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The (Other) Truth About The Financial Crisis: 10 "Geithner-Sized" Myths Exposed

Tyler Durden's picture




 

Excerpted from Toxic bankers, captive regulators: Everything you think about the housing market is wrong; authored by Jennifer Taub, originally posted at The Salon,

After the crisis, many expected that the blameworthy would be punished or at the least be required to return their ill-gotten gains—but they weren’t, and they didn’t. Many thought that those who were injured would be made whole, but most weren’t. And many hoped that there would be a restoration of the financial safety rules to ensure that industry leaders could no longer gamble the equity of their firms to the point of ruin. This didn’t happen, but it’s not too late. It is useful, then, to identify the persistent myths about the causes of the financial crisis and the resulting Dodd-Frank reform legislation and related implementation.

Myth 1: There has been no official bipartisan consensus on the causes of the financial crisis:

An official government report was produced in April 2011 by the Senate Permanent Subcommittee on Investigations, led by Chairman Carl Levin (D-MI) and Ranking Member Tom Coburn (R-OK), titled Wall Street and the Financial Crisis: Anatomy of a Financial Collapse. The “Levin-Coburn Report,” a 639-page document, including 2,849 footnotes unanimously and unambiguously concluded that “the [2008] crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

 

This myth got traction in January 2011, when after conducting over five hundred interviews and holding twelve days of hearings, the Financial Crisis Inquiry Commission (FCIC) failed to produce a unified report. The 545-page book the panel did publish, titled The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, had three sections. The first part was a lengthy majority report endorsed by the six Democratic appointees. This was followed by two much shorter dissents. Reading the three parts together, it is clear that all ten commissioners agreed that the collapse of the U.S. housing bubble was the proximate cause of the crisis.

 

In addition, there was substantial consensus among nine of the commissioners. For these nine—including three of the four Republican appointees—the centerpiece of the consensus was that poor risk management at U.S. financial institutions was a chief contributor to the crisis. For example, all nine agreed that risk management failures at financial institutions led to insufficient capital and a reliance on short-term borrowing.

Myth 2:The financial crisis was an accident without human causes:

The Levin-Coburn Report clearly concludes that the crisis was not a natural disaster. In the FCIC Report, the Majority, Primary Dissent, and Solo Dissent also agree on this point. Without question, the crisis was caused by people. The Primary Dissent identifies a list of “ten essential causes” that point to human decisions and actions, yet it suggests that the outcome could not have been prevented. The Majority is clear in its contention that the disaster, at least in the magnitude we experienced, was preventable: “The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire.” The Solo Dissent also points to human causes: “To avoid the next financial crisis, we must understand what caused the one from which we are now slowly emerging, and take action to avoid the same mistakes in the future.” In addition to these official reports, experts have renounced this false narrative.

Myth 3: The financial crisis was brought about because the Community Reinvestment Act of 1977 forced banks to lend to people with low incomes who could not afford to pay back their mortgages:

The FCIC Majority and Primary Dissent roundly reject this myth, leaving the Solo Dissent as the lone proponent of this shaky story. The Community Reinvestment Act (CRA) was enacted to prevent banks from refusing to extend loans to creditworthy borrowers in particular neighborhoods, a practice known as “redlining.” The FCIC Majority notes that “the CRA requires banks and savings and loans to lend, invest, and provide services to the communities from which they take deposits, consistent with bank safety and soundness.” Further,
it states that

 

"the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law."

 

Similarly, the Primary Dissent explicitly states that the Community Reinvestment Act was not a “significant cause.” Many government officials and scholars have also rejected this myth. In contrast, the Solo Dissent singles out U.S. government housing policy, including the CRA, as the sine qua non of the financial crisis.

Myth 4: The giant government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, caused the financial crisis because the government pushed them to guarantee mortgage loans to people with low incomes as part of their public housing mission:

Not exactly—both the FCIC Majority Report and the Primary Dissent agree that Fannie and Freddie on their own did not cause the financial crisis. They focus blame largely on the private-label mortgage market. Fannie and Freddie did not originate any loans; the “exotic” and high-risk loans were designed by and extended to borrowers through the private-label pipeline. While the Majority and the Primary Dissent concur that Fannie and Freddie’s business model was flawed, they also agree that affordable housing goals neither drove Fannie and Freddie to ruin nor caused them to create the overwhelming demand for predatory, high-risk, mortgages.

 

The Majority Report stated that the affordable housing goals that the Department of Housing and Urban Development (HUD) gave to the GSEs “did contribute marginally” to their purchase of risky mortgages. But it was the desire to gain market share and increase executive compensation that drove the management teams at Fannie and Freddie to fill their portfolios with high-risk private-label mortgage-backed securities. It was the growth of their portfolio business for profit coupled with a 75– 1 leverage ratio—not their public housing mission—that caused them to fail. Fannie and Freddie “had a deeply flawed business model as publicly traded corporations with the implicit backing of and subsidies from the federal government and with a public mission.”

 

Similarly, the Primary Dissent concluded that “Fannie Mae and Freddie Mac did not by themselves cause the crisis, but they contributed significantly in a number of ways.” It noted that U.S. housing policy does not itself explain the housing bubble. The Primary Dissent echoed the Majority in contending that “Fannie Mae and Freddie Mac’s failures were the result of policymakers using the power of government to blend public purpose with private gains and then socializing the losses.” In his Solo Dissent, Peter Wallison blamed housing policy and the GSEs for the crisis.

Myth 5: Mistakes were made, but there was not widespread fraud and abuse throughout the financial system:

There is evidence of widespread fraud and abuse throughout the private mortgage market. Examples exist across the mortgage supply chain, beginning with fraud in mortgage documentation and ending with the peddling of worthless synthetic mortgage-related bonds to guileless institutional investors. From borrowers, to brokers, to lenders, to bank securitizers, to credit-rating agencies, to investment bankers, the Majority Report found evidence of either fraud or corrupt and abusive behavior across each link. It describes FBI agents warning of mortgage fraud in 2004 and 2005 and housing advocates early and consistently trying to get the attention of regulators to crack down on predatory lending. As for abuse, the bipartisan Levin-Coburn Report and the FCIC Majority provided many instances of lenders making loans they clearly knew borrowers could not afford.

 

The Primary Dissent agreed that the industry’s conduct went well beyond mistakes and errors: “Securitizers lowered credit quality standards and Mortgage originators took advantage of this to create junk mortgages.” Although Wallison’s Solo Dissent rejected the notion that fraud was an “essential cause” of the crisis, he agreed that it was a “contributing factor and a deplorable effect of the bubble.” He acknowledged that “mortgage fraud increased substantially” beginning in the 1990s “during the housing bubble” and that “this fraud did tremendous harm.” But unlike the Majority and Primary Dissent, Wallison blamed “predatory borrowers” as the ones who “engaged in mortgage fraud.”

Myth 6:The financial crisis was caused by too much government regulation: 

Deregulation and regulatory forbearance—too little regulation, rather than too much—contributed to the crisis. The entire toxic- mortgage supply chain was enabled by decades of deregulation and desupervision. The Levin-Coburn Report included more than eighty pages focused exclusively on the regulatory failure at one agency, the Office of Thrift Supervision (OTS). It also made recommendations for further reform beyond Dodd-Frank’s changes. The FCIC Majority stated that more than three decades of:

 

"deregulation and reliance on self- regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe. This approach had opened up gaps in oversight of critical areas with trillions of dollars at risk, such as the shadow banking system and over-the-counter derivatives markets. In addition, the government permitted financial firms to pick their preferred regulators in what became a race to the weakest supervisor."

 

Similarly, the Primary Dissent identified “in effective regulatory regimes” for nonbank mortgage lenders as an important “causal factor.” It faulted “lenient regulatory oversight on mortgage origination” at the federally regulated bank and thrift lenders Wachovia, Washington Mutual, and Countrywide.

 

In the Solo Dissent, Wallison claimed the Majority had “completely ignored” solid evidence that there were not thirty years of deregulation. He pointed to the FDIC Improvement Act of 1991 (FDICIA), a law that he said “was celebrated at the time of its enactment as finally giving the regulators the power to put an end to bank crises.”

 

Contrary to his assertion, the Majority did discuss FDICIA; it has nothing to do with the deregulation that enabled high-risk mortgage lending and securitizing. This law requires the FDIC to shut down or sell a failing bank or thrift. This part of the law did not apply to independent investment banks like Bear Stearns and Lehman Brothers; for them the choice was bailout or bankruptcy. And, there were loopholes in FDICIA. If the regulators determined that the firm posed a “systemic risk” to the financial system, the FDIC did not have to pursue a resolution of “least cost” to the deposit insurance fund. Also, the Fed was permitted to make emergency loans to failing banks. Given these loopholes, the Majority explained that FDICIA sent a “mixed message: you are not too big to fail—until and unless you are too big to fail. So the possibility of bailouts for the biggest, most centrally placed institutions—in the commercial and shadow banking industries—remained an open question until the next crisis, 16 years later.” Indeed, the “systemic risk” exception would be invoked several times during the bailouts.

Myth 7: Nobody saw it coming:

Plenty of people saw it coming, and said so. The problem wasn’t seeing, it was listening. As both the Levin-Coburn Report and the FCIC Majority showed, financial sector insiders, consumer advocates, regulators, economists, and other experts saw the warning signs. They spoke out frequently about the housing bubble and the mortgage underwriting practices that fueled it. Yet most whistleblowers were ignored or ridiculed at best, and fired and blacklisted at worst.

 

The Primary Dissent emphasized that some players in the market saw what was ahead: “Managers of many large and midsize financial institutions in the United States and Eu rope amassed enormous concentrations of highly correlated housing risk on their balance sheets. In doing so they turned a building housing crisis into a subsequent crisis of failing financial institutions. Some did this knowingly; others, unknowingly.”

 

The Solo Dissent stated that the housing bubble was clearly growing but also claimed that the “number of defaults and delinquencies among these mortgages far exceeded anything that even the most sophisticated market participants expected.”

Myth 8: The financial crisis was unavoidable. And financial crises of this magnitude are inevitable:

The Majority Report unequivocally stated that “this financial crisis was avoidable. . . . The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.” The Solo Dissent contended that. “No financial system . . . could have survived the failure of large numbers of high risk mortgages once the bubble began to deflate.” However, it blamed housing policy, not bankers, for the creation of the high-risk mortgages.

 

This myth that we cannot avoid large-scale financial crises is particularly corrosive, as those who are in its thrall reason that since crashes are inevitable, regulation is fruitless. But this is not the necessary conclusion. There were no major financial crises between the New Deal and the S&L crisis, a span of fifty years when each type of firm was protected in its own niche and limited in their activities. Deregulation delivered the S&L debacle and the related 2008 financial crisis. This inevitability myth also distorts the view of Hyman Minsky, the economist who advanced the theory in 1986 that markets are prone to instability. The sensible reaction to this recognition is not to let the system keep running up risk and collapsing, but instead to create countercyclical buffers. This could involve doubling equity capital requirements in good times when it appears an asset bubble is inflating, so as to slow down its growth and create a better cushion on the downturn. It might also require higher capital to finance those assets the prices of which tend to rise and fall with the business cycle.

Myth 9: The Dodd-Frank Act has ended “too big to fail”:

In 2009 Federal Reserve chairman Ben Bernanke defended the multi-trillion-dollar bailouts, explaining that “it wasn’t to help the big firms that we intervened. . . . [W]hen the elephant falls down, all the grass gets crushed as well.” Today, the elephants are larger than ever, and the grass is still crushed. The conditions that brought the financial system to the brink of failure in 2008 persist. The top banks are bigger, and they still borrow trillions of dollars in the short-term and overnight repo markets, leaving them vulnerable to runs.

 

Because they are perceived as “too big to fail,” the largest banks borrow money more cheaply, receiving an $83 billion annual subsidy according to a Bloomberg News study, which also suggests that the profits earned by these top banks are “almost entirely a gift from Dispelling Myths about the Crisis 281 U.S. taxpayers.” Regulatory proposals have been made to modestly raise equity capital for giant banks, but the permitted leverage ratio is still just 3 percent (equity to total assets). This means borrowing $97 for every $100 in assets, or a 33- 1 leverage ratio. This level of leverage was a key factor in the 2008 crisis.

 

The law pins most of its hopes on new powers granted to the FDIC to dismantle failing bank holding companies and “systemically important” nonbank financial institutions. This is an alternative to the terrible choice between the chaos of a Lehman- like bankruptcy and taxpayer- funded bailouts. Many question whether regulators will have the courage to pull the plug on a dying financial firm and others worry that this won’t work in cross- border insolvencies. However, the FDIC is confident that its experience resolving large banks and thrifts will translate well. During the contentious legislative process, the requirement that banks finance an orderly resolution fund to be used by the FDIC during the resolution process was taken out. Politicians, including House Minority Leader John Boehner, actually contended that bank pre-funding would be a taxpayer-funded bailout. This Orwellian argument carried the day, so under Dodd-Frank, upon the takeover of a failing firm, taxpayers will front the money the FDIC needs via a line of credit from the Treasury. If the proceeds from selling pieces of the failed institution are not sufficient to pay back the Treasury, the surviving banks will be assessed.

 

There are strong tools in Dodd- Frank, and time may tell if they are used effectively. The law called for nearly four hundred rulemakings by regulators already struggling with insufficient funding. Fewer than half of the rules have been issued, and more than a hundred deadlines have been missed. Among the delays is the implementation of Section 619 of Dodd-Frank, often referred to as the “Volcker Rule.” This provision bans banking entities (that have access to FDIC insurance and loans from the Fed) from engaging in proprietary trading—buying and selling securities for profit. The Volcker Rule also limits how much such banking entities can invest in hedge funds and private equity funds. It was meant to be a modern day Glass-Steagall, creating a separation between firms that have access to the public safety net from those that make high-risk bets. The provision was drafted and shepherded through the legislative process by Senator Jeff Merkley and Senator Carl Levin. However, it was named for former Fed chairman Paul Volcker, who initially recommended these restrictions to President Obama.

Myth 10: The bankers are the victims of greedy homeowners who borrowed money and did not pay it back:

Some homeowners participated in fraud, and others were simply unrealistic or were speculating that housing prices would continue to rise. But a much larger number were victims either of abusive lending practices or of the housing bubble and burst that diminished their home values and retirement savings.

 

Even the hopeful and the speculators were no different from some apparently naive bank executives like JPMorgan CEO Jamie Dimon, who told the FCIC: “In mortgage underwriting, somehow we just missed, you know, that home prices don’t go up forever and that it’s not sufficient to have stated income.” Even if we accept this at face value, it does not follow that bankers are victims of homeowners. Many homeowners made the same error. The difference is that the banks got trillions of dollars in bailouts and backstops, and their employees kept their billions in bonuses. Meanwhile, since the burst of the housing bubble, there have been about five million home foreclosures, with millions more underway. Ten million homes are underwater—approximately one- fifth of all mortgaged properties. Unemployment remains high and home prices low. The gains of the post-crisis recovery have been uneven. The net worth for the top 7 percent of Americans increased by 28 percent while the net worth for the bottom 93 percent declined by approximately 4 percent.

 

In addition, blaming subprime borrowers doesn’t hold up mathematically. According to former Goldman Sachs executive Nomi Prins, even if every single subprime mortgage defaulted, the total money lost would have been $1.4 trillion. Yet much more was committed by the Fed, Treasury, and FDIC in the financial crisis. It is not credible to blame subprime mortgage borrowers alone for the crisis.

 

It was additionally the desire of banks to make profitable trades and the desire of hedge funds to speculate on mortgage- backed securities that brought down the system. It was the billions upon billions of side bets that put far more at risk than the total value of all the subprime mortgages.

 

As for banks being the victims, this myth is typically not propagated by bankers but by service providers, those who stand to gain from maintaining friendly relationships with banks. For example, Steve Eckhaus, an attorney who negotiates executive compensation packages, is one such denier. Over his career, Eckhaus claims to have helped bankers secure more than $5 billion in pay. Among his clients were executives from Lehman Brothers, Merrill Lynch, and Morgan Stanley. Defending his clients and the financial sector in general, Eckhaus has said: “To blame Wall Street for the financial meltdown is absurd.”

 

Notwithstanding this pay negotiator’s assertion that Wall Street was not to blame, when put under oath, bankers do not concur. Bank of America CEO Brian Moynihan told the FCIC: “Over the course of the crisis, we, as an industry, caused a lot of damage. Never has it been clearer how poor business judgments we have made have affected Main Street.” At an FCIC hearing in January 2010, JPMorgan Chase CEO Jamie Dimon told the Commission, “I blame the management teams 100% . . . and no one else.”

Read more here

 

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Sun, 05/25/2014 - 14:31 | 4793635 bugs_
bugs_'s picture

Some things of mine ARE big!!!

Sun, 05/25/2014 - 14:41 | 4793645 Stroke
Stroke's picture

No need to worry, We'll be safe because leverage is insured by more leverage

Sun, 05/25/2014 - 15:03 | 4793684 max2205
max2205's picture

Statues of Limitations on 99% of all this is due up this year

 

Well played assholes

Sun, 05/25/2014 - 15:12 | 4793692 Greenskeeper_Carl
Greenskeeper_Carl's picture

Not like it would have mattered anyway. And fuck salon. A bunch of left wing 'we need moar govt' bullshit. Not once I have heard them mention the Feds easy money policies and interest rate manipulation. Most of these causes people talk about stem from that. Moar gvt solves nothing, only makes it worse. End the fed, and you get rid of the primary enabler of all this nonsense.

Sun, 05/25/2014 - 15:54 | 4793755 mc225
mc225's picture

people seem to think regulations and overseers are a panacea, but in truth these are part of the problem.

Sun, 05/25/2014 - 17:21 | 4793925 Frilton Miedman
Frilton Miedman's picture

If done behind closed doors without transparency, yes.

Where I'm from, if a cop's busted taking bribes, we fire the cop, not the entire police department.

 

 

Sun, 05/25/2014 - 17:22 | 4793920 Frilton Miedman
Frilton Miedman's picture

 

 

Carl, where does the article talk about more government?

Looks more like the article promotes "less TBTF" via existing regulators to me, but maybe you saw something I missed.

 

Sun, 05/25/2014 - 14:37 | 4793641 Son of Captain Nemo
Son of Captain Nemo's picture

Here's a goody everyone will want to understand stashed under the folder "land grabs and illegal title changes"...

Looks like the Bundy Ranch isn't the only one that needs to worry!

http://mortgagemovies.blogspot.com/2014/05/kingcast-and-mortgage-movies-...

 

Sun, 05/25/2014 - 14:48 | 4793661 Remington IV
Remington IV's picture

Best part is , once everything blew up , I bought the 2 next door co-ops and combined them into a 4BR ... thanks guys

Sun, 05/25/2014 - 14:55 | 4793670 0b1knob
0b1knob's picture

"Geithner Sized" Myths?

Geithner is shorter than Hillary Clinton.   His dick is also smaller than her clit.

Sun, 05/25/2014 - 20:24 | 4794271 prains
prains's picture

....it's the nose of her second malformed head, Bill realized this the first time he nibbled on it and it sneezed

Sun, 05/25/2014 - 14:56 | 4793673 hooligan2009
hooligan2009's picture

one has to ask, so what has been done about it? 

treasury never made it clear why printing the odd half a trillion in bank notes and delviering it to banks on demand, rather than printing trillions of zeros just for the banks was the right way to go.

neither was the issue of shares in banks directly to the public rather than shares being kept within the treasury and discharged with profits gorged from the public (again) by zero interest rates with free money to the banks to buy treasuries at a pick of c. 3% per annum on an average 2 trillion (from zero to 4 trillion over the last 5 years). All money that went to banks rather than to joe sixpack (3% x 2 trillion x 5 years = a direct transfer from the economy to the banks 300 billion dollars of profit that should have been left to others in the economy, not banks)

nor have any of the federal agencies brought test cases to establish precedents and standards in the courts of law in each of the states.

predatory interest rates have simply been replaced by predatory fees with the sole intention of impoverishing people that use the banking system. 

the banking sector was unfit for purpose 20 years ago (from the run up to the bubble of Y2K) has cratered a few times since, and remains unfit for purpose now. the good parts of banking remain swamped by the banks' boards, management and executive remuneration policies sanctioned and demanded by banks' shareholders...

why should a mortgage owner care if the annual cost of a 200,000 mortgage is all interest of 10,000 or if its made up of 5,000 of fees and 5,000 of interest? (leaving aside the cost of city taxes rising inexorably in some places, unless you are some fruitcake state like NY, Texas or Fla that allows tax breaks for new companies and makes sure that indigenous companies pay for it and go broke).

Sun, 05/25/2014 - 15:15 | 4793699 dot_bust
dot_bust's picture

Fraud is so prevelant in corporate America that it should be referred to by its rightful name -- corporate fascism.

The big U.S. banks aren't the only ones looting the country. Companies from every business sector have been engaging in a giant looting spree through state-by-state tax incentives. These companies avoid taxes and stick the public with the bill. As a result, various states and municipalities are going broke.

Companies should be required to create jobs and pay a living wage in order to qualify for tax breaks and loans. Requiring nothing of them and handing out money to them is simply busting out the country.

Sun, 05/25/2014 - 23:43 | 4793914 Frilton Miedman
Frilton Miedman's picture

"Companies should be required to create jobs and pay a living wage in order to qualify for tax breaks  ..."

Wouldn't this have catastrophic consequences for job creators? 

(Yes, that was a joke)

Sun, 05/25/2014 - 15:28 | 4793711 fxrxexexdxoxmx
fxrxexexdxoxmx's picture

Is it wrong to pray that bankers die a slow and lingering death. Or if that is not possible that they die a sudden death under the blade of a guillotine?

Sun, 05/25/2014 - 15:42 | 4793728 kchrisc
kchrisc's picture

The banksters backed by the violence of the DC US criminals did it. They "printed" theft and then stole the undying properties while riding into the 'bail-out" sun.

Now, with that said, I need to go outside and treat the wood on my guillotine.

Sun, 05/25/2014 - 16:05 | 4793779 VWAndy
VWAndy's picture

Check the cord while you are at it.

Sun, 05/25/2014 - 16:00 | 4793767 limacon
limacon's picture

Predators and Prey .

The mega-rich and Bankers can be described as Predators .

The Prey are getting uppity .

A technology of Superabundance is undermining the control of the Predators .

All will end rich or dead .

In the meantime ...

A virtual argument on supportable human predation is in  http://usersites.horrorfind.com/home/horror/darkfire/nov07_article.html

 

A rather amusing derivation , but supportable .

This gives an elite predator number of about 175 000 predators .

They own about 36% of global wealth see http://en.wikipedia.org/wiki/Millionaire

This is well within healthy GINI boundaries .

However , if the ownership exceeds 38% , revolution will occur .

Note that my statistics are a bit outdated .

 

We need mega-rich to concentrate capital , but not too much .

Andre

 

 

 

Sun, 05/25/2014 - 16:10 | 4793790 disabledvet
disabledvet's picture

Myth 11 : "we're not gonna try and do this again."

Pretty much a spot on report...but if you can't discuss "too big to fail" then you're just "pining for the Bush years."

Forget doubling down on a bad bet. "We're full on exponentialing it." (Quantitative Easing.)

Since Wall Street invented the math (Quantitative Analysis...what did the guy say who saw Bernie Madoff ten years before he blew up France? "There are only a few dozen people in the world who have the expertise I do"? Which was in fact true in my view) then obviously "we're shocked that the solution Wall Street came up with worked well for them."

I mean look at where all the "housing people as public policy" currently reside. Every one of them is top of the food chain.

ALL STILL "good money after bad" (Gresham's law.)

This party stopped a year ago folks.
This Titanic has been on the bottom for some time now.

Sun, 05/25/2014 - 19:40 | 4794178 Frilton Miedman
Frilton Miedman's picture

 

 

"Myth 9

The Dodd-Frank Act has ended “too big to fail”"

Just an idea, read the article, specifically its mention of Dodd-Frank's failure to eliminate TBTF, or Clinton's role in legislation that allowed it all to happen.

Just an idea.

 

Sun, 05/25/2014 - 16:26 | 4793830 edwinorc
edwinorc's picture

This whole article:

It is a myth that positive government action caused the financial crisis. Blame muh free market. Moar government power is needed in the future.

- Sincerly the FCIC (The government)

Sun, 05/25/2014 - 16:53 | 4793841 Frilton Miedman
Frilton Miedman's picture

Absolutely PERFECT!!!

Thank you Tyler, for a level headed, honest assessment, THAT's the Tyler I know.

For six years, instead of intelligent debate that might lead to political pressure on how to clawback losses from TBTF banksters, or how to revive regional banks instead of bolstering TBTF's, we've all been screaming at eachother about how "It's Carter & Democrats fault for creating the CFMA"..or "It's the GOP's fault for deregulating". (Clinton's the one who signed off on Glass-Steagall & the CFMA)

Let's stop berating eachother and get back to berating our representatives, on both sides, for still having done almost NOTHING about the bank's fraud. 

Trillions in middle class net worth and income, stolen right in front of us...and we're beating eachother up over petty political ideology.

 

 

 

Sun, 05/25/2014 - 16:57 | 4793884 Clowns on Acid
Clowns on Acid's picture

"Jennifer TAUB"..? Really ? Nice try at obfuscation you cwunt... You are complicit and trying to escape the noose... you obfuscate. You fool no one...cwunt.

Sun, 05/25/2014 - 17:11 | 4793907 Frilton Miedman
Frilton Miedman's picture

"Trillions in middle class net worth and income, stolen right in front of us...and we're beating eachother up over petty political ideology."

Sun, 05/25/2014 - 17:37 | 4793919 I Write Code
I Write Code's picture

Pretty good article, even if it is from Salon.  Pretty good but not great.  Most of what it says is true, but it doesn't go far enough.*

Contra the article (unmentioned in it) it *is* true that "nobody saw coming" the market failure that froze everything for about a week in 2008.  And it was the market failure and not ANY of the other 47 features that justified TARP.  Everyone *did* see the other 47 things happening, and they pretended they were ready for it.  Turns out they were not.

And both the investigation and this article are much too kind about the "risk management" issues, it was not just bad management at the banks, but the ENTIRE theory that allows for CDOs must be questioned - and rejected.  Oh, the theory is OK as theory BUT if it were fairly priced NOBODY WOULD BUY IT.  Nothing more "derivative" than old GNMA bonds should be legal, certainly not by any institution covered by government insurance.  EVERYONE WHO DEALT IN THESE knew it or should have known it AND SHOULD BE CONVICTED, STRIPPED, and IMPRISONED.  Or worse.  I'd say 1,000 people minimum, including the top 10 to 100 in each of Citibank, Merrill, and AIG.  CDS, too - 99% of CDS is fraud, pure and simple, even today, self-dealing theft, bribery, extortion, and skimming from the deals.

And that doesn't even GET us to the QE and how that is milking the 99% for the benefit of the 1%.

*Actually, looking at the article, it does focus on exactly some of these issues that do go beyond the ten "myths".  Looks like a good book.  Probably *still* doesn't go far enough for even mention QE.  Well, that should be good for a second book. 

Sun, 05/25/2014 - 18:50 | 4794092 Frilton Miedman
Frilton Miedman's picture

"Pretty good article, even if it is from Salon.  Pretty good but not great.  Most of what it says is true, but it doesn't go far enough.*"

Wait, maybe I'm wrong about political divisiveness - you might be onto something here.

Maybe we can start prompting the Tea Party to poke at the Liberals for not doing anything, whom in turn can start harrassing the Tea party into a competition to see who can get the most accomplished by going after Banksers!

Had a smirk as I typed that, but not so sure if I'm kidding now.

Last, this is a CRUCIAL distinction that NO ONE can disagree on -

" ... it was not just bad management at the banks, but the ENTIRE theory that allows for CDOs must be questioned - and rejected"

Absolutely, it wasn't "mismanagement", but in fact excellent management, they knew exactly what was going to happen and positioned themselves to profit from it.

Both sides of the aisle agree here, Americans aren't THAT stupid.

 

 

 

Sun, 05/25/2014 - 19:23 | 4794168 I Write Code
I Write Code's picture

You said:

Maybe we can start prompting the Tea Party to poke at the Liberals for not doing anything, whom in turn can start harrassing the Tea party into a competition to see who can get the most accomplished by going after Banksers!

Works for me.

BTW, in case anybody didn't notice, the Salon article is a promo for the book coming out next week:

Other People's Houses: How Decades of Bailouts, Captive Regulators, and Toxic Bankers Made Home Mortgages a Thrilling Business

http://www.amazon.com/Other-Peoples-Houses-Regulators-Mortgages/dp/0300168985/

Snarky title.  Me gonna get a copy, screw that Piketty guy.

Sun, 05/25/2014 - 23:56 | 4794642 Frilton Miedman
Frilton Miedman's picture

 

 

Sneaky, sneaky...a writer making money off writing.

What's next?...The mechanic? ..The plumber? ...Landscaper? ...Doctor?

 

 

 

Sun, 05/25/2014 - 17:40 | 4793966 drstrangelove73
drstrangelove73's picture

Let me get this straight:

The subprime mortgage crisis,that crashed our economy and the world's was definitely NOT caused by:

1.Bill Clinton and a democrat controlled congress mandating that banks give mortgage loans to people who couldn't afford them;

2.Fannie Mae and Freddie Mac guaranteeing these toxic loans,thereby implying they were backed by the full faith and credit of the US government;

3.These toxic mortgages were then spread throughout the entire financial system by TBTF banks packaging them into mortgage backed securities;

4.And finally,when the excrement hit the fan,who do they call upon to fix the ensuing holocaust but Barney 'Fag'Frank and Chris Dodd,arguably the 2 rats who had the most to on the congressional side with creating this abortion in the first place?

Is that what you are saying?
Because I'm calling BULLSHIT on that

Sun, 05/25/2014 - 19:12 | 4794124 Frilton Miedman
Frilton Miedman's picture

 

 

1, Actually, the article mentions it, Clinton signed off on the CFMA & Gramm-Leach-Bliley (the cause) - read the article.

2, Read the article, FRE & FNM weren't a substantial quantity of the total sub-primes, not enough to be causal. (Nor was the C.R.A.)

3, Seriously, read the article, that's the entire premise, TBTF banks did this via fraud...read the article, really, read it.

4, The article agree's with you about Dodd-Frank doing nothing about TBTF, read the article, really, read it.

Read the article, really, read it.

 

 

Mon, 05/26/2014 - 01:05 | 4794712 epobirs
epobirs's picture

#3 is constantly misunderstood. The CRA and other similar policy wasn't the cause. It was protective camouflage that allowed the offenses to reach far greater levels than they should have otherwise. The CRA didn't need to be far reaching, it just needed to establish the precedent by which banksters could claim to be doing the government's will. Such are the numerous bad results of overgrown government.

Mon, 05/26/2014 - 02:58 | 4794792 Frilton Miedman
Frilton Miedman's picture

Not just protective camouflage then, but more so after the fact, for years of debating whether the CRA, GSE's, FRE & FNM caused it, the public hasn't been pressuring their representation to do anything because half were convinced it wasn't CDO's and bank / investment fraud, but something else, the CRA, foolish borrowing, "natural" market forces ...etc.

For those who now realize this, it's not too late.

 

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