LEGISLATORS, REGULATORS and GREED

I've done a little searching around about this "financial crisis" and found something called the Community Reinvestment Act of 1977.

This act (PL 95-128) by Congress and its subsequent implementation and political tinkering over the past several years created an environment in which banks were forced to make no down payment loans to un-credit worthy consumers with no verification of income, assets, or consideration of the applicant's ability to make payments.  Regulatory changes in 2005 ruled that lending institutions were subjected to new lending tests which included a new combined community development test to meet lending requirements for moderate and low income households.  Racial inequities in mortgage acceptance rates as reported by the National Community Reinvestment Coalition , ACORN, and others were cited as the primary reasons to increase the scope of the Community Reinvestment Act.  Congressman Barney Frank and Senator Cris Dodd have their finger prints all over this.

If that isn't a train wreck fixing to happen then I'll jump over the Empire State Building.  Any moron with an iota of sense would know this is not a good situation.  Federal Reserve chairman Ben Bernanke admitted that, "The underlying assumption of the Community Reinvestment Act that more lending is always better for local communities is questionable."  The problem is our elected legislators passed this legislation and over the years revised the regulations that focused financial regulators attention on the lending institutions performance to "help meet community credit needs."  Thus, lenders using the subprime authorization did not mitigate loan risks with savings deposits as was traditionally done.  These revisions allowed securitization of loans containing subprime mortgages.  The first securitization of these loans was started in 1997 by Bear Stearns.

Other rules changes by regulators gave Fannie and Freddie extraordinary leverage allowing them to hold just 2.5% of capital to back their investments.  By 2007 Fannie and Freddie owned or guaranteed half of the $12 trillion U.S. mortgage market.  Another train wreck any moron could see coming.

Now we have an impending train wreck about to happen any moment if the taxpayers don't pony-up $700 billion with no strings attached.  Many high ranking individuals are walking away from the wreck with millions of dollars in their pockets.  I fail to see the equity in paying someone millions of dollars after they ran an institution into the ground.  Its our legislators, government regulators and greed that has brought us to this point.  And, I'm sick of it.  I can't help but think there has been collusion to entrench and empower certain legislators and enrich a few individuals that aided and abetted the demise of the financial institutions and created  this crisis we all have to pay for.

Few of us, the ordinary folks, knew anything about all this.  We entrusted our erstwhile legislators to be good and honest stewards of our tax dollars without accountability.  They got us into this mess and now they have the audacity to point fingers of blame elsewhere.  They find that political posturing is more important than seeking an equitable solution.

Its partly our fault.  We keep re-electing these morons to Congress year after year.  Think about it.  We have the likes of Barney Frank, Cris Dodd, Nancy Pelosi, Joe Biden, Chuck Hagel, Harry Reid, etc. running our country.  I'm not exactly proud of President Bush on this matter either.  He should have known long ago what was coming and been out front in the bully-pulpit warning us all about it.

Tighten your belts and hold on.  We may be in for a rough ride before its over.