-Submitted by David Drumm (Nal), Guest Blogger
New York City mayor Michael Bloomberg surprised many when he stooped to the level of Rush Limbaugh to push the Big Lie, that it was the government that caused the mortgage crisis. Bloomberg claimed that “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and to give mortgages to people who were on the cusp.” Bloomberg added that members of Congress “were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will.”
Fannie and Freddie don’t make loans. Whom does Bloomberg think he’s fooling?
Matt Taibbi referred to the speech as Bloomberg’s Marie Antoinette moment, his own personal “Let Them Eat Cake” line. Taibbi went on to write:
Well, you know what, Mike Bloomberg? FUCK YOU.
The Big Lie has been shown false so many times, and Bloomberg’s persona as a pragmatic technocrat has been so carefully crafted, that Taibbi’s frank language is not only understandable, but refreshingly honest.
More than 84% of the subprime loans were issued by private lending institutions. Only one of the top 25 subprime lenders was directly subject to the Community Reinvestment Act (CRA).
The Occupy Wall Street movement must be worrying the 1% if Bloomberg is willing to embarrass himself by spouting falsehoods. It was the greed of Wall Street that created the demand for riskier loans. Mortgage Backed Securities were a hugely profitable financial monster with an appetite for more and more mortgages. More mortgages required more borrowers and hence, risky and even fraudulent lending practices.
As we have discussed, here, the Obama administration has proposed a settlement with major banks that would restrict the ability of prosecutors to investigate wrongdoing with regard to bundling of loans into mortgage securities. Taibbi’s frank statement need not be reserved for Bloomberg.
H/T: Mike Konczal, McClatchy, Barry Ritholtz, NYTimes, Center for Responsible Lending (pdf).
“Strategically speaking, there is a very real danger that if we naively put our cards on the table and rally around the “overthrow of capitalism” or some equally outworn utopian slogan, then our Tahrir moment will quickly fizzle into another inconsequential ultra-lefty spectacle soon forgotten. But if we have the cunning to come up with a deceptively simple Trojan Horse demand … something profound, yet so specific and doable that it is impossible for President Obama to ignore … something that spotlights Wall Street’s financial capture of the US political system and confronts it with a pragmatic solution … like the reinstatement of the Glass-Steagall Act … or a 1% tax on financial transactions … or an independent investigation by the U.S. Department of Justice into the corporate corruption of our representatives in Washington … or another equally creative but downright practical demand that will emerge from the people’s assemblies held during the occupation … and if we then put our asses on the line, screw up our courage and hang in there day after day, week after week, until a large swath of Americans start rooting for us and President Obama is forced to respond … then we just might have a crack at creating a decisive moment of truth for America, a first concrete step towards achieving the radical changes we all dream about unencumbered by commitments to existing power structures.”
http://www.adbusters.org/blogs/adbusters-blog/occupywallstreet-update.html
“I didnt bring up greenspan anywhere. Presenting him as some authority and knocking him down doesnt really have anything to do with what i said.” (ekeyra)
News Flash … not everything written here is in reaction to your presence … a “legend in his own mind” adequately describes your excessively high regard for your own importance.
If this is so, can anyone explain why the CRA mortgages as a group outperformed most other mortgages?
The banks are the ‘professional’ actors here. They had a fiduciary and an ethical and business responsibility to make sure the loans they gave out were sound and were rated properly.
None of this can explain why minority populations, even when they had excellent credit scores, were given Alt A mortgages that blew up (in balloon payments people could not afford, etc) causing penury and dislocation and bringing down real estate values all over the nation.
People in these communities trusted their bankers, their RE agents, the title companies, etc. All the ‘professional’ class that were supposed to be using due diligence in creation of loans.
http://www.huffingtonpost.com/2011/11/04/millennial-voters-generation-y-support-obama_n_1074543.html Obama remains the choice of younger voters but the enthusiasm has dropped.
I didnt bring up greenspan anywhere. Presenting him as some authority and knocking him down doesnt really have anything to do with what i said.
“A financial crisis that has crippled the world was caused by ( fiat currencies, central banking and massive moral hazard brought on by government garunteeing, not only bank loans but bank deposits as well) the working poor who bought houses they couldn’t afford and banks were forced to lend money to them by George Bush … oops, I mean “the government” .. and to prove it just look at what the government, oops, I mean Barack Obama, is doing now to protect Wall Street. Have I got that right?”
At least its closer to right. Also how would the fact that one is a former president and one is a current president make them not “the government” in any way?
http://www.huffingtonpost.com/2011/11/04/move-your-money-activists_n_1076630.html
http://www.huffingtonpost.com/2011/11/04/small-businesses-switching-from-big-banks-to-local-banks_n_1070547.html
Don’t Be Big Banks’ Puppet; No Immunity Deal for Crooks
Posted Nov. 4, 2011
http://occupywallst.org/article/occupy-wall-street-obama-dont-be-big-banks-puppet-/
Jill, She does run a good economics blog but one can’t overlook the fact that she is in the “business”.
S.M.,
I think it’s worth looking into. We should always look at conflicts of interest. It’s also important to look at reality. How she lays out the situation is something which can be independently verified. In this particular case, even a conflict of interest will not be able to erase the facts of the matter. She states them accurately and correctly. You can do verify her analysis yourself, and that’s would I would recommend!
Alan Greenspan Educated by Bernie Sanders ’03
Blouise,
You dare speak ill of Alan “The Oracle” Greenspan. Matt Taibbi wrote a chapter about Greenspan for his book “Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America.” The title of the chapter is “The Biggest Asshole in the Universe.”
Bloomberg seems to have contracted a bit of that 1% fever going around. Gotta work on a vaccination for that malady.
Jill, Since Yves Smith of “naked capitalism ” is a former Goldman employee, she is very knowledgeable about the banking system. Since she also advises hedge funds, I sometimes wonder if she does not have massive short positions in her accounts. Some say Roubini does.
Elaine,
“Even Alan Greenspan, an Ayn Rand acolyte, was forced to admit that he had made a “mistake” in believing that financiers would restrain themselves from such reckless behavior.” (Cynthia Tucker)
SwM,
Yeah … what are you doing reading Krugman!? … read Ayn Rand instead then you can be über-smart like me and Alan Greenspan and all those” Wall Street Masters of the Universe who created toxic financial instruments that they didn’t understand and sold them around the world.”
Krugman … bah humbug!
Bring Back Glass-Steagall: Banks that behave like hedge funds don’t deserve guarantees.
Wall Street Journal
January 12, 2010
http://online.wsj.com/article/SB10001424052748704586504574654751857203602.html
Last month, Sens. Maria Cantwell and John McCain proposed a measure that would revive parts of the old Glass-Steagall Act, the 1933 law that separated investment from commercial banking. After having been diluted many times over the years, Glass-Steagall was largely repealed in 1999, permitting a wave of consolidation in the financial industry.
The latest crisis has provoked a new debate over the old regulatory regime. Nobel laureate economist Joseph Stiglitz has argued that the repeal of Glass-Steagall had an “especial role” in making the financial calamity of 2008 possible. Former Fed Chairman Paul Volcker, currently the head of the President’s Economic Recovery Advisory Board, has called for a new separation between commercial banking and riskier financial activities.
Any discussion about breaking up the financial industry, however, runs into a powerful stereotype: the overwhelming consensus belief in the risible backwardness of Glass-Steagall.
In 1999, the last time the 1933 law was being debated, it was routinely described as a “Depression-era” law, a “relic” of a benighted age, “venerable,” “obsolete,” “outdated,” “archaic,” insufficient to meet the public’s “sophisticated needs” in the bold new era of accelerated everything. The measure that overturned Glass-Steagall in 1999 was, of course, called the “Financial Services Modernization Act.”
Having government forbid everyday commercial banks to take gambles on high-risk schemes, why, that just didn’t make sense to the enlightened minds of 1999. We had learned by then to trust the market. Besides, what could go wrong? Fears about speculative risk were so 1933!
Today, it is that old critique of Glass-Steagall that strikes one as a relic in need of modernization. Reading through journalistic accounts of the old regulatory regime from 1999 is like watching long reels of ecstatic dot-com commercials or flipping through the metallic-and-fluorescent pages of old copies of Wired magazine and remembering the mind-blowing prosperity that the Internet was supposed to be bringing us.
The business-culture delusions of the ’90s may seem obvious today. But at the time, our great thinkers assured us that we had turned a historical corner and the “old rules” no longer applied. Prosperity was eternal. And government was a dinosaur, serving only to impede our pursuit of info-age excellence. Again and again, the narrow agenda of particular interests were cast as freedom for all of humanity.
Consider “The Twilight of Sovereignty,” the influential 1992 manifesto by former Citicorp CEO Walter Wriston. Here was a man who had spent much of his career warring against Glass-Steagall and other federal banking regulations. In his book, however, he did not criticize regulation so that Citi might be permitted to become a grotesquely distended too-big-to-fail financial supermarket gambling in whatever schemes would bring the richest bonuses. Certainly not. Wriston instructed us to give up on regulation because we had entered a new stage of history and regulation was now technologically obsolete. “How does [government] track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them?” he asked.
Half-baked historicism like that was persuasive stuff in those days. On the occasion of the old banking law’s repeal, President Bill Clinton intoned that Glass-Steagall was “no longer appropriate to the economy in which we live. It worked pretty well for the industrial economy. . . . But the world is very different.”
Today, as we begin to debate Glass-Steagall all over again, the old stereotypes are simply being pulled out of deep-freeze. The futility of efforts to “turn back the clock” are noted. A clever put-down from an anonymous Treasury official is much repeated: it “would be like going back to the Walkman.”
The old law’s revival is said to be a way of pandering to the low emotions of the public, as opposed to its higher faculties of reason. A Business Week story on the subject understands the Cantwell-McCain proposal as a way of “soothing public anger over bailouts and bonuses.” Politico’s account of the measure chalks the whole thing up to “populist angst,” whatever that is.
What no one has yet grasped is that pooh-poohing Glass-Steagall in this way is about as sound a move as was slapping down your savings on shares of TheGlobe.com.
One of these days, we will finally dispel the “New Economy” mysticism that beclouds this issue and begin to think seriously about how to re-regulate the financial sector. And when we do, we may find that the answer involves some version of the idea behind Glass-Steagall—drawing a line between banks that the government effectively guarantees and banks that behave like big hedge funds, experimenting with the latest financial toxins. Hopefully, that day will come before Wall Street decides to take another headlong run at some attractive cliff.
A financial crisis that has crippled the world was caused by the working poor who bought houses they couldn’t afford and banks were forced to lend money to them by George Bush … oops, I mean “the government” .. and to prove it just look at what the government, oops, I mean Barack Obama, is doing now to protect Wall Street. Have I got that right?
If it weren’t for the OWS bunch that is indeed all we would be hearing from the right wing.
OWS has put the spotlight of truth right on the Banks and Wall Street where it belongs and the right wing, recognizing that well over half the population supports what OWS is doing, is frantic to get the spin out there.
All of the republican candidates have tried but OWS keeps frustrating the Big Lie by simply standing, quite literally, firm and pointing at Wall Street. What’s a guy like Bloomberg to do? Tell the truth?