[cryptography] Digital cash in the news...

James A. Donald jamesd at echeque.com
Mon Jun 13 07:03:15 EDT 2011


On 2011-06-13 3:12 PM, Randall Webmail wrote:
 > That's right: POOR PEOPLE caused the Current
 > Unpleasantness!

Yes they did.  I was at ground zero of the crisis: Sunnyvale
California.

And every person I saw buying a seven hundred thousand dollar
house was a cat eating no hablo english wetback with no
regular job.

(Well I don't actually know that they ate cats - that is just
stereotyping, but they were no hablo english with no regular
job.)

 > The people who pushed the Liar Loans and the alleged people
 > who packaged those into securities and the alleged people
 > who gave those securities AAA ratings and the alleged
 > people who sold those AAA securities and the alleged people
 > who bought those AAA securities and so on are completely
 > blameless.

Those few banks that did not issue liar loans, for example the Bank of 
Beverly hills, got rated as "Substantially noncompliant with the 
Community Reinvestment Act", because of "No use of innovative or 
flexible lending products"

The major source of dud loans to deadbeats was Fannie and
Freddy, which were acting to please their political
constituency but the major private source was Washington
Mutual.

Washington Mutual sincerely believed that pissing away 375
billion on no hablo english cat eating wetbacks was God's
work:

          Porter says that Washington Mutual takes the CRA
          very seriously. But he adds the bank regards the
          CRA as a floor rather than a ceiling. He says the
          company, and its employees, want to surpass the
          regulatory standard for institutions to meet the
          credit needs of their communities. Porter points
          out, for instance, that the bank's $375-billion,
          10-year lending commitment was not necessarily
          dictated by the CRA. ‘It was good from the
          company's perspective,’ he says. ‘It was good from
          the community perspective, and it actually gives us
          a higher bar that we want to achieve.’

          "Helping to build strong, vibrant communities
          wherever Washington Mutual does business is integral
          to the company’s long-term strategy. The Community
          and External Affairs Division oversees all community
          investment and development activities to ensure that
          Washington Mutual fulfills its community goals in
          the most strategic way possible."

And proof that they really and truly believed is that they
did not dump ever single one of these crap loans as fast as
possible.  Although they securitized a lot and dumped a lot
of them on wall street, they kept a lot.

Steve Sailer analyses what went wrong:

Say there are two banks, WaMu and Scrooge-Potter BanCorp. The
latter is owned by Ebenezer Scrooge of Charles Dickens’ A
Christmas Carol and Mister Potter of Frank Capra’s It’s a
Wonderful Life. While WaMu is beloved for lending to anybody
with a pulse, Scrooge-Potter BanCorp is widely loathed for
taking a dim view of lending money to likely deadbeats.

They both would like to buy George Bailey’s Bailey Building
and Loan Association. ACORN and the National Community
Reinvestment Coalition announce they will protest
vociferously against regulatory approval of the merger unless
the winner pledges to make $50 billion in minority and low
income loans.

Fearing a debacle of defaults, Scrooge-Potter BanCorp issues
a two-word press release: “Bah, humbug”. And it drops out of
the bidding.

WaMu announces: “Well, heck, we’ll promise to lend $55
billion.”

In fact, because Scrooge-Potter realized its quest was
hopeless, WaMu got Bailey Building and Loan for less than it
would have paid if the government wasn’t biased in favor of
imprudent bankers. This gives WaMu more money to pursue more
targets.

Lather, rinse, and repeat. The CRA means that WaMu gets big
while Scrooge-Potter stays small.

Consider the indirect effects on Scrooge-Potter BanCorp. Who
would want to go to work for a bank that can’t make
acquisitions because it won’t play nice with the government
on CRA? Scrooge-Potter can’t buy anybody, it can only be
bought. So, how’s your job security at Scrooge-Potter
looking? Wouldn’t it make more sense to go work for WaMu
instead?

The CRA drives the climate of opinion in the entire mortgage
industry. If you wanted to be able to buy other banks, you
had to play ball.

Practically everybody did. Out of the thousands of banks with
federal CRA Performance Evaluations, 496 got the highest
rating of Outstanding, while only five dared to be in
“Substantial Noncompliance”.

The biggest noncomplier: First Bank of Beverly Hills. It had
the kind of business strategy that you’d expect from a bank
with that name: take in deposits from rich people and make
loans to big real estate developers outside Los Angeles.
Sensing the popping of the Housing Bubble coming, it was
pulling it its horns when the government evaluated it. The
feds didn’t like that. (You can read the government’s report
http://www2.fdic.gov/crapes/2007/32069_071001.pdf
and see if you can find anything shameful about how FBBH did
business. I can’t.)

Over time, the madness infects the entire culture of finance,
as the government labels the prudent bankers automatic losers
in the great game of acquisitions.




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