San Diego Housing Bubble News and Analysis

Innovation has brought us MERS -- an entity that helps facilitate the securitization of mortgages. Supposedly MERS has saved the mortgage securitization industry a billion dollars since inception (at least that is the number mentioned in every story I read about MERS). Never mind the trillions that have gone into bailing out Government Sachs and other criminal financial organizations who trade securitized mortgages and derivatives.

Generally, it seems that financial innovation is just a way for the crooks on Wall Street to show short term 'profits' which allows them to collect massive bonuses. The short-term 'profits' are later dwarfed by the size of the eventual taxpayer bailout. As near as I can tell, the size of the bailouts are about 1000x bigger than any of the supposed benefits from financial innovation.

My motto: First, let's shoot all the bankers.

Innovation stifling is some that we desperately need in finance. They are innovating America into the pawn shop.

Innovation has also brought us runaway inflation in the cost of education and the cost of housing. My professors who went to school in the late 70's would routinely talk about how they were able to pay their own way through school with part-time jobs. That is unthinkable today. No one gets out of school today without a mountain of debt.

And all of the zero-down loans to unqualified borrowers have caused the cost of housing to zoom. This inflation didn't show up in Bush era because the 'housing costs' portion of the CPI was tied to equivalent rent.

So all of the financial innovation has led to massive salaries and bonuses on Wall Street with misery for everyone else.

If you want to fight the criminals on Wall Street, the following blogs routinely point out their shenanigans and suggest things you can do (such as calling/emailing political representatives and letting them know your views):

http://globaleconomicanalysis.blogspot.com/
http://www.nakedcapitalism.com/
http://www.zerohedge.com/
http://blogs.reuters.com/rolfe-winkler/
http://www.calculatedriskblog.com/

Right We need more Innovation like this.

"Scientists have engineered a more intelligent rat, with three times the memory length of today's smartest rats. Reseachers bred transgenic over-expression of the NR2B gene, which increased communication between the rat's memory synapses. Activating a crucial brain receptor for just a fraction of a second longer produces a dramatic effect on memory, as proven by the rat's longer memories of the path through a maze."

Maybe they should put those rats in the place of the ones on Wall Street

Kiva.org is innovation.

True but is it really a Wall Street innovation or Tech innovation? It's more of a tech innovation, aka internet.

You cannot really say 'Wall Street' and 'Kiva' in the same sentence.

Credit innovation is just a way to borrow from the future in a way that makes it seem less painful today.

People used to buy cars with cash savings. Then they could buy cars with 20% down. Then they bought cars with zero down. Then they leased cars with residual value at the end of the lease.

Consumption/production gets front-loaded but the debts need to be paid back some way, somehow, in the future.

Wall Street "earned" up-front commissions on making credit available so they don't care if the debt is ever paid back. The onus will be on the government to bailout the system.

We all end-up in debt servitude where all of our income goes to service debt and to pay for services that we think we need.

One involves macro financing. One involves micro financing.

One involves pooling debt into traunches and converting them to investment vehicles like MBS and CDOs... The other involves pooling small lenders to make loans to very small borrowers - to change the lives of the borrowers.

One is driven by people obsessed with profit and bonuses, the other is driven by people who quit their high tech jobs at Tivo, Broadcom, Ebay etc to start this microfinancing venture to do good.

There are comparisons - but they're not very favorable to Wall Street.

i once worked on wall street as a college student temping. I was paid way too much money in overtime. For some reason I purchased a tie that was super expensive, maybe $50, this was in the early 80's. i probably should have stuck around. I left, but i still have the tie, amazingly.

Wall Street is a financial meth lab the got the whole country hooked on speed and now is time for the come down. The pushers are still pushing their crap but now it does not give the same rush and in fact, is starting to do damage.

If you go look at one of those anti-meth before/after posters it should be similar with the face of america in years to come.

There are many municipalities taking out debt at 5-7% interest and betting on the stock market. We doomed.

Innovation is a ruse to contrive so-called investments that only create fees for the contrivers - at the expense of capital formation for our economy. All the innovation is mathematically designed to provide unexplicable leverage at the expense of anyone left holding the empty bag of nothing - which taxpayers backed up with TARP and FDIC money. So all the claims of collateral were LIES! And these lies were not disclosed. Congress needs to appoint a special prosecutor to investigate for 10b-5 violations of existing SEC regulations and become better acquianted with over 1500 page of Bank Holding Co. regulations which prohibit the sale of securities that are "too complex to explain." Go to my blog at: www.howwegotswindled.blogspot.com to understand that my new book, "How We Got Swindled by Wall Street Godfathers, Greed and Financial Darwinism" fully exposes the context and the culprits which nuked our economy and caused so much devestating financial tragedy for so many of our fellow Americans - who are clinically referred to as 17% unemployment! Further my book and my blog expose the real root cause!!!!

Another thought. Kiva exists for the good of the poor in 3rd world, and for us more fortunate to feel good about doing good.

What can you say about Wall Street?

Let's not drag the good name Kiva into the pit of Wall Street...

I don't have a problem with financial innovation, per se. None of the following were "bad" products for the first several years of their existences: securitized mortgages, credit default swaps, option ARMs, etc.

The problem is that the nature of Wall Street is to push every innovation (which may be perfectly useful on a limited scale) to the point that it starts to fail. And recently we had a whole bunch of these pushed to the edge and failing all at the same time.

A simple "30-year fixed-rate mortgage" was once considered a major financial innovation. Would it be better if we eliminated mortgages (or credit cards?) altogether? I think not.

I don't think the problem is innovation. The problem is the degree to which these innovations are foisted upon folks who should have no exposure to them.

i still buy cars with cash or a 6 month note

the feds invented the 30 year mortgage, the FHA
started selling these during the depression.
i would like to see a defense of all that Wall Street innovation

If we didn't have 30-year mortgages or credit cards, prices would be much, much lower (as would wages). Personally, I'd like to see a lot less "innovation" and a return to **saving** for purchases instead of pulling the purchases forward and pushing debt into the future.

I understand that for high-priced items like cars and houses, people will need some kind of credit or they'd only be able to buy when they're 60. Still, we be better off with 15-year fixed-rate mortgages instead of 30-year. The increased duration simply props up prices of land and housing-related industries.

i don't think Canada has 30 year mortgages, instead they do
5 year with 30 year amortizations.

we can have 10 year mortgages with 30 year amortization schedules,
it's just a form of ARM or balloon payment