Exacerbate Meltdown Problems
Exacerbate Meltdown Problems
The leaders of the United States Federal Reserve banking system have trotted out the enormous chutzpah required to actually sue the leading German bank for doing a tiny part of what our Federal Reserve allowed and even encouraged here in this country. Putting the matter into the simplest terms, the Fed would like Deutsche Bank to repay a few Billion dollars because they claim that the FED lost money when DB didn’t pay enough attention to whether people receiving home loans in Germany actually had jobs or not.
We say “chutzpah” (what the British call “cheek”) in describing our Fed Banking because meanwhile, here in the United States the Fed completely ignored for over thirty years far worse banking practices which nearly brought about the complete collapse of the American financial system and that today threatens to give the country stagflation and eventually run-away inflation. Fed Chief Alan “Don’t-you-dare-tie-me-to-the-meltdown” Greenspan even went so far as to lead the cheerleading for the tricky straw that broke the camel’s back: unregulated derivative investment. To be specific, the Federal Reserve under Alan Greenspan and Ben Bernanke has for years given a wink and a nod to and ignored the impact of . . . .
A) The Jimmy Carter 1977 Community Reinvestment Act (CRA ’77) and five expansions of it (four by Clinton; one by Bush, Sr.) between 1992 and 1998 that created the sub-prime lending crisis by forcing banks and mortgage companies to knowingly make very ill-advised home loans.
B) The activities of ACORN in browbeating and shaking down mortgage lenders and banks to accelerate the evils of CRA ’77 and the sub-prime lending crisis.
C) The shift in mortgage banking from 1975 when one in every four hundred-four loans was “suspect” (administered at 3% down payment or less); to 1985 when one in every one hundred-ninety-six such loans was suspect; to 1995 when one in just seven loans was suspect; to 2005 when worse than one in three such loans (34%) was highly suspect, granted often without any down payment at all.
D) The final Clinton steroid version expansion of CRA legislation in 1998 which made it easier for ACORN to get unqualified loan-seekers into $450,000 homes in 1999 than it had been to get such people into $110,000 to $120,000 homes a decade earlier.
E) The final ACORN assault on the nation’s home mortgage industry by abusing the CRA laws to get houses for people . . . .
1) Without jobs
2) Without good credit ratings
3) Without rental histories
4) With only food stamps to list as “income”
5) Enrolled in other welfare programs
6) and even for Illegal aliens
F. Fed Chief Alan Greenspan heartily approved the onslaught of derivative investments saying they “held the key to eliminating financial downturns in the future.” Of course, it was derivatives of lumped-together junk mortgages that proved to be the final nail in the financial melt-down coffin which collapsed so many large financial institutes . . . you’re a great man, Alan, a truly great man.
G. Once retired from his post as Fed Chief, Greenspan worked as a special consultant to . . . wait for it . . . Deutsche Bank . . . that’s right . . . .
H. In a speech in February, 2004, Greenspan suggested that more home-seekers should take out ARMs (Adjustable Rate Mortgages) after he’d deliberately held the nation’s interest rates artificially low for a decade . . . in effect, sabotaging the individual lenders almost as much as the CRA laws were sabotaging the nation
I. According to Wikipedia, in referring to the part Greenspan played in allowing the financial-meltdown, Matt Taibbi called Greenspan a vain "classic con man" and a undistinguished economist who, through political savvy, "flattered and bullshitted his way up the Matterhorn of American power and then, once he got to the top, feverishly jacked himself off to the attention of Wall Street for 20 consecutive years." Taibbi said Greenspan had "established himself as an infallible oracle, and a lot of it had to do with his ability to seduce key media figures, sometimes literally." Taibbi reported a Wall Street term called the "Greenspan put" which "meant that every time the banks blew up a speculative bubble, they could go back to the Fed and borrow money at zero or one or two percent, and then start the game all over", thereby making it "almost impossible" for the banks to lose money. The chapter Taibbi dedicated to Greenspan in his book Griftopia bore the title The Biggest A__hole in the Universe.
J. Even now as the nation seeks to fight its way back to prosperity, present Fed Chief Ben Bernanke is inflating the currency and denying at every juncture that he’s doing so. The rising price of gas and food is 95% Bumbling Ben’s fault and only 5% due to other extraneous factors.
In fairness to Greenspan it must be said that for the first ten years of CRA ’77 legislation he was not the Fed Chief, Paul Volcker was. In fairness to Volcker, none-zero-nada-zip-not one of the five CRA ’77 expansions to come was law when Volcker was in office . . . and ACORN in those days was largely confined to Clinton’s Arkansas (It began life in 1977, as the “Arkansas Community Organizations for Reform Now”) so the percent of suspect loans in the entire country only doubled in the first decade vs. multiplying by 28-fold under Greenspan. Greenspan never once notified the nation of the immense danger from this cancerous assault upon the nation’s mortgage system or reminded progressive lawmakers of the harm they were doing. Ronald Reagan deserves huge censure for putting a man of such monumental incompetence into such a power seat.
Credit Default Swaps and other derivatives were praised on several occasions by Greenspan as valuable instruments that would make severe financial downturns impossible. In March, 1999, he said, “ . . . I am quite confident that market participants will continue to increase their reliance on derivatives to unbundle risks and thereby enhance the process of wealth creation.” In another speech he opined that “derivatives have increased the standard of living globally.” How could such an idiot get any job in the financial industry? Just about any asinine investment works in a wide-open bull market; the key to understanding dangers is to see what happens in a severe downturn when everybody wants to sell and get out all at once.
The ultimate Greenspan lunacy was uttered in 2004 when he summed up the value of derivatives for protecting the financial markets: “Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.”
So now our FED has the ironic gall to criticize and bring suit against a German bank for a sin perhaps 1/10,000 the size of our own failings which brought the entire world to the brink of financial cataclysm. Good job, Bernanke, good job.
Ya’all live long, strong and ornery,