The "hidden debt" of the financial industry is the heart of the problem

[SoCalDem]

Most of these "institutions" had loaned a lot more money than they could afford to , and they are still hiding those "exposures"...while they "hope" things will "work out"..

What needed to happen in Sept, was for the govt to nationalize them ALL, until a thorough audit was done, and then re-capitalize the ones that were less egregious in their lending.

No one has confidence in ANY aspect of the financial infrastructure.

Throwing TARP money at banks (the very ones who started this whole mess, and perpetuated it gleefully) was a mistake.


From 2001 to 2008, banks loaned out money to sellers for homes, that were NOT WORTH the money they loaned out (once the bubble popped). They gave that money to SOMEONE, and the "someones" are not giving it back.. The "buyers" owe it PLUS interest, but many of them never could afford to pay it back, THEN..and surely cannot NOW..

The only "winners" here are the folks who presciently sold out in 2004-2006, paid cash for a smaller, cheaper place and put the rest of the money into plain ole bank CDs, or they rented. If they re-invested in a higher priced house they are in a fix now too.

Musical Chairs is a game that even a 3 yr old can grasp. The financial industry has been playing Extreme Musical Chairs with the money-supply, and once the music stopped, most of them lost out.. there can only be ONE winner at that game..everyone else loses..

....

Bank "loans" $400k for a mortgage.."buyer" pays interest only for 3 years..house "value" drops to $200K, payment resets several hundreds a month, and they walk away..

Bank "sold" the original loan immediately, and the mortgage is "owned" by ??? Whomever "???" is, is on the hook .. The people who walked, have ruined credit (not unusual these days), they are back to renting (where they probably should have been all along).. The originating bank has been out of the mix for a long time, but they may have been trading in these Mortgage-backed-securities too, and someone down the line who "owns" the paper, is going to lose half (or more) of that $400K mortgage.

multiply that by millions, and throw in the rest of the world's countries who bought these worthless MBSes from our august financial institutions, and it's not hard to see why we are on the edge of financial doom.

These institutions need to be scrubbed..top to bottom, and a big-ole RE-SET needs to happen..sooner...not later (after we have wasted more billions of dollars)..

Stockholders Will lose? BooHOO..stock buying is GAMBLING now.. It stopped being "investing", a long time ago.

CEOs/CFOs will lose? BooHOO..they made a killing for a long time, and the game's over now..

Until we KNOW the total extent of the REAL losses, we cannot address the "fix". None of the banks want to own up to their real losses, and will not, until they are FORCED to,.

We're still treating the cancer that our financial system has become, with baby aspirin.

[sandnsea]

1. Bloated stock values is the heart of the problem

Doing banking based on stock values and ratings that were 90% pure air is the heart of the problem. The mortgages never were enough to cover the phony stock balloon these insitutions created. I don't think there's any way to fix it except start from scratch and build a new industry. And then regulate these damn banks so completely that this can never happen again.

[SoCalDem]

3. Yep.. We have to break it all apart and start over

and turn investing back to what it should have stayed..

WallStreetCasino needs to shut down..

[Greyhound]

5. How about putting the function of currency supply back into the hands

of the people as it was intended?

Article 1 section 8 says nothing about a private, profit seeking organization controlling the nation's currency.

[Greyhound]

2. This is why I love DU.

There are so many here that see through the BS and just throw the truth out there.

This is not that complicated when you don't have an agenda to protect.
:kick: & R

[kirby]

4. The problem...

The problem with hitting the 'reset' button as you say, is that things are so extraordinarily leveraged that it is very complicated. For each of those loans and mortgage backed stuff, there are credit default swaps which contractually need to be paid if things reset or things are nationalized. It is one big tangled globalized cluster fuck.

I think this is why you hear so many people chanting to 'suspend mark to market'. That delays the inevitable even longer so the true situation remains hidden.

I dont think the country / world is in enough pain to hit the reset button yet. As evidenced by the outpouring of support for Rick Santelli yesterday.

Another missing piece is putting those responsible in prison. CEO's of AIG, Mortage brokers/appraisers who lied, Hedge funds who manipulated stuff. Until that happens, people will not want to sacrifice even more.