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The problems start when you are packaging trillions of dollars in highly questionable mortgages that have created a housing market bubble and the credit rating agencies are certifying them as low risk. You have companies like Lehman and Bear Stearn's holding this crap, private investors not fully aware of the risks holding this crap and AIG insuring a lot of it.
It seems like everywhere you turn, the finance sector is involved in some scheme or exotic instrument to pass risk on to everyone else and pocket the profits from the exploits.
They say that they are paid really well because of the risks they take, but there is no risk at all if everyone else is always paying for it.
In capitalism, the saying goes both parties have full transparency, knowledge and freedom in the exchange.
The finance sector has violated every law in capitalism in order to part others from their money.
The GSEs own or guarantee over 90% of US mortgage loans. Those loans have to meet HUD-mandated GSE lending standards. Institutions that originated the loans also had to meet those standards or the loans wouldn't be eligible for the backing of the GSEs.
Why bring up the GSEs when the investment banks were purchasing loans that the GSEs wouldn't even touch and at the height of the bubble the investment banks share of the mortgage loan markets exceeded that of the GSEs.
Anyway, it would seem they lightened the paper-work burden just a wee bit too much. Collaterialized debt obligations and structured investment vehicles were created in response to Clinton's demand to issue more mortgages or be financially penalized and suffer legal action and scrutiny at the federal and State level, and also in the Media.
Your assertion about CDOS is way overstated. If it were true then explain the growth in synthetic CDOs which didn't even require the creation of new mortgages.
1. You guys screwed it up and now you blame others for not fixing your mistake? And you have the audacity to talk about other people “incapable of owning up their own actions�
2. No party can control the congress without a super majority. What you said is a boldfaced lie.
Who is 'you guys'?
I provided plenty of proof how Bush and the Republicans messed it up and created a disaster. They need to own it as opposed to trying to blame someone else. They are showing complete lack of personal responsibility.
And yes, they had all the votes needed to prevent it, but they chose to do the opposite.
You can blame Exxon for the financial collapse... no really. After the Valdez disaster Exxon was seeking a multi billion dollar line of credit from JP Morgan. JP Morgans problem was it would tie up a lot of their capital because banking regulations required they set aside X amount to cover the loan if Exxon failed to repay it.
What they figured out is they could off load the risk of the loan to investors, take their profit in fees and avoid having to set aside capital which they can then loan to someone else. On it's face not a bad idea because the likelihood of Exxon defaulting or the other major companies they were originally using this for is not that great and the investors would of been well aware of the risks.
The problems start when you are packaging trillions of dollars in highly questionable mortgages that have created a housing market bubble and the credit rating agencies are certifying them as low risk. You have companies like Lehman and Bear Stearn's holding this crap, private investors not fully aware of the risks holding this crap and AIG insuring a lot of it.
The other side piece of the puzzle along with the swaps that originated with Exxon and JP Morgan are the CDOs whose origin can be traced to the Savings and Loan crisis where the Resolution Trust Corp started packaging various problematic real estate properties obtained from failing S&Ls into derivative products that they could sell.
It established the belief that safe investment products could be created out of risky investments. It worked for the RTC why not for mortgages.
I never heard anyone offer an alternative explanation. What else could it have been?
Investment Banks believing in the alchemy of CDOs. Investment Banks believed they could create safe investments out of risky investments. Without the Investment Banks, which were not under government lending mandates, the capital available for mortgages would not have had the explosive growth seen during the bubble.
Investment Banks believing in the alchemy of CDOs. Investment Banks believed they could create safe investments out of risky investments. Without the Investment Banks, which were not under government lending mandates, the capital available for mortgages would not have had the explosive growth seen during the bubble.
The risky investments were all the result of the liberal policies the OP alludes to. What you're talking about is a result of the same cause.
Investment Banks believing in the alchemy of CDOs. Investment Banks believed they could create safe investments out of risky investments. Without the Investment Banks, which were not under government lending mandates, the capital available for mortgages would not have had the explosive growth seen during the bubble.
Might as well give it a rest.
There is no talking to people that look at the government as one entity and the finance sector as another separate entity.
The Finance and Political Sector are so tied together that you could almost consider them one.
Hundreds of bankers revolve between DC and Industry serving themselves.
The Government bailed out the bankers but even more, continues to bail them out today through QE eternal.
The ultra wealthy in this country have all their wealth tied into the stock markets.
The ultra wealthy are also the major donors to all politicians.
Politicians also made it legal for them to do insider trading but illegal for everyone else.
The incestuous relationship between government and finance is sickening.
The risky investments were all the result of the liberal policies the OP alludes to. What you're talking about is a result of the same cause.
No, banking lobbyists were behind it all the way, unless you wish to suggest the banking and finance sector are all liberals.
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