How 'Reckless' Greed Contributed To Financial Crisis

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    May 26, 2011 6:00 AM GMT
    http://www.wbur.org/npr/136496032/how-reckless-greed-contributed-to-financial-crisis (a lot more at the link):

    Now Morgenson and co-author Joshua Rosner have written a book about the origins of the financial meltdown. In Reckless Endangerment: How Outsized Ambition, Greed and Corruption Led to Economic Armageddon, Morgenson and Rosner describe how regulators failed to control greed and recklessness on Wall Street.

    Morgenson focuses on the managers of Fannie Mae, the government-supported mortgage giant. She writes that CEO James Johnson built Fannie Mae "into the largest and most powerful financial institution in the world."

    But in the process, Morgenson says, the company fudged accounting rules, generated big salaries and bonuses for its executives, used lobby and campaign contributions to bully regulators, and encouraged the risky financial practices that led to the crisis.

    Morgenson is an assistant business and financial editor and a columnist for The New York Times and the author of the Forbes publication Great Minds Of Business. She won the Pulitzer Prize in 2002 for her "trenchant and incisive" coverage of Wall Street. Joshua Rosner is a managing director at the independent research firm Graham Fisher and Co., which advises regulators and institutional investors.
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    May 26, 2011 1:18 PM GMT
    as did many corporations, companies and individuals alike.
    End of story..


    And that's "the rest of the story".....
  • Timbales

    Posts: 13993

    May 26, 2011 1:22 PM GMT
    Reckless Greed is the American Way. It's promoted and endorsed. Not wanting to acquire is "bad to the economy".
  • CuriousJockAZ

    Posts: 19119

    May 26, 2011 2:15 PM GMT
    The "Reckless Greed Syndrome" had everything to do with the financial crisis, but we can't just blame the rich and powerful controlling banks and other financial institutions. Everyday Americans have been spending beyond their means in their personal lives for decades, and once they were allowed to use the equity in their homes as a virtual ATM card to pull out cash and pay bills, or to buy homes they knew they really couldn't afford, it was the final ingredient for a recipe to disaster.
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    May 26, 2011 3:04 PM GMT
    What makes me more pissed off is why are there not more people from wall street in jail. They sold out America! icon_mad.gif
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    May 26, 2011 3:05 PM GMT
    rjb2001 saidWhat makes me more pissed off is why are there not more people from wall street in jail. They sold out America! icon_mad.gif


    Because they'd also have to jail all of the politicians and congress who gave them the green light with taxpayer dollars. You can't call for nazis to be tried and then leave hitler out.
  • CuriousJockAZ

    Posts: 19119

    May 26, 2011 3:06 PM GMT
    rjb2001 saidWhat makes me more pissed off is why are there not more people from wall street in jail. icon_mad.gif



    Probably for the same reason all the people who took out "Stated Income" loans and lied on their loan applications about their income in order to buy homes they couldn't afford aren't in jail.
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    May 26, 2011 3:09 PM GMT
    CuriousJockAZ said
    rjb2001 saidWhat makes me more pissed off is why are there not more people from wall street in jail. icon_mad.gif



    Probably for the same reason all the people who took out "Stated Income" loans and lied on their loan applications about their income in order to buy homes they couldn't afford aren't in jail.


    Well, they kinda ended up paying for that. At least they were mainly ruining their own lives.
  • HndsmKansan

    Posts: 16311

    May 26, 2011 3:09 PM GMT
    CuriousJockAZ said
    rjb2001 saidWhat makes me more pissed off is why are there not more people from wall street in jail. icon_mad.gif



    Probably for the same reason all the people who took out "Stated Income" loans and lied on their loan applications about their income in order to buy homes they couldn't afford aren't in jail.


    I absolutely agree... and nobody learned anything apparently!
  • CuriousJockAZ

    Posts: 19119

    May 26, 2011 3:37 PM GMT
    mocktwinkie said

    Well, they kinda ended up paying for that. At least they were mainly ruining their own lives.



    Ruined their lives? Really?!?! I wish I had a dime for every person I have seen who bought houses they couldn't afford during the Real Estate "You can get a mortgage as long as you're breathing -- and maybe even if you aren't" boom who bought a house, watched it increase in value, took out an equity loan sometimes for hundreds of thousands of dollars and pocketed the cash, then later walked away from that home and gave it back to the bank. They should be in jail too, but it's not likely going to happen because so many people did just that. The REAL crime, in my opinion, is all the restructuring going on with mortgages held by people who haven't been making payments for a long time, but the government is offering all those programs to keep them in their homes. Meanwhile, people who pay their payments on time and live in homes we can afford (even though the value has gone WAY down) get no help at all in terms of restructuring a loan at current market values. It's an example of where the honest or responsible get punished, while the dishonest or irresponsible get bailed out.
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    May 26, 2011 3:42 PM GMT
    CuriousJockAZ said
    mocktwinkie said

    Well, they kinda ended up paying for that. At least they were mainly ruining their own lives.



    Ruined their lives? Really?!?! I wish I had a dime for every person I have seen who bought houses they couldn't afford during the Real Estate "You can get a mortgage as long as you're breathing -- and maybe even if you aren't" boom who bought a house, watched it increase in value, took out an equity loan sometimes for hundreds of thousands of dollars and pocketed the cash, then later walked away from that home and gave it back to the bank. They should be in jail too, but it's not likely going to happen because so many people did just that. The REAL crime, in my opinion, is all the restructuring going on with mortgages held by people who haven't been making payments for a long time, but the government is offering all those programs to keep them in their homes. Meanwhile, people who pay their payments on time and live in homes we can afford (even though the value has gone WAY down) get no help at all in terms of restructuring a loan at current market values. It's an example of where the honest or responsible get punished, while the dishonest or irresponsible get bailed out.


    A very good point.
  • HndsmKansan

    Posts: 16311

    May 26, 2011 3:42 PM GMT
    CuriousJockAZ said
    mocktwinkie said

    Well, they kinda ended up paying for that. At least they were mainly ruining their own lives.



    Ruined their lives? Really?!?! I wish I had a dime for every person I have seen who bought houses they couldn't afford during the Real Estate "You can get a mortgage as long as you're breathing --.


    And the stock market!! Think about the number of americans that invest in the markets and how the effects of it cause the markets to tumble...
    ... and for some, their lives weren't ruined.. at all....
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    May 26, 2011 3:50 PM GMT
    CuriousJockAZ said
    mocktwinkie said

    Well, they kinda ended up paying for that. At least they were mainly ruining their own lives.



    Ruined their lives? Really?!?! I wish I had a dime for every person I have seen who bought houses they couldn't afford during the Real Estate "You can get a mortgage as long as you're breathing -- and maybe even if you aren't" boom who bought a house, watched it increase in value, took out an equity loan sometimes for hundreds of thousands of dollars and pocketed the cash, then later walked away from that home and gave it back to the bank. They should be in jail too, but it's not likely going to happen because so many people did just that. The REAL crime, in my opinion, is all the restructuring going on with mortgages held by people who haven't been making payments for a long time, but the government is offering all those programs to keep them in their homes. Meanwhile, people who pay their payments on time and live in homes we can afford (even though the value has gone WAY down) get no help at all in terms of restructuring a loan at current market values. It's an example of where the honest or responsible get punished, while the dishonest or irresponsible get bailed out.


    Yeah you're actually right here. I didn't really think about it in those terms. I was only thinking of the people who ended up losing their homes over their own irresponsibility.
  • CuriousJockAZ

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    May 26, 2011 3:54 PM GMT
    mocktwinkie said
    Yeah you're actually right here. I didn't really think about it in those terms. I was only thinking of the people who ended up losing their homes over their own irresponsibility.



    Well, there are plenty of those too. But the fact is that many people cashed in the equity then just walked away from homes that had devalued even when they could have actually still made the payments.
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    May 26, 2011 3:59 PM GMT
    CuriousJockAZ said
    mocktwinkie said
    Yeah you're actually right here. I didn't really think about it in those terms. I was only thinking of the people who ended up losing their homes over their own irresponsibility.



    Well, there are plenty of those too. But the fact is that many people cashed in the equity then just walked away from homes that had devalued even when they could have actually still made the payments.


    Unreal.
  • coolarmydude

    Posts: 9190

    May 26, 2011 5:25 PM GMT
    Unfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes
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    May 26, 2011 5:29 PM GMT
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    It is VERY unlikely that this will happen again, at least in the same way and in the foreseeable future.

    The GSEs have tightened the screws down on underwriting criteria and there is huge regulatory pressure to keep it that way.

    Investors still are not buying private mortgage-backed securities at all, even securitizations of the most sterling, prime quality mortgages - there have been only two public MBS deals since 2008 and precious few private ones.

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    May 26, 2011 5:37 PM GMT
    showme said
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    It is VERY unlikely that this will happen again, at least in the same way and in the foreseeable future.

    The GSEs have tightened the screws down on underwriting criteria and there is huge regulatory pressure to keep it that way.

    Investors still are not buying private mortgage-backed securities at all, even securitizations of the most sterling, prime quality mortgages - there have been only two public MBS deals since 2008 and precious few private ones.



    Wrong, its back. Rock and roll times here again, at least on CRE side of the business. Its gonna happen again just like it always has every seven or eight years. It may be a slightly different cause the next time, but the old boom and bust cycles aren't about to stop.
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    May 26, 2011 5:46 PM GMT
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    I'm curious how you believe the repeal of Glass Steagall contributed to this crisis?
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    May 26, 2011 5:46 PM GMT
    I thought this thread said "Hot Rednecks!" I was gonna say, "I'd go for some of that." ;)
  • Posted by a hidden member.
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    May 26, 2011 7:27 PM GMT
    Americans remortgaging their homes so they could go shopping, then they too went underbelly.
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    May 26, 2011 7:34 PM GMT
    OneGeezer said

    Wrong, its back. Rock and roll times here again, at least on CRE side of the business. Its gonna happen again just like it always has every seven or eight years. It may be a slightly different cause the next time, but the old boom and bust cycles aren't about to stop.


    I wasn't saying that boom and bust will stop - there is zilcho that any regulation can do to stop that. What I was saying was that, on the rezzie side, another unsustainable boom - particularly one that could lead to another meltdown - is a loooooong time away.

    CRE has had its booms and busts, but the data show that CRE (and CMBS) performed vastly better during the market crisis than residential mortgages and RMBS. Much more along the lines that would reasonably be expected during a severe financial downturn.

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    May 26, 2011 9:13 PM GMT
    riddler78 said
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    I'm curious how you believe the repeal of Glass Steagall contributed to this crisis?


    Are you serious? Surely, as someone who prides himself on his knowledge of the US economy, you're aware of the role repealing Glass-Steagall had on the rampant fraud the was conducted by the financial services industry and the creation of "too big to fail" banks.
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    May 26, 2011 9:36 PM GMT
    Christian73 said
    riddler78 said
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    I'm curious how you believe the repeal of Glass Steagall contributed to this crisis?


    Are you serious? Surely, as someone who prides himself on his knowledge of the US economy, you're aware of the role repealing Glass-Steagall had on the rampant fraud the was conducted by the financial services industry and the creation of "too big to fail" banks.


    Ah - so what in Glass Steagall discouraged fraud?
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    May 26, 2011 9:45 PM GMT
    riddler78 said
    Christian73 said
    riddler78 said
    coolarmydude saidUnfortunately, I think this will happen again. Adjustable rate mortgages are still legal and the Glass-Steagall Act isn't reinstated. I think Phil Gramm is also culpable in this mess on the institutional level.

    [url]http://en.wikipedia.org/wiki/Gramm–Leach–Bliley_Act[/url]

    http://en.wikipedia.org/wiki/2007_Subprime_Mortgage_Financial_Crisis#Causes


    I'm curious how you believe the repeal of Glass Steagall contributed to this crisis?


    Are you serious? Surely, as someone who prides himself on his knowledge of the US economy, you're aware of the role repealing Glass-Steagall had on the rampant fraud the was conducted by the financial services industry and the creation of "too big to fail" banks.


    Ah - so what in Glass Steagall discouraged fraud?


    Glass Steagall preventing the merging of investment and commercial banking arms. It further ensured that commercial banks managed their risk in the interest of their depositors, not their stock holders or executives. The removal of those two regulations, coupled with the growing financial influence of the banks, and the new technology that allowed more complex and esoteric financial instruments created a breeding ground for fraud.