Conservatives give a lot of deference to the opinions of business leaders and other ‘job creators’. The operating assumption is that their criticisms of White House policies are accurate and well informed. What if this assumption is largely off-base?
Consider this roundtable hosted on CNBC between Austan Goolsbee, the former Chairman of the Council of Economic Advisers, and several business executives. Pay close attention to the arguments made by John Allison, former CEO of the bank BB&T
Read it at FrumForum
Would You Trust a Randian Banker?
by Noah Kristula-Green
12 comments:
do you know what is sooo freaking hilarious.....John Allison says he HATES regulation....and then he goes on to say that Paulson acted arbitrarily and he would have preferred a more "systematic" way of going about that process. If that's not regulation then WTF is it!???!?!!
none-the-less it was a real good convo and had some real legs to it imho. I've always liked Goolsbee and this video only confirms that more. He knows more than he's letting on (of course). He's seen into the lion's den....why do you think he made that comment about getting "reasonable people together"? Perhaps b/c there aren't any in office right now making the policies...
but to be fair also...it sounds like Allison ran BB&T smart with regards to his derivative exposure and analyzing the state of affairs at that time. I definitely give him credit for that, and respect him in that regard. He just has that "southern mentality" regarding Fannie and Freddie. They all do. I have some "friends" from down in those parts and they all talk and think like that. Ahhh I love the south I really do. (I do love the south I mean that...I also have relatives down there and they are all real good people down there...outside of these topics).
Freddie and Fannie were buying crap from New Century Mortgage until Mar. 2007 when NO ONE ELSE WOULD. I wish Bloomberg would FOIA request from the GSEs with the same bloodthirst they had for The FED. I think people would be shocked.... there were no worse loans than those New Century Originated and Freddie couldn't get enough. Someone like Allison with first hand knowledge is far more credible than professor Goolsbee.
TB,
yeah many other mortgage reits too Ameriquest, etc....
then giving huge amounts to folks (like Newt)to keep everyone happy.
The whole edifice is corrupt to the core....
Resp,
I'm not so sure TB. All the evidence I've seen shows otherwise. I don't think the GSE's are the big bad boys here and definitely don't deserve all the heat they get relative to all the players. There may be more insider trading with the GSE's...but that is a different issue...one that I too think sucks and needs to change asap.
http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-how-the-facts-of-the-economic-crisis-stack-up/
Saw this piece over at FrumForum.
It illustrates an important point: the principles that apply to successful management of a company do not always necessarily apply to management of the economy as a whole. It is this fallacy of composition that MMT explicitly seeks to expose - that is, the government budget under a floating exchange rate regime operates under different constraints that that of an individual firm or household.
Unfortunately, it is the inability to make this distinction that precludes us from taking the necessary steps from doing what is necessary to bring back full employment and recovery.
No. The only bankers I trust are MMT bloggers!
I only watched a little bit. Mostly I just like reading everyone's comments. lol
So how is it that Citigroup isn't catching flack? Man, total crap. Remember, they had an MLM division called Primerica. That's now way to sell financial services but they did it like that for years.
Mario? lol GSEs don't deserve all the heat... come on! Does your mom work for FNMA or somethin?
1990 entered the LIBOR. 91-92 FNMA rolled out their DU (automated underwriting engine) also, the FICO was invented! And of course, B paper i.e. subprime market emerged seemingly from the dust of the S&L crisis. And until 1999 they (GSE) and the scum of Wall St. sat watching the subprime market making money hand over fist MANUALLY UNDERWRITING loans. GREEEEEEEEED bubble - they wanted in!
Just to clarify - It was 98 or 99 when Alt-A was introduced. In the beginning Alt A looked a little bit like a subprime loan in that it allowed for 'alternative' documentation but the borrower had to be self employed! Early subprime was a 2 year fixed with a 5 year hard prepay - no option to buy out the prepay. In time the guidelines on the Alt A loosened up while subprime terms improved so they ended up looking very much the same. And remember, borrowers paid premiums to the GSEs in exchange for every millimeter of risk.
Tomato Basil,
Fannie and Freddie were buying crap THAT WAS RATED AAA BY THE RATING AGENCIES! They were defrauded, like everyone else. Blame the victim????
Read what you will into the specifics of the discussion, the most horrifying and dangerous aspect is the influence of the Galts at the institutes of so-called higher learning. I have two quick comments about this and would love to hear about other experiences:
1. I have an MBA from a pretty good b-school. I've learned more about economics and monetary policy in the past year in a self-study than any of the garbage I learned in grad school. Frightening.
2. B-schools were already very conservative (UM-KC and some others excepted), this is just scary. During a course on business ethics, readings from Atlas Shrugged were used. It was awful, and battling with the Randians was an energy sucker. It is a cult.
Mike, Your comment prompted me to go back and read TB and so now I have two questions I need to answer for myself.
First, TB says F&F were buying loans from New Century. I didn't know that. And, if New Century then why not Option One, Fremont, Franklin, etal. too? I didn't do much subprime but when I these are the lenders I'd broker to.
Second, Mike might be right. Because I regularly spoke with underwriters at Fannie and Freddie I assumed the pools of loans were shipped to the GSEs after they were sold. Maybe they went straight to the rating agencies?....NAH!
Mike, F&F made the rules. They wrote the underwriting guidelines. Therefore, they new what they were buying.
Joe- High school and community college economic and sociology curriculum is dark and misleading. My 19 year says I am "whacked" when I talk mmt.
I read Atlas Shrugged this summer. What a great, great story- I love Dagny. She's both driven and compassionate. I'm curious to know which readings and what context your instructor applied.
Fannie and Freddie were buying the Alt-A's Liar Loans from New Century -- I don't know how far down the sub-prime path they went. I got one of the very last ones they sold =). I got a call on the morning of closing telling me they probably wouldn't have funds to close on the property. Apparently they came to an agreement with Freddie that Countrywide would service the loans instead of New Century -- at least that is what the rep from new century told me.
This is from the SEC filing on Mar. 20:
New Century Mortgage Corporation, New Century Financial Corporation’s (the "Company") indirect wholly owned subsidiary ("NCMC"), received a Notice of Breach and Termination of Mortgage Selling and Servicing Contract, dated March 14, 2007, from the Federal National Mortgage Association ("Fannie Mae"). In its notice, Fannie Mae purports to terminate its Mortgage Selling and Servicing Contract with NCMC (the "Fannie Mae Contract") for cause, based on alleged breaches of the Fannie Mae Contract as well as alleged breaches by NCMC under other contracts with Fannie Mae. As a result of the purported termination, the Company and its subsidiaries are no longer able to sell mortgage loans directly to Fannie Mae or act as the primary servicer of any mortgage loans for Fannie Mae.
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