Mr. Andrea Mitchell shares his thoughts on the subprime market:
Alan Greenspan, the former chairman of the Federal Reserve, told CNBC in a documentary to be shown Thursday night that he did not fully understand the scope of the subprime mortgage market until well into 2005 and could not make sense of the complex derivative products created out of mortgages.
“So everybody in retrospect now knows that that boom was developing under the markets for quite a period of time, but nobody knew it,” Mr. Greenspan told CNBC’s David Faber. “In 2004, there was just no credible information on that. It wasn’t until we got well into 2005 that the first inklings that that was developing was emerging,” he said.
***Mr. Greenspan also lays the blame on the ratings agencies and the people that trusted their judgment for the proliferation of the mortgage derivatives that were a major part of the current financial crisis.
“What we have created in this world is an aura around the credit rating agencies about certification from them is the Good Housekeeping Seal of Approval, ” Mr. Greenspan said. “I will tell you the record of a lot of the forecasters of ratings have not been distinguished. They never were.”
I still can’t figure out how or why the ratings agencies seem to be getting a free ride in this debacle. Not that anything really bad has happened to the bankers or the rest of the Wall Street wizards. Berine Madoff is relaxing in his luxury apartment as we speak. Sure, congress pulled some of them in and threw some tomatoes at them and gave them a couple raspberries, but at the same time Geithner, is announcing he is working on a plan to throw billions and trillions at them. I’ll face a couple silly questions from Maxine Waters for a share of the $350 billion. Where do I sign up?
liberal
What a prick.
Dean Baker, who blogs over at the American Prospect, showed early on that there was a housing bubble by looking at simple statistics (like comparing the costs of renting and buying).
There’s a special place in hell reserved for this bastard. I hope he dies a cruel death.
Jay Severin Has A Small Pen1s
Someone should have asked him the following:
Were subprime borrowers the main cause of the global financial meltdown? If not, what percentage of a factor did they play?
Who was more to blame: Barney Frank or George Bush?
Jay Severin Has A Small Pen1s
"I hope he dies a cruel death."
He’s married to Andrea Mitchell. That’s pretty cruel punishment.
Robin G.
I’m sorry, but Greenspan is saying, in essence, "No one could have predicted the levees would fail." Bullshit. I have a friend who worked in the market until about 7 years ago, until he "saw the writing on the wall and got the hell out." Even a layperson paying a little attention could tell there was something seriously wrong with the way real estate and mortgages were functioning, even if they couldn’t explain the economic nuances. If Greenspan didn’t "fully understand," then he’s a total fraud or a corrupt motherfucker or some combination thereof.
Michael
There’s more of that troop bashing, America hating, terrorist coddling Marxist Muhammedan rhetoric from you.
Didn’t you know that the highest service that a lowly prole can perform for the Masters of the Universe is to get out of their way, and let Adam Smith give you his invisible finger? After all, someday, some little crumb from can be yours – it will trickle down, and you can finance it with the Masters for very reasonable terms.
John S.
It’s all about EGO.
Being a Master of the Universe™ means never having to say you’re sorry or accepting responsibility for your actions.
Incertus
Let me see if I have the time line straight. In the 20s, we have a largely unregulated system that goes ass up and fucks up the country for a decade or so, and which results in some pretty massive regulation. For the last thirty years or so, we’ve seen that regulation pecked away at the margins until we’re back at a largely unregulated system–at least the most damaging parts had little oversight–and the whole thing goes ass up again. Did I miss anything?
Michael
I vote "combination". After all, he was an acquaintance of St. Ayn of the Gin Bottle.
Xenos
@Robin G.: By 2002 it was clear, on the ground, that the pricing for buying and selling houses had no relationship any more with fundamental economic and financial principles.
Greenspan knew what he was doing when he let the real estate financial market go crazy. He just thought that he could control it. The idea that nobody could reasonably expect animal spirits allowed free range would corrupt the system and wreck it is ridiculous.
ksmiami
ding ding ding – we have a winner. The ratings agencies were the only ones who had a 360 degree view of how out of control the securitization market had become and could have actually you know checked to see how lousy the tranches were except for the fact that you can’t have for profit entities doing government regulatory duties. It just doesn’t work. Moody’s and S&P need to lose their charters and their management needs to be replace by smart and earnest USA govt employees.
Silver
Think of ratings agencies like real estate appraisers.
They function as an outsourcing of risk or plausible deniability. Nothing else…
The Populist
If Greenspan didn’t "fully understand," then he’s a total fraud or a corrupt motherfucker or some combination thereof.
He’s a victim of his own ego. He can’t accept that HIS policies helped create this mess. So in a word, he’s a fraud.
Michael D.
Someone asked me today if Canada securitizes its mortgages. Does anyone know the answer to this question?
Oh, and Canada is not in this mess. We’re smrt.
srv
Thick indeed, is the Randian Bubble. All those double-digit, year-to-year housing price increases could not have implied anything.
I’m sure he has adjusted his formulae to properly account for a new reality.
MikeJ
This isn’t a smart ass question, but what charter? Who says who can be a ratings company other than the invisible handjob (which of course will pick whoever gives the best news)?
joe from Lowell
In a totally unrelated observation, I haven’t seen the libertarians making the case for replacing our system of government health inspections with private "food rating agencies" in some time.
They will be accurate and cautious, cuz their business depends on their reputation, dontcha know.
Zzyzx
@Robin G.: I knew there was a housing bubble. I was happy about it because it let me refi my house to a lower interest rate but I knew it was just paper equity.
What I didn’t know was all of the backroom stuff that was happening with the mortgages. That’s why I never understood why the bubble people were freaking out so much… I was expecting another 2001 or so when it popped.
scarshapedstar
http://www.wsj.com
Comrade Dread
He’s just covering his ass, partly because he was to blame. There were plenty of people who saw the imbalance in the housing market, who voiced concern that the artificially low rates of the Fed was spawning investment and growth that was out of sync with economic realities, and saying that a financial reckoning was coming.
But there were too many short sighted assholes who wanted to loot as much as they could before the bubble burst and too many stupid assholes who thought the market would inflate forever without regard to economic fundamentals and too many corrupt assholes with political connections who knew that even if everything went to shit, they had friends in high places that would bail them out and save them from having to wait in the bread lines with the rest of us.
Fuck ’em all.
Incertus
@ksmiami: Butbutbut the free market is always more efficient than government is. If you make the government rate the securities, they’ll be too conservative with their ratings and the market won’t be able to run free and create wealth. /Randroid.
Original Lee
I haven’t been able to understand the free ride the ratings agencies have been getting, either, especially since real estate appraisers have also been getting a mostly free ride, as well. Considering that Countrywide persuaded some of the largest appraisal firms in the country that kickbacks from overvaluing properties were the greatest thing since sliced bread, why isn’t some forensic accountant looking for the same kind of thing with the ratings agencies?
Gay Veteran
BULLSHIT
Fed Shrugged as Subprime Crisis Spread
N.Y. Times, 12/18/07
"…Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago [2000] that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman…."
http://www.nytimes.com/2007/12/18/business/18subprime.html
gex
He presented himself as an expert guide to the economy. He now says, "who couda thunk it?". He sits back, waits to see who else screwed up so he can start pointing the finger.
If Wall Street was always getting AAA ratings, they should have known the system was the problem. Unless that’s exactly what Wall Street wanted from the ratings agencies.
Epic fail. Randians and Republicans can never admit when they did something wrong.
passerby
Greenspan is a bald-faced liar. It’s so obvious as to discredit everything he says.
Considering he was in charge for so long, his name should be synonymous with the word "fraud" but for some reason, the media hasn’t picked up on that…because their actions are also synonymous with "Fraud"…but We haven’t picked up on that.
Cynical me.
MBunge
"I still can’t figure out how or why the ratings agencies seem to be getting a free ride in this debacle."
The system can’t function without the ratings agencies. Even if the ratings are complete BS, people have to have some sort of baseline upon which to make decisions. People just can’t deal with their corruption right now.
It reminds me of a co-worker who could’t accept how much vacation George W. Bush took as President. When told that Bush II took more vakay time in his first term than, I believe, either Reagan or Clinton did in two terms, all he could do is sputter about how the President is never really out of touch, so he’s never really on vacation. His brain just couldn’t handle the concept that Bush II might not be as hard a worker as other Presidents, evidence be damned.
Mike
Mark
This may not be the right place for this, but here goes anyway:
Yes, Greenspan and the banks and the ratings agencies all screwed us. But the real villains here – the ones who no one ever seems to blame – are the real estate agents.
Anyone who has bought a house knows that buyers have far more contact with agents than they do with bankers. If someone buys a house they can’t afford, I’ll bet that nine times out of 10 it was their agent that talked them into it. It is completely nutty that the people in the de facto role of personal housing advisers to millions of Americans are getting paid on commission.
(In case you were wondering, I did not personally get screwed by my real estate agent)
Brick Oven Bill
My theory is that, as the Credit Rating Agencies are owned in large part by institutional investors, the power structure cannot go after them. If there were to be an honest assessment of the risk of municipal bonds, or the real value of a stock that is selling at 20 times their ‘earnings’, that might just be that.
In the run-up to this mess, the bankers, the credit rating agency guys, and the bond lawyers would travel as a team to certify projects. This was an accepted, institutional conflict of interest. There were all kinds of real estate geniuses in 2005.
The Federal Reserve should be abolished. Banks should not be allowed to regulate themselves.
Peter Orszag testified that taking over Fannie-Freddie would likely not cost the taxpayer any money when he was at CBO, when, in fact, it will cost trillions. I believe that Orszag should be read his rights and then be offered immunity in exchange for full and open testimony as to what has happened.
The Other Steve
I hate realtors.
Cat Lady
Rep. Mike Capuano called out the rating agencies yesterday, and wants them testifying. Barney Frank, my Rep., has been asked about them at our local meet and greet, and I will ask him again about when we can expect to see them on the Hill.
Re the subprime packaging – even, and perhaps especially, the big swinging dicks are afraid to admit they don’t understand something. It’s the Enron phenomenon – the analysts and everyone else who question anything are berated for being stupid – the "smartest guys in the room" convince everyone else that everyone else but the questioner understands the structure, and you’re obviously a stupid unworthy loser for asking. Courage is a rare quality.
matt
The ratings agencies sure know what they did, but at least one of them is in the position to cover it up, as Barry Ritholtz at Big Picture has found.
Church Lady
Mark, you are excusing personal responsibility. As with all things, when it seems too good to be true, it invariably is. Far too many people bought homes (and a whole lot of other shit) that they couldn’t afford. Yes, they were allowed to, because everyone from the real estate agent to the original mortgage lender (not to be confused with the sucker that actually owns the mortgage now) saw a way to make a buck on the transaction. However, no matter how you slice it and dice it, the purchaser of a home that could not afford it then and certainly cannot afford it now, bears the ultimate responsibility for biting off more than they could chew.
o kanis
You’ve already signed up for this shit when you and the rest wouldn’t hear criticism of Obama’s economic team. Anyway….
Brooksley Born
http://tinyurl.com/6hdx4f
Summers, Greenspan, Rubin and Clinton were/are the ones most responsible for the derivatives scam.
passerby
@Brick Oven Bill:
Hear, hear.
Orszag is a bald-faced liar and his name should be synonymous with "fraud" but, the media aren’t picking up on that…
Cynical me.
Mr Furious
As far as I’m concerned, the entities that most closely walked across the line of illegal in the whole fucking fiasco is the ratings agencies. What they did seems to me to be out and out fraud.
o kanis
Who’s responsible for the shitpile?
Summers, Rubin, Greenspan, Graam, Clinton.
Napoleon
@o kanis:
Thats funny, because Bush was President the last 8 years as the bubble inflated. Other then Greenspan nobody is as much to blame as Bush.
pharniel
we purchased a house in ’07 (i know ’cause my ass is still bleeding) but we figured out how much cash we had a month, how much we could afford if one of us lost our jobs and how much of a monthly payment we could reasonably handle.
we then setout and purchased at that amount.
the. entire. fucking. time. our realetor was telling us to just ‘stretch a bit’ or ‘get a bit bigger than you think you can afford’ etc. So was or mortgage lender, but at least he was ballz up front about ‘hey, bigger the morgtgage the better my commision, so i’ll get you qualified for as much cash as you want!’, otoh he was also the one to tell us what we could actually afford based on all the documents we wern’t required to send in.
In the end we purchased a house we really do enjoy and have seen ourp ayments go down as property values crash, but if we’d listend to our real estate agent and a few others we’d be living at my mom’s after getting forclosed upon.
NonyNony
I’ll voice some dissent and say that I don’t see why the ratings agencies should take the blame at all.[*]
They gave bad advice. In a rational world the banks own internal analysts should have been able to see what a crock of crap the ratings agencies were rating as gold. In fact, many small-to-mid-sized regional banks avoided these traps by doing just that.
But it was the big guys that listened. Despite being exactly the sort of people who should be able to rate this stuff themselves independently and be able to avoid these kinds of problems. And that’s because the ratings agencies were telling them what they already wanted to hear. If the ratings agencies had told them differently, they would have found some ratings agency that was willing to go along with what they wanted.
Why did the smaller banks pay attention to fundamentals while the big banks didn’t? That’s the question that should be getting asked. Unfortunately, the answer to that question would bring the whole edifice of American-style supercapitalism crumbling down around our ankles, and the folks in charge wouldn’t like that.
[*] Rhetorically speaking, of course. In actuality, these ratings agencies should suffer the slings and arrows of the market for their failed product and should be discredited pariahs of financial advice and end up in bankruptcy. Funny how that never seems to happen in our supposedly "free market" isn’t it?
Wile E. Quixote
@Mark
This guy has some interesting and fun things to say about realtors. My realtor made almost $10,000 for three days of work with me, and I did all of the driving because I had a list of houses that I wanted to look at and had done all of the research that I could beforehand because I figured that I didn’t want to waste my time looking at houses that I didn’t want to buy. I bought my house in 2000 and what got me then was what total assholes realtors were about controlling information. At that time only one of the real-estate websites in the Seattle area gave you address information on the houses that were listed, the rest just gave you information on the neighborhood. I asked my realtor why this was and she said that it was to protect the sellers because they didn’t want people just dropping in on them, which sounded like bullshit to me.
Needless to say I found this frustrating because I wanted, even before I went and looked inside of a house, to see what it looked like on outside, what the neighborhood was like, where the nearest bus line was, etc, etc, etc. Later I talked to another friend of mine who is a realtor and he said that the reason why most realtors were such control freaks is because that’s the only way that they could make money, they really weren’t adding any value to the transaction.
Sites such as Zillow and Redfin have the real-estate industrial complex shitting itself. In several states realtor associations have attempted to impose a floor on commissions to prevent discount realtors from gaining any traction, with predictable anti-trust results. Additionally Zillow allows a prospective buyer to do a lot of the work that realtors used to do, or claimed to do, and shows a lot of information that realtors wish buyers didn’t have easy access to, such as the last price the house sold at at and sales information for the neighborhood and for comparable houses in the area.
JL
OT I just got home an put on MSNBC and my representative is on tv…eeek
woody
I blame Greenspan for "Devolution."
We’re ALL ‘sub-primates’ now…
Grumpy Code Monkey
@Mark:
When my wife and I were looking at houses back in 2003-2004, we met an agent who helped a single mom who barely spoke English and made maybe a couple of bucks over minimum wage secure a loan for $150,000. Dude was proud of himself; after all, he was helping this women realize her dream of home ownership.
We didn’t understand how that was supposed to work, but we figured the agent and the bankers must have known what they were doing.
Silly us.
woody
It is completely nutty that the people in the de facto role of personal housing advisers to millions of Americans are getting paid on commission.
Further commercial ‘irony’: agents work for the SELLER. They get their pay from a commission on the sale of the house. No sale, no commission.
It is not for naught that Douglas Adams consigned them to the wayward spaceship along with the personal coaches and hair stylists…
Zzyzx
@pharniel: why didn’t you switch out? My mortgage broker was a close friend and my realtor was another friend’s mother. I wanted people I trusted not to screw me over.
El Cid
I seem to recall Michael Milken being punished for profiting $1 billion on worthless S&L deregulated "junk" bonds by being sentenced to 1 year minimum security + restricted release prison and fined $400 million.
So, yeah, I’d be willing to go to minimum security jail + house arrest for a year if I get to walk away with $600 million.
Mark
@Church Lady
If you are going to use the personal responsibility argument to excuse the behavior of real estate agents, then by extension the banks and the ratings agencies don’t bear any blame either.
No one forced borrowers to take ridiculous option-ARM loans. No one forced investors to make their bond-buying decisions based on the (terrible) advice of ratings agencies. Caveat emptor all around!
If the real estate agent and the bank told the buyer that he couldn’t afford the home, but he went ahead and bought it anyway, then it is his own fault. Otherwise, they share the blame.
Robin G.
@Zxyzx: I think that’s about where most people were in awareness – no real knowledge of this mortgage trading shit, but smart enough to know that, no, my house isn’t worth 35% more this year under any system connected to reality. That’s where I was, and I’m no economist. So if you and I knew that much, why didn’t Greenspan, with all his connections and education and guruness, know at LEAST as much as we did? It’s appalling.
@Church Lady: In some cases (like flippers), yes. But largely no. Lots of people, particularly first time homebuyers, don’t have a whole lot of understanding of the nuances of homeownership. It’s not a simple matter of checkbook balancing — there’s property taxes, maintenence, closing costs, borrowing the down payment, etc. Most importantly, don’t forget what started the ball down the hill: ARMs that were, in large part, never properly explained to those who took them (if they had been, hardly anyone would have done it). Not many people DELIBERATELY bought outside their means — they were actively deceived by the realty and banking industries into thinking they could afford a home that they couldn’t. And now these people are sleeping on a series of couches while banks are getting trillions.
cleek
there’s little reason to use agent to buy a house. nearly all of the home listings are on-line these days, and the seller’s agent will usually be more than happy to let you in to take a look if you want.
selling a house is a different story – there’s a lot for a seller’s agent to do: listing it, setting up appointments, showing it (which involves a bit of salesmanship), etc.. but you can do that yourself too, if you’ve got the time.
ksmiami
Mike – J – I meant the ratings agencies’ incorporation as private companies:
Incertus – freemarkets now and forever – NOT
Anyways, I have a wierd anecdote, when we lived in Newport Beach, the Ayn Rand institute was down the street in Irvine, the epicenter of the mortgage fraud industry.
kay
@Church Lady:
However, no matter how you slice it and dice it, the purchaser of a home that could not afford it then and certainly cannot afford it now, bears the ultimate responsibility for biting off more than they could chew
Well, yes. Yes they do. And they’re certainly paying for it, which should comfort the sanctimonious.
Weird values system you’ve adopted there, Church Lady. The sophisticated party, the people who palm themselves off as "experts", on one end of a transaction, bear no burden of "personal responsibility" while the unsophisticated one-in-a-lifetime borrower earns a "tut tut".
That’s handy. Personal responsibility only applies to the purchaser, and there is no professional responsibility. I wonder how that comes out. Oh, wait! I know! It looks like our economy!
Who wrote those loans? They’re supposed to provide reliable and prudent advice about mortgage lending, because unlike the homebuyer, they SELL reliable and prudent advice. If they aren’t selling that, what are they selling? The ability to fill out a form?
4tehlulz
>>I still can’t figure out how or why the ratings agencies seem to be getting a free ride in this debacle.
Being owned by a publishing house helps S&P.
r€nato
also, nobody could have predicted that terrorists would fly airplanes into buildings.
Except, of course, they did.
Perry Como
@Original Lee: The FBI is pursuing 500+ fraud cases right now due to the blow up. It’s bad enough they are pulling agents off of national security to investigate. Tip of the iceberg.
r€nato
@Church Lady:
If I lend you $1000 without bothering to do the due diligence to ensure you can pay back the loan, who’s the bigger fool? You for taking free money or me for lending it to someone who probably could not or did not necessarily have to pay it back?
…I’ll add, people sure did foolish things with all that HELOC money (esp. in Orange County and other parts of SoCal).
I’m willing to parcel out a fair share of blame to people who borrowed against their overinflated house values and pissed away the money on consumer spending.
But who lent them that money? It’s not like anyone held a gun to Citibank’s head or Countrywide’s head and forced them to lend that money.
And if you try to tell me it was CRA I’m gonna reach right through the intertubez and slap you upside the head with a clue-by-four.
trizzlor
Can someone explain how "Fannie & Freddie" became the reason for this scandal on the right? It’s like I’m living in two different worlds where the left is talking about regulatory agencies and credit-default auctions, and the right is railing against fannie and the 30 year old CRA. Even now, is there a consensus at all on the cause?
Jon H
"I still can’t figure out how or why the ratings agencies seem to be getting a free ride in this debacle."
I think the theory is that they were writing opinions, which are covered by the First Amendment.
Which clearly breaks down – or ought to – when you consider how the money was flowing. It was like if Roger Ebert were paid for movie reviews by the producers of the movies.
El Cid
This is all the fault of Jimmy Carter who forced banks to let Barney Frank make them give free houses to black people.
r€nato
Because it sounds enough like blaming the gummint for all evils, to suit the rat-wing’s predilection for rejecting reality and facts when it doesn’t conform to their ideology.
(even though Fan and Fred were not in any way government entities until they were bailed out last year)
in the reality-based world, yes pretty much.
However, in the reality distortion field on the right, they still consider Bush a good president. So, there you go.
Reverend Dennis
Yeah, Greenspan is a fucking genius all right:
USA Today, 2/23/2004
And he in no way contributed to this mess.
Jon H
renato writes: "If I lend you $1000 without bothering to do the due diligence to ensure you can pay back the loan, who’s the bigger fool? You for taking free money or me for lending it to someone who probably could not or did not necessarily have to pay it back?"
Given that originators of loans were typically only on the hook if the loan went bad in the first six months or so (long before the rates reset to crazy payments), and could sell the loan on long before then and walk away with the cash and fees, the bigger fool is the person who set up those conditions for the originators and then bought the loans that were generated.
From the originator’s standpoint, it doesn’t matter at all if the borrower can pay.
r€nato
When you remind rat-wingers that the vast majority of toxic mortgage loans were made by non-bank-lenders like Countrywide who were and are not covered by CRA, you get a blank stare. Or, they tell you that you got that from NY Times which is a lying liberal rag anyways so you can’t believe anything they print.
r€nato
actually I started with a much more fitting analogy but then it was getting rather long-winded.
Long story short, people lent money to people with little to no regard for how it was going to be paid back.
Ultimately, the bigger fool and most of the blame should go to the person/entities which made the loans. Nobody forced them to do so. They thought it was good business, in fact.
I can ask for free money all I want but until some fool comes along and gives it to me, I got nothing.
kay
I’ve been listening to this fool for 20 years, and I never bought his particular Posneresque view of "markets". How long do we have to listen to him? Haven’t we heard enough?
Look around. He’s a big flop.
Reverend Dennis
Citi, BofA, Lehman, etc., all nod their heads in agreement.
Jon H
"Ultimately, the bigger fool and most of the blame should go to the person who made the loan. Nobody forced them to do so. They thought it was good business, in fact."
True. And I’d bet most liar loans (and false claims on applications) were made at the suggestion of the mortgage broker after it became obvious that the customer’s true income level wouldn’t qualify them for a mortgage any other way.
The whole point was to generate loan volume for sale, long-term impact be damned.
They collect their money, declare bankruptcy for the mortgage brokerage firm, shut it down, and skate free with their ill-gotten loot.
Walker
On a related note, since we are talking about rating agencies.
McGraw Hill, owner of S&P, has refused to publish a book (for which they already paid an advance) that is critical of S&P.
JL
@Church Lady: A friend of mine who sells real estate would try to counsel folks who were purchasing homes. Mortgage brokers received commissions based on the size of the loan and new builders especially were offering sweetheart deals. Yes purchasers hold some responsibility but they were not giving out all the information necessary.
Alan Greenspan told people that fixed loans weren’t necessarily the best way to go. He also said that most people had to much equity. His memory seems to be failing him.
kay
@Reverend Dennis:
They all did it. They sold those loans, and houses, as good investments. I can’t believe we are rewriting this 4 short years later. For what? To save Greenspan? Who cares?
JL
@trizzlor: Fannie and Freddie share some blame but they are responsible for only 14% of sub prime.
kay
I ask people of they have a mortgage on their homes. They say "yes". I say "second mortgage?" . They say "oh, no. I have a home equity loan".
They sold those, too. Clever re-branding. It’s ALL about personal responsibility and ethics, don’t you think? Except for…the sophisticated entity.
The Cat Would Be Tunch
For those talking about who’s to blame for the real estate bubble and sub-prime crisis, take a look at the following New York Times article. While there’s definitely blame to go around, practices like the one described in the mortgage brokerage industry is definitely up there as one of the primary reasons. My apologies if this has already been shared, discussed, and beaten to death.
Saying Yes, WaMu Built Empire on Shaky Loans
Rome Again
@Robin G.:
Robin, it sounds like your friend had a conscience. The people who have been involved in the banking industry don’t have a conscience anymore, those people have all gotten out because they saw what was coming down the road.
I heard someone on television mention recently that the people involved in these institutions are Type A risk takers who don’t really consider what their fucking with the system will do to the common people, it’s all just a big game to them.
While Bush was busy playing Risk on the big board, Wall Street and the bankers were playing Monopoly. The rest of us are all playing Life. We’re all now living in a Parker Brothers reality.
Brick Oven Bill
My conspiracy theory: A large percentage of the CDOs were originated by Goldman Sachs when Paulson was at the helm. When these CDOs went bust in 2006, Goldman was not holding them. Meaning that Goldman knew there were problems.
If there was fraud proven in the pro-forma, Goldman would be made to buy the CDOs back from investors at face value. This is why Paulson was transferred to the Treasury by the time the CDOs went bust. This is also why M3 was stopped being tracked on the 23rd of March, 2006.
The deal, as far as I can tell, was that the taxpayer makes the investors whole, or the investors would go after Goldman, and Paulson as its head. The money has been paid and there has been no law-suits, and no discovery into the pro-formas of the CDOs.
This is why there is currently a place-holder at Treasury, with a Chief of Staff from Goldman Sachs. This is also why the Credit Rating Agencies are off-limits, because of what would come out during discovery.
This is why Orszag should be granted immunity.
Reverend Dennis
@kay:
All of the participants in the bubble kept at it and kept quiet if they had reservations because they thought that they’d discovered the monetary equivalent of Perpetual Motion.
Rome Again
Just in case anyone is interested:
The Mess That Greenspan Made
binzinerator
How fucking convenient. He was clueless until, um, just after the 2004 election. This sonofabitch expects us to believe the now-cliche "who woulda thunk?" excuse? Especially since there were people who had a clue then.
This is the exact same methodology of lies and manipulation and excuses as used for WMDs in Iraq.
Nobody knew. A lie. No credible information available. Another lie.
Fuck Greenspan.
And I wonder, just what did this fucker do during the 3 and a half years between 2005 and September of 2008 when he knew the economy was going to get flushed down the toilet?
Answer: He sat on his ass and watched it swirl the toilet bowl.
Fuck Greenspan.
binzinerator
@Robin G.:
Some combination thereof.
Church Lady
@Mark – I didn’t excuse either the real estate agent or the mortgage lender. It’s just that, unlike you, I didn’t excuse the purchaser either. We have what would be considered an above average income, but if anybody told me that I could qualify for buy a million dollar house, my response would be "Yes, I can buy it, but I won’t be in it for long because I CAN’T AFFORD the payments." Far too many people were operating under the delusion that the lunch is always free, their income will always go up and that no bill will ever come due.
My brother relocated to Texas a few years ago. He and his wife (pregnant at the time with their second child and not planning on going back to work for at least a year) were determined to live a certain section of town, because it was "the best" – the best schools, the best neighbors, the best rising real estate values, etc. They purchased a huge five bedroom home (for a family of four) that was almost twice the cost of the house they sold (for about what they paid for it three years earlier), even though their income for the next one to two years would be less than it had been while in the previous house. My parents, my sister and I all tried to tell them that they were stretching themselves way too thin, but they were determined to have "the best." These are not ill-informed borrowers. They are college degreed professionals (sister-in-law has a Masters in Education) that have owned two previous homes and understand taxes, maintenance costs, etc. They knew what they were getting into and knowingly bought a house that was really more then they could comfortably afford.
Within nine months of closing, he lost his job and it took him four months to find another, paying less. My sister-in-law, a teacher, was only able to secure part time work teaching AP History at the local high school because she wasn’t certified to teach in Texas yet. My parents had to loan (give) them money to try keep up with the housenote, they mowed through their savings, retirement funds and children’s college funds, while running up a huge amout of credit card debt, trying to keep the whole house of cards from falling down. Even now, two years later, with both working full time, they are living paycheck to paycheck, paying the mortgage, keeping the utilities on in the monster of a house, and trying to pay down some of the debt they incurred all because they knowingly bit off more than they could chew at the time they made the purchase.
The difference between them and so many others just like them is that they don’t blame their real estate agent for selling them the house (who was her aunt, by the way) or the mortgage company for giving them the loan. They fucked up and they know it. They tried to have their version of a free lunch, but the bill came due and they will be paying the price for years.
Elie
"Not that anything really bad has happened to the bankers or the rest of the Wall Street wizards. Berine Madoff is relaxing in his luxury apartment as we speak. Sure, congress pulled some of them in and threw some tomatoes at them and gave them a couple raspberries, but at the same time Geithner, is announcing he is working on a plan to throw billions and trillions at them. I’ll face a couple silly questions from Maxine Waters for a share of the $350 billion. Where do I sign up?"
Be patient. It takes time for the sociology, pychology and politics to catch up with certain realities and events. We also have to be careful not to spring the trap too fast or let them jump out of the pot before we have the time to manage all of the levers essential to do the appropriate justice.
We are just at the very beginning of all this — the anger out here is deepening but if best applied, should be done with cold calculation and a full command of all the right levers. Unless we are want to just up end the system for its own sake…not wise.
o kanis
Here we go with the "poor people bought mortgages they couldn’t afford" bullshit.
That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”
http://tinyurl.com/64mm8l
Bernard Maddof is a piker compared to the likes of Henry Paulson, ex Goldman Sachs and Rober Rubin ex Citigroup, present and past guardians of America’s financial integrity. Furthermore, Harry Markopolos the guy who was onto Madoff from the start (crickets from the blogosphere) in his testimony last week, gave the SEC A+ for incompetence, and the FINRA self regulators A+ for corruption. Obama’s (Summers’s) head of the SEC, Mary Schapiro, heretofore head of…FINRA. SEC is now plea bargaining with Madoff in his penthouse arrest. Who woulda predicted, eh?
JL
@Rome Again: Send it to Mrs. Greenspan.
Rome Again
@Church Lady:
Does not compute, sorry. If they had to borrow extra from anywhere to keep their house, they indeed WERE ill-informed.
les
@NonyNony:
Except for the fact that they knowingly trumped up ratings when they had no idea of the risk, to keep the cash flowing. Look up Bill Moyers’ Journal episode on the issue–the principal shit in charge admits he had no clue, but kept issuing ratings.
Florida Cynic
Quick take on the ratings agencies:
Institutional investors are required to by "investment grade" bonds as the result of that previous, much smaller banking mess (remember when 300 or 400 billion dollars in bailout money was huge?). Moody’s, Fitch, and S&P all used to be private companies that made money selling ratings and corporate info to investors, not whoring out AAA ratings to Lehman, Bear, and whoever. While they are certainly more than complicit in this mess, the reason they were doing what they were doing the way they were doing it was because that’s the way Congress set it up. Half-assed regulatory schemes screwing things up because Washington can’t leave something alone but it’s too chickenshit to do the right thing.
joe from Lowell
Renato,
Try telling them that CRA loans can’t be sold on the secondary market, because the bank then loses their CRA credits.
Worst. Theory. Ever.
Rome Again
@o kanis:
There were some people who bought far more than they could afford, you can’t say that didn’t happen, but that is not all that happened.
My ex-husband and I were approached by a former co-worker who had gone into the mortgage industry several years ago, she handed me her business card and said "call me, I can get you into a house" and I, knowing our financial circumstances, said "no, we’re not doing that". I’m glad I resisted now.
r€nato
I’ll agree with you that a fair amount of economic innumeracy (or would it be illiteracy?) played a role; for years, after all, I’ve been harping about the credit card culture and how many people I’ve known who max out their credit cards and think they are doing OK if they can make minimum payments.
But… I hear an awful lot of this, "it’s all the fault of stupid people who took out loans they couldn’t pay back!" So that’s why I am constantly reminding people that it was not 100% the fault of stupid people. I’m trying to balance things out against the glibertarian bullshit.
There’s always been people in our culture who don’t know how to handle their finances. I think that proportion of the population has been pretty constant over the last two or three decades.
So, what happened to cause this burst bubble right now? Did someone put something in the water in 2005 and a lot of people suddenly got stupid and decided it would be a good idea to take out 100% loans with toxic terms on overvalued housing?
Is it really reasonable to suggest that nothing changed on the lender end of things and they had no role in this?
Church Lady
@Rome Again – no, they just decided to discount or ignore the risk. Not cognizant of the responsibities that go with home ownership? No. Stupid? Yes.
binzinerator
@El Cid:
Some spoof feedback for you: A real wingnut would have said Barney Fag instead of Barney Frank.
kay
@Reverend Dennis:
It’s like they won’t go away. Isn’t there some statute of limitations on Greenspan and Phil Gramm and the rest? My entire adult life, at this point. Phil Gramm was dead wrong about the meltdown less than 6 months ago, and in the pages of the WSJ, no less. Why is he talking at all?
How freaking old are these people? Isn’t it time they retired to some country without an extradition treaty?
JL
When investment banks were allowed to leverage 30-1 in 2003(by the way Clinton was not President then), it allowed for major abuses. We are all guilty for living just for today but We are not guilty of creating the largest bubble ever. Realtors get paid only if they sell, mortgage brokers were getting paid for loans that once they went through, they were not responsible for. The idea that it’s the po’ folk that caused this is ludicrous. You only have to look at the areas where the largest foreclosures are happening to realize how false a statement that is.
NonyNony
@les:
Sure, but my point is that the big banks either knew this or should have known it and just went along with it because the ratings agencies were telling them what they wanted to hear.
The banks are at fault here. Period. Everyone else may have some part that they played that should cause them grief (as I said, the ratings agencies should no longer be trusted and should be bankrupt if our markets were truly as "free" as conservatives tell us they are), but the big banks had people who should have been able to see that the ratings agencies were FULL. OF. SHIT. But they knew it already – they just wanted the ratings agencies to validate the SHIT as GOLD. And they paid the ratings agencies well to do it.
You can lay blame on the ratings agencies all you want, but they only facilitated the stupid. It was the banks who promoted it and whose top executive should be suffering the most for it. And a 500K a year salary cap isn’t what I’d call "suffering".
les
In the blame list, let’s not forget GWB, whose "regulators" actively prevented state attorneys general from prosecuting mortgage lending fraud and predatory lending practices for the last few years.
Rome Again
@Church Lady:
I guess what you’re saying is they had that "it will never happen to me" attitude?
Martin
Except that so many of the loans were illegal. An ARM loan is in compliance if the borrower can pay the highest indexed rate that the terms call for. So a borrow could only qualify for an 4% ARM that could rise as high as 10% if they qualified at 10%. it’s supposed to always be easier to qualify for a 30 fixed than a 30 ARM. You do the 30 ARM because you believe the adjustable rate will somehow be favorable, not because you can’t afford the 30 fixed. The originators and brokers know this – borrowers generally don’t.
You can’t blame the borrowers for being handed illegal loans. And it wasn’t the originators that were the problem – it was the brokers that the originators handed the responsibility for ensuring that loans were in compliance without really putting them on the hook for the loan. LOTS of brokers recognized that the risk/reward was massively in their favor, did this for a few years, and then packed up with their profits before the shit hit the fan.
Rome Again
I just heard a soundbite from Bush on CNN stating that the economy was a victim of 9/11.
Why am I not surprised?
gbear
two things I wonder about Madoff:
-How much is the government spending to keep him from leaving the apartment (and keep him from transfering all his stolen cash to untouchable locations)?
-How much is Bernie Madoff spending himself to keep people with pitchforks and torches from getting anywhere near him?
I bet Bernie is spending more to protect himself than the government is spending to keep him isolated. I bet all these bankers are spending a LOT of money employing people who used to work for Blackwater.
I don’t have a link, but I read a story recently about peaceful protests outside of the homes of big bankers. If these protests ever turn into street fights, it will probably be the result of overzealous private security guards. It’s always been a part of Grover Nordquist’s dream to defund police departments thru tax cuts that allow the rich to hire their own security. They will be the first to attack the poor.
SnarkIntern
No one could have predicted that MSNBC would be in the the tank for the financial empire created by Mister Andrea Mitchell, even as we speak.
Has anyone ever heard even Keith, or Rachel, mention the fact their MSNBC family friend basically completely fucked the country?
A.M. herself talks about this stuff as if she weren’t married to the guy who did the fucking of the country, and has no clue.
binzinerator
@Mark:
Dood, sometimes they skull-fuck kittens here. This is always the right place.
Rome Again
@les:
I think you need to link that info, otherwise Church Lady will never believe it.
;)
les
@NonyNony:
No argument, Nony. The banks and the raters were in bed together, fucking over the economy for fun and profit. There were bright, greedy, amoral assholes on both sides of the fence, knowingly creating the Big Shitpile.
kay
Financial people have screwed themselves, in my view. My friend Marty will do title work, cheaply and well, and I can probably figure out how to fill out the boxes on a loan form.
Skip the whole finance-expertise middleman. They apparently aren’t offering anything of value, and it’s certainly not prudent to pay someone who’s actively working to cheat you.
JL
IMO,
Greenspan wanted to help Bush Jr. create a rosy picture of the economy. Since the middle class was not spending enough to prop up the economy, he just helped them along.
SnarkIntern
That depends on whether we think (a) a lot of people suddenly got stupid for no apparent reason, or (b) they have always been stupid, and not qualified to take on these loans, but the lenders suddenly decided that that didn’t matter any more.
I don’t know about you, but I’m thinking B.
passerby
@NonyNony:
I generally agree here, but also agree with the upthread comment that it’s "Caveat Emptor" all around.
Everyone, from the banks down to the borrowers, was being told exactly what they wanted to hear.
Sing it with me:
…and the green grass grew all around, all around, and the green grass grew all around.
[oops, blockquote fail]
r€nato
Orange County was and is the epicenter of the entire mess. That’s where most of the toxic lenders were located, and that’s where people were engaging in egregiou HELOC abuse as well as buying homes for ridiculous prices (even by SoCal standards).
Last I checked, OC is full of white Republicans, not dark-skinned Democrats.
Xenos
I am trying to find it in the archives, but I remember back in 2005 reading about boiler room operations being set up to market option arms. These were privately held companies that would open for a few months, would work with networks of mortgage brokers to write toxic mortgages, green-lighted all manner of fraudulent loans. They then sold the loans to major wall street banks that built CDOs and derivatives out of them.
The suggestion was that the major wall street banks were secretly setting up and running the mortgage finance companies, essentially creating counter-parties that could create the risky mortgages, and in the assignment contracts, take on the liability if they should go bad. The CDOs had language that let the liability for fraud and mistake pass through the banks and rest on the fly-by-night mortgage financers. After a few months the Banks would wind down and close the finance companies they secretly owned, and voila – the perfect crime. All the fraud turns out to have been committed by a dead man, so to speak. Thus, the whole real estate bubble was a side effect of a multi-trillion dollar scam to make a killing in the CDO and derivatives business.
If this is what they were doing, I hope it shows up in the examinations those banks are going through now.
Brick Oven Bill
To my knowledge, Paulson’s predecessor, Snow, when relieved, joined Cerberus. Cerberus then bought Chrysler, which we are bailing out. Cerberus then bought 51% of GMAC, which recently qualified as a bank holding company, and received money from Paulson, and is now receiving money from Geithner.
Another reason why Orszag should be granted immunity.
les
@Rome Again:
True, but I’m lazy and no facts will ever penetrate Church Lady–The Truth buttressed by anecdote will always triumph over reality for self righteous bags like her.
Oh, all right, 15 seconds with teh Great Gazoogle:
r€nato
Personally I would have ran, not walked, away from anyone who offered me a 100% loan on a home, and oh by the way the loan is an ARM.
At the individual level, there’s plenty of blame to be put upon people who should have known better, no matter what the media/realtors/lenders were telling them.
At the macro, societal level, there’s plenty of blame to be put upon those who allowed this confidence scam to take place. This is PRECISELY why we have government regulation of financial markets. We’re learning first-hand that when enough people are allowed to do foolish things with their money, they are not the only ones to pay the price; we all do.
The Other Steve
GOP Pushing fabricated Salt Marsh Mouse talking point
les
@les:
15 seconds gets you hosed by the magic tags, apparently; trying again–
here
or here
JL
Suppose you bought a house in 2004 and paid 500,000. In some areas even if you put 20% down, your mortgage would be higher than the value of the house. Now it is 2009 and you have to move for whatever reason. Do you just walk away or out of the kindness of your heart sell the house at a loss? This is a case where even the most responsible among us is screwed.
Rome Again
@The Other Steve:
All their talking points are fabricated, of course you already know this.
;)
r€nato
wait! For 30 years the Right has been telling me that each man is an island unto himself!
Could it be they were full of shit?
JL
@Brick Oven Bill: IMO
There are many economists that President Obama (gosh I love typing that) could have chosen to help run Treasury. Krugman and Stiegtliz come to mind. Geithner, although tainted, know banks and at this time he might be the best to pull us out of this muck.
The Populist
Anyone who has bought a house knows that buyers have far more contact with agents than they do with bankers. If someone buys a house they can’t afford, I’ll bet that nine times out of 10 it was their agent that talked them into it. It is completely nutty that the people in the de facto role of personal housing advisers to millions of Americans are getting paid on commission.
They can’t get a commission if the customer can’t get the loan. RE Agents don’t loan the money.
My mortgage broker was a shady fella. My loan kept changing and changing even though he told me my FICO was good and my history of paying bills was good. I bought the house after haggling but he would not budge. Countrywide and those scumsuckers weren’t much better. I needed to close and get the house loan or else I’d lose it.
Then the foreclosures came and my bank lied and won’t even TOUCH a re-fi.
I know who is at fault here…Clinton for letting the righties take out Glass-Steagall which was step one in this mess. THEN Bush and congress de-regulated the mortgage brokers and it allowed any schmoe off the street to offer any kind of loan he could without any verification.
The Populist
How the fuck does an idiot like Joe The Plumber get a book deal? Who wants to read this mental midget’s ruminations on silly shit?
Oh yes, the rightie think tanks will buy the heck out of it the same way they do when Annie releases her craptastic scribes.
Rome Again
@The Populist:
It doesn’t matter what he says, so long has he’s standing in line on the wingnut team.
BDeevDad
Gregg withdraws from consideration for Commerce post
Because of stimulus and census differences. WTF.
JL
I like to say that Bush was Clinton on steroids. The idea that investment banks could leverage 30-1 is just beyond my understanding of econ 101.
Church Lady
@Rome Again #94) – Yes, they did. As did countless thousands of others.
The biggest part of the problem is the desire for instant gratification. We have an abysmal savings rate and are drowning in debt (both personal and governmental) due to our seeming unwillingness to wait for anything, of true value or not. Envy drives some of it (the Jones have it, so I should too), but it runs deeper. There is skewed sense of entitlement present, that attitude of "I DESERVE it, and I DESERVE it now." The quaint notion of working for something and saving for something seems to have disappeared. All of us fall into this false sense of entitlement on occassion, it’s just a matter of degree, and dollars, as to how harmful it can or will be.
Until we, personally and as citizens, return to the ethos of working and saving for that "better life", our economy and our personal financial situtations will not improve.
JL
@BDeevDad: lol, Who wants to bet that there are a few cobwebs in his closet?
r€nato
@The Populist:
I’m all for the Rethugs pimping Joe the Plumber as some kind of genius.
The longer they listen to him (and Palin), the longer they spend in the wilderness as a regional party consisting of religious wackjobs and idiots.
Brick Oven Bill
Geithner is qualified because he was the one put in place by the banking lobby to REGULATE PAULSON as the President of the New York Branch of the Federal Reserve from 2003 through the crash.
You can tell Geithner is on top of this because he goes on TV to tell us he is not sure what to do, in spite of his in-depth grasp of the system. This is the man who is so brilliant, that we can overlook his clear ethics problems.
JL
Why even mention this?
Rome Again
@Church Lady:
Well, you may see it differently than I do, but "it will never happen to me" seems pretty fucking ill-informed IMNSHO.
The Moar You Know
@JL: Somebody bought him off, and somebody vetting him found out about it.
BDeevDad
@JL: Seriously
kay
I don’t know why there are two sets of standards. One for people who sell money and one for people who sell…everything else.
The salespeople at Sears make a commission. But, when I go into Sears to buy a water heater, they don’t walk me over to the humongous model, with way more capacity than I need, although they would make more money doing that, and could conceivably get away with it. What if every industry operated like this sector? It’d be a mess.
JL
@The Moar You Know: Educated guess?
Church Lady
@JL:
Because Gregg probably doesn’t have skeletons in his closet. I don’t think it had anything to do with the stimulus package either. It was most likely having the census removed from his purview. The census is political in nature due to the congressional redistricting that follows. Pulling it from Commerce was a way of saying we don’t trust you. Not the best condition under which to start a job.
Rome Again
@kay:
That is not always the case. Ask TZ about when we went to Sears looking for a drill.
JL
@Church Lady: Well, counting black folks might change the districts for some. I still think that The Moar you know might be right.
Punchy
Obama fails again. I cannot believe he refuses to act in a bipartisan fashion by having his R nommy bail out on him. Do we impeach him tomorrow, or should we wait until Monday?
Legalize
Re Gregg withdrawal:
1. Good, he shouldn’t have been there in the first place;
2. This proves yet again that GOPers are simply incapable of working with President Obama (Gregg to his credit at least got out of the way instead of trying to undermine from the inside); thus resulting in
3. President Obama now being able to say, yet again, "I tried" to work with them but it didn’t work out.
Karmakin
In the (paraphrasing) words of Lewis Black.
If a company cannot explain…in one sentence…what it does…it should be illegal.
This would fix pretty much all these problems.
Xenos
Considering what he needs to do (seize and break up the largest eight banks) it is obvious that he can’t come out and say it. Instead, he hems and haws and punts, and starts the "stress testing" (a/k/a moving bank holiday, or financial vivisection). When he moves to seize the banks in a few weeks it will appear to be because he was forced to, not because he wants to.
This is all about taking power without ever appearing to want to take power. I just hope Obama does not get carried away with it.
Martin
Translation: I paid all my taxes.
Nothing to see here…
BDeevDad
Wasn’t the reason he was appointed was to provide a dissenting opinion?
Rome Again
So now, since Kennedy is not expected to return to Washington to vote on the final Stim bill, and Judd Gregg doesn’t have to recuse himself anymore, what is the count?
Xenos
@JL: Um, if you google "Gregg Abramoff" you get 160,000 hits. Just sayin’.
Face
Newsflash, Judddd — we dont. Greggggg takes the census, and suddenly there’s only 6 Af-Ams in NYC and the new college graduation rate of MS and TN and Bama suddenly shoots past 103%.
Stuck
Gregg is a a wingnut, has been and always will be. Good riddance .
Rome Again
@Karmakin:
"We grow a green plant that when it is dried and smoked makes people feel happy and less stressed for a while thus making them feel better about their lives. "
I like it.
;)
JL
@Rome Again: I didn’t know that Kennedy couldn’t vote. I was out until mid afternoon, has his health deteriorated more?
The Moar You Know
@JL: Yeah. I cannot think of any other possible interpretation of his actions.
demkat620
@Punchy: Can you let him stay til Tuesday? I’m on vacation this weekend.
Reverend Dennis
@BDeevDad:
From the article linked at the bottom of the Gregg piece:
Turns out that Obama wants the director of the Census to report directly to the White House instead of to the Commerce Secretary as was done in the past. Not that an honest census would cost Republicans seats in the House and not that Gregg prevent that from happening.
demkat620
Hmm, this is starting to get weird. Gregg never told the WH he was withdrawing? He never talked to Obama about this? WTF?
But, I’m sure the vetting process doesn’t have Jack to do with this.
Rome Again
@JL:
Well, I heard it announced on CNN today that Kennedy is not expected to go to Washington for the final vote. If I’m wrong, blame CNN for misinforming me.
Rome Again
@Reverend Dennis:
So Gregg only wanted Commerce so he could continue the gerrymandering operation on a larger scale?
That Anonymous Guy
Judd Gregg’s withdrawal is truly tragic.
Without his brilliant insight, it might not occur to anyone in the Obama White House that the best way to deal with most every crisis is to give rich people another tax cut.
ReuM
When my partner went looking for a house in 2002, we were gobsmacked at the outrageous prices here in NCal, where the median income was $65k but the median house price was $350k. All we heard was how "worth it" it was, and how "with today’s loan products, you don’t really know how much you can afford". After a few weeks of exploring what was available, I took him aside and said, "I can’t in good conscience recommend you buy at this time. I may not be a finance wizard but I can multiply and divide. Your income and these prices don’t add up at all." We were told we were naive, clueless and missing out because homes were just going to increase in value.
5 years later, we picked up darn near our dream home for over 100k off it’s supposed value. One of our friends has been working 7 days a week for 2 years because he bought at the height of the market-with his agent’s blessing and with the funky loan his broker came up with. There was so much pressure to join in this madness of overpriced homes and strange loan products. You can’t just foist all the blame or even half the blame on consumers. You couldn’t get straight information from most of the supposed professionals who were providing "information".
Stuck
Capn Ed is yammering about how this is Emmanuel’s fault for taking away the Census gig from Gregg. Does he, or anyone else, believe that Gregg expected to, or was told he could oversee such a sensitive political operation. Not likely. I suspect the stimulus stuck in his craw because he has been one of the stingiest motherfuckers in the Senate for providing any kind of help to the poor, or anyone else in need.
Obama should learn a valuable lesson on the merits and limits of the bipartisanship meme.
TenguPhule
Two words.
Wingnut Welfare.
Comrade Darkness
I still can’t figure out how or why the ratings agencies seem to be getting a free ride in this debacle
Because Bush moved the 1800 white collar crime FBI agents over to counterterrorism and then never replaced them.
His rich buddies were orgasmically ecstatic about this and acted appropriately.
JL
@Stuck: Your partner is very lucky.
Stuck
@JL:
Stuck thanks you, he thinks. True false persona love is hard to come by.:)
binzinerator
@Martin:
Nope, didn’t know this, Martin.
I bought my house in 2003. It was my first, and still is, and it was harder to qualify for the one 30-yr I could find than for all the ARMs I was offered. Hell, I found exactly one bank that was willing to offer me exactly one iteration of their 30-year fixed mortgages given my income and amount of money available to put down, but I had any number of ARMs from that bank and others for the asking.
I wanted the 30-yr not because I knew what I was doing, but because I thought didn’t understand how ARMs worked.
With an ARM it seemed to me that I could end up with a mortgage I couldn’t afford. No problem, said the bankers. You can always refinance. And refinancing will be no problem either. Home values always go up. Makes it easy.
What I was being told was how great the ARMs were, and how it made owning a home affordable.
That’s what I didn’t understand. I thought Ok they are great, yadda yadda yadda. But if an ARM reset by 2% every year if rates jumped, in three years my mortgage would have double-digit interest rates and I would not be able to afford the payments. What was I missing here?
I thought I was missing something because all the people who were supposed to be the experts on this were telling me how great something was that seemed to me to be not so great.
I finally concluded I just didn’t know enough about how ARMs really worked. And therefore I decided I better not sign for something like the value of a house when I didn’t understand fully understand it.
I made the right choice, but I got lucky. Also because I am stubborn. I held out for a 30-yr fixed, and then I barely qualified for it. In contrast I got pitched a lot of bullshit about ARMs. They were put under my nose at every bank. It was an industry-wide snow job.
Xenos
You were missing the fact that the brokers were making a much bigger commission on the ARMs. With interest rates at a historic low, why would any informed buyer choose anything other than a fixed loan? Thanks, Greenrand!
Comrade Desert Hussein Rat
Shorter Alan Greenspan:
The truth is, in the 20 something years I was Fed Chairman, I had no idea what I was fucking doing.
or alternately:
Who knew that basing monetary policy on the economic and political ramblings of a shitty novelist (Rand) wouldn’t work out the way I hoped it would?
Chuck Butcher
Jumpin’ Judas Priest, so we’re back to mortgages? The housing bubble was going to cause problems but this implosion is happening because those mortgages were leveraged to hell and back. With a functioning economy some people were going to lose houses, not nice and the readjustment was going to be a bit rough, but now you’ve got a cascading effect that is taking out people who could have held on.
Greenspan is a liar, the housing boom was being called out well before the crash, in fact anybody with an operating brain cell knew that property doesn’t appreciate at that level. It was convenient because it was holding the house of cards together, a new house or re-fi means a hell of a lot of spending for items that aren’t construction itself related. That spending propped up BushCo/St Ronnie’s gutting of the working class. Wealth dislocation and leveraging is what has killed this economy, housing propped it up for awhile.
Banks could afford to take a 10-15% hit on mortgages – alone – but when they’re leveraged 10x you find yourself with a 10% being 100% and problems beyond belief. The Great Depression became Great because of leveraging, it was a boom fueled on imaginary money lasting forever, which of course, it didn’t. A correction turned into a disaster.
You look at the housing boom a say "oh bullshit" and not one of you says, "look at stocks." When was the last time stocks had any goddam thing to do with the actual value of a company and a little good will? They had value because people believed they did and bought them at whatever price because "magically" they’d appreciate – with no economy to back them, except housing.
I tried to get out of the construction business 6 years ago, but came up short on financing and had to stick with what was making me money. Oh well…
That Anonymous Guy
Hate to mention this, but the same could be said of the U.S. dollar, backed solely by the "full faith and credit" of the US government.
In other words, we place value in dollars because the government says we should, and we believe the government on that one.
Uh oh.
(Christ, now I’m starting to sound like a Paultard. Depressions suck.)
pattonbt
Greenspan: he did not fully understand the scope of the subprime mortgage market until well into 2005 and could not make sense of the complex derivative products created out of mortgages.
Did not understand? Isnt that his job? Shouldnt he have raised the flag at that point and screamed that something is fishy? But no, he didnt want to appear stupid and call bullshit so he let it pile up to the mess we have now. Fuck him.
Ive always said, I dont invest in things I dont understand, like Enron before, when people tell me ‘you just dont understand’ I walk away as quickly as I can because I know its bunk.
And as El Cid said above, we know the real reason for this mess, in order:
Democrats
Black people
Brown people
Poor people
Atheists (or non christians)
ACORN
CRA
Fannie / Freddie
Jimmy Carter / Bill Clinton / Obama
Abortion
liberal
@binzinerator:
Yeah, that’s a radical thought.
Steeplejack
@binzinerator:
LOL!