Who Is to Blame for the Financial Crisis?

I believe that Paulson and then NY banking chief (Tiny Tim non-Taxpayer) should never have let Lehman go down..when the money markets redemptions caught fire, if prevented the gov’t. the opportunity to unwind without panic.
Also the McCain/Obama extravaganza was not a big help.. these election years should be a red flag warning for investors (in the future).

American Infidel:”our Congress and Senate force banks into giving deadbeat loans and KNEW it wouldn’t hold water.”
Could you please provide ANY citation for this? Or are you repeating the spin that a thirty year old law (the CRA) somehow resulted in mortgage derivatives and an utter failure of institutions to properly cost their associated risk? You do realize most of the loans were done by organizations that were not even subject to the CRA (which only applied to the bank and thrift arms)?
Congress certainly is at fault, for not providing appropriate regulations to ensure a stable market place.

I blame the democrats in congress.
Barney Frank and that other yahoo. Both democrats.
They caused a huge mess with the economy and the housing mortgage mess.

Greg T: “I blame the democrats in congress.”
Gee, what a surprise. Those poor powerless Republicans, all they could do is sit and watch even though they held the majority in both houses of Congress during the full run up of the housing bubble AND held the presidency up until a few months ago too.
Yup, if there’s a problem the buck stops… over there. With a Democrat. Probably a Clinton.

Good read. But we still have many of the same Congressional “players” in charge of fixing the screw ups they helped oversee.
Country wide, AIG, Wachovia all names we have heard before, handing out political donations like candy at a parade, and now the Government throwing money back to them in return, in the same fashion.
We need to run the varmits out of town.

Chris Dodd and Bawlknee Phrank are high on the list of destroying this ecomney
Honorable mention goes to the leftwing, Lets hate on America Media. Whose constant barrage of negative broadcasting, created panic in the public confidence

I would just like to know why the Obama Administration said yesterday that Chrysler did not have to pay the 7.2 billion dollar bailout money back.
Kinda confused there…. why give out good money after bad, if all you are going to do is forgive the loan.
Wasn’t that taxpayer money that needed to be paid back?

jhw539:
Check out the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. The act mandated that the Department of Housing and Urban Development set specific goals for Fannie Mae and Freddie Mac with regards to low-income mortgages. Fannie Mae and Freddie Mac were forced to increase their purchases of mortgages for low-income borrowers.
An excerpt from a Sept. 25, 2008 Los Angeles Times article (“LA Times Blames Clinton For the Economic Crisis”) states as follows: “The bottom line: Between 1993 and 1997, home loans grew by 72% to blacks and by 45% to Latinos, far faster than the total growth rate.”

jhw539–
Do you not realize that there are two(2) missing Loan Houses?
Fannie and Freddie ring a bell?
Are you going to deny that Democrats in the 90s’ didn’t push for poor people to be able to own their own homes? They even went so far as to let them be able to claim welfare entitlements as income.
This my friend is not the talking points of anyone but the transgressors of this debacle.
Don’t “YOU” want to find out who screwed this nation up? Or are you more inclined to worry about the terrorist at Gitmo are getting new prayer mats and if “THEIR” rights are being trampled?
I am all for poor people being in homes of their own but they can’t be in homes that I can’t afford and I work for a living. I am responsible enough to know that if I can’t afford something then I can have it.
Th government may have meant well but EVERYTHING they run, touch turns into a Chinese fire drill. Next thing you know….everyone has their hands out!!
It is way past time to let everyone feed at the gubbamint trough!!

American Infidel:”Do you not realize that there are two(2) missing Loan Houses?”
You mean Fannie Mae and Freddie Mac are NOT in the list of “the top 25 subprime lenders that helped start this economic meltdown.” How does that make you partisan point that they’re to blame again?

Every individual who contracted for a loan they couldn’t afford, and every individual who walked away from a loan they thought no longer worthy of honoring is to blame.
Every loan officer who made a loan to people who weren’t credit worthy is to blame as well as the mortgage companies who employed the stupid loan officers.
Every bank who participated in sub-prime loans is to blame.
Every congresscritter who cried “racism” when attempts were made to rein in Freddie and Fannie are to blame.
Every participant in fraudulent accounting at FM/FM is to blame.
Every investor who participated in CDS who couldn’t afford to take the loss is to blame.

American Infidel:”Are you going to deny that Democrats in the 90s’ didn’t push for poor people to be able to own their own homes? ”
Huh, sounds like an “Ownership Society” to me (TM – George H. W. Bush campaign slogan). Who signed that Federal Housing Enterprises Financial Safety and Soundness Act of 1992 bill into law?

Other people on this post have told you info and data that backs up everything I’ve said but unfortunately you want to drag that ol’ ball and chain around with you. Wasting my time on you….live long and “FREE”!

“You mean Fannie Mae and Freddie Mac are NOT in the list of ‘the top 25 subprime lenders that helped start this economic meltdown.’”
I’m not certain, but I don’t believe Fannie and Freddie are classified as lenders–they do not make loans; they purchase them from lenders, and for a long time under administrations of both parties they were encouraged, if not pressured, to purchase very shaky loans to further the benign national policy of expanded home ownership. Lenders, in turn, were encouraged to make these loans in the knowledge that Fannie and Freddie would purchase them.
“Chartered by the government to keep mortgage money flowing, Fannie Mae buys loans from lenders, enabling them to make more loans. It also packages loans into securities for sale to other investors, guaranteeing it will make the payments if borrowers default. Its mortgage-related investments and guarantees total $3 trillion.
“During the peak years of the housing bubble, the company was distracted by an accounting scandal and its fallout. For much of 2006, the company was focused on a continuing effort to correct years of false financial reports, a massive project that cost more than $1 billion and ultimately revealed that Fannie Mae had overstated past profits by $6.3 billion.
“Mudd promised his employees a celebration when the restatement was done, and he delivered. In December 2006, the company threw a holiday bash at a Washington hotel with entertainment by Earth, Wind & Fire, the ’70s group known for such hits as ‘Boogie Wonderland’ and ‘Fantasy.’”
There is a huge amount of blame to be thrown around here, including players in the private sector and both political parties.
It does appear that the Bush administration sought to impose a “super-regulator” within Treasury over these two entities, and it’s very clear that Frank and Schumer led the opposition.

Fascist Hyena:”There is a huge amount of blame to be thrown around here, including players in the private sector and both political parties.”
Since I have work to do, I’ll grab that sentence so I can depart in (very rare) agreement with FH here. This is really too important an issue to be simplified into competing bumper stickers . Just like after the Great Depression, the actual complex causes of this collapse need to be accurately identified and changes made so the next collapse is generations away and for a new reason.

JWH539, we are in complete accord. And I don’t have too much of a clue about what should be done. I think the people who create financial instruments will always be many leagues ahead of those who try to regulate them.

Thank You, Bro!!
“CHECK and MATE”

Barack and Michelle, sub-prime borrowers:
“In April 1999, they purchased a Chicago condo and obtained a mortgage for $159,250. In May 1999, they took out a line of credit for $20,750. Then, in 2002, they refinanced the condo with a $210,000 mortgage, which means they took out about $50,000 in equity. Finally, in 2004, they took out another line of credit for $100,000 on top of the mortgage.
“Tax returns for 2004 reveal $14,395 in mortgage deductions. If we assume an effective interest rate of 6%, then they owed about $240,000 on a home they purchased for about $159,250….”
Greed.

I don’t object to appropriate regulation; every free marketeer recognizes the need to prevent and punish fraud. But if anybody can tell me what kind of regulation might have prevented this mess, I’d like to hear it.
One possibility would simply have been to require some level of loan-to-value, but of course that’s what stood in the way of expanded home ownership. And no one was opposed to expanded home ownership.

jhw539 wrote: “How many of these mortgages are now in default?”
Fannie Mae and Freddie Mac have been given $200 billion EACH in bailout money so it doesn’t take a rocket scientist to determine that a substantial amount of the loans were in default. However, feel free to write to Fannie Mae and Freddie Mac for the specific answer.

“His administration has spent, lent or guaranteed $12.8 trillion in taxpayer dollars to Wall Street and insolvent banks . . . Brand Obama has allocated nearly $1 trillion in defense-related spending and the continuation of our doomed imperial projects in Iraq, where military planners now estimate that 70,000 troops will remain for the next 15 to 20 years. . . Brand Obama has refused to ease restrictions so workers can organize and will not consider single-payer, not-for-profit health care for all Americans.”
America, we warned you. Barack Obama never was and never will be an agent of change in Washington. He is, always was, and always will be a hologram of leadership manufactured by Machiavellian Marketeers who want nothing more than to continue the de-democractization of the United States begun by Ronald Reagan. The lesson the Machiavellian Marketeers who fix elections for their corporate donors learned from the Bush era is that if the messenger eventually becomes a person reviled by the masses, as George W. Bush became, you don’t have to change the message. All you have to do is change the Messenger.

“The CRA was Carter’s answer to a grassroots activist movement started in Chicago, and forced banks to make loans to low income, high risk customers.”
This is a typically right-wing slanted description of this law. CRA was a legislative response to extremely solid statistical evidence that minorities were being discriminated against because of geographical demographics by the lenders alone. The volume of lending increased by this law is simply nowhere near enough to account for the scale of the housing crisis.

I think the government is for non Regulation on the banks and financial institutions…such as your credit cards.
It is not the people who went out and purchased a home they can’t afford it is the bank who found ways of giving them the loans they could not afford and insisting that they can. Believe me they tried to play me also only I knew my price and I knew to get nothing but a 30 year lock.. now with being said the realtor plays a big part in all this also.. I don’t know how many times my first one said “anything is possible” “I can make it happen”….. I got a new realtor one that stayed on hearth.

Oh, and we’re also further to blame if we don’t hold people like Barney Frank accountable. He points his fat sausage fingers in every direction but at himself, so he can go on another day to destroy our country a little more.

Who is “copy editing” for you guys, Jayson Blair? Over 50 posts and no one has commented on how stupid it would be to build an analysis of this kind based on the study of “7.2″ loans?
Jayson, it ought to read “7.2 million ‘high interest’ loans.”

“The Dow Jones Industrial Average was at 13,000 when the Democrats took control of Congress. That’s when I got out, paid capital gains at Mr. Bush’s rate, and never looked back.”
Jan 2007: Dow Jones was under 12500.
It peaked around 14000 in late 2007.
And the capital gains rate remains unchanged.
The lesson as always? Right wingers lie.

“Doesn’t ACORN deserve an honorable mention?
The professional protesters (paid for with our money)–used mob rule to intimidated banks.”
Yes the organiztion that protested racial discrimination by the banks is at fault.
If one every wonder why ACORN is so villified by the right wing you only need to see who they stand up for, poor minorities.

MONEY,MONEY,Money and the blame game,
some of you think you know things, so you blame people you don’t like..
Obama has been president since Jan. 09
He’s not to blame for anything. Some democrats may have contributed to the problem, but it was an effort to help more Americans own a home. The “free market” forces seeing $ signs then offered people loans that started off low but balooned to a level un manageable by the average wage earner.
The banks should have seen this coming but they have competing interests and departments, what was good money to one dept should have been caught by the accountants but if it was, those accountants were ingored because of the huge sums of money they were making.
The power for the last 8 to 12 years have been the Republicans, They controlled Washington in the Congress, the Presidency and because of the Bush appointments, the the Supreme Court.
Don’t fool yourselves conservatives, Bush and Company screwed us and you.
The people holding the cards makes the rules…It’s our turn now.

Jake, you left out the part about WHY those companies were lending to people who could never pay them back (hint: they sell those mortgages to Fannie) and the part about why Fannie wanted to buy them, and who legalized the subprime loans and why.

Over 50 posts and no one has commented on how stupid it would be to build an analysis of this kind based on the study of “7.2″ loans?
=================================
Check 10:15 am

Deregulation of the banking industry is directly to blame for the crisis. Allowing banks to be leveraged at 35 to 1 is an obviously dangerous risk to a small bank but when large institutions gamble with leveraging like that it creates a crisis.
The idea that a bank or lending institution would make a loan or mortgage and then bundle and sell it enables the problem of bad loans. It makes the incentive to create loans the money maker rather than making stable loans that will be paid back the moneymaker.
First Congress should bring back the regulation laws we had, to prevent more bad loans piling up. Second they should Write even more thorough legislation on the topic. Outlaw variable rate mortgages. They are too big a gamble for something as important as home ownership. They gamble that either the owner’s income or the value of the home will go up.
Like me, you’ve heard the ads, when your bank says no, we’ll say yes. It was that kind of bad lending that got us into this mess. I’ve been in a bank that bragged in their ads that they would give totally unsecured loans to businesses and not even ask for proof of income!
And please let Congress address the topic of unfair rate increases by credit card companies. Some of them are like the loan sharks of old.
Our financial system can be strong again with strong regulation and common sense.

“…FORCED banks to lower/drop their lending standards, all under the banner of racism and or discrimination.”
That ‘banner’ happened to be rock-solid mathematics. But don’t take the time to read the studies, it’s safe to dismiss the numbers when it’s politically expedient.

“Barry and ACORN staged “sit-ins” at some of chicago’s biggest lending institutions,”
While Obama did some legal work for ACORN he did not stage sit ins.
The lesson as always? Right wingers lie.

Willem van Oranje, from 1995 through 2000, the Clinton Administration threatened banks and mortgage companies with hefty fines if they did not lower their lending standards.
Now as for just walking into a bank to get a loan, it didn’t work that way. There were newspaper ads by organizations like ACORN telling people that they could get mortgages–even if they thought they didn’t qualify–by calling them. Then if a bank or loan company refused to give the mortgage, ACORN would threaten the bank or loan company with a lawsuit. Eventually the company would settle–giving ACORN additional funds to operate, and the individual his or her loan. NOTE: As previously mentioned, then community organizer, Barack Obama, was one of ACORN’s attorneys, representing them in these lawsuits.

Certainly the banks should not have made these loans, as the borrowers couldn’t afford them. However…
1) Are we sure these were “predatory” loans? The banks certainly seem much worse off for having made them. My understanding has been that banks counted on ever increasing home prices to make up for the risk of the loans.
2) Nobody held a gun to the heads of the borrowers and forced them to take these loans. While I have considerable sympathy for people who have lost their homes, some of us still rent because we were cautious and unsure if we could really afford a house.