The failure belongs to the democrats.
When a resolution was on the table to rein in the mortgage lenders, every single republican voted for it to get out of committee and every single democrat voted NO.
The House Banking Committee Chairman is not responsible for oversight on banks or other financial institutions.
Got it.
No. The underlying problem is with fraud.
Where are the Republicans on this?
Why are they always too weak and too stupid to fight back against the Democrats’ lies?
Why are they not putting the blame squarely where it belongs: on Fannie Mae and Freddie Mac’s social engineering policies as demanded by Democrats in congress?
If deregulation is the problem, what new regulations are the democrats proposing to fix the problem?
"Clinton added that "we also must begin to look at the root cause of this, which is these mortgages that people cannot afford."
It was social engineering that caused this.
Red Lining was the practice of lenders NOT lending money in areas where the investment didn't make sense or the incidents of loan defaults were high or the income of residents didn't qualify for loans...
Congress greased the skids for loans - especially risky loans with ZERO down payments for homes with criminally inflated “appraisals”...to people who couldn't prove the ability to repay!
There were Republicans who participated in this crime, but it was predominately DEMOCRATS who pushed it to “buy” their constituents with YOUR money....
This mess is a stinking Albatross that should remain around the Democrat's neck..
I am 100% opposed to a Taxpayer funded "Bail Out. ANYONE involved in this rip off and fraudulently manipulated crises - that ANY fool could have seen coming...should suffer the consequences of their actions.
Let the chips fall.....Let the banks fail.....Let the foreclosures commence..
This bullshit of “buying” what one can't afford has to stop.
No one should profit from their careless or fraudulent behavior.
The market needs oversight just as any other financial institution which has a fiduciary control of the life savings and finances of the American people. Deregulation certainly does and did tremendously helped certain industry in the economy(such as the airline industry in the 1970s) because it sparked more competition for passengers and cheaper rates.
The markets have a Security and Exchange Commission as an oversight authority and it, quite frankly, it didn't do such a good job. Congress complicated the situation by allowing companies which were well-steeped in success in one aspect of the economy diversify and branch out into another (AIG is a great insurance company but was a poor banking one). So, greed had a lot to do with the crisis. Still, most of the problem with the current crisis was caused by lenders making risky loans to unqualified homebuyers. This is where more regulation was needed, IMO!
Corruption, ignorance, greed, hunger for power by the global elites. We were set up like bowling pins, and now we’re getting knocked down.
One of the components of the crisis is FASB Rule 157 that went into effect Nov 15, 2007 and still has not been suspended.
This is the rule that forced “mark to market” accounting even for illiquid assets.
The main undeniable fact is that when debt becomes 350% of GDP (our highest ever, probably the highest for any major country ever) there are going to be big problems. Greenspan made credit absurdly cheap to the point that it did not reflect inflation or default risks.
The securities were a natural result from excessive cheap credit, the crisis is the next natural result because credit can't be reduced without major pain. The securities crisis is forcing action now, but the pain would have come sooner or later. Inflation is the less painful option that will eventually be chosen (although price rises are a lagging indicator).
"Second, recent events highlight the absurdity of the attempt by several pundits to blame recent problems on "financial deregulation." That complaint was aimed at the Financial Modernization Act of 1999, which passed the House by a vote of 362-57 and the Senate by 90-8, yanking the last brick out of the 1933 Glass-Steagall Act's regulatory wall between commercial banks and investment banks.
If it was somehow possible in today's world of global electronic finance to the rebuild such a wall, that would mean J.P. Morgan could not have bought Bear Stearns, Bank of America could not have bought Merrill Lynch, Barclays could not buy most of Lehman, and Goldman Sachs and Morgan Stanley could not become bank holding companies. It is hard to imagine how things would have worked out in that situation, but it surely would not have been an improvement.
My paraphrasing and re-casting of the excellent article from the WSJ (a must-read). Also, see this Freep thread here.
Our current mess can be tied directly to the Rats in Washington and the greed of Obama’s campaign bigwigs (Jim Johnson, former chairman of Fannie Mae and Franklin Raines, former Fannie Mae CEO). The Rats propped up these two government-sponsored enterprises (GSEs) so their CEOs could reap multiple millions while lining the pockets of Obama and Dodd through massive campaign contributions and perks.
Fannie and Freddie as GSEs were viewed in the capital markets as government-backed buyers, thus they were able to borrow as much as they wanted at below market rates to buy junk mortgages and mortgage-backed securities.
Economists at the Federal Reserve and Congressional Budget Office had studied them in detail, and found that they did not significantly reduce mortgage interest rates despite their subsidized borrowing rates. If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing?
Fed Chairman Alan Greenspan became a powerful opponent and began to call for stricter regulation and limitations on the growth of their risky portfolios.
Fannie Mae and Freddie Mac had accounting scandals in 2003 and 2004, so to avoid regulation and retain their government sponsored low-cost financing advantage, they re-committed to increased financing of "affordable housing." They became the largest buyers of subprime (garbage) and Alt-A (mostly garbage) mortgages between 2004 and 2007, supercharging growth of junk mortgages, exposing taxpayer’s to $1 trillion, and substantially magnifying the costs of this collapse.
Beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to explode from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period it was clear that originators were scraping the bottom of the home-buyer barrel to pump-up Fannie and Freddie profits (i.e. CEO compensation and campaign contributions to Rats) since loan quality declined with low or no down payments and low adjustable initial rates.
Fannie and Freddie bought the support of Rats and were allowed to continue unrestrained. Barney Frank (Rat., Mass), the chair of the House Financial Services Committee, (wrongly, ignorantly, stupidly) described the arrangement with "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing."
In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill. The bill was the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Rats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Rats, remained silent.
Rats are blaming the financial crisis on "deregulation." This is a canard. There has been deregulation in our economy that has produced innovation and lowered consumer prices. The primary "deregulation" in the financial world permitted banks to diversify their risks, which has kept banks relatively stable in this storm.
As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs.
Deregulation also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.
Obama now criticizes Republicans and deregulation, but along with Rats Frank and Dodd, blocked the only reform proposed - causing and increasing the size of current crisis. Sen. McCain has been pointing to systemic risks and trying to do something about them for years. In contrast, Sen. Obama lined his pocket with their money and helped to block Republican and Fed regulation that would have stopped the insanity. Obama likes Fannie and Freddie so much, he hired their former CEOs who cooked the books and left us taxpayers with the bill while keeping their millions in compensation.
If the Rats hadn’t blocked the 2005 legislation, the huge growth in junk loans from Fannie and Freddie could not have occurred, and the scale of the meltdown would have been substantially less. The Rats who today blame Republicans on the lack of regulations were the ones who blocked the only legislative effort that could have stopped it. And the deregulation that did occur mitigated bank risk and positioned them to reduce the cost to taxpayers of this mess - caused by Rats.
Also:
"Second, recent events highlight the absurdity of the attempt by several pundits to blame recent problems on "financial deregulation." That complaint was aimed at the Financial Modernization Act of 1999, which passed the House by a vote of 362-57 and the Senate by 90-8, yanking the last brick out of the 1933 Glass-Steagall Act's regulatory wall between commercial banks and investment banks.
If it was somehow possible in today's world of global electronic finance to the rebuild such a wall, that would mean J.P. Morgan could not have bought Bear Stearns, Bank of America could not have bought Merrill Lynch, Barclays could not buy most of Lehman, and Goldman Sachs and Morgan Stanley could not become bank holding companies. It is hard to imagine how things would have worked out in that situation, but it surely would not have been an improvement.
The promise that junk bonds would be backed by the government as though they were AAA is what made much of this mess possible in the first place.
If printing money was the solution to all problems, Zimbabwe would be the most prosperous country in the world.~ MISH'S Global Economic Trend Analysis"
http://globaleconomicanalysis.blogspot.com
Open Letter To Congress On The $700 Billion Paulson Bailout Plan
http://globaleconomicanalysis.blogspot.com/2008/09/open-letter-to-congress-on-700-billion.html