Who Is To Blame For The Foreclosure Crisis?
Tuesday, 29. July 2008, 20:58:50
Government Repo Homes Blog asserts in article The Biggest Financial Crisis In Years, that former senator Phil Gramm, a McCain election advisor, and former House of Representative member, Jim Leach, and their Gramm-Leach-Bliley Act, which repealed the Glass Steagall Act, should take the blame for the Foreclosure Crisis.
Wikipedia relates that the bills comprising the Gramm-Leach-Bliley Act were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA). The bills were passed along party lines with Republican support in the Senate and with bipartisan support in the House of Representatives. It was signed into law by President Bill Clinton.
Government Repo Homes Blog continues: "In 1999 Gramm was the architect of the aforementioned banking deregulation bill that has become history. He eradicated the fire walls that had been created between commercial and investment banks, insurance and securities firms that had been made during the post Depression period. A merger mania set in forming the basis and roots of the foreclosure crisis of today.
Gramm was the friend of the financial servicing industry. They gave him millions during his congressional career spanning 24 years. On 15th December 2000 the situation was tense on two counts – the budget showdown with Clinton and the Republicans and on the other hand the controversy between Bush and Gore. The stage was set for the shrewd senator to twist the system around his fingers. Gramm slipped in a measure running into 262 pages named Commodity Futures Modernization Act. Few at that time had the time or the inclination to read it. None had an idea of what was going on – the perfect ground for planting the seeds of the foreclosure crisis of today. The act guaranteed that neither the SEC nor CFTC got involved in regulating new financial products."
Commentary
Yes, I have to agree. It was the repeal of the Glass Steagall Act and the liberalization of the SEC and CFTC that provided for securitization and financialization is at the root of the foreclosure crisis. This coupled with easy money flowing into the economy via credit margin, and the actions of Alan Greenspan, the purveyor of credit liquidity, "bubbled up" real estate prices and stock market values which under OFHEO and FHA administration, enabled Freddie Mac, FRE, and Fannie Mae, FNM, to flood the market with easy, much too easy to obtain real estate loans; and which were financialized as highly leveraged investments and sold worldwide as "highly desireable investments".
Much unsold investment remains on the books of bankers and investment bankers as level two assets and level three assets which have been marked to fantasy. And much credit resides off balance sheet in SPEs and SIVs. The National Bank Of Australia has done the right thing and wrote off 55% of the loan value; this was one of the factors precipitating Peak Currencies -- currency wealth will now be turning lower; this means the EUR/JPY will be turning lower; an unwinding of the yen carry trade is now at hand; and disinvestment is coming to stocks world wide as the Yen appreciates in value relative to the Euro.
Banks, KBE, and investment bankers, KCE, became "technically insolvent" when financialization started under the neoliberal principles of the Gramm-Leach-Bliley Act. Banks and investment bankers became "marketplace insolvent" on October 7, 2007, with the Citigroup CDO Bust.
The lowering of the US Central Bank interest rate by the Federal Reserve and the provision of TAF, TSLF, and PDCF, and the Fed assisted buyout of Bear Stearns by JP Morgan, to stabilize the insolvent institutions, have only served to debase the US currency, that is the US dollar, deflate stock prices, and inflate the price of both oil and gold.
Yes the actions of the Federal Reserve in keeping the central bank interest rate below market place interest rates, has created an investment demand for gold; this is seen in the chart of gold relative to stocks, GLD:VTI, rising dramatically since late 2007.
And today the world is residing on the brink of multiple systemic risk events: some political as in the case of the coming confrontation between the EU US western world government with Iran over its nuclear ambitions; and other systemic risk events such as issues surrounding the liquification and capitalization of the two GSEs Freddie Mac and Fannie Mae which is causing both aggregate bonds, AGG, and US Treasuries, TLT, to fall in value, and the interest rate on the 30 Year US government bond, $TYX, to rise.
All crises present opportunity; those with wealth should be invested in gold. I recommend that one dollar cost average a buy in gold this week -- by close of financial business on Friday, August 1, 2008, with a diversified investment in gold at BullionVault.com, GoldMoney, and in a gold ETF, in a trust account, in Switzerland.
Related
The Con In Central Bankers' Confidence
The Enron Loophole
Wendy Gramm
John McCain's Gramm Gamble
Sucking Up To The Bankers: A bipartisan love feast
Republican candidate John McCain even appointed as his campaign co-chairman Phil Gramm, who went from being chairman of the Senate Banking Committee, where he sponsored disastrous legislation that empowered the banking bandits, to becoming one of them at UBS Warburg. Gramm was forced to resign from McCain's campaign only after he went public with his contempt for the financial concerns of ordinary Americans, calling them "whiners" and perpetrators of a "mental recession."
But Gramm and the Republicans couldn't have done it without the support of leading Democrats. The most egregious of Gramm's legislative favors to the financiers took the form of legislation named in part after him--the Gramm-Leach-Bliley Act, which became law only after then-Treasury Secretary Robert Rubin prevailed upon President Clinton to sign the bill. The bill's immediate major effect was to legitimize the long-sought merger between Citibank and insurance giant Travelers. Rubin's critical support for the bill was rewarded with an appointment, within days of its passage, to a top job at Citibank (later Citigroup) paying more than $15 million a year.
That is the same Rubin with whom Democratic candidate Barack Obama met, along with other influential advisers, on Tuesday to figure out what to do about the sorry state of our economy. But what in the world did he expect to learn from Rubin? And why did he appoint Rubin's protégé, Jason Furman, who ran the Rubin-funded Hamilton Project, to be the Obama campaign's economic director? Hopefully, during their encounter Tuesday, Rubin offered himself as a contrite model of everything that the candidate of change needs to change.
After all, Goldman Sachs, where Rubin spent 25 years of his business career before entering the Clinton administration, has been one of the prime corporate villains in the financial shenanigans that led to the subprime mortgage scandal. As co-chairman of the firm, surely he had knowledge of the financial hanky-panky that would prove so disastrous down the road. Indeed, as Treasury secretary, he favored an extension of the deregulation that enabled this explosion of banking avarice. Not surprisingly, the current Treasury secretary, Henry Paulson, also previously headed Goldman.
When Rubin assumed a top position at Citibank after his stint at the Treasury, he was not above influencing his former employees in the government. In one notorious instance during the fall of 2001, when Enron was going down the tubes Rubin telephoned a Treasury undersecretary and asked him to consider intervening with credit-rating agencies to hold off downgrading Enron's ratings. When the story was leaked, some media accounts noted the possibility of a conflict of interest because Enron owed Citibank $750 million, which it could not pay if bankrupt.
Despite his skills and his vaunted position as Citibank's chairman, Rubin was not spared the disastrous consequences of Citibank's own wild financial manipulations, which, if anything, exceeded those of Enron. Tens of billions in bad mortgage and credit card debt placed the bank at the forefront of the current economic crisis, and so it is weird that Obama would now turn to Rubin for advice.
It's even weirder that the presumptive Democratic nominee would pick Rubin's man Furman as his campaign economic director at a time when cleaning up the mess left by the bankers is the highest priority. Furman hardly distinguished himself four years ago in that role in John Kerry's failed presidential campaign, with its muffled economic message that could not be blamed on the candidate's stiff style alone.
The bigger problem is that folks such as Rubin and Furman, perhaps best known as an economist for his bold but woefully misguided defense of the Wal-Mart business model, clearly do not feel the pain of the voters who are losing their homes.
But then again, why should Rubin, or Gramm on the Republican side, be expected to care when he has made so many millions off the suffering of those voters? Not good at a time when we need a presidential candidate who sticks it to the bankers instead of sucking up to them.
Chart of California Foreclosures
Tracking California Foreclosure
Keywords
glasssteagallact, glasssteagall
Wikipedia relates that the bills comprising the Gramm-Leach-Bliley Act were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA). The bills were passed along party lines with Republican support in the Senate and with bipartisan support in the House of Representatives. It was signed into law by President Bill Clinton.
Government Repo Homes Blog continues: "In 1999 Gramm was the architect of the aforementioned banking deregulation bill that has become history. He eradicated the fire walls that had been created between commercial and investment banks, insurance and securities firms that had been made during the post Depression period. A merger mania set in forming the basis and roots of the foreclosure crisis of today.
Gramm was the friend of the financial servicing industry. They gave him millions during his congressional career spanning 24 years. On 15th December 2000 the situation was tense on two counts – the budget showdown with Clinton and the Republicans and on the other hand the controversy between Bush and Gore. The stage was set for the shrewd senator to twist the system around his fingers. Gramm slipped in a measure running into 262 pages named Commodity Futures Modernization Act. Few at that time had the time or the inclination to read it. None had an idea of what was going on – the perfect ground for planting the seeds of the foreclosure crisis of today. The act guaranteed that neither the SEC nor CFTC got involved in regulating new financial products."
Commentary
Yes, I have to agree. It was the repeal of the Glass Steagall Act and the liberalization of the SEC and CFTC that provided for securitization and financialization is at the root of the foreclosure crisis. This coupled with easy money flowing into the economy via credit margin, and the actions of Alan Greenspan, the purveyor of credit liquidity, "bubbled up" real estate prices and stock market values which under OFHEO and FHA administration, enabled Freddie Mac, FRE, and Fannie Mae, FNM, to flood the market with easy, much too easy to obtain real estate loans; and which were financialized as highly leveraged investments and sold worldwide as "highly desireable investments".
Much unsold investment remains on the books of bankers and investment bankers as level two assets and level three assets which have been marked to fantasy. And much credit resides off balance sheet in SPEs and SIVs. The National Bank Of Australia has done the right thing and wrote off 55% of the loan value; this was one of the factors precipitating Peak Currencies -- currency wealth will now be turning lower; this means the EUR/JPY will be turning lower; an unwinding of the yen carry trade is now at hand; and disinvestment is coming to stocks world wide as the Yen appreciates in value relative to the Euro.
Banks, KBE, and investment bankers, KCE, became "technically insolvent" when financialization started under the neoliberal principles of the Gramm-Leach-Bliley Act. Banks and investment bankers became "marketplace insolvent" on October 7, 2007, with the Citigroup CDO Bust.
The lowering of the US Central Bank interest rate by the Federal Reserve and the provision of TAF, TSLF, and PDCF, and the Fed assisted buyout of Bear Stearns by JP Morgan, to stabilize the insolvent institutions, have only served to debase the US currency, that is the US dollar, deflate stock prices, and inflate the price of both oil and gold.
Yes the actions of the Federal Reserve in keeping the central bank interest rate below market place interest rates, has created an investment demand for gold; this is seen in the chart of gold relative to stocks, GLD:VTI, rising dramatically since late 2007.
And today the world is residing on the brink of multiple systemic risk events: some political as in the case of the coming confrontation between the EU US western world government with Iran over its nuclear ambitions; and other systemic risk events such as issues surrounding the liquification and capitalization of the two GSEs Freddie Mac and Fannie Mae which is causing both aggregate bonds, AGG, and US Treasuries, TLT, to fall in value, and the interest rate on the 30 Year US government bond, $TYX, to rise.
All crises present opportunity; those with wealth should be invested in gold. I recommend that one dollar cost average a buy in gold this week -- by close of financial business on Friday, August 1, 2008, with a diversified investment in gold at BullionVault.com, GoldMoney, and in a gold ETF, in a trust account, in Switzerland.
Related
The Con In Central Bankers' Confidence
The Enron Loophole
Wendy Gramm
John McCain's Gramm Gamble
Sucking Up To The Bankers: A bipartisan love feast
Republican candidate John McCain even appointed as his campaign co-chairman Phil Gramm, who went from being chairman of the Senate Banking Committee, where he sponsored disastrous legislation that empowered the banking bandits, to becoming one of them at UBS Warburg. Gramm was forced to resign from McCain's campaign only after he went public with his contempt for the financial concerns of ordinary Americans, calling them "whiners" and perpetrators of a "mental recession."
But Gramm and the Republicans couldn't have done it without the support of leading Democrats. The most egregious of Gramm's legislative favors to the financiers took the form of legislation named in part after him--the Gramm-Leach-Bliley Act, which became law only after then-Treasury Secretary Robert Rubin prevailed upon President Clinton to sign the bill. The bill's immediate major effect was to legitimize the long-sought merger between Citibank and insurance giant Travelers. Rubin's critical support for the bill was rewarded with an appointment, within days of its passage, to a top job at Citibank (later Citigroup) paying more than $15 million a year.
That is the same Rubin with whom Democratic candidate Barack Obama met, along with other influential advisers, on Tuesday to figure out what to do about the sorry state of our economy. But what in the world did he expect to learn from Rubin? And why did he appoint Rubin's protégé, Jason Furman, who ran the Rubin-funded Hamilton Project, to be the Obama campaign's economic director? Hopefully, during their encounter Tuesday, Rubin offered himself as a contrite model of everything that the candidate of change needs to change.
After all, Goldman Sachs, where Rubin spent 25 years of his business career before entering the Clinton administration, has been one of the prime corporate villains in the financial shenanigans that led to the subprime mortgage scandal. As co-chairman of the firm, surely he had knowledge of the financial hanky-panky that would prove so disastrous down the road. Indeed, as Treasury secretary, he favored an extension of the deregulation that enabled this explosion of banking avarice. Not surprisingly, the current Treasury secretary, Henry Paulson, also previously headed Goldman.
When Rubin assumed a top position at Citibank after his stint at the Treasury, he was not above influencing his former employees in the government. In one notorious instance during the fall of 2001, when Enron was going down the tubes Rubin telephoned a Treasury undersecretary and asked him to consider intervening with credit-rating agencies to hold off downgrading Enron's ratings. When the story was leaked, some media accounts noted the possibility of a conflict of interest because Enron owed Citibank $750 million, which it could not pay if bankrupt.
Despite his skills and his vaunted position as Citibank's chairman, Rubin was not spared the disastrous consequences of Citibank's own wild financial manipulations, which, if anything, exceeded those of Enron. Tens of billions in bad mortgage and credit card debt placed the bank at the forefront of the current economic crisis, and so it is weird that Obama would now turn to Rubin for advice.
It's even weirder that the presumptive Democratic nominee would pick Rubin's man Furman as his campaign economic director at a time when cleaning up the mess left by the bankers is the highest priority. Furman hardly distinguished himself four years ago in that role in John Kerry's failed presidential campaign, with its muffled economic message that could not be blamed on the candidate's stiff style alone.
The bigger problem is that folks such as Rubin and Furman, perhaps best known as an economist for his bold but woefully misguided defense of the Wal-Mart business model, clearly do not feel the pain of the voters who are losing their homes.
But then again, why should Rubin, or Gramm on the Republican side, be expected to care when he has made so many millions off the suffering of those voters? Not good at a time when we need a presidential candidate who sticks it to the bankers instead of sucking up to them.
Chart of California Foreclosures
Tracking California Foreclosure
Keywords
glasssteagallact, glasssteagall
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