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I do think the deal should have included renegotiation of the bad mortgages to make the banks regurgitate a substantial share of the principle of the loans that they absolutely knew were bogus. They did well, the homeowners got screwed.
I bought real estate in 1988. It got crushed in the S&L Meltdown. I signed a mortgage contract. My choices were to keep paying the mortgage or declare bankruptcy. How was it the bank's fault that I bought a piece of real estate, borrowed money, and then got crushed in a real estate downturn?
I ended up selling 4 years later for 60 cents on the dollar. I had to accelerate payments for 4 years to do that and I had to borrow money against my paid-for car to settle up at the closing. I was one of millions who had things like that happen to them in the late-1980's and early-1990's. There was no such thing as a short sale with bank forgiveness. You signed a contract. You were held to it. Your alternative was bankruptcy.
If you look at what really happened, the banks got enormous Federal pressure to lend money to people with lousy credit ratings in poor zip codes. The government relaxed the credit standards to make it possible. If the Federal government hadn't done this, no bank in the world would have written any of those mortgages. If you're assigning blame, blame Dubya for allowing it and blame people in Congress like Barney Frank and Christopher Dodd.
while not the cause , so many people got loans for big dollars with teaser rates for 2 years . there incomes could not support the regular rates once the teaser rates expired .
once news of these loans that should not have been made hit the markets it panicked the debt holders .
that thought sent the cdo and default swap markets in to a tail spin freezing up the flow of money .
throw in hundreds of billions being wagered in the default swap market as to loans being repaid and then being lost by institutions and you have the perfect storm for collapse
That has to do with compliance with the Fair Housing Act. They still have to produce those documents and they have since 1968.
Yes, but it was the lowering of lending standards in the mid-90s that were the catalyst. While the wording of the CRA wasn't materially changed, it was the aggressiveness of the regulators that mattered. Regulators suddenly were asking lenders to consider alternatives to normal payment histories and relax income requirements, giving applicants such as day laborers a shot at homeownership even when they didn't have reliable incomes. Particularly troublesome was the push by regulators to have automated underwriting of mortgages, lest banks put their CRA ratings at risk.
No sane bank president would have fought this, chiefly because they wouldn't want to risk the ire of regulators or even a discrimination lawsuit. And with Andrew Cuomo heading up the drive on the part of Fannie and Freddie to buy up to $2 TRILLION of affordable mortgages, the government was intentionally decreasing the risk to banks in order to increase loans to high-risk borrowers. So because the government was providing the escape hatch for a bank to dump any marginal loans, banks went along with it. After all, if the loan went bad, there wasn't any skin off their noses any longer.
you can bet most of the "let crash " folks have gov't jobs or lower end jobs and no money to speak of invested in anything .
You can also bet that they are voting and breeding. The parents are lost causes, but I truly wish they'd put at least personal finance courses for kids in the school curricula. Maybe when I retire I can volunteer to teach it as an elective.
you can bet most of the "let crash " folks have gov't jobs or lower end jobs and no money to speak of invested in anything .
Yep. They would have been the first on the streets, too.
I remember the phone call I made to my wife in September, 2008.
"I'm taking $7500 out of our money market account."
"Why?"
"Because the banks might crash."
"You think?"
"Oh yeah."
"But we're FDIC insured."
"That's fine. But we'll need cash in the meantime."
I went down to the grocery store and bought two weeks of grocery and filled up both cars with gas. Not because of some apocalyptic scenario, but the fact that I worried that the whole system would just be down. The banks obviously didn't crash and I put that money back in a week later. But, holy cow, that was terrifying. Anybody who wasn't scared just wasn't paying attention.
There is barely a subject which infuriates me more than this one.
Wall Street and the Banks created a massive problem, getting hugely rich along the way. When people realized that they had sold a LOT of worthless investments, a HUGE liquidity problem developed.
Why?
Our banking system is basically a pyramid scheme. There ia NEVER sufficient reserves for everyone to withdraw their money from the system all at the same time. We rely on "confidence" to keep the thing afloat. Top that off with the fact that the collateral which the banks were holding wasn't a fraction of what THEY owed, the system was in a real crisis.
There were two options. The best one being letting the greedy SOB's who had put themselves in this position fail, thus cleansing the system of bad Banks and REALLY BAD people. Instead, Hank Paulson of Goldman Sachs stepped in and after several attempts, was able to convince Congress that the sun would not come up tomorrow if we didn't step in and salvage the bad banks with generous amounts of the peoples money. What he was really saying, and what he knew, was that HIS FIRM, GOLMAN SACHS, had made billions of dollars of bad bets with AIG, and those bets were about to sink, along with Goldman. Never mentioned was that there were thousands of banks around the world (I know, because i worked for one of them which was one of the few which still had a Triple A Credit rating) which had not participated in the scam and could readily step in to finance healthy businesses. We could extend credit to sound banks, we could move money, we could do all the things which Hank assured us would never happen if the Congress didn't step in to bail out (his ) banks.
That was the first HUGE error.
As if that wasn't bad enough, when Europe faced the same crisis and was about to "do the right thing"(write off the bad banks, and invest in the good ones) Hank sent Timmy Geitner over to tell them that we would backstop their loan guarantees, and thus became a series of quantitative easing and liquidity measures which created a false, and depressed economy, for nearly a decade now.
What we are left with is a Secretary of the Treasury who got away with treason and raping the American people to save his firm, a multi trillion dollar deficit, a multi trillion dollar balance sheet at the Federal Reserves, and an economy which is frozen. It can't get better, because then we have trillions in bills to pay, and it can't get worse, because it is awash in phony paper liquidity.
Thank god The Donald is going to make America Great again.....or at least take us so far back that this will look like a pleasant dream.
There is barely a subject which infuriates me more than this one.
Wall Street and the Banks created a massive problem, getting hugely rich along the way. When people realized that they had sold a LOT of worthless investments, a HUGE liquidity problem developed.
Why?
Our banking system is basically a pyramid scheme. There ia NEVER sufficient reserves for everyone to withdraw their money from the system all at the same time. We rely on "confidence" to keep the thing afloat. Top that off with the fact that the collateral which the banks were holding wasn't a fraction of what THEY owed, the system was in a real crisis.
There were two options. The best one being letting the greedy SOB's who had put themselves in this position fail, thus cleansing the system of bad Banks and REALLY BAD people. Instead, Hank Paulson of Goldman Sachs stepped in and after several attempts, was able to convince Congress that the sun would not come up tomorrow if we didn't step in and salvage the bad banks with generous amounts of the peoples money. What he was really saying, and what he knew, was that HIS FIRM, GOLMAN SACHS, had made billions of dollars of bad bets with AIG, and those bets were about to sink, along with Goldman. Never mentioned was that there were thousands of banks around the world (I know, because i worked for one of them which was one of the few which still had a Triple A Credit rating) which had not participated in the scam and could readily step in to finance healthy businesses. We could extend credit to sound banks, we could move money, we could do all the things which Hank assured us would never happen if the Congress didn't step in to bail out (his ) banks.
That was the first HUGE error.
As if that wasn't bad enough, when Europe faced the same crisis and was about to "do the right thing"(write off the bad banks, and invest in the good ones) Hank sent Timmy Geitner over to tell them that we would backstop their loan guarantees, and thus became a series of quantitative easing and liquidity measures which created a false, and depressed economy, for nearly a decade now.
What we are left with is a Secretary of the Treasury who got away with treason and raping the American people to save his firm, a multi trillion dollar deficit, a multi trillion dollar balance sheet at the Federal Reserves, and an economy which is frozen. It can't get better, because then we have trillions in bills to pay, and it can't get worse, because it is awash in phony paper liquidity.
Thank god The Donald is going to make America Great again.....or at least take us so far back that this will look like a pleasant dream.
In other words lets impoverish everyone because businesses of all sizes wouldn't exist without the banking system we have. Basically becomes the guy with the land to farm to feed himself backed up with some really big guns wins. Yep, great idea.
We dodged a huge bullet. Our entire economy is based on credit and liquidity and both had almost disappeared in October 2008. If TARP had not stepped in I believe we could have suffered a collapse worse than the 1929 crash.
We didn't dodge a bullet....we just put it off for a little later in the form of ever increasing government debt.
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