(retireeforumsyndicate) Fwd: Re: Re: [Iyer123] American banks -- Why they failed?! The Complete Story! Comments and Rebuttal
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vl.vijay...@gmail.com
Apr 18, 2010, 8:23:16 AM4/18/10
to vangal heritage, retireeforumsyndicate
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From: Srinivasan Sashti <sash...@gmail.com>
Date:
Subject: Re: Re: [Iyer123] American banks -- Why they failed?! The Complete Story! Comments and Rebuttals!
To: Srinivasan Subramaniam <sri...@yahoo.com>, acces...@yahoo.com, wondermarve...@yahoo.co.in, ghanshyam dass <mentori...@gmail.com>, hariharan sundaresan <promet...@gmail.com>, iyergroup <iye...@yahoogroups.com>, ram.je...@thesys.co.in, Krishpal K <krish...@rediffmail.com>, Lakshmi Krishnan <laksh...@gmail.com>, lalina iyengar <lal...@yahoo.com>, Lata Narayanan <la...@cs.concordia.ca>, M Aravind Subramanian <maravind...@hotmail.com>, m_mahe...@camsonline.com, murali T <t.m...@iciciprulife.com>, n r sabapathy <sabap...@yahoo.com>, Neelakantan N S <nee...@rediffmail.com>, Radha V <bodh...@hotmail.com>, raghunath m <mragh...@thesys.co.in>, Rajalakshmi <scorpi...@gmail.com>, rajaram <ashwi...@yahoo.co.in>, rajeswar a <rajes...@hotmail.com>, Ram Narayan <ram_l...@yahoo.com>, rukmani raghuraman <mru...@hotmail.com>, salim ea <eas...@rediffmail.com>, Sanal Kumar K S <sanalku...@wipro.com>, saratha balaji <saratha...@wipro.com>, shyam sunder <sh...@thesys.co.in>, srinivasan <yaminisri...@yahoo.com>, subramanian <rahm.sub...@eds.com>, Subramanian Rahm <rah...@yahoo.com>, sundararaman c <sundararam...@wipro.com>, Sushil Kumar <sushil...@citi.com>, tr arulrajhan <trarul...@yahoo.co.in>, Uma Jayaraman <g070...@nus.edu.sg>, Uma Balasubramaniam <thin...@gmail.com>, veena krishnan <krishn...@hotmail.com>, Venkatanarayanan S <venk...@yahoo.com>, vimla joseph <vim...@hotmail.com>, geo...@gmail.com, BRAHMINASSOC...@yahoogroups.co.in, USBra...@yahoogroups.com, meenakshi td <tdmee...@yahoo.co.in>
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> Srinivasan Sir,
>
> Your point number 1 is correct!
>
> Your point No. 2 (theory) is incorrect or may not apply to the bust of 2008, because the Clinton era home dumpers, were gone by the year 2002-2003 and the housing boom was still continuing at a significant pace in the early part of this decade; what truly happened between the years 2005 and 2008 was that home loans beyond the consumers' ability to re-pay were thrust down through the throats of consumers by greedy banks; mortgage brokers (at lower levels -- telemarketers) were very highly incentivized! This was done by the highest level of management in Banks, right from CEO level who saw an opportunity to sell huge mortgage notes, increase the profits for shareholders, in turn effectively pay themselves huge bonuses and stock options and also reward the lower echelon mortgage brokers who were hipping up sales to end consumers. They saw this opportunity as a double-edged sword! They could sell fake mortgage notes to poor and ill-affording tax payer and then turn around and package these mortgage notes as mortgage backed securities to investors, pension fund and others! The fact that sales of pre-owned homes, did not either appreciate much or significantly in many ;parts of the country and the fact that new home builders were still building and selling homes in many of the other states will bear me out on my theory! The only exception being in States like California, Nevada and Arizona, where prices of homes skyrocketed, and some retires who had built up huge equity in California saw an opportunity to cash in, take their money, move out to neighboring states like Arizona or Nevada, where home prices were significantly lower at that time (2006), where they could buy a home for half the cash or a third the cash by liquidating their homes in California, living in that home; then they saw an opportunity to invest in second, and third homes with their equity brought in by the sale of their homes in California, with huge appreciations of homes taking place in a year or two and began to make greedy investments and when things unravelled, the bottom fell off the cliff! They lost their life savings.
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> I would also like to comment on another wishful thinking on the part of my esteemed colleague Krish ( email d, tdmeenakshi) who wrote to me in response to my email on the above topic "American Banks, Why They Failed? The Complete Story!" whose email also I have appended hereunder, for the benefit of other readers!
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> I have to agree with Krish's belief that the aftermath of the economic meltdown is far from over! In fact it has changed the lives up side down of billions of people the world over! It is just beginning to happen in Europe and Greece is having one heck of a problem trying to float bonds and become cash liquid! Here again Euro countries are running up to its rescue! When I drive down and see tens of thousands of vacant office space, manufacturing buildings, strip shopping centers, in Michigan, Ohio, Carolina's, Georgia, Texas, and other states, I often sympathize as to who is holding onto these bank notes and how terrible those business peoples' lives should be! Talk about the poor taxpayer who lost his home, because he lost his job and the bank took over his home and drove him out by a repossession! If the bottom were to fall off these investors and banks who are holding these mortgage notes of vacant office buildings, industrial complexes, strip shopping centers, their lives could be pathetic. That is why I concluded my last email by closing "I shudder to imagine what might befall this Nation if the Banks or investors began closing in those notes and took possession of all of those empty vacant office space, industrial space, and strip shopping centers?! What would they do with it? Who would buy them? What use would anyone have for them? With all of the jobs being gone to India, we do not need so much office space in this country any more! With all of the manufacturing virtually exported to China, since the beginning of 1970's, there is no use for millions and millions of square feet of empty office space buildings; and with lots of people unemployed and having less to spend with, what are we going to do with those strip shopping centers, where the small businesses once flourished serving these people!
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> I also like Krish's wishful thinking or likening that the dollar would dip so low that US$1 would equal to INR 1.00, enabling lots of Indian students to come to the U.S. and go to all Ivy league schools, filling them with more intellectual scholars! I would surely like that phenomenon to occur, because @ US1 = INR1 conversion rate, it would bring back all of the software jobs that we exported to India, reduce our unemployment to virtually zero; it would also bring back all of the manufacturing jobs we exported to China, Korea, Taiwan and other far east countries, because the price of goods produced in those countries would virtually not be competitive any more in the U.S. Already China is doing this by trying to contain costs and reneging with exchange rates and our Treasury is having one heck of a difficult time to ask China to re-value its Yuan!
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> I don't think that Krish's another wishful thinking of liberalization of U.S. immigration is going to occur any time soon! Because where will these people go, what work they will do? If anything the one thing that they might do is to regularize the "illegal aliens" from Mexico and other countries who are here -- that is going to put more cheap labor force in the U.S., and take away whatever work the white Caucasian men and women in this country are doing! I don't see it (the immigration policies for Indians) as significantly helping the Indian population! They will continue to sweat it out with their H1B jobs, trying to convert it to a green card process, which could take them another 20 years to get one, leaving them lingering with their personal challenges such as getting married, buying homes and settling down in their lives!
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> I some times sympathize with and think of Poor Obama, how he has been left holding others' bags of sins, misdeeds, government oversights, wrong policies, failed and ill-represented wars that we were heralded unto in Iraq and Afghanistan ,trillions of dollars in debts created in fighting these two wars for well over 8 years, does someone even want his job? Are there not other good economists that can enunciate the right policies and bring this National back to its original flying colors any time soon! Rather than attack him on every step he initiates! If so, there would be a very great Nobel Laureate winning a trophy at the end of this year!
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> Respectfully,
>
> V Srinivasan
> 3614 Columbia Boulevard
> Garland, Texas 75043-2246
> U.S.A.
>
> 001-972-840-3495
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> On Wed, Apr 14, 2010 at 5:47 AM, Srinivasan Subramaniam sri...@yahoo.com> wrote:
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> Waitlist reason:
> Srinivasan Subramaniam (sri...@yahoo.com) is not on your Guest List
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> | Approve sender
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> Sir,I have heard of 2 stories
> 1.Overpaid management graduates were overworking-selling mortgage loans to bet their bonuses
> 2.Clinton effect-Tax benefits on resale of homes-people bought with 100% loan,sold it at a profit and repaid the loan.when the cycle reached asaturation level,home prices collapsed and loanees defaulted-this is more credible story from American business men who are still strong in their business
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> Thanks&Regards
> S.Srinivasan
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>
> Guess the story is far from complete. Not wanting to sound alarmist, I
> would still anticipate a far more fragile future for not just the US,
> but Europe and Asia Pacific too.
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> The meltdown was not the end,
> it could be the beginning of a nuclear winter for global economics. The
> fact that $ 865 billion American bailouts (not just banks, AIG, GM and
> FM twins including) were financed by freshly minted currency (backed by
> no assets, no gold) will go to trash US $ to unprecedented lows. This
> in effect would mean the end of export market for US products and
> imports into the country will be phenomenally expensive. The only
> attractive avenue would be travelers and students coming to the US will
> have it easy if the currency is so much depreciated. ( Imagine a
> situation when Re.1=$1, one can easily finance a course at Stanford or
> MIT at 1/45 th of what it would cost today.)
>
> So what's the way out for the US...? I see
> liberal immigration laws could be a big boost for attracting both human
> resources like capital and talent. Then keep fueling the wonderful
> entrepreneurial and the spirit of innovation that lie embedded in
> almost every true blue American. Then stop spending on wars, give up
> supporting Israel, Pakistan and use all those extra funds to clean up
> the ghettos of Chicago and New York.
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> If US has one way out, it's in the hands of Mr.Obama...!
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> Krish
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> --- On Tue, 4/13/10, Srinivasan Sashti sash...@gmail.com> wrote:
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> From: Srinivasan Sashti sash...@gmail.com>
> Subject: Re: [Iyer123] American
> banks -- Why they failed?! The Complete Story!
> To: "iyer123" Iye...@yahoogroups.com>
> Date: Tuesday, April 13, 2010, 7:45 PM
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> Dear Friends,
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> Let me interject! Bank failures in the U.S. have been caused by unscrupulous lending policies by these Banks. Between 2005-2008, Banks financed homes and home mortgages to people who ill deserved them or qualified for one! Many large Banks like JP Morgan Chase, City Bank and others put out guidelines to their underwriters to not verify one's income, in other words, to accept primafacie what the applicant declares in his/her application as his/her earnings!
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> In the 1980s, when we bought our first home in the U.S., you had to provide your W2 (employers annual salary certificates) for two years! In addition, you had provide your Federal Income Tax returns with your application for the preceding two years! On top of that, when you qwnt to the closing, you had to take the last month's pay stub to prove that you're still under gainful employment with your employer. Moreover, you had to prove that you did not borrow any money from your relatives or friends to put down as down payment, say 10% of the home value, which was a minimum requirement and the Banks verified this through asking for your Monthly Bank Statements for the last one year (and if there were any entries of deposit for $5,000 or $10,000, they asked you how you got the money. Just to make sure, you were not borrowing the down playment! And then the Banks had a golden
> rule, that said one was not eligible more than 3 times ones' annual wages, as purchase price of the house one could afford to pay on his loan mortgage with; there was another provision to keep the buyer under check -- your monthly payments on the house, including principle, interest and taxes, should never exceed 30% of your gross monthly wages you're making!
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> Banks became greedy in the last four years; they cleverly devised to many products with which to market them to ignorant and innocent people -- came up with many products, one was called "interest only" loans; which meant that one could never liquidate the loan and become a home owner eventually; another one was called "variable interest mortgage" - with which one could qualify for a home loan, paying initially 1%, 2% or 3% interest. Banks went to borrowers and told them "look, you only earn $75K now, but as the economy grows, as you age, so will you over the next five years, and you willl start making $100K or $125K, so here is loan package for you -- whereby you pay your monthly mortgages at 2% and eventually as you grew over the years, you would pay a higher mortgage" and tantalized the poor, unassuming, ill educated home owner into one of these mortgages on a home
> that was much larger than the one he needed, or a price he could ill afford and qualify! Yet another product the Banks devised was you only put minimum equity or down payment, watering it down to a mere 5% or so. In some cases, the greedy home builders said that they would subsidize the buyers with down payment, by adding it to the price of the house and giving it as a discount to the purchaser towards down payment at the time of closing! Another clever ploy or product that the banks came up was one that would finance up to 125% of the value of the home; in other words, if the house was worth $400K the Banks would loan up to $500K so you could do all your move in upgrades to the house and never incurred a dime in out of pocket expenses. Some other banks also said, move your car loan payments under your home loan payment, that way
> you can take a deduction on the entire house payment against income taxes and brought other assets such as cars/minivans under the home loan mortgage payment! Some greedy people who could barely afford payment on a single home, became "self-styled" investors in two, three or 4 homes, renting the homes and paying the mortgages, for a while; others some bought second and third homes, waited for the appreciation to take place in a year or so and then retired the property at some gain!
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> Another ploy that the Banks such as JP Morgan, Goldman Sacs, City Bank, engaged hand in hand was to package these bank notes that the purchaser was assuming as "collateralized home loan securities" and sold them fraudulently to pension funds, and other investors saying one could never go broke because these were backed by home mortgages! In addition, government sponsored agencies like Freddie Mac and Fannie May were also buying these mortgage backed securities to funnel currency (funds) back into lending, so more and more houses could be built, sold and financed!
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> While all this was going on, the Bush Administration was basking in its glory of one of the "greatest economic prosperity" of all times, letting go of all government oversight! And looking in another direction, while the Banks committed fraud!
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> While all of this was happening, the large Banks made one heck of a financial windfall during the years 2006, 2007 and 2008 and paid huge bonuses to their executives, management employees and CEO's. Some Bank's CEO like Countrywide who was a great con artist took lot of money from the bank, declared bankruptcy and left! Some Banks even paid huge bonuses to their CEOs and executives, after the banks were bailed out by the U.S. Government Treasury, from out of the proceeds of such "bail-out" funds!
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> Until finally one day in September 2008, "all hell broke loose" and the whole market collapsed. As I said in a write up in another Forum, this was greatest "failure of capitalism"! This Nation proudly watched the Fall of the Berlin Wall in 1990s, heralding President Ronald Regan's foreign policy as a great success but now our comrades Nikata Kruschev and Yuri Bulganin must have been watching over and laughing the "great fall of capitalism" from their graves!
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> So the U.S. Government has had to intervene and prop up all of the Banks by bailing them out and giving them enough loans to stay in business! The U.S. Government has had to do it to save this Nation's currency (US dollar) from falling and collapsing! Because there were many countries like China, Japan and others holding trillions of dollars worth U.S. Treasury Bonds and not rescuing the banks, its Dollar, would have meant recall of the bonds held by these foreign countries and U.S. had no means to pay them with Gold or other currencies and this would have meant the total collapse of world currencies, spelling utter ruin and destruction to the finance of the rest of the World!
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> At my last reading,nearly 48 banks in the U.S. have failed, with the Government taking them over and quickly mergingthem with other private banks that are still successfully operating! The Government never kept the banks for themselves to operate -- they wrote off the financial loss (of the losses) and gave away the equity and assets in the failed (taken over) banks to other banks for a price.
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> Meanwhile American tax payer is burned with all these Government oversight! He has lost his job, found that his house has been foreclosed by the Banks, that the industry in general is not hiring, because of recession on a never before seen magnitude or scale being witnessed, no hiring because all U.S. jobs have been shipped overseas, the home industry is dying, because there are no people to buy these homes, (both foreclosed homes and newly bought homes) because people are not getting jobs, with which to qualify and buy these homes and so we are continuing to struggle, and struggle!
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> There are no thousands of banks in the U.S. that could fail, as our friend, Ms. Radha Venkatanarayan seems to think! I think the bank failure flow has been contained by the Treasury very well and if at all, another dozen or so banks could fail by the end of this year!
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> And while all this is going on, there is still a thought that what happened to single family homes,could also happen to Commercial Real Estate market!
> I shudder to think what might befall this Nation if this were to occur!
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> Respectfully,
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> V Srinivasan
> 3614 Columbia Blvd
> Garland, Texas 75043-2246
> U.S.A.
>
> 001-972-840- 3495
>
>
> On Mon, Apr 12, 2010 at 10:34 AM, Radha Venkatanarayanan access2rad@yahoo. com> wrote:
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> Hello Friends,
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> Below, excerpt of a newletter that i get everyday.... ......... ...it says a lot......... ..pls go thru....
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> "Thousands of banks in America are going to fail over the next three years. Most Americans believe the U.S. government is safely insuring their bank deposits. But it's impossible to predict what havoc this wave of bank failures will create. Although it seems unlikely right now, some depositors could lose their savings and we could even see bank runs again…
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> The FDIC is the institution in charge of protecting bank deposits. The FDIC is supposed to maintain a pool of funds to insure America's banking deposits. This pool is empty. In fact, according to the FDIC's latest report, the pool had sunk to a negative $21 billion as at the end of 2009. Forty-one banks have collapsed so far this year, so the deficit must now be nearing $25 billion.
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> The head of the FDIC, Sheila Bair, has
> said the FDIC's insolvency is possible and she's assessed a one-time fee on every bank the FDIC insures in an attempt to cover the deficit. For some small banks, this onetime fee could consume an entire year's profits. Paradoxically, this fee could end up causing even more bank collapses."
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> "Don't believe your doubts and don't doubt your beliefs"
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From: Srinivasan Sashti <sash...@gmail.com>
Date:
Subject: Re: Re: [Iyer123] American banks -- Why they failed?! The Complete Story! Comments and Rebuttals!
To: Srinivasan Subramaniam <sri...@yahoo.com>, acces...@yahoo.com, wondermarve...@yahoo.co.in, ghanshyam dass <mentori...@gmail.com>, hariharan sundaresan <promet...@gmail.com>, iyergroup <iye...@yahoogroups.com>, ram.je...@thesys.co.in, Krishpal K <krish...@rediffmail.com>, Lakshmi Krishnan <laksh...@gmail.com>, lalina iyengar <lal...@yahoo.com>, Lata Narayanan <la...@cs.concordia.ca>, M Aravind Subramanian <maravind...@hotmail.com>, m_mahe...@camsonline.com, murali T <t.m...@iciciprulife.com>, n r sabapathy <sabap...@yahoo.com>, Neelakantan N S <nee...@rediffmail.com>, Radha V <bodh...@hotmail.com>, raghunath m <mragh...@thesys.co.in>, Rajalakshmi <scorpi...@gmail.com>, rajaram <ashwi...@yahoo.co.in>, rajeswar a <rajes...@hotmail.com>, Ram Narayan <ram_l...@yahoo.com>, rukmani raghuraman <mru...@hotmail.com>, salim ea <eas...@rediffmail.com>, Sanal Kumar K S <sanalku...@wipro.com>, saratha balaji <saratha...@wipro.com>, shyam sunder <sh...@thesys.co.in>, srinivasan <yaminisri...@yahoo.com>, subramanian <rahm.sub...@eds.com>, Subramanian Rahm <rah...@yahoo.com>, sundararaman c <sundararam...@wipro.com>, Sushil Kumar <sushil...@citi.com>, tr arulrajhan <trarul...@yahoo.co.in>, Uma Jayaraman <g070...@nus.edu.sg>, Uma Balasubramaniam <thin...@gmail.com>, veena krishnan <krishn...@hotmail.com>, Venkatanarayanan S <venk...@yahoo.com>, vimla joseph <vim...@hotmail.com>, geo...@gmail.com, BRAHMINASSOC...@yahoogroups.co.in, USBra...@yahoogroups.com, meenakshi td <tdmee...@yahoo.co.in>
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> Srinivasan Sir,
>
> Your point number 1 is correct!
>
> Your point No. 2 (theory) is incorrect or may not apply to the bust of 2008, because the Clinton era home dumpers, were gone by the year 2002-2003 and the housing boom was still continuing at a significant pace in the early part of this decade; what truly happened between the years 2005 and 2008 was that home loans beyond the consumers' ability to re-pay were thrust down through the throats of consumers by greedy banks; mortgage brokers (at lower levels -- telemarketers) were very highly incentivized! This was done by the highest level of management in Banks, right from CEO level who saw an opportunity to sell huge mortgage notes, increase the profits for shareholders, in turn effectively pay themselves huge bonuses and stock options and also reward the lower echelon mortgage brokers who were hipping up sales to end consumers. They saw this opportunity as a double-edged sword! They could sell fake mortgage notes to poor and ill-affording tax payer and then turn around and package these mortgage notes as mortgage backed securities to investors, pension fund and others! The fact that sales of pre-owned homes, did not either appreciate much or significantly in many ;parts of the country and the fact that new home builders were still building and selling homes in many of the other states will bear me out on my theory! The only exception being in States like California, Nevada and Arizona, where prices of homes skyrocketed, and some retires who had built up huge equity in California saw an opportunity to cash in, take their money, move out to neighboring states like Arizona or Nevada, where home prices were significantly lower at that time (2006), where they could buy a home for half the cash or a third the cash by liquidating their homes in California, living in that home; then they saw an opportunity to invest in second, and third homes with their equity brought in by the sale of their homes in California, with huge appreciations of homes taking place in a year or two and began to make greedy investments and when things unravelled, the bottom fell off the cliff! They lost their life savings.
>
>
>
> I would also like to comment on another wishful thinking on the part of my esteemed colleague Krish ( email d, tdmeenakshi) who wrote to me in response to my email on the above topic "American Banks, Why They Failed? The Complete Story!" whose email also I have appended hereunder, for the benefit of other readers!
>
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>
> I have to agree with Krish's belief that the aftermath of the economic meltdown is far from over! In fact it has changed the lives up side down of billions of people the world over! It is just beginning to happen in Europe and Greece is having one heck of a problem trying to float bonds and become cash liquid! Here again Euro countries are running up to its rescue! When I drive down and see tens of thousands of vacant office space, manufacturing buildings, strip shopping centers, in Michigan, Ohio, Carolina's, Georgia, Texas, and other states, I often sympathize as to who is holding onto these bank notes and how terrible those business peoples' lives should be! Talk about the poor taxpayer who lost his home, because he lost his job and the bank took over his home and drove him out by a repossession! If the bottom were to fall off these investors and banks who are holding these mortgage notes of vacant office buildings, industrial complexes, strip shopping centers, their lives could be pathetic. That is why I concluded my last email by closing "I shudder to imagine what might befall this Nation if the Banks or investors began closing in those notes and took possession of all of those empty vacant office space, industrial space, and strip shopping centers?! What would they do with it? Who would buy them? What use would anyone have for them? With all of the jobs being gone to India, we do not need so much office space in this country any more! With all of the manufacturing virtually exported to China, since the beginning of 1970's, there is no use for millions and millions of square feet of empty office space buildings; and with lots of people unemployed and having less to spend with, what are we going to do with those strip shopping centers, where the small businesses once flourished serving these people!
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> I also like Krish's wishful thinking or likening that the dollar would dip so low that US$1 would equal to INR 1.00, enabling lots of Indian students to come to the U.S. and go to all Ivy league schools, filling them with more intellectual scholars! I would surely like that phenomenon to occur, because @ US1 = INR1 conversion rate, it would bring back all of the software jobs that we exported to India, reduce our unemployment to virtually zero; it would also bring back all of the manufacturing jobs we exported to China, Korea, Taiwan and other far east countries, because the price of goods produced in those countries would virtually not be competitive any more in the U.S. Already China is doing this by trying to contain costs and reneging with exchange rates and our Treasury is having one heck of a difficult time to ask China to re-value its Yuan!
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> I don't think that Krish's another wishful thinking of liberalization of U.S. immigration is going to occur any time soon! Because where will these people go, what work they will do? If anything the one thing that they might do is to regularize the "illegal aliens" from Mexico and other countries who are here -- that is going to put more cheap labor force in the U.S., and take away whatever work the white Caucasian men and women in this country are doing! I don't see it (the immigration policies for Indians) as significantly helping the Indian population! They will continue to sweat it out with their H1B jobs, trying to convert it to a green card process, which could take them another 20 years to get one, leaving them lingering with their personal challenges such as getting married, buying homes and settling down in their lives!
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> I some times sympathize with and think of Poor Obama, how he has been left holding others' bags of sins, misdeeds, government oversights, wrong policies, failed and ill-represented wars that we were heralded unto in Iraq and Afghanistan ,trillions of dollars in debts created in fighting these two wars for well over 8 years, does someone even want his job? Are there not other good economists that can enunciate the right policies and bring this National back to its original flying colors any time soon! Rather than attack him on every step he initiates! If so, there would be a very great Nobel Laureate winning a trophy at the end of this year!
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> Respectfully,
>
> V Srinivasan
> 3614 Columbia Boulevard
> Garland, Texas 75043-2246
> U.S.A.
>
> 001-972-840-3495
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> On Wed, Apr 14, 2010 at 5:47 AM, Srinivasan Subramaniam sri...@yahoo.com> wrote:
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> Waitlist reason:
> Srinivasan Subramaniam (sri...@yahoo.com) is not on your Guest List
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> | Approve sender
> | Approve domain
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> Sir,I have heard of 2 stories
> 1.Overpaid management graduates were overworking-selling mortgage loans to bet their bonuses
> 2.Clinton effect-Tax benefits on resale of homes-people bought with 100% loan,sold it at a profit and repaid the loan.when the cycle reached asaturation level,home prices collapsed and loanees defaulted-this is more credible story from American business men who are still strong in their business
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> Thanks&Regards
> S.Srinivasan
>
>
> Guess the story is far from complete. Not wanting to sound alarmist, I
> would still anticipate a far more fragile future for not just the US,
> but Europe and Asia Pacific too.
>
> The meltdown was not the end,
> it could be the beginning of a nuclear winter for global economics. The
> fact that $ 865 billion American bailouts (not just banks, AIG, GM and
> FM twins including) were financed by freshly minted currency (backed by
> no assets, no gold) will go to trash US $ to unprecedented lows. This
> in effect would mean the end of export market for US products and
> imports into the country will be phenomenally expensive. The only
> attractive avenue would be travelers and students coming to the US will
> have it easy if the currency is so much depreciated. ( Imagine a
> situation when Re.1=$1, one can easily finance a course at Stanford or
> MIT at 1/45 th of what it would cost today.)
>
> So what's the way out for the US...? I see
> liberal immigration laws could be a big boost for attracting both human
> resources like capital and talent. Then keep fueling the wonderful
> entrepreneurial and the spirit of innovation that lie embedded in
> almost every true blue American. Then stop spending on wars, give up
> supporting Israel, Pakistan and use all those extra funds to clean up
> the ghettos of Chicago and New York.
>
> If US has one way out, it's in the hands of Mr.Obama...!
>
> Krish
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> --- On Tue, 4/13/10, Srinivasan Sashti sash...@gmail.com> wrote:
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> From: Srinivasan Sashti sash...@gmail.com>
> Subject: Re: [Iyer123] American
> banks -- Why they failed?! The Complete Story!
> To: "iyer123" Iye...@yahoogroups.com>
> Date: Tuesday, April 13, 2010, 7:45 PM
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> Dear Friends,
>
> Let me interject! Bank failures in the U.S. have been caused by unscrupulous lending policies by these Banks. Between 2005-2008, Banks financed homes and home mortgages to people who ill deserved them or qualified for one! Many large Banks like JP Morgan Chase, City Bank and others put out guidelines to their underwriters to not verify one's income, in other words, to accept primafacie what the applicant declares in his/her application as his/her earnings!
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> In the 1980s, when we bought our first home in the U.S., you had to provide your W2 (employers annual salary certificates) for two years! In addition, you had provide your Federal Income Tax returns with your application for the preceding two years! On top of that, when you qwnt to the closing, you had to take the last month's pay stub to prove that you're still under gainful employment with your employer. Moreover, you had to prove that you did not borrow any money from your relatives or friends to put down as down payment, say 10% of the home value, which was a minimum requirement and the Banks verified this through asking for your Monthly Bank Statements for the last one year (and if there were any entries of deposit for $5,000 or $10,000, they asked you how you got the money. Just to make sure, you were not borrowing the down playment! And then the Banks had a golden
> rule, that said one was not eligible more than 3 times ones' annual wages, as purchase price of the house one could afford to pay on his loan mortgage with; there was another provision to keep the buyer under check -- your monthly payments on the house, including principle, interest and taxes, should never exceed 30% of your gross monthly wages you're making!
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> Banks became greedy in the last four years; they cleverly devised to many products with which to market them to ignorant and innocent people -- came up with many products, one was called "interest only" loans; which meant that one could never liquidate the loan and become a home owner eventually; another one was called "variable interest mortgage" - with which one could qualify for a home loan, paying initially 1%, 2% or 3% interest. Banks went to borrowers and told them "look, you only earn $75K now, but as the economy grows, as you age, so will you over the next five years, and you willl start making $100K or $125K, so here is loan package for you -- whereby you pay your monthly mortgages at 2% and eventually as you grew over the years, you would pay a higher mortgage" and tantalized the poor, unassuming, ill educated home owner into one of these mortgages on a home
> that was much larger than the one he needed, or a price he could ill afford and qualify! Yet another product the Banks devised was you only put minimum equity or down payment, watering it down to a mere 5% or so. In some cases, the greedy home builders said that they would subsidize the buyers with down payment, by adding it to the price of the house and giving it as a discount to the purchaser towards down payment at the time of closing! Another clever ploy or product that the banks came up was one that would finance up to 125% of the value of the home; in other words, if the house was worth $400K the Banks would loan up to $500K so you could do all your move in upgrades to the house and never incurred a dime in out of pocket expenses. Some other banks also said, move your car loan payments under your home loan payment, that way
> you can take a deduction on the entire house payment against income taxes and brought other assets such as cars/minivans under the home loan mortgage payment! Some greedy people who could barely afford payment on a single home, became "self-styled" investors in two, three or 4 homes, renting the homes and paying the mortgages, for a while; others some bought second and third homes, waited for the appreciation to take place in a year or so and then retired the property at some gain!
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> Another ploy that the Banks such as JP Morgan, Goldman Sacs, City Bank, engaged hand in hand was to package these bank notes that the purchaser was assuming as "collateralized home loan securities" and sold them fraudulently to pension funds, and other investors saying one could never go broke because these were backed by home mortgages! In addition, government sponsored agencies like Freddie Mac and Fannie May were also buying these mortgage backed securities to funnel currency (funds) back into lending, so more and more houses could be built, sold and financed!
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> While all this was going on, the Bush Administration was basking in its glory of one of the "greatest economic prosperity" of all times, letting go of all government oversight! And looking in another direction, while the Banks committed fraud!
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> While all of this was happening, the large Banks made one heck of a financial windfall during the years 2006, 2007 and 2008 and paid huge bonuses to their executives, management employees and CEO's. Some Bank's CEO like Countrywide who was a great con artist took lot of money from the bank, declared bankruptcy and left! Some Banks even paid huge bonuses to their CEOs and executives, after the banks were bailed out by the U.S. Government Treasury, from out of the proceeds of such "bail-out" funds!
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> Until finally one day in September 2008, "all hell broke loose" and the whole market collapsed. As I said in a write up in another Forum, this was greatest "failure of capitalism"! This Nation proudly watched the Fall of the Berlin Wall in 1990s, heralding President Ronald Regan's foreign policy as a great success but now our comrades Nikata Kruschev and Yuri Bulganin must have been watching over and laughing the "great fall of capitalism" from their graves!
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> So the U.S. Government has had to intervene and prop up all of the Banks by bailing them out and giving them enough loans to stay in business! The U.S. Government has had to do it to save this Nation's currency (US dollar) from falling and collapsing! Because there were many countries like China, Japan and others holding trillions of dollars worth U.S. Treasury Bonds and not rescuing the banks, its Dollar, would have meant recall of the bonds held by these foreign countries and U.S. had no means to pay them with Gold or other currencies and this would have meant the total collapse of world currencies, spelling utter ruin and destruction to the finance of the rest of the World!
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> At my last reading,nearly 48 banks in the U.S. have failed, with the Government taking them over and quickly mergingthem with other private banks that are still successfully operating! The Government never kept the banks for themselves to operate -- they wrote off the financial loss (of the losses) and gave away the equity and assets in the failed (taken over) banks to other banks for a price.
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> Meanwhile American tax payer is burned with all these Government oversight! He has lost his job, found that his house has been foreclosed by the Banks, that the industry in general is not hiring, because of recession on a never before seen magnitude or scale being witnessed, no hiring because all U.S. jobs have been shipped overseas, the home industry is dying, because there are no people to buy these homes, (both foreclosed homes and newly bought homes) because people are not getting jobs, with which to qualify and buy these homes and so we are continuing to struggle, and struggle!
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> There are no thousands of banks in the U.S. that could fail, as our friend, Ms. Radha Venkatanarayan seems to think! I think the bank failure flow has been contained by the Treasury very well and if at all, another dozen or so banks could fail by the end of this year!
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> And while all this is going on, there is still a thought that what happened to single family homes,could also happen to Commercial Real Estate market!
> I shudder to think what might befall this Nation if this were to occur!
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> Respectfully,
>
> V Srinivasan
> 3614 Columbia Blvd
> Garland, Texas 75043-2246
> U.S.A.
>
> 001-972-840- 3495
>
>
> On Mon, Apr 12, 2010 at 10:34 AM, Radha Venkatanarayanan access2rad@yahoo. com> wrote:
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> Hello Friends,
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> Below, excerpt of a newletter that i get everyday.... ......... ...it says a lot......... ..pls go thru....
>
>
>
> "Thousands of banks in America are going to fail over the next three years. Most Americans believe the U.S. government is safely insuring their bank deposits. But it's impossible to predict what havoc this wave of bank failures will create. Although it seems unlikely right now, some depositors could lose their savings and we could even see bank runs again…
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> The FDIC is the institution in charge of protecting bank deposits. The FDIC is supposed to maintain a pool of funds to insure America's banking deposits. This pool is empty. In fact, according to the FDIC's latest report, the pool had sunk to a negative $21 billion as at the end of 2009. Forty-one banks have collapsed so far this year, so the deficit must now be nearing $25 billion.
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> The head of the FDIC, Sheila Bair, has
> said the FDIC's insolvency is possible and she's assessed a one-time fee on every bank the FDIC insures in an attempt to cover the deficit. For some small banks, this onetime fee could consume an entire year's profits. Paradoxically, this fee could end up causing even more bank collapses."
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> "Don't believe your doubts and don't doubt your beliefs"
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