The coming financial crisis

[Phanatic]

So Wachovia (one example) who sold the loans isn't even paying the ultimate price for starting this mess? Though I did hear Wachovia had some problems and here in St. Louis the Feds raided them or something.

[Geowhizzer]

My mortgage has changed hands several times.  We started with Wells Fargo, and it's been sold and re-sold.  Can't even remember who owns it now.

[PoopyfaceMcGee]

My mortgage has changed hands several times.  We started with Wells Fargo, and it's been sold and re-sold.  Can't even remember who owns it now.

Right, and the entity to which you make payments might not even be the one that really has skin in the game.

It's fun.

[Butchers Bill]

So Wachovia (one example) who sold the loans isn't even paying the ultimate price for starting this mess? Though I did hear Wachovia had some problems and here in St. Louis the Feds raided them or something.

Generally, the Wachovia's, Soveriegn's, and Commerce Banks are being effected much, much less than the big houses because they sell off their mortgage holdings.  Wachovia does have some problems but they should be OK.

The consumer banks make money on fees, not the mortgages themselves.  In order to maximize their fee intake they have to be able to churn a certain number of mortgages out week in and week out.  In order to have the capital to do that they have to sell the mortgages they take in from consumers to get the money "back", to loan it out again.  They actually rarely hold the debt on their books.

Wachovia et al, was simply feeding the appetite and greed of the big firms.  I wouldn't blame the originators so much as the big guys who bought the stuff.

[rjs246]

Are we seeing cracks in the free market self-regulation theory?

The interesting thing about capitalism is that it requires a free market to thrive in the immediate/short term but in the long run it requires regulation. Without regulation it will literally burn itself out and result in a series of monopolies because the best, cheapest and most streamlined product can and will eventually eat up the entire marketplace in a free market. Once in place, monopolies represent the exact opposite of the capitalistic ideal of a competitive marketplace, but a truly open market will inevitably lead to them.

The failures of all of these financial institutions seems to me to be an example of this. The mortgage marketplace ran unchecked for years and companies were falling all over themselves to make easy money in questionable ways. When the bills came due and no one paid some of the major players lost their shirts, leaving fewer of the major companies to fight for their share of a marketplace. Taking a step closer to a monopoly.

Anyway, the idea of 'the marketplace' regulating itself is nonsense, regulations need to be put in place and enforced and that isn't hippy leftist nonsense. They are needed for the sake of continued capitalistic competition and the expansion of wealth.

[Seabiscuit36]

in 3 years BOA will be Bank of Earth

[rjs246]

in 3 years BOA will be Bank of Earth

Exactly my point.

[Cerevant]

So Wachovia (one example) who sold the loans isn't even paying the ultimate price for starting this mess? Though I did hear Wachovia had some problems and here in St. Louis the Feds raided them or something.

Generally, the Wachovia's, Soveriegn's, and Commerce Banks TD Banks are being effected much, much less than the big houses because they sell off their mortgage holdings.  Wachovia does have some problems but they should be OK.

The Toronto Dominion is commin to get ya, eh?

[Phanatic]

in 3 years BOA will be Bank of Earth

Exactly my point.

It does seem like this 'crisis' is causing consolidation so that there will only be a few large players left controlling everything. The capitalist model eats itself?

[rjs246]

In the absence of regulation? Absolutely.

[ice grillin you]

how do the rich get flithy richer with regulation in place?

[rjs246]

A wicked jump shot?

[Diomedes]

I would like a more nuanced explanation, or more honest if nuance is not required, of why the Fed bailed out Bear Stearns but not Lehman Bros or Merrill Lynch.  What I hear on the news is "line in the sand" mumbo jumbo, which sounds like a bunch of crap to me.  Was it simply because they went first, and so they got lucky?  What their situation a less risky one for a bailout? 

[Phanatic]

They had to cut off the free corporate hand outs somewhere!

[General_Failure]

A wicked jump shot?

That only gets your rich, not rich enough to employ the guy with the wicked jump shot. Or buy a giraffe.