Madoff vs Mortgages

The last several months have been filled with reporting about Bernard Madoff. We’ve also heard a lot about mortgages. Many seem to want to crucify the people who took out a mortgage to buy a home and now are having trouble making their payments. Why are these people not considered to be victims of a corrupt system? Rick Santelli considers them to be “losers.” And why are the people who invested in Madoff seen as victims of a corrupt system? Why isn’t Santelli labeling them as “losers” as well?

The people who invested in Madoff should have known better. Perhaps there are many who invested in Madoff and didn’t lose all of their money. The news media does not tell us of these investors, however I assume that they exist. The news media does focus on those investors who lost everything with Madoff. Why did these investors do this? They broke several of the most basic rules of investing. They did not diversify (they put all of their money with Madoff) and they did not invest only money that they could afford to lose.

Don’t get me wrong, Madoff is a crook and deserves what is probably coming to him. I am simply wondering why these two groups of victims have been treated differently by the news media. Is it because one group is poor and the other group is/was rich?

Karl Rove Or Streakers?

I would pick “inebriated and naked bankers” over Karl Rove any day of the year. No contest.

On second thought, screw all of them. I’m not very happy with mortgage bankers these days either.

From Protests and Hecklers Have Mortgage Bankers Longing for Good Old Days by Jesse McKinley:

It was just another business-as-usual day at the annual convention of the nation’s mortgage bankers: a few panels, a few presentations and an attempted abduction of Karl Rove.

Mr. Rove, the Republican strategist and former adviser to President Bush, was accosted onstage during a convention panel here on Tuesday morning by a protester who tried to handcuff and arrest him “for treason.” Mr. Rove tried to elbow her away before she was taken offstage.

No one was injured and no arrests were made, but the stage-storming was just the latest outburst at an event that usually packs all the excitement of a mortgage calculator. On Monday, another panel was interrupted by protesters demanding a moratorium on foreclosures, and hecklers screamed at attendees through bullhorns outside.

The convention was booked for San Francisco well before the national mortgage meltdown, the $700 billion bailout and all the recriminations between. But the rancor of the protests and the general malaise in the mortgage business has left more than a few conventioneers, like Gregory B. Lucas, a mortgage broker from Pomona, Calif., fondly remembering the good old days of the industry’s gatherings.

“We had streakers during the 1990s, but that was a joyful, happy thing,” said Mr. Lucas, who had been coming to such events for 20 years and recalled how a group of inebriated and naked bankers had once entertained the crowd. “But now everyone is blaming us for everything.”

Read the rest here.

Maybe if they had kept their clothes on and stayed sober we wouldn’t have had a subprime mortgage meltdown.

The Toxic Mess Is Your Own Damn Fault

At first I thought she had made a mistake, a slip of the tongue. She said Main Street when she meant Wall Street and vice versa. On reflection, I think otherwise. I think she is reaching out to those who believe this garbage, that basically it is poor people who caused the sub-prime mortgage meltdown.

Sick And Tired Of Reading About The Bailout?

If you’re not, try the following tidbits.

If Bush is for anything, I’m usually against it. Never did trust the man, and now I trust him even less.

From Bush Presses House to Pass Rescue Package by Carl Hulse:

The day after the Senate strongly endorsed a $700 billion economic bailout plan, the administration and Congressional leaders tried to muster support on Thursday for the rescue package ahead of a crucial vote in the House.

Speaking after a meeting at the White House with representatives of American businesses, President Bush said it was essential that the House “get this bill passed so we can get about the business of restoring confidence” in the financial system.

From Salon Radio: David Cay Johnston on the bailout by Glenn Greenwald:

Glenn Greenwald: My pleasure. So, I want to begin with a piece that you wrote, actually last week, as the financial crisis was literally exploding, and you wrote at poynter.org, at the Romanesko site, a place where lots of journalists talk to one another, and is a very popular site among professional journalists. And you essentially issued at the time an admonition in advance, about what the media should do and in particular what they should avoid in covering this financial crisis. And in particular, you said -- let's not make the same mistakes as were made with the run-up to the Iraq War, and the PATRIOT ACT that so eroded our credibility, in terms of how we cover this financial crisis.

What did you mean by that, and have those admonitions been largely followed in your view?

David Cay Johnston: Well, what I meant was, the line I opened my piece was, "Journalists, start your skepticism." The core value of journalism, the first rule of a journalist is check it out. Just because the President of the United States says something doesn't make it so. And so my initial concern was, is there really a crisis going on, and if there is, let's hear the case - tell the government we want a comprehensive, comprehensible and clear explanation of what the problem is, and then journalists should begin questioning that, and checking things out, and cross-checking them, and then they should begin looking at the solution. We've been told there's only one solution. Well, a whole group of economists have come forward with solutions. I proposed one area that might help ease this crisis.

We've been seeing some of this. Some of the journalism has been better, some of it has been atrocious. And I'll give you an example of the fear-mongering I see going on now. Monday night, after the bail-out was rejected, Katie Couric opened up the CBS Evening News with the clerk reading the vote total, and said: "that sets off the biggest decline in stock prices ever." Well, it did not - it wasn't even close to the biggest decline. Brian Williams on the Nightly News said the very same thing - the worst single day drop ever. That's just wrong. And there's an enormous amount of just wrong reporting going on.

From Why the Bailout Sells America Short by Nomi Prins:

The $700 billion bailout bill that failed in the House after a dramatic Monday afternoon vote addressed many things, but not the regulatory vacuum that allowed Wall Street to get us into this mess. Wrapped in a bipartisan bow, this plan—dubbed a "rescue" package on the Hill and a "bailout" elsewhere—will neither save the economy nor permanently shore up Wall Street.

Across the media, the proposal has been described as the largest government intervention since the Great Depression, but it by no means delivers the financial stability to the banking system or the economic security to the general population that the post-Great Depression Glass-Steagall Act of 1933 did.

I really like the title of the following one.

From Why Bail? The Banks Have a Gun Pointed at Their Head and Are Threatening to Pull the Trigger by Dean Baker:

If you have a real story, you don't have to make up phony stories. That's pretty straightforward.

I've heard lots of phony stories. Much of the country's political and economic leadership has been running around raising the prospect of the Great Depression and a breakdown in the banking system (I actually had taken the latter seriously). These stories are absolutely not true.

There is no plausible scenario under which the no bailout scenario gives us a Great Depression. There is a more plausible scenario (but highly unlikely) that the bailout will give us a Great Depression. There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. We will not lose our modern system of payments.

At this point I cannot identify a single good reason to do the bailout.

Perhaps Wall Street changed their aim, Mr. Baker?

From Wall Street Held a Gun to Our Heads by Dean Baker:

The $700bn bail-out bill is a victory for wealthy bankers who exploited fears of a financial crisis for their own gain.

Most authors of books on politics or economics are happy when they get one or two prominent members of Congress to endorse their work. It looks like I'm about to get majorities of both chambers to endorse my book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (free download available). There is no other way to describe Henry Paulson's $700bn bail-out deal.

The point of my book is that the battle between progressives and conservatives is not about a policy of government intervention as opposed to free market policies. Rather, it is a battle between those who want to use the government to benefit the middle and bottom of the income distribution and those who want to use the power of government to redistribute income upward.

The bail-out is a big victory for those who want to redistribute income upward. It takes money from school teachers and cab drivers and gives it to incredibly rich Wall Street bankers. These bankers have in turn distinguished themselves by their incompetence, having driven their banks into the ground.

Steve Chapman sees a gun, too.

From Bailing out Wall Street with a gun to our heads by Steve Chapman:

The late comedian Jack Benny made a career of claiming to be a cheapskate. In one joke, a robber accosted him and said: "Your money or your life." Getting no response, the thug repeated his demand. Benny replied, "I'm thinking about it!"

That's the sort of dilemma posed by Henry Paulson and Ben Bernanke in their proposed rescue of financial institutions. They predict dire consequences if they don't get their way. But the consequences of letting them have their way are so awful that the alternative doesn't look so bad.

What they prescribe is for the federal government to buy $700 billion worth of lousy assets from banks and other lenders, exposing taxpayers to a potentially crushing liability. This plan would nationalize the money-losing part of the financial sector, to the benefit of capitalists who have made spectacularly bad decisions -- fostering more bad decisions in the future.

And finally, I’m not sure if they were shot by a gun or not, but many subprime lenders are no longer with us.

From Subprime’s dearly departed by Ronald Campbell:

The list of major subprime lenders for 2006 and 2007 resembles the casualty roster from the Battle of Verdun in World War I. Only difference: way fewer walking wounded this time.

Of the 30 biggest subprime home lenders in 2006, measured by dollar volume, 22 have gone bankrupt, shut down, been sold or been seized by Uncle Sam. Most of the survivors have scaled back.