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August 27, 2007

 

Congress and Fed Collude to Cause Mortgage Crisis

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Lessons of Great Depression give way to greed.

The history behind the mortgage fiasco and bank liquidity is a complex long intertwined affair.

After the Great Depression new financial regulations were put in place. For one, banks were barred from equity deals or brokerage operations. Then, fairly recently, Congress and the Fed gave in to the natural greed of the banks and let them return to brokerage/equity dealings. It is in no way surprising that subsequent to dismantling safeguards the present catastrophe should occur. It is axiomatic to allowing banks to invest in speculative fashion outside of regulated asset lending scenarios.

As many have said there is a tie-in here to the S&L debacle.

Congress and the Fed deregulated the S&Ls to give in to the natural greed of the big banks. Prior to deregulation the S&Ls were allowed to pay one half percent more for savings than other banks. That attracted long term secure savings/ assets to the S&Ls which they lent out long term in mortgages. It was a stable arrangement and as a side affect the money stayed local. Coveting these assets the big banks, Congress and the Fed made a devil's pact allowing S&Ls with no experience in non mortgage financing to go deregulated into risky areas. They crashed but the big banks got their hands on the trillions in mortgage assets which became speculative assets, leading to excess and our present liquidity crunch.

My point is that Congress and the Fed have bent to the greed of the big financial institutions and systematically dismantled well thought out needed protections, apparent from The Great Depression.

Now, John and Jane Doe will have to pay higher interest rates for their car loans, etc until the banks eroded capital (much of which was stripped off as fees to individuals) is replaced.

This is simply more organized theft (!**!) like CEO salaries which are actually a form of embezzlement.

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Comments:
Theft is an understatement. As I close out my last days in the corporate world, I do so with disgust.

I have watched the rape and pillage of many... And I can no longer participate without my soul shriveling.

Who wins? CEOs, Private Equity monsters and others of that ilk.

Who loses? Oh just about everyone else.

Disgraceful.
 
FranIAm...My favorite thought is that the corporates actually waste through bad decisions or inbred inefficient policies more than enough to fund our health and retirement programs. There is so much capital sloshing around with so many people taking their little nibbles and then crying'poor.'.
 
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