U.S. Debt discussion

[CaramonLS]

Originally Posted by Azure

The fact that companies are sitting on trillions in cash has nothing to do with who is in the Whitehouse, and everything to do with the policies that the government has put in place.

Isn't it really just a lot simpler than that?

A company is going to invest in a project if the project is going to be profitable.

Which is why I've never really understood the whole "supply side economics" argument in general. Whether taxes are low, or taxes are high, companies are going to invest where they can make money. Taxes only make the venture slightly less profitable.

When you've massive Multinational companies like you do down in the US, it doesn't matter if they're sitting on 2 billion or 3 billion - someone, somewhere in the world will give them the money to get the project started.

[Vulcan]

Originally Posted by afc wimbledon

How exactly do the Republicans get these companies to not spend their trillions? Payoffs? Promises?

One would assume under this hypothosis it isn't the Republicans getting anyone to do anything, it is big business telling the Republicans what to say, which bearing in mind the Tea Party is almost intirely the invention of one multi millionaire in the energy sector, is not that far fetched.

Yeah, Azure doesn't understand that in the States and maybe to a lesser extent in Canada, it's the tail that wags the dog.

[afc wimbledon]

Personally I think the dog just got dumped into the meat grinder and turned into hot dogs, god help us all.

[seattleflamer]

Originally Posted by Calgaryborn

You could argue that if a regulation was in place that disallowed the banks from lending so freely that the crisis wouldn't have happened but, that wasn't the cause of the crisis. Bankers without regulation aren't so incompetent as not to see a bad risk. And even if some were the majority wouldn't follow.

The problem was Fanny and Freddy were willing to insure high risk debt for a small fee which freed the banks to lend more because they didn't have to cover those risks. This created a lending frenzy because with the government backing Fanny and Freddy they couldn't lose. One day in 2008 Fanny and Freddy quit insuring high risk loans. What brought down the banks was all the bad debt still in their system which they couldn't get covered by Fanny or Freddy. Covering those high risk loans ate up their lending capital. Since then even many of their sound loans have lost them money because of the huge drop in housing prices and high unemployment.

Fanny today is back asking the government for money. They need another 5.1 billon to cover last quarter's losses. That will put the government out over 100 billion and counting just with Fanny.

So it is just insurers who are incompetent then? 'Splain me how AIG fits into all this?

Fanny and Freddie secure all mortgage debts not just high risk. FNM and FRE have been doing business for several decades and as GSE have an implicit backing of the gov't which has never been excerised till 08 when every single financial firm whether Citi, Bear Stearns or AIG were explicitly backed by the federal treasury to the tune of ~$1trillion.

It was AIG whose industry created an innovative market created solution (no gov't regulation to get in the way) with an insurance product called Credit Default Swaps.

They were willing to take all those premiums and make money for their investors but ended up having the gov't actually payout any claims because they didn't think it was every going to go south.

They were bailed out to the tune of 80 billion with a market cap of 10 billion.

Does that make sense?

[Vulcan]

forget it

[T@T]

[Kybosh]

^^^ Has Alaska said to hell with the USA and wants to join us?

[T@T]

Originally Posted by Kybosh

^^^ Has Alaska said to hell with the USA and wants to join us?

No, an American colored the map. most don't know where Alaska is.

[afc wimbledon]

Originally Posted by Kybosh

^^^ Has Alaska said to hell with the USA and wants to join us?

Not an effing chance if it means we have to take bloody Palin.

DTB and we can talk about it.

[afc wimbledon]

Originally Posted by T@T

No, an American colored the map. most don't know where Alaska is.

Your sure Alaska hasn't been repossesed?

[nik-]

Originally Posted by afc wimbledon

Your sure Alaska hasn't been repossesed?

No, Russia isn't Triple A either

[SeeBass]

Kinda makes you feel proud to be a part of this club

[SebC]

Really, France? Land of the 35 hr workweek and half the country is on strike at any time?

[Slava]

Originally Posted by SebC

Really, France? Land of the 35 hr workweek and half the country is on strike at any time?

S&P is a joke. The explanations they gave for the downgrade seemed to be factors that are only somewhat relevant. Issues like difficulty in dealing with the political impasse. Sure its true, but not entirely relevant when it comes to meeting their obligations (they did a deal after all, and all of the bills are paid no matter what your personal feelings are toward the deal).

Then to top it off you see how many European countries are AAA and holding a lot of toxic debt on the books. How can we trust the accuracy of these ratings when (a) there seem to be some glaring mistakes present, (b) they made another $2T mistake in coming to the decision to downgrade and (c) their track record through the past 5 years was ridiculous and nowhere near accurate in rating subprime debts as AAA.

[SebC]

Originally Posted by Slava

S&P is a joke. The explanations they gave for the downgrade seemed to be factors that are only somewhat relevant. Issues like difficulty in dealing with the political impasse. Sure its true, but not entirely relevant when it comes to meeting their obligations (they did a deal after all, and all of the bills are paid no matter what your personal feelings are toward the deal).

Then to top it off you see how many European countries are AAA and holding a lot of toxic debt on the books. How can we trust the accuracy of these ratings when (a) there seem to be some glaring mistakes present, (b) they made another $2T mistake in coming to the decision to downgrade and (c) their track record through the past 5 years was ridiculous and nowhere near accurate in rating subprime debts as AAA.

Corroborates that the credit rating agencies are awful:

http://www.thenation.com/blog/162555...ating-agencies

[Yasa]

If there are 3 agencies that determine credit ratings, which ones do investers listen to? S&P seem to make the loudest noise, but do they have more influence than Moody's or Fitch? Are investors still going to panic monday despite 2/3 agencies keeping their ratings at AAA, and public knowledge of S&P's error?

[HOZ]

Originally Posted by CaramonLS

Isn't it really just a lot simpler than that?

A company is going to invest in a project if the project is going to be profitable.

Which is why I've never really understood the whole "supply side economics" argument in general. Whether taxes are low, or taxes are high, companies are going to invest where they can make money. Taxes only make the venture slightly less profitable.

When you've massive Multinational companies like you do down in the US, it doesn't matter if they're sitting on 2 billion or 3 billion - someone, somewhere in the world will give them the money to get the project started.

Multi-nationals are not the greatest job creators. Small and medium businesses are. Multi-nationals are rarely effected by increases in taxes as they have far greater ability to weather them. Small and medium businesses are greatly effected by tax increases. 2-3% increase can kill any profit margin and or their competitiveness.

US businesses have smaller profit margins than Canadian ones. There is greater competition and less brand loyalty. Hence the reason Canadian businesses have a helluva time expanding into the US.

[Azure]

All 3 need to be burned to the ground.

Corrupt agencies shouldn't be in charge of something that important.

[Flash Walken]

Nothing wrong with the financial system, working exactly the way it was supposed to.

It's racketeering in the truest sense.

[Flames Fan, Ph.D.]

Originally Posted by seattleflamer

Fanny and Freddie secure all mortgage debts not just high risk. FNM and FRE have been doing business for several decades and as GSE have an implicit backing of the gov't which has never been excerised till 08 when every single financial firm whether Citi, Bear Stearns or AIG were explicitly backed by the federal treasury to the tune of ~$1trillion.

Well, Fannie and Freddie do not secure all mortgage debts. Far from.

I had a post lined up for Calgaryborn's "Fannie and Freddie caused everything" canard, but I just shook my head and decided not to. Why bother?

Bottom line is that F&F's contribution to the housing crisis was minor. The numbers behind F&F's holdings, and the default rate of their "risky" sub-prime / Alt-A mortgages was actually low. If anyone is interested, they need to look at the type of loans that Countrywide was financing... those are the ones that were problematic and securitized privately. Their loans were largely nonconforming and therefore ineligible for F&F's securitization and had to go to the secondary market. They did misrepresent loans to make them conforming for F&F's securitization.