Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, 1% Went to Wages

[jgarden]

Europe wasn't doing great...it's been propped up by the U.S. for decades. They spend virtually nothing on national defense, and use the saving to supporting their crumbling welfare states. Now, with declining birth rates, their just aren't enough native born young workers to support the promised benefits...and hence, riots.

As Margaret Thatcher so aptly noted: The problem with Socialism is that sooner or later you run out of other people's money.

Here we go again -sources, proof!

The last I time I asked her for proof, "boedicca" sent me a nasty comment on "Latest Reputation Received."

Given the source, I took it as a compliment!

 

[jgarden]

“I think that people at the high end, people like myself, should be paying a lot more in taxes. We have it better than we’ve ever had it ...”
(Warren Buffett, CEO of Berkshire Hathaway, 11/22/2010)

“The rich are always going to say that, you know, ‘Just give us more money, and we’ll go out and spend more, and then it will all trickle down to the rest of you.’ But that has not worked the last 10 years, and I hope the American public is catching on.”
(Warren Buffett, 3rd richest man in the world, 11/22/2010)

Warren Buffett: Trickle-Down Economics Failed; More Taxes For The Rich | Veracity Stew

Perhaps Buffett is overestimating the intelligence of the many Americans.

Deep thinkers like "Oddball," "CrusaderFrank," "boedicca," and "whitehall," just don't get it - and never will!

And then there are the idiots who believe his BS.
Maybe you can show me how his $60,000 a year secretary paid 30% in income taxes? LOL!

What wouldever possess "Toddsterpatriot" think that he is a more credible source than Warren Buffett?

Conservatives are great at making unsubstantiated assertions and then either retreat into "denial mode" or try to change the subject - most in this Forum couldn't provide a credible source if fell out of the sky and hit them on the head!

 

[Quantum Windbag]

I cheated, I clicked the link in the story on Think Progress.

I didn't challenge the data because it didn't matter to me, but, lesson learned, always double check thinkprogress...

or" i live in a bubble, and nothing is going to change my opinion"

Yeah we are used to this ignorance.

You are trying to defend the findings of a report that does not even exist, and Trajan is the one that is not willing to change his mind?



How?

 

[Raoul_Duke]

Obamacare is deregulation?

Please show me some of the deregulation that occured in the financial industry under Bush.
Was Sarbanes-Oxley the deregulation you were thinking about?

BTW, Obama has the worst job growth of any President.

Bush deregulated the mortgage industry pretty much entirely. one of the major changes was that he changed the rules so that banks and mortgage originators no longer had to hold mortgages to maturity and could sell them immediately.

That is an interesting claim. What was this rule that forced banks to hold mortgages until maturity? When was it created?

Maybe you have a link showing when that regulation was eliminated?

Or were you imagining it?

Here you go. This is a link to one of the most popular financial sites on the net, it's run by a guy called Barry Ritholtz. Barry is a quantative analyst and owns an investment firm that looks after a couple of billion dollars. He's a regular face on CNBC and Bloomberg. Barry was one of the first guys warning that the deregulation of the housing industry was leading to the kind of meltdown we got in 2008. This is just one link but if you read through his archives you'll find endless more links in real time that go into endless detail about the whole thing. You could also go through the archives of quite a few business pundits, people like Kudlow for instance, who were huge cheerleaders of the whole mortgage deregulation thing at the time it happened and predicted fantastic profits, urging investors that Countrywide and Ameriquest stock was a great investment. Anyway, here's Barry :

I am working on something for The Economist -- its an Oxford style debate on the current crisis. The proposition being discussed is: "This house believes that it would be a mistake to regulate the financial system heavily after the crisis."

Any comments you may have on this would be appreciated -- my final version is due later today.

My biggest problem is trying to cover a lot of ground in just 500 words . . .

DRAFT:

Over the past 30 years, the United States has moved from an environment of excessive regulation to excessive deregulation. This philosophical shift was taken to irrational extremes, and it is the heart of the current financial crisis.

A brief history: Post War World II, the global economy expanded dramatically. By the late 1960s, the U.S. had an expansive bureaucracy. Regulatory oversight had become time-consuming, complex, and expensive. Eliminating this excess regulation started with President Jimmy Carter, and dramatically accelerated under Ronald Reagan. Originally, only the most expensive and onerous provisions were targeted. But eventually, deregulation became a religion, and effective and necessary safeguards were removed along with the costly ones.

Free-market deregulation became a misguided rallying cry of conservative ideologues. The U.S. moved from a state of excess regulation to radical de-regulation.

In 1999, the Glass-Steagall Act was repealed, allowing insurers, banks and brokerage firms to merge. In 2000, Derivatives were exempted from all regulatory, supervisory or reserve requirements by the Commodity Futures Modernization Act.

During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

~~~

To show the impact of deregulation, consider the underlying premise of all credit transactions – loans, mortgages, and all debt instruments. Over the entire history of human finance, the borrower's ability to repay the loan has been the paramount factor in all lending. With mortgage, this included elements such as employment history, income, down payment, credit rating, other assets, loan-to-value ratio of the property, debt servicing ability, etc.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

This represented an enormous change from the past.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

~~~

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

In business, the profit incentive leads to similar behavior. We push the envelope, tap dance close to that line, and then blow past it.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession. The total cleanup costs are scaling up towards $10 trillion dollars.
All due to an excess of deregulatory zeal . . .

The Big Picture


And just to add a little more of Bush deregulating the mortgage industry, here he is making a speech in 2004 :


I’m going to tell you another statistic, which is an amazing statistic given what we’ve been through. Housing starts in 2003 were the highest in a quarter of a century. Homeownership sales were the highest ever. Sixty-eight percent of homeownership — the homeownership rate is the highest ever. And that’s fantastic news for America. We want more people owning their own home. There’s nothing like saying, this home is my home. (Applause.)

There’s nothing better than somebody over there saying, welcome to my home. And we’re about to talk to some first-time homeowners. And I want to share their stories with you — they’re going to share their stories with me, and you’re going to get to hear it.

I do want to talk about a challenge for our country, and there is a minority homeownership gap in America. Not enough minorities own their own homes. And it seems like to me it makes sense to encourage all to own homes. And so we’ve done some interesting things. Again, I want to thank the Congress. But we passed down payment assistance programs that will help low-income folks buy their own home. A lot of times, if you’re trying to buy your own home, you never bought one, the down payment seems like a little much. Some of you know what I’m talking about. It seems to make sense if one of the things we’re trying to do is to get — to close the minority home ownership gap and to get 5.5 new — million new minority homeowners into homes over the next five years, that we ought to help with down payments — and we have.

The state of Arizona is going to have $2.6 million to help people with down payments. (Applause.) I proposed that mortgages that have F.H.A.-backed insurance pay no down payment. That will help 150,000 new homeowners. (Applause.)

. . .

One other thing I’ve done, is I’ve called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There’s a lot of people in this — our communities around the country that deeply care about the issue of homeownership, and they’ve been responsive.


And more again :

Posted 1/20/2004 1:31 AM

Bush seeks to increase minority homeownership
By Thomas A. Fogarty, USA TODAY
In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.

In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the "most significant FHA initiative in more than a decade." It would lead to 150,000 first-time owners annually, he said.

Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush's proposed change would extend the nothing-down option to borrowers with blemished credit.

The FHA isn't a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property.

USATODAY.com - Bush seeks to increase minority homeownership


And the mortgage deregulation led to stuff like this. Some nice quotes for you here :

"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending."

Alan Greenspan
Chairman of the Federal Reserve Bank,
April 2005




"It was unbelievable. We almost couldn't produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce." —Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in "The Giant Pool of Money," This American Life, May 9, 2008


What is that movie? Boiler Room? That's what it's like. I mean, it's the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That's all we did. This deal, that deal. How we gonna get it funded? What's the problem with this one? That's all everyone's talking about . . . 

We looked at loans. These people didn't have a pot to piss in. They can barely make car payments and we're giving them a 300, 400 thousand dollar house.

Then the next one came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don't have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse.

[reporter] Alex Blumberg: Actually, that pulse thing. Also optional. Like the case in Ohio where twenty-three dead people were approved for mortgages.
--------------------------------------------------------------------------------


"Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education."

Center for Responsible Lending report
"IndyMac: What Went Wrong?"
June 30, 2008



"I would reject a loan and the insanity would begin," one former underwriter
told CRL. "It would go to upper management and the next thing you know it's



going to closing... I'm like, 'What the Sam Hill? There's nothing in there to
support this loan.'"

Center for Responsible Lending report
"IndyMac:
What Went Wrong?"
June 30, 2008





Mortgage-backed securities, credit default swaps and similar new financial
securities and products were made possible by the wave of deregulation led
by the Republican party and primarily by Republican Senator Phil Gramm,



who managed to repeal the Depression-era bills and statutes that prevented
the kind of unsafe leverage and risk-taking that has been a hallmark of the
financial industry since the turn of the century.

Mr.Gramm, now a lobbyist for UBS, has a long history of deregulating markets for



and
lobbying for corporations like Enron. UBS and its executives are currently
facing charges of having helped clients evade taxes in multiple countries, including
the U.S. and Germany. UBS has directed its private bankers to stay away



from the U.S., fearing that they would be detained for questioning in
relation with the ongoing probe by U.S. prosecutors.



Picture the whole chain. You have Clarence. He gets a mortgage from a broker. The broker sells the mortgage to a small bank. The small bank sells the mortgage to a guy like Mike at a big investment firm on Wall Street. Then Mike takes a few thousand mortgages he's bought this way, he puts them in one big pile. Now he's got thousands of mortgage checks coming to him every month. It's a huge monthly stream of money, which is expected to come in for the next thirty years, the life of a mortgage. And he then sells shares of this monthly income to investors. Those shares are called mortgage-backed securities. And the $70 trillion global pool of money loved them.



And so on. Now then, now that you've read all this, seen the guys with the chainsaw and the tree shear chopping up a stack of mortgaeg regulations, what's your opinion on the whole thing?

 

[Raoul_Duke]

Obamacare is deregulation?

Please show me some of the deregulation that occured in the financial industry under Bush.
Was Sarbanes-Oxley the deregulation you were thinking about?

BTW, Obama has the worst job growth of any President.

Bush deregulated the mortgage industry pretty much entirely. one of the major changes was that he changed the rules so that banks and mortgage originators no longer had to hold mortgages to maturity and could sell them immediately. This allowed the newly unregulated mortgage providers like Countrywide and Ameriquest to go on a huge lending spree and immediately sell their mortgages on to Wall Street firms who sliced and diced them and turned them into securities. The same securities that went toxic and blew the global financial system up in 2008. Here's a 2003 press conference that announced the deregulation of the mortgage industry :

See the guy on the left of the picture? The guy holding the chainsaw to the stack of regulations? He spent his career as a Washington lobbyist for banks and financial firms. he basically spent his entire career lobbying Washington to "cut red tape" for his clients and set the markets free to bring us all unparalleled prosperity! In a stunning fox/henhouse move when he took office in 2001, Bush put guys like this in charge of all the various bank regulators. The chainsaw guy was actually responsible for regulating AIG. AIG, the firm that cost taxpayers so much money when the Bush administration socialised their losses, were based in New York and london so naturally th chainsaw guy had them overseen by one guy working from an office in the midwest, when a firm like that would obviously need dozens of regulators to be effectively regulated. AIG decided they didn't want to let him through their front door and called the chainsaw guy to call him off.

The Bush SEC, also run by a guy similar to Chainsaw man, allowed Wall Street securities firms like Goldman to lever up the debt: assets ratio from an historically safe 10:1 to 30 and more :1. These guys argued that because they were sitting on tons of newly-created rock-solid AAA-rated mortgage securities made from all the new mortgages that were being writtten that they were far safer than before and so could take on huge increases in risk, and the SEC said OK. This allowed them to really rack up a really impressive level of losses in just a few years.

Now those mortgage securities wouldn't have been a problem if they hadn't been able to get a AAA rating. To turn these crappy mortgages into AAA-rated paper would be impossible as the people responsible for rating them would never issue AAA ratings to crappy mortgages once they analysed the loan tapes and the other paperwork, right? You know what's coming next, yes, ratings agencies had been left to self-regulate too. Analysts were actually fired if they refused to rate stuff they knew was garbage. Here's one small piece of evidence that became public knowledge a while ago, an IM conversation between two analysts :

Rahul Dilip Shah: btw -- that deal is ridiculous.
Shannon Mooney: I know right ... model def does not capture half of the risk
Shah: we should not be rating it.
Mooney: it could be structured by cows and we would rate it.

News Headlines

Here's another one :

Oct. 22 (Bloomberg) -- Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody's, Standard & Poor's and Fitch Ratings in the global credit freeze.

Credit-Rating Companies `Sold Soul,' Employees Said (Correct) - Bloomberg



So now it was possible to create AAA-rated paper, the same credit rating s US bonds and stuff banks could describe as Tier 1 capital on their balance sheets, out of million dollar mortgages made to unemployed meth dealers. And then you had huge side-bets on these garbage securities via derivatives like credit default swaps which ended up a far bigger market than the value of the actual securities themselves.


The vast majority of bad lending wasn't even subprime. Losses from prime loans have already dwarfed subprime losses and there's huge amounts of prime defaults yet to come, an impending commercial real estate crash not too far off as well. Subprime was just the canary in the coalmine and a handy way for the right to blame the meltdown on ethnic minorities.

But when mortgage companies went on a lending rampage of lending to people who shouldn't have had mortgages, people who were previously known as "renters", there was a mechanism to prevent it happening. We'd already had something very similar in the 1920s so a bunch of FDR-era regulations and regulators existed to prevent any wide-scale predatory lending from happening again. I'll let the New York AG take up the story there :

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Eliot Spitzer - Predatory Lenders' Partner in Crime


And so on. There's endless more stuff but I think I got most of the really big ones there.

Here's where I stopped reading. "Bush deregulated the mortgage industry pretty much entirely"

Fucking moron. Total fucking moron

Can you provide any facts and evidence to show that i'm wrong. I challenge you to try. Let's debate this and find out which of us could more accurately be described as a moron.

 

[Raoul_Duke]

And then there are the idiots who believe his BS.
Maybe you can show me how his $60,000 a year secretary paid 30% in income taxes? LOL!

She doesn't pay anything like 30% of her income in income taxes. but income taxes aren't the only taxes that people pay! there are FICA taxes to start with, along with lots of others. I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at and i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are.

Or maybe Buffet pays less in taxes because the rate for cap gains and dividends are lower than that for wages, salaries, fringies and bonuses...But the Buffet butt sniffers don't often like to notice such distinctions in the tax code, as long as they think they're scoring political points against the eeeeeviilll rich.

And speaking of Buffet and taxes, how much does Berkshire-Hathaway owe in back taxes, penalties and interest again?

Yes, that's right. He pays less because capital gains and other investment taxes are taxed at a lower rate. So what?

 

[Raoul_Duke]

The Moonbats, unsurprisingly, miss the point.

Wages are affected by Supply and Demand, just like any other good or service. When the government damages the conditions for economic growth so that there is an Excess Supply of Labor, Wages are not going to increase.

You want higher wages, free up the economy to grow so that there is more demand for labor...instead of spending $4.8M per job to create a paltry 3.5K of Green Jobs.

Since 1980 America has steadily deregulated the economy, "freed it up" to set the markets free. This reached its current apex in the early 2000s under george bush who went on a deregulation binge especially with the financial industry. So markets had never been freer in the first decade of this century than they'd been since the 1920s. And exactly what happened? Bush got the worst job growth of any president. Also, too. Since we started deregulating corporations have foun d less and less demand to cater to and invest to meet. They're steadily accumulated money and are sitting on uninvested trillions of dollars. This accumulation of cash continued all through the GW Bush years, the period when markets have never been freer. So, bearing this in mind, why wasn't there massive job growth in the 2000s when markets had never been freer in living memory?

HAHAHAHA!!!!!

You think we have LESS Regulation now?

Sarbanes Oxley
Dodd Frank
ObamaCare
and the reams of regulations being made up by the DOE, FDA, EPA etc. in an endless quest to regulate the most mundane aspects of our lives

When the full weight of the federal government is applied to fine a family $90,000 for making $200 of profit selling bunny rabbits, there is Far Too Much Government are far too little liberty.

Remember how Enron used newly deregulated energy markets to gouge their customers and dodgy accounting to blow up their own compnay? Remember Adelphia, Worldcom, Tyco and other accounting scandals? Sarbanes-Oxley was introduced to try and re-regulate what had previously been deregulated and stop more Enrons from happening. Same goes for Dodd-Frank, which unfortunately is basically a waste of time and is basically endless loopholes. But the clear trend over the past thirty years is one of deregulation, especially in the financial industry, and this has led to the biggest economic meltdown since the 1920s, the last time we had such lax financial regulation.

 

[Raoul_Duke]

And then there are the idiots who believe his BS.
Maybe you can show me how his $60,000 a year secretary paid 30% in income taxes? LOL!

She doesn't pay anything like 30% of her income in income taxes. but income taxes aren't the only taxes that people pay! there are FICA taxes to start with, along with lots of others. I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at and i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are.

She doesn't pay anything like 30% of her income in income taxes

I know, so why did Buffett lie and say she did?

"I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at"

If they're so smart, why did they get the numbers so wrong?

i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are

I'm glad you're happy. It doesn't make his lie less of a lie.

Prove he's lying.

 

[The Rabbi]

You'd think the US would get the clue. They have a better quality of life, while we spend everything on the military industrial complex.

How many Muslims rioting have you seen in the U.S? How many in Paris and London? OK, they dont have a better life. Whatever they have is left over from rebuilding after WW2 and better policies that largely ended in the 1960s. They were able to skimp on military spending because Uncle was there to protect them from the Soviets. Now their own financial systems are wrecks.
I don't see millions of Americans moving to Europe but I see lots of Europeans wanting to moev here. Maybe you're the one who needs to get a clue?

I don't think you'll find many Europeans who want to move here. They like to visit because their euro goes so far on our cheap dollar, though.
Plenty of rich Americans are buying homes in Europe...many of them are republicans.

In 1996 there were 197,000 Europeans who moved here. ANd the dollar wasn't so cheap.
Immigrants to U.S. by Country of Origin — Infoplease.com
You conveniently ignore the social unrest in Europe presently.

Your point is refuted. Europeans do not have it better than Americans and there is no reason we need to copy anything they do.

 

[The Rabbi]

The Bush SEC, also run by a guy similar to Chainsaw man, allowed Wall Street securities firms like Goldman to lever up the debt: assets ratio from an historically safe 10:1 to 30 and more :1. These guys argued that because they were sitting on tons of newly-created rock-solid AAA-rated mortgage securities made from all the new mortgages that were being writtten that they were far safer than before and so could take on huge increases in risk, and the SEC said OK. This allowed them to really rack up a really impressive level of losses in just a few years.

Now those mortgage securities wouldn't have been a problem if they hadn't been able to get a AAA rating. To turn these crappy mortgages into AAA-rated paper would be impossible as the people responsible for rating them would never issue AAA ratings to crappy mortgages once they analysed the loan tapes and t/url]

Here's another one :

Oct. 22 (Bloomberg) -- Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody's, Standard & Poor's and Fitch Ratings in the global credit freeze.

Credit-Rating Companies `Sold Soul,' Employees Said (Correct) - Bloomberg



So now it was possible to create AAA-rated paper, the same credit rating s US bonds and stuff banks could describe as Tier 1 capital on their balance sheets, out of million dollar mortgages made to unemployed meth dealers. And then you had huge side-bets on these garbage securities via derivatives like credit default swaps which ended up a far bigger market than the value of the actual securities themselves.


The vast majority of bad lending wasn't even subprime. Losses from prime loans have already dwarfed subprime losses and there's huge amounts of prime defaults yet to come, an impending commercial real estate crash not too far off as well. Subprime was just the canary in the coalmine and a handy way for the right to blame the meltdown on ethnic minorities.

But when mortgage companies went on a lending rampage of lending to people who shouldn't have had mortgages, people who were previously known as "renters", there was a mechanism to prevent it happening. We'd already had something very similar in the 1920s so a bunch of FDR-era regulations and regulators existed to prevent any wide-scale predatory lending from happening again. I'll let the New York AG take up the story there :

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.



Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Eliot Spitzer - Predatory Lenders' Partner in Crime


And so on. There's endless more stuff but I think I got most of the really big ones there.

Here's where I stopped reading. "Bush deregulated the mortgage industry pretty much entirely"

Fucking moron. Total fucking moron

Can you provide any facts and evidence to show that i'm wrong. I challenge you to try. Let's debate this and find out which of us could more accurately be described as a moron.[/QUOTE]

Bush did not deregulate the mortgage industry. You are a fucking moron.
And your article sucks.

 

[editec]

Raoul_Duke

Beautiful encapsulation of the policies and events, PLUS the motives of the players, that all lead us up to the RE Bubble and BANSTERS susequent MELTDOWN that it launched.

I post this simply to let you know that SOME OF US fully understand and appreciate just how difficult it is to describe such complex economic events in this venue.

Don't be too discouraged that the lil'puts here can't follow it, object to it on grounds that have nothing to do with what you've written, or decide to attack you personally for having the fortitude to post something more intellectualy demanding than bumper sticker logic.

The devil is in the details and most of the players here are NOT capable (or willing, one never knows) of understanding those details.

 

[Toddsterpatriot]

Perhaps Buffett is overestimating the intelligence of the many Americans.

Deep thinkers like "Oddball," "CrusaderFrank," "boedicca," and "whitehall," just don't get it - and never will!

And then there are the idiots who believe his BS.
Maybe you can show me how his $60,000 a year secretary paid 30% in income taxes? LOL!

What wouldever possess "Toddsterpatriot" think that he is a more credible source than Warren Buffett?

Conservatives are great at making unsubstantiated assertions and then either retreat into "denial mode" or try to change the subject - most in this Forum couldn't provide a credible source if fell out of the sky and hit them on the head!

Please feel free to show us the math.
Tax tables are available.
Do some work.
Help out your buddy Warren.
Chop chop.

 

[Toddsterpatriot]

Bush deregulated the mortgage industry pretty much entirely. one of the major changes was that he changed the rules so that banks and mortgage originators no longer had to hold mortgages to maturity and could sell them immediately.

That is an interesting claim. What was this rule that forced banks to hold mortgages until maturity? When was it created?

Maybe you have a link showing when that regulation was eliminated?

Or were you imagining it?

Here you go. This is a link to one of the most popular financial sites on the net, it's run by a guy called Barry Ritholtz. Barry is a quantative analyst and owns an investment firm that looks after a couple of billion dollars. He's a regular face on CNBC and Bloomberg. Barry was one of the first guys warning that the deregulation of the housing industry was leading to the kind of meltdown we got in 2008. This is just one link but if you read through his archives you'll find endless more links in real time that go into endless detail about the whole thing. You could also go through the archives of quite a few business pundits, people like Kudlow for instance, who were huge cheerleaders of the whole mortgage deregulation thing at the time it happened and predicted fantastic profits, urging investors that Countrywide and Ameriquest stock was a great investment. Anyway, here's Barry :

I am working on something for The Economist -- its an Oxford style debate on the current crisis. The proposition being discussed is: "This house believes that it would be a mistake to regulate the financial system heavily after the crisis."

Any comments you may have on this would be appreciated -- my final version is due later today.

My biggest problem is trying to cover a lot of ground in just 500 words . . .

DRAFT:

Over the past 30 years, the United States has moved from an environment of excessive regulation to excessive deregulation. This philosophical shift was taken to irrational extremes, and it is the heart of the current financial crisis.

A brief history: Post War World II, the global economy expanded dramatically. By the late 1960s, the U.S. had an expansive bureaucracy. Regulatory oversight had become time-consuming, complex, and expensive. Eliminating this excess regulation started with President Jimmy Carter, and dramatically accelerated under Ronald Reagan. Originally, only the most expensive and onerous provisions were targeted. But eventually, deregulation became a religion, and effective and necessary safeguards were removed along with the costly ones.

Free-market deregulation became a misguided rallying cry of conservative ideologues. The U.S. moved from a state of excess regulation to radical de-regulation.

In 1999, the Glass-Steagall Act was repealed, allowing insurers, banks and brokerage firms to merge. In 2000, Derivatives were exempted from all regulatory, supervisory or reserve requirements by the Commodity Futures Modernization Act.

During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

~~~

To show the impact of deregulation, consider the underlying premise of all credit transactions – loans, mortgages, and all debt instruments. Over the entire history of human finance, the borrower's ability to repay the loan has been the paramount factor in all lending. With mortgage, this included elements such as employment history, income, down payment, credit rating, other assets, loan-to-value ratio of the property, debt servicing ability, etc.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

This represented an enormous change from the past.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

~~~

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

In business, the profit incentive leads to similar behavior. We push the envelope, tap dance close to that line, and then blow past it.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession. The total cleanup costs are scaling up towards $10 trillion dollars.
All due to an excess of deregulatory zeal . . .

The Big Picture


And just to add a little more of Bush deregulating the mortgage industry, here he is making a speech in 2004 :


I’m going to tell you another statistic, which is an amazing statistic given what we’ve been through. Housing starts in 2003 were the highest in a quarter of a century. Homeownership sales were the highest ever. Sixty-eight percent of homeownership — the homeownership rate is the highest ever. And that’s fantastic news for America. We want more people owning their own home. There’s nothing like saying, this home is my home. (Applause.)

There’s nothing better than somebody over there saying, welcome to my home. And we’re about to talk to some first-time homeowners. And I want to share their stories with you — they’re going to share their stories with me, and you’re going to get to hear it.

I do want to talk about a challenge for our country, and there is a minority homeownership gap in America. Not enough minorities own their own homes. And it seems like to me it makes sense to encourage all to own homes. And so we’ve done some interesting things. Again, I want to thank the Congress. But we passed down payment assistance programs that will help low-income folks buy their own home. A lot of times, if you’re trying to buy your own home, you never bought one, the down payment seems like a little much. Some of you know what I’m talking about. It seems to make sense if one of the things we’re trying to do is to get — to close the minority home ownership gap and to get 5.5 new — million new minority homeowners into homes over the next five years, that we ought to help with down payments — and we have.

The state of Arizona is going to have $2.6 million to help people with down payments. (Applause.) I proposed that mortgages that have F.H.A.-backed insurance pay no down payment. That will help 150,000 new homeowners. (Applause.)

. . .

One other thing I’ve done, is I’ve called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There’s a lot of people in this — our communities around the country that deeply care about the issue of homeownership, and they’ve been responsive.


And more again :

Posted 1/20/2004 1:31 AM

Bush seeks to increase minority homeownership
By Thomas A. Fogarty, USA TODAY
In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.

In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the "most significant FHA initiative in more than a decade." It would lead to 150,000 first-time owners annually, he said.

Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush's proposed change would extend the nothing-down option to borrowers with blemished credit.

The FHA isn't a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property.

USATODAY.com - Bush seeks to increase minority homeownership


And the mortgage deregulation led to stuff like this. Some nice quotes for you here :

"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending."

Alan Greenspan
Chairman of the Federal Reserve Bank,
April 2005




"It was unbelievable. We almost couldn't produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce." —Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in "The Giant Pool of Money," This American Life, May 9, 2008


What is that movie? Boiler Room? That's what it's like. I mean, it's the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That's all we did. This deal, that deal. How we gonna get it funded? What's the problem with this one? That's all everyone's talking about . . . 

We looked at loans. These people didn't have a pot to piss in. They can barely make car payments and we're giving them a 300, 400 thousand dollar house.

Then the next one came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don't have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse.

[reporter] Alex Blumberg: Actually, that pulse thing. Also optional. Like the case in Ohio where twenty-three dead people were approved for mortgages.
--------------------------------------------------------------------------------


"Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education."

Center for Responsible Lending report
"IndyMac: What Went Wrong?"
June 30, 2008



"I would reject a loan and the insanity would begin," one former underwriter
told CRL. "It would go to upper management and the next thing you know it's



going to closing... I'm like, 'What the Sam Hill? There's nothing in there to
support this loan.'"

Center for Responsible Lending report
"IndyMac:
What Went Wrong?"
June 30, 2008





Mortgage-backed securities, credit default swaps and similar new financial
securities and products were made possible by the wave of deregulation led
by the Republican party and primarily by Republican Senator Phil Gramm,



who managed to repeal the Depression-era bills and statutes that prevented
the kind of unsafe leverage and risk-taking that has been a hallmark of the
financial industry since the turn of the century.

Mr.Gramm, now a lobbyist for UBS, has a long history of deregulating markets for



and
lobbying for corporations like Enron. UBS and its executives are currently
facing charges of having helped clients evade taxes in multiple countries, including
the U.S. and Germany. UBS has directed its private bankers to stay away



from the U.S., fearing that they would be detained for questioning in
relation with the ongoing probe by U.S. prosecutors.



Picture the whole chain. You have Clarence. He gets a mortgage from a broker. The broker sells the mortgage to a small bank. The small bank sells the mortgage to a guy like Mike at a big investment firm on Wall Street. Then Mike takes a few thousand mortgages he's bought this way, he puts them in one big pile. Now he's got thousands of mortgage checks coming to him every month. It's a huge monthly stream of money, which is expected to come in for the next thirty years, the life of a mortgage. And he then sells shares of this monthly income to investors. Those shares are called mortgage-backed securities. And the $70 trillion global pool of money loved them.



And so on. Now then, now that you've read all this, seen the guys with the chainsaw and the tree shear chopping up a stack of mortgaeg regulations, what's your opinion on the whole thing?

Thanks for the data dump.
Why don't you try again and this time highlight the part about the regulation requiring banks to hold a mortgage until maturity?

 

[boedicca]

And then there are the idiots who believe his BS.
Maybe you can show me how his $60,000 a year secretary paid 30% in income taxes? LOL!

What wouldever possess "Toddsterpatriot" think that he is a more credible source than Warren Buffett?

Conservatives are great at making unsubstantiated assertions and then either retreat into "denial mode" or try to change the subject - most in this Forum couldn't provide a credible source if fell out of the sky and hit them on the head!

Please feel free to show us the math.
Tax tables are available.
Do some work.
Help out your buddy Warren.
Chop chop.

Here's one thing Buffett could do, but doesn't (he shields his vast wealth in tax exempt trusts instead):

The Bureau of the Public Debt may accept gifts donated to the United States Government to reduce debt held by the public. Acting for the Secretary of the Treasury, Public Debt may accept a gift of:

- Money, made only on the condition that it be used to reduce debt held by the public.

- An outstanding government obligation, made only on the condition that the obligation be retired and the redemption proceeds used to reduce debt held by the public.

- Other intangible personal property made only on the condition that the property is sold and the proceeds from the sale used to reduce the public debt.

Gifts to reduce debt held by the public may be inter vivos gifts or testamentary bequests.

Government - Gift Contributions to Reduce Debt Held by the Public

 

[Toddsterpatriot]

She doesn't pay anything like 30% of her income in income taxes. but income taxes aren't the only taxes that people pay! there are FICA taxes to start with, along with lots of others. I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at and i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are.

She doesn't pay anything like 30% of her income in income taxes

I know, so why did Buffett lie and say she did?

"I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at"

If they're so smart, why did they get the numbers so wrong?

i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are

I'm glad you're happy. It doesn't make his lie less of a lie.

Prove he's lying.

Show me how she pays 30% in income taxes.

When you're done, I'll show you she doesn't.

 

[Toddsterpatriot]

What wouldever possess "Toddsterpatriot" think that he is a more credible source than Warren Buffett?

Conservatives are great at making unsubstantiated assertions and then either retreat into "denial mode" or try to change the subject - most in this Forum couldn't provide a credible source if fell out of the sky and hit them on the head!

Please feel free to show us the math.
Tax tables are available.
Do some work.
Help out your buddy Warren.
Chop chop.

Here's one thing Buffett could do, but doesn't (he shields his vast wealth in tax exempt trusts instead):

The Bureau of the Public Debt may accept gifts donated to the United States Government to reduce debt held by the public. Acting for the Secretary of the Treasury, Public Debt may accept a gift of:

- Money, made only on the condition that it be used to reduce debt held by the public.

- An outstanding government obligation, made only on the condition that the obligation be retired and the redemption proceeds used to reduce debt held by the public.

- Other intangible personal property made only on the condition that the property is sold and the proceeds from the sale used to reduce the public debt.

Gifts to reduce debt held by the public may be inter vivos gifts or testamentary bequests.

Government - Gift Contributions to Reduce Debt Held by the Public

The only difference between Buffett and the typical lying, scumbag liberal is the size of his portfolio.

 

[Raoul_Duke]

The Bush SEC, also run by a guy similar to Chainsaw man, allowed Wall Street securities firms like Goldman to lever up the debt: assets ratio from an historically safe 10:1 to 30 and more :1. These guys argued that because they were sitting on tons of newly-created rock-solid AAA-rated mortgage securities made from all the new mortgages that were being writtten that they were far safer than before and so could take on huge increases in risk, and the SEC said OK. This allowed them to really rack up a really impressive level of losses in just a few years.

Now those mortgage securities wouldn't have been a problem if they hadn't been able to get a AAA rating. To turn these crappy mortgages into AAA-rated paper would be impossible as the people responsible for rating them would never issue AAA ratings to crappy mortgages once they analysed the loan tapes and t/url]

Here's another one :

Oct. 22 (Bloomberg) -- Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody's, Standard & Poor's and Fitch Ratings in the global credit freeze.

Credit-Rating Companies `Sold Soul,' Employees Said (Correct) - Bloomberg



So now it was possible to create AAA-rated paper, the same credit rating s US bonds and stuff banks could describe as Tier 1 capital on their balance sheets, out of million dollar mortgages made to unemployed meth dealers. And then you had huge side-bets on these garbage securities via derivatives like credit default swaps which ended up a far bigger market than the value of the actual securities themselves.


The vast majority of bad lending wasn't even subprime. Losses from prime loans have already dwarfed subprime losses and there's huge amounts of prime defaults yet to come, an impending commercial real estate crash not too far off as well. Subprime was just the canary in the coalmine and a handy way for the right to blame the meltdown on ethnic minorities.

But when mortgage companies went on a lending rampage of lending to people who shouldn't have had mortgages, people who were previously known as "renters", there was a mechanism to prevent it happening. We'd already had something very similar in the 1920s so a bunch of FDR-era regulations and regulators existed to prevent any wide-scale predatory lending from happening again. I'll let the New York AG take up the story there :

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.



Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Eliot Spitzer - Predatory Lenders' Partner in Crime


And so on. There's endless more stuff but I think I got most of the really big ones there.

Here's where I stopped reading. "Bush deregulated the mortgage industry pretty much entirely"

Fucking moron. Total fucking moron

Can you provide any facts and evidence to show that i'm wrong. I challenge you to try. Let's debate this and find out which of us could more accurately be described as a moron.

Bush did not deregulate the mortgage industry. You are a fucking moron.
And your article sucks.[/QUOTE]

That's an impressive reply. I just posted a whole bunch of facts and evidence that quite clearly show that the bush administration deregulated the mortgage industry. Now they weren't 100% to blame for the meltdown because a lot of deregulation happened before they took office. but an awaful lot of the stuff that directly led to the meltdown was done by the bush administration. So, can you refute the stuff I posted with actual facts and evidence? I challenge you to try. let's debate this and find out which of us can better be described as a moron.

 

[Raoul_Duke]

Raoul_Duke

Beautiful encapsulation of the policies and events, PLUS the motives of the players, that all lead us up to the RE Bubble and BANSTERS susequent MELTDOWN that it launched.

I post this simply to let you know that SOME OF US fully understand and appreciate just how difficult it is to describe such complex economic events in this venue.

Don't be too discouraged that the lil'puts here can't follow it, object to it on grounds that have nothing to do with what you've written, or decide to attack you personally for having the fortitude to post something more intellectualy demanding than bumper sticker logic.

The devil is in the details and most of the players here are NOT capable (or willing, one never knows) of understanding those details.

Thanks for that. basically when you get a reply like "you're a moron!" you know you've explained to them something that they didn't want to know, goes against everything they believe and makes them feel bad. they've got no clue at all how to reply to it other than to lose their temper and namecall.

 

[Raoul_Duke]

That is an interesting claim. What was this rule that forced banks to hold mortgages until maturity? When was it created?

Maybe you have a link showing when that regulation was eliminated?

Or were you imagining it?

Here you go. This is a link to one of the most popular financial sites on the net, it's run by a guy called Barry Ritholtz. Barry is a quantative analyst and owns an investment firm that looks after a couple of billion dollars. He's a regular face on CNBC and Bloomberg. Barry was one of the first guys warning that the deregulation of the housing industry was leading to the kind of meltdown we got in 2008. This is just one link but if you read through his archives you'll find endless more links in real time that go into endless detail about the whole thing. You could also go through the archives of quite a few business pundits, people like Kudlow for instance, who were huge cheerleaders of the whole mortgage deregulation thing at the time it happened and predicted fantastic profits, urging investors that Countrywide and Ameriquest stock was a great investment. Anyway, here's Barry :

I am working on something for The Economist -- its an Oxford style debate on the current crisis. The proposition being discussed is: "This house believes that it would be a mistake to regulate the financial system heavily after the crisis."

Any comments you may have on this would be appreciated -- my final version is due later today.

My biggest problem is trying to cover a lot of ground in just 500 words . . .

DRAFT:

Over the past 30 years, the United States has moved from an environment of excessive regulation to excessive deregulation. This philosophical shift was taken to irrational extremes, and it is the heart of the current financial crisis.

A brief history: Post War World II, the global economy expanded dramatically. By the late 1960s, the U.S. had an expansive bureaucracy. Regulatory oversight had become time-consuming, complex, and expensive. Eliminating this excess regulation started with President Jimmy Carter, and dramatically accelerated under Ronald Reagan. Originally, only the most expensive and onerous provisions were targeted. But eventually, deregulation became a religion, and effective and necessary safeguards were removed along with the costly ones.

Free-market deregulation became a misguided rallying cry of conservative ideologues. The U.S. moved from a state of excess regulation to radical de-regulation.

In 1999, the Glass-Steagall Act was repealed, allowing insurers, banks and brokerage firms to merge. In 2000, Derivatives were exempted from all regulatory, supervisory or reserve requirements by the Commodity Futures Modernization Act.

During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

~~~

To show the impact of deregulation, consider the underlying premise of all credit transactions – loans, mortgages, and all debt instruments. Over the entire history of human finance, the borrower's ability to repay the loan has been the paramount factor in all lending. With mortgage, this included elements such as employment history, income, down payment, credit rating, other assets, loan-to-value ratio of the property, debt servicing ability, etc.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

This represented an enormous change from the past.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

~~~

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

In business, the profit incentive leads to similar behavior. We push the envelope, tap dance close to that line, and then blow past it.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession. The total cleanup costs are scaling up towards $10 trillion dollars.
All due to an excess of deregulatory zeal . . .

The Big Picture


And just to add a little more of Bush deregulating the mortgage industry, here he is making a speech in 2004 :


I’m going to tell you another statistic, which is an amazing statistic given what we’ve been through. Housing starts in 2003 were the highest in a quarter of a century. Homeownership sales were the highest ever. Sixty-eight percent of homeownership — the homeownership rate is the highest ever. And that’s fantastic news for America. We want more people owning their own home. There’s nothing like saying, this home is my home. (Applause.)

There’s nothing better than somebody over there saying, welcome to my home. And we’re about to talk to some first-time homeowners. And I want to share their stories with you — they’re going to share their stories with me, and you’re going to get to hear it.

I do want to talk about a challenge for our country, and there is a minority homeownership gap in America. Not enough minorities own their own homes. And it seems like to me it makes sense to encourage all to own homes. And so we’ve done some interesting things. Again, I want to thank the Congress. But we passed down payment assistance programs that will help low-income folks buy their own home. A lot of times, if you’re trying to buy your own home, you never bought one, the down payment seems like a little much. Some of you know what I’m talking about. It seems to make sense if one of the things we’re trying to do is to get — to close the minority home ownership gap and to get 5.5 new — million new minority homeowners into homes over the next five years, that we ought to help with down payments — and we have.

The state of Arizona is going to have $2.6 million to help people with down payments. (Applause.) I proposed that mortgages that have F.H.A.-backed insurance pay no down payment. That will help 150,000 new homeowners. (Applause.)

. . .

One other thing I’ve done, is I’ve called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There’s a lot of people in this — our communities around the country that deeply care about the issue of homeownership, and they’ve been responsive.


And more again :

Posted 1/20/2004 1:31 AM

Bush seeks to increase minority homeownership
By Thomas A. Fogarty, USA TODAY
In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.

In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the "most significant FHA initiative in more than a decade." It would lead to 150,000 first-time owners annually, he said.

Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush's proposed change would extend the nothing-down option to borrowers with blemished credit.

The FHA isn't a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property.

USATODAY.com - Bush seeks to increase minority homeownership


And the mortgage deregulation led to stuff like this. Some nice quotes for you here :

"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending."

Alan Greenspan
Chairman of the Federal Reserve Bank,
April 2005




"It was unbelievable. We almost couldn't produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce." —Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in "The Giant Pool of Money," This American Life, May 9, 2008


What is that movie? Boiler Room? That's what it's like. I mean, it's the [coolest] thing ever. Cubicle, cubicle, cubicle for 150,000 square feet. The ceilings were probably 25 or 30 feet high. The elevator had a big graffiti painting. Big open space. And it was awesome. We lived mortgage. That's all we did. This deal, that deal. How we gonna get it funded? What's the problem with this one? That's all everyone's talking about . . . 

We looked at loans. These people didn't have a pot to piss in. They can barely make car payments and we're giving them a 300, 400 thousand dollar house.

Then the next one came along, and it was no income, verified assets. So you don't have to tell the people what you do for a living. You don't have to tell the people what you do for work. All you have to do is state you have a certain amount of money in your bank account. And then, the next one, is just no income, no asset. You don't have to state anything. Just have to have a credit score and a pulse.

[reporter] Alex Blumberg: Actually, that pulse thing. Also optional. Like the case in Ohio where twenty-three dead people were approved for mortgages.
--------------------------------------------------------------------------------


"Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education."

Center for Responsible Lending report
"IndyMac: What Went Wrong?"
June 30, 2008



"I would reject a loan and the insanity would begin," one former underwriter
told CRL. "It would go to upper management and the next thing you know it's



going to closing... I'm like, 'What the Sam Hill? There's nothing in there to
support this loan.'"

Center for Responsible Lending report
"IndyMac:
What Went Wrong?"
June 30, 2008





Mortgage-backed securities, credit default swaps and similar new financial
securities and products were made possible by the wave of deregulation led
by the Republican party and primarily by Republican Senator Phil Gramm,



who managed to repeal the Depression-era bills and statutes that prevented
the kind of unsafe leverage and risk-taking that has been a hallmark of the
financial industry since the turn of the century.

Mr.Gramm, now a lobbyist for UBS, has a long history of deregulating markets for



and
lobbying for corporations like Enron. UBS and its executives are currently
facing charges of having helped clients evade taxes in multiple countries, including
the U.S. and Germany. UBS has directed its private bankers to stay away



from the U.S., fearing that they would be detained for questioning in
relation with the ongoing probe by U.S. prosecutors.



Picture the whole chain. You have Clarence. He gets a mortgage from a broker. The broker sells the mortgage to a small bank. The small bank sells the mortgage to a guy like Mike at a big investment firm on Wall Street. Then Mike takes a few thousand mortgages he's bought this way, he puts them in one big pile. Now he's got thousands of mortgage checks coming to him every month. It's a huge monthly stream of money, which is expected to come in for the next thirty years, the life of a mortgage. And he then sells shares of this monthly income to investors. Those shares are called mortgage-backed securities. And the $70 trillion global pool of money loved them.



And so on. Now then, now that you've read all this, seen the guys with the chainsaw and the tree shear chopping up a stack of mortgaeg regulations, what's your opinion on the whole thing?

Thanks for the data dump.
Why don't you try again and this time highlight the part about the regulation requiring banks to hold a mortgage until maturity?

I already provided it. Read the post again then go and read the archives of the site i linked to. You'll find endless stuff there. now then, how about answering my question. here it is again ; now that you've read all this and seen the guys with the chainsaw and the tree shears chopping up a bunch of mortgage regulations, what's your opinion on the whole thing?

 

[Raoul_Duke]

She doesn't pay anything like 30% of her income in income taxes

I know, so why did Buffett lie and say she did?

"I'm guessing Buffett and people he employs are smart enough to work out the percentage that they're taxed at"

If they're so smart, why did they get the numbers so wrong?

i'm happy to take him at his word that he's paying a smaller percentage of his income in federal taxes than his employees are

I'm glad you're happy. It doesn't make his lie less of a lie.

Prove he's lying.

Show me how she pays 30% in income taxes.

When you're done, I'll show you she doesn't.

Who said she pays 30% in income taxes? Where did you get that from?