Wall Street and Bankers did not cause our current crisis. As Mark points out, 4 major events contributed to the so-called financial crisis, and they involve the Clinton Administration, the Federal Reserve, the Treasury Department, Freddie Mac, Fannie Mae, and Congress.
During Obama’s campaign in 2008, he suggested several times that Washington D.C. needed some adult supervision.
Most of us are involved in some way with Wall Street and with Banks. If you have a 401k or some other retirement account, you are involved with Wall Street. If you own a home, a car, have a credit card, checking or debit account, you rely on banks.
We learn over the years that the mortgage payment is first and foremost, and if we are responsible, our ability to borrow and have credit are awarded in time. However, Democrats have, over the years, found these facts of life atrocious.
The current financial argument by Obama is based solely on anger toward Wall Street and Banks. What kind of adult suggests that responsibility should be disregarded? Especially now that the President and his wife are preaching that responsibility in diet and exercise are the keys to good health.
Adult supervision is not what this administration is providing, but instead, complete control. As long as the current group of crony capitalist Democrats are in control of Washington, the longer it will take the families in this nation to recover.
(Please welcome jenkuznicki as our new contributer to this site!)
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Welcome! Give ‘em heck, Jen.
Thank You Sgt. Tim:)
This was a RE driven fiscal crisis and unless you were in a comma it was quite apparent to most people throughout 2008 and most of us watched banks getting pummeled in 2007. Fannie Mae the larger of the two GSE’s, had consumed over 50% of domestic mortgages processed by banks and lenders, lacked any SEC supervision, borrowed for less and needed less cash on hand to operate. Congress was well warned through its internal investigations and we all saw the videos of Congressional democrats feigning unwarranted zealousness of the auditors while defending the remarkable increase in home ownership under the outstanding leadership of Franklin Raines. Even McCain wrote a letter with 18 other Republicans warning of the urgency to reign in the Fannie Mae. And Alan Greenspan had similar remarks despite the fact that he never expected the problem to become this catastrophic. If Fannie Mae had not accelerated the CRA program (under the Clinton Administration and Andrew Cuomo) by incentivizing the purchase of inflated, poorly funded mortgages by irresponsible borrows there would have been no banking crisis and there would have been no TARP for investment houses and hedge funds.
Banks did not cause the crisis. Lending practices mandated by the government did with the aid of cheap Fed money.
Hedge Funds and Investment House are not banks that hold and lend deposited money. They buy and bought bundled instruments that they sold and insured using derivatives and credit default swaps, which were further traded in all manner of ways. Most Americans are not into Hedge Funds because they require a substantial financial commitment and they do far more than buy and sell stocks. The trade just about everything including currencies and they generally make substantial management fees even if you lose. These houses take long and short positions on the same instruments and often take opposite positions on these instruments to offset possible losses and to provide a variety of choices. They trade in all manner of scenarios with all manner of investment instruments.
Banks are necessary to an economy; investment and clearing housings along with hedge funds are not. Most of all they are not real capitalists even though they are considered crony capitalists. Capitalist create goods and provide services. Most of Wall Street gambles on capitalism to be successful or to fail. They are gamblers. And while many people lost money on their 401K and Roth IRA investments it was not because companies were not good investments but because of fear, which is often what determines S&P, NASDAQ and DOW values. On the other hand almost everyone has equitable positions in property (homes and businesses) and that took a real dive because product inventory was high, was over valuated and mortgages were in the process of accelerated defaults because of people who never should have owned property, of the type that they bought, in the first place.
Other than a small 401K and a Roth IRA’s I have stayed clear of investment houses and remain almost solely invested in property. And even though I easily saw what was happening you couldn’t easily unload businesses or sell primary residences and rent, until a better day, and then rebuy.
What is so frustrating is that the real wolves, the Congressional ones that created the problems, are now doing the investigating when they should be deposed witnesses themselves. Barney Frank and Chris Dodd were the individuals, who headed the financial committees within their respective chambers, saw nothing and were in fact benefactors. Congress is looking into Wall Street (who everyone hates) so as to generate exculpatory material for themselves, blame Wall Street and evolve out of this exonerated.
This from the WSJ several weeks ago: So far, Fannie and Freddie have required more than $126 billion in taxpayer infusions, a number that is likely to grow as mortgage defaults rise further. One of the panel’s commissioners, Douglas Holtz-Eakin, a former budget analyst, said on Friday that the collapse of Fannie and Freddie would leave taxpayers with the “single largest bill we will face in this episode.” Again it stated “”Could we really sit out?” said Robert Levin, a 27-year Fannie veteran who retired in 2008. “That’s what we were grappling with.” But executives ultimately decided that new, riskier loans were “not a fad, but a growing and permanent change” in the mortgage market that the companies couldn’t ignore, Mr. Mudd said. The company opted to strike a “middle course” by trying to offer less-risky versions of Alt-A loans.
Fannie’s Alt-A loans have performed better than loans originated by private lenders, but taxpayers will likely pay a steep price for the decision to delve into them. Alt-A loans accounted for just 9% of Fannie’s loan guarantee business, but represented nearly 40% of credit losses in the fourth quarter of 2009. Nearly 23% of Alt-A loans originated by Fannie Mae in 2007 were 90 days or more delinquent at the end of 2009.” For the record Alt-A loans are undocumented. Finally it stated: “Even if Fannie hadn’t stepped up its exposure to the riskier loans, “they still would have taken a huge hit,” said Thomas Lawler, a former Fannie economist who retired in January 2006, in an interview. “BUT WOULD IT HAVE BEEN THIS BIG? WELL, GOOD GOD, NO.”
And as far a the easy money lending practices from the Feds goes I listened to Greenspan defend his position, albeit he was wrong, by reminding Congress that they seem to have amnesia regarding the pressure that they placed upon the Federal Reserve to keep interest rates low.
Let me conclude by offering an email I received several years ago from a friend and banker in response to my email:
From: XXXXXXXXXXXX
To: XXXXXXXXXXXXXX
Subject: Re: FW: Root causes of the current financial crisis.
Date: Sat, 22 Nov 2008 16:36:02 +0000
How well I know it. If you remember one of my jobs was running a mortgage department and then later the Compliance area of the Bank. The FRB had us by the balls and would stop any mergers, branch applications, or any attempts at growth if we did not make more loans in low and moderate income neighborhoods. All loans were geo-coded by census tract and we would be quizzed why we did not make loans in certain areas whether we had a branch there or not. I had all of our market area geo-coded by census tract. Even did it in colors. Blue was for the more affluent areas, green was for middle income and yellow was piss poor. (Examiners thought that was original).
To have the ability to grow you had to have a CRA rating of Satisfactory or better or the FRB and the State Banking Departments would hold up any applications pending. So, this forced us into meetings with ACORN and other community groups in the Bronx and New Jersey. Yes, I even had to meet with Sharp James in Newark. Humm, seems to me that he is now in jail..
Yes, I know first had how the liberal Democrats pushed their weight around.
XXXX
As a resident of New York I often have diner with friends and people from Westchester County and Connecticut and I have remarked for years that many, if not most of these Wall Street people, are either democrats or RINO’s that sound and act so much like democrats you could not tell the difference if they did not reveal their political affiliation. They know about as little of our Constitution and Founding Documents as they do about the Parliamentary Governments of Africa an Asia. Furthermore Goldman Sachs is a democrat run firm. Democrats are embedded in their leadership and they love the fact that they have been given special bailout privileges and the opportunity to conduct business under new legislation that provides them with better insurance protection than even AIG and they don’t have to even pay for it. We do. This new legislation is designed to protect some and hurt everyone else and represents an unparalleled expansion of one branch of the Federal government… the Executive Branch. It is exactly the way Chicago is run and why this President had the perfect training to institute his socialist, fascist Alinsky policies better than most. He is stupid, not because he is an outstanding socialist ideologue but because he could never understand freedom of choice and capitalism, The children that run the country are those that criticized it in the sixties along with their offspring and to this day they never did grow up. They just grew into power by making sure every one else did not recognized what they are about as they created scarecrows that were vilified for what they never did.
Isn’t it interesting that Congress never saw any of this coming despite being warned but Goldman Sachs somehow saw it all and should be prosecuted. They just took the Congressional Leadership at their word. And so did America.
Welcome to the MLF Scroll, Jen!
Good job! Looking forward to more!
Thank you Mark:)