Wall Street and big banks caused the financial collapse, end of story

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Earlier today I posted on the childish rant of Teabagger Congressman Joe Walsh in which he attempted to shout-down his constituents with the fairy tale that banks and the marketplace were not responsible for the financial mess we’re in. He actually claims that government “forced” banks to put everyone into a home (“the devil made me do it” defense). I’ve heard this argument made by the radical right, that Clinton is to blame for pressuring banks to lend to low-income families who couldn’t afford a home. Sorry folks, but working to increase home ownership for low-income families is something all presidents have done, but no one pushed harder than George W. Bush.

In this video, Dubya lays out a whole host of policies to increase bank loans to low-income and minority families who can’t get a loan, can’t come up with a down-payment, and can’t afford the payments.

http://youtu.be/kNqQx7sjoS8

And here’s Dubya at the 2004 RNC Convention taking credit for the high number of home owners, promising to create an “ownership society”, and promising to expand his home ownership programs to add 7 million more households:

So if the radical right wants to blame government policies and point fingers at a president, Dubya would be the one to blame. However, homeowner policies by Clinton and Bush did not cause the housing crisis and financial collapse. The “securitization” of home loans began after the 2000 tech bubble burst when investors were looking for the next big investment. In 2003, most of the bundled prime mortgages had been loaned or refinanced, so Wall Street and the banking industry came up with the sub-prime mortgage scheme. The crimes committed by Republican-owned and managed banks and Wall Street firms gambling with people’s mortgages by bundling them into mortgage-backed securities, pushing them on unsuspecting investors around the world, and insuring their bad bets with trillions in credit default swaps built an unsustainable housing bubble that was guaranteed to burst, and that caused the financial collapse.  The fraud and deception committed by greedy Republicans caused the financial collapse (there were no bleeding-heart liberals in the bunch). That’s not going to be enough to convince a dope like Joe (he’s not even smart enough to keep up on his child support). So, for Joe’s benefit let’s offer some additional evidence …

Back in April of 2011, the Senate Permanent Subcommittee on Investigations released a 650-page report entitled, “Wall Street and the Financial Crisis: An Anatomy of a Financial Collapse“. The report is the product of a two year, bipartisan investigation. The link is here for anyone to read the entire report, but Alternet gives a shorter analysis of the report that even a simpleton like Joe should be able to read. Here’s a portion of that article:

The first case study focuses on Washington Mutual (WaMu), the nation’s largest savings bank, and its overt strategic decision to go big into selling high risk, high profit mortgages. Here you will find a detailed description of every type of dangerous mortgage foisted onto the public. Your blood pressure also will climb when you read how the bank used focus groups to help its mortgage brokers find better ways to sucker customers into risky mortgages even though the applicants had qualified for and wanted safer fixed-rate mortgages.

The report also details outright fraud committed by brokers – forging documents, making phony loans, stealing money – who then got rewarded again and again by the bank for their high sales records, even after they were caught! Nobody cared because the loans quickly were sold to Wall Street – the riskier the loan, the higher the interest rates and the more Wall Street would pay.

I encourage our readers to read the rest of the analysis by Alternet or read the 650 page report.

Also: Be sure to watch the two-part (full-episode) Frontline special, “Inside the Meltdown – How the economy went so bad, so fast, and what Bernanke and Paulson didn’t see, couldn’t stop and weren’t able to fix.

Update: I added the report to the U.S. Historical Documents page in this site for future reference. The report is the first and best bi-partisan, Congressional document that explains in great detail how private industry (banks and wall street firms) caused the financial crisis (not Clinton, not government, but typical, corporate greed).

This entry was posted in Corporate Greed, Financial Collapse, Mortgage Crisis, The Economy, Wall Street and tagged , , , , , , , . Bookmark the permalink.

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