Posted on 11/16/2010 6:38:34 AM PST by WebFocus
Was the great financial crisis caused by greedy and reckless bankers and Wall Street players or by a broad range of individuals, financial institutions and governments who became less risk-averse and prudent or by government housing policies that brought on the housing bubble and mismanaged the risks? The lame-duck Congress now in session is about to make some major decisions on spending and taxes - when all too many members still are operating on the idea that greedy bankers and Wall Street players, rather than government housing policies, are the problem.
Without waiting for the evidence, many in the political class, and particularly those on the left, immediately bought into the argument that the financial crisis was caused by greed. This view of the cause provided much of the political energy behind the passage this year of the Dodd-Frank Act, also known as the financial reform act. Somewhat more sophisticated observers have claimed that all of the actors in the financial system are implicated. Peter J. Wallison, a former general counsel of the U.S. Treasury and now a fellow at the American Enterprise Institute (AEI), debunks these arguments and conclusively shows in a study that those were primarily government housing policies that caused the crisis. Mr. Wallison summarized the arguments of the collective responsibility/guilt crowd as follows:
* Wall Street did not put into place sound risk-management processes.
* Government regulators did not properly or effectively oversee these processes or the banks, investment banks, and Fannie Mae and Freddie Mac.
* Rating agencies' models were flawed. The agencies themselves had conflicts of interest, allowing complex, ultimately toxic instruments to be released into the financial market.
c Borrowers obtained mortgages under false pretenses. Unregulated mortgage brokers took advantage of unsophisticated buyers.
c Homebuyers mistakenly believed housing prices would always go up.
(Excerpt) Read more at washingtontimes.com ...
Greed is what caused it.
Just before God makes you greedy, He makes you stupid.
-Rex
Greedy bankers, whose losses are guarenteed by the government. That is a license to steal. Take the profits, pass on the losses to the taxpayers. It makes risk less risky for bankers.
The greedy parties include real estate brokers who sold homes to people they couldn't afford, bankers who underwrote loans without any regard for the borrowers' ability to repay them, and investors in collateralized debt obligations (i.e., bundled mortgages) who thought they could get above-average returns without any risk.
The ignorant parties include home buyers who really believed there was no end to the real estate bubble, along with investors who bought those collateralized debt obligations without having any idea what the hell they were.
On top of all this, I would simply point out that this entire charade unfolded because of government oversight that was either woefully inadequate (in the case of Federal mortgage guarantees) or non-existent (in the case of CDOs, which have little or no regulatory oversight).
Greedy bankers, yes, but it took a spark to set off the fire and that was the price of gas and even then it smoldered a while before consuming the economy.
People were living paycheck to paycheck and more. They were overwhelmed with debt and juggling things to keep up but when gas went through the roof and other prices rose the house of cards collapsed.
Don’t forget to factor in the Community Reinvestment Act.
That egocentric desire for power, combined with the greed of banks and individuals who benefited financially (including many politicians) is the cause.
The self centered want of power, and the sin of greed...two basic elements that were necessary to create a fertile ground for growing the disastrous economic crisis.
Political/legislative malpractice by professional politicians. As most are attorneys, We the People may well have a court case against about 535 of ‘em.
There is no good reason for the country to be in the condition it presently is. Any other American “professional” conducting themselves for the last 10years, as Congress has done, would be considered a menace to their community and have been hauled in front of a court long ago.
Congress has been negligently complicit in the problems we face today.
It is both government/legislative greed and malpractice as well as corporate greed and malpractice working in collusion.
Many of those on the corporate side who worked with and supported the democrat agenda are now feeling the knife in the back from their democrat “friends” as they take the blame and the hits for problems in banking and real estate.
These idiots are clueless about history such as the purges of the Kulaks or the Night of the Long Knives; these are just a couple of examples of how siding with socialists never pays off in the long run.
Neither. Our debt-happy popular culture caused it; passing blame on to freely elected leaders or businessmen who only complied with the law and consumer demand is absurd.
* Wall Street did not put into place sound risk-management processes.
*Madoff worked for years and SEC was asleep at the wheel,wonder how many other scame will show up.
PLEASE, I can show you YOUTUBE after YOUTUBE video of Democrat Politicians telling us how well Freddie and Fannie were working. By putting all this MONEY out there, Wall Street bit just like the DEMO Communists wanted them to.
Then the way the revolutionaries work, Obama was going to BE THE ONE who picked up the smoldering ruins and saved us.
It hasn't gone to plan as Obama is exposed as a total completely incompetent idiot. The PRESS is attacking the TEA PARTY as fiscal responsibility is the only way out of this mess and the radicals realize they are a huge threat.
If YOU don't understand this was a planned, coordinated attack on America to get control, then they will try it again. Can you say CONSPIRACY?
In retrospect, it was incredibly easy to execute. Just instill a sense of entitlement amongst the citizenry, promise the sheep even more slops from the gov't teat, legislate & promote debt encumbrance, and co-op bankers to finance the entire shabang with phantom "money".
So many people need to be brought to justice for this charade.
“On top of all this, I would simply point out that this entire charade unfolded because of government oversight that was either woefully inadequate (in the case of Federal mortgage guarantees) or non-existent (in the case of CDOs, which have little or no regulatory oversight).”
the opposite is true. Too much government oversight everywhere. To assume that government oversight could have prevented the crisis is to assume that one is wiser, more virtuous, smarter, and less prone to corruption, by virtue of the fact that one draws a paycheck from the government.
In fact the government was right in there encouraging the behavior that brought about the bubble and burst it.
.....did you read this article. Apparently you disagree with everything in it. It is a fact that government policy forced lenders to make highly risky loans and sell they to Fannie and Freddie.
And the point of this rant is? Collusion means the democrat party CONSPIRED with their friends in corporations. Was this the democrat plan? YES. Were they using their corporate friends? YES. Were their corporate friends collaborating knowingly with the democrats to bring down the Constitution? YES, some were, some were idiot dupes. The blame falls on both sides.
Great article.
I’d like to see these GSE’s completely restructured or dismantled. It’s an attack on private property to tell a private entity that they must loan money to someone that they don’t want to loan to.
Greed is not the enemy here. Greed is what made the system work! Why would a bank want to loan money to someone who has a high risk of default?
It appears to me that the Carter law to force banks to lend to blacks in the same ratio as whites started the ball rolling. Clinton actually instituted serious enforcement of it. The bankers understood that they were being required to lose money unto bankruptcy and, being naturally pirates anyway, pretty much said let’s make the most of it- make hay while the sun shines and started ripping off with both hands and front end loaders, too. Goldman Sachs was in the best position because that one company has provided ALL of the financial and economic talent that the Federal Government and Federal Reserve have used for several administrations. The entire financial system has been run by GS for GS’s benefit and the enrichment of GS people. The government kicked it off and then zealously abetted the chicanery, getting benefits for itself.
I understand your point, but my point about the lack of government oversight specifically deals with mortgage bonds and other forms of collateralized debt obligations. An interesting bit of history here is that questions about these financial instruments go back several decades, and were prominent during the S&L crisis of the 1980s. One dilemma that Wall Street and government regulators have faced over the years (and this dilemma apparently has never been resolved) is that there was always an uncertainty about whether mortgage-backed investment pools should be regulated under real estate law or under securities law. I’m no lawyer, but from what I understand there are apparently some very important distinctions that would apply one way or another.
Congress under the Democrats enforced the Community Reinvestment Act making sure that banks loaned to people who couldn’t pay them back. Rather than keeping these bad loans banks sold them to Freddie and Fannie.
Bankers are like anyone else. They won’t give money to people they know can’t pay it back unless forced to by the government.
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