View Poll Results: What Created The 2008 Financial Meltdown?

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  • Greedy Wall Street Investment Bankers /Deregulation of the financial Industry

    37 33.94%
  • Barney Frank, Chris Dodd and the CRA

    32 29.36%
  • Poor people buying houses they canít afford

    27 24.77%
  • Other

    13 11.93%
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Thread: What Created The 2008 Financial Meltdown?

  1. #81
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Harry Guerrilla View Post
    They were called stated income loans, aka liar loans.
    Many of them were done by fly by night lenders, who then sold the loans off.

    Stated income loan - Wikipedia, the free encyclopedia
    A lot of good comments here, and I am likely echoing others, but your post was as good as any to pick up on.

    Picking up where you left off, I do not see how we can blame those who lied to get loans, etc. I am not saying such is the right thing to do, but under normal circumstances, lenders would have never been willing to take folks at their word, make such "risky" loans, etc. The normal mechanisms of capitalism had always kept such to a minimum.

    The root enabler of the crisis was the monstrous inflation in the market. It helped to eliminate the risk of these sub-prime (and worse) loans, because it did not matter if the new owners couldn't afford it a year or two down the road. You could take the house back, cover all foreclosure costs, and resell it still at a profit with such insane inflation. Too much money to be made too easily to not predict that the bubble would do as bubbles do, which is make money for everyone ..... until it popped.

    So what enabled the inflation at levels we had never seen before ? Too many new buyers. Where did they come from ? Fannie and Freddie underwriting the subprimes starting in larger measure beginning in 1997.

    Hate to admit it, but nothing was going to stop the bubble once it got going. Not a politician in the world was going to say "hey wait" and be able to draw much of an audience.

    But as George Bush was politician #1, it was his responsibility #1. And all the rest with him.

    The repeal of Glass Steagle added to the frenzy, but we were going to have a bubble, and a burst, and 25% of American mortgages underwater regardless. And a recession.
    Last edited by Eighty Deuce; 10-19-11 at 01:20 PM.

  2. #82
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by radcen View Post
    ARMs, in my opinion, aren't the primary cause. ARMs have been around for decades. It was sudden the lack of qualification criteria that was the primary cause. The lack of qualification criteria presented an illusion of ability to honor the contract. An illusion that was false in way too many cases. Again, in my opinion.
    I never said they were the primary cause, but they were a factor, and they were not an idea that came from consumers.
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  3. #83
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    Re: What Created The 2008 Financial Meltdown?

    Two major causes (there are lots of minor ones):

    1) Wall street shenanigans. Basically wall street was operating several steps ahead of the regulators. They were doing sorts of transactions that were clearly fraudulent, but in most cases not illegal yet. For example, creating a corporation, destroying it intentionally, and betting against it in the market. Or creating a shell corporation that assumes all your liabilities while your corporation takes all the profits, then just bankrupting and abandoning the shell when it was used up. These sorts of practices were going on across the board with disastrous consequences.

    2) Destruction of the middle class. Ultimately it is the middle class that drives the US economy. They drive consumer spending and that is what determines the revenues of these companies. Consumer spending has been more or less stagnant for about 15 years because our tax and regulatory policies have been aggressively redesigned to funnel all the economic growth to the super rich. Without a corresponding growth in revenues, investor driven market surges cannot be sustained. We can't get the economy back on track until we stop rigging the game for the super rich.

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    Re: What Created The 2008 Financial Meltdown?

    Other: Mortgage banking socialization caused the bubble. Fannie and Freddie are still protected from prosecution.

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    Re: What Created The 2008 Financial Meltdown?

    I think Eighty Deuce hit the nail on it's head. There was a confidence in the market that you would always be insured against the costs, and the market would always go up, and up, hence it made sense to give out those crappy loans. In 2001 the politicians should have popped the bubble. However, Bush did the exact opposite and tried to fuel the bubble to prevent a recession. This did not solve the underlining problems, and caused the bubble to be 10 times worse when it popped.

    Lack of regulation made the crisis worse, but was not the underlining cause.

  6. #86
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Catawba View Post
    I never said they were the primary cause, but they were a factor, and they were not an idea that came from consumers.
    They are a factor, absolutely. And in a level-headed economy they also have their proper place. They should always be the exception to the rule, not the rule itself. I think they were an otherwise legitimate tool that was abused.
    Last edited by radcen; 10-19-11 at 03:20 PM.

  7. #87
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by teamosil View Post
    Two major causes (there are lots of minor ones):

    1) Wall street shenanigans. Basically wall street was operating several steps ahead of the regulators. They were doing sorts of transactions that were clearly fraudulent, but in most cases not illegal yet. For example, creating a corporation, destroying it intentionally, and betting against it in the market. Or creating a shell corporation that assumes all your liabilities while your corporation takes all the profits, then just bankrupting and abandoning the shell when it was used up. These sorts of practices were going on across the board with disastrous consequences.

    2) Destruction of the middle class. Ultimately it is the middle class that drives the US economy. They drive consumer spending and that is what determines the revenues of these companies. Consumer spending has been more or less stagnant for about 15 years because our tax and regulatory policies have been aggressively redesigned to funnel all the economic growth to the super rich. Without a corresponding growth in revenues, investor driven market surges cannot be sustained. We can't get the economy back on track until we stop rigging the game for the super rich.
    I agree, as do the OWS protesters. These major causes are addressed in their proposed demands:

    " 1. CONGRESS PASS HR 1489 ("RETURN TO PRUDENT BANKING ACT" H.R. 1489: Return to Prudent Banking Act of 2011 (GovTrack.us) ). THIS REINSTATES MANY PROVISIONS OF THE GLASS-STEAGALL ACT. http://en.wikipedia.org/wiki/Glass–Steagall_Act --- Wiki entry summary: The repeal of provisions of the Glass–Steagall Act of 1933 by the Gramm–Leach–Bliley Act in 1999 effectively removed the separation that previously existed between investment banking which issued securities and commercial banks which accepted deposits. The deregulation also removed conflict of interest prohibitions between investment bankers serving as officers of commercial banks. Most economists believe this repeal directly contributed to the severity of the Financial crisis of 2007–2011 by allowing Wall Street investment banking firms to gamble with their depositors' money that was held in commercial banks owned or created by the investment firms. Here's detail on repeal in 1999 and how it happened: http://en.wikipedia.org/wiki/Glass–Steagall_Act#Repeal

    2. USE CONGRESSIONAL AUTHORITY AND OVERSIGHT TO ENSURE APPROPRIATE FEDERAL AGENCIES FULLY INVESTIGATE AND PROSECUTE THE WALL STREET CRIMINALS who clearly broke the law and helped cause the 2008 financial crisis in the following notable cases: (insert list of the most clear cut criminal actions). There is a pretty broad consensus that there is a clear group of people who got away with millions / billions illegally and haven't been brought to justice. Boy would this be long overdue and cathartic for millions of Americans. It would also be a shot across the bow for the financial industry. If you watch the solidly researched and awared winning documentary film "Inside Job" that was narrated by Matt Damon (pretty brave Matt!) and do other research, it wouldn't take long to develop the list.

    3. CONGRESS ENACT LEGISLATION TO PROTECT OUR DEMOCRACY BY REVERSING THE EFFECTS OF THE CITIZENS UNITED SUPREME COURT DECISION which essentially said corporations can spend as much as they want on elections. The result is that corporations can pretty much buy elections. Corporations should be highly limited in ability to contribute to political campaigns no matter what the election and no matter what the form of media. This legislation should also RE-ESTABLISH THE PUBLIC AIRWAVES IN THE U.S. SO THAT POLITICAL CANDIDATES ARE GIVEN EQUAL TIME FOR FREE AT REASONABLE INTERVALS IN DAILY PROGRAMMING DURING CAMPAIGN SEASON. The same should extend to other media.

    4. CONGRESS PASS THE BUFFETT RULE ON FAIR TAXATION SO THE RICH AND CORPORATIONS PAY THEIR FAIR SHARE & CLOSE CORPORATE TAX LOOP HOLES AND ENACT A PROHIBITION ON HIDING FUNDS OFF SHORE. No more GE paying zero or negative taxes. Pass the Buffet Rule on fair taxation so the rich pay their fair share. (If we have a really had a good negotiating position and have the place surrounded, we could actually dial up taxes on millionaires, billionaires and corporations even higher...back to what they once were in the 50's and 60's.

    5. CONGRESS COMPLETELY REVAMP THE SECURITIES AND EXCHANGE COMMISSION and staff it at all levels with proven professionals who get the job done protecting the integrity of the marketplace so citizens and investors are both protected. This agency needs a large staff and needs to be well-funded. It's currently has a joke of a budget and is run by Wall St. insiders who often leave for high ticket cushy jobs with the corporations they were just regulating. Hmmm.

    6. CONGRESS PASS SPECIFIC AND EFFECTIVE LAWS LIMITING THE INFLUENCE OF LOBBYISTS AND ELIMINATING THE PRACTICE OF LOBBYISTS WRITING LEGISLATION THAT ENDS UP ON THE FLOOR OF CONGRESS.

    7. CONGRESS PASSING "Revolving Door Legislation" LEGISLATION ELIMINATING THE ABILITY OF FORMER GOVERNMENT REGULATORS GOING TO WORK FOR CORPORATIONS THAT THEY ONCE REGULATED. So, you don't get to work at the FDA for five years playing softball with Pfizer and then go to work for Pfizer making $195,000 a year. While they're at it, Congress should pass specific and effective laws to enforce strict judicial standards of conduct in matters concerning conflicts of interest. So long as judges are culled from the ranks of corporate attorneys the 1% will retain control.

    8. ELIMINATE "PERSONHOOD" LEGAL STATUS FOR CORPORATIONS. The film "The Corporation" has a great section on how corporations won "personhood status". THE CORPORATION [2/23] Birth - YouTube . Fast-forward to 2:20. It'll blow your mind. The 14th amendment was supposed to give equal rights to African Americans. It said you "can't deprive a person of life, liberty or property without due process of law". Corporation lawyers wanted corporations to have more power so they basically said "corporations are people." Amazingly, between 1890 and 1910 there were 307 cases brought before the court under the 14th amendment. 288 of these brought by corporations and only 19 by African Americans. 600,000 people were killed to get rights for people and then judges applied those rights to capital and property while stripping them from people. It's time to set this straight."

    PROPOSED LIST OF DEMANDS (please help edit/add so this can be submitted for consideration to those maintaining the official list) | OccupyWallSt.org Forum
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  8. #88
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    Re: What Created The 2008 Financial Meltdown?

    De-regulation was a huge part. Then add in financial institutions knowing a crash was going to happen and bet against their clients. Even if the financial fallout of 2008 never happened, I would still a have bone to to pick with Chris Dodd! Barney Frank's love of de-regulation will set us back. Then add in house "flippers" over pricing housing, causing house prices to rise even on bad properties. The final nail in the coffin is banks allowed to give out tweleve times what they can't pay back, but yet given incintives for doing so, if they did not give to bad loan they would be fined! I've covered many things but I'm sure I've probably missed something. Those are my two cents, in this 14.5 trillion dollar mess!
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    Re: What Created The 2008 Financial Meltdown?

    I just heard Geithner, in an interview with Rand Paul, just a couple days ago, say it was due to government underwriting. The deregulation/regulation debate misses the whole point, that the epic scale was caused by the government. Otherwise it would have been like a bank or two.

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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by JMJ View Post
    ...it was due to government underwriting. The deregulation/regulation debate misses the whole point, that the epic scale was caused by the government. Otherwise it would have been like a bank or two.
    Absolutely right. The government "guaranteed" loans. The loans were packaged and sold based on that guarantee. The government didn't have the ability to back the loans when they went bad. Barney Frank and his cronies fought tooth and nail to keep the process in place and publically scoffed at anyone who was critical, anyone who predicted what was going to happen down the line - basically accusing them of racism and prejudice.
    The US is an odd ship. The captain yells out when he sees obtacles , but 535 individual propellers do the steering.

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