obama trying to limit pay of non tarp companies

[rjd970]

fine than ban mortgage back securities or sue the crap out of those people who sold them to their clients. don't screw with my friggin pay when i'm doing right by my client.

btw: what short term profit do you think you get on 30 year mortgages? please explain that logic to me.

Is there not a profit turned when these 30 year mortgages are packaged and sold again and again? And I'm sure bonuses were handed out each time one of these things were sold.

 

[droski]

But generating that liquidity returned big bonuses for people, right? Are you saying the bonuses had nothing to do with shotty MBS portfolio's? You can't tell me nobody knew these things were extremely risky, even with hedging the riskier loans with good ones.

the underwriting fees for mbs portfolios weren't exactly huge and that's the way people made money off of them. many people thought that the posibility of the housing market dropping like this was an extremely unlikely event. obviously they were being naive and should have realized housing can't go up forever, but don't think that people bought this crap and thought it was going to zero. trust me the banks wouldn't own trillions of this crap if their "analysts" didn't tell them it was relatively safe.

 

[rjd970]

fine than ban mortgage back securities or sue the crap out of those people who sold them to their clients. don't screw with my friggin pay when i'm doing right by my client.

Maybe I misread the article, but I don't think they are doing anything to people who are being responsible. It's the high risk crowd with short term vision that they want to go after.

 

[droski]

Is there not a profit turned when these 30 year mortgages are packaged and sold again and again? And I'm sure bonuses were handed out each time one of these things were sold.

wall street bonuses are handed out once a year so i very much doubt anyone got one every time it was sold. as i said they get the underwriting fees. which means it's sold once btw, not again and again. with the size they were doing i'm sure it was a profit center, but it wouldn't have been less of a profit center if these mortgages were all solid.

 

[droski]

Maybe I misread the article, but I don't think they are doing anything to people who are being responsible. It's the high risk crowd with short term vision that they want to go after.

and you (or obama) can tell the difference between the two exactly how? what obama is saying is limit the compensation of EVERYONE just in case someone is a crook.

 

[BigPapaVol]

Well, I guess I would like to see how many of these portfolio's were disproportionately heavy on the high risk stuff and were sold with the short term profit in mind, with little to no regard for the long-term effects if that house of cards came crashing down. I would suspect it was not as rare as some want to suggest.

you're simply not getting it. The high risk stuff was allowed in because it was being marked up to higher ratings by sham insurance called credit default swaps. Back when guys like MGIC were providing the insurance, it worked because they were regulated insurance companies. When hedge funds started doing it because it was massively profitable, we moved from regulated companies to unregulated companies providing surety. That ruined the validity of the high ratings in any MBS pool They'll come back, but real insurers will be the ones augmenting the credit ratings and you can bet your ass that their underwriting standards will be strenuous.

 

[BigPapaVol]

Is there not a profit turned when these 30 year mortgages are packaged and sold again and again? And I'm sure bonuses were handed out each time one of these things were sold.

how are they sold again and again. The pool is aggregated, underwritten and sold in tranches at very small spreads. The gross dollar amounts seem staggering, but that's simply a function of the size of the pools.

The resales are because they can become a traded security based upon underlying collateral or value of the document.

 

[rjd970]

you're simply not getting it. The high risk stuff was allowed in because it was being marked up to higher ratings by sham insurance called credit default swaps. Back when guys like MGIC were providing the insurance, it worked because they were regulated insurance companies. When hedge funds started doing it because it was massively profitable, we moved from regulated companies to unregulated companies providing surety. That ruined the validity of the high ratings in any MBS pool They'll come back, but real insurers will be the ones augmenting the credit ratings and you can bet your ass that their underwriting standards will be strenuous.

The bolded part is what I was confused about. So regulated companies are better for providing validity to the ratings on these securities?

 

[BigPapaVol]

The bolded part is what I was confused about. So regulated companies are better for providing validity to the ratings on these securities?

yes, period. Regulated insurers are required to keep a minimum of regulatory capital on hand in order to underwrite anything. Simply put, they can't make bets on margin, as the guys selling these swaps could. When the market as a whole fell and lots of folks came calling for them to make good on the payments, they simply folded up the shop when they could afford no more. Guys with actual capital at risk would have underwritten better and managed the borrowers better.

 

[DAVOL]

yes, period. Regulated insurers are required to keep a minimum of regulatory capital on hand in order to underwrite anything. Simply put, they can't make bets on margin, as the guys selling these swaps could. When the market as a whole fell and lots of folks came calling for them to make good on the payments, they simply folded up the shop when they could afford no more. Guys with actual capital at risk would have underwritten better and managed the borrowers better.

I thought conservatives (such as yourself) all hated regulation but here you make it sound like it was a good thing?

 

[droski]

I find that most financial professionals think it is complete bs the hedgefund industry is unregulated.

 

[lawgator1]

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

U.S. Eyes Bank Pay Overhaul - WSJ.com

What gives the govt the right to regulate pay at private companies who haven't taken govt money!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

HOW IS THIS NOT SOCIALISM

Whoa whoa whoa whoa whoa.

Quoted exceprt says they are looking at ways they can change compensation practices. You know full well that there are about a hundred options on that well before they start talking about "regulating" compensation.

There are a number of policies the government could adopt that would promote less of a windfall mentality on Wall Street, contribute to economic stability, and yet not give a bank a payscale it must adhere to.

 

[BigPapaVol]

I thought conservatives (such as yourself) all hated regulation but here you make it sound like it was a good thing?

I've never made that argument. Some limited regulation, especially in the name of clarity for investors is absolutely warranted and necessary.

 

[droski]

Whoa whoa whoa whoa whoa.

Quoted exceprt says they are looking at ways they can change compensation practices. You know full well that there are about a hundred options on that well before they start talking about "regulating" compensation.

There are a number of policies the government could adopt that would promote less of a windfall mentality on Wall Street, contribute to economic stability, and yet not give a bank a payscale it must adhere to.

right because obama would never set a limit to compensation. oh wait.

 

[Lexvol]

When Big Papa and Oski use big words I feel like I'm getting some fancy learnin'. You guys have been putting on some excellent financial clinics lately.

 

[BigPapaVol]

Whoa whoa whoa whoa whoa.

Quoted exceprt says they are looking at ways they can change compensation practices. You know full well that there are about a hundred options on that well before they start talking about "regulating" compensation.

There are a number of policies the government could adopt that would promote less of a windfall mentality on Wall Street, contribute to economic stability, and yet not give a bank a payscale it must adhere to.

help me understand how he might impact compensation practices to private companies without being dictatorial.

The idiot is acting like compensation isn't a risk capital investment on the part of the owners of a private company. That's just stupid.

 

[rjd970]

I find that most financial professionals think it is complete bs the hedgefund industry is unregulated.

Interesting.