Posted on 04/07/2010 5:53:20 PM PDT by dangthis
"At today’s Financial Crisis Inquiry Commission hearing, Brooksley Born, the former head of the Commodity Futures Trading Commission, declared Alan Greenspan’s tenure at the Federal Reserve an unmitigated failure – to his face. Greenspan accords a certain degree of respect on Capitol Hill, despite Born’s accurate take on his many failures, and so this outburst was highly unusual – and gratifying.
Born, who pushed to strictly regulate derivatives under the Clinton Administration, but lost the battle to, among other people, Alan Greenspan, told the former Federal Reserve chair that his agency “failed to prevent housing bubble, failed to prevent the predatory lending scandal, failed to prevent the activities that would bring the financial system to the verge of collapse.”
“You failed to prevent many of our banks from consolidating and growing to a size that are now too big or too interconnected to fail,” Born added. She added that Greenspan’s views on deregulation, which he took as an article of faith, contributed to the Federal Reserve’s failure in delivering on its mandate."
(Excerpt) Read more at news.firedoglake.com ...
I've been busy. If it has the typical lefty slant, I don't see why I should bother.
The principle cause was subprime mortgages, that led to foreclosures
Yeah, dropping prices. CDS just move the losses around.
I'm as right wing as you can possibly get. I found it fascinating that there was one voice crying out in the wilderness. If Conservatives are going to lead the next round then they better wise up about OCD's and CDS's. Yes, on any given day you can pull on the taffy and morph it into any useful weapon against the opposition. If you fail to learn from history then you will certainly cause yourself to repeat it.
Poor old Brooksley? Please.
If Conservatives are going to lead the next round then they better wise up about OCD's and CDS's.
Please explain what the problem is with CDS that we're not wise about.
CDOs? What don't you know about CDOs that I could clear up for you?
Watch the show.
OCD, Over the counter derivatives
CDS, credit default swaps
GAC, get a clue
OK so it’s OTC...
This has grown troublesome. You are the same mind set of those that caused all this trouble. "Poor Toddsterpatriot" should be included in your sympathies. Anyone that views the Frontline show will know your blind side. That should be fun to watch in the future.
LOL! Listen to that silly program, before it even gets going
NARRATOR: Before the toxic assets poisoned the economy, she warned of their danger.
She was saying that derivatives were "toxic assets"?
Why go beyond that proof of her silliness?
You’re getting a very limited and misleading idea of what occurred by relying on Wikipedia. Some of the information you are citing from there is quite inaccurate. I suggest that you pick up Muolo and Padilla’s “Chain of Blame”, Gasparino’s “Sellout”, Gillian Tett’s “Fool’s Gold”, Yves Smith’s “ECONned” if you want to understand what happened.
That article is telling you that the conservatorship of Fannie and Freddie triggered some credit default swap contracts. These swaps were taken out on Fannie and Freddie bonds by outside firms. The swaps weren’t entered into by either Fannie or Freddie which is what I think you believe. You need to read more than Wikipedia.
They went into conservatorship because the collapse of the housing bubble left them with 15 billion dollars of bad debt on their books. The Bush administration decided to bail them out in order to keep the secondary market for housing debt from ceasing to function. Their non-performing loans are probably now on the Federal Reserve’s books.
I don’t believe that Fannie and Freddie were the largest dealers in securitized mortgage debt during the years of the bubble. The investment banks had entered the field in a huge way offering much looser credit terms to the public than either Fannie or Freddie.
There is a difference between toxic mortgages and non-performing loans. Toxic paper includes stated income stated asset loans, option ARMs and other exotic non-conforming loans, none of which Fannie and Freddie dealt in. Again, you need more information that you are getting from brief articles on Wikipedia.
If China and Russia had dumped loads of performing paper on the market it would have been snapped up at bargain prices. Investors like a fire sale. The problem wasn’t China and Russia selling their holdings. The problem was American borrowers who weren’t paying their mortgages. That results in worthless paper and no one is going to buy that.
I am not diminishing the Fannie/FReddie scandal, merely expounding on it. I was there with the the breaking news about Fannie, as you can see in the Timeline Project.
Our nation was infected with a tape worm when FDR and his fawning press transformed American politics. Our philosophy of free market forces is what made us great. But now the voter is too obsessed with the score card of the moment. Spain was manipulated by train bombings right before an election. And I think we were manipulated the same way through economic sabotage.
We need a more mature voter who is not tricked so easily. People think they can’t possibly understand how the president tweaks the economy. But you and I both know the simplicity of free markets being unleashed.
It’s time tested even in recent times — Kennedy and Reagan. Clinton was an ineffective liberal and thus unable to harm the economy much in the short term.
We all know that Bush’s tax cuts helped build tax revenue through prosperity. But that has been blighted, hasn’t it?
Thank you for your take. FRegards ....
“And CDOs are Collateralized Debt Obligations.”
I never mentioned CDO. I mentioned OCD when I should have said OTC derivatives.
So some of you have issues with Wikipedea. The way that works is someone with your knowledge goes there and corrects things so that it is reflective of accurate information.
I went to three or for news articles, Frontline, wikipedia, and other internet sources that I did not publish here in this forum. I don’t have the faintest idea how most of this stuff works or is manipulated. I do know that the only regulation board to oversee OTC derivatives and credit default swaps was put to sleep back in the mid 90’s. This would have been on bonds that Fannie and Freddie hold, on 1.5 trillion in mortgages, to the tune of half a billion credit default swaps that are the biggest source of all the CDS failings in the market. Only a moron could believe that the dangers of the sub prime loans would not have been discovered had there been oversight of that market.
Nope, you have been talking with an idiot regarding financial proclivities and over access to power structuring. So deal with this. I’m an idiot but I have far more common sense. I at least know when people get caught in their craftiness they squirm when placed on the hot seat. Greenspan, three Presidents and their cabinets, and congress gambled on winning was at the heart of this. Red herrings, muddying the waters, and passing the buck does not fix what needs to be fixed. The OTC market is still doing what it did to get us into this mess. That’s why the Frontline show is titled “The Warning.”
Yes, I know. And I tried to decipher what you really meant.
So some of you have issues with Wikipedea.
Only because we prefer accuracy.
The way that works is someone with your knowledge goes there and corrects things so that it is reflective of accurate information.
Wouldn't waste my time.
This would have been on bonds that Fannie and Freddie hold, on 1.5 trillion in mortgages
You are incorrect. Fannie and Freddie had a govt guarantee. No need to write CDS on their bonds.
Only a moron could believe that the dangers of the sub prime loans would not have been discovered had there been oversight of that market.
And only a moron believes that outlawing CDS would have somehow prevented the bubble.
The OTC market is still doing what it did to get us into this mess.
The OTC market has nothing to do with bad mortgages. Sorry. Banks holding mortgages that never traded a CDS were also big losers when the market collapsed.
Great link. Reading it now.
DennyW.... thinking my cat has more common sense than than that superannuated libertarian hippie Alan Greenspan
How true. At one point he admitted that he needed to rethink his philosophy, but seems to have backed away from that. I have ordered Yves Smith’s Econned and it should be here any day.
parsy, who is waiting on pins and needles
“This would have been on bonds that Fannie and Freddie hold, on 1.5 trillion in mortgages, to the tune of half a billion credit default swaps that are the biggest source of all the CDS failings in the market. “
This is one point where you are mistaken. The securitized mortgage product market wasn’t just Fannie and Freddie. Wall Street investment banks were cranking out an even greater number of mortgage securities than were Fannie and Freddie. And unlike Fannie and Freddie these weren’t built on conforming loans, which are relatively safe. These private label CDOs were made out of option ARMS, stated income loans, and other high risk paper. This is where the meltdown originated. The swaps on this paper failed because the insurers hadn’t taken into account what would happen if failure was systemic.
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