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Re: [RT] Fw: Please read the entire article



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Are you sure this was a Bill Clinton issue?  The bill was introduced in the Senate by Phil Gramm (R) and in the House by James Leach (R).  The vote in the Senate was 54 Yeas (43R & 1D) and 44 Nays (1R & 44D).  In the House it was 362 Yeas (207R & 155D) and 57 Nays (5R & 51D).  While Clinton signed the Bill, it sounds like a Republican measure to me.  Maybe you could spread the blame around a little bit more, if indeed you are correct this was the root cause of the problem (doubtful).

Charles Meyer wrote:

On Sun, 03 Aug 2008 14:02:32 -0400
Ben <profitok@xxxxxxxxxxnet> wrote:
>
> Sent: Sunday, August 03, 2008 9:32 AM
> Subject: Please read the entire article
>
>
>
>
> How Did We Get Into This Financial Mess?
>
> by Jason Leavitt
>
> LeavittBrothers.com
>
> The financial "crisis" that exists in the US and world
>is one that hasn't been experienced
>
> since the 1929 stock market crash and subsequent Great
>Depression. Pointing fingers
>
> after the fact is somewhat cowardly, but unless we know
>why and how we got into this
>
> situation, how can we expect to get out of it and avoid
>another one in the future? Here's
>
> my take on who played a role in the financial situation
>we're in and who deserves most
>
> of the blame
>
>Federal Government. Banks lend money to home buyers. If
>the banks planned on
>
> keeping those mortgages, they'd be very careful who to
>lend to and how much to lend.
>
> They'd really do their due diligence to make sure there
>were very high odds the
>
> borrower would pay the loan back. But if the bank wasn't
>planning on keeping the loan,
>
> no doubt their standards would drop.
>
> Enter the Federal Government sponsored/supported Fannie
>Mae and Freddie Mac
>
> (both created by the government) which buy mortgages
>from banks, so the banks can
>
> turn around and make more loans. This implied safety net
>created by the government
>
> with these two GSE's (government sponsored enterprise)
>has had a very negative ripple
>
> effect. Namely, banks are motivated to take more risks
>and have significantly lowered
>
> their standards knowing they could always dump the
>loans.
>
> The government also encouraged policies that exacerbated
>the situation. In short, their
>
> extreme desire to increase home ownership - especially
>to lower income folks who
>
> couldn't afford a home - completely backfired. But are
>you surprised? Does any
>
> government program work? There are 300-400 government
>programs designed to
>
> make housing more affordable. If a couple can't afford
>to buy a house, why help them
>
> buy a house?
>
> And I could go on and on about how the government has
>branded home ownership as
>
> the American Dream, but nothing could be further from
>the truth. Owning a home is not
>
> an investment, it's a cost, and that cost is high. If
>you rented for 30 years and put the
>
> money you saved (lower monthly payments, no property
>taxes etc) into the stock
>
> market, you'd make a heck of a lot more money than if
>you put your savings into a
>
> house and held if for 30 years. But for years, people
>have been brainwashed into
>
> thinking they must own a home because renting is
>classless - or something new college
>
> grads do.
>
> President Bush and HUD Secretary Alphonso Jackson First
>a quick comment --- in
>
> the government and military there is a chain of command.
>You do what you're told by
>
> those you report to. If George Bush says: "I want 5
>million new homeowners," Jackson
>
> either works towards the goal or he resigns his
>position. There is no middle ground. So
>
> while I could leave the former HUD secretary out of this
>because ultimately Bush should
>
> take the blame, Jackson did have the choice to say: "No
>way, that's not possible without
>
> creating a mess. I'm outta here."
>
> Bush was way too eager. He was so excited for everyone
>to live the American Dream of
>
> owning a home. It was Jackson's job to work towards this
>goal, and Jackson was one of
>
> the people who encouraged little- or no-money down loans
>and interest-only loans. The
>
> ripple effect this had is unknown, but when the
>Secretary of Housing and Urban
>
> Development encourages totally irresponsible financial
>agreements, someone needs to
>
> at least step up and say: "that was a mistake."
>
> Stupid, Gullible Americans. Regardless of what happens
>in Washington, Americans
>
> still have the choice to buy or not buy, so ultimately I
>could blame them. They are, after
>
> all, making the final decision, and they could have
>easily walked away from the table.
>
> But they didn't. They bought houses they couldn't afford
>with money they didn't have by
>
> not putting money down, using interest only loans,
>and/or using variable rate loans they
>
> knew would reset higher than they could afford. If you
>wanna throw a couple grand into
>
> a stock because you think it's going to move up, fine;
>the damage will be minimal if
>
> you're wrong. But why in the world would you potentially
>cripple the rest of your financial
>
> life by buying a house you had no business buying?
>
> Banks. The ultimate blame could also be place here too.
>They are, after all, the ones
>
> lending the money. They do have the ability to say: "No,
>you can't afford that house. We
>
> are not lending you the money."
>
> Call them greedy. They only make money when they make
>loans and since money was
>
> artificially made cheap, they couldn't control
>themselves. They drastically lowered their
>
> standards and loaned money to parties they should have
>know could not pay the loan
>
> back. Shame on them.
>
> Standard & Poor's and Moody's etc. So banks loan money
>and take those
>
> mortgages/loan docs etc. and package them together to be
>sold as CDO's
>
> (collateralized debt obligations). Fannie Mae, Freddie
>Mac, Bear Sterns, foreign banks
>
> etc. buy CDO's without scrutinizing the individual
>contents because they trust the likes
>
> of Standard & Poor's to do their due diligence to
>accurately rate the credit worthiness of
>
> the package.
>
> If Bear Sterns buys billions of dollars of subprime
>mortgages from a bank, then only
>
> they should be blamed for buying the junk - the buck
>stops at their desk. But if this is
>
> the case, why does the entire planet pay such close
>attention to the ratings?
>
> If Standard & Poor's inaccurately rates the CDO's, and
>banks end up buying chickens
>
> they thought were eagles, who is to blame? Nobody will
>argue S&P had extremely high
>
> ratings on loans that were total junk. Should S&P take
>some of the blame? Have they
>
> admitted their calculations where wrong? Moody's
>recently said a computer glitch may
>
> have resulted in inaccurate ratings. Is this little
>admission enough? Were these rating
>
> agencies and the banks working together?
>
> In my eyes, the rating agencies need to either admit
>they screwed up, or forever, they
>
> have zero credibility whatsoever.
>
> Mortgage Lenders. These are the guys most home buyers
>work with. I know banks
>
> ultimately lend the money, but most buyers don't work
>directly with a bank; they work
>
> with a middleman which may be a big company like Lending
>Tree or Quicken Loans
>
> (you see their banner adds all over the internet) or a
>small ma and pop type shop. There
>
> are some very good lenders out there that won't let
>buyers get in over their heads (I've
>
> bought two properties in the last two years, and each
>time it was a simple 30-year fixed
>
> with no bells and whistles or special conditions), but
>there are many that will do anything
>
> to get your business because they only get paid when
>they hook up a buyer with a
>
> bank. They're the ones that told people they could
>afford 'that' house if they used an
>
> interest only loan; they're the ones that encouraged
>buyers that putting no money down
>
> wasn't such a bad idea; they're the ones that exposed
>people to such mortgages as
>
> Payment Option Adjustable Rate Mortgage which allows
>borrowers to pay a small
>
> portion of the interest due each month (but then the
>remaining principle and interest
>
> balance due is added to what they owe).
>
> If these middlemen collectively were more upfront and
>honest with buyers rather than
>
> selling them up a river just to get their business, the
>housing market may not have
>
> gotten out of control.
>
> Alan Greenspan is the man most would like to blame, and
>while I certainly agree he
>
> played a role, it's my belief he only added fuel to the
>fire after the fire was already lit.
>
> The economy's expansion and contraction hinge most on
>one thing, and that thing is
>
> liquidity. The more money there is, the more growth that
>happens. Unfortunately the
>
> opposite is also true. Give me a city full of brilliant
>entrepreneurs, and without money,
>
> they won't create much.
>
> Greenspan artificially lowered overnight rates to
>encourage banks to loan beyond their
>
> reserve requirements. Essentially, he flooded the market
>with money which you may
>
> think is good, but at some point, if there is too much
>money, that money is wasted or
>
> used inappropriately.
>
> It's pretty simple. When money is tight, it's naturally
>funneled towards safe investments
>
> just like tight money in your household results in
>spending only on the bare necessities.
>
> As more money becomes available, riskier bets can be
>made, and when there's "too
>
> much" money, bets that should never be made no matter
>what the circumstances, are
>
> places.
>
> This is what Greenspan did. He made too much money
>available, so businesses that
>
> should not have gotten loans, got loans, and people who
>had no business buying a
>
> house, bought a house, and people who should have bought
>$300K house bought
>
> $400K houses.
>
> Too much money results in totally irresponsible usage of
>that money.
>
> A tightening of rates - or if he at least held them
>steady - may have partially choked off
>
> the aggressive lending.
>
> But Greenspan is not #1 on my list because I do not
>believe people have to sip from the
>
> bunch bowl even though it's full. Anyone who's gotten
>into financial trouble could have
>
> chosen to walk away from the table. Several years ago my
>girlfriend (now my wife) was
>
> in the market to buy a condo. She was approved for much
>more than she knew she
>
> could afford. Did she buy up to the limit her lender
>approved her for or did she buy what
>
> she knew she could afford? You can guess the answer; she
>wasn't about to get herself
>
> in trouble.
>
> To say that Greenspan is most responsible for this mess
>is to desire the Fed play a
>
> greater role in tinkering with the money supply. This is
>a discussion in and of itself and
>
> not one I wish to go into here. There are some
>well-known economists (John Maynard
>
> Keynes comes to mind) who absolutely believe the
>government should stimulate and
>
> suppress the economy to dampen the economic
>fluctuations. But let's not get into a
>
> political discussion.
>
> There are many people involved in buying a house. A
>buyer works with a mortgage
>
> lender to secure a loan from a bank which then packages
>that loan to sell to GSE's such
>
> as Freddie Mac or other banks such as Bear Sterns. The
>system was greased with
>
> artificially low rates, easy money, and extremely
>irresponsible activity from the rating
>
> agencies. If any of the parties involved would have put
>their foot down, and said: "No, I
>
> cannot in good conscious do this," I would not be
>writing this report.
>
> But the roots of the problem cannot be traced back to
>any of these parties.
>
> Bill Clinton. All these people and institutions played a
>role getting us to the current
>
> housing situation, but ultimately, I blame Bill Clinton.
>This probably comes as a shock to
>
> most of you because his name is hardly ever mentioned,
>but in my opinion, if you start
>
> with today and work backwards, seeds of the housing mess
>were started in 1999 when
>
> Bill Clinton replaced a 66-year old law that restricted
>the capabilities of financial
>
> institutions with one that vertically aligned the
>industry and set it on a path to
>
> destruction. Let's go back in time.
>
> It was believed improper and super aggressive banking
>activity played a big roll in the
>
> 1929 stock market crash and subsequent Great Depression.
>At that time, commercial
>
> banks took depositors' money and made risky investments
>in the stock market. Call it
>
> greed, but times were so great in the 1920's, the desire
>to be involved and the feeling
>
> the good times would never end, caused many banks to
>over-speculate with money that
>
> wasn't theirs. They were literally taking depositor's
>money and using it to finance risky
>
> investments. Even worse, unsound loans were made to
>companies in which the banks
>
> invested in, and they encouraged their clients to also
>invest. Can you say: Major conflict
>
> of interest?
>
> Remember back in 2002 when Citigroup came under fire for
>their over involvement with
>
> WorldCom. Citigroup was not only acting as an investment
>bank which made money
>
> when WorldCom "made deals," they were also upgrading the
>stock, so those deals were
>
> easier to execute. It was a Ponzi scheme that had no
>system of checks & balances, and
>
> it eventually imploded. This is exactly what was
>happening in the 1920's that partially
>
> led to the collapse of the stock market and many years
>of struggles. Along comes the
>
> Glass-Steagall Act in 1933 which separated commercial
>banking from investment
>
> banking - essentially a bank could not also be a
>brokerage firm and vice versa.
>
> Sectioning off the financial industry incidentally set
>up a system of checks and balances
>
> and eliminated many conflicts of interest. Also, banks
>were insulated somewhat from
>
> the stock market.
>
> Since then, there have been periods where housing prices
>appreciated faster than
>
> historical norms or flattened out for a couple years,
>but overall, it was smooth and
>
> steady sailing with no major, national interruptions.
>And although we've had several
>
> recessions (recessions are no big deal; they surface
>every handful or years and we
>
> always emerge from them stronger than when we entered)
>we didn't have anything
>
> even remotely close to the financial crisis that
>followed the 1929 stock market crash.
>
> Why? Because of the explicit system of checks & balances
>that existed due to
>
> companies not being permitted to have their hand in more
>than one part of the process.
>
> That's what the Banking Act did. It said: "You can't be
>everything in the process; you
>
> can't be vertical integrated."
>
> But this all changed on November 12, 1999. With the CEO
>of Citigroup looking over his
>
> shoulder, Bill Clinton signed into law the
>Gramm-Leach-Bliley Act which repealed the
>
> Glass-Steagall Act of 1933.
>
> The Gramm-Leach-Bliley Act permitted commercial and
>investment banks to
>
> consolidate, and almost overnight behemoth financial
>service companies that supplied
>
> everything to everybody were born. Smith-Barney, Salomon
>Brothers, PaineWebber
>
> and many other well-known and respected investment banks
>were gobbled up by
>
> Citibank, JP Morgan etc, and while the lay public didn't
>have a clue what was going on,
>
> conflict of interests were rampant. Suddenly the banking
>arm of one of these financial
>
> service companies was pressuring the investment arm to
>raise its ratings on stocks to
>
> help lubricate the deal-making process.
>
> (As a quick side note, Citigroup played a major role
>lobbying for an end to Glass-
>
> Steagall. Starting in 1998, the finance, insurance and
>real estate industries together
>
> spent more than $200 million to get Glass-Steagall
>repealed, and not so coincidentally,
>
> only a couple days after Clinton signed
>Gramm-Leach-Bliley into law, recently-departed
>
> Treasury Secretary Robert Rubin was hired by Citigroup
>as a member of its 3-person
>
> office of the chairman.)
>
> If you start with today and work backwards with
>intentions of figuring out when "all this
>
> mess started," you'll find many parties that played a
>role in adding fuel to a fire which
>
> was spinning out of control, but your journey won't end
>until November 12, 1999 when
>
> Bill Clinton tore down the walls within the financial
>community.
>
> I'm not going to go as far to say if Bill Clinton had
>not repealed Glass-Steagall, we
>
> wouldn't be in the financial situation we're in, but I
>can certainly say it would have been
>
> much more mild and probably isolated. When second and
>third parties are involved in a
>
> transaction, more due diligence is done, more scrutiny
>is applied, and less risk is taken.
>
> Bill Clinton started this financial mess.
>
> In Summary Bill Clinton laid the foundation. Alan
>Greenspan greased the wheels.
>
> Then, extremely unscrupulous mortgage lenders and banks
>took full advantage of
>
> gullible, unsophisticated borrowers.
>
> By replacing Glass-Steagall with Gramm-Leach-Bliley,
>banks and investment brokers
>
> were permitted to consolidate, and the natural system of
>checks & balances was
>
> destroyed. Not to mention the conflicts of interest that
>were born. Yes, Greenspan aided
>
> the situation by lowering rates and keeping them low,
>and S&P encouraged risky loans
>
> by giving them AAA ratings, and many idiot Americans who
>thought prices would keep
>
> appreciating need to check themselves into gamblers
>anonymous, but if I had to go
>
> back to the beginning, to where this mess started, it
>would be with Bill Clinton's
>
> signature on November 12, 1999.
>
> You opinion is welcome and appreciated.


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