In hindsight, who is most to blame for the Financial Crisis?

[HLS]

The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS

[SK in CV]

I have to agree with many of the others, that there is plenty of blame to go around, and virtually no one group is guiltless. From financiers to put the funds up to build homes, the builders, agents, brokers (of all types), lenders, the all but non-existent underwriters, and not least the buyers.

I’ve been inclined, over the last years, to identify the lenders, whose incentive to lend with impugnity had been unleashed by Gramm-Leach-Bliley, and the emergence of an unlimited supply of funds through securitization, as the prime culprit. Recent hearings in Washington confirmed these suspicions.

I’ve spent a few minutes trying to track down the origin of this quote from a liveblog of the WaMu hearings, so far to no avail, but the words, if accurate, are damning.

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine.

This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

http://www.ourfuture.org/blog-entry/2010041513/liveblogging-washington-mutual-hearing

80% of the fraud. Not borrowers who lied on their applications. But lenders who encouraged and knowingly looked the other way. Stunning.

[SK in CV]

I have to agree with many of the others, that there is plenty of blame to go around, and virtually no one group is guiltless. From financiers to put the funds up to build homes, the builders, agents, brokers (of all types), lenders, the all but non-existent underwriters, and not least the buyers.

I’ve been inclined, over the last years, to identify the lenders, whose incentive to lend with impugnity had been unleashed by Gramm-Leach-Bliley, and the emergence of an unlimited supply of funds through securitization, as the prime culprit. Recent hearings in Washington confirmed these suspicions.

I’ve spent a few minutes trying to track down the origin of this quote from a liveblog of the WaMu hearings, so far to no avail, but the words, if accurate, are damning.

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine.

This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

http://www.ourfuture.org/blog-entry/2010041513/liveblogging-washington-mutual-hearing

80% of the fraud. Not borrowers who lied on their applications. But lenders who encouraged and knowingly looked the other way. Stunning.

[SK in CV]

I have to agree with many of the others, that there is plenty of blame to go around, and virtually no one group is guiltless. From financiers to put the funds up to build homes, the builders, agents, brokers (of all types), lenders, the all but non-existent underwriters, and not least the buyers.

I’ve been inclined, over the last years, to identify the lenders, whose incentive to lend with impugnity had been unleashed by Gramm-Leach-Bliley, and the emergence of an unlimited supply of funds through securitization, as the prime culprit. Recent hearings in Washington confirmed these suspicions.

I’ve spent a few minutes trying to track down the origin of this quote from a liveblog of the WaMu hearings, so far to no avail, but the words, if accurate, are damning.

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine.

This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

http://www.ourfuture.org/blog-entry/2010041513/liveblogging-washington-mutual-hearing

80% of the fraud. Not borrowers who lied on their applications. But lenders who encouraged and knowingly looked the other way. Stunning.

[SK in CV]

I have to agree with many of the others, that there is plenty of blame to go around, and virtually no one group is guiltless. From financiers to put the funds up to build homes, the builders, agents, brokers (of all types), lenders, the all but non-existent underwriters, and not least the buyers.

I’ve been inclined, over the last years, to identify the lenders, whose incentive to lend with impugnity had been unleashed by Gramm-Leach-Bliley, and the emergence of an unlimited supply of funds through securitization, as the prime culprit. Recent hearings in Washington confirmed these suspicions.

I’ve spent a few minutes trying to track down the origin of this quote from a liveblog of the WaMu hearings, so far to no avail, but the words, if accurate, are damning.

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine.

This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

http://www.ourfuture.org/blog-entry/2010041513/liveblogging-washington-mutual-hearing

80% of the fraud. Not borrowers who lied on their applications. But lenders who encouraged and knowingly looked the other way. Stunning.

[SK in CV]

I have to agree with many of the others, that there is plenty of blame to go around, and virtually no one group is guiltless. From financiers to put the funds up to build homes, the builders, agents, brokers (of all types), lenders, the all but non-existent underwriters, and not least the buyers.

I’ve been inclined, over the last years, to identify the lenders, whose incentive to lend with impugnity had been unleashed by Gramm-Leach-Bliley, and the emergence of an unlimited supply of funds through securitization, as the prime culprit. Recent hearings in Washington confirmed these suspicions.

I’ve spent a few minutes trying to track down the origin of this quote from a liveblog of the WaMu hearings, so far to no avail, but the words, if accurate, are damning.

According to the FBI, 80% of mortgage fraud is committed by the lender. We’re not talking about stupid loan officers allowing borrowers to get away with something crazy that is bad for the bank. We’re talking about clever loan officers pushing fraudulent documents in order to score bigger paychecks, and bank executives looking the other way so that they can keep getting big paychecks from the securitization machine.

This isn’t a problem unique to WaMu. This is how the U.S. mortgage system operated for half a decade.

http://www.ourfuture.org/blog-entry/2010041513/liveblogging-washington-mutual-hearing

80% of the fraud. Not borrowers who lied on their applications. But lenders who encouraged and knowingly looked the other way. Stunning.

[Rich Toscano]

I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich

[Rich Toscano]

I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich

[Rich Toscano]

I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich

[Rich Toscano]

I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich

[Rich Toscano]

I like sdduuuude’s answer, but I have to put Greenspam first and the ratings agencies second.

The agencies were the lynchpin to the whole mortgage crisis, so they bear huge responsibility there. However, Greenspam was asleep at the wheel for not one but two world-beating asset bubbles. No, scratch that — he wasn’t just asleep at the wheel, he was a cheerleader for both bubbles. And the mop-up from the first bubble basically created the environment that allowed the second and much worse bubble.

His “reign” was truly catastrophic and I just hope he clings to life for long enough to witness the final outcome of his legacy (the nigh-inevitable US govt funding crisis) and, if there is any justice, the resulting complete destruction of his reputation as a central banker.

Rich

[CA renter]

[quote=HLS]The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS[/quote]

Very much agree with this and with UCGal’s post.

The only thing we differ on, HLS, is the effects of low rates on the housing market — or asset prices, in general.

Low rates encourage more risk taking as investors go further out on the risk curve in the pursuit of higher yields. This is what facilitates easy lending. IMHO, when rates are high, cash is more valuable, and investors will be more circumspect WRT where and with whom they invest or lend.

Even though credit might be “tight” right now, the low rates are forcing investors/savers into the housing market. IMHO, many/most of these all-cash investors we keep hearing about are chasing the market because they can get a higher yield via rentals (all-cash purchases) versus any kind of bond or savings vehicle with an equivalent risk profile.

Also, since lower rates initially allow more buyers to enter the market (until prices rise to make up for the difference), demand can be increased in a low-rate environment.

[CA renter]

[quote=HLS]The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS[/quote]

Very much agree with this and with UCGal’s post.

The only thing we differ on, HLS, is the effects of low rates on the housing market — or asset prices, in general.

Low rates encourage more risk taking as investors go further out on the risk curve in the pursuit of higher yields. This is what facilitates easy lending. IMHO, when rates are high, cash is more valuable, and investors will be more circumspect WRT where and with whom they invest or lend.

Even though credit might be “tight” right now, the low rates are forcing investors/savers into the housing market. IMHO, many/most of these all-cash investors we keep hearing about are chasing the market because they can get a higher yield via rentals (all-cash purchases) versus any kind of bond or savings vehicle with an equivalent risk profile.

Also, since lower rates initially allow more buyers to enter the market (until prices rise to make up for the difference), demand can be increased in a low-rate environment.

[CA renter]

[quote=HLS]The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS[/quote]

Very much agree with this and with UCGal’s post.

The only thing we differ on, HLS, is the effects of low rates on the housing market — or asset prices, in general.

Low rates encourage more risk taking as investors go further out on the risk curve in the pursuit of higher yields. This is what facilitates easy lending. IMHO, when rates are high, cash is more valuable, and investors will be more circumspect WRT where and with whom they invest or lend.

Even though credit might be “tight” right now, the low rates are forcing investors/savers into the housing market. IMHO, many/most of these all-cash investors we keep hearing about are chasing the market because they can get a higher yield via rentals (all-cash purchases) versus any kind of bond or savings vehicle with an equivalent risk profile.

Also, since lower rates initially allow more buyers to enter the market (until prices rise to make up for the difference), demand can be increased in a low-rate environment.

[CA renter]

[quote=HLS]The list of the most responsible in declining order:
Govt: allowed “IT” to happen without intervention.
The drug cartel
The growers
The middlemen
The dealers
The street pushers
The users

Nobody held a gun to the end user and made them inject/snort. If the govt had required skin in the game over 50% of mortgages would have never occurred. 100% financing was THE main cause.
Greenspan and low rates weren’t the problem.
Rates are lower today and there is no housing bubble.

The true criminals: Barney Frank, Chris Dodd, etc.
Hanky Panky Paulson did a perfect job of raping the taxpayer without using KY jelly and transferred wealth to his Wall Street buddies.
AIG was given billions so that Goldman Sachs could be paid for gambling on CDS’ and Lehman Bros was allowed to fail because they annoyed/crossed Paulson on the way up.

Never forget: Foreclosures are not the problem- Foreclosures are the solution. HLS[/quote]

Very much agree with this and with UCGal’s post.

The only thing we differ on, HLS, is the effects of low rates on the housing market — or asset prices, in general.

Low rates encourage more risk taking as investors go further out on the risk curve in the pursuit of higher yields. This is what facilitates easy lending. IMHO, when rates are high, cash is more valuable, and investors will be more circumspect WRT where and with whom they invest or lend.

Even though credit might be “tight” right now, the low rates are forcing investors/savers into the housing market. IMHO, many/most of these all-cash investors we keep hearing about are chasing the market because they can get a higher yield via rentals (all-cash purchases) versus any kind of bond or savings vehicle with an equivalent risk profile.

Also, since lower rates initially allow more buyers to enter the market (until prices rise to make up for the difference), demand can be increased in a low-rate environment.

[Author]

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