FDIC chief puts blame on Fed for crisis

The Federal Reserve was blamed by a fellow regulator for contributing to the financial crisis on Thursday as the central bank and one of its former chairmen fought back against congressional moves to curb its powers.

In unusually pointed criticism, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, told the Financial Crisis Inquiry Commission that “much of the crisis may have been prevented” had the Fed dealt with subprime mortgages seven years before it did.

Regulators were wholly unprepared and ill-equipped for a systemic event,’ said Sheila Bair before the
Financial Crisis Inquiry Commission

In New York, Paul Volcker, former Fed chairman and now White House economic adviser, was making the case for the defence.

He said there was “a compelling case that central banks should have a strong voice and authority in regulation and supervisory matters”.

Both Ms Bair and Mr Volcker carry weight on Capitol Hill, where the Fed has drawn blame for aspects of the crisis.

Mr Volcker told the Economics Club of New York he was “particularly disturbed” about moves to take away the Fed’s regulatory function.

Chris Dodd, Senate banking committee chairman, has proposed consolidating bank supervision into a single regulator.

The Fed published a paper on Thursday, which had been sent to Mr Dodd on Wednesday, arguing that its financial stability and monetary policy roles were complemented by supervising bank holding companies.

Institutions at the centre of the crisis, such as Lehman Brothers, AIG and Countrywide, had been outside its jurisdiction and subject to “far less comprehensive” regulation, it said.

The Fed paper marks a public and proactive stance by a body whose culture and independence from Congress have made it less willing than other agencies to fight for power in the altered regulatory landscape.

It acknowledged some failures but said the Fed was at the forefront of new and improved techniques of oversight, such as “cross-firm, horizontal exams” to assess common exposures and vulnerabilities, and “forward-looking stress testing based on alternative projections for the macroeconomy”.

Mr Volcker said: “What seems to me beyond dispute, given recent events, is that monetary policy and the structure and condition of the banking and financial system are irretrievably intertwined.”

The finger pointing by all of the culprits is becoming hilarious.

Those who have been paying attention know the true story by now;

- the Fed and the Wall Street banksters provided the monetary fuel for the bubble,

- Fannie, Freddie, and Congress directed the nature of the bubble,

- the regulators, whom investors naively count on to protect them, were too busy planning their revolving door futures with the banksters to spend any time regulating the bubble blowers,

- the rating agencies, whom investors count on to warn them, had no incentive to look for the bubble much less call it a bubble when they did see it,

- the Keynesian dominated economics profession were busy following false theory while it was all going on and missed seeing the bubble,

- investors were looking to make a quick buck on a sure thing and greedily participated in the bubble blowing frenzy,

- the media were, and remain for the most part, too economically ignorant to see any of this before, during or after the events took place,

- and finally, the average Joe, who was just busy making a living, is now awake, paying attention, and trying to rebuild his life savings and keep his job while keeping an eye out for all the crooks and idiots.

Put down 20% and have payments including taxes and insurance of no more than 30% of net income!!!!

Other than bad economic conditions, absolutely nothing has changed with home financing. The fed has interest rates near zero and it looks like they are going to be there for a while. If reports are accurate, the FHA is making bad loans with only 3% down. It is still a disaster over at Fannie and Freddie.

I heard a radio ad from a slime outfit pushing 100% cash out refinancing loans for veterans.

SNAFU

She can also put lots of blame squarely on Chuck Me Schumer:

Schumer told the press that Indy Mac Bank was in trouble- starting a run on the bank which it never recovered from.

BTW_ Indy Mac Bank was sold to a group of private investors-—which includes George Soros.

As it is now held by Private Investors—the bank is not required to disclose how much it pays to it’s officers, investors, etc.

You are correct- I have been hammering away at this from the beginning. NO One seems to want to recall Jimmah Carter’s role in creating the CRA in the first place in 1977. Reagan kept it from exploding. Then along came Bill Clinton.

Janet Reno held a news conference where she sternly told the banks she would sue each and every one of them for discrimination if they didn’t give loans to “the poor”, because Henry Cisneros had convinced her that it was a RIGHT for” everyone to own a house”.

NINJA loans—NO INCOME NO JOB OR ASSETS were commonly given to persons who didn’t qualify to buy a T-Shirt on time payments. If you could sign your name & fog a mirror- you were qualified in Clinton’s & Reno’s eyes. Food stamps- Welfare money- and WIC were to be considered INCOME for the banks to lend you money to buy a house!!!!
This meant that people living in rented quarters on Section * housing money—where the Taxpayer is paying 80% of the rent- were given HOME LOANS! HOME LOANS!!!! Who was going to pay the 80% for them after closing escrow?????

I am pretty sure there was not even the term ‘Sub-Prime Mortgages’ before all of this legislation.

An illegal seasonal fruit picker from Mexico was allowed to buy a $600,000 house in Fresno, California, and the Liberals were incensed when he lost it to foreclosure. He is just one incident, especially in California.

The banks were targeted years ago for a disaster- and I blame Jimmah Carter the most of all.
He went bankrupt 2 times in his peanut growing ‘business’ and I believe the banks would NOT lend him any more money, and he set out to slowly destroy them. He is a particularly hateful person, as demonstrated by his anti-Israel attitude. (I think he deliberately let the Israeli military die in the attempt to rescue the American hostages Iran was holding..He waited too long to let them go, and then sent them into a sandstorm). If Carter was a Catholic- he would give a good priest a case of truck butt sitting overly long in the confessional.

Liberal Democrats seeking votes from the poor and uneducated (terms are interchangeable- you are poor because you are UNeducated)—kept this fiasco afloat and added the Freddie Mac & Fannie Mae cohorts to the mix.

Along comes the Marzist Hoax occupying the Oval Office, and you have the trigger for the collapse of the American financial system.

IMO,If BANKS had been able to keep to their conservative lending practices, they probably would not have devised all those high risk ideas to make up for the bad NINJA loans.

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