Cnbc "Ron-Paul-a-Holics"

[budlover13]

OK, i think we just need a Dan, ND, UB, Syncos, bl(did i miss anyone? Sure i did! i'm high!) thread. LOL!

 

[sync0s]

OK, i think we just need a Dan, ND, UB, Syncos, bl(did i miss anyone? Sure i did! i'm high!) thread. LOL!

I second that motion, haha

 

[sync0s]

Better yet, there should be a chatrom in the middle of this thread, this way I don't have to keep reloading the god damn pages...

 

[NoDrama]

Dan, banks have to have money to lend in order to make loans available. individual banks cannot "Print" more of it to go into fractional reserve so as to create a loan upon it. They must either borrow the Reserve to make the loan or have new depositors deposit more money. If the cost to borrow money from the fed is very low and you can create a loan that has a 6-8% spread between what you borrowed for and what you loan for and by the magic of fractional reserve banking you can essentially make multiple loans (up to 9 times the principal) that will make you a 50-70% profit on every dollar you loan out. The only way this is possible is if you can get the loan at a very low rate.

How does the fed increase credit capacity? By reducing the cost to borrow the money, i.e. low interest rates.

 

[Dan Kone]

Dan, banks have to have money to lend in order to make loans available.

Actually they didn't. We decided that pesky regulation that capped the limit on how far banks could leverage their actual worth was interfering with the free market. That's the technical reason a lot of financial services corporations failed.

AIG being the prime example of that. When they allowed corporations to bet against the market by selling them CDS's they only had enough to pay off ~1/30th of the CDS's they sold. When everyone tried to collect all at once, guess what happened? It was 1929 all over again.

individual banks cannot "Print" more of it to go into fractional reserve so as to create a loan upon it.

If you're referring to commercial lending banks, they didn't need to print money because they had Wall St buying up all the loans, bundling them and reselling. Once they sold a loan to Wall St, they had money give out a new loan, then sell that one two, repeating the cycle taking money off the top each time. That's why these banks weren't hit hard unless they too were invested in CDC's which became legal for them to do once we deregulated the banks with Gramm-Leech-Bliley.

If you're talking about investment banks, then as I said above, they didn't need to print money because they were allowed to over leverage themselves.

Either way, the fed doesn't come into play when talking about that aspect of it. The FED threw gasoline on the fire, but they did not light the match.

They must either borrow the Reserve to make the loan or have new depositors deposit more money. If the cost to borrow money from the fed is very low and you can create a loan that has a 6-8% spread between what you borrowed for and what you loan for and by the magic of fractional reserve banking you can essentially make multiple loans (up to 9 times the principal) that will make you a 50-70% profit on every dollar you loan out. The only way this is possible is if you can get the loan at a very low rate.

Agreed. At least we are talking about the same thing now.

 

[NoDrama]

Actually they didn't. We decided that pesky regulation that capped the limit on how far banks could leverage their actual worth was interfering with the free market. That's the technical reason a lot of financial services corporations failed.

AIG being the prime example of that. When they allowed corporations to bet against the market by selling them CDS's they only had enough to pay off ~1/30th of the CDS's they sold. When everyone tried to collect all at once, guess what happened? It was 1929 all over again.

Neither AIG nor financial service companies made mortgages, banks made mortgages.

If you're referring to commercial lending banks, they didn't need to print money because they had Wall St buying up all the loans, bundling them and reselling. Once they sold a loan to Wall St, they had money give out a new loan, then sell that one two, repeating the cycle taking money off the top each time. That's why these banks weren't hit hard unless they too were invested in CDC's which became legal for them to do once we deregulated the banks with Gramm-Leech-Bliley.

If banks are required to have a reserve ratio or be liquidated by the FDIC how is it possible to sell loans that you cannot make? I mean, if you can't make a loan because you have no money, how can you sell said loan to wallstreet? You are using an illogical assumption that no matter what, the loans would be made and sold to wall street, even if there were no one to buy the loans in the first place. You CANNOT make a loan to nothing, you must have a real customer, a real customer would not be possible without low rates to borrow that money. this was made possible by the Fed.

Either way, the fed doesn't come into play when talking about that aspect of it. The FED threw gasoline on the fire, but they did not light the match.

The fed is the fire, not the gasoline and not the match.

Agreed. At least we are talking about the same thing now.

Kind of contradicts your thesis.

 

[Dan Kone]

Neither AIG nor financial service companies made mortgages, banks made mortgages.

I never said they did. I said the were selling cds's which were basically bets on these bundled mortgages failing or holding up. When AIG lost that bet, they had sold way more of these then they had the cash to pay out, resulting in the company failing.

I

f banks are required to have a reserve ratio or be liquidated by the FDIC how is it possible to sell loans that you cannot make?

If spent the majority of this thread explaining that including the post you're responding to.

Banks do have enough money to make a certain amount of loans. Once they made the bad loan, they sold it off. Once they were no longer carrying the paper, they were no longer required to carry a reserve for it. This allowed the bank to make another loan, sell the paper, repeat the process.

I

mean, if you can't make a loan because you have no money, how can you sell said loan to wallstreet?

I'm pretty sure banks have money if them. If you're a bank without money then you're just a guy with a building.

You are using an illogical assumption that no matter what, the loans would be made and sold to wall street, even if there were no one to buy the loans in the first place.

You're making the illogical assumption that these loans weren't a good investment even with a higher interest rate and no one would want to take out a loan on a property that was projected to double in value because they'd have to pay interest on it.

You CANNOT make a loan to nothing, you must have a real customer, a real customer would not be possible without low rates to borrow that money. this was made possible by the Fed.

So you think no one would want to own a home that would skyrocket in value because they had to pay a higher interest rate. A lot of people had bought properties held on to them for a couple years, then just resold them at a profit. Even with higher interest rates, there would have still been a margin in it.

 

[NoDrama]

So you think no one would want to own a home that would skyrocket in value because they had to pay a higher interest rate. A lot of people had bought properties held on to them for a couple years, then just resold them at a profit. Even with higher interest rates, there would have still been a margin in it.

Your assumption that I think no one would buy a home is a strawman attack, i actually never said anything remotely close to that. Does Wal Mart sell more items when prices are higher or lower? If Wal mart were to increase their prices by 100% do you think they would have the same amount of shoppers?

Dan, i have explained how you are wrong several times now, you even agreed with me, yet here you still are trying to argue your same disproven, illogical assumption that banks can make loans without reserve requirements and without even having people get mortgages.

What is the difference on the minimum monthly payment with a 30 year mortgage on a $100k home at 10%? What is the payment on same home at 5%? For the 10% mortgage it would be $878 a month, for a 5% loan it would be $536, which is a 64% difference. Which loan do you think is more affordable? Choose wisely because so far according to your logic there will be just as many customers for the $878 payment as there are for the $536 payment just as long as the house will double in price over the next 20 years right? At 10% interest you will pay $215k just in interest, so you in total will pay almost $315k for a house that you can sell for $200k, something wrong with that math. With a 5% loan you will pay $98k in interest and therefore when you go to sell your home you will actually break even maybe make a little profit. Which loan would you rather have?

 

[Dan Kone]

Your assumption that I think no one would buy a home is a strawman attack, i actually never said anything remotely close to that.Does Wal Mart sell more items when prices are higher or lower? If Wal mart were to increase their prices by 100% do you think they would have the same amount of shoppers?

You said several times that no one would take these loans unless there was low interest rates. So yes, you did say that.

If you're now changing your mind and saying that less people would take these loans, that's fine. You'd probably be correct about that. But then we are talking about making the problem worse, not causing the problem.

Dan, i have explained how you are wrong several times now, you even agreed with me

You're ignoring key peaces of the equasion over and over again. I agreed with you that the fed bears some responsibility in the problem. They were clearly in the wrong and I'm not disputing that. I do not agree with you the FED caused the problem.

Your refusal to answer my questions is evidence that you probably no you're wrong at this point and are just trying to save face.

If that is incorrect, then answer my questions.

Would banks be handing out loans to people who were likely to default on them if those banks were financially responsible for the loans defaulting?

Would investors buy bundled bad loans in large quantities if they had been told the truth about what they were?

yet here you still are trying to argue your same disproven, illogical assumption that banks can make loans without reserve requirements and without even having people get mortgages.

No, I've explained that to you three or four times now. It's not my fault you ignored it. Ignoring key pieces of the equation isn't proving me wrong. It's doing quite the opposite.

As I've explained over and over again, the banks were selling the mortgages, not holding on to them so they did not need to keep a reserve for them. Go ahead and keep ignoring that though....

 

[Parker]

I get what you're saying about the FED and the low interest rates making loans more attractive and easier to get. While I totally agree that made the problem way worse it's still not the cause.

What made the problem possible is that banks were not liable for the mortgages they were handing out so they didn't care who they were handing them out to and whether or not those people could pay them.

That was 100% due to deregulation for the reasons I've explained several times in this thread and no one has disputed.

There were a bunch of things that made the financial crisis way worse than it needed to be. And yes, the fed is one of those factors. But even if you take the fed out of the equation, this would have still happened because banks were not financially liable for the loans they were handing out.

Because this all still would have happened without the involvement of the fed, you can not say it was the root cause, only something that made a bad problem much worse.

when you say deregulated you are pointing to banks not being liable. Is that correct?
when you say "would have happened without the Fed, although they made it worse", werent they the ones who set the interest rates low?

 

[Parker]

So no, you're incorrect. The FED made the problem worse, but they were not the root cause of the problem since the problem would have still existed with or without these low interest rates.

here is where we disagree. It was the loans being made at the low interest as well as the low down payment that attracted people. The low interest rate problem also caused mal investment that led to the Great Depression.

The business equation will say I can make money getting MY loan at 2 percent and lending to people who are not a good risk. But when I get MY loans at 3 percent the profit margin is lower and the risk isn't worth it for me to loan them money.

We saw housing prices increase when the people got into a feeding fenzy. I can't afford the 150k house because I don't have the money. Obviously if less people cannot afford it, less customer base, less chance to sell it, so the price will come down. The Free Market tells us that. The ones who didn't have the capital before, do now, so the price will NOT come down because the demand has been "artificially" created.

Anytime you manipulate the free market you get the booms and busts. The ones who get in early, (and get out) profit the most. The busts are always worse than the booms.

 

[Dan Kone]

when you say deregulated you are pointing to banks not being liable. Is that correct?

I'm pointing to the deregulation of bundled mortgages through the commodities futures modernization act (also responsible for creating the enron loophole).

That allowed Wall St to buy up all the bad mortgages and since this sector of the economy was allowed to regulate itself, they decided to give these bad bundled mortgages a AAA rating so people thought they were a save investment.

None of this was legal until we deregulated the market. Without doing this the banks would not have been able to sell off these bad loans. By not being able to sell them off as a safe investment, the banks would have been liable for who they handed out the mortgages to. If they were liable, they would not have given out mortgages that were likely to default. Without all the bad mortgages, no collapse. It was the defaulting of the bundled bad mortgages that led to the crash.

That is the root cause of the crash because if you eliminate that variable the rest of it would not be possible. There are lots of people who share the blame for making it worse. You can fairly blame the fed, greenspan, larry summers, GW Bush, Clinton, Dodd, etc... All made the problem worse. But the cause was deregulating that market.

make sense?

Also another act of deregulation led to this. When we deregulated commercial banking by getting rid of Glass-Steagall that allowed commercial banks to become investment banks. Since the banks were now allowed to gamble on Wall St, they ended up heavily invested in these junk CDC's. When the investments became worthless, we had a run on the banks requiring bailouts to prevent another great depression.

These was exactly the event Glass-Steagall was put into place to prevent.

when you say "would have happened without the Fed, although they made it worse", werent they the ones who set the interest rates low

?

Yes they were. Those interest rates made the problem much worse, I'm not disputing that. What I'm saying is they are not the root cause since this entire thing was still able to happen since banks were not responsible for the bad loans they were giving. The interest rates just made the loans more attractive, making the problem worse. But they did not cause the problem in the first place. The ability of the banks to hand out loans to anyone regardless of ability to pay is the cause of the problem.

Unfortunately, commercial banks are still still allowed to gamble on Wall St today. We are still one bad day on Wall St away from another run on the banks and another round of bailouts. The problem is actually worse now that it was when the crash happened. The banks that got bailout $$$ were the large banks. Those banks are now going around and buying up all the small banks in America. So when they crash next time, they will take a lot more banks down with them.

 

[Dan Kone]

here is where we disagree. It was the loans being made at the low interest as well as the low down payment that attracted people.

We don't disagree about that. I completely agree the fed did that. What I'm saying is that made the problem worse. But this whole thing would not be possible if the banks were financially responsible for who they handed out loans to. But since they were being bundled up and sold on Wall St as AAA investments regardless of how likely they were to default, the banks could give loans to anyone risk free. Without that, this whole thing is not possible.

The point that this would not have been possible if the market had not been deregulated is a point I've made several times on every page in this thread and no one has yet even addressed it. That says something right there.

I'm told I'm wrong over and over again, yet everyone telling me I'm wrong as completely ignored the core of my argument without exception. If I'm wrong, this should easily be debunked right?

The business equation will say I can make money getting MY loan at 2 percent and lending to people who are not a good risk. But when I get MY loans at 3 percent the profit margin is lower and the risk isn't worth it for me to loan them money.

It is worth it if what you're getting the loan to buy was projected to double in value over the life of the loan. The average price of a house was projected to do better than that.

 

[Parker]

I'm pointing to the deregulation of bundled mortgages through the commodities futures modernization act (also responsible for creating the enron loophole).

That allowed Wall St to buy up all the bad mortgages and since this sector of the economy was allowed to regulate itself, they decided to give these bad bundled mortgages a AAA rating so people thought they were a save investment.

None of this was legal until we deregulated the market. Without doing this the banks would not have been able to sell off these bad loans. By not being able to sell them off as a safe investment, the banks would have been liable for who they handed out the mortgages to. If they were liable, they would not have given out mortgages that were likely to default. Without all the bad mortgages, no collapse. It was the defaulting of the bundled bad mortgages that led to the crash.

That is the root cause of the crash because if you eliminate that variable the rest of it would not be possible. There are lots of people who share the blame for making it worse. You can fairly blame the fed, greenspan, larry summers, GW Bush, Clinton, Dodd, etc... All made the problem worse. But the cause was deregulating that market.

make sense?

Also another act of deregulation led to this. When we deregulated commercial banking by getting rid of Glass-Steagall that allowed commercial banks to become investment banks. Since the banks were now allowed to gamble on Wall St, they ended up heavily invested in these junk CDC's. When the investments became worthless, we had a run on the banks requiring bailouts to prevent another great depression.

These was exactly the event Glass-Steagall was put into place to prevent.

?

Yes they were. Those interest rates made the problem much worse, I'm not disputing that. What I'm saying is they are not the root cause since this entire thing was still able to happen since banks were not responsible for the bad loans they were giving. The interest rates just made the loans more attractive, making the problem worse. But they did not cause the problem in the first place. The ability of the banks to hand out loans to anyone regardless of ability to pay is the cause of the problem.

Unfortunately, commercial banks are still still allowed to gamble on Wall St today. We are still one bad day on Wall St away from another run on the banks and another round of bailouts. The problem is actually worse now that it was when the crash happened. The banks that got bailout $$$ were the large banks. Those banks are now going around and buying up all the small banks in America. So when they crash next time, they will take a lot more banks down with them.

All of this makes sense but I think its a by product of what happens. The bubble would have happened anyway I think this moved it forward quicker as well as added to it.
I'm saying the free market would never have let this happen. They would not have allowed these type of loans in the first place.

related story I read home ownership at America is back at 1998 levels. Prices in my area are still above 1998 levels dunno about the rest of the US.
What a waste. Another reason the government needs to stay out of the economic manipulation business.

It is worth it if what you're getting the loan to buy was projected to double in value over the life of the loan. The average price of a house was projected to do better than that.

yep And that was what investors were counting on. Early on it would be worth it, Then the prices rise and the loans dry out. good ole boom, bust
As long as prices stayed up no problem. Housing prices were rising too quickly. Once prices drop people had more out on their loans than what the house was worth. The snowball starts to roll downhill. Made sense for those to default EVEN if they could afford to pay.
Freddie and Fannie don't care, they were insured.

 

[budlover13]

Well Dan. You and fdd are one heck of a crew man. Going to close this thread too?

 

[Dan Kone]

Well Dan. You and fdd are one heck of a crew man. Going to close this thread too?

lol. I'm not the one reporting posts, getting it shut down. Blame the people doing the tattle tailing. Can't blame FDD for responding people reporting posts. That's what moderators are supposed to do. Next time you guys might want to think about that before you feel the need to call mommy because big bad dan kone said you were wrong.

The idea that posts that contradict Ron Paul's flimsy logic should be deleted and result in a ban fall perfectly into my "Ron Paul supports act like cult members" theory.

 

[Dan Kone]

All of this makes sense but I think its a by product of what happens. The bubble would have happened anyway I think this moved it forward quicker as well as added to it.

This only happened when loans started defaulting and AAA rated CDC's became worthless. You can't have a crisis that revolves around people defaulting on loans if people aren't defaulting on loans.

The reason the loans started defaulting en mass is because the banks didn't care if the people they were handing the loans out to couldn't pay. If it wasn't for deregulation these loans could not have been sold off, instead the banks would be holding the paper. In that situation they must consider whether or not the customer can afford it.

I'm saying the free market would never have let this happen. They would not have allowed these type of loans in the first place.

What do you think the free market is? You seem to be using it as a blanket term that includes everything you think works good. But that is not what it is at all.

Free market simply = no regulations, rules, etc. You are free to buy or sell whatever you want without restriction. Basically, the free market lets everything happen. Now how would getting rid of all the rules prevent this sort of thing from happening?

related story I read home ownership at America is back at 1998 levels. Prices in my area are still above 1998 levels dunno about the rest of the US.
What a waste. Another reason the government needs to stay out of the economic manipulation business.

I'm not following that line of thinking. Explain.

Anyways, like I said, the fed made the problem worse, they didn't cause the problem because as I explained at the rate real estate prices were increasing at a rate higher than any interest rate we could put on it, so most of those loans would have still been viewed as profitable by the customers.

If you think about it, the FED could have actually helped the problem. They didn't, but the potential was there. If the FED was eliminated and there were no regulated interest rates, wouldn't that have made the problem much worse potentially?

 

[budlover13]

lol. I'm not the one reporting posts, getting it shut down. Blame the people doing the tattle tailing. Can't blame FDD for responding people reporting posts. That's what moderators are supposed to do. Next time you guys might want to think about that before you feel the need to call mommy because big bad dan kone said you were wrong.

The idea that posts that contradict Ron Paul's flimsy logic should be deleted and result in a ban fall perfectly into my "Ron Paul supports act like cult members" theory.

Moderators are supposed to moderate, not stifle conversation. IF i were a moderator my action would have been an infraction for both of you(dependent on your records) and the observe. BUT, i'm not one. i'm not saying fdd is not trying to do his job, simply that i think he had many options at his disposal that could've been more beneficial to the forum.

 

[Dan Kone]

Moderators are supposed to moderate, not stifle conversation. IF i were a moderator my action would have been an infraction for both of you(dependent on your records) and the observe. BUT, i'm not one. i'm not saying fdd is not trying to do his job, simply that i think he had many options at his disposal that could've been more beneficial to the forum.

So you think I should get some sort of penalty for having an opposing view?

I love how 30000000 Ron Paul threads = freedom
1 person posting an opposing view = spammer who needs to be silenced!

 

[budlover13]

So you think I should get some sort of penalty for having an opposing view?

I love how 30000000 Ron Paul threads = freedom
1 person posting an opposing view = spammer who needs to be silenced!

i say spamming infringes on my rights and the rights of others. "Wanna fuck a goat? Go ahead, idc. Don't fuck MY goat." THAT'S our philosophy.

Not a "penalty" for an opposing view, but for childish, antagonistic, baiting, trollish behavior.

He would've gotten one for taking your bait and getting into a pissing match with you.

You can't bitch about finding a shit-ton of RP vids in a RP thread. But if you come in and start spamming with a ton of stuff OTHER than RP in THIS thread then it IS spam. If you want to spread you opinion, START YOUR OWN THREAD!

Damned blind people!