The Monster That Ate Wall Street

I am sorry that I don't have a Phd in finance, or experience on Wall Street. But I am an attorney who closed home mortgage loans for 25 years, and I believe you have missed the whole point. If I may simplify everything, AIG was an insurance company. Their business is to assess risk, and charge a premium for it, which will cover the assumed liabilities under the insurance contract and give them a return in excess of the money that they have to pay out. The question is, why did they (and all the other players on Wall Street) so radically miss the true risk of the securities they were insuring? Well, certainly, they didn't miss on loans to IBM, Wal-Mart and Ford; it was the mortgage backed securities issued predominantly by Fannie and Freddie that was the downfall. Now why would this be? Because Fannie and Freddie were implicitly guaranteed by the US government, and they were being pushed by the poiiticians to do so in order to make homeownership availabile to people who had never been able to afford a home before. This political trend started in the 1970's with Jimmy Carter and gained momentum in the 90's and the new millenium. And, although there were some who recongnized the problem and sounded the alarm at various times (Warren Buffet, Greenspan, Bush, McCain, et al), none could get enough attention (or muster the sustained political will) to oppose the "homes for everyone" demagoguery. And most of the demogoguery was enunciated by Chris Dodd, Chuck Shumer, Barnie Frank and the other democrats on capital hill, who, not uncoincidentally, received massive campaign contributions from Fannie and Freddie, and also the Wall Street firms who they are now giving billions to to fix the problem.

The bottom line: just like the Great Depression, this was a government caused problem. Wall Street would have never gone to the excesses they did without the assurance they had from Wahsington and their paid for politicians.

Why do Senators Frank and Dodd get off scott free? Shouldn't they be held responsible to some degree since they are Banking Finance overseers in congress? Were they asleep at the wheel? Who''s minding the store, anyway???

Why is there no discussion of the Community Reinvestment Act (1977) that pushed Fannie and Freddie to aggresively lend to people who did not have the income levels or downpayments required by standard mortgages? And why is there no mention of the Treasury Department under Robert Rubin (1995) giving the banks new quotas for the level of "diversity" in their mortgage loan portfolios. The federal government was complicit in this financial meltdown.

Maybe you should mention Senator Phil Gramm who sponsored and pushed through many of the deregulation bills that also allowed this administration to turn it's back on sanity.

The American people are not stupid! I have voted republican for the last 30 years and it doesn't take an Einstein to figure out that it was a republican president and a republican congress who had full control of everything for six of the eight years leading up to this mess, I am not so naive as to buy into the rederick coming out of their mouths blaming a democratic congress that has only been in for less than two years.. My family and I have all switched our party affilliation to the democratic ticket this year. I would like to see a Democrat president and democrat congress to see how they would govern. I am sincerely disappointed and disillusioned with the republican party that Icontributed to for a long time. I think it's time to give the other party a chance now.

For those talking about McCain's campaign manager's connection to Fannie and Freddie, Obama is not innocent either. This argument is pointless. Let us not forget that Obama is No. 2 when it comes to the top 3 U.S. senators (all Democrats) who have received a lot of money from Fannie and Freddie.

It's too bad this isn't China...they would line up these Wall Street geniuses and shoot them.

Forcing the mortgage companies to give loans to people?? These subprime loans were aggresively sold to people -- there was no "forcing". How about McCain's financial advisor, Phil Gramm, who was actually instrumental in pushing through deregulation that caused this mess. And how about McCain's campaign manager, Rick Davis, who was payed 2 million by Fannie and Freddie from 2000 to 2005 to lobby for deregulation. Blaming this on Democrats is ridiculous.

Skatingartist: You are absolutely correct; however it wasn't just "giving poorer people in this country affordable houseing" it was forcing the mortgage companies to give loans to people who any person with a little financial sense would know could not pay it back (for example; if a person makes $50,000 a year then he/she cannot buy a house at $150,000 and ever expect to make the payments on it). Unfortuneately the Democrats of the Clinton years made sure that Fannie Mae and Freddie Mac would do just this by forcing them to take on a certain number of these mortgages. Also I find it interesting that I haven't heard the "mainstream" media point out just who Obama's financial advisors are, where they used to work, and how much money they made workign there. HUM, MAYBE NEWSWEEK SHOULD BREAK THAT STORY, BUT I FEEL THEY WON'T BECAUSE IT MIGHT BE A LITTLE TOO MUCH TO EXPOSE THE "MAINSTREAM" MEDIAS PRESIDENTIAL CANDIDATE.

YES, PART OF THIS STORY IS TRUE, BUT YOU LEFT OUT THE MOST IMPORTANT PART OF THIS STORY. THE DEMOCRATS FORCED THE BANKS AND MORTGAGE BUSINESS TO GIVE THE POORER PEOPLE IN THIS COUNTRY AFFORDABLE HOUSING. FANNIE AND FREDDIE MACS WITH BARNEY FRANK AND THE COOKING OF THE BOOKS AT THESE INSTITUTIONS WAS THE MAIN REASON FOR THE BALL ROLLING. BARNEY FRANK IN THE LATE'90'S SAID NOTHING WAS WRONG WITH FREDDIE AND FANNIE BUT IN '96 THE CEO OF FANNIE WAS FIRED FOR MISSHANDLING THE BUSINESS. AND OF COURSE YOU DIDN'T MENTION HOW ALOT OF DEMOCRATS GOT DEALS WITH HOUSES SOME IDIOT REPUBLICANS GOT MONEY INCLUDING BARACK OBAMA WHO GOT MORE THEN $120,000. MCCAIN RECIEVED ABOUT 25,000. THESE INSTITUTIONS WERE THE KICK BACK OPERATION FOR THE DEMS MAINLY. AND THAT IS WHY PEOPLE ARE PISSED OFF.