I get a lot of questions these days about sources for understanding the current massive financial crisis. CNBC’s House of Cards is good, and Frontline’s recent effort was solid, but by far the best is this program from NPR. You can download a transcipt, but I highly recommend listening to the whole thing–KSH.
I listened to this last summer – before the big collapse – and it was the first time I understood very much at all about the whole thing. There is blame enough for all – from the top to the bottom.
I wish the NPR piece had gone into the Government’s role in all this (or lack thereof). But it is fascinating and enlightening to hear.
This is the most helpful account I’ve heard yet. Thank you.
It’s the most helpful account I’ve read – would’ve missed much of it had I tried listening, I’m sure.
Interesting that in the entire 20 pages of transcript there is no instance of mentioning the House of Representatives or the Senate or Congressman Frank or Senator Dodd and only three instances in which the word ‘government’ occurs (and then only to describe the mortgage financial instruments in relation to government bonds). I guess the underlying legislation passed by both houses of Congress and signed by a President that gave the financial services industry the figleaf it needed to lend on the assumption that the ‘full faith and credit’ of the U.S. Government stood behind the totally nuts actions the bankers were allowed to take was just a figment of their imaginations.
But what am I saying? This is NPR after all – National Phantasmagorical Radio.
Kendall, you need to get out more.
Dilbertnomore,
No one really buys the blaming the government diversion, which is the Republican dodge to continue to sanctify de-regulated capitalism they love. The NPR account makes clear what is clear to everyone — greedy, unprincipled and often predatory bankers/mortgage brokers/Wall-Streeters are the principal cause plain and simple.
A+, if you would like a more thorough and much more readable relation of how this whole thing got started, read ‘Liar’s Poker’. And if you really believe that ‘Wall Street’ is so wild west that it doesn’t closely account for risk and wouldn’t insist on government backing before doing anything so foolish as to lend money to people who really have no means to repay? Well, there is a nice bridge over the East River leading to Brooklyn you might have an interest in.
That Freddie and Fannie decided out of the goodeness of their misguided little hearts to underwrite stinky mortgages tells only a bit of the story. F&F;were DIRECTED in the Community Reinvestment Act (Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq) to do exactly what they did. A majority of our elected representative in House and Senate passed all this legislation that ‘Wall Street’ has taken advantage of. This travesty was initiated in the 95th Congress during the Carter Administration and flogged to greater and greater glory through succeeding Congresses to the point that the watch word that attracted all Liberals and Moderates was ‘affordable housing.’
We the People created this mess through the politicians, of both major parties, we elected from 1976 to now. And now We the People have the opportunity to learn, to the degree we are able to open our eyes, that elections do, indeed, have consequences.
But to do so we absolutely, certainly must seek wisdom beyond the self-enlightened bias of NPR.
You have no argument from me on NPR’s biases. I think the point is the ongoing ping-pong game of acting as if the government’s housing policy is more to blame than the human actors of Wall Street who brought us outrageous credit defaults and toxic bonds via predatory and irresponsible mortgage brokers, bankers, and our financial services industry at the highest levels.
An interesting piece, but ultimately unsatisfying. It’s as if they profiled a lung cancer victim without ever mentioning the three-pack-a-day habit that went on for thirty years. Does NPR think the huge surge in demand for housing sprung fully-formed from Wall Street, like Athena from the head of Zeus? Where did this mania come from? You won’t find it in the piece, but you will [url=http://spectator.org/archives/2009/02/06/the-true-origins-of-this-finan]here[/url].
the problem is that the government wasn’t doing much at all.
Jefferson, was your hearing aid on? The piece indicated that the surge in demand happened because there were more investors ever who wanted reliable investments. Greenspan decided that it wouldn’t be treasuries. The market (God bless it) created a product, one unregulated by the government. One the government would even back.
this “mania” came from the eagerness of people who wanted to make money. That simple. The government wasn’t necessary.
Well, [i]some[/i] thought the government wasn’t necessary (either to create products, or to regulate….). Forgive me bringing it up yet again, but wasn’t this CDO disaster the very one that Brooksley Born (see here: http://en.wikipedia.org/wiki/Brooksley_E._Born or better yet, google her name and read up) attempted to head off, for which she was bullied by Rubin, Greenspan and Levitt?
She saw first-hand the foolishness of earlier US administrations never having [i]usefully[/i] incorporated regulatory functions into the business of governing. Now who exactly were these guys who hollered to the Administration(s) not to pay her any attention? Why, the officials the American public ended up trusting, it seems.
It seems just as one-sided to blamed greedy bankers and Wall St. types entirely as it is to blame Congress entirely. To ignore the role of greedy mortgage issuers while ignoring the roles of greedy home buyers and market-meddling Congressional mandates will lead us back to the same places again. Our leadership is currently trying to fix the mess by once again meddling in the mortgage and housing market.
A+, to your note in #8, I’m glad you are not living in denial over NPR’s little blind spots. As to who is to blame, the answer is pretty universal.
‘Wall Street’ will seek to make money any way it can get away with. Like a shark, ‘Wall Street’ will ‘eat’ anything it can get its ‘jaws’ around – that’s just the way it is. We control it – or don’t – with laws and regulations.
Our media, largely invested in not making waves for its favorites, reports selectively to as to see their vision of the ‘greater good’ become the reality of our lives.
As to government, it is they, of course, who produced the laws and regulations that ‘Wall Street’ found ways to use to their benefit. Because the laws and regulations government produced were, to be charitable, ineffective, government must share in the blame.
My gripe is that the government has not shouldered its share of the blame and the media, that guardian of the truth protected by the Constitution, has chosen to turn a very selective blind eye to this current circumstance.
Finally, We the People must claim our very large piece of the blame. We the People are ‘Wall Street’s’ customers who demand the best return possible. We the People elect the Congress and the President. And we get the government we deserve for good or ill. We the People don’t educate ourselves on the ways of the world around us and depend too much on the media to tell us what the ‘truth’ is. We the People in our fallen state seek advantage we don’t merit by lusting for houses that are beyond our means using mortgage loans we can’t afford all the while depending on our elected representatives to cover our irresponsibility by printing money out of thin air while our elected representatives tell us nice lies about how wonderful we are in our ‘victimhood.’
Pretty sick combination. No wonder we need Jesus so badly.
Dilbertnomore,
You say nothing at all with which I disagree about our media. Katherine’s point really goes to the heart of it — that’s why I called it “ping-pong.”
J[blockquote]efferson, was your hearing aid on? The piece indicated that the surge in demand happened because there were more investors ever who wanted reliable investments. Greenspan decided that it wouldn’t be treasuries. The market (God bless it) created a product, one unregulated by the government. One the government would even back.
this “mania†came from the eagerness of people who wanted to make money. That simple. The government wasn’t necessary. [/blockquote]
So where were these greedy capitalists before the housing bubble, John? Was no one eager to make money before? Your free-floating explanation doesn’t answer the obvious questions: Why now, and why housing? For anyone caring to look a little deeper will find the answer: Because it was government policy.
Read the piece, John, and open your mind for once.
I don’t think you listened to the piece.
1) Sure people were interested: but you might have not heard – the pool of money doubled (during the Clinton years).
2) Why now? Greenspan eliminated treasuries as a reliable, low risk investment. The grand pool of money had doubled, but now couldn’t find anything to invest in. Until….
3) the invention of mortgage based securities and credit swaps (there’s a part two to this episode) created a product that the great pool of money wanted. It was crack.
The CRA and Fannie were working fine, even before the MBS. They did follow the herd, and perhaps CRA made it a bit easier for banks to fulfill their obligations to the law and offer these products. But It wasn’t necessary. NINA loans were invented, not because of the CRA or because of Fannie – if anything fannie and freddie were more conservative than mortgage lenders – but because there was a demand for these mortgage products. And if you’d listened to the program (or at least part 2), you might have discovered that there were no computer models that would predict a crash, because they thought housing prices would go up indefinitely.
The amount of damage that the CRA and Fannie and Freddie did is miniscule to the overal damage to the world economy. It’s simply blaming the poor for the faults of the powerful.