The Monster That Ate Wall Street

Great video of C-Span2 hearings on Freddie and Fannie:

http://www.youtube.com/watch?v=_MGT_cSi7Rs&eurl

I understand conservative Respublicans (even do not support) in their effort to block the bailout. If Obama is in the office - he will buy bad mortgages and forgive insane homeowners (Democrats already tried to include it in the package), and then all $700 billions will be lost for normal taxpayers. The bailout is the done deal, so if you want most of your tax money back - do not vote for Obama (still feel free to vote for Democrats in congress). You can blame bush and Republicans, buth still think.

Years ago I was a bank examiner for the Federal Reserve. So knowing about banks' risk levels was our primary mission, and that supervision kept banks from getting too ambitious with crazy schemes. However with the creation of third party risk swaps used for various illusory solutions, risk management and supervision of same went out the window. Your article tells the story very well.

Bill Zunkel

No more needs to be said. I see no "change" with this guy either. Just the usual bought and paid for politicians.
http://www.youtube.com/watch?v=H5tZc8oH--o

Why a $700 billion(s?) bailout for the "investment" banks and "credit swaps" insurance companies but not for the "greedy" homeowner?

That $700,000,000,000.00 equals lets say 7,000,000 mortgages at $100,000. each. What if all default back payments and related costs were tacked onto the back of home mortgages and the approximately $100,000. (weighted) for each mortgage from this bailout fund was split amongst all home mortgages and applied to each mortgage balance thereby lowering the mortgage payments etc. to somewhat reflect the present value of these homes and take the undue pressure off the homeowner.. Not only would this money go into the banking system as in the present bailout idea, but it would provide the basis for again introducing value into the U. S. home market--thus by bringing "subprime" mortgage loans up to par. This mortgage direct credit plan immediately revalues the troubled mortgages and morphs that "valueless" paper into viable loans. Voila, the squeeze causing our credit problems due to the mortgage collapse dissappears.

This leaves the hedge funds and other hugely speculative firms to handle their own problems. These firms have been profitting greatly on highly speculative derivatives and credit swaps by risky leveraging. When they guess wrong, they get "margin calls"--that's the nature of the beast. Yet they too will also obtain some relief through the tricke down effects of this mortgage direct credit plan.

People, on the other hand, have to live somewhere. They all, argueably, pay for home mortgages either directly or through landlords. When given the chance to own their own home--The American Dream--they jump at the chance. What's wrong with protecting the American people, the related banks, and the secondary market instead just limiting the bailout to specualtors only?

The reality is that either bailout is but a temporary fix. If serious rules regulating the federal reserve, the hedge funds, credit swaps, and the like, are not put in place, the federal reserve will remain incapable policing the American economy. The federal reserve has become an organization bent on protecting the net worth of a very few to the detriment of the middle and lower classes.

The kneejerk severe and incessant increasing of the fed funds rate from 1% in 2003 to the high of 5.25% on June 29,2006 was the primary cause of this credit crisis. By raising these rates so quickly, the economy did not have a chance to self correct. They really appear in a fog on what to do now. Whatever it is that the federal reserve does now, they, rather than just focusing on protecting the super wealthy, must act instead for the benefit of entire American populace.

Can we get Phil Gramm to explain his intent in pushing through the grammswap bill in Dec 2000 that enabled the unregulated trading of credit default insurance?

The reasons for our ecnomic failures are multiple and probably stretch at least over 3 decades of policy makers, wouldn't you agree? They span mostly Republican controlled and some Democratically controlled segments over this time span. Maybe it's the 2-party system, maybe not.
With the U.S. being so vast and businesses involved in foreign countires, leaving hard working U.S. workers who made their businesses great, only to become more greedy over the decade with the lower paid workforce overseas , don't you think this too, contributed to the problem?
I just want to see every business involved in any greed to, "pony up," and return to the U.S. workers, what should never have been kept away. Fat chance, huh?
Gee, if they just would take 1/2 of the CEO's bonuses and overpriced salaries and divide them among U.S. lower paid workers, everyone who is losing so much, especially their homes, would have the money to pay for them and the banking industry wouldn't need a bail-out, now would they? Hey, this may be a novel idea?
Hey, why not use all of the so-called Bail Out money and divide that among every U.S. citizen? Wouldn't that be a win-win solution? Search, research, study and vote wisely! Carol G.l

Nothing but thieves , how can you live with yourselfs. your lives will take a turn for the worst. Carma coming right at you.

The Acorn loans were a social experiment that went wrong. Clinton and Reno were responsible for "encouraging" red line loans

This is a complex situation. We need to start of "greed", lack of regulation, and the most important, the Financial sector of Wall Street made a Chess mate to the next administration before start. A legal extorsion: if you do not bail us now, we will send America to the hardest Depression to its history. Sending us to the third world so fast that we will not be able to see it unitl we are there

This article fails to mention that CDS's did not have to be purchased on a loan that you actully owned. This is equivalent to purchasing insurance on your neighbors car because you know he is a bad driver. Pure gambling, and this type of product has to be outlawed.

Credit default swaps are a little like going to the produce store where the tomatoes on top are pretty but those on the bottom are less than perfect. If you can see to the bottom, fine, but the those rating the model weren't looking at what was inside the package. You can blame Dems or Republicans all you want but it was mortgage companies that became greedy because they were making a fortune in selling faulty products while no one was looking. They didn't know when to fold and walk away from the table. Stay too long and what do you get? You get the government picking up the t ab.

This misses one salient point about CDS's. You did not have to have the loan on which you were buying the insurance . Used correctly they can be helpful; used this way it's like buying insurance on your neighbors car because you know he is a terrible driver. Pure gambling.

Here's the lead of a New York Times story on Sept. 11, 2003: "The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." [see link below]

McCain said in co-sponsoring the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, "If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole."

What was Barney Frank and fellow Democrats saying at the time of these attempted reforms? According to reports, Representative Barney Frank(D-MA) claimed of the thrifts "These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." Representative Mel Watt (D-NC) added "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing." [ See Community Reinvestment Act, second link below w/ history]

The first link below contains a purported list of the top 25 in Congress who got contributions from the folks at Fannie and Freddie. Obama is listed second, after Dodd, even though Obama is just a junior Senator. Obama is followed next by Kerry and then Clinton. The last link describes how some in Congress tried to use the original bailout bill to funnel money to groups like ACORN. See:

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&artnum=1&issue=20080918

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

http://article.nationalreview.com/print/?q=M2QwNDhkZTg2OGYzZjkzM2E2NDEwM2U5OGVkNTc0YzU=

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63

http://online.wsj.com/article/SB122247015469280723.html?mod=googlenews_wsj