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March 25, 2009

Comments

It's worth looking at the history of CDS's and derivatives, as well. A big part of the blame falls on Phil Gramm, who slipped deregulation of derivatives into a bill at the last minute in December 2000. We can also blame Bill Clinton, who signed the bill, and Larry Summers, who advised Bill Clinton in favor of cementing the de facto deregulation of derivatives into the law.

More than that, we can blame the banks who formed the lobbying organizations that fought the regulation of derivatives and provided the funds and campaign contributions that bought Congress. And we can especially blame the MoU who ran those banks.

We ourselves do not bear a whole lot of the blame, unless we were once Republicans or DLC Democrats) who mindlessly thought that all regulation was bad. Or that this regulation of the financial system was bad in particular.

I also blame the people who lobbied for tearing down the Glass-Stegall act. Yes, that means there are a lot of people to blame... but not the people who bought houses or used credit. The blameworthy are the people who fought regulation and voted for idiots who would mindlessly deregulate.

The nut of the problem is that derivatives are like side bets, and the value of those side bets dwarfs the size of the original loans. So our large banks ended up on the wrong side of most of those side bets, and are insolvent. Period.

They were able to gamble because they got themselves deregulated. Are those of us who fought, who tried to argue for caution and regulation, for conservative prudence, to blame? No, those who argued and fought and voted for deregulation are to blame. Period.

now_what:
"If it was your money, would you trust it to someone who didn't understand the concept of a sunk cost?"

But it isn't just sunk cost, you have more at risk.

now_what, indeed!!

TDaulnay: A big part of the blame falls on Phil Gramm, who slipped deregulation of derivatives into a bill at the last minute in December 2000. We can also blame Bill Clinton, who signed the bill, and Larry Summers, who advised Bill Clinton in favor of cementing the de facto deregulation of derivatives into the law."

Gramm and whoever voted for the bill bear much responsiblity. Do you know what all was in the bill and the implications if Clinton hadn't signed it? My impression is that the potential problem grew exponentially; so subsequent Congresses had the opportunity to reverse the error.

And then,with AIG the Europeans apparently wanted to regulate it, but Bush administration fought this, claiming the Thrift Office could regulate effectively.

Andrew Sullivan had the following quote from one of those who I assume escapes blame:
'I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010. I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness," - Senator Byron L. Dorgan, Democrat of North Dakota, November 5, 1999.

You still don't understand the concept of sunk cost.

He's dead, Jim.

In terms of who's to blame:

If a bank president goes out and loans the entirety of the bank's assets to winos, the bank president is the problem, not the winos.

Likewise, when almost every major financial institution makes loans far in excess of its equity to an assortment of speculators and people who don't know economics, the problem is the financial institutions.

Incidentally, there's a lot more to the problem than the US housing bubble. There's also massive bubbles in commercial real estate, leveraged buy-outs, credit cards, and auto loans, and they're popping away right now. There are similar problems, in different proportions, in almost every major country on earth. It's ridiculous to blame a worldwide problem like this on foolish people who can't evaluate investments because we have always had lots of them and probably always will. They didn't change. What changed was that a lot of financial people were willing to loan them lots and lots of money because of a mixture of delusion and fraud. Those financial people are to blame.

Vlad, you're just rationalizing screwing these people over. AIG is NOT bankrupt, in fact the freaking POINT of the bailout money is so that AIG can pay it's creditors, and not declare bankruptcy.

Arguing that AIG isn't bankrupt is like arguing that a Ponzi scheme is a good investment for everyone involved as long as there's money coming in.

The source of the bailout was that if AIG goes down, so does the entire economy. If they aren't around, there's no one to insure much of anything and the entire economy comes to a halt, because they insure more than financial products, and if they fail to pay out on those financial products that they did insure, those financial entities become insolvent and the financial markets collapse.

AIG is in essence bankrupt. The only money they have is the money we gave them (and continue to give them), and the entire economic system in the U.S. is precariously balanced on the idea that the government won't let them fail. Nothing more, nothing less. That should be what scares the hell out of you.

Now if staff leaves, we may get to see how irreplaceable they are.

Here's a simple test for you. Take a glass of water and put your finger in it.

Now remove your finger.

Notice the whole you left behind? Neither did anyone else.

Now fill that glass with a trillion in taxpayer dollars and see if there's any difference.

I could care less whether or not the crooks at AIG get bonuses or not. I'm more concerned about whether or not I can make my next mortgage payment as my business dries up and bills mount.

Oh, and Von.... I'm thinking you can guess.

I take Von's general point about blame with some equanimity.

But, I would like to know if Von, besides having a small mortgage and an impressive savings rate, passively held AIG stock in his 401K or IRA, and if so, how it is that Von didn't alert us early on about the financial debacle on the horizon, you know, if people are supposed to be so financially sophisticated and attuned?

But let's leave aside the idea of blaming the great unwashed [Von and I and everyone else here probably need to wash ;)] who bought too much house for a moment, and ask why it is that many of the great value equity managers in the mutual fund industry had AIG at or near the top position in their fund portfolios?

These are mostly honest financial wizards who know how to read a financial statement but still held AIG stock from its highs as it plummeted to single digits.

How is it that Warren Buffett, whose Berkshire Hathaway holds the equity of banks like Wells Fargo, USBank, and Suntrust, didn't see this coming, if the rest of us were supposed to.

Lots of reasons, I guess.

But I believe the main reason has to do with the meeting in the middle of, on one side, obfuscating financial reporting and balance sheets amd purposefully opaque accounting turned out in glossy 4-color annual reports (George Bernard Shaw: "Every profession is a conspiracy against the laity") and, on the other ....

........ the American Larry Kudlowian glib optimism that accepts American cheating and lying because it is American and better than everyone else's cheating and lying, and a concerted effort over the past 30 years to make the environment much more hospitable to American cheating and lying by loosening regulation and permitting the monumental edifice of the shadow banking system, which was left largely unregulated and encouraged to grow by the free marketeers over the past many years, to have its way with us.

Tell me the name of one poor schlub, who bought too much house, who could explain how the unregulated banking system worked to provide him with that mortgage money.

The schlub can't explain it because the shadow banking system was not required by dreaded government regulation to divulge its machinations to him.

Maybe the schlub should have read behind that annoying smirk on Phil Gramm's face as he was forced to get down off the wagon and take out a mortgage.

"We ourselves do not bear a whole lot of the blame, unless we were once Republicans or DLC Democrats, who mindlessly thought that all regulation was bad. Or that this regulation of the financial system was bad in particular."

Absolutely right. Looks like there will be a pitch to correct this situation for the future today: it will be interesting who in Congress disputes the need for this new regulatory regime.

I've been trying to understand Now_What's post. He speaks of "sunk costs". Now "sunk costs are costs which are gone regardless of future events. I don't know what he means, but perhaps the reason so many want to do what in my mind is irrationally sabetogue the unwinding of AIG is that you think you are talking about sunk costs. I have the disadvantage of having listened to Liddy's testimony last week, and in absence of hearing anything to the contrary believed him when he said his current expectation was that the remaining AIG Financial Products portfolio could be wound down over 2-3 years at a cost of only $2 billion. (If I recall correctly, selling off the really bad part of the portfolio had cost $30 billion). Minimizing the cost of completing this task should be important, because it lessens the amount AIG will have to repay to US taxpayers.

Johnny Canuck:

It's only "irrational sabotage" to the unwinding of AIG if you have any reason to believe the people "retained" to do so would do any better at this than say, J. Random Dude walking down the street in Manhattan. Or, more likely, J. Random Financial. While the people currently at AIG could likely do better than J. Random Dude, because they're trained in finance, but it's questionable, considering the way they've managed it so far. And it's unlikely they'd do better than some other J. Random Financial, especially if they're going to whine like this op-ed because they're not getting paid the "bonus" they were supposed to be paid, when they "agreed to work for $1". Which, since he was guaranteed a 750K bonus, means he wasn't working for $1.

Basically, we have no reason to trust any of the yahoos who've worked at AIG over the last many years when they say how critical they are.

I've been trying to understand Now_What's post. He speaks of "sunk costs". Now "sunk costs are costs which are gone regardless of future events

he said his current expectation was that the remaining AIG Financial Products portfolio could be wound down over 2-3 years at a cost of only $2 billion

It would cost 2 billion dollars to sell it off? OK, don't sell it off then, you'll save 2 billion dollars, right? No? Sunk cost.

"It would cost 2 billion dollars to sell it off? OK, don't sell it off then, you'll save 2 billion dollars, right? No? Sunk cost."

Liddy testified AIG FP has a $1.6 trillion portfolio. The object is to wind up the business. The US taxpayer has "invested" $79 billion and is exposed for at least a total of $170 billion.

The nut of the problem is that derivatives are like side bets, and the value of those side bets dwarfs the size of the original loans. So our large banks ended up on the wrong side of most of those side bets, and are insolvent. Period.

I've had people ask why the total amount of exposure is so high, given that it is several times the amount lost in the housing bubble. The answer is quite simple, as explained above. Think of two drunks at the bar making a bet for $100 on which customer the bartender is going to serve next. The value of the underlying transaction is close to zero. But the terms of the bet still have to be honored.

This is also, incidentally, why the housing bubble is not the problem (note that those who say it is more often than not go on to finger the usual suspects, the FF's and the undeserving poor and greedy.) Some of these people will make the claim then that even if this is true, the larger blowup wouldn't have happened if their hadn't been a crisis in the housing markets. This strikes me as a husband who blames his wife for 'making' him hit her by making a smart remark.

It's only "irrational sabotage" to the unwinding of AIG if you have any reason to believe the people "retained" to do so would do any better at this than say, J. Random Dude walking down the street in Manhattan. Or, more likely, J. Random Financial. While the people currently at AIG could likely do better than J. Random Dude, because they're trained in finance, but it's questionable, considering the way they've managed it so far. And it's unlikely they'd do better than some other J. Random Financial, especially if they're going to whine like this op-ed because they're not getting paid the "bonus" they were supposed to be paid, when they "agreed to work for $1". Which, since he was guaranteed a 750K bonus, means he wasn't working for $1.

Basically, we have no reason to trust any of the yahoos who've worked at AIG over the last many years when they say how critical they are.

This is exactly right. While we can't be sure of the claims in this particular case, we do know that in the past other banks have been unwound from untenable positions by outsiders with no side effects, despite the insistence on the part of those banks that only insider expertise would work. We also know that in some of those instances, the banks making those claims had something more to hide over and above the acknowledged troubles.

I agree, we don't know for a fact that special expertise isn't needed in this particular case. But the burden of proof for this claim lies rather heavily on the parties making it - AIG and it's proponents. Since they are arguing by assertion and nothing more (like they have so many times in the past to other people's detriment), I'd say they have come nowhere near meeting this burden.

AIG without a government bailout -- DeSantis has no job.

AIG with a government bailout -- DeSantis has a very lucrative job, but loses his bonus.

And I'm supposed to cry for him because he doesn't have the third option of the job plus the bonus?

Let me take the flip position of von's apologetics. I've been saying for months now that I have absolutely no objection to bailouts and bonuses save for one condition: that the officials of the company seeking government aid go on live TV and admit that they made mistakes, apologized for those mistakes, and vowed to try to make some sort of amends. Not just one token sin eater who could be denied later, btw, but as many of the responsible people that could be rounded up as possible, even if that number went into the dozens or hundreds.

My thought is that this would have helped craft better responses to the crisis down the road. It's much harder to argue against the cramdown option when the guilty parties have just gone on TV admitting that they were in fact guilty, to name one example.

Instead - as I predicted then - what has emerged is a self-serving paean of the responsibility of all in this fiasco. All are wicked. All are punished. No one man can thus be singled out if all men are guilty. How convenieeeeent, the Church Lady would have said.

Nate: "Basically, we have no reason to trust any of the yahoos who've worked at AIG over the last many years when they say how critical they are."

They aren't proclaiming their self-importance. It was Liddy who was testifying to their importance, specifically the learning curve necessary to take over and manage a $1.6 trillion portfolio whose risk needs to be assessed and possibly adjusted each day. He's the one saying in this 400 employee unit the damage was done by 20-30 people in the credit default swap section; those people are gone.

Liddy is the guy the US govt sent in last September to clean things up. If it is Liddy you don't trust, get someone else in.

Obama has enough sense so that his efforts to steady the finanical system will not be sabetogued by this kind of advice; would that Congress would stop shooting holes in the bottom of the boat, and train their fire and hearings on the former AIG executives that caused the problem.

Or perhaps asked Senator Dorgan- who was one of the few senators who was warning about the problem 10 years ago- what they should do.

Anyone inside the financial industry is not really in a position to be trusted, ESPECIALLY the executives of big companies. Or the people who sat on their boards. Like Liddy. He'd have to be replaced with somebody from outside the system, because everybody involved in the system has been complicit and profited off the orgy of derivatives. Which brings up the same issues of knowledge versus competence, but the executives are especially implicated in this. I don't buy any "If only the czar had known!" talk.

So no, I have no reason to trust Liddy in particular, since he's got a vested interest in protecting his friends, his class, and the system that got them all where they are. OF COURSE he's going to say everything except CDSs are roses and happiness, and AIG's books are filled with unicorns. He has no reason to want any kind of major systemic changes, no matter how needed they are.

And no, I don't know who I'd put in place, but somebody who'd been sitting on the boards of various banks and insurance companies for the last decade, worked to get Bush re-elected and tried to get McCain elected, and got appointed by his buddy Henry Paulson doesn't come across as unbiased. Which doesn't mean he's specifically lying all the time, but he's certainly got plenty of reason to pretend things are better than they are, and exaggerate.

They aren't proclaiming their self-importance. It was Liddy who was testifying to their importance, . . .

Sigh. Liddy is working at AIG. What part of "Basically, we have no reason to trust any of the yahoos who've worked at AIG over the last many years when they say how critical they are." don't you understand?

This type of coy argumentative style strikes me as a rather poor one. Especially since denying the premise doesn't change the fact that Liddy has excellent reasons(and probably legal ones involving fiduciary duties) for talking up the people on his team.

Hmmm . . . maybe it's the anger talking :-)

Plus, doesn't Liddy get a big fat bonus depending on how well he unwinds AIG? Which should give him incentive to do it well, but also gives him incentive to make things seem not as bad as they may be, and tell Congress (his employers) what he thinks they want to hear?

AIG

See, you guys weren't explaining it to us correctly. Instead of the AIG people being so invaluable to keep around to wind up business, they were actually so venal and incompetent before that AIG now cannot afford to give the counterparties the slightest excuse to void their contracts and try to take their money. That I can believe.

"I think the values system needs to be reversed."

No surprise, Fraud Guy, that I agree with your sentiments and was moved by your commentary from yesterday.

Sounds like we have faced similiar predicaments in this economic meltdown, although you've had it much worse.

I just signed off on my bankruptcy papers yesterday. A Chapter 7 -- the attorney made it clear I qualified easily, which is a sad indication of how low my earnings have been the past six months. (It was also sad, and humbling, that I had to borrow $400 to be able to pay her $1,700 fee, but, thankfully, I have a close friend who didn't bat an eyelash when I asked.)

I waited until the last possible moment to file, denying to myself that it was necessary; the guilt you feel is tremendous. But once the cupboard was bare, there was no choice.

Somehow, I've been able to cobble together enough to continue making my mortgage payments. But it always comes down to the end, and that stress becomes overwhelming.

As bad as things have been, however, I can't imagine the pain and despair a foreclosure would bring.

I think the reason Von's it's-on-you blame is being received so negatively is he is not weighing the overall effects of the economy and, especially, unemployment. He is not showing any compassion.

ScentofViolets: You appear to be in a slightly better mood than yesterday

You say:
Liddy is working at AIG. What part of "Basically, we have no reason to trust any of the yahoos who've worked at AIG over the last many years when they say how critical they are." don't you understand?

why you think someone who only arrived at AIG last September becomes "worked at AIG over last many years".

Nate says:Plus, doesn't Liddy get a big fat bonus depending on how well he unwinds AIG? Which should give him incentive to do it well, but also gives him incentive to make things seem not as bad as they may be.

First part of this makes sense to me. I thought money talked most to these people.

As I previously wrote: "Liddy is the guy the US govt sent in last September to clean things up. If it is Liddy you don't trust, get someone else in." I can see force in the distrust because he is Paulsen's appointment, but would you trust anyone Obama appointed either?

I think the reason Von's it's-on-you blame is being received so negatively is he is not weighing the overall effects of the economy and, especially, unemployment. He is not showing any compassion.

It's on us. (This is also my response to Hilzoy's comment.)

Really? My mood is no different than yesterday's. I find your parsing of Nate's simple sentence extremely odd. When someone says "any of the yahoos who've worked at AIG over the last many years " they are not implying that they have worked there for many years; only that they've been employed there sometime in the last several years, with the length of employment unremarked upon. Has Liddy been employed sometime over the last several years? Why, yes. Yes he has.

I understand your anger at being easily countered at every turn, but don't let your anger blind you to the meaning of quite simple sentence constructions.

Really von? Even if we've been excoriating these sorts of practices for years? Still our fault? You don't offer any reasons why this should be. So you haven't convinced me that this is the case. But I'll give you this - I'll blame you for providing cover for these people. That's meeting you halfway, I would think.

Predatory lenders used foreign credit to throw money at people they knew could not pay - typically helpless financial naifs. Now these predatory lenders extort money from the government to recoup their shitty loans. The United States is a kleptocracy, and while the individual kleptocrat is merely going along to get along, the entire FIRE sector is built on corruption and fraud. The Chinese would take a sampling of these parasites out and shoot them. Can you do better than that? Your voice of reason is inaudible while you fellate your betters.

Really von? Even if we've been excoriating these sorts of practices for years? Still our fault? You don't offer any reasons why this should be. So you haven't convinced me that this is the case. But I'll give you this - I'll blame you for providing cover for these people. That's meeting you halfway, I would think.

If we're going to assign guilt, sure it's our fault. US savings rates have been extremely low for years. We accepted policies -- particularly easy money and mortgages -- that advantaged us. They advantaged me, when I purchased my first home after more than a decade of renting.

I realize that as soon as one points out that it's "our" fault -- as much as anyone's -- a thousand hands shoot up. "It's not me!" comes the cry. (From the Gen-Xers: "whaddaya mean 'us,' Kemosabe?")

John Thullen provides a highly sophisticated version of the argument, above. And John is right: there's no conscious guilt. I certainly didn't intend to lose money in virtually every one of my retirement funds. (Cash equivalents is doing OK, but Helicopter Ben is going to change that.) But I made those investments and I benefited when times went well. Now that times have soured and now that my cheap house is even cheaper, I'm not going to create some "other" to blame.

Those who were incompetent or did criminal acts should be punished proportionately. If you're looking for vicarious guilt or guilt-by-association, however: look in the mirror.

Sure, Von, we all have to take responsibility to a certain extent.

But what about all of the people who have lost their jobs -- and then their homes? Shall we dollop a big scoop of blame on that poor sap?

And I guess the subprime mortgage companies never used deception on some of the borrowers who went under.

I guess WE are the reason WE are bailing out all of the banks that got rich selling instruments that are now toxic. I guess we are toxic.

bedtime,

Thank you.

I guess the pain comes from feeling that your home is your future. Even in the move up, move out, and flip world, your home was an investment in that future, if mainly for financial reasons. Losing a home that we once lived in, and whose sale could have stopped our financial tail spin is like having a portion of your dreams ripped out of your skull and trampled on. You know that portion of your future is gone, that your potential and possibilities are that much more constrained, and there is grief in that knowledge.

I recall the news story about the study which found that the most successful traders on Wall Street were those who the least involved emotionally in their investments. In fact, they most closely resembled sociopaths in their inability to worry about the social impacts of their financial decisions, which allowed them to make their trading decisions mainly on the basis of profit.

I choose to be whole, even with the sorrow, rather than missing that part of me, which would be a greater loss.

I guess that is why I take such umbrage over von and similar commenters, who blame everyone for what happened. In a sense, you and I act with the understanding that the worst predatory instincts of business and finance will be kept in check, and that there will be some limits to what they can do. But there aren't, especially when they, or their sympathizers, are in control of the institutions that watch over them. So their amoral financial schemes run rampant over our futures, the media, entrusted to report, support instead, and the politicians seek their input to insure that there are not too many checks on their ability to minimize the financial damage they caused.

My job is to protect, but I didn't protect my family. Because I didn't accept that the game was rigged from the start. So I guess I am to blame, as von says, and I have paid a dear price, indeed.

But the ones who gamed, those who supported them, and those who encouraged them; when in von's world will they accept their blame, and their repercussions. I don't see him, or any of those who bring similar claims, bring forth any solution to that problem. Until there is equal weight carried on all of our shoulders, I don't want to hear blame assigned to Main Street; we have our penalties already. Now Wall Street and K Street, and Pennsylvania Ave have to accept, recognize, and recompense us for their roles in the fiasco.

bedtimeforbonzo, sorry to hear your news. Geographically, are you in a particularly hard hit area?

Rather than just repeating yourself robotically, why don't you answer my question? I've been criticizing the easy money and outrageous lending practices for years. I've been prudent with my own finances, have a traditional mortgage, etc. What would I had have done to not be considered guilty according to you? Emigrate?

No, despite your insistence and rote repetitions, I don't think you've won any converts. Though you've certainly convinced many people that you're part of the problem. Why isn't this enough for you? I suspect that your anger at being duped - quite justified, I am sure - has blinded you and made you behave irrationally.

If you can't do anything but mechanically recite talking points, why don't you just step away from your computer and come back when you can do better?

Seriously. Your efforts are only making people hold you in even lower regard than they already do. Stop digging.

SoV -- I'm guessing you're writing in a sarcastic tone rather than a serious one, but just because "someone else started it" doesn't excuse your tone. I think you've made some excellent points on this thead, but you've been sidetracked here and there, and it's counterproductive. Don't make it personal, regardless of how poor you think someone's arguments are.

Fraud Guy: I can't elaborate on your comments without repeating them since we have clearly walked in each other's.

I see what you mean about looking at your home as your future, but I'd add it is also a big part of one's past, the memories we've made in ours are so vast.

One thing I think this recession shows is that you can play by the rules and still be left behind or forced to play catch-up. (Hence, the outrage caused by bailout-seeking companies that did not play by the rules.)

Johnny Canuck: I live in the Northeast, which I guess is holding up as well as many other parts of the country (although citizens of Rhode Island might differ). But I work in a toxic industry, selling cars for a living. First we were killed by $4 a gallon gas, then banks stopped lending to buyers, now buyers seem afraid to buy. There are signs things are picking up, however: so, fingers crossed.

Those who were incompetent or did criminal acts should be punished proportionately. If you're looking for vicarious guilt or guilt-by-association, however: look in the mirror.

von, that's the thing. THEY'RE NOT. The people who are suffering? They're the people who bought houses. Had jobs. Worked for regular wages. They're already being "punished" by losing their houses, their jobs, their futures, watching their neighborhoods fall apart around them, and all the rest of the ways the crashed economy is hurting people.

Meanwhile, the people who made the bets, created the "financial innovations", pushed the mortgages, sliced them up, and bet more than their companies are worth aren't. They're crying over lost bonuses worth orders of magnitude more than most people make in a year. They're crying about "working for $1" with great benefits and a job that's only there on our dime. They're whining because people are being mean to them, while they made millions over the last decade+ by setting this crash up.

And now you're coming along and saying "Oh, don't blame the people who created and ran the system, the real problem is everybody else!" Even the people who were prudent, even the people who were okay until they lost their jobs, or their house became worth less than their mortgage, or they got sick and their insurance denied them, or any of the other myriad things that can wipe people out in this country. "We" are all already being "punished" for our "mistakes", even if we didn't participate, fought them, advised against them, or weren't even involved. The spleenweasels on Wall Street, at AIG, and the rest AREN'T. How many of them are living in tent cities? How many of them are deciding between rent and preventative health care? How many of their kids are going to have to drop out of college, or graduate with crippling debt and no job prospects? How many of them are going to have to put off retirement because their savings all got sucked down by the financial maelstrom? How many of them are facing criminal charges, discharge for incompetence, or any other consequences for their part in setting up and running this system that fell apart so spectacularly?

Yes, I'm angry. I don't deny it, I have no reason to. Not only are these people getting away with their ill-gotten gains, the same people who spent decades supporting deregulation, lax enforcement, and "the magic of the market" that got us here are now lecturing us on how we shouldn't blame the people who made the bets, we should all share the blame, so nobody's at fault?

@$!# that.

Who's "creating" others to blame? I wish I had to invent AIG et al. Unfortunately, they actually exist.

And why should someone who was financially responsible, did not work in any of the relevant industries, took out no bad loans, did not support any of the policies that are to blame, and expressed that disapproval to his or her elected representatives be held responsible for this? i don't see that the fact that that person profited from investments has anything to do with it: are we supposed to have had to choose between being to blame and keeping our money in a shoebox?

No reason you have to answer this at all. But if you do, it would be nice if you'd go beyond rhetoric ("a thousand hands shoot up. "It's not me!" comes the cry.") and tell us why that cry is wrong. Because if it isn't -- if the reason those hands shoot up is because the people whose hands they are are not to blame -- then there's no reason to portray them as evading anything, or to lecture them about how they ought to "look in the mirror".

I'm not following you, farmgirl. I really do want to know why von thinks I am somehow to blame, and what I could possibly have done to shed this accusation.

Hilzoy: I was surprised to see your name at the end of your last comment, the outrage was so raw. (By the way, I mean that as a compliment.)

I am sure I speak for many others when expressing appreciation that you "get it."

There is a point somewhere in everyting that Von has said, but even if so, I think it would get lost after telling down-on-their-luck folks to "look in the mirror."

I'm not following you, farmgirl. I really do want to know why von thinks I am somehow to blame, and what I could possibly have done to shed this accusation.

SoV -- That's fine. You're in good company there, and several others in addition to yourself have put forward well-argued challenges to von's thesis.

What I was suugesting you avoid in future is criticism *of von* rather than *of his arguments.* You might compare the last 3 paras of your 1:44 post with Nate at 2:01 and hilzoy at 2:03, for the most recent samples among many. (I am guessing that you wrote these with a sardonically raised eyebrow, but the flat text on the page does not contribute to a productive discussion.)

Rather than just repeating yourself robotically, why don't you answer my question? I've been criticizing the easy money and outrageous lending practices for years. I've been prudent with my own finances, have a traditional mortgage, etc. What would I had have done to not be considered guilty according to you? Emigrate?

Great. Did you refinance your mortgage? Take advantage of a lower rate?

No, despite your insistence and rote repetitions, I don't think you've won any converts. Though you've certainly convinced many people that you're part of the problem. Why isn't this enough for you? I suspect that your anger at being duped - quite justified, I am sure - has blinded you and made you behave irrationally.

I never said that I was "duped." My mortgage is of the standard 15-year variety. Responsible! Indeed -- not that anecdotes matter much -- I remarked at the closing that we were probably buying at the top of the market. (We weren't, but that doesn't mean that we didn't overpay.)

By the way: I understand and appreciate that my message is unpopular. But, like I said, I have the luxury of sitting in the peanut gallery on this one. I'll shoot the spitballs that I think are appropriate, even if many folks disagree.

(You'll note that I'm not responding to your various other ad hominems, chest-thumpings, and insults. I don't know what you think you accomplish with them, but my policy -- when I remember it -- is to neither feed the trolls nor reward trollish behavior.)

Anyone inside the financial industry is not really in a position to be trusted, ESPECIALLY the executives of big companies. Or the people who sat on their boards. Like Liddy. He'd have to be replaced with somebody from outside the system, because everybody involved in the system has been complicit and profited off the orgy of derivatives.

Yep. The finacial gurus we all subprime is no big deal, we're all covered. There's no problem that need to be addressed, these aren't the droids you're looking for.

Then all of a sudden it was give us $700B in the next three days, no questions asked or were all doomed!!!!11eleventyone!!

If it were up to me I'd be bringing in bankruptcy attorneys and forensic accountants (people who have Actual Experience winding stuff like this up) not the deluded financial class and their happy pony stories about how the big shitpile really really is worth something

bedtime -- sorry to hear your news. I hope things start to turn around for you now.

We missed you the other night -- we'll have to do it again sometime, or maybe one of these days someone will revive that notion of a national ObWi gathering....

Financial institutions that are crucial to the functioning of the economy were leveraged 30 to 1. Get it? To be leveraged 30 to 1, they would either have to have been deluded as to the risk of the assets they held, or have to have figured they couldn't lose, i.e. the government would bail them out, precisely because of the crucial economic functions they perform.

Or, the people making the decisions, who had visibility into the leverage, didn't care if their companies went under. They were getting seriously paid, and knew that they personally would come out just fine if the crap ever hit the fan.
Or, less cynically, they were under pressure to be bringing in as much as the firm next door, and that could only be done by making overleveraged bets.

Hilzoy, I previously criticized you for painting with too broad a brush when you blamed the so-called "Masters of the Universe" for the financial crisis, when individual "Masters of the Universe" were no more at fault than you or I. To answer your question, I need a clarification regarding your position. Does your statement still hold if we include the following strikeout?

And why should someone who was financially responsible, did not work in any of the relevant industries, took out no bad loans, did not support any of the policies that are to blame, and expressed that disapproval to his or her elected representatives be held responsible for this?


farmgirl, thanks for trying. I just wanted to say it "out loud" as it were, so you'd know you had some support.

Repeated nastiness and sarcasm, even when "cleverly" framed as an echo of someone else's words, are a blight on the neighborhood. There's always the choice of just not reading comments by particular authors, but that gets frustrating too.

I've seen new commenters settle down after a while (in a mild way I was one of them), and I always admire the regulars who patiently engage them with civility, until it starts to appear that civility might be contagious.

It doesn't alway seem to work, sad to say. Maybe I'm too impatient, but sometimes it seems like life is just too short. The answer to that? -- back to work. ;)

Overgeneralization? Yes, of course. Similar to the overgeneralization regarding bankers? Yes, of course.

And have you not just written a post in part attacking such generalizations of bankers? Of course. Can I tell if the initial post was a tongue-in-cheek satire of this overgeneralized blame of bankers, pretending to blame everyone to show how ludicrous the position is? No, I cannot, because you appear to be defending the proposition (ie that we're all to blame) vigorously. It would be pretty cool if it were though. But if that's that case, you've got to pull back the curtain pretty soon.
Otherwise, if I understand you correctly, DeSantis is *not* to blame for this mess, but the rest of us are. Because we accepted cheap loans from people who then bet the US economy that we'd be able to repay.
[IMO, this is like betting your car on a basketball game and then blaming the team for losing your car.]

Maybe we're lucky- maybe DeSantis has a morgage on his house, or his vacation house, or his ski condo. Then we could all agree that he had some blame coming to him.

Janie -- Thanks, I appreciate you taking the time to say that. (I always do enjoy reading what you have to say on these threads.) I hope to be able to join the crowd next time you have a Boston-area gathering; I'm just over the border in NH.

Otherwise, if I understand you correctly, DeSantis is *not* to blame for this mess, but the rest of us are. Because we accepted cheap loans from people who then bet the US economy that we'd be able to repay.

No, that's not my point. "Us" and "we" are inclusive of DeSantis. My point is that DeSantis bears the exact same proportion of blame as you and I do. If you want to assign vicarious guilt to folks who work in finance or someone like DeSantis because he worked at AIG ('tho, importantly, wasn't responsible for the current mess) you have to cast your net wider. You have to, ultimately, include yourself.

A lot of folks are missing this point, and reflexively assuming that everything has to be us v. them. I'm not. Again, "we" is inclusive.

"Us" and "we" are inclusive of DeSantis. My point is that DeSantis bears the exact same proportion of blame as you and I do.

No, he doesn't. That's half the point.

The other half of the point, is for all the talk of "blame", he's NOT suffering. While "we" are.

Those are what you don't seem to get, von.

von: I think that people who did not work in any of the relevant industries, and meet my other conditions, are not responsible. Or at any rate, I might be persuaded to add conditions if they were suggested. But the operative point is: it does not follow from the passage you quoted that I think that everyone who did work in the relevant industries is responsible. Similarly, some people who took out bad loans might not be responsible, e.g. if the loan was for a nickel and was repaid the next day (as the result of an unexpected windfall, so that the repayment does not stand in the way of its being a bad loan.)

I'm on record as thinking that people at AIG who did not work in the financial products group, or in any management position that would have given them the power to help set the course of the company as a whole, are not responsible for this, for instance.

So I don't really see what you were getting at with your last comment.

And yet while "you and I" have lost jobs, had wages cut, lost student loans or whatnot DeSantis whines about how unfair it is that people don't like the fact that his insolvent employer is paying him more than the average American earns in a decade. As I said above DeSantis is severely deluded about how the economy has operated in the last 30 years.

Even in good times, good workers lost jobs with profitable companies because factories were moved to China where they could get slave labor and give themselves even bigger bonuses. Meanwhile the wizards of Wall Street trumpeted all this as creative destruction.

But those rules don't apply to finance I guess.

What I was suugesting you avoid in future is criticism *of von* rather than *of his arguments.* You might compare the last 3 paras of your 1:44 post with Nate at 2:01 and hilzoy at 2:03, for the most recent samples among many. (I am guessing that you wrote these with a sardonically raised eyebrow, but the flat text on the page does not contribute to a productive discussion.)

Posted by: farmgirl

If you look back at previous posts by von you will see that I haven't said anything that he hasn't already said to me.

Are you suggesting then that in fact, von has been insulting? That maybe he should own up to that and move on?

That's an honest question.

No, that's not my point. "Us" and "we" are inclusive of DeSantis. My point is that DeSantis bears the exact same proportion of blame as you and I do.

I can accept that proposition (at least, I can accept that it could be true, I don't know what he was doing specifically at AIG, and it's not really important to the larger argument).

My point is related to how much of that blame really goes to 'everyone'. I would say, almost exactly zero. My point is that the people blaming DeSantis with broad generalizations are doing *exactly* what you're doing in blaming everyone with broad generalizations. The specifics of the crisis relate to banks making insanely disadvantageous loans (which, unsurprisingly, people accepted, being insanely *advantageous* to them) and then betting their existence on those loans being AAA via some obscure mathematical fertility ritual.

Thus the question about whether this was a particularly clever satire. I was hoping that you'd jump up and say- well, if blaming everyone is crazy as everyone says that it is, then blaming DeSantis is also crazy.

I would like to note I have nothing against this DeSantis guy, other than his being a whiny little prick about his "honorable" "working for $1" while waiting for a $750K bonus. He may not have set up the system, but he made damn good money enabling it. And didn't try and fix it.

I've got this mental picture of a family- they live in an apartment, and the bank comes to them and says "we can get you into a bigger house in a nicer part of town, for less than you currently pay in rent. No money down, no paperwork."
And the family has bad credit and a bad job history, this is a chance they never thought that they'd have. So it's a 5-year with a balloon, so what- maybe the house will appreciate and they'll be able to refinance with the gains. Or maybe they mail the mortgage company a box of dog crap after 5 years of living better and cheaper than they had been. They can't lose.

And Im imagining this family saying "No, we can't do that, some batshit bankers might bet the US economy on our ability to pay this back in 5 years. We'll take our fleabag apartment rather than risk that, it would be selfish of us."

Rather than just repeating yourself robotically, why don't you answer my question? I've been criticizing the easy money and outrageous lending practices for years. I've been prudent with my own finances, have a traditional mortgage, etc. What would I had have done to not be considered guilty according to you? Emigrate?

Great. Did you refinance your mortgage? Take advantage of a lower rate?

As it happens, no. This is not answering my question.

No, despite your insistence and rote repetitions, I don't think you've won any converts. Though you've certainly convinced many people that you're part of the problem. Why isn't this enough for you? I suspect that your anger at being duped - quite justified, I am sure - has blinded you and made you behave irrationally.

I never said that I was "duped." My mortgage is of the standard 15-year variety. Responsible! Indeed -- not that anecdotes matter much -- I remarked at the closing that we were probably buying at the top of the market. (We weren't, but that doesn't mean that we didn't overpay.)

By the way: I understand and appreciate that my message is unpopular. But, like I said, I have the luxury of sitting in the peanut gallery on this one. I'll shoot the spitballs that I think are appropriate, even if many folks disagree.

Your message is a statement of opinion that is not backed by any discernable facts or reasoning. I and several others have asked you to justify that opinion, and have also asked what we would have had to have done to avoid this blanket criticism. To date, you haven't made any responses in that direction.

(You'll note that I'm not responding to your various other ad hominems, chest-thumpings, and insults. I don't know what you think you accomplish with them, but my policy -- when I remember it -- is to neither feed the trolls nor reward trollish behavior.)

Posted by: von

Sigh. von, I have no idea what you are talking about. You have said every one of those things to me and more(notice that I don't stoop to any silly playing around with people's online names, as you have.) If they are not insulting when they are coming from you to me, why would you think they would be insulting going in the other direction? I suspect an irrational anger is clouding your judgment here.

Here's a thought - if you think what I am doing is 'insulting', why don't you admit that you've done the same thing, first, and apologize? A novel idea, taking responsibility for one's own deeds, I know. But give it a try.

Thus the question about whether this was a particularly clever satire. I was hoping that you'd jump up and say- well, if blaming everyone is crazy as everyone says that it is, then blaming DeSantis is also crazy.

I don't know if it was clever or not -- a lot of people are arguing not -- but that was my point.

I'm pretty stupid, but I'm not stupid enough to follow a criticism of overgeneralizations with a massive overgeneralization myself without some reason for doing that. Maybe a stupid reason, but a reason nonetheless. DeSantis bears the exact same proportion of vicarious "blame" for the current mess as you and I do.

Hilzoy, I'm a little confused by your first sentence and think that it might contain a typo. Did you mean to write "von: I think that people who did not work in any of the relevant industries, and meet my other conditions, are not responsible"?

"I'm on record as thinking that people at AIG who did not work in the financial products group, or in any management position that would have given them the power to help set the course of the company as a whole, are not responsible for this, for instance."

That's not the only record you have. There is at least one posts of yours that contains a broad attack on the "Masters of the Universe." But I agree that most of your posts are much more careful, and I believe that the careful posts are the ones that reflect your true thinking on the issue.

Thanks, Janie. If things pick up -- with the idea of a Chapter 7 being you get a fresh start -- better days could be ahead. The guilt I felt about making this decision, I must admit, was diminished each time another Wall Street entity asked for government/taxpayer assistance. Also, when I hear what Fraud Guy has gone through, I realize things could be much worse.

Last night's "Nightline" led off with a segment on the growing number of people taking up residence living in motor homes (not the high-end kind) at various camp grounds. One middle-aged guy with a wife and daughter lost his job as an editor at a magazine, lost his home, then couldn't pay the rent for an apartment, and now is essentially living out of a very big car. ("Nightline" followed that story with a sobering piece on Altzheimer's. Shouldn't there be a rule against two depressing segments in a row before bedtime?)

Bernard Yomtov emailed me and made wish I had been at the Boston gathering -- I told him I am sure there was room for one more balding/graying middle-age man. Under better circumstances, a train trip from Newark, Del., to Beantown would make a cool trip.

Von: What do you say to the homeowner who lost his/her job and did not find gainful employment in time to save his/her home? Look in the mirror?

Repeated nastiness and sarcasm, even when "cleverly" framed as an echo of someone else's words, are a blight on the neighborhood. There's always the choice of just not reading comments by particular authors, but that gets frustrating too.

I've seen new commenters settle down after a while (in a mild way I was one of them), and I always admire the regulars who patiently engage them with civility, until it starts to appear that civility might be contagious.

It doesn't alway seem to work, sad to say. Maybe I'm too impatient, but sometimes it seems like life is just too short. The answer to that? -- back to work. ;)

Posted by: JanieM

I'm sorry, but this is simply false. We've already established that saying someone is angry, blindly angry, unjustifiably angry, angry in a way that affects what they write, rather than just addressing the points that supposedly angry person is making is not, in fact, a personal attack.

If you disagree, take it up someone else.

If, otoh, you do agree that this sort of thing is nasty, sarcastic, and out of line, I would appreciate you saying so to a few other people. People who deserve it far more than I by virtue of them saying those things first.

Von: What do you say to the homeowner who lost his/her job and did not find gainful employment in time to save his/her home? Look in the mirror?

Sure: If we're going to make people guilty for a financial crisis because they profited from the boom-before-crash, then this homeowner is likely included in the group.

That's not the only record you have. There is at least one posts of yours that contains a broad attack on the "Masters of the Universe." But I agree that most of your posts are much more careful, and I believe that the careful posts are the ones that reflect your true thinking on the issue.

Posted by: von

Right. And saying that dogs are four-legged animals means that we are excessively generalizing because you can point to three-legged dog.

I don't buy it. Because you're not just posting this to a select few people who you think may have committed some sort of imagined infraction. You're also posting to an audience who may or may not have transgressed. It looks to me like you're scrabbling for a way out of the hole you've dug for yourself that doesn't make you look too undignified.

Sure: If we're going to make people guilty for a financial crisis because they profited from the boom-before-crash, then this homeowner is likely included in the group.

Okay, von, seriously, why do you not appreciate the difference, both qualitatively and quantitatively between a homeowner who ended up buying a bigger house than "needed" and lost their job, as well as the value they put in the house, and the people who worked on Wall Street and raked in millions of dollars by sustaining and creating the system that caused this economic crash, and are going to go home and still be enormously wealthy?

I don't buy it. Because you're not just posting this to a select few people who you think may have committed some sort of imagined infraction. You're also posting to an audience who may or may not have transgressed.

Can you explain what you mean by this?

Okay, von, seriously, why do you not appreciate the difference, both qualitatively and quantitatively between a homeowner who ended up buying a bigger house than "needed" and lost their job, as well as the value they put in the house, and the people who worked on Wall Street and raked in millions of dollars by sustaining and creating the system that caused this economic crash, and are going to go home and still be enormously wealthy?

I do appreciate the difference on a number of levels: the case of the homeowner is unfortunate and, no matter how unwise his or her behavior, there is good cause to provide support. What I don't see why the former is "innocent" of any wrongdoing but the latter is "guilty".

von,

Imagine you and I are playing blackjack. We are in a dark room, and are blindfolded and in straitjackets.

The dealer plays your cards, and tells you what they are. You decide to add one, or double down, based on what he tells you. So do I.

He may tell us that we win the occasional hand, and if our memories are good enough, we may try to place our bets based on each other's cards. Sometimes we win, sometimes lose, but at some point, the dealer tells us that we're out of chips. And when he says this, somehow we know he's smiling.

The financial instruments are the game, the financial instutions the dealer, the dealer's voice is the media, and our chips--well, did we ever really have them?

And you feel that the players are as much to blame as the dealer?

Okay, let's see. I know this has all been gone over before, but here's one more

First, aiding and abetting a crime is also a crime.

Second, it's a matter of responsibility. The "Masters of the Universe" lobbied to create the environment that led to this crash, they created and abused the "financial innovations", they made and profited from the bad loans, bets, and other short-term "profits" for years. Also, part of the justification for people being paid more for some jobs than others is responsibility. Jobs that can cause more damage if not done right tend to pay more. The "Masters of the Universe" were paid QUITE well, and caused nearly unprecedented damage. The average people just took out (maybe) more loan than they could handle, and listened to the TeeVee and the people who were supposed to know these things. Therefore, the "Masters of the Universe" should bear more responsibility for what happened, ESPECIALLY the executives who were in charge of the companies that have bet themselves almost out of existence.

Also, the Wall Streeters, even ones not directly involved, generally walked away with quite handsome payments from the "profits" their risky loans and bets posted. They shared in the loot.

Third, none of the Masters of the Universe have suffered any punishment, or apologized, or admitted they screwed up. They just come begging for cash, and then demanding it, and threaten to crash the entire global economy even more if we don't pay them more money than an average person makes in a decade.

Oh, and if you want to quibble about "sharing the loot", I would like to point out that yes, maybe some homeowners made money off the bubble, but the Wall Streeters REGULARLY walked away with MILLIONS of dollars in a single year. Again, it's a matter of scale.

I don't expect this to convince you any more than the other times people have said it. But those are some of the main differences, and if you don't appreciate them, there's not much point to this conversation.

There is at least one posts of yours that contains a broad attack on the "Masters of the Universe."

Note how 'a broad attack' is erroneously conflated with 'attacking everyone who works on Wall street'.

He may not have set up the system, but he made damn good money enabling it. And didn't try and fix it.

Posted by: Nate

Isn't the principle of complicity well-known and recognized? If I can identify a particular person in the commission of a crime and I fail to report this, certainly I can be charged with a crime myself. This is not a particularly arcane bit of knowledge, you don't get to complain that you're being unfairly punished because even though you knew your husband was selling cocaine (and you were enjoying the high life) you didn't sell any yourself.

So. Does this DeSantis fellow have a record for speaking out against what was going on in his own company?

Show me that, and I might be moved to cut him some slack.

VON: "If you want to assign vicarious guilt to folks who work in finance or someone like DeSantis because he worked at AIG ('tho, importantly, wasn't responsible for the current mess) you have to cast your net wider. You have to, ultimately, include yourself."

The post closest to my feeling was by: TDaulnay | March 26, 2009 at 12:47 AM

How would you feel about recasting your argument in terms of concentric circles of responsibility?

Starting fairly far out, anyone who voted for a Senator who voted to repeal Glass Steagall?

I don't buy it. Because you're not just posting this to a select few people who you think may have committed some sort of imagined infraction. You're also posting to an audience who may or may not have transgressed.

Can you explain what you mean by this?

Sigh. How have I personally benefited from anything that has gone on lo these past 10 years? Where have I criticized everyone on Wall street has being on the take? What would I have had to have done to make me not be at fault, even partially?

You keep ducking those questions, and until you give a straight answer, your defense that this was supposed to be some sort of performance art just doesn't cut it with me.

I understand how your anger can make you say things that perhaps you didn't intend to. No one likes to feel that they've been duped. But them's the breaks. After all, no one held a gun to your hand for your previous apologetics for these people. Perhaps you should go away for a while until you cool off and can hold a reasonable conversation.

farmgirl -- it was really fun to meet some of the other commenters in person. Someone said that night that we should make it an annual event, but I don't think there's any need to wait that long. I had been waiting for a longer trip down here so that there would be a reasonably wide window, and next time I plan a trip I'll mention it again. Maybe see you then!

bedtimeforbonzo: Picking your brain. I understand that the percentage of fuel efficient cars sold in Canada last year was significantly higher than in US. I don't remember the numbers but recall being struck (something like 54% versus 18%) Do you have any theory as to why this would be?

I had impression that Americans generally were quite oblivious to the cost of gas, until relatively quickly the price shot up so dramatically. And then the resale value of many gas guzzlers collapsed.

Do you suppose the sudden shock caused buyers to hold back until they could evaluate, or confronted with dramatic depreciation in existing vehicle couldn't afford to turn and and buy new, or primarily bank credit squeeze?

ScentofViolets, please reading the posting rules and don't make us ban you.

At this point I would suggest that you take a breath and return to substantive points.

Sure: If we're going to make people guilty for a financial crisis because they profited from the boom-before-crash, then this homeowner is likely included in the group.

See, this is what makes me think that you're playing a satirical game. Here, rather than defending a position (ie that everyone is guilty), you're just pointing out that this position is analogous to the position that all financial services workers are guilty. "If we're going to" sort of language specifically- it's the sort of language I expect in a reductio ad absurdum (ie assume a position and then examine the consequences- if you reach a fallacy, then the position is wrong).

But that is not the same thing as actually defending the proposition. Some of the time you seem to be seriously suggesting that someone who took advantage of an inexpensive mortgage actually carries some moral responsibility for the crash(but what should they have done- insisted on a higher rate? put off buying a home for 5 years because they didn't want the moral responsibilty?), other times (such as this one) you seem to be using this argument to ridicule those who blame everyone who worked in financial services.

If you're actually assigning moral responsibility, I can't accept it. Your formulation that the recession brought on the financial collapse puts the moral agency in the wrong place.
To repeat the analogy: if I bet my kid on a basketball game, the players are not morally responsible for my loss or my crime. Even if they made bad basketball decisions that led to the loss, they bear no responsibility because they were not the ones making the bet. As in this case, they may even not be *aware* of the bet.
If it weren't for the financial wizards and their lobbyists, we might have had a mild recession. It was their bet on our game, not us, that caused the financial meltdown.

I haven't been following this very long thread, so I apologise if I'm repeating this, but I didn't see the story about the AIG bosses in Paris quitting when I skimmed through the multitudinous comments above.

It's well worth reading, but I found this bit particularly interesting, and alarming:

In the wake of their resignations, AIG must replace them to the satisfaction of French banking regulators.

If they don't, French regulators may appoint their own designee to manage the bank -- an outcome that could trigger defaults under the bank's derivative contracts. The private contracts say that a regulator's appointment of a manager constitutes a change in control, according to a person familiar with the matter; the provision is often included in derivative contracts where parties want to preserve a way out if something about their counterparties changes.

Fraud Guy, I sympathize with your situation, but your example cannot be correct. People who get mortgages have an idea of what their salary is, the other kinds of debt they're carrying, and how much the monthly payment will be (as well as whether it's fixed or variable). The fact that they might be approved for mortgage X doesn't mean that they are forced (or should) take mortgage X. You don't need a PhD to make these kinds of decisions. It's called life.

That doesn't mean that there weren't people who were defauded, that there wasn't sleazy behavior on the lending side, or there aren't examples of folks who did everything right but because of circumstance (loosing a job, health problems) lost their home. But, c'mon: a little personal responsibility, please.

Sigh. How have I personally benefited from anything that has gone on lo these past 10 years? Where have I criticized everyone on Wall street has being on the take? What would I have had to have done to make me not be at fault, even partially?

I'll repeat my question from upthread: did you receive (or refinance) a mortgage in the last 10 years? And I'll expand: Did you receive a home equity loans? Did you enjoy low interest rates on a credit card?

But that is not the same thing as actually defending the proposition. Some of the time you seem to be seriously suggesting that someone who took advantage of an inexpensive mortgage actually carries some moral responsibility for the crash(but what should they have done- insisted on a higher rate? put off buying a home for 5 years because they didn't want the moral responsibilty?), other times (such as this one) you seem to be using this argument to ridicule those who blame everyone who worked in financial services.

Carleton, I'd put it this way -- and hope that it squares what you seem to think is a circle in my reasoning. "Some of the time you seem to be seriously suggesting that someone who took advantage of an inexpensive mortgage actually carries some moral responsibility for the crash" as an AIG worker like DeSantis. (Italicized addition mine.) Does that make my point clearer?

byrningman,

So on top of everything else, among the side bets that AIG made is one for over $200 billion that they would not lose certain employees, or that they would be able to replace them if they lost them.

Ludicrous; simply ludicrous. I can't think of an analogy that is not as risible.

Actually, it reminds me of a favorite joke:

How many surrealists does it take to change a light bulb?

---

Three

---

---

---

Two to fill the bathtub with jello and four to paint the house green.

By that token, von, for the Iraq War and all attendant crimes:

Those who were incompetent or did criminal acts should be punished proportionately. If you're looking for vicarious guilt or guilt-by-association, however: look in the mirror.

You believe that Bush, Cheney and the rest should be tried for war crimes then? 'Cuz on this issue, the face in the mirror is you, not me.

ScentofViolets, please reading the posting rules and don't make us ban you.

At this point I would suggest that you take a breath and return to substantive points.

Posted by: Sebastian

What? Are you saying this is not 'substantive':

Sigh. How have I personally benefited from anything that has gone on lo these past 10 years? Where have I criticized everyone on Wall street has being on the take? What would I have had to have done to make me not be at fault, even partially?

Nor have I said anything that I can be banned for. Haven't we already established that comments like this:

ummm, seriously? The division that he worked in and its profitability are a matter of public record. I think your anger is blinding you.

or like this:

Almost-PhD-Scent-of-Violets, do you have a belief that it will be worth paying you even $10K for a year of work? Do you have a sense that there is a labor market, and that we can refer to average salaries without having to write 150,000 pages of definitions for that .001% of readers who seem intent on missing the point entirely?

or like this:

You are angry. Yes Wall Street has been greatly overpaid. But if you are going to take revenge, go after the people who agreed to pay the excessive compensation, not those who accepted it.

are perfectly acceptable, not insulting at all. I don't see anything that's impugning poster in question, no suggestion that some sort of wildly inferred intentions or emotions are causing the poster to make bad arguments, rather than addressing the arguments themselves, right? No bizarre playing around with a posters handle either.

Right?

So, what, precisely, have I said that is out of line?

Does that make my point clearer?

Actually, I don't understand what you said there very well, with the italicized bit. I don't think it parses.

Can you tell me this: do you really think Im morally responsible for the crash because I paid a low rate on my credit card? Should I have demanded a higher rate, or refused to use credit cards so I could avoid this moral stain? Of course, I would've also needed to be a precog to avoid this responsibility. And, of course, I've always *paid* my credit card bills, so I haven't made irresponsible decisions either.
Please, don't analogize to DeSantis's situation, just argue that point on its own merits. When you use DeSantis, I can't tell if your actually arguing for the position above or not. It's like listening to "Just Like Brian Wilson" without knowing who Brian Wilson is, when you analogize to DeSantis's hypothetical guilt without saying whether you agree with that guilt or not, I just don't know what you think.

Did you enjoy low interest rates on a credit card?

Due to the South Dakota exemption, rates have gone up in the last few years, but thanks for playing.

In spite of all sorts of reasons given why "us" is not to blame (from Nate and others), you continue to assume this collective guilt nonsense without anything to back it up. So please: give us a more detailed arguement than "you breathed the same air as AIG, therefore you're just as guilty!" or drop this silly concept.

=============

SoV, whne both hilzoy and Sebastian (or either one alone, for that matter) tell you to tone it down, the correct response is not to argue or whine but to it it the frick down. Capiche?

Sigh. How have I personally benefited from anything that has gone on lo these past 10 years? Where have I criticized everyone on Wall street has being on the take? What would I have had to have done to make me not be at fault, even partially?

I'll repeat my question from upthread: did you receive (or refinance) a mortgage in the last 10 years? And I'll expand: Did you receive a home equity loans? Did you enjoy low interest rates on a credit card?

And I will repeat my answer to your question from upthread:

Great. Did you refinance your mortgage? Take advantage of a lower rate?

As it happens, no. This is not answering my question.

And though you're clearly reaching here, I'll go further and say that I haven't had a credit card since '96 or thereabouts.

Now, would you either quit stalling or just admit that you were wrong? You said your piece, now take responsibility for it. No more waffling.

ScentOfViolets, I think this:

And you sir, are a dishonest little chiseling weasel who would rather die than admit he made a mistake. Some nasty nonentity who's continual fallback position is 'if you can't make me say I'm wrong I win'. You are scum.

qualifies.

No, you didn't say it to von, but you did violate posting rules.

"So on top of everything else, among the side bets that AIG made is one for over $200 billion that they would not lose certain employees, or that they would be able to replace them if they lost them."

This is why Liddy figured not renegotiating the "bonus" contracts was a good business decision. Why presumably the representatives of the Federal Reserve thought it was a good decision, why whoever reviewed it at the Treasury Department thought it was a good decision.

And, of course, I've always *paid* my credit card bills, so I haven't made irresponsible decisions either.

And, of course, up until recently the credit card companies considered you a 'deadbeat' for such responsible borrowing

Apparently so. But that was yesterday, and for reasons I have already clearly stated. What is being objected to, as far as I can tell, are the words of other people that I am using. The words that I took exception yesterday, and why I wrote what I did above (along with that explanation, and a suggestion that we refrain from those types of attacks.)

Now, I would really appreciate if either:

a)people would get off my back for using the words of other people, who apparently have caused no offense with their use, or

b)at long last finally admit that what others posted and that I responded to was nasty and abusive.

I dislike contradictions, uneven privileges, special pleading, that sort of thing. Either tar us all with the same brush, or tar none of us. Don't try to pin one guy down while letting the other guy slide. Frankly, I don't see how this can be construed as anything but fair.

To repeat the analogy: if I bet my kid on a basketball game, the players are not morally responsible for my loss or my crime. Even if they made bad basketball decisions that led to the loss, they bear no responsibility because they were not the ones making the bet. As in this case, they may even not be *aware* of the bet.

This summarizes my view pretty well. If I stupidly bet Tiger Woods that I can beat him at golf my loss is my fault. But if you make a much larger side bet on me, and when you lose find that you can't pay your kids' tuition, that's not my fault. It's yours. The consequences of AIG's imprudence are the responsibility of AIG.

As I've said before, I don't really think the poor quality of the underlying mortgages was the major contributor to the problem.
You can make bad side bets on good mortgages also. You can bet more than you can afford to lose on good propositions. You can Or, you might bet a reasonable amount on Woods in my hypothetical match. That would be smart, unless you bet with someone who can't pay.

What happened here is simple. The financial markets are supposed to price risk. They did a lousy job. Criticize foolish home buyers for taking excessive risks, if you want, but the fact is that the financial markets are supposed to be able to deal with that. It's a big part of what they are there for.

I think, Sebastian (and Hilzoy, too) that if you're looking to ban SoV, you really should ban some others here as well. Such as, for instance, von.

And though you're clearly reaching here, I'll go further and say that I haven't had a credit card since '96 or thereabouts.

Now, would you either quit stalling or just admit that you were wrong? You said your piece, now take responsibility for it. No more waffling.

OK, Scent of Violets, assuming you also don't own any stock, I give you the official von-blessing: You are in no way responsible for the current economic downturn. You behave irrationally and to your long-term detriment, but, by not doing anything of economic note, you are neither a benefit nor a drag on the system. Hurray!

ScentOfViolets, your post at 5:22 p.m. today is inaccurate.

When a variety of regulars here are telling you that they agree with your views but disagree with your manner of expressing them, someone who has the kinds of credentials and intelligence that you claim as your own should do the math and tone it down. Do it. (This is now an instruction, not a request.)

Uh, Hilzoy? Sebastian?

Could we have a strike against von please? I don't know how to construe this as anything other than insulting:

You behave irrationally and to your long-term detriment, but, by not doing anything of economic note, you are neither a benefit nor a drag on the system. Hurray!

It's also wrong on the face of it of course, seeing as how my 'irrational' behaviour has saved me thousands, if not tens of thousands of dollars and not possessing a credit card does not in any way equate with not 'doing anything of economic note.'

I think, Sebastian (and Hilzoy, too) that if you're looking to ban SoV, you really should ban some others here as well. Such as, for instance, von.

CJ, feel free to email me at [email protected] if you have particular comments of mine that you think crossed the line. I'm receptive to feedback.

It's also wrong on the face of it of course, seeing as how my 'irrational' behaviour has saved me thousands, if not tens of thousands of dollars and not possessing a credit card does not in any way equate with not 'doing anything of economic note.'

Well, if you live off the grid, as you contend, you are not doing anything of economic note. It's an observation, not a personal attack. Gandhi, for instance, did very little of economic note in his personal life. He's not exactly a bad guy.

Gandhi, for instance, did very little of economic note in his personal life.

Kinda depends on whether or not you think that India being an independent country is of economic significance...

"I had impression that Americans generally were quite oblivious to the cost of gas, until relatively quickly the price shot up so dramatically. And then the resale value of many gas guzzlers collapsed."

JC: In general, you are exactly right. We were oblivious toward the price of gas -- less so when it hit $3, then we really woke up when it $4.

At first -- last spring, early summer -- I noticed a lot of buyers trading out of SUVs and big cars for more fuel-efficient vehicles. Then, in late summer and fall -- the worst being in October and November -- the credit markets dried up. After that, buyers seemed afraid to make a move, period. And now, they're being cautious (which seems smart to me).

That 5-2 ratio (purchasing good-gas cars vs. bad) is impressive, but it does not surprise me that Canadiens are more green than we are: Americans have had a long love affair with big cars and trucks and it is not going to end overnight.

I mentioned to Hilzoy the other day that we have seen a significant increase at my dealership in demand for trucks and SUVs the past two months -- pickup trucks especially. So old habits are indeed hard to break.

SOV,
So, what, precisely, have I said that is out of line?

In fairness, I think von's Ph.D bit was out of line, and while von has been patient he also IMO should retract that- the moderators owe a stricter adherence to the rules.
But if you felt that was out of line, you should have merely called von on it. One slight by someone does not open the door to repeated postings of insults in return.
As I pointed out on a previous thread, entire paragraphs of invective are just not going to fly here, no matter the provocation. Likewise, constantly escalating is a very bad thing- your exchange with AJ, where he claimed that your reasoning was flawed by anger, and you claimed that he was stupid and that you could 'wipe the floor with him', or your exchange with Johnny Canuck, where afaict you retreated to calling him a weasel when presented with a complex argument about autoworker pensions, using an earlier reference to anger as the pretext.
And frankly, from what I've seen, I don't think anyone who suspects that you've got a lot of anger is making a significant leap.

Saying that someone's argument may come from anger is not a violation of the posting rules, particularly not in the context of a larger discussion. Your incessant name-calling is a violation. Notice that even people who are sympathetic to you are pointing out that you're coloring outside of the lines.

Nor have I said anything that I can be banned for.

I don't think you understand how this works. Maybe you were looking for the words "ought to" instead of "can". You are very close now I think, and you can either really try to understand where these people (left and right) are coming from, or not. If you want to stick to your guns and go down with the ship, so be it.

von: "There is at least one posts of yours that contains a broad attack on the "Masters of the Universe.""

The term "Masters of the Universe" comes from a Tom Wolfe novel, in which one of the main characters, who (iirc) works on Wall Street, identifies himself that way. As I used it, it didn't refer to every single person who owns a job there, but to people like that character who have a specific, outsized view of their own importance, and their exemption from ordinary standards of conduct.

Note also: I haven't written a word about DeSantis. Though, for what it's worth, I don't buy the idea that he's not responsible: unlike the rest of us, he worked in a unit of several hundred people one chunk of which was busy making bets that came close to taking down the financial system. At that level of proximity, I think one generally has the ability to see that something is wrong, and to make one's views known. If I am wrong, and he was working in a hermetically sealed room with no contact with his peers, I will of course conclude that he has no responsibility. Likewise, if it turns out that he did everything he could to get Cassano to stop what he was doing. But there's no sign of that, and if it were true, I would have expected it to show up somehow in his op ed.

When a variety of regulars here are telling you that they agree with your views but disagree with your manner of expressing them, someone who has the kinds of credentials and intelligence that you claim as your own should do the math and tone it down. Do it. (This is now an instruction, not a request.)

Wow. A site owner/moderating repeatedly poking a poster with a stick, then trying to hide behind other posters when the poked poster actually tries to bite him? Amazing.

Hilzoy re: DeSantis: "At that level of proximity, I think one generally has the ability to see that something is wrong, and to make one's views known."

I'm not sure whether this is realistic. I don't work in the realm of financial wizardry. I have worked in corporations though. Has anyone here worked in a corporation where if one sees something immoral, one can change the dynamics of what's happening? I'd be interested in some testimonials where anyone was able to save the day, as Hilzoy expects that DeSantis might have been able to do. The fact is, it just doesn't happen. You play or you leave. If you leave, how are you going to explain to the public at large what's happening? I'd like to have an example of anyone, here or in the news, who changed the culture of a corporation by "making one's views known". It just doesn't happen.

Von: I think your harsh -- black-and-white -- stance is not accounting for foreclosed victims who did not fall into the subprime or gimmick mortgage trap.

In this case, I think they truly were victims -- losing a job in a down economy, coming down with an illness that prevented them from working, etc.

One thing I think I the Great Recession has shown is the vast amount of middle-class (and lower) workers who are living paycheck to paycheck -- and are one downturn away from disaster.

I'm living paycheck to paycheck -- things being more tighter the past year than ever -- and have been a homeowner for the past 14 years. Does that make me unqualfied to be worthy of a mortgage? Or am I too high risk? You tell me.

wow, no one's exactly covering themselves with glory here. bicker, bicker, bicker. Can we have a serious debate about serious issues without getting quite so personal?

No, probably not.

Von, you're using the word "responsible" in a way that very few people are willing to accept.

Did many of the poster here benefit from the cheap money era? Depending on your job and the year you bought your house, it's quite possible. I, for one, am perfectly willing to admit that much of the work I did over the last several years (entitling land and delivering water in So.Cal.) was directly linked to the boom.

Am I responsible for it? Uhh, no. I had no say in the appointment of Greenspan to Fed Chair and in fact voted against the president who made that appointment. I got no benefit nor am I responsible for the dot com boom and bust which led to the easy money era. I thought the repeal and roll back of banking regulations was a bad idea, but my congresscritter disagreed. etc.

The larger point is that by saying we're all responsible you're (not so subtly) advocating that no one is responsible.

That, however, is just false. The current bust is directly attributable to a Republican/DLC philosophy that the government regulation of business is bad, especially in the financial sphere. If we refuse to call out and analyze the particular causes of this bust, then we will fail to prevent it from occurring again.

Since your political philosophy predisposes you to argue against government regulation, your claim of universal responsibility is not surprising.

But it's also not right.

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