shano06 wrote:I really have tried to ignore these political threads but this is the same argument that I have with the Republicans that I work with. Anyways, I am a 22 year old homeowner that bought my house about 1 year before the collapse. I have never been late for a payment and pay my mortgage every month, just like 94% of Americans. I find it hard to believe that 6% of one industry in the whole market can collapse it. What Republicans are blind to are that what caused this was the deregulations of REGAN allowed these rediculous amount of bad securitys that were traded between banks. The market doesnt regulate itself unlike you Republicans like to believe( check out what happened in1929 if you dont believe me.) Just one last thing, how do you think Bernie Madoff voted? My bet is Republican.
(if you are going to insult him, spell his name right) was long gone when Clinton signed the Gramm-Leach-Bliley Act.
GLBA repealed most of the Glass-Steagall Act which was enacted after the Great Depression. It kept retail banks, commercial banks, investment houses and insurance companies from pooling their money. Citi Bank merged with Travellers Insurance and the snowball started rolling.
The remaining provisions of the Glass-Steagall Act - enacted following the Great Depression - forbade banks to merge with insurance underwriters, and meant Citigroup had between two and five years to divest any prohibited assets. However, Weill stated at the time of the merger that they believed "that over that time the legislation will change...we have had enough discussions to believe this will not be a problem". Indeed, the passing of the Gramm-Leach-Bliley Act in November 1999 vindicated Reed and Weill's views, opening the door to financial services conglomerates offering a mix of commercial banking, investment banking, insurance underwriting and brokerage.
Then when you add in tons of "free" money from the Fed and banks do what they do best, make money. They were choking on cash and started inventing ways to lend it. It didn't hurt that GWB wanted to give speeches bragging about how we had the highest "home ownership" in history. And the D's were just happy to have a happy electorate. Like I said earlier, happy voters don't upset the applecart be voting the incumbents out.
And even though it is technically 6% of the mortgages, all that money was leveraged out 30-50 times. Sometimes multiple times. And then it was all insured, and insured against the insurance. And then they bet against themselves just in case. It was positively Byzantine.
There is plenty of blame to go around from the top to the bottom. Blaming borrowers, lenders, R's or D's is pointless. The truth is, everyone got what they wanted. At least for a little while. The real issue now is throwing good money after bad to prop up the sham system. They all should have been allowed to fail and then we could start fresh. As it is now, the system will still fail, we'll just be more in debt when it finally comes.