Moral Hazard ?

A cartoon two-fer!

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And then there is this one also:

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What's been said:

Discussions found on the web:
  1. Paul in NYC commented on Jul 22

    Hey it’s all about bilking the public now isn’t it? Those are the morals of the power elite. No hazard is possible in that world.

  2. MarkTX commented on Jul 22

    Should I laugh or cry???

    And I do not want to “bend over” in either event.

  3. Rich Shinnick commented on Jul 22

    ..sad but true. The innocent will pay, I stopped at a coffee shop in Ventura, Ca. a couple days ago and there was an IndyMac bank next door. Who was in line, dozens of elderly folks who obviously didn’t get the memo that:

    1. Their life savings in excess of $100 k was used to lever up 65 times to make subprime and Alt-A loans so that a select few could reap windfalls…

    2. Whatever savings they have left will be reduced by inflation at a real rate of about 5% per year.

    These silly people were probably too busy playing with their grandchildren and trusting in the system..I guess sitting in the hot sun for a couple days is what THEY deserved, NOT!

    Hey, at least the FDIC rented some folding chairs for them. Thanks Sheila.

    The innocents will suffer…as for our kids…don’t even go there…….

  4. Wally commented on Jul 22

    “Capitalism demands the best of every man – his rationality – and rewards him accordingly. It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the products of others, and to go as far on the road of achievement as his ability and ambition will carry him.”
    ‘For the New Intellectual’ 1961 WMail Issue #17 Any Rand

    It boils down to personal responsibility. The masses have failed us. Now we all pay for it.

  5. Stuart commented on Jul 22

    It seems no one gives a damn anymore about moral hazard. Today’s jam job by the Feds in the financial stocks was outright criminal. Financial fascism. So much for the land of the free. Everyone should feel outrage at the destruction of transparency. Watching Wachovia today was one for the history books. Jam the prices higher, issue stock, lure suckers and another round of successful financing concluded. People are soooo stupid sometimes.

  6. MarkTX commented on Jul 22

    Stuart | Jul 22, 2008 5:37:03 PM

    “It seems no one gives a damn anymore about moral hazard.”

    agreed….

    It is sad when you realize that the cartoons posted here are only a small part of the bigger joke.

    I will let everyone think on that for a while.

    Cheers…..

  7. Ecklebob commented on Jul 22

    So true!!!! Almost made me laugh but crying seems more appropriate. “Stutterin Hank” has gone from proclaiming he could “break the back of a recession” to “what the hell, if your bank does fail,your money is covered by the FDIC.”

  8. jhunt commented on Jul 22

    hey barry, think you could add a cartoon section in the new layout? you’ve had some good ones and they only seem to get better…

  9. Clint Golden commented on Jul 22

    I’ve been visiting this sight as a casual observer with the goal of trying to gain a greater understanding how our banking system, economy and fiscal politics work.

    As a self-employed person, in a non-finance sector for the last ten years, I’ve been sitting on the sidelines and not taking the home buying leap because I wanted to live within my means and I felt the cost of home ownership was artificially inflated. I believe recent events have shown that has proven out to be the case. In the end, it appears I am the “schnook” for not going with the herd because I, as a taxpayer, now without homeowner interest deductions, am going to pay via taxes what it ‘s going to take in $$$$ infusions into the market to keep the value of homes artificially inflated and keep people who lived beyond there means and who put there names to bad deals in their homes and to save the asses of bankers and originators and others who live by that motto, “On my honor I’ll do my best to take for myself and fuck the rest.”

    I’m not so naieve to think this couldn’t happen. I have been thru a few rodeo’s.

    I’d like to ask this community to give me a wikipedia-like primer on how this FreddieMacFannieMay thing worked.

    There is a lot that doesn’t jibe from where I sit. One example is the recent meltdown.

    I notice looking at the stock chart for FNM that in mid-July when things started to unwind south, 400 million shares of FNM were sold on or about the 14 for roughly somewhere between $9.75 and $10 per share.

    That’s a trade of about $4 billion and the interesting thing I see and don’t understand is immediately precedeing this dumping of 400 million shares and immediately after the sale, the rate of change of the decreasing value of the FNM shares was — greater — then was the decreasing rate of value of the stock when the 400 mil. shares traded.

    Is it public information who bought those 400 mil. shares and if it was an all-or-none transaction?

    Who would agree to buy that much volume at AON in a downward trending value market?

    Shortly after the 400 mil. dump, the value of FNM tanked to $7/shr. How is it during the interval of the 400 mil. shares were sold the trade price stayed close to $10/shr?

    Who would pay 4 billion and take such a hit immediately thereafter? Us, the G?

    Can anyone give any insights into the dynamics of how this is possible?

    Regards,
    CG

  10. muckdog commented on Jul 22

    It’s capitalism on the way up when companies are making money. It’s socialism on the way down when companies are losing money and need a bailout.

    And that’s a bad idea.

  11. Stuart commented on Jul 22

    The next cartoon should be of big brother trying to shut down blog sites that reject the kool aid and offer critical insight…. that would never happen.

  12. John commented on Jul 22

    Given that this is a blog devoted to financial markets, there seem to be a hell of lot of people around who don’t seem to believe in them or capitalism. Stories about lines of elderly people at Indy Mac who have most certainly NOT lost their life savings, the public is being bilked, we’ll be getting little orphan annie next. This general take, like the cartoons is a grotesque oversimplification. Yep there’s no doubt the Bush admin has screwed Joe Sixpack as incomes for 80% of the country have stagnated or sunk. But then Joe Sixpack put Bush in power twice! Caveat Emptor. Then there’s the little matter of Joe Sixpack’s debt. He took this on himself, I didn’t force him, nor did Hank Paulson although he no doubt took advantage of Joe’s greed and stupidity. If we don’t bail out F/F the whole housing finance market is going to seize up for months which would likely cause a total economic bust which would leave Joe without a job although that doesn’t seem to bother some. The congressional budget office today announced at worst the bailout could cost $25billion or a couple of months expenditure in Iraq. A much better investment I’d say.

  13. leftback commented on Jul 22

    The weight of the world is on our shoulders.

    …no wonder my back has been bad lately…

  14. dave commented on Jul 22

    Well, from what I have read, FNM and FRE are really hiding a lot of toxic garbage.
    1. They purchased a lot of private MBS that included subprime and ALT-A.
    2. Since they were the only ones buying recently, they have been sent a lot of mortgages with creative numbers. If the GSE’s wont take it, you didnt have a sale.
    3. They relaxed their standards (if I am informed correctly) to a 3% downpayment in some instances. They also allowed DAP (Down Payment Assistance), which is really a scam whereby the seller inflates the selling price, donates the money to a non-profit, who grants the money to the buyer. It is still a 0% downpayment on an inflated price, a certain future foreclosure if prices dont rise.
    4. They borrow a lot at short term rates to lend long-term. If the dollar crashes, they are set up for huge losses on interest rate increases.

    Why should we believe anything out of the mouths of the GSE’s? They will be long gone with their golden parachutes, and their $200M in lobbying in the last 10 years will immunize them from claw-backs.

  15. Daniel K commented on Jul 22

    Barry, please take note of Tom Brown’s bold assertion today that July 15 will mark the bottom, and that the opportunities today are the best we can expect in our lifetimes. See it at Bankstocks.

    Also, if you have a chance, please explain soemtime how one person can do so much serious blogging and also run a business.

    ~~~

    BR: I add it to the list of bottom calls he has made over the past few months . . .

  16. Mike in NOLa commented on Jul 22

    I think John, above, is really Dennis Kneale.

  17. Automated Robot commented on Jul 22

    keep people who lived beyond there means and who put there names to bad deals in their homes

    Clint, don’t call these people Predatory Borrowers

  18. Pool Shark commented on Jul 22

    I think they refer to this situation as:

    “Screwed without the benefits of intercourse.”

  19. Mad Investor commented on Jul 22

    I was on the sidelines waiting(100% cash)for the big fall.

    Now, the government socializes the market and it goes up.

    My plan gets rotten.

    I was waiting patiently,no credit cars, no debt, saving and saving for this moment.

    I feel like a stupid kid.

    Thank you Mr.Bush & Co.

  20. Holden commented on Jul 22

    Dave, you don’t know what you’re talking about.

    * The GSEs “have been sent a lot of mortgages with creative numbers.”
    Sure. Nowadays, you have to document everything.

    * “They relaxed their standards (if I am informed correctly) to a 3% downpayment in some instances. They also allowed DAP (Down Payment Assistance)…”
    You have been informed incorrectly. The GSEs have been tightening standards. So have the mortgage insurance companies. As far as down payment assistance programs, Fannie and Freddie have always shunned them. You’re confusing a mortgage insurance provider, the FHA, with the GSEs. That’s kind of like confusing GEICO with GM.

  21. Stuart commented on Jul 22

    Well, you can put a fork in it now. By “it” I mean everyone’s butts.

    By Brian Faler

    July 22 (Bloomberg) — U.S. lawmakers reached agreement on a rescue plan for Fannie Mae and Freddie Mac that the House may vote on tomorrow, Representative Barney Frank said.

    Under a modified version of proposals made by the Bush administration, the Treasury Department would gain authority to inject capital into the two largest U.S. mortgage finance companies, through loans and equity investments.

    The Treasury would be barred from providing aid that would cause a breach in the federal debt ceiling under the agreement, a constraint aimed at limiting any taxpayer losses. The plan would give Treasury Secretary Henry Paulson power to restrict the companies’ ability to pay dividends and require regulatory approval of the salaries of top executives.

    “The package we have got is fully acceptable to Treasury,” along with lawmakers in the Senate, said Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee. “Nobody is for everything that’s in it or got everything in it he wanted, but we negotiated a lot with the Treasury and the Senate.”

  22. lunatic_fringe commented on Jul 22

    John, you’re a doofus. Do you really think this mess is gonna cost $25 billion? This bill is asking to raise the debt limit (this time) by $800 billion. Now why do you suppose they would do that if it’s only gonna cost $25 billion. Think it might have something to do with Paulson’s bazooka in his pocket?

  23. Rich Shinnick commented on Jul 22

    “Stories about lines of elderly people at Indy Mac who have most certainly NOT lost their life savings”

    Johh,

    Simple math for you: IndyMac bank had $500 million in uninsured deposits but FDIC is fronting half so $250 million is NOT coming back UNLESS the bank is sold and the funds are recouped.

    According to the nice man from the government in front of IndyMac that “may take years, if at all.”

    Thus $250 million of somebody’s money is either gone or locked up for years..you wanna bet some life savings ABSOLUTELY DID take a big dent.

  24. Stuart commented on Jul 23

    The funny thing is, the rate at which treasuries are hitting the market (new supply), they’d have to boost it to that limit anyways within a few months. People don’t seem to grasp the explosion underway in the fiscal deficit. Estimates from the TBAC are outdated within weeks, it’s that bad.

  25. MarkTX commented on Jul 23

    The last several comments are actually hitting what the big joke is about (as per my comments earlier)….

    The bigger the Joke the more people laugh, RIGHT!!!!!??????

  26. Tom commented on Jul 23

    If Ben and Hank continue ad infinitum, we will disintegrate faster than the Soviet Union.

  27. That Guy commented on Jul 23

    John said,
    “The congressional budget office today announced at worst the bailout could cost $25billion”
    If you believe that, I have a bridge to sell you. I would happily put money on the fact that that estimate is off by at least an order of magnitude, and I wouldn’t be surprised if it was a couple orders of magnitude. The write offs have continually been worse than expected, why you think that would not be the case here with over 5 trillion in debt is beyond me. Do you really think the losses incurred are going to be as little as a half a percent on this stuff????????

  28. Francois commented on Jul 23

    John said,
    “The congressional budget office today announced at worst the bailout could cost $25billion”

    You think? Someone who knows what she’s talking about has taken them to the woodshed for spewing that BS.

    http://www.nakedcapitalism.com/2008/07/fed-comptroller-of-currency-due.html
    http://www.nakedcapitalism.com/2008/07/cbo-fannie-freddie-rescue-to-cost-25.html
    http://www.nakedcapitalism.com/2008/07/omb-comes-close-to-saying-it-made-up.html

    John…by now, you should know that whatever you read in the mainstream media about the go-vermin, (most especially THIS edition of the go-vermin) must be verified elsewhere.

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