$700 Billion isn't going to fix the flat tire on our "wrecked bike economy"
I can not believe that the government is trying to patch up the economy like it is a bicycle with a flat tire. We'll stick with the bike analogy for a minute...
The countries economy is like a bicycle..
When it is running good we cruise along fine. The gears are all lubed up. The chain isn't rusty and the tires are full of air. So we've got on this economy bicycle and started riding it all over the place during the past 7 years of econmic boom.
The bike was riding all over the place with out ever stopping to look at the wear it was putting on its tire. Let's look at the tires like they are the mortgage loans. The bad mortgage loans.
The tires on that bike were worn away from slamming on the breaks going down a hill. Think of this when you were a kid on a down hill slope. Fun but dangerous and rough on your tires.
This kind of tire skidding fun was what the big banks were doing with creative mortgages. Adjustable rate mortgages. Just think about the name, the rate is going to adjust and the home owner is going to be paying more! How about option arms? You have the option pick how much you pay for for your mortgage payment! HUH?! So the big banks were accepting these kinds of deals as good assets. Assets based on the assumption that people with the 500 fico scores would keep current on their notes. HA. Why do you think lending guidlines were so tough back in the 80s? Because banks didn't want to loose there tail! And so wrecklessly the economy bike was riden.
Want a good example.....
Wachovia was just bought out by Citi group. Wachovia was one of the largest banks in the US. Here's how it tumbled...
On a May 2007 conference call, Wachovia Corp.'s then-Chief Executive Officer Ken Thompson trumpeted the $24 billion acquisition of Golden West Financial Corp., a California lender that specialized in payment-option adjustable-rate mortgages.
``I think that 12 months or so from now people are going to look at the acquisition of Golden West as one that produced great success for Wachovia,'' Thompson said.
Seventeen months later, Thompson is gone and so is Wachovia. After losing 82 percent of its market value since that conference call due to mounting losses on option ARMs, the bank was sold to Citigroup Inc. today in a deal brokered by the Federal Deposit Insurance Corp.
``Golden West was the beginning of the end'' for Wachovia, said Anat Bird, a former Wells Fargo & Co. executive who now runs SCB Forums Ltd., a Granite Bay, California, company that conducts peer group conferences for bankers. Golden West ``had lousy assets, lousy liabilities and they paid a fortune for it.''
,
Wachovia holds $122 billion of option ARMs which the Charlotte, North Carolina-based bank calls ``pick-a-pay'' mortgages, 72 percent of its residential loan portfolio, according to its Web site, and the most of any U.S. bank.
By Bob Ivry
Sept. 29 (Bloomberg)
The banks were riding wildly around on there "bikes" that were running on tires that were bound to burst. I mention Wachovia because I have a dear friend who lives in Charlotte and works for Wachovia. This flat tire hits close to home for me. But there are going to be more.
It will get worse before it gets better.
To spin this forward. ALL BANKS WERE LENDING LIKE THIS. How could you not? If one bank was writing option arm loans and making a killing, and you owned a bank, you would too. These kinds of troubles are deeply rooted in the financial system right now. A government bail out will help a few, but others will still feel the wrath.
The government needs to back off and let who's going to fall, fall.
All the banks are riding on tires with no tread. It's too bad they have to go flat before they stopped to fix them a few years ago.
The countries economy is like a bicycle..
When it is running good we cruise along fine. The gears are all lubed up. The chain isn't rusty and the tires are full of air. So we've got on this economy bicycle and started riding it all over the place during the past 7 years of econmic boom.
The bike was riding all over the place with out ever stopping to look at the wear it was putting on its tire. Let's look at the tires like they are the mortgage loans. The bad mortgage loans.
The tires on that bike were worn away from slamming on the breaks going down a hill. Think of this when you were a kid on a down hill slope. Fun but dangerous and rough on your tires.
This kind of tire skidding fun was what the big banks were doing with creative mortgages. Adjustable rate mortgages. Just think about the name, the rate is going to adjust and the home owner is going to be paying more! How about option arms? You have the option pick how much you pay for for your mortgage payment! HUH?! So the big banks were accepting these kinds of deals as good assets. Assets based on the assumption that people with the 500 fico scores would keep current on their notes. HA. Why do you think lending guidlines were so tough back in the 80s? Because banks didn't want to loose there tail! And so wrecklessly the economy bike was riden.
Want a good example.....
Wachovia was just bought out by Citi group. Wachovia was one of the largest banks in the US. Here's how it tumbled...
On a May 2007 conference call, Wachovia Corp.'s then-Chief Executive Officer Ken Thompson trumpeted the $24 billion acquisition of Golden West Financial Corp., a California lender that specialized in payment-option adjustable-rate mortgages.
``I think that 12 months or so from now people are going to look at the acquisition of Golden West as one that produced great success for Wachovia,'' Thompson said.
Seventeen months later, Thompson is gone and so is Wachovia. After losing 82 percent of its market value since that conference call due to mounting losses on option ARMs, the bank was sold to Citigroup Inc. today in a deal brokered by the Federal Deposit Insurance Corp.
``Golden West was the beginning of the end'' for Wachovia, said Anat Bird, a former Wells Fargo & Co. executive who now runs SCB Forums Ltd., a Granite Bay, California, company that conducts peer group conferences for bankers. Golden West ``had lousy assets, lousy liabilities and they paid a fortune for it.''
,
Wachovia holds $122 billion of option ARMs which the Charlotte, North Carolina-based bank calls ``pick-a-pay'' mortgages, 72 percent of its residential loan portfolio, according to its Web site, and the most of any U.S. bank.
By Bob Ivry
Sept. 29 (Bloomberg)
The banks were riding wildly around on there "bikes" that were running on tires that were bound to burst. I mention Wachovia because I have a dear friend who lives in Charlotte and works for Wachovia. This flat tire hits close to home for me. But there are going to be more.
It will get worse before it gets better.
To spin this forward. ALL BANKS WERE LENDING LIKE THIS. How could you not? If one bank was writing option arm loans and making a killing, and you owned a bank, you would too. These kinds of troubles are deeply rooted in the financial system right now. A government bail out will help a few, but others will still feel the wrath.
The government needs to back off and let who's going to fall, fall.
All the banks are riding on tires with no tread. It's too bad they have to go flat before they stopped to fix them a few years ago.
posted by All About Debt at
1:22 PM
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