The Cellar - View Single Post - How a 'perfect storm' led to the economic crisis

sugarpop · 01-31-2009, 06:23 AM

Interesting article. Thanks classicman.

A couple of things I would like to point out (bear with me, this will be long), it doesn't really go into how deregulation allowed this to happen. Ultimately, it has to do with the Glass Steagall Act being repealed, which allowed banks to trade in ways that made this happen. http://www.pbs.org/wgbh/pages/frontl...ll/demise.html And this was a bipartisan effort. Congress overwhelmingly voted to overturn this legislation, and in 1999, Clinton signed it.

Personally, I don't believe mortgages should be traded unless the institution holding the mortgage goes out of business. That would make banks more accountable for the way they do business. If you know you have to hold the mortgage, you aren't going to give one to someone you know can't pay for it, and you won't lend people more than they can afford. But if you can just sell them off in bundles, that just breeds irresponsible and unethical lending practices. And these mortgages have been bought and sold so many times, and in so many different packages and in different ways, they don't even know in some cases where they originated. I even heard the other day that some mortages can't be found. Hey, if there's no paper, there's no debt, right?

In addition, the fact that banks have been allowed to become so damn huge, that is also a problem. When institutions/corporations become so big, and so many of them start merging, it consolidates their power, and allows them to gain dangerous control over the citizens of this country.

Look at how we have been held hostage by this crisis. Either we give financial institutions hundreds of billions of dollars, which ultimately will be well over a trillion (and will come from the Federal Reserve, another huge hoax that has been perpetrated on the American people,), or they all fail and our economy completely crashes. Only, we gave them money, and now they aren't using that money for the purpose for which it was intended, which was to help failing mortgages, which is where the crisis started, because of deregulation. Instead, they have held onto the money (using a huge amount to pay themselves lavish bonuses), and in some cases, banks have used that money to buy other banks. In one case, a bank that applied for the TARP funds was declined, even though it was a healthy bank, and another bank was allowed to buy it. This was a hostile takeover. What makes this significant is that Hank Paulson, the man who Bush appointed to be solely in charge of the TARP funds, had a previous relationship with the bank that took over the other bank. That was a serious conflict of interest. I find it ironic that so many of Hank Paulson's buddies from Goldman Sachs benefitted from those billions of dollars.

In addition, where was the oversight? It seems that, in the past decade, oversight has been nonexistant. Why has Congress been so lax in their duty to the American people? They all seemed so stunned that this happened, but the truth is, some people have been warning about it for several years. Why weren't the people of this country warned? Where was the press? The media?

And this comes to another point, until we change the way elections are run and funded, this problem will never go away. As long as corporations are allowed to lobby and fund politicians, and as long as they have these incestuous relationships, things will not change. As it is now, the people of this country have no power, because corporations (and a few individuals) have all the money, and money always wins.

An example of this goes back about 5 years, when the FCC was getting ready yet again to change the regulations regarding media ownership, and how many TV/radio stations, newspapers etc. any one corporation/person could own. Congress was bombarded with tens of millions of letters from concerned citizens, even though it was not reported in the news or on most TV stations (big surprise there, right?). People found out about it on PBS, and in other liberal media not owned by big corporations. Even though the public outcry was so enormous that it actually forced the issue out into the open, and Congress made out publicly like they would vote it down, the FCC andCongress changed the legislation anyway. Here is a timeline of FCC ownership regulations. http://www.pbs.org/now/politics/mediatimeline.html

While this may seem unrelated to the economic crisis, is it really? If the media is gagged from doing it's job, whether by a president that refuses to answer questions in any meaningful way, or whether it's because journalists have forgotten how to ask the really hard questions, and they have forgotten how to be relenting when they don't get an answer, or whether it's because of the decisions from the top (because of personsal interests), the media has fallen asleep at the wheel when it comes to serving the public interests.

Another thing we need to look at is how dependent people have become on credit, and how banks/credit card companies control us with regard to this issue, and how that contributed to this financial mess.

First of all, it boggles the mind (mine anyway) that banks/credit card companies get away with some of the things they get away with. They start out charging you a very low percentage rate, but they can change, overnight, what that rate is. Many people are paying over 30% interest on their credit card purchases. Over 30%! What is more amazing, is that many of those people don't even realize how much they are being charged, because they don't really look at their statements. (yea, yea, I know, how stupid of them.) What I want to ask though, is how is that any different than being a freaking loan shark? (silly analogy I know, but go with it for a minute.)

With a loan shark, the interest goes up astronomically (daily or weekly) as you don't pay the money (or you lose a finger). If you don't pay off the balance, you end up owing more money, until you owe so much, you become so indebted, the loan shark owns you.

With CCs, you make payments, but they keep upping the % rate, so you end up paying interest on the interest, until all you are doing is paying the interest, but the interest accumlates so fast, that before you know it, something that cost $1000 ends up costing you $5000. (that is an extreme example, but so many people buy so much crap on credit, and they only pay the minimum balance, that it is actually pretty accurate in some cases.) In addition, CC cos are also very guilty of giving CCs to people who shouldn't have them, and of giving people more credit than they should have. That's so they will make money off of you in perpetuity. So, in essence, they end up owning you, just like the loan shark. Only difference is, they won't take your finger, or make you sell drugs, they will just take your car, or your house, and put you in the poorhouse.

People in this country (and increasingly other countries) are addicted to "stuff." And it isn't just that we are addicted to stuff, it's that we constantly have to have new stuff. Because really, we can't have a 5 year old cell phone, no, we have to have the newest, coolest phone, or TV, or stereo, or whatever. And the technology is obsolete so fast, and it isn't made to last anymore. NOTHING is made to last. That's so we will be good little consumers and buy more stuff that we really don't need. And what is really shocking, is government actually colluded to make it happen that way after WWII. Check out this video to learn about how consumption really affects the world. http://www.storyofstuff.com/

The truth is, the entire banking system is a system of slavery that the Founding Fathers were well aware of. Thomas Jefferson wrote, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered,"

(cont...)

01-31-2009, 06:23 AM	#7
sugarpop Professor Join Date: Nov 2008 Location: the edge of the abyss Posts: 1,947	Interesting article. Thanks classicman. A couple of things I would like to point out (bear with me, this will be long), it doesn't really go into how deregulation allowed this to happen. Ultimately, it has to do with the Glass Steagall Act being repealed, which allowed banks to trade in ways that made this happen. http://www.pbs.org/wgbh/pages/frontl...ll/demise.html And this was a bipartisan effort. Congress overwhelmingly voted to overturn this legislation, and in 1999, Clinton signed it. Personally, I don't believe mortgages should be traded unless the institution holding the mortgage goes out of business. That would make banks more accountable for the way they do business. If you know you have to hold the mortgage, you aren't going to give one to someone you know can't pay for it, and you won't lend people more than they can afford. But if you can just sell them off in bundles, that just breeds irresponsible and unethical lending practices. And these mortgages have been bought and sold so many times, and in so many different packages and in different ways, they don't even know in some cases where they originated. I even heard the other day that some mortages can't be found. Hey, if there's no paper, there's no debt, right? In addition, the fact that banks have been allowed to become so damn huge, that is also a problem. When institutions/corporations become so big, and so many of them start merging, it consolidates their power, and allows them to gain dangerous control over the citizens of this country. Look at how we have been held hostage by this crisis. Either we give financial institutions hundreds of billions of dollars, which ultimately will be well over a trillion (and will come from the Federal Reserve, another huge hoax that has been perpetrated on the American people,), or they all fail and our economy completely crashes. Only, we gave them money, and now they aren't using that money for the purpose for which it was intended, which was to help failing mortgages, which is where the crisis started, because of deregulation. Instead, they have held onto the money (using a huge amount to pay themselves lavish bonuses), and in some cases, banks have used that money to buy other banks. In one case, a bank that applied for the TARP funds was declined, even though it was a healthy bank, and another bank was allowed to buy it. This was a hostile takeover. What makes this significant is that Hank Paulson, the man who Bush appointed to be solely in charge of the TARP funds, had a previous relationship with the bank that took over the other bank. That was a serious conflict of interest. I find it ironic that so many of Hank Paulson's buddies from Goldman Sachs benefitted from those billions of dollars. In addition, where was the oversight? It seems that, in the past decade, oversight has been nonexistant. Why has Congress been so lax in their duty to the American people? They all seemed so stunned that this happened, but the truth is, some people have been warning about it for several years. Why weren't the people of this country warned? Where was the press? The media? And this comes to another point, until we change the way elections are run and funded, this problem will never go away. As long as corporations are allowed to lobby and fund politicians, and as long as they have these incestuous relationships, things will not change. As it is now, the people of this country have no power, because corporations (and a few individuals) have all the money, and money always wins. An example of this goes back about 5 years, when the FCC was getting ready yet again to change the regulations regarding media ownership, and how many TV/radio stations, newspapers etc. any one corporation/person could own. Congress was bombarded with tens of millions of letters from concerned citizens, even though it was not reported in the news or on most TV stations (big surprise there, right?). People found out about it on PBS, and in other liberal media not owned by big corporations. Even though the public outcry was so enormous that it actually forced the issue out into the open, and Congress made out publicly like they would vote it down, the FCC andCongress changed the legislation anyway. Here is a timeline of FCC ownership regulations. http://www.pbs.org/now/politics/mediatimeline.html While this may seem unrelated to the economic crisis, is it really? If the media is gagged from doing it's job, whether by a president that refuses to answer questions in any meaningful way, or whether it's because journalists have forgotten how to ask the really hard questions, and they have forgotten how to be relenting when they don't get an answer, or whether it's because of the decisions from the top (because of personsal interests), the media has fallen asleep at the wheel when it comes to serving the public interests. Another thing we need to look at is how dependent people have become on credit, and how banks/credit card companies control us with regard to this issue, and how that contributed to this financial mess. First of all, it boggles the mind (mine anyway) that banks/credit card companies get away with some of the things they get away with. They start out charging you a very low percentage rate, but they can change, overnight, what that rate is. Many people are paying over 30% interest on their credit card purchases. Over 30%! What is more amazing, is that many of those people don't even realize how much they are being charged, because they don't really look at their statements. (yea, yea, I know, how stupid of them.) What I want to ask though, is how is that any different than being a freaking loan shark? (silly analogy I know, but go with it for a minute.) With a loan shark, the interest goes up astronomically (daily or weekly) as you don't pay the money (or you lose a finger). If you don't pay off the balance, you end up owing more money, until you owe so much, you become so indebted, the loan shark owns you. With CCs, you make payments, but they keep upping the % rate, so you end up paying interest on the interest, until all you are doing is paying the interest, but the interest accumlates so fast, that before you know it, something that cost $1000 ends up costing you $5000. (that is an extreme example, but so many people buy so much crap on credit, and they only pay the minimum balance, that it is actually pretty accurate in some cases.) In addition, CC cos are also very guilty of giving CCs to people who shouldn't have them, and of giving people more credit than they should have. That's so they will make money off of you in perpetuity. So, in essence, they end up owning you, just like the loan shark. Only difference is, they won't take your finger, or make you sell drugs, they will just take your car, or your house, and put you in the poorhouse. People in this country (and increasingly other countries) are addicted to "stuff." And it isn't just that we are addicted to stuff, it's that we constantly have to have new stuff. Because really, we can't have a 5 year old cell phone, no, we have to have the newest, coolest phone, or TV, or stereo, or whatever. And the technology is obsolete so fast, and it isn't made to last anymore. NOTHING is made to last. That's so we will be good little consumers and buy more stuff that we really don't need. And what is really shocking, is government actually colluded to make it happen that way after WWII. Check out this video to learn about how consumption really affects the world. http://www.storyofstuff.com/ The truth is, the entire banking system is a system of slavery that the Founding Fathers were well aware of. Thomas Jefferson wrote, "If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered," (cont...) Last edited by sugarpop; 01-31-2009 at 07:26 AM.