Join Early Retirement Today
View Poll Results: Your opinion on Financial Reform
Wall Street needs/deserves a smack down (regulation to limit their activity) 26 92.86%
Everything is fine, Keep it status quo 1 3.57%
No optinion 1 3.57%
Voters: 28. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Financial Reform
Old 04-20-2010, 05:18 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Financial Reform

Try to forget your politics for a moment.

How many people want serious Financial Reform? Do you think the large Banks (all flavors), Insurance companies, Hedge Funds, etc that contributed to bubbles, market instability and economic instability require stiffer regulations?

Are you tired of getting the short end of the stick due to their misbehavior, or do you believe status quo is just fine?
__________________

__________________
chinaco is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-20-2010, 05:25 PM   #2
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 1,763
I think the current legislation, at least as far as it has been covered in the press, does not address the core problem of investing funds and protecting from unnecessarily high risks.

As for the "short end," that's historical and you can't legislate it away.

-- Rita
__________________

__________________
Only got A dimple, would have preferred 2!
Gotadimple is online now   Reply With Quote
Old 04-20-2010, 05:27 PM   #3
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Option 4 -- the devil is in the details. The status quo may not be acceptable, but that doesn't mean that *anything* to change it is a good idea.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Old 04-20-2010, 05:30 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,157
I think I can hear the townsfolk coming up the drawbridge with their pitchforks. Seriously, this is not simple to fix but I agree it must be fixed. I would start with reform to the mortgage market (make it look more like Canada), phase out the deduction of mortgage interest for tax purposes. Reduce the number of regulators and encourage them to apply the spirit of the rules rather than the rules themselves. Then string the bastards up
__________________
Danmar is offline   Reply With Quote
Old 04-20-2010, 05:30 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by ziggy29 View Post
Option 4 -- the devil is in the details. The status quo may not be acceptable, but that doesn't mean that *anything* to change it is a good idea.
Yes... agreed. But do you think they need to be reigned in or are you satisfied with the way things have gone over the last decade or so.
__________________
chinaco is offline   Reply With Quote
Old 04-20-2010, 05:38 PM   #6
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by chinaco View Post
Yes... agreed. But do you think they need to be reigned in or are you satisfied with the way things have gone over the last decade or so.
That's a rather loaded way to put it. Sounds like you're steering people to the answer you want them to give in how you word this.

Sure, in some areas there should be some reforms but I'm not going to answer "yes" or "no" without specifics. As I said before, I may want change but that doesn't mean I want *any* change just to show we did something about it. I want to know the specifics and the potential benefits and consequences. Without that I stick to option 4.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Old 04-20-2010, 06:29 PM   #7
gone traveling
 
Join Date: May 2008
Posts: 3,864
Quote:
Originally Posted by chinaco View Post
Try to forget your politics for a moment.

How many people want serious Financial Reform? Do you think the large Banks (all flavors), Insurance companies, Hedge Funds, etc that contributed to bubbles, market instability and economic instability require stiffer regulations?

Are you tired of getting the short end of the stick due to their misbehavior, or do you believe status quo is just fine?

Could you add a couple of choices to this interesting poll? (just to be fair and balanced.)

I believe that people who took out mortgages and HELOCS they couldn't afford and then walked away from their financial obligations contributed to bubbles, market instability and economic instability and require stiffer regulations.

I am tired of getting the brown end of the stick due to their financial misbehavior, and do not believe the status quo of bailouts and handouts is just fine.

Thanks!
__________________
Westernskies is offline   Reply With Quote
Old 04-21-2010, 07:14 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,646
You could better have asked do we need reform or are things OK as they are. Then you would get 100% on one side of the equation. I voted for "reform" but I didn't like the question. For one thing I don't think reform should be motivated by "smack down." What we need are reforms that try in good faith to protect the economy while not needlessly constraining the players. That will be hard to identify and open to multiple interpretations. I hope all sides are willing to compromise at least to a degree and don't demand the perfect when the good is in reach. Or worse, torpedo the process for perceived political gain.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 04-21-2010, 07:58 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Jun 2006
Posts: 1,666
Poor choices.
No, I don't think the 'status quo' is any good.
Yes, this must be fixed.
But your answers are extreme. I believe many (please note, I did not say 'all') of the tools for regulation are already in place, they just weren't used.
__________________
"We do not inherit the earth from our ancestors, we borrow it from our children.
(Ancient Indian Proverb)"
Zathras is offline   Reply With Quote
Old 04-21-2010, 08:00 AM   #10
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by Zathras View Post
I believe many (please note, I did not say 'all') of the tools for regulation are already in place, they just weren't used.
Agreed. Some of the "scandals" I'm hearing about were doing things that are already illegal, but the regulators were asleep at the switch. They need to be awakened. Also, there's only so much good passing new laws will do when it's already established that regulators are having trouble enforcing existing law.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Old 04-21-2010, 08:27 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RonBoyd's Avatar
 
Join Date: Dec 2007
Location: Denver, Colorado
Posts: 5,280
Quote:
Originally Posted by ziggy29 View Post
Agreed. Some of the "scandals" I'm hearing about were doing things that are already illegal, but the regulators were asleep at the switch.
Sounds like a need for a law right there.

Quote:
Originally Posted by ziggy29 View Post
Also, there's only so much good passing new laws will do when it's already established that regulators are having trouble enforcing existing law.
Would giving the regulators enforcement power really work? If so, then a singular new law would be sufficient.
__________________
"It's tough to make predictions, especially when it involves the future." ~Attributed to many
"In theory, there is no difference between theory and practice. But, in practice, there is." ~(perhaps by) Yogi Berra
"Those who have knowledge, don't predict. Those who predict, don't have knowledge."~ Lau tzu
RonBoyd is offline   Reply With Quote
Old 04-21-2010, 08:32 AM   #12
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by RonBoyd View Post
Would giving the regulators enforcement power really work? If so, then a singular new law would be sufficient.
To the extent the problem is that the regulators have their hands tied by existing restrictions on their authority, that might help, yes.

I mean, without that it's like adding more traffic laws when there are no police on the road to enforce the existing ones. If there's no fear of being busted by the authorities for speeding or driving drunk, you won't deter many people -- so what good would new traffic laws do when they also go unenforced?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Old 04-21-2010, 10:06 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,978
Quote:
Originally Posted by Zathras View Post
I believe many (please note, I did not say 'all') of the tools for regulation are already in place, they just weren't used.
I voted #1, but here is my preferred answer...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 04-21-2010, 02:34 PM   #14
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
The devil is in the details.

I see two or three core issues I would like addressed.

1) How much leverage any investment can have. I realize our banking system depends on leverage. I remember seeing a graph about how a $100 deposit at one bank can be something like $1000 in the banking system...

Bank A accepts $100 deposit and keeps $10 and lends $90
Bank B accepts $90 deposit and keeps $9 and lends $81
Bank C accepts $81 deposit and keeps $8 and lends $73
and so on...

it is really a ponzi scheme... so the best course of action would be limit the run on banks, and also restrict how much additional leverage is added to the already highly leveraged system.

2) The ethical standards of the people and companies need serious work. Of course the ethical standards of the politicians we are asking to change the system or solve the problem **might** be much worse LOL.

3) The interdependence of every institution on every other institution might be a flaw (not sure). Too big to fail to me is clearly an excuse, its not really true (the one thing I would have wanted Bush to do was let them fail and let the whole economy crash quickl... if that were really the result... giving the unethical people $800 billion was not a good solution). Let them fail and see what happens.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 04-21-2010, 08:09 PM   #15
Thinks s/he gets paid by the post
IndependentlyPoor's Avatar
 
Join Date: Jul 2009
Location: Austin
Posts: 1,142
Quote:
Originally Posted by Westernskies View Post
I believe that people who took out mortgages and HELOCS they couldn't afford and then walked away from their financial obligations contributed to bubbles, market instability and economic instability and require stiffer regulations.

I am tired of getting the brown end of the stick due to their financial misbehavior, and do not believe the status quo of bailouts and handouts is just fine.
You might this testimony from CSPAN interesting.

__________________
Start by admitting
from cradle to tomb
it isn't that long a stay.
IndependentlyPoor is offline   Reply With Quote
Old 04-22-2010, 04:44 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by IndependentlyPoor View Post
You might this testimony from CSPAN interesting.

YouTube - Bill Black's eye-popping opening statement at House FinServ hearing on Lehman Bros. failure
Thanks. It is refreshing to see someone who has been involved in the bureaucratic mess trying to fix a problem "calling it like it is".

All of the checks and balances broke down because everyone was making money or the culture of the different organizations (including regulators) was to look the other way... or at least not to look too closely lest something is found that disrupts the money grab and then the subsequent political blow back from congress and the administration (last several congresses and administrations) for "interference".
__________________
chinaco is offline   Reply With Quote
Old 04-22-2010, 08:26 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by Westernskies View Post
I believe that people who took out mortgages and HELOCS they couldn't afford and then walked away from their financial obligations contributed to bubbles, market instability and economic instability and require stiffer regulations.
So then would you support a strong and independent Consumer Protection Agency?

I don't have a strong view myself, but it would seem to address this particular problem. It's worth noting that people haven't been blaming Toyota customers for buying cars with defective accelerators. It's also worth noting that, in many instances, the most complicated mortgages (pay option ARMS) were marketed to those least able to assess the risks (sub-prime borrowers). It's also worth remembering that many borrowers could afford the initial terms and were told by lenders they viewed as "financial experts" that they'd have no problems refinancing before the payments stepped up.

In other areas financial advisers have a fiduciary responsibility to their clients . . . to not sell them products that are unsuitable for them. We typically don't blame grandma for putting her life savings in commodity futures, we blame the "nice" financial adviser who sold her an unsuitable product.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 04-22-2010, 08:57 AM   #18
gone traveling
 
Join Date: May 2008
Posts: 3,864
1. I believe Lehman's role in packaging and marketing the "liars loans" was reprehensible, and that quite a few of their senior management folks should be rotting in prison, aka Bernie Madoff and Ken Lay.

2. Borrowing money is a personal responsibility, whether it is for a new home, a college education or crystal meth. No one forced people to buy homes they couldn't afford. DW and I could qualify for a mortgage 5X what we are paying, but we know it isn't realistic. What really irks me in this whole mess is the emergence and encouragement of the victim mentality in this debacle -"it wasn't my fault, the evil bankers told me I could afford a new 300K home on $10/hour. And I needed all new furniture and jet skis, all the neighbors had them" And.... "now I expect the folks who played by the rules, lived below their means, and whose own home equity and stock portfolios I trashed when the bank foreclosed on my place next door at 50cents on the dollar to step up and pay higher taxes to bail my stupid a$$ out- it's not my fault, it was the (insert viillan of your choice here). Where's my check, I'm entitled to it... sheesh, all I did was lie about my income on my loan application? ".
__________________
Westernskies is offline   Reply With Quote
Old 04-22-2010, 10:52 AM   #19
Thinks s/he gets paid by the post
IndependentlyPoor's Avatar
 
Join Date: Jul 2009
Location: Austin
Posts: 1,142
Quote:
Originally Posted by Westernskies View Post
1. I believe Lehman's role in packaging and marketing the "liars loans" was reprehensible, and that quite a few of their senior management folks should be rotting in prison, aka Bernie Madoff and Ken Lay.

2. Borrowing money is a personal responsibility, whether it is for a new home, a college education or crystal meth. No one forced people to buy homes they couldn't afford. DW and I could qualify for a mortgage 5X what we are paying, but we know it isn't realistic. What really irks me in this whole mess is the emergence and encouragement of the victim mentality in this debacle -"it wasn't my fault, the evil bankers told me I could afford a new 300K home on $10/hour. And I needed all new furniture and jet skis, all the neighbors had them" And.... "now I expect the folks who played by the rules, lived below their means, and whose own home equity and stock portfolios I trashed when the bank foreclosed on my place next door at 50cents on the dollar to step up and pay higher taxes to bail my stupid a$$ out- it's not my fault, it was the (insert viillan of your choice here). Where's my check, I'm entitled to it... sheesh, all I did was lie about my income on my loan application? ".
I don't disagree with a lot you have said here. I am mad about it too. Although I do think it is really evil for mortgage brokers to deliberately mislead stupid and ignorant people. The argument smacks of "It is their fault for believing me. Everybody knows I am a crook."

I believe that the most reasonable way to fix this is to dry up the market for such loans: to force the originator to keep some skin in the game and to force the rating agencies to do their jobs. For example, banks can now choose the rating agencies to choose which agency they want as an overseer, creating a race-for-the bottom among regulators, whose budgets depend on the number of banks regulated.

Don't forget that the first bailout bill (created by the previous administration) was a real piece of work, including a measure that would have absolved its big-wigs from any legal responsibility. We only managed to defeat it though a massive letter-writing campaign. I admit that I know precious little about the present bill, and haven't decided whether I endorse it or not, but I reject the idea that we should just do nothing, or tear the thing up and wait for a possible republican-controlled congress after November and start over.

There have always been poor people who are bitter about their place in life and perfectly happy to game the system whenever possible. The problem is that the present system created an army of retail mortgage brokers whose livelihood depended on misleading these folks into believing that they could indeed afford these loan by easily refinancing a few years later, having them sign forms containing blank spaces, or wink-wink nugde-nudge.. everybody does it. One of them even tried something like that on me!

It has always been incumbent on the lender to vet applicants and to be able so say NO. Wall street created a system that was the opposite. Retail brokers had every incentive to cheat. Indeed, their paychecks depended on it. The most reasonable way to return to a working system is to remove the lucrative market for crappy loans, and that starts at the top, not the bottom.

Presently banks can choose which regulating agency they want as an overseer. Since the agencies are paid by their number of clients, that has created a race to the bottom among the agencies. End this system with a unified agency with some teeth in it that can require reasonable reserve requirement, and to require that banks retain a healthy percentage of the loans they originate, and you will see a return to reasonable lending standards: things like verified employment records and reasonable down payments. If a liberal congress wants to increase home ownership among the poor, let them (try) do it do it through direct subsidies or grants.

There is plenty of blame to go around, but to place the entire blame of the people who took out mortgages who couldn't afford them is to side with the wall street magnates who pocketed those billions of taxpayer money. Except for the rather paltry Obama mortgage remediation efforts, the vast majority of those billions went to wall street, not the mortgage payers. Goldman received 100 cents on the dollar for its credit default swaps against AIG, and maybe Lehman too.

The changes to the Net Capitalization Rule allowed Bear, Goldman, Lehman, Merrill, and Mogan (and only those) to operate with unlimited leverage. Gramm-Leach-Bliley Act partially repealed Glass-Steagall and allowed unregulated trade of derivatives. These are the kinds of misguided deregulatory efforts that we need to role back. What justification is there for allowing primary brokers to sell billions of insurance (with no reserve capital requirements) in the form of credit default swaps to folks who don't own the underlying bonds? And worse, AIG was somehow allowed to encumber their reserve capital (required by state insurance regulators to back up their "regular" insurance businesses), to allow their crazy London Financial Products group who sold this policies to sport a AAA rating.

Rant off. IP is grouchy again this morning.
__________________
Start by admitting
from cradle to tomb
it isn't that long a stay.
IndependentlyPoor is offline   Reply With Quote
Old 04-22-2010, 11:06 AM   #20
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by IndependentlyPoor View Post
I believe that the most reasonable way to fix this is to dry up the market for such loans: to force the originator to keep some skin in the game and to force the rating agencies to do their jobs.
I can see this. Originators have little incentive to make a "quality" loan if they can successfully package a toxic mortgage as "investment quality" to sell and make someone else's problem.

I don't think it's a coincidence that many of the small banks and credit unions which don't package and sell the mortgages they originate (they keep them on their books) had more conservative lending standards and didn't blow up.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Would you support "real" financial reform? donheff FIRE Related Public Policy 171 05-18-2010 08:48 PM

 

 
All times are GMT -6. The time now is 05:08 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.