The four Republicans appointed to the commission investigating the root causes of the financial crisis plan to bypass the bipartisan panel and release their own report Wednesday, according to people familiar with the commission's work.First, it's important to note that the Mortgage Crisis was international in scope, affecting primarily coastal areas, in the U.S., the Meditteranean, South Africa, and Australia, among many diverse locations where the U.S. Government's reach is weak (but where Wall Street's reach is strong). Second, commercial real estate was affected just as bad, or sometimes worse, than residential real estate in the Mortgage Crisis. How could that be if RCRA, Fannie Mae, and Freddie Mac bore sole responsibility?
The Republicans, led by the commission's vice chairman, former congressman and chair of the House Ways and Means Committee Bill Thomas, will likely focus their report on the explosive growth of subprime mortgages and the heavy role played by the federal government in pushing mortgage giants Fannie Mae and Freddie Mac to purchase and insure them. They'll also likely focus on the Community Reinvestment Act, a 1977 law that encourages banks to lend to underserved communities, these people said.
The Republicans' report is expected to conclude that government policy helped inflate the housing bubble and that prices weren't expected to crash because the government pushed homeownership so aggressively. They say that the report will note that once the bubble burst, a financial panic followed because firms weren't adequately prepared.
...During a private commission meeting last week, all four Republicans voted in favor of banning the phrases "Wall Street" and "shadow banking" and the words "interconnection" and "deregulation" from the panel's final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.
...The shadow banking system refers to the part of the financial system in which investors and other nonbanks like hedge funds and investment firms provide credit to borrowers, as opposed to more traditional banks. Interconnection refers to the links that bind financial institutions to one another, like derivatives, borrowings, and investments.
"I certainly felt, and I think the majority of the commission felt, that deleting those phrases would impair the commissioners' ability to give a full and fair and understandable report to the American people about the causes of the financial crisis," Born said.
"Certainly, it's hard to imagine Wall Street wasn't involved," she added.
...Experts agree that while Fannie and Freddie and the federal government's push to encourage homeownership played a significant role in causing the crisis, actions by Wall Street magnified the fallout and caused a crisis that led to the Great Recession. Economists from the Federal Reserve, as well as bank regulators first appointed by Republicans, agree that the Community Reinvestment Act played virtually no role in causing the financial crisis.
The Mortgage Crisis exposed how the Entire. Freakin'. Economy. was being run as a Ponzi scheme. Picture the role of RCRA, Fannie Mae, and Freddie Mac as being like Street Kids ushering the sappiest rubes of the neighborhood (Hispanics like myself) into a great, big meeting hall, where they would hear a Spellbinder (the Real Estate Industry) say things like "paying rent is like throwing your money down the toilet (with appropriate glug-glug sound effects), so why not buy-to-own?" The Spellbinder created mortgages from the saps' money and sent the mortgages to Wall Street. Wall Street, in turn, bundled the mortgages into investments that were then sold as safer than they really were to Clueless Investors, and made a killing. And truth be told, they'd like to do it again!
And now that blame is circling, looking for a place to land, instead of being pointed at Wall Street, or even the Spellbinder, Republicans are aiming the sole blame at the Street Kids. Now RCRA, Fannie Mae, and Freddie Mac weren't blameless, but they certainly don't carry a majority of the blame. Come on, they were the Street Kids! Patsies!
Most of the big-money action wasn't even with the banks, but with the mortgage companies, like Countrywide, who aren't even subject to RCRA! I mean, just how stupid do they think we are? And trying to ban use of the term "Wall Street"! Ban the term! As Orwell understood long ago, the words you are permitted to use govern the thoughts you are permitted to have. Talk about thought control! Truly Orwellian!
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