On Sunday, ABC's This Week failed to hold Alan Greenspan accountable for his role in the mortgage crisis. But today, the New York Times did, picking up where Salon.com left off.
And as the NYT report shows -- like every other failure of the Bush Era -- Greenspan's failure was not one of incompetence, but the conservative ideology of reckless government.
Greenspan received several direct warnings about the looming crisis, but did nothing to regulate irresponsible corporations:
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.....
And leaders of a housing advocacy group in California, meeting with Mr. Greenspan in 2004, warned that deception was increasing and unscrupulous practices were spreading.
John C. Gamboa and Robert L. Gnaizda of the Greenlining Institute implored Mr. Greenspan to use his bully pulpit and press for a voluntary code of conduct.
"He never gave us a good reason, but he didn't want to do it," Mr. Gnaizda said last week. "He just wasn't interested."
...
An examination of regulatory decisions shows that the Federal Reserve and other agencies waited until it was too late before trying to tame the industry's excesses. Both the Fed and the Bush administration placed a higher priority on promoting "financial innovation" and what President Bush has called the "ownership society."
...
Mr. Greenspan and other Fed officials repeatedly dismissed warnings about a speculative bubble in housing prices. In December 2004, the New York Fed issued a report bluntly declaring that "no bubble exists." Mr. Greenspan predicted several times -- incorrectly, it turned out -- that housing declines would be local but almost certainly not nationwide.
The Fed was hardly alone in not pressing to clean up the mortgage industry. When states like Georgia and North Carolina started to pass tougher laws against abusive lending practices, the Office of the Comptroller of the Currency successfully prohibited them from investigating local subsidiaries of nationally chartered banks.
Virtually every federal bank regulator was loathe to impose speed limits on a booming industry.
It was not always this way. As John Atlas and Peter Dreier explain in The American Prospect this week, our government once practiced regulation. And it was good.
There was a time, not too long ago, when Washington did regulate banks. The Depression triggered the creation of government bank regulations and agencies ... After World War II, until the late 1970s, the system work[ed]. The savings-and-loan industry was highly regulated by the federal government, with a mission to take people's deposits and then provide loans for the sole purpose of helping people buy homes to live in. Washington insured those loans through the FDIC, provided mortgage discounts through FHA and the Veterans Administration, created a secondary mortgage market to guarantee a steady flow of capital, and required S&Ls to make predictable 30-year fixed loans. The result was a steady increase in homeownership and few foreclosures.
Those glory days became a distant memory once Ronald Reagan brought the conservative movement to town:
...by the early 1980s, the lending industry used its political clout to push back against government regulation. In 1980, Congress ... eliminated interest-rate caps and made sub-prime lending more feasible for lenders. The S&Ls balked at constraints on their ability to compete with conventional banks engaged in commercial lending. They got Congress -- Democrats and Republicans alike -- to change the rules, allowing S&Ls to begin a decade-long orgy of real estate speculation, mismanagement, and fraud...
...The deregulation of banking led to merger mania, with banks and S&Ls gobbling each other up and making loans to finance shopping malls, golf courses, office buildings, and condo projects that had no financial logic other than a quick-buck profit. When the dust settled in the late 1980s, hundreds of S&Ls and banks had gone under, billions of dollars of commercial loans were useless, and the federal government was left to bail out the depositors whose money the speculators had put at risk.The stable neighborhood S&L soon became a thing of the past. Banks, insurance companies, credit card firms and other money-lenders were now part of a giant "financial services" industry, while Washington walked away from its responsibility to protect consumers with rules, regulations, and enforcement. Meanwhile, starting with Reagan, the federal government slashed funding for low-income housing, and allowed the FHA, once a key player helping working-class families purchase a home, to drift into irrelevancy.
Into this vacuum stepped banks, mortgage lenders, and scam artists, looking for ways to make big profits from consumers desperate for the American Dream of homeownership. They invented new "loan products" that put borrowers at risk. Thus was born the sub-prime market.
To review:
When our government follows progressive principles, represents the public interest and protects consumers from irresponsible corporate behavior, the system works.
When conservatives allow our government to be co-opted by irresponsible corporations, the system falls apart.
And you can take that to the bank.
Follow Bill Scher on Twitter: www.twitter.com/billscher
We are just at the start of this Depression by the time it all works out many American families will be living out of their cars begging for food and crime will rampant.
All of those criminals who have profited and live in gated communities should remember what happened in France.
"Some of my best friends are [insert ethnic reference]!"
"I won't *** in your *****!"
"Business can regulate itself!"
Ah ... the truly great lines never go out of style!
Don't blame the free market, since we've never had one.
The housing bubble and the current mortgage crisis were caused by the government. The Federal Reserve made easy credit available by lowering the interest rate and buying T-bills, essentially the same as printing money. Earlier, in 1998 the IRS increased the deduction from real estate profits to half a million dollars. Within less than a decade on both coasts prices rose by that amount. The FDIC, Freddy Mac and Fanny Mae made it look like lending money was without risk. Now the chickens are coming home to roost.
What we need is to get the government out of our lives. Abolish the Federal Reserve. Repeal the income tax. Cut spending by one half. Just curtailing our imperial military activities overseas would do it instantly.
Ron Paul knows what he's talking about.
http://www.lewrockwell.com/north/north591.html
"Down here on the ground," usury is rampant. Fraudulent banking-practices and billing-abuse is rampant. It happens, I am quite sure, to you too.
We've got to push-aside some convenient illusions and start digging deeper. We LIVE in this country, and when criminals in high places rip us off we all suffer great harm. We can no longer afford to take a pablum half-truth that is offered to us, as though it were gospel.
I love posts like this that accurately puts it all in a nutshell.
It's true history that makes a lot of sense as to the reasons why responsible government is so important and will be what people will historically see as an age of shameful deception and mismanagement by greedy leaders.
The term conservative itself is a lie. So-called conservatives get themselves elected by talking about how they want to lock all the drug users up, and will spend billions fighting the whole charade. I dont need there to be drug laws, where we spend billions on building prisons, lock people away for nonviolent crimes fighting drugs, because I have talked to my kids, and involved myself in their lives. They're grown now, and safe from the choices of making themselves less of themselves. I consider myself more the true conservative. Conservatives label themselves that way because they don't have the balls to truly be responsible for their own... They're simply just more jerks that want everything easy.
That this "bubble" popped and is the cause for consternation today only means that there are more opportunities for profit-making and opportunities for a "new" game. Right, Mortimer?
In other words, you want a nanny state to protect you from yourself at all times.
I took out a home loan I can't pay off?
Where's my nanny state!
I'm up to my teeth in credit card debt?
Where's my nanny state!
I want a free tummy tuck, but can't afford it?
Where's my nanny state!
This typical liberal attitude is exactly why your new Congress ignores your ridiculous pleas, and why the next President will be a Republican. There's just too much at stake to turn over the keys to a bunch of socialists.
Derivatives, swaps, and the current favorites SIVs, CDOs, and the like ...
The privately owned and operated Federal Reserve System and their largest shareholders the money center banks and brokerages are using the full faith and credit of the United States to underwrite all their ponzi schemes.
Glass Steagal should be reimplemented, separating deposit banks from investment banks and all other financial institutions. The Fed needs to be replaced with a publicly run central bank and set up much as the CBO is operated today.
Unless and until these reforms are put in place more mischief is guaranteed, and once again the public will pay the price for more boondoggles, shenanigans and outright criminality.
The gilded era ushered in with snake oil by Reagan and his ilk have rained disaster on the hard working middle class of America.
We need a complete reversal with a Dem prez and Congress in 2009 or you'll be writing about how you are hearing: "Let 'em eat cake."