Who gets your vote?

[[AK]Nuts]

It's been a long time since we had a Nuts Poll and I know how much some of you like my poll so here ya go:

[[AK]Camelwalk]

I personally HATE all canidates at the moment except Palin, who holds most of my values as hers! I wish the ticket was the other way around but Macain is the lesser of two evils so he gets my vote. I hope the wall street fiasco gets turned around cause that going to get blamed on bush which could hurt in Nov. Anyone that has done any homework know that Clinton veto a reform bill in 97 that could have avoided most of the garbage going on now! I just wish the gov't would stay out of the market. At this moment FREE MARKET IS DEAD!

[[AK]Nuts]

I think most of the problems stem from the repeal of the Glass-Steagall Act in 1999. Of course Clinton was in power but the republicans had the legislature and signed off on it as well. Some reports say this was the single most costly lobbying effort of all time.

[[AK]Hylander]

I think most of the problems stem from the repeal of the Glass-Steagall Act in 1999. Of course Clinton was in power but the republicans had the legislature and signed off on it as well. Some reports say this was the single most costly lobbying effort of all time.

Actually I could go on for hours on how that has NOTHING to do with the current situation. Ask my students in the Risk Management class I'm teaching right now. They definitely know what the Gramm-Leach-Bliley Act did.

This has everything to do with mortgaged back securities and how it's impossible to value them, and of course - ignoring principles of risk to chase "easy" short term profits.

If the Democrats are so worried over the failures at Fannie Mae and Freddie Mac - perhaps they should ask Obama why he's using the CEO who over saw this disaster as an advisor and how he received more contributions from these organizations than just about anyone else in congress.

[[AK]Beaker]

I'm glad someone posted on the economy stuff. This is really disturbing me. I hate to see the federalization of the banking industry, the housing industry, and the insurance industry. All in a few months.

In my non-educated in finance view it comes down to this... People were allowed to borrow too much money and then institutions borrowed too much money in order to get a quick buck and now.......no one wants to pay the piper they want government support.

Yes I know I know we can't let the markets collapse.... UGHHHH!

There are still solid institutions out there that surprisingly enough said hey we aren't going to invest heavily in something that is this entangled, just like there are people who amazingly enough bought a house using a standard morgage with 20% down and didn't then turn around and take all of the equity out of their house and they are doing fine. (Well their house is worth less but they are still in it and capable of paying for it).

Of course this type of thing has gone on for as long as commodities of any kind have been traded. Can we say Holland and the tulips anyone?

OK off my soapbox.

As for the candidates I will be in the minority in this forum

I'm luke warm about all of them honestly so don't expect me to go defending my choice or anything, just where I lean more.

It is ok to call me a tree hugging liberal hippie though, as long as I get to call yall Jack booted gun toting crazies (I married one I ought to know)

[[AK]Nuts]

This has everything to do with mortgaged back securities and how it's impossible to value them, and of course - ignoring principles of risk to chase "easy" short term profits.

This sounds really sarcastic as I type it... it's not intended. But could you explain some of this stuff to us... What I get online and on the radio isn't the whole story. And use simple words. Thanks.

[[AK]Camelwalk]

This sounds really sarcastic as I type it... it's not intended. But could you explain some of this stuff to us... What I get online and on the radio isn't the whole story. And use simple words. Thanks.

Hy it also meant nothing to me, but I am intrested as well. Guess I should have listen in school!

[[AK]Camelwalk]

It is ok to call me a tree hugging liberal hippie though, as long as I get to call yall Jack booted gun toting crazies (I married one I ought to know)

People have different views thats all........when I see someone panhandling I dont feel sorry for them, I see someone who has given up. In this socity if you want a job you can get one period. I work with alot of low income ppl who use state assisance and let me tell you they can run a game like no one eles. No amount of money from the govt will help them and we kept giving. I like lower taxes because I pay enough, I work too hard! The enviroment is being overhype, just wait till the carbon tax hit. Now I am a hippie and I love this planet, but I want to change things because we are humans and live on this earth. Libs want to scare me into change. Doom and gloom dont sit well with me. I believe in personal responsible and taking care of your own, Libs dont. The list goes on and on!

Its not that your a tree hugging liberal hippie, its just you have a mental disorder.........J/k! I respect your opinion, but I have never heard a lib put forth any concerte reasoning behind any of there ideas. There Ideas are good in theroy, but the therory is solicalism..........WE ARE AMERICA!

[[AK]Hylander]

Let me try and give an abbreviated version of this that is simplified, but should hopefully help.

You have all kinds of institutions making mortgages. Banks, Credit Union, Brokers, etc. When they fund these mortgages, it takes capital. IE - They have to give you the money. Let's say they made the mortgage at 8%. They might sell this mortgage to someone and earn 3% NOW instead of holding until maturity to earn the full 8%. The institution buying the mortgage will earn the full 8% minus the 3% they paid. But the original institution get the capital back to reinvest again - either through making loans again or other investment instruments. This allows them to turn the money over multiple times and keep earning on it.

So, you have this giant pool of mortgages out there. But some are "subprime". Arguments over what subprime is can vary - but it basically means it's a higher risk loan than "A-Paper". This could be due to higher loan to value ratios (IE - Above 80 or 90%) or perhaps 0% down or Interest Only mortgages, etc. When the Real Estate market was really hot, people wanted in. They wanted their "McMansions". They didn't care how, they wanted their 5,000sq foot beige sided house along with the other 300 5,000sq foot beige sided houses in the development. So, perhaps they couldn't afford a 6.5%, 30 year, 90% fixed rate mortgage. For example, a $250,000 mortgage, at 6.5%, for 30 years would be about $1,580 per month not including taxes and insurance. BUT.. let say they get an adjustable rate mortgage at 4%. That payment drops to $1,194.00 and now maybe they qualify for the mortgage. Or even worse - people were taking out 45 year mortgages!! Whatever it took to get them in the house. But the problem is they are qualified at the low rate. They never look at if they can afford it if the rate goes up. Outright negligence on the part of the lenders.

Now, interest rates start to rise. That 4% adjustable is now at 7% and your payment went from $1,194.00 up to $1,663.00. Just under a $500 difference in principal and interest. Let's not forget that above taxes and insurance, anything over 80% LTV (Loan to value) is going to require mortgage insurance as well. So basically, they can't afford the payments as they increase with interest rates. Why anyone who actually thought the process out would think that getting an adjustable rate mortgage when the interest rates are near historical lows is a good idea just baffles me. But.. they got their house! That's all that matters.

Now, there are times when adjustable rates are great. For a time when rates are higher and it looks like rates might drop, or perhaps you plan to sell the house within 3 to 5 years. So you might say.. why don't they just refinance? Well.. because they can't qualify at the fixed rates where they are now. Just like they couldn't when they originally wanted to get a mortgage. Thus.. that's the subprime problem.

Now lets get backed to Mortgage Backed Securities and all these other financial instruments secured by real estate instruments. What lenders do, is they group all these mortgages and their principal and interest streams into securities - just like a stock. The value of these instruments are NOT calculated by the mortgages included in the portfolio being sold like a bond or anything like that. No, they are determined by the market. So, they can be very irrational just like stocks. So everyone and their brother (Financial institutions like insurance companies, large investment banks, larger banks, etc) are buying these because they are making money on them while the real estate market is hot. No problem - everyone is making money, everyone is happy, and institutions are able to sell their mortgages and use the capital to make MORE mortgages. It's working.

Now, interest rates begin to rise. Uh oh. More and more people can't afford their mortgage payments. There may be a small amount of people who suffered from predatory lenders (mostly brokers who aren't funding the loans, they are just getting paid a commission or fee to make loans on behalf of funding institutions (banks, etc)) - but most of this is just due to greed. Greed on the lenders to make money, but mostly on the part of consumers who wanted to buy these houses, and then when values continue to rise, took out home equity loans on TOP of their subprime first mortgage, in order to subsidize their standard of living. So now they have a first and second mortgage and can't make the payments, compounding their own problems.

This isn't a major problem at first because the foreclosure numbers, while large and alarming, aren't really significant in the grand scheme of things and the markets in most areas of real estate are still going OK. But then the numbers begin to grow, the pundits start predicting chaos, the politicians jump into getting publicity, and the main stream media start pumping out the stories. Now you have a sort of self fulfilling prophecy. Why? Because now people stop buying these securities, the demand drops, the value thus drops, and the value of the securities are now going down and because nobody is buying - institutions holding them can't get rid of them and institutions who have all these loans can no longer bundle them and sell them because nobody is buying them. Eventually, these institutions have to write off their losses on the books and that's when the sh@t hits the fans and institutions can't raise capital to operate as they can't get rid of their loans, and people start pulling their money out due to the downgrading of their bond ratings by the agencies, etc. So it really comes down to a liquidity problem.

The fact that it was banks, wall street firms, and insurance companies, etc is really irrelevant. The primary reason for all this was lack of transparency in the true value of these instruments with no real regulations in terms of reserve requirements, etc.

But one thing to understand is.. the true value of these securities are unknown. Do you think that alot of these mortgages are bad? NOT REALLY. Only about 2 or 3% off all mortgages in existence are being foreclosed on. So even if the more 'recent' mortgages have a higher percentage - lets say even as high or double like 5%, that means 95% of the mortgages in these instruments are performing normally and are not delinquent or foreclosed loans. So why do they have no value? Because nobody wants to buy them based on the fear. But the institutions still have to write these monetary losses off on their books - just like any other security they own - and when you are talking about BILLIONS - Ouch.

But here is what alot of people don't realize. What do you think is going to happen to all these securities? Are they just going to disappear? Not a chance. Institutions, probably run by the people who ran these failed banks and wall street firms into the ground and have their golden parachute money, are going to buy all these securities for pennies on the dollar and make BILLIONS of dollars off of it. These mortgages are going to keep performing and interest is going to be paid. There is huge value there - just not in this market when all anyone thinks about are the bankruptcy rate and the fear being blown at every corner of the media. But trust me - someone is going to make out like a bandit by buying these things at pennies on the dollar. Perhaps some of the companies taking over the failed institutions who already wrote off all the losses. Now the value will only go back up as they see the loans performing.

I hope that maybe made a little more sense? Maybe? LOL

[[AK]Squidly]

I'm glad someone posted on the economy stuff. This is really disturbing me. I hate to see the federalization of the banking industry, the housing industry, and the insurance industry. All in a few months.

If you really and truly believe this, then you're supporting the wrong candidate. A vote for Obama is a vote for more government involvement in your life.

[[AK]Nuts]

I'd really like to vote for libertarian but they are all just bat-shit crazy! On the surface they sound pretty rational: less government, lower taxes, etc... but once you look at some of their plans... well, they scare the hell out of me.

[[AK]Camelwalk]

Wow ty HY for that post, I truly learned alot!

[[AK]Hylander]

OK, so the hidden purpose to this vote is to reveal that there are 6 people that need to be disassociated with AK. Correct?

[[AK]Swae]

OK, so the hidden purpose to this vote is to reveal that there are 6 people that need to be disassociated with AK. Correct?

I think we are up to 7 now.....watch out, the liberals are taking over!

[[AK]Squidly]

Don't understand the appeal of increasing the taxation of small business and adding more governmental involvement in our lives, but...ok.