Talk:Subprime mortgage crisis
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[edit] Op Ed? For Deletion?
This article strikes me as being myopic and naive. This crisis that we hear about through the media today has been ten years in the making. It is a product of lax oversight and irresponsible 'shell game' lending practices on the part of major federal reserve banks as much as anything else. What should be noted is that despite the FOMC denoting itself as an 'Open Market Committee', the manner in which JPM was allowed to first buy Bear Sterns for about 50 cents on the dollar on 3/14/08 and eventually took ownership on 3/17/08 at $2 a share via the Fed Discount Window was neither Open nor Transparent. Both actions on the part of the FOMC were taken when the markets were basically closed, which made it impossible for many parties to cover their positions (or intiate new ones) when the news was released through the media.
It should be noted that the liquidity issues brought about by the 'Raptor' stuctures in use at Enron several years ago are virtually the same types of problems brought about by overdependency on Credit Default Swaps to fund the Subprime Lending shell game of the last ten years. If the CBOT Credit Default Swap futures contract had been allowed to start trading on March 1st, 2008 as it was originally slated to do, these two most recent actions by the FOMC would not have been necessary. It should be noted that Goldman Sachs has an enormous amount of Credit Default Swap exposure at this point and they will eventually have to cover that risk.
I also find it questionable that the FOMC would make such a huge deal out of this situation and then only cut the FF rate by 0.25%. This is made even more ridiculous by the fact that there is a scheduled FOMC meeting for this week; if two or three days was that important then I find it hard to believe that 25 basis points is going to really fix anything. In January the FOMC made an intermeeting cut of 50 basis points due to the Societe Generale 'crisis', yet this situation is receiving much more sensationalized press coverage. I have many years of trading experience with various financial instruments, including options on Fed Fund Futures at the CBOT, and the way the FOMC is handling this situation is hamfisted and questionable at best. At worst the case could be made for a RICO indictment along the lines of what Enron received. DavidMSA (talk) 03:23, 18 March 2008 (UTC)
Whatever. Just cite your sources. Keep your edits short so they can be reversed if your opinions exceed your sources.Farcaster (talk) 04:22, 18 March 2008 (UTC)
- OK Pro. Sorry if I crashed your party. If you want to make this into a chicken and egg this we can do so. However if you were actually in the industry you would understand that the housing 'bubble' is a red herring, over-sensationalized topic. The real meat on the bone is about the Credit Default Swaps. Good luck getting the numbers on those without being a registered NASD broker dealer. Either that or it helps if you actually have some experience trading the stuff. Don't you agree? DavidMSA (talk) 04:30, 18 March 2008 (UTC)
If you can cite it, I'll back you up 100%. I've had to take about 5 folks with unsupported theories out of this article before. Even if you are right, without sources it must go. I suggest your start with the body; pick a section you want to update and work on that. Plus, this isn't an op ed page for you and your ego. Don't care whether you trade or not, just that you can support your views with credible sources. Main sources are Fed letters from Bernanke, Economist, and other top periodicals. Your time in the trenches doesn't count here, unless you can use it to explain some of the complex topics we're wrestling with. Trying to explain this in simple terms may be the best use of your experience.Farcaster (talk) 04:36, 18 March 2008 (UTC)
My point is not to argue about the outcome, it is obvious for all to see. I am saying that it is oversimplifying the situation to say that the liquidity crisis is just a result of what happened the last six or eight months. I have given a much better outline of how the FOMC injects cash into the system on this page than was previously there. I'm not disputing the facts; I'm disputing the way these facts are being used to connote cause and causation of the problem. If I wanted this to be about my ego I would be vandalizing the article, which I am not doing by any stretch. I will do some serious work on this, it just happened to catch my eye this evening. The parallels to the liquidity issues which brought down Enron should not be swept under the rug. Jeff Skilling is sitting in prison for doing something which many FOMC member banks are getting away with doing via the Credit Default Swap market. I feel like 50 cent writing this stuff, believe you me. DavidMSA (talk) 04:42, 18 March 2008 (UTC)
There are two things I see deserving of mention: 1) The privatization of profit benefits from the socialization of risk and, 2) the fact that the subprime crisis has generated a great buying opportunity and will surely lead to great riches. —Preceding unsigned comment added by Bidness (talk • contribs) 17:54, 6 May 2008 (UTC)
[edit] OpEd or another Inconvenient Account of the Truth?
HAHA touche, Brutus! Shall we destroy Pliny's accounts of the destruction emanating from Vesuvius as well? Do not belittle the power of primary sources. I have not yet begun to write. This is now listed as current event. "He who controls the present controls the past and he who controls the past controls the future." - George Orwell. I look forward to going through all of the Financial Times articles I have saved up since November. The Truth about this despicable Leveraged Buyout of the American Public will manifest itself over the next few months. It will be documented and digitized for everyone's edification. Best Regards. DavidMSA (talk) 20:09, 19 March 2008 (UTC)
A guy on Bloomberg who advises Senator McCain said too much regulation caused this whole mess. I thought I heard it all until I heard that one. He's from AEI, which is an anti-regulation think tank in need of some horsepower. Got a good chuckle from that. You're at least a well-read guy. If you have a series of sources that develop an alternate hypothesis on how this came about, perhaps write it as a separate article. We can then add a paragraph to this article and link it in. Traffic on this article is extremely high based on the number of edits recently, so it will get some visibility without distorting this article, which is approaching 200 sources now. This is one of the best articles for starting to research this topic and hence its #1 Google search position on the topic. Further, there is a related timeline article that could use an update. We could use your help on that if you want to contribute.Farcaster (talk) 23:28, 19 March 2008 (UTC)
-
- Thank you my friend. It is interesting that you bring up a McCain adviser, since McCain was prevalent in the Keating Five scandal which was instrumental in 'opening the floodgates' for the S&L scandal to come rushing through in the late 80s. I am working on a book which will draw parallels between both scandals and demonstrate that the problems derive from the way banks securitized the debt as well as the weakness in the housing market. It is interesting to note that states which had a ton of regulation for issuing mortgages did not see such a destructive 'bubble' effect in their real estate markets. When I worked at Countrywide we were discouraged from doing loans in Texas due to the restrictive underwriting guidelines for the state. The no income/no documentation loans were super easy to get in places like Florida and California. Furthermore the role of home appraisers in this whole mess is completely overlooked and I will have some sources to cite on that, since I have no professional experience in that field. I will start some other topics after Easter and then we can work on tying them all into this master article. What will be interesting is if/when the debt which was securitized from prime loans starts to get hit, or if there is a serious problem with the Credit Default Swap market. I will post some interesting information from the CBOT website on this talk page for everyone can take a gander at, I need to edumacate myself on my Wiki technique. For now I recommend checking out this list:
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1048+50088,00.html
Then reference that list against this one:
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1048+55035,00.html
I'm not a CPA, just a peon futures trader but these lists are showing everyone who was CDS exposure. I predict that the non-FOMC entities with CDS exposure are going to experience 'liquidity' issues (like Bear Sterns) and get snapped up by the FOMC-member entities at super low prices. This happened with JPM buying Bear Sterns on the US taxpayers' dime. Now I need to do more research but I bet that these 14 or 15 companies that are being 'investigated' (like Lehman) are either going to run into 'liquidity' issues or be scandalized to the point that they get super cheap and then the FOMC-member banks can buy their assets below market value, thus gaining assets that will help to offset the CDS exposure for all the firms involved.
If the CDS future were trading more freely (I'm pretty well-connected at the CBOT and no one will talk to me about this) then the yahoos in Chicago would have too much control over such a big debt market, which is not what the folks in NYC and the FOMC want to see happen. A la prossima =) DavidMSA (talk) 17:07, 20 March 2008 (UTC)
[edit] BoE govenors warning last June
This may be worth putting in somewhere - Mervyn King June 2007 - "The development of complex financial instruments and the spate of loan arrangements without traditional covenants suggest another maxim: be cautious about how much you lend, especially when you know rather little about the activities of the borrower.
It may say champagne - AAA - on the label of an increasing number of structured credit instruments.
But by the time investors get to what's left in the bottle, it could taste rather flat. Be cautious about how much you borrow is not a bad maxim for each and every one of us here tonight."
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/03/ccom103.xml
[edit] Rationale for deleting the write-down table
Bloomberg posted a complete table containing all subprime related write-downs and losses. http://www.bloomberg.com/apps/news?pid=20601087&sid=aK4Z6C2kXs3A&refer=home Because of Bloomberg's table we now had 2 options:
- -Quote Bloomberg's write-down number and delete our table since it is now redundant and incorrect?
- -Copy, which is illegal, Bloomberg's table since it's far more complete and has the correct write-down numbers? Our numbers are in most cases summations which if kept would constitute original research.
I am in favor on Option 1. Get Bloomberg's write-down number and delete our table since:
- Our table is around $80 billion below Bloomberg's number.
- Our table occupies too much space and distorts the text format.
- Our table has become a source citation hell with over 70 source citations, making the article heavier.
- The table is hard to keep up to date and it is, unfortunately, incomplete.
- Our table has number disparities that are very hard to explain. For example, Bloomberg's table doesn't include AIG's $11 billion write-down.
Deleting the entire table is kinda sad since I worked hard into keeping it updated since November 2007, at that time the write-downs totaled just $20 billion. Basically all that time was wasted now ouch.... but it has to be done, the time has come to let go of it so I deleted it.
I many ways I am glad though, having to visit Google News every other day to check for news was a real pain and now I can move on. ⇨ EconomistBR ⇦ Talk 07:02, 20 May 2008 (UTC)
- FOR FUTURE REFERENCE - HERE IS THE LAST PAGE REVISION CONTAINING THE OLD WRITEDOWN TABLE:[1]
- EconomistBR, I wanted to keep it in view for two reasons. One is that Bloomberg's table is unsourced, whereas yours documented sources for the individual figures. Also, Bloomberg's own figures will eventually become obsolete. Mporter (talk) 09:40, 9 June 2008 (UTC)
- In fact, I would consider recreating it as a separate page, e.g. 'List of writedowns in 2007 credit crunch'. Bloomberg's table can be just another source of figures. If it disagrees with the Wikipedia figure, that can be noted, but again, all the Wikipedia numbers are sourced, all the Bloomberg numbers are unsourced. Mporter (talk) 09:44, 9 June 2008 (UTC)
- I appreciate your selflessness and integrity EconomistBR, but have you considered that Bloomberg copied your table, then made a couple of changes to claim it as their own ? ;-) -- John (Daytona2 · Talk · Contribs) 09:48, 9 June 2008 (UTC)
- I've restored it as a new page, List of writedowns due to subprime crisis, and linked to it from "Effects". It's a valuable resource for researchers, because, as I said, the numbers are individually sourced. Better to keep it around, and update it when someone has the energy to do so. Mporter (talk) 10:15, 9 June 2008 (UTC)
