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MikeI read an article this morning about James Johnson, former CEO of Fannie Mae that I thought may be of interest to you.http://www.bloomberg.com/news/2011-06...
That's true arlewill, Fannie Mae and Freddie Mac had about $5 trillion of government backed securities in the game but I also left out the Fed and the SEC's role. They played different roles but it was Wall Street possible collapse that would have brought down our financial system.... If we're not going to reinstate Glass- Steagall, then we need to make the over- the- counter sale of derivatives more transparent.
The Securities and Exchange Commission, for example, gave an exemption to investment banks in 2004 that allowed them to take on much more debt. But credit default swaps were never regulated in the first place. In 1999, Republicans passed legislation, signed by Clinton, specifically exempting them from regulation.
Some regulatory agencies had regulation powers that they never utilized or didn't utilize well. The Federal Reserve has the power to tighten lending standards, for instance, or raise interest rates. But former Chairman Alan Greenspan discouraged new rules and advised Congress repeatedly not to regulate derivatives. http://www.politifact.com/truth-o-met...
Back in the 90s ,Robert Rubin,Alan Greenspan and Larry Summers , eliminated Broooksly Born's authority to regulate derivatives, today the same standards are being used to stop Elizabeth Warren from regulating the shenanigans of Wall Street.
MikeWe should not forget the significance of Fannie Mae and Freddie Mac in the housing debacle. These agencies were accepting the bad paper from the banks, bundling it and selling it worldwide. They encouraged the banks to accept bad mortgage loans.
The first time I saw the Countrywide ad on television, I knew something was wrong in the mortgage industry. The Bank of America bought Countrywide and I knew that was a mistake by people lacking in common sense.
What about the system used to rate the MBS? The buyers of these packages thought they were getting one thing, when in fact they were getting something else.
Yes,loans were approved for people who should have never applied ,but near the end of the crises ,Wall Street just needed signatures to keep the bubble going;creditworthiness didn't matter.
Gansoblanco,the CEOs and hedge fund mgrs. received their record breaking bonuses.
"Will government still encourage financial institutions to loan money for mortgages to people who can't pay for them?"
The financial institutions that made the bad loans, by and large, sold the paper immediately and cashed in. Smelled like a rose all the way to the bank. Best I can tell much of the current credit tightening is due to new government restrictions requiring mortgages to be held for a period of time before they can be sold. Apparently when lenders actually have to assume risk, instead of immediately selling it, they have different practices.
Just because they made bad loans is no reason to assume the money boys didn't have some big pay days.
Today,the banks that were bailed out by the taxpayers are getting money at near zero interest but they are not lending to credit worthy borrowers ,because the real money is in the credit default swaps etc and other risky schemes that got them in trouble.
Read the book "Too Big to Fail" or watch the documentary "Inside Job" then come back and tell me it was the borrower's fault....they were just pawns in the shell game....The banks just needed signatures,Moody would give them a AAA rating and the rest was a perfect storm for Wall Street....Let the banks regulate themselves;what could possibly go wrong?
Will government still encourage financial institutions to loan money for mortgages to people who can't pay for them? Leave the financial institutions to do their due diligence and allow them to just say no to people who don't qualify for a home loan.
My Grandfather, who was a german as you will no doubt read on and figure out. He used to tell me that I needed to "Invest in land with minerals and not with the Crooked Jews on Wall Street".PLEASE DO NOT FLAG. AS I AM NOT A RACIST AS MY GRANDFATHER WAS BACK THEN.I am only stating his opinion in the 60's.After my last check fron Marathon, I realized he gave me sage advice compared to the money my roomate lost in mutual funds and the such.
Poor Mike: he never met a Democrat he didn't like!
vet43That's right but what can we expect if Wall Street writes the law for Wall Street?...It's time for that to stop.
I agree completely. Profit is not the same as theft. Using raw economic power to control other peoples lives is not freedom. It had another name we will not use here but we did fight a terrible war over it.