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Discussion in 'Politics' started by slurper_la, Jan 26, 2009.
Twenty-five people at the heart of the meltdown ... | Business | The Guardian
Nice to finally see a little blame placed on others rather than W alone.
Allow me to add...
#26: Barney "Fannie and Freddie are in good shape" Frank, Chairman, House Financial Services Committee
How this douche repeatedly gets a pass, I'll never know. Not only did he claim Fannie and Freddie were "fine" as they were going down the tubes, he led the way on the glorious $750b TARP legislation and is now busily working on the $825b "stimulus" plan. If anyone in DC should to be led away in cuffs, it's this clown.
Frank's fingerprints are all over the financial fiasco - The Boston Globe
Then again, Jeff Jacoby isn't exactly an unbiased observer, is he?
YouTube - Inside Look: Fannie Mae & Freddie Mac
That list looks pretty good. I agree with Veep...how could Frank or Raines have possibly left off the list?
It was also appropriate that the American public was included.
Ah yes, how could they exclude Franklin "The Gilded Book-Cooker" Raines?
"...a committed free marketeer who had steered the US economy through crises ranging from the 1987 stockmarket collapse through to the aftermath of the 9/11 attacks,.."
This is what I don't get. How did anyone ever think he was a "committed free marketer" when all he ever did was attempt to manouver and manipulate the market. That's not free market policies. That's some sort of weird semi-socialist BS.
Interesting read... agree with much of it. Per Greenspan, et al.... noone seemed to mind when their portfolios were up 40% in one year alone, and he was tempering the fervor.
Also, wondered why Franks isn't in this list either. The crap he's pulling now is near-criminal (figuratively) anyways.
Yeah, Bailout Barnie needs a special mention, I think.
Now it has happened it is easy to point the finger at leading politicians and financiers who didn't see it coming, as the Guardian article does. But surely the point is that absolutely no-one with any real authority did see it coming, and we should be shocked that our leaders were so blind
What we've seen is an explosion of leveraged investments, some so complicated that even the experts don't understand them. I don't ubderstand what a derivative is. I'm sure lots of people could complete a sentence beginning "a derivative is ..." but I'm not sure that even these people have truly understood them. In reality simplicity is best. The bank that takes money from savers and lends this money to borrowers is following a model we can all understand. The bank that lends money against leveraged investments is one that has found a clever and complex model - and it has all ended in tears.
Derivatives in this regard is a synthetic financial transaction of sorts. Either you pay $1 to buy $100 of risk or reward.... and/or you pay for something that will happen in the future, hoping it may or may not be worth $100 at that point in time.
Thusly, you can get yourself in a heap o' trouble...
Part of the problem is it's the "$1" value that goes on your books, and not the "$100" in terms of value at risk.. or notional value.
Good point. The crazy issue with the derivatives market is their was no central clearing house. How could that be??? (See Phil Gramm and the CRMA) We have clearing houses for practically every possible investment, including housing futures -based on the Case/Schiller index- (Now there was a good short). Derivatives were a GIGANTIC market, equal to 40 YEARS worth of USGDP at '08 values, which dwarfs both the bond and stock market by factors of 10.
There were a total of $532T worth of derivatives written going into '08, although the "net" exposure was purportedly only $2.7T, but when you have no idea who has underwritten whom, or what the collateral was, or how it was rated, it was a house of cards as soon as one largish entity defaults, because you no idea who & what they were cross-collateralizing; that is still the case for many of these contracts. I believe JP Morgan Chase currently has the largest book at $80T, which on a net basis may amount to $400M. AIG underwrote more of these contracts than anyone, which they likened to printing money when there were no defaults, and which is why the government "rescued" them, but Lehman Bros. to twist in the wind last fall. We are still feeling the effects of Lehman's BK. It will take several more years to unwind the AIG book. We are far from out of the woods.
What we need is a Federalization of the entire mortgage market as Sweden did in '91, after their own disastrous foray into deregulation of the mortgage markets in the late '80s. Their net cost was about 20% of GDP, in our case that would be about $2.6T, far less than the $8T "we" have pledged in TARP, TALF, etc. But we would all have to utter that word, which is anathema to some: socialization. It seems way cheaper to socialize, than to pay debt on upwards of $10T the way were are presently heading.
You make some good points here, duc.
Here's the thing. Deregulation of mortgages isn't what caused this. Pressure from gov't..the Community Reinvestment Act..interfered with market-proven underwriting guidelines that turned the industry upside-down.
Those aggressive mortgage programs are gone. Completely gone. The current underwriting standards are extremely conservative and completely low-risk.
The only federal involvement needed is with the trash that is already on the books.
WOW, this is the first I've heard of "Saint" Clinton being criticized.
Bill Clinton, former US president
Clinton shares at least some of the blame for the current financial chaos. He beefed up the 1977 Community Reinvestment Act to force mortgage lenders to relax their rules to allow more socially disadvantaged borrowers to qualify for home loans.
A lot of what the economic propellor heads are complaining about in terms of frozen credit markets has a lot to do with a return to "conventional" lending terms.
In other words, this is the way it should be, as opposed to the insanity that was.
The derivatives market is just plain scary. No wonder Buffet called them economic weapons of mass destruction.
But what to do with the trash still sitting on so many ledgers? The correct thing to do would be allow it to liquidate but that's not realistic as it will let the genie out of the bottle, so to speak.
It's not the first time, and to some level it is true.
However, speak to certain conservatives around here and they'll make it seem as if THIS was the biggest problem of them all. Even with new laws in place, it's still up to the mortgage lenders to give to the right people. Not every person who is "socially disadvantaged" had intentions on purposely defaulting on their home loans.
No no that list can be shortened to two, Clinton and those dumb borrowers who borrowed more than they can afford. We can wipe those other winners in life off the list. How were they to know the poor couldn't afford a house?
American borrowers, in aggregate, were definitely the #1 most responsible party. Although the rest of the list deserves to be there, without a doubt.
Because Raines was fired in Dec. 2004 when Fannie Mae was still solvent and the sub prime mortgages held by it were few. Fannie Mae attained its terminal amount of toxic mortgages and meltdown under the subsequent executive board of CEO Daniel Mudd.