The Unnanounced Class War

[kimmy]

If that is true then everyone should be in jail. There is a regulation that applies to you too.

If you or I break get caught red-handed breaking regulations, we can anticipate that the law will deal with us accordingly.

How do corporations get to massive size? There is only one way in a free market to do that and that is to have the support of the people. In a special interest democracy it is done by government fiat and the fascist picking of winners and losers. Making regulations that are impossible for new business to enter the market and provide competition.

That's a load of crap. Fascists didn't pick winners and losers. Regulations aren't preventing small banks from providing competition to big banks.

No. The most regulated industry in the US is banking and if the government did just oversee it that would an improvement but they like to play in the game.

This is also false. First off, the derivatives market that was a major component of the financial crisis was completely unregulated. Second, removal of important regulations in the late 1990s and early 2000s was an important factor in the financial crisis. Third, the banks showed an utter disregard for regulations and laws that did exist. Fourth, regulations that did exist were not enforced adequately. And fifth, even when regulators did on occasion step in to do their job, the penalties they imposed were trivial and the corrective actions they imposed were laughable.

So no, banks are not the most heavily regulated industry in the US. In fact, the banking crisis is an example of what business would do if they were given free reign to create the libertarian utopia you guys dream of, and the result is not pretty.

No politician will accept responsibility for ending the party. It has to come to its inevitable an end by running its course and letting the market take all the blame.

The market deserves all the blame their getting, and more.

We also didn't have the CRA to deal with and make people unhappy about not receiving mortgages that they would default on. We still have low interest rates that could cause a problem when they start rising.

And blaming the CRA for the housing bubble is big fat 100% fail. We've stomped down Shady dozens of times for repeating this flat-out falsehood over and over. Did he appoint you to keep promoting it while he's in the cooler or something?

-k

Edited February 17, 2013 by kimmy

[bush_cheney2004]

I'm not trying to divide and conquer anything. The division is between Americans who continue to swallow the BS being promoted by the banks and their political allies, and Americans who no longer accept that BS. I am cheerleading for the good-guys from the sidelines.

Great...I will let them know, not that they need any irrelevant "cheerleading" from Canada. Take time to enjoy your own tidy banking system, lack of capital, and resulting wide scale foreign ownership. No balls...no blue chips.

[ReeferMadness]

Great...I will let them know, not that they need any irrelevant "cheerleading" from Canada. Take time to enjoy your own tidy banking system, lack of capital, and resulting wide scale foreign ownership. No balls...no blue chips.

And we miss the excitement when the banks fail and economy collapses.

[ReeferMadness]

Ponzi schemes are against the law, and their end is inevitable. That's why they should be prohibited.

And yes, government should step in to halt a 'boom' based on fraud which can only end in massive financial disaster.

The Conservatives saw what had happened in the US and they started imposing regulations to stop lenders from engaging in subprime lending, for example, and enhance the security of loans to avoid mass defaults.

And I would point out there were lots of good economic times before Clinton and congress repealed the laws put in place after the lessons learned after the great depression.

It was the lack of transparency in the system that allowed the sub-prime mortgages to be issued. As long as the game was being played, nobody with any actual knowledge held the bad debt. The lenders made their cut by making loans they knew they wouldn't have to collect on. They packaged those loans and passed them onto the investment banks. The investment banks packaged them into deals that were so complex that they themselves didn't understand them anymore. That didn't stop the rating agencies from stamping them triple-A. And the institutional investors bought them. It was a ponzi-scheme writ large.

The problem with American Crony Capitalism is that it is so incestuous. The people in charge of the Federal Reserve come from Wall Street. Even now, the people that are in charge of running the system are the same investment bankers who caused the mess in the first place.

[icdpress123]

.....................

[Pliny]

If you or I break get caught red-handed breaking regulations, we can anticipate that the law will deal with us accordingly.

That's a load of crap. Fascists didn't pick winners and losers. Regulations aren't preventing small banks from providing competition to big banks.

This is also false. First off, the derivatives market that was a major component of the financial crisis was completely unregulated. Second, removal of important regulations in the late 1990s and early 2000s was an important factor in the financial crisis. Third, the banks showed an utter disregard for regulations and laws that did exist. Fourth, regulations that did exist were not enforced adequately. And fifth, even when regulators did on occasion step in to do their job, the penalties they imposed were trivial and the corrective actions they imposed were laughable.

So no, banks are not the most heavily regulated industry in the US. In fact, the banking crisis is an example of what business would do if they were given free reign to create the libertarian utopia you guys dream of, and the result is not pretty.

The market deserves all the blame their getting, and more.

And blaming the CRA for the housing bubble is big fat 100% fail. We've stomped down Shady dozens of times for repeating this flat-out falsehood over and over. Did he appoint you to keep promoting it while he's in the cooler or something?

-k

You can live with your angst and remain bitter if you like, seems your preference is wallowing in the crap and you are not up to accepting facts on this issue. Epic fail on your part.

You know when I have conflicting data, for example, when Nancy Pelosi claims to have already legislated cuts to the budget of 1.2 trillion dollars, I tend to believe what people say and that they aren't lying. So I have to check what exactly they mean because they can't lie or they would totally discredit themselves. So what Nancy means is that cuts to increases in baseline budgets have been made over the next ten years. So now I understand her. But there still has been no actual cuts to the level of spending which is what I think of when I think of cutting spending. Do you find Nancy a little disingenuous in her statement? Or when Barack Obama says, "We have slowed the growth of spending more than any other administration in the last 60 years!" A very true statement. The truth is that Bush's budget in his last year in office included the TARP bill which added 860 billion dollars to the federal budget making it the highest it ever was. Obama didn't have to raise his budgets but he kept the spending at just above the same level as Bush's last year. He took one of the highest spending years and kept it at that level then claimed he was one of the most thrifty President's to come along in decades because he had not increased spending at the same level. Do yo find him a little disingenuous in his statement?

Certainly politicians do this all the time which is why we need political analysis and fact checking and interpretation and why people taking what politicians say at face value are generally confused by the reality of things when compared to political statements and opposing arguments.

Anyway, your bitterness is perhaps valid but the target of your angst will not result in a rational Wall St. banking system just a more heavily dictated one that requires a more dictatorial government something you perhaps may agree with so that nasty people are controlled. So try not to be so nasty in the future if your desire is for your freedom of expression.

[Argus]

It America's choice but just your opinion....guess which one will carry the day?

Actually, Canadians have as much say in it as Americans do, I mean, given no one actually cares what the American people think or want.

[bush_cheney2004]

Actually, Canadians have as much say in it as Americans do, I mean, given no one actually cares what the American people think or want.

Even if that were true (it isn't), more Americans call the internal shots in government and on Wall Street. Don't worry, we know how important it is to let the Canadians watch. That's what 'peanut galleries' are for.

[cybercoma]

I'm sure there's no Canadians at all working in the US government or on Wall Street.

[Argus]

Even if that were true (it isn't), more Americans call the internal shots in government and on Wall Street. Don't worry, we know how important it is to let the Canadians watch. That's what 'peanut galleries' are for.

Peanut Galleries would be the appropriate term for Americans. The oligarchs own your leaders, and they decide what goes based solely on what's good for them. It's true many of the oligarchs are Americans, but they increasingly lead corporations spread out through the world, and so what's good for America isn't necessarily what they're instructing your leaders to put in place.

Don't kid yourself. You might not be as bad as Russia yet, but you're getting worse every election.

[bush_cheney2004]

Peanut Galleries would be the appropriate term for Americans.

It's an American 'peanut gallery'.....you just get to watch. I really can't relate to having the value of my nation's currency quoted in terms of "U.S." my entire life, but I can see how resentment would grow. Not my fault...next time win the war.

The oligarchs own your leaders, and they decide what goes based solely on what's good for them. It's true many of the oligarchs are Americans, but they increasingly lead corporations spread out through the world, and so what's good for America isn't necessarily what they're instructing your leaders to put in place.

That's fine by me. I am not a government employee, and I understand how the fiscal bread gets buttered.

Don't kid yourself. You might not be as bad as Russia yet, but you're getting worse every election.

Much worse than Russia....remember...they lost the Cold War. It's so bad that more people still emigrate to the evil U.S.A. than any other frickin' place on the planet, including Canada.

Edited February 20, 2013 by bush_cheney2004

[kimmy]

You can live with your angst and remain bitter if you like, seems your preference is wallowing in the crap and you are not up to accepting facts on this issue. Epic fail on your part.

No, Pliny. All the facts are on my side. You've offered no facts at all to support your position; all you've offered is excuses why you think you should ignore the facts, like your anecdote about Nancy Pelosi, which doesn't actually have anything to do with this at all. Or you've offered attempts to make excuses for the banks' behavior. Your latest effort-- the banks did what they did because regulators didn't stop them-- amounts to a flat out admission that business needs regulation; I expect you'll be kicked out of the Junior Libertarians for daring to suggest such a thing.

I'm not getting my information from Nancy Pelosi, or any other politician. I'm getting it from journalists and academics who have actually studied this issue and thoroughly debunked the idea that CRA cause the subprime crisis. And from the whistleblowers who've come forward to say that they were told to rubber-stamp every application that was shuffled across their desk. And from the evidence obtained through subpoena for the lawsuits that are now reaching the courts.

You're the one wallowing in crap. You believe Marco Rubio or Rush Rimjob or Breitbart or the chumps at Fox News when they say that the housing bubble was caused by the CRA. That's been thoroughly debunked, but Rubio and Rush and Breitbart and Fox keep repeating it anyway, because they know their preaching to an audience that's ignorant enough to believe it-- not to point fingers at anybody in particular.

-k

[Pliny]

No, Pliny. All the facts are on my side. You've offered no facts at all to support your position; all you've offered is excuses why you think you should ignore the facts, like your anecdote about Nancy Pelosi, which doesn't actually have anything to do with this at all. Or you've offered attempts to make excuses for the banks' behavior. Your latest effort-- the banks did what they did because regulators didn't stop them-- amounts to a flat out admission that business needs regulation; I expect you'll be kicked out of the Junior Libertarians for daring to suggest such a thing.

I don't make excuses for the banks behavior. What is it you want from them? You're getting your pound of flesh. The courts, the journalists, the academics, who have all studied the issue, have thoroughly debunked all other possibility of responsibility- well, with the exception of maybe government was lax in its regulating duties. That wouldn't be the mainstream theory though would it?

Business does not need that much extraneous regulation if it wishes to continue doing business. It needs a product, a demand for the product and a happy customer base, which means customers won't for long tolerate being made as fools and business will not survive long past that point without protection from government - Hello - Goldman Sachs!

Regulations, from government are just parameters of how low their standards of operation can be before they can be determined to be held legally culpable in their activities, and they will stretch the bounds of those regulations. Why? Because it's legal. But quite a few of those regulations have more to do with cozying up with the big players in the banking industry - like Goldman Sachs.

I'm not getting my information from Nancy Pelosi, or any other politician. I'm getting it from journalists and academics who have actually studied this issue and thoroughly debunked the idea that CRA cause the subprime crisis. And from the whistleblowers who've come forward to say that they were told to rubber-stamp every application that was shuffled across their desk. And from the evidence obtained through subpoena for the lawsuits that are now reaching the courts.

Well, you may as well have gotten it from NancyPelosi, she's singing the same song. But I just used those examples of how information is generally given to the public and is not what it seems.

You're the one wallowing in crap. You believe Marco Rubio or Rush Rimjob or Breitbart or the chumps at Fox News when they say that the housing bubble was caused by the CRA. That's been thoroughly debunked, but Rubio and Rush and Breitbart and Fox keep repeating it anyway, because they know their preaching to an audience that's ignorant enough to believe it-- not to point fingers at anybody in particular.

-k

Well, of course now that everything is out, we know what really happened and those responsible are finally getting their comeuppance, all is returning to normal. The economy is on the mend - well, at least Wall St. and Washington are doing fine. If not for a few recalcitrant ignoramuses who won't accept the truth we could bury this and get back to the usual crap.

The facts are that the CRA contributed to setting the framework, coupled with low interest rates, easy monetary policy and an exuberant Barney Franks. You see, the Keynesians believe that consumption drives the market and all they were trying to do in Washington was increase consumption in order to have a thriving economy. The fact that Wall St. abused their benevolence and good intent is appalling. I understand why Wall St. would invent a CDS as a kind of insurance though. It shows they knew what was happening was insane. Those mortgages coming at them were a challenge to repackage and insure against loss.

Your simple little theory that banks issued mortgages to a gullible populace and Wall St, repackaged them and sold them to gullible investors is just that - simple. It's easy to understand and be bitter about. Meanwhile all returns to the status quo with just a little more regulation being the only permanent reminder.

Edited February 20, 2013 by Pliny

[GostHacked]

So where are the politicians that accepted these bribes?

Do we not know what lobbyists are?

[Canuckistani]

Do we not know what lobbyists are?

Sure, they're the ones that legally bribe the politicians. Where are the millionaire US politicians? Sitting smug in the pockets of the billionaires.

[GostHacked]

Your simple little theory that banks issued mortgages to a gullible populace and Wall St, repackaged them and sold them to gullible investors is just that - simple. It's easy to understand and be bitter about. Meanwhile all returns to the status quo with just a little more regulation being the only permanent reminder.

But that is what happened. The banks sold the mortgages to another entity which repackaged them and sold them off as derivatives which were traded on Wall Street. Each time the selling took place, another gullible entity was on the hook for it. They passed the buck down the line as far as they could before the collapse started.

The regulations still have not been reinstated (the one Clinton and Co took down was the Glass Steagle Act) so the fraud is most likely still continuing. Also we should note that there is QE4 currently in place where the government is throwing money each month at the system until further notice. There is no expiration on the current quantitative easing.

[Pliny]

But that is what happened. The banks sold the mortgages to another entity which repackaged them and sold them off as derivatives which were traded on Wall Street. Each time the selling took place, another gullible entity was on the hook for it. They passed the buck down the line as far as they could before the collapse started.

Quote

Yes, that is exactly what happened. Feel better? Everything ok now? At least another housing boom will not occur. What is going to happen to get growth in the economy now? How is prosperity going to be created now? Shouldn't we be a little wary of economic growth?

The Glass-Steagall act basically separated commercial banking and investment banking. We have never had that in Canada. Shouldn't we have that regulation here? Or are we less greedy and don't need that kind of regulation? The fact is that in America they have competition and that has to be regulated or else upstarts might think they can take on the big boys. Here we don't have competition we have a cartel everyone agrees what the rules are.

Edited February 21, 2013 by Pliny

[kimmy]

I don't make excuses for the banks behavior. What is it you want from them? You're getting your pound of flesh.

Not at all. Nobody's been held accountable.

The courts, the journalists, the academics, who have all studied the issue, have thoroughly debunked all other possibility of responsibility-

There's lots of blame to go around, and lots has. But no amount of pointing your fingers and shouting "but lookit those guys!" will obscure who the main culprits are.

well, with the exception of maybe government was lax in its regulating duties. That wouldn't be the mainstream theory though would it?

It's very mainstream. Public anger at the failure of regulators to do their jobs is quite high. Elizabeth Warren is being treated like a folk-hero for simply asking some regulators "when was the last time you took a bank to court?" last week. People have had it with excuses.

However, that doesn't get the bankers off the hook.

If crime is out of control in your town, you might have a legitimate complaint about the police force, but the guys who are breaking into houses are still the criminals. When they go to court, "well the police never catch anybody here" isn't going to fly as a legal defense.

And I have to again point out that this line of argument-- that the banks needed the regulators to keep them from getting themselves into a financial disaster-- flies in the face of what people like you and like Marco Rubio always tell us. "Less regulation is better!" "Businessmen know how to run their own businesses!"

Well, you may as well have gotten it from NancyPelosi, she's singing the same song. But I just used those examples of how information is generally given to the public and is not what it seems.

If Nancy Pelosi is saying that, it just means she's right for once.

Nancy told a half-truth... what's you're point? Are you telling me you're justified in ignoring any facts that are presented to you because you assume that everything else is a half-truth too?

I tell you that only a small fraction of sub-prime mortgages were mandated by CRA, and I tell you that the banks deliberately rubber-stamped applications they knew were unacceptable, and your response is ... well, that stuff sounds pretty bad but there's more to the story that will exonerate the banks?

I understand why Wall St. would invent a CDS as a kind of insurance though. It shows they knew what was happening was insane. Those mortgages coming at them were a challenge to repackage and insure against loss.

And why wasn't saying "No" an option? As I keep pointing out, the vast majority of subprime mortgages were not mandated by any government quota or program. The vast majority were completely voluntary by the banks. They could have just said "no". Why wasn't that an option?

They *wanted* those insane mortgage applications. They approved mortgages that their own due diligence contractors put in the Reject bin. They told their due diligence people to approve everything. Why? They invented a way to spin straw into gold, and they needed all the straw they could get. That's why.

Your simple little theory that banks issued mortgages to a gullible populace and Wall St, repackaged them and sold them to gullible investors is just that - simple. It's easy to understand and be bitter about. Meanwhile all returns to the status quo with just a little more regulation being the only permanent reminder.

Being bitter about it isn't the issue. The issue is confronting the false information being spread around by Marco Rubio, Fox News, and Shady and some of the others around here. I can't do much to confront Marco Rubio or Fox News, but at least I can confront Shady and others who are bringing that fiction to this message board.

-k

[bush_cheney2004]

...However, that doesn't get the bankers off the hook.

If crime is out of control in your town, ....

What crime was committed ?

[Peter F]

Kimmys

And why wasn't saying "No" an option? As I keep pointing out, the vast majority of subprime mortgages were not mandated by any government quota or program. The vast majority were completely voluntary by the banks. They could have just said "no". Why wasn't that an option?

in reply to pliny's

I understand why Wall St. would invent a CDS as a kind of insurance though. It shows they knew what was happening was insane. Those mortgages coming at them were a challenge to repackage and insure against loss.

I would like to add that many of the CDS's were created by the same people issuing the MBS's. Hell, even more money to be made! The MBS's were safe as houses according to the rating companies, .

The three guys in thier garage in San Francisco actually went out and convinced AIG to issue CDS's on MBS's. Take our money please! We beg you! they said.

So no, Pliny, Wall St had no effin idea what they were doing or getting into. When Bernake and the boys from the Fed were summoning all to meetings during the crisis, the honcho's at AIG had no idea how much money they were at risk for with the CDS's. Not a clue.

and EDIT to add the obvious: If Wall St knew what was happening with MBS's was insane, I suggest that there would be no-way-in-hell they would then issue CDS's. It follows that they had no idea that what was happening was insane, as you suggest, but in fact thought CDS's were a grand idea for even more cash coming in.

Edited February 22, 2013 by Peter F

[Pliny]

kimmy, on 21 Feb 2013 - 20:51, said:

Not at all. Nobody's been held accountable.There's lots of blame to go around, and lots has. But no amount of pointing your fingers and shouting "but lookit those guys!" will obscure who the main culprits are.It's very mainstream. Public anger at the failure of regulators to do their jobs is quite high. Elizabeth Warren is being treated like a folk-hero for simply asking some regulators "when was the last time you took a bank to court?" last week. People have had it with excuses.

However, that doesn't get the bankers off the hook.

Quite a few corporations are gone. Bear-Stearns, Lehman Bros, Washington Mutual,Merrill Lynch, Countrywide all eaten up by Goldman-Sachs, JP Morgan and Bank of America.

It's interesting to note that Henry Paulson, CEO of Goldman-Sachs was made Secretary of the Treasury in 2006. He must

have known what was going on on Wall Street?

Here's a few things he said:

Quote

In April 2007, he delivered an upbeat assessment of the economy, saying growth was healthy and the housing market was nearing a turnaround. "All the signs I look at" show "the housing market is at or near the bottom," Paulson said in a speech to a business group in New York. The U.S. economy is "very healthy" and "robust," Paulson said.[22]

In August 2007, Secretary Paulson explained that U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.[23]

On March 26, 2008, Secretary Paulson said in remarks at the U.S. Chamber of Commerce, “As we work our way through this turbulence, our highest priority is limiting its impact on the real economy. We must maintain stable, orderly and liquid financial markets and our banks must continue to play their vital role of supporting the economy by making credit available to consumers and businesses. And we must of course focus on housing, which precipitated the turmoil in the capital markets, and is today the biggest downside risk to our economy. We must work to limit the impact of the housing downturn on the real economy without impeding the completion of the necessary housing correction. I will address each of these in turn. Regulators and policy makers are vigilant; we are not taking anything for granted.”[24]

In May 2008, The Wall Street Journal wrote that Paulson said U.S. financial markets are emerging from the credit crunch that many economists believe has pushed the country to the brink of recession. "I do believe that the worst is likely to be behind us," Paulson told the newspaper in an interview.[25]

Note "regulators and policymakers were vigilant" in March of 2008.

So he must have been playing the banker game while at Goldman-Sachs. He just kept it going?

Goldman-Sachs acted as an advisor in Greek financial affairs too.

The idea, from the political viewpoint, was to keep the economy strong. That meant encouraging the housing market.

According to Paulson in April 2007 the worst was behind us and in August 2007, the subprime mortgage fallout was largely contained.

Tim Geithner was head of the Federal Reserve Bank of NY. These guys had no clue about what was going on on Wall Street?

That's what your suggesting.

The only reason that AIG didn't go down was because it held a few important portfolios like the Teacher's pension fund.

Geithner was willing to let it go but in the end bailed it out.

Quote

If crime is out of control in your town, you might have a legitimate complaint about the police force, but the guys who are breaking into houses are still the criminals. When they go to court, "well the police never catch anybody here" isn't going to fly as a legal defense.

Seems a lot of people possess marijuana these days but I don't see a lot of enforcement. The speed limit of traffic is

often above the posted limit and I do't see everyone getting tickets. The police usually catch the criminals but they

return for the umpteenth time in court for the umpteenth charge. Do we need more regulation?

Too much regulation that is too complex for even regulators to understand, is useless. And much of it is just to justify the job of regulators.

Quote

And I have to again point out that this line of argument-- that the banks needed the regulators to keep them from getting themselves into a financial disaster-- flies in the face of what people like you and like Marco Rubio always tell us. "Less regulation is better!" "Businessmen know how to run their own businesses!"If Nancy Pelosi is saying that, it just means she's right for once.

Treat people like they are kids without responsibility and they act like kids without responsibility. When regulators don't even understand what they are regulating because the regulations are too numerous and too complex then they just

wait until something happens and apply the law later when they want to prove something, interpreting it in their favour.

Lawyers are popular when you have lots of money and it is good to have a good accountant too. Regulators know where the money is and will pick on you if you don't have the protection of an interpreter of law.

Criminality is what you want to catch, fraud or theft. But that isn't the interest of regulators. They want fines,

licences and fees for the most part.

So we know that the Secretary of the Treasury knew about sub-prime mortgages and CDSs but it continued. They didn't stop it. There was no crime. There was imprudence, just as there is in any boom which, I might add no one wanted to end.

Quote

Nancy told a half-truth... what's you're point? Are you telling me you're justified in ignoring any facts that are presented to you because you assume that everything else is a half-truth too?

It has to be scrutinized, especially when it is political or from a political source.

Quote

I tell you that only a small fraction of sub-prime mortgages were mandated by CRA, and I tell you that the banks deliberately rubber-stamped applications they knew were unacceptable, and your response is ... well, that stuff sounds pretty bad but there's more to the story that will exonerate the banks?

Nothing will exonerate the banks they were scandalous and quite a few paid the ultimate price.

What was the small fraction of sub-prime mortgages that were mandated by the CRA? Any mortgage done for that purpose was wrong and served as a signal. Fannie and Freddie buying mortgages served as a signal. Low interest rates were a signal.

Quote

And why wasn't saying "No" an option? As I keep pointing out, the vast majority of subprime mortgages were not mandated by any government quota or program. The vast majority were completely voluntary by the banks. They could have just said "no". Why wasn't that an option?

The Secretary of the Treasury, Mr. Paulson, coming from Goldman-Sachs, must have had a clue. Why didn't he say no? He's the regulator? As you say, the vast majority were sought by the banks. The signal was still there to create more credit and keep things going.

Quote

what was going on,

They *wanted* those insane mortgage applications. They approved mortgages that their own due diligence contractors put in the Reject bin. They told their due diligence people to approve everything. Why? They invented a way to spin straw into gold, and they needed all the straw they could get. That's why.

Being bitter about it isn't the issue. The issue is confronting the false information being spread around by Marco Rubio, Fox News, and Shady and some of the others around here. I can't do much to confront Marco Rubio or Fox News, but at least I can confront Shady and others who are bringing that fiction to this message board.

-k

Well, like it or not, government and the Federal Reserve played their part, they knew what was going on and allowed it

to continue. Politicians like to tell people no. What was their problem here? And as BC asks - What was the crime?

Over-rating MBS's? Why doesn't the government level with the people and stop allowing the creation of money out of thin air then? Blame the fractional reserve banking system for that. Totally legal. Trying to hide unwisely created credit

was the problem that Wall St. faced.

The tools government uses to attempt to manipulate the economy are real. They created the boom and everyone took part

until, like every boom, it comes tumbling down and the fingers start pointing. There won't be any change, the boom-bust

cycle will continue until the whole system collapses or they adopt sound monetary policy and economic theory.

[kimmy]

Quite a few corporations are gone. Bear-Stearns, Lehman Bros, Washington Mutual,Merrill Lynch, Countrywide all eaten up by Goldman-Sachs, JP Morgan and Bank of America.

Yes, I recall seeing the CEO of Lehman Bros telling a committee how bad he felt that his company was gone; this guy who'd collected something in the neighborhood of $100 million of performance bonuses in the previous 3 years was now out of work. Tough times, bro. I know those feels.

It's interesting to note that Henry Paulson, CEO of Goldman-Sachs was made Secretary of the Treasury in 2006. He must

have known what was going on on Wall Street?

Here's a few things he said:Note "regulators and policymakers were vigilant" in March of 2008.

So he must have been playing the banker game while at Goldman-Sachs. He just kept it going?

They hired a fox to guard the hen-house. And so did Obama later on. They can hire somebody who doesn't understand the game, or they can hire somebody who understands the game and has a vested interest in making sure the game doesn't change.

Of course Paulson knew what was up, of course he assured everybody the regulators were doing a bang-up job, and of course he went around trying to raise support for the bailout as soon as the stuff hit the fan. Why would this surprise anybody?

Geithner was willing to let it go but in the end bailed it out.Seems a lot of people possess marijuana these days but I don't see a lot of enforcement. The speed limit of traffic is

often above the posted limit and I do't see everyone getting tickets. The police usually catch the criminals but they return for the umpteenth time in court for the umpteenth charge. Do we need more regulation?

Lots of people smoke pot, and traffic is usually moving faster than the posted limits, so there shouldn't be any rules on what the banks can do? I'm not quite sure that follow, Pliny.

Too much regulation that is too complex for even regulators to understand, is useless. And much of it is just to justify the job of regulators.Treat people like they are kids without responsibility and they act like kids without responsibility. When regulators don't even understand what they are regulating because the regulations are too numerous and too complex then they just wait until something happens and apply the law later when they want to prove something, interpreting it in their favour. Lawyers are popular when you have lots of money and it is good to have a good accountant too. Regulators know where the money is and will pick on you if you don't have the protection of an interpreter of law.

None of this has any bearing on the subject under discussion. This is just generalized libertarian rambling.

Criminality is what you want to catch, fraud or theft. But that isn't the interest of regulators. They want fines, licences and fees for the most part.

The regulators' "preference" for fines and settlements over criminal trial is because they don't have the budget to take these cases to trial, and because they would likely only be able to obtain convictions against the lower tier employees.

So we know that the Secretary of the Treasury knew about sub-prime mortgages and CDSs but it continued. They didn't stop it. There was no crime. There was imprudence, just as there is in any boom which, I might add no one wanted to end.It has to be scrutinized, especially when it is political or from a political source.Nothing will exonerate the banks they were scandalous and quite a few paid the ultimate price.

What was the small fraction of sub-prime mortgages that were mandated by the CRA? Any mortgage done for that purpose was wrong and served as a signal. Fannie and Freddie buying mortgages served as a signal. Low interest rates were a signal.The Secretary of the Treasury, Mr. Paulson, coming from Goldman-Sachs, must have had a clue. Why didn't he say no? He's the regulator? As you say, the vast majority were sought by the banks. The signal was still there to create more credit and keep things going.Well, like it or not, government and the Federal Reserve played their part, they knew what was going on and allowed it to continue. Politicians like to tell people no. What was their problem here? And as BC asks - What was the crime?

Over-rating MBS's?

Fraud, as we discussed earlier.

You can talk all you want about "signals", but there was never a signal sent that banks ought to approve mortgage applications from waitresses claiming to earn $12,000 a month. Saying that banks must treat qualified applicants in urban areas the same as they treat qualified applicants in the suburbs wasn't a signal to disregard their own due diligence process. Saying that banks must treat qualified applicants with swarthy skin-tones the same as they treat qualified applicants who are paler wasn't a signal to disregard their own due diligence process.

Why doesn't the government level with the people and stop allowing the creation of money out of thin air then? Blame the fractional reserve banking system for that. Totally legal. Trying to hide unwisely created credit was the problem that Wall St. faced.

The tools government uses to attempt to manipulate the economy are real. They created the boom and everyone took part until, like every boom, it comes tumbling down and the fingers start pointing. There won't be any change, the boom-bust cycle will continue until the whole system collapses or they adopt sound monetary policy and economic theory.

Fractional reserve banking has been around a long time and is used in a lot of countries. It works well as long as the fundamental principle is observed: lend money to people who can repay it.

Yes, hiding unwisely created credit was the problem. And it was their decision to approve mortgages for "anybody who can fog a mirror", as one exec put it, that unwisely created that credit.

Wall Street invented a means by which it no longer mattered to them if the loans they issued were repaid, and in fact they could make more money from risky lending than from safe lending. That's why they approved all those junk mortgages: they didn't lose money if the mortgage defaulted. Such a system should not have been allowed to exist.

-k

[bush_cheney2004]

...Fraud, as we discussed earlier.

Easy for you to say....but not easily proved in a court of law. Sure, screaming "fraudsters" is politically safe and popular, especially from another country. But the U.S. government knows how difficult it is to prove the elements of the offense, and there will be no widespread prosecutions for systemic "fraud".

http://www.businessweek.com/magazine/content/11_21/b4229060222515.htm#p2

[kimmy]

Easy for you to say....but not easily proved in a court of law. Sure, screaming "fraudsters" is politically safe and popular, especially from another country. But the U.S. government knows how difficult it is to prove the elements of the offense, and there will be no widespread prosecutions for systemic "fraud".

http://www.businessweek.com/magazine/content/11_21/b4229060222515.htm#p2

Is your opinion that no crimes were committed, or just that nobody is actually going to be punished for anything? They're not actually the same thing.

Regardless, as these lawsuits in progress make their way through the courts, evidence obtained through subpoena will become public knowledge, like the debate between Morgan Stanley brokers about whether to call their CDO "Subprime Meltdown", "Nuclear Holocaust", or "Shitbag". It will become harder for clowns in politics and the media to spin the story that they're trying to sell right now. It will be harder for the banks and their allies to claim that they need less regulations, not more.

And ultimately, whether or not they're held responsible in a legal sense, they'll be shown to have been responsible in a moral sense, and that will have political ramifications.

-k

[Canuckistani]

And ultimately, whether or not they're held responsible in a legal sense, they'll be shown to have been responsible in a moral sense, and that will have political ramifications.


-k

I doubt it. Far too much time has passed. Especially if things pick up (doubt it) people will just want to get on with making money again, and never mind the lessons of the past. If things are going poorly, many seem to ready to buy the rightwing snakeoil anyway., or just be too afraid to rock the boat in case the bossman takes the jobs away.