Originally Posted By: Dogfish
Originally Posted By: Hankster
A little more on how we're taking it in the shorts by Goldman Sachs and, I'm sure, others in the industry.

http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1014681


#1. Goldman Sachs IS the blood sucking vampire of the financial world. Granted.

#2. The failure of Indy Mac Bank was set in motion by Chuck Schumer. They were well capitalized, meaning they should have been able to weather some downside on their profits, which they were experiencing. http://www.bloomberg.com/apps/news?pid=20601103&sid=aAYLeK3YAie4 Schumer should be looked at, with his ties to Goldman Sachs. Both from New York, etc. Indy Mac's failure was one that didn't have to happen. Schumer was teh cause. Can't find the New Yorker magazine article just yet, but it describes in detail his roll in the failure of Indy Mac. Schumer orchestrated a run on the bank. Schumer needs to be investigated.

#3. Goldman Sachs got a sweetheart deal, but Indy Mac was the first of the large banks to go down, so FDIC didn't know how many willing buyers there were, and had just started ramping up their bank closure operations. Current banks that are being sold are now having their assets (loans) sold at par (100%), or with a slight discount. Indy Mac's portfolio of Alt A loans held a higher risk, so some discount was appropriate, but I'm not sure that the steep discount was appropriate.

#4 Loss share agreements are S.O.P. nowadays. It usually only applies to a portion of the loan portfolio purchased, and with the elimination of the steep discounts, fewer of the abomination type deals are out there.

#5. The video only shows one example. They don't discuss the transactions where Goldman Sachs took it on the chin. You need to look at the portfolio performance as a whole, not just one single transaction. I don't know if that data is available. As far as that homeowner is concerned, they signed a contract to pay the debt, they defaulted, and their loss was soley based on the front end of eth transaction. While it sucks that GS made money on the short sale, they had essentially hedged that short sale in a SEPARATE transaction. Had they not defaulted, it wouldn't have occured.

#6. The FDIC is funded by member banks, not by taxpayers directly. The fund for failed banks is not a static amount. Money flows in as assessments are collected from member banks, and flows out as bank failures occur. Look for a few more to be announced today after 5pm tonight. They close banks on Fridays. The line of credit will help smooth out the inflows and outflows if assessments aren't collected in a timely manner. Corporate clients are charged directly for FDIC insurance. Consumers receive no direct charge for the service, it is a service because it protects them. The consumer portion is collected through other fees, etc.



Blood sucking vampire squid wink

IndyMac would have eventually folded under their own weight. Their construction lending portfolio was almost exclusively CA properties and the value of the Alt-A business would have tanked just like everyone else's did.

Despite all this it does not clear Chuck Shumer from his actions and responsibility for creating a run on that institution. Chuck Schumer is crooked enough to sleep in a trombone and deserves to be in jail. I'm not sure how much he was, if at all, involved in the passing of the CRA, but I know his buddy Barney Fwank was. It's ironnic Schumer cites that the OTS should have been doing their job in controlling IndyMac's irresponsible lending practices. When it was those lending practices that were satisfiyiing CRA requirements in the form of MBS's bought by Fannie and Freddie.

The video is misleading (the first video anyway, I didn't watch this latest one) in that the examples cited are of individual transactions,.......and yes I'm sure there were a couple where Goldman or OW took it on the chin. If I had to guess I'd say the probably made out better than alright on the portfolio as a whole.

I don't have a problem with Goldman making money, everyone should have the opportunity. What I have a problem with is their undue influence in the market itself,.......often times accomplished by placing former employees in top gov't positions.

During the run up in subprime mortgage loans Goldman Sachs provided the bulk of warehouse line credit for more than a few of the top subprime origination firms. When they pulled their line that comprised of more than 50% of New Century's funding capability in early 2007 it precipitated a larger crisis. Immediately Goldman began betting on the other side of transactions they had spent the last decade funding.

Your analysis of FDIC premiums is what I was basically saying earlier in the thread although I would still argue that consumers of member banks pay for increased premiums one way or another. If a member bank has to raise associated fees to cover the cost of increased premiums it's still a direct cost to the consumer even if they pay for it indirectly through an increased fee.


Edited by StinkingWaters (02/12/10 12:49 PM)
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