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It’s time we quit bailing everyone out and use common sense. Let the free market take care of it. Keep lending practices sane so we don’t need further bail outs of FAH, Fannie or Freddie. We get into the mess everytime the government sticks it’s nose where it shouldn’t be!
There may be a 4th solution to avoiding the bubble, a 2 part solution: First, our industry needs to create a source of private sector lending offering competive rate which will compete with Fannie/Freddy/FHA. If successful, Fannie/Freddy/FHA will either go away or ‘loosen restrictions/costs in order to compete. Think US Post Office which laughed at FedEx, but they ain’t laughin anymore. Second part is just let the ‘free market’ market dictate.
It’s all about taking personal responsibility for the decisions one makes as an individual and as a consumer! It’s the reverse of predatory lending, it’s called PREDATORY BORROWING!! Mozillo and the higher ups at the big banks only carved a path that idiot homeowner’s chose to take. As a homeowner you have to be a complete moron if you think 90k a year warrants buying a home for 650k with no money down and a 580 credit score. Just because a bank says you qualify, doesn’t mean you take the loan and buy the home. Personal fiscal responsibility never reared it’s head during the sub-prime days! Americans are falling into a bad habit of not taking responsibility for themselves, their actions and the decisions they make. It’s the American consumer who for the most part is to blame for this mess. Keeping up with the Jones Syndrome is what i called it!! There’s a huge difference between doing the right thing and doing things right!! There is a right way to rob a bank or commit murder, but it that doing the right thing!!
Well said Tmyke. I totally agree!!
Thanks, Doug! You know what you are talking about! I just tried to say the same thing and it said I already posted! Investment firms running our Govt Treasury! Greenspan, formerly of an investment firm as Treasury Secretary, with Clinton who repealed Glass-Steagall and now Timothy Geithner, current Treasury Secretary, formerly CEO of Goldman Sachs, and Bernacke for all their TARP funds which could have paid off everyone’s mortgage in this country, giving them more money to put into the economy! We need not only Glass-Steagalll back (vote for Ron Paul) but also a division of govt with the feds and investment firms bc govt is for them and not the people! Tired of being the scape goat. Mozillo broke rules and regs but who created them so he could break them?
Alan Greenspan and Clinton for doing away with the Glass-Steagall Act and Timothy Geithner, formerly CEO of Goldman Sachs, and Bernacke for their excessive TARP relief.
Funny that most picked CW’s Mozillo! It goes back to where the rules and regs come from! Not just who broke the rules and regs!
Read “It Takes A Pillage” by Nomi Prins. Great book which documents current history with references! It will make you angry especially when they are cutting what a broker/LO can earn but the investment firms are taking in millions without any regulations or accountability! See Goldman Sachs prominently running our govt along with the Feds destroying it for their own greed! Get mad! and do something about it and don’t vote for either candidate in November! Vote for Ron Paul who went to Congress and asked for the Glass-Steagall Act back and he was turned down bc banks and investment firms are in control! Get them out of the House! The book will esplain the dangers and how the Glass-Steagall Act was created by Woodrow Wilson when we had the First Great Depression! We already had #2! Now we are not going to get better unless, more people are enlightened with the TRUTH!!! Tired of being the scapegoat to deflect from what is really taking place and funny you don’t see it on the news!
How about the rating agencies? Had they actually done their job, perhaps all the mortgages that were rate AAA would have been rated junk and Merrill, Lehman and others, would not have been able to offload the MBS crud into the market.
Barney Frank and Chris Dodd. No Question!!
They took a bad situation and made it much worse. More knee jerk legislation meant to make a name for themself. Make a law, cost someone a job. The new Amercan way….and they will all sit there an wonder, \why isn’t the economy boucing back??? gee, i don’t know..why not make up some more legislation and see who we can put out of business next.
You have GOT to add CUOMO to your list of bad guys…
We never will know what the free markets would have done with the reduced government regulations mentioned in the Clinton/Gramm Commodity Futures Modernization Act of 2000.
The markets were not allowed to work as President Clinton, Barney Frank, and Janet Reno forced the creation of loans for the \Underserved\. Wall Street was told to get creative and get CBO’s tagged by the rating agencies with B or higher ratings. With these Clinton-Frank-Reno created bogus high ratings, Reno unleashed the Federal Government threats of ECOA violations as the loans the Lending Community would not allow were forced upon them. Jessie Jackson and his gang of In Your Face entitlement protesters were waiting in the wings to provide fodder to Government controlled media spin.
It will be a long time before free markets will ever have an opportunity to test Commodity Futures Modernization Act of 2000.
Either you believe in Big Government little citizens or little government Big Citizens. Never have citizens been big when controlled by a big government.
My vote is US the people. You, me and every other red blooded American walking this Earth. It is US because we allowed it and continue to allow it by rehiring these clowns by voting them back in.
By being complacent through it all.
By not demanding they represent US rather than the lobbyists.
By allowing corporate funds to fill their campaign coffers.
By allowing them absolute power to control their pay and compensation package.
By not shouting from the rooftops.
By allowing them to bail out private insitutions with our hard earned money. By not marching and making our collective voice heard.
By not starting a revolution(non-violent) to make sure WE THE PEOPLE regain control of OUR government and future.
We are the cause and we are the solution. So if we just get our heads out of our collective asses and start doing rather than talking, we may be actually able to regain control of OUR government.
OUR government…..not the politicians and special interest groups. Not the Federal Reserve’s, not the banksters’, not the lobbyists, not the ones that control the politicians’ campaign funds. OURS and OURS alone…..WE THE PEOPLE.
True, but everyone was too busy having a great time at the party to stop it. In 2004 Greenspan was asked if he was concerned about the housing bubble and he said the FED is not concerned with bubbles, only inflation, and inflation is in check. The “FED’s” stated objective is to temper business cycles to maintain stability. How well have they done? Look what’s happened since – we have a brand new CFPB which answers to no one, is housed at the FED and is funded by the FED. Coincidence? So what should we do right now?
None of the above. . . because it just doesn’t matter unless we are really going to do something about it and remain ever vigil. . . I remind us all of MEATBALLS. YES MEATBALLS. . . . . .and even if we win, if we win, HAH! Even if we win! Even if we play so far above our heads that our noses bleed for a week to ten days; even if God in Heaven above comes down and points his hand at our side of the field; even if every man woman and child held hands together and prayed for us to win, it just wouldn’t matter because all the really good looking girls would still go out with the guys from Mohawk because they’ve got all the money! It just doesn’t matter if we win or we lose. IT JUST DOESN’T MATTER!
Rest of group: IT JUST DOESN’T MATTER! IT JUST DOESN’T MATTER…
My vote goes to Alan Greenspan….Let go back to the root of the problem with 100% financing and sub-prime loans
Yes, the FED, because before there was 100% financing there was overzealous rating agencies, before that there was unrealistic appreciation, and before there were masses of loans to bundle there was exceedingly low rates courtesy of the FED. That was the trigger that created the tsunami of loans, both refinance and purchase, that precipitated everything that came afterwards, without which there would be no bubble, or certainly not one that size.
Without a march on Washington I see no change happening from any political party. Hell can you even trust the voting process to be legit? With that said I would still have my apt buildings that I leveraged at practically 100% and cash flowed nicely thank you, if it weren’t for taxes and oil eating all profit from them….Wrong to be able to buy like that? Absolutely. But wouldn’t have been able to otherwise and would prolly do it again if presented with the opportunity….
is that you KJ?
You asking us about the face of the meltdown. However you allow to use your pretty faces to market REMN?! It is horrible lender with a horrible service. Do you really want to be a face of such miserable lender?
barney frank, chris dodd, franklin raines, and maxine waters.
The guilty party is…We the People.
(The face will be what ever the face of greed is at any given time.) As long as we promote the concept that we should get something for nothing, we will get nothing for everything.
Not sure if my post made it out there, just testing here…
Whats wrong with all you guys, Joe the plumber cause it!! LOL Seriously, just follow the money….
The recent financial disaster is in part due to Clinton and his repeal of the Glass-Steagall Act, but really one must go to the Community Reinvestment Act, first passed under Jimmy Carter in 1977 and then excacerbated by Clinton in 1995 which acts loosened the lending standards on credit worthiness and lowered downpayment requirements to near zero and to Janet Reno (think Clinton) who threatened the major banks with Federal \Investigations\ if they did not comply by shovelling out funny money to un qualified buyers. And to that group you must add all the Goldman Sachs ex CEO’s who served as Treasury Secretaries, from Robert Rubin all the way to Bush’s Hank Paulson. And sitting on top of that dung heap how can one exclude Barney Frank, Chris Dodd and their great enabler, Alan Greenspan. All partners in this colossal crime.
You nailed that one on the head! Great comment.
Right on the money!! Wow, I am so surprised to actually see someone state the facts and not the government controlled media spin!
There were many factors, possibly intentionally coordinated, that exacerbated the bubble but the root cause is the FED (The Federal Reserve – a cartel of banks) whose stated mission is to control and temper business cycles. The FED’s economic engineering manipulated rates down too low for too long after the dot com bust of 2000 and then 9/11, which fuelled and made possible everything that came afterwards. Tremendous appreciation from extremely low rates led to fewer defaults on all loans including sub-prime loans, which led to higher ratings for sub-prime loans, which are more lucrative, which led to more generous underwriting guidelines for all, but particularly sub prime loans, rinse, repeat for several years.
Even the Dallas FED chief admitted they brought rates down too low for too long. When the FED began raising rates in late 2004 until a relative high of just under 7% in 2006, inflated housing prices that were a function of cheap money were no longer sustainable, this lowered demand and home prices responded accordingly. Low rates masked underlying weakness in the economy during that time. The economy was weakened by ‘outsourcing’, ‘downsizing’, and ‘right sizing’ since the late 90′s as US jobs migrated overseas. It was only this cheap money courtesy of the FED’s low rates that masked these underlying problems and kept the economy pumping until rates were raised. After the faucet of cheap money was turned off, so was the economy.
It is ludicrous to think that Real Estate agents, Mortgage Brokers, or Appraisers conspired on a national level to create a bubble, to assume this is absolutely ridiculous. It took something much bigger, something that permeated every nook and cranny of every market in the country to have this effect. The one common factor was exceedingly low interest rates for an extended period of time. If rates had stayed between 7.5% and 8% as they had been through the 90’s there would have been no frenzy over real estate.
Now legislators insist on treating the symptoms instead of the cause with misguided legislation that is Dodd-Frank, HVCC/AI, GFE 2010, Originator compensation, et al. As usual, the consumer is left bearing higher costs along with fewer choices and less access to financing which continues to put downward pricing pressure on housing, exacerbating the problem. Someday a real journalist will actually do some research instead of parroting all the erroneous information that’s been written in the mainstream media, – like “The housing crash caused the recession”. When they do, they will realize that if the economy had been healthy, housing wouldn’t have crashed. When people don’t have decent paying jobs, they cannot afford housing, no matter how many subsidies there are. The focus needs to be on creating opportunity which creates good paying jobs. It’s not as easy as spending tax money to try to entice citizens to ‘buy’ something (cash for clunkers, homebuyer tax credit) which only temporarily alleviates a symptom. Creating opportunity for jobs is one long term solution, the other is to address the FED.
I agree that we must dump the Fed, dump Frank’s-Dodd’s, restore Glass-Steagal and about Maxine Waters…You can not get rid of her as she provides comic relief to millions of Americans daily.
The housing bubble was not about rates being too low. It was due to Federal Government forcing the creation of loans for their so called “Underserved”– code for bad credit & no money.
When this group was unleashed with No Doc Negatively Amortizing loans, they pushed housing prices above real income based housing values. These No Doc Negative Amortizing loans were then piled on by investors looking to leverage for a quick buck.
Once home values were out of reach for majority of citizens (those actually taking loans based upon their income) the bubble burst.
Thank you Barney Frank and his gang of Entitlement Pushers the free markets were no longer free to serve by accountability to risk management. See above on July 31, 2012 at 11:51 am — Aitor says:
No Spin;Just Facts, not true. Low rates at that time were the root cause. The total of all subprime loans at the PEAK (other times it was lower) were only about 12% of ALL loans. That makes 88% of all other loans PRIME. And the only reason they were being applied for was low rates. Certainly CRA loans, as you state, didn’t help, with their guidelines that legitimized tax evasion by allowing ‘non documented’ income from lawn mowing and baby sitting.
ALL OF THE ABOVE AND BILL CLINTON SINCE HE WAS THE ONE WHO SIGNED OFF ON THE GLASS STEAGALL BILL IN THE FIRST PLACE. ALSO LETS NOT FORGET SANDY WEILL WHO WAS THE MASTER MIND BEHIND IT ALL.
GREAT COMMENETS!! We have some very savy folks who follow TBWS. Who’d a thot after listening to Frank and Brian. lol (just kidding guys.)
Yes, when are we going to get wise and stop playing this two-party us-against-them game they engineered? All we have to do is vote out the incumbent and demand that new representatives and senators vote for changes on how congress works.
Nailed it, Chris! Then-Sen. Phil Gramm (R-TX) authored the Banking Modernization Act of 1999 (Gramm-Leach-Bliley). This essentially repealed 1933′s Glass-Steagal. With GLB (yes, it was signed by Bill Clinton, but he did face a heavily Republican Congress), commercial banks, investment banks and insurance companies could merge. GLB allowed the megabanks, now Too Big To Fail, to exist.
But we can’t let the good Senator off the hook with GLB. In March of 2000, he authored and sponsored the Commodity Futures Modernization Act of 2000. This was the real catalyst; this is what deregulated the trading of financial derivatives, like CDOs and Credit Default Swaps. Putting these instruments out of sight of the regulators allowed the superleverage to happen. That is what we are paying for today–and it is still going on. JPMorgan’s sainted CEO, Jamie Dimon, matter-of-factly admitted that his trading desk had a little \oops\ and lost $2 billion. Actually, it has turned out to be more like $7 billion. And his little bank has been the beneficiary of Treasury’s largesse. Oh, and St. Jamie (all praise his Name) sits on the board of the powerful New York Federal Reserve.
Still, in my opinion, it’s Phill Gramm in a landslide.
P.S. Sen. Gramm’s wife, Wendy, is the former head of the Commodity Futures Trading Commission, a regulatory body. After passage of the 2000 law, she was awarded a seat on Enron’s board of directors. Oh…did I fail to mention that the law also deregulated the trading of energy futures? Silly me.
You are indeed a wise man.
like I said, follow the money, you are on point !!
Those who said the repeal of the Glass-Steagal Act in 1999 with the passing of the Financial Services Modernization Act deserve kudos, but I come to a different conclusion as to the real face of the meltdown.
In 1999, it was a Congressional bi-partisan effort led by Charles Schumer (D-NY), Christopher Dodd (D-CT)and Phil Gramm (R-TX), who received millions from the Banking, Insurance and Securities industry that led to the deregulation bill. Citigroup’s Sandy Weill, also influential in the passing has now come out against it (nice of him to do, living off the millions he made off it, sipping on his Mai Tai’s enjoying his retirement). Of course Dodd says he’s wrong, lol.
But what no one in the media is discussing (except me) are the sub-investment grade derivatives (as opposed to the 600+ trillion of normal interest rate swaps some in the media do discuss) held by the nations top 5 banks that today total more than at the height of the 2008/2009 financial crisis. Dodd Frank did nothing to curtail this activity? Why? When you put the Fox in charge of the Hen House, what do you expect?
Dodd was part of the repeal of Glass-Steagal and Frank who said in 2003 that Fannie and Freddie are fine and wont need to be bailed out.
Who leads this sorry bunch of top banks that will take the banking system down? Jamie Dimon’s J.P. Morgan Chase who just lost $1 billion, no $2 billion, no, now $5 billion on an alleged London “whale” trader’s activity. This is what happens when you have no counterparty to the over $2 trillion of sub-investment grade derivatives that Chase has coming due in the next 5 years.
In reality, the only counterparty will be the Federal Reserve, the “lender of last resort” and you know they won’t get caught taking a hit, so this leaves only one face for the meltdown; We the People! via some Chicken Little crying by Timmy Geithner (see Secretary Paulson circa 2008) –
It is We who keep electing these same clowns (like Dodd and Frank) into office. It is We who don’t put enough pressure on Congress to Audit the Fed. It is We who bailed out the banks under Bush. It is We who pay for Obama’s trillion dollar budget. It will be We who they try and stick with the bill for the nations top 5 banks gambling habit in sub-investment grade derivatives.
We the People! are becoming We the Serfs! (title of my next book) right before our very eyes.
We need to stop bailing out failed institutions, take the hit on practicing austerity and living within our means, stop policing the world with money only the Fed can print and get back to producing what the world wants!
How easy we forget. This is all about consolidating banking assets under one source so we just don’t have a choice anymore. The S&L meltdown was in fact just like this one. It was generated by our congress. What happened was that the depreciation deduction was changed so commercial properties could not be sold and take advantage of the accelerated depreciation. That meant that investors who were looking to shelter there incomes could not use commercial property to do it. At the time the S&L’s were all holding commercial mortgages. Then came the burp in the economy and thus there S&L’s portfolios was in jeopardy then started to collapse. The big banks then came in and swooped up all the commercial property deals and it all ended up in there loan portfolios.
Of course we need a fall guy in all this so one that was corrupt gets sent to jail and what every one now thinks is it was all his fault, Give me a brake! Wake up America time to get rid of the tax code.
Sure would like to see you do a show on the Fair Tax. We can get rid of all this crap real easy.
I am in totally agreement with 5pence. Whomever this person is is highly educated and has followed the banking industry as long as I have. I also agree that every one had a play in this. I do mean every one. Starting with the borrowers who knew what they were lying. The Wall Street greed, following the congressional greed, and on up the ladder to President Clinton who wanted every American to have a home (biggest idiot that was not on the list!) However the true Devil in all this is Barney Frank who manipulated congress, fannie and freddie, wall street and the whole world. Now he is retired living the life with his billions of dollars flipping us all off as he spends his money. Where is the justice in that? Where is the Dept of Justice? Oh I am sorry in Obama’s back pocket…..
God forbid a democrat go to jail for destroying the World’s economy. But we southern california folk, we sent Randy Duke Cunningham to jail for manipulating military contracts and taking bribes. But I guess you only go to jail for little things. Destroying the world’s economies does not count for anything…..Barney Frank and Clinton should be in the jail cells next to Randy Duke Cunningham…..
In reality, it was Dodd, Frank, and Cuomo. But Mozillo will ultimately be the face…
Gents……….when are you going to talk about Franklin American’s decision to go to lender paid compensation? Are other wholesalers going to follow suit, what does this mean to broker shops, etc.? This has to do with the CFPB’s upcoming announcement about which brokers are anticpating possible flat fee compensation.
I think there is plenty of blame to go around. We could have a regular Mount Rushmore of Shame with a number of heads up there. Sadly I don’t think any of them feel any guilt or shame they just want to justify and point fingers. Other forgotten names Turbow Tax Tim, Barney Frank, Chris Dodd, and the list goes on.
Barney Frank. If there was no appetite there would have not been the type of loans to get us in trouble. Everything was going OK until they unleashed the beast. The Banks and Us unfortunately
did what we are suppose do and that was make loans. Yes, the banks came up with crazy loans but, if there were no one to buy them. do you think they would have done that.
I confess! It was me! I took out a loan to buy my house and everything went south after that! Now main stream media has arranged a contest between twiddle de dee and twiddle de dum dum attempting to convince us that there is a difference and that one or the other has the answer. I hear that Iceland has sent the main players to jail, defaulted on the debt, and, are now enjoying relative prosperity. Is that correct?
The removal of the Glass–Steagall Act during the Clinton Administration, basically allowed the Banks carte blanche to take our deposits and mortgages and gamble them on the open market. Banks should never have been allowed to become investment bankers, especially those who are so large that they would control monetary policies. It is truly criminal !
That can’t possibly be true! Ayn Rand (who had to rely on Medicare and SS in her later years), Phil Gramm (the campaign economic policy advisor to Mccain/Palin) and the TBaggers (get your hands off of my Social Security) have been screaming at us that this would never happen if we just get “guvmint” out of the way. I’m shocked, shocked, shocked,…oh the humanity!.
Really? I thought it was still all Bushes fault. I find it interesting that you blame a group that didn’t even exist for a law that was put into place a decade ago. Spinning responsibility in an attempt to save SS as an “evil plot” to eliminate it is along standing liberal talking point that does not hold water. You even keep trying to invent slurs. Pretty lame. Go back to school and study math. And, oh, by the way, each of tha last two meltdows mentioned could have been avoided if individuals had done the right thing. More government is not the answer, and never has been. More is not better. it’s just more.
The 1998 Republican controlled Congress that repealed the Glass-Steagall Act.
Signed into law by Clinton.
I’d have to say the SEC along with Finance Committee members in Washington who were bought by banks and wall street.
Hands down it was Angelo Mazilo and Countrywide Funding
We need a photo with all of the bleeding heart liberals who decided that home ownership is a RIGHT! That EVERYONE should be able to own a home, whether they can afford it or not!!!
Joe Cassano, AIG fraudster and profiteer (now living like a king)
and his partner Warren Buffet
Everybody is responsible for the melt-down. The Feds for forcing the sub-prime loans on us, Wall Street for their involvement, and lets not forget the consumer for lieing about the facts when they jumped on the stated income loans to buy thier McMansions and then when they used their home as an ATM machine. They all new what they were doing and they are all equally responsible.
Banks were investing on Wall Street before 1978 and Graham, Bliley. I worked for a bank in my younger days. Every night I would call the VP and give him the amount of the deposits so that they could invest overnight! That was back in the late 1960′s!
James Johnson of Fannie Mae, created the market for subprime above anyone else.
Greenspan next for keeing interest rates too low for too long.
Look it’s the “duo”bombers. Sorry I couldn’t help it. If Chicago is unwilling to bring in the duo than how about Wisconsin? You’ve been here a couple of times and with much fanfare I might say. Just sayin’
Let’s not Dick Fuld of Lehman and his “Deer in the headlights” look when he testified in front of congress. It was Lehman’s failure that triggered the market panic which finally got everyone’s attention.
The face of the meltdown?
Sen. Phil Graham – Promoted & got passed the Graham, Bliley Leach Act which Repealed Glass-Steagall Act and opened up Wall Street to all our deposit monies in the commercial banks. Hence the Boom followed by bust.
The ratings agencies for the cover up but that’s not one person is it. The victors write history….so it was Bush’s fault…lol. My vote is for Barney”FNMA is not in trouble” Frank. He learned that during pillow talk…
wait for it, wait for it…..
The Federal Reserve
Their 100 year charter is up next year. What are we going to do?
Greenspan, never saw it coming….what an idiot
Clinton signed off on Glass-Steagall so he Lewinski’d the banks and skrewed us all. But the banks were hollowing out the New Deal starting with Reagan.
If they wanted real banking reform there wouldn’t have been a 2,300 page Dodd/Frank bill, written by bank lobbyists, that will take years to understand. Glass-Stegall was 17 pages so it’s policies would and could be initiated right away without any misunderstanding. Dodd/Frank was and is a front to buy banks time to buy us all out. A betrayal. And after Obama promised that no lobbyists would be writing legislation. Liar
Franklin Raines – Hands Down
From the book “Reckle$$ Endangerment” that went into great detail on the players, the face should be the guys that left behind even more of a mess that we are learning today…..Barney Frank and Chris Dodd. Without their almost “racketeering” plan with James Johnson, Franklin Raines and Freddie/Fannie in general, we would not have the depth of this slump. Thanks for putting this one in perspective. Remember, a recession is when your neighbor loses his job/income, a depression is when you lose yours.
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