Capital New York

Exactly right (for once.) The banks may have picked up the subprime ball and ran with it but it was Congress who created the incentives - or should I say, the REQUIREMENT as I can recall numerous banks that were investigated for not making "enough" loans during the bubble. And as far as irresponsiblity is concerned, when Congress is irresponsible it causes MORE damage than when other institutions are. Congress makes laws that others are required to comply with. If the First National Bank of Nutville starts lending money to zombies, the regulators can come in and close them down. Who intercedes when Congress writes a Zombie Reinvestment Act that requires banks to lend money to zombies???? And the most disgusting thing is the SOBs blame everybody else when their stupidity leads to a disaster.

The banks created the "shady financial instruments" solely BECAUSE Congress passed laws that forced them to take high risks that they knew would result in massive losses. The left side of the political spectrum is so stuck on "static accounting" that they have no understanding that many (if not most) regulations they pass have a direct and immediate effect on the balance sheets of business by increasing the costs that are required to do the business they exist to do. The banks did what any business would do (albeit in a deceptive, but legal, way): they protected their profits. Granted, their methods SHOULD have been illegal, but that's what happens when Congress and bureaucrats start dictating policies to businesses... the businesses consult with their lawyers and they start to get creative. The fact is that there are always consequences and loopholes that no one even imagined when the regulations were written, so government tends to do far more damage than good when they try to regulate the economy.

If the banks weren't pressured by the federal government to make risky loans to people, some of who had no legitimate means of ever repaying, none of this would have happened. None of it. This is what happens when the federal government begins implementing their social engineering, central planning schemes. There are always unintended consequences. To make matters worse, Frank, Dodd and Schumer were all warned of the impending disaster, yet the ignored the obvious and pushed for more sub-prime loans. OWS should be in Washington, DC.

CRA has been around since 1977 but just mysteriously just became a problem recently.Right. Mike is finally showing his true colors in his glorious third term. Only two more years; don't let the door hit you on the way out.

CRA didn't apply to the private lenders that dominated the subprime market. Fact. (But I realize that facts are fast and loose these days.)

Oh, and Fannie and Freddie don't make loans. Another Fact. Funny, you'd think someone who created a "financial" network might know this.

Fannie and Freddie might deserve some of the blame. But Wall Street is responsible for securitizing and repackaging mortgages (into CDO's CDS's, CDS-cubed). If anything it was Wall Street's hunger for mortgages (raw materials) to feed the derivatives machine that turned the housing crisis into a ful blown global financial crisis!

The banks were not pressured by congress to make bad loans. That is some right-wing propaganda invented to excuse the crimes of Wall Street. It takes a lot of ignorance or (possibly in Bloomberg's case) a willingness to flat-out lie about history. Bloomberg is wrong.

Pfw51- Your "facts" are lies. They are simply not true. The great majority of bad loans were done by non-bank lenders like Ameriquest, Countrywide and New Century. No one was forced to lend on these subprime loans by any governmental agency. They were done purely for greed because you could charge 5.0%+ in points and fees upfront and then bundle and sell the paper through a company like Goldman Sachs for up to another 7%. That 12% is before any of the high interest rates being charged was collected. That was on loans with little to no income documentation and questionable appraisals. Goldman, et al would then turn around and sell the "AAA-rated"*** paper to unsuspecting pension funds, etc. This worked until the bubble burst and many investors would left holding the worthless paper that was known to be worthless when it was sold to them and the millions of homeowners that were sold a bill of goods to do these loans and the tens of millions of homeowners that bought or refinanced property at the market peak. All so people like Roland Arnall (owner of Ameriquest) could become billionaires and contribute so much to political campaigns that they would be named Ambassador to The Netherlands by GWB. All of this because there was NO regulation. Feel free to refute but please use actual facts.

The FHFA (Fannie and Freddie's receiver) is now suing the major banks and several of their officers that sold the securitized mortgages and represented that they were AAA investments under a definition that the mortgage holder have at least 20% of the equity and be owner-occupied. When the banks' research discovered this was not true they simply did less research so that their culpability was reduced.

Congress did not require the bankers to lie about the quality of their investments. If they had merely told the truth the folks who lost money would have themselves to blame, and AIG would never have underwritten them for the rates they charged. Public relations operatives at the banks have basically said that Fannie and Freddie are sophisticated investors and should have known the banks were lying.

Misrepresentation of the worthiness of a mortgageholder is a criminal offense when the mortgageholder does it, and is at the very least perjury when the bank official does it. Yet the only criminal prosecutions to date do not include the vice-presidents who are all named in the FHFA suits.

Instead of spinning perjury that it is somehow Congress' fault, perhaps his administration should seek to prosecute the perjurers and let them make their own argument that they were somehow induced by congress to lie.

Wow. What a bunch of misinformation. It was unregulated entities, mortgage companies originating to private equity and then private-label securities mills that pioneered and then massively grew the subprime market. The GSEs and regulated entities were late to the game, playing catchup to try to retain market share.

And the why matters - it is a lack of public oversight, not public pressure, that created the mess. The GOP and finance capital wish us to believe otherwise, because it threatens the myth of deregulation. Fewer opportunities to play roulette with the public as the loss guarantor.

Bloomberg shows us who he is - just another bankster.

I have to laugh. Fannie and Freddy don't write loans. They didn't force any bank to write a loan. THey didn't force securitization. Here are some undisputed facts from the Federal Reserve Board data which show that:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions. (Countrywide, Saxon Mortgage, American Home Mortgage. etc.)

• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

In short, it had nothing to do with FannieMae, FreddieMac or the 1977 CRA law that function brilliantly and, instead, had everything to do with greedy financiers exploiting people not smart/sophisticaed enough to understand what was happening to them...

I really like Bloomberg a lot and had hoped he would run for President someday, but as a former mortgage lender during those years, I have to say this statement: "It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp" is totally false.

Congress did not force Fannie Mae and Freddie Mac to do what they did - they had every economic incentive in the world to do those loans. Money was essentially free. The Fed was pushing it for years, and they were literally running out of people to lend it to!

The equities market had tanked in the early 2000s and looked to stay that way for a while. Real estate, a historically safe and stable investment, became a nationwide phenomena again. Everyone wanted to buy house! And everyone did. Yes, congress and the President have encouraged home ownership as a national virtue *for decades* ...but they forced these guys to relax lending standards as the pool of available buyers got smaller and smaller? They forced the Wall St banks to cook up ways to package this stuff as AAA when it was beyond junk? They forced them to make the bonus payouts from rescue funds? Come on, Mr. Bloomberg. I know you have a problem on your hands with these protesters, but this is the wrong argument.

wow in washington it is always the blame game or pointing fingers. didnt the goverment give banks billions to keep people in their homes. what did they do with it, where didthe money go. It went to the ceo's and upper management .( bigger paychecks).
I say the american people sue the banks for not using the money to adjust thier payments/morgages to fit the new fair market value of there home . Not for money but for the value of the homes.
Didnt they create the mess and make billions doing so.

David

In numbers, 70% of the subprime loans were originated by organizations which were not subject to the CRA. (ComradeANon is right here.) Of those that were written by a bank subject to the CRA, they have shown a much lower default rate than those written by private mortgage originators like Countrywide or Ameriprise.

I am amazed at this conversation. There is absolutely no question that Congress was not driving the banks to make these loans. Not only has the CRA been around since 1977, but it only applies to deposit-taking institutions -- and those institutions have declined dramatically in importance in the last 25 years (mostly since the S&L crisis in the late 1980s). According analysis from the Federal Reserve, only 6% of the subprime loans in the last decade were CRA loans.

Also, even if Congress did pressure banks to make these loans -- which doesn't matter, since banks weren't making these loans, independent mortgage lenders were, Congress never told the subprime lenders to go "granny hunting" as Countrywide Mortgage lenders are on record as talking about their subprime strategy (their strategy was: target the old and uninformed!). Congress never told Wall Street investment banks to create Collateralized Debt Obligations based on these loans. Congress never told Wall Street investment banks to use those CDOs to make new securities ("CDOs squared"). And Congress never told Wall Street to use the old insurance instrument of credit default swaps as a gambling tool, and make a whole set of bets and not have the capital to cover them should they need to cover them.

I'm sorry, but anyone who says that "Congress made Wall Street do it" is either ignorant of what happened, or a liar. Bloomberg is not an ignorant person.

Mortgage lenders were threatened with extermination if they refused to lower lending standards. See
http://news.investors.com/Article/589858/201110311638/Housing-Crisis-Oba...

The Clinton administration is ENTIRELY to blame for the housing bubble.

In 2007 before the financial meltdown, my Wachovia branch manager insisted that I get a home equity loan, which I didn't want or need. She promised that I would pay no fees. She then had a drive-by appraisal done which showed my house double its worth on paper. Someone planning to lend her employer's money would not do this. So it dawned on me that either she was after a hefty commission, or that Wachovia had no intention of keeping the loan. Probably it was going to sell it to Merrill Lynch and likes as to be packaged as a CDO. Banks are the primary offenders here. Not the borrowers. Congress only gave ammo to the banks to perpetrate this crime which they got away with. Banks probably lobbied for it too.

The reason Fannie and Freddie even come up in this debate is that THEY WERE THERE TO PURCHASE ALL OF THE LOANS the banks were encouraged to make by CRA and other gvt dabbling in social engineering. The reason this didn't happen at the outset of CRA in '77 is that FanFred wasn't repackaging securities until Clinton, Gorelick, & Raines put it on steroids in the 90's. The gvt CREATED this playground in the name of home ownership for all, regardless of ability to repay...the blame lies squarely at it's feet. OWS represents nothing but socialist commie scum who exhibit nothing but envy and their own brand of the same greed they protest.

Bloomberg taken to school:

http://krugman.blogs.nytimes.com/2011/11/01/michael-bloomberg-ignorant-y...

ridiculously disingenuous by the mayor but thats what the public gets when Wall Street choses politicians.

To freelunch:

I was in the banking business then and I guarantee you we were pushed to make imprudent loans. The sticks included being audited frequently, being banned from growing (buying other institutions or opening branches), and much much more. The carrot was being left alone to take care of business without auditors directing who to lend to and who not to. Many of the accusations of "redlining" that occurred were the Feds way of punishing a bank for not playing ball their way. That's why when we made the loans, we sold them off instead of keeping them on our books to collect on. And guess who were the big buyers? Fannie and Freddie. And they were staffed with Dem political hacks from top to bottom to zip in make a quick fortune, and then get back to politics. Others got into the act buying the mortgages and then bundling them, and selling shares of the bundles. The problem was that with Congress setting the mandate, and Fannie and Freddie setting the standards, not very many people realized that it would all come crashing down. Some of us did and got into other lines of work. The truth is, all organizations and institutions can run out of money, especially if they are highly leveraged. If the OWS people weren't being led by the same folks that set us up for the financial crisis, they would instead, be Occupying 1600 Pensylvania where the head community organizer took part in some of what I'm talking about.

http://news.investors.com/Article/589858/201110311638/Housing-Crisis-Oba...

Yes, Congress made all of those loosely regulated investment banks securitize all of those private label junk loans with mind control. They also made them borrow billions to buy these mortgages and in some cases hold MBS paper themselves and put it up as collateral to borrow billions more so that when MBS went down in value Bear Stearns, Lehman Brothers, and Merril Lynch became insolvent.

Congress also made AIG swap contracts that paid off if any of the above went bankrupt or if any CDO counterparty defaulted.

Congress used X-band radio waves to control the bankers (who all made tons of money for themselves, but pay no attention to that because it is a distraction).

It is important that investment bankers wear foil hats to prevent this happening again.

http://rortybomb.wordpress.com/2011/05/18/peter-wallison-discusses-fanni...

Really? The Pinto wasn't a particularly good car either.

Excuse me, the banks didn't get in trouble for making loans to poor people, they got in trouble for being pigs, leveraging themselves off the map with stuff they knew full well was junk, but figured they could unload it on pensions and then short it. They just got caught with too much of it on the books when the music stopped.

The CRA only required a small segment of banks to make loans to the communities where they set up shop. They were notoriously convincing these communities to make deposits so they could lend money to people outside of those communities while actively refusing to loan anything into the communities.

The CRA never required that loans be made to high-risk individuals, just that these certain banks could not consider the communities as a whole high-risk. The banks had the responsibility to lend to community members who COULD pay back the loans.

As was pointed out already on this thread, the crisis happened when private lenders and mortgage companies from all over got into the subprime game and pushed loans like crazy and gave them out without regard to borrowers' ability to pay. These entities were NOT under CRA jurisdiction in the least.

And why did these moronic lenders give money to people who could not pay the loans back? Because they didn't carry the risk for even 10 minutes. The loans were instantly sold to financial institutions to be packaged into mortgage backed securities. And then these financial institutions bet against the securities (KNOWING they were crap) making money on both ends.

So, massive amounts of loans were made to high-risk borrowers due to the incentives created by the mortgage backed securities and credit default swaps. Period.

Congress had nothing to do with any of that. Ever.

Only 6 percent of subprime mortgages were made in Community Reinvestment Act areas, and the Federal Reserve found their default rate was no greater than other subprime loans. The crisis was caused by mortgage-backed securities and the greed of deregulated banks. Bloomberg, of course, makes his money on Wall Street. He has to defend it.

Investors Business Daily claims that they have the “smoking gun” that shows exactly how the government created the bubble in the first place by intimidating banks into distorted lending practices — based on a flawed study:

At President Clinton’s direction, no fewer than 10 federal agencies issued a chilling ultimatum to banks and mortgage lenders to ease credit for lower-income minorities or face investigations for lending discrimination and suffer the related adverse publicity. They also were threatened with denial of access to the all-important secondary mortgage market and stiff fines, along with other penalties.
The threat was codified in a 20-page “Policy Statement on Discrimination in Lending” and entered into the Federal Register on April 15, 1994, by the Interagency Task Force on Fair Lending ...

read it, if you'd like

Comrade suggested that private lenders were not coerced.
Countrywide Financial was public?

Wall street firms replaced the old S&L thrift institutions after the money market funds killed them.

When loans were secuitized to get financial economies of scale and maturity features by being CMOs, they also had to get FNMA or FHLMC agency guarantee to get marketability. This required the packagers to follow the recipe laid down by Barney Frank and company.. roughly 50% Community Reinvestment act junk mortgages. Low life origination firms were created to supply these mortgages to that quality loans that were racist could be diluted to meet that recipe.

FNMA /FHLMC put their guarantees on $7 trillion of home mortgages.

The Excel loan submission for the guarantee was still on FNMA's web site when they went broke, and it had those race, neighborhood, language, columns to be totalled.

In the old days at the S&L, a loan committee met and somebody would say, "yes, make that loan ... he was our paper boy and we know his dad."

Countrywide Home Mortgage initiated 60% of the subprime loans at the time of the credit collapse and was under NO CONGRESSIONAL MANDATE to issue those. Hell, they weren't even regulated at all. So, how again did Congress, Fannie or Freddie, through the CRA, cause this?

Neither Congress, Fannie nor Freddie created a single CDO or sold insurance (as a CDS) for those same CDO's. So how did they create this mess?

Neither Congress, Fannie nor Freddie rated those same CDO's (made up of B or BBB rated mortgages) as AAA. So how did they create this mess?

This was completely and irrevocably a mess created by Goldman Sachs and the other Wall Street banks and investment houses assisted by Moody's, Fitch and S&P. Facts are so inconvenient sometimes.

The method that Bloomberg used to get his message across is a little sloppy, but the point is that there is not one person or institution to blame for this crisis. By arguing whether Congress or the banks were at fault, you're falling victim to the same trap that probably set Bloomberg off- stop pointing fingers. It's an ineffective way to make any progress toward positive change.

interesting how frightened everyone is to acknowledge the truth:
all this...and not a word on the monetization of racial tension...
all this...and not a word on how we're living in the wreckage of a U.S. housing finance collapse caused by an Ivy-laden experiment to increase black American home ownership.
reparations only happened after the 'elites' found a way to profit from it.
>Our beloved virtuous omniscient American Oxbridge Tribe successfully used government force to compel lending to blacks and hispanics who were horrible credit risks, then the AOT made billions by using government power to securitize and monetize those mortgages (via Freddie and Fannie),
>The amounts not tucked into the Hamptons property market was distributed to lobbyists and political campaigns;
>now they blame it on others' "greed", and their solution is that we all give them even more power.
>if anyone dares to challenge their alternate history? would anyone dare ask Franklin Raines to return his $128 million bonus? oh dear no...that would be....'racist')
>in the unlikely event that anyone desires to understand recent history: go peak at the 1994 "Policy Statement on Discrimination in Lending" by Clinton's "Interagency Task Force on Fair Lending", and see what happened thereafter).

The Clinton administration was indeed at the genesis of the problem with pressure on lending institutions to lower lending requirements in order to encourage home ownership for those more at risk to default. Unfortunately, the Bush administration further extended this encouragement with Bush himself stumping for the cause. Here are a few of many speeches he made promoting this insanity:

http://www.youtube.com/watch?v=kNqQx7sjoS8

http://www.youtube.com/watch?v=MqR15H0gNBU

Even with all the warning signs flashing red near the end of Bush's term, his administration was in such denial about the coming crash that they completely ignored it until it happened. In my opinion (only), they were so mired in two intractable foreign wars that they didn't keep their eye on the ball - and were more than happen to let the collapse happen on the next guy's watch. Instead, it further tainted an already flawed presidency.

Congress, no doubt, has a major share of the blame, too - again, both parties, for their typical reasoning. The Dems wanted to promote housing for all to give minorities (and illegals) the opportunity to own a piece of the American dream, no matter who was impacted. The GOP saw this as great business for the banks, homebuilders and the rest of the housing "machine." Both sides played an equal role in failing this country.

Then you have the banks / lenders themselves who clearly skirted the law, took advantage of deregulation and worked tirelessly to extended company and personal profits. Not only did they give away money to folks who clearly were unqualified to buy homes, but they loaned homebuilders more and more money to fund construction projects that never would have qualified buyers unless the banks FURTHER reduced their lending requirements (if that was even possible). As long as they were making money hand over fist, no one worried that the party would come crashing down on all of us - and they were assured by their attorneys that nothing they did was illegal. One of the reasons we haven't seen any of the fat cat bankers tried for crimes is because, technically, they broke no laws - they had plenty air cover from an equally culpable Congress and two presidential administrations.

Face it, folks - everyone's hands are dirty in this except the poor slobs who paid through the nose for overpriced houses and now have seen the value of their property plummet.

johnnieutah, the banks did what they HAD to do to survive the outrageous demands of the government. Just as the OWS protesters act illegally due to the current government condition, so they claim.
Force people to give up food and they will steal it.

Barney Frank and Dodd pushed the plan that "everyone" should have a home. That is when no downpayments etc took effect. It was a democratic congress that approved. There are no doubts about this. Put the blame where it belongs!!!!!

Has Bloomberg been living on Mars? The banks rigged the game, and then gamed the financial system essentially to commit theft. Who sold the securities that raised the funds that resulted in the collapse of credit? Not Congress. Who peddled the "no job, no income, no nothing" loans to individuals who wanted to buy a house? The mortgage brokers and banks, not Congress. Who devised the "innovative products" that led to the collapse of the markets? The Harvard MBAs working for the banks. And who hired the lobbyists who went to Congress, the Federal Reserve, and the Fannies to get the regulations changed or adopted so that they could carry out their schemes? I think it was the banks and the other financial institutions.

It's almost as though Bloomberg has switched brains with Glen Beck. Where has he been? Somebody give him a newspaper.

From where I sat it looked like Fanny and Freddy (pushed by the Congress) were fueling the market. The derivatives were a way of preventing the inventory from accumulating in one place. Give Bloomberg an A for accuracy of explanation and another A for setting the matter where it belongs both for inception and oversight - viz Congress. We had Dodd and Conrad both in the pocket of CountryWide. Notice that they both stepped adroitly down by not taking their miserable records back to the tame voters who had given them far too many terms.

Well folks, Bloomberg is partly 'correct' and seems to not include "some of Wall Street" into the group that needs to be included into 'those to blame.' Bob Livingston wrote a short book "Robbed Blind, Who's REALLY to Blame for Americas's Economic Crisis?" It is a short read, about 100 pages, in which he sumarizes how 'Wall Street Theives and Their Political Friends' perpetrated "The Biggest Trasfer of Wealth" in american history.

@ kebbe:

The good old days of the S&L's???? You've got to be kidding.

In case you were unaware, there was this little thing the 1980's called the S&L
Crisis crisis which cost taxpayers hundreds of billions of dollars while lining the pockets of executives, investors and developers. This huge industry-wide fraud followed de-regulation of the industry by Congress in response to lobbying by the S&L's.

The only thing to wax nostalgic about the S&L crisis was that back in the 1980's we still prosecuted and sent at least a few of these people to jail. In sharp contrast, we now see the tipping point of corruption of our system, putting partisan politics above the good of our country and pretending that it didn't happen by making stuff up like Bloomberg, Limbaugh and the GOP propaganda machine have done, pimping the Republican party out to Wall Street and selling out the 99% of American citizens and especially the middle class along the way. How much does it cost to avoid prison? Evidently, somewhat less than the recent record-breaking political contributions of Wall Street and the banks.

You are partialy right Mr Bloomberg.It was congress who wanted to but every misfit into a overpriced home with their mandates soley for votes,but the banks are responsible for these exotic investments,whitch they got congress to change the rules on.Its perfectly clear the banking industry didn't like the actions of congress and scudled the whole thing.OH WHAT A TANGLED WEB WE WEAVE WHEN WE PRACTICE TO DECEIVE.THIS IS THE PLUNDERING OF CAPITALIST AT ITS BEST????????.ALL I CAN SAY IS "IDIOTS"

The fault for the mortgage crisis rests specifically with Bill Clinton and secondarily with the Democratic party. On April 6, 1998, Andrew Cuomo, then Secretary for HUD under Bill Clinton, held a press conference in which he actually bragged about the Clinton Administration bringing lawsuits against banks under the Fair Housing Act claiming they were "discriminating" against low income minorities because they refused mortgages to African-Americans at a rate that was twice that of whites. This the Administration and HUD and the Justice Department viewed as discimination and won several lawsuits against banks forcing them to change their lending practices and make billions of dollars available for applicants who lacked the necessary credit worthiness to acquire mortgages otherwise. Cuomo even admitted they expected a "higher default rate" among these loans, but the federal government under Clinton forced banks to make these loans anyway. So when it comes to blame, the buck stops squarely with Bill Clinton and his administration. On numerous occassions the Bush Administration warned Congress that Fannie Mae and Freddie Mac, which had bought up these bad loans, were in serious financial trouble and needed to be audited, but Barney Frank, whose boyfriend headed up Freddie Mac at the time, along with other Congressional Democrats, accused the Bush Administration of not wanting minorities to have affordable housing and Congress blocked any effort to audit or rein in the risky lending practices that resulted in the mortgage crisis and consequent economic collapse. Cuomo, in his 1998 press conference, states that these low-income familes would not have qualified for these loans if not for the "affirmative action" on the part of these banks which the Clinton Administration sued the banks and forced them to comply with.
http://youtu.be/ivmL-lXNy64
So if anyone is to blame, it's Clinton and the Democrats who forced the banks to engage in these risky loans creating a mortgage bubble and then denying there was a problem until the bubble burst and plunged this country into the economic nightmare we are still struggling with today. The Democrats had good intentions, but they are so woefully ignorant of the economic impact of their do-gooder policies that they are bankrupting this country and driving us into economic collapse. And rather than learn a lesson from their government interventionist policies, they are now trying to intervene in other industries and sectors such a healthcare, but the results will be the same, chaos and collapse.

What does he(Bloomberg) think we(the public) are-STUPID?????
There was a lot of "slight of hand" by lenders/banks & Wall Street--But because He is involved, he can shift the blame!
It was "Quick" profit for a while& a #s game(like a ponzie scheme)---Giving BAD loans& selling them off as fast as possible-Taking that money& doing it over&over!
Thinking people KNEW that a lot of these loans would go bad but everyone thought they could allways find "Suckers" to by them& thus-turn a profit!
He(Bloomberg)& other (allready wealthy) folks never lost out--in fact they got much richer!

So, the banks and their lobbies were completely powerless though they complained vigorously against being forced to generate fraudulent loans.

By the way, I just lost all respect for Mr. Bloomberg for being either disingenuous, ignorant, or pandering.

The banks weren't "given incentives". They were forced into it.

see Smoking-Gun Document Ties Policy To Housing Crisis

http://news.investors.com/Article.aspx?id=589858&p=3

Yes, It wasn't the banks fault. Barney Franks as minority chair of the banking committee used his dominating personality to control the Republican Congress during the Bush years to defeat the billion dollar lobbying efforts of the finacnce community. Thank goodness we had the guts to provide investment banks with the same protections as commercial banks to make up for it. the Banks were forced to bet trillions on naked credit default swaps they created to allow them to provide the billions in bribes Frank demanded.

Very convenient to pretend that Congress, as a whole, isn't owned, lock stock and bank accounts, by the major investment houses, banks and insurance giants (among other corporate 'supporters).

The legalized bribery that pours in under the guise of 'campaign contributions' goes to finance the corrupt legislation which allows outright fraud to pass as 'business'. I feel deeply for the poor houses like Goldman, who were 'forced' by the government to concoct CDO's & other asinine faux-securities and pass them off to all who trusted them on the basis of their reputations. Theft, by any other name, damages just as badly.

Um, aren't the banks among the top donors that help get Congresstwits elected in the first place? Aren't the banks the ones who hired the lobbyists who then pushed Congress to adopt the policies that made the whole mess possible? How, exactly, are the banks blameless?

Bloomberg is playing to the uninformed Republican base who love to vilify the lower classes.
Weak loans have been around forever. They are risky and to cover the risk, the mortgagae will cost more, either in discount points when it is sold to an investor or in higher interest rates. The problem here is , the investors that purchased the loans were not aware of the level of risk because shady brokers packaged the risky loans in with the solid ones and called them all AAA quality. Then to make matters worse, they created a phony quasi-insurance policy between the two parties buyng and selling the mortgagaes, called a credit default swap.That's where Joe Blow sells junk bundles of mortgages to Mortimer Sucker and tells him they are all AAA, but just in case they aren't, Joe Blow gurantees any losses by issuing a credit default swap. Problem there is there were no reserves to back up the little quasi-insurance policy. They didn't need reserves because deregulation under Republicans eliminated the need for reserves, as odd as that may sound. Thank you Phil Gramm for that little gem.

Believe it or not, Bloomberg actually got it correct. And believe me this is no partisan plea for I'm no Republican. Although the bankers drove the getaway car, the Congress masterminded the heist start to doleful conclusion. Both should go to jail. I know this because I watched it happen and documented the entire cosmology contemporaneously. Sadly, I watched this crisis evolve over many years. For me it occurred in almost slow motion as I monitored the events that led to the September 2008 takeover. I have all the documentation.
My first job out of grad school was as a secondary market analyst. One of my job duties was as liaison to Fannie and Freddie. Over a decade I got to know the GSEs well: programs, policies, people,etc. I knew the GSEs both before and after 1992, the pivotal year.
In 1996 I spoke at the MBA annual convention--as an independent analyst. I lashed out at Fannie and Freddie for their duopolistic policies and warned that the ground was being prepared for a taxpayer bailout. I maintained the criticism for 12 years, until the insolvency and federal takeover.
In addition to speeches, articles and Congressional testimony about the potentially dangerous federal housing policy I observed, I wrote and sent 23 letters to Washington VIPs outlining my concerns and suggesting they take a look for themselves. Again all this is documented and available.
tom.lamalfa@gmail.com

Lame excuses and finger pointing. Again. President Bush, not "Government," is the one whom we can see in video clips push for home loans for everyone. Banks and their affiliates, not government or the people, who finessed "Zero-down" loans and didn't explain the fine, misleading and in fact very tricky print. Banks, not government or the people, are the ones who engage in mobster-style lending tactics when it comes to just credit cards alone (30 percent rates for people with fairly good and timely payment histories, anyone?). Banks, not government or the people, are the ones who were pushed their lobbyists to gain tax loophole advantages, who enjoy socialism-style subsidies and who get to pick up their mail in the Cayman Islands. Banks, not government or the people, arrange for their CEOs to get literally hundreds of millions of dollars in bonuses and golden parachutes after they either do a poor job and are forced out — or accept bailouts paid for by the people. If the banks were so very, very concerned about the potential paltriness of their own savings and future (LIKE the people), why on earth would they spend so much of their hard-earned money on lobbyists, super-pacs, bonuses, parachutes, corporate jets and corporate (not product-specific) advertising? Answer is: they have plenty of money, and if they didn't over-leverage and let their greed and egos and total out-of-touchness go wild — if they'd just chill on the fear of not having a big enough place in the Hamptons — we'd all be happier. Shhh-shhh — it's okay, let 'em reinstate the Glass-Steagall act. Get honest with yourself, work on your deep-down unhappiness and never-satisfied hunger to feel important. Blaming Fannie and Freddie — an actually tiny part of the problem — is just another example of Wall Street's determined ignorance, wishful thinking, lack of integrity and passing of the buck. Find some soul.

Bloomberg IS ABSOLUTELY CORRECT. People (that could not otherwise get a loan) basically just had to be able to sign their names and they could purchase a house (WAY ABOVE WHAT THEY COULD AFFORD) with ACORN funneling them towards Fannie and Freddie..and CONGRESS putting heavy FINES in place if Banks didn't give out these loans...
It all began in the CARTER administration, slid into the Clinton Administration and finally into the Bush administration, where BUSH attempted to try to put restraints on it, but with a Democratic CONGRESS in place, it would not pass..

...and here we sit again, with Obama wanting to lead us down the primrose path again... KOOLAID ANYONE?

Fannie and Freddie’s affordable housing goals (authorized by the ironically named Federal Housing Enterprises Financial Safety and Soundness Act (the GSE Act) and enforced by HUD) were responsible for many distortions of the housing finance market. One of the most significant was that Fannie and Freddie (the GSEs) were required to compete with FHA and subprime lenders for loans that qualified under one or more of the affordable housing goals. The GSEs competition with FHA started in 1993 and by the mid-1990s had expanded to subprime. This competition combined with the National Homeownership Strategy required the GSEs (and the market generally) to progressively reduce downpayment requirements. By the early 2000s zero down loans had become commonplace across all market segments including subprime and Alt-A.

The GSE Acts also set low capital standards for Fannie and Freddie. These allowed them to operate at extraordinary leverage levels (for example: 220:1 on their MBS guarantee business).

The resulting high levels of leverage greased the slippery slope of declining standards and fueled the housing boom. It is now five years after home prices started declining and we have yet to deal with excessive leverage.

This was a repost by someone else.

So if , as many here have posted, the Dems and Barney Frank are the guilty ones for pushing minority lending , then the mortgages that failed should all be minority loans. Since that is certainly not the case, can someone explain how the other mortgages failed?

Why does my previous comment not display unless I log in?

Muggs wrote on November 1, 2011, 3:36 PM [LINK]
The banks bought deregulation from the Republican party. The reason the movement, here, is Occupy Wall Street and not Occupy Washington is because Washington is run by professional politicians who make untold millions of $$ (look at Bush family wealth over last 20 years, or Clinton, or Pelosi), paid by industries. The financial services industry just swallowed up our wealth and they want us to blame Congress for deregulating the financial services industry, thereby allowing them to rape the nation of trillions of dollars. "It's not our fault because Congress allowed us to to it," except for the false documentation. No, the source of the problems are Wall Street (figuratively, if not exclusively). The people know this.

Eventually We, The People, shall have more influence over Congress than any corporation or even all of Wall Street.

Not one comment about personal responsibility. I was in the Mortgage business for 3 years between 1990 and 1993 - rules were in place. During the "free money" phase a few years later, there were no rules. There is documentation that then President Bush encouraged people to buy homes, but he also cautioned against irresponsible lending. The Purple Dinosaur Frank assured the public that these loans were good. But let's go back to the beginning... where is the personal responsiblity of the homeowners? Granted, banks were happy to lend $100,000 on a home today because tomorrow, that same home would be worth $120,000, so they weren't that worried... they could re-sell it for a profit. Then the reality phase of the mortgage Ponzi scheme surfaced when balloon payments came to fruition...Bottom line: where are the borrowers' responsibilities in this fiasco? Oh....they are Occupying Wall Street, Atlanta, and othere places that promote irresponsibility...

Um, Smartening Up, who writes above "BUSH attempted to try to put restraints on it," needs to smarten up by watching this clip of Bush telling the world that thanks to his approval, low-income folks can have a house as nice as anyone: http://www.youtube.com/watch?v=GkAtUq0OJ68

Feather, watch this... your video was 2002. This one was 2004

http://www.youtube.com/watch?v=cMnSp4qEXNM

Read my previous post too...

Step 1) Everybody regardless of credit can now get a mortgage.
Step 2) The loans have to be gauranteed
Step 3) Good loans have to packaged with bad loans to sell the portfolio
Step 4) The portfolio has to be insured
Step 5) More and more loans have to be given to people with poor credit
Step 6) Not enough good loans to balance the bad loans in the portfolios
Step 7) The portfolios have to be insured

Somebody tell me where this started.

Touche, Courtland, touche. Saw the clip and, while the Fox report doesn't negate the fact that Bush pushed for home loans to the credit-less even a year after his White House saw problems there, Barney Frank's naive or worse comments about F&F are irksome indeed. Dems, Republicans — anyone who takes money from lobbyists and then votes in their favor — are all crooks and scoundrels. What, deep down, is the real reason that McCain and the Republican crowd only seem to favor "regulatory structure" for F&F, and not everything? Sorry for the partisan sound there — just curious (and tired of right or left as our only, divided choice . . . it's just all part of the distraction that allows those greedy CEOs to steal the candy while everyone else is arguing).

Dear Mayor Bloomberg, thanks for reading my blog, but its not that "plain or simple". While I agree Congress is to blame, they did have some help. Your comments are extremely simplistic. Here are some details that you may have overlooked. Congress was lobbied to dismantle the Glass Stegall Act,

A change in the business model of banking, mixing credit with equity culture was like added gasoline to a fire. This model, when combined with complex interactions from incentives emanating from macro policies, changes in regulations, taxation, and corporate governance, created the global financial melt down in 2008. And the current melt down. Back to 2004 - 1) Interest rates are 1 percent for banks and investment banks, 2) the SEC has approved the change to double and triple the debt to equity ratio, 3) mortgage securitization began to explode with the very attractive loans, 4) Banks and Mortgage Companies are writing loans, deciding due diligence - qualifying people for a mortgage - was no longer necessary once the Bush administration said Freddie and Fannie would guarantee those mortgages. Off to the races! The liquidity dam was overflowing, and then the rating agencies rated everything Triple AAA

Mayor Bloomberg - Obviously, you effort to absolve the banks has fallen flat. Congress is always a popular whipping boy but lets get real here. You know who was to blame - the peasants on the "cusp" who applied for loans they were assured they could afford because they thought they and their children were entitled to a share of the American dream. You know, the 99 percent who are outside looking in. They paste their runny noses on the glass and leave such a mess. By the way, in addition to the banks and Congress, I personally would like to add to the list of villains the watchdogs that were supposed to protect the American public - the Securities and Exchange Commission and the rating agencies.

With all due respect, I don't know whether Mr. Bloomberg is a fool, a tool or a stool - he may be just drinking the kool-aid of his banker friends - if he actually believes that the biggest bubble of all time is the result of foolish homeowners and government bureaucrats. Usually in a bubble, to find the culprit look to the one party that most profited and ran the thing - in this case the financial intermediaries. I don't know how the fictional story perpetuated by some that the banks were merely stool pigeons got started and blossomed, but from by experience they seem to be mostly waxing some pet prejudices. I found an interesting article about the distortions and how they are created:

http://rortybomb.wordpress.com/2011/05/18/peter-wallison-discusses-fanni...

The real crime is that it was and is not a crime to perpetuate the largest scam of all time. Banks sold mortgage backed securities that were fraudulently rated. They created a bubble in mortgages to create more and more mb-securities which they sold all over the world. When things went sour they shorted the very securities that they had created with credit default swaps. When that soured they were bailed out. To pay back the bail out they sold the worthless securities still held to the federal reserve.

Drink some more Kool-Aid. The banks never had to make loans that would lead to insolvency. If you believe that you are a fool. There seem to be a lot of fools commenting. The Gov't did not create the financial tools that got us here. Phil Gramm a Republican is the one that thought getting rid of Glass/Steagall was a good idea. Everyone else stupidly went along with it.

What everyone is doing on this post ONCE AGAIN is finger pointing. So, since that is the point of the article comments, you are ALL right. Bill Clinton signing de-regulation, Congress pressuring banks to lend. Shady mortgage brokers and large banks using white out ( I was a mortgage broker, had friends in all places including underwriting, secondary market, marketing and pricing, and investors. 73% of my book in 10 years were 30 Year Fixed. I did 7 Pay Option Arms, one on my own house which has a rate of 4.94% on an investment property with cash out. I still have 100k equity in it. I begged people not to do the "1% 30 Year Fixed" they were being telemarketed by people who could barely speak English or proper mortgage knowledge). Obviously there was no such thing but the LO's were Economically benefited from 3 on the back jacking up the margins. Which Leads me to my next person at fault, the guy down the street who took 100k cash out on an inflated appraisal and bought his dune buggy, and camper with towing kit. And a new car. He did not read, care or look at his HUD with 27k closing fees on it because he wanted to toys so bad. He was taken to 95% LTV. I tried to sell him a 30 year Fixed, no higher than 85%, and he went with "the guy who could get it done". He fell behind on his payments, and foreclosed. Idiot. Now he is crying broke. You deserve it. Then the guys on the back end who sold his loan in a nice A- package with some other decent loans and a couple golden Vanilla loans. Now as far as Bush, was he going to stop an Economy and Industry that was booming with people happy and making more money and Spending their asses off. Hell no and No President would including Obumer because he has no idea how a mortgage worked. When asked what a Debt to Income Ratio was, he said it was peoples balances on their credit cards and other account as compared to their Net Income. What an idiot. So the answer is, ALL of them are to blame. Its called Greed. CEO's compensation is nothing compared to Ameriquest and New Century producing 4 Billion a month in Subprime loans and the Account Execs and their managers making 600k a year answering the phone and giving quotes, sometimes .375% better on the same deal to a different loan officer in my same office because she was screwing him and she gave him some of the 27k commish. GREED people, everyone is to blame. It hit everyone. And the CDO's and CDS's you could write a book on too. Everyone reading articles on the internet, if you were in it you could see it coming from a mile away. Now, fix it. Come up with solutions. Its not how we got here (although its important to know), its how you fix it. Obama wants a new refi plan? How moron. When you never have sat down and gone through a persons file. Education is whats needed. And for those who said Congress did nothing, I have a judge in my neighborhood who over Scotch talked to me about death threats. Enough said. If you are going to comment, know your shizz.

"It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I'm not saying I'm sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn't have gotten them without that.

But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody."

Plain, simple, forced, pushed? Passing along bundled junk even overseas, multiple times, and making a ton of money doing so is neither plain or simple. That took some conniving. And to say the banks can be forced and pushed by Congress bwahahahaha. They got our money and haven't trickled that down yet. Everyone is screaming at them and NADA. Now they own a heck of a lot of prime real estate that used to belong to the people.

It appears that every time Congress passes a new bill the wording has to be very, very precise because Corp. America will figure out a way to run wild with it, screw the little guy, and gain more wealth and power.

Alas, Bloomberg shows his true colors as a fat cat protecting his brothers in wealth.

I find it remarkable that in so many cases, folks want to lay blame on only one side or another. The reality is that this crisis was the work of congress (passing policies that would effictively buy them an electorate - democrats tending to want to buy the polulist vote, republicans tending to want to buy the business vote, but in truth evn these lines are increasingly blurry as it seems in truth both will pass policies to acquire the votes of whoever will give them the surest path to power), greed on the part of businesses (leveraging and betting on market conditions and seeking to pass the risk along to another - in most cases now to the taxpayer through governmental bailouts), as well as consumers leveraging themselves to the hilt for their own financial/material rewards (purchasing things we couldn't afford with money we hadn't ever really earned, refinancing home equity loans to profit on conditions that were inflationary in nature).

We all participated in the sytems that brought this on - what sickens me is that due to political wrangling and the way that power tends to move, it will likely be the "little" guys with least power who will (are) bearing the brunt of this. While bankers and politicians will continue on their merry way, the rest of us are all shouldering the burden of the reality. How:

1) High unemployment - business cannot afford to hire / maintain labor forces - entrepreneurs have an increasingly hard time opening new businesses - and even if they could with a shrunken labor pool, there is also a shrunken customer base for all products
2) The basically "free" money tossed around by the Fed continues to be used by banks to purchase Treasuries giving the banks 2-3% profit on money that they get for basically free - all of it coming from the US taxpayer in the interest payments on those bonds.
3) Increased prices, less a sign of increased prices so much a sign or the decreasing value of the dollar. As the cost of nearly everything seems to increase we are all having our wealth slowly stolen away as our purchasing capacity decreases compared to wages. Put simply as the govenrment / banks continue to get to behave wrecklessly, the rest of us have the dollars in our accounts and wallets and lest you are seeing rasies to keep up with inflation, even your future paychecks are having the values of these dollars decrease by the day. Inflation is a hidden tax that is allowing the incestuous relationship between big business / and big government to continue to pay handsomly while the rest of us bear the brunt.
4) With the Fed and others keeping interest rates so low, those who would save are being stolen from daily. Interest used to be an expression of "risk" but in this new climate, with governmental backing, one can literally be as risky as one wishes with little ramification. It is those who would choose not to behave with risk who are being punished and their wealth stolen away in this arrangement. Any individual or financial institution that might want to behave responsibly are actually being punished for their choices in this climate.

There are likely others, but these are the ones that come most readily to mind.
If we are to ever come to the other side of this pit, it will likely only be through a realization that the answers probably do lie in a combination of:
a) better regulation (NOT in the hands of the current regulators which largely seems to be just another extension of the love-fest in the financial world) focussed on ACTUAL prosecution of wrongdoing, make it punishing to conduct business in particularly risky ways
b) less political manipulation of the markets - don't legislate social agendas
c) better self discipline on the part of individuals
d) revised monetary policy that has some better basis in "real" assets or at least prudent ones - that banks can currenly use all kinds of wonky instruments as collateral to conduct business is arguably how we arrived here over these last 4 years.

The reality is that it was in fact the powerful who were able to set the stage and even ushered on the first act, but it was all of us who played our roles to the hilt. it might be that the American Dream needs to be tempered with some better doses of reality and that perhaps justice does call for ALL to share in the costs of recovery. I am not comfortable but I do accet that we ought allow the natural consequences to fall upon those who deserve it - i do think the "To Big to Fail" ought to be allowed to fail now and into the future and that any and all who mismanaged them into such a failure suffer the consequences (including I do think that executives ought to be persoannaly liable for the mismanagement of stock and bond holder trust), the rest of us have been suffering their consequences long enough, I do think that politicians ought to be swept clear from office whenever they display that they are more beholden to re-election and power than they are to the public well being, I do think that all of us as consumers are facing a future of tighter belts and leaner purchasing because it may just be that "no" we can't always have it "our" way nor do we deserve it all.