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They might be very different. But given that only 11% of workers are unionised, I fail to see how they can hold a lot of blame for the collapse of the US econom

by ktizo 14y ago

They might be very different. But given that only 11% of workers are unionised, I fail to see how they can hold a lot of blame for the collapse of the US economy, which seems largely driven by a horrendous Total Debt/GDP ratio, massive regulatory capture across pretty much all sectors and blatantly fraudulent accounting in the financial sector.

yummyfajitas 14y ago
...blatantly fraudulent accounting in the financial sector. Could you explain this claim, possibly providing some citations? I'm unaware of fraud playing any significant role in the recently ended recession. Regulatory capture, maybe - the regulators certainly gave frannie/realtors/construction/homeowners whatever they wanted. A speculative bubble also played a major role. But fraud? Could you explain this claim?
- ktizo 14y ago
  Here's an article about the extent of mortgages and securitisation fraud, which the FBI characterised as an epidemic. http://rwer.wordpress.com/2012/05/26/mortgage-and-securitization-fraud-wheres-the-task-force/ http://rwer.wordpress.com/2012/05/26/mortgage-and-securitiza...
  - yummyfajitas 14y ago
    The FBI characterized mortgage fraud in which banks are the victim as an epidemic, according to the only source cited by your blog post. Criminals attempting to rip off banks via schemes involving mortgages != fraudulent accounting in the financial sector.
- ericd 14y ago
  You could call it willful ignorance due to the massive profits that were being made, I don't know if that constitutes fraud. I interned at Citi in 06 as a quant/trader, and as we were being taught these things, it was pretty clear to the interns that you couldn't assume independence in the case of something like the home mortgage market - they're at least correlated by the performance of the wider economy, and an assumption of independence was at the core of why CMOs were supposed to work. When we asked about this, the answer we were given was that historically, home prices had never declined over the entire US, on average, and let's move on. I personally think it was fraudulent/criminally negligent. The fraud was them making these things out of garbage and claiming to customers that they were AAA in aggregate when they had good reason to believe that they were not.
  - yummyfajitas 14y ago
    Who was defrauded? Note that "AAA" has a well defined meaning, namely whatever independent ratings agencies says it means. Banks didn't lie about this. They also didn't lie about the fact that if house prices went down, purchasers of CMOs would probably lose money. The purchasers made the same assumptions about house prices never going down that banks and regulators made, but how is that fraud? Are the banks now responsible for convincing institutional investors, hedge funds and other banks not to make the same assumptions they themselves make?
    - ktizo 14y ago
      Hang on. I know that I am just a hobby economist and that whether I am right or wrong, I have no direct experience of the internals of what was going on, beyond having some family and friends working in those areas. Ericd on the other hand is saying that he interned as a quant/trader at Citi and has direct personal experience of what was going on and that in his professional opinion it was probably fraudulent. Unless you can start to demonstrate some profound level of insight or experience of the situation being discussed here, I don't think you are likely to get all that far in trying to rubbish someone who was directly involved in it. To my understanding, it was fraud, because the organisations involved were not blind to the fraud lower down the chain, and were directly profiting from this fraud by helping package it for them and then sell it on to people who were unaware. Is like saying that a professional fence isn't responsible for the fact that the goods they sell are stolen.
      - yummyfajitas 14y ago
        I didn't "rubbish" anyone. Nor did I even dispute any facts. I'm simply asking Ericd to describe the specific mechanics of fraud. The only factual claim he made was that assumptions were made (hint: they always are), and in his opinion this constitutes fraud. I'm just asking for more detail. Specifically, who was lied to? What action did they take as a result of the lie? What did they lose as a result of that action? You know, standard questions about how a fraud might actually work.

by ktizo 14y ago

yummyfajitas 14y ago

...blatantly fraudulent accounting in the financial sector. Could you explain this claim, possibly providing some citations? I'm unaware of fraud playing any significant role in the recently ended recession. Regulatory capture, maybe - the regulators certainly gave frannie/realtors/construction/homeowners whatever they wanted. A speculative bubble also played a major role. But fraud? Could you explain this claim?

ktizo 14y ago
Here's an article about the extent of mortgages and securitisation fraud, which the FBI characterised as an epidemic. http://rwer.wordpress.com/2012/05/26/mortgage-and-securitization-fraud-wheres-the-task-force/ http://rwer.wordpress.com/2012/05/26/mortgage-and-securitiza...
- yummyfajitas 14y ago
  The FBI characterized mortgage fraud in which banks are the victim as an epidemic, according to the only source cited by your blog post. Criminals attempting to rip off banks via schemes involving mortgages != fraudulent accounting in the financial sector.
ericd 14y ago
You could call it willful ignorance due to the massive profits that were being made, I don't know if that constitutes fraud. I interned at Citi in 06 as a quant/trader, and as we were being taught these things, it was pretty clear to the interns that you couldn't assume independence in the case of something like the home mortgage market - they're at least correlated by the performance of the wider economy, and an assumption of independence was at the core of why CMOs were supposed to work. When we asked about this, the answer we were given was that historically, home prices had never declined over the entire US, on average, and let's move on. I personally think it was fraudulent/criminally negligent. The fraud was them making these things out of garbage and claiming to customers that they were AAA in aggregate when they had good reason to believe that they were not.
- yummyfajitas 14y ago
  Who was defrauded? Note that "AAA" has a well defined meaning, namely whatever independent ratings agencies says it means. Banks didn't lie about this. They also didn't lie about the fact that if house prices went down, purchasers of CMOs would probably lose money. The purchasers made the same assumptions about house prices never going down that banks and regulators made, but how is that fraud? Are the banks now responsible for convincing institutional investors, hedge funds and other banks not to make the same assumptions they themselves make?
  - ktizo 14y ago
    Hang on. I know that I am just a hobby economist and that whether I am right or wrong, I have no direct experience of the internals of what was going on, beyond having some family and friends working in those areas. Ericd on the other hand is saying that he interned as a quant/trader at Citi and has direct personal experience of what was going on and that in his professional opinion it was probably fraudulent. Unless you can start to demonstrate some profound level of insight or experience of the situation being discussed here, I don't think you are likely to get all that far in trying to rubbish someone who was directly involved in it. To my understanding, it was fraud, because the organisations involved were not blind to the fraud lower down the chain, and were directly profiting from this fraud by helping package it for them and then sell it on to people who were unaware. Is like saying that a professional fence isn't responsible for the fact that the goods they sell are stolen.
    - yummyfajitas 14y ago
      I didn't "rubbish" anyone. Nor did I even dispute any facts. I'm simply asking Ericd to describe the specific mechanics of fraud. The only factual claim he made was that assumptions were made (hint: they always are), and in his opinion this constitutes fraud. I'm just asking for more detail. Specifically, who was lied to? What action did they take as a result of the lie? What did they lose as a result of that action? You know, standard questions about how a fraud might actually work.