The Glass-Steagall Partial-Repeal Did Not Cause the Financial Crisis

[DirkGently]

33. Oh please. No one ever said it was ONLY Glass-Steagall.

That's a straw man argument. It's not the point either Warren or Sanders are making. No one has said Glass-Steagall was the primary cause of the market bubble and the collapse. But it wasn't irrelevant either. The primary cause was widespread de-regulation and consolidation, combined with the utter lack of concern on the part of the financial houses as to what would happen when they inflated yet another speculative bubble and allowed it to explode all over the world's economy.

This is rather silly:

It has been the result of banks making loans to individuals and businesses who can’t pay them back.

Talk about half-truths and peddling myths. The gigantic, world-destroying market bubble didn't happen because people just suddenly couldn't remember how to pay off loans. The banks and financial houses, free of regulation and oversight after decades of whining that the bad old government was holding them back, and with full confidence the American taxpayers would bail their sorry behinds out when they blew it, CREATED THEIR OWN MYTHS, deciding that "real estate prices never go down everywhere at once" and that therefore any mortgage, good, bad, or otherwise, could be chopped up and sold as a highly-rated mortgage-backed security.

The lenders had ZERO CONCERN as to the quality of the loans, and yet they were the ones in the best position to ensure the loans they were making weren't imaginary.

When even the crappy loans ran thin, JP Morgan Chase sent around its infamous "Zippy Cheats & Tricks" memo, helpfully advising its underwriters as to how to circumvent Chase's own underwriting software by falsifying personal income until the loan got through.

3) If you do not get Stated/Stated, try resubmitting with slightly higher income.
Inch it up $500 to see if you can get the findings you want. Do the same for assets.

It’s super easy! Give it a try!
If you get stuck, call me . . . I am happy to help!

Tammy Lish
[phone]
[e-mail]

http://www.oregonlive.com/business/index.ssf/2008/03/chase_mortgage_memo_pushes_che.html

The result of all this deliberate self-deceit was that real estate prices skyrocketed. Anyone could get any loan, for any amount, because the lenders ceased caring about anything but shoving them out the door. The result was that even the most careful, considerate home borrowers imaginable were presented with a market based entirely on the theory that prices would continue to go up and up and up. People making far too little to afford a given property were being given gigantic loans and told they could re-finance, so who cares?

Borrowers weren't in a position to tell people making $20k a year they couldn't afford a $400,000 house. The lenders created the reality for everyone, and then took the profits and left, billing tax payers for whatever damage they did to themselves in the process.

It's a bit rich for the lenders to be blaming the borrowers they lured and snookered and lied to and about for the disaster they foisted on everyone.

A hedge-fund manager, writing on Forbes:

It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers. This ability along with financing provided to all the other players was what kept the bubble-machine going for so long.

Now, when memories are fresh, is the time to reinstate Glass-Steagall to prevent a third cycle of fraud on customers. Without the separation of banking and underwriting, it's just a matter of time before banks repeat their well-honed practice of originating garbage loans and stuffing them down customers' throats. Congress had the answer in 1933. Congress lost its way in 1999. Now is the chance to get back to the garden.

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

The Washington Post allowing that the repeal was not "the proxmimate cause" but was a factor:

The repeal of Glass-Steagall in 1999 was part of a broad deregulatory push, championed by the likes of Fed chief Alan Greenspan, Sen. Phil Gramm (R-Tex.) and Treasury Secretary Robert Rubin, that eliminated much of the oversight on Wall Street. Freed from onerous regulation, the banks could “innovate” and grow.

● After the repeal, banks merged into more complex and more leveraged institutions.

● These banks, which were customers of nonbank firms such as AIG, Bear Stearns and Lehman Brothers, in turn contributed to these firms bulking up their subprime holdings as well. This turned out to be speculative and dangerous.

http://www.washingtonpost.com/repeal-of-glass-steagall-not-a-cause-but-a-multiplier/2012/08/02/gJQAuvvRXX_story.html

There is nothing even remotely "fringe left" about the rather unassailable observation that BANKING DE-REGULATION CAUSED THE MARKET CRASH. Glass-Steagall, the failure to regulate derivatives, giant mergers, and on and on and on.

No one in the world honestly thinks it was just some kind of $4 trillion fluke of irresponsible borrowers, descending on the poor banks and forcing them to create a gajillion bad loans and selling them as B-rated securities when everyone knew they weren't. That is not a thing that "business and financial experts" think. It is a really weak lie they tell, because they want to go and on, sucking the country dry with one greedy scheme after the other, because so far, no one has stopped them.