Posted on 09/20/2008 8:12:12 PM PDT by SteveAustin
"....Michael Greenberger served as the CFTC's director of trading and markets at the time. A proponent of tougher oversight, he recalls the Greenspan-Rubin resistance as being fierce and across-the-board. "If we had prevailed, the [subprime-securitization] party would never have gotten started; the wildness wouldn't have happened," he says. "There would have been auditing requirements, capital requirements, transparency. No more operating in the shadows. Bear Stearns, Lehman, Enron, and AIG would be thriving, and spending every waking hour complaining about regulatory restraints imposed upon them." Now a law professor at the University of Maryland, Greenberger adds: "In a booming economy, people couldn't be convinced that without corrections, LTCM would happen again—bigger and with more ramifications." Today, Bear, Lehman, and AIG have untold amounts of outlandish derivatives on their books. It could be years before anyone untangles what they're worth."
(Excerpt) Read more at businessweek.com ...
This article provides a powerful cite that Obama economic advisor Robert Rubin and Greenspan were the guys that allowed the derivative market to take off during the Clinton 1990's.
Bush was asleep at the wheel, but the Wall Street derivatives car was built in the 1990's under the auspices of Rubin and his Wall Street buddies at the time.
Derivatives are what created this house of cards that finally fell down last week.
if...
i don’t buy it.
Guess again.
$1 trillion in subprime loans just melted down our financial system.
The reason there were $1 Trillion in subprime loans doled out is because the Wall Street guys engineered all these derivative products that chopped up the loans into different pieces.
We were told that by creating these derivative products that the risk from such low credit loans was much smaller and a real business of subprime lending could be created.
The derivatives ponzi scheme attracted all sorts of legitimate money into these funding vehicles.
If you went direct to Bank of America in year 2000 and said you wanted to make $1 trillion in subprime loans they would have laughed you out the door. But if you chopped them up in undecipherable pieces so complicated that Standard and Poor’s would slap a rating on them, you then had a buyer.
Obama was quoted as saying, “Rubin?.......Rubin?........I don’t believe I’ve ever talked to, or have taken in advice ever from anyone named Rubin.”
I seem to remember several years ago that the left was crying because minorities were being turned down for mortgages at a higher rate than whites. They blamed it on raciscm and they basically forced the banks to make a lot of these sub-prime loans. Well the problem has come home to roost. That’s not all of the problem though. There were a lot of people that took out an ARM. They seem to forget that interest rates under Carter hit double digit percentage wise. I remembered them days so when I bought a house there was no way I’d take an ARM. I may pay a little more but it is locked in and I don’t have to worry about the interest getting out of hand. Thirdly, banks were greedy and loosened their standards on mortgages. To force the taxpayers to bail these people out is wrong. A lot of the problems in today’s society is we no longer hold people accountable for their bad judgement. These bailouts are only going to hurt us in the end and make the problem worse instead of fixing it.
Bank of America and every other major bank, and Fannie and Freddie, was led by the nose by Clinton, Cuomo, Frank, Rangel, Raines, Johnson, et al to a big steaming pile of crap and told to spoon it down. And they did, and earned a pile of fees of their own in doing so.
Low interest rates and rising house prices kept the chickens from coming home to roost.
Until now.
Yeah it is. The whole fricken disaster from the time of the creation of these unconstitutional quasi-government agencies to the present is the fault of the socialist democrats and their RINO enablers. It’s Roosevelt, Carter, Clinton, et al leading the charge. And Dodd, Frank & Co were the latest ones asleep at the wheel. Actually, they weren’t asleep. The bastards were in on the take and were looking the other way while the corruption ran rampant. Bush tried to reform them. McCain tried to reform them. The Democrats pooh poohed the need. Read up. Don’t try feeding us a bunch of crap!
Look guys....if the political winner is that somehow government forcing lending to poor credit minorities is what took down the financial system, that’s fine. Go with it. But we’ve had the CRA in place for 25 years before this subprime mess took off without any problems other than a few local bank presidents grousing about a risky loan or two they needed to make to comply with CRA.
The reason this situation is such a mess is that exponential leverage and complexity was created with Wall Street derivatives. If you read the article, you’ll see Greenspan defending the whole thing under the guise that it introduced “prosperity” In reality it just created a big credit bubble that exploded inside the economy.
Paulson needs the massive power granted him in that draft bill because I don’t think even he knows exactly what type of “bad debt” he’ll need to buy back and in what forms.
I disagree that derivatives was the cause of the problem, but rather a participating activity within the time frame of the event. I still believe the Carter era CRA legislation was the planted seed that germinated and grew out of control under the care of the Clinton misadministration.
Here’s more from a previous post by FReeper Palmer on Derivatives (even though I disagree), but noticed there wasn’t any explanation as to what the “H” derivates are in this article you have posted. So for those whom are confused on the matter, here’s the link:
http://www.freerepublic.com/focus/f-news/2084907/posts
I worked with a gal last summer who was with her husband processing paperwork to buy a house. I didn't get into incomes with her but tried to explain ARM's and balloon payments to her. I told her I was trying to scare her so they would not get burned. Telling her about that lost money if you can't pay and loose the house. And told her of my experience with interest going from 7% to 21.5% before their run-up ended. It is a simple math problem to keep from being snookered into providing scum with unearned income.
They did not sign the paperwork and I am glad.
I agree with you guys on ARM’s and the dangers of balloon payments. The low interest rates of the last 10-15 years lulled a younger generation into thinking there was no interest rate risk in taking on what is for most people the biggest loan of their lifetimes.
15 and 30-year fixed rate is where you need to be IMHO.
Years from now, I think Robert Rubin will be identified as one of the main facilitators of the mess we are in now. Bill Clinton made many mistakes, but making this guy Treasury Secretary was one of the worst.
And that is the purpose for my posting of this article.
We’ve had the MSM this past week touting the fact that Obama has been consulting with Rubin. In reality Rubin was the man who let the Wall Street Houses run unhinged during the Clinton years to create this crap.
Rubin needs to take some serious heat for this derivatives mess.
Talk about the fox watching the hen house...
If you answered Barack Obama you win.
Obama might also say “that isn’t the Rubin I knew”
Yes indeed, the CRA was the club that the lefties used to extort money out of the banks to lend to minority borrowers. It was so important that Banks lending departments were forced to post their CRA Notice in a prominent place within their lending areas and in their lobbies...From that Bank Extortion Act everything else flowed—the corruption, the derivatives, the fraudulent sale of weak loans to Fannie Mae and Freddie Mac, the excessive closing costs, the heavy penalties if banks violated the CRA- even losing up to 10% of their assets for violations...The democrats and leftists shoved this Law down the banks throats and the Banks played the game...
When Sub-prime lending came into play, that was the beginning of the end...Now you had banks forced to make risky loans to customers with poor credit histories, or no credit history, and sometimes without jobs and withour any proof that they could repay the loan—it was illegal for the bank to ask to see copies of social security income or disability income....Social policy took preference over sound bank lending practices and so we now have this debacle to deal with...We no longer have a safe banking system, not with laws like the CRA on the books...The CRA should be abolished now to save the banking system...otherwise, the criminality and unwise lending will just proceed but at a slower pace...Fed Chairman Bernanke should lift the CRA immediately and get the Banks out of the extortion racket...You can either have a sound banking system, or you can have a system open to criminals and thievery and extortion...Take your pick....
More people need to be aware of the political ramifications of this especially before the election!
Does not seem to be much being said about this in MSM or on financial channels :(
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