"I’ve planned for reirement all my life. I never planned for this."
Talk to Dick.
Dick Cheney, the master con artist will tell you Fannie Mae and Freddie Mack are our villians.
Do we dare call it Casino Capitalism?
Someone hijacked our 401K Retirement Security Blankets and we need a face to smack.
It’s good to discuss how we got into this fucking mess.
People are outraged, and fearful, and rightly so.
Robert Johnson, in a FDL compares the meltdown to the Horatio Alger story gone awry. “Government has not, even now, erected adequate boundaries vis a vis taxpayer money for the financial sector and the excesses of the financial sector have exploded Horatio Alger. Alger has been blown off his moorings due to no fault of his own. Yes Horatio, you can be destroyed by the actions of others and it is the role of government to set up a context which maximizes your "freedom to" while giving you the most "freedom from" harm by others.”
Yes. We were harmed. By whom?
A whole cast of reckless characters and Wall Street corporations.Dick Cheney, you lying sack of shot, blames Fanny Mae and Freddie Mack for the collapse, the demons who ignited the September collapse.
I’d like to offer a different approach.
The myth of the free market is dead. For Republicans, this is heresy. The Wall Street Journal (editors), Investors Business Daily, CNBC, Republican leaders, and many others are in denial. “In an insane world, the person who is rational has the problem,” Andrew Lo, a Professor of Financial Engineering says, “Money is as addictive as cocaine.”
Called upon to explain what happened, the financial community hid their cocaine in their Mercedes glove compartment. “Fanny Mae and Freddie Mack did it” and they went thattaway!”
How convenient.And simplistic.
There are many causes. Economists, historians, and financial analysts will be kept busy for decades.
Fanny and Freddie played a role in the housing bubble, but not as nefarious as you think.They were private, profit-making institutions whose debt was implicitly guaranteed by the federal government. Many folks, including me, thought they were governmental entities. They weren’t.
Remember the S&L scandals?
The S&L’s blew up due to deregulation and bad lending practices. Fannie and Freddy drove in and capitalized on the market. Growth fanned their troubles between 2002-2004, but the numbers show they were not the underlying reason for the Ponzi schemes.
“What followed from 2004 through 2006:” economist Krugman writes, “The two mortgage giants got muscled aside by Wall Street firms willing to underwrite bigger, riskier mortgages than Fannie and Freddie were allowed to touch. Their joint market share fell to only about 25% in 2006.”Paul Krugman goes on, “Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S&L fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990’s, largely faded from the scene during the height of the housing bubble. Partly, that’s because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income.”
Fanny and Freddie deserve no white hats and share some blame, but for the entire stickin mess?
They are a nice target though. Especially for Republicans looking for a scapegoat.
So, let’s put a smiley face to the reasons. Picture, if you will, Fuld, Raines, Mozillo, Thain, Lewis, and Cassano.
Richard Fuld, former CEO of Lehman Brothers. Under Fuld’s leadership, Lehman went belly up last September, triggering the financial crisis we’re still dealing with today.
Franklin D. Raines, former CEO of Fannie Mae. Under Raines’ leadership, Fannie approved many of the disastrous home loans that ultimately led to it being taken over by the federal government last summer.
Angelo Mozilo, former CEO of Countrywide Financial. The SEC is investigating Mozilo and two other Countrywide executives for lying about credit risks– a critical factor in the mortgage company’s collapse.
John Thain, former CEO of Merrill Lynch. Thain served as Merrill’s CEO while it posted massive losses late last year, but still approved billions in bonuses for Merrill staffers. Thain also spent 1.2 million of Merrill’s money on a redecoration of his office suites. After being ousted, Thain reportedly walked Merrill’s halls declaring: "I don’t know how these people can run this company without me."
Kenneth D. Lewis, Bank of America’s embattled CEO. Lewis was subpoenaed last month in NY Attorney General Cuomo’s investigation into the billion dollar bonuses awarded to Merrill Lynch execs just before the company came under Bank of America’s control. Lewis continues to refuse to disclose information on these bonuses.
Joseph Cassano, former head of AIG’s financial products division. That was the unit responsible for the disastrous credit default swaps that triggered AIG’s collapse — which we’re still paying for. Back in August 07, Cassano declared that it was difficult to imagine "a scenario within any kind of realm of reason that would see us losing $1." Cassano left AIG in February 2008, but was initially given a $1 million a month retainer — which has since been terminated.
Investor’s Business Daily, in an editorial, concludes that the real culprits in this meltdown were Fanny and Freddy. “Market failure? Hardly.”, they wrote. “Once again the crisis has government’s fingerprints all over it.”
They rip Raines apart, but no mention of Fuld, Mozillo, Thain, Lewis, or Cassano.
I’m putting my money on Credit Default Swaps, naked selling, hedge fund managers, big bad banks, gambling, and lax governmental oversight. Those are the bad guys.
“Whatever credit defaults are in theory, in practice they have become mainly side bets on whether some company, or some subprime mortgage-backed bond, some municipality, or even the United States government will go bust.”Michael Lewis writes. “In the extreme case, subprime mortgage bonds were created so that smart investors, using credit-default swaps, could bet against them. Call it insurance if you like, but it’s not the insurance most people know. It’s more like buying fire insurance on your neighbor’s house, possibly for many times the value of that house — from a company that probably doesn’t have any real ability to pay you if someone sets fire to the whole neighborhood. The most critical role for regulation is to make sure that the sellers of risk have the capital to support their bets.”
You can kick the Democrats all you want. I think they are trying to put out the fire.
For Republicans and Cheney, get another mantra
Note: Thanks to TPM for the bios on the fat cats.