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Among other matters, Wednesday's news cycle will be focused upon one of the ongoing themes of our economy's even deeper nosedive into the Depression abyss: the reality that the banking/lending industry just is not cooperating with our government's stated goal to inject credit liquidity back into the small business and consumer marketplace.  So, what's their solution:  up to another trillion dollars and elimination of many of those new regulations we've been hearing so much about! But, somewhere along the way, they forgot to work out a few of the other minor details.

Yet once again in this regard, in tomorrow's press, we have the following story: "Government Announces $200 Billion Lending Program," which, in turn, provides us with a link onto
the front page of Wednesday's WaPo, and this lead article: "As Markets Sink, U.S. Tries to Halt Cycle of Fear."

Inherently, this program is flawed. Why? The consumer credit network needed to distribute credit to Main Street is now grossly compromised. (Distributing credit to the retail auto, heavy equipment and student loan sectors is still feasible. But, when it comes to credit cards, consumer loans, etc., the banking industry is neither willing nor able to facilitate the effort.) This program is widely known as "TALF," or the Term Asset-Backed Securities Loan Facility, and here's what Wikipedia tells us about it:


Term Asset-Backed Securities Loan Facility

The Term Asset-Backed Securities Loan Facility (TALF) is the name of a program created by the US Federal Reserve (the Fed), announced on November 25, 2008[1]. The facility will support the issuance of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (SBA). Under the TALF, the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans.

Purpose

The Fed explained the reasoning behind the TALF as follows:

New issuance of ABS declined precipitously in September and came to a halt in October. At the same time, interest rate spreads on AAA-rated tranches of ABS soared to levels well outside the range of historical experience, reflecting unusually high risk premiums. The ABS markets historically have funded a substantial share of consumer credit and SBA-guaranteed small business loans. Continued disruption of these markets could significantly limit the availability of credit to households and small businesses and thereby contribute to further weakening of U.S. economic activity. The TALF is designed to increase credit availability and support economic activity by facilitating renewed issuance of consumer and small business ABS at more normal interest rate spreads.

Despite trillions already dumped into the failed effort to revive consumer and small business credit over the past year, and even with both our former Republican and current Democratic Presidents publicly complaining about this lack of cooperation from Wall Street to return consumer credit to the marketplace, even now, it's simply mind-boggling how insanity and denial runs rampant in and around the Beltway about this reality.

So, here we go again:


The Federal Reserve and Treasury Department announced the launch of a lending facility for consumer-backed debt that will potentially generate up to $1 trillion in lending. The New York Federal Reserve Bank will lend up to $200 billion to owners of triple-A rated asset-backed securities supported by new and recently originated auto loans, credit card loans, student loans and government-guaranteed small business loans. The Fed and Treasury said the Term Asset-backed Securities Loan Facility, or TALF, is designed to give securitization markets a jolt by offering financing for investors to encourage them to buy AAA-rated asset-backed securities. Markets for the securitization of loans have virtually shut down since the financial crisis worsened in October.

Up to another trillion dollars for supposed "credit" for whom exactly?

The roughly one-third of the population that still might just be able to qualify for it? Well, they don't need it!

(For all intents and purposes, Triple A ["AAA"] credit portfolios, or "prime loans," are comprised of credit paper from only the most creditworthy consumers. And, the most recent/simplistic definition of prime creditworthiness means we're talking about consumers with 720 or higher FICO credit scores. Until a year ago, that number used to be 680. Then, it creeped up to 700 over the past Summer. Now, it's at 720, at best, or higher. That's somewhere between only 33% and 40% of the population...on a good day. The median consumer credit score is 678.)

The other two-thirds of our society--the folks that really do need it and we're talking about folks that also pay their bills--still won't have access to it. (Read the comment, above, re: "...AAA-rated asset-backed securities...")

That's because there'll be nobody around to provide it to them! I'm not saying this; the lenders are, themselves! Yes, most of the major consumer lenders in the U.S. (many of them receiving tens of billions, if not hundreds of billions in taxpayer bailouts, already) have stated that they're either getting out of these lines of business, entirely, or they're drastically cutting back on existing consumers' credit lines, if they haven't done so, already.

As Einstein told us: "The definition of insanity is repeating the same action and expecting a different result."

This is nothing short of a travesty of the highest order.

In terms of helping out U.S. small business, unemployment, the foreclosure crisis, and Main Street, in general, I ask: Where is this $200 billion to $1 trillion supposed to go, and how's it going to get there?

It appears the folks inside the Beltway missed a few "memos." The following companies represent most (not "some," but most) of the consumer point-of-sale, credit card and consumer financing resources in the United States:

CITIGROUP: Intends to "dispose" of their CitiFinancial and consumer credit card divisions, in their entirety, according to most recent reports from their New York boardroom. That's all of their consumer retail lending operations! (If one continues reading here, they'd have to ask: Who would buy it?)


The Wall Street Journal reported on Monday that CitiFinancial, international retail-brokerage operations and the private-label credit-card businesses may also be put on the block. The bank declined to comment...

...But Citigroup may not find it easy to sell other assets, and like insurer American International Group Inc, it could run into problems disposing of units amid the financial crisis, investment bankers said. Few would-be buyers have enough cash, stocks are down, financing is not easily available, and the quality of financial assets is often suspect...

...Selling consumer lending businesses such as private label credit cards and CitiFinancial, which provides loans for home improvement, debt consolidation and tuition, is also likely to prove difficult in an economic downturn as consumers suffer...

GE: Reports have circulated throughout the business press how GE is totally walking away from entire retail business verticals, altogether. In Canada, they just terminated their retail credit programs, altogether! Perhaps even worse than this is what they're doing in the credit card marketplace, where they control significant market share.


In September, General Electric Co shelved plans to sell its $30 billion U.S. private-label credit card business, saying it was a challenging time to find someone who wanted to take responsibility for more than $30 billion of assets.

HSBC: "HSBC to Curtail U.S. Consumer Lending Operations," from just this past weekend.


HSBC to Curtail U.S. Consumer Lending Operations
By CARRICK MOLLENKAMP and SARA SCHAEFER MUñOZ

HSBC Holdings PLC plans to curtail its disastrous foray in U.S. consumer lending by pulling back from key businesses, according to people familiar with the matter, a move that comes as the British bank prepares to raise billions of pounds to shore up capital and possibly hunt for acquisitions...

...At the same time, however, HSBC is largely throwing in the towel on the 2003 purchase of Household International Inc., a $14 billion deal that saddled it with a U.S. subprime lender whose results have worsened amid the housing downturn. HSBC had already ceased originating new U.S. auto loans; now people familiar with the bank's plans say, it will stop providing personal loans, while continuing to offer credit cards. HSBC's move comes as U.S. banks are under pressure to lend more money to consumers and it also could signal that HSBC believes the turndown in the U.S. has a long way to go.

HSBC also plans to shutter some 800 branches that were part of a Household network, these people said.

AMERICAN GENERAL: This is AIG's consumer lending subsidiary. (Do I have to say anything else?)

WELLS FARGO, BANK of AMERICA, AMERICAN EXPRESS: It's all the same story. (Need I continue?)

Most of the channels to restore consumer credit back into the marketplace have simply evaporated over the past 12 months! So, exactly how are we going to restore credit on Main Street?

Details. Details. Details. But, why let a little thing like reality get in the way of our comments.

From [the front page of today's Washington Post]:


By Neil Irwin
Washington Post Staff Writer
Wednesday, March 4, 2009; Page A01

...A day after the markets hit crisis lows, the administration sought to restore calm. The Treasury Department and the Federal Reserve launched a long-awaited program to pump money into consumer lending. Aides, including the White House budget director, vowed that the president's spending plan would benefit the vast majority of working Americans. And officials in various public venues used soothing language in an effort to inspire hope.

"What I'm looking at is not the day-to-day gyrations of the stock market," said President Obama, speaking to reporters at the White House, "but the long-term ability for the United States and the entire world economy to regain its footing."

The nation is caught in a dangerous cycle in which an endless stream of grim news -- waves of layoff announcements, signs that banks are teetering financially and negative economic data -- has contributed to anxiety among American consumers and businesses. That, in turn, has caused further economic weakness. The White House now appears to be moving to arrest that cycle.

But words weren't enough to end the raft of bad news yesterday...


Bold type is diarist's emphasis.

Yes, words are certainly not enough.

When it comes to actually making a difference with small businesspeople and the U.S. consumer (I'm not talking about automotive and student loans, where other special programs are also addressing those problems; I'm talking about all of those empty stores and warehouses...and all of those foreclosures and unemployed people), the reality is that Wall Street doesn't give a damn how much money we throw at them to help Main Street; and Washington's quite clueless.

Still.

There's tremendously sad irony to the reality that we're calling this: "TALF." It's being done wrong. It's downright ass-backwards. And, "TALF," spelled backwards is: FLAT.

 

Originally posted to http://www.dailykos.com/user/bobswern on Wed Mar 04, 2009 at 12:10 AM PST.

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Comment Preferences

  •  Tips: This isn't going to work. (19+ / 0-)

    It doesn't address credit problems on Main Street, except for the automotive and student loan sectors.

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Wed Mar 04, 2009 at 12:22:49 AM PST

    •  It's not clear to me... (8+ / 0-)

      ...that "credit issues" even need to be addressed at all. This entire bubble was based on excessively cheap and available credit, so some amount of credit contraction is simply expected.

      I agree with this though: the government has been f**king this up from day 1. Assuming you have a goal of "getting credit going again" even assuming this is a good thing, this policy has totally failed to do it and so the TARP money has been totally wasted.

      Banks simply aren't going to lend money into a deteriorating economy... would you?

      •  For the most part, TALF isn't about mortgages. (0+ / 0-)

        And, it's the mortgage meltdown which triggered everything. Truth be told, most (not all, but most) credit card portfolios and other consumer credit lines were doing okay through most of the Fall, while the mortgage industry burned.

        This is about jobs, retail, manufacturing (what's left of it).

        It's about Wall Street stripping away credit from 2/3 of the population. Why? Not because of what everyone thinks, but because consumer credit is not as profitable for most banks as other lines of business.

        Basic math: consumer credit isn't as much about auto or mortgage as it is about RETAIL. The transactions are smaller, but the paperwork's about the same as it is for monthly mtge or auto loans. By definition, it's more labor intensive...so, given an excuse to walk away from it, that's exactly what the banks have done.

        Now, with everything going down the tubes...it's even easier for Wall St. to justify this total abandonment...further exacerbating our economic problems.

        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

        by bobswern on Wed Mar 04, 2009 at 12:41:49 AM PST

        [ Parent ]

        •  Whoa (1+ / 0-)
          Recommended by:
          pletzs

          Even if you were correct, say, and consumer credit is simply not a profitable activity to be in (even in good times), what business is it of the government's to force organizations to lend money and hence to lose it (since according to you, it's not profitable and is generally a money-loser)?

          I mean seriously, why should anyone be forced to run an unprofitable business enterprise, or be forced at figurative gunpoint to loan money?

          If consumer credit is unprofitable, it is unprofitable and we'd better get used to an economy without it available rather than forcing private organizations to lose money on it.

          (For the record, I don't think you are correct; I think retail credit is very profitable... when the economy is good).

          •  I own a credit app processing company. (5+ / 0-)

            Consumer lending is, generally speaking, much less profitable than automotive or mortgage.

            They use consumer lending to gain a toehold with consumers, and then to upsell/cross-sell them into auto and mortgage products.

            That was the overall strategy, across-the-board, throughout the lending industry...up until the past year, anyway.

            It's bible. Not widely publicized, but the truth.

            Capital One's a textbook example of this. HSBC...Citi..virtually all lenders (especially the big ones).

            "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

            by bobswern on Wed Mar 04, 2009 at 12:53:47 AM PST

            [ Parent ]

            •  Sure (1+ / 0-)
              Recommended by:
              JesseCW

              I don't doubt that this is true, but my point remains valid, I think. In my view, we need to wait a bit and allow the economy to settle back to a sustainable place rather than attempting to force consumer credit back into an economy that might not need as much of it.

              We need to allow profitable activities to thrive, and unprofitable ones to die on the vine IMO.

              •  "Wait a bit?" That's part of the problem, IMHO. (3+ / 0-)
                Recommended by:
                Piaffe, JesseCW, Rachel Q

                There's the ongoing issue--even now--of everyone underestimating the severity of the situation we're in.

                Most recent reminder...last couple of days...the CW just 90 days ago...was that the market would drop to 7000-7200. Now it's below that, and the CW's just shifted to 5000.

                All the neo-Keynesian economists...the ones that have been getting this right...from Baker, to Stiglitz, to Roubini, to Rogoff, to Krugman...all are saying the exact same thing. Do not repeat the mistakes made by FDR in the 30's...when we suffered through a prolonged Depression that was only overcome by a World War. How much unanimity of thought--from the ONLY people that have been getting this right--is it going to take before we hope for the best but expect the worst, and plan accordingly.

                Next reminder...the unemployment nos. coming out for February...are going to be the worst monthly nos. yet. The worst single month's loss of jobs ever, perhaps! (And, we're talking a 28-day month, too!)

                We cannot afford to "wait." #1) The money might not be there. #2) Tens of millions are suffering.

                "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                by bobswern on Wed Mar 04, 2009 at 01:07:59 AM PST

                [ Parent ]

                •  Of course they're suffering (4+ / 0-)

                  I lost my job myself in January. But that doesn't mean that I think that any of these cockamamie schemes to reflate the economy are going to work or aren't just a complete waste.

                  The back side of deflationary credit bubbles always sucks, but I do not believe that it is possible to deal with them except on the front end, to prevent the bubble to begin with. Once you've got the bubble, you're stuck with it and all the downside pain associated with malinvested capital in the economy being retrenched back to useful purposes again.

                  The US has more retail space than any other G8 nation, like 5x as much per capita. Most of this is unnecessary and excessive and was created in the last ten years as a result of two bullshit economic "booms". Well guess what? Now retail must and will contract back to a sustainable level, and that is going to involve a lot of retail people being laid off and being unable to find retail work again.

                  This process is painful and unavoidable at this point. In my view, the government should concern itself with ensuring that appropriate food stamps, social services, possible job retraining, etc are available to help the displaced and should otherwise leave business to business people to figure out.

          •  Not-as-profitable <> Unprofitable (5+ / 0-)

            I don't think the leap can be made.

            More importantly, these idiot companies took the TARP money on the basis of restoring credit markets then decide to bail?  WTF?!

            I say, give the TARP money back immediately then.

            All of this "free market" stuff goes out the window when you accept government bailouts, IMHO.

            --
            Make sure everyone's vote counts: Verified Voting

            by sacrelicious on Wed Mar 04, 2009 at 12:56:42 AM PST

            [ Parent ]

            •  Exactly! All of these entities that took gov't... (2+ / 0-)
              Recommended by:
              JesseCW, beforedawn

              ...funds made commitments, at least verbally, to not turn the backs on the taxpayers--the source of the money they received.

              Obviously, these commitments were only worth the paper they were written on...which means they were worthless.

              But, there's a whole riff about corporate obligation to society...especially when the society is--at the most basic level--allowing them to freakin' continue to exist!

              "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

              by bobswern on Wed Mar 04, 2009 at 12:59:52 AM PST

              [ Parent ]

            •  Sure (2+ / 0-)
              Recommended by:
              pletzs, yellow dog in NJ

              I opposed TARP for precisely this reason; also remember that the Dems in their wisdom never passed any requirement that the money be used for lending; they got suckered (again) by the banks, Paulson, the administration, etc.

              The reality is that no one will lend into a deteriorating economy for any project except the safest and most obviously profitable. This is unfortunate, but is a necessary part of the business cycle and despite how much it sucks now, I don't really see a justification for mucking with it any more.

              •  You must not be in a job where your clients (2+ / 0-)
                Recommended by:
                Sparhawk, bobswern

                need access to credit.  I'm a veterinarian, and the great majority of people don't plan for pet illness.  They need access to credit; it's not like many people can just whip out a check book or cash and pay the bill.

                I'd guess the same goes for all emergency expenses: human medical/dental/eye, car and home repairs, emergency travel. These things have a huge impact on people's lives, and the credit card is the mechanism we as a society count on to see people through.

                •  No one deserves credit (4+ / 0-)

                  It's unfortunate that people with pets do not keep emergency cash funds around to pay for pet illnesses (or any other emergency), but no one is "owed" a loan from anyone.

                  I realize that this might sound like a cold and heartless thing to say, but it's the truth. No bank, individual, or anyone is required to loan anyone money at all. They will only do so if they make enough of a profit, and if the risk of default is low enough.

                  Government attempting to force these institutions to lend simply requires them to essentially give money away, since they wouldn't have done so of their own free will since the proposed loan is either unprofitable or too risky. The net result is government money (i.e. your and my hard-earned taxes) being given to people who will probably default (or at least, will do so in the credit card company's estimation); so those people get free stuff and you and I get screwed.

                  the credit card is the mechanism we as a society count on to see people through.

                  No one deserves a credit card; you only deserve one if a bank will give one to you. If we as a society have an excessive reliance on credit, now's a good time to cure that.

                  •  Note (2+ / 0-)
                    Recommended by:
                    JesseCW, yellow dog in NJ

                    My statement above does not apply to massive human health bills, since no reasonable person can prepare adequately for getting majorly sick, which is why I am a single-payer health advocate.

                    But your pets' medical bills are in the "things I need an emergency cash fund for" category, not "things I deserve a credit card to help me pay for" category.

                    •  People with the foresight (1+ / 0-)
                      Recommended by:
                      Sparhawk

                      and financial planning skills to have an emergency cash fund invariably have good credit - in my obviously limited experience.

                      •  I have some foresight (2+ / 0-)
                        Recommended by:
                        Sparhawk, Rachel Q

                        (I like to think) and plan for emergencies...but I have literally no credit score.

                        My wife, on the other hand, has great credit, but no one wants to loan to her because she pays off loans early.

                        "If we ever pass out as a great nation we ought to put on our tombstone, 'America died from a delusion that she has moral leadership." Will Rogers

                        by JesseCW on Wed Mar 04, 2009 at 02:05:50 AM PST

                        [ Parent ]

                  •  I have no argument with that. (2+ / 0-)
                    Recommended by:
                    Sparhawk, Piaffe

                    My profession has largely switched to outsourcing credit to credit card companies exactly because we were getting so burned by doing it ourselves.  I can hardly argue that the credit card companies "have" to give credit to someone when the business I'm working at won't.

                    I'm just trying to argue (maybe not very well) that people with good credit need their cards to have access to services they can, in fact, pay for.  If the credit card businesses contract significantly, it would affect a whole lot of people at really bad times in their lives.

                    You want to argue that no company should be "forced" to give these credit-worthy people consumer credit.  Fine.  But in that case we have no business bailing them out with any taxpayer money, because they're not providing us with any social good in return.

                    •  A lot of those people are in those dire straights (1+ / 0-)
                      Recommended by:
                      Sparhawk

                      at least in part, because so much of their income goes to service interest on easy credit.

                      Can't break the cycle without pain...and hopefully we'll get some meaningfull easing of bankruptcy laws to at least ease that pain.

                      "If we ever pass out as a great nation we ought to put on our tombstone, 'America died from a delusion that she has moral leadership." Will Rogers

                      by JesseCW on Wed Mar 04, 2009 at 02:07:34 AM PST

                      [ Parent ]

                      •  Re (2+ / 0-)
                        Recommended by:
                        pletzs, JesseCW

                        Can't break the cycle without pain...and hopefully we'll get some meaningfull easing of bankruptcy laws to at least ease that pain.

                        The bankruptcy law changes in 2005 were total BS. Everyone associated with that travesty should have been voted out, either in a primary or a general election (sorry, Biden, I like you, but come on...).

                        The whole point of bankruptcy laws is to force lenders to be careful and prudent making loans, because if they are imprudent and extend too much credit, the borrower may bankrupt themselves and force the loan amount to be written down to zero or some other low value.

                        The borrower's credit rating is at risk, but especially with unsecured lending, if the lender's money is at risk, they will be more prudent in lending and will lend less money out. Changing bankruptcy law is a bullshit way to continually inflate the credit bubble and crush imprudent borrowers under mountains of debt they will never be able to pay back...

                    •  Re (2+ / 0-)
                      Recommended by:
                      realthinker, Rachel Q

                      I'm just trying to argue (maybe not very well) that people with good credit need their cards to have access to services they can, in fact, pay for.  If the credit card businesses contract significantly, it would affect a whole lot of people at really bad times in their lives.

                      Sure it will. That's what a recession is: it sucks. But I mean, I have "good credit" and I have a number of credit cards open with tens of thousands in (mainly empty) credit lines. I don't think that people with good credit are having their consumer credit significantly curtailed. I mean, I still have about half my former yearly salary in credit lines available: how much credit does one person need? I mean, can you even find a story in the media of someone with good credit not being able to get a credit card?

                      You want to argue that no company should be "forced" to give these credit-worthy people consumer credit.  Fine.  But in that case we have no business bailing them out with any taxpayer money, because they're not providing us with any social good in return.

                      Precisely, and I completely agree, which is what my original beef was with the TARP.

                      If you want to run a communist-style economy with a government banking system that loans or not based on government-set standards, I mean, you could have that if you wanted it, with all the problems that this system entails.

                      I prefer a private, properly regulated, banking system (and economy, barring stuff like health care), in which prudent and well managed and profitable firms grow, while badly run firms go bankrupt. This way the economy can dynamically adjust to situations on its own (i.e. Adam Smith's invisible hand). This only works, though, when government is used effectively as a regulatory agency and not as a method of forcing particular outcomes.

                      Government makes an excellent referee, but a bad player...

                  •  Wrong. Some people ARE "owed" credit. (1+ / 0-)
                    Recommended by:
                    Rachel Q

                    That's a big part of the reason why we're supposed to have regulators in place to handle this type of thing.

                    If one is in the business of "selling money," one must do so equitably. And, that doesn't always occur in our society right now.

                    In fact, our government does a really shitty job of enforcing that.

                    Minorities were navigated into shittier loans than non-minorities. This is simply a fact. I saw this happen firsthand with numerous large mortgage, automotive and retail credit operations over the past few years.

                    A great many of the minorities that are facing credit problems today are in that predicament due to little more than inherently established bias within the system, itself.

                    This is a firsthand, highly documented observation. It is not conjecture.

                    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                    by bobswern on Wed Mar 04, 2009 at 02:12:00 AM PST

                    [ Parent ]

                    •  Re (2+ / 0-)
                      Recommended by:
                      pletzs, Rachel Q

                      If one is in the business of "selling money," one must do so equitably. And, that doesn't always occur in our society right now.

                      The discrimination case is a totally separate animal. Of course people shouldn't be discriminated on based on race. But they can and should be discriminated on based on their credit score, since the credit score reflects the statistical likelihood that they will pay the loan back as agreed.

                      A great many of the minorities that are facing credit problems today are in that predicament due to little more than inherently established bias within the system, itself.

                      Well, that, and the fact that they apparently were unable or unwilling to have a lawyer review their loan documents before signing them.

                      Prudent people who are careful, shop around, and don't just sign things stuck in front of them simply do not have the kinds of problems you are describing here, minorities or otherwise.

                      I'm all for prosecuting bona fide fraudulent behavior, but the buyer needs to know what they are getting into when they sign papers for multiple times their net worth.

                      •  No. Still incorrect. Credit scoring is not... (0+ / 0-)

                        ...properly deployed in most major lending environments. This is also a fact.

                        INACCURATE/BIASED SCORING
                        Most scorecards in most major lending institutions are created on a customized basis, specifically for the lender.

                        One assumes these scorecards run properly, but just the opposite tends to be the rule of the day...and I'm talking about major lending institutions with flawed scorecards...in most instances...totally out of compliance.

                        UNETHICAL "NAVIGATION"
                        There are tons of instances (this happens TENS of thousands of times per day in the U.S., even now, in the midst of a depression) where consumers are "navigated" into awful credit solutions based upon prejudice and totally unfair practices, while other consumers are taken by the hand, given every break, and provided with value.

                        INACCURATE CREDIT DATA (INTO A SYSTEM MEAN INACCURATE SCORING COMING OUT OF IT)
                        Today, as I write this, thousands of people will go into auto showrooms throughout the U.S., and in five minutes time, they'll have 5, 10 or more "hard inquiries" hit their credit report, when by law, the entire credit data provisioning effort should only account for one hard inquiry. "Number of inquiries" is one of the top three credit variables used in retail credit scoring. The next time these consumers apply for credit, they'll lost anywhere from 5 to 50 points on their credit score due to nothing other than improper, unenforced business practices, both at point of sale, at the credit repository (Equifax, Experian and/or Trans Union), and within the manner by which a scorecard is deployed on a customized basis at a given lender.

                        ONLINE
                        "When lenders compete, you do not win;" one of the biggest frauds in all of credit marketing, IMHO. Lenders compete to buy applications from these online sources. If these online sources have hundreds of lending options available to them--and they do--and only four offers are provided to a creditworthy applicant, which is around the maximum for those online lenders, something was done to whittle down the pool of potential lenders for that consumer. What was that? It was the lenders paying the online entity to make a bid on the consumer's loan.

                        I could go on and on (off the top of my head, I could probably mention 20 other scams) with examples of ways by which consumers are defrauded in the lending industry...but I think you get my point. The most important takeaway here is that many of these con-jobs are based upon the color of a person's skin, their gender, their location of their home (or the location of a home they wish to purchase), etc., etc.

                        Got it? Good! :-)

                        "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

                        by bobswern on Wed Mar 04, 2009 at 02:43:22 AM PST

                        [ Parent ]

                •  I guess that's how some people roll.... (1+ / 0-)
                  Recommended by:
                  Sparhawk

                  I have a thousand dollar per-cat fund.

                  Ilnesses or injuries that would cost substantially more than that to resolve would likely mean the end of a cats life.

                  So it goes.

                  "If we ever pass out as a great nation we ought to put on our tombstone, 'America died from a delusion that she has moral leadership." Will Rogers

                  by JesseCW on Wed Mar 04, 2009 at 02:04:19 AM PST

                  [ Parent ]

                  •  Sure (0+ / 0-)

                    But I mean in all seriousness, how much is that cat worth to you? Certainly a lot less than a human being, probably.

                    Are there such products as cat health insurance? :)

                    •  You bet (2+ / 0-)
                      Recommended by:
                      Sparhawk, Rachel Q

                      I take great care of my critters, and do all I can to keep them healthy.

                      On the other hand, a hungry kid in the third world could eat for six years on a thousand bucks.

                      The inverse is, how much less than a cat is a human worth?

                      Life is full of compromises, and we all draw our own lines.

                      "If we ever pass out as a great nation we ought to put on our tombstone, 'America died from a delusion that she has moral leadership." Will Rogers

                      by JesseCW on Wed Mar 04, 2009 at 02:18:01 AM PST

                      [ Parent ]

                    •  Yep, the most common one is (1+ / 0-)
                      Recommended by:
                      Sparhawk

                      VPI.  I think some corporate veterinary chains have their own plans, but they don't work well as insurance because they don't cover after-hours emergencies outside the chain.

                      Cats are worth more to people than you seem to think... and I had such a warm and fuzzy view of you.  :-)

                      •  Hehe (1+ / 0-)
                        Recommended by:
                        Rachel Q

                        I am sensitive to people's love of their pets (I had a cat when I was little, I don't now because I can't handle the responsibility... ask me when I plan to have kids sometime... :)); I just think that if they love them so much, they should have made provisions to pay for their care is all.

                        And I'm sure all the endless ranting about economics that you've rec'd for me in the last few weeks (thanks for that) really makes you realize what a warm and fuzzy person I am...

                        I really am... in real life... :)

              •  Nationalize the banks (0+ / 0-)

                even that won't free up the credit markets, but it will speed up the repair of the banking sector. The last depression did not really end until the credit market resurfaced, in the late thirties. We don't want to muck around with half-measures, the way Japan did in the lost decade.

                Let's just get it done.

                Bipartisanship: what happens when an unstoppable force tries to reason with an immovable object!

                by Bobs Telecaster on Wed Mar 04, 2009 at 03:32:08 AM PST

                [ Parent ]

      •  You nailed it, Sparhawk! (2+ / 0-)
        Recommended by:
        Sparhawk, Piaffe

        On one hand: The availability of cheap credit brought us to this  crisis

        On the other: More credit is supposed to deliver us from it?

        We let the credit flow - and taxpayers shore up for all the funny money or we let let the banks and finance giants fall and get this thing turned around.

        It would have been less expensive just to open USA Financing with the Taxpayer Purse and have the government deal directly with the people and businesses and cut out the cancer.

        The goal of life is living in agreement with nature. - Zeno

        by yellow dog in NJ on Wed Mar 04, 2009 at 02:08:06 AM PST

        [ Parent ]

    •  Goolsbee confirmation in trouble (2+ / 0-)
      Recommended by:
      Losty, Rachel Q

      Free Austan Goolsbee!

      Bloomberg reports that Council of Economic Advisers appointees Ceci Rouse and Austan Goolsbee have been caught up in a Senate crossfire and have yet to be confirmed:

       

       March 2 (Bloomberg) -- President Barack Obama’s economic advisers are increasingly concerned about the U.S. Senate’s delay in confirming the nominations of Austan Goolsbee and Cecilia Rouse to the White House Council of Economic Advisers.

         Without Senate confirmation, the two economists are barred from advising the president as the administration tackles the worst financial crisis in 70 years and tries to advance the spending plan Obama submitted to Congress last week. ...

         Goolsbee and Rouse appeared before the Senate Banking Committee on Jan. 15 and were slated for a full Senate confirmation on Inauguration Day, Jan. 20, according to a senior administration official. Instead, they were approved by the panel Feb. 10.

         They weren’t placed on the confirmation slate for the full chamber, leading some administration officials to conclude that Senate Republicans were retaliating against the Democrats because President George W. Bush’s nominations for the same slots languished in the Senate for months at the end of his second term.

      I realize we all need to get even and all, but is it really necessary to take it out on Obama's wonks? Why not an appointee who's more obviously political and not quite as central to solving the current crisis--deputy assistant agriculture secretary for legislative affairs, or something? (With apologies to the future occupant of this position...)

      (Via Ben Smith.)

      Update: While we're on the subject, it wouldn't be a terrible idea toconfirm Gary Gensler either. He's the administration's nominee to head the Commodity Futures Trading Commission, the agency that oversees derivatives. It's not like those have been causing problems lately...

      --Noam Scheiber

      FDR: "I agree with you, I want to do it, now make me do it."

      by robertacker13 on Wed Mar 04, 2009 at 01:06:52 AM PST

      [ Parent ]

    •  PLUS, DEMS & repubs are blocking Obama's nominees (0+ / 0-)

      FDR: "I agree with you, I want to do it, now make me do it."

      by robertacker13 on Wed Mar 04, 2009 at 01:07:37 AM PST

      [ Parent ]

  •  Just now you realize this? (2+ / 0-)
    Recommended by:
    sacrelicious, realthinker

    Main Street lost when Obama appointed Geithner and Summers.

    It's not that Geithner is clueless; he's incompetent.

    The real cynics are the ones who tell you everything will be alright. - George Carlin

    by felldestroyed on Wed Mar 04, 2009 at 12:23:01 AM PST

  •  He's not incompetent...just fearful (5+ / 0-)

    I'm hoping in the next few months he's going to pull the trigger.  He knows what the problem is, he knows how to solve it, it's just a question as to whether he's going to do it or not.  

  •  Was looking for the part where it 'splains (0+ / 0-)

    how/why Geithner is wrong?

    I ask because I'm trying to read up on it instead of just taking everybody's word for it.

    •  I explain this... (2+ / 0-)
      Recommended by:
      JesseCW, yellow dog in NJ

      The channels formerly used to restore liquidity to Main Street are pretty much in shambles. (I provide case-by-case/lender-by-lender examples.)

      Auto, heavy equipment and student loan funding is important, and being addressed by TALF and other programs. But, when it comes to the rest of small business, Main St., unemployment problems, retail, manufacturing, etc...this program grossly misses the mark.

      And, the purpose of the program was, supposedly, to restore consumer-related credit to the marketplace.

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Wed Mar 04, 2009 at 01:13:36 AM PST

      [ Parent ]

    •  here's the basic dillemma (2+ / 0-)
      Recommended by:
      JesseCW, yellow dog in NJ

      http://andrewsullivan.theatlantic.co... via sullivan

      WSJ yesterday:

      No decision has been made on the final structure of what the administration is calling a private-public financing partnership, but one leading idea is to establish separate funds to be run by private investment managers. The managers would have to put up a certain amount of capital. Additional financing would come from the government, which would share in any profit or loss.

      Whatever the details, Geithner and his colleagues are said to be deeply uncomfortable with the idea in principle. "Most people who run businesses in this area ... would look to nationalization as a last step--if it was the only thing standing between us and the abyss," says Michael Granoff, a private-equity fund manager who is friendly with several senior administration officials. "The people in charge of the economic policy side of things have pretty good communication with the people ... who sit where I sit," he says. "There is a shared understanding in these conversations."

      If Obama has the balls to announce a massive long-term increase in government spending and borrowing, a withdrawal by date certain from Iraq, and a halving of the deficit in his first term, he should have the balls to grasp the banking nettle, before it grasps him.

      The Dow is cratering and they've had months to come up with a plan, but they're still having a seminar. The gist of Noam Scheiber's piece on the Treasury Department is that they're too scared to seize the banks temporarily for political reasons, and too skittish to run the banks even for a short period of time. But staggering on for years slowly bleeding money to the banks ... that's just political heaven, isn't it?

      FDR: "I agree with you, I want to do it, now make me do it."

      by robertacker13 on Wed Mar 04, 2009 at 01:17:19 AM PST

      [ Parent ]

  •  Krugman: Geithner's CLUELESS (6+ / 0-)

    http://krugman.blogs.nytimes.com/...

    Indeed. Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains. We’re going to buy up all the bad assets at premium prices; no, we’re going to offer the banks guarantees against losses; no, we’re going to let private investors buy the stuff, but offer them de facto guarantees against losses in the form of non-recourse loans.

    Underlying all this, apparently, is the theory Tim Duy sums up so aptly:

       Policymakers are assuming that restoring proper functioning in credit markets - and confidence in general - is equivalent to a housing price rebound. They seem incapable of envisioning a world in which this is not the case. This tunnel vision prevents policymakers of trying to devise policy which assumes that the many of the assets in the banking system are simply "bad." For Bernanke and Geithner, there are no bad assets. Only misunderstood assets.

    And the insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won’t notice? That is, are they stupid, or do they think we’re stupid?

    I don’t know which possibility is worse.

    FDR: "I agree with you, I want to do it, now make me do it."

    by robertacker13 on Wed Mar 04, 2009 at 01:10:37 AM PST

    •  Outstanding link! Thank you. n/t (1+ / 0-)
      Recommended by:
      robertacker13

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Wed Mar 04, 2009 at 01:15:13 AM PST

      [ Parent ]

      •  i am so freakin sick of this (3+ / 0-)

        krugman's point and simon johnson's that Geithner and Obama really think they're being bold but are doing nothing of the sort!

        This is the only person i can find who has access to the president, call him if you want or email him.
        http://faculty.chicagobooth.edu/...  (if he asks how you got his contact info, say you found it yourself on google)

        nationalization is the best strategy, both politically and practically.

        Apparently Geithner is the person who, last September, went back to the fed with his personal assessment saying that there was no political will in washington to save Lehman. It's no wonder he is against Nationalization.
        He severely misreads the public, and why is it his job to read the public anyway? that's Obama's job. Republicans like Alan Greenspan and James Baker now, are in favor of nationalization!

        even a republican congresswoman realizes these banks are insolvent and said so today at the HUD testimony:

        FDR: "I agree with you, I want to do it, now make me do it."

        by robertacker13 on Wed Mar 04, 2009 at 01:26:06 AM PST

        [ Parent ]

        •  Geithner: no common sense, all about WS. (0+ / 0-)

          This is like when an apartment building catches fire, and the fire department, upon getting the call, sends its men out to put a fresh coat of wax on the trucks first, thinking that nicer looking trucks will make a great public impression.  Meanwhile, the apartment building burns down.

    •  They're not stupid- just evil (0+ / 0-)

      All the politicians, Dems included, are stooges of the banks.  The banks printed up $600 TRILLION worth of contracts nobody understands, and they called it "wealth".  They are just now realizing that it is Monopoly money, and they're trying to cover their asses by bribing the pet politicians into giving neverending bailouts.  But $600T is a black hole.  There's not enough real wealth in the world to bail them out, so now the dollar will become Monopoly money too.  Time to admit that the real wealth has already been spent on call girls and crack. Nationalize the banks now, claw back the bonuses, lock up the looting execs and start rebuilding from the ground up.

      Notice how the bailout bills never addressed what Washington claimed to be the central problem (banks not lending)?  That's because Washington doesn't give a shit about you.  All you get is trickle-down.

  •  Krugman: "Feelings of Despair" (1+ / 0-)
    Recommended by:
    Piaffe

    Obama and Geithner say the right things. But Simon Johnson nails it:


       How long can you say, "we are being bold" when in fact you are not?

    Obama and Geithner say things like,

       

    If you underestimate the problem; if you do too little, too late; if you don’t move aggressively enough; if you are not open and honest in trying to assess the true cost of this; then you will face a deeper, long lasting crisis.

    But what they’re actually doing is underestimating the problem, doing too little too late, and not being open and honest in trying to assess the true cost. The actual plan seems to be to keep the banks semi-alive by implicitly guaranteeing their liabilities and dribbling in money as necessary, all the while proclaiming that they’re adequately capitalized — and hope that things turn up. It’s Japan all over again.

    And the result will probably be a deeper, long-lasting crisis.

    http://krugman.blogs.nytimes.com/...

    FDR: "I agree with you, I want to do it, now make me do it."

    by robertacker13 on Wed Mar 04, 2009 at 01:31:55 AM PST

  •  This is not a liquidity problem. Treasury/FED (0+ / 0-)

    keep attacking like more liquidity is the answer. We are well beyond that. It is an issue of solvency, confidence and trust.

    RebelCapitalist - Financial Information for the Rest of Us.

    by dennisk on Wed Mar 04, 2009 at 04:55:47 AM PST

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