Moral Hazard Is For The Little People

The US Senate, a wholly owned subsidiary of the banking industry:

On the same day that the White House announced that overextended Chrysler would go into a “quick” bankruptcy — its loans rewritten by a judge to emerge for life another day — Senators defeated a proposal to allow bankruptcy judges to rewrite home loans.

The vote on a so-called “cramdown” proposal, which President Obama supported during the presidential campaign, was 45-51 despite support from the president and the endorsement of one large bank, Citigroup. Read more on Citigroup’s endorsement of the plan HERE. The mortgage restructuring proposal needed 60 votes to pass so it didn’t even come close to passing. Several Democrats, including the newest Democrat, Sen. Arlen Specter of PA, opposed cramdown.

***

Durbin said on the Senate floor that in negotiations, the banking industry argued that restructuring primary home loans — secondary home loans and luxury loans for items like yachts can already be restructured by a bankruptcy judge — would create a moral hazard in this country.

“Senator, you don’t understand the moral hazard here,” Durbin paraphrased the banking argument. “People have to be held responsible for their wrongdoing. If you make a mistake, darn it, you’ve got to pay the price. that’s what America is all about.”

“Really, Mr. Banker on wall street? that’s what America is all about?” he railed.

“What price did wall street pay for their miserable decisions, creating rotten portfolios, destroying the credit of America and its businesses?” Durbin said of the $700 billion Wall Street bailout Congress passed, and Durbin supported in the waning days of the Bush administration. “Oh, (the bankers) paid a pretty heavy price. Hundreds of billions of dollars in taxpayers’ money sent to them to bail them out and put them back in business, even to fund executive bonuses for those guilty of mismanagement. Moral hazard, huh? How can they argue that with a straight face? They do.”

The roll call vote is here, and if you missed it, Glenn had a good post up on Durbin and the banking industry earlier.






107 replies
  1. 1
    Tom says:

    Let them eat cake.

  2. 2
    Third Eye Open says:

    Jesus-Friggin’-Christ

    Ofcourse Martinez voted against it, he’s the lamest of ducks…Well at least we got ole’ Nelson on it, perhaps he’s only slightly less worthless than I first surmised, but not much.

  3. 3
    KG says:

    isn’t the ban on cramdowns relatively new?

    if they can’t get this, then i’m guessing they aren’t going to get the votes to strengthen the damage provisions of TILA. that’s a shame.

  4. 4
    blogenfreude says:

    The newest Democrat voted against it. What a scumbag he is. And both of those renegade Republicans from Maine voted “no”. Compassionate conservatism at work!

  5. 5
    Steve V says:

    I don’t understand why the banks are so desperately opposed to it. They’re stuck with a bunch of properties on their hands right now that are losing value in their hands and they’re being billed by local governments for property taxes and other fees for them. Sure, they’re trying to get out of those obligations, but wouldn’t it just be a wash for them if they accepted the cramdowns? Presumably they wouldn’t have all this on their hands if they had taken some cramdowns on some percentage of these properties.

  6. 6
    kay says:

    Another stupid decision by the titans of finance. They’d rather own a lot of houses than take a short-term hit and allow people to rewrite a contract and stay in the home.

    Good. Foreclose. Throw the bankrupts into the street, and try to collect the deficiency from the increasing ranks of the unemployed.

    I’m still waiting for the titans of finance to provide “solutions”. They were insisting less than 6 months ago they would voluntarily renegotiate these mortgages. Like everything else they say, it was complete bullshit.

    It’s about protecting their own padded paychecks.

  7. 7
    JL says:

    Finding the bottom of the housing market would only be good news for the economy. I don’t get it. Unless they have public financing of campaigns, it won’t change. Our congress members love them some wine, dine and cash.

  8. 8
    Just Some Fuckhead says:

    The newest Democrat voted against it.

    That’s malleability ya can believe in.

  9. 9
    ericvsthem says:

    At least we know that Arlen Specter is not beholden to the Democratic Party. I’ll bet the banksters are relieved!

  10. 10
    kay says:

    Are banks doing this because if they rewrite the contract they have to declare a loss?

    Is that it? If they seize, and hold, can they claim the house as an asset on the books at the loan value?

    is this musical chairs?

  11. 11
    Comrade Kevin says:

    Dem no votes:

    Lincoln, Pryor, Bennet, Carper, Landrieu, Baucus, Tester, Nelson, Dorgan, Specter, Johnson, Byrd

  12. 12
    Steve V says:

    @kay:
    That’s what I was wondering — if their opposition is driven by accounting methodologies or something.

  13. 13
    blogenfreude says:

    @Just Some Fuckhead: And he voted against the budget right after he said he’d behave. He needs to get Lamonted.

  14. 14
    Balconesfault says:

    Anyone who voted for the bank bailout last fall … and no here … has just declared themselves to be a Wall Street tool. Pure and simple.

  15. 15
    Just Some Fuckhead says:

    @blogenfreude:

    And he voted against the budget right after he said he’d behave. He needs to get Lamonted.

    Surely you jest. He’s a real get for us. The President is delighted. Anyway, it’s my understanding that a moderate lifelong Republican is the best Democrats can do in a very conservative state like PA.

  16. 16
    Dennis-SGMM says:

    @kay:
    The recent change in accounting rules allowing banks to value their assets at mark to book rather than mark to market means that they can value a house, even if it’s gutted by thieves and falling apart from neglect, at whatever the bank valued it when they issued the mortgage.

  17. 17
    ericvsthem says:

    Didn’t the easing of Mark-to-Market rules in early April make mortgage “cramdown” even less attractive to banks versus just foreclosing, or is my understanding on this just totally wrong?

    edit: Dennis asked the same question and beat me to it.

  18. 18
    KG says:

    i think the problem on part of this is that the loans aren’t owned by the banks. the loans, for the most part, have been securitized along with thousands of other loans and sold off to some amorphous investor (who then hires a “servicer” to collect the debt). rewriting the loans (if it happened on a large scale) would result in the securities becoming worth much less than the value they were allegedly worth. at least by going to foreclosure, the servicer (who is usually a subsidiary of a bank, using the bank’s name) buys the property, pays off the trust (or whoever owns the security) and then can try to recoup some of the loss by either renting the property or by selling it. and I’ll say this, short sales and REO sales are incredibly hot right now, so I don’t think the “banks” are that worried about buying these properties.

    there may also be an angle involving the market price for homes, but i have to think it through a little bit.

  19. 19
    JDM says:

    Good thing Obama and Fat Fuck Republicrat Rendell got Specter on board. Got a lot out of preserving his seniority. Effective.

  20. 20
    Olliander says:

    Dem no votes:
    Lincoln, Pryor, Bennet, Carper, Landrieu, Baucus, Tester, Nelson, Dorgan, Specter, Johnson, Byrd

    Wait! You mean the Democratic isn’t ideologically pure? The horror!

  21. 21
    Shawn in ShowMe says:

    Sixty votes bitches.

  22. 22
    Comrade Kevin says:

    I find the flailing around bitching about Specter here to be kind of funny, when there were 11 not-“new” Democtratic senators who also voted No on this bill.

  23. 23
    JenJen says:

    Be sure not to miss Durbin’s awesome speech (and dday’s equally awesome post) here.

    Blue Dogs f’n infuriate me. Don’t ever forget about them, as we head into the looming Health Care Reform debate, and our Awesome Liberal Media tells us that with 60 Dems it will sail right through and it’s so unfair to Republicans. Grrrrrrrrrr.

  24. 24
    used to be disgusted says:

    I’m proud that Durbin is my senator.

  25. 25
    MikeJ says:

    The mortgage restructuring proposal needed 60 votes to pass so it didn’t even come close to passing.

    Under what rules what this brought to a vote? Pretty much everything only requires 51 (50 with the veep voting yes) to pass. Was this a cloture vote?

  26. 26
    Dennis-SGMM says:

    @Comrade Kevin:
    Yeah, but that Fuckin’ Specter… The only thing surprising about this to me is that so many Democrats voted for it. Anyone who thinks that having sixty Democrats in the Senate means a bulletproof majority on all legislation is dreaming.

  27. 27
    Mnemosyne says:

    I think this ‘graf from this AP story about the Chrysler bankruptcy explains it all:

    The Obama administration had long hoped to stave off bankruptcy for Chrysler LLC , but it became clear that a holdout group of creditors wouldn’t budge on proposals to reduce Chrysler’s $6.9 billion in secured debt. Obama praised all the constituencies that have offered sacrifices and blasted those that did not. [Obama] said a group of investment firms and hedge funds were holding out for the prospect of an unjustified taxpayer bailout.

    Basically, the banks think they can bleed their customers dry and then come back to the government for another bailout. After the Chrysler fiasco, I hope the financial “geniuses” in the administration have received instructions to make an example of one of the big banks. I think an FDIC takeover of either Bank of America or Citibank would be an instructive lesson for the obstructionists who think they can get blood from a stone.

  28. 28
    Shawn in ShowMe says:

    I find the flailing around bitching about Specter here to be kind of funny, when there were 11 not-”new” Democtratic senators who also voted No on this bill.

    They’re passê. Intertube blog ranting is all about adding new blood to the rogue’s gallery. OK, Specter’s carcass is old but his tags are new.

  29. 29
    El Cid says:

    If only we did have New Deal 2:

    The Home Owners’ Loan Act of 1933 created the HOLC. The agency eventually grew to about 20,000 employees but was designed as a temporary program “to relieve the mortgage strain and then liquidate,” as one early description put it. The Treasury was authorized to invest $200 million in HOLC stock. In current terms, based on the consumer price index, that’s about $3 billion, but if adjusted based on the change in gross domestic product per capita since 1933, it would be about $20 billion. The act initially authorized the HOLC to issue $2 billion in bonds, or 10 times its capital, which relative to GDP per capita would be about $200 billion today. The idea was that for three years the agency would acquire defaulted residential mortgages from lenders and investors, give its bonds in exchange, and then refinance the mortgages on more favorable and more sustainable terms. Lenders would have a marketable bond earning interest, although with a lower interest rate than the original mortgage, in place of a frozen, non-earning asset. Lenders would often take a loss on the principal of the original mortgage, receiving less than the mortgage’s par value in bonds. This realization of loss of principal by the lender was an essential element of the reliquification program — just as it will be in today’s mortgage bust.

    But we can’t do anything like that today, since the banksters would whine that we’re threatening to reanimate Hoot Smalley.

    To be honest, what we’re doing right now seems to be modeled not after FDR, but after late term Herbert Hoover, who launched many of the programs built into the New Deal, but who simply couldn’t bring himself or those working with him to commit to the sort of scale and speed necessary.

    We need the New Deal right now, not Hoover’s cautious implementation of programs not capable of solving the problems.

  30. 30
    KG says:

    @29: count me among those favoring caution and prudence in the face of a crisis. unintended consequences and all that.

  31. 31
    Just Some Fuckhead says:

    Yeah, as long as one or more blue dog Democrats votes with Republicans, Specter is off the hook. Which means we won’t ever get to hold him accountable. Undermine the democratic agenda from within with no accountability, gauranteed reelection, seniority, how long before the entire Republican party switches over?

  32. 32
    John Cole says:

    @Mnemosyne: I read somewhere that part of the reasons the hedge Funds refused to play ball with the Chrysler haircut was because they wanted it to go to bankruptcy because they would get full money via CDS.

  33. 33
    El Cid says:

    @KG: I don’t understand the response — the point was that Hoover’s responses to economic collapse were both cautious and inadequate. The correct response would be both cautious and adequate, not reckless and inadequate or reckless and disproportional.

  34. 34

    The recent change in accounting rules allowing banks to value their assets at mark to book rather than mark to market means that they can value a house, even if it’s gutted by thieves and falling apart from neglect, at whatever the bank valued it when they issued the mortgage.

    No. Just, no. The set of circumstances that would lead to a house being a Level 3 asset is kind of hard to imagine. You can’t find any appraiser in the area? There aren’t any sales to compare it to?

    FAS 157-4, which is the pronouncement you are referring to, is not the overwhelming bogeyman that everyone seems to think it is. Read it, if you like. To understand it, you’ll probably have to read the rest of FAS 157, and maybe some of the other pronouncements covering the assets and liabilities it applies to. Go for it. Or not. I’m in the middle of taking the CPA exams (Auditing and Attestation on Monday), so I have to read this kind of stuff, but there’s no particular reason anyone else should.

    In addition, one thing that everyone seems to forget is that companies don’t get to just put together whatever financial statements they want to. There outside auditor has to approve them. That includes that they check all valuation assumptions for reasonability. Good luck getting approval on what you are concerned about.

  35. 35
    Shawn in ShowMe says:

    We need the New Deal right now, not Hoover’s cautious implementation of programs not capable of solving the problems.

    I respectfully disagree. By 1933, unemployment was at 25 percent and about half of mortgage debt was in default. By that point FDR had no choice but to swing for the fences on every pitch. We’re nowhere near those numbers.

    If Hoover would have been more hands-on in 1929 instead of putting off direct action until late in his term, a lot of that economic damage could have been averted.

  36. 36

    Basically, the banks think they can bleed their customers dry and then come back to the government for another bailout. After the Chrysler fiasco, I hope the financial “geniuses” in the administration have received instructions to make an example of one of the big banks. I think an FDIC takeover of either Bank of America or Citibank would be an instructive lesson for the obstructionists who think they can get blood from a stone.

    Again, no. The FDIC can’t takeover Citibank or BoA. It only has the statutory authority to take over commercial banks. These companies are vast, sprawling things, of which the commercial bank is only a small part. The investment banks, the brokerages, the insurance companies, the hedge funds, the trading desks, and so forth can go bankrupt, but the government can’t force them into receivership. It will probably manage to pull this off with Chrysler only because the company isn’t fighting it.

    If you want the administration to nationalize the big banks, you have to get Congress to pass a law giving it the authority to do so. Given that today makes it obvious that the financial companies have a lot of pull in Congress, what makes you think that a decent bill could possibly get through? You haven’t seen a giveaway until you watch Congress pass a receivership bill.

  37. 37
    demkat620 says:

    @Mnemosyne: Yeah, I’d like to see Timmeh do that to. But that ain’t gonna happen.

  38. 38
    El Cid says:

    @Shawn in ShowMe: I could be wrong, but my sense is that the direct action being engaged on now is not sufficient to avert economic damage later on, even though we are, admittedly, nowhere near as bad off as the U.S. was in 1933, nor are we the largely underdeveloped nation we used to be.

  39. 39
    Mnemosyne says:

    @J. Michael Neal:

    Given that today makes it obvious that the financial companies have a lot of pull in Congress, what makes you think that a decent bill could possibly get through?

    Oh, I’m sure you’re right. But that means that we’re all completely fucked and should start stocking up on canned goods, because it’s clear that the banksters won’t admit there’s a problem unless we actually start hanging them from the lampposts on Wall Street.

  40. 40
    tavella says:

    I forget which poster it is who always likes to come on these threads and explain than any responsible person knows that we should give the banks whatever they want, because otherwise the economy will collapse. But that it’s okay, it won’t happen again because the banking laws will be reformed to prevent it.

    He always amuses me, that one.

  41. 41
    Comrade Kevin says:

    @Just Some Fuckhead: And focusing all of your outrage on Specter lets all the rest of them off the hook.

    Funny how that works.

  42. 42
    robertdsc says:

    What a fuckup. Goddamned “centrists”.

  43. 43
    PeakVT says:

    the banking industry argued that restructuring primary home loans—secondary home loans and luxury loans for items like yachts can already be restructured by a bankruptcy judge—would create a moral hazard in this country.

    That luxuries can be crammed down but homesteads can’t is really, really f***ed up.

  44. 44
    Shawn in ShowMe says:

    @El Cid

    I don’t think we’re that far apart. Hoover’s mistake was waiting until the whole neighborhood was engulfed in flames before calling in the first fire truck. Obama has done that much already and there aren’t nearly as many fires. The question is, how many fire trucks are required to do the job?

  45. 45
    TenguPhule says:

    The question is, how many fire trucks are required to do the job?

    That depends on how long it takes the water company to turn the water on in the pipes first.

  46. 46
    omen says:

    @tavella:

    i enjoy the one who advocates lining up a row of bankers heads to be put up on pikes.

    don’t condone violence, of course, but for just for a few seconds i allow myself the vicarious thrill of the image.

  47. 47
    KG says:

    @ El Cid: probably not well stated on my part. I typically don’t trust government (or any large institution) moving quickly. When I hear things like “bold action is needed” I sense “damn the consequences, man the torpedoes!” of course, with Obama, he seems to have a grasp of the long game, and the ability to think a few moves ahead (he seems to be playing three dimensional chess while everyone else is playing checkers – or in the case of GWB, tick-tack-toe against a chicken).

    I read your comment as more of a “do something, anything, now” sort of sentiment; taking from it the idea that we did not have time for caution or prudence. I apologize if that’s not where you were going.

  48. 48
    PeakVT says:

    Bonus annoyance: the budget resolution passed by Congress stripped out all the good parts Obama put in.

  49. 49
    Texas Dem says:

    Isn’t the real reason for the failure of the so-called “cram down” bill that most homeowners are not threatened with foreclosure and will never have to worry about foreclosure? The issue seems far more important to the banks than it ever will to most home owners, because the overwhelming majority of them are current on their mortgages and just don’t give a shit what happens to the unlucky few who fall behind. In the absence of overwhelming and constant public pressure, the banks are likely to get their way. The real test for how much clout banks have in this congress will come when they vote on credit card reform, which is something that affects a much larger constituency.

  50. 50
    Shawn in ShowMe says:

    That depends on how long it takes the water company to turn the water on in the pipes first.

    And Obama realizes this. Hence the threat to go around the Republicans to get his most critical measures passed.

  51. 51
    Joel says:

    The banks oppose cramdowns because they can continue operating at a loss while propped up by the taxpayer.

  52. 52
    Just Some Fuckhead says:

    @Comrade Kevin: No, it doesn’t actually work that way. Those other folks are actual Democrats elected by Democratic voters. Specter is a Republican who switched to save his own sorry ass even as we Democrats promised him lots of bennies and he told us he wasn’t going to vote with us. He is literally a cuckoo in our nest.

    OTOH, we coulda let Toomey primary his sorry ass in 2010 and run an actual Democrat and picked up the seat. Then if somehow that actual Democrat wound up voting with Republicans, THAT woulda been the equivalent of your binary construct here.

  53. 53
    Comrade Kevin says:

    @Just Some Fuckhead: What do you mean it doesn’t work that way? Ignoring the “actual” Democrats’ votes will just encourage them to keep doing what they’re doing.

  54. 54
    Just Some Fuckhead says:

    @Comrade Kevin: Dude, I ain’t yer fucking monkey. If you think outrage needs to be expressed at the eleven actual democrats that voted against the cramdown, do it. Don’t tell me what I can and cannot express outrage about as you do neither. Are you the fucking ref or are you playing the game?

  55. 55
    Hunter Gathers says:

    Souter is retiring.

  56. 56
    kay says:

    @J. Michael Neal:

    I don’t get it. A cram down just means splitting the debt into two pieces, secured (appraised value) and unsecured (loan value above appraised value). The bk judge can then discharge the unsecured portion in a ch. 7.

    What’s the moral hazard? These people are in bk anyway. We’re all going to file bk to get a loan that equals value?

  57. 57

    Joe! Stay outta those tanning beds for a while, hon.

  58. 58
    Texas Dem says:

    What’s the moral hazard? These people are in bk anyway. We’re all going to file bk to get a loan that equals value?

    You bet. The banks are terrified that with so many people under water on their mortgages, there will be a tidal wave of bankruptcy filings.

  59. 59
    JK says:

    OT

    MSNBC has a banner headline stating that David Souter plans to retire from SCOTUS

  60. 60

    how long before the entire Republican party switches over?

    Um, if by they haven’t already been beaten into utter submission by the Dems, which means they have to do what we fucking tell them to do, I’m leaving the party.

  61. 61
    demkat620 says:

    @JK: Well, how many times are we going to hear upperdown vote this time? Activist judges dontcha know.

  62. 62
    tc125231 says:

    There is only one solution. Nationalize the big 19 who are 2/3 of the assets. We already paid for them.

    I am sorry. Obama’s team is wrong on this. They are approaching it like someone trying to rapidly fix a flat tire and get the car on the road.

    But the tire blew because the Driver was Under the Influence.

    Putting them back on the road is just inviting reckless homicide.

    Insanity can be defined as doing the same thing over and over, and expecting different results.

  63. 63
    omen says:

    @tc125231:

    how many people will it take to come in and do a takeover of 19 banks?

  64. 64
    JK says:

    OT

    NPR confirms NBC report on Souter retiring
    http://www.npr.org/templates/s.....=103694193

  65. 65
    Ash says:

    Yes! Now Obama can appoint a black, Muslim, 30-year old woman!

    I know she must exist.

  66. 66
    omen says:

    @Ash:

    appoint anita hill. make clarence thomas’ life a quiet little hell.

  67. 67
    Mnemosyne says:

    @Texas Dem:

    The banks are terrified that with so many people under water on their mortgages, there will be a tidal wave of bankruptcy filings.

    So instead they’d rather hold fast for the tidal wave of foreclosures so they end up with no assets at all instead of an asset whose value has been reduced.

    That sounds like them.

  68. 68
    Texas Dem says:

    My money is on Sonia Sotomayor, a judge of the United States Court of Appeals for the Second Circuit.

  69. 69
    tc125231 says:

    @omen: Interesting question. AT&T took over NCR with just a few hundred people. Financial institutions may require more. But we are talking temporary actions here, and institutions of a different character. So I don’t actually know.

    It must be possible. Sweden recently took over and sold two large banks.

    Sweden temporarily took over two banks late last year and then sold them back to private investors at a roughly 50% profit three months later, says Swedish Finance Minister Anders Borg.

    U.S. officials should confront the financial industry’s political power and seize temporary ownership of troubled banks, Borg says. Otherwise, error-prone bankers will be bailed out at taxpayer expense…. http://yglesias.thinkprogress......r-plan.php

    I am sure Obama’s team could get staffing recommendations from Sweden, eh?

    …if Summers wasn’t already bought and sold.

  70. 70
    The Moar You Know says:

    He needs to get Lamonted.

    @blogenfreude: That worked out so well for us last time.

  71. 71
    The Moar You Know says:

    So instead they’d rather hold fast for the tidal wave of foreclosures so they end up with no assets at all instead of an asset whose value has been reduced.

    @Mnemosyne: That “tidal wave” is the gun they’re holding to America’s head, because most of those mortgages are our retirement funds.

    Why settle for half the money when you can rob the Treasury and get it all?

  72. 72
    omen says:

    @tc125231:

    a couple of weeks ago, naked capitalism blog complained treasury didn’t task enough people to do a proper stress test. if they didn’t have enough people to even do that…

  73. 73
    El Cid says:

    appoint anita hill. make clarence thomas’ life a quiet little hell.

    I agree, except for the “quiet” part.

    Though I think we ought to spread the rumor that it will be Ward Churchill just to see if we can get Whirled Nut Daily or the Moonie Times to pick it up.

  74. 74
    Shibby says:

    @PeakVT:

    Your link plus the above info has me really despondent. It seems that special interests are simply far too entrenched. I could utter some platitude such as “vote the bums out!”, but really what good would it do? The basic framework we have now would still remain, ready to welcome any newcomers into the system. I mean is it too much to ask that elected officials support policies which benefit the majority of their constituents? Don’t answer that question, it might make me even more depressed.

  75. 75
    Tom says:

    As long as the pick is no older than 45, I’ll be happy. Take that, alito/roberts.

  76. 76
    Alan says:

    The vote went the right way. After all, the little guys brought it on themselves. And anyway, why does the little guy deserve special treatment? The guy’s really hurting out there are the snake oil salesmen…you know, Jim Cramer’s friends. Thank G-d someone’s looking out for them.

  77. 77
    wilfred says:

    GM’s alliance with Fiat was a disaster for GM so it makes sense for Chrysler to do the same, I suppose.

    The only thing for sure is that some bankers will make yet another ton of money handling this nonsense. Or will that be kept secret like the stress tests?

  78. 78
    SBW says:

    As mentioned in the article, bankruptcy judges currently have the ability to modify mortgages on second homes, so the fact this deals with housing is most assuredly not the issue.

    I think that fact needs to be mentioned whenever this comes up. If you belong to the right class (more specifically in the right industry — that would be the financial industry), there is no sanctity of contracts if it’s not in your favor.

    The double standard is disgusting, and needs to be constantly shown to the public.

  79. 79
    Calouste says:

    @Shibby:

    elected officials support policies which benefit the majority of their constituents?

    They do.

    Constituents just doesn’t mean what you think it means.

  80. 80
    gopher2b says:

    I would have voted no. But, I would have voted against all of TARP too so at least I’m intellectually honest.

  81. 81
    MikeJ says:

    That worked out so well for us last time.

    It certainly didn’t turn out bad. Turning out bad would have been Droopy Dawg running as an indy, splitting the Dem vote, and handing the seat to a Republican. Instead Droopy ran as an indy, split the dem vote and still beat the republican. Before Lamont ran we had someone who voted with the Dem caucus to make a majority and nothing else. After Lamont ran we wound up with someone who votes with the Dem caucus to make a majority and nothing else.

    It doesn’t make tactical sense to challenge Dems from red states, but when the state is more liberal than the candidate, we certainly should.

  82. 82
    Brachiator says:

    @Ash:

    Yes! Now Obama can appoint a black, Muslim, 30-year old woman!

    Actually, I expect to hear a lot from two branches of the wingnut fringe. Republigoons will threaten to oppose anyone who fails their purity litmus test (abortion, abortion, abortion, gay marriage). And I expect to hear a little noise from worn out PUMAs that Hillary Clinton should be elevated to the Court because she is the bestest woman ever!

    The possibility, the certainty, of a Supreme Court appointment was one of the many reasons I thought it essential that Obama be elected.

    Happy, happy, joy, joy!

    Back on topic: bankers lecturing about moral hazard. This is so absurd that I can’t even bother with trying to come up with a retort. OK, OK, and Bill Clinton’s next book will be about the importance of abstinence.

    Bring on a Souter retirement thread. Wingnut heads must already be exploding!

  83. 83
    Corner Stone says:

    @Brachiator:

    And I expect to hear a little noise from worn out PUMAs that Hillary Clinton should be elevated to the Court because she is the bestest woman ever!

    Tis true. Now fuck off.

  84. 84
    Corner Stone says:

    This is one lame ass thread. It’s still difficult to believe Cole refused a direct request from both harlana pepper & asiangrrlmn.
    Maybe they should consider enlisting LauraW in their cause next time.

  85. 85
    omen says:

    Durbin said on the Senate floor that in negotiations, […] secondary home loans and luxury loans for items like yachts can already be restructured by a bankruptcy judge.

    has the makings of a campaign commerical i can see in the offing.

  86. 86
    JK says:

    @Brachiator:

    Wingnut and insufferable crybaby Michelle Malkin weighs in on Souter’s retirement decision

    The biggest mistake John Sununu ever made was vouching that Souter would be a “home run” for conservatives. Now, we’ll get an out liberal as opposed to a stealth one. Is it Harold Koh’s lucky day? Gah.

  87. 87
    Rommie says:

    Jeez, I could see Obama doing a /facepalm about now – aliens could land on the front lawn of the White House and he’d tell them to take a number.

    At this rate he really could turn into TheRock Obama. Keep pushing him GOPosaurus, keep pushing him.

  88. 88

    Jeebusss, I love you man, I mean, I really love you!!! Why don’t you ever call???? So I voted for John Edwards in the primary. (sigh)

    You hate me for that don’t you?? You just hate me!

    (slams phone/door)

  89. 89
    binzinerator says:

    @kay:

    Good point, kay. But these are the same fucking morans who got the same worthies in congress to pass that credit card bankruptcy bill only to find that in the long run they only fucked themselves.

    It’s about protecting their own padded paychecks bonuses.

    It’s all about the short-term for these people.

    Incredible. Senior management whose long-term/stragetic planning doesn’t extend beyond the end of the quarter. And they insist they are entitled to millions for their savvy genius and unique bizness skillz.

    Fuck ’em with a pitchfork.

  90. 90
    justinslot says:

    Okay, does anybody have a theory on why the individual Democrats voted this way? I get people from finance states like DE and SD, and I assume Landrieu and Nelson vote like Republicans just by reflex, but what’s Tester doing? Or the Arkansans? Why is Byrd’s animated corpse voting this way?

    I mean what is going on here? My only idea is that we have red state Democrats providing cover for blue state Democrats/finance industry representatives like Schumer, who I can’t believe actually wants this to pass. Otherwise I’m just baffled at the numbers of Dems who wouldn’t vote for this. They should have at least had more than 50 votes.

  91. 91
    Comrade Desert Hussein Rat says:

    @justinslot:

    Your answer can be found here:

  92. 92

    @kay: I think you have me confused with someone else. I’m very much in favor of cramdowns, and I’m very disappointed it died. My post was on the effects of the new FASB pronouncements on fair value measurements. All I’m saying is that a lot of people are incorrectly assuming that banks don’t have to mark down property that they own. Basically, I’m an accounting nerd.

  93. 93
    omen says:

    okay, busted. i didn’t study for the test. why didn’t this need 60 votes again? when republicans didn’t want something passed, they would filibuster.

  94. 94
    tc125231 says:

    @omen:

    a couple of weeks ago, naked capitalism blog complained treasury didn’t task enough people to do a proper stress test. if they didn’t have enough people to even do that…

    So, let me get this straight. Sweden somehow has the magic capability to take over and then resell two large banks within 6 months, but the US isn’t up to the job?

    No comment. If you want to believe that things fall up, be my guest. I have some dandy risk free real estate securities to sell you. Sure, the distribution doesn’t really match the situation, but man, there’s money to be made! No time to worry about reality.

  95. 95
    omen says:

    @tc125231:

    whadya get all nasty for? i didn’t get nasty with you.
    don’t get mad at me because you don’t know the specifics of something you’re calling for.

    with krugman calling for the magic silver bullet of nationalization all the time, you’d think he’d give more details of what that would entail, including the number of manpower needed.

  96. 96
    Laura W says:

    @Corner Stone: This is the third or fourth time you’ve brought my name into a thread I was not even active in. And not in a good way.
    Do you have a problem? Or a point?

  97. 97
    kay says:

    @J. Michael Neal:

    I don’t have you confused. I’m just unfairly blaming you for anything remotely connected to finance. I’m a little upset.

    It was a real question. I don’t understand why lenders want these 50,000 to 75,000 dollar houses in the county where I live. These are houses no one but the current owner wants. It’s people with two 9 dollar an hour incomes and little kids. These are not sophisticated borrowers in mini mansions. Why do lenders want this vast inventory of 50 year old trashy houses? The only rational reason I can come up with is that they’re not willing to admit the loss on their asset to debt sheet.

    I don’t understand why they won’t allow a cram-down, and let people keep making payments. These people are unemployed. They’re in ch. 7 because they’re jettisoning any debt that is unsecured so they can make the mortgage. They want to keep the house. That’s why they’re in ch 7. I talk to them all the time.

    Good luck on the CPA exam. When another finance person starts posting here I’ll address mildly hostile questions to them, and you’ll get a reprieve.

  98. 98
    Karmakin says:

    @justinslot: I think that looking at it just from the idea of corruption is a bit simplistic.

    It’s simply this. There’s a large swatch of society that is extremely opposed to people “getting something for nothing”. Why? I really don’t know. They may be jealous of it or something, jealous of the lucky duckies who’ve been laid off or something.

    The entire Conservative movement, rallies around this point I think, thus, including conservative Democrats.

  99. 99
    kay says:

    @Karmakin:

    I hope lenders lose. When they foreclose, and end up with a deficiency between appraised value and the ridiculous inflated value of those mortgages they wrote, the only thing they can do is go after a state court judgment lien.

    And to collect on that, they need assets or wages to attach. The people around here that are losing their homes are uncollectable. They don’t have any assets or wages. The judgment isn’t worth squat.

    At some point, they’re going to have to submit a set of books that aren’t cooked. And then there go those ludicrous pay packages.

    I’m thrilled that I paid the salaries of lobbyists for the dead-beat finance sector, incidentally. I’m thrilled to subsidize this fabulous, innovative sector, who churn paper and never, ever take a loss.

  100. 100
    Karmakin says:

    They’ll NEVER put forward books that aren’t cooked. They’ll just cook them a different way.

  101. 101
    kay says:

    @Karmakin:

    I think they can claim those uncollectable state court judgments as an asset. They’re probably turning them into instruments as we speak, and churning more worthless paper.

    In 2 years, we’ll be discussing the implosion of that market.

    Because the people here can’t pay them. They’re not worth the paper they’re printed on.

  102. 102
    Michael says:

    Wanna talk ultimate moral hazard?

    Having government created entities (corporations) be immortal, all while insulating the owners and principal decisionmakers from liability for their screwups and continuing to ratchet down any and all meaningful public regulation of these very governmentally created entities.

    You want true free markets? Fine – eliminate the corporation as a business entity. Let the owners and decisionmakers of the resultant partnerships be personally responsible for the decisions that get made.

  103. 103
    argh says:

    So great it must be repeated:

    Having government created entities (corporations) be immortal, all while insulating the owners and principal decisionmakers from liability for their screwups and continuing to ratchet down any and all meaningful public regulation of these very governmentally created entities.

    You want true free markets? Fine – eliminate the corporation as a business entity. Let the owners and decisionmakers of the resultant partnerships be personally responsible for the decisions that get made.

  104. 104
    omen says:

    @argh:

    you know we live in a topsy turvy world when corporations are viewed as people and are protected by constitutional rights, while actual flesh and blood people have been rendered “non-persons” and denied protection.

  105. 105
    WayneLively says:

    My blog post today expands on Greenwald’s and Taibbi’s posts. As bloggers, we cannot let this one go, nor be sidetracked by swine flu or SCOTUS fights. The GOP perfected the systemic corruption and Democrats are poised to put their hands out. The MSM is not going to expose it. It is up to the blogosphere.

    Wayne Lively
    Las Vegas Review-Journal

  106. 106

    I like Sen Jeff Merkley (OR-D), here ya go Ed Show MSNBC.

  107. 107
    JoeK says:

    @Karmakin 98: “There’s a large swatch of society that is extremely opposed to people “getting something for nothing”.

    Yet that same segment seems to be OK with the idea that investment bankers are The Most Productive Peeps Ever In The Whole World. I think my irony meter just exploded.

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