Rather than paraphrase my earlier essay, I’ll just quote part of it here and let you judge for yourself:
…The Greenlining Institute existed solely to bully banks and financial institutions into giving loans to otherwise unqualified minority borrowers.
…There’s been a lot of finger-pointing on all sides about this financial crisis, but much of it misses the point. The off-topic details about CEO salaries and bond markets and mergers and bailouts and who voted for what all chase the horse after it’s already left the barn. The key question is this:
Once upon a time, banks only loaned money to individuals who could qualify for a home mortgage; and then sometime recently, they changed their practices and started loaning money to a lot of people who didn’t qualify and could not afford to pay back the loans. And when they started defaulting, and when real estate values starting dropping, the entire industry collapsed, because there was no equity to pay back the loans. The banks lost money, the customers lost money, and it all went down the toilet. Which, of course, many people had predicted. So the question is: Why? Why did banks start making countless risky untenable loans to unqualified customers?
And the answer is: Because they were afraid of being called racists by the legal bullies at the Greenlining Institute and other similar “community organizers.”
It all started with The Community Reinvestment Act, a federal law originally passed during the Carter administration and then ramped up during the Clinton years, that was originally designed to prevent racist lending practices by banks who wouldn’t loan money to minorities, even if they were qualified. Which was a fine idea. But over time the law was twisted to force banks to make loans to minorities even if they weren’t qualified — which all may sound very peachy keen in Fantasy Utopia Land but which inevitably spells long-term financial suicide for a bank.
The Greenlining Institute’s self-appointed role is to identify those banks which by Greenlining’s reckoning haven’t doled out enough money to underqualified minority borrowers, and then threaten them with lawsuits, protests, and accusations of institutional racism if the banks don’t start opening their wallets ASAP. And the banks caved. Greenlining brags that they have unparalleled access to banking boardrooms, and they successfully squeezed $2.4 trillion (yes, trillion) in “CRA commitments” (i.e. loans to unqualified borrowers) out of terrified banks. Nearly every bank and financial institution you’ve ever heard of seems to kowtow to Greenlining.
According to this 2005 article in The Berkeley Daily Planet:
With a $4 million annual endowment, Greenlining’s interests are larger than Berkeley, stretching from Sacramento to Washington, DC. Started in 1994 by John Gamboa, a co-founder of the consumer interest law firm Public Advocates, and backed by minority business associations, the institute has fought to extend the benefits of capitalism to inner-city neighborhoods that had been traditionally cut off from access to business and home loans.
“Making the unbanked bankable has always been a top objective,” Turner said.
To persuade banks to serve inner-city clients, the institute has opposed high-profile bank mergers, threatening to demand hearings before the Federal Reserve Board if the bank didn’t agree to invest more in inner cities.
Under pressure from Greenlining, Wells Fargo committed $45 billion to community lending and $300 million to philanthropic causes as part of its 1996 acquisition of Los Angeles-based First Interstate Bank. Washington Mutual, also hounded by Greenlining, agreed to provide $120 million in community lending as part of its 2001 merger with Bank United. Similar concessions have been squeezed out of insurance and utility companies. Greenlining issues annual report cards tracking the institutions’ progress in hiring minorities and serving minority communities.
The organization also retains two attorneys to initiate public interest lawsuits against organizations they feel discriminate against minorities.
Although it fights in the name of the poor and disenfranchised, Greenlining’s close relations with corporate donors and its commitment to economic expansion have also drawn enemies on the left.
“Our experience with Greenlining is that they often don’t tell the truth and they’re quick to hurl allegations rather than dealing with the facts,” said Bill Magavern, legislative analyst for the Sierra Club. …
Magavern thinks Greenlining’s environmental policies are rooted in the interests of key donors. “Look at who they take money from,” he said. “Part of their modus operandi is to threaten people until they get paid. We’ve never given them money so that is one of the problems they have with us.”
Tracking down Greenlining’s major contributors isn’t simple. The names of major donors are whited-out on the organization’s federal tax forms. The omission was news to Turner, he said.
He said that corporations accounted for about one-third of the institute’s revenues. The rest, he said, comes from foundation grants and fees from intervening on behalf of the public before the state Public Utilities Commission.
Greenlining faxed the Daily Planet its 2002 tax returns, which listed four contributions, including $250,000 from Washington Mutual, $300,000 from Wells Fargo…[etc.]
Who are these people? And how did they gain so much power, while flying so far under the radar? Their latest push is to force the banks to convert the adjustable rate mortgage loans given to dodgy borrowers into fixed-rate loans, which would further punish the banks financially.
The American Anachronism blog lists some of the other pressure groups who bully banks — including the now notorious ACORN.
How does this connect to the presidential election? According to this 2007 article in the Chicago Sun-Times, Barack Obama’s mysterious years as a “community organizer” were spent doing this exact thing: Accusing banks of racism for not giving loans to underqualified minority borrowers:
Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods.
(A case which, by the way, Obama won. Add another risky loan to the pile.)
Now, having read that (and the rest of the essay), reconsider a key detail from Inside Job: Robert Gnaizda, the President of the Greenlining Institute, is depicted in the film as a hero who tried to prevent the financial meltdown by warning banks about risky loan practices.
Say what?
It’s impossible for the Greenlining Institute to hide its original mission: The group’s very name reveals what they’re about. If “redlining” means to deny loans to minority borrowers, then “greenlining” must be to give loans to minority borrowers. But why were banks denying those loans in the first place? Because they were seen as too risky, since in the bad old days, even more so than now, minorities were generally impoverished and had limited income opportunities. The banks’ lingering “institutional racism” was partly based on cold hard experience: homes in low-income neighborhoods did not appreciate much in value over time; residents of low-income areas more frequently defaulted on their mortgage payments; so home loans in poor (i.e. minority) neighborhoods were generally too risky for most banks. That was an unfortunate state of affairs, I concede, but not one caused by the banks; nor should it have been the banks’ responsibility to rectify it.
But groups like the Greenlining Institute saw the banks as potential agents of economic restructuring: If banks could be forced to grant homeownership to poor people, then that would be the first step for the lower classes to climb out of poverty, since everyone knows that owning one’s own home instills a sense of pride, self-worth, and self-reliance.
And so, using the bullying tactics described above (and in the original article which first inspired my post), the Greenlining Institute (and similar groups) twisted the banks’ arms to make risky loans, for the purpose of “social justice,” to use the activists’ own terminology.
Forced into this situation, the banks then went to great lengths to disguise the risk they had foolishly assumed; to fob the bad loans off on unsuspecting other investors, they devised convoluted financial instruments that obscured the danger of the investments; and so on.
It is these after-the-fact shenanigans that Inside Job focuses on. And like any good propaganda, it’s effective because it’s technically true: Everything shown in the film pretty much did happen as depicted. But here’s the key point: It may be true, but it’s irrelevant. The filmmakers are focusing on the glorious gory details of the financial explosion caused by the subprime loan crisis, but they aren’t showing you who lit the fuse.
The meltdown was not caused by the bankers who mislabeled their risky debt; the economy would have collapsed no matter who was holding the bag when it all went sour. The only crime committed by the villains depicted in Inside Job was to make sure they weren’t personally liable when all those bad investments went kablooey.
It’s clever to stir up populist outrage against the fatcats who tried to enrich themselves when everyone else went broke. Who doesn’t hate devious fatcats? Even I hate them. But in this case I know that they didn’t cause the recession: they merely tried to profit from it. Because that’s what fatcats do: They try to profit from anything, in any financial climate. That’s what makes them fatcats.
If you look at the Greenlining Institute’s Web site nowadays, you won’t find much mention of redlining and housing discrimination; in recent years, Greenlining has expanded its focus to become a general-purpose left-wing advocacy group, and now advertises its “Leadership Academy” to groom the next generation of behind-the-scenes radical activists, and concentrates on a much broader push to fundamentally alter American society.
But most Americans will never know any of this. Inside Job dominates the headlines, and the thesis it puts forth is the accepted wisdom of an angry nation. Only the few of you reading this essay, plus a handful of researchers and analysts, are aware that there’s a different side to the story. I concede my likely defeat in this particular battle from the War of Ideas. But all I can do is call it like I see it, a tiny voice in a hurricane of disinformation blowing in the other direction.
Yet I can take consolation in one fact: At least I don’t have that smug expression on my face.
Who did the 2008 finanicial meltdown help?
Lots of bankers, TONS of mortgage bankers lost their jobs, their homes, and their yachts.
But little lenin walked into the white house. A man who had never held a job, a man who has never even had an acquaintenance who is a normal american, a man who has since proceded to balkanize the US in every way conceivable, walked into the white house.
And for those of you interested, the attack on Lehman Brothers began Sept 8, 2008, which 9 days later resulted in TARP and then the Obama Depression. There is no doubt it started that day. Check the market volume for the week before, and then that week. On Sept 7, the most respected poll in the country, Gallup, leaked the information that McCain/Palin, for the first time, had taken the lead for the presidential race.
Of course McCain/Palin’s signature issue was energy independence, which was a hot topic because the price of gasoline had just topped $4 per gallon. Strangely enough, while the stock market crashed, wiping out the savings of a generation of seniors, gasoline cratered to under $2 per gallon by Nov 4. The signature issue was forgotten. Anybody who had ever saved a dime in his or her life was raging at Bush and the Republicans. The least experienced man in any room won the presidency.
Great expose as usual, Zombie!
@proreason: the fact that McCain had a “deer in the headlights” response to the financial crisis did not help. GWB, in “Decision points”, relates his meetings with McCain and BHOzo concerning the crisis, and he got the impression that McCain was running around like a chicken without his head (of course W is too much of a gentleman to say this in so many words) while 0bama seemed calm and collected.
Was this BHOzo’s hubris at work? Or was he assured now the job was his? Dunno, but others were swayed in the same way as Dubya. Losing your cool in public does not inspire confidence unless it is precisely what the situation calls for. The “petulant child” face of 0bama had yet to be seen.
I also do remember that just after he was elected he had a meeting on which he was briefed on the security situation. Those who saw him leave reported he was pale. As bl**dy well he should have been…
I agree with you, probably more than you imagine.
I believe that McCain lost his desire to be president during those two months. I wouldn’t say that he threw the race, but it’s hard to dig down for the final two yards if you’ve caught a glipse of the victory stand and there’s an alligator chewing it up. McCain is the furthest thing imaginable from a committed leader. The only reason he wanted to be president was for the attaboys from his buds. Once the victory stand started looking ugly, he realized what a sweet deal he has in the Senate, where he is totally comfortable as the perpertual boy maverick with few responsibilities, and of course, his wife’s hundred million dollar fortune and the adulation of the state-owned media (as long as he regularly jabs the real Republican leaders).
Agreed.
IMO it was McCain’s intemperate reaction to the financial crisis, not the crisis itself, that cost him the election: or, in any event, made the result much less close than it would have otherwise been.
At the time the country did not recognize Obama’s knack for looking collected and judicious when he is in fact clueless. Unfortunately, much of the country still does not recognize it…
gb: You took the words right out of my mouth. I was going to say, we now know WHY Obama was so cool, calm and collected during that time. He’s clueless without a teleprompter. He’s a puppet that barely studies his “speech” before he gives it. Someone (Soros?) just hands him what to read off the prompter. Obama is more interested in his tee time or where he’s taking Moochelle and the mother-in-law next.
oops, sorry, I meant gs.
What a koinkeydence! Berkeley’s Robert Reich, who I guess saw the movie, said this on MSNBC only last night (thanks Newsbusters blog):
“They see people at the very top getting away with, well, the equivalent of murder: look at what happened on Wall Street. There’s not a single Wall Streeter that’s actually been indicted or brought to justice after that huge implosion on Wall Street.
Read more: http://newsbusters.org/blogs/mark-finkelstein/2011/03/01/reich-rich-redistribute-or-risk-angry-populace-turning-you#ixzz1FSPowGMz
You can read more about Frank, Dodd, and Reich, whose special talents are a combination of radicalism and the art of telling lies, in Volumn One of my new book “The Clownishness of Little Economists” in three Vols., Pipsqueak University Press.
Well, I detest Robert Reich and nearly everything he says. And it is true that organizations like Greenlining and ACORN were responsible for political pressure that forced banks to do SOME subprime lending and Fannie and Freddie to create and legitimize a secondary market for it. But claiming that the size of the subprime market resulted principally from such political pressure, that the cause of the meltdown was making subprime loans, as opposed to slicing them into incpomprehensible “tranches” and selling them, on a hugely leveraged basis, backed by fraudulent ratings from Moody’s and S&P, or that the bigwigs in the banks and on Wall Street were only trying to profit from what would happen anyway, is preposterous.
If banks had simply responded to the political pressure of the Greenlinings of the world and made enough subprime loans to keep them at bay, yes there stil would have been significant losses. But there would have been no meltdown, at least now one caused by those defaults. No, it took the massive fraud perpetrated by Wall Street investment bankers and their accomplices in the ratings agencies, plus the massive stupidity and greed of investors around the globe, to cause the unprecedented losses we have witnessed.
I’m all for blaming the Cloward-Piven Left for their deliberately subversive strategy of overloading the financial system with non-creditworthy mortgages. But let’s not pretend the real villains are not the fat cats who gleefully bankrupted the country while making gargantuan fortunes for themselves. Many or most of the are Dem contributors and cronies too, as we all should know.
Sorry, Victor, that simply is not true. To Greenlining and the others, there was no such thing as “enough loans to minorities.” The more the banks lent, the more those organizations demanded. The bundling, leveraging, and credit default swaps were authorized by the government (only Fannie and Freddie were originally allowed to do this) in response to the banks’ request because those mechanisms were the only way they could continue to make these fraudulent loans. As far back as 2003, Congress was put on notice that this was a bad idea, but they loved the campaign contributions more than they cared about what was happening in the financial market.
Here down in the West Village of NYC you can have the same experience. Misfits and creeps troll the streets, scruffy, wizened baby boomers dressed like time has stood still, filthy looking men with earrings, greasy gray hair, all three twisted into a rat’s tail, effete delicate girly men shashay with their partners giggling and groping like school girls with their first crush, ancient Bolshevik bag women whose faces have congealed in a grimace of hate, women strut with an air of superiority and arrogance, squat ugly gay women whose masculinity is a repulsion. Every manner of social left wing type is on parade. Proving once again that is not brick and mortar which makes one feels at home. It is the people. Forced to be down here a couple of times a month and being here has the feeling of awakening to find one’s self in a dream sequence from Fellini’s Satyricon. Liberalism is the political expression of a deranged, perverted, distorted mind. Isn’t it funny how people appear as a reflection of their spirit?
“Liberalism is the political expression of a deranged, perverted, distorted mind”
I wish I could be so sanguine about it.
Like
Poor people? And gays? And an old lady? You poor thing. I feel so bad that you had to see people like that; it must have been upsetting.
You should also mention the clean-cut yuppie types that outnumber the more eclectic individuals by a factor 10 to 1. They’re probably liberal, too. Do they appear as reflections of their spirit?
Poor people? Where do those words appear? Old women? Gays? Left out a few words, didn’t you. Can you read? Properly? Your response proves my point. You see things not as they are, but climb up on a little cardboard box so as to appear above it all and twitch with rectitude. I don’t have to like those whom I have described. In fact I don’t. And I suspect even you do not like many types of people either. But at least I have the integrity to admit it. Did I describe you too well for your liking? Was it the word effete that drove you ’round the twist? LOL
The denizens of West Village may be many things, but poor isn’t one of them. It takes serious bank to live there, and as many of them as not work on Wall Street.
As the child of two old timers in the West Village I can attest to the fact that there are many poor old people still living there. They are still in the rent controlled and rent stablized tenement apts. They are the people that came out and helped their neighbors when something happened. They were hard working salt of the earth people. They raised their children there and their children couldn’t afford t o live in the neighborhood so they moved out. Now they are often snickered about by the rich ingrates that live there and wouldn’t have such a fine neighborhood if it wasn’t for these peole.
Hey, I feel your pain. I’m literally a few blocks to the east, shacked up with an NYU professor. She’s gorgeous and has a heart of gold, but is living in an alternative universe of moral relativism and white guilt (bless her pointy little beautiful head).
Oy gevalt, what to do? I just shake my head every time she twists into gordian knots of Marxist pretzel logic when confronted with reality.
[I'm] shacked up with …. She’s …living in an alternative universe of moral relativism .
Ummm…?
Perfect description of the creepy denizens of downtown. I remember going to physical therapy at a place in the Village right after 9/11. I was wearing an Old Navy tee shirt with an American flag on it, and an obvious lefty old lady snarled in a way that revealed her repulsion at seeing Old Glory, “All these flags!”
Wow, beautiful description of something very ugly. Bravo!
Ane we’re supposed to stay awake nights worrying about an Iranian nuke on the East Coast because? I’d guess NYC stopped being part of America some time before 1900.
Way to spew the hate, little Hitler.
You just spewed some of your own. Recognize it?
Zombie ..doesn’t help to be right when no one (present company excluded) listens.
too many people with no skin in the game get to decide what happens. jeez who is that going to help or as holder says “my people”
BTW, the same guy who made alGore’s “Inconvenient truth” was one of the finalists this year with “Waiting for Superman”, about the EPIC FAIL in public education.
http://www.waitingforsuperman.com/
He set out to document everything every liberal likes to believe about public schools, found the reality rather… different, and, surprisingly, had the guts to kick against some left-wing houses of the holy.
Of course, while A Convenient Fraud was what the Anointed Class wanted to hear, WFS had a message that was an… inconvenient truth for them, so they couldn’t let him win.
No, it was even worse:
“WAITING FOR ‘SUPERMAN” WAS COMPLETELY SHUT OUT OF THE BEST DOC CATEGORY. Not Even Nominated, it didn’t fit their narrative. Davis Guggenheim, despite his “Inconvenient” pedigree, felt compelled to tell the truth about corrupt education unions.
Bien-pensant critics like A. O. Scott and David “I lost all my money in the tech bubble” Denby lined up to knife Guggenheim and his film. Critics who let accuracy slide when it came to Gore and Global Warming were suddenly strict when it came to shielding the American Federation of Teachers.
If you want to laugh out loud, read A. O. Scott’s boot-licking review of “Inconvenient Truth,” then read his one paragraph dismissal of “Waiting for ‘Superman.’” Global Warming requires urgency and filmmaker “responsibility.” Children of Color trapped by a self-serving bureaucracy? Not so much.
If you want to see a truly heroic filmmaker, go to charlierose.com and watch the interview with Davis Guggenheim. His documentary challenged the narrative and changed the discussion. No thanks to critics or the Academy.
have y’all seen the video of the “noodles and co is a dictatorship” employee?
it is a video of a young employee complaining that noodles is a “dictatorship” becuase the employees are actually told what time to come to work, how to do the work etc. he thinks the co should be unionized to get past this “dictatorship”…look for him on the unemployment line..or comedy central
This young man is where our country is and the hands that will be guiding it..scary as hell
we have done a poor job of guiding the youth of this country, and there is too much media coverage of the wrong things.
Good article. No leftist ever profited from telling the truth. But, you tell us some surprising things about yourself. You admit to (1) watching the unwatchable, the Oscars, (2) reading the newspaper, (3) visiting Berkeley, and (4) actually watching the movie, itself. There is little value in doing any of these things. We appreciate your willingness to endure such pain and your bravery in reporting on it.
Actually, I’ve never seen the movie in full. I’ve just watched various clips and scenes from it, and read dozens of reviews.
As for watching the Oscars — it was more of social visit with friends, rather than a dedicated TV-watching experience. Normally, I never watch TV of any kind…most people don’t know that about me. I don’t watch TV except on rare occasions, almost always at someone else’s house. At my own home, the TV (I do admit to owning one) remains off except for use as a monitor to watch rented movies on DVD. I’ve never even seen the dreaded Fox News, except as clips on YouTube.
Same here… I have a tv set, and use it only for watching dvds, if then. I watch most of them on my laptop. I see news reports only in clips from websites that I frequent. I feel much calmer this way.
Oscar night I was in the other room surfing the net until I heard Bob Hope’s voice which caused me to jump out of my seat and run into the living room. Mr. Hope, in his two minutes of virtual-hosting-from-the-beyond, did better than anyone involved in the entire rest of the show.
Man I miss Bob Hope!
But more on topic, my stomach really turned when, after the meltdown, none other than Bwany Fwank said, “I’ve been in favor of people renting all along….” The instant pivot on a lie was breathtaking.
The other was seeing Duke Cunningham (a true American hero) go to jail because he had a contractor build him a house while Chris Dodd gets a sweetheart deal from Countrywide and somehow becomes the owner of an Irish cottage.
Just what is the difference between getting a free house from a contractor (Cunningham) and getting a “loan” that is so cheap it’s like being given tens or hundreds of thousands of dollars (Dodd)?
How does this connect to the presidential election? According to this 2007 article in the Chicago Sun-Times, Barack Obama’s mysterious years as a “community organizer” were spent doing this exact thing: Accusing banks of racism for not giving loans to underqualified minority borrowers:
Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods.
(A case which, by the way, Obama won. Add another risky loan to the pile.)
Is it just me or is this the very first indication that Obama ever actually practiced law as opposed to studying law or being on the Harvard Law Review? Does this mean that Obama actually stood in a courtroom and participated in a trial as an attorney and won? Is it possible the man has a genunine achievement in his past after all, even if it is this rather dubious one?
Up until now, I’d gotten the impression that he never once litigated an actual case and simply worked as a “community activist” since his graduation from Harvard….
Sorry, the initial citation was supposed to be in italics as follows:
How does this connect to the presidential election? According to this 2007 article in the Chicago Sun-Times, Barack Obama’s mysterious years as a “community organizer” were spent doing this exact thing: Accusing banks of racism for not giving loans to underqualified minority borrowers:
Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods.
(A case which, by the way, Obama won. Add another risky loan to the pile.)
Is it just me or is this the very first indication that Obama ever actually practiced law as opposed to studying law or being on the Harvard Law Review? Does this mean that Obama actually stood in a courtroom and participated in a trial as an attorney and won? Is it possible the man has a genunine achievement in his past after all, even if it is this rather dubious one?
Up until now, I’d gotten the impression that he never once litigated an actual case and simply worked as a “community activist” since his graduation from Harvard….
Actually, I’ve worked in law firms for years, and most attorneys never stand in a courtroom and “try a case.” It isn’t done that way anymore. In fact, I’ve met very few lawyers (in a 25 year career) who have ever stood in a courtroom and worked a trial. These days it’s all about the settlement.
I presently work for one of the top 10 law plaintiffs’ attorney firms in the U.S., and in the year and a half I’ve been there, I’ve never seen any cases actually go to court. In fact, one of the founding partners is on record saying that he considers a case going to trial a failure.
Most of a lawyer’s work nowadays has to do with making copies of exhibits, copying other pleadings and changing the names in them, doing Lexis searches, and assorted other boring rubbish. Courtrooms are where they go to make deals, not present evidence or be rhetorically brilliant. (Teleprompter, remember?)
And to Mr.Zombie: thanks for another great article. I’m one of your biggest fans here in the Bay Area, and appreciate the photos and stories. It’s good to have at least one alternative voice out here in the Big Liberal Kahuna.
I’ve heard that he participated in two cases before he got bored with that “job”, but from the sidelines, not the courtroom.
I’ve also read that his fellow non affirmative-action lawyers were perpetually irritated with him in the 8 or 9 months he had “the job” because he spent all of his time with his legs on the desk, writing his self-indulgent autobiography which he was never able to finish because he can’t write or even spell very well.
After those months, he moved on to his next triumph.
Is it just me or is this the very first indication that Obama ever actually practiced law as opposed to studying law or being on the Harvard Law Review? Does this mean that Obama actually stood in a courtroom and participated in a trial as an attorney and won?
If ACORN hadn’t successfully scrubbed its website in anticipation of the 2008 campaign, you’d have seen a section with a jolly young Obama ‘helping’ them via legal advice and lawsuits of just this sort. I’ve never seen such a successful campaign by a national candidate to obliterate the records of academic and post-academic activism on the extreme left. His public image was a fraud, by omission, with major help from the MSM which eagerly helped pull the curtain by betraying its ‘news-reporting’ profession.
Mostly through the writings of Stanley Kurtz and Steve Diamond (a labor professor, who worries about Stalinist authoritarianism), some bits of the Obama backstory have seeped into the fawning information flood. The public is blissfully, perilously unaware.
And now some of those fatcats are the only hope we have of someone standing up for liberty and prosperity in the face of the Platonic mob. Should we trust them? Who is John Galt?
“I must start by pointing out that three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail — and that’s wrong.” Well, there was that Bernie Madoff guy who BTW recently said that the US government is a ponzi scheme. He being an expert would know a ponzi scheme when he sees one but so do most of us, especially the classic ponzi scheme of Social Security. NRO, Michelle Malkin, Zombie, and many others were all over this before the election, (I even blogged about it, http://dunellanoestachato.blogspot.com/2008/10/bail-out.html) but since most people still believe the drivel they are spoon fed by the MSM the truth will be ignored and Fannie and Freddie are still alive and kicking. That’s where you should look for people to jail.
The first paragraph of the article says it ALL! America, post WWII has produced virtually nothing more than educated morons who facilitate the nations social and political ideological enemies….be they nations or other powerful organizations.
The most genius folks I’ve known or made aware of in my 82 years barely had more than sixth grade educations. Yet, they were able to conclude such mistakes as the first and second U.S. Banks and eventually the Federal Reserve. Fast forwarding, the old timers were genius in rejecting global economies over charity assistance. They were likewise, informed of the dangers of a World bank and convereting back to a fiat currency in leiu of a gold and silver standard….and the list goes on!
My great grandpappy said this: “If you have what everybody wants, you’re troubled with two things…folks trying to take what you have, or….destroy what you have.”
Todays American generations of educated morons ‘facilitate’ both!
Whats worse is, the ease with which our government today, sends off our guys and gals to shed their blood in lands that pose NO great threats to the American dream while essentially standing down and ignoring all those entites and governments who truly do threaten our dream given us by our founders and once defended with just cause.
Mass ignorance on the part of the people always prove disaterous! The people can either become factually informed or continue to squander the worlds greatest experiment of opportunity our founders gave to us.
Following/electing educated morons will only further facilitate our nations demise!
Discerning moron’s and educated moron’s from true traditional constitutionalist American citizens as leaders, is not all that difficult. You simply measure all their ‘rhetoric’ and lives [against] the social, moral and constitutional standards of opportunity our founders intended. IF one makes such a sound checklist, it is easy to conclude that few if any running for office today…qualify. I don’t know how anybody saves us from where we are today…but I trust there are those who can somewhere if we can find them and pursuade them.
America’s newer generations of educated morons have given away, forced away and or destroyed, all that it takes to maintain a successful economy needed to sustain its people and nation.
God help us!
excellent comment
it used to be self reliance, responsibly and pride. it seems that has been discarded by the last few generations.
regards
Thanks! America’s newer generations haven’t a clue how stupid they in spite of those sheepskins they have hanging on their walls.
Adjusted for all the ‘arbitary’ circular inflation of the last several decades, the dollar is worth about the same as the mid 50′s. ALL of their excessive lifestyles beyond that of the mid 50′s dollar value…. comes ONLY through corrupted (intended) consumer credit. Thus, we have the dummest, richest, own nothing, poor folks on the face of the earth. Most begin adulthood in debt and die in massive debt, owning few things in full….leaving the losses they create on the backs of lending institutions, family members and society at large.
The reason most folks of both parties turn rabid dogs in attack mode, which they will do, when tough changes are actually being discussed for implementation is, that they lack the basic skills and resources of suvival outside their taken for granted corporate and government welfare. Few today know how to live on the land for survival and haven’t the resources of dirt in the first place….not even a front or back yard! Few have the skills to frabricate or innovate necessities of survival in lieu of gas and electricity appliances. Can you imagine the millions who have flocked to the big cancer cities of America chasing the almighty dollar, if things collaspe much more?
So, I have little to no respect for todays educated morons, be they self perceived ‘leaders’ of some sort or otherwise! American’s will have to pay the fiddler they danced to at the party for the last 50 years….and for those who didn’t go to the party, the bounty of our farms and ranches will be open to them.
that libified stare is something i have a very hard time specifically describing but i definitely know when i see it
there is also that androgynous, hutt-like appearance that overcomes the current crop of statist bureaucrats: geitner, holder, lisa jackson, susan rice, sibelius, valerie jarrett, it’s quite creepy
There is a reason Private banking is the fastest growing segment of Finance, and creates ten times the wealth of Mainstream banking..and why Mainstream banks are terrified of this trend. Private banking is cash and wealth based, mainstream banking is fractional and credit based. The end result, no matter how hard politicians and Feds and German central bank systems try, is the collapse of Western European banking system. It may be 5 years, maybe 10, but in the end the credit markets will not be able to sustain defaults coming.
If people seriously believe the bank crisis was brought on by the 2% that could not pay their mortgages, then please bury your heads even further into the sand. Greenline and any other group had no more to do with bank crisis than anyone reading these posts, it makes for great rhetoric but falls short in reality of the marketplace.
For those that utilize reason and logic, investigate Private Banking and for your own safety move your assets there.
a. it’s way more than 2%.
b. the problem was compounded by the credit swaps and other derivatives that were designed to hide the bad loans (as directed by your friendly government)
c. then the compounded problem was compounded because the GSA’s gave every impression that the US gov would back up the crap…which it did
d. and then the compounded compounded problem was allowed to go on way too long because libwit idiot politicians (drooling Barney) demanded that the nightmare continue
e. and then the compounded compounded problem was made even worse than that because it began to impact average peoples HOMES.
So yes, it was about 90% because of the CRA and it’s frothing greedy marxist politician supporters, 10% about the fed and a big fat 0% about your irrelevant point about private banking.
alex…you had some good comments going until you got to this comment: ["If people seriously believe the bank crisis was brought on by the 2% that could not pay their mortgages, then please bury your heads even further into the sand."]
There is no legitlate [historical] data on mortgage defaults that I’m aware for which one can compare the 2% you elude to.
That said, I have no problems understanding that even a 2% default could ['trigger'] the two-prong collaspe of the housing and commercial mortgage bubble economy. Consider that Fannie and Freddie [ALONE] hold more mortgage debt than most other nations economies of the worlds.
Then ask yourself WHY the sharkster’s felt it [necessary] to devise a credit default mechanism to market worldwide….to obviously some pretty stupid people….even domestically! Maybe ask Dodd on his dying bed!
[“According to Federal Reserve flow of funds data, the banking institution share of total mortgage assets declined from a peak of about 75% in the mid-1970s to about 35% in 2008,” said John Krainer, Senior Economist, in his analysis.
“Much of the decline in banking institution housing portfolios over this period was related to the expansion of the government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac, and Ginnie Mae.”]
["In the first quarter of 2006, non-agency securitization (jumbo loans, option arms, subprime, etc) peaked at a staggering 40 percent of new loan originations, while Fannie and Freddie held about 50 percent.
Meanwhile, all that mortgage securitization resulted in banks, thrifts, and credit unions ceding market share to capital market investors, who sliced and diced mortgages to mitigate risk."]
By the end of 2009 95% of mortgage liabilities were held by government agencies or backed guarantees.
One has to put some hard numbers to those percentages to grasp the enormity in addition to the potential trend(s)forthcoming.
The mortgage credit scheme (housing bubble economy) created by congress was a complete corrupt/sham from concept to finish…and we’re a long ways from the finish line.
I don’t know the hard numbers but whatever they are, along with the overall risk factor, I have no problem understanding it very likely was the cause of a global economic collaspe. The high risk ‘junk and speculators market’ was allowed to grow very big and essentially unregulated worldwide over the last couple of decades starting from the days of the technology bubble. Obviously, the losses of the technology bubble could be easily absorbed and the housing bubble losses….not so much.
If you have a legitimate ‘hard numbers’ source I would be interested in seeing them.
the total debt is already unsustainable. like proreason said the derivatives alone sink the country. when obama is done it will be too late to turn things around even if the republicans find a spine.
imagine what will happen when health care is completely taken over by the government. one sixth of the economy will stop paying taxes and start sucking on taxes.
the spending and printing of money hasn’t stopped.
I fear it is over.
Even assuming the default was 2%, that’s plenty for a tipping point.
Blunting the asset appreciation growth rate implied in derivatives automatically lowers the value of those deals on one side, meaning someone has to come up with money. As it is mostly banks making derivative deals, they now have increase their capital holdings at the same time they are paying the short end of the derivative deal Real Cash Money, because the short guys do not want the real estate or more bank paper they though was worthless enough to leverage to the hilt to be against, they want their RCM. Banks get hits on their capital from both sides, meaning a lowered ability to or interest in loaning even more money in the mortgage sector.
The people barely in their house and planning to refinance next year on a higher home value are now screwed, they will default next year, and take home values down with them another peg. The people who can make their payment but realize they are underwater are the next to bail, along with the people who see the long line forming outside the default processing center and realize they can live rent-free in their houses for months to years. People with no-recourse mortgages that are at least honest might just mail back the keys to their house and move out, the squatters will drag things out as long as possible. Meanwhile, home values will continue their steady decline and break every promise built on the assumption that US homes always appreciate.
In Michael Lewis’ “The Big Short”, the main characters realize that their derivative contracts will pay off if there is just a decline in the rate of appreciation, much less an actual decline in asset prices. Your 2% of defaulters are the key to the whole domino chain. Note that this is not a hypothetical — this really happened, and continues to happen.
I’m wondering why the credit rating agencies are still in business. Their role in this is rarely mentioned and yet just as crucial as the 2% of initial defaulters.
Is that like ‘the Innsmouth Look’?
Good article (as usual, when Zombie is the author), except the CRA was pretty much designed to get financial institutions to make risky loans to people without dough right from the get-go.
Just another government mandated wealth redistribution scheme, pure socialistic nonsense, and (also as usual), in the long run, as socialist schemes always do…it failed miserably.
It’s a bad law, and ought to be repealed.
Eh, you can see the Berkeley expression in many places. Here in North Carolina it is readily found in Chapel Hill, Asheville and Durham. It sort of involves a little head wiggle, a setting of the jaw and an expulsion of inanity through the lips.
If anyone in the financial meltdown deserves prosecution, it would be those who made it possible; Greenspan, Frank, Dodds and so on. The people on Wall Street merely played within the rules the idiots in Washington gave them. They were incompetent, not fraudulent. No law against not knowing what the hell you are doing. Obama proves that every day.
I agree. One can see the Berkeley expression in many places – Madison, WI and Portland, OR being two of them. I’ve spent a great deal of time studying the residents, and I have never been able to completely fake the smugness. Perhaps the lucidity in my eyes just gave me away.
For a little humor, South Park did a parody on this a few years back:
http://www.southparkstudios.com/clips/155203/the-perfect-storm-of-self-satisfaction
Just for the record, Calvin Roberson still lives in his house on the Chicago south side. It’s a 1200 square foot house valued at $20,000.00. Sometimes it works out when you help the little guy.
The documentary also features Barney Frank.
http://www.youtube.com/watch?v=CI3hE2sYcN4
timings of frank:
25:40, 27:35
This is an excerpt from a talk I gave back in ’09 in order to shed some light on the root cause of the crisis.
A brief explanation of Fannie Mae and Freddie Mac is needed
A bank, mortgage bank or mortgage loan broker originates a loan.
Where’s the money come from? Fannie and Freddie provide the liquidity – they borrow money, at a discount from the government.
Fannie and Freddie are not government agencies, instead they are publically traded companies with federal backing via implicit loan guarantees.
As such they are neither fish, nor fowl.
There were multiple unsuccessful efforts to reform Fannie and Freddie. It was well known that they were too big.
So what did leadership do? They expanded the reach of the Community Reinvestment Act.
From our current vista, let’s consider two metrics to assess whether the CRA worked.
In 1970 home ownership hovered around 63%. In 2007 home ownership rose to 68%, a 5% increase over 37 years. I suspect ownership is lower today and may be less than 1970 levels.
What about minority ownership? It too rose 5% over the same time period. Where is it today? I don’t know, but suspect it too is much, much lower than when the CRA was established.
So how did the wheels fall off?
Besides the known unrestrained growth of Fannie and Freddie a second flash point was the expansion of the CRA.
In 1994 the President decided not enough was being done to expand home ownership. So the CRA was liberalized and enabled Fannie and Freddie to become more aggressive
This was proposed under the President’s “National Homeownership Strategy” (1994):
http://www.huduser.org/publicatdions/txt/hdbrf2.txt
“MAKING FINANCING MORE AVAILABLE, AFFORDABLE, and FLEXIBLE: The inability (either real or perceived) of many younger families to qualify for a mortgage is widely recognized as a very serious barrier to homeownership. The National Homeownership Strategy commits both government and the mortgage industry to a number of initiatives designed to:
o Cut transaction costs through streamlined regulations and technological and procedural efficiencies.
o Reduce down payment requirements and interest costs by making terms more flexible, providing subsidies to low- and moderate-income families, and creating incentives to save for homeownership.
o Increase the availability of alternative financing products in housing markets throughout the country.
AND OPENING THE HOMEBUYING MARKET TO UNDERSERVED POPULATIONS:
Discrimination, inflexibility, and lack of information continue to keep homeownership out of reach for many Americans, including racial and ethnic minorities, people with disabilities, and others. The National Homeownership Strategy acknowledges a special need and presents a special opportunity to reach out to historically underserved populations through actions that:
o Promote fair housing and fair lending by removing barriers that deter many Americans from seeking buying, insuring, or maintaining a home in the neighborhood of their choice.
o Increase employment diversity in the homeownership industry.”
This led to the expansion of no-income, no-asset, stated-income, 100% loan-to value, sub-prime, etc. high-risk product expansion.
Wall St. met the push with open arms and new products with implicit guarantees of federal backing from Fannie and Freddie
But there was a problem. The balance of power changed in congress in 1994. And many were concerned about the unrestrained growth.
What did the President do? He had the Treasury Department modify the rules.
The new rules made it more difficult for banks to secure a high CRA rating. They had to meet enforceable lending quotas in low income areas.
Bank examiners would use loan data to determine if banks were lending in the “right” census tract, to the “right” minorities, and in the “right” income brackets.
It was lending by diversity. It remains that way today.
One cannot have a loan underwritten without having complete ethnicity questions answered on the application. If a borrower refuses to answer then the person submitting the application must make a determination and note that it was made by visual inspection. No kidding – a loan will not be underwritten without those blanks completed.
The CRA examiners were not interested in the ability to repay, the amount put down, or the credit of the borrower.
The language in the 1977 CRA legislation that lending be“…consistent with safe and sound lending practices” was thrown out the window and ignored.
Consider the banking sector M&A activity, the number of new bank charters and the expansion of existing charters from 1977 until 2007. All were consider under the duress of CRA lending activity.
But the President did not stop there; he didn’t think the expansion efforts went far enough.
So, he used the Housing and Urban Development (HUD) as a tool. How?
Well if CRA was the foundation for the crisis, and the ’94 reform was the flashpoint, then HUD changes were the gas on the fire.
How so?
HUD only required Fannie and Freddie to maintain a 2.5% capital reserve.
The banks, at that time were required to maintain a 10% capital reserve. That, it now appears, was not nearly enough given the large amount of risk that was being absorbed.
Most would consider a 2.5% reserve requirement an issue. Congress did not.
Consider that Fannie and Freddie as a GSE monopoly, providing implicit guarantees now hold around 50% of all mortgages.
That was around $6 TRILLION in loans.
The expanded loans were themselves not the issue.
Ignoring historic lending guidelines under regulatory duress led to over $1 TRILLION of this total to become sub-prime or alternative loans.
Fannie and Freddie were unrestrained.
They controled 90% of the secondary mortgage market. The market that buys loans from banks, packages, securitizes and then sells them.
Keep in mind that because they are a GSE with implicit guarantees, they can borrow money at below market rates.
But that’s not all.
Fannie and Freddie used leverage, even with only a 2.5% reserve requirement.
How much did the lever? They used their balance sheet to borrow $1.5 TRILLION to purchase these loans.
So what exactly was the impact of the CRA liberalization, the increased regulatory duress, and the easing of HUD requirements?
Subprime loan totals grew from a risk tolerant and manageable $35 billion in 1994 to over $1 TRILLION.
There of course is more, much more, but you get the point.
Thanks for the full explanation of the process which I hyper-succinctly summarized as “and then ramped up during the Clinton years.”
As I understood it another big factor in the implosion was the Basel II conference which changed the accounting rules from “mark to model” to “mark to market”.
What this did was to revalue, downward, the worth of all the mortgage backed securities which were the foundation for the credit system. Therefore nobody could borrow because their collateral disappeared suddenly.
Does this sound right to you?
You are welcome. Clearly I loved your article, the topic is near and dear to my heart and I know the “stare”. Those who haven’t seen it should watch the South Park episode on smugness. Though it deals with hybrid’s the cross-over is the same.
Here is some more history. If the Hollywood gentleman wants to go after corporate leadership who should be in prison he should start with Fannie Mae.
Let’s look at FNMA. So who is supposed to regulate Fannie and Freddie? That too is an interesting issue.
That responsibility rests on the shoulders of the Office of Federal Housing Enterprise Oversight (OFHEO)
There is one, not so minor problem
Unlike every other major regulatory oversight organization, OFHEO is funded by Congress.
The same Congress that votes to renew OFHEO funding is the one that was receiving very large donations from Fannie and Freddie to block reforms.
Two items are of particular interest about the congressional donations.
The first is to look at those who received the most. They are in leadership roles then and remain so today actively picking winners/losers. That is, until the mid-term election changes moved many off of the Chairmanships of the Congressional committees.
The second is to consider the one recipient of Fannie and Freddie largess who received a disproportionate amount. How so? Because he only sat in office a couple of years, yet he received the second highest amount of donations.
I’ll let you guess who he is.
What’s the big deal? Everyone pays lobbyists, right?
Remember these are quasi-government monopolies. They are corporations with stock holders. You madam and sir likely own some of these companies in your 401k or mutual funds.
How much was spent?
Well one analysis shows Fannie and Freddie spent over $150 million on political donations over a ten year period.
These funds were spent to influence congress NOT to reform Fannie and Freddie.
But in 2004 something did happen.
It turns out there was an accounting scandal. OFHEO had to act and they did.
What did they find? It is a trillion dollar operation, there are certain to be some irregularities, aren’t there?
Well they found a “…Enron-styled accounting”, that’s what.
Keep in mind this is post Enron and Sarbanes-Oxley.
Keep in mind that those FNMA leaders are not in jail. You’ve likely heard their names only not in the context of the FNMA accounting scandal.
What did they do?
They cooked the books to the tune of $10.6 billion. But why, if things were going so swimmingly, would they need to do that?
So they could extract bonus money. One received close to $100 million and another reaped north of $25 million.
Not only are they not in prison, but one acted as a financial advisor to a recent Presidential candidate. I’ll let you guess which one. Another is a go-to attorney hired to fix big political problems such as Duke University’s behavior as a result of the lacrosse rape hoax.
Does it make you sick? Yeah me too.
In ironic fashion Mr. Ferguson is correct, it was an inside job, only it was executed by people he ignores to discuss in his movie.
Thanks for the wonderful history lesson. This should be sent to all taxpayers and voters.
It’s also further proof that the government can’t legislate its wishful thinking into existence. Just because we all think it would be just keen if everyone owned their own house, we can’t just rule it to be true. Just as we cannot rule “green” solutions to energy issues into existence. Liberals consistently fail to recognize this truth.
Hollywood hires Chris Dodd to be it’s number one lobbyist the same time as “Inside Job” wins best documentary.
No irony there.
I was about to turn off the tv when I saw that bald headed cross eyed commie launch into his fantasy-based speech, but this is the first time I have seen it mentioned anywhere. I assumed he was looking for a glory hole to man or something – never realized that’s a Bezerkley expression.
I am a former Wall St. banker. The crisis is 90% government caused. They used the CRA to force bankers to lend. They used Freddie and Fannie to insulate the bank from the risk. The crisis occurred because the bank had no skin in the game yet was forced to play. 10% was willful blindness on the part of the bank (or fraud in the Countrywide case) — but it never could have happened without the gov to mandate the conduct.
My wife was a commercial loan officer for a medium sized bank back in the ’90s and told me then that the bank was being pressured to make loans to people who were unlikely to repay those loans because of the CRA, and she was right.
Bingo.
This article is absurd. Of course people from Berkeley are smarter than the rest of us. I am so dumb, I live in a area where it gets cold and snows in the winter. “Berkers”, as I think they should be called, live in a wonderful climate. They having nothing to worry about, except maybe the huge tectontic fault underneath the city.
I guess it could be a Cal/Farm thing, but I call it “Palo Alto smug,” and it goes from The City all the way down the Peninsula to Almaden…
Whenever I visit Berkeley, I’m struck by something else–everyone seems to be in costume, affecting attitudes and striking poses. It’s a kind of Neverland for the malignantly infantile and dangerously self-important. They cluster in together for mutual protection and affirmation in their little tribelets–the trust-fund Fidelistas in one corner, the furious feminist vegans in another–all acting out their daddy issues on a grand stage of their own imagination.
It’s all a reminder that there, but for the grace of God (and my local draft board), go I . . .
You know, Zombie, I currently live in a red state, in a very Democrat dominant profession. And, as you might have guessed, I’m completely in the closet with my conservative leanings. It’s not such a big deal, as outside of my profession, I have plenty of Republican and Libertarian friends to hang out with. (as well as Dem)
But I’ll be moving soon, and the place I’ll be moving has often been called the most liberal bit of land on the East Coast. I know that I’ll be one of a tiny minority there… and I was wondering if you had any tips for how to peacefully coexist in that environment?
My coping technique to regard everyone around me as my troupe of unwittingly performing buffoon-jesters.
Whenever anyone or group in the Bay Area does something politically idiotic, I say to myself, “Dance, my pretties, dance!” and then use them as fodder to highlight the lunacy of left-wing thought.
never bring up politics
Jewels
“often been called the most liberal bit of land on the East Coast”?
The northwest and southeast corners of New Jersey are solid red and semi-rural. Thanks to the small size of the state and it’s abundance of highways, you can commute to the blue zones in about 30-45 minutes. You can make NYC in an hour, or take the train.
Unless you think there are other areas even more lefty than Blue Jersey? Nah, couldn’t be.
Great post.
Not to cast doubt, but I was curious about that Calvin Roberson case. I was especially curious to find out the follow-up. For example, the case was won, did Roberson had end up later defaulting on a mortgage?
One thing I found is an entry on snopes that claims the article to be a hit piece of sorts. The snopes piece also engages in misdirection and exaggeration, but still I was just curious what you thought.
It seems that the Snopes article pretty much confirms what I wrote in 2008 — Obama did work on the case, and the case was won. The only point of contention was whether or not the case only involved applicants were were indeed qualified. But as a class-action suit, just like the infamous Pigford case, it’s almost certain that plenty of hangers-on — in this case, unqualified would-be borrowers — jumped on board as well.
D. H. Lawrence first dubbed the Berkeley expression “the Oxford voice.” Here:
“When you hear it languishing
And hooing and cooing and sidling through the front teeth,
The oxford voice –
Or worse still
The would-be oxford voice –
You don’t even laugh any more; you can’t.
For every blooming bird is an oxford cuckoo nowadays.
You can’t sit on a bus or in the tube
But it breathes gently and languishingly in the back of your neck.”
And it ends: “We are, you must admit we are, superior.”
Wow — little did I know I had identified a classic loathesome “type” that transcended eras and cultures!
Obviously, none of you watch South Park. Visit the South Park website and look for episode 141 from season 1. It’s called Smug Alert!. It’s focus is SanFran but it’s just as applicable to Berkeley.
hahaha— one of their greatest episodes
i suppose zombie is taking one for the team by living amongst the smug let us just hope the zombster doesnt go jane goodall on us and morph into the very thing that is being observed/studied
Actually, it’s the opposite: I used to be one them, but I evolved to a different plane of consciousness after 9/11. I’m the ape who became Jane Goodall.
all the more power to you!!!
keep up the good work
Should Greenlining be prosecuted by the U.S.Attorney General for violation
of the RICO statutes? They represent nothing more than threats and organized muscle.
if “wall street insiders” scammed the world of trillions of dollars, where are those trillions of dollars?
The big mean Wall Street villains bought diamonds, furs and yachts with the money!
/s
The left wing narrative does not hold up to scrutiny. Since when is losing money evidence of greed? The point of making loans is to get paid back with a tidy profit. The federal government put pressure on lenders to make shaky loans. Surprise, the default rates were through the roof. The bad loans were then bundled as investments (as they have for decades). These bad loans reverberated through large financial institutions wrecking everyone and everything that came in contact with them. This was a direct result of federal policy. This is the way I understand the current mess we are in. If I’ve got it wrong please show me the error of my ways.
You are correct. The only detail left out was that the Greenlining Institute and their ilk were the “muscle” enforcing ( or rather, over-enforcing) the federal policy. If any bank didn’t cough up enough CRA-mandated subprime loans, Greenlining would play the race card on them in public. Worked every time.
Worked every time.
And that’s a huge problem now because it’s pretty much impossible to find a “safe” bank to put maney in. Even my local small-town bank just got cautioned for having too many iffy loans because they’re all afraid of the bad publicity if they tell someone “no”.
Zombie, you’re spot-on about the “Berkeley look” (went to grad school there), but I think the focus on CRA loans is misplaced.
In the Milken Center presentation I blogged here, they made the point that the forclosure rate of the CRA-triggered loans was nowhere near as high as that of subprime and alt-A loans.
The CRA may have provided political cover for the subprime movement – maybe – but it was mismanagement and corruption in the entire housing finance food chain (including and especially Fannie and Freddie) that brought down the house.
Marc
For at least the last ten years, the best way to make money was to take advantage of, often via leverage, the political class’s bipartisan irresponsibility.
Zombie, I think you’re more like Prof. Henry Higgins than Sherlock Holmes. Higgins, you recall, could immediately place anyone by their speech patterns the minute they opened their mouth.
Charles Ferguson is an active participant in the Democrats’ Dishonest Narrative (DDN). The DDN is rooted in Marx’s rejection of Western moral values in favor of the “inevitable” communist utopia. Any lie or deception is encouraged if it furthers the ultimate triumph of Marxism. Indeed, dishonesty is a sacrament among Marxists, for the greater good, of course.
Carter’s CRA 1977 required lending institutions to give qualified borrowers access to mortgage loans. CRA had little initial impact but growing controversy, as community activists (Alinsky and Obama were most prominent) agitated and demonstrated to gain mortgage loans for the poor. By the early 1990s, Democrats in congress had expressed support for mortgage loans for the poor and quotas were established for Fan and Fred to issue such mortgages, but these were sub-prime and Alt-A mortgages. In 1998, Clinton adopted the FRB Boston position that all mortgage borrowers were qualified regardless; the FRB Boston position was described in a booklet, “Closing the Gap” that gave detailed instructions on how to help unsophisticated borrowers commit criminal fraud against taxpayers. Well worth a read.
To make their mortgages more attractive and marketable, and not incidentally to help them to make their quotas, by 1993 Fan and Fred were fraudulently labeling sub-prime mortgages as prime investment grade paper. Then Fan and Fred executives realized that they could maximize their annual bonuses for meeting congressional quotas by shifting sales from year to year, and over $10 billion was fraudulently misstated in Fan’s and Fred’s annual reports.
Meanwhile, encouraged by congressional approval, rating agencies, banks, insurance companies, and lending institutions jumped on the Democrats’ bandwagon to provide loans to the poor, usually relying on Fan’s and Fred’s assessment of a mortgage’s creditworthiness. It was rather late in the game that everyone discovered that the Democrats in congress had created a corrupt house of cards that soon came crashing down in 2008. The sense of crisis with inadequate background information to lend perspective at the financial meltdown contributed to Obama’s election.
TARP was designed to maintain capital among financial institutions that were adversely affected by the Democrats faulty policies, and it was largely successful after the initial wave of bank collapses. Most TARP loans have been repaid, not including Government Motors. The mortgage borrowers that were the victims of the Democrats’ fraud are on their own and the housing market is in shambles, along with the economy.
Generally speaking, financial institutions were the least guilty of the involved parties, except when such financial institutions became entangled directly with congress, as Countrywide became entangled with Senator Dodd. But if you are searching for the guilty parties, the Democrats in congress should be first on the docket. All the screeching and whining about greedy financial institutions is an attempt to conceal Democratic Party guilt. This entire story is well documented if you are interested and want to take the time:
http://www.nevilleawards.com/fannie_freddie.shtml
Wow, I didn’t realize that Alinsky was one of the most prominent community activists supporting Carter’s 1977 CRA. That’s quite an accomplishment for a guy who died in 1972. It’s almost as amazing as the way that the CRA was responsible for the 50% or more of subprime mortgages from institutions not regulated by the CRA.
Subprime lending had been going on for a long time. What changed in the 2000s was: (a) Fannie and Freddie started buying subprime loans in order to meet ridiculous “affordable housing goals” imposed on them by the Bush administration, and (b) Countrywide tried to corner the market, and in the process both CW and Fannie drove the prices of subprime loans down far below what their risk should have demanded. When the inevitable defaults started, nobody had enough reserves to cover them, the loans became worthless overnight due to stupid mark-to-market accounting rules, and suddenly every firm on Wall Straet was technically insolvent. The Bush administration panicked and screwed up, allowing Lehman Bros. to fail which started the meltdown.
There is a really big story here, but it isn’t what “Inside Job” portrayed, and it isn’t exactly what Zombie is portraying here either. Bottom line, the four big banks who are left standing today colluded with witting and unwitting federal regulators and Congress, to kill everyone else in the mortgage business, and eventually to kill Fannie and Freddie. They want ALL of the business, from origination to securitization, and they are now very close to getting all of it. The Greenlining Institute was duped.
Robert Gnaizda = Eugene Lawson
Is Atlas shrugging yet?
“Eugene Lawson might just be the worst banker ever. Eugene is a pro at making bad investments. He dumped a lot of money into the Twentieth Century Motor Factory when it was under bad management. When the factory crashed it took Eugene’s bank with it, which in turn nearly took out the entire state of Wisconsin. Well, if you’re going to crash, at least do it with panache.
“Like a roach, Eugene emerged and scurried off to a cozy job in Washington at the Bureau of Economic Planning.” http://www.shmoop.com/atlas-shrugged/eugene-lawson.html
“It’s a great responsibility,” said Eugene Lawson, “to hold the decision of life or death over thousands of people and to sacrifice them when necessary, but we must have the courage to do it.” His soft lips seemed to twist into a smile.”
Robert Gnaizda = Eugene Lawson
Is Atlas shrugging yet?
“Eugene Lawson might just be the worst banker ever. Eugene is a pro at making bad investments. He dumped a lot of money into the Twentieth Century Motor Factory when it was under bad management. When the factory crashed it took Eugene’s bank with it, which in turn nearly took out the entire state of Wisconsin. Well, if you’re going to crash, at least do it with panache.
“Like a roach, Eugene emerged and scurried off to a cozy job in Washington at the Bureau of Economic Planning.” http://www.shmoop.com/atlas-shrugged/eugene-lawson.html
” ‘It’s a great responsibility,” said Eugene Lawson, “to hold the decision of life or death over thousands of people and to sacrifice them when necessary, but we must have the courage to do it.’ His soft lips seemed to twist into a smile.”
Here in Atlanta you can get “the Berkley Expression” in Little Five Points, Atlanta’s wannabe Greenwich Village. Not just in L5P itself, but among the artsy/New Agey set that think of L5P as their neighborhood-away-from-their-neighborhood. The suburbs may be Republican, but most of the city is either ghetto-Black lockstep Democrat or uber-”liberals” who think themselves superior to the conservative Christian South that surrounds them. The evidence of that alleged superiority eludes me, since as a libertarian agnostic, I see the Cult of the State (of which they are faithful zombies) as about as intellectually respectable as the Church of Snake-Handling Inbreds in East Jesus, GA.
I love you Zombie, you’re one of the best but:
Are you really trying to absolve the plutocrats who own the banks along with govt policy from their responsibility?
If the right wing and tea party keep following this line of attack they will make themselves a laughing stock. Govt policy created this problem because govt policy is owned by Wall Street:
Ritholtz on the CRA:
http://www.ritholtz.com/blog/2009/06/100000-cra-challenge/
Denninger on the Credit Bubble:
http://market-ticker.org/akcs-www?singlepost=2137745
The CRA was a TINY portion even of Subprime and Subprime was a TINY portion of the housing bubble which was driven by Federal Reserve holding rates too low for a DECADE and MANY other factors (read the links) but PLEASE don’t use this simplistic partisan line of attack, it’s simply incoherent.
http://jiujitsutalk.com/index.php?topic=13427.0
I had seen several articles before this, that have detailed the role of the community reeinvestment act, and the dems coddling of fannie mae, in the financial. But this article is a pretty interesting insight into the ability of leftist film makers to lie, and rewrite history. In this case by making one of the groups that were one of the prime causes of the crisis, into a hero that tried to prevent it. They obviously have no shame, and as you said are actually smug about their lies. Perhaps their worldview is so distorted they might even beleive those lies. Thank god there are blogs like this one to expose them.
32 Howe: Since when is losing money evidence of greed?
“Bulls make money some times; bears make money some times; but pigs get slaughtered.”
Disastrous losses very often follow overreaching attempts at “big” profits, especially in a “bubble” market.
As long as the real estate market was rising, there was big money to be made in writing mortgages, and the more mortgages the bigger the money. Bank and financial regulators are supposed to impose restraint on lenders, but the CRA reversed that control. The loans issued explicitly to satisfy the CRA were only a fraction of the dubious mortgages issued, but they set the trend. If you can loan a busboy $100,000 to buy a condo, why not loan a bus driver $500,000 to buy a McMansion?
Lenders were making tons of money writing mortgages. Wall Street was making tons of money reselling mortgages. The mortgage profiteers threw lots of money at the politicians on both sides. We had a great big party, and nobody wanted to be the pooper.
In the mid-2000s, Rep. Cliff Stearns of FL started probing Fannie and Freddie’s dubious practices. House Speaker Denny Hastert pulled him off, and shifted jurisdiction to a subcommitee chaired by Mike Oxley (who had had about a dozen fundraising events organized for him by Fannie Mae execs).
And the Bush administration was reluctant to do anything that might be seen as obstruction of home ownership by the poor.
In short, there’s plenty of stick to go round.
Where’d the money go? The Sandlers, who ran Golden West Financial, collected $2.5 billlion when GWF was acquired by Wachovia. They are among the biggest financial supporters of Democrats and the left-wing network (such as the “Center for American Progress”).
Probably made the film to rebut your original and obvious point.
A policy of fudging and obscuring the truth that continues and is obvious in the bonuses paid to top bankers and consequent outcry.
However there is a further question: Why do the bankers go along with it?
Because it’s hard to turn down several million dollars, or are they all in it together, somehow?
What, pray tell, exactly are the academy awards? Anybody? Hello……..(silence as the echo fades.)ITYS.
SUIBNE
Zombie, great commentary on the look of a left wing drone (as usual).
I have to disagree some on the verbiage in your article though. It appears to give some slack to folks who were indeed bad guys.
“Forced into this situation, the banks then went to great lengths to disguise the risk they had foolishly assumed; to fob the bad loans off on unsuspecting other investors, they devised convoluted financial instruments that obscured the danger of the investments; and so on.”
It is the devising of those complicated packages to profit from the risk forced upon them that was instrumental in the collapse of the housing market.
I dont believe anybody was forced to do that.
“It is these after-the-fact shenanigans that Inside Job focuses on. And like any good propaganda, it’s effective because it’s technically true: Everything shown in the film pretty much did happen as depicted. But here’s the key point: It may be true, but it’s irrelevant. The filmmakers are focusing on the glorious gory details of the financial explosion caused by the subprime loan crisis, but they aren’t showing you who lit the fuse.”
They certianly did light the fuse.
I love this video of the democrat “usual suspects”(many with the Berkeley smirk)actually defending the status quo at the time, when republican lawmakers wanted to bring this arrangement around the bend, and were actually stumping for more reulation on FM/FM.
Maxine Waters especially is loathsome in this clip.
http://www.youtube.com/watch?v=_MGT_cSi7Rs
You have a great photo on your website that captures the glazed eye Berkeley smirk already.
http://www.zombietime.com/hall_of_shame/135-3575_2IMG.JPG
Okay, say this redlining to greenlining shenanigans is all true (I have no reason to suspect it is not).
It is STILL a fact that if the banks had not had a vehicle to hide their bad loans (no matter how they got hoodwinked or threatened into making them) we would not have had the game of hot-potato that ensued.
And I’ll grant that they were ingenious in passing the hot potato on to investors, but I can’t go down the garden path with the author that these investors did not know what was going on and weren’t devising their own ingenious ways to pass the potato on even further.
So, no matter how it got started, everyone played along in the game and thought they could win (from ordinary people gambling on real estate valuation increase on up to the big guys in international markets peddling this “goat poo”). They all were in on the ponzi scheme and they all smuggly thought they could pass it along for someone else to deal with … until
Kablouey!
Now, how the Hell does all this mean that the entire citizenship of the USA (plus people not even born yet) end up with the hot potato? Please explain.
I would be happy if everyone who played the game had to pay for playing this stupid game and callously trying to pass the buck, even the ‘risky borrowers’.
But I will not accept that we ALL have to pay for this casino jaunt … it was Bush + Obama, McCain, H. Clinton (anyone who would have won the presidency) + a majority of the 110th Congress who labeled current and future US citizens as SCHMUCKS in perpetuity.
It is these people who need to be in jail. Every single one of them who passed the buck to American citizens for who knows how many generations in the future need to be at a minimum out of office pemanently and preferrably in jail as traitors to the United States of America.