Discussion in 'Politics' started by AVG-JOE, Apr 24, 2012.
Money, Power and Wall Street | FRONTLINE | PBS
"The greed of Wall Street broke Main Street."
That about sums up the first half.
These guys, not individually, but as an industry, really screwed up.
The build-up to the crisis was not one sided. The government knew this would happen because they had caused this same thing to happen on a smaller scale in 1972. A major scandal struck the Federal Housing Administration (FHA). Since passage of the Housing and Urban Development Act of 1968 and the creation of the Government National Mortgage Association (Ginnie Mae) had been responsible for helping the poor buy homes in inner-city areas via government-backed mortgages. This was financed by mortgage-backed securities, the first issues of which George Romney had announced in 1970. A number of FHA employees, along with a number of real estate firms and lawyers, were indicted for a scheme in which the value of cheap inner city homes was inflated and sold using those government-backed mortgages to black buyers who could not really afford them, and the government was stuck for the bad loans when owners defaulted. FHA was under Romney's purview, and he conceded that HUD had been unprepared to deal with speculators and had not been alert to earlier signs of illegal activity. By January 1973, all federal housing funds had been frozen.
--October 1992-- Congress, enacting the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, It "established HUD-imposed housing goals for financing of affordable housing and housing in central cities and other rural and underserved areas." Washington Post In a brief debate unfolded on the floor of the House of Representatives over a bill to create a new regulator for Fannie Mae and Freddie Mac. On one side stood Jim Leach, an Iowa Republican concerned that Congress was "hamstringing" this new OFHEO regulator at the behest of the companies. He warned that the two companies were changing "from being agencies of the public at large to money machines for the stockholding few." On the other side stood Barney Frank, a Massachusetts Democrat who said the companies served a public purpose. They were in the business of lowering the price of mortgage loans.
--September 1993-- The Chicago Sun-Times reports an initiative led by ACORN's Talbott with five area lenders "participating in a $55 million national pilot program with affordable-housing group ACORN to make mortgages for low- and moderate-income people with troubled credit histories." Kurtz notes that the initiative included two of her former targets, Bell Federal Savings and Avondale Federal Savings, who had apparently capitulated under pressure.
--July 1994-- Represented by Obama and others, plaintiffs filed a class-action lawsuit alleging Citibank had "intentionally discriminated against the plaintiffs on the basis of race with respect to a credit transaction" and calling its action "racial discrimination and discriminatory redlining practices." Buycks-Roberson v. Citibank
--November 1994-- President Clinton addressed the National Association of Realtors Conference Anaheim, California "I think we all agree that more Americans should own their own homes, for reasons that are economic and tangible and reasons that are emotional and intangible but go to the heart of what it means to harbor, to nourish, to expand the American dream"..."I am determined to see that you have the opportunity and together we can make that opportunity for the young families of our country. I am committed to a new and unprecedented partnership between industry leaders and community leaders and government to recommit our nation to the idea of homeownership and to create more homeowners than ever before." "The Clinton administration announced the bold new homeownership strategy, which included monumental loosening of credit standards and imposition of subprime lending quotas."
--May 1995-- The FDIC's Board of Directors approved a final rule implementing the Community Reinvestment Act (CRA). The Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision have approved parallel regulations for the institutions they supervise. The joint final rule largely retains the principles and structure of the proposals issued in December 1993 and October 1994. The new CRA regulation replaces the 12 assessment factors contained in the old rule with a more performance-based evaluation process to assess whether financial institutions are meeting the credit needs of their communities, including low- and moderate-income neighborhoods. The new rule establishes different tests for large and small institutions, as well as for retail and wholesale or limited purpose banks.
--June 1995-- The Clinton administration, allied with Rep. Frank, Sen. Ted Kennedy, D-Mass., and Rep. Maxine Waters, D-Calif., directed HUD Secretary Andrew Cuomo to inject GSEs into the subprime mortgage market. "ACORN had come to Congress not only to protect the CRA from GOP reforms but also to expand the reach of quota-based lending to Fannie, Freddie and beyond." What resulted was the broadening of the "acceptability of risky subprime loans throughout the financial system, thus precipitating our current crisis."
The administration announced the bold new homeownership strategy, which included monumental loosening of credit standards and imposition of "SUBPRIME LENDING QUOTAS." HUD reported that President Clinton had committed "to increasing the homeownership rate to 67.5% by the year 2000." The plan was "to reduce the financial, information and systemic barriers to homeownership" which was "amplified by local partnerships at work in over 100 cities."
"Urged on by ACORN, congressional Democrats and the Clinton administration helped push tolerance for high-risk loans through every sector of the banking system far beyond the sort of banks originally subject to the CRA. So it was the efforts of ACORN and its Democratic allies that first spread the subprime virus from the CRA to Fannie and Freddie and thence to the entire financial system. Soon, Democratic politicians and regulators actually began to take pride in "LOWERED CREDIT STANDARDS" as a sign of "fairness." Attorney General Janet Reno, who had already won a number of bank lending discrimination settlements, sternly announces, "We will tackle lending discrimination wherever it appears." With the new policy in full force, "No loan is exempt; no bank is immune. For those who thumb their nose at us, I promise vigorous enforcement."
--1997-- HUD Secretary Cuomo said, "GSE presence in the subprime market could be of significant benefit to lower-income families, minorities, and families living in underserved areas. "
--April 1998-- HUD announced a $2.1 billion settlement with AccuBanc Mortgage Corp. for alleged discrimination against minority loan applicants. [ame="http://www.youtube.com/watch?v=ivmL-lXNy64"]Affirmative Action Lending[/ame] The funds would provide poor families with down payments and low interest mortgages. "Discrimination isn't always that obvious," said Secretary Cuomo in announcing the AccuBanc deal. "Sometimes more subtle but in many ways more insidious, an institutionalized discrimination that's hidden behind a smiling face." Before the camera, Cuomo admitted the mandate amounted to "affirmative action" lending that would result in a "higher default rate."
The institution would "take a greater risk on these mortgages, yes; to give families mortgages who they would not have given otherwise, yes; they would not have qualified but for this affirmative action on the part of the bank, yes. It is by income, and is it also by minorities? Yes. "With the $2.1 billion, lending that amount in mortgages which will be a higher risk, and I'm sure there will be a higher default rate on those mortgages than on the rest of the portfolio." The CRA allowed ACORN "organizations to collect a fee from the banks for their services in marketing the loans. The Senate Banking Committee had estimated that, as a result of CRA, $9.5 billion had gone to pay for services and salaries of the organizers."
--May 1999-- The Los Angeles Times reports that African-American homeownership is increasing three times as fast as that of whites, with Latino homeowners growing five times as fast, attributing the growth to breathing "the first real life into enforcement of the Community Reinvestment Act." Mandateing that Fannie Mae and Freddie Mac buy mortgages with deviant down payments and debt-to-income ratios, which allowed lenders to approve mortgages for lower-income families that would have been denied otherwise. By now, all pretense had disappeared and lending practices were based upon concerns of discrimination in the banking system regardless of the consequences. Clinton threatened to veto a bill passed by the Senate that had "shortsightedly voted to retrench" CRA, as the Times put it. Under pressure, Fannie Mae was resisting increased targeting, arguing that the result would be more loan defaults. Barry Zigas, head of Fannie Mae's low-income efforts, argued, "There is obviously a limit beyond which (we) can't push (the banks) to produce," the Times reported.
--Fall 1999-- Treasury Secretary Lawrence Summers issued a warning: "Debates about systemic risk should also now include government-sponsored enterprises, which are large and growing rapidly."
--September 1999-- New York Times "With pressure from the Clinton administration, Fannie Mae eased credit requirements on loans it would purchase from lenders, making it easier for banks to lend to borrowers unqualified for conventional loans. Fannie Mae's Raines explained that "there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market."
With this action, Fannie Mae put itself at substantial risk in the event of an economic downturn. "From the perspective of many people, including me, this is another thrift industry growing up around us," warned Peter Wallison, a fellow in financial policy studies at the American Enterprise Institute (AEI). "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry." The danger was known.
A study by Freddie Mac, confirming earlier Federal Reserve and FDIC studies, contradicts race discrimination arguments for CRA. The study found that African-Americans with annual incomes of $65,000-$75,000 have on average worse credit records than whites making under $25,000. This showed that the difficulty in qualifying was not because of race but bad credit records. Accordingly, the Federal Reserve Bank of Dallas entitled a paper "RedLining or Red Herring?"
"City Journal warned that the Clinton administration had turned CRA into 'a vast extortion scheme against the nation's banks,'committing $1 trillion for mortgages and development projects, most of it funneled through the community organizers."
--November 1999-- President Bill Clinton signed into law S.900 Financial Services Modernization Act of 1999 This bill had CRA loan mandates & allowed banks to sell the mandated bad loans to GSEs Fannie, Freddie, pension funds, foreigners & anyone else. This disolved Glass Steagall & made it legal for banks to create bad risky loans with the government backing it allowing it to get a AAA rating. This gave banks a license to steal!!!
--December 2000-- President Bill Clinton signed into law H.R. 4577: Consolidated Appropriations Act, 2001. Consolidated in this bill was Commodity Futures Modernization Act of 2000. This law made most over-the-counter derivatives (OTC derivatives) mortgage risk spreading transactions between sophisticated parties un-regulated as futures under the Commodity Exchange Act (CEA) or as securities under the federal securities laws. Instead, banks and securities firms would continue to have their dealings in OTC derivatives supervised by their federal regulators under general safety and soundness standards. Functional regulation. This was to create an international derivatives market for comodities securities. Clinton & Gore were trying to built the framework for Carbon Cap & Trade Energy Trading Market Scheme with this law. This gave birth to the Enron Loophole.
[ame="http://www.youtube.com/watch?v=vFK-UTGH1Zw"]Gore and the Enron Loophole.[/ame]
--2005-- Fannie Mae CEO Frank Raines affirms partnership with Barack Obama & The Congressional Black Caucus" [ame="http://www.youtube.com/watch?v=usvG-s_Ssb0&feature=related"]Frank Raines[/ame]
--September 2007-- Obama: "Subprime lending started off as a good idea - helping Americans buy homes who couldnt previously afford to. Financial institutions created new financial instruments that could securitize these loans, slice them into finer and finer risk categories and spread them out among investors around the country and around the world. In theory, this should have allowed mortgage lending to be less risky and more diversified." These same financial institutions were Top Contributors to Barack Obama's Campaign
--2008-- Fannie and Freddie have purchased about 80% of all new home mortgages in the United States. Their combined investment portfolios held mortgage assets (loans and MBSs) valued at $1.5 trillion (as of June 30, 2008) - These GSE will never pay back tax payer for losses like all the banks have.
--April 2009-- Obama on his world appology tour in Strasbourg, France "difficult to imagine that the inability of somebody to pay for a house in Florida could contribute to the failure of the banking system in Iceland. Today what's difficult to imagine is that we did not act sooner to shape our future."
--JULY 2009-- Committee on Oversight and Government Reform released a report on The Role of Government Affordable Housing Policy in Creating the Global Financial Crisis of 2008
From Wall Street to 'K' Street in D.C. where the lobbyists live, the actual history of the problem is dumbfounding. This information is 'must have' for every voter.
As they said in the show: If you think this crisis is over,
Here's a HEAD$ UP for all of you no matter what the problem or who is in power.
Failure of government to govern rests with the people WHO HAVE OR HAD THE POWER.
I mention this because too often some of us here on this board choose to blame the victims rather than the perps.
IN the case of the meltdown the blames rests both in the government failing to govern and regulate, and the banksters and finaciers who knew exactly what was going on but didn't really give a damn because they were getting richer.
.... and nobody went to prison
The really fun fact is that nearly everyone involved in creating the sub-prime disaster is now way richer than they were before they destroyed the economy.
Isn't that the crying fucking shame of what Paulson did with his TARP checkbook?
He didn't even tell them that things had to change - he just covered their losses with our money.
Yes it is crying fucking shame & it was not just Paulson. These big financial institutions were charged with regulating the entire financial system. When ask why did you sell trash to client/investors, these institutions said that their client/investors were investing professionals who should have known the risk. But when AIG could not pay the swaps to Goldman who was a professional investing firm, they should have known the risk. Goldman should have known the risk posed by trying to cash in on so many claims to AIG. The medicine that is good for investors is not good for large Wallstreet financial institutions. The USG paid these banks 100% of their AIG claims. The Federal Reserve's balance sheet is still swollen by $2.2 trillion of worthless toxic crap. Then we still own Fannie, Freddie & Gennie.
I don't see anyone proposing stripping all those executives of all their wealth. In my first post in this thread I laid out plenty of proof showing that they knew this would blow-up as it had before. They claimed that risk spreading is less risky. The fact is spreading risk creates more risk & makes it systemic. They knew this. They pulled the biggest scam in the history of mankind & claimed they could not have known the risk. They try to pass the blame on to a groupe of 20 year olds who created this swap system & say they were to young to know the danger. That story is complete BS. The people who knew better allowed the youngsters to do their wet work.
They knew this when the USG created the FDIC. They knew a few bankers would take high risk & pay higher interest to depositors. This would cause most of the depositors to remove their money from the low interest banks & deposit it into the high interest high risk banks. Because after all the FDIC insured all deposits the same, so who cares about risk when the FDIC has your back. This is why the banks were heavily regulated in order to prevent them from risking all the government backed money.
The government should have seized all the Wallstreet financial institutions & their executives assets. They should not have been rewarded for their own failure. The working class has been punished for the failure of sub-prime borrowers & Wallstreet financial institutions. The borrowers made out by not paying back what they borrowed & the fat cats made the most of it. The rest of us got shafted.
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