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03:12 PM on 11/07/2011
Traditionally, banks and S&L's made their money from the interest on loans that they made with depositors funds. In the 80's this became untenable as they could not make enough return on equity to satisfy shareholders. Fannie and Freddie would buy loans to free up capital so that banks could make more loans. But then something happened. It became possible to make money by creating securities. Investment houses would create these derivatives that they could buy and sell on the market. Banks and traders would make their income on the commissions and fees for every transaction. Credit default swaps could be purchased on loans and securties you didn't even own. The international supply of money increased exponentially. And all because Greenspan kept interest rates too low. It was insane and unregulated. And in the end everyone drank the cool aid. But it was invented by Wall Street, who profited the most, and are profiting to this day.
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blueken
Finger Picking blues man
03:44 PM on 11/07/2011
I didn't drink the cool aid. I havn't had a decent raise in about 5 years, and my bought and paid for house is worth 60% of what it was a few years ago. My investments are beating the market, down less than 1% YTD. Whoopee! Can't retire on that.
04:10 PM on 11/07/2011
Yeah. Lost my house a few years ago myself. My point is that all the banks felt like they had to get in the game with the Alt A, Subprime, low doc and no doc loans because so much money was being made and the investment houses were tearing down the door for more and more loans. The big banks and investments houses were gobbling up small and medium signed lenders and mortgage banks like they were potato chips.
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CPAwADD
Always look on the bright side of life.
03:11 PM on 11/07/2011
This was much more than bad judgment. This was fraud.
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blueken
Finger Picking blues man
03:46 PM on 11/07/2011
You got that right. I had the VP of Mortgage of an S&L tell me that I was crazy to not have an adjustable loan. The S&L went bankrupt, I didn't. My point is that most people that sit down with a bank rep know much less than the rep does about the transaction. They have insider knowledge that we don't. They are supposed to be above board, but they are not.
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CPAwADD
Always look on the bright side of life.
06:28 PM on 11/07/2011
My problem was the poor quality of the due diligence in buying and selling mortgages. You can't do that without making certain representations.
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03:09 PM on 11/07/2011
But the other half of The Big Truth is that literally hundreds, even thousands of regulators, politicians, staff etc., on the Government side, all people who were bound to serve the public interest, were a party to the worst excesses of commission and omission over nearly 2 decades including the highest officials (elected or appointed) in the Clinton, Bush and Obama Admins and Congresses. The ENTIRE Washington/Wall Street nexus is corrupted beyond repair.
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blueken
Finger Picking blues man
03:47 PM on 11/07/2011
That's why we need publicly funded federal elections, on all levels.
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02:57 PM on 11/07/2011
The biggest lie yet was that the bailout TARP money was repaid. It was actually swindled by using the FED DISCOUNT window to "borrow" money at zero interest and the buy US debt at 3% interest which permitted the banks to make an interest profit at the expense of the US taxpayer and then use that interest profit to pay back the money they took in the bailouts. Biggest swindle ever - leaving the principle on the books of the US as debt.

People need to understand the US GOVERNMENT is one giant MAFIA wealth consolidating organization allowing the criminals to steal with impunity at zero accountability. Since they make the rules they can make the rules that permit all sorts of unequal treatment and unfair advantages. That's why people spouting this "hard work" mantra are living in the 1800's.
DanBest
My micro bio is empty
02:47 PM on 11/07/2011
The reason the Fannie Freddie, Barney Frank meme is so compelling to rightwingers is that it conveniently lines up all their boogeymen, big guv, gay men and a quasi government agency. Throw in CRA, an entity most rightwingers couldn't have indentified a few years ago and you have the making of one great distracting fairy tale where all the bad people are on the left and all the well meaning businessmen nothing more than victims, As if our well meaning businessmen didn't own our government through a sytem of legitimate bribery we call a political donation. It's all about as clever and amusing as a rapist who claims he wouldn't have comitted the act had that woman not tempted him with what she wore.
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MoistvonLipwig
Life is for the living - Death
02:41 PM on 11/07/2011
One fact would supply all of the answers to this. What percentage of the home loans were given to "low income" buyers that were unqualified. There is no way those make up any majority of the $400-600TRILLION dollars in bundled mortgages that were gobbled up by insured banks, using FDIC guaranteed money that are now worth less than half of that. Middle class America pulled fun money out of the sudden upward evaluation of the homes, and even more than that, instant entrepeneurs bought houses they expected to turn in 1-3 yrs before the ARM hit.

An environment of sudden wealth was encouraged by banks and lenders knowing they would sell the mortgages. The banks made massive profits and the international monetary system is vaporware. Simple regulation of the percentage of OUR money a bank could invest in anything, much less high risk loans would have stopped this.
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RMForbes
Ask me about industrial hemp
04:14 PM on 11/07/2011
I don't know the exact percentage of high risk loans that were given but I know these loans accounted for just 25% of the foreclosures in 2008-2009. Most (75%) of foreclosures were caused by normal mortgages or seconds that were aggressively marketed to middle class homeowner's by the likes of Countywide to take equity out of your home to do what you want. I still remember the TV ads, don't you?
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Somethinuglythiswaycomes
talkin loud and sayin nuthin
02:29 PM on 11/07/2011
It's almost funny, they didnt start screeming class warfare till we started fighting back.
02:07 PM on 11/07/2011
Why would they change their ways? Their conservatives and they have no conscience. They think the best response to conservative failure is to double down!
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01:49 PM on 11/07/2011
% of blame.

65% Government
25% Private Sector
10% Individuals

http://www.youtube.com/watch?v=NU6fuFrdCJY
02:56 PM on 11/07/2011
Wow. If it says so on YouTube it must be true.
03:22 PM on 11/07/2011
I would argue you to follow the money, the Big money. Those that got away with it deserve most of the blame. Private sector 99%.
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Reno Fickler
Head Lifeguard/Dead Sea Marina
01:43 PM on 11/07/2011
The simplest form of mathmatics will tell you that a fund constantly reduced by a small percentage (fees) eventually is empty. The Madoffs of the world rely on one of the oldest of human emotions.
GREED. They thrive on the belief that there will always be more.
01:39 PM on 11/07/2011
Sure, the big lie - but not one mention of Fannie Mae in the entire article - NOT ONE.

Those of us working in the financial industry were there front and center when Fannie Mae collapsed, and that was the trigger. No mention of that fact in this article drains it of any credibility it might have had.

Sure, Wall St used too much leverage. The made investments they didnt know a whole lot about - that deficitly exasperated the collapse, but it wasnt Wall St that made those thousands of mortgage borrowers default.

Go ahead, keep your head in the sand and keep believeing it was all those greedy bankers. Without Fannie Mae, this article is good for one thing - replacing ScotTissue with the paper its printed on.
01:53 PM on 11/07/2011
Thousands of borrowers? Try millions and still counting. Your head is in something thicker than sand. Fannie and Freddie only held 24% of the defaulting mortgages. The rest were held by private banks and mortgage companies who just wanted to get the deal done (no matter what it took) so they could get their fees and sell the loans off to be bundled into mortgage-backed securities to be sold to the next sucker in line.

http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story_1.html
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Somethinuglythiswaycomes
talkin loud and sayin nuthin
02:09 PM on 11/07/2011
Theres that big lie again
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DevonTexas
Eternal Optimism
01:32 PM on 11/07/2011
"...Congress who forced everybody to go and give mortgages to people who were on the cusp.”

And the Fox Fear Channel viewer friends of mine are doing their best to echo this lie and much and as often as possible. You gotta admire their mendacity.
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ThomasPaineWeNeedYou
Know history or repeat it.
01:30 PM on 11/07/2011
The big lie the fa s cisti favorite friend.
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01:24 PM on 11/07/2011
http://www.project-syndicate.org/commentary/roubini28/English
Gordon Gekko Reborn - Nouriel Roubini - Project Syndicate

"...greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out. The systematic bailouts of the latest crisis – however necessary to avoid a global meltdown – worsened this moral-hazard problem. Not only were “too big to fail” financial institutions bailed out, but the distortion has become worse as these institutions have become – via financial-sector consolidation – even bigger. If an institution is too big to fail, it is too big and should be broken up.

Unless we make these radical reforms, new Gordon Gekkos – and Charles Ponzis – will emerge. For each chastised and born-again Gekko – as the Gekko in the new Wall Street is – hundreds of meaner and greedier ones will be born."
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jflorish
01:20 PM on 11/07/2011
Alot of things went wrong, and not just the U.S. but worldwide. The government and businesses both share some blame in this.
02:27 PM on 11/07/2011
To be sure.

But it's not even close to equal.