Part of the problem here is that you think FM&FM are the only entities involved, when in actuality it's encompasses banking, quasi-banking, quasi-government agencies and stock market manipulation. You did notice the amount of bank failures that happened did you not?
Without addressing all your points, some of which are completely legitimate and quite frankly tame compared to the true extent of the problems. I would just say that it should be investigated...but not by the FBI because they warned Bush Jr. in 2004 and can be seen as purely political motivations of who needs investigating. Do I think Barney Frank is innocent? Absolutely not. Do I think Bush Jr. is innocent? Absolutely not....he's where the buck stops though. A significant driver of economic growth during the Bush administration was home equity extraction, in essence borrowing against the value of the home to finance personal consumption. The Bush administration also replaced Fannie and Freddie's chief regulator in 2003 immediately after the regulator published a report warning of the risks posed by the GSE. (Now why would he do that?) On December 16, 2003, President George W. Bush signed the American Dream Downpayment Act, a new program that provided grants to help home buyers with downpayment and closing costs. The act authorized $200 million dollars per year for the program for fiscal years 2004-2007. --- The moral hazard, deregulation, the unregulated and fraud running rampant. Brokers, who were not lending their own money, pushed risk onto the lenders. Lenders, who sold mortgages soon after underwriting them, pushed risk onto investors. Investment banks bought mortgages and chopped up mortgage-backed securities into slices, some riskier than others. Investors bought securities and hedged against the risk of default and prepayment, pushing those risks further along. In a purely capitalist scenario, the last one holding the risk (like a game of musical chairs) is the one who faces the potential losses. In the 2007– 2008 subprime crisis, however, national credit authorities – in the U.S., the Federal Reserve – assumed the ultimate risk on behalf of the citizenry at large. Consider the following hypothetical situation: Suppose that dangerous loans, lent to borrowers with few assets and an uncertain income, would pay six percent interest, due to risk, whereas loans made to a too big to fail company would pay two percent interest, since there is little risk. Then the too big to fail company could borrow many times its net worth at low interest, and lend many times its net worth at high interest. Suppose the too big too fail company guarantees, or borrows and lends, one hundred and one times its net worth. Then if all went well, the company would triple its net worth in a year, and if all went badly, its net worth would be wiped out, and the taxpayer would have to pay one hundred times its net worth. Thus the likelihood that a too big to fail company may be wiped out may not provide sufficient threat to deter it from taking excessive risks. Theoretically "good strong regulation" should restrain too big to fail companies from taking excessive risks, but regulators are frequently former senior executives of the firms that they regulate, for example Henry Paulson, and to the extent that regulators come from the political class rather than the business class, for example William H. Donaldson, they may overlook the risks taken by firms that cooperate enthusiastically in treating finance as a distribution of the spoils of political victory between political voting blocks, as Washington Mutual and Fannie Mae were accused of doing. --- What may be needed is a 3rd party independent oversight, regulation and investigation into financial practices of all these entities. And the funding to do this should come equally and substantially from both major political parties. But lacking a better solution, until then, the spoils will of political victories in corruptly manipulating how the finance world works will just keep happening in the future by the 2 major parties. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
