Letter from Goldman Sachs re: Occupy Wall St.


By Patrick   Follow   Thu, 20 Oct 2011, 5:07pm   6,399 views   75 comments
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The following is a letter released today by Lloyd Blankfein

Dear Investor:

Up until now, Goldman Sachs has been silent on the subject of the protest movement known as Occupy Wall Street. That does not mean, however, that it has not been very much on our minds.

As thousands have gathered in Lower Manhattan , passionately expressing their deep discontent with the status quo, we have taken note of these protests. And we have asked ourselves this question: How can we make money off them?

The answer is the newly launched Goldman Sachs Global Rage Fund, whose investment objective is to monetize the Occupy Wall Street protests as they spread around the world. At Goldman, we recognize that the capitalist system as we know it is circling the drain - but there's plenty of money to be made on the way down. The Rage Fund will seek out opportunities to invest in products that are poised to benefit from the spreading protests, from police batons and barricades to stun guns and forehead bandages. Furthermore, as clashes between police and protesters turn ever more violent, we are making significant bets on companies that manufacture replacements for broken windows and overturned cars, as well as the raw materials necessary for the construction and incineration of effigies.

It would be tempting, at a time like this, to say "Let them eat cake." But at Goldman, we are actively seeking to corner the market in cake futures. We project that through our aggressive market manipulation, the price of a piece of cake will quadruple by the end of 2011.

Please contact your Goldman representative for a full prospectus. As the world descends into a Darwinian free-for-all, the Goldman Sachs Rage Fund is a great way to tell the protesters, "Occupy this." We haven't felt so good about something since we've sold since our souls.

Sincerely, Lloyd Blankfein Chairman, Goldman Sachs

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  1. Patrick


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    36   8:05pm Sun 23 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    So, to say it's moral hazard is basically saying the owners of the banks have no control over their executives. (which might be true I guess as board of directors don't represent shareholders anymore)

    True, shareholders don't actually control the executives. Shareholders would have to get unified and have a coherent agenda, which is kind of hard when shares change hand ten times per second like they do these days.

    http://en.wikipedia.org/wiki/Agency_problem

  2. REpro


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    37   8:13pm Sun 23 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Wondering who first discovered the system?

  3. REpro


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    38   8:14pm Sun 23 Oct 2011   Share   Quote   Permalink   Like   Dislike  

  4. uomo_senza_nome


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    39   8:46pm Sun 23 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    1. How did it work out for Lehman? Or Bear Stearns? Or IndyMac? Or Wamu? Or Countrywide?

    Except for Lehman, the rest all were acquired by one of the big banks if I am not mistaken. So you are wrong. moral hazard was never solved, the incompetent financial firms or banks should be allowed to fail, there should be no such thing as TBTF. The most ignorant statement in such a situation will be 'hey, it's because of the free market'. What the hell? This is the mother of all rigged markets.

    tatupu70 says

    2. Do you think AIG would like to lose 95% of it's value again?

    If I recall correctly, the then BofA CEO did not want to take Merril Lynch but was forced to acquire the financial firm because Chase had already acquired Bear Sterns. This was a bad deal for the shareholders of BofA probably, but they still went and did it.

    Countrywide is also a part of BofA. Clearly nothing was solved. This is indicated in their share performance now.

    tatupu70 says

    3. How much do B of A and Citibank and others continue to reserve for bad debts? How much of a hit to earnings have they taken so far? How long will it continue?

    Here's the thing: if there was ever something called balance sheet integrity , they would already be declared insolvent.

  5. thomas.wong1986


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    40   10:45pm Sun 23 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    True, shareholders don't actually control the executives.

    The SH do control the entities and exectives they hold shares in. Many corporations actually encourage fund managers to hold the the shares long term.

    Its not only shareholders, but includes interested of vendors, bondholders and customers. It isnt limited to executives but all employees of the entity.

    That is why you implement a good corporate goverence system with proper monitoring devices. The main internal devices is the BOD and externally, the auditors.

    Good Internal Control, Risk Mgmt, best practices aligned with mission and objectives has been around for a very long time.

    http://en.wikipedia.org/wiki/Corporate_governance http://en.wikipedia.org/wiki/Control_environment
    http://en.wikipedia.org/wiki/Committee_of_Sponsoring_Organizations_of_the_Treadway_Commission

  6. Austinhousingbubble


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    41   3:05am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    iwog says

    What was wrong with bailing out the banks?

    All the money was paid back.

    Yeah, except it wasn't...

    TARP was paid back.

    Total bailout funds disbursed to date: 4.76 trillion

    Total outstanding funds: 1.54 trillion

    Total funds at risk: 13.87 trillion

    http://www.sourcewatch.org/index.php?title=Total_Wall_Street_Bailout_Cost

    Matt Taibbi made an interesting counterpoint to this meme back in March:

    http://www.rollingstone.com/politics/blogs/taibblog/mailbag-alan-greenspan-david-brooks-and-bailouts-20110307

    "If a bank can go to the Fed, borrow $100 billion at 0% interest, lend it out on the market to all of us suckers as 4% mortgages and 11% credit cards and so on, what does it mean when it “returns” that money to the Fed later on? Are the profits they make in the meantime “earned” money, or is that subsidy? You and I don’t have the ability to borrow at 0%, but Goldman and JP Morgan Chase do."

  7. tatupu70


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    42   4:16am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    austrian_man says

    Here's the thing: if there was ever something called balance sheet integrity , they would already be declared insolvent.

    So, you agree then. There is no moral hazard. Being insolvent is not a desired result.

  8. tatupu70


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    43   4:17am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    thomas.wong1986 says

    Good Internal Control, Risk Mgmt, best practices aligned with mission and objectives has been around for a very long time.

    Were you around for the housing bubble? Just curious.

  9. bgamall4


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    44   5:50am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    thomas.wong1986 says

    Good Internal Control, Risk Mgmt, best practices aligned with mission and objectives has been around for a very long time.

    Risk management models always are bogus, and they always fail. They would only have success if people would monitor their performance to real world occurances. But that didn't happen in the housing bubble did it?

    Risk management tanked Enron, Worldcom, Parmalot, the housing market, and the middle class. Thanks.

  10. uomo_senza_nome


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    45   9:42am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    There is no moral hazard. Being insolvent is not a desired result.

    What? The definition of moral hazard is saving a corporation that was deemed to fail by the market. So we have moral hazard well embedded in the US economy. Financials, automobiles - you name it.

  11. tatupu70


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    46   10:09am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    austrian_man says

    What? The definition of moral hazard is saving a corporation that was deemed to fail by the market. So we have moral hazard well embedded in the US economy. Financials, automobiles - you name it.

    No that's not the definition of moral hazard. Here is one definition (wiki):

    In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.

    In the case of Freddie and Fannie, I might agree that moral hazard existed. In the case of the banks and S&Ls, I just don't find a compelling argument. They lost HUGE. Many went under. Even the supposed TBTF banks continue to take huge losses. It seems to me they were heavily exposed to the risk and the consequences of their actions.

  12. Cook County resident


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    47   10:47am Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    austrian_man says

    The definition of moral hazard is saving a corporation that was deemed to fail by the market

    I think saving the corporations was justified.

    Saving the bonus babies who drove them to the brink? Not so much.

  13. corntrollio


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    48   12:09pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Papercut says

    "Central to the effort are Fannie Mae and Freddie Mac, the government-controlled companies that issued and guaranteed more than 71 percent of mortgage-backed bonds last year. Between those companies and Ginnie Mae, which guarantees loans insured by the Federal Housing Administration, the government backed nearly 97 percent of U.S. mortgages in 2009."

    So 2009 was during the bubble? Let's look at your incorrect claim once again and show how you didn't prove it:

    Papercut says

    And Washington created the housing bubble by buying or otherwise guaranteeing virtually every loan made during the bubble.

    Vicente says

    Name me a major banker doing a perp-walk over their crimes? The person who should be in JAIL is the robber. Teabaggers in Congress have shown no stomach at all for enacting any sort of financial reform, outlawing future bailouts, or requiring Too Big To Fail banks be broken up, so their credentials about being against bailouts are just HOT AIR not action. Evidence is Teabaggers only SAY they are against bailouts and financial favoritism, and in fact love it since it helps fill their campaign coffers.

    Exactly. I'm not seeing much of anything to prevent things from happening again. If anything, Congress' policies are ensuring we will have more Too Big to Fail institutions.

    tatupu70 says

    The moral hazard argument is actually pretty weak. Banks lost HUGE. The ones that didn't go under have lost, and will continue to lose, enormous sums as the foreclosures continue.

    No, they still have the same incompetent management that is getting paid massive bonuses and shareholders who are unfairly getting a benefit, and it's not helping the rest of us who saved their incompetent asses.

  14. bgamall4


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    49   12:30pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.

    In the case of Freddie and Fannie, I might agree that moral hazard existed. In the case of the banks and S&Ls, I just don't find a compelling argument. They lost HUGE. Many went under. Even the supposed TBTF banks continue to take huge losses. It seems to me they were heavily exposed to the risk and the consequences of their actions.

    Hey here is a chart in this article:
    http://www.businessinsider.com/quigley-bis-prediction-came-true-clinton-knew-better-than-to-sign-glass-steagall-2010-11

    If you look at the chart, the private MBS in mid 2003 took over for the public, CRA ACORN MBS which was smaller. The private MBS was the real bubble and the private banks entered into this willingly and greedily. I don't buy Fox News when they say the public CRA/ACORN was responsible for the housing bubble. They gave it a kickstart but they weren't the real bubble.

  15. thomas.wong1986


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    50   12:38pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    Risk management tanked Enron, Worldcom, Parmalot, the housing market, and the middle class. Thanks.

    Yes, you mentioned a handful, but what does that say about everyone else who has morals and ethics ?

  16. bgamall4


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    51   12:42pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    There are almost 3000 stock companies using off balance sheet banking right now including Netflix. Morals and ethics are hard to come by Thomas. Perhaps some companies use risk management properly, but the companies that didn't put America in danger.

  17. thomas.wong1986


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    52   2:22pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    off balance sheet "banking"

    Banking ? or do you mean their royalty commitments (liabilities). The same could be said regarding facilties operating
    lease commitments for any business who signs a 3-5 year building, but have not yet incurred the benefit. You certainly dont capitalize building leases which you dont own, nor have you yet incured the liabiltiy/expense. But like all other commitments they are properly disclosed in the SEC schedules.

    According to the Form 10-Q filed by Netflix on April 27, 2011 with SEC, during the first quarter of 2011 company's off-balance sheet commitments have increased from $1,075.2 million to $1,634.0 million. According to the filing, these liabilities arise from "streaming content license agreements that do not meet content library recognition criteria"

    For Netflix this represents 52% increase in off-balance streaming costs in just 3 months, and 1,423% increase from December 31, 2009 ($114.8 million).

    (http://www.sec.gov/Archives/edgar/data/1065280/000119312511112061/d10q.htm).

  18. tatupu70


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    53   5:05pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    corntrollio says

    No, they still have the same incompetent management that is getting paid massive bonuses and shareholders who are unfairly getting a benefit, and it's not helping the rest of us who saved their incompetent asses.

    I don't disagree, but I don't consider that moral hazard. It's more of a compensation/oversight problem. The owners (shareholders) don't have control of company--the execs do. It's the inmates running the asylum...

  19. tatupu70


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    54   5:08pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    bgamall4 says

    If you look at the chart, the private MBS in mid 2003 took over for the public, CRA ACORN MBS which was smaller. The private MBS was the real bubble and the private banks entered into this willingly and greedily. I don't buy Fox News when they say the public CRA/ACORN was responsible for the housing bubble. They gave it a kickstart but they weren't the real bubble.

    I agree wholeheartedly. Freddie and Fannnie were NOT the cause of the housing bubble. Anyone who looks objectively at the data cannot conclude that the CRA or Freddie/Fannie were the problem.

    My point was only that Freddie and Fannie were in a very unusual position--they were not government owned, but everyone knew that they had government backing.

  20. corntrollio


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    55   5:40pm Mon 24 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    I don't disagree, but I don't consider that moral hazard. It's more of a compensation/oversight problem. The owners (shareholders) don't have control of company--the execs do. It's the inmates running the asylum...

    Moral hazard for shareholders too. They should have lost all their money too.

    tatupu70 says

    I agree wholeheartedly. Freddie and Fannnie were NOT the cause of the housing bubble. Anyone who looks objectively at the data cannot conclude that the CRA or Freddie/Fannie were the problem.

    Yes, anyone suggesting stuff to the contrary is probably an ideologue. Can't fight the data on this one.

  21. ¥


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    56   12:43am Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Papercut says

    And Washington created the housing bubble by buying or otherwise guaranteeing virtually every loan made during the bubble.

    Horrifically incorrect. What about http://ml-implode.com/ didn't you understand?

    The GSEs got into the subprime game late, but subprime wasn't where the real action was at, it was all the NONCONFORMING -- NON-GUARANTEED -- lending that tanked the global economy.

    All this tranching and derivatives (CDO, CDO-squared) was done for the PRIVATE LABEL lending business to turn crap loans (and refinances) into gold. GSEs didn't have to tranche their own stuff since they were on the hook for it all anyway. They just sold agency bonds to China and everyone else with excess USD to fund their loans.

    But once you have to type 6 sentences to refudiate some vile lie, the liars have already won.

  22. TPB


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    57   9:35am Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Of all of the Charts posted in this thread about Government spending, not one of them match each other.

    Can I say it again? Chart != Data

    I'm not debunking that we're spending a crap load of money on waste. But I'm quite certain, it will be impossible to do anything about it, as long as mis information is being presented in dialog on how to fix it.

    More over, isn't it disgusting that in this country that recently had a decree of "Transparency" there's no official "DATA" on actual government spending?

    Sure there's pretty pictures and Charts. I have first hand knowledge charts don't mean anything. 99% of people don't even inspect the discrepancies nuances between one chart to the next.

    It's no wonder Government fraud is so abound.
    You couldn't pull this shit on the old Green dot matrix printouts.
    Of course you had to take the time to peruse over the data, but that possibility, kept people honest.

  23. corntrollio


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    58   12:04pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Bellingham Bill says

    The GSEs got into the subprime game late, but subprime wasn't where the real action was at, it was all the NONCONFORMING -- NON-GUARANTEED -- lending that tanked the global economy.

    Yeah, exactly. And subprime itself (if it's traditional subprime) was always fine. It means you meet underwriting standards, but have lower credit, so you pay a higher rate.

    It's non-prime and non-subprime that was the problem. The media included traditional subprime and all of the non-conforming/non-guaranteed and all the Alt-A/Option ARM stuff into one category called "subprime" but traditional subprime has a distinct definition that had lower default rates than all of that other stuff. All that other stuff depended on lower underwriting standards, so of course the default rates were higher.

  24. mdovell


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    59   12:34pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Blame can go nearly anywhere about the housing market but this site here has a nice animation (about 11 minutes) that shows the flow of what happened)
    http://crisisofcredit.com/

    What's wrong with bailing out banks? Well obviously there is moral hazard but there is also other issues as well.

    If someone does not know where to put there money banks are supposed to be safe by default. Deposits are insured and banks generally do not go out of business. The logic of banking is pretty simple. They take deposits in and give out a given rate to them. Then they lend money out at a higher rate. The difference should be the profit. The problem with the bubble is by lending out more than people could afford banks could simply take those repossessed houses and put them back on the market for a near instant profit. But since there are so many empty homes out there and the employment market is worse than it was it creates a paradox. Banks lowered standards for lending and that backfired.

    So now we have banks that do not lend because it is all going down.Supposedly as a country the market is down 31% in just about six years. When will it stop? hard to say. 1990 prices? 1980?...1970? hard to say.

  25. bgamall4


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    60   1:34pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    tatupu70 says

    I agree wholeheartedly. Freddie and Fannnie were NOT the cause of the housing bubble. Anyone who looks objectively at the data cannot conclude that the CRA or Freddie/Fannie were the problem.

    My point was only that Freddie and Fannie were in a very unusual position--they were not government owned, but everyone knew that they had government backing.

    True, and once the bubble blew it's top in 2004, Fannie and Freddie tried to get back into the game, at their peril. And one more point, even if they are to be wound down, Bernanke requires a backstop (guarantee) on all mortgages even if Wells and other TBTF banks takeover their business. It is a total bankers scam.

  26. TechGromit


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    61   2:10pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    kentm says

    So what, that just proves they're Americans...

    The Average America is pretty stupid. Sure we have lot of educated engineers, doctors, lawyers, etc, but I would hardly call them American's of Average intelligence. Kinda of reminds me of the movie, "Idiocracy" when stupid people breed like rabbits and pass of the lack of opportunities to there children and they breed like rabbits when they are old enough.

    Between American Idol and the Iphone, a good portion of the population couldn't name all 50 states let alone where they are located in the country. While they might know all the foot ball players on there favorite team or who won American idol last year there education level in in other important areas is lacking. The simple reason isn't because they are stupid and can't learn, they just don't want to. Educating themselves it too much effort and it really doesn't interest them. Better to go off protesting with half the facts or misinformation they heard from there friend Bob.

  27. TechGromit


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    62   2:20pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Ninety-four percent answered the military, when in fact health care and pensions account for the bulk of the federal budget.

    Not sure where you got that pie chart, but what the hell is Past Military? I know for a fact about 6% of the yearly federal budget goes towards paying interest on the debt that was accumulated from previous years, but I don't see that represented on your pie chart. for FY11, Military spending is 25%, Health Care 24%, Pensions 22% (includes Social Security), Welfare 13%, Interest on National Debt 6% and all other spending 10%.

    If the entire military budget was eliminated, the Country still couldn't balance the budget on Taxes it currently takes in today. Either Taxes need to be raised of spending needs to be cut elsewhere.

  28. Vicente


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    63   3:28pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    TechGromit says

    Not sure where you got that pie chart, but what the hell is Past Military?

    Vet benefits, plus a large chunk is interest on war debts. You don't think this year's budget actually pays for this year's war operations do you? No, they borrow on top of that. Oh, and let's not forget DHS, border guards etc. which are laughably enough not considered "defense".

  29. thomas.wong1986


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    64   5:00pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Fannie Mae Eases Credit To Aid Mortgage Lending

    By STEVEN A. HOLMES
    Published: September 30, 1999

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

    In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

    ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry"

    http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html

  30. thomas.wong1986


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    65   5:06pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    The GOP says

    Of all of the Charts posted in this thread about Government spending, not one of them match each other.

    You can either use the chart from the OMB or from a pacifists organization who has no accountibilty but do have a twisted agenda.

  31. corntrollio


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    66   5:09pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    thomas.wong1986 says

    Fannie Mae Eases Credit To Aid Mortgage Lending

    By STEVEN A. HOLMES
    Published: September 30, 1999

    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    Yes, the problem is that the article you referred to is about a change in traditional subprime lending. Traditional subprime lending has a lower default rate than Alt-A, Option ARM, NINJA, and other non-traditional loans and is not the source of our problems. This is what I said above:

    corntrollio says

    And subprime itself (if it's traditional subprime) was always fine. It means you meet underwriting standards, but have lower credit, so you pay a higher rate.

    I have written on this before and need not repeat it here: http://patrick.net/forum/?p=816140#comment-744196

    Traditional subprime lending is fine. The media fucked this up by referring to all non-prime lending as "subprime." However, subprime is a term of art, and this is a very imprecise way to refer to these types of loans. A better moniker would be "non-traditional" lending or "lending without full underwriting standards."

    The problem is not that subprime loans were made to people who had slightly lower credit, but still had good capability to pay and good collateral. The problem is that non-traditional loans were treated as if they would behave similar to prime loans, but did not. Non-traditional loans have far higher default rates than those guaranteed by Fannie and Freddie, and they were made by private banksters. The stats show this.

  32. Dan8267


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    67   6:48pm Tue 25 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    thomas.wong1986 says

    Vicente says

    BZZZT! OWS people are in the right, survey people wrong

    source ?

    http://www.tineye.com/search/a281fc03d3301950939e5a7c7ef38d33bd27ff53/?pluginver=firefox-1.1

    Not hard to find. Install the tineye plugin and right-click the picture.

    Quickly leads to http://www.warresisters.org/pages/piechart.htm

  33. UAVMX


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    68   9:24am Wed 26 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    We spend a higher % of our GDP on military than any other industrialized country.


    We have a lower tax rate as % of our GDP than any other industrialized country. US taxes are especially low on capital gains and dividends, which make up the bulk of income for the very rich.


    Very high military spending + very low taxes = very deep debt


    We have to cut military, raise taxes on the non-productive rent-seeking by the rich, or both.

    While I agree that DOD budget must and will be cut, it's a large portion of our budget, think about the 20% medicare/medicaid and the 20% welfare. At least the defense budget creates a TON of jobs and works towards something, creates technologies, etc. What do the others contribute towards (keeping people healthy, okay) I do understand that welfare/medicare/medicaid is necessary (and abused in some ways).

    I think you can argue that although the defense spending is a lot, it also creates a lot.

  34. TechGromit


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    69   8:58am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    UAVMX says

    While I agree that DOD budget must and will be cut, it's a large portion of our budget, think about the 20% medicare/medicaid and the 20% welfare. At least the defense budget creates a TON of jobs...

    Medicare creates plenty of jobs for Nurses, Doctors, X-ray technicians, and all kinds of support personnel. While it's true the reimbursement rates from medicare aren't the highest and medical care facilities would rather fill there hospitals with private insurance paying patients which have a higher profit margins. If Medicare didn't exist, there would be a fewer medical facilities, especially in poorer areas where there are fewer people insured by private insurance.

    While it difficult to imagine a Major city without several hospitals, without medicare many cities could have as few as one Hospital and rural areas no services at all. Imagine having to travel a hour to see a doctor and several hours to get to a full service hospital.

  35. corntrollio


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    UAVMX says

    At least the defense budget creates a TON of jobs and works towards something, creates technologies, etc.

    That used to be true, but I'm not sure if the defense industry actually creates much technology these days vs. what it used to do. The difference, during the Cold War, is that there was lots more R&D being sponsored without wasting all kinds of resources on actual war.

    In contrast, the recent decade has mostly been about blowing stuff up, about paying off mercenaries big bucks, and pork barrel nonsense. Our substantive work in R&D was too oriented towards the Cold War before Rumsfeld, and being distracted by Iraq/Afghanistan kept Rumsfeld from making the bigger reforms that were needed.

    Does anyone else have thoughts on this?

    TechGromit says

    Medicare creates plenty of jobs for Nurses, Doctors, X-ray technicians, and all kinds of support personnel. While it's true the reimbursement rates from medicare aren't the highest and medical care facilities would rather fill there hospitals with private insurance paying patients which have a higher profit margins. If Medicare didn't exist, there would be a fewer medical facilities, especially in poorer areas where there are fewer people insured by private insurance.

    Agreed.

    The problem that a lot of people don't realize is that government spending does increase GDP. The ratio might be less than 1:1 sometimes and it might be lower than 1:1 sometimes, but the recent austerity measures are almost guaranteed to lower GDP for this reason.

  36. ¥


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    71   10:49am Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    corntrollio says

    Does anyone else have thoughts on this?

    yeah, all of our DOD is uneconomic waste.

    We'd be better off paying 10 million people to play xbox all day.

    Hell, make an XBLA app that controls the Predators, and we'd have one helluva force.

  37. corntrollio


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    Bellingham Bill says

    yeah, all of our DOD is uneconomic waste.

    We'd be better off paying 10 million people to play xbox all day.

    Hell, make an XBLA app that controls the Predators, and we'd have one helluva force.

    Ender's Game?

  38. mdovell


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    73   2:12pm Thu 27 Oct 2011   Share   Quote   Permalink   Like   Dislike  

    I think we've focused way too much on advanced weaponry and not realized the long term costs of maintaining it.

    There's a claim here that it is nearly 400 million each and three year cost to maintain each of them every year
    http://www.counterpunch.org/2009/03/27/what-does-an-f-22-cost/

    Technology is great for some items but we don't have to go crazy with it.

    The idea of military spending helping the economy might have also made sense when most of our bases were more domestic than foreign. How does a solider spend their money in Iraq or Afghanistan? Yeah they might wire it home if there are loved ones. Meanwhile we have bases closing at home and that instantly changes the economy of that local government. Growing up I lived near an airbase. They'd be a airshow and many I knew in school lived on base and some off it. I highly doubt anyone serving in Iraq or Afghanistan wants to live off base.

  39. Vicente


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    74   12:23am Tue 1 Nov 2011   Share   Quote   Permalink   Like   Dislike  

    mdovell says

    How does a solider spend their money in Iraq or Afghanistan?

    Haha, a SOLDIER doesn't spend very much.

    The MIC air-drops money in by the PALLET LOAD. Bribes for locals, money spent on infrastructure, more money spent to just keep things from falling apart. Yeah we'll spend a TON just to bribe some warlord not to get too active, but if you talk about "foreign aid" some people have a fit. If there's one things Americans like, it's the notion you can BUY a successful solution and certain operatives are tasked with shooting a firehose into the desert in a quixoitic endeavour to create an oasis. And what do we get at the end of it for all this money? Something like Bagram was 5 years after the Soviets left, just another gutted and rotting air base.

  40. FunTime


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    75   11:56am Tue 1 Nov 2011   Share   Quote   Permalink   Like   Dislike  

    austrian_man says

    Both these statements are super-ridiculous. More and more, I've come around to accept the idea that there are only two classes: debtors and savers.

    I've thought a lot recently about how people see life as a game and then base their success on how well they play. I think if you take this view, you'll be a debtor since debt is clearly a popular strategy with built-in government backing and other advantages.

    Others who actually got educated when they read something like Boethius' 'Consolation of Philosophy" in college, are guided by reason or, at least, an attempt to bring consistency to their thinking and ethics.

    People are always a bit of a mix, since human capacity for understanding is so low. When I write that, I think of how we're destroying the planet on which we live. I'm not sure this latter, reasonable, or having the intention of reason even if capacity fails, group would save, but I think it's more likely.

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