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Everyone is trying to blame bankers now (for the purposes of full disclosure I work for an investment bank) when in reality they should be looking in the mirror
No banker put a gun to anyone's head and forced them to buy homes they couldn't afford
No banker put a gun to anyone's head and forced them to lie on their mortgage application
No banker put a gun to anyone's head and forced them to charge flat screen TVs to their credit cards
No banker put a gun to anyone's head and forced them to default on their debts
etc etc
The public made these choices for themselves and now like infants they are throwing a tantrum and looking for someone else to blame. There is no culture of personal responsibility. "I don't have to read my loan documents to see what I'm signing, they should have told me my mortgage will reset"
ajeleonard,
I think you should look in a mirror. The banks are the ones looking for a sow's rack of nipples as we speak. The public did not rapidly inflate our money supply and have it sling shot back because they created it on the basis of "sub prime", meaning the banksters took the public trust and tossed in a sewer. If a baby sitter takes the baby to a crack house I do not hold the eternal ever present rabble responsible. I do not yell at the edge of cliff for being a danger. I blame the baby sitter. I blame those with the POWER granted to them to create money and are obscenely rewarded for doing so. What exactly were all of you doing? Taking someone's temperature and if it was warm they are fit for a loan? That is the essence of the job.
We are not even discussing that only the principle is created and interest is paid with further debt.
I think you should look in a mirror. The banks are the ones looking for a sow's rack of nipples as we speak. The public did not rapidly inflate our money supply and have it sling shot back because they created it on the basis of "sub prime", meaning the banksters took the public trust and tossed in a sewer. If a baby sitter takes the baby to a crack house I do not hold the eternal ever present rabble responsible. I do not yell at the edge of cliff for being a danger. I blame the baby sitter. I blame those with the POWER granted to them to create money and are obscenely rewarded for doing so. What exactly were all of you doing? Taking someone's temperature and if it was warm they are fit for a loan? That is the essence of the job.
We are not even discussing that only the principle is created and interest is paid with further debt.
Yes, they should of looked in the mirror... in theory, they were the real ones that should of been whistle blowers, and could of prevented the crisis.
But, of course, the money was too good! and for those that actually suspected anything... they'd be fired and shut out and silenced (sued, or ensnared in litigation - non disclosures, etc.). The banking system is a mess, and the investment banks a shame to society.
I still don't know why everybody is soo pissed off at homeowners.... I guess it's easier that way. Yes, there are unruly and bad homeowners that shouldn't have been owners... But, if it was my money, I wouldn't have given them any money in the first place... and then passing junk off to investors with AAA ratings. Love those "investment" bankers and their wizardry.
And I love how they've all transformed into "Banks" (from brokerages)... and are now able to suckle on yummy TARP funds and ensure some federal protection as banks... vs. high risk brokerages and investment banks.
I still don't know why everybody is soo pissed off at homeowners.... I guess it's easier that way. Yes, there are unruly and bad homeowners that shouldn't have been owners... But, if it was my money, I wouldn't have given them any money in the first place... and then passing junk off to investors with AAA ratings. Love those "investment" bankers and their wizardry.
Quite! The following exerpt that I took from a very good article on the cause of the crisis illustrates how a combination of government policy, low interest rates and irresponsible lending practices contributed to the problems we have today.
Increasing home ownership has been a Federal policy goal since 1938, the year Fannie Mae was created. Since then Federal policy has supported home ownership through various government tax subsidies and incentives. In the 1970s a significant advancement in home mortgage finance was made when Fannie Mae and the newly formed Freddie Mac began to facilitate the purchase, packaging, and selling of “securitized” mortgages in the secondary market. These Federally guaranteed mortgage-backed securities grew in size as income thresholds and underwriting standards were lowered to increase the number of Americans able to qualify for mortgages. Policies allowing tax deductibility of interest on home loans also favored home ownership over renting. Beginning in the late 1990s financial innovations produced important gains, such as enabling home ownership to reach record levels (particularly among lower income groups) and expanding consumer spending power during a period in which personal incomes remained relatively flat. Yet these policies also opened the financial system to substantial and unanticipated risk. Mortgage loans were granted increasingly to borrowers with little or no capacity to repay (subprime mortgages) or to prime borrowers with no verification of income or assets (Alt-A loans). Moreover, private sector financial institutions began issuing their own mortgage-backed securities, but without the Federal guarantee. Many of these securities were collateralized entirely by subprime or Alt-A mortgages. Before the proliferation of securitization, a bank generally made mortgage loans only after conducting careful due diligence, as the bank typically held the loan to its maturity. The emergence of new mortgage products (particularly interest-only, subprime and Alt A) and the continued growth of securitization shifted default risk from banks to investors and the Federal guarantors. In addition, new lightly regulated non-bank participants were able to originate these new mortgages to high-risk borrowers and then sell these loans to government-sponsored entities or the broader market with little or no retained risk. Further, no one regulator supervised these new originators or the end-to-end loan and securitization operation. Early in this decade, a number of macroeconomic and public policy factors converged to create tremendous growth in subprime securitization, housing demand, housing prices and, although not fully recognized at the time, credit risk. With the Federal Reserve keeping interest rates low for an extended period and policy makers emphasizing increased home ownership among lower income groups, housing demand exceeded supply for most of the decade.
Yes, they should of looked in the mirror... in theory, they were the real ones that should of been whistle blowers, and could of prevented the crisis.
But, of course, the money was too good! and for those that actually suspected anything... they'd be fired and shut out and silenced (sued, or ensnared in litigation - non disclosures, etc.). The banking system is a mess, and the investment banks a shame to society.
I still don't know why everybody is soo pissed off at homeowners.... I guess it's easier that way. Yes, there are unruly and bad homeowners that shouldn't have been owners... But, if it was my money, I wouldn't have given them any money in the first place... and then passing junk off to investors with AAA ratings. Love those "investment" bankers and their wizardry.
-chuck22b
Hi chuck22b,
Several reasons
1. Its the psychology behind blaming the victim. When its the victim's fault it can't happen to you since you will act differently than the victim. If its the criminals fault you lose the power to prevent it.
2. The financial industry is trying to scape goat the public and they are using their media channels. Criminals also blame their victims.
Here is one piece of the puzzle. The spike in oil prices, occurring at the time it did, probably took what would have been a milder recession/bubble burst and turned it into a severe global downturn. Those energy prices severely stressed the system when it was very vulnerable.
I think the spike in oil prices was a GOP-led effort. WAY too convenient timing. If your administration is ending, the GOP is in the toilet because you really don't give a rat's ass about the country, and it's mostly been about oil anyway (like there's even an oil tanker named Condoleeza Rice), then you grab all the oil-related $$$$ you can before you can't.
Back in the early 80's when the globalization sham was really kicking in, we started exporting jobs and production offshore. People were being forced to find new careers. They had to put 2 incomes out there to survive in low paying service jobs. The government and the banksters decided to create an illusion of wealth by expanding credit. Car loans went to 60-72 months, proliferation of credit cards, and then the no money down, alt-a, subprime, and ninja loans. All this served to create an illusion of prosperity. In fact it was creating a mountain of debt. Everytime it got close to popping the bubble, Alan Greenspan lowered interest rates to "save"(delay) the day. Nothing lasts forever and voila, eventually the bubble breaks. Not a small bubble but a 30 year bubble and it can't be fixed in an 18 month recession like the old days. We need production and savings. Low interest discourages savings and enforces risk taking and creates bubbles. There has never been a time in history that cheap credit, cheap capital hasn't ended in disaster. We are in the latest edition of the story. Trouble is without manufacturing, there are limited ways to stimulate the economy, only by putting money in the hands of the consumer which is the engine that drives the economy. But that is inflationary. Think about it, if in March of 2008 the government handed every american of legal age $20,000, wouldn't we be better off today?
Probably not long term, but my bet is we wouldn't be any worse off than the ludicrous plans presented today.
Here is one piece of the puzzle. The spike in oil prices, occurring at the time it did, probably took what would have been a milder recession/bubble burst and turned it into a severe global downturn. Those energy prices severely stressed the system when it was very vulnerable.
Hi pinetreecity,
Its all from finance. Finance attaches its self to appreciating assets like a parasite and creates a positive feed back loop. All it seeks is a debtor that will drive out equity and become an interest bearing asset owned by debt.
During the real estate bubble, massive amounts of bank credit money flooded the system. This caused people to seek inflation shelters which means hard assets. This made oil an inflation hedge. Oil probably would have hovered around $40-50 a barrel but as an inflation hedge it was driven up and hoarded which of course along with real estate, caused even more inflation and more desire to seek inflation shelters. Hedge funds were acquiring commodities on margin with a pretty healthy feed back loop since the more they bought the more this added to the money supply to drive up the relative price of oil. If you track oil/gold ratios or Euro, which was not generally used to finance these acquisitions, you can see the real price of oil.
It works like this. Someone owns a barrel of oil out right. Someone wants to buy it for $25 with their own cash. However another person decides he wants it and pay $25 + $25 from a bank. Now the price is $50. The bank creates bank credit out of thin air and fractional reserve magic and now the oil is drawing interest on 50% of the asset. This new money causes the price of oil to float up since there is more total money chasing oil.
This carries some small advantage to the seller but as they attempt to buy things they also begin to compete with financed acquisitions since they will be out bid on their house , for example, by ownership by finance. In the end, everyone ends up with the same amount of goods but the money was inflated and the assets are now owned at a debt to a bank. The banking system is a leech.
This crisis was created 100% by the Federal Reserve accompanied by politicians who shirked their responsibility. I don't think anyone will question that the real estate boom fueled everything.
in a free market without the federal reserve, obviously, rampant home buying would have resulted in a shortage of cash at the banks. this shortage of cash would have sent interest rates soaring and that would have curbed appetite for more housing. all that the fed did was to continue providing liquidity to the banks.
tom woods explains it better at 4:40 in the enclosed video YouTube - Tom Woods Speaks at CPAC Part 2
having said all of that, most of us did enjoy the boom. the new cars, vacations, boats, clothes, big screens, toys, restaurants, bikes......
we are now in a position where we have to payback the enormous debt we racked up. nobody likes this but what it all boils down to is this: if you can't do the time, then don't do the crime!!!!
I have my own views and have read several opinions and seen the CNBC report by David Faber-"House of Card". A recent Opinion piece in the Friday Feb 20th Wall Street Journal on page A17 by Phil Gramm is a pretty good read. You can find it here if you do not have access to the paper.
I am interested in what the rest of the folks here think is the root cause of our current problems.
What has been happening for the past 45 years that has lead up to this Current Financial Crisis? Narcissism in the vast general population, Greed, and many in public, state and Federal government not looking out for many are basic Causes for the Current Financial Crisis and many, many others coming in the future that platform politics and the printing press can't solve.
Last edited by Gematria; 03-05-2009 at 08:42 PM..
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