Posted on 01/25/2011 10:38:06 PM PST by CutePuppy
The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a Congressional inquiry.
The government commission that investigated the financial crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors, and risky bets on securities backed by the loans.
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Many of the findings have been widely described, but its synthesis of interviews, documents and testimony, along with its government imprimatur, give it a sweep and authority that the commission hopes will shape the public consciousness.
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The document is intended to be the definitive account of the crisis’s causes, but its authors may already have failed in achieving that aim.
Of the 10 commission members, only the 6 appointed by Democrats endorsed the final report. Three Republican members have prepared a dissent; a fourth Republican, Peter J. Wallison, a former Treasury official and White House counsel to President Ronald Reagan, has written a dissent, calling government policies to promote homeownership the primary culprit for the crisis.
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The report does knock down — at least partly — several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession “created increased risks” but were not chiefly to blame. It says that Fannie Mae and Freddie Mac , the mortgage finance giants, “contributed to the crisis but were not a primary cause.” And in a finding likely to upset conservatives, it says that “aggressive homeownership goals” set by the government as part of a “philosophy of opportunity” were not major culprits.
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(Excerpt) Read more at cnbc.com ...
A "politically correct" "bipartisan" government report which blames everybody, that is neither bipartisan, nor correct in its conclusions, refusing to actually point out the main culprits and failures of "politically correct" government policies of broad "home ownership society" regardless of desirability, means or ability to afford mortgages.
Typical political commission looking out only for protecting the politicians and their failed policies. Sprinkle a little bit of blame on "everybody" here and there, and they can continue with the failed policies until another crisis, which will also be "fixed" through more "politically correct" laws and regulations of the symptoms, but not the causes of the disease.
So Congress didn’t point the blame finger at itself? Shocked, I tell you! I am shocked! I honestly thought they would take all the blame that they deserve and throw Frank and Dodd out of their chambers.
I agree with that. The problem wasn't the mortgages. The problem was the economy that tanked. Mortgages always take it on the chin in an economic downturn, every time. And banks take it on the chin from mortgages and commercial loans.
The oil price shock which this nation has done little or nothing to prepare for since the first one in the 1970's, had more to do with the crisis than mortgages.
Credit card rate shock was probably next. Banks got greedy and drove their customers into bankruptcy. Both fuel prices and credit card rate increases brought consumer spending to an abrupt halt.;
And the final nail in the coffin of consumer psychology is the way Bush shocked the nation with the demand for TARP. That had the double whammy of directly assaulting consumer psychology and handing the pending election to the rat's, a double blow.
If the economy had been stable, the mortgages would still be being paid.
Nonsense!
The entire fiasco could have been prevented by NO BAILOUTS and NO IMPLICIT PROMISES OF BAILOUTS.
People act irresponsible when they know they will never have to face any consequences.
Yep, definitely a shocker, and... "unexpected"!
I honestly thought they would take all the blame that they deserve and throw Frank and Dodd out of their chambers.
Well, too late to do that to Dodd, he is already out; but Frank is still there, promising to "cooperate" with Republicans in "reforming" the Feddie.
The 2008 financial crisis was:
Engineered by the big banks to get their Kenyan Kommie elected, so that he would roll over as they continued to plunder the taxpayers.
I watched the bubble develop in California. Ground zero for the subprime lending industry was just down the road in Costa Mesa and Irvine. I had neighbors and friends in the business.
These people were writing subprime loans because they made an incredible amount of money writing them. They weren’t covered by the CRA. They didn’t sell their paper to Fannie or Freddie, their paper didn’t conform and investment banks paid them more for it anyway. No one was pressuring them to write this paper. Someone with a high school diploma could pull down $400,000 a year writing loans. And the profits up the line where it was bundled and sold as CDOs and derivatives was even bigger.
I’ll be curious to read this report and the dissents. But don’t kid yourself, there was a lot more involved in the bubble than just some government meddling. The financial industry was mining the subprime market for all its worth.
I think they are leaving out what the IMF did in changing accounting procedures in 2007 by moving from “hold to deliver as the value of a thing increased” to “mark to market” where the value is immediate. They demanded the USA change. It ruined the markets and nearly caused a world financial collapse. Soros was chair of the IMF at one time. Did he have a hand in it?
At the secret, closed session of Congress on Mar. 12, 2008, Steny Hoyer predicted the collapse of housing and currency, among many other catastrophies. Who told him? Soros? At that time Bush instructed Paulson to prepare a plan (TARP).
When the $500 billion run came in October of 2008, the money was there so banks would not fail just before elections. We are pawns.
Well, the fiasco was already in full swing, freezing the credit markets and drying up liquidity, and taking down the financial systems by the time they got around to TARP.
But re IMPLICIT PROMISES OF BAILOUTS, that is exactly what Fannie Mae (and later, her spinoff Freddie Mac) was created for, in 1938 by Franklin Delano Roosevelt, as part of the New Deal - to securitize and package FHA loans into MBSs for sale, with "implicit" but definite guarantee of government / taxpayer backstop of originated mortgages - to facilitate the housing sales. That guarantee and the size was one reason the Feddies were able to obtain money and provide loans at lower rates of interest relative to private competitors.
People act irresponsible when they know they will never have to face any consequences.
Exactly! And that was the "implicit" deal behind Fannie / Freddie / FHA since the New Deal, and all but explicit behind Carter's CRA and it picked up steam due to its fierce enforcement by Clinton gang at DOJ and HUD (Secretary Andrew Cuomo) and through lawsuits by "community organizers" like Obama... culminating in the burst bubble about decade later.
What a load of crap! And this is the final word? When everybody’s responsible, nobody’s responsible. There are people involved in this mess in and out of government that should spend the rest of their natural lives behind bars. The ONLY people on the commission to endorse the findings were....RATS??? High tech whitewash!
That's the idea of all these "bipartisan" commissions, n'est-ce pas?
The ONLY people on the commission to endorse the findings were....RATS???
The commission was "bipartisan" and "evenly" split - 6 Democrats and 4 Republicans.
Glad to see that Republicans showed they had a spine and didn't go along with the "bipartisan consensus".
High tech whitewash!
Indeed. A whitewash of the politicians by the politicians for the politicians.
ROFLOL
What a worthless commission this was.
It was Bush’s fault.
There, done. See that was easy.
More importantly, I would add that when speculators are required to cover their bets, they will generally stabilize the marketWhen speculators are allowed to make bets they won't have to cover, they will destabilize the market. Speculators who act in ways that destabilize the market lose money; those who use their own money have an incentive to avoid that, and will be forced out of the market (by going broke) if they don't. Speculators who can lose money without losing their own money face no such restriction.
If a market allows participants to speculate without having to cover their losses, it is entirely rational for people to do so, and nobody should be surprised if the markets become unstable as a result.
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