Thursday, March 5, 2009
Congressman Barney Frank Wants to Prosecute the People Who Caused the Meltdown - Has No Specific Targets in Mind
The chairman of the U.S. House Financial Services Committee - Barney Frank - wants to prosecute those who caused the financial meltdown, although he has no targets in mind.
I'd like to provide a list of where Congressman Frank might start:
- Of course, there is Madoff and Stanford, the guys who ran multi-billion dollar Ponzi schemes
- And there are the senior military officials who stole approximately $125 billion dollars out of money earmarked as Iraq reconstruction funds
- And there are the rating agencies, which committed massive fraud
- And there are the Treasury department officials who allowed banks to "cook their books"
In reality, the list could go on and on.
Indeed, while it might not be criminal, Frank himself bears some responsibility for the crisis. He has thrown trillions of dollars of hard-earned taxpayer money down the drain, in concert with Bernanke, Geithner, Dodd, Pelosi and the gang. Mish slams Frank on that count.
But there's something above and beyond that:
Frankly, boneheads on both the left and the right caused the meltdown.Time and time again, Frank insisted that Fannie Mae and Freddie Mac were in good shape. Five years ago, for example, when the Bush administration proposed much tighter regulation of the two companies, Frank was adamant that "these two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis." When the White House warned of "systemic risk for our financial system" unless the mortgage giants were curbed, Frank complained that the administration was more concerned about financial safety than about housing.
Now that the bubble has burst and the "systemic risk" is apparent to all, Frank blithely declares: "The private sector got us into this mess." Well, give the congressman points for gall. Wall Street and private lenders have plenty to answer for, but it was Washington and the political class that derailed this train. If Frank is looking for a culprit to blame, he can find one suspect in the nearest mirror.
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I have to tell you, here in Columbus most of the empty foreclosed homes in the inner city were not owner occupied. The slum lords got what they deserved. I hope the government makes it priority to sell them to owner occupants now that you can buy one for a song...
ReplyDeleteGood list, GW
I'm surprised that you resort to quoting the Jeff Jacoby BoGlo column which blames poor people (via the Community Reinvestment Act) for the economic crisis. This is a RW talking point to divert attention from the true culprits, whom you usually name for causing this economic debacle.
ReplyDeleteIt's really securitization of the crappy loans that is the culprit, something that dates to the 1990's. If the banks had to keep crappy mortgages on their books, they wouldn't have made them. It was only the ability to make huge profits while passing the hot potatoes onto Aunt Millie's pension fund that led to the 'Giant Pool of Money' (as Ira Glass called it in the classic This American Life episode 355 that better explains how this crisis was engineered).
And it was only with the expectation of being bailed out by the taxpayers that the scheme was carried out.
Furthermore, it is the lack of income keeping up with the cost of living that results in people not being financially qualified to become homeowners. The poor people didn't pass NAFTA, or arbitrage their jobs to China. Blaming the victims is counterproductive to the usual purpose of this blog, which is to expose the real perpetrators and inform your grateful readers/fans.
The poor and minorities were set up to be blamed for this mess. The bad guys deliberately pushed through mortgages that would fail. They then chopped up, disguised and securitized them. The securities were then sold all over the world, using the good name of the U.S. as collateral. They then took out CDS bets on the other end that the underlying mortgages would fail. When they did so predictably, they cashed out again, using bailout money that was unrestricted under threat of military takeover. Now, they blame the poor and minorities they set up in their scheme. This all has a grander purpose. In order to set up a one world government, you have to tear down the world's economies so you can come in and "save" them. People who participate in, or turn a blind eye to evil such as this do so at their own peril.
ReplyDeleteAddendum:
ReplyDeleteMany of the subprime and other crappy mortgages were made by institutions that were not regulated by the Community Reinvestment Act. The mortgage companies like Countrywide were under no obligation to lend to people who were poor credit risks. There have been plenty of articles in the NYT and elsewhere exposing the intentionality of pushing as many loans as possible, falsifying asset and income statements in order to approve loans that should not have been made. From "Zippy Cheats & Tricks":
"Loan volume became as important as loan quality, particularly for the rank and file typically paid on commission.
During the boom, it was common for lenders and brokers to get paid more for risky subprime loans than for 30-year fixed-rate loans because the higher-interest loans fetched a higher price on Wall Street."
Here's the opening of an article in the Miami Herald fron 12/6/08:
Exec had mortgage racket down to an art
"Orson Benn, once a vice president at the nation's largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.
From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers."
As you pointed out in an earlier post, the thieves abused the trust of the banking system, US brand, and of average folk who were lured into becoming vehicles (or 'fodder units' as Jeb Bush calls us) for the fraud.
EQ gives a concise explanation of the scam.