The sale of syndicated home mortgages by unscrupulous sellers contributed to the severe economic hardships suffered world wide. Bank regulators at all levels set the standards for home loans. The bank examiners test bank loans to enforce these standards. How then do we have this overwhelming mountain of homes facing foreclosure? where were the bank examiners?”
The bank examiners did not examine these loans. WHY? Because these loans were NOT made by regulated lenders, but rather these loans were made by UNREGULATED mortgage companies. Each day our TV’s and radios told us about these huge mortgage companies that offering home loans to anyone over 18 whose only requirement was they were alive. The Federal Reserve and the Bush Administration encouraged this conduct. As had the Clinton administration. The equally unscrupulous investment bankers sold these syndicated sub-prime home mortgages to their clients w2hile investing their own funds based on the failure of these syndicated loans. They knew huge loan failures were soon to strike. So when the sub-prime mortgage market collapsed, the sellers of the syndicated loans were proved correct- the investment bankers made a fortune- The fees for selling these worthless syndicated loans and the pay off for betting the loans would fail. When investment bankers testified before Congress, they were asked how the could they sell these loans to their clients knowing the loans were worthless? The investment bankers said this was standard business practice in the investment banking business. The SEC sued Goldman-Sachs in a civil suit over this practice. Goldman agreed to pay a record fine of $550,000,000. This is a 4% of Goldman’s 2009 profit. The SEC is preparing similar law suits against other sellers of these worthless sub-prime loans.
Yesterday, the Congress passed a major overhaul of finance rules. This was the culmination of two years of Wall Street doing every thing possible to stop this legislation. A little history-
After the Stock Market Crash of 1929, and the ensuing Great Depression, Congress passed legislation to prevent a recurrence of those terrible times. Each time Congress acted, Wall Street came up with “legal” schemes to get around the new regulation. Some of the regulations were so strong that only by repealing these laws could Wall Street accomplish their devious goals. The last of the repeals was in the Clinton Administration. With a former head of Goldman-Sachs as Secretary of the Treasury, Clinton recommended the repeal of the Glass-Steagll Act. The Glass-Steagal Act was one of the cornerstone’s of financial reform MANDATED by President Franklin D. Roosevelt.
Daniel Pecora led the fight for financial reform in the 1930′s, taken over by FDR. . Today Representative Barney Frank is the Pecora for today with Mr. Obama leading the fight.
The sub-prime loan disaster caused the economic ruin of many throughout the world. YET almost all Republicans in Congress voted against this reform legislation. Today, Obama’s polls show he is down and many Republicans hoping to gain from this.
I stand behind our President. I admire his courage to insist on making this country a better place for our children, grandchildren and great grandchildren.
Their future depends on a strong, viable, and large middle class. Obama’s legislative program is the answer. Let us work together to insure their future.
Over half a billion is not enough penalty but it’s a start! I’ve read on your blog that the government backed lenders to the tune of 100 billion dollars which allowed those lenders to take massive risks to the US taxpayer and none to them personally or as a company, and thereby profit at our expense. You stated above that Goldman bet against the paper they were selling and profitted hugely by it, while those who bought it lost everything. I’ve read foriegn owned BP didn’t allow the concrete in the well to cure properly, in a cost cutting attempt, allowing it to crumble and leak explosive gas. They knowlingly were drilling on our soil unsafely and not only costing lives but ruining an industry and ecosystem. Is the point well taken that Corporations must be held liable for their acts! BP’s CEO may have relinquished his job but the criminal liability he faces should just be begining! The things corporations get away with and are currently getting away with must now be reduced for the sake of Don’s children and grandchildren! Obama probably should have went after the prior administration for it’s tone of deception and lies with regards to the war in Iraq, the contracts that followed and the methods of governing which lead to an ineffective government in policing Corporations! Obama on the otherhand should now make BP criminally liable for the ecosystem it ruined and industry as a result! Making CEO’s criminally liable may open up a huge legal can of worms in the future for unscurpulus lawyers so this has to regulated tightly by you know who the US government!!! Can the government strike a ballance between Corporate accountibility and Legal ambulance chasing under this administration. Yes. In the long term if a like minded Bush’s administration repeates itself all bets are off! Our political system is therefore flawed! The government proved unaccountable in Bush’s terms and for that matter Ragan’s! See Iran Contra! Good luck America!
Comment by dantishman — July 27, 2010 @ 7:19 am