The Mysteries Of The Collapse

While I was in Europe, the world celebrated the anniversary of the collapse of Lehman Brothers, the financial house at the center of the mortgage meltdown. Like everyone, the fact that it has been ten years since the world teetered on the edge of the abyss slipped my mind. It is important though, to think back on the last decade, since many economists and analysts still think it was a near-death experience for the world. Danish television was playing the movie The Big Short, which was based on the great Michael Lewis book.

As to the crisis itself, a few things remain remarkably obscure. One is that the best minds on this stuff still cannot bring themselves to notice the biological element. Blacks and Hispanics were wildly over-represented in the default numbers. The only analysts and commentators, outside of those on this side of the divide, to notice this fact, do so in order to “debunk” it. These are the folks who run around making sure everyone in the human sciences says “race is a social construct” five times a day while facing Frankfurt.

The other mystery is that the so-called experts still have not explained how the sub-prime mortgage bubble formed, why it went unnoticed and what happened in the after math. Even a decade on, it is hard to get reliable numbers on the quantity of mortgages that constituted the bad paper. The only thing that the experts agree upon is that the lowering of lending standards created a speculative bubble. The result was a wave of over-lending and over-building, that led to the great mortgage bubble which burst a decade ago.

Currently, the druids from the grand economic council claim that eight million people lost their jobs as a result of the recession that followed the collapse. That seems small, given that the labor force is roughly 160 million. That means unemployment would have gone from about four percent to just under ten percent. That’s the official line from the druids in the academy, but it certainly does not fit with the narrative about this being a near-death experience for the economy. Those numbers suggest a fairly common recession.

Another part of the official narrative is that super-smart druids from the academy rushed in and saved the world from ruin. That’s an interesting aspect of this story. Economists all believe that the Great Depression could have been thwarted, and as a result the events that followed could have been avoided, if central banks had expanded the money supply in response to the crash of ’29. Therefore, the reason this crash did not result in world war and the rise of you-know-who was the central banks expanded the money supply.

Another number that was presented at the end of the film was that the collapse resulted in six million foreclosures. This number is hard to judge, other than the presence of the mystical number six. There’s no question that lots of people lost their homes. It’s also true that lots of connected people cashed in on this by quietly investing in house flipping operations that preyed on the vulnerable. I recall being in Las Vegas sometime after the crash and thinking that the only guy getting rich was the guy selling “For Sale” signs.

Of course, the inability to figure out the details of what was billed as the greatest economic event in world history since the crash of 1929, may have something to do with who was responsible. In a world run by bankers of a certain sort, it is probably a bad idea to point out that the bankers were responsible for destroying the economy. The economists start from the assumption that the failure was not systemic and not deliberate. They seem to view it as a weird accident like leaving the coffee pot on before leaving for work.

It’s like the bias toward normal distributions that Nicholas Taleb discusses in his book, The Black Swan. This blind spot for various aspects of the crash is not the result of some complex conspiracy. Economists are not sitting around plotting to obscure the facts from the public. They simply start from a set of assumptions that rule out things like a cultural bias that manifests as a systemic bias. They can only think systemically within the accepted parameters of the system itself. That means ignoring lots of possible answers.

Like the Great Depression, the mortgage collapse of 2008 has created a specialty of study within the field of economics. PhD’s in economics will be based in this event for generations, assuming the we make it that long. Each book and paper will fill in a bit of the official narrative until the only people questioning it will be cranks and oddballs. This is how religions evolve. As long as the disaster is not repeated again in the near term, the ambitious will be happy to go along with the conventional wisdom.

Another part of the official narrative is what is assiduously excluded from the official narrative. For example, the fact that no one was held accountable for the disaster. Take, for example, Franklin Raines, the head of Fannie Mae. He walked away with millions, never having to answer for his crimes. Angelo Mozilo, the guy in charge of Countrywide Financial, was allowed to avoid acknowledgment of wrongdoing and criminal charges, by paying a relatively small fine to the SEC. He retired a gazillionaire.

Just as important, as Steve Sailer likes to point out, no one even mentions that the Bush Crime Family was largely responsible for the sub-prime loan disaster. It was the Bush administration that pushed banks to drop their lending standards as a part of the “ownership society” campaign and the desire to buy votes from migrants. In fact, the political class emerged unscathed from the disaster. If anything, the catastrophe that was the Bush administration strengthened the managerial state’s stranglehold on society.

Here’s where you see the race obscurantism warp official reality. To focus on the wrongdoings of the Bush people, would require acknowledging some unpleasant realities about diversity. For example, default rates for blacks and Hispanics were three and four times the rate for whites. Similarly, the people targeting these groups with bogus loans were doing so because they knew they were not savvy enough to understand what was happening to them. That opens doors that must remain bolted closed in this age.

My own view on this, to wrap up the post, is that the financial system is built on the biases of the people who control it. A system designed by people who keep a bug-out bag next to their desk, and leave their car running in the parking lot, is never going to incorporate long term risk. Ours is a parasitic system that is designed to drain the blood from the American middle-class. The patches and remedies to keep it going are just that, quick fixes to keep the blood flowing. Eventually, the host will die and the bankers will move on.

110 thoughts on “The Mysteries Of The Collapse

  1. Z… I’m surprised that you link “…no one even mentions that the Bush Crime Family was largely responsible…” to the subprime crisis.
    Not a word about “Community Reinvestment Act” of 1977″ ?
    As far as I know… Carter was president.

  2. I’ve always been somewhat befuddled by the hyperbole of ‘Worst Financial Crisis since the Great Depression.’ Maybe I’m too damn old, but when did all this leapfrog the Jimmuh Carter days?’ Shid was off the chain with peanut head- unemployment, interest rates and inflation around double-digit, and of course who can forget the Misery Index.

  3. An excellent book was written about the 30 year build up to the 2008 crash. Called “The Sellout”, by Charles Gasparino. It is extremely well documented and detailed.
    It’s a good read for those who would like to learn the full length “backstory” of what happened.

  4. This reminds me of the post, allegedly on software, about ‘sometimes it is just better to start over again from scratch.’ The modern financial market is completely intransparent and hypercomplex. And I dont think any single individual fully understands it.

    But I do believe this ‘obscurity in complexity’ is part of a new strategy to deliberately mislead. And it could well be a rational strategy for a high IQ elite to mask their intentions and power from ‘the masses.’ Then there will be a branch of slightly sharper tools in the shed who feel ‘left out of the fun’ and some of us may count in those ranks??

  5. With all due respect, the CRA/ “Ownership Society”/ Affirmative Action angle wasn’t the prime driver. It was the latest in financial engineering , the combination of tranched Mortgage Securitization and Credit Default Swaps. Huge amounts of money were being made by inducing rating agencies to give high ratings to complex bundles of crap, the Mortgage Backed Securities. The agencies were paid by the bundlers so any staff who made a stink were canned. Pension Funds and and others bought the MBS on the high ratings plus the historically low mortgage default rate without understanding the crap they were buying. The bundlers provided the buyers with enormous complicated descriptions that might have warned the buyers off but we’re mainly used to insulate the bundlers from fraud liability. In that they worked perfectly.

    The risks were further distributed and hidden by the Credit Default Swaps. This in reality amplified the risk hugely, since the CDS terms required delivery of the underlying MBS upon default. The problem was that an MBS was often sold off in parts, and each part could have a long chain of CDS transactions. Apart from direct counterparties, no one knew who owned what. So when the music stopped, this whole multitrillion market just froze up.

    Did I mention that huge fees and spreads were also made in the CDS market?

    Back to our honest community bankers forced to make bad loan. Like a lot of scams this mess could not just stop, it needed to grow, always, like a Ponzi scheme. Hence the insatiable demand for more more more mortgage loans. But it would inevitably pop like all bubbles, if not before then when prices and demand rose to the point when even minimally plausible credit applications dried up.

    Toward the end you had to be a complete idiot not to see what was happening. But that didn’t stop many people. As the head of one big operation said afterwards, “Well, as long as the music’s playing, you have to get up and dance.”

    Sorry this is already way beyond tl:dr so I’ll stop but I could go on. I was there.

  6. I chuckled my way through this one, with a few guffaws along the way. The last sentence brought ne up short. Where will the bankers run when it all does collapse.

  7. I met with a stock broker two days ago. He was discussing risks and mentioned the beta risks of portfolios:
    I mentioned, pace Nassim Taleb, that this does not measure right tail risk at all. That the financial crash was in no way anticipated or cushioned by this (useless) metric. If something happens infrequently it can’t be modeled. Like trying to predict if a black swan in fact exists from looking at all know examples of white swans.
    No machine learning can predict data that never existed before. As AI takes over these types of risk will haunt and affect us.

    • The way I like to explain it, is that Wall Street likes to talk about the equivalent of batting averages, when what investors want to know is what is going to happen in the next at-bat. Investing is about finding a satisfactory return amongst the probabilities inherent in an investment environment clogged with an infinite number of variables. The way to save your skin in an adverse outcome is to not bet too heavily on any one set of outcomes. A fundamental problem with Wall Street is that investing is actually gambling, and the g-word is verboten in talking with clients. But the survival and success techniques are similar (map the probabilities, size up your opponents, and size your bets).

  8. “These are the folks who run around making sure everyone in the human sciences says “race is a social construct” five times a day while facing Frankfurt.”


  9. I was a consultant for both F’s, but mainly Fannie, and also for several Citi units that were responsible for making the loans that collapsed. I was on the ground level, in charge of creating classes for employees of both the Fs and Citi in making sure these loans went through. From the perspective of the front lines of both organizations, the mentality was simply that these loans had to be made or their organizations would get in tremendous trouble with the government. The F agents were in charge of working with banks to get them to make loans which could be packaged by the Fs and sold in turn to other financial institutions; the people at Citi were on the ground trying to make these mortgages happen. The classes I developed were for teams of salespeople, their managers, and the underwriters to get these mortgages approved.

    Underwriting is actually a science, and extremely accurate if the numbers are large enough, so everyone’s goal was to introduce new variables that would enable the underwriters to jiggle their numbers. For example, one initiative I was involved in enabled underwriters to take into account the potential future income of the buyers (during an economic boom; what happens after?), the value of the land (but this was based on values inflated by lower lending standards), and future utility of the land (ditto).

    The point I’d like to make is that on the ground level, all they knew was that a percentage of mortgages, as mandated by the federal government, had to be made to borrowers who under proven mortgage actuary science would not be able to pay back their loans in the percentages that would justify the lending rates they were given. The realtors — never underplay the influence of their lobbying power, it’s huge–, the construction industry, the banks, and the politicians and their cronies, made a fortune. The “moral justification” was a screen.

    • Thanks for bringing this up.

      Yes – the loans to people who were completely unable to pay was the doing of the Federal government. As you pointed out – underwriting is a science and banks don’t typically make stupid loans without a lot of “incentive” ( a gun to the head is a good incentive).

  10. Karl Denninger was all over the fraud of the housing bubble.

    It was widespread, pernicious fraud, from end to end, en toto. And to date, not one person has gone to prison.

    • Yeah, Unknownsailor, KD was a pioneer in agitating for prosecutions, and for incentives to minimize leverage.
      Too bad he so wantonly wields the Ban Hammer, that he drives off thoughtful critics.

  11. Parts of CA were ground zero for the RE bubble. I remember it quite well, entire housing tracts were being populated by illegal aliens and poor blacks. All thanks to NINJA loans and balloon mortgages.

    Anyone could get a home back then. Although at very high prices. We had two room shacks out in Mojave, CA go for $95,000.00 at the peak. Guys were quitting well paying jobs to flip homes. One man I knew had 24 homes he was flipping at one time.

    That wasn’t the worst. Other idiots were treating their homes like ATM’s with HELOC’ and going nuts buying cars and all sorts of expensive shit.

    The RE agents were totally giddy at the time as well. They were selling one to two homes a week at $350k a pop. They believed that homes would eventually go up to a million dollars. When I heard that, I knew the bubble was going to pop.

    It did 3 months later. Entire tracts went empty, people moved out in the middle of the night, leaving their pets behind. And often the homes were thrashed. In my area alone we had almost 8,000 homes in default at the peak. Maybe 10,000 IMS. BTW this is a desert community of 300,000 people.

    What was worrisome, is that people got scared at that point. They saw their 401K turn into a 201k and all their home equity vanish. Consumers stopped consuming. The train that runs through my town about every hour that brings in Chinese goods from Long Beach, It went to about 2-3 times a day.

    All it would have taken at that point to have the people hunting the elite would have been banks closing. The elites barely dodged the bullet that time.

    Next time, they won’t. The current bubble is beyond patching if it bursts.

    • Ironically, Rod1963, it may not be beyond patching, if FoFoA etc. are right (about the Freegold patch).
      (See my above reply to Lance, at 12:52 PM.)

      However, it’s likely that, if the Freegold patch works, many current elites will become paupers.

    • Rod;
      Good points about the greed and frenzy of the period. I recall it too as an observer scratchin’ ma haid.

      No swindle works without the greed and stupidity of the mark. Hence the literally true saying, ‘You can’t cheat an honest man’, meaning you’re unlikely to be swindled if you are not inclined to take what you know to be unfair advantage of an *apparently* foolish mark (actually the con-man).

      So, greedy, short sighted folks used their houses like ATM’s or bought mega-houses they planned to mail in the keys on once the ARM reset. And many of them got burned. As a sign of how f**ed up our culture is now. somehow these folks became the innocent victims of the evil banksters in the big narrative. Not that this absolves the banksters, it’s just that both are guilty.

  12. I think also the generational angle cannot be ignored.
    It’s like I told my son who is a millennial, (I’m a genxr) the generation that grew up in the greatest period of growth and relative safety, decided that instead of taking on the chin they would borrow from the next two or three generations.
    That is what will continue, we don’t live in one America, we live in several.
    There’s Boomer America, the America that gives it all away: jobs to China, NAFTA, basically dismantling “their “ inheritance and selling it to make their wealth go a little further.
    There’s Gibs me dat America, the Black, Female, Brown, Latino, Handicapped, whatever America that lives off “need”
    Then there’s us, “Americans “ who will see how far we can bend now that the rich Boomers have squandered everything and will join the Gibs me dats plundering us.
    I told my son that at the same time everyone calls his generation “snowflakes “ and lazy they are importing and entire new generation of hardworking immigrant Americans to replace him.

    • Atlander…….I’m a mid-60’s Boomer and I didn’t vote for or even think of anything you said about my generation. I drove truck cross country, worked hard and lived my life. I’m so far from being rich that Church Mice take pity in me and give me a few scraps once in a while.

      Jesus H. Krist, what was I supposed to do? Rub a crystal ball and diabolically cackle with glee as I raped the environment, screwed the workers and bombed the world? All the while living like a King and having my filthy way with vestal virgin. Gee wiz, I missed out on that party.

      Because that’s All. I. Hear on the Internet. Hatred for boomers. Tell me….please tell me what I was supposed to do. I’m all ears. Let’s settle this.

      • How can we settle anything? Whats done is done, sorry bout your generations legacy.
        I used to hear from boomers, “sorrry you kids are gonna get stuck with the bill and the mess”
        My reply was this, don’t feel bad for us, I can keep working and get it back, YOU are retiring into the worst most uncertain time since the Civil War, what will you boomers do? Probably make it legal to adopt immigrants as long as they take care of you.

        • Altlander…..That’s a nonsensical reply. It does not address what I was asking. Since you seem very confused and angry, here is my question again in a different frame of reference:

          What specifically would you have done, in my place, to change the future?

          BTW, if you ever actually heard any “Boomer” saying something as ridiculous as “sorrry you kids are gonna get stuck with the bill and the mess”, then you were delusional and most likely smoking something toxic.

          NOBODY ever said that, but it sounds good to you so you went for it.

      • Personally I don’t see this as much of a generational thing as I see it as an ideological thing.

        The generations get swept up in the blame game because by and large generations adopt the prevailing bullshit that dominates the time period they grew up in.

        The generations thing seems like horseshit to me anyway. I was born in 1964 – and lately I keep getting called a boomer. Twenty years ago – I was Generation X. Not quite sure exactly how I’d fall into the category of a boomer seeing as how I was born almost twenty years after the war ended – and my parents were born during the war years. The people I consider to be Boomers are anywhere from 10 to 20 years older than me – and didn’t have the same cultural experience I had at all.

        I agree with your overall point though. Most people I think are just caught up in the shit stream and trying to make their way thru the world. Trying to buck the prevailing winds just makes it that much harder. Most people won’t even try to do it.

    • As soon as the Federal Reserve came into being in 1913 – the current generation was borrowing from the future with no intent on paying it back. The train sped up in 1935 when Social Security was created. The hard money crowd knew damn well what the Federal Reserve meant – and were against it when it was created. There’s a reason why Andrew Jackson shut down the National Bank.

      There were people calling out Social Security for the Ponzi scheme that it is – at the time it was created.

      Everybody seems to be blaming the Baby Boom generation for what is going down – when in reality it’s the inevitable result of things that the progressives laid in place over a century ago.

      Those things were put in place on purpose – because the Republic as it had stood – was not up to the task of empire and the centralization of command that was needed to run that empire.

      The big money people also didn’t like the fact that there was nothing in the system backing them up and could (and did) lose their fortunes to the whims of capitalism. Which is of course entirely as it should be.

      If you want an instructional on how the Federal Reserve has screwed the deplorables – go to the Wikipedia page for the US dollar:

      and then scroll down and find the chart labeled ” Buying power of one U.S. dollar compared to 1774 USD”.

      Here’s a quick synopsis:

      US dollar worth in 1774 = $1.00
      US dollar worth in 1900 = $0.96

      US dollar worth in period between 1774 and 1900 varies from as high as $1.03 to as low as $0.59.

      US dollar worth in 1910 = $0.85
      US dollar worth in 2012 = $0.03

      You could have stuck $1.00 in the bank in 1774 – and even with no interest – still had it have been worth 96 cents in 1900. That’s 126 years.

      If you stuck 85 cents in the back in 1910 – right now it would be worth less than 3 cents. Go look the yearly tracking for value since 1910 – it’s nowhere but DOWN. Inflation is a tax in case you didn’t know.

      Who do you think funds all this progressive shit anyway? It’s you. One way or another.

      • “The big money people didn’t like that there was nothing in the system backing them up, and they could (and did) lose their fortunes to the whims of capitalism. Which is of course entirely as it should be”. Money quote, right there. The financiers bought off the politicians (cheaply), the Federal Reserve was created, and the rest was history.

      • “Republic as it had stood – was not up to the task of empire and the centralization of command that was needed to run that empire.”

        Tremendous comment. And that was, and is, the bottom line. Once you go Empire, you never go back.

  13. Couple of points (expanded on my blog). Bagehot in “Lombard Street” writes that the credit system needs two things: properly collateralized loans, and borrowers that can make their payments. If either is questionable (hello blacks and Hispanics) then people start to worry about the weak links.

    Second, in the central banking era (invented by the Dutch and cribbed by the Brits and then Alexander Hamilton) the government bets the country with its sovereign debt. This is win-win for rulers that have squirreled away their bugout money. But not, of course, for deplorables.

    You can blame greedy bankers all you like, but the government sets the rules on money and credit.

  14. Kurt Vonnegut once drily suggested that instead of “E pluribus unum,” the motto of the U.S. should be “Grab all you can, or you won’t get anything at all.” Looks like all the key players in this racket agreed.

    A simple (but not perfect) heuristic for all this would be to disaggregate the typical “means, motive and opportunity” checklist for crime-solving: viz. there are three players instead of one.

    Means: the various crooks who dine out on America’s childish, simple-minded and sentimental racial politics — libtards, Goodwhites, race hustlers, gibsmedats, and (((genocidal subversives))) who all saw a way to leverage NAMs to different ends.

    Motive: the Bush crime family and the hard Left, who both saw a way to make political hay.
    Opportunity: the banisters, who maliciously though quite rationally, thought, “well if the rest of you retards want to cut your own throats, at least we can profit selling you the razor.”

    • “banisters” should be “banksters” obviously; whoever writes autocorrect software needs to adjust for post-English usage.

  15. “ These are the folks who run around making sure everyone in the human sciences says “race is a social construct” five times a day while facing Frankfurt.”

    Don’t forget “getting on their knees mimicking the motions of fellating George Soros.”

  16. ZMan – I was listening to Frank Gaffne on the Radio on Sunday and he had a guest on who talked at length about something I had never heard reported before. He said that the crisis at Lehman was initiated by a coordinated short attack coming out of Quatar and led by the Saudis. He said that they suddenly made a huge short bet against Lehman (called the bank) which exposed the bad loans on the mortgage backed securities, once the massive selling started. It was described as a deliberate attack on a Jewish run financial institution by the Saudis. Just curious if anyone had heard about this before. The other question I have is when did this selling of mortgage backed securities start and who allowed it (I guess the SEC). Those people made a butt load of money off of those financial vehicles, but when the music stopped, only Lehman was allowed to fail.

    • I’ve never heard that one. I’ll look into it. The version I heard early on from people in the rackets is that Lehman was always seen as the downscale firm. Lehman traders took the train in from Jersey, while Goldman traders lived in Manhattan and used a car service. It could be baloney, but Wall Street is a very small club at the top, so petty tribalism is to be expected.

      • If only the MSM or Congress would probe into whether the Saudis got Paulson to throw Lehmann under the bus, and then bail out Goldman etc.

      • Lehman and Bear Stearns were the obvious two Wall Street patsies. As Z points out, there is, and was, a pecking order in the Wall Street club, and LB and BS were at the bottom of it at the time. If the Saudis didn’t tip over the apple cart, it was going to get tipped over anyway. Once the next victim is identified, pole on against it, allow Soros’ reflexivity to kick in, and a bunch of money is made off of someone else’s misery.

    • Oddly enough they tried MBS’s in early 20th century. It immediately turned into a bubble so the feds banned them. I can’t remember who, but some intrepid banker in the 70’s tried to revive them to some success. ibankers love them because you don’t have to deal with borrowers and people will usually do whatever it takes to avoid home loan default, so supposedly the risk is lower. I imagine they will stick around.

  17. The Federal Reserve IS a parasitic system.

    I know you don’t like to acknowledge libertarianish thinking – but Ron Paul and economists like Murray Rothbard have been all over this system for a long time. The Federal Reserve prints money – with nothing real backing it up. This is literally a “license to print money”.

    The dummies on the left constantly bitch about corporations and “rich people” stealing all the wealth – then they turn right around and bitch that the government needs more money to spend on non-productive people.

    Who the hell do they think gets to spend all that newly printed money FIRST? When you hand somebody a pile of freshly minted dollars and he’s allowed to spend it into the economy – then that person gets the benefit of all that money – while everybody downstream suffers the consequences. More money to spend = higher prices. This is a well known and proven economic effect. The housing bubble was largely driven by this effect because – as you pointed out: all sorts of people who shouldn’t have ever qualified for a mortgage were suddenly given money to buy houses because of FORCED lower lending standards.

    I don’t recall that being a Bush Crime Family effort either. The lower lending standards were driven (as usual) by left wing efforts to make blacks and hispanics part of the “ownership society” – and there was significant political pressure behind the scenes by the usual lefties to do so. Barney Frank if I remember correctly – was ass-deep in those efforts.

    The whole thing was also driven be abject stupidity on the part of home buyers. I bought a home in 1999 and expected that the whole thing was going to crash WELL before it did. The wife and watched and commented on how it seemed utterly ridiculous what some people were buying – the money just didn’t seem to be there.

    I remember the Boston Globe ran a series of articles after the bubble burst with examples of “people who were hurt” by the collapse. In one example a woman who worked cleaning offices at night – was able to buy a $400k-ish home in some Boston suburb. As soon as I read ” cleans offices” and “$400k home” – I knew where it was going. Within two months she’s not making the mortgage payments – so she gets her mother to move in. That put off the inevitable for another 6 months or so – and they were in foreclosure. The gyst of the article was how the bankers and real estate people screwed them – but the REAL reality was that these people were just stupid and couldn’t do basic math.

    I’d also add that they probably fell prey to the leftist propaganda about how they “deserve to own a home” – and all the rest of the utter horsecrap that was being pumped out at the time about how people with low wage jobs could “afford” homes way out of their price range.

    The housing boom and the resulting retardation was a perfect example of why I think finances are the key to the castle. The lefties whole experiment rests on a foundation of taxation and easy money. Start kicking the blocks out of the foundation and sooner or later the house falls.

    There’s a reason why the Federal Reserve was brought back right at the beginning of the progressive era in the early 1900’s and came into being right around the same time as women voting, income tax, elimination of the true militia, overseas adventures, and changing the voting for Senators as well as the restrictions on seats in the House.

    These pieces are all part of the same progressive puzzle.

    • If I recall correctly, George W didn’t invent the “ownership society” thing, but he bought into it wholeheartedly, once it was out there.

  18. “Another number that was presented at the end of the film was that the collapse resulted in six million foreclosures. This number is hard to judge, other than the presence of the mystical number six.“

    Oy Vey.

  19. My take on the crisis is that all economic actors acted in an economically rational response to misguided incentives created by the government and the central banks.

    Starting from the bottom, consumers who had no business owning a home rationally decided to buy a home. Why not? Fedgov had been pushing banks to extend credit to underserved communities. The central bank had been pushing down interest rates, causing asset prices to rise. Freddie/Fannie had dropped underwriting standards in the secondary market. Why pay rent for a shitty apartment in the ghetto when you can get into a nice, new home with a zero-down, no-doc, interest only 5-year balloon?

    Mortgage banks were cleaning up on origination fees and service fees. And as long as banks are lending builders will keep building. Enough said on that.

    In an environment of falling rates, investors were hungry for yield. And in response to this hunger investment bankers quite rationally structured mortgage backed investment products that generated yield up front, but with the default risk cleverly hidden in the 3-10 year window. Most of these structured mortgage products performed for the first few years. They began to fail when the balloon period in enough of the underlying mortgages expired and the homeowners could not afford to refinance. Of course, investment banks and hedge funds also made a ton of money shorting these products on the way down.

    Ultimately, this is a story about smart (and connected) people in investment banks praying on relatively dumb asset managers in pension funds and investment funds. The asset managers who bought these structured mortgage products clearly did not understand what they were buying, and they bought with leverage which significantly compounded the problem.

    Politically, the Cloud People learned nothing from this crisis, because they suffered very little. The Bernanke put forced a stock market recovery, so our 401k accounts recovered, as did our home values. The millennial generation generally sucks, but I totally understand why they are jaded about business and capitalism. They have grown up in an era of markets that were managed to effect a massive wealth transfer from their generation to their parents’ generation.

    • When the security of the system is based on “past performance”, and the financial instruments involved only resemble those of the past, but operate differently, that’s where the “black swans” come from.

    • Politically, the Cloud People learned nothing from this crisis, because they suffered very little.

      Oh, they learned. They learned that the tax payer will bail you out if you gamble high enough.

  20. 2008 was a weird moment, because the Democrats needed to blame everything going wrong on the powers that be, and make things look and be as bad as possible in the short run, all for votes. At the same time, they needed to play up the idea that their “really smart people” would make it all better.

    Flooding the system with cash did a good short term job of replacing much of the cash and equity lost in the quickly declining asset values. But we haven’t found any other method of coaxing prosperity along, other than constant financial stimulus. The elites scooping all the vig off the top means that you need a hell of a lot of stimulus to have it meaningfully help the average person.

  21. Both sides of the mortgage scam knew what was going on. The bankers knew that the loans could never be repaid and the mortgagees knew that there would be an eventual default, but they got to live high-on-the-hog for few years in exchange for an esoteric economic sanction that they didn’t care about anyway. The banker’s cut was the vig on the loan tranches and politicians made sure the debt became federal (see student loan debt for a similar scam). One of the advantages of the extinction of privacy is that the names of the culprits are now known to all. Can’t outrun the signal.

    • I’m not a banker, but 10 years ago I could have walked through the neighborhood and accurately predicted which houses would be foreclosed on. The lazy con-man with no legal form of income, and the weird druid family with the drug habit (who quit his job as a Postal Carrier when he won the grand sum of $60k in the lottery) would have been the easy guesses.

      Before the Sheriff’s auction, both owed far more than the houses were worth and hadn’t made a payment in years. An actual bank would never have handed these losers $700k – but a loan originator who just sells off the risks doesn’t care.

  22. My great granddad, who lived to the ripe old age of 106, owned, among other things, a bank. It was one of two banks in the region that didn’t fold during the depression. If anyone made a comment about him owning a bank he would inform them that the federal government has owned the bank since the depression, but they let him keep his office. And yet, he was a Roosevelt Democrat.

  23. Mortgages and the Bonds that enabled them were a low margin/low risk investment instrument. That is why the banksters were looking for ways to transform or pitch them as equities where large pools of dumb money would readily buy without fully understanding the risks. The markets had been booming and the banksters caused dumb investors to believe these equities would rise with the tide. This is how the money was sourced.

    On the other side, the Clinton administration started the loosening of the mortgage rules through legislation and Fannie Mae. The Bushes just turned the volume up as a result of learning from the Clinton success of getting votes by making it easier for people with no money and no income to get mortgages.

    For the poor, it was a great party while it lasted.

      • Let’s try the link again: .
        Seeing as that post is so long, scroll down to the section “Money Hoarding”, in which the author writes:
        “The re-lending of credits earned as surplus revenue simulates the money creation process, without actually creating any new money, again overvaluing the unit itself, as the credits enjoy a present purchasing power that would otherwise be lower, if new money had actually been created. Re-lending is fine and normal, to a degree. That degree is, where it is done *professionally*, with one’s own surplus revenue.

        Where it becomes hazardous is, when it is done systemically and *passively*, by savers who leave it up to *someone else* to determine the lending standards. All of this money circulates in the same pool, so using credits as the system’s reserves, and the passive savings of virtually everyone in the world, crowds the banks and professional investors within the financial and monetary arena. This crowding pushes the banks and professional investors into *riskier* and more questionable activities, in order to make a living.”

        • Another key passage from the above link:
          “… a glut of passive savings crowds active money out of prudent activities, thereby retarding the entire financial system. For years I have made the point, that investing requires *active specialization*, and should therefore not be a passive activity. That naturally-passive, risk-averse savers are a large and distinct group, separate from investors, traders and speculators, and that only in the present dollar-based international monetary and financial system (the $IMFS) are they forced to swim with the sharks.”

          • Bottom line:
            The above-mentioned mass flows of dumb money entice smart money to think *less* about the really-viable investments in productive innovations, and *more* about where the dumb money is going to flow, and about when the dumb money is likely to flee.

  24. I agree with your version and mostly blame the diversity engine for the crisis, but also the understood lack of accountability of the financial class enabled the situation by removing the correctives that should have been in place. As to the people who made money, sort of like bitcoin, I imagine I would take advantage of the situation too. Like as I always decried bitcoin as a bubble, but you can bet if I could go back I would gladly put a couple of thousand in bitcoin!

    OT, what do people think of this Kavanaugh situation? I find it eeiriely similar to that Alabama conservative who was recently derailed with 30 year old sex allegations, but I don’t know the details. Seems like the new sword of the left, to find some crazed female who will make up or imagine sec crimes to submarine conservatives at key times.

    • Well, first I would love it if Kavenaugh got derailed, because Trump could do better than Kennedy’s clerk. Unfortunately, the Dems are vicious and the TrueCons worthless, but the fix is in and the effort to stop Kavenaugh going nowhere.

      Yes, the Kavenaugh accusations are very like the ones against Roy Moore, but Moore really was a weirdo even if the allegations were crap, and an outsider who couldn’t keep the GOPe onside, while Kavenaugh is to the Swamp born, and favored.

  25. In the car dealer waiting room several years ago, I fell into conversation with another retiree who had been a loan officer at a bank. He said he was forced into approving loans to borrowers everyone knew were unqualified. Race wasn’t mentioned overtly, but this is the small-town South and we knew who we were mostly talking about.

  26. Not to minimize the damage done by Dubya and his cronies (I hate the bastards), but we must not forget what the Clinton administration did. I had dinner one evening in the mid-90s with a banker who complained bitterly about the abandonment of lending practices being forced on the banking community. The banker swore ominously that the entire system would eventually collapse into a pool of insolvency if the regulations were not reversed. Far from being reversed, the Bush team added their own foolish idealogical prerogatives to the federal rule book of lending regulations.

    • There’s no question that Bush is not the only villain. The anti-red-lining lunacy got going in the 90’s when the Boston Fed (I think it was Boston. It could have been NY) started pressuring banks to diversify their portfolio of mortgages in order to acquire small banks. The political class, broadly defined, simply became convinced that they could eliminate poverty and racial inequality by handing out free money. The “ownership society” stuff was exactly that, when you think about it.

    • You are correct. The red-lining protests in the 90s started the downgrade of underwriting standards by Fannie and Freddie, and in particular Freddie. Freddie was originally a purchaser of high quality loans and Fannie was the buyer of bad loans. After Clinton, Freddie and Fannie underwriting standards became one and the same, with either purchasing any loan up for grabs. The underwriting standards went to hell which was made possible by a change in the law.

      In fact, I am not so sure that Bush did anything more than buy into the ownership BS.

      • Community Reinvestment Act of the late ’70’s given steroids under the Clinton Admin. Those lending institutions that didnt want to play “let’s lend to losers” were threatened with being labeled racist and blah blah blah. During the Bush years this thing had a mind of its own and both parties were championing this as a plus. I remember seeing a video of a Bush admin regulation official being berated by Dem Congress critters over lending practices and how everything was going to be just fine, despite what the numbers said.

  27. Read Moldbug on the banking crisis, posted exactly 10 years ago. (That is, while it was happening.) He lays it all out.

    When we ask: “what caused the bank crisis,” we need to distinguish between proximate and ultimate causes. Our focus today will be on the ultimate cause. But first, let’s get the proximate cause out of the way.

    The proximate cause of the bank crisis is the gigantic vote-buying machine we know and love as the “Democratic Party.” This gave us something called the Community Reinvestment Act, which compelled banks to steer over a trillion dollars in flagrantly bogus loans to the Democrats’ electoral base. The scam is described, and its outcome predicted, in this article from 2000. Here is Barack Obama’s lead economic advisor, endorsing it—in 2007. Doh.

    If the gigantic protection racket known as the “Republican Party” had obstructed “diversity lending” in any way, that might be a reason to support them. They didn’t, and it isn’t. Indeed, Steve Sailer has uncovered a hilarious, and apparently improvised, W. speech endorsing the program…

    So, we have our proximate cause: the Dempublicans. Or possibly the Republocrats. Do we care? Does anyone with any brains still believe in any of these swine?

    The ultimate cause, however, is a matter of financial engineering.

    He goes on to discuss the real problem. It has not changed in the slightest as a result of the crisis. Nothing was fixed.

    • Right, a few paragraphs into this I started thinking “didn’t Moldbug cover this shortly after the crisis itself?” And he was largely just co-opting principles identified by Austrian economists decades back. Who cares what mainstream “economists” think – they’re part of the problem!

      America’s 300-year-old banking system is built on sand. It’s based on an illogical (and in many religious traditions, illegal) practice known as maturity transformation, from which all other problems like fractional reserve and central banking logically arise. It creates asset bubbles – the notorious boom-bust cycle, or business cycle as it is known to the Austrians.

      What was different in ’08? Years earlier, the shadow-banking system was completely unregulated and had turned credit into an “asset”. So when the next bubble hit, it was a credit bubble, which led to not only a massive credit expansion, but a huge inflation in on-the-book values of ABCP, mortgage-backed securities and other forms of credit. And after a credit expansion comes… a credit contraction. Rapid deflation of balance sheets resulting in massive capital flight. Credit bubbles are the most insane of all bubbles because credit is central to western economies today; it affects almost every asset and every industry.

      It’s really not that hard once you understand the root cause. Imagine your friend is trying to run a tech business on a Windows 95 workstation. He methodically analyzes every crash and vulnerability, offers up an explanation to users/shareholders and maybe even patches the issue. But the problem that nobody seems to want to call out is that HE’S RUNNING WINDOWS 95, one of the most unstable and insecure systems ever to be released on the mass market. That’s what we have with the American (or, as MM noted, Anglo-American) banking system.

  28. I remember the first time I heard the IBGYBG (I’ll Be Gone You’ll Be Gone) philosophy on wall street. It became undeniable that the sole concern was finishing the deal, not who will suffer as a result. Bankers commonly view themselves as part of a global elite, so pedestrian concerns of justice or a common good attached to a particular people are out of the question. They just can’t cognize the concept.

    To some degree, blame also lies at the feet of rand and the obectivists. When OTC derivatives began to explode in the 90’s Greenspan opposed any form of oversight for purely ideological reasons. By the late 90’s there were hundreds of trillions of derivatives contracts sitting in the file cabinets of banks all over the world, while no one really knew what was in them.

    The sociopaths at GS had no problem accelerating the debacle as well. When analysts realized they could bet against the housing market, they just walked over to AIG and sold them billions in CDS’s. AIG was happy with their new cash flow from the premiums (mgmt incentives aligned to qtrly performance), so they didn’t bother to investigate the deals. Once other ibanks and insurance giants saw the arrangement, they wanted in. CDS’s flowed in billions and no one bothered to investigate the underlying value. Whew, good thing such cognoscenti have taken it upon themselves to legislate dirt people morality!

    • Yeah, cheesehead, it was the huge pile of *tinder* (the bundling of suspect loans into unintelligible derivatives), which turned a minor collapse of one corner of the real estate market, into a world-wide crisis.
      The subprime loans get far too much, and derivatives get far too little, attention from many alt-Righters.
      These loans were merely the *match* which started the conflagration.
      That conflagration became so dangerous, because of leverage and derivatives.

      In the S&L crisis of the late 1980s, the bad loans were not the bases for massively leveraged instruments.
      Thus, the collapse of S&Ls could not endanger major Wall St. firms, which later staked so much on these subprime etc. CDSs continuing to hold value.
      Thus, the world economy could shrug off the S&L debacle, but (we’re told) was in dire danger
      in ’08.

      • You’re right the S&L debacle is another good event to mention. The rate mismatch between what S&L’s could lend at and what depositors demanded on deposits made it an untenable business. The longer they operated the more insolvent they became. Instead of targeting the cause, reagan and bush just deregulated the S&L’s, hoping they’d jump into riskier investments with higher returns and “dig themselves out”. Ofc, ibanks saw the opportunity to buy-up insolvent S&L’s and use them as pass-thrus because of their special legal status. The gubbmint didn’t have to issue a bailout and bankers got a loophole. Everyone was happy until the rate mismatch problem turned into a bad asset problem. Ofc, Reagan and bush kept the size of the problem hush hush until after the election, then quietly issued a half measured bailout. It’s a little known fact that by the size of the bailout, the S&L debacle cost taxpayers more than the ’08 crash. uff da.

        • The banking analyst addressed our broker training class in 1972. When he finished, someone asked about the Savings and Loans, which he hadn’t mentioned. He responded by flatly stating the S&L concept wasn’t viable. You can’t make long-term home loans against short-term savings deposits, because if interest rates rise, you are broke. Surprise!

          • Well, Din, you can get away with borrowing short and lending long, if your derivative hedging against a rate rise holds up in a crisis.
            Alas, so many Wall St. firms were awash in so many exotic derivatives, that the failure of one major counterparty casted huge doubt on the solvency of the others.

        • Well, cheese, the S&L debacle may’ve directly cost taxpayers more than the ’08 crash.
          But, if you include the subsequent *Yellen (etc.) Put*, financed by well-nigh interest-free Fed loans, the math may look different.

          These loans may not yet directly affect taxpayers, but, in due course, figure to inflict a huge price upon the general public.
          For example, when foreign $$ need to pile back (from $$ instruments) into US goods/ services, you’ll see hyperinflation.

      • You are mostly right. It was not the CDSs that caused the crisis but the securitized debt instruments that caused it. CDS is basically an insurance policy on some type of securitized debt (CDO, CMBS, RMBS etc.). At the time, I remember reading some columnist who urged people not to panic as there were only about $350 billion in outstanding subprime loans. He forgot that there were trillions of dollars in derivatives tied to that $350 billion in subprime loans.
        The CDSs did in AIG. What did in so many of the banks and brokerages were the trillions in securitized loans and the derivatives tied to those loans that lost their value.

        It seems to me it would have been a hell of a lot cheaper (and just) to have just paid off all or some those subprime loans. But then our rulers didn’t think of saving the people only their friends in the system. It would have been unjust to let Goldman et al., not reap 100% of the bets they had placed against the market.

        I am not sure why the GOP never tarred he Dems with their failure to hold anyone accountable. Maybe Trump will beat Warren with it in 2020.

        • Really good stuff, Mike.
          No way was the GOP brass going to touch the Dems on this, when the GOP brass had cheerled the whole mess from the start.

          And, the MSM had also cheerled it all, so they would’ve jumped all over any GOP talk to this effect.

          Folks don’t call it the Uniparty Swamp for nothing.

        • Agree completely. Swaps were not the precipitating factor. They magnified the size of the collapse. That is what I meant by “accelerated”, but I probably could have been clearer.

        • Mike;

          I agree that it was hypothecation of the same security as an infinite series of diminishing terms that was a big factor. As mentioned above, the S & L collapse didn’t put the entire financial system at risk because the expanding universe of leverage hadn’t yet been created. Besides that, in ’08 it was mostly a dark universe due to regulatory capture of the uni-party by Wall St.

          I personally experienced an earlier, smaller bubble in in mid-market commercial lending in ’73 – ’74. I was just out of the .mil for the first time and working as a credit-punk/analyst for a mid-market (small – medium commercial or industrial firms) bank. Inflation was double-digits as was prime. These guys (said firms were mostly founder/family controlled) were borrowing at Prime + 2% to + 4% (thus even higher than credit card rates now, as high as 27% to 30% depending) to speculate on inventory_! ! !

          IOW, because ~18% – 20% inflation increased the nominal/accounting value of their assets (particularly inventory) with no effort on their parts, they thought themselves suddenly rich and crafty. So they were adding onerous debt to swell inventory despite the fact that their historic return on assets was usually in the 12% range.

          Due to the lack of exotic derivative products available, the bank’s own capital was directly at risk. So it was resolved to demand increased loan security as a way of reducing that risk. Such was the bubble madness that many firms’ principles agreed to covert unsecured credit lines to personally guaranteed credit lines so as to keep the happy ramp running. Then, as might have been expected, sales growth failed to cover.

          The resulting recession of ’75 deleveraging was painful, and a number of these firms went under as did a number of over-extended banks such as Continental NB mentioned elsewhere. But there was no risk that the entire financial system was on the verge of collapse.

          As an interesting side note, then as with any downturn, banks ran to DC saying the sky was falling and you’d better bail us out. Until the S & L crisis they didn’t get bailed out and the sky never fell. So we can add bank bailouts as another indicator of the advent of the New World Order under GHW Bush.

    • Not a coincidence that Elliot Spitzer had just chased AIG CEO and founder Hank Greenberg out of the company on ridiculous charges. The idiot they replaced Greenberg with got suckered and destroyed the company.

      Cost shareholders and the economy $billions, but Spitzer made his name and got elected Governor – so it was all worth it.

  29. The American “host’s” immune system is adapting very rapidly to this parasite’s presence. Ignore the doom and gloom, there is real change going on right now — after decades and decades of paralysis. The fact that it is happening at all, is orders of magnitude more significant than the details of any particular change/event.

    You can make the argument that Obama was able to rise to POTUS is evidence the ancient regime’ was already in a parlous condition; i.e. Obama was an external “virus” that took over the Dem party. Trump is just the same thing, re: taking over the GOP. So now we have two very different versions of the major parties, as the progs are finding out to their dismay. Trump still has work to do, in consolidating his grip on power, but he will get there well within his first term. And then the prog pain will really start…

  30. One has to wonder if a malevolent Skynet type AI was put in charge of running the financial system? Could it be any worse than what we are living in?

    It’s not hard to see evidence that nothing has been learned since 2008. A small hike in the Fed’s interest rates threatens to destroy the economies of Turkey, Argentina, South Africa and Brazil. All of that helicopter money caused the inflation that was predicted, it just wasn’t here.

    The GOP tax cut exemplifies their collaborationist nature. The banks are run by people that hate Middle America, and think nothing of screwing them over. But yet they got a tax cut and lower regulation. The establishment loves to defend the “success” of the TARP bailout, but perhaps we should have just left the banks under the quasi nationalized state they were in. It’s unreasonable that the shareholders were able to privatize the profits, which should have accured to the federal government until the QE liability is paid off.

    • “One has to wonder if a malevolent Skynet type AI was put in charge of the financial system”

      It was and is, of course; except it wasn’t “put” in charge, it assumed/arrogated control on its own behalf.

      Your phrase “Skynet type AI” is more apt than you realize: simply add “PAC” after “AI” and you’ve essentially named your culprit.

      • Jews are living in your brain rent-free.

        Out here in the real world AIPAC had nothing to do with the housing bubble.

        • And, more importantly, the Lehmans were Jews, but Paulson is not.
          It was he who called the shots about the bailouts.

          • The stupid is strong with these two young Jedi.

            “AIPAC had nothing to do…”

            Look up “metonym,” also look up “joke” (see, certain kinds of ‘sentence-completion’ tasks can work as “jokes”. And we all know how Meistersinger Freud concluded that jokes are without sub-surface meaning.)

            Jedi No. 2, in his great wisdom, thinks Hank Paulson was the eye of this ‘ere hurricane.

            I’ll let a jury of his munchkin peers debate that one.

          • So, for failing to read your mind, I / we are Jedi Deplorables?
            Perhaps I’ll wear that as a badge of honor.

          • Paulson is a strange case. It’s not clear how he ended up at the top at GS. He was in charge of the Chicago GS office back when Continental Bank failed (a really big deal back then) so he sat in on all the meetings but the guys from GS New York basically treated him like the idiot brother in law.

  31. He’s awful on a lot of things, but Taibbi has written some great stuff on this.
    Netflix (!) even aired a pretty good piece, oddly dubbed in french with english subtitles: “Goldman Sachs: the Bank that Runs the World”

    The simplest explanation is always the correct one. Bush and friends wanted to buy brown votes. People much smarter than him knew the score and figured out a way to cash in big on both the upswing and downswing, and to protect themselves when the SHTF.

    The big question: what new hosts will the bankers move on to?

    • Japanese and Chinese banks are “zombies”, stuffed full of debts that will never be paid back, and probably can’t be paid back.

      Muslims have admirably maintained usury restrictions, one of the few things they do correctly.

        • Islamic nations are low trust, lower IQ and clan based. This more than Islamic banking codes creates the issues they face.

          In any case matters as much as size in an economy is wealth distribution

          The US GDP is around 20 trillion.

          However 90% of that is in the hands of around 10% of the population

          Also the government at all levels spends around 40% of the GDP

          Therefore the real GDP is 2 trillion or so wages for most people and some part lets call it 25% in direct and indirect distribution

          Most of America lives in roughly a 12 trillion GDP country with crumbling infrastructure, basically we are about as well off in real terms than the UK or Canada maybe a bit less in places since those nations allocate taxes mostly to social spending and a bit more in some others.

          The nicely matches health outcomes and family size which are roughly comparable with Canada being a bit lower

          On to topic, making sure the FIRE sector is kept small in an economy requires heavy regulation, probably an outright Constitutional prohibition on a lot of activity

          It also requires nearly closed borders and a 1930’s style low import/low export economy

          Best also if foreign bankers are not allowed entrance for any reason.

          This won’t actually impoverish the country despite what free traitors, I mean free traders think but such a nations elite will be cut off from the mainstream of global politics and such a nation will have to live within its means

          That’s harder than you think. Culturally the US has been unable to get more than roughly 20% GDP at the Federal level in tax revenue (so called Hauser’s law) before the Laffer Curve kicks in and this would level of enforced low spending will make decision making harder

          Normally you just raise local taxes but our mobility means a race to the lowest taxes in most cases

          last when this comes up I’m reminded of the S&L crisis , thousands went to prison for misdeeds and all the finance guys learned from it was “We need to lobby to make it legal” which they did.

          They will never learn, can’t and won’t and as the song goes, the lure of easy money has a very strong appeal

        • I lived in Saudi Arabia. I paid a “service fee” for a loan up front, and the principal in equal monthly installments over the term of the loan. It’s technically not “usury”, and actually a worse deal than with western banks.

          Allah be praised!

        • True – a Muslim coworker of mine explained it. Different countries do it differently but basically they add what would be the interest cost to the price of the house and then pay it off a chunk at a time. See? No interest!

  32. I sometimes believe that a lot of us are like boy scouts trying to live our morally programmed lives in a hellish world and expecting some form of justice.

    Yeah, they’ll get theirs, right? In a righteous world there would have been a lot of bloody walls. In that world the Hildebeast would be in jail with her husband.

  33. My father was a banker – the real kind who started as a loan officer and moved up the management ladder in community / retail banking. He and his compatriots were very good at accessing risk and making a profit in the personal and small to medium commercial market.

    What they were bad was managing politicians and their bureaucrat regulators. It has always been a see-saw – flipping between getting hounded to lower lending standards, write loans to minorities and in the hood. Then a couple years later, stern government auditors show up and declare big swaths of their loan portfolio as too risky and force the bank to strike them from the balance sheet.

    No wonder the small banks all started selling off their loans as soon as the made them – it made bending to the current will of the government much easier. It also enabled the big financial gambling houses to bundle up risks and sell them to suckers.

    • Global financial houses took over the banking system int he 80’s and 90’s. The sorts of community banking your father did no longer exists. You make different decisions when the people effected by your decisions are your neighbors.

      • Intentionally or accidentally, the ever-shifting regulatory environment enabled that take-over. Most small banks stopped holding loans on their balance sheet (there a few exceptions) because, unlike the big houses, they don’t own Senators who’ll keep the regulators under control.

      • Amen to that, Z-man. That’s actually one of those “portable” truths that apply to so many economic (and other) spheres in the current year. We in the Dissident Right needs to stand up to the globos in favor of community. I know we’re not going back to the my growing-up times, but we should reassert the best of those times going forward.

    • ” It also enabled the big financial gambling houses to bundle up risks and sell them to suckers.”

      What apparently hasn’t registered is that “suckers” made great careers out of buying the crap, and bankers etc who didn’t buy the crap didn’t exceed targets and thus get promoted and didn’t have the opportunity to cash in. Are you a sucker if you get rich being a “sucker”?

      • When its all “other peoples money”, propped up by big daddy gov’t, the sucker is the one who applies rational investment merit to decisions in a ponzi.

        I worked at a major investment bank during this time in alternative/proprietary investing. It was all volume/velocity.

        Our research team (a bunch of ivy phd’s) were repeatedly told to pound sand aka play ball and stfu about all those pesky metrics that clearly defined the bubble and inevitable collapse.

        The culture sinister: apply rigorous investment acumen but do so such that reality is artfully kept at bay.

        The pressure to get $ out the door was enormous. Yet everyone knew that the world had gone mad. Yet the madness mean you just had to work harder and be smarter to find the “good” deals. It was the kind of cognitive dissonance that naturally favored the guys blessed with dark triad traits.

        At one point it became clear to me that all the talk of “investment thesis fundamentals” was just like the “be nice and one day she will notice you” game that paychopaths and feminists instill in the beta masses to convince them that eating shit sammies is the path to sex/success.

        I did get to buy a bunch of paper at pennies on tbe dollar from the dickheads at Lehman as their ship was sinking but it was all shortlived.

        2/3 of my team, me included were let go 11 months into the bonus cycle shortly after that. In no small part because I wasn’t sharky enough, my volume had dropped off too much leading up to the crash.

        Whats worse is that i personally gad only taken a 60% mortgage on my house. So unlike everone else, I had to keep paying. Lolz. Sucker on all levels.

  34. We’re just livestock on the tax farm, here to be milked until we’re ready for the table when the milk runs dry.
    Gloomy perspective.

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