The laissez-faire Bush era of hands-off has produced disastrous results, as we are seeing in the current financial markets."This is bigger than the private sector can fix by itself," Reagan's former Secretary of the Treasury James Baker said on "This Week with George Stephanopoulos" Sunday. "Now we have to figure out a way to regulate out of it."
Too little, too late, some may say.
Last December, Martin Eakes, CEO of The Center for Responsible Lending, told the New York Times, "If the Fed had done its job, we would not have had the abusive lending and we would not have a foreclosure crisis in virtually every community across America."
Who is to blame for this nightmare? Free-market ideologues like former Federal Reserve Chairman Alan Greenspan helped perpetuate this nonsense that business does not need regulation.
This approach allowed the bottom feeders of the mortgage industry, like Countrywide Financial in our own backyard, to grow and thrive and feed on the naiveté of families sucked into sub prime loans they could not afford. The bigger and riskier the mortgage, the higher the fees these mortgage brokers and lenders raked in.
These loans were in turn sold to investment banks and other investors. And suddenly the bottom fell out. Meanwhile CEOs have taken home millions of speculative dollars.
The banking industry has too much influence in politics. In 1987, the Keating Five scandal ensnared John McCain, who along with other senators, was accused of trying to improperly intervene in a federal investigation of Charles Keating, chairman of the Lincoln Savings and Loan Association. McCain accepted $112,000 from Keating and was flown to the Bahamas.
Lincoln Savings and Loan collapsed in 1989, at a cost of over $3 billion to the federal government.
Back in 2001, California had a chance to crack down on predatory lenders with AB489. Tony Strickland, now a candidate for State Senate, served in the Assembly Banking and Finance Committee where he was supposed to be looking out for consumers and protecting them from unfair banking practices.
Instead, Strickland took $47,575 in contributions from the banking and finance industry and helped them water down AB489, so it protected almost nobody.
It is time to end this disastrous influence corporations have on the decisions which affect our future.
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Hi Helen, thanks for the blog. I appreciate anyone that communicates their position on the financial crisis.
Unfortunately, no one wants to be accountable for any of it. This includes Democrats, Republicans and Management. These people are accountable for Fannie Mae's integrity. The implementation of reduced documentation and requirements for loans for lower income individuals and families has been an issue at Fannie Mae for a long time.
We have bi-partisan committees that are directly responsible for Fannie Mae's performance and integrity They all abdicated their responsibility, as to fraudulent bonuses for management and payments to politicians. In some cases Congressmen and Senators got sweet heart deals from the lenders.
On the flip side of this situation is the fact that there are many lower income people that were able to purchase homes, they would not have been able to. The vast majority of these people have elected to pay their bills and take accountability for their debts.
Unfortunately as you point out, there was not the regulation that would have helped the buyer determine the needed ratios and credit ratings that would be normally required to get a loan on a house.
Mortgage Brokers had a phenomenal incentive to get loans through the system without any personal penalties at all. The banks looked the other way and soon we had a big mess.
On the banking side of this, I hold both parties at least partially accountable for the crisis. Unfortunately the more creative financial minds in the Wall Street community developed new financial instruments that were confusing and in essence "ponzi" schemes. These capitalized on the shaky loans that were given. This has blown up on us and have brought our banking system to its knees.
I am of the opinion that there should be accountability, (prison sentences, fines)for the people that drove and approved the strategy. Ignorance and greed played a big role as well, none the less, ALL of us will pay.
Dan Frederickson
Thank you for your cogent correct analysis. Yes both Democrats and Republicans bear responsibility for this recession (should we posit possible depression) in capital originating in our system. The problem has been festering since the 1980s. Now I am concerned with how to fix it. I suggest that a bipartisan approach will be necessary to point the way forward for California. Are you familiar with California Forward? They are offering realist policy and political solutions.
Gosh, you libs are such pessimists. No wonder you can't win an election.
This is not going to turn into a depression, Helen. Have some faith. The circumstances in the late 20's/early 30's were completely different from what they are today.
For one thing, they didn't have FDIC protection for individual bank accounts back then (which was recently increased from $100K to $250K), so people are not in danger of losing their life savings like what happened in The Great Depression.
Secondly, we don't have the Dust Bowl/agricultural drought conditions that severely worsened the economic problems experienced in the Great Depression era.
Finally, the government, to its credit, responded quickly to deal with the current economic crisis and, although some are skeptical of the bailout plan, it certainly provides a back-stop for financial institutions to prevent the bottom from falling out of the financial markets like it did in the early 30's.
Hang in there, Helen. All is not lost.
Mongo-Gibson is all wet. Bush dumped this socialistic "bail-out" on us to enrich his boys one more time before the election. The right wing nuts think it is OK to bail-out the rich, but not OK to help those most in need. Mongo-Gibson and his right wing nuts will be going down in two weeks. Down the drain with the rest of human waste.
The Bronx butcher's son/thug with the fake tan who ran Countrywide in conjunction with Freddie and Fannie's looking the other way had nothing to do with anything in the Bush Administration's "laissez faire era of hands off", Ms. Conly. Your gay Congressman Barney from Boston, along with the guy from Connecticut, saw to it that the controls already in place were breached. Years ago, the WSJ was warning of these problems as was the Bush Administraion. Intimidation of bankers by ACORN started the process and their chief instructor, known as B.O. or That One, has a direct causal connection to all of these goings-on. Rant on, Helen.
Keep banging the drum, CAP-(Whatever Number You Randomly Pick Each Time You Post). Tony is currently wiping the floor with the Taxin' One and, as for me, I have a huge bottle of Dom Perignon chillin' in the frig as we speak. Two weeks til poppin' time. Can't wait.
Yep, Mongo, me too. Except I've got a bar in my house that I'll be serving drinks to a few close friends and family as we watch the election returns on the 4th.
You're welcome to come over, if you wish, especially if you're who everyone says you are. Maybe we can use it as an opportunity for you to launch another campaign for City Council. You certainly have my vote!
Damien,
I'd love to take you up on the offer. Thanks for your support too. I know it will be a celebratory night for us Republicans.