<p>Barrons re Post #10.</p>
<p>I'm preparing to buy a foreclosed home myself and I fear what I might find lurking in the crevices, ceilings, walls and floors of a home whose last occupants departed with a great deal of anger towards the bank or the landlord.</p>
<p>the next "job du jour" for driven ivy graduates? the proposed new RTC-style government agency, of course (oh, the irony!)</p>
<p>There will be plenty of time to assign blame. But for starters they got rid of Glass Steagall Act in 1999. They they opened the floodgates and expanded the notion of homeownership for people who didnt qualify for a mortgage. It started in the Clinton years and was exacerbated by Bush. Some of our "leaders" went to Ivy League Schools: Congressional Leaders, Presidents, Fed Chairmen, Treasury Secretaries etc.</p>
<p>The decision to lend money on homes to unqualified people was not the fault of any politician. We try to assume businesses have a lick of business sense. You cannot legislate against all stupidity. All the stupidity that was Wall Street. It would have taken just one senior person to say wait a minute--this is nuts. The entire scheme would have imploded before it got this far. Every real estate economist was saying early on that prices would not continue to rise forever.</p>
<p>In all this mess, I haven't read about anyone breaking the law, so I don't think handcuffs are called for. It's the law that's broken. +</p>
<p>It will come out. I think several charges were already been made months ago.</p>
<p>The lawyers are already working overtime.</p>
<p>The WSJ a week ago had an article on a dumb contractor from Thousand Oaks who bought Freddie Mac stock because he read statements from Paulson that the government needed Fannie/Freddie in their current form. He lost over $100k for his kids education and now he's suing. </p>
<p>:rolleyes:</p>
<p>Come on folks. You can not just blame Wall St. What about all the people who bought houses they could not afford. For years i have been watching McMansions going up everywhere and seeing people drive these
SUV's and asking my H (a PhD economist) "How can people afford these?" It turns out they could not.</p>
<p>Then you say they were persuaded by "unethical" sales people. I say --
1. No, they were greedy and wanted to look like something they were not. So they bought into the crap, i.e. you can afford this big house that usually only rich folks can live in.
2. They, as high schoolers, were probably playing and being adored (worshiped) as a human who can kick, throw or hit a ball rather than a human who can do math, or any science course. So they did not understand what the "sales " people were saying.
3. Sales workers work on commission. They will always try to sell you. duh!!</p>
<p>Stop trying to blame someone else or make someone else pay for your mistakes.</p>
<p>Also, my D is an ivy student. She also interned at Goldman Sachs this past summer as a rising junior. She was told she would most definitely be asked back. Now it seems not likely, but who knows. She, however has so many other things going on. She is so ambitious and creative, I think she has a lot of options. The ambitious Ivy students are not lost without IB or Wall St.</p>
<p>No, not all of them. But the dreams of quick riches are gone.</p>
<p>Barrons, the ambitious, hard working kids have who are driven to make money have hardly given up the thought of quick riches. In the past few days I've had several discussions with kids who summer interned at ibanks and now realize they may well not get an offer (although some will). Venture capital is exploding with biotech deals, the biotech industry (and others) itself is gleeful about access to these kids, there's a lot going on in Eastern Europe and Asia.....believe me, these creative kids have places to go and things to do. </p>
<p>Also keep in mind that in bad economies there are always sectors where the money rolls in from capitalizing on the opportunities created. There are real estate agents making small fortunes because they know how to complete short sales and foreclosure sales while the traditional agents starve. There are luxury goods brokers making a fortune representing people who need to sell. Day traders making money because of irrational panic.....</p>
<p>So, I wonder what percentage of econ and business majors at the "Top Twenty" national universities have already swarmed, or will soon swarm, the registrar's office to change their majors to pre-law and pre-med. Oh, the injustice of it all! It's just not fair!</p>
<p>I'm sure they'll all just switch from their Goldman-Morgan-Lehman application lists to their McKinsey-Bain-BCG ones...</p>
<p>Thank you all in advance for contributing your tax dollars to the $700 billion bailout. If my mutual fund doubles in the next 3 years, I will think of you. And, the Ivy League future bankers and brokers would thank you personally if they could.</p>
<p>morrismm,
my blame list in order of rank:</p>
<p>Loan officers committing fraud to qualify borrowers for loans so they could secure wacky loan terms (and collect commissions for their effort)</p>
<p>Greenspan and the Fed. For encouraging a nation with a savings rate so abysmal to weather any financial setback.</p>
<p>Holders of CBOs and Mortgage-backed securities for creating a wild market based on misinformation (actually, no information as these investments are off the book). The insatiable demand for such a risky instrument freed reserve limits from banks and allowed many ARM lenders to make many dumb or fraudalent assessments of credit-worthiness.</p>
<p>People living in excess of their abilities (Less I, your or anyone tell someone they can't borrow what a bank is willing to offer them to improve their lot. Granted, many dumb people made dumb decisions, but the dumb get a pass. The people who knew what they're doing and did it anyway are the real crooks)</p>
<p>Ferryboat--</p>
<ol>
<li><p>As I said, these folks work on commission. It is their livelihood. They will try to sell.</p></li>
<li><p>No disrespect--but weather is rain , sun , snow.</p></li>
<li><p>Demand creates supply.</p></li>
<li><p>Dumb (ignorance) is not an excuse in law or otherwise.</p></li>
</ol>
<p>Who do we blame? The list is long and interconnected. They were all making too much money to notice and no one wanted to act responsibly and kill the golden goose. Some of those who were responsible were:</p>
<p>*Bankers (investment and commercial) who took on excessive leverage, frequently exceeding 30 to 1, and then took on unstable collateral to support these loans</p>
<p>*Bankers (investment and commercial) who extended unsupportable amounts of capital to mortgage brokers and other consumer lenders, thus facilitating their lending. The expectation, of course, is that they could dress up and lay off these crummy loans in securitized form to the institutional and retail investment communities and they’d collect their pretty fees in the process</p>
<p>*Rating agencies who were completely asleep to the instability of this collateral and continued to proclaim high credit quality when it was closer to a house of cards</p>
<p>*Politicians, mostly in Washington, who got great contributions from Wall Street and then created regulatory conditions that would feed the beast with protections and legislative carve-outs that benefit the activities and coffers of the investment and commercial banks and the investment management industry and gave little thought to the risk of the system that they were establishing</p>
<p>*the trading community, including prominently the hedge funds, who engaged in naked shorting and who exploited the relationships between different securities to create fear and panic in multiple financial stocks. Hopefully, there will be some revealing books out about this and more than a few of these charlatans will go out of business or, even better, get taken to prison</p>
<p>*the mortgage brokers and other consumer lenders who asked virtually nothing of their borrowers, but instead approved untold numbers of loans to people with insufficient income and/or assets, and then sold the loans off as a solid package</p>
<p>*the business media who were little more than cheerleaders and did little to uncover these long simmering problems and instead lauded the unscrupulous practices of many in the investment community</p>
<p>And who gets the shaft? Millions and millions of Americans who had absolutely nothing to do with this and yet will get stuck with the $1 trillion bill for years to come. Do you really think that the Paulsons, Macks, Blankfeins of the investment world are going to pay a price? The best and the brightest? Yeah, at making themselves look good while taking so much risk that they put the entire system at risk. </p>
<p>This is like LTCM in 1998, but only much worse and much broader and, without real change in regulations AND in Wall Street leadership, this will happen again. </p>
<p>My guess is that, in classic Wall Street fashion, these firms will discover a way to manipulate this and make tons of money on this (track the hiring levels and profits of the distressed investing/principal investing areas of these firms going forward and you will see what I mean). And then they’ll be lauded once more as geniuses and masters of the universe and how they saved the financial system in 2008 and on and on…ah, the hypocrisy, the payoffs, the exploitation, the chutzpah.</p>
<p>Yeah and no one else made money?? Funny how when folK's IRA's and 401K'S were increasing in value up, up, up no one was complaining.</p>
<p>How many of you are driving gas hogs and living in houses much bigger than a human feasibly needs. And oh, by the way, you saved no money? And it is our fault? Or Wall Streets?</p>
<p>Quit making excuses for something that was FAR different in both scope and impact.</p>
<p>
[quote]
Goldman Sachs and Morgan Stanley, the last two independent investment banks, will become bank holding companies, the Federal Reserve said Sunday night, fundamentally altering the landscape of Wall Street.
...............
In return, they will submit themselves to greater regulation, including limits on the amount of debt they can take on. When it collapsed, Lehman had about a 30:1 debt-to-equity ratio, meaning it had borrowed $30 for every dollar in capital it held. Morgan Stanley currently has a debt-to-equity ratio of 30:1, while Goldman Sachs has one of about 22:1.</p>
<p>Bank of America, on the other hand, currently has about an 11:1 leverage ratio, while JPMorgan has about 13:1 and Citigroup about 15:1. Because they can borrow less, bank holding companies typically have lower earnings multiples.
[/quote]
</p>
<p>Neither VC nor biotech companies throw money at kids just out of college. Both prefer lean and nimble.</p>