From what I hear from folks locally doing foreclosure counseling people who are losing their homes seem to fall into 2 catagories. Victims of predatory lending and idiots who bought homes they couldn't afford. Fairly even split with a small group of "other." No matter, the defaults are only one part of a much larger picture. What disturbs me the most is how damn well Wall St. has pulled this off. Fleeced all of us, we pay for the wrechage and they never miss a bonus. Their kids don't go to the now overcrowded public schools. Every price increase, layoff, or abonded home or business means those of us paying taxes are paying more and getting less. Derivitives and "mortgage" backed securities markets combined with banking institutions entering the investment house business is what caused the meltdown. Credit default swaps, making profit on devaluing investmets? Mortgage in quotes because people can't even figure out who holds many of these notes the way they were cut up and re-packaged. Trust me, Wall Steeters made billions and billions and they still have it. WE pay for the damage and they laugh all the way back to their bank. BTW, it used to be illegal for the "Building and Loan" and "deposit" (traditional) banks to play Black Jack with our deposits. I don't remember if this went away under Clinton or Bush (either way both admins helped create this). They did it all knowing the FDIC (us) would bail the whole mess out. This was a scam. And the best of all is that they are getting people to actually believe they are not the bad guys! Our credit risky low-income neighbors are the bad guys? It is not even possible, literally. Huge financial problems can not be made by folks who do not have huge financial resources. "Low income" people just are not worth enough to cause this. Goldman knowingly and intentionally throwing their own investors under the bus, that is the real tip of the iceburg, in my opinion.

 

I think we need to take another look here. Banks are normally not in the business of making bad mortgage loans. So, why did that happen? The problem started with the Neighborhood Reivestment Act of 1977. Inner city neighborhoods were deteriorating, because banks wouldn't give mortgages they deemed too risky. Under that new law, the government stepped in an pressured banks to make loans. That wasn't all bad, because there was a problem that needed solving. However, Clinton came along and put the program on steroids with his concept of giving everyone the American dream of home ownership. That sounds like a wonderful idea, and a housing boom resulted. Fannie Mae and Freddie Mac went full steam in making money available for almost everyone who wanted it. Alarms started going off, and there were attempts to get Congress to rein in those two agencies. But, Congressional leaders like Barney Frank and Chris Dodd didn't want to do anything that might curtail prosperity. Then the housing bubble burst and the economy crashed.

Wall Street may have had a feast, but well-intentioned government set the table. The only thing I can see to do is to vote out the people who were there when this train wreck happened and didn't stop it.

 

Nothing collapsed in 1977. It would have, or 1978/79/80. It may make for some bad lending pressure, but if you look at the data, no one made those bad loans. I too think it was the Clinton admin that gutted our protections. Not positive, but the best fund raising machine in all of US political history sold out some real moral footing. But which one hasn't? The Community or Neighborhood Reinvestment Act is no culprit. Period. Banks like Fleet never made CRA loans, lawsuits later and nothing, got bought up before it got settled. Smaller regional banks, like First Union, (around here, also bought up) made all of their obligated loans. And, no, these loans were NOT only for residential mortgages. In fact, most CRA obligated loans were not made for that market.

I have clearly chosen the wrong line of work. If I knew I could loot and rape your pension and everything else you work so hard for and get away with it? And you would actually blame Jane and John down the street... Those blasted parents, instilling in me the moral judgement to make an honest living.

You make great points, but Wall Street didn't just have a feast, they made the whole dinner party. Imagine having a system that guarantees protection on consumer losses (FDIC) but letting banks play in Vegas with our money. No matter what, we wind up holding the handle to a bucket of ****.

 

I still don't see how Wall Street would have had such a feast if it hadn't been for a flow of unintended consequences of government actions that started with the Neighbor Reinvestment Act of 1977. Eventually, over the decades, these actions built into a Tsunami that crashed the economy.

Government needs to regulate, but it has been incompetent. The really sad thing is that incompetence is being taken to new levels as national debt, budget deficits and unemployment go unchecked. Social Security is broke, and nothing is being done about it. Medicare costs are out of control, and government gives us a massive new healthcare spending program. We're facing the prospect of inflation that will rob our pensions and savings more than any actions by Wall Street.

And now we see that government has been incompetent in regulating off-shore oil drilling. We desperately need a major shake-up in Washington, not an unkept promise for change.

 

BP will make gulf water front purchasing very affordable in the coming months. Thats the only good news.

 

I went down to the Gulf after Katrina with a box truck loaded with supplies. After the delivery we took a ride along the coast. Where we were the hurricane only came through as a Category 2 but the storm surge ripped houses right off the foundations. Including large houses with I-beams integrated into the wood framing. The foundations and I-beams were there but the houses were washed 100s of yards inland. As bad as the oil spill is I hope it doesn't do as much damage as the hurricane did.

 

Deep- tsunami's are, by their very nature, the result of accute incidents, almost always either an earthquake or cyclone. You are sure correct about the tsunami. Letting the financial markets off the hook will be catastrophic for us real people, I guarntee you. The math is very straight forward. If you were to calculate all the defaults by CRA recipients it wouldn't come to a hill of beans compared to what went "missing" in the financial markets. Unregulated (properly, you got it Deep) greed, same as the Great Deprression, is the cause, sure residential mortgage defaults amke up some of this, but CRA loans did not build up, heck, those early loans, as mortgages, would be paid off by now.

 

Nothing to do with "Drill Baby Drill" mantra, but worth a reply.

CRA in 1977 was designed to combat redlining," the "systematic denial of credit to persons living within a certain area." Somehow you've gone back in time to state that this law to keep banks from denying credit based on the neighborhood people live (poor) to the current Wall Street mess? The law as totally ineffective anyway and was just used to encourage banks to lend to the lower class more. There's plenty of real information about it, what it was for and how bland it was. The law had no teeth. It did nothing to create the current Wall Street mess that 90% of middle-class American rode so well. As stated by PB....those potential loans would be long paid off by now. Is there something more to it?


Who do you propose will create this "shake-up". Our system of government doesn't react to shake-ups. That's why we have the three branches of government. Did you have somebody in mind that will effectively shake things up from your point of view?

 

Has anyone suggested the government blew up the levee... I mean rig, yet?

 

I honestly don't know if they've come to any conclusion as to why the rig blew in the first place. It was weird that it happened shortly after Pres. Obama announced limited off shore drilling along the East Coast. Probably a coincedence, but odd...