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10 years after Lehman, is another crisis brewing? Rate Topic: -----

#1 User is offline   MTP Reggie 

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Posted 14 September 2018 - 11:42 AM

10 years after Lehman, is another crisis brewing?
By TENDAYI KAPFIDZE MONEYWATCH
September 14, 2018, 5:30 AM
https://www.cbsnews.com/

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Ten years ago, the collapse of Lehman Brothers signaled that the U.S. was hurtling toward a financial crisis. In the years that followed, consumers faced difficulty managing debt as the economy contracted, unemployment accelerated and incomes stagnated. The Federal Reserve enacted extraordinary monetary policy to stem the decline, lowering interest rates to near zero to ease the burden of debt and buying securities to support the credit markets.

These actions, along with initiatives from the Department of the Treasury, helped borrowers and lenders weather the Great Recession. Treasury, with other regulators, created programs to assist borrowers with their mortgage debt, including homeowners who found themselves "underwater" -- owing more on their mortgage than their homes were worth -- as home prices fell. Congress crafted more stringent capital rules to shore up banks.

So where are we 10 years later?

  • Consumer debt has increased to levels higher than those prior to the crisis. This is offset by an increase in personal income, though such gains have been sluggish by historic standards.
  • U.S. consumers have a lower debt ratio. Americans have improved their financial condition as debt levels fell to 80 percent of GDP from a peak of 99 percent at the start of the crisis in 2008.
  • Delinquency rates are down. From a high of 10 percent of mortgages in 2010, now just 4.36 percent of mortgages are delinquent. Credit card delinquencies are down to 2.47 percent from 6.77 percent in 2009. The one area of concern is subprime auto loan delinquencies, which are now higher than before the crisis.
  • The debt service ratio is down. The portion of income borrowers use to service debt, is now 10.21 percent, down from a high of 13.22 percent in 2007. However, this is up from a low of 9.89 percent in 2012 as consumers have added some debt since then.


Consumers are set to further improve, or at least sustain, their favorable financial condition because of the recently enacted Tax Cut and Jobs Act. Although most of the benefits will float to the higher-income brackets, there should be some improvement in aggregate consumer finances.

However, those tax breaks come with a cost: a deteriorating fiscal position for the U.S. government. The Congressional Budget Office's long-term budget outlook, released in June 2018, reveals an unprecedented accumulation of federal debt.

  • Path to $100 trillion: Under the new baseline incorporating recent changes in law, the national debt reaches $99 trillion in 2048 -- equivalent to 152 percent of GDP.
  • Trillion-dollar deficits: The federal budget deficit is expected to break through a trillion dollars in 2020 and never look back, reaching $2 trillion in 2032 and $6 trillion in 2048.


These projections indicate that federal budgets will be under significant pressure. Underlying these projections is the assumption of continued favorable interest rates, and notably, no recessions are modeled in the projection period. Adverse real-world events could result in poorer fiscal outcomes.

This creates risks, and not only for the government -- consumers could confront financial challenges as a result, too.

(snip)

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#2 User is online   Dean Adam Smithee 

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Posted 14 September 2018 - 12:10 PM

Better get those printing presses going...

https://i.pinimg.com/originals/e3/73/c6/e373c61f5d2d858a961c45f276400121.jpg
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#3 User is online   searcher 

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Posted 14 September 2018 - 05:27 PM

I bought some Lehman stock for next to nothing during the crisis. Figured they'd get bailed out with the rest and if it even came halfway back I'd make a good profit. Guess which outfit of all of them didn't get bailed out? I always knew I was on a list. :rofl:
Mark
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#4 User is online   Dean Adam Smithee 

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Posted 14 September 2018 - 05:49 PM

View Postsearcher, on 14 September 2018 - 05:27 PM, said:

I bought some Lehman stock for next to nothing during the crisis. Figured they'd get bailed out with the rest and if it even came halfway back I'd make a good profit. Guess which outfit of all of them didn't get bailed out? I always knew I was on a list. :rofl:
Mark


I can remember when it was Shearson-Lehman-American-Express. My dad (a banking exec at the time) warned me: Louis Gerstner of AMEX (at the time) was a complete D!p<censored>. A BS-artist. But don't take my word for it: Check out IBM's performance in the "Gerstner" era.

How the F'ing Bejesus dammit-all-to-hell do such people get selected as CEO's????

This post has been edited by Dean Adam Smithee: 14 September 2018 - 05:54 PM

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#5 User is offline   gravelrash 

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Posted 14 September 2018 - 05:57 PM

View PostDean Adam Smithee, on 14 September 2018 - 05:49 PM, said:

I can remember when it was Shearson-Lehman-American-Express. My dad (a banking exec at the time) warned me: Louis Gerstner of AMEX (at the time) was a complete D!p<censored>. A BS-artist. But don't take my word for it: Check out IBM's performance in the "Gerstner" era.

How the F'ing Bejesus dammit-all-to-hell do such people get selected as CEO's????


Peter Principle or was I supposed to assume that was a rhetorical question?
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#6 User is online   Dean Adam Smithee 

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Posted 14 September 2018 - 06:24 PM

View Postgravelrash, on 14 September 2018 - 05:57 PM, said:

Peter Principle or was I supposed to assume that was a rhetorical question?


No, it wasn't Rhetorical. My dad was "Banking" at the time. I was as true-blue IBM at the time as anyone. And then came Louis-F'ing-Gerstner who destroyed both.
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#7 User is offline   johnnybravo 

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Posted 16 September 2018 - 08:55 AM

Itís no mystery why consumer debt increased. When you have 8 years of practically zero interest this will happen. My house mortgage has a 3.25% interest rate. That is unheard of. What bugs the crap out of me is premium mortgage insurance (PMI), which was supposed to keep things like the meltdown in 2007 from happening. After those companies went belly up or bailed out do you suppose they would eliminate PMI? Ha! No! That would be the smart thing to do so of course they didnít. So now people have higher debt due to the low interest rates and their property taxes are continuing to go up plus paying PMI, if anything happens to the economy we will be back to 2007-2008 default levels. Probably will happen just before a presidential election as the Dems and the media will create another panic in the hopes to get everyone scrambling to get out of their mortgage. Yes, I think the 2007 crash was a created crash to get a Dem elected. There was absolutely no reason for people to panic about the value of their home decreasing unless they were already planning to sell. Being underwater for a few years on a 30 year mortgage is meaningless.
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#8 User is offline   Coach 

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Posted 16 September 2018 - 03:42 PM

The democrats started setting up that crash way back under Jimmuh Carter forcing banks to make loans to bad risk individuals. Hearings were held and democrat members of the committee blocked reforms which would have averted the collapse. It seems to me that auntie Maxine played a prominent role.

Oh, the race card was played. Imagine that.
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#9 User is offline   Ticked@TinselTown 

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Posted 16 September 2018 - 05:58 PM

View PostCoach, on 16 September 2018 - 03:42 PM, said:

The democrats started setting up that crash way back under Jimmuh Carter forcing banks to make loans to bad risk individuals. Hearings were held and democrat members of the committee blocked reforms which would have averted the collapse. It seems to me that auntie Maxine played a prominent role.

Oh, the race card was played. Imagine that.


They doubled down under bo-bo the Camel Toe and nobody seemed to notice or mind it...
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#10 User is offline   jr_tex 

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Posted 17 September 2018 - 03:37 PM

Anyone read this paragraph? I read Treasury collections were up since the tax breaks. It's more a spending problem not a revenue problem but the article blames the tax cuts.

However, those tax breaks come with a cost: a deteriorating fiscal position for the U.S. government. The Congressional Budget Office's long-term budget outlook, released in June 2018, reveals an unprecedented accumulation of federal debt.
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#11 User is offline   johnnybravo 

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Posted 17 September 2018 - 08:09 PM

 jr_tex, on 17 September 2018 - 03:37 PM, said:

Anyone read this paragraph? I read Treasury collections were up since the tax breaks. It's more a spending problem not a revenue problem but the article blames the tax cuts.

However, those tax breaks come with a cost: a deteriorating fiscal position for the U.S. government. The Congressional Budget Office's long-term budget outlook, released in June 2018, reveals an unprecedented accumulation of federal debt.

Exactly. Itís never a spending problem. Spending never puts people in debt. Hard to type that with a straight face. Another big problem is the interest on that debt. Rates are going up so guess what happens to the debt that you canít keep up with already? Negative amortization.
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