Forum Post: How the Fed Caused the Crisis...
Posted 12 years ago on Jan. 7, 2012, 9:16 p.m. EST by JoeTheFarmer
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John Allison is a former CEO of a bank, the 12th largest in the US, that did not need and did not want a bail out. He lobbied congress to stop the bailouts. Congress and the Fed put pressure on his bank to take the loan and pay it back at a high interest rate.
This clip is 24 minutes long but it is quite interesting. http://bigthink.com/ideas/17844
The Federal Reserve is truly owned by the private member banks...The banks wanted legislation passed to deregulate the banking industry...
The Federal Reserve Chairman Alan "Print" Greenspan......Oh forget it...Cut to the video:
http://www.pbs.org/wgbh/pages/frontline/warning/view/
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yea and? who is ultimately accountable to the people? the banks or the Pols?
None of them at this point...Who cares about "The People"? These pols and banksters look at the American people like we are all suckers...and you know something ..They've been right..
so you equate the bankers & pols with the same responsibility to the people?
Anyone I give my "trust" to...Sometimes it's bankers sometimes it's politicians...That trust has been abused and I will my damnedest to ensure that these people never have to bear the "responsibility" of my "trust".
They have shown their irresponsibility....and by doing so they have broken the system..
There's more, the Fed to the States: drop dead.
"Ben Bernanke announced that the Fed had ruled out a central bank bailout of state and local governments. “We have no expectation or intention to get involved in state and local finance,” he said in testimony before the Senate Budget Committee. The states “should not expect loans from the Fed.” http://markcrispinmiller.com/2011/01/fed-to-main-street-drop-dead/
However the Fed could illegally bail out European banks and participate in the illegal "AIG bailout" passthrough to make good investment bank derivative swindles.
Here's a few things about AIG. Greenspan's fed pushed to have derivative laws changed so that AIG was allowed to sell their unfunded insurance policies (called credit default swaps). There was a law written in 2005 that gives derivatives priority in a bankruptcy deal. In other words Goldman Saks was always going to get paid first. The bondholder's would have probably been wiped out and forget the shareholders, what I don't know is where the policy holders stand under that law. You had Bush appointee, Hank Paulson, X Goldman exec as treasury secretary so he made sure his pals got paid in full. I'm just guessing here but I bet the fed did that Euro bailout either because our banks have to many CDS that they wrote on Euro-bonds or our banks have to many over leveraged positions in Euro-bonds (like MF Global) What we need is Glass/. Steagall back in place and that kind of trading out of our banks. Bernanke is not just being a nice guy here he is putting out fires as they pop up in a very over leveraged flawed banking system.
great points dem. that 50 billion swap line to the EU for currency trades is a piece of crap. that said, i appreciate ben's refusal to bailout CA and the others--they have chapter 9, if needed. i would think there'd be another civil war among states if he started bailing out CA et al.
The Fed is buying toxic Chinese loans taken out by Ghost cities and villages, lmao
The really sad thing is that the federal government could shut the fed reserve down anytime. Just say, hey we aren't gonna be slaves to it anymore. It is absolutely incredible that our elected leaders continue to be puppets to the elitist banking cartel. WTF! Are they completely insane or just completely spineless? The Federal Reserve needs to be dismantled yester-fucking-year. This small group has a jack-boot to the necks of the government and the rest of america. This money sucking machine needs to be destroyed before it destroys everyone and everything we care about.
The fed had to do the bailouts, because the country under Greenspan's fed had allowed so much risk and leverage into the system that all things needed to do was go a little bit wrong and every big bank in the country would be insolvent. Greenspan's fed changed so many laws about banking that the risk just kept piling up. Not much has changed, MF Global's bankruptcy is evidence that folks are still using to much leverage. Who knows how many convoluted secret trades are in our banks. We could be right back in the same mess any old time.
Yes, the process took years, not doubt. It was actually congress allowed and even pushed the risk. The Fed helped perpetuate the problem by lowering interest rates and increasing the money supply
What was the risk? The risk was selling homes to people with sketchy income and bad credit scores. The risk was pushed into the market in the name of getting more houses to people. This was caused by changes made to the CRA.
It wasn't in the name of getting more and more homes to people it was in the name of getting more and more loans written. Remember the lenders took 3 or 4 k for every loan they wrote, then wall street took a cut when they turned the bad loans into CDO's. The amazing thing about it all were the math whizzes who concocted this theory that if you take a pile of crap and put it with many other piles of crap that you can turn it into a AAA bond. Really the top math minds in the country came up with that !!!! Believe me it was never about getting people homes if it was we'd be bailing out people not banks. Wall street bubbles need fuel from the middle class to become truly spectacular
What prompted Occupiers to camp out on Wall Street in the first place ?
– a corrupt banking system that serves the 1% at the expense of the 99%. To redress that, we need a banking system that serves the 99%.
Occupy San Francisco has now endorsed a plan aimed at doing just that. In a December 1 Wall Street Journal article titled “Occupy Shocker: A Realistic, Actionable Idea,” David Weidner writes:
Protesters in the Bay Area, especially Occupy San Francisco, have something their East Coast neighbors don't: a realistic plan aimed at the heart of banks. The idea could be expanded nationwide to send a message to a compromised Washington and the financial industry.
It's called a municipal bank. Simply put, it would transfer the City of San Francisco's bank accounts—about $2 billion now spread between such banks as Bank of America Corp., UnionBanCal Corp. and Wells Fargo & Co.—into a public bank. That bank would use small local banks to lend to the community.
The public bank concept is not new. It has been proposed before in San Francisco and has a successful 90-year track record in North Dakota. Weidner notes that the state-owned Bank of North Dakota earned taxpayers more than $61 million last year and reported a profit of $57 million in 2008, when Bank of America had a $1.2 billion net loss. The San Francisco bank proposal is sponsored by city supervisor John Avalos, who has been thinking about a municipal bank for several years.
Weidner calls the proposal “the boldest institutional stroke yet against banks targeted by the Occupy movement.”
http://www.webofdebt.com/articles/the_way.php
Why not serve everyone?
Yes, why not?
North Dakota has had the nation's lowest unemployment ever since the economy tanked. What's its secret?
In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:
Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.
According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July—that’s just over a third of the national rate (9.1 percent), and about a quarter of the rate of the state with the highest joblessness (Nevada, at 12.9 percent).
North Dakota has had the lowest unemployment in the country (or was tied for the lowest unemployment rate in the country) every single month since July 2008.
Its healthy job market is also reflected in its payroll growth numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent. Texas came in second, with an increase of 2.6 percent.
Why is North Dakota doing so well?
Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7% percent.
North Dakota has one thing that no other state has: its own state-owned bank.
Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state. In 2010, according to the BND’s annual report:
The Bank provided Secured and Unsecured Federal Fund Lines to 95 financial institutions with combined lines of over $318 million for 2010. Federal Fund sales averaged over $13 million per day, peaking at $36 million in June.
The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services. In 2010, according to the BND annual report:
The need for Flex PACE funding was substantial, growing by 62 percent to help finance essential community services as energy development spiked in western North Dakota. Commercial bank participation loans grew to 64 percent of the entire $1.022 billion portfolio.
The BND’s revenues have also been a major boost to the state budget. It has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. According to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did (oil and gas revenues added $71 million while the Bank of North Dakota returned $60 million). Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.
North Dakota’s money and banking reserves are being kept within the state and invested there. The BND’s loan portfolio shows a steady uninterrupted increase in North Dakota lending programs since 2006.
According to the annual BND report:
Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.
A 19 percent return on equity! How many states are getting that sort of return on their Wall Street investments?
http://www.webofdebt.com/articles/north_dakota.php
But it really was not Wall Street that caused the housing crisis. It was changes to the Community Reinvestment Act that caused the crisis. It was the mortgage brokers and Fannie and Freddie that caused the crisis. The brokers were pushed into making high risk loans in the name of providing affordable housing. They pushed zero money down, interest only loans to people with bad credit scores. You remember the TV commercials "Bad credit score... No problem... No money for down payment.... No problem!!!"
Those loans were made to by the the 99% to the 99% and not the 1%. None of those mortgage brokers were part of the 1%. They were mostly folks in an office of a small mortgage broker.
There are many solid commercial banks out there. There are also many good credit unions. I use a bank that has a good asset to liability ratio, has free checking, no ATM fees, great service, and free on line bill pay.
The problem I see is that just because a bank is public does not mean that all the corruption goes away. There is plenty of corruption in government. It was the government that raised the Social Security trust fund. It is the government that is $15 trillion in debt.
In the end I think I am actually safer with a credit union.
Farmer Joe, either you have bought a load of hooey or you are selling it. The meme foolish-home-buyers-crashed-the-world-economy is pure bullshit. A fraud was set up that simply vacuumed in the buyers.
The Wall St. geniuses designed a system that "protected" the the loan originators from risk. Mortgage backed securities supposedly spread the risk so far that there was no risk. Brokers made their money no matter what. They had no incentive to scrutinize buyers -- in fact, that would cut their profits.
Furthermore many of the fly by night home brokerage businesses were actually run by the big Wall St. banks. They knew exactly what they were doing and should have gone bankrupt in 2008.
But just what what was the risk that was being hidden?
The risk was loans were being made to people that should not have received them.
You cannot deny that!
You're putting the cart before the horse. First the banksters invented "risk free" capitalism through mortgage backed securities, etc. Since the brokers took no risk themselves they couldn't have cared less if buyers were qualified or not.
There was no 'risk that was being hidden.' The idiot banksters thought they couldn't lose. They also believed housing prices would rise forever.
Risk = A loan that may not be paid back
Risk Factor - likelihood that borrower will pay the money back.
Low likelihood = People with poor or no credit history are allowed to borrow the money.
Hidden = Bundle them together and sell them as mortgage backed securities.
@Joe the Farmer...Fannie and Freddy where cleared of any major wrong doing in the financial collapse. See the Congressional report on the financial crisis of 2007-2008.
@chuck1al ...There is a difference between cleared by congress of wrong doing and participating in the process that lead to the collapse. Congress oparticipated!!!
The changes to the Community Reinvestment Act and GSEs’ mandated housing goals were the cause however there is not doubt that Fannie and Freddie contributed to the crisis. Fannie and Freddie had a flawed business model in which profits were privatized and losses socialized.
FACT:
By 2008, before the crisis, half of the 54 million mortgages in the U.S. financial system were subprime and other low-quality mortgages. More than 70% of these 27 million weak mortgages were on the books of government agencies, primarily the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
@ JoeTheFarmer....I take it you didn't read the congressional report on the causes of the 2007-2008 financial crisis.
If you had bother reading it, this useless post of yours would have been unnecessary.
I have read many reports on the causes of the 2007-2008 financial crisis.
If you read the report and understood what you were reading you would understand that it was the sub prime lending to high risk borrowers that was the cause.
Perhaps, but the rating agencies should have stopped the bad debt from spreading. The banks were bundling mortgages into blended tranches under the theory they could mitigate risk. The approach they were using was locally applied to individual loans, and there was never a wider look considering systemic risk. The "check" on the banks was supposed to be the rating agencies, but they just rubber-stamped the tranches "AA" and sold them off. Had they not done so, the debt would not have spread, and the Banks would have had to change their practices.
I used to wonder why we weren't seeing a lot of press about investigations into the rating agencies and so forth, but then I realized there would never be such material in the press. Our rating agencies are the world's rating agencies, and if we cast doubt on them, everything they've rated would be suspect. I think we spoke to the them quietly and pushed them into reforming their practices. They immediately responded by downgrading our debt (which was probably appropriate).
Lenders were encouraged to make high risk loans.
The changes made to the Community Reinvestment Act of 1977 combined with the Fed pushing interest rates down.
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability. Similarly, banks were expected by regulators to relax income requirements.
if the banks held on to those mortgages like in the old days they would never have lent the money. as usual you have missed the boat - you are really out of your depth here. if you do this for fun you should stop - there are better ways to pass the time than getting the shit kicked out of you. if you are being paid then find another line of work - farming perhaps?
"If the banks held on to those mortgages like in the old days they would never have lent the money."
I agree 100% with you here so if I am out of my depth so are you.
To take it one step further...
If people did not buy homes and cars they should not have there would not have been a problem at all. I refuse to take responsibility away from the borrowers. The lenders repeatedly offered me sweet deals like a $100,000 HELOC because my home value was so high but I refused them. A little self control by the 99% would have went a long way.
follow the money - it is not hard - who profited - with obscene numbers and then after the bailouts with tax dollars - who is out on the street - follow the money a novel concept for you. you seem to suck up to the money
The "bailouts" $700B were loans that had to be paid back with interest.
The stimulus spending $700B which did not have to be paid back went to automakers, and green energy companies, and a lot went to California and New York.
first of all please respond to my point! follow the money - who profited and who lost - can you spell it out - do you have any idea - i can point you to the books that will help. if you just want to make some horse shit debating points then give up since the only ones who buy your shit are those who do not convincing. do some reading - too many people here follow the news properly so you right wing talking points don't fly - i can give you a few ideas on what to google - first try fed secret loans trillions. then you could try stimulus 2009 breakdown. now we agree that it was poorly done and too small (well maybe you don't agree on the size) - lot's of things to complain about we could try to have a reasonable discussion but you need to stop the bullshit
Can't reply to your other post.
Q: "Who caused it...the man on the street or the big banks"
A: All four. Huh? The people who took the loans they could not afford and the brokers that allowed them to and the government that reduced regulations on credit scoring, and the Fed who lowered interest rates and increased the money supply.
The brokers who make their money up front would take the bad loans, bundle them, and sell them. The banks that bought the bad bundles and the institutions that insured the deals took on that risk and needed the bail out to stay in business when people defaulted on the loans they never should have received.
CMOs and derivatives have been around for decades without a problem. It was relaxing of qualification rules that caused the problem.
Why did it get worse?
Everything went in the other direction and no one could get a loan. Businesses that wanted to expand could not get the capital. Private citizens credit card limits were cut down often for $20,000 to $500 limit. This credit squeeze almost shut down the economy.
You should not cut off a leg because of a blood clot, you fix the clot.
your point here -The brokers who make their money up front would take the bad loans, bundle them, and sell them. The banks that bought the bad bundles and the institutions that insured the deals took on that risk and needed the bail out to stay in business when people defaulted on the loans they never should have received. - we agree - this is the crux of the problem. with old style banking (where the bank holds the mortgage) none of the rest would have happened - those people who should not have gotten loans would have been laughed out of the bank. so now follow the money - who changed the rules - who made the money and who got bailed out??? the politicians and the banks were in bed together -as usual! clinton, rubin, paulson, summers and then should i start on the goldman people involved in the gov't and banking system. come on - this is obvious - we should be able to agree on this!... as to this -CMOs and derivatives have been around for decades without a problem. It was relaxing of qualification rules that caused the problem.
Why did it get worse? - you are off base here! look for yourself - look into the brooksley born story and you will get all the same answers. rubin, summers, and the banking ceos. ...............as to this comment - Everything went in the other direction and no one could get a loan. Businesses that wanted to expand could not get the capital. Private citizens credit card limits were cut down often for $20,000 to $500 limit. This credit squeeze almost shut down the economy.. you are correct to some extent but this is after the meldown - i thought we were discussing what caused the crisis - i am not arguing for eliminating banks just the banking practices of the last 30 years - get rid of the clot and the clods!
I thought I was.
The automakers, green energy companies, California and New York profited the most.
http://www.recovery.gov/Pages/default.aspx
You can research it on the government web site.
we were talking about the financial crisis - who caused it aan who profited from it. if you want to find the cause you only need to follow the money - who profited during the run up to 2007- who profited form the lending of money to those who couldn't really afford to pay - the man on the street or the banks? tough question but i think we all know the answer. next question is who is paying all those fines for fraud - the man on the street or the big banks. read "the monster" and get back to me. like a good politician you are trying to divert the debate - can't do it here - try again
I know. See my comment above ( http://occupywallst.org/forum/how-the-fed-caused-the-crisis/#comment-574369 ). All I'm saying is that the lan bundles should have never made it past the rating agencies, and the problem would not have been so big had they done their jobs.
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@Joethefarmer....Congressional Report:
The Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.
FBI report on mortgage fraud:
Up to 70% of Mortgage Defaults Linked to Misrepresentation An article in eFinance Directory, citing the FBI 2006 Mortgage Fraud Report, reports that mortgage fraud played a role in as many as 70% of early payment defaults. The type of fraud wasn’t specified, but one assumes it was mainly overstatement of income. As the story notes: A study of more than 3 million mortgage loans found that between 30 and 70 percent of early payment defaults are directly linked to misrepresentations in mortgage loan applications Defaults are largely concentrated in ARM loans, but are present in nearly every lending sector.
Of the 10 states with the highest concentration of mortgage fraud, 7 of them rank in the top 10 states with the highest default rates.
Now this would seem to be a rather damning set of facts for those who believe that predatory lending played a significant role in the subprime mess.
What the hell do you think the toxic mortgages were?
You don't seem to even understand the words contained in your cut and paste posts!
"The type of fraud wasn’t specified, but one assumes it was mainly overstatement of income."
That fully supports what I posted:
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability. Similarly, banks were expected by regulators to relax income requirements.
Hence the overstated income.
@joethefarmer...The fraud committed was exchanging the mortgages agree upon with high interest rate ARMs, unknown to the borrower.
I'll not do your research for you, go to the FBI site and educate yourself.
Your lack of knowledge about the mortgage fraud problem is dumbfounding.
Every buyer signs a HUD loan form at closing that clearly states the terms of the loan. The interest rate is clearly listed.
Here is a 5 year chart 2007-2012 of ARM rates. Notice they never went above 6%. They were even higher in the late 1990s
http://www.bankrate.com/funnel/graph/?&cat=2&state=zz&d=1825&t=Line&ids=341
@JoeTheFarmer...Your a complete idiot..
Here is just one mortgage lender.
In the first two parts of this three-part series, we examined how a speculative mania had engulfed the housing market during the bubble years of 2004-2005 and then how it was financed by a total collapse in lending standards by the mortgage industry. In this final segment, we will explore how widespread mortgage fraud undermined the housing market and helped to bring it crashing down.
Fraud for Profit Schemes
AFG Financial was no ordinary mortgage brokerage firm. Last July, Manhattan D.A. Robert Morganthau announced an indictment of the principals in a press release which declared that "AFG's business model was focused solely on defrauding the lending banks of millions of dollars."
According to the press release, here is how it worked. Property locators were paid to find suitable properties for their scams, usually homes owned by people in financial distress. Other paid recruiters found what have become known as "straw buyers" with good credit ratings to stand in for the real buyers. They were told that they would be well paid, often receiving a small upfront fee, and that they would not have to make any mortgage payments.
Then the conspirators swung into high gear. Forgeries and fraudulent documents were used to enhance the straw buyer's creditworthiness. Forged W-2s and bank statements were created to inflate the straw buyer's income and assets so the maximum amount of money could be borrowed. Corrupt appraisers provided inflated appraisals for the property, much higher than its market value. Bank employees who were part of the conspiracy verified that the bank statements were accurate. Co-conspirators employed at lenders such as Countrywide and New Century Mortgage made sure that loan applications were processed quickly without any due diligence.
At the sale closing, lawyers were brought in to make sure that everything went smoothly, that no one asked any questions, and that the bulk of the sale proceeds went to the AFG principals. Title company principals made sure that funds which were supposed to go to the sellers ended up in a shell account controlled by the AFG owners. The conspirators were so brazen that in one transaction, they created a sham appraisal with a stated value of over $500,000 for a 2-family home which was, in reality, only a vacant lot.
he net result of their fraudulent schemes was that the AFG principals walked away with most of the cash which was supposed to go to the sellers, nearly $12 million. Since they made only a few loan payments at most, the houses went quickly into default and then foreclosure leaving the straw buyers with ruined credit and the banks with worthless mortgages.
By creating these phony residential sales between mid-2005 until the end of 2007, the co-conspirators were charged with defrauding the banks of more than $12 million. The D.A.'s press release concluded by stating that, in total, the defendants appeared to have defrauded the banks of more than $100 million and that the investigation was continuing.
I can find more like this one however as your post states "AFG Financial was no ordinary mortgage brokerage firm"
This is nothing compared to the majority of risk that was taken on by mortgage brokers totaling hundreds of billions not millions.
@Joethefarmer...Yes "AFG" was no ordinary mortgage broker, they where an organized crime group!
Did you not read my entire post? Fraud was what collapse the Housing bubble.
Respond to that and not some straw man.
@JoeTheFarmer...Here is part 2, you moron.
If you think this highly organized mortgage fraud gang was a rare exception, you would be wrong. Similar fraudulent rings could be found in nearly every state during the bubble years. Why? Two main reasons. First, there was big money to be made. Second, the FBI's white collar crime budget for fraud had been emasculated by the focus placed on radical Islamic terrorists after 9/11.
The type of fraud perpetrated by the AFG gang became known as "Fraud for Profit." We can also include "house flipping" under this category. Flipping a residence has always been a part of the real estate market. A flip was usually where an investor bought a house, often a fixer-upper, then resold it quickly at a substantial markup.
In a five-part series published in July 2009, however, the Miami Herald Tribune declared that house flipping became a national pastime during the bubble years and that Florida had become "one of the key playgrounds" where fraudulent flipping "ran rampant." Its massive year-long research and review of 19 million real estate transactions found fraudulent flips in at least 50,000 of them during the last decade. The authors argued that suspicious fraudulent flips in Florida involved some $10 billion dollars. Professor William Black, one of the nation's foremost authorities on real estate fraud, believed that this figure was much too conservative.
Lying Became the Ticket to Real Estate Speculation
In September 2004, the FBI reported that there was a "growing epidemic" of mortgage fraud in the country that could eventually cause the collapse of the housing market. No one paid much attention. After all, this was right in the middle of the housing bubble, home prices were soaring, and nearly all homeowners felt wealthier because of it.
The following July, a syndicated real estate columnist named Ken Harney wrote an article asserting that there was widespread and growing fraud in mortgage applications which was "a multi-billion dollar problem." Still no reaction.
Then in September 2005, a firm named the Prieston Group which insured against mortgage fraud announced that in the first half of that year, the most prevalent type of mortgage fraud - 53% of all claims -- was something called "occupancy fraud." This fraud involved an investor who falsely claimed on the mortgage application that he/she intended to occupy the property as a primary residence.
Speculators had good reason to lie about intending to occupy a purchased property. Because owner-occupied houses had lower rates of default than investor-owned properties, lenders would give owner occupants an interest rate that could be as much as 40% lower than what they gave an investor. They would also require a smaller down payment as well as lower cash reserves. With stated income loans which did not require documentation of a borrower's income having become so widespread by 2005, the temptation of a speculator to lie on the application to obtain mortgages for one or more properties became irresistible.
The Prieston report claimed that based on its experience, as much as 10% of all mortgage applications involved fraud and that 25% of all foreclosures involved some kind of application misrepresentation. It turns out that these estimates may be much too low.
A previous REAL ESTATE CHANNEL article entitled Investors Played a Key Role in Creating Housing Bubble cited a 2009 Florida study which found that 44% of all foreclosures in Hillsborough County between 2007 and 2009 were on homes owned by investors who did not occupy their properties. An earlier 2005 study of that same county had reported that 40% of all homebuyers in 2004 did not apply for a homestead tax exemption because they admitted being non-occupant investors. If you add to this the large number of buyers who lied about being an owner-occupant to obtain the tax exemption, it seems clear that a majority of 2004 buyers in this county were speculators.
This egregious lying by speculators about intending to live in the property is illustrated by an article which appeared in the Arizona Republic in November 2005. It described a Phoenix attorney who was surprised to learn that nobody there was checking for mortgage fraud. So he did some checking on his own. A spot search of public records found large numbers of homeowners with two or more of their properties listed as owner-occupied. One property owner actually had fifteen of his houses listed as owner-occupied. Apparently no one else had ever looked into this or even cared.
@JoeThefarmer;;Here's part three ...you complete ass.
The domination of the housing market by speculators in key bubble metros is also shown by an August 2005 study of house flipping put out by First American Core Logic. It found that in 2004, nearly 45% of all home sellers in the Las Vegas and Miami-Dade metro areas were flippers who had purchased the property within the previous two years. In Orange County, California, nearly 30% of all home sellers were similar flippers. In two zip codes of Las Vegas, 40% of these flippers had bought the property within the previous 12 months.
How much lying on applications was done by investors during the bubble years in hot markets such as California, Florida, Las Vegas, Chicago and Phoenix? An incredible amount. The comprehensive report on the nonprime mortgage market sent to Congress by the GAO in July 2009, which was referenced in a previous REAL ESTATE CHANNEL article, Terms of Endearment: How the Speculative Madness Was Financed, found that 92% of all subprime borrowers in 2004-2006 claimed that they were owner-occupants. Incredible! This was outright lying by millions of mortgage borrowers which was encouraged by lending institutions that were simply not interested in checking.
Mortgage Brokers and the Liar Loan
As I explained in the second article of this 3-part series, Terms of Endearment, commission-based mortgage brokers had become the source for a majority of all nonprime mortgages applications during the bubble years of 2005-2006. At its peak, there were nearly 90,000 brokers around the nation in more than 50,000 small firms. Many states did not have any licensing requirements for mortgage brokers. It was much like the Wild West. Telemarketing was the favorite tool for finding loan applicants. These brokers took the information from applicants, sent it on to the wholesale lenders and received a commission for all mortgage applications which were accepted by lending giants such as Countrywide and New Century Mortgage.
A May 2007 article in the Washington Post described what it was like inside New Century, one of the largest subprime lenders in the industry. In one of the offices, the atmosphere was described by an employee as resembling a fraternity -- the average age was only 23.
The article portrayed the plight of one woman in underwriting whose job was to weed out bad mortgage applications that were probably fraudulent. She explained to the author that as soon as you rejected a loan, the whole office was immediately notified: "Two guys would come with a bat and they were all ticked off because you cut their deals." One salesman used the intimidating method of banging the sides of nearby desks with a baseball bat and yelling expletives as he approached her. She claimed that she was eventually fired for rejecting too many weak loan applications. Other employees interviewed by the author said they quit because they could not take the pressure of "unofficial quotas" of loans that had to be approved each day.
LOL ! The agencies that Congress pushed to keep escalating the conforming loan limit while decreasing their standards regarding the quality of loan they would buy were found not to be the problem by the very same Congress ! I'm shocked ! Of course, had they found otherwise, folks would trace the cause back to Congress, so maybe I shouldn't be so surprised after all.
good point on conforming loans--obama just raised it again, i think it's back to 725k, after being lowered in 2008 to 650k. when i bought my home in 1999 (which i astutely sold in 2005 and rented) it was 284k. almost tripled in 8 years (it was 725k in 2007).
I know. It's a bit pathetic.
Only a couple of years after we told the financial system to get it's house in order, we started complaining that they weren't lending. The banks said, "yes we are, just not to those who can't afford it." Unfortunately, that meant the recovery was going to take a long time, and that's not good for one's political career, so now we're off trying to relight the fire that consumed us before.
The fact is, we have a lot of houses that need to be cleared off the market. If the average rate of housing growth is x% per year and we have a 6 year bubble at 2x% per year, we have put an excess 6 years of housing on the market, and it will take 6 years before it's consumed and growth resumes (on average).
I think strongly that houses are still radically dislocated from incomes. people who could buy back in, such as myself, are usually smart enough to recognize this, and are not going to risk their capital in a downpayment of 25% which will disappear if i resell in, say, 10 years as the price of housing starts to match incomes and as banks stop lending at 40-65% of incomes--yes I know lots of people in the field (formerly), and the average had loan generation at a median of 52% of a person's income across all spectrum's of incomes (30k-300k). that is why this is not isolated to subprime. and why the economy is contracting--people mortgaged too much future income for the next 30 years.
Agree. The Fed, who everyone here seems to hate so much, is trying to help by monetizing our debt. We are in debt at the personal, local, state, federal, and international level. Inflation is appropriate. This seriously has to be the first popular uprising of people in debt over modern history in which the people are asking for hard money.
You might find my description of the 2008 crash and the Fed at http://occupywallst.org/forum/how-long-should-i-be-allowed-to-live-in-my-house-w/#comment-576142 interesting. I'd like to hear your comments.
rico, i read it, and while i am not so adoring of the fed, it's actions have muted the impact of this disaster. i agree that accountability is a bad idea... subject to the politcal winds of unknowing people. i agree that now, after what we've seen, rigorous, mandatory financial education at the high school level is clearly in order. since you seem astute in finance, i wonder what your thoughts are on whether the fed should dismiss the debt that the us government owes it in order to reduce the debt load--just today it announced that it relinquished back to the us treasury the interest earned on bonds from last year--i expect it will keep doing the same.
interesting point of fact from the website: "The Board and the Reserve Banks share responsibility for supervising and regulating certain financial institutions and activities, for providing banking services to depository institutions and the federal government, and for ensuring that consumers receive adequate information and fair treatment in their business with the banking system.
as you can see the fed. under greenspan was a colossal, abject failure on all fronts--failing of it's essential purpose. you probably saw "inside job", but that movie made more apparent to me how pernicious greenspan's tenure was.
The Fed can't just "dismiss" debt. Doing so breaks all the rules that underly an economy. It's like the "debt holiday" some advocate; we can certainly forgive everyone's debt, but what then do we say to those who have been responsible and not incurred a large debt load ? It's an unfair rule change. Worse, once people get the idea that you can be irresponsible and then be forgiven, the values that sustain the economy erode, and the system collapses. The US forgiving it's debt is the same thing among nations. Note, by the way, we didn't "forgive" the banks, we refinanced them with loans that have been repaid.
Greenspan may have had the economic chops, but he also operated from a strong philosophical stance (Ayn Rand), wasn't a very good leader of men, and got drunk on his celebrity. His poor leadership is evidenced by the how tightly he constrained the voices around him (notice how the other members of the board are now allowed to speak again), and that may have been driven by his taking his celebrity to mean his opinion was superior to all others on the board.
Greenspan was a poor leader of the Fed, but that doesn't mean we should eliminate the Fed anymore than we should eliminate the role of President because of Bush.
P.S. Yes, I saw "Inside Job" quite some time ago.
effectively, the fed did dismiss the debt, since today it announced that it handed back to the treasury all the interest it earned on the bonds (79 billion). i agree there is a moral hazard, since perhaps the politicians would presume they can spend without constraint if the debt is going to be dismissed. but i am not advocating that the private debt (between banks and customers or corporations) be dismissed, just that the fed dismiss P+I on all those treasuries it has soaked up.
The Fed has always returned the profits from its operations back to the Treasury. That's in their charter. Its routine profits include the fees it collects from the member banks, the interest it receives from them at the discount window, and the revenues derived from it's open market operations. If we let the Fed keep it's profits, we end up with a situation similar to "Iran/Contra," and the Fed may as well be a private bank (just as many assert).
Granted, it seems a little funny to first buy Treasury debt then return the interest back to the Treasury, but when you think about it, that's the right thing to do. The Fed is, after all, an agency of the US government.
The Fed buying as much Treasury debt as it has is not normal, it's part of "Quantitative Easing" used in emergency situations when the normal mechanisms are exhausted. We first tried the normal methods via the federal funds window, but those rates hit near zero without having the desired effect; there was simply no demand for loans, so lowering the rate had little impact on the money supply. By buying large amounts of Treasury debt, the Fed bypasses the demand problem and injects funds into the system independent of demand.
Per my prior comment, the US Government dismissing its own debt violates the rules between nations in a fashion similar to the way a consumer debt holiday violates the rules between citizens. Both undermine the foundations of the system.
i did not know that the fed ordinarily returned interest on bonds in it's portfolio to the treasury. i thought the interest received was held and lent to banks, so thought this was a provisional measure like QE and twist, to supplement the lack of demand on discount window take downs by banks who are borrowing at a far far slower pace than in the past. if it's not provisional, then the debt held by the fed, if dismissed, would have no effect. thus, it seems that at least the fed.-held part of that 15T in debt is illusory, since it merely represents a fund transfer to the straw man fed, who then pays it back. interesting. well now i hope they start QE3, since the arrangement is better than borrowing from the chinese (who cut us off, prompting QE1) and watching the money go elsewhere.
Dismissing debt is bad form and it violates social contracts between individuals and nations. The Fed never "dismisses" debt. It has a balance sheet that it always balances over the long term.
The purpose of the Fed is to smooth cycles and shocks into a more tolerable average; it's like a shock absorber. When banks get in trouble, it buys their long term assets in exchange for liquid cash. As the banks recover, it sells the assets. It does the same thing to intervene in the currency. When there's too little, it injects some by buying debt and manipulating bank reserve requirements ( indirectly via the discount window ) to expand lending and hence the money supply. When there's too much, it sells the debt instruments and raises the discount window rate. Its books always balance over the long term; it's only buffering short-term cycles and converting the excess or deficit into long term instruments.
People who understand the Fed know that it's going to have to pull all the money it's issuing under Quantitative Easing back onto its books at some point. It will do so by selling the instruments at very low return, and compensate by increasing the rate at its discount window as the economy heats back up. It's all legit and consistent with the social contracts underlying any economy precisely because the books are eventually balanced.
It is in fact cheaper for the Fed to buy our Treasuries than the Chinese because the Fed is a non-profit and they're not. On the other hand, Quantitative Easing is disruptive to the trade balances of the world, particularly when we do it because the dollar is the dominant reserve currency. The effect is generally positive for us (raising import costs and falling export costs), but only insofar as the other nations do not retaliate in kind. Thus far, the world has been tolerant because much of what we're doing is acknowledged to be in the interests of the world economy.
Most people don't know this, but the actions of all the world's banks are coordinated by the oldest international bank in the world, the Bank for International Settlements established after World War One. Their agreements are codified in the Basel Accords, and were currently working to implement Basel III which contains many of the lessons learned from the events of 2008. See my post at http://occupywallst.org/forum/amateur-economists-read-this/ .
It's good to have smart knowledgeable people on here--i checked out the link and read quite a bit. I agree that dismissing the debt is not a good solution to the enormous 15T problem, but it appears that is taken care of by the straw man, circular nature of QE, which has the same effect as dismissing the debt, albeit much more subtle. if you look at substance over form. the debt problem is compounded by the fact that tax receipts are down from lower personal incomes and lower income from many other sources, as well as the apparent fact that nobody can raise taxes or cut spending in congress--in other words, they cannot do what needs to be done--i.e., they cannot do their job. I agree that the world has been surprisingly tolerant to QE, as we have started what seems like a race to the bottom on currency devaluation (i.e., a "hidden tax" that we'll agree to call inflation); however, I doubt currency devaluation can cure the enormous trade imbalance since our cost-structure, that is, labor rates dictated by a high standard of living, lead to cost of production that are too high relative to the rest of the world. a curious question--why would the austrians be upset? this is exactly the result they would predict: credit expansion leads to a disaster, which is resolved through either: 1) contraction/depression (which we're undergoing now); or 2) currency collapse. that is, at least according to von mises. we've chosen to suffer both.
@Rico....Why are you shocked?
I clarified my comment to make what was sarcastic more explicit.
@rico...your being foolish.
Yea, I know. I'm hoping all will be revealed as I leave my deathbed and walk toward the bright light. Until that moment, I suspect we're all a bit foolish ;o)
@Rico...Hate to be a wet blanket, but there is no bright light. Just nothingness , your dead!
Yea, well your mother wears combat boots ! ;o)
@Rico...Typical intelligent reply from someone who has no response to the truth.
Some of this was also caused by people buying more than they could afford or "trying to keep up with the Jone's"
"caused by people buying more than they could afford or "trying to keep up with the Jone's"
and lenders, the gatekeepers of the amount of debt in our economy, approving loans to "people buying more than they could afford or "trying to keep up with the Jone's"
@Wallgreed...It was caused by fraud in the mortgage lending institutions. See the FBI report on fraud in the mortgage lenders 2002-2008.
Henry Ford said, “It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
We are beginning to understand, and Occupy Wall Street looks like the beginning of the revolution.
We are beginning to understand that our money is created not by the government, but by banks. Many authorities have confirmed this, including the Federal Reserve itself. The only money the government creates today are coins, which compose less than one ten-thousandth of the money supply. Federal Reserve Notes, or dollar bills, are issued by Federal Reserve Banks, all twelve of which are owned by the private banks in their district. Most of our money comes into circulation as bank loans, and it comes with an interest charge attached.
According to Margrit Kennedy, a German researcher who has studied this issue extensively, interest now composes 40% of the cost of everything we buy. We don’t see it on the sales slips, but interest is exacted at every stage of production. Suppliers need to take out loans to pay for labor and materials, before they have a product to sell.
For government projects, Kennedy found that the average cost of interest is 50%. If the government owned the banks, it could keep the interest and get these projects at half price. That means governments—state and federal—could double the number of projects they could afford, without costing the taxpayers a single penny more than we are paying now.
This opens up exciting possibilities. Federal and state governments could fund all sorts of things we think we can’t afford now, simply by owning their own banks.
http://www.webofdebt.com/articles/rights.php
@PublicCurrency...Henry Ford also spied on his employees to determine if they where living up to his personal moral code.
Why do you think putting anything in the hands of government would eliminate abuse and corruption?
There is more corruption and waste in the government that there will ever be in the private sector.
@Joethe farmer...Its the Government that runs the Military, its the government that has never missed a SS payment, its the Government that runs veterans Hospitals, Its the Government that protects binding contracts, its the Government that preserves the separation of church and state. I could go on all day but you get my point.
chuck1al OK, You go on trusting the government.
I volunteer in both a private and VA hospitals in NJ and NY providing computer access controls to private citizens and veterans with physical disabilities. I can tell you that the VA hospitals are poorly run and somewhat disgraceful. I really feel bad for anyone coming back with serious injuries.
I am not against the concept of government. Sure the government should resolve our disputes. I am against them running a business that are better off in the private sector. I would rather private hospitals compete for government funding to provide services to veterans.
@JoeTheFarmer...The private sector is motivated by profits, lowest bidders, and therefor would not do an adequate job of caring for our veterans.
The main problems with the VA system is lack of an adequate budget which is political.
Actually the private hospitals are mostly non profit and the ones I have done work in are better than and VA hospital I have been in.
Meridian, Children's Hospital Of Philadelphia and St Jude's are an awesome examples.
@Joefarmer...Non-profit hospitals are not private sector free market hospitals....Make up your mind free market or charity hospitals.
Non profit hospitals absolutely are private sector free market hospitals.
The government has nothing to do with them.
You really are stupid.
@Joethefarmer ...Charity hospitals cannot be consider free market enterprises, because they produce no profit.
You really are stupid.
A completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely.
You really are stupid.
@JoeTheFarmer.....No I'm not stupid, but you have an extreme lack of intelligence.
Transact freely without Government enforcement of contracts is the height of stupidity. The Libetarianism is the root that nonsense.
You said
"Charity hospitals cannot be consider free market enterprises, because they produce no profit."
That is completely wrong and shows a complete lack of understanding of economic and political systems.
@Joethefarmer....You didn't reply to my Debunking your erroneous theory.
Constitution of the United States Article 1 Section 8 The Congress shall have Power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Our monetary system is the root of our many problems . . .
"The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” – Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
“I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson
… "The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating." -Thomas Jefferson
"If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations." -Andrew Jackson
"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." -Abraham Lincoln
"Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands." – Theodore Roosevelt
“The bank hath benefit of interest on all moneys which it creates out of nothing.” William Paterson, founder of the Bank of England in 1694, then a privately owned bank
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).
As Nicolas Trist – secretary to President Andrew Jackson – said about the incredibly powerful privately owned Second Bank of the United States, “Independently of its misdeeds, the mere power, — the bare existence of such a power, — is a thing irreconcilable with the nature and spirit of our institutions.” (Schlesinger, The Age of Jackson, p.102)
[Removed]
@ PublicCurrency....When has any Bank in the modern era issued its own money?
Our money is created not by the government, but by banks. Many authorities have confirmed this, including the Federal Reserve itself.
http://dallasfed.org/educate/everyday/ev9.html
The only money the government creates today are coins, which compose less than one ten-thousandth of the money supply.
Federal Reserve Notes, or dollar bills, are issued by Federal Reserve Banks, all twelve of which are owned by the private banks in their district.
Most of our money comes into circulation as bank loans.
@publiccurency..The US treasury prints all American monies.
The Federal Reserve Note is a type of banknote used in the United States of America. Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing on paper made by Crane & Co. of Dalton, Massachusetts. They are the only type of U.S. banknote that is still produced today [1] and they should not be confused with Federal Reserve Bank Notes.
Federal Reserve Notes are authorized by Section 411 of Title 12 of the United States Code and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System.[2] The notes are then put into circulation by the Federal Reserve Banks.[3] Once the notes are put into circulation, they become liabilities of the Federal Reserve Banks[4] and obligations of the United States.[2]
Federal Reserve Notes are legal tender, with the words "this note is legal tender for all debts, public and private" printed on each note. (See generally 31 U.S.C. § 5103.) They have replaced United States Notes, which were once issued by the Treasury Department. Federal Reserve Notes are backed by the assets of the Federal Reserve Banks, which serve as collateral under Federal Reserve Act Section 16. These assets are generally Treasuries which have been purchased by the Federal Reserve through its Federal Open Market Committee in a process called monetizing the debt. (See Monetization.) This monetized debt can increase the money supply, either with the issuance of new Federal Reserve Notes or with the creation of debt money (deposits). This increase in the monetary base leads to larger increase in the money supply through the fractional-reserve banking as deposits are lent and re-deposited where they form the basis of further loans.
For documentation follow the link:
http://en.wikipedia.org/wiki/Federal_Reserve_Note
@PublicCurrency...All is factual information, Your point is what exactly?
@chuck1al
You asked for my point . . .
Your statement, "The US treasury prints all American monies," is inaccurate and misleading. Your statement implies that our government is printing our money, and this is not the case. A private banking cartel issues and controlls our monetary system for their personal benefit at our expense.
Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing at the discretion of the Board of Governors of the Federal Reserve System
@PubilcCurrency....You are in error...And completely full of shit.
The Bureau of Engraving and Printing (BEP) is a government agency within the United States Department of the Treasury that designs and produces a variety of security products for the United States government, most notable of which is paper currency for the Federal Reserve.
You Said: "Federal Reserve Notes are printed by the United States Bureau of Engraving and Printing at the discretion of the Board of Governors of the Federal Reserve System"
The Board of Governors is a Federal Agency.
The presidentially appointed Board of Governors (or Federal Reserve Board), an independent federal government agency located in Washington, D.C.
the Federal Reserve does not have the authority to print or create money. Though the printing of money is physically done by the Department of the Treasury, that agency is told by the Federal Reserve how much to print. The Federal Reserve also does "regulate the value" of the U.S. Dollar through its various operations, as authorized by Congress.
You said: "A private banking cartel issues and controlls our monetary system for their personal benefit at our expense."
There is no private banking Cartel controlling our monetary system. This is false information.
All of that had nothing to do with my question. I did not say the government should not issue currency.
My question was.... Why do you think putting anything in the hands of government would eliminate abuse and corruption?
@Joethefarmer...Who's hands would you put it in, the company's? The government is elected by the people for the people , your paranoid rants don't change that fact.
LOL
I could go on all day...
Waste of the people's money , corruption by the people, abuse of the power, arrogance toward the people,
@JoeTheFarmer....Well your first item is false, the Government is allowed by law to borrow from the SS surplus and pay it back with interest.
So unless the USA ceases to exits there is no problem.
I didn't bother with the rest of your points, seeing as your main bone of contention was so off base.
OK I guess we will continue to disagree. You just go on trusting politicians and their cronies. Me I will continue not trusting them based on the performance I see.
I am have put my faith in the private sector. My IRAs and 401Ks are doing much, much, much better than what the government did with my Social Security. It is a shame I could not have kept and invested the money they took from me so they could "borrow" it. I would be a wealthy man.
@joethefarmer...SS has a 2.8 trillion dollar surplus and has never missed a payment, so what are you talking about?
The private sector committed widespread fraud on the consumer with their lobbying efforts they reduced over-site.
So keep on trusting the untrustworthy .
My retirement investments over the past 20 years are about equal to what they took out of my paycheck and are worth over $1,300,000. All I am saying is I am getting a better return in the private sector.
My Social Security my not be there at all.
Let's look at the SSI Web page concerning solvency
The last 5 Trustees Reports have indicated that Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) Trust Funds would become exhausted between 2036 and 2041 under the intermediate set of economic and demographic assumptions provided in each report. If no legislative change is enacted, scheduled tax revenues will be sufficient to pay only about three fourths of the scheduled benefits after trust fund exhaustion. Many policymakers have developed proposals and options to address this long-range solvency problem.
http://www.ssa.gov/OACT/solvency/
Stick that into you Nationalized Crap Filled Hat.
@Joethefarmer...your 401k might not be there either.
@chuck1loser
My 401k will be there because it is diversified and I keep my eye on it, make changes when necessary
@Joethefarmer...Your SS will be there without doing anything.
Our money is created not by the government, but by banks. The only money the government creates today are coins, which compose less than one ten-thousandth of the money supply. Federal Reserve Notes, or dollar bills, are issued by Federal Reserve Banks, all twelve of which are owned by the private banks in their district.
Constitution of the United States Article 1 Section 8 The Congress shall have Power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Our monetary system is the root of our many problems . . .
When our government does not follow our laws. . . We the people MUST find a solution . . . if we are to be a nation ruled by law rather than a tyranny.
@PublicCurrency....you are spreading a false doctrine....
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States.
It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907. Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved. Events such as the Great Depression were major factors leading to changes in the system.
The Congress established two key objectives for monetary policy--maximum employment and stable prices--in the Federal Reserve Act. These objectives are sometimes referred to as the Federal Reserve's dual mandate.
Its duties have expanded over the years and today, according to official Federal Reserve documentation, include conducting the nation's monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions.
The Fed also conducts research into the economy and releases numerous publications, such as the Beige Book.
The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors (or Federal Reserve Board), the Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous privately owned U.S. member banks and various advisory councils.
The FOMC is the committee responsible for setting monetary policy and consists of all seven members of the Board of Governors and the twelve regional bank presidents, though only five bank presidents vote at any given time.
The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. The result is a structure that is considered unique among central banks.
It is also unusual in that an entity outside of the central bank, namely the United States Department of the Treasury, creates the currency used.
Only the Federal Reserve Board of Governors is appointed by the President and confirmed by Congress.
The Board of Governors consists of SEVEN MEMBERS and they serve FOURTEEN YEAR TERMS.
The President selects the first appointment during his second year in office. Therefore a President would be in his EIGHTH YEAR of office before a majority could be appointed !
The 12 Federal Reserve Banks are owned exclusively by the member banks of their districts. This is a matter of law and anyone may read the Federal Reserve Act.
Since the 1960's the Federal Reserve Banks are required to return to the U.S. Treasury all profit above 6%. But there IS NO AUDIT.
The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations (i.e., the Fed's buying and selling of United States Treasury securities). It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money supply. It is the principal organ of United States national monetary policy. The Committee sets monetary policy by specifying the short-term objective for the Fed's open market operations, which is currently a target level for the federal funds rate (the rate that commercial banks charge between themselves for overnight loans).
The current structure of the FOMC consists of twelve voting members: the seven members of the Federal Reserve Board of Governors and five of the twelve Federal Reserve Bank presidents. The Federal Reserve Bank of New York president always sits on the Committee, and the other presidents serve one-year terms on a rotating basis.
The FOMC also directs operations undertaken by the Federal Reserve System in foreign exchange markets, although any intervention in foreign exchange markets is coordinated with the U.S. Treasury, which has responsibility for formulating U.S. policies regarding the exchange value of the dollar.
http://en.wikipedia.org/wiki/Federal_Open_Market_Committee
@PublicCurnecy....You said..."Since the 1960's the Federal Reserve Banks are required to return to the U.S. Treasury all profit above 6%. But there IS NO AUDIT".
The Facts:
The Federal Reserve's annual financial statements are audited by an outside auditor. Similar to other government agencies, the Federal Reserve maintains an Office of the Inspector General, whose mandate includes conducting and supervising "independent and objective audits, investigations, inspections, evaluations, and other reviews of Board programs and operations." The Inspector General's audits and reviews are available on the Federal Reserve's website.
The Federal Reserve System is NOT a government agency. The 12 banks are owned by the member banks which are under their supervision. (The supervised member banks own the supervisor Federal Reserve Banks). The employees are NOT civil servants. The 12 Federal Reserve Banks are not listed under government agencies in the telephone book etc. etc.
Even if the audit were accurate, a guarantee of 6% profit is very nice.
The banks which are supervised by the 12 Federal Reserve Banks (all FDIC Banks) are not limited to a 6% profit.
Constitution of the United States Article 1 Section 8 The Congress shall have Power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
Our monetary system is the root of our many problems . . .
"The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” – Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
“I believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson
… "The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating." -Thomas Jefferson
"If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations." -Andrew Jackson
"The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity." -Abraham Lincoln
"Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to…provisions [which] would place our currency and credit system in private hands." – Theodore Roosevelt
“The bank hath benefit of interest on all moneys which it creates out of nothing.” William Paterson, founder of the Bank of England in 1694, then a privately owned bank
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).
As Nicolas Trist – secretary to President Andrew Jackson – said about the incredibly powerful privately owned Second Bank of the United States, “Independently of its misdeeds, the mere power, — the bare existence of such a power, — is a thing irreconcilable with the nature and spirit of our institutions.” (Schlesinger, The Age of Jackson, p.102)
http://www.WebOfDebt.com
http://www.Monetary.org
http://www.TheMoneyMasters.com
@PublicCurrency...Your concern about the Fed approaches paranoia. I have no clue as to why you included all those statements for historical figures, this was before the Fed was created in 1913.
The US treasury prints all monies for the United States of America.
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act.
The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. The result is a structure that is considered unique among central banks. It is also unusual in that an entity outside of the central bank, namely the United States Department of the Treasury, creates the currency used.
The members of the Board of Governors, including its chairman and vice-chairman, are chosen by the President and confirmed by the Senate. The government also exercises some control over the Federal Reserve by appointing and setting the salaries of the system's highest-level employees. Thus the Federal Reserve has both private and public aspects.
the Board of Governors, is a federal agency.
The U.S. Government receives all of the system's annual profits, after a statutory dividend of 6% on member banks' capital investment is paid, and an account surplus is maintained. In 2010, the Federal Reserve made a profit of $82 billion and transferred $79 billion to the U.S. Treasury.
Key laws Key laws affecting the Federal Reserve have been:
Federal Reserve Act Glass–Steagall Act Banking Act of 1935 Employment Act of 1946 Federal Reserve-Treasury Department Accord of 1951 Bank Holding Company Act of 1956 and the amendments of 1970 Federal Reserve Reform Act of 1977 International Banking Act of 1978 Full Employment and Balanced Growth Act (1978) Depository Institutions Deregulation and Monetary Control Act (1980) Financial Institutions Reform, Recovery and Enforcement Act of 1989 Federal Deposit Insurance Corporation Improvement Act of 1991 Gramm-Leach-Bliley Act (1999) Financial Services Regulatory Relief Act (2006) Emergency Economic Stabilization Act (2008) Dodd-Frank Wall Street Reform and Consumer Protection Act (2010
Current functions of the Federal Reserve System include:
To address the problem of banking panics To serve as the central bank for the United States To strike a balance between private interests of banks and the centralized responsibility of government To supervise and regulate banking institutions To protect the credit rights of consumers To manage the nation's money supply through monetary policy to achieve the sometimes-conflicting goals of maximum employment stable prices, including prevention of either inflation or deflation moderate long-term interest rates To maintain the stability of the financial system and contain systemic risk in financial markets To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation's payments system To facilitate the exchange of payments among regions To respond to local liquidity needs To strengthen U.S. standing in the world economy
However that still has nothing to do with my question.
My question was.... Why do you think putting anything in the hands of government would eliminate abuse and corruption?
Obviously, abuse and corruption can be found in government but there is a role for government and there is a role for the private sector.
Over time, whoever controls the money system controls the nation.
The Constitution of the United States is the primary law of our nation. Our government should follow it.
"The Fed caused the crisis" is a bizarre meme that is incredibly widespread despite being based on literally no concrete, factual information. Out of all of the investigative reporting into the financial collapse, there are exactly zero authoritative sources claiming the Fed caused it. It's a weird urban myth that's mainly adopted by Tea Partiers and Paultards because it is ideologically convenient to blame anyone but the criminals in the internatn'l finance industry who took the money and ran as the whole thing collapsed.
The FED is a privately owned international bank. They have a MONOPOLY on the creation of currency. The currency is not money, it is a note. As in a promissory note. In other words an IOU. Imagine me giving you an IOU for the sale of your car and charging you 6% interest for having my IOU. That is the game. To pay back the money you think was borrowed by you (but was actually borrowed by me in the form of an IOU) You have to come to me and have me print more IOUs. You can never get out. Perpetual debt through trickery.
@TheEvilFuckaire...You are in complete error in your beliefs.
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States.
It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.
Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved. Events such as the Great Depression were major factors leading to changes in the system.
The Congress established two key objectives for monetary policy--maximum employment and stable prices--in the Federal Reserve Act. These objectives are sometimes referred to as the Federal Reserve's dual mandate.
Its duties have expanded over the years and today, according to official Federal Reserve documentation, include conducting the nation's monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions.
The Fed also conducts research into the economy and releases numerous publications, such as the Beige Book.
The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors (or Federal Reserve Board), the Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous privately owned U.S. member banks and various advisory councils.
The FOMC is the committee responsible for setting monetary policy and consists of all seven members of the Board of Governors and the twelve regional bank presidents, though only five bank presidents vote at any given time.
The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. The result is a structure that is considered unique among central banks.
It is also unusual in that an entity outside of the central bank, namely the United States Department of the Treasury, creates the currency used.
Jekyll Island is a real island that's off the coast of Georgia. It was on that island back in 1910 that the Federal Reserve System was created at a highly secret meeting that took place there.
http://www.bigeye.com/griffin.htm
@PublicCurrency....Bullshit.
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.
Back in 1910, Jekyll Island was completely privately owned by a small group of millionaires from New York. We're talking about people such as J. P. Morgan, William Rockefeller and their associates. This was a social club and it was called "The Jekyll Island Club." They owned the island and it was where their families came to spend the winter months. There was a magnificent structure there, the clubhouse, which was the center of their social activities. That clubhouse is still there, by-the-way. The island has since been purchased by the state of Georgia, converted into a state park and the clubhouse has been restored and you can visit it. I think you'd be very impressed by it. As you walk through the downstairs corridors you'll come to a door and on the door there is a brass plaque and it says: "In this room the Federal Reserve System was created." This is not a secret anymore; it's a matter of public record. Around the clubhouse there were some cottages as they were called which were built by some of the families to quarter themselves. They're attractive little things; they were magnificent examples of the architecture of the turn of the century. One of the cottages through which they take tours if you're interested in doing that, as I recall the guide told us that there were 14 bathrooms in that cottage--not exactly what we would call a cottage.
The clubhouse is where the Federal Reserve System was created.The year was 1910, that was three years before the Federal Reserve Act was finally passed into law. It was November of that year when Senator Nelson Aldrich sent his private railroad car to the railroad station in New Jersey and there it was in readiness for the arrival of himself and six other men who were told to come under conditions of great secrecy. For example, they were told to arrive one at a time and not to dine with each other on the night of their departure. They were told that should they arrive at the station at the same time they should pretend like they didn't even know each other. They were instructed to avoid newspaper reporters at all cost because they were well-known people and had they been seen by a reporter they would've asked questions. Especially if two or three of them had been spotted together, this would've raised eyebrows and they would've asked a lot of questions. One of the men carried a shotgun in a big black case so that if he had been stopped and asked where he was going he was prepared to say that he was going on a duck hunting trip. The interesting thing about that part of the story is that we find out later from his biographer that this man never fired a gun in his life, in fact he borrowed that shotgun just to carry with him on this trip as part of the deception.
Once they got on board the private railroad car this pattern continued. They were told to use first names only, not to use their last names at all. A couple of the men even adopted code-names. The reason for that is so that the servants on board the train would not know who these people were. They were afraid that if the servants would talk about it then the word would leak out and it might get into the press. They traveled for two nights and a day on board this car and they arrived after a 1,000 mile journey to Brunswick, Georgia. From there they took a ferry across the inland straits and they ended up on Jekyll Island in the clubhouse where for the next nine days they sat around the table and hammered out all the important details of what eventually became the Federal Reserve System. When they were done they went back to New York.
For quite a few years thereafter these men denied that any such meeting took place. It wasn't until after the Federal Reserve System was firmly established that they then began to talk openly about their journey and what they accomplished. Several of them wrote books on the topic, one of them wrote a magazine article and they gave interviews to newspaper reporters so now it's possible to go into the public record and document quite clearly and in detail what happened there.
These were the seven men aboard that railroad car who were at Jekyll Island. Amazing as it may seem, they represented approximately 1/4 of the wealth of the entire world. These are the men that sat around the table and created the Federal Reserve System.
Follow the link to find documentation:
http://www.bigeye.com/griffin.htm
@what are your sources?
By privately owned you mean their surpluses go directly into the US Treasury and the people that run it are appointed by the President and confirmed by Congress?
Unfortunately the President and Congress are privately owned by the 1% and therefore Fed appointees are typically Wall Street people - it's called regulatory capture.
"The Federal Reserve System's structure is composed of the presidentially appointed Board of Governors (or Federal Reserve Board), the Federal Open Market Committee (FOMC), twelve regional Federal Reserve Banks located in major cities throughout the nation, numerous PRIVATELY OWNED U.S. member banks and various advisory councils. The Federal Reserve System has both private and public components, and was designed to serve the interests of both the general public and private bankers. Its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government."
http://en.wikipedia.org/wiki/Federal_Reserve_System
You said this, "Unfortunately the President and Congress are privately owned by the 1% and therefore Fed appointees are typically Wall Street people - it's called regulatory capture." That is correct.
http://www.youtube.com/watch?v=d9_nHOeKWgI
http://www.youtube.com/watch?v=YimTs6Q_xD0&list=FLEwSllwonAZBCc7W3e27_dQ&index=21&feature=plpp_video
Yes, certain "components" are privately owned, but like I said, the people that RUN it are government employees confirmed by congress.
Only the Federal Reserve Board of Governors is appointed by the President and confirmed by Congress.
The Board of Governors consists of SEVEN MEMBERS and they serve FOURTEEN YEAR TERMS.
The President selects the first appointment during his second year in office. Therefore a President would be in his EIGHTH YEAR of office before a majority could be appointed !
The 12 Federal Reserve Banks are owned exclusively by the member banks of their districts. This is a matter of law and anyone may read the Federal Reserve Act.
Since the 1960's the Federal Reserve Banks are required to return to the U.S. Treasury all profit above 6%. But there IS NO AUDIT.
The Federal Open Market Committee (FOMC), a committee within the Federal Reserve System, is charged under United States law with overseeing the nation's open market operations (i.e., the Fed's buying and selling of United States Treasury securities). It is the Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money supply. It is the principal organ of United States national monetary policy. The Committee sets monetary policy by specifying the short-term objective for the Fed's open market operations, which is currently a target level for the federal funds rate (the rate that commercial banks charge between themselves for overnight loans).
The current structure of the FOMC consists of twelve voting members: the seven members of the Federal Reserve Board of Governors and five of the twelve Federal Reserve Bank presidents. The Federal Reserve Bank of New York president always sits on the Committee, and the other presidents serve one-year terms on a rotating basis.
The FOMC also directs operations undertaken by the Federal Reserve System in foreign exchange markets, although any intervention in foreign exchange markets is coordinated with the U.S. Treasury, which has responsibility for formulating U.S. policies regarding the exchange value of the dollar.
http://en.wikipedia.org/wiki/Federal_Open_Market_Committee
The board is made up of 12 privately owned banks. The FED functions as a fourth branch of the government which is privately owned and only partially publicly controlled. No fourth branch is authorized under the constitution. An act like the Federal Reserve Act does not equal a constitutional amendment. The small number of people who hold public positions are appointed not elected.
Really? Tim Geithner as head of the NY Fed had a hand in the 2008 financial calamity, that is, he got 100 cents on the dollar for the losers on wall st.. He may not have been a primary cause but he sure has facilitated the carnage we continue to see in the capital markets because of his refusal, in his capacity as treasury secretary (how convenient) to break down the too big to fail banks.
Conflict of interest at all levels of the Fed is a real, pressing issue, as is Too Big To Fail. But what isn't "real" is the idea that the Fed CAUSED the financial crisis.
One more thing, to call what went on with the Federal Reserve and Wall St. a conflict of interest is to not call it what it really was; a crime.
Why wouldn't a conflict of interest be interpreted as being a partial cause. Alan Greenspan as head of the Fed advocated for the repeal of Glass Steagall, and a free for all in the credit default swap market along with Robert Rubin and Larry Summers and against the protests of Brooksley Born back in the 90's. They all made it possible, and are equally responsible for the greedy bastards on wall st. that went hog wild.
Greenspan advocated for the repeal of Glass Steagall, so what? He was just being a good Libertarian/Objectivist, like the Ayn Rand disciple he was. The fact is, Congress repealed it as a result of a massive lobbying campaign coming from the financial services industry. Wall Street money runs DC, corruption at the fed is a symptom and not the cause.
Just wondering, do you know who the people are who run the federal reserve.
Gee I think I'd rather say that the Fed is the cause and the DC corrupt are the symptom. Wall St. and the Fed are one and the same. Greenspan, Rubin and Summers not only advocated for repeal of GS, they also got rid of people who might stand in their way, like Brooksley Born.
The federal reserve is still corrupt out the ass.
Is this the US congress or the board of directors meeting for Goldman Sachs??
http://www.youtube.com/watch?v=YimTs6Q_xD0&list=FLEwSllwonAZBCc7W3e27_dQ&index=21&feature=plpp_video
The federal reserve creates 7.7 trillion dollars out of thin air.
http://www.youtube.com/watch?v=d9_nHOeKWgI
The truth about the federal reserve
http://www.youtube.com/watch?v=u2KBpqiORkU&list=FLEwSllwonAZBCc7W3e27_dQ&index=10&feature=plpp_video
@ TrevorMnemonic....The Fed doesn't print money, the US treasury does.
The U.S. Treasury prints our bills at the request of the Federal Reserve. The cost to the Federal Reserve is for printing and it is the same for all denominations of bills IE:a stack of $1.00 bills is the same as $100.00 bills etc.
@PublicCurrency...The US treasury prints money as needed from input from more than one source and criteria, the fed being one.
How much it cost to print money means what?
[Federal Reserve Notes are authorized by Section 411 of Title 12 of the United States Code and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System.[2] The notes are then put into circulation by the Federal Reserve Banks.[3] Once the notes are put into circulation, they become liabilities of the Federal Reserve Banks[4] and obligations of the United States.[2]
Federal Reserve Notes are legal tender, with the words "this note is legal tender for all debts, public and private" printed on each note. (See generally 31 U.S.C. § 5103.) They have replaced United States Notes, which were once issued by the Treasury Department. Federal Reserve Notes are backed by the assets of the Federal Reserve Banks, which serve as collateral under Federal Reserve Act Section 16. These assets are generally Treasuries which have been purchased by the Federal Reserve through its Federal Open Market Committee in a process called monetizing the debt. (See Monetization.) This monetized debt can increase the money supply, either with the issuance of new Federal Reserve Notes or with the creation of debt money (deposits). This increase in the monetary base leads to larger increase in the money supply through the fractional-reserve banking as deposits are lent and re-deposited where they form the basis of further loans.
For documentation follow the link:
http://en.wikipedia.org/wiki/Federal_Reserve_Note
@PublicCurrency....Federal Reserve Notes are authorized by Section 411 of Title 12 of the United States Code and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System.
The Board of Governors for the Fed is a federal agency.
collateral for federal reserve notes are US Treasury Bonds, the most secure investment in the world.
What your point is I have no idea.
You're rambling is so simple minded.
I'm not usually inclined towards grammar nazism but if you're ("you are") going to accuse others of being simple minded, you should take care to exhibit a basic grasp of the English language. Unless it's your [SIC] second language in which case I retract my comment.
I ain't gonna argue bout the difference tween syntax and substance when it comes to simple mindedness.
Based on yer response I seems that you only read the title and did not watch the video.
@JoeTheFarmer...Anyone can upload video to U-tube.
I guess you did not watch. It was not a U-tube video
While anyone can upload a video, not everyone can do what John Allison did... take a $100 million dollar bank and turn it into a $230 billion dollar bank that refuses a government bailout. The man knows what he is talking about.
@JoeTheFarmer ...And his words of wisdom trump all others?
You don't believe that mismanagement by Greenspan was a big factor in the housing bubble? 'Cause I do. EDIT: oops, I guess I should watch the video before I comment.
@JesseHeffran....You can believe anything you care to, but the facts are that fraud in wall street and by mortgage lenders cause the financial crisis of 2007-2008. See the congressional report issued in 2011 on the causes of the financial crisis.
I understand that, but if Greenspan did his job and tightened the money supply and did not give his cheesy ass speech about irrational exuberance, then I believe the mortgage lenders would not have had the low interest rates to feed the bubble.
@JesseHeffran...What is it about mortgage lenders comitting fraud do you not understand.
Well, I've given you a few days to ponder your thoughts and hopefully got over your silly witch hunt. I see that a lot of people have the same perspective as i do. Although it is pleasing to blame a boogy man, mortgage lenders, are you ready to give some of that blame to Greenspan and his adulteration with the market. If not, I suggest you read his book, "age of turbulence"
@JesseHeffran...I was giving you time to research mortgage fraud, I see you declined too, so I will post a comprehensive account of the wide spread fraud you seem oblivious to.
Massive Fraud Finally Toppled the Subprime Mortgage Market
Lying by homebuyers using the stated income loan application became so flagrant and so massive that at an August 2006 Federal Reserve hearing, the President of an organization called The Mortgage Broker Association for Responsible Lending declared that stated income loans were "being used fraudulently in alarmingly high rates." He insisted that they "must stop now." To buttress his argument, he pointed to a recent review of 100 stated income loans by the Mortgage Asset Research Institute (MARI) which compared the loan applications to the borrowers' IRS tax returns (allowable under U.S. Treasury form 4506 signed by all applicants). The analysis found that 90% of all the applicants had exaggerated their income and more than half of these borrowers had inflated their actual incomes by more than 50%.
Another important report published in November 2007 by Fitch Ratings confirmed this pervasive loan fraud. They reviewed the loan files of 45 borrowers who had defaulted soon after taking out the mortgage. What they found shocked them: "there was the appearance of fraud or misrepresentation in almost every file." Multiple fraudulent entries were discovered in nearly every application.
Two-thirds of the applications in this Fitch report revealed occupancy fraud by investors who claimed that they were going to occupy the home. More than half had inflated appraisals. Over 40% had exaggerated income levels or questionable employment. Nearly one in five had credit reports of questionable ownership. One out of six showed evidence of straw buyer schemes or fraudulent flips. What was most damning was the review's assertion that these misrepresentations could have been detected with almost any diligent underwriting by the lender.
These findings by Fitch Ratings seemed to be confirmed in an April 2008 article written by Paul Jackson, publisher of the widely-read real estate publication, Housing Wire, who had seen estimates by mortgage insiders that anywhere from 40-70% of the entire pool of 2006-2007 nonprime mortgages were "fraudulent originations."
he evidence appears to be overwhelming that by 2006, mortgage fraud had reached epidemic proportions. Although the housing market still looked fairly strong to the public in 2006, warning signs were appearing inside New Century and other subprime lenders that a crisis was about to erupt.
A growing number of New Century's recent loans had been defaulting within the first few months after origination. Known within the industry as early payment defaults (EPDs), they had begun to exceed 10% of all originations in the second half of 2006. Because New Century was obligated to buy back any loans from institutional investors where the borrower failed to make the first payment, this was a serious problem. By the end of 2006, these loan "kickbacks" to the firm had reached 15% of new originations. New Century did not have the capital to absorb all these returns.
Industry insiders were baffled by the high rate of these early defaults. Some thought it was the result of homebuyers who had gotten in over their heads. Others said it was all those adjustable rate mortgages that had started to reset at much higher interest rates. Still others wondered whether it was all those speculators who could not flip their properties or refinance. What they completely overlooked was the massive number of defrauders who never intended to pay back the loans.
For example, let's take the scammer in New York City whom we will call L. V. At the end of 2006, he went on a two-month buying spree in which he purchased ten investment properties in south Queens by obtaining 20 mortgages from ten different banks putting little or nothing down on any of the purchases. Apparently none of the banks was interested in checking his other purchases to see whether he had the means to handle 20 mortgages. Of course, L. V. never told the banks that he had no intention of making the payments on any of these loans.
One by one, L. V. defaulted on the loans. By the end of 2007, eight of the homes were in foreclosure. Undeterred, he continued to collect rent from tenants whom he had put into these two-family homes. When the article about his scam appeared in a December 2009 New York Daily News article, he was trying to evict tenants from two of the properties for non-payment of rent even as foreclosure actions against him were proceeding.
By early 2007, one subprime lender after another was collapsing because of the avalanche of defaulting loans that investors were sending back to them. New Century filed for bankruptcy in April and the entire subprime market came to a screeching halt. All that fraud had finally caught up with them. The housing market would never be the same.
A May 2007 article in the Washington Post described what it was like inside New Century, one of the largest subprime lenders in the industry. In one of the offices, the atmosphere was described by an employee as resembling a fraternity -- the average age was only 23.
The article portrayed the plight of one woman in underwriting whose job was to weed out bad mortgage applications that were probably fraudulent. She explained to the author that as soon as you rejected a loan, the whole office was immediately notified: "Two guys would come with a bat and they were all ticked off because you cut their deals." One salesman used the intimidating method of banging the sides of nearby desks with a baseball bat and yelling expletives as he approached her. She claimed that she was eventually fired for rejecting too many weak loan applications. Other employees interviewed by the author said they quit because they could not take the pressure of "unofficial quotas" of loans that had to be approved each day.
The environment was not much different at another large mortgage lender - Long Beach Mortgage - which had been acquired by Washington Mutual (WaMu as it became known) in 1999. An article published by the Huffington Post in December 2009 described what went on there to carry out the unofficial directive of "How many loans can we push out [today]?"
The author researched mortgage records and court documents and interviewed numerous former employees. He found policies coming from top management and lax lending practices which "enabled fraud to run rampant." Former employees explained that these policies were treated by thousands of brokers as "an invitation to fraud." One former employee said that she "knew brokers who were doing fraudulent documents all day long." Another said that these lax standards led to New Century salespeople actually "coaching brokers how to fake documents."
A February 2008 article in the San Francisco Chronicle described how a broker coached the applicant to lie. The broker didn't tell her to lie, explained the applicant, but he just made strong suggestions. He asked her: "Are you sure you don't remember any more income, like alimony or consultancies, because if you made $80,000, we could get you into a better loan with a better interest rate and no prepayment penalty." The applicant told the author, "It was such a big differential that I felt I had to lie. I'm lying already so what the heck." So she told the broker, "Come to think of it, you're right, I did have another job that I forgot about."
Massive Fraud Finally Toppled the Subprime Mortgage Market
Lying by homebuyers using the stated income loan application became so flagrant and so massive that at an August 2006 Federal Reserve hearing, the President of an organization called The Mortgage Broker Association for Responsible Lending declared that stated income loans were "being used fraudulently in alarmingly high rates." He insisted that they "must stop now." To buttress his argument, he pointed to a recent review of 100 stated income loans by the Mortgage Asset Research Institute (MARI) which compared the loan applications to the borrowers' IRS tax returns (allowable under U.S. Treasury form 4506 signed by all applicants). The analysis found that 90% of all the applicants had exaggerated their income and more than half of these borrowers had inflated their actual incomes by more than 50%.
Another important report published in November 2007 by Fitch Ratings confirmed this pervasive loan fraud. They reviewed the loan files of 45 borrowers who had defaulted soon after taking out the mortgage. What they found shocked them: "there was the appearance of fraud or misrepresentation in almost every file." Multiple fraudulent entries were discovered in nearly every application.
Two-thirds of the applications in this Fitch report revealed occupancy fraud by investors who claimed that they were going to occupy the home. More than half had inflated appraisals. Over 40% had exaggerated income levels or questionable employment. Nearly one in five had credit reports of questionable ownership. One out of six showed evidence of straw buyer schemes or fraudulent flips. What was most damning was the review's assertion that these misrepresentations could have been detected with almost any diligent underwriting by the lender.
These findings by Fitch Ratings seemed to be confirmed in an April 2008 article written by Paul Jackson, publisher of the widely-read real estate publication, Housing Wire, who had seen estimates by mortgage insiders that anywhere from 40-70% of the entire pool of 2006-2007 nonprime mortgages were "fraudulent originations."
Read more: http://articles.businessinsider.com/2010-05-18/news/30097544_1_straw-buyers-afg-financial-inflated-appraisals/3#ixzz1j9vFSy6z
Thanks for the Info. I had heard about the LIAR loans and the NINJA ones too, and I have to concede that these brokers most likely played a bigger part in the crisis than Greenspan's refusal to raise the interest rates. I believe lack lending practices was the major cause, and strategic default was the last nail in the coffin. I'd say your article makes a great case for why regulation is needed, and unregulated markets are utopian fluff. Again, thanks for being patient with me and doing my home work for me.
big banks, big government - same thing. this is just mental masturbatory nitpicking. they all need to go.
Bigger banks would be the result of smaller, weaker government. Smaller banks, or at least more responsible ones, would be the result of a robust government protecting its citizens.
The banks got too big not because government was big, but because it didn't govern (aka regulate) effectively. Government behaved small.
true - i just like to call out the hypocrisy of folks who rail against big government but not big business. both can be equally dangerous to liberty.
Good point.
Greed caused the crisis. You think elimination of the fed will cure that? The problem is a lot more complex than such simplistic analysis implies.
I do not say anything about eliminating the Fed.
If there is a blood clot in the leg you do not cut off the leg you fix the clot.
Perhaps I misinterpreted you. Perhaps you could be more specific in you view that the fed. is the central element of the problem. I agree that it is one element of the problem, but I think it is merely a mechanism employed by those who represent that larger problem; those who themselves must be held to account, and stripped of their overweaning economic power of coersion.
That was the title of the video that you did not watch. Sure there were more players however they played a key role.
agreed
Thank you. This is what I enjoy most about this dialogue we are engaging in here. When we put our heads together we can arrive at truth, and real, unflinching truth is the only thing that can see us through this mess.
the truth is slowly getting out there and the people are wising up. the jig is up for the bankers and they have to begin playing by the same rules as the rest of us.
First we have to recover their fraudulently stolen gains from their numerous hidden bank accounts. Those amounts of money would make Midas blush.
JFK and the Private Banking Cartels
http://www.youtube.com/watch?v=pLhAmBOpEhc&feature=related
John F Kennedy, June 4, 1963, signed Executive Order 11110, which authorized the U. S. Treasury to print a new form of silver certificate, called the United States Note. Four billion dollars of this new cash money (free of debt, free of interest) was issued, enough to allow the nation to conduct its business without the involvement of the private Federal Reserve Bank.
Only 5 months later John F. Kennedy was shot by ‘the crazed lone nut.’ As soon as J.F.K. was buried, the United States Notes were pulled out of circulation and destroyed.
Why was John J. McCloy, former President of the World Bank President, former President of Chase Manhattan Bank, appointed to the Warren Commission? No matter kind of man McCloy was, he was not a homicide investigator.
John J, McCloy, former president of the World Bank President, former president of Chase Manhattan Bank, former chairman of the Council of Foreign Relations (established by J.D. Rockefeller), former Chairman Ford Foundation, former trustee of the Rockefeller Foundation.
and how we can fix it http://www.thesocialistrepublic.org/index.html
Anyone notice the faces of those three: Greenspan, Ruben, and Summers? as though they were saying to the world: "We will let you eat shit! All your money will go to our glorious King Solomon temple in Jerusalem where the next Superpower is born and we the greatest people will live on drinking blood of the Goyim."
heres a simple video http://www.youtube.com/watch?v=tGk5ioEXlIM :D
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
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End the FED... stop fractional reserve banking
http://washingtonexaminer.com/opinion/op-eds/2011/04/soros-and-friends-reorder-global-finance-new-bretton-woods
Interesting read...
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@JoeTheFarmer....The Fed was responding to the crisis, not causing it. I'm not saying the bailouts where in any way correct, or that the feds policy's where correct.
See the Congressional report on the causes of the 2007-2008 financial crisis, it was presented in 2011.
It was the Fed manipulating interest rates and the money supply, in combination with Fannie and Freddie and changes to the Community Reinvestment Act enabled the mortgage brokers and borrowers which in turn caused the crisis.
@Joethefarmer....Please read the congressional report on the causes of the 2007-2008 financial crisis.
It would save a lot of time for me, repeating myself, and put to rest your unwarranted theory.
I have read that and many other reports so give it up.
The first section of the report lists "High Risk Lending" as the primary cause.
The conclusion of the report list states as follows:
• The business model for Freddie Mac and Fannie Mae as publicly traded, profit-making companies, with government backing and a public mission, was fundamentally flawed.
• Goldman Sachs avoided at least a $19 billion loss when the federal government bailed out AIG.
• Enforcement of mortgage regulations by Alan Greenspan's Fed could have prevented the crisis.
• Credit-rating agencies were key enablers of the meltdown.
@Joethefarmer.....The Commission reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.
FBI report on Mortgage fraud:..
Mortgage fraud continued at elevated levels in 2010, consistent with levels seen in 2009. Mortgage fraud schemes are particularly resilient, and they readily adapt to economic changes and modifications in lending practices. Mortgage fraud perpetrators include licensed/registered and non-licensed/registered mortgage brokers, lenders, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, bank account representatives, and trust account representatives. Total dollar losses directly attributed to mortgage fraud are unknown. A continued decrease in loan originations from 2009 to 2010 (and expected through 2012), high levels of unemployment and housing inventory, lower housing prices, and an increase in defaults and foreclosures dominated the housing market in 2010. RealtyTrac reported 2.9 million foreclosures in 2010, representing a 2 percent increase in foreclosures since 2009 and a 23 percent increase since 2008. Analysis of available law enforcement and industry data indicates the top states for known or suspected mortgage fraud activity during 2010 were California, Florida, New York, Illinois, Nevada, Arizona, Michigan, Texas, Georgia, Maryland, and New Jersey; reflecting the same demographic market affected by mortgage fraud in 2009. Prevalent mortgage fraud schemes reported by law enforcement and industry in FY 2010 included loan origination, foreclosure rescue, real estate investment, equity skimming, short sale, illegal property flipping, title/escrow/settlement, commercial loan, and builder bailout schemes. Home equity line of credit (HELOC), reverse mortgage fraud, and fraud involving loan modifications are still a concern for law enforcement and industry. With elevated levels of mortgage fraud, the FBI has continued to dedicate significant resources to the threat. In June 2010, the Department of Justice (DOJ), to include the FBI, announced a mortgage fraud takedown referred to as Operation Stolen Dreams. The takedown targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in combating mortgage fraud. The current and continuing depressed housing market will likely remain an attractive environment for mortgage fraud perpetrators who will continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market. These methods will likely remain effective in the near term, as the housing market is anticipated to remain stagnant through 2011.
That's what I said. but you left out the conclusion:
The Commission concludes that the business model of Fannie Mae and Freddie Mac (the GSEs), as private-sector, publicly traded, proit-making companies with implicit government backing and a public mission, was fundamentally lawed. We ind that the risky practices of Fannie Mae—the Commission’s case study in this area—particularly from ???? on, led to its fall: practices undertaken to meet Wall Street’s expectations for growth, to regain market share, and to ensure generous compensation for its employees. Affordable housing goals imposed by the Department of Housing and Urban Development (HUD) did contribute marginally to these practices. The GSEs justiied their activities, in part, on the broad and sustained public policy support for homeownership. Risky lending and securitization resulted in signiicant losses at Fannie Mae, which, combined with its excessive leverage permitted by law, led to the company’s failure.
Corporate governance, including risk management, failed at the GSEs in part because of skewed compensation methodologies. The Oice of Federal Housing Enterprise Oversight (OFHEO) lacked the authority and capacity to adequately regulate the GSEs. The GSEs exercised considerable political power and were successfully able to resist legislation and regulatory actions that would have strengthened oversight of them and restricted their risk-taking activities.
In early 2008, the decision by the federal government and the GSEs to increase the GSEs’ mortgage activities and risk to support the collapsing mortgage market was made despite the unsound inancial condition of the institutions. While these actions provided support to the mortgage market, they led to increased losses at the GSEs, which were ultimately borne by taxpayers, and relected the conlicted nature of the GSEs’ dual mandate.
@Joethefarmer...did contribute marginally, is the key wording.
The repeal of Glass Steagall, failure to properly regulate derivative transactions (like credit default swaps), and yes, expansionary monetary (and fiscal) policy during the Bush administration, all caused the financial crisis. It was also the animal spirits of the market (that Keynes discusses in his general theory), but Glass Steagall insulated our commercial banking sector from the animal spirits of the market (which is why after the great depression, we didn't have a financial panic until 1989, following deregulation of Savings and Loan banks in 1980, whereas prior to the depression, we had a major financial panic about every 12 years).
and still, they won't reinstate Glass Steagall and they will continue to allow these institutions to basically sell uncovered options (on everything under the sun) with notional values that dwarf their capital by insane multiples.
Did you watch the video?
His point that while they added regulation there was little regulation on risk management.
The the repeal of GSA had more to do with the effect than the cause of the crisis. GSA prevented commercial banks from also being investment banks. So allowed the high risk to flow onto the commercial side of banking. That had little to do with the cause and rally more to do with the size of the problem. In fact the banks that failed Bear Sterns and Lehman Brothers were purely investment banks and not hybrids.
It was really changes to the Community Reinvestment Act that lead to higher risk taking. The changes to CRA allowed mortgage lenders to give out zero money down no interest loans to people with poor credit scores. Had the bad loans not been made in the first place we would not have had the crisis.
In my view that's inaccurate. CRA had little to do with the 2008 financial crisis, it was the repeal of Glass Steagall that was mostly responsible. All the studies I've seen show that loans given under CRA were a tiny fraction of defaults.
That is because you don't understand what the two acts are about.
The repeal of Glass Steagall allowed commercial banks to operate as investment banks. That do not cause the crisis that just allowed the banks to become larger. The banks that actually failed, Bear Sterns and Lehman Brothers were purely investment institutions so would have operated just as they were if GS was still enacted. The repeal of GS made the problem bigger but it was NOT the cause.
The changes made in the 1990s to the Community Reinvestment Act of 1977 combined with the Fed pushing interest rates down cause the crisis.
Regulators instructed banks to consider alternatives to traditional credit histories because CRA targeted borrowers often lacked traditional credit histories. The banks were expected to become creative, to consider other indicators of reliability. Similarly, banks were expected by regulators to relax income requirements.
Well, I disagree (largely because your view isn't supported by the empirical data). Before the repeal of Glass Steagall, subprime mortgages were only 5% of all mortgages, by 2008, they were 30% of all mortgages (whereas only a small percentage of risky loans originated as a result of CRA).
http://en.wikipedia.org/wiki/Community_Reinvestment_Act#Relation_to_2008_financial_crisis
Wikipedia Bwahahahahahah
"Wikipedia is the best thing ever. Anyone in the world, can write anything they want about any subject. So you know you are getting the best information" -- Michael Scott
That is improper modus ponens.
It's kind of like saying
Before the iPod was invented subprime mortgages were only 5% of all mortgages, by 2008, they were 30% of all mortgages Therefore the iPod caused the crisis.
Glass Steagall has nothing to do with subprime mortgages. It had to do with allowing COMMERCIAL banks to offer INVESTMENT products like mutual funds.
CRA had everything to do with mortgage regulations. Those regulations were relaxed once under Clinton and again under Bush all in the name of getting more people into homes. The Fed pushing down interest rates to near zero further inflated the balloon. Home prices were inflated higher than they would have been and should have been if those regulations were not relaxed.
Fair enough, but they do cite sources .... and while I'm not categorically saying you're wrong, you'll need to bring more than bare assertions to the table.
All I am saying is that many here are looking for ONE reason for the crisis. Many here blame Glass-Stegall. While that is the reason the problem got bigger it was not the cause. It was a combination high risk loans and low short term interest rates that caused the problem.
You have to remember the TV commercials... "Bad credit score... No problem... No money for down payment.... No problem!!!"
Yes, but those TV commercials were not targeting CRA eligible borrowers. It was just that easy to get a loan (even without CRA). Adjustable rate mortgages (where banks didn't even give a shit about having an income that could never support a conventional mortgage for that amount of money) was a big contributor to the problem. CRA is mostly about borrowers in what used to be "red lined" geographic areas (like poor inner city communities). Look at where most of the foreclosures are happening, in the suburbs, sun states, etc.
I just said there was not one reason. I never said CRA was the only reason. In fact the Fed, the brokers, and the borrowers were the main reason for the crisis.
As for adjustable rate mortgages, they were not the problem because the rates on those loans have done nothing but go down. it was people borrowing more than they should. You could say it was the greed of the 99%.
It was not just home buyers. When housing prices were inflated people took out second mortgages and HELOCs to but more stuff, go on vacations, get another car or boat. I receiived offers in the mail and on the phone just about every day from 2003-2007. I just said NO.
When prices fell many people owed more than their houses were worth. Still if they were living within their means they should have been OK.
I'll make a suggestion you might find abhorrent, but John Maynard Keynes, a long time ago, discussed a dynamic in economics he called "animal spirits" (that is ... irrational exuberance and irrational panic, which profoundly influences human behavior and economics). Simple yet brilliant, and so damn true.
I think we have to understand the concept of animal spirits to understand why Glass Steagall was so important to the stability of our financial system.
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