Forum Post: Moyers And Black On The Roots Of The Financial Crisis
Posted 12 years ago on April 22, 2012, 11:01 p.m. EST by GypsyKing
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I'm saying this without any irony at all, but in perfect seriousness - how is it possible that after a news report like this every American isn't already in the streets? I honestly can't understand it. How is it possible to be oblivious to crimes so massive that they will impoverish not only you, but your children, your grandchildren, and even your great granhdchildren? WTF???
Conspiracy theorists blame it on fluoride water.
I think it's because deep down, a lot of people don't think they can make a difference. Or think they're too busy already to try... and instead of trying they just hope it will get better. That and most people aren't aware of the fraud. Some people, even on this site, think the bailouts for the big banks were a solution. A lot of people still think there's nothing wrong with the power of the federal reserve, the big banks, and the credit rating agencies. TRILLIONS OF DOLLARS! Which is why you gotta talk about it... a lot... to everyone.
Good post.
Well said. A mess like this can't be swept under the rug. If we don't fight back we'll become a third world country. People need to be WOKEN UP!
You need to get some sleep, quite frankly. I think all the caffeine is getting to you.
I don't know what you need to come out of your coma?
How about an articulate argument?
How about a question?
What do you think about the threat against our nation's sovereignty when it comes to the power and manipulation of the big banks and the federal reserve?
There have been big banks and the Fed for a long, long time.You are chasing ghosts.
Yeah. This is what we gonna do in the near future. We will fight them back! WE need Another WAR. What if CHINA and other EUROPEAN NATIONS will get our subsoil before US? You can not achieve anything without sacrifice. Even animals with no brains understand pain on reflex level. I feel Gypsyking as a very intelligent person. Tell me about history of nonviolent revolution. Is this really possible? Without freedom of information? why should we care? i like this one here --> http://occupywallst.org/forum/does-occupy-need-help-in-pr/#comment-726983
Subsoil? China? What the hell are you talking about?
I suggest you and Gypsy take another hit on the crack pipe.
Hold on. Hold on... Hold on. revolution is about the people who making it. will see who gota have the last laugh. small countries fight for the land. big one fights for resources
I only communicate with people who speak English.
yeah right. who you see in the mirror? talk to yourself, cut the nonsense http://www.youtube.com/v/Ebt13APN_LY?version=3&f=videos&app=youtube_gdata
is there a non-full screen page?
come on man just click youtube button on the bottom right of full screen page . This is full version of the song http://www.youtube.com/watch?v=rMKlE6A99Ug WHO IS THE HARDIEST =)
More youtube links? I suggest reading a book or two. English grammar would be a great first attempt.
sorry
con·den·sa·tion/ˌkändenˈsāSHən/ Noun:
Water that collects as droplets on a cold surface when humid air is in contact with it. The process of becoming more dense, in particular.
I ask myself the same thing all the time Gypsy. But, who is watching PBS? Certainly not those who choose to pursue life in blind faith. There's a lot of folks out there, including some members of my own family who would rather just turn a blind eye than to know the truth. I can't speak for everyone but when I know the truth about something, I tend to want to do something about it whether it's changing my lifestyle, habits or perhaps actively addressing the issues in a public forum. The majority of folks aren't watching Bill Moyers..they are watching reality shows, sports and other ' mindless' things that don't impact their conscience on any level. It's easier and they don't have to feel guilty shopping at Walmart or for supporting other corrupt institutions, slave factories, farm factories or for feeding their kids unhealthy cheap foods. If doing the right thing and living in truth were easy, everyone would be doing it. They aren't.
I agree with your statement. That is why it is up to those ( like us ) who have become aware to share it to go out and wake people up to the facts of reality - that they are needed to help put out the fire before they die of smoke inhalation or worse. Thank God for this forum and all of the good people who have found their way here. Thank God for the Birth of OWS that kicked this all off. It took us time to get where we are and it will take time to correct what is wrong - but we have started to move in the right direction and more people are becoming aware.
Of course you are right, and it is that level of denial that may doom this country. It's just jaw dropping!
But, of course your right - doing the right thing is often very hard, and a lot of people's lives are already very hard. Unfortunately denial makes us all frogs in hot water. In the end we'll all get cooked. It's just so hard to face abstract realities like that as well as the concrete, every day realities.
"Oh what a tangled web we weave . . . "
I think the deal that has been made is: "You ignore my denial and apathy and I will ignore your corruption and malfeasance."
Of course it was made by default.
Then when the going gets tough it's, "I am too busy to care and it's probably all right anyway, " and "Things are tough, so I have to cheat more to support my habit."
When you say "doom this country", GypsyKing, which country are you referring to? The USA, or the jungle nation where you reside? Where was that again? The Philippines?
You're a pretty funny guy, iron butt.
Not sure about the reference, but if someone referred to GypsyKing as laughable I'm not sure I'd disagree. Now again, where exactly are those banyan trees you find so appealing rooted?
People in America are waking up to the way they've been ripped-off, in spite of all your efforts to divide us. Sorry, iron butt.
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It's why OWS was started, of course. Moyers, Black and Michael Moore are a few of the people who asked the questions and ramped up the volume of outrage over this whole thing.
TCN !!!!!!!!!!!!!
Good to see you! {:-])
It's been a while.
Thanks DK. Good to "see" you, as well. It has been a while. Seems I got myself in the doghouse with my frustrations and big mouth 'round these parts. But all's well now. :-)
Good glad to see you back. Lord knows a persons patience can be tested around here. Pointy headed trolls not withstanding there are some really incredible deniers of truth and facts. Dumber than a box of rocks. Sorry rocks no intent to offend.
LOL!
Hey - Hey - Thank you - now I have done something to feel good about today - Clearly My job is done here - up Up and AWAYYYYY.
Yeah, thank God for those few journalists who wouldn't be intimidated.
You're right Gypsy, and where in the hell would we be without those journalists? I don't even want to think about it 'cause it's so scary to think what might have been allowed to pass.
Even now, I tend to think many people are willing to accept what has happened and may well happen again, because they figure that others will take care of it, and if not, "oh well, what can I do about it anyway."
Obviously, wringing on ones hands and sighing isn't an answer!
Absolutely, and you got that last part right too! I hope Mayday exceeds all expectations!
If the Demopublicans and their false fronts and Pied Piper operatives keep their sleezy paws out if things, it just might...
Got another username, ay iron butt.
Great video GK, and thanx for posting!! Bill Black explains things in a way that's clear, concise, and he also possesses a good understanding of the situation. Another Moyers video to watch that ties into this one is -
How Big Banks are Rewriting the Rules of our Economy
http://billmoyers.com/episode/full-show-how-big-banks-are-rewriting-the-rules-of-our-economy/
He interviews former Citigroup chairman John Reed and former Senator Byron Dorgan. Reed gives an insiders view of how Glass-Steagal got trashed and how our political and financial class shift economic benefits to the very top.
After watching both; the disturbing conclusion I get is that the government was just as complaisant in the fraud as the banks were. They were the enablers! That may be why no one was held accountable. I kinda expect the banks and WS to be greedy, thieving, and corrupt .......... but I expect more from the people on the hill, that put their hand on the book and gave an oath. They are the ones that were supposed to regulate and keep things on an even keel. Instead they blew-up our economy and created "Too Big To Fail". Could it be that the terrorists work in DC?
Cheers ;|
"After watching both; the disturbing conclusion I get is that the government was just as complaisant in the fraud as the banks were. They were the enablers! That may be why no one was held accountable. I kinda expect the banks and WS to be greedy, thieving, and corrupt .......... but I expect more from the people on the hill, that put their hand on the book and gave an oath."
With the type of money and power that is being wielded by the lobby's it is not realistic to have a double standard in expectations. Greed is part of human nature, oaths or not, key people will give in to the money and power. Power corrupts, absolute power corrupts absolutely....
It is why all lobbying by groups must end.
I would agree completely with you right up until the last sentence.
Environmental laws, child labor laws, worker safety laws, national parks, civil rights laws, and a thousand others that together comprise civil society would not exist at all if no one had lobbied for them.
It is not lobbying, per se, that is destructive, but particular kinds of lobbying combined with outsized access and deep pockets. While it is true that some bacterium will kill you, our good health is dependent on others.
"Environmental laws, child labor laws, worker safety laws, national parks, civil rights laws, and a thousand others that together comprise civil society would not exist at all if no one had lobbied for them."
True. That all took place within our current framework, which allows lobbying.
I don't think there is a way to keep lobbying fair. To keep big money, or money period out of it. It's a flaw in the Constitution that has been exploited.
Lobbying in itself, is taking your position to your representative and asking them to support it. ALL organizations and ALL individuals should have that right, and ALL should be considered and the disposition should not be swayed with reward. The problem we have now is bribery through campaign contributions. 100% government financed campaigns would put individuals and lobby groups on the same playing field.
Personally, I think the system is broken and can not fix itself ....... so I support a Direct Democracy
http://osixs.org/Rev2_menu_commonsense.aspx
Real lobbying reform must end the practice of corporate lobbyists writing our laws. ~ Amanda Clark ~
I understand the intent of lobbying, and in Andrew Jacksons day, he had average citizens over at the WH for dinner who just dropped by unannounced.... however, as practiced today the process has been usurped, and I don't believe that high pressured, big monies lobbying can be eliminated without removing lobbying completely. The genie is out of the bottle and will not go back in.
You can't remove lobbying completely. It is unconstitutional, and for very good reason. When I sign a petition and send it to my congressman or senator, I am engaging in lobbying. When I have a meeting with the mayor of my town (and yes, I have had such meetings) about restoring bus service so the poor can get to work, I am lobbying. I would fight tooth and nail to retain that right.
The issue is the money. Even in the case of my meeting with that mayor, the taxi companies who might benefit from reduced public transportation could lobby him by taking him to lunch, or by offering to drive him wherever he wanted to as log as he was alive. I only had my case to present him. I have no problem with those same taxi companies presenting their case, but only with their ability to provide him with incentives I couldn't. I object not to voices being heard, but to laws made because of politician's personal gain instead of the relative value of the case being made. The problem is the money, not the access.
The ability of the people to petition congress for a redress of grievances is a fundamental pillar of democracy. Get rid of the money that undermines democracy, not democracy itself.
Right on!
I respectably disagree, but I share your frustration. If no one was allowed to convey their thoughts and opinions to their representatives; they could not represent anyone, because they would not know how anyone felt about any particular issue. The problem is the money, perks,and campaign contributions. Remove the bribes and our auctions will look like more like elections again.
Cheers :)
" If no one was allowed to convey their thoughts and opinions to their representatives...."
Shouldn't it be the representatives who need to canvass their constituents who elected them on their thoughts and opinions? Isn't that part of the job description, or do they get to not work at all?
Senators and House Representatives represent their specific states. When groups from across the country lobby Congress they are representing a special interest and are influencing state representatives very possibly in opposition to what the representatives actual constituents who elected him/her believe.
Law is supposed to finally be achieved when everyone's representatives bang heads and come to an agreement that hopefully satisfies all the constituents... that means voters, not groups.
I agree with your point, and it correctly describes what's happening today ...... but the culprit is money. Having only 100% government funded campaigns and allow no one to contribute, would be a step in the right direction; but if we want to keep THIS form of government, EVERYONE is entitled to petition them.
That being said, I think THIS form of government is broken and can not fix itself ....... so I support a Direct Democracy. It doesn't tear down our current system - it simply builds on it and gives the people the final say. We would no longer have to "trust" or "hope" that our words will be heard in Congress.
Read more here:
http://osixs.org/Rev2_menu_commonsense.aspx
Trying to change a corrupt system, within that same system, is overly optimistic. Congress has been waiting a long time to get this kind of money flowing into their coffers; so don't expect them to make any real changes. They like things just as they are.
I think there are ways to keep lobbying more fair than it currently is. It has to do with getting the money out and putting oversight (with real teeth) in.
But lobbying simply means having access to decision makers. The danger in eliminating all lobbying is that the Sierra Club loses access along with Exxon, the consumer protection advocate loses access along with Citibank.
I don't know what the solutions to the problem will eventually be, but shutting off the ability to talk to one's representatives, of shutting down access to all is not among them.
good post thanks for the link
Thank You for taking a reasoned interest.
I see that this is from 2009, Reich was on Jon's show so I looked him up, he was writing about this stuff in the late eighties,that's what got Clinton's attention, Moyers and Black are two that have been telling truth a lomg time, but somehow that got super radical.
Yes, it seems that the truth has been radical for a long time.
Way back in the eighties I started saying, “The truth is liberal.” It was a reference to how slanted news coverage was becoming that anybody telling plain truth sounded liberal as hell.
That's right. For years if you were simply acquainted with the facts, and didn't mind talking about them, then you unwelcome company just about anywhere! LOL!
Unless you were young at a kegger and pretty stoned/drunk. Then there could be some pretty fun and energetic discussions on society government capitalism what the inside of your eyelid's looked like............. pretty great stuff.
{;-])
You should of seen me around 86 talking to a table of GreenPeace at a concert and saying at least nuclear didn't add to gobal warming, now this was before Japan, even I've made adjustments, but the guy running GreenPeace then supports nuclear now, funny how things go.
Yep wild world. At about the same point in time though it was winter in a small night club I remember talking to a group of East Indian's as they talked about the hedonistic American youth's around them. I do believe this was way before Bollywood. How their world has changed. My My My.
they went home and took our jobs with'em... the world is indeed flat
That was about the time that some businesses had started contracting out phone services. Help/information services.
If we don't start to understand labor as a commodity and start deciding how much power do we give to money, how much to democracy, I think democracy will lose out, unless we start at least looking at that question.
Money should have no standing in the process of democracy - only an understanding of how it should be used/channeled to support a healthy society. The task is to find a fair structure to guarantee a minimum living wage and that all contribute their fair share. Put a stop to runaway profits by perhaps tying them to the success of the lowest paid/positioned average employee. It is the majority of the employed the average worker that is the most hands on to the actual process of production.
once we fully understand the problem, not just those of us trying to now, but most of us, I think the solutions will not be all that hard to come up with, it's this ideal that money equals freedom that is part of the problem, money is a score card we write the rules and right now the scores are lopsided.
Absolutely. I do not care about money - except to the extent - that - others who have it do not understand the meaning of living in poverty as a wage slave. The bleeding white of 50% of the population is the source of many social ills.
"just about anywhere" try the middle of a nuclear plant, staffed entirly by NRA members (ok only 90% NRA)
Holy Cr@p! That's not anywhere I would ever want to find myself!
20 year vet, these guys are whimps, I've said meaner face to face in the midle of a crowd, I use to watch their eyes so I could stop just before they came up out of chairs at me
All set to watch Frontline tonight?
{:-])
It's set on recorder, may watch live though, thanks for reminder.
Not a problem - I am sooooo looking forward to the program - I want everyone to see it. As I hope everyone will take the time to find and watch Inside Job.
did you see this post from way back, part of my "re-education" plan
http://occupywallst.org/forum/documentaries-all-occupiers-must-see-with-links/
I do believe I have and an excellent post to keep in circulation. Thanks.
I'm starting to move from the chatter to look for some of the simple but good well written ideals, from early on, I think we are close to being able to do what some wanted to but many fell away as their own tendacies were not so aurgmentive, even if the whole thing is young, it's good to see what the early thoughts were.
Good plan. A lot of the earlier posts contain some great material. Also as time goes buy more people have stopped in to take a look and a lot of the posts have been given added strength towards being understood because of all of the crap that has gone down even in this short time period. As well as the now wider spread of awareness.
Alt. medical conferance this weekend, see what things are like in my more liberal sister city. The forum is getting very busy, our mentions are down on actions, but things may be picking up, I don't hear the wealth thing talked about as much as other imporant issues, but with luck we will remember what the 99% really do have in common, all we have to do is keep telling people, the other stuff helps. All of these people who talk about "co-opting" to me any time someone ties themself to OWS but fails to talk about wealth inequality that is co-opting.
How the hell any one figures that a leaderless ( purposely ) movement can be co-opted I do not even begin to understand. The movements against greed and corruption are what they are. Anyone is free to contribute- I mean how could you stop them. As for co-opting how do you do that the fight against greed and corruption takes on so many issues starting with the Tip of the iceberg - WallStreet/Bankers/greed/corruption anyone is welcome to add to this list of the corrupt and greedy issues. But they can not change the basic truth the basic cause, the final straw that broke the camels back. They can only try to divide us into bickering groups or individuals to try to break our unity in acting in common cause.
I do agree the whole "co-op" thing is not based in reality or reason, I mean the whole ideal here is that people make up their own minds about things, are they afraid people will decide they're crazy?
I do think that when we speak of the wealth disparity and how the monied few are buying our government we speak to the largest group of supporters, sometimes we get in the weeds so to speak and people ie, media don't know what message to report, when it was clear we were upset about wealth and other stuff, seems they talked about us more.
Also a good analogy.
[-] 1 points by factsrfun (3714) 18 minutes ago
Parent position is a good one, I like to push the concept that the government is your tool if you use it, it will do what you want, if you don't someone else will. ↥like ↧dislike permalink
Kind of like the truth in the saying - Guns don't kill people - people with guns kill people. A tool is a tool the difference in how it is used is in the handler.
The people must come to understand that they are the parents in this relationship and that they can not allow the children to run wild. That the children need to be led and otherwise be shown the path to follow and not be afraid to apply the rod when those children ( business and Government ) do something wrong and worse bad and worse evil. It needs to be understood that these are special needs children and that they will never fully mature and so will always require their parents ( the people's ) guidance.
Parent position is a good one, I like to push the concept that the government is your tool if you use it, it will do what you want, if you don't someone else will.
It is understanding the depth ( the true depth ) of our concern and outrage at the all encompassing corruption and greed that we are fighting that throws people when they 1st start to consider it ( IMO ) as it is so wide spread and far reaching. Everyone is aware of a little bit of corruption and greed here and a little bit over there and there and there and there etc etc etc but it is only really now since the Birth of the WallStreet movement against the greed and corruption that everyone is starting to pull it all together into one complete tapestry of mind-boggling corrupt greedy shit.
Up until now when peole had a lot of money they could say "God did it" now OWS is starting to explain to people Gods got nothing to do with it, it's about rigging the system to favor those who write the rules, all people want is a fair set of rules. Of course you put evil people in power and all kinds of evil comes out.
Awesome show (I seen this on PBS, I assume it was a rerun as it was late at night), but Bill Moyers, as always, does a superb job. BTW, I also seen Moyers interview an occupier (who had some pretty prestigious credentials, really good guy, who's name escapes me at the moment, but it was a very good interview), so Moyers is what journalism should be (unfortunately, he's one of the few I can think of who upholds the highest standards of journalistic integrity).
Agreed. Most journalists won't even touch this stuff. It's a disgrace to the profession.
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I remember seeing this a while ago, but it was good seeing it again. I cannot understand why some people try to take the heat off the banks, considering all the perverse human behavior that followed could not have occurred without the banks having set up this screwy system in the first place. I do have my supicions as to why people defend the banks though.
I remember seeing this show a while ago. Moyers should be cloned because as far as I can see, he is the only journalist who is doing his job. Black was right, we have lost our sense of outrage.
I am seriously waiting to see if this spring and summer people will take to the streets. Really, the degree of apathy in this country to date has been just jaw dropping.
It's hard to gauge these things, as Chris Hedges pointed out after having covered the uprisings in Eastern Europe. There are many young people in particular that I know in NYC that are working very hard for the success of this movement. From morning to night, they are planning, communicating, and collaborating with each other. It is very inspiring to see the dedication of these bright young people.
I made up a bunch of flyers promoting the Money, Power, and Wall St. doc with a little commentary, first, "If you still don't believe this could be happening in our country, or you want to see more of the malfeasance , and recklessness that caused so many Americans to suffer needlessly, and a corrupt system that continues to threaten every American's financial well being then view these:" Then I provide other sources and suggestions. At the end it reads, " "Choose the world that your kids grow up in. Support Occupy Wall Street or don't complain and the corrupt status quo will continue by default." I made a whole mess of these on bright green copy paper. They turned out surprisingly well, and I then dropped them off at 4 super-markets, 2 libraries, and a laundry mat, and have replenished them at a couple of places. I'm also bringing them to NYC on the 28th, as the conclusion of that doc is on May 1st, and I think there will be other chances to view it either on line and/or getting it at the libraries.
the savings and loan scandal was in the 80s
Yes, I know the S&L crisis was in the 80s. It was the biggest financial scandal in the 20th century, but it pales in comparison to the 2008 melt-down, and its aftermath.
it seems bankers can't be trusted
I cheated my own sister playing monopoly
Lol...if the truth be known, I've done some shitty things to my sister too, but we have both grown up, and redeemed ourselves, I'm sure. 'Accountability' is not a word that you hear much in this forum, but that is the key word, and principle that is needed going forward, as we are all subject to the frailities in human nature. The other word or phrase is 'clear consequences' for breaking the trust of the people.
there's always and clear consequence of breaking trust
that person no longer trusts
The consequences have to be clear for the people we entrust with our government. The victims, us.... should never lose faith in a system or a person that has redeemed himself. We are just nudging them along towards that redemption, but we still want them to pay for what they did, as we would have to. On a personal note, and I do realize there are limits, but I believe it is better to be taken as a 'sucker' once in a while than to go through life not trusting anyone.
I never did, still I always won, wonder if I didn't always win I would of done it different.
William K. Black is AWESOME in this interview. A "Pecora" investigation would be great right about now!
Yeah, this spells it out so clearly that it seems one thing we need is to petition States Attorneys General to file civil and criminal charges.
You do that. Of course, the Courts are rigged against you to, so that won't work either.
You can always blame "the man".
What a tool. You really have no human dignity at all.
None whatsoever!
You are one angry Gypsy, Gypsy.
No, I just can't understand how someone could stand up so staunchly as you do for oppression.
Who is oppressing you?
WallStreet.
I thought you knew. Did you get lost and end up on the wrong web site?
This one's called............
OccupyWallStreet.
Where you looking for CATO?
There's dumb, there's stupid, and then there is above and beyond the call of stupid, like mikey here.
The roots of the financial crisis are clear; Fannie and Freddie mandated underwriting standards that allowed nearly everyone to borrow money. And these borrowings were insured by the Federal government.
Far more complicated than that. It was really subprime loans that sank the market, and Fannie and Freddy only insured about 25% of these loans in 2006 (although the number was as high as roughly 40% several years earlier). The market as a whole created this mess. Large financial institutions were bundling and securitizing these loans (to the point where the type of loans and level of risk became indistinguishable). This happened because of the merger of commercial and investment banks (following the repeal of a provision of Glass Steagall in 1999, which prohibited these mergers).
In other words, a firm like Citicorp gave out thousands of loans, also being an investment bank, they bundled these loans and created synthetic securities (mortgage backed securities), and on top of that, created derivative products from those securities. Then, the big banks started buying loans, because their investment banking divisions were making a ton of money by bundling, securitizing, and creating derivative products. Basically, this created a contagion of reckless lending. Banks didn't really have to worry about the risk of default, because they were able to immediately sell the loans.
Ultimately, it imploded. The casino of investment banking, and the conservative world of commercial banking, are like oil and water (or maybe better put, an explosive and detonator) :)
No, it really isn't. When the Federal government insures the existence of banks you are going to see risk-taking behavior. It's not terribly complicated.
The securitization of mortgages didn't create the problem, it was the implicit government guarantee.
Yet prior to the repeal of Glass Steagall, our financial system enjoyed seven decades of stability (under its regulatory scheme). So it's hard to blame it on FDIC insurance, or for that matter lay the entire blame at the feet of Fannie and Freddie (and while Fannie and Freddy certainly share some of the blame, I think the facts & circumstances show that this mess was largely caused by deregulation). I mean, we can insure deposits, but to do so, we need to regulate the industry (assuming we don't want the taxpayer stuck with another trillion dollar bailout in the future).
The alternative is not insuring anything, and let the industry do what it wants, but that approach led to the great depression. Moreover, the securitization of loans was "certainly" a causative factor, because if that wasn't happening, there would be no market for loans (in other words, the main reason why banks were able to sell off their mortgage loans, was because a market existed for mortgage backed securities). To say otherwise is sort of ridiculous.
Our financial systems, banking, securities, housing all need to have a governor placed on them to limit speculative investments. It's human nature. Investors tend to over inflate the price of any market in their chase for higher profits. They can only imagine the climb but not the fall.
It's also human nature for those people who understand speculation, to use it to their advantage to take enormous profits at the expense of those who do not understand. It's hard to believe the people who removed these controls also didn't know what the eventual consequences will be. If you remove the governor from your lawnmower, you know the engine will race and blowup eventually. Were the people that removed Glass Steagall that ignorant of basic economic facts? I doubt it.
As long as we let two people put their money together, we need rules to make sure the will of the people is protected, people didn’t die to make it safe to make money, they did it to own their own government.
I respectfully disagree about Glass-Steagall. I have never seen any legitimate argument to justify your position. Deregulation has been a boon to consumers.
Yes, there were in fact numerous recessions prior to GS. There have always been recessions and depressions- Egypt, Greece, Rome, HRE etc.
Government insurance is the cause, plain and simple.
I just gave you a legitimate argument to justify my position. That you deny objective reality is (I hate to put it like this) your problem, and while you're certainly entitle to believe what you like, the rest of us shouldn't have to suffer because some people are deluded by economic mythology.
So, we have now reached the point of casting dispersions? I'd love to hear what you have to say. I guess I'm one of those crazy university-educated finance people.
Read above, I've given you two posts worth of reasons, watch the Bill Moyers show (linked in the OP), and btw I also have an academic background in finance (both undergrad & grad), and I'm an attorney (who's researched this issue), but really, understanding this doesn't require an extensive academic background (it should be intuitive).
If you're a bank, and you know you could hand out mortgages, sell the mortgage (and no longer carry any default risk), and make money, would you be more or less inclined to lend? The answer should be obvious to any reasonably intelligent person. Considering that the banks who originated these loans were able to immediately hand off default risk to another institution, would you be inclined to think this would increase or weaken lending standards? Again, a person does not need an academic background in finance, economics, much less a law degree, to understand the very obvious dynamics here.
That our regulators and policy makers failed to do their jobs and serve as good stewards of the public treasury, isn't rocket science.
I agree with you, but "handing off" default risk is the basis of the Federal insurance system.
Of course you would be more inclined to lend; that's what cause the problem. Everyone qualified for a government insured mortgage.
I'm not sure I understand. Should the banks have stood by, on moral grounds, and refused to make mortgage loans? Would you have done the same?
Quite frankly, I think an academic background does play a role. I certainly wouldn't argue with you about constitutional law (that's a lie) but I would afford you the respect of your education. You simply know more than I do..
The points here are simple enough. Yes, you can always argue that if a government insures risk, it could induce sloppy behavior, but in this case, there's a sequence of events that tells us what happened, why, and what we should do about it. I don't seriously think any bank would want to risk failure, and in most cases (barring a system wide crash) the FDIC bailing out your bank would have been a death warrant. Yes, they would have bailed out your depositors, but the bank would have failed, the executives would have lost their jobs (not to mention face possible sanctions or worse), but the situation that led up to 2008 was much different.
Imagine the difference in incentives. If I can hand out a loan, sell that loan the next day (to another institution, who will bundle it, securitize it, make more money by using it to support derivative transactions, and then sell it again, repeat the process, sell it again, and again, and so on), me (the originator bank) doesn't need to worry about regulators coming in and shutting down my bank. I sold the loan, it's gone, off my books, and not because of the government, but rather the private market took it off my hands (thank you very much).
It must have been great while it lasted, and in fact, the only risk of something going wrong in that whole scenario, was a system wide crash (because it spread out the risk so much); but that's exactly what happened, a system wide crash.
So now we have to trace back, and ask ourselves, why were we able to avoid this sort of thing for 70 years, and what changed that caused it to go so wrong? We had FDIC insurance for that entire period, so any argument that tries to pony the idea that FDIC insurance was to blame, has to contend with the fact that it worked so well for such a long period of time (and that fact alone creates a high bar for your argument). In fact Fannie Mae was established in 1938. That is a long damn time to go without a major mess, so again, what went wrong?
I can tell you exactly what went wrong, but Bill Moyers does a better job :)
I'll just put it this way, we had to relearn an old lesson, but the worse part is, many people (for some reason) aren't willing to just accept the facts for what they are.
good argument. You schooled that "little gubernment is the problem" acolyte. I swear some Americans are so in love with our system that they remind me of a wife suffering from beaten wife syndrome. They make excuses for a system that beats them down and steals their future. I believe we are a nation of stockholm syndrome patients. Yes master, can I have another. lol
Are you serious?
Yes
Gov insurance on the mortgages didnt help any. But when they can dice them up due to Glass being repealed, and sell them in trillions of derivatives packages ( http://www.zerohedge.com/contributed/bank-much-worse-rest-and-guaranteed-bust-will-probably-be-funded-right-out-your-bank-acc).
Dicing up the mortgages is what caused the global meltdown of a small segment of housing loans going bad. It wasnt that foreclosures caused the meltdown, the foreclosures were a result of the market catching onto the fact that there was 100 Trillion dollars of derivatives that all had semi core positions of shitty mortgages in them. People started wanting out, and there simply wasnt any money, it was all an illusion.
Nope. Wrong again.
http://rortybomb.wordpress.com/2011/11/01/bloombergs-awful-comment-what-can-we-say-for-certain-regarding-the-gses/
http://thelonggoodbye.wordpress.com/2010/08/12/the-myth-of-fannie-mae-freddie-mac-barney-frank-the-housing-bubble-and-the-recession/
http://www.theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
http://motherjones.com/mojo/2010/05/dear-gop-fannie-mae-freddie-mac-cause-financial-crisis-subprime-mortgage-gse
I told you before. I don't click on links sent to me by wacko liberals
Relegating you to a lifetime of ignorance and belief in falsehoods.
I've learned more in the last seven months through links posted on this website than I've learned in the past half-dozen years, at least in regards to the subjects discussed here. They are invaluable.
Thank you.
It goes far beyond Fannie and Freddie.
Yes, but that was the root of the problem. All you folks seem to think there is something inherently wrong with securitization.
CDSs have been around for decades, and common stock is a "securitization". Car loans are routinely bundled and securitized.
Mortgage back securities have been around since before I was in grad school during the late 80's.
Gee...I thought we had passed the point of people trying the justify the banks corrupt behavior back in October. First...when was the last time you got a no doc car loan?? The facts are... the most sophisticated home loans...the subprime loans, where the REALLY BIG MONEY was for the banks and mortgage lenders..... were pushed on the most unsophisticated buyers..most were low doc or no doc loans...even when borrowers qualified for regular loans, many of their assets were not counted...they were often encouraged to simply lie too as the sellers had no 'skin' in the game.. because they knew that they could sell them. Then they took these loans...or as one poster here called them "flaming piles of shit..with ribbons tied around them," :-).... and bundled them up and sold them to unwary investors throughout the world. Amazingly these derivatives had investment-grade status causing many people in retirement funds to lose a bundle when this CRIMINAL-BUILT house of cards came crashing down. Unlike any time before these CDS,s were UNregulated, and that is because the corrupt financial and political elite wanted them to be so...and worked long and hard for that DREAM to become a reality.. NO this nightmare...for the rest of us... was not a problem brought on by the CRA, and those damn unsophistcated poor people!....AND if that weren't enough...the banks knowing these investment products were garbage...were betting against them...making big money in the process.....and referred to the investors in very demeaning terms. They will not have the last laugh...I assure you.
I stopped reading after 3 lines. It's unreadable.
Willful illiteracy is just sad.
Yep. Looks readable to me. Mike's forte is in economics, by the way. Not that it's very relevant to his illiteracy, mind you, just wanted to give you some insight into the man.
Mike's two fortes are distortion and trolling.
Ah, I stand corrected. His 'skoolin' is in economics.
Another bad day on the union-organizing trail?
Your whacking off get in the way of your reading?
No, it really doesn't..
It must be the willful illiteracy, then.
Ok Mike...fair enough..maybe it was unreadable to you! I did streamline my reply, as I have butted heads with people who have tried to defend the indefensible many times before, although it was months ago. CDSs have not been around for decades, only 13 years before they helped cause the biggest financial melt-down since the Great Depression. They were dreamt up by young JP Morgan bankers while on a retreat in Boca Raton, FL. Lastly, there is nothing wrong with securitization, but when it is shit that is being packaged up and sold, there lots wrong with it. That was a good doc tonight, wasn't it? I hope that is readable enough for you!
Credit Default Swaps were around when I was studying Finance at grad school in the late 1980's. They were far less widely used, but they were fairly common in corporate finance.
No one knew they were crap when they were buying them because default was rare. They do, in fact, serve a legitimate purpose and will continue to be used.
Default was rare back then because they were mostly used in commodities to avoid wildly fluxuating prices, I belivieve. That all changed though, and they started to use them in casino-like bets, and there were no regulators around to monitor them.
Don't forget that there are always two parties to these transactions. Neither side would agree to the deal unless it makes sense to them.
I agree, they did become a bit of a casino play for may firms. But every investment is essentially a "bet" anyway. Are farmers gambling when they sell futures contacts in order to guarantee themselves a price at harvest? Sure they are, but they are betting to reduce their risk of price declines.
I'm not real big on market regulation. I think that all these folks who were burned on these instruments will be far more careful the next time. So, in essence, the market regulates itself over the course of time.
This was not about a bad crop of soy beans, or an over-abundance of corn, and you know it. The fiasco that we have undergone, and still suffer from was not part of a normal up and down business cycle.This was about BIG BANKS RECKLESSLY screwing around with regular hard working folk's money, and it has caused people world-wide to suffer immeasurably. For you to say anything less just proves to me that you are a paid troll.
OK, I'm a paid troll. You don't have any interest in learning anything; you are only interested in scapegoats.
I'm sorry, but no one with any sense would pay anyone to post here.
I have learned more in the last six months than maybe any other point in my life. i have learned so much that I know your arguments although somewhat clever, are never-the-less BS! The BANKS aren't scapegoats, they ARE CRIMINALS. They have very few scruples, and no "sense" to have been so greedy to think that they could keep getting greedier, and greedier without thinking that there was finally going to be a backlash. OWS is that BACKLASH, and you will not be let off easy!
Well, then let's throw all these criminals in jail!! Why aren't King Obama and AG Holder doing anything about these vicious, greedy rascal?
MBS's have been around since the 1930's but without the financial weapons of this century they were harmless. CDS's have been around for decades, but never existed in the form they to today. The old CDS's have about as much in common with the the new ones as the Wright Bros Flyer has with the Space Shuttle.
With the advent of the 'Commodities and Futures Modernization Act of 2000, the whole playing field changed. Derivatives were exempt from regulation. As such, with the real estate market beginning to take off, it was the gasoline to light the fire, a market set for manipulation with little to no regulation. Free Market run amok.
Believe it or not, the buyers of these instruments are pretty sophisticated too. You can certainly blame the ratings agencies for ignoring the systematic risk, but the buyers didn't do their homework. It should be noted that many people got very, very rich by betting against these same instruments. Caveat emptor.
Again, you are assuming that derivative buyers are all fools. Derivatives allowed banks to unload the risk of holding huge numbers of mortgages, and investors wanted to invest in them. The banks didn't set the underwriting standards, the government did.
So the old "never give a sucker an even break" should hold true? Why have consumer protections for anything at all then? The government was in bed with the banksters.
Why not have consumer protections on everything? You shouldn't eat Big Macs (if you worry about your health) and they would be outlawed under strict consumer protectionism. So would alcohol, pizza, salt, etc. etc.
Do you think we would live in a better world if the government "protects" us from everything harmful?
We know of harmful effects of those things you name in your reply because of consumer protection agencies. If we had the correct information at the time, many wouldn't have bought toxic assets, because they would have known they were toxic. I don't smoke because I believe, based on available information, that it's bad for my health. If I choose to smoke I do so realizing the risk I'm taking. No one's telling me to smoke, and even if they do tell me to smoke I'll choose not to do so. I think that government can play a role in trying to protect us, even from ourselves, through distribution of information so that we each can make better, more informed decisions. Con games are illegal, Mike. Scams are, too. Some on Wall St. took fullest advantage of the trust that was given them. Countrywide and Wells Fargo took advantage of the mortgage consumers' ignorance and trust. That level and scope of betrayal cannot be allowed to go unpunished.
OK, so you blame everything on someone else. Why not accept personal responsibility? Do you need a government agency to tell you everything?
Apparently we do, Mike. Do you find it objectionable that we "hire" people to protect us from swindlers and con artists? I don't. It's like "hiring" people to defend the country. As a nation we do that and have for a very long time. Protection and the common good are the reasons for having formed a nation in the first place.
I disagree. The vast majority of business people are honest, and sell a quality product. I'm sorry, but I don't think people need to be protected from everyone.
And so, by your logic, the vast majority of countries, sects, groups, and individuals don't aim to harm us and/or take over our land, but there are a few who would try, so while we hope for the best we must prepare for the worst.
Derivative buyers may just be fools, unless you have a PhD Mathematics analyst on your staff. That is how complicated these instruments can tend to be. A custom CDS covering a billion dollars worth of mortgages can be several inches thick in high level math and legalese. I remember a few years back The National Bank of China suing JP Morgan over not disclosing details of their CDS/CDO purchases, causing a few billion in losses for the Chinese. They were sophisticated investors as well.
Caveat Emptor is the slogan of swindlers.
Oh. So these investors didn't understand what they were buying, but they gave them the money anyway?
Thats true for many of them yes. When you buy a new car from Ford, do you first take it to a certified mechanic for a complete head to toe inspection, or are you swayed by the reputation of the manufacturer and the guarantee?
JP Morgan, Citigroup, etc. had good reputations and more importantly AAA ratings for their SIV's from ratings agencies that were at one time honest and reputable. That AAA rating was a guarantee.
Good analogy, geo, and to futher the point, if my accelerator sticks and it's shown to be a mechanical issue throughout the model run of a particular car, the manufacturer is required to recall all of the cars in question for repair/replacement whether or not a peticular car has exhibited the symptoms of the problem.
Rating are not guarantees, they are opinions.
Any analyst worth their salt will investigate an investment, especially an investment based on mortgage tranches. You simply can't understand the risk without analyzing the underlying assets.
You are speaking with 20/20 hindsight. The reality of the situation, history proves you wrong. Investors did in fact buy 'black box assets' without knowing the true risk and distributed them world wide. Hence the global economic meltdown.
If what you state was true, a global meltdown would never have happened.
Even the creators of the derivatives admitted that they calculated the underlying risk incorrectly by only going back a few years in looking at housing prices, and concluding that housing prices only rose. The investments were marketed as 99.9% risk free, due to the algorithms.
Hey Geo: I assume you watched the frontline report tonight. How'd you like it?
Missed it, life got in the way... I have it recorded, so I'll see it soon.
Hope you do. It confirms most of what we have been talking about, and it provided some revelations I wasn't aware of.
Do yourself a favor and watch it soon.
(And hope that the life that got in the way did so in a good way.)
Every one of the thousands of analysts, most of whom have advanced degrees, failed to consider the historical housing prices?
Just about. Greed makes people see what they want to see. Even the ones who invented credit default swaps had no idea what they were doing. As they unloaded risk through one door, they brought it back in through anther within the same firm. And the market as a whole decided that housing prices would never fall.
There were a few people trying to sound the alarm for years, but management simply didn't listen: everyone at the top was making too much money to care.
You've been reading too many union-organizer manuals.
You are obviously an intelligent, thoughtful person. Why did you choose this route?
I chose this route, instead of masturbating in public as you have precisely because I am an intelligent, thoughtful person.
I don't choose to make facts up as I go along. I don't choose to repeat myths that have been debunked a hundred times over. I don't go to get my jollies via negative attention by trolling (mental masturbation.) I leave that to people like you.
There is still plenty of time to move on to something else.
In the feeding frenzy of profit that ensued yes, the analysts were overruled. Analysts don' buy and sell investments. Many towed the party line, because the CDO's came with a AAA rating as it was, and the marketing was touted as risk free:
Summary of this Action
“The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions ... Derivatives have permitted the unbundling of financial risks.” Alan Greenspan 2005
No decent analyst assumes that the rating is correct. They aren't a part of the grand conspiracy.
$82 million is .00001% of the assets of US banks.
So, what's the problem with Greenspan's statement?
"No decent analyst assumes that the rating is correct. They aren't a part of the grand conspiracy. $82 million is .00001% of the assets of US banks."
I should have searched out the JP Morgan portfolio cover that claimed 99% Risk Free... instead of using just one court case. If you do the research its no secret that a scam, or just ignorance was going on. As long as money was being made, nobody rocked the boat.
"So, what's the problem with Greenspan's statement?"
He basically believed the same thing as well, "Derivatives have permitted the unbundling of financial risks.” ... this is false.
That is exactly the reason that derivatives exist- to transfer risk!
Why do you think farmers buy/sell futures contracts?
"The banks didn't set the underwriting standards, the government did." OK.... but at whos behest did they write those slack standards? Whos corrupt bribes (is there any other kind) did our politicians' take so that the financial sector was able to run rough-shod over people's lives?? The BIG BANKS is the answer. Sorry Mike, but your about six months too late to try, and convince us that the BIG BANKERS are just regular folks who may have made a couple of mistakes. What they did to the American people was out and out EVIL.
At the behest of Barney Frank and all of the other democrat social engineers, as a matter of fact. It's not like this is a big secret. Take a look at the McCain congressional hearings 5 or 6 years ago:
http://www.youtube.com/watch?v=LPSDnGMzIdo
This is not partisan for me, so trying to deflect the blame away from the CORRUPT BANKERS and/or politicians won't work. Both parties stink, but no one has a bigger STENCH than the banks.
Let's not let the facts get in the way! Of course it's partisan for you; if it weren't you would look at the other side.
I say we kill everyone who works for a bank! Who's with me?!
LOL. Save your energy with me Mike. My critical thinking skills work fine, and my background on the 2008 melt-down goes back three years. I could not understand why more people weren't angry. I know better than most people what and how it went 'down.' You are clever on how you try to frame your arguments...the trouble is the facts are not on your side. I am sure that you will be able to find some new poster here to feed your bull to. One more time...the big BANKS are EVIL !
I have plenty of energy.
What's your solution to the evil banks? How are you going to borrow money for a car or a house once you have done away with these criminals?
Banks themselves, yes needed...what we have now..not needed. These guys should all be sitting in jail cells for all the human misery they have caused world-wide.
Gotta blame someone!
OH - BTW
coarse/kôrs/ Adjective:
Synonyms:
rough - rude - crude - gross - vulgar - harsh
I think it suits you just fine.
You emphasize coon. Why is that?
OH - BTW. I gave up on your ever having anything to debate hours ago. You see you offer nothing. You have no facts and your comments are based in fantasy. No one ( I Mean except for your consoling friend toonces ) has seemed to have any meaningful interaction with you, none at all except for you and toonces and that can not be considered meaningful as you were patting each other on the back for a mutual misunderstanding and misrepresentation of reality. So Go troll go troll it's off to troll you go................
[-] 0 points by MikeInOhio (500) 0 minutes ago
I hate to do this, but obviously the schools aren't very good in "Coon" Rapids.
The word "coarse" is different than the word "course". I suggest that you type all your posts in Word before posting them here. There are grammar and spelling features that might help you articulate your thoughts in a more, ah, articulate manner.
Again, it doesn't make sense for me to waste my time debating high-school dropouts. ↥like ↧dislike permalink
Yeah...and it ain't going to be just one of those things!
As such - as "we" do believe in accountability it should be those that did the crime - Confused? Of Coarse you are. Reality will do that to the feeble minded. That's OK once health care is straightened out I am sure they will have a place for you. It was repubs that put the helpless on the streets after all.
Say what? Your curious? Well of coarse i will tell you people have been trying to all night. Good people them - not calling it a lost cause and walking away...... Hhmmm? What?..... Oh right right.... not to worry I did not forget about you, I was just wondering who might let you out without a keeper.........oh well. The Banking and WalllStreet Investment firms along with their Insurers. Yep. Really. Uh Huh. For real. Run along now go play in traffic for awhile.
I hate to do this, but obviously the schools aren't very good in "Coon" Rapids.
The word "coarse" is different than the word "course". I suggest that you type all your posts in Word before posting them here. There are grammar and spelling features that might help you articulate your thoughts in a more, ah, articulate manner.
Again, it doesn't make sense for me to waste my time debating high-school dropouts.
Who lobbied the FHA to have Fannie lower its underwriting standards?
The banks that originated the loans in the first place. Fannie and Freddie bought them, securitized them, and sold them to trading companies that bundled them into CDO/CDS's and sold them as AAA rated securities around the world.
Geo, don't get suckered into anything this dipshit Ohio asshole has to say. Fannie and Freddie had virtually nothing to do with the crash. Yes they participated, essentially pressured to compete with the banks late in the game, but they had virtually noting to do with the crash.
You might be interested in this:
http://rortybomb.wordpress.com/2011/11/01/bloombergs-awful-comment-what-can-we-say-for-certain-regarding-the-gses/
http://thelonggoodbye.wordpress.com/2010/08/12/the-myth-of-fannie-mae-freddie-mac-barney-frank-the-housing-bubble-and-the-recession/
http://www.theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
http://motherjones.com/mojo/2010/05/dear-gop-fannie-mae-freddie-mac-cause-financial-crisis-subprime-mortgage-gse
As to Barney Frank's possibly misguided statement's, it's still bullshit, nothing but smoke and mirrors and an attempt to misdirect and shift blame. From the second link: "Republicans controlled the House in 2003 and Tom The hammer Delay of K-Street infamy was House Majority Leader. ..... Delay controlled the agenda and Bush 43 was in the White House. Frank could have set himself on fire and still had absolutely zero effect on any Republican attempts to legislate new regulations or create regulatory reform."
Unfortunately, thats not completely true. The GSE's lobbied hard themselves to lower the underwriting standards. As psuedo private organizations they worked hard to keep the market advantage they had over the rest of the lenders, that was in 1992, not late in the game.
http://moritzlaw.osu.edu/eblj/issues/volume5/number2/oesterle.pdf
Lowering the underwriting standards is one thing, being a major contributer to the crash is quite another. I was also talking about securitizing mortgages, not underwriting standards for them, They were not the ones who kicked that mess off.
Look at the links I provided. There are some telling numbers there.
Fannie and Freddie not only had fewer subprime issues than regular banks, but the entire subprime crisis had less to do with with the crash than regular mortgages did. The entire Fannie/Freddie thing, despite their being problematic institutions, is a myth. If you look particularly at the CRA, (which is what I assume you were referring to regarding underwriting issues) which is what the right wing is using as an excuse to attack, you will see that it had nearly ZERO effect on the crisis. The loans that fell under its guidelines were almost completely sound. It is not surprise this myth has been promulgated by the Right Wing. They have been against giving access for the lower middle class and minorities to mortgages and homeownership for a very long time. Indeed, anything that is not controlled by and exclusively benefits the 1% is on their list of things to oppose. (Can we say "destroy Medcaid*?) And this is a proxy for their decades-long, unrelenting bashing of the poor, and especially any government program that would help them.
Again, the numbers are telling. The links I provided contain some of them.
Got it and I agree. Very much like how the RW tries to use the CRA as the excuse for the crash, saying that the CRA forced banks to make bad loans. There is no language in any revision of the CRA that forces banks to make bad loans.
Thanks.
My pleasure. Nice to provide someone with info knowing that the info will actually be read, and more, thought about without preconception.
Barney Frank would be the name you are searching for. Remember, he accused the Republicans of "class warfare" when John McCain questioned the underwriting standards. His boyfriend was an executive at Fannie back then, if you recall.
I know you young hipsters like your videos. So here's one that might help refresh your memory:
http://www.youtube.com/watch?v=LPSDnGMzIdo
Personally, I am not young... I'm 58, nor am I a hipster, and I really dislike video's.. Barney Frank may be the voice of the puppet but he was pushed by the banking lobby, whose members were the chief beneficiaries of having the GSE's standards lowered, while the originating banks no longer having accountability for the mortgage they wrote. The GSE's were giant hedge funds.
Try this from the St. Louis Fed:
http://research.stlouisfed.org/conferences/gse/White.pdf
Barney Frank was pushing the Democrat ideal of "homes for everyone". They got their homes for everyone. It didn't work.
I guess you didn't look into the Fed Resv paper:
"There is no outrage because Fannie and Freddie have become a political football between the left and right wing of American politics. On the left, they were vehicles for promoting affordable housing for all, while on the right they furthered the idea of the ownership society. And they were a politician’s dream: They reduced monthly mortgage costs without requiring any federal budgetary outlays."
**You only want to see one side of the picture, but BOTH parties enabled the GSE's, which were privately owned and not part of the governments budget.
“Although prospectuses for GSE debt are required by law to stipulate that such instruments are not backed by the full faith and credit of the U.S. government, investors worldwide have concluded that our government will not allow GSEs to default… Investors have provided Fannie and Freddie with a powerful vehicle for achieving profits that are virtually guaranteed through the rapid growth of their balance sheets, and the resultant scale has given them an advantage that their potential private-sector competitors cannot meet. As a result, their annual return on equity, which has often exceeded 30 percent, is far in excess of the average annual return of approximately 15 percent that has been earned by other large financial competitors holding substantially similar assets. Virtually none of the GSE excess return reflects higher yields on assets; it is almost wholly attributable to subsidized borrowing costs… The Federal Reserve Board has been unable to find any credible purpose for the huge balance sheets built by Fannie and Freddie other than the creation of profit through the exploitation of the market-granted subsidy.”
I did not. I will look at it.
Here it is broken down by the big steps in the making of the biggest heist in the history of the planet
Before the credit boom, about 1/2 the houses had paying mortgages on them. Now 90% do, and no one can move out of them.
Indeed, I think we can also lay some of the blame on artificial credit expansion (via aggressive & expansionary monetary policy). Basically, it was a perfect storm.
I would say that the first two legislative decisions were the kindling, and the credit expansion/cheap money was the lighter fluid.
Everyone always points to Bear Sterns as the trademark start of the collapse, but i always wonder what was going on with those few select people that led to that moment anyways?
CDO/CDS's have performance specifications to meet before the insurance provided by the CDS triggers and declares a default. As a guess that figure can be as high as say 16% of the underlying assets in foreclosure, thus cutting the income stream of the investment.
In the beginning it was JP Morgan and Citigroup that led the writing of the contracts, they had the computer geniuses who had the algorithms to manage risk. The real estate market was just taking off. The economy seemed good, the investment seemed sound. Morgan and Citi bundled and sold to the big name security traders, Bear Stearns, Merrill Lynch, GS, etc. who held some and sold some.
CDS insurance price/payout terms are partially determined by ratings called a spread, reported in basis points - which is correlated to calculated risk. As the spread increases, the cost of the contract increases and the payout terms change, custom made to each CDO and its projected performance.
A bundle of money was being made on the sale of these derivatives. The market jumped in nominal value to over $600 Trillion dollars in a few short years. As the real estate market crashed, the more riskier traders got caught holding derivatives which triggered their default clauses at the same time, which usually was worded stating face value now due in full. Since the CDS market was unregulated, there was no formal requirement for what these traders had to keep in cash reserves on hand, should defaults occur. It was like a game of musical chairs.... the music stopped and who ever didn't get a seat in time was left holding the bag. It's how one tiny CDS underwriting department in the worlds largest insurance company AIG, took it down completely. The music stopped.
Excellent post! If this doenst get on the top 5, Im quitting the forum :)