Best Net Neutrality Explanation Ever

[singe_101]

Like it did for the financial and housing markets...

For our mixed economy to work, there need to be rules and at least basic public knowledge. Consumers and investors could see the growth of housing prices. Very few could see the true scope of the derivatives market. If the ISPs discriminate traffic, we may see it, but if it's hard to tell and LEGAL, they won't stop.

It would be akin to deducting a 10% fee out of someone's direct deposit compensation, if it's not from a "preferred" employer like Wal-Mart, Verizon, etc.

 

[satsunada]

Goverment backed and incentivized adjustable sub-prime loans started it all. In order to push banks into allowing more home ownership among a broader income sector, they allowed normally conservative (e.g. fixed rate loans) banks to make highly unstable subprime loans with often little to no income verification. HUD wanted about half of Freddie and Fannie purchased mortgages to belong to those whose income fell below the median income. Problem is the banks couldn't write conventional loans (30 year fixed) because the borrower couldn't afford the payments. Sub-prime to the rescue. You know the rest of the story...

Uh huh.. keep letting the talking heads tell you that but explain to me one thing. 6 years ago, a friend of mine was looking at buying a modest house. He was 25, freshly graduated from college and had a job (2 months on the job) making 25 grand a year starting. When he went to the bank to ask for a loan, they pre-approved him for $440,000. There's is absolutely no reason to offer that much money to anyone making that little and fresh on a job. They did it to make money and put a fat loan on the books. There was no intelligence or forced action. And banks have NO history of being conservative when they aren't regulated properly. They KNEW the economy was going to fail, look at Goldman Sachs.

That said, I picture telecom providers pretty much the same. The only reason profit margins are changing or small is that they are taking HUGE tax cuts and grants for expanding services. Either that, or they are loaning existing lines from each other. In most places they even have a monopoly of some kind on ground lines. It's truly messed up. Oh.. and Comcast bitching about a 10% profit margin makes me have about as much worry as if Exxon said they only made 5% profit on TRILLIONS. On top of that, most of these guys are sitting on cash and doing nothing with it which leads to frozen funds that are neither profitable or usable just to confirm they can have liquidity if a bank goes under. It's truly messed up.

 

[MrGuvernment]

ISPs aren't doing this now, so why call in the government before it's needed (as if the government really has our interests in mind)?

Competition is what prevents ISPs from doing as they wish.

There is no Net Neutrality law. There is a law that gives the FCC power to control information flow on the internet, to achieve what it sees as "fair" ("fairness" not "neutrality" is congressional mandate to the FCC).

The government has no competition, and so can do as it wishes.

This also puts us another step closer to the government imposing taxes on the internet.

the FCC gave ISP's the power to determine what they can and can not block earlier this year, what hey can filter and limit.

 

[UrielDagda]

The FCC has said that they have nothing against turning the internet into a "pay per use" service.

Considering every time the government makes a move to actually protect consumers from anything, the far political right whip up a "we want to take it up the buttpipe from large corporations" frenzy large enough that it makes it look like the entire populace is going to revolt, we're not likely to see that change. Ever.

Our government has become the perfect product of our schizophrenic mixed messages. Too many people have been convinced that the end all, be all of "freedom" is to stand there and let corporations rape the populace.

Take the Wall Street bailouts... Everybody seemed outraged by them. Then when Congress tried to implement rules to crack down on huge bonuses, and to restore restrictions that could keep them from decimating the economy again, everybody went berserk over THAT!

I'm beginning to think that people in America collectively exibit a form of financial Stockholm syndrome.

 

[nutzo]

Net Neutrality has NOTHING to do with the government taking over or taxing anything. What it is supposed to be about is having the government actually protect the little guy for a change by telling predatory telecom giants that they can't tier the internet and charge extra for services that they don't even fucking provide in the first place.

That's the original intent of the law, and if they kept the law to a single page, I'd believe that.

The problem, is that when the congress and the senate get done with writing the law, it will be 1000+ pages, and be full of dozens of new taxes, hundreds of new mandates on the ISP's, and exemptions for the companies that donated the most to their campaigns. The result will be higher ISP prices, less competition, government bureaucrats telling the ISP's how to run their business

 

[Cerulean]

The illustration is very nice, simple, user-friendly, and effective.

 

[nutzo]

Considering every time the government makes a move to actually protect consumers from anything, the far political right whip up a "we want to take it up the buttpipe from large corporations" frenzy large enough that it makes it look like the entire populace is going to revolt, we're not likely to see that change. Ever.

The big problem is that too often they don't protect the consumer, they actually make it worse.
The government cracked down on banking fees (that I never pay because I'm responsible). So now the deposit requirements for my free check account are going up. Instead of saving me money, it's costing me money.

The Government cracked down on the credit card industry for high interest rates/fees (again I never pay either one since I responsibly pay off my card each month). The end result is changes to my credit card cash back program that is going to cut my cash back in half.

These nanny state law may help a few irrespirable consumers, but they tend to punish the responsible ones.

The problem with big corporations is not the corporations, it's that they are in bed with big government. Big corporations can afford to twist the laws in their favor, stifling their competition. The solution is to cut back on the regulations and force more competition back into the market place.

 

[nutzo]

Uh huh.. keep letting the talking heads tell you that but explain to me one thing. 6 years ago, a friend of mine was looking at buying a modest house. He was 25, freshly graduated from college and had a job (2 months on the job) making 25 grand a year starting. When he went to the bank to ask for a loan, they pre-approved him for $440,000. There's is absolutely no reason to offer that much money to anyone making that little and fresh on a job. They did it to make money and put a fat loan on the books. There was no intelligence or forced action. And banks have NO history of being conservative when they aren't regulated properly. They KNEW the economy was going to fail, look at Goldman Sachs.

Actually they did it to make money, they had no intention of holding onto the loan. This was mainly due to Fanny mae and Freddie mac (Government run companies that created the market for sub-prime loans)

When the banks had no skin in the game, (they didn't have to keep these bad loans), they thier only motive was to make as much money up front as possible. This is what happens when the government interferes in the market. People/companies will find a way to cash in.

 

[WBurchnall]

Indeed. And WHEN ISPs actually try that, then you go ahead and enact some Net Neutrality LEGISLATION. Since they are NOT doing that, what do we need this for again ?

Well in Canada, because, our legislative system is a bit odd, a company or corporation can sue a government for enacting regulation and/or a law thats not deemed to be for safety, public welfare, etc(a fewo ther escape clause) that in any way harms said company or corporation's profit if said profit can be calculated.

IE. If you enact a net neutrality law in Canada after that business model had taken place increasing ISP revenues by 300% say? The ISP can sue the Canadian government for the 200% difference in revenue after the regulation takes effect forcing them go to back to the old system. Yes, its sounds odd, but, is designed as a business-protection mechanism to prevent government from being able to bully business with rediculous regulations? Like a 1,000,000% paper tax until you give every government office free paper and government employees free unlimited beer at their request in every bar that might in theory ruin some paper mills, office supply stores, etc. Those companies would then be able to sue said government.

On the other hand, a regulation preventing toxic waste from being dumped into the water that causes the company 'Toxic Chemical Magic Disappear Inc' from making insane profit margins, would be deemed necessary for public health and safety and therefore Toxic Chemical Magic Disappear Inc would not be able to sue the Canadian government.

The catch here is, ...is net neutrality necessary for public safety, health and well-being? If a company decided to sue, that would likely wind up as a decision by a judge or jury. It could go either way depending on who has the best lawyers/case/argument. So in Canada, we need to enact net neutrality before companies get the head-start on greed.

 

[Spewn]

Same goes for government mandated net neutrality. Telcos and cable companies have costs to consider when providing internet access. Bandwidth costs money. Goverment comes in and lays down the law. No descrimination of content no matter how bandwidth intensive and how costly such access is to the provider. What's the unintended consequence? Providers will either charge per MB of access or simply raise monthly rates to much higher levels to cover increased costs..

Cool story, except ISP's already charge per MB.

 

[LightningCrash]

You are confusing pay-per-use with the segregation of content delivery. One is charging per-megabyte, one is per-website. This was discussed in General Mayhem and it was worded nicely by one of the members there, so I'll just quote his response:

A leaked marketing slide means they want to tier the internet? Are you drunk?

 

[gdonovan]

The most frightening words ever spoken- I'm from the government and I'm here to help you.

Almost without exception there isn't anything that doesn't turn to crap after the government has laid their mitts on it.

I'd be willing to wager that "Net Neutrality" is either about controlling the flow of information or protecting Hollywood deep pockets, if not both.

The lamestream media & cronies are dying and will do anything to control the flow of information to the public.

 

[rat]

Too many Randroid trolls spouting out parroted lines and FUD.

Using California's energy deregulation as an example of how it's done right? You're an idiot for believing so.

http://en.wikipedia.org/wiki/California_electricity_crisis

OMG A WIKI Link. Like most Wiki articles, this one is sourced. Your bite size regurgitated remarks are not.

Um, no. ... Couple that with an unexpected spike in demand due to unusually hot weather, it's no wonder electric prices skyrocketed. Little really to do with deregulation. Just like any business, when your input costs spike uncontrollably, your product prices spike accordingly.

*cough* Bullshit. A half-truth if I'm feeling EXTREMELY generous.

Drought and delays in approval of new power plants[4] decreased supply and forced up wholesale prices, which increased over 800% from April 2000 to December 2000.[5] This rise was exacerbated by market manipulation, with Enron accused of deliberately shutting down power plants gratuitously.

The financial crisis was possible because of deregulation legislation instituted in 1996 by Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California's spot markets.[9] The crisis cost $40bn to $45bn.[10]

As the FERC report concluded, market manipulation was only possible as a result of the complex market design produced by the process of partial deregulation. Manipulation strategies were known to energy traders under names such as "Fat Boy", "Death Star", "Forney Perpetual Loop", "Ricochet", "Ping Pong", "Black Widow", "Big Foot", "Red Congo", "Cong Catcher" and "Get Shorty".[11] Some of these have been extensively investigated and described in reports

Megawatt laundering is the term, analogous to money laundering, coined to describe the process of obscuring the true origins of specific quantities of electricity being sold on the energy market. The California energy market allowed for energy companies to charge higher prices for electricity produced out-of-state. It was therefore advantageous to make it appear that electricity was being generated somewhere other than California.

Overscheduling is a term used in describing the manipulation of capacity available for the transportation of electricity along power lines. Power lines have a defined maximum load. Lines must be booked (or scheduled) in advance for transporting bought-and-sold quantities of electricity. "Overscheduling" means a deliberate reservation of more line usage than is actually required and can create the appearance that the power lines are congested. Overscheduling was one of the building blocks of a number of scams. For example, the Death Star group of scams played on the market rules which required the state to pay "congestion fees" to alleviate congestion on major power lines. "Congestion fees" were a variety of financial incentives aimed at ensuring power providers solved the congestion problem. But in the Death Star scenario, the congestion was entirely illusory and the congestion fees would therefore simply increase profits.

In a letter sent from David Fabian to Senator Boxer in 2002, it was alleged that:

"There is a single connection between northern and southern California's power grids. I heard that Enron traders purposely overbooked that line, then caused others to need it. Next, by California's free-market rules, Enron was allowed to price-gouge at will."[12]

 

[The Red]

For our mixed economy to work, there need to be rules and at least basic public knowledge. Consumers and investors could see the growth of housing prices. Very few could see the true scope of the derivatives market. If the ISPs discriminate traffic, we may see it, but if it's hard to tell and LEGAL, they won't stop.

It would be akin to deducting a 10% fee out of someone's direct deposit compensation, if it's not from a "preferred" employer like Wal-Mart, Verizon, etc.

The king of anti-regulation, Greenspan, went on the books after the meltdown, stating that his theory on free-market self regulation was wrong and the govt needed to immediately enact new regulation as WaMu, AIG, Meryl Lynch, and Goldman woke up with mutually signed daggers in their backs. It was his wake-up revelation and you can read about his admitted de-regulation folly in his own book.

Unlike the price of Oil and Apple, you cannot float Housing & Derivatives on simple greed and unicorns. In the effort of less confusion, it is simpler to talk about this like a real ponzi scheme, bigger than Madoff could have dreamed of, with loans bundled, backed and written off as solid investments, propped only by more loose credit sold as investments.. and all was fine till the market tried to cash out, hell broke loose, and the magic died in seconds like a proverbial Steve Jobs.

Net Neutrality is absolutely necessary, as a nation we cannot bare another Bell monopoly or the current duopoly between Verizon & Comcast and remain competitive in the world. The world has caught up to us and the next time we have to enact regulation because of predatory practices of telecoms, again, the US will wake up in a daze of the highest prices, least network freedom, and oldest infrastructure in the world.

The current Net Neutrality regulation did not go far enough, but may be far enough to slow them down and give us a chance to see the beast in our rear-view mirror, and change direction in the future, before it runs us over.

 

[LightningCrash]

You mean when comcast wasn't throttling bittorrent, or when comcast was fudging with L3 and Netflix.

I hope you've not remained purposefully ignorant of the situation surrounding the L3 ordeal.

What's wrong with throttling BT? You customer SMTP being blocked, but not BT? You accept IRC ports being blocked, but not BT?
Throttling BT != Tiered internet.
Just like how blocking port 25 is not tiered internet.

When someone says they have to legislate against this thing that nobody is doing, you need to closely examine that legislation and the people writing it.

 

[Monolith2013]

Yeah, I understand this diagram... I understand that it's a Socialist/Big Gov't interpretation. I'd rather have ISPs regulating themselves than have a "we care about you" gov't dictating what I can and can't see in the name of fairness or some other BS notion that's simply designed to mask their true intent.

 

[Dylan80]

One of my family members reports that AT*T just cut out their fast tiered DSL and lowered their speeds reporting that internet prices are changing........ oh...... no.......comcast already jacked and got rid of their 19.99 plan that's been around for years in my area. So bullshit, monopoly price gouging shit.

New mom-n-pop broadband ISPs are popping up here though, but their startup costs are high (equipment cost = $299-499, but normal speeds and rates pretty much)

 

[gdonovan]

Yeah, I understand this diagram... I understand that it's a Socialist/Big Gov't interpretation. I'd rather have ISPs regulating themselves than have a "we care about you" gov't dictating what I can and can't see in the name of fairness or some other BS notion that's simply designed to mask their true intent.

I'm amazed that so many *here* would buy it hook, line and sinker.

I have never seen an administration so hostile towards the average consumer going as far as to calling us bitter clingers, stupid and sexually assulting women in the name of "transportation safety".

 

[SenorBeef]

I find it pretty strange how the free market advocates are so stringently against net neutrality regulation. The neutrality is what has made the internet great. It's the closest thing we have to an open and free market. The barriers to entry are low - if you have the right idea/service/product, you can succeed. You aren't locked out because you're the little guy on the block.

Net neutrality is one of the clear successes of your world view.

And yet.... you want it to be crushed. You want your own victory, your own nearly ideal market, to be crushed because your knee jerk response to the government keeping it free is to say "OMG GOVERNMENT CAN NEVER DO ANYTHING RIGHT EVER OMG IT'S LIKE A FACT OF LIFE"

Government in this case is only trying to make sure that what makes the internet great, an open free market of ideas, what should be the shining bastion of your philosophy, stays that way. You want to make the internet worse - an imperfect market where the big players get to decide who can compete and who can't.

It's... quite irrational. The weird thing is that I've been a very libertarian leaning person my entire life, but the current wave of teabagger retardation where there's no thinking whatsoever, only a kneejerk GOVERNMENT IS ONLY PURE EVIL AND HAS NO VALUE WHATSOEVER! nonsense is making me reconsider. You guys are scary.

 

[LightningCrash]

And yet.... you want it to be crushed. You want your own victory, your own nearly ideal market, to be crushed because your knee jerk response to the government keeping it free is to say "OMG GOVERNMENT CAN NEVER DO ANYTHING RIGHT EVER OMG IT'S LIKE A FACT OF LIFE"

Because clearly, if the status quo persists (a status quo which you have asserted is free!), the only possible outcome is for that freedom to be crushed, by this invisible monster that doesn't exist. It will not be possible for this freedom, which exists today in spite of the lack of assistance from the government, to exist a moment longer if this is not passed.

How about... it's free now. It will continue to be free. If somehow we determine that it is not reasonably free, we then move to free it.
Funny how everybody hates lawyers, but put a party in front of their name and send them to DC and suddenly they have everybody's best interest at heart, we should trust this bill they wrote to address a problem that doesn't exist.

 

[gdonovan]

It's... quite irrational.

I find your faith in the government meddling irrational.

 

[gdonovan]

The weird thing is that I've been a very libertarian leaning person my entire life

Do you even know what one is? Your statement indicates otherwise.

 

[SenorBeef]

I find your faith in the government meddling irrational.

I haven't expressed faith in government meddling, I've only expressed that the position that government is always, invariably wrong and to be railed against to be irrational. The ultimate irony of this situation is that the government is advocating freedom and open markets in this case, and everyone is railing against it because well, it's the government, there must be some super secret conspiracy agenda here!

Do you even know what one is? Your statement indicates otherwise.

Libertarians, on average, historically, have been a very well educated and thoughtful bunch. Some of their ideas are impractical, and there's a range of belief within libertarianism (with some people wanting to privitize police forces and roads, and other people being more sane).

But lately there's been a strange rise in anti-intellectual, uneducated, counter-factual teabagger bullshit that has completely overwhelmed any sense of intellectual libertarianism. I mean, look at post #32. Government is NEVER the good guy? When they prosecute crimes or prevent fraud or run the army - they're still an evil force that needs to be opposed?

It's almost to the point where the government could announce that they support freedom of speech, and people would come out railing against them because OMG GOVERNMENT IS ALWAYS EVIL! NOW I'M ANTI-FREE SPEECH!

Which is almost what this issue is. The government wants to step in and ensure that the internet remains an innovative, free, and open market like it always has been, because there've been active attempts to try to change that lately. The government is acting in the public's interesting in this case, and in the interest of the free market - to preserve what already has made the internet the greatest example of the free market ever - and people are opposing it in a knee-jerk antigovernment reaction. This is not a reasoned, intellectual stance - it's a frothing at the mouth contradiction.

 

[Deadly Ramon]

Indeed. And WHEN ISPs actually try that, then you go ahead and enact some Net Neutrality LEGISLATION. Since they are NOT doing that, what do we need this for again ?

Because these same liberal lemmings who rallied in the streets in opposition to preventative or preemptive war initiated by a more conservative administration turn a blind eye to supposedly preventative or preemptive regulation decreed by bureaucrats with parenthetical D's instead of R's by their names. Granted, war and its justification are more serious subject matters than the connection speed through which we can access Internet entertainment, but the analogy remains.

If imposing an increased governmental presence in ISP affairs is necessary to prevent an inevitable or imminent conspiracy by broadband providers to price gouge, then I'd have to say that's a good thing despite my conservative/libertarian-leaning tendencies. I'd also hope that those of an opposite political predilection would set aside their aversion to military conflicts if a first strike is the only way to avoid an inevitable or imminent foreign military attack on their country. In both cases should the skeptical parties be provided ample evidence which supports and justifies their government's proactive prevention or preemption, barring anything legitimately labeled as classified information. I'm just not all that convinced yet that the Comcast action against certain bittorent use is the tip of an evil ISP broadband company conspiratorial cabal iceberg.

 

[Deadly Ramon]

And just to head you off, dialup/DSL/wireless are not competitors to broadband.

False dichotomy. DSL is broadband, even if some or all of its tiers aren't as fast as the fancy connection you mainstream fiberoptically from the evil duopolist maniacal greedy ISP that you distrust or loathe.

 

[drakken]

Well living in Los Angeles I can tell you that competition is a good thing because it limits things a company will do that are not in the best interests of its consumers. Yet net neutrality is needed because it stops monopoles from doing those things the free market prevents. Free markets only work where their is a level playing field.

 

[rat]

I haven't expressed faith in government meddling, I've only expressed that the position that government is always, invariably wrong and to be railed against to be irrational. The ultimate irony of this situation is that the government is advocating freedom and open markets in this case, and everyone is railing against it because well, it's the government, there must be some super secret conspiracy agenda here!

Just ignore the Randroid Trolls. They're doing nothing but shitting up this thread with the false dichotomy of "If you're against sucking the corporate cock, then you're advocating for the government fucking you up the ass!"... That blindly polarized black and white thinking never worked in reality. It's why they're still a fringe group, at best.

The shade of gray is this: Corporations cannot be trusted to play fair and the Government method of enforcing monopolies by funding buildouts that never happened didn't work. There's over 200billion (sauce: http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_002683.html ) that went missing. Who gave it? Government. Who abused it? EVERY GODDAMN ISP STILL STANDING. If we can't trust them to use government funds to build out and expand broadband access to more areas in this country, then how the hell can we trust them to self regulate? We need to foster competition (one great way is to reclaim ownership of the last mile due to the missing 200bil) and allow ANY ISP to serve ANYWHERE. We're not going to get anyone, especially not Comcast, to play fair until someone steps on their balls.

It's like how I tell people. I used to be a Libertarian (capital L, registered and affiliated to a city chapter, volunteer work, the whole shebang)... but then I grew up.

 

[WinSomeLoseNone]

Like it did for the financial and housing markets...

Are you saying that deregulation and less government meddling caused the financial and housing crisis?? As in more bureaucracy and regulation is better? This is so completely wrong.

I write financial analysis papers and articles for a living. In the US, the financial crisis and housing market bubble, and the subsequent bursting of this bubble was almost completely that fault of the US federal Government. The policies and laws the federal gov't enacted and excluded lead the US on the path to failure. You can literally follow the dollar from the typical US citizens pocket and see how the mortgage and subsequent financial crisis came to be. Predatory mortgage lending to sub-prime credit holders is at the root of the cause.

I use these videos to explain to non-finance persons how it all works.
Bottom line, Government meddling/involvement is almost never a good thing. The market will always right itself with time.

Take a breath and try to understand all sides of an argument before choosing a side. The correct answer is usually somewhere in the middle.
http://www.youtube.com/watch?v=eb_R1-PqRrw&feature=channel
http://www.youtube.com/watch?v=06PwMyJY1vA&feature=related

 

[Bootleg Usher]

ABottom line, Government meddling/involvement is almost never a good thing.

Protecting the environment is one situation where government involvement is great, since the free market would chop down every tree standing, just look at Easter Island.

 

[gdonovan]

Are you saying that deregulation and less government meddling caused the financial and housing crisis?? As in more bureaucracy and regulation is better? This is so completely wrong.

They don't get it.

Even if you point out hundreds of failed government programs with all the charts and stats you will be called a "ryanoid" or "teabagger" because the individual making the claim has nothing else to fall back on.

Trying to explain the CRA and why it was bad (and supercharged under Clinton) even though the wreakage is all about us, detractors will always fall back on "it was greed! Not government meddling that brought us here! greed!"

And they will do it again with the mindset of "next time it will be done right" like good intentions will guarantee the desired outcome right? Doesn't work that way in the real world....

 

[LightningCrash]

Protecting the environment is one situation where government involvement is great, since the free market would chop down every tree standing, just look at Easter Island.

Yeah, just look at Pennsylvania! Nearly 3/4 of the forests there are in private hands, and the forest footprint is growing.
Damn that free market. Obviously Pennsylvania is a barren wasteland.

 

[LightningCrash]

I haven't expressed faith in government meddling, I've only expressed that the position that government is always, invariably wrong and to be railed against to be irrational. The ultimate irony of this situation is that the government is advocating freedom and open markets in this case, and everyone is railing against it because well, it's the government, there must be some super secret conspiracy agenda here!

Not everyone. In this case it's more significantly opposition to people who desire X Legislation when they don't even know what X Legislation says, but they claim it's a magical elixir in response to a problem that they say doesn't exist. The government will always claim each bill affects more freedom and more open markets... when has the government ever admitted that a bill would do the opposite?

You say the problem doesn't exist. Woz says the problem doesn't exist.
The status quo is fine.

This both similar and dissimilar to the Waxman Markey bill's infancy. People were at least using the Waxman Markey bill (with its many blank pages) to argue against the status quo, claiming that the status quo was harmful. But you don't even assert that, you assert that the status quo is fine, but still insist that an unspecified quantity of legislation(that you haven't even read), should be passed to fix it.

How do you plan to handle SMTP on residential connections?

 

[computerpro3]

Like it did for the financial and housing markets...

It did. Over-regulation via Clinton pushing his "A Home for Every American" program is what caused the meltdown.

 

[The Red]

It did. Over-regulation via Clinton pushing his "A Home for Every American" program is what caused the meltdown.

You listen to too much Rush friend. Read up on the derivatives market and sub-prime loans being disguised as solid debt investment vehicles by lenders. They knew what they were doing and they did it themselves for short term profit.

Follow the money... pro.

 

[computerpro3]

You listen to too much Rush friend. Read up on the derivatives market and sub-prime loans being disguised as solid debt investment vehicles by lenders. They knew what they were doing and they did it themselves for short term profit.

Follow the money... pro.

I don't listen to Rush. I do, however, have articles from the NYT you may be interested in reading from 1999 that accurately predict the meltdown would happen.

"NY TIMES
Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University 's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants."

/owned

 

[TooEasy!]

GREED, GREED, and GREED!!! is the name of the game. Most of you guys remember in the early to mid 90's when the World Wide Web was in it's infant stages and the gov. gave the telco and cable companies billions of dollars to roll out fiber across America. Hell, we were suppose to have FTTH years ago, but instead they line up their pockets providing us with with a shitty infrastructure that "supposely" doesn't have the resource to support the growth of the net. Now they are blaming the likes of Google and other web services for saturating the internet's bandwidth. It's not the consumer's fault that we paid our taxes and these companies didn't fulfill their obligation. These companies have a piss poor excuse and are trying to use mob techniques to extract more money from the consumer. I'm in pure discuss!

 

[The Red]

Are you saying that deregulation and less government meddling caused the financial and housing crisis?? As in more bureaucracy and regulation is better? This is so completely wrong.

I write financial analysis papers and articles for a living. In the US, the financial crisis and housing market bubble, and the subsequent bursting of this bubble was almost completely that fault of the US federal Government. The policies and laws the federal gov't enacted and excluded lead the US on the path to failure. You can literally follow the dollar from the typical US citizens pocket and see how the mortgage and subsequent financial crisis came to be. Predatory mortgage lending to sub-prime credit holders is at the root of the cause.

I use these videos to explain to non-finance persons how it all works.
Bottom line, Government meddling/involvement is almost never a good thing. The market will always right itself with time.

Take a breath and try to understand all sides of an argument before choosing a side. The correct answer is usually somewhere in the middle.
http://www.youtube.com/watch?v=eb_R1-PqRrw&feature=channel
http://www.youtube.com/watch?v=06PwMyJY1vA&feature=related

I don't know if you expected me not to watch the videos but I did and the guy does not support your argument. He's the lead editor at Marketplace.org and states in no uncertain terms after the full explanation in his first video that "We're in a mess of our own making (referring to finance ppl), we're in a mess of these bank managers making, and these fund managers making."

It underpins, very strongly, my argument that they purposely disguised toxic assets, lumped them together, and sold them as investment vehicles.

I don't listen to Rush. I do, however, have articles from the NYT you may be interested in reading from 1999 that accurately predict the meltdown would happen.

/owned

First of all, since you're such a fan of the times, heres an article 9 years fresher than yours with Greenspan explaining:

“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

and:

But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

Its called predatory lending, pro, the kind where the lender is the predator and the low income individual is the prey, not the other way around.

Also, I'd like to link you the video that someone linked above trying to prove a different point, but it actually illustrates very clearly by the lead editor of marketplace.org how this fiasco came about. Highly recommend, and you may own yourself.


Kindly,
Red

 

[sleepeeg3]

Fantastic, now every tier is going to pay more for those downloading 10TB of movies they will never watch.

For once people, look beyond the immediate impact. Government regulation will always cost you money.

 

[gdonovan]

Its called predatory lending, pro, the kind where the lender is the predator and the low income individual is the prey, not the other way around.

And of course the individual who is taking out a loan for a $250,000 house that makes $20,000 a year isn't at fault are they? Not, not them at all! Houses for everyone!

The fact that the government even demanded (with penalties) that loans be extended to people who indicated they were on *unemployment* benefits means nothing to you?

 

[The Red]

And of course the individual who is taking out a loan for a $250,000 house that makes $20,000 a year isn't at fault are they? Not, not them at all! Houses for everyone!

The fact that the government even demanded (with penalties) that loans be extended to people who indicated they were on *unemployment* benefits means nothing to you?

You're not seriously putting the onus on the person and not the lender? You cant possibly be making the argument that lenders did it for charity.

But its still beyond the point here. You can take on a risky loan and hold on to it to see what happens and make a later argument for giving or not giving such future loans. What the lenders did however is bundle the loans, disguise them for AAA investments, and sell them to every which place they could, from pension funds to major global investment firms.

Meaning.. all fairness mandates aside, the bank wanted to give the larger loans so they have MORE to sell after they disguise it, to make more immediate money off of it.