60 Minutes, as usual, had a very nearly excellent program last week on the economic collapse, and they were all upset because no one has been arrested; no particular person appears to be under investigation. They have a good reason to be upset, but they seemed, at least in this report (and in several previous programs), to be clueless as to why.
What happened at the end of 2008 changed history and the direction of the United States. Treasury Secretary Hank Paulson goes to President George Bush and tells him, “The banks in the United States are about to collapse. We need TARP. Let me have nearly a trillion dollars, and I can take care of this.”
Then 10 or so huge banking conglomerates are called in and they are told that they are going to take a huge, temporary loan, and no one is to talk much about it. If a bank is in good shape, they take the money; if a bank is ready to collapse, they take the money. The explanation, which seemed reasonable, was, we do not want the public to know which banks are solvent and which ones are not. The problem was, so many of these banking conglomerates had a huge amount of bad housing investments in their portfolios.
At first, Congress said no. Then our economy very nearly collapsed. The Dow Jones dropped 778 points on at the end of September, 2008, right after Congress refused to pass the TARP legislation. This was the greatest net loss in Stock Market history, when $1.2 trillion of wealth was lost in one day.
TARP was immediately passed; money was left on the table for the next administration, and, eventually, hundreds of institutions were bailed out. As a result, the momentum for Republican candidates McCain and Palin stopped and they began to lose ground. The Democrats capitalized on this, blaming the Republicans, and Obama blamed George Bush. and the Democrats took over the Presidency, with strong majorities in the Senate and the House.
If you will recall the Obama campaign, you heard President Bush and his economic policies being blamed, over and over again, for the market crash. TARP was not strongly questioned, but it was clearly Bush’s fault, at least, according to Obama and the media. Democrats successfully blamed George Bush, the banks and Wall Street, and said it was all their fault for the market crash.
So, here it is, 3 years later, after 2 years of super-majorities by Democrats in Congress, and, for some reason, these evil bankers and evil Wall Street types are not being pursued for their criminal acts. In fact, it turns out that Wall Street is giving far more money to Democrats than to Republicans. Furthermore, it was Wall Street that got bailed out, both under Bush and under Obama. Those same evil bankers and financial types that the media told us were at fault.
So, what gives? Why is there this symbiotic relationship between the current White House and these same financial institutions that they blamed for the crisis?
That is what 60 Minutes asks. Who is going to be investigated? Who is going to be arrested? Department of Justice seemed to have no substantive answers for them, apart from, “The wheels of justice grind slowly.” Furthermore, 60 Minutes seemed to have no real clue either. There were no questions about the key connection here: the relationship between the government, Wall Street, credit services and the large banks. This is the unholy alliance. I’m not talking about Democrats versus Republicans here; I am talking about government and the many financial institutions which were intimately involved in this crisis.
What has been happening as of late? It turns out that many members of Congress were making money on the stock market, no matter that we are in a down market or an up market (and this has been going on for a long time). Senators, in particular, were getting great returns on their investments—even greater than smart fund managers. Somehow, these Senators are so brilliant that, besides handling all this government stuff, they are brilliant investors.
Although I have not studied this, I can just about guarantee you that the investments that various members of Congress made with respect to housing and the housing market was inspired. Just as if they could see the future. It is as though they knew when the markets were going to tank.
Information is coming out in drips and drabs. No investigating committee wants to turn over too many stones. After all, what Wall Street banker, who has given $1000’s or has bundled tens of thousands of dollars for the current president wants to take the fall for this. Do you think they will stay quiet? Do you think one of them is going to be arrested and then he says, “Yep, I did it all. It was all my idea.” No, if he is pushed against the wall, he is going to starting naming government names and government legislation and, more importantly, the names of the government regulation who told them, “Start lending money for housing to specific groups of people and we will buy these loans from you.” You simply cannot have dozens of institutions suddenly doing the exact same thing (making bad loans) without some guidance and help from the government.
Only recently, it has come out that credit agencies would do rapid re-scores on people with bad credit (one of the ignored stories of this month). The buyer or buyers would walk in to get a loan after finding a house; they explain with a short letter why this, that, and the other thing is on their credit record, and suddenly, within 1 hour, their credit score goes from 500 to 700. Suddenly, they are qualified to buy that house; they can now get the loan for it. They have the background and credit score necessary to qualify. Although this is well-known in the banking industry, this does not seem to be of any interest to the media.
From personal experience, I know that loan officers and underwriters did a horrible job when it comes to checking the backgrounds of potential home buyers. I had two instances where I was called to tell how my tenants were doing; did they pay on time; and, in each case, these were problem tenants. So as not to ruin their chances to get a house, I said, “Call me back in a week” so that I could work things out with the tenant. These people doing the verification never called back a second time. They verified the ability of a person to pay on their housing loan without getting a clear appraisal from me, their landlord.
And so, millions of people purchased homes that they could not afford; banks loaned money on very bad loans; and the government continued to buy or guarantee these loans. Also, in all of this, the government went from owning and controlling 50% of American mortgages to owning and controlling and guaranteeing 90% of the mortgages in the United States. During all of this time, these rapid re-scores would last just long enough for the loan to close and fund; and the government continued to buy or guarantee these bad loans. At the same time, people who worked for FNMA and FHLMC made millions–particularly the executives.
In other words, the government was intimately involved in this mortgage mess, as I have pointed out in many articles in the past. In fact, those in the government were criminally involved. If there was no government involvement, there would have been no housing bubble and subsequent crash.
What we are talking about is hundreds and possibly thousands of people, both inside and outside of government, who pulled this off. They may have had some honorable intentions at the beginning, but then they began to make so much money and the economy went like gangbusters; and then there was that crash. And still, some Senators and Congressmen seemed to have this uncanny ability to know how to time their own investments as to make money during one of the greatest crashes to occur in our lifetime.
Let me make it clear—if there are more than 10 Wall Street types and mortgage company CEO’s that are arrested, then, there is going to be revelations of many ties to our government, government officials, and government regulators to a point that our heads will spin. And then there will be thousands of arrests, most of them coming from inside the government.
Therefore don’t expect any arrests; not in the near future. Expect the official explanation to be, “While what these bankers and mortgage officers was immoral, it was not illegal; and so, we have no way that we can prosecute them.” Because, to bring charges against these private citizens is to eventually bring charges against many congressmen, Senators and government regulators, from both parties. Do you think our government is going to allow that to happen?
From Conservative Review #207 (HTML) (PDF)
A retired math teacher who spends most of his time exegeting the Old Testament and, once a week, puts out an ezeen.
The one who planted the time bomb is still alive. Arrest Jimmy “The Peanut” Carter. Then arrest every living president and member of congress for failing to undo what the above mentioned scum did.
That would be very nearly all of them.
Personally, I would like to take a bullwhip to all of them, starting top down- what they, in their greed, have done, was to put the US’s back against the wall- in short, they committed TREASON, for short-term financial gain, and we need to begin treating Treason as it used to be- a Major Crime, with a Death Penalty solution. For far too long, people have thumbed their nose at the laws, or found the little loopholes that allowed them to wriggle through.
When you have a Cancer in your system, you MUST excise it, dig deep, and eliminate every vestige of it, and I believe we will need to do this if we, as a nation, are to survive.
The only other option would be to curl into a fetal ball and await the end, because the actual end of our society and government is frightfully near.
Excellent Gary.
Gary why do you insist on sugar coating this? You paint such a rosy picture you’d think there was a chance of salvaging this nation. What about the 16+ Trillion in total loans the Federal Reserve has made in total between 2007-2010. These loans will no more get re-payed than the 110% of value low interest low income housing loans that banks were required to make to inner city crack dealers. Who guarantees that the debts of the Federal Reserve will be paid? The government of the United States of America that’s who, and who does the government have the power to tax thereby guaranteeing its own debts will get paid?
And what about the Quadrillion+ Dollar derivatives bubble? Who will be on the hook for that?
http://www.cbsnews.com/8301-18560_162-57341032/president-obama-the-economy-the-congress-the-future/?pageNum=5&tag=contentMain;contentBody
But, according to the Blaze, Obama was wrong about the legality of some of these bad actors.
See the last 1/2 of this.
And Kroft gave Obama a softball with NO FOLLOW-UP despite the fact that Kroft had covered the legality-illegality issues just before Obama was elected!
In that piece Kroft stated:
Essentially they are side bets on the performance of the US mortgage markets and the solvency of some of the biggest financial institutions in the world, a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and the bonds and the mortgages. It would have been illegal during most of the 20th century, but eight years ago Congress gave Wall Street an exemption.
The producers also chose not to expose the key Democrats — most notably House Speaker Nancy Pelosi (D-Cali.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) — that voted in favor of this legislation back in 2000 or Bill Clinton who signed it.
@Poppa_T: Poppa — Are you including foreign aid in the trillions in loans? – if not we have to cut that way off — hey — charity begins at home — long past time to close the candy store — and cut off all the leeches – worldwide — gird up the old loins
And do not forget the futures market rip-off — FM Global comes to mind — readers should check out Ann Barnhardts’s site if they have not already — she pointed out the FM Global Bee Esss about a month (or more) prior to the actual collapse – and has had several detailed follow ups
NanG,
As usual, your comments are well thought out, researched and presented.
The producers also chose not to expose the key Democrats – most notably House Speaker Nancy Pelosi (D-Cali.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) – that voted in favor of this legislation back in 2000 or Bill Clinton who signed it.
The program was, IMHO, a cover-up protecting the guiltiest scum who played with social engineering, and as a result foisted the worst and most consequential economic engineering in American history.
Barney Frank should be leading the line-up of clowns walking to jail, yet he now is ‘resigning’ without a single member of the MSM led by the NYT calling for his head.
@Budvarakbar: No sir I’m not, the private loans the private Federal Reserve made to private foreign banks are not “foreign aid” and are not included on the governments balance sheets, the 16 trillion is above and beyond the governments published Federal debt.
Most people I talk to blame all of them, and Bush and Obama as well. And yes you still have your party die hards on both sides that only believe that the “other side” is to blame, which is pure BS. And our worthless so-called leaders on both sides know that they can always count on the party faithful to get some votes, and then on the ignorant segment of the population who go and vote every four years, and then tune out. Hear they are facing another government shut down, and saying the same lies they all told us a few months ago, and all the times before that. They the politicians go to DC to write books, and to get rich off our backs, while they watch our country fall apart. They use different groups of Americans against each other, and spread more hate and anger than you can shake a stick at. They send our sons and daughters off to fight and die in conflicts, and or come back home horribly maimed for life and then use those conflicts as political tools to beat the other side with. So in short they waste our money, waste precious human lives, and then wreck our country while they all profit big time. While doing nothing but make excuses as to why nothing ever gets done anymore. And yet we still have people who swear up and down that we need then professional criminals to continue to rule over us because an average Joe or Jane is not up to the job. Maybe they right. Because if becomming like a politican is the answer, then we are screwed.
The problem with Bush’s TARP was it didn’t require the Banks to pay it back. Obama’s TARP program did-and they did! So Bush gave his wealthy donors one last gift before he left office-and screwed us all.
@liberalmann:
Do you purposely post things that are false out of ignorance or to see if you can simply get away with it?
Recoupment was in TARP I, in fact without the recoupment being part of TARP I it would have had trouble being being passed.
You just flat out lied.
On top of that a majority of the money has actually been recouped…before you can start lying about that.
@liberalmann:
Hi liberalmann, I disagree…what happens is that those huge loans get refinanced. The original loan gets taken off the books but another loan pops up somewhere else. Nothing ever gets repaid, debt gets bundled together, repacked, accepted as collateral for yet another loan and interest keeps compounding.
@malize, it was the same thing with both TARP and Stimulus, both Pres. Bush and Obama are at fault.
What has to be kept in mind is that the SEC can investigate but has no indictment powers, The DOJ can indictment and prosecute. The holder DOJ ain’t gonna do shit to obongos financiers..Get rid of holder and obongo then watch the fur fly..Dirty lidem bastards and the RINO’s that aided them must be imprisoned. It will take our doing to make it happen..
Good article, Gary. I’d like to add another aspect that is rarely discussed: The different set of laws that apply to the financial industry. For a member of the financial industry to be prosecuted, he must have displayed “malicious intent”. Jon Corzine can sit before congress and say “I have no idea where all my customer’s money went and I never intended to lose it.” Presto…he’s off the hook.
Compare that situation to…say…a bus driver who was texting and drove the bus off a cliff, killing a number of passengers. He would be arrested, tried, and certainly found guilty of negligent homicide.
But congress and the lawyers (sorry for the redundancy) have set up a totally different legal standard for the financial industry. In that industry, there is no such crime as negligence, no matter how many lives are destroyed.
@ liberalmann:
I seriously try not to make ad hominem attacks or call people names that share their views here, but you are a complete moron.
TARP did have a payback provision and the TARP funds have been paid back.
Obama’s Stimulus, or the American Recovery and Reinvestment Act (ARRA) had no payback provision. Do you seriously think Solyndra is going to be paying money back?
If you want to be mad about something, it should be ARRA and the dirty little secret that the banks paid back the TARP loans with Federal Reserve loans. And maybe you should do your own research instead of listening to Obama propaganda and taking it for fact….moron.
@Aqua:
Aqua, he’s a mentally ill troll. I looked around the web and he spams other Conservative sites with his stupidity. He has a facebook site too. I’m surprised the squirrels haven’t carried him away.
@ Hard Right:
We have real people from the left that come in here and comment, and although I rarely agree, I respect their opinions. But libmoron is proving the theory that the left pays people that live in their mom’s basement to post on conservative blogs, true.
@John Cooper: Excellent Obervation John! Our ever so ethical politicans and presidents can have their cake and eat it too as well. The politicians can always make any major business owners life miserable if he/she refuses to play their game game of kickbacks, and payoffs. Or they can just raise their taxes. But then again our politicans are untouchable in most cases. The laws they write and pass are for us, not them. Its simply amazing to watch a brand new politican enter the world of congress and then 20 years later he/she is rich. No sacrifice is too great for country though!
@Aqua:
He’s here to antagonize just like liberal 2 is. Both of them have mental health issues.
I disagree about the mom’s basement thing tho. They probably live with their grandmas since mom threw them out for being such losers.
Maybe the reason no one has gone to jail is that Obama WANTS more poor people.
They constitute most of his constituency, after all.
Look how he’s gone whole hog creating them:
57 percent of all children in the United States are living in homes that are either considered to be “low income” or impoverished.
http://usnews.msnbc.msn.com/_news/2011/12/15/9461848-dismal-prospects-1-in-2-americans-are-now-poor-or-low-income
48 percent of all Americans are either considered to be “low income” or are living in poverty.
http://usnews.msnbc.msn.com/_news/2011/12/15/9461848-dismal-prospects-1-in-2-americans-are-now-poor-or-low-income
One out of every seven Americans is on food stamps and one out of every four American children is on food stamps.
http://www.nytimes.com/2009/11/29/us/29foodstamps.html
48.5% of all Americans live in a household that receives some form of government benefits.
http://blogs.wsj.com/economics/2011/10/05/nearly-half-of-households-receive-some-government-benefit/
The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
http://research.stlouisfed.org/fred2/series/UEMPMEAN
There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
http://www.usnews.com/opinion/mzuckerman/articles/2011/06/20/why-the-jobs-situation-is-worse-than-it-looks
Approximately one out of every five Americans that do have a job consider themselves to be underemployed.
http://www.foxnews.com/us/2011/07/06/underemployed-new-reality-american-job-market/
About 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
http://money.usnews.com/money/careers/articles/2011/10/19/the-ranks-of-the-underemployed-continue-to-grow
The Federal Reserve recently announced that the total net worth of U.S. households declined by 4.1 percent in the 3rd quarter of 2011 alone.
http://money.cnn.com/2011/12/08/news/economy/household_net_worth/index.htm
The ratio of household debt to personal income in the United States is now 154 percent.
http://en.wikipedia.org/wiki/Personal_income_in_the_United_States
46 percent of all American workers have less than $10,000 saved for retirement, and 29 percent of all American workers have less than $1,000 saved for retirement.
http://www.ebri.org/pdf/surveys/rcs/2011/FS2_RCS11_Prepare_FINAL1.pdf
http://www.ebri.org/pdf/surveys/rcs/2011/FS2_RCS11_Prepare_FINAL1.pdf
The U.S. national debt has been increasing by an average of more than 4 billion dollars per day since the beginning of the Obama administration.
http://www.cnsnews.com/news/article/obama-has-now-increased-debt-more-all-presidents-george-washington-through-george-hw
If Bill Gates gave every single penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for about 15 days.
http://www.dailymail.co.uk/news/article-1390090/One-giant-debt-mankind-U-S-national-deficit-reach-moon-piled-high-5-bills.html
Is it not obvious that this debt is unpayable? So what do we have to do to fix it?
In the past day or so, the SEC has apparently indicted a few executives from FNMA or FHLMC because they obviously lied to Congress when asked about the percentage of bad loans. As noted above, the SEC cannot put these guys in jail. It can sue them, or it can sue FNMA or FHLMC, which means that taxpayers will pay whatever penalty is assessed. Only the Department of Justice can actually criminally prosecute anyone, and they aren’t.
Greta asked the most obvious question tonite: “These executive obviously lied to Congress; there is no doubt about that. They could be tossed into jail for a couple years at least.” (not an actual quote, but the gist of what Greta said).
But, notice, no one is actually being arrested. No one has yet been tossed in jail.
I think that this is one of the few times that there really is a true government conspiracy; how long will it take for it to all unravel? Apart from perjury, what are the crimes committed here?
@Poppa_T: In order to fix, or even Begin to fix this fubared economy we now have, we have to cut to the bone ALL discrecionaryspending, and even bite into the entitlements- after all, they were not designed for the modern day person who lives longer and needs more health care also- the cure will nearly kill us, but if we do NOT do this, we ARE dead, as a Nation.
Why is no one arrested?
Because the criminals are writing the laws, and make themselves exempt.
@Ditto:
This is false. A broker cannot lie about what sort of mortgage backed securities they are selling. Arrest and prosecution would be easy.
@Blake: discretionary spending and SS and medicare benefits as well. Unemplyment too. The government cannot be everyone’s backstop and last resort; there is not enough money in the world for that.
@gary kukis:
Brokers do not write laws, so I clearly wasn’t referring to them.
What I was referencing was members of Congress, who use insider information on for personal investment profits. We know that they do so by recent reports, therefore what I posted was not a lie.
@Blake: You’re not the only one using the T-word. Ann Barnhardt writes: On Cascading Counterparty Risk & Economic Treason
http://www.youtube.com/watch?v=18A698QQex0
What we seem to have here is a failure to communicate. LOL
Gary, the SEC vs the Fannie/Freddie execs is a civil suit by the SEC for securities fraud… i.e. the execs deliberately mislead potential investors in the health of the GSEs in their public statements, by using false and narrowed definitions of “subprime” (ahem… where’s Larry W on this, I wonder. Sure will give his talking points a punch in the belly, but I digress).
Being a civil matter, of course it’s got nothing to do with arrest and prison. Nor should it.
The question is, why do you think it is criminal for a publicly traded firm to falsely entice investors with bogus stats or performance? My gosh, make that a criminal offense, and over half the CEOs of firms/products advertised on TV would be in jail.
This is a civil matter. Firms provide financial statements to investors, and it’s not unusual that the data is somehow “cooked” in a way to appear more solvent. In that case, the wronged parties – the investors – can bring a civil suit as legal recourse for their losses and the SEC can levy fines for securities fraud.
The GSEs are a hybrid form of public/private entity. They are publicly traded and have shareholders/investors etc, but they enjoy two notable perks that other financial institutions don’t:
1: Their assets are guaranteed by the US Treasury, ergo the taxpayer and
2: They don’t have to taxes.
Now if the cooking of the books were done to deliberately avoid paying the IRS, that would be a crime and prosecuted. But since the GSEs are tax exempt, I am confused as to what “crime” you are alluding to that needs prison time?
This brings me to Ditto, who “gets it”. The crime is not that the execs tried to hide the real balance of subprime to low risk assets on the books… it’s that any of those loans were allowed to enter the GSEs portfolio via lowered guidelines at all… i.e. the true criminals are Congress, and the WH regulators.
They, however, are exempt from prosecution for the crime of writing really stupid legislation and regulations.
What Ditto was also talking about was both parties of Congress are immune from their own brand of insider trading, when I did a post on last May. They’ve reaped the benefits of legislative power, and advance notice on possible stock performance for decades…. yet, as Ditto says, since the criminals are those writing the laws, they have exempted themselves.
@MataHarley asks:
IANAFL, but fraud is an actual crime. According to some random legal site:
I have a lawyer friend who tells me that in order to prove criminal fraud in court, one must prove intent to defraud, which is next to impossible.
I agree, JC. Because standards for “intent” are so vague and difficult to prove to a jury, most are prosecuted thru civil courts only. Which goes to the heart of is it a “crime”?
The question then becomes did these executives misrepresent the toxic assets deliberately for profit for a fraudulent presentation, or because the toxic assets were not considered “toxic” by the analytic standards used to ID them within the GSEs? i.e. a deficient accounting method. The former is a crime (and as you said, hard to prove) while the latter is not.
Now you can bet that were the IRS involved, or the related state tax authorities, the criminal aspect and investigations would be pursued with a vengeance.
@Circa53:
I’m all for getting rid of Holder and Obama; but I don’t think that is going to result in real arrests. Although I believe that it is mostly Democrats who are dirty here; I would not be shocked if there are a number of prominent Republicans involved as well.
@John Cooper:
I don’t doubt that this is, in part, true. But I am sure that an investment vehicle cannot be misrepresented as the mortgage backed securities were misrepresented. If that were not indictable, then all mutual funds become bogus.
@Nan G: I think you ought to post this as an original collection rather than as a comment. I think more people should read this.
Mata and John,
I certainly will admit not to knowing all of the rules, laws and regulations that are applied to hedge fund managers, to mutual fund managers, and those who oversee various investment vehicles. However, I cannot believe that someone can simply lie about what is in the investment package (90% high risk mortgages being sold as 10% high risk mortgages, etc.). If we send Martha Stewart to jail because it appears as if she lied when it comes to stock investing; same thing with Scooter (he appeared to have lied when being questioned), and a number of people have been sent to jail for the hedge fund scams (like the iconic Bernie Madoff, who is not the only person recently sent to jail).
You both seem to indicate that a fund manager can basically make up whatever story he wants to about the investment vehicles that he is selling, and, the worst that will happen to him is a civil suite from the SEC. I just don’t buy into that.
And step back and look at the big picture. Do we have dozens of mortgage bankers being called in my the Senate (Democratically controlled) or by the House (GOP controlled) asking them probing questions?
I stand by my article here, that these people could be pursued criminally, but they will not be because this is a very dirty swamp that they have been swimming in, a swamp filled with politicians.
Anthony Mozilo will pay $67 or $73 million in fines, as long as he keeps a hundred million or so.
It is not as if this is a topic being ignored. In the past few weeks, B of A was sued for discriminatory lending, by Countrywide.
But, which executives are being criminally charged? Which executives are being called in front on Congress and questioned? Who is really being investigated? Who is going to jail over process crimes?
@gary kukis writes::
Well that seems to be the case, doesn’t it? Goldman Sachs was slapped with the largest civil fine ever for misrepresenting the securities they sold- which represented roughly 2 days of their profits for the year. Nobody served any time for lying (unlike Martha Stewart and Scooter Libby).
@John Cooper: My point is, and has been, is not because there are no legal processes available to the government; no attorney general will open up this can of worms, because those who are guilty here are Republicans and Democrats…mostly the latter.
@gary kukis: For sure both parties know which side their bread is buttered on. BTW, Goldman is heavily supporting Romney now, so I read…