Wall St. protests

[Michchamp]

TinselWolverine[/color]]

the ratings agencies are paid by the banks to rate securities; there is evidence out there from whistleblowers that they were told not to actually look at this junk and rubber stamp it "AAA," or the banks would pull business from them. the entire process is corrupt. the compensation structure completely undermines the independence of the rating agencies.

it's similar to the way drug companies funnel research dollars to the labs that give them the favorable results they want to see.

OK - do you have a link to anything that documents this?

I'm under the impression that the ratings agencies are financed prmarily through publishing/subscription.

jesus, man. Go buy a book about it like I did!

The best one is "The Big Short" by Michael Lewis, same guy who wrote "Moneyball." Vic read it, and he knows lots of things too, like me.

Here: http://www.thefundamentalanalyst.com/?p=480

Regarding payment structure, here: http://topics.nytimes.com/topics/news/business/companies/standard_and_poors/index.html Quote from article: <blockquote>Critics pointed to a conflict of interest inherent in the fact that the raters are paid by the entity whose debt is being rated

 

[tinselwolverine]

Does that mean that the entities whose debt was being rated paid them as subscribers to the publications, just like everybody else?

As far as The Big Short goes, I'm holding out for the movie, just like with Moneyball.

Word is DiCapprio is the inside leader to star in that one.

 

[tinselwolverine]

A Couple of things -

The Fundamental Analyst piece was a good read - but it doesn't have anything to do with Moody's and Standard and Poors maintaining AAA ratings because they were getting paid by any bank - but we'll get back to that in a minute.

Now, Moody's and Standard and Poors have been around longer than anybody on Wall Street has been alive. I would like to see specific data on what "the raters are paid by the entity whose debt is being rated" means.

Anyway, back to the Fundamental Analyst piece, which is dated March 12, 2008 - right at the time the ground was starting to rumble; ARMs were adjusting and delinquencies were on the rise - but this was long after any initial rating on any security would have awarded.

Now - I do believe that, at that time, both of those agencies could well have been pressured to maintain ratings that were "laughable," as Kyle Bass was quoted as having said.

But that pressure at that time would not at that time have come from no bank.

But from "entities" - not at a much higher pay grade, but - rather - a much higher security clearance.

The 800 pound gorilla itself.

Now, that - that I could believe.

Oh, and yes, you're right - Vic does know a lot of things.

 

[TheVictors]

Hey, when the Van's A-Rockin'
Don't Bother Knockin' !!

Nobody likes 'that guy' who ruins the party!

With respect to the specific mortgage-backed products, it was a bunch of things. First off, the ratings agencies are antiquated bodies that have lagged the product 'innovation' over the past 15yrs or so and had no idea what they were trying to rate based on how the funds were bundled. In some cases, jumbo loans from places like Scottsdale, AZ were lumped in with 'below investment grade' high-risk loans and how do you rate the likelihood of default with that?

In the end it was good old GREED ...why not take $1 and leverage it out to $20 ...$30 dollars based on free money being lent to anyone with a pulse (if that)..? There were plenty of folks who warned of the impending mortgage crisis but they were largely shown the door and told to shut up.

 

[tinselwolverine]

In the end it was good old GREED ...

Yep.

Gordon Gekko was wrong - greed isn't good.

Ambition is good - greed sucks.

Steve Jobs was ambitious. Angelo Mozilo was greedy.

Steve Jobs was good. Angelo Mozilo sucks.

Even Ayn Rand wrote that avaricious greed was not in one's own rational self-interest, and was socially morally bankrupt.

Or some shit like that.

And she was an athiest, too.

So she must have come up with her concept of "morality" within the context of some kind of existential construct.

Or some shit like that.


Note - people who worked in sub prime mortgage origination in the leadup to the financial meltdown did not consider themselves as being part of "Wall Street".

At least - not the ones that I know.

 

[hockeywings]

TinselWolverine[/color]]

How dare the worker class stage protests! Don't they know that they are supposed to accept wall street thugs paying half the percent in taxes they do?

Capital gains tax - max 15%
Income tax - max 33%

Ha, ha....pretty sure not too many protester out there pay the top marginal income tax rate...

Do you have any data that shows what percentage of "Wall Street Thugs"' compensation is through capital gains, and what percentage is income?

I can't single out wall street people but what I can do is show you the top 400 richest people and their taxes(government tracks it).

The average rich(top 400) income tax rate from 1992 to 2006 were: 26% 29% 28% 29% 27% 24% 22% 22% 22% 22% 22% 19% 18% 18% 17% 16% 18% (source: http://www.irs.gov/pub/irs-soi/08intop400.pdf ).

 

[tinselwolverine]

TinselWolverine[/color]]

Ha, ha....pretty sure not too many protester out there pay the top marginal income tax rate...

Do you have any data that shows what percentage of "Wall Street Thugs"' compensation is through capital gains, and what percentage is income?

I can't single out wall street people but what I can do is show you the top 400 richest people and their taxes(government tracks it).

The average rich(top 400) income tax rate from 1992 to 2006 were: 26% 29% 28% 29% 27% 24% 22% 22% 22% 22% 22% 19% 18% 18% 17% 16% 18% (source: http://www.irs.gov/pub/irs-soi/08intop400.pdf).

So - you make a blanket statement about the rate of taxes that "Wall Street Thugs" pay, then you turn around and say you don't know what the rate is.

Your link is to "page does not exist," and your claim about what the top marginal income tax rates were from 1992 to 1996 is wrong.

Here is a chart with the correct data from the Brookings Institute, going back to 1913 when personal income tax was introduced.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213

It does occur to me that you may not know the difference between income and capital gains. Here's a link that explains it a little.

http://news.morningstar.com/classroom2/course.asp?docId=144042&page=2&CN=COM

Hope that helps.


Capital gains are taxed at a lower rate than income, and they're taxed at a lower rate for everybody who earn them, whether the earner of a capital gain is "rich" or not.

Granted, a number of affluent people may earn a significant amount of their annual taxable revenues through capital gains rather than ordinary income - obvioulsy, the percentage of taxable proceeds that is income and that is capital gains will vary from tax filer to tax filer.

There is not and never has been a set - specific tax rate category for "the top 400 richest people" - probably why your link is to "page does not exist".

I'm sitting here, having a chuckle, actually, at the notion that you think there is one.

Pretty funny stuff.

 

[hockeywings]

Sorry about the page not working, just remove the ")." on the end.
http://www.irs.gov/pub/irs-soi/07intop400.pdf

The top 400 (which I am using as an indicator of the tax rates for the wall street argument) averaged paying in taxes those exact figures that I listed earlier.

I understand the difference between capital gains and income tax and perhaps i shouldnt have used the word income(which capital gains basically is anyway) but I truly didn't think you would be picky about wording.

Capital gains tax is taxed lower since 2003. But your argument that anyone can take advantage of it is silly. over 50 percent of stocks, bonds and mutual funds is owned by the top 1% and the top 50 percent of people own over 99 percent of stock, bonds, and mutual funds.

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#half-of-america-has-only-05-of-americas-stocks-and-bonds-3

 

[tinselwolverine]

It was a very good response.

I exalted you and gave a karma point for it.

Not that you necessarily care about the karma point.

But it was a very good response.

I'm drinking and watching football now, so I'll reply to you with a friendly discussional answer tomorrow, or in the near future.

How soon I get back depends on how the Lions and Tigers (and Bears - oh my!!!) do within the next couple of days.

But it was a very good response.

Mazeltov.

 

[hockeywings]

Thanks for the compliment.

And to the original question you asked about what part is capital gains versus income. If we take the average of the richest 400 at 18% in taxes, and assume they pay 33% on income and 15% on capital gains, then (hopefully my math is right here) 68.75% of their total income(income plus capital gains) comes from capital gains and 31.25% comes from income.

 

[TheVictors]

FROM MICHAEL LEWIS' THE BIG SHORT - [specific excerpts related to the thread ... pg citation is difficult on an iPad version but the quotes begin about p.230+]

"The ratings agency, in theory, were just an authority. As the securities became more complex (bundled sub-prime loans), the rating agencies became more necessary. Everyone could evaluate a US Treasury bond; hardly anyone could understand a mortgage-backed CDO. There was a natural role for an independent arbiter to pass judgment on these opaque piles of risky loans. [at a conference]'In Vegas it became clear to me that this entire industry was just trusting in the ratings ... Everyone believed in the ratings, so they didn't have to think about it.'"

"...stock market people didn't pay much attention to the rating agencies. Now Eisman had his first exchanges with them, and what struck him immediately -- was the caliber of their employees. 'You know how when you walk into a post office you realize there is such a difference between a government employee and other people ... The ratings agency people were all like government employees ... individually they were nobodies .... The people who worked at the rating agencies barely belonged in the industry."

"All rating agencies worried about was maximizing the number of deals they rated for Wall Street investment banks, and the fees they collected from them. Moody's, once a private company, had gone public in 2000. Since then its revenues had boomed, from $800 Million in 2001 to $2.03 BILLION in 2006. Some huge percentage of the increase -- flowed from ... [subprime debt products]."

"It was like everyone had agreed in advance that five percent was the number" [assumption of default at 5%, whether below investment grade or AAA]

"'Holy shit, this isnt' just credit. This is fictitious Ponzi scheme.' Do the deserve merely to be fired, or should they be put in jail? Are they delusional, or do they know what they're doing? Danny thought that the vast majority of the people in the industry were blinded by their interests and failed to see the risks they had created ... 'They were more morons than crooks.'"

So, sort of like I summarized in my earlier post --- nobody had any clue what was going on and nobody likes a party pooper.

I suppose those that argue in favor of de-regulation would eliminate the rating agencies and honestly, that may not be a bad idea. At least then you're not some poor investor being sold a "AAA-rated" pile of crap made up by people who took loans without ability to make even one payment in some cases.

 

[redandguilty]

TinselWolverine[/color]]

Ha, ha....pretty sure not too many protester out there pay the top marginal income tax rate...

Do you have any data that shows what percentage of "Wall Street Thugs"' compensation is through capital gains, and what percentage is income?

I can't single out wall street people but what I can do is show you the top 400 richest people and their taxes(government tracks it).

The average rich(top 400) income tax rate from 1992 to 2006 were: 26% 29% 28% 29% 27% 24% 22% 22% 22% 22% 22% 19% 18% 18% 17% 16% 18% (source: http://www.irs.gov/pub/irs-soi/08intop400.pdf ).

Am I the only one that finds that 1st column funny enough to comment on? "Number of returns in the top 400" 400,400,400,400,400,400,400,400...

 

[redandguilty]

So...I've got something to share. My personal feelings regarding blame and fault and greed include some feeling that some of the Wall St. stuff is more a problem of the system and the people at the very top than the bulk of the participants. I see a lot of it as being analogous to a crowd of people all push in the same direction and end up crushing people. I'm biased. One of my favorite people in the world is a college roommate that works for Goldman.

Anyway.

I like to give him hell whenever I can, so I made a sign saying that this was all his fault (using his first name only) and took at picture holding it at the local "occupy" protests.

 

[TheVictors]

I work on Wall Street ..... we never took TARP and we're a small company that actually has benefitted from all the Uber firms shitting the bed. I'd say the same thing about Tea Partiers as I would OccupyWallStreeters ..... half of the protestors don't know why they're protesting and the Tea Party had corporate, PAC and party backing whereas the OccupyWallStreeters do not. I'm all for plurality and power of the people, but have seen too many panhandling 'street kids' jump in a Nissan Pathfinder parked around the corner not to be cynical.

 

[Michchamp]

FROM MICHAEL LEWIS' THE BIG SHORT - [specific excerpts related to the thread ... pg citation is difficult on an iPad version but the quotes begin about p.230+]

"The ratings agency, in theory, were just an authority. As the securities became more complex (bundled sub-prime loans), the rating agencies became more necessary. Everyone could evaluate a US Treasury bond; hardly anyone could understand a mortgage-backed CDO. There was a natural role for an independent arbiter to pass judgment on these opaque piles of risky loans. [at a conference]'In Vegas it became clear to me that this entire industry was just trusting in the ratings ... Everyone believed in the ratings, so they didn't have to think about it.'"

"...stock market people didn't pay much attention to the rating agencies. Now Eisman had his first exchanges with them, and what struck him immediately -- was the caliber of their employees. 'You know how when you walk into a post office you realize there is such a difference between a government employee and other people ... The ratings agency people were all like government employees ... individually they were nobodies .... The people who worked at the rating agencies barely belonged in the industry."

"All rating agencies worried about was maximizing the number of deals they rated for Wall Street investment banks, and the fees they collected from them. Moody's, once a private company, had gone public in 2000. Since then its revenues had boomed, from $800 Million in 2001 to $2.03 BILLION in 2006. Some huge percentage of the increase -- flowed from ... [subprime debt products]."

"It was like everyone had agreed in advance that five percent was the number" [assumption of default at 5%, whether below investment grade or AAA]

"'Holy shit, this isnt' just credit. This is fictitious Ponzi scheme.' Do the deserve merely to be fired, or should they be put in jail? Are they delusional, or do they know what they're doing? Danny thought that the vast majority of the people in the industry were blinded by their interests and failed to see the risks they had created ... 'They were more morons than crooks.'"

So, sort of like I summarized in my earlier post --- nobody had any clue what was going on and nobody likes a party pooper.

I suppose those that argue in favor of de-regulation would eliminate the rating agencies and honestly, that may not be a bad idea. At least then you're not some poor investor being sold a "AAA-rated" pile of crap made up by people who took loans without ability to make even one payment in some cases.

Tinsel's response: <blockquote>"Bla bla bla... even though I initially denied the rating agencies had any conflict of interest, and then when that smartass Michchamp showed me some evidence they did, I acted like it was no big deal, and that an obvious conflict of interest and testimony from whistleblowers of actual misconduct still didn't prove anything, none of that matters, because I'm sitting here at my computer (or on the couch using my ipad) here in Hollywood, drunk, shirtless, and dreaming of a nice set of big boobs... and as long as I can do all that, I am not concerned with public policy and economics, at all, none whatsoever."</blockquote>

 

[tinselwolverine]

Tinsel's response:
"Bla bla bla... even though I initially denied the rating agencies had any conflict of interest, and then when that smartass Michchamp showed me some evidence they did, I acted like it was no big deal, and that an obvious conflict of interest and testimony from whistleblowers of actual misconduct still didn't prove anything, none of that matters, because I'm sitting here at my computer (or on the couch using my ipad) here in Hollywood, drunk, shirtless, and dreaming of a nice set of big boobs... and as long as I can do all that, I am not concerned with public policy and economics, at all, none whatsoever."

Actually, it's a lot less detailed.

Vic's citation from the source MichChamp referred to supports Vic's assertion that the ratings agencies were more incompetent tnan fraudulent, as was MichChamp's accusation of the agencies.

No bla bla bla at all.

I'm wearing a shirt too.

A Michigan shirt.

Which makes me more attractive.

 

[tinselwolverine]

even though I initially denied the rating agencies had any conflict of interest

Red, could you please copy/paste and note the post number that you're copy/pasting from that is a specific denial of anything?

Seems to me I merely have been asking for substantiation and corroboration of other people's claims - what's wrong with that?

Paragraph 3 of the New York Times article might show evidence of a conflict of interest - but it might not necessarily, and I'll explain to you why.

I worked a number of years in publishing, primarily for newspapers, among them was the Los Angeles Times - I worked in ad sales, circulation management, and public relations.

There is an entity known as The Audit Bureau of Circulation, that verifies paid circulation for publications.

Publishers then sell ad space based on that circulation number.

Now, the publishers pay fees to the ABC - but if anyone were to claim there was a conflict of interest because ABC might "risk losing business" from a lower than desired circulation count it would be absurd - it would be vastly more damaging to the publisher to not have a verified circulation count than it would be for the ABC to lose that publisher's fee - the publisher wouldn't be able to sell advertising space!

So - is it the same with S & P and the securities issuers? Would it be vastly more damaging to the securities issuer to go to the market with unrated securites than it would be for S & P to lose the fee?

I don't know.

Standard and Poor's ostensible underlying business has always been financial news - securities ratings came out of that.

Now - maybe there was a conflict of interest - I don't know. I would have know more about the specifics of the payments of fees, the interactions of individuals between S & P and the securities issuers, and obviously the overall operational revenues of S & P as a whole.

But the statement "Critics pointed to a conflict of interest" itself isn't necessarily evidence that there was one.

 

[mhughes0021]

http://www.cnn.com/video/#/video/us/2011/10/09/baldwin-ny-slut-walk.cnn

wall street protests are not the only movement happening in NYC. click the link. :49 sec mark is my fav part

 

[TheVictors]

It's not so much a 'conflict of interest' other than when the ratings agencies went public (during the IPO craze of early-00), they were incented to make money, not necessarily do what's best for investors. Add in the complex mortgage-backed securities where these agencies weren't capable of proper evaluation and you have a mess.

I'd offer this analogy -- FDA officials allowing new, innovative energy drinks to come to market only to discover a horrible, cancerous ingredient caused by a few of the drinks ingredients being mixed and sales of said drinks through the roof.

 

[redandguilty]

TinselWolverine[/color]]

even though I initially denied the rating agencies had any conflict of interest

Red, could you please copy/paste and note the post number that you're copy/pasting from that is a specific denial of anything?

I'm confused. Could you clarify what you're asking for?

edit:
After re-reading, I'm thinking that maybe you meant MC instead of me.