiots drove that truck off a cliff 40 years later...



Edited 1 time(s). Last edit at 02/28/2009 10:11AM by dono.

WashingTone Locian Wrote:
-------------------------------------------------------
> I will point out that markets around the world are
> falling, whether the country's economy is more
> "free market" or more "socialist." We have a
> worldwide liquidity crisis brought about by greed
> and a "herd mentality" of looking the other way.
>
> Free markets are only "free" when they aren't
> gamed to someone's advantage. The mortgage-backed
> securities were gamed and sold to unsuspecting
> investors around the world who thought AAA ratings
> really meant AAA.
>
> Basically the world is suffering from the greatest
> Ponzi scheme in history. That has nothing to do
> with "free markets" or "socialism."

It's a Government regulation problem. When the SEC exists people assume they are safe and they take bigger risks that they would normally. Remove the SEC and none of this would happen.

But instead we are now going in the opposite direction and looking for more regulation and oversight.

dono Wrote:
You see its more like he invented a
> truck - I hardly blame him for the fact a group of
> drunk idiots drove that truck off a cliff 40 years
> later...


Fair enough.

Remove Regulation... and Govt Wrote:
-------------------------------------------------------

>
> It's a Government regulation problem. When the
> SEC exists people assume they are safe and they
> take bigger risks that they would normally.
> Remove the SEC and none of this would happen.
>
> But instead we are now going in the opposite
> direction and looking for more regulation and
> oversight.


That's a crock of shit. The ratings agencies aren't the SEC. People were buying this shit because private sector companies were giving it AAA. The credit default swap market wasn't regulated AT ALL!

Yep. CDS market only has universal rules and regulations (ISDA) that act as a guide. They are more contract law than anything else. They are supposed to mirror the underlying assets that they are protecting, so you could say ratings assigned to assets with a swap could indirectly apply to the swap itself. The trouble comes where swaps get called or terminate and companies or banks enter into an entirely new swap agreement called a floor contract. It is supposed to hedge the risk of an entire portfolio or numerous assets based on current market variables, rather than a single asset class.