Video Surfaces of Hillary Clinton Blaming Homeowners for Financial Crisis

It is up to the voters to decide which Presidential candidate has a better plan to go over Wall Street execs and end the commercial banks from engaging in the investment business and not simply have the same repeated bank offenders to continue to pay a fine and sign a non-prosecution agreement in order to avoid jail time.

USUncut:

According to Hillary Clinton, if you were a victim of the foreclosure crisis, it was probably your fault.

The only problem with that argument is that it’s not even close to factually correct.

Clinton in 2007: Homeowners “should have known they were getting in over their heads”

When Clinton ran for president during her second term as New York’s U.S. Senator, she gave a tepid speech at the NASDAQ headquarters on December 5, 2007 — before the financial crisis reached a boiling point — about reforming Wall Street’s housing loan practices, largely excusing financial criminals for their behavior.

“Now these economic problems are certainly not all Wall Street’s fault – not by a long shot,” Clinton said early in the speech.

Clinton’s NASDAQ address amounted to essentially asking the financiers assembled to take voluntary action or else she would “consider legislation” to stop banks from kicking families out of their homes. But early on in the speech, Clinton placed equal blame for the subprime mortgage crisis on low-income homeowners alongside Wall Street.

“Homebuyers who paid extra fees to avoid documenting their income should have known they were getting in over their heads,” Clinton said.

One YouTube user found video of the statement and put it side-by-side with her claim at the first Democratic debate in which she said she went to Wall Street before the crisis and told them to “cut it out.”

I read a financial book a couple of years ago that discuss the 10 causes of the financial crisis. I posted some of the highlights on my Justice League blog in 2012:

I mentioned Credit Default Swaps are one of the causes of the financial crisis. Of course there are others. First, let’s talk about Securitization.

Securitization sounds like a great deal for anyone such as the banks, investors, and so on. But, the securitization of pools of mortgages into mortgage-backed securities (MBS) allowed banks to transfer risk to investors because banks no longer obliged to hold mortgages. This allowed banks and mortgage companies to originate more loans and make more money. The more money, the more profits for the banks. And securitization started to apply to other products such as car loans, student loans, credit card debt, and so on.

Second, subprime loans or liar loans.

Once securitization came to play, banks came up with other method of increasing their profits: Originate loans quickly and sell them off to the government, Fannie Mae and Freddie Mac, or to giant mortgage companies such as Countrywide, Option One, Washington Mutual, etc. and change the lending standards such as 0% down, no documentation of income or payment histories, etc.

Third, financial institutions that are deemed “Too Big To Fail.”

We now know which banks own the majority of the US economy: Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Goldman Sachs. I called them the “Five Families.” These five families according to Dallas Federal Reserve head own 56% of the US economy. Notice that Goldman Sachs was named with the rest of the four banks. Keep in mind that Goldman Sachs is an investment firm. And in 2008, Goldman Sachs as well as Morgan Stanley became a bank holding company. And of course, Litton Loans, a mortgage servicing company, was owned by Goldman Sachs before Goldman sold Litton Loan to Ocwen.

Fourth, derivatives

In December 2000, thanks to the banking lobbyists’ pressure, Senate passed Commodity Futures Modernization Act which allowed the banks and brokerages to create insurance-type products. Yes, we were introduced to insurance-like products called “Credit Default Swaps.” This product, because it was unregulated, allowed traders that worked for banks and insurance companies to place bets on everything including mortgages and even on products that didn’t own. The risker the bet, the higher the return. And thanks to the introduction of subprime loans, subprime loans were the riskiest.  this is what led to demise of Bear Stearns, Lehman Brothers, and AIG.

Fifth,  Residential and Commerical housing bubble

Certainly much of the blame of the residential and commerical housing bubble is Congress that resisted in reforming Freddie and Fannie rather allowing Freddie and Fannie to buy mortgages from lenders, securitized the loans into bonds, and selling those bonds to investors. As far as commerical mortgages, they were sliced up, securitized, and sold to investors  (i.e. state and municipal pension funds, non-profit foundations, etc.)

Sixth, Politicians wanting to stay in office and benefits from the financial crisis

It has been well known of the many ex- lawmakers and who have personal relationships with our current elected officials have fled to the career as a lobbyist. People who check their own former elected officials to see who is now a registered lobbyist as well as their current elected officials to see if he or she has any lobbyist that works in his or her office or writing his or her bills.

Seventh, Deregulation

After the Glass-Steagall Act, which was a bill in the Great Depression that prohibited commerical banks and investment banks merger, which officially ended regulation for the banks, this is why we had products such as “Credit Default Swaps’ to be unregulated and allow banks to hide liabilities and participate in high risk investments.

Eighth, Globalization

When each nation has its own set of rules for regulating and financial transactions of a company and that international company declares bankruptcy, it affects other companies globally and becomes a financial nightmare. Lehman Brothers’ bankruptcy is an example as many banks and investment firms globally sued to get back the billions that was invested in Lehman bonds and derivatives.

Nine, Credit Rating Agencies

The three major financial rating agencies—Moody’s, Standard & Poors, and Fitch are supposed to office non-biased rating on stocks and bonds. Right? Wrong. All three credit rating agencies gave Lehman Brothers bonds an “A” ratings right up to the day Lehman Brothers filed bankruptcy.

Ten, Federal Reserve Chairman Alan Greenspan

Remember Greenspan, the “godfather of the economy” or the man kept interest rates too low for too long that encouraged buyers to purchase homes in a bid-up market and the height of the housing bubble? This is the same Greenspan who opposed tighter regulation on derivatives and subprime mortgages, had faith in free markets to regulate themselves, and endorsed adjustable rate mortgages (ARM) that ending up being bad advice which left homeowners’ mortgages upside down and left holding the bag.

Yes, there are other individuals and entities to blame such as the Securities Exchange Commission, federal regulators, FDIC, Office of Thrift Supervision (OTS), Justice Department, Office of Comptroller of Currency, homeowners who took out those liar loans and knew that they couldn’t afford them, current Federal Reserve Chairman Ben Bernanke (when he took over Greenspan’s job) who never disclosed to the public the discount window loans given to the banks besides the $700 billion dollar taxpayer money to bail them out, Clinton Administration for allowing the deregulation, Bush Administration for escalating the deregulation which eventually crashed the economy, and so on. We can continue to discuss the causes of the global financial crisis. The real question is will we learn from this and will this be repeated again?

 

Chris Hayes discusses with Barney Frank whether or not breaking up the big banks

And former Congressman Barney Frank disagree with some of Bernie Sanders’ stance of breaking up the banks and the Glass-Steagall and defended Hillary Clinton’ Wall Street reform plan. But, what I find interesting from Chris Hayes’ interview with Frank is that Congressman Frank stated that Lehman Brothers was an investment banks and Glass-Steagall would not have helped Lehman.

Yes, Lehman Brothers was an investment firm but what Congressman Frank left out from the interview is that Lehman Brothers had a subprime mortgage company called BNC Mortgage and Aurora Loan Services LLC:

Lehman Brothers took an ownership stake in BNC in 2000 and acquired the lender in 2003. Founded in 1995, BNC Mortgage had its initial public offering in 1998. Two years later, BNCM Acquisition, a group including the company’s top managers, took the company private. In 2004, one of its partial owners, Lehman Brothers, bought it. In addition to owning subprime lenders, Lehman was also a top underwriter of subprime mortgages for other businesses.

………………..

• Parent/subsidiary companies: BNC Mortgage Inc. was the primary subprime lending subsidiary for Lehman. Others included Finance America LLC (which merged with BNC in 2005) and Aurora Loan Services LLC (acquired in 1997).

And this is why the Glass-Steagall act was repealed to allow banks and investment firms to intertwine products and services together rather become separated. Unfortunately, Lehman wasn’t allow to be a bank holding company:

Timothy Geithner, then New York Fed president, now Treasury secretary, didn’t like the idea of letting an investment bank become a bank holding company — so he said no.

Yet, in 2008, Federal Reserve allowed Morgan Stanley and Goldman Sachs to become bank holding company:

The Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs Group Inc.into traditional bank holding companies.

And keep in mind that Morgan Stanley had a subprime mortgage, Saxon Mortgage and Goldman Sachs had a subprime mortgage, Litton Loans.

So, yes, Congressman Barney Frank, Glass-Steagall law needs to be reinstated to end the merging of investment and commercial banking activities.

Here Chris Hayes’ interview with Barney Frank:

on.msnbc.com/1RbeGZB

 

Fact Check: Did Glass-Steagall Cause The 2008 Financial Crisis?

aking on Wall Street makes for good politics in the Democratic Party. And several of the candidates at Tuesday night’s debate had tough words about big banks. That was particularly true of former Maryland Gov. Martin O’Malley and Vermont Sen. Bernie Sanders.

Although he didn’t say so directly, O’Malley suggested several times that consolidation in the banking business was a big factor in the 2008 financial crash and that the U.S. economy remains vulnerable because of it.

His solution: Bring back Glass-Steagall, the Depression-era law that barred commercial banks from engaging in investment banking that was scaled back in the Clinton administration. We decided to look at O’Malley’s claim about the risks of bank consolidation.

The Claim:

“[T]he big banks — I mean, once we repealed Glass-Steagall back in the late 1999s, the big banks, the six of them, went from controlling, what, the equivalent of 15 percent of our GDP to now 65 percent of our GDP.”

The Big Question:

How much bigger have the largest banks gotten, what did Glass-Steagall have to do with it and, most important, did the scaling back of Glass-Steagall lead to the 2008 financial collapse?

The Broader Context:

Despite what O’Malley and many other people believe, Glass-Steagall was not technically repealed in 1999, but it was effectively neutered. Legislation was passed that year that allowed bank holding companies to engage in previously forbidden commercial activities, such as insurance and investment banking.

The change in the law opened the floodgates for giant mergers, such as the $33 billion deal between J.P. Morgan and Chase Manhattan in September of 2000. During the darkest days of the financial crisis, Bank of America acquired two troubled financial companies — Countrywide Financial Services and Merrill Lynch, deals that wouldn’t have been possible before 1999.

The Long Answer:

The biggest banks are a lot bigger than they once were, mostly because of mergers and acquisitions. What’s not in dispute is that changes to Glass-Steagall allowed the biggest banks to grow bigger, which has raised new concerns about risks to the financial system.

At issue is the “too big to fail” problem: Will the federal government once again be forced to come to the aid of federally insured megabanks that have taken outsize risks with their money?

Since 2008, regulatory changes in the U.S. and abroad have supposedly mitigated that danger. The Dodd-Frank financial overhaul bill contains complicated provisions that would allow regulators to step in and take over failing banks, if necessary.

But there’s plenty of skepticism that the changes have gone far enough.

Read on.

Presidential debate answer fail: Lincoln Chafee fumbles on the Glass-Steagall question

Huffington Post:

Presidential candidate and former Rhode Island Gov. Lincoln Chafee struggled to explain during Tuesday’s Democratic debate why he voted in favor of deregulating big banks in 1999. 

CNN host and debate moderator Anderson Cooper asked Chafee how he could press Hillary Clinton on Wall Street when he voted for a bill repealing the Glass-Steagall Act, a landmark financial regulation bill that separated the banking industry from the securities industry. 

“Glass-Steagall was my very first vote,” Chafee said. “I’d just arrived, my dad had died in office.”

Chafee was appointed to the U.S. Senate seat held by his father, John Chafee, until his death in 1999.

Cooper continued to press Chafee, asking if he didn’t understand the bill before voting on it.

“I think you’re being a little rough,” Chafee replied.

And here is his vote in 1999. Click here.

On a side note : The final vote of the Glass-Steagall Act came on Nov. 4, 1999, the same day Chafee was sworn in as Rhode Island’s senator. He filled the seat vacated by the death of his father, John Chafee, on Oct. 24, 1999.

Hillary Clinton won’t propose reinstating a bank break-up law known as the Glass-Steagall Act

Hillary Clinton won’t propose reinstating a bank break-up law known as the Glass-Steagall Act – at least according to Alan Blinder, an economist who has been advising Clinton’s campaign. “You’re not going to see Glass-Steagall,” Blinder saidafter her economic speech Monday in which she failed to mention it. Blinder said he had spoken to Clinton directly about Glass-Steagall.

This is a big mistake.

It’s a mistake politically because people who believe Hillary Clinton is still too close to Wall Street will not be reassured by her position on Glass-Steagall. Many will recall that her husband led the way to repealing Glass Steagall in 1999 at the request of the big Wall Street banks.

It’s a big mistake economically because the repeal of Glass-Steagall led directly to the 2008 Wall Street crash, and without it we’re in danger of another one.

Read on.

Shoot Bank Of America Now—-The Case For Super Glass-Steagall Is Overwhelming

Ouch!

The mainstream narrative about “recovery” from the financial crisis is a giant con job. And nowhere does the mendacity run deeper than in the “banks are fixed” meme—an insidious cover story that has been concocted by the crony capitalist cabals that thrive at the intersection of Wall Street and Washington.

So this morning comes yet another expose in the Wall Street Journal about the depredations of Bank America (BAC). Not surprisingly, at the center of this latest malefaction is still another set of schemes to grossly abuse the deposit insurance safety net and enlist the American taxpayer in the risky business of financing high-rolling London hedge funds.

In this case, the abuse consisted of BAC funded and enabled tax avoidance schemes with respect to stock dividends—–arrangements which happen to be illegal in the US.  No matter. BAC simply arranged for them to be executed for clients in London where they apparently are kosher, but with funds from BAC’s US insured banking entity called BANA, which most definitely was not kosher at all.

As to the narrow offense involved—-that is, the use of insured deposits to cheat the tax man—-the one honest official to come out of Washington’s 2008-2009 bank bailout spree, former FDIC head Sheila Bair, had this to say:

“I don’t think it’s an appropriate use…….. Activities with a substantial reputational risk… should not be done inside a bank. You have explicit government backing inside a bank. There is taxpayer risk there.”

Read on.