[paraclete]

Yes this is the ultimate result of democracy, it turns into mediocracy because sooner or later you have to look after that aging population. I hear one of the remedies is to advance the pension age to 67, I wonder where all those people are going to find jobs. II expect there will an exodus of all the young and talented, that is if they have any, from Greece to the rest of Europe. Goodbye EU

[Athos]

By creating a market for people who could not afford traditional morgages without subsidizing the purchases, the government created a bubble in a market that was bound to collape.
It wasn't the derivative market that created the bubble ;it is the fact that people were purchasing homes with no skin in the game.

No, the bubble was created by the demand for securities based on faulty AAA ratings. Without securitization, there was no market for a bubble to form.

What is Goldman's crime ? They bet the housing market would collapse and they were right .They traded in synthetic securities with brokers who were just as willing to bet Goldman was wrong.

If that was all they did, no crime. But they did more than that - they sold securities with the full knowledge the products were falsely rated.

If Goldman committed a crime then so did Fannie and Freddie ,all the regulators and clowns like Andrew Cuomo who pressured banks to loosen requirement standards,. and especially hypocrites like Chris Dodd who was bribed into looking the other way at the inherent riskes involved that he ,Barney Frank, and all the related oversight committees overlooked when they pushed the policies

Fannie and Freddie did not arrange to have the securities rated AAA. Their contribution was to encourage the no doc loans (simply to sweeten the compensation of the executives). Probably illegal, but hard to prove. Definitely sleazy and unethical. Cuomo and Frank, as you say, encouraged lower standards - stupid in hindsight, but not illegal. Dodd likewise.

Everyone thinks these were a bunch of saps buying the securities .WRONG ! They were savvy sophisticated investors who made their bets on a large part because there was an understanding that the moral hazard they knew they were taking was underwritten by the government in case things went south. Would they have bet on the continued expansion of the housing market if there weren't a concerted effort by the government to push home ownership beyond reason ? I doubt it.

With all due respect, I think you're getting things confused here. The buyers bought because the securities were rated (falsely) the same as US Government securities but with a higher yield. They did not understand that the underlying assets were junk. The very definition of a bubble is when "savvy, sophisticated investors" buy irrationally into securities that they don't understand - or that everybody else is buying driving the market up. No one, including Greenspan and Berneke, believed house prices would fall until it was too late. (A handful figured it out, and they made billions.)

Additionally, Fannie and Freddie gov-guaranteed mortgages were only a part of the securitized mortgages. The investment banks also dealt directly with subprime originators whose mortgages were not guaranteed by government. Investors in these securities were not buying with an understanding of "moral hazard" safety.

Even when the homebuyers began to default, the mortgage securities were still selling like hotcakes - so much for the savvy investor.

[paraclete]

Ex it is time to take this to the next level or even the level above that. We have seen banks that are too big to fail, manufacturers that are too big to fail, insurance companies that are too big to fail, all bailed out by nations, now we have seen a country, a small one, too big to fail, bailed out by a consortium of countries, and the fall out continues, next we will be asking the question is the EU, or the US. Too big to fail and I am wondering, who is the lender of the last resort here? China will exhaust itself trying to stop its biggest customers failing but it is only the third biggest economy, it doesn't have the economic power to be the lender of the last resort. The IMF relies on countries to contribute, it cannot be the lender of the last resort. The answer is obvious but the world has forgotten.

The great falacy here is that some of these corporations and even Greece should have been allowed to fail. The world still hasn't learned not to buy worthless securities. This is what you get for living beyond your means and giving yourself a paid holiday and lower taxes. Whether you are socialist or capitalist it doesn't matter sooner or later the piper must be paid or in this case Schylock must get his pound of flesh

[tomder55]

Should BP be bailed out if this Gulf of Mexico mess puts them out of business ? Why not ? This could be a straight up accident ;or it could be the result of faulty ,insufficient insight or even criminal negligence.

But if they should be allowed to fail then why not financial institutions ? What makes them so sacrosanct ?

It cracks me up that Senator Obama and others took the lead in 2008 to make a special case of Goldman ;and now are doing everything in their power to discredit it and drive it out of business.
They forced Goldman to take TARP .They forced Goldman to become a bank holding company . They were perfectly happy being an investment firm .Goldman was the 1st to pay TARP back . So of course they are the target of destruction.

The financial institutions could've and should've been allowed to sort through their problems with write downs and bankruptsies . Policy makers panicked and bought the chicken-little garbage former Goldman exec. Hank Paulson was peddling .

[excon]

Should BP be bailed out if this Gulf of Mexico mess puts them out of business ? Why not ?

Hello again, tom:

Uhhh, because they're NOT too big to fail. Duh! That concept, along with racial profiling, seems to escape you today. Figures.

excon

[tomder55]

Oh yes the concept of too big to fail escapes me completely

[excon]

oh yes the concept of too big to fail escapes me completely

Hello again, tom:

Apparently, so.

The financial institutions could've and should've been allowed to sort through their problems with write downs and bankruptsies .

Excon