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Was The Financial Meltdown Manufactured By Banks-Too-Big-To-Fail?

Posted by politicalpartypooper on April 7, 2010

The Enron Nine:  J.P. Morgan Chase, Citigroup, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, Bank of America, Merrill Lynch, Barclay’s, Deutsche Bank and Lehman Brothers.

The Bailout Nine:  Fannie Mae, AIG, Freddie Mac, Bank of America, Citigroup, J.P. Morgan, Wells Fargo, Goldman Sachs, Morgan Stanley.

Merril Lynch was bought by Bank of America but is also famous for using one-third of the bailout money it received to give bonuses to its top executives.  In 2008, Credit Suisse was caught overvaluing its assets by $2.85 Billion.  Lehman Brothers, of course, was allowed to die.  It filed for the world’s largest bankruptcy discharge ever in 2008.  The previous record was held by none other than Enron.  Canadian Imperial is of course, Canadian, but since 2003 has been involved in one controversy after another.  From as late as 2001 to at least 2007, Deutsche Bank engaged in a covert espionage scandal on its critics.  Barclay’s needed a huge bailout from its own British Government.

I thought it was interesting that five American banking firms were tied to Enron scandals and were also amongst the largest firms to receive bailouts or bankruptcy discharge due to the mortgage crisis.  Of course everyone knows that Wells Fargo, J.P. Morgan, Bank of America, Goldman Sachs,  Citigroup and Morgan Stanley received one hundred cents on the dollar from the Federal Government for their bad bets on AIG Credit Default Swaps.  Those firms continue to this day to chase down the individual owners of those mortgages, meaning they are being paid twice for the same credit transaction.  Ever wonder how they paid back the Fed so quickly?  Now you know.

What does it say for America and its banking system when five of the companies that helped Enron cook its books were also five of the most heavily bailed out firms in America? Coincidence?  Or does it rather tell us that there is an overwhelming culture of corruption at America’s biggest banks?  Can we do anything about this?  Does anyone want to?

Fannie Mae and Freddie Mac need to go.  I think it has already been proven beyond doubt that they are as corrupt as lenders can be.  But what about these other guys?  They all continue to receive respect in the business sector, even after some of the largest scandals in the financial history of the world.  They are currently fighting financial regulatory reform tooth and nail, and it seems as though they are winning.  There is already talk that “Banks-too-big-to-fail” will be allowed to remain as such, meaning the next financial meltdown is only as far away as one of these banks next brain farts.

How do we reign in these mammoths?  Do we need to get more serious about prosecuting some of these people?  An even bigger question lies unanswered:  Was the housing bubble artificially created?  With the advent of Credit default swaps, did these huge banks see a way to take on very risky debt at high interest rates and get paid anyway?  Did they use that opportunity to create a crisis where they knew the government would have to bail them out and honor AIG’s CDS commitments?

No one has answered these questions.  No one in our government has even asked them.  Why not?  I want to know.  Was the financial meltdown MANUFACTURED by these Banks-too-big-to-fail?  History is not on their side.  The only evidence we have from their collective pasts is that, hell yes, we ought to be massively investigating if they manufactured this crisis for a huge payday.

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4 Responses to “Was The Financial Meltdown Manufactured By Banks-Too-Big-To-Fail?”

  1. Liberty4all said

    All blame rests in government.

    ALBANY, N.Y. — Republican candidate for New York governor Carl Paladino on Tuesday blamed Democrat Andrew Cuomo and his policies as President Bill Clinton’s housing secretary for the sub-prime mortgage crisis that helped trigger the recession.

    The millionaire Buffalo developer said Cuomo initiated policies that helped poor people qualify for adjustable rate mortgages they didn’t understand and couldn’t afford once rates rose. Paladino said the defaulted mortgages cost poor families their homes, while other taxpayers lost retirement funds in the ensuing Wall Street meltdown.

    Cuomo, who was the federal housing secretary in the late 1990s, didn’t immediately comment. The one-term attorney general is considering a run for governor.

    Paladino said that as secretary for Housing and Urban Development, Cuomo “couldn’t wait to get in front of the cameras at press conferences” to say how he was encouraging the federally chartered mortgage giants Fannie Mae and Freddie Mac “to lower their standards so every American can enjoy having a house.”

    “He did a terrible injustice to those poor Americans telling them they could have a house they couldn’t afford,” Paladino told reporters a day after he formally announced his campaign for governor. “He did a more egregious injustice to the taxpayers and the people who had homes as he created the sub-prime meltdown, which resulted in lower valuations.”

    “He was initiator of a policy that was carried by others,” Paladino said, naming Clinton and Republican President George W. Bush. “It turned into a monster … all in the name of Andrew’s political career.”

    In 2008, The Village Voice reported that there were many starting points of the mortgage meltdown that would soon pummel Wall Street and the broader economy, but “one decisive point of departure” was Cuomo. The “kid from Queens without any real banking or real estate experience was the only man in Washington with the power to regulate the giants of home finance.”

    http://www.syracuse.com/news/index.ssf/2010/04/gop_gubernatorial_candidate_bl.html

    December 24th, 2009

    WASHINGTON (AP) — The Obama administration says it is removing the $400 billion financial cap it will provide to Fannie Mae and Freddie Mac to keep the mortgage giants from failing.

    Treasury Department officials said the cap will be replaced with a flexible formula to ensure the companies will have all the government support needed to stand behind the billions of dollars in mortgage-backed securities they sell to investors.

    http://www.wtsp.com/money/costing/story.aspx?storyid=120895&catid=34

    WASHINGTON, April 7 (Reuters) – Former Federal Reserve Chairman Alan Greenspan chastised critics on Wednesday by pointing out that Congress pushed the U.S. central bank to make sure lending to poorer Americans kept rising in the 2000s.

    http://www.reuters.com/article/idUSWAT01427220100407

  2. […] by politicalpartypooper on April 20, 2010 An excerpt from my April 7, 2010 post called, Was the Financial Meltdown Manufactured By Banks-Too-Big-To-Fail? Yes, many of us in the investment business were talking about the probability of scams and frauds […]

  3. Ron said

    Sub-prime loans have a HIGHER risk of default. Yet, all the big banks bought them up and called them AAA loans, they lied and they knew it.

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