Thursday, December 24, 2009

Where Is The Outrage?

Take a look at this article:

  1. Goldman Sachs creates CDOs (collateralized debt obligations), bundling bad debt with good (and linked to mortgage debt by credit-default swaps) during the most manic phase of the housing bubble.
  2. Pension funds, insurance companies, and others bought them believing Goldman's hype that the housing market couldn't fail. Goldman didn't even let buyers short them.
  3. All the while realtors, real estate agents, lenders, local papers where all fueling the buzz about how real estate can't fail, "buy now or be priced out forever".
  4. Goldman Sachs then short their own CDOs well beyond what was justifiable for hedging risk.
  5. The housing markets then predictably implode. Pension funds, insurance companies, mom and pop all bank huge losses.
  6. Goldman Sachs pockets huge rewards.
  7. You and I then bail out the losers.

    "The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

Or a school bus mechanic taking out life insurance on all the kids who ride that bus. Or your doctor taking out life insurance on you before doing your heart surgery. Or airline mechanics taking out insurance on the passengers. Or ferris wheel mechanics...

Where is the outrage?


Blogger W.C. Varones said...

The outrage is in the polls, and at the Tea Parties. The public is pissed whether or not the MSM wants to cover the outrage.

Dec 26, 2009, 4:51:00 AM  
Blogger zarkov01 said...

This is old news. As for the outrage, we have lots of it. The public is mad as hell and they're not going to take it any more. The uni-bomber polls better than Congress and Obama's approval ratings are in free fall. Just last week Treasury announced that Fannie and Freddie will get all the extra money they need to stay afloat. The managers have absolutely no incentive to manage prudently. This went over like a lead balloon. If you read Calculated Risk, Doctor Housing Bubble, Market Ticker, you will see outrage galore. Wait for next November and see Congress turnover from public outrage. The Fed is trying to re-inflate the housing market by holding interest rates down and flooding the market with newly printed money. If you think printing money is the solution, then you should invest in Rhodesia, now called Zimbabwe. Printing money is now called "quantitative easing" in a transparent attempt to fool the public. But it's not working except in places like Marin County.

Dec 27, 2009, 4:08:00 AM  
Blogger W.C. Varones said...

The Christmas Eve Surprise nationalization of the entire US mortgage industry isn't old news:

Dec 27, 2009, 8:41:00 AM  
Blogger marinite2 said...

This comment has been removed by the author.

Dec 28, 2009, 4:41:00 PM  
Blogger marinite2 said...

I know it is old news to us. But by "where is the outrage" I am referring to sites other than blogs -- the MSM, my neighbors, etc. I think a message needs to be sent and that message should be a lot stronger than simply voting out the weasels in Washington.

Dec 28, 2009, 4:44:00 PM  
Blogger Lisa said...

The lack of outrage does make some sense (warped though it is) when you consider about 70% of the country "owns" their home. So there were an awful lot of people who "benefited", although that benefit is worthless unless you actually sold your overpriced debt trap while the going was good. Look at all the shiny new cars & vacations & private school tuitions that were paid with HELOC money. Look at how wealthy people felt during the bubble years.

I also think we're early in the hang-over stage and there's still a lot of denial about what happened over the last few years. The big stock market rallies this year probably helped lessen the anger as well. Maybe it's 2010, when Alt A, Option ARM and Prime loans start to crumble in earnest. Then perhaps we'll see more repulsion at what's happened, as the pain really starts to spread up the food chain.

And for all the FB's who participated in the madness, took out HELOCs and bought investment properties, blah, blah, can we really expect them to be outraged? Outraged, no. Woe is me, yes, and we've seen plenty of "victims" in the MSM.

Thanks for taking the time for a new post!! I love the local discussion here.

Dec 29, 2009, 11:54:00 AM  
Blogger Marinite said...

I saw this video over at The Mess Greenspan Blog and it makes the point.

Dec 30, 2009, 10:07:00 AM  
Blogger Holland said...

A quote from Robert McHugh:

"A little history from ancient Greece. A policy of allowing a few large and powerful individuals, or in our case banking firms, to drive government economic policy, which is what we see going on now, is called an oligarchy, not a democracy, not even a republic. "Oligarchy" means "rule by a few" in Greek. Almost the entire stimulus plan has been cash handouts to a few large financial corporations. Nothing of any substance has been provided to the masses of the people, who elect representatives, who elect our government. Somehow, the Central Planners are heeding the wishes of Goldman Sachs and friends, with ill-regard to moms and pops on Main Street. This was the politics of ancient Greece from 800 to 650 B.C.

Resentment of aristocratic power over the interests of the masses led to dictatorship. The age of the tyrants followed oligarchy in Greece from 650 to 500 BC. The policy and decision making road this Central planner group has chosen is a dangerous path."

Jan 5, 2010, 3:34:00 PM  
Blogger Matthew said...

Howdy Marinite.. thanks for posting..

On the subject of outrage, my guess is that all that outrage has since turned to apathy... it has with me, mostly ... I'm at that point where I just shrug my shoulders and look out for myself nowadays.. I suspect I'm not alone either in those sentiments..

I don't see the MSM or NAR or CAR changing my mind anytime soon... I don't care how much BS they fill the air with.. it's all BS, so I'm just doing my best to watch my backside and take advantage of opportunities that this screwed up market and country presents... Congress is broke (I've recently fully come to that conclusion), especially the Senate..

I've posted before, but it is worth repeating.. this unbelievable housing bubble did more damage to the middle classes's net worth and financial statements, it screwed up the values and work ethic of the entire country... there is no doubt in my mind about that.. the quick / easy buck generation...

there have been and continue to be more scum / sleaze balls associated with buying / trading / flipping / mortgaging real estate than any other profession... that scum still has the floor I'm sorry to say, because they sell the easy message... the message on the quick buck and on the status of "ownership" etc.. anyhow, they have had the floor again, and can keep it as far as I'm concerned..

I'll continue to stick to relying on basic math, basic economics and basic common sense, which is what caused the bubble to pop in the end..

this was and remains a micro economic recession IMO.. households are strangled with debt due, very very largely, to all the fraud in housing.. middle amercian's balance sheets are still out of whack due to housing... that's a fact, esp in bubble areas like CA..

when the Congress and Fed are done with their BS / bubblegum tactics, and the housing allowed to fully reset, then we might see the makings of a real recovery... then I'll invest in real estate again..

until then, save and invest your nickels in whatever non-real estate opportunity presents itself..

Jan 11, 2010, 9:20:00 PM  
Blogger mountainwatcher said...

Hi Matthew,
Thanks for posting that.
I guess I have the same feeling.
We are continuing our quest to find a Marin home.
Every RE agent we have encountered has said that "it is a great time to buy"
Too funny!
I have seen several proud homeowner folks fall on their swords and lose their homes.
It is painful.
One of them was always telling us that we were wasting our money by renting.
He is now renting and in credit hell.
I know that there will be a reset, albeit a slow and sticky reset.
It is happening and I thank you for your voice.

Feb 8, 2010, 12:09:00 AM  

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