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Experts inside the Bush Administration tried to warn about the mortgage meltdown. They even proposed new regulations to set guidelines for the risky loans written by the banks who now have their hat in hand looking for a bailout. The banks fought these regulations and the Bush administration caved in. Now, we taxpayers are paying for this lapse in judgment in two ways -- an economic meltdown and a huge tax bill. According to an Associated Press report today, regulators warnings to banks in 2005 included:- Banks were warned exotic mortgages were often inappropriate for buyers with bad credit. Anyone surprised about that?
- Banks that bundled and sold mortgages were told to be sure investors know what they were buying. We know that's not true. AAA ratings were given to much of this debt that proved to be of much lower quality and much more risky.
- Regulators urged banks to help buyers make responsible decisions and clearly advise people that interest rates might skyrocket and huge payments might be due sooner than expected. Do you believe that mortgage brokers or banks clearly warned people about the dangers of the loans they were taking? I don't.
None of these warnings made it into the final rules that were released in late 2006. The Bush Administration bowed to aggressive lobbying from the same banks that are now getting bailed out. The banks didn't want these rules, but now that their aggressive lending tactics have led to massive losses they do want a government handout.
One of the bankers the Associated Press quotes is David Schneider, home loan President of Washington Mutual who told federal regulators in early 2006, "These mortgages have been considered more safe and sound for portfolio lenders than many fixed-rate mortgages." I wonder what he was on when he made that statement.
Regulators disagreed with the bankers and were particularly worried about "option ARMs," which allow borrowers to make payments so low that mortgage debt actually increases each month. Bankers told the government regulators they were overreacting. Unfortunately, they weren't, but we're still bailing out the banks.
Ironically, the Bush Administration's lack of intervention and belief in market forces has led to the most massive government bailout since the 1930s, and we're probably just at the start of what's going to be needed to avoid a worldwide depression.
Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies" and "Trading for Dummies."
One of the bankers the Associated Press quotes is David Schneider, home loan President of Washington Mutual who told federal regulators in early 2006, "These mortgages have been considered more safe and sound for portfolio lenders than many fixed-rate mortgages." I wonder what he was on when he made that statement.
Regulators disagreed with the bankers and were particularly worried about "option ARMs," which allow borrowers to make payments so low that mortgage debt actually increases each month. Bankers told the government regulators they were overreacting. Unfortunately, they weren't, but we're still bailing out the banks.
Ironically, the Bush Administration's lack of intervention and belief in market forces has led to the most massive government bailout since the 1930s, and we're probably just at the start of what's going to be needed to avoid a worldwide depression.
Lita Epstein has written more than 25 books including "Reading Financial Reports for Dummies" and "Trading for Dummies."
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Reader Comments (Page 1 of 1)
12-01-2008 @ 11:44AM
JCH said...
The entire game, including the rules of the game, was originated by the Bush Administration.
Their goal was a 100-year neocon reign. They wrote about it. They talked openly about it.
They had to have a portion of the minority voters. They tried to buy them with a house. They thought they would not get caught. Why? Because Alan Greenspan was thought to be the maestro of non-exuberant flights and pillow-soft landings.
The maestro found a flaw - himself.
12-01-2008 @ 11:48AM
gerald said...
Big suprise Bush screwed up "Again". This man is the biggest dummy in the whole entire world. When they were handing out brains he held the door open for everyone else.
12-01-2008 @ 11:45AM
andy said...
Give me a break...Bush did it all ? Like Barney Frank is a Bush guy. Last I looked he was the man in charge...Although this mortgage mess came to a head during the Bush Administration, it started under the Clinton administration.
12-01-2008 @ 2:03PM
JIM said...
ANDY IS STILL IN DENIAL !!!
12-01-2008 @ 2:04PM
BHarrison said...
Let's not lose sight of the fact that the FIs and the elitist / ultra wealthy special interests groups WERE the major recepients of the past profits of the greatly infalted markets . . . they played it out until they "broke the bank" . . . For the most part most of them are still receiving their exorbitant salaries and "other compensataions". Now the Federal government is "bailing them out"; and they are in a position to buy the market at ungodly low prices, with government subsidies.
George Bush has shown himself to be both incompetent and CORRUPT; but there is plenty of blame to go around to BOTH the Democratic and Republican congressmen who were substantially complicit in all of this also. They're distracting the niave Americans by ptting blame between either the Republicans or the Democrats . . . it's as simplistic as trying to distract a child from something.
Geroge Bush and Dick Cheney should have been IMPEACHED three years ago; Pelosi, Reid and others were just as corrupt; we simply did not have a viable replaceement for them.
The primary losers are the American middle class and lower class. And those who were not suckered into the pyramid and Ponzi schemes are being made to subsidizes and to absorb the losses through the national deficit that is subsidizing the bailout.
12-01-2008 @ 2:25PM
Rick said...
JCH and others including this blog are moronic, Do a little research people, your actually on the internet!!! President Clinton and his administration started the 125% loans, The Democrats were bashing B of A for not loaning money to minorities and others who couldn't qualify!! It started with the Dems, Then President Bush never one to miss an opportunity went right along with it till the dems took over congress in 2006!! Do your research people, Don't blame one man it's virtually impossible for this to collapse in 8 years, One more thing if someone can tell me when we had a surplus ( with factual backup) I can give factual backup the Clinton surplus never existed, Check out the department of treasury website!!!
12-01-2008 @ 9:44PM
Larry Lepley said...
Here we go again with the liberal revision of the truth and history. I saw Barney Frank, Dodd, and a gaggle of democrat turkeys browbeat a regulator in a hearing, as he was trying to warn them or the impending disaster. I saw fear and confusion in his eyes as he was personally ATTACKED buy these congressmen. Generally speaking, both parties have sold out the American people.