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There have been and will continue to be documentaries on the causes of the financial crisis with various blame.
One could drive a truck through the spin within this particular report.
I prefer to keep it simple.
Banks were lending money to anyone with a pulse. They sold whole loans to Wall Street who sliced and diced them and repackaged them as private label securities that were in effect, patented, when the independent credit rating agencies assigned them investment grade ratings.
So called conservative investors, pension plans, retirement funds, insurance companies, mutual funds, hedge funds, U.S. and global banks and FHLMC and FNMA invested their own capital and other people's money into these products solely because of the investment grade ratings and a better projected return on their investment than they could obtain from other investment grade investments. In doing so, they unknowingly became the source of funding the dirties of the sub prime loans.
( FNMA/FHLMC's market share declined as the bubble inflated. The worst of the junk never hit FNMA/FHLMC because they were not conforming loans. They did however use their own capital to invest in private label securities that had been assigned investment grade status by the independent credit rating agencies. When those bonds tanked, so did their respective balance sheets)
In 2004, the SEC reduced Net Capital Requirements for the fab five, Bear Stearns, Lehman, Merrill Lynch, Morgan Stanley and Goldman Sachs and in doing so allowed them to leverage to the max.
The panic was caused by a credit run by global institutional investors. Had the government not stepped in, the Greatest Depression would have occurred.
U.S. history shows that this was not the first financial crisis this country has seen. All can be boiled down to risky lending practices, inadequate regulation and excess leverage. The last biggie occurred in the late 80's, the S&L crisis.
The institutional investors are govt. Govt, elite et al created the bubble then imploded it. They didn't have to step in they never left. Meanwhile they have been raking it in. The BK's going on are mostly about pension funds. Same thing happened in the 80's and 90's with the big public corps. (also owned by govt) Long or short they profit. The avg joe, not so much.
That FAB five is part of the same group govt shareholder controlled that controls 80% of global wealth.
Study by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich.
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When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. "In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.
Do you think that Barney Frank is responsible for our economic collapse?
Hmm.. Barney Frank became the Chairman of the House Financial Services committee in 2007 and the economy crashed exactly a year and a half later.
Jesus I just realized that right before the crash we had Frank as Financial Services chairman and freaking Maxine Waters as Chairwoman of the Subcommittee on Housing and Community Opportunity.
In Fall 2003, the Bush Admin was pushing Congress hard to create a new Federal agency to regulate and supervise Fannie and Freddie, both Government Sponsored Entities, or GSEs.
At a Congressional hearing on Sept 10, 2003, John Snow, Secretary of the Treasury stated: "We need a strong, world-class regulatory agency to oversee the prudential operations of the GSE's, and the safety and soundness of their financial activities."
At that same hearing, ranking member of the House Financial Services Committee Barney Frank (D-MA) defended his practices with regard to Fannie Mae and Freddie Mac: "Fannie Mae and Freddie Mac, are not in a crisis."
Frank said the Fed Govt should be encouraging F&F to do more to get low-income families into homes:
"The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up a possibility of serious financial losses to the treasury - which I do not see, I think we see entities which are fundamentally sound financially and can withstand some of the disaster scenarios - the more pressure there is there, then the less I think we see in terms of 'affordable housing' ".
The top executives at F&F began cooking their books, exaggerating their sales in their quarterly reports, so that the company officials could claim they had met their companies' sales targets, and thus collect huge salary bonuses. They were finally caught in 2004. Several of them stepped down, but none was every punished, or even charged. One of them, Franklin Raines, CEO of Fannie Mae, later gave financial and housing advice to the campaign of Presidential contender Barack Obama.
At a House Financial Services Committee Hearing on Feb. 17, 2005, Alan Greenspan warned against one of the fundamental ideas of modern liberalism, the idea of putting all our eggs in one basket by concentrating financial activity into just a few big agencies in central government: "... Enabling these institutions to increase in size - and they will once the crisis in their judgment passes - we are placing the total financial system of the future at a substantial risk."
He later added at another hearing on April 6, 2005: "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis."
Senator Charles Schumer (D-NY) ignored any possibility the F&F might be in trouble at that hearing, and simply pointed to the advantages some people had gotten from the government's activities: "I think Fannie and Freddie ... are an intrinsic part of making America the best-housed people in the world... if you look over the last 20 or whatever years, they have done a very, very good job."
Schumer also complained, "Things are good in the housing market. Why are people entertaining radical change?"
On April 7, 2005, Treasury Secretary John Snow warned again: "These large portfolios, unchecked in their growth over the last decade or so, pose a real problem." The Senate Banking Committee adopted strong regulation that would have prevented Fannie and Freddie from acquiring these bad mortgages. All of the Republicans on the committee voted for it, and all the Democrats voted against it, and it passed out of the committee on a straight party-line vote. But Democrats then filibustered the bill on the Senate floor, preventing it from being brought to a vote.
Freddie Mac and Fannie Mae was active in making campaign contributions to politicians, from money that ostensibly was for low-income mortgages. The top two recipients were:
Christopher Dodd (D-CT): $165,000
Barack Obama (D-IL): $126,000
The highest-receiving Republican was Bob Bennett (R-UT), who got $108,000. Further down the list was John McCain (R-AZ), who accepted $25,000.
On May 25, 2006 in the Senate, John McCain (R-AZ) sounded more warnings over the huge size and lack of discipline in the government companies, and sponsored a bill to regulate the companies more firmly: "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac... and the sheer magnitude of these companies and the role they play in the housing market... the GSEs need to be reformed without delay." McCain's bill was voted out of committee on a straight party-line vote: All Republicans voted for it, and all Democrats voted against. Democrats then announced they would filibuster the bill in the Senate, as they had the previous year's regulatory legislation. Republicans knew they did not have enough votes to achieve the 60% needed, and so never brought the bill to the Senate floor.
By the beginning of 2008, Fannie Mae and Freddie Mac had bought up over $4 trillion in mortgages, roughly one-quarter of which was risky sub-prime mortgage paper. With interest rates rising, these rickety homeowners started defaulting on their loans. Only about 2% of them defaulted by January 2008, but the effect was disastrous. Banks began to get leery of lending money to each other, knowing that their fellow banks held substantial assets that might default and become worthless, thus making the banks unable to pay back their loans to each other.
Banks and lending institutions began collapsing or seeking emergency help: Countrywide Financial, Lehman Brothers, insurer AIG, Bear Stearns, IndyMac bank, etc. buckled to their knees as paralysis spread. The huge numbers of risky subprime mortgages, had become like a "poison pill" that choked the institutions that had swallowed them. The Fed finally took over Freddie Mac and Fannie Mae, but the damage had long been done.
Congress appropriated nearly $1 trillion in emergency funds to loan to, or otherwise prop up, failing financial institutions. But none of the original legislation that had spurred decades of risky lending, has been repealed in all the "bailout" frenzy, and there are no bills pending to do so.
Great post.
Odd, isn't it, that the libs laid the foundation for the collapse and contributed most to its scale, yet were able to successfully pin the disaster on Bush, one of the few who tried to avert it.
First...it's not unconstitutional if Congress votes for it and passes it.
Yes, it is. Read up about what it takes to amend the Constitution. The Congress alone is not authorized to do it.
If you are going to laugh at other people, you should always make sure you are right. In this case you are dead wrong, which makes you a laughing fool.
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Second...it's not a power grab to appoint a special regulator to work within the Treasury Department and give the authority to appoint directors of Fanny & Freddie away from the President TO Congress.
Yes, it would be, because the Constitution grants that authority to the Congress, not to the president. I am not making this up, the GOP said the same exact things when they threw the idea out of Congress.
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Third...Congress never got to vote on this proposal because it didn't make it
bout of committee!
It didn't make it past anything, because even Republicans rejected it.
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I really have to wonder about your ability to read plain English?
Insult, when everything else fails. You think people are not smart just because they do not accept your igonrace as truth?
GWB was admnished by watchdog barney frank who claimed Freddie and fanny were solvent. If you expressed concern about freddie and fannie you hated the poor and were a racist.
Toss in watchdog Tim Guitner as well. Shelia jackson lee and other mad dog libs who helped sink our economy by defending virulent economic policies manifested partly in F&F.
The government assigned watchdogs were fast asleep..... this demonstrates how well government control and protection has failed the country.
The federal govermnment agencies owns a huge part of the blame.
Check out post #57. I'll be glad to help if you encounter comprehension issues.
You didn't say anything in Post #57.
You ignored the videos.
And if Congress doesn't follow parliamentary procedures, then why do they have designated parliamentarians?.........
The Parliamentarian is a nonpartisan official appointed by the Speaker of the House to render objective assistance on legislative and parliamentary procedure to the House of Representatives. During proceedings on the floor, the Parliamentarian sits to the Speaker’s right on the dais.
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BF guilty as charged
