Quote:
Originally Posted by TheMercenary
(Post 499512)
In the summer of 2005, a bill emerged from the Senate Banking Committee that considerably tightened regulations on Fannie and Freddie, including controls over their capital and their ability to hold portfolios of mortgages or mortgage-backed securities.
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The bill I remember reading about then put restrictions on mortgage back securities for low-income homes. It did not fix the problem with mortgage backed securities - no underwriting - NINJA loans. It did nothing to address the problem which were mortgage backed securities where non one (because so many finance people with big bonuses are only salesmen) knew what was even inside those SIV, tranches, and other financial instruments.
The reasoning was simple. Fannie and Freddie are government agencies. Therefore mortgages from them are as stable as Treasury bonds. Well, that reasoning was popular because so many financial experts never bothered to learn what was inside those instruments - did not bother to learn that Fannie and Freddie were not branches of government.
Meanwhile, that 2005 bill did nothing to address the problem, in part, because it would hurt the wealth created by Wall Street salesmen who did not even know what NINJA meant.
In 2004, Freddie and Fannie werel required to provide the easy money to the low income homes as it was also financing those McMansions. Problem was not that Freddy and Fannie had to finance everyone. Problem (that Wall Street ignored even in the credit rating agencies - Dow Jones, Standards and Poors, Moodys, etc) was how these mortgages were underwritten. An underwriter that did his job lost his job. In the new and heavily deregulated Wall Street, any underwriter who notice NINJA did not bring in sufficient income.
During this massive deregulation, Glass Stegall was even shredded. The parts of Glass Stegall that remain are ignored - SEC no long investigates or prosecutes those regulations. In fact, most bankers don't even know what parts of Glass Stegall remain - the regulations are that much ignored.
Any blame for the meltdown of the mortgage industry is directly traceable to mortgages issues to most anyone because no one vetted mortgages any more. Why bother? Government no longer demanded fiscal responsiblity for more than 10 years. No one bothered to even notice that the mortgage applicant had a job or sufficient credit rating. No longer were there any legal consequences for offering money to everyone. Every mortgage could be bundled up and sold to other companies such as AIG and Bear Stearns who were simply hiding any losses in spread sheet games.
TheMercenary forgot to learn all that. He worked hard to find a newspaper article to support his politcal agenda - his 'American is secondary' attitude. Somehow he would even blame Obama for fiscal irrresponsibilty created by the destruction of regulation on the finance industry.
I can think of no other industry that both deserves and desperately needs heavy government regulation. The industry is chock full of salesmen who look like pretty boys, spin that they are finance experts, and ... Well, only a fool pays a financial adviser to put money in a mutual fund where another financial adviser takes another 1% or 2%. That is simply salesmen without industrial knowledge hyping myths. Well their myths - including NINJA style mortgage backed securities - has just come crashing down.
NINJA - what happens when your financial expert is nothing more than a salesman for equities he knows nothing about. TheMercenary forgot to blame the real reason for economics now taking revenge because the so called Wall Street experts were nothing more than heavily enriched salesmen. They never even knew about NINJA. NINJA knowledge would only threaten profits and bonuses.
Bonuses? They are not clamoring for their bonuses claiming that their salaries are too low. Greed is good. TheMercenary posting more praise of those who are the problem.
