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| Home Front Economy |
| Citigroup Saw No Red Flags Even as It Made Bolder Bets |
| 2008-11-25 |
| Posted by:tipper |
| #11 Mr. Carville you are only half correct. The mark to market rule makes sense for many things and if it had been phased in slowly it would have improved a bad picture as all those worthless derivitives would have been weaned from the mark to model rule. The move to mark to market was the catalyst that blew apart all the phony leverage that had been building up with all those phony baloney mortgage scams like variable rates, balloon notes, etc. C-patch has it right. This was set up to fail from day 1. Somehow "people" managed to bundle a s**t load of dicey mortgages together chop them up and sell the resulting tranches off as AAA worthy debt. Investors thought they were so cool buying $10 Rollexes from the street vendor and then using them as collateral (at Rolex prices) to borrow more money to invest in Kartier jewels from the same guy to sell for Cartier prices. This whole fiasco is a classic example of a scam and remember, you can't con an honest man. As a Ponzi scheme I think they ran up against an honest man. |
| Posted by: AlanC 2008-11-25 15:51 |
| #10 JamesC, Is your bank going to come demand that you immediately make up the difference in your required down payment between what you bought yours for and what the repo down the street just sold for? Or will they just let you keep making your payments? Kind of depends on laws and the terms of your specific contract, though logic says everyone is better off if they don't make 'margin calls' on every upside down borrower in today's market. |
| Posted by: Glenmore 2008-11-25 15:44 |
| #9 Repealing that assinine mark to market rule will do a lot to healing all of the bank balance sheets. I bought my home for $675,000, at a time when it was appraised at $865,000. Now the repo down the street, just like mine sold for $366,000. There goes my equity. I would personally skin and cut into small pieces the moron that came up with the mark to market rule. It is the single biggest creator of this mess. |
| Posted by: James Carville 2008-11-25 15:04 |
| #8 Of COURSE there were no red flags as long as interest rates were declining or stable and housing values were continuing to rise. Every $5 bill they bought was turning into a $20 bill. But when interest rates went up and the first person whose adjustable mortgage needed to be refinanced defaulted, they all had to "mark to market" and their $20 bills turned into $2 overnight. This wiped out all the equity in all the homes in the entire neighborhood because of "mark to market" requirements. This resulted in all the subsequent mortgages that needed to be refinanced being "under water" (home worth less than the mortgage value) forcing people to either come up with a huge down payment for the refinance or default ... which made things even WORSE. When interest rates are at historic lows, you do NOT put people who can barely afford the payment into an adjustable rate mortgage. This is because when rates are at historic lows, there is a better chance they will rise in the future than fall ... which they did ... and mortgages adjusted up and out of the affordability range of the people holding them. IDIOTS |
| Posted by: crosspatch 2008-11-25 12:14 |
| #7 I don't get it. Why does Citigroup get bailed out and the auto makers don't? Somebody must have the right connections in Washington is the only answer I can come up with. This stinks. Citigroup should FOAD. |
| Posted by: Abu Uluque 2008-11-25 11:38 |
| #6 Heck, they're eating the cookie dough. No wait...they're just huffing the powder out of the package. |
| Posted by: Procopius2k 2008-11-25 11:24 |
| #5 All the more reasons for them to not get (see:steal) my children's money. That president elect better get ahold of his contemporaries in congress else he will go down in history but not for the reasons he wants. Hey BO, congress is shitting in your trophey cup - they are acting like toddlers without a baby sitter and know cookies are in the jars. |
| Posted by: swksvolFF 2008-11-25 11:06 |
| #4 Color blind. Under ADA protection. |
| Posted by: Glenmore 2008-11-25 09:23 |
| #3 > Is there any other answer? Bankruptcy (the only real option). |
| Posted by: Bright Pebbles 2008-11-25 09:05 |
| #2 Will Robert E. Rubin please report to the baggage handling area. Robert E. Rubin. |
| Posted by: Besoeker 2008-11-25 07:49 |
| #1 Is there any other answer? Didn't think so. |
| Posted by: gorb 2008-11-25 05:20 |