[davelj]

stp,

One of the two banks is here in San Diego. I’d be happy to email you the name of that bank if you’ll post an email address. I won’t, however, post the name of the bank on this board because, among other reasons, I want to retain my anonymity.

[davelj]

stp,

One of the two banks is here in San Diego. I’d be happy to email you the name of that bank if you’ll post an email address. I won’t, however, post the name of the bank on this board because, among other reasons, I want to retain my anonymity.

[davelj]

stp,

One of the two banks is here in San Diego. I’d be happy to email you the name of that bank if you’ll post an email address. I won’t, however, post the name of the bank on this board because, among other reasons, I want to retain my anonymity.

[davelj]

stp,

One of the two banks is here in San Diego. I’d be happy to email you the name of that bank if you’ll post an email address. I won’t, however, post the name of the bank on this board because, among other reasons, I want to retain my anonymity.

[davelj]

“OK, then why did you banking retards approve loans to those homeowners?”

This is a very good question, and one that’s understandably on the minds of many people. As a board member of two banks with zero subprime and zero construction exposure (and, at the moment, zero non-performing loans), I’ll try to answer this one in two parts.

One group of “banking retards” was comprised of the mortgage brokers and the banks that sold most of their production. These folks acted as originators and sold off the product to Wall Street to be securitized. Why did they approve these obviously bad loans? Because they weren’t going to hold onto them; they just collected a fee and sold them. (Unfortunately, some of these loans started coming back to them, but that’s another matter.) And the folks that securitized this crap just collected their fees and sold them off to “investors.” So the question is: Why did the investors want this paper? Because they were starved for yield, used extremely bad judgement when analyzing how the loans “should” perform (they also dramatically underestimated the probability of widespread fraud), and thought that if they were wrong they could just sell it off. The problem with the last issue is that everyone tends to get that idea about the same time.

Then there are the banks (actually, mostly “thrifts”) that actually held these loans on their balance sheets. Why? The corporate equivalent of “Keeping up with the Joneses.” Imagine being the CEO of a thrift circa 2004 while every other institution is growing like a weed, making crazy loans, and “appearing” to rack up big profits while you sit there explaining to your Board, “It’s all crazy, my esteemed colleagues! We can’t do this kind of business and survive.” In the meantime, your loans are running off and your investing the money in MBS’ yielding 4.5%. There’s no spread after interest expense and no profit after operating expenses. To your idiotic Board, it looks as though YOU are the idiot. Hey, everyone else is doing it and making a ton of dough, right? Well, wrong, obviously. But for several years, it looked too idiotic NOT to participate in the New Paradigm. The weakest link in the market set the pricing and all of the weak-minded institutions (most of them) fell over themselves to jump off the cliff. It’s real world behavioral finance, you see.

There’s a saying in banking: “The stupidest banker gets the loan.” The reasoning here is that everyone’s money is just as green as everyone else’s, so if you get the loan it’s because your pricing was too low. This isn’t always the case, of course, but it’s correct often enough for the saying to be pretty robust.

As Lord Keynes once pointed out: “Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally.” In general, people don’t trust those who think differently, even when they succeed.

It takes a strong-headed management team and an unusually independent-minded Board to tilt against windmills for years on end. But plenty of banks have done just that over the last several years. It hasn’t been easy. There is considerable temptation to ask, “Are we missing something?” Too many figured they were and jumped into the fray. And here we are.

[davelj]

“OK, then why did you banking retards approve loans to those homeowners?”

This is a very good question, and one that’s understandably on the minds of many people. As a board member of two banks with zero subprime and zero construction exposure (and, at the moment, zero non-performing loans), I’ll try to answer this one in two parts.

One group of “banking retards” was comprised of the mortgage brokers and the banks that sold most of their production. These folks acted as originators and sold off the product to Wall Street to be securitized. Why did they approve these obviously bad loans? Because they weren’t going to hold onto them; they just collected a fee and sold them. (Unfortunately, some of these loans started coming back to them, but that’s another matter.) And the folks that securitized this crap just collected their fees and sold them off to “investors.” So the question is: Why did the investors want this paper? Because they were starved for yield, used extremely bad judgement when analyzing how the loans “should” perform (they also dramatically underestimated the probability of widespread fraud), and thought that if they were wrong they could just sell it off. The problem with the last issue is that everyone tends to get that idea about the same time.

Then there are the banks (actually, mostly “thrifts”) that actually held these loans on their balance sheets. Why? The corporate equivalent of “Keeping up with the Joneses.” Imagine being the CEO of a thrift circa 2004 while every other institution is growing like a weed, making crazy loans, and “appearing” to rack up big profits while you sit there explaining to your Board, “It’s all crazy, my esteemed colleagues! We can’t do this kind of business and survive.” In the meantime, your loans are running off and your investing the money in MBS’ yielding 4.5%. There’s no spread after interest expense and no profit after operating expenses. To your idiotic Board, it looks as though YOU are the idiot. Hey, everyone else is doing it and making a ton of dough, right? Well, wrong, obviously. But for several years, it looked too idiotic NOT to participate in the New Paradigm. The weakest link in the market set the pricing and all of the weak-minded institutions (most of them) fell over themselves to jump off the cliff. It’s real world behavioral finance, you see.

There’s a saying in banking: “The stupidest banker gets the loan.” The reasoning here is that everyone’s money is just as green as everyone else’s, so if you get the loan it’s because your pricing was too low. This isn’t always the case, of course, but it’s correct often enough for the saying to be pretty robust.

As Lord Keynes once pointed out: “Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally.” In general, people don’t trust those who think differently, even when they succeed.

It takes a strong-headed management team and an unusually independent-minded Board to tilt against windmills for years on end. But plenty of banks have done just that over the last several years. It hasn’t been easy. There is considerable temptation to ask, “Are we missing something?” Too many figured they were and jumped into the fray. And here we are.

[davelj]

“OK, then why did you banking retards approve loans to those homeowners?”

This is a very good question, and one that’s understandably on the minds of many people. As a board member of two banks with zero subprime and zero construction exposure (and, at the moment, zero non-performing loans), I’ll try to answer this one in two parts.

One group of “banking retards” was comprised of the mortgage brokers and the banks that sold most of their production. These folks acted as originators and sold off the product to Wall Street to be securitized. Why did they approve these obviously bad loans? Because they weren’t going to hold onto them; they just collected a fee and sold them. (Unfortunately, some of these loans started coming back to them, but that’s another matter.) And the folks that securitized this crap just collected their fees and sold them off to “investors.” So the question is: Why did the investors want this paper? Because they were starved for yield, used extremely bad judgement when analyzing how the loans “should” perform (they also dramatically underestimated the probability of widespread fraud), and thought that if they were wrong they could just sell it off. The problem with the last issue is that everyone tends to get that idea about the same time.

Then there are the banks (actually, mostly “thrifts”) that actually held these loans on their balance sheets. Why? The corporate equivalent of “Keeping up with the Joneses.” Imagine being the CEO of a thrift circa 2004 while every other institution is growing like a weed, making crazy loans, and “appearing” to rack up big profits while you sit there explaining to your Board, “It’s all crazy, my esteemed colleagues! We can’t do this kind of business and survive.” In the meantime, your loans are running off and your investing the money in MBS’ yielding 4.5%. There’s no spread after interest expense and no profit after operating expenses. To your idiotic Board, it looks as though YOU are the idiot. Hey, everyone else is doing it and making a ton of dough, right? Well, wrong, obviously. But for several years, it looked too idiotic NOT to participate in the New Paradigm. The weakest link in the market set the pricing and all of the weak-minded institutions (most of them) fell over themselves to jump off the cliff. It’s real world behavioral finance, you see.

There’s a saying in banking: “The stupidest banker gets the loan.” The reasoning here is that everyone’s money is just as green as everyone else’s, so if you get the loan it’s because your pricing was too low. This isn’t always the case, of course, but it’s correct often enough for the saying to be pretty robust.

As Lord Keynes once pointed out: “Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally.” In general, people don’t trust those who think differently, even when they succeed.

It takes a strong-headed management team and an unusually independent-minded Board to tilt against windmills for years on end. But plenty of banks have done just that over the last several years. It hasn’t been easy. There is considerable temptation to ask, “Are we missing something?” Too many figured they were and jumped into the fray. And here we are.

[davelj]

“OK, then why did you banking retards approve loans to those homeowners?”

This is a very good question, and one that’s understandably on the minds of many people. As a board member of two banks with zero subprime and zero construction exposure (and, at the moment, zero non-performing loans), I’ll try to answer this one in two parts.

One group of “banking retards” was comprised of the mortgage brokers and the banks that sold most of their production. These folks acted as originators and sold off the product to Wall Street to be securitized. Why did they approve these obviously bad loans? Because they weren’t going to hold onto them; they just collected a fee and sold them. (Unfortunately, some of these loans started coming back to them, but that’s another matter.) And the folks that securitized this crap just collected their fees and sold them off to “investors.” So the question is: Why did the investors want this paper? Because they were starved for yield, used extremely bad judgement when analyzing how the loans “should” perform (they also dramatically underestimated the probability of widespread fraud), and thought that if they were wrong they could just sell it off. The problem with the last issue is that everyone tends to get that idea about the same time.

Then there are the banks (actually, mostly “thrifts”) that actually held these loans on their balance sheets. Why? The corporate equivalent of “Keeping up with the Joneses.” Imagine being the CEO of a thrift circa 2004 while every other institution is growing like a weed, making crazy loans, and “appearing” to rack up big profits while you sit there explaining to your Board, “It’s all crazy, my esteemed colleagues! We can’t do this kind of business and survive.” In the meantime, your loans are running off and your investing the money in MBS’ yielding 4.5%. There’s no spread after interest expense and no profit after operating expenses. To your idiotic Board, it looks as though YOU are the idiot. Hey, everyone else is doing it and making a ton of dough, right? Well, wrong, obviously. But for several years, it looked too idiotic NOT to participate in the New Paradigm. The weakest link in the market set the pricing and all of the weak-minded institutions (most of them) fell over themselves to jump off the cliff. It’s real world behavioral finance, you see.

There’s a saying in banking: “The stupidest banker gets the loan.” The reasoning here is that everyone’s money is just as green as everyone else’s, so if you get the loan it’s because your pricing was too low. This isn’t always the case, of course, but it’s correct often enough for the saying to be pretty robust.

As Lord Keynes once pointed out: “Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally.” In general, people don’t trust those who think differently, even when they succeed.

It takes a strong-headed management team and an unusually independent-minded Board to tilt against windmills for years on end. But plenty of banks have done just that over the last several years. It hasn’t been easy. There is considerable temptation to ask, “Are we missing something?” Too many figured they were and jumped into the fray. And here we are.

[davelj]

“OK, then why did you banking retards approve loans to those homeowners?”

This is a very good question, and one that’s understandably on the minds of many people. As a board member of two banks with zero subprime and zero construction exposure (and, at the moment, zero non-performing loans), I’ll try to answer this one in two parts.

One group of “banking retards” was comprised of the mortgage brokers and the banks that sold most of their production. These folks acted as originators and sold off the product to Wall Street to be securitized. Why did they approve these obviously bad loans? Because they weren’t going to hold onto them; they just collected a fee and sold them. (Unfortunately, some of these loans started coming back to them, but that’s another matter.) And the folks that securitized this crap just collected their fees and sold them off to “investors.” So the question is: Why did the investors want this paper? Because they were starved for yield, used extremely bad judgement when analyzing how the loans “should” perform (they also dramatically underestimated the probability of widespread fraud), and thought that if they were wrong they could just sell it off. The problem with the last issue is that everyone tends to get that idea about the same time.

Then there are the banks (actually, mostly “thrifts”) that actually held these loans on their balance sheets. Why? The corporate equivalent of “Keeping up with the Joneses.” Imagine being the CEO of a thrift circa 2004 while every other institution is growing like a weed, making crazy loans, and “appearing” to rack up big profits while you sit there explaining to your Board, “It’s all crazy, my esteemed colleagues! We can’t do this kind of business and survive.” In the meantime, your loans are running off and your investing the money in MBS’ yielding 4.5%. There’s no spread after interest expense and no profit after operating expenses. To your idiotic Board, it looks as though YOU are the idiot. Hey, everyone else is doing it and making a ton of dough, right? Well, wrong, obviously. But for several years, it looked too idiotic NOT to participate in the New Paradigm. The weakest link in the market set the pricing and all of the weak-minded institutions (most of them) fell over themselves to jump off the cliff. It’s real world behavioral finance, you see.

There’s a saying in banking: “The stupidest banker gets the loan.” The reasoning here is that everyone’s money is just as green as everyone else’s, so if you get the loan it’s because your pricing was too low. This isn’t always the case, of course, but it’s correct often enough for the saying to be pretty robust.

As Lord Keynes once pointed out: “Worldly wisdom teaches that it is better to fail conventionally than to succeed unconventionally.” In general, people don’t trust those who think differently, even when they succeed.

It takes a strong-headed management team and an unusually independent-minded Board to tilt against windmills for years on end. But plenty of banks have done just that over the last several years. It hasn’t been easy. There is considerable temptation to ask, “Are we missing something?” Too many figured they were and jumped into the fray. And here we are.

[davelj]

I thought I’d weigh in on the insurance issue. I’m self-employed and I pay $160/month through Blue Cross of CA for a policy that has a $10K deductible and covers 100% of everything else up to $2 million of health costs annually. So, essentially, I’m self-insuring myself for the first $10,000 and insuring through Blue Cross of CA for anything really serious.

This is probably the best sort of plan for anyone with ALL of the following characteristics:
(1) self-employed;
(2) healthy – no known pre-existing health issues;
(3) single or married with no kids;
(4) under 55;
(5) enough liquidity to comfortably pay $10K if something bad comes up.

Many folks here in the U.S. are way overinsured for their real needs. When I was an employee several years back I paid $270/month through some high-fallutin’ plan and I think I used about $100/year of that insurance when I’d go to the doctor once a year for a check-up. Otherwise, it was flushed down the toilet. Had I not been part of group coverage, I’m sure that same coverage would have cost $400/month or more. Now, I’m not against insurance, per se. But a lot of people don’t think about their real insurance needs and how they should structure their policy. If you meet 1-5 above, self-insuring that first $10K is probably the most cost effective means of insuring yourself until you hit 55. For what it’s worth, my doctor agrees with this thinking as well.

[davelj]

I thought I’d weigh in on the insurance issue. I’m self-employed and I pay $160/month through Blue Cross of CA for a policy that has a $10K deductible and covers 100% of everything else up to $2 million of health costs annually. So, essentially, I’m self-insuring myself for the first $10,000 and insuring through Blue Cross of CA for anything really serious.

This is probably the best sort of plan for anyone with ALL of the following characteristics:
(1) self-employed;
(2) healthy – no known pre-existing health issues;
(3) single or married with no kids;
(4) under 55;
(5) enough liquidity to comfortably pay $10K if something bad comes up.

Many folks here in the U.S. are way overinsured for their real needs. When I was an employee several years back I paid $270/month through some high-fallutin’ plan and I think I used about $100/year of that insurance when I’d go to the doctor once a year for a check-up. Otherwise, it was flushed down the toilet. Had I not been part of group coverage, I’m sure that same coverage would have cost $400/month or more. Now, I’m not against insurance, per se. But a lot of people don’t think about their real insurance needs and how they should structure their policy. If you meet 1-5 above, self-insuring that first $10K is probably the most cost effective means of insuring yourself until you hit 55. For what it’s worth, my doctor agrees with this thinking as well.

[davelj]

I thought I’d weigh in on the insurance issue. I’m self-employed and I pay $160/month through Blue Cross of CA for a policy that has a $10K deductible and covers 100% of everything else up to $2 million of health costs annually. So, essentially, I’m self-insuring myself for the first $10,000 and insuring through Blue Cross of CA for anything really serious.

This is probably the best sort of plan for anyone with ALL of the following characteristics:
(1) self-employed;
(2) healthy – no known pre-existing health issues;
(3) single or married with no kids;
(4) under 55;
(5) enough liquidity to comfortably pay $10K if something bad comes up.

Many folks here in the U.S. are way overinsured for their real needs. When I was an employee several years back I paid $270/month through some high-fallutin’ plan and I think I used about $100/year of that insurance when I’d go to the doctor once a year for a check-up. Otherwise, it was flushed down the toilet. Had I not been part of group coverage, I’m sure that same coverage would have cost $400/month or more. Now, I’m not against insurance, per se. But a lot of people don’t think about their real insurance needs and how they should structure their policy. If you meet 1-5 above, self-insuring that first $10K is probably the most cost effective means of insuring yourself until you hit 55. For what it’s worth, my doctor agrees with this thinking as well.

[davelj]

I thought I’d weigh in on the insurance issue. I’m self-employed and I pay $160/month through Blue Cross of CA for a policy that has a $10K deductible and covers 100% of everything else up to $2 million of health costs annually. So, essentially, I’m self-insuring myself for the first $10,000 and insuring through Blue Cross of CA for anything really serious.

This is probably the best sort of plan for anyone with ALL of the following characteristics:
(1) self-employed;
(2) healthy – no known pre-existing health issues;
(3) single or married with no kids;
(4) under 55;
(5) enough liquidity to comfortably pay $10K if something bad comes up.

Many folks here in the U.S. are way overinsured for their real needs. When I was an employee several years back I paid $270/month through some high-fallutin’ plan and I think I used about $100/year of that insurance when I’d go to the doctor once a year for a check-up. Otherwise, it was flushed down the toilet. Had I not been part of group coverage, I’m sure that same coverage would have cost $400/month or more. Now, I’m not against insurance, per se. But a lot of people don’t think about their real insurance needs and how they should structure their policy. If you meet 1-5 above, self-insuring that first $10K is probably the most cost effective means of insuring yourself until you hit 55. For what it’s worth, my doctor agrees with this thinking as well.

[davelj]

I thought I’d weigh in on the insurance issue. I’m self-employed and I pay $160/month through Blue Cross of CA for a policy that has a $10K deductible and covers 100% of everything else up to $2 million of health costs annually. So, essentially, I’m self-insuring myself for the first $10,000 and insuring through Blue Cross of CA for anything really serious.

This is probably the best sort of plan for anyone with ALL of the following characteristics:
(1) self-employed;
(2) healthy – no known pre-existing health issues;
(3) single or married with no kids;
(4) under 55;
(5) enough liquidity to comfortably pay $10K if something bad comes up.

Many folks here in the U.S. are way overinsured for their real needs. When I was an employee several years back I paid $270/month through some high-fallutin’ plan and I think I used about $100/year of that insurance when I’d go to the doctor once a year for a check-up. Otherwise, it was flushed down the toilet. Had I not been part of group coverage, I’m sure that same coverage would have cost $400/month or more. Now, I’m not against insurance, per se. But a lot of people don’t think about their real insurance needs and how they should structure their policy. If you meet 1-5 above, self-insuring that first $10K is probably the most cost effective means of insuring yourself until you hit 55. For what it’s worth, my doctor agrees with this thinking as well.

[davelj]

DiCaprio… yes… a green condo… a Prius… and that pesky private plane that offsets all of his other green efforts by a factor of 20. It’s all appearance, folks. What is right for thee isn’t necessarily for me.

[Author]

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