Consider municipal banks

October 21, 2011

Richard Salzman

OPINION By RICHARD SALZMAN

Ten days into the Occupy Wall Street protests, I wrote letters to the editor of several papers complaining about the lack of mainstream media coverage. By the time that letter was printed, they finally got to the story, to their credit.

There are now “Occupy” actions taking place in 1,482 cities across the country including in my own town of Arcata in Humboldt County, California.

Surprisingly, even as the media has covered the story, many seem mystified by the motives and/or lack of a cohesive message. Does “people’s needs, not corporate greed” explain it?

San Francisco Supervisor John Avalos  wants his city  to pull its money out of corporate financial institutions and start a municipal bank “so we can control how we are investing in local businesses…” I hope other cities and states will also consider this option.

Long ago, I pulled my money from a big bank and put it into a local credit union. Then it was recently publicized that the CEO of my small “non-profit” credit union was taking home just shy of a million dollars a year in compensation (making the $160k that our county administrative officer earns seem pretty reasonable). I’m sure people would love to put their money in a publicly-owned bank whose CEO doesn’t get paid a million dollar salary.

Here are more excellent ideas, some from Senator Bernie Sanders and some from Rolling Stone contributor Matt Taibbi:

1. Break’em up.   If it’s too big to fail, it’s too big to exist. Start with repeal of the Gramm-Leach-Bliley Act and the separation of insurance, investment and commercial banks.

2. Pay for bailouts.  A speculation fee on credit default swaps, derivatives, stock options and futures would pay for the bailouts

3. Cap credit card interest rates, end usury so they’re not permitted to charge  25 plus percent interest.

4. Tax hedge-fund gamblers more then 15 percent on their income.

5. The Fed needs to provide small businesses in America with low-interest loans like it gave to foreign banks.

6. Stop Wall Street oil speculators from artificially increasing oil prices.

Richard Salzman lives in Humboldt County on California’s Redwood Coast, where he works as an Illustrators’ Rep and Political Consultant.


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JonnyB

The Banksters did it to themselves:’


Dec 2008:


The “turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007,” the President’s Working Group on Financial Markets


http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1UC8M7o1g


NOT based on government but GREED. The Banksters saw BONUS MONIES to be made. Regardless of what it did to their own institutions!


mkaney

Yes the bankers did it to themselves. Human nature dictates that if you set up a system where this can happen, IT WILL HAPPEN. But where did the environment come from that ENABLED this to happen?.. Yes, pulling backs regulations helped speed it along, but that is not where the money came from. All of the regulations in the world will not prevent malinvestment when the government picks winners and losers and manipulates the money supply.


JonnyB

Show me ONE example of a government that doesn’t do that Bbb? Just one. How about an example of a successful libertarian government?


The job of EVERY government is to set the rules of an economy Bbb! You know it! Your experiment was a failure in Chile already!


JonnyB

ONE MORE TIME.


Give me ONE example of a successful libertarian city, county, state or nation, EVER to survive? Prosper? IT NEVER HAPPENED! It’s because they PROGRESS from the tripe!


And EVERY government picks winners and losers, always has, always will. Just think it’s time for US to pick the bottom 90% of US over the top 1% after 30+ years!


mkaney

How about the United States of America prior to 1913.


JonnyB

First, it wasn’t we used Alex Hamilton’s economic theory (Central bank, protectionism, subsidies, etc), second IF I accept your theory, WHY DID IT CHANGE AGAIN? lol


“It’s because they PROGRESS from the tripe!”


mkaney

It’s because government saw the value in controlling the currency, particularly for the use of war and for fulfilling campaign promises that would otherwise be impossible to fulfill, so they could get reelected. Our dollar has seen a 95% decline in value since the Federal Reserve was created, you call that progress?


JonnyB

Keep dancing, it’s ALL you have!


bobfromsanluis

Has anyone heard of the Bank of North Dakota? This is a state run bank that has been in business since the early 20th century, endured the great depression, continues to make loans (did a lot of that to farmers early on when it first started up) and I believe that all state business is conducted through the state owned bank. The employees are “government workers” but the people in the management positions do not make outrageous salaries like a lot of bank presidents in commercial banks do. I for one would really like for California to do the same, establish a “Bank of California”, run by the state, for the state, with all state business being run through this bank. Any and all EBT funds would also be run through our own state bank (that’s the electronic equal to Food Stamps) and all of those fees that our state currently pays to Bank of America and all other banks is then a thing of the past, plus the added benefit of the state run bank being able to “capitalize” all of the deposits as well, possibly even making a dent in our beleaguered state budget.


r0y

I’m not sure I’d trust Californian government workers to run a bank. Maybe things are different enough in North Dakota, but just looking at Sacramento gives me the shivers to think of them handling even more of our money. I’m curious if they would even qualify for FDIC…


JonnyB

But you trust the Bansktsers who we’ve bailed out over and over and over?


r0y

You should really refrain from putting words into other people’s mouths. It’s bad form.


mkaney

1. Break’em up. If it’s too big to fail, it’s too big to exist. Start with repeal of the Gramm-Leach-Bliley Act and the separation of insurance, investment and commercial banks.


How about letting institutions that have been run improperly just go broke on their own? That is how the capitalist system reorganizes resources to make sure they are being put to their best use


2. Pay for bailouts. A speculation fee on credit default swaps, derivatives, stock options and futures would pay for the bailouts


You don’t think the consumers would end up paying for this? Think again. NO BAILOUTS. The government should NOT be picking the winners and losers. That is the PROBLEM, not the SOLUTION,


3. Cap credit card interest rates, end usur so they’re not permitted to charge 25 plus percent interest.


People need to stop buying things they cannot afford. Something substantial needs to become the basis of our currency, not debt.


4. Tax hedge-fund gamblers more then 15 percent on their income.


Ok here is where I will compromise. Although I do not support increasing taxation, it does irritate me that the long term capital gains tax is so much lower than the income tax.


5. The Fed needs to provide small businesses in America with low-interest loans like it gave to foreign banks.


No.. this is what creates bubbles. The interest rate needs to be set by the market, if it does not, malinvestment occurs like it did in housing. Ultimately the market cannot sustain that bubble and then when the Fed goes to raise that interest rate, all hell breaks loose.


6. Stop Wall Street oil speculators from artificially increasing oil prices.

Why? Just use less energy, it’s the smart thing to do.


Everything you’ve talked about is the CAUSE of our current problems. You’ve been drinking the koolaid dished out by the financial elite. Passing more regulations is actually legitimizing their control, not preventing it.


JonnyB

Unfortunately you can’t point to ONE example of your libertarian philosophy EVER working. EVER! The closest to your “small government” is Somalia or Mexico.


EVERY government sets the rules to an economy! Of course they pick winners and losers! But for 30+ years in the US the bottom 90% of US are the losers!


Your libertarian BS is just that Bubba! BS! You guys with Milton Friedman had the Chile experiment from 1973 on and it was a failure!


You promised higher incomes and wealth for all. They were the lowest growth in Latin Americas, in fact the bottom 90% lost wages! You privatized SS and promised 25% more and they received 10% less! Just google Chile Experiment! Libertarians/CONservatives, 40 years of failures!


mkaney

Here you go AGAIN with the talking points. Yes, I have a libertarian philosophy but that is not the question here. The question is whether the manipulation of the money supply is a major factor in causing these problems. There WAS a time when there was no central bank, and crashes were limited to specific banks and regions..


So are you saying that the United States was an utter failure without the central bank? What you’re doing here is taken a thought, tying it to a “team” and then attacking the ideas of the “team” as a whole. You obviously troll the Democrat blogs all day long because you are a textbook partisan. I am a compromiser, regardless of which way I lean. I do not hear ONE thing you say and then retort with “ALL YOUR DEMOCRATIC IDEALS SUCK.”


Get off the holier than though talking point bandwagon and think for yourself.


By the way, Somalia WAS working under Anarchy, but the U.S. did not like the Islamic courts, so we helped bomb them bout of existence. But that not even relevant here. YES I TOO HAVE SEEN THE CUTE DEMOCRAT LIBERTARIAN TALKING POINT VIDEO on Somalia. That’s how I KNOW you’re just parroting the talking points.


JonnyB

“There WAS a time when there was no central bank, and crashes were limited to specific banks and regions.”


LOL


YES, SOME POINT OF THE US HAD A RECESSION DEPRESSION AT LEAST ONCE EVERY TWO YEARS FROM 1800-1913!


“So are you saying that the United States was an utter failure without the central bank?’


I’M SAYING IT LEARNED FROM IT’S HISTORY BBB, SOMETHING CONservatives REFUSE to do!


“You obviously troll the Democrat blogs all day long because you are a textbook partisan. I am a compromiser, regardless of which way I lean.”


LOL


That’s all you got Bbb?


“By the way, Somalia WAS working under Anarchy, but the U.S. did not like the Islamic courts, so we helped bomb them bout of existence”


LOL


SURE BBB, SURE! I guess it’s how you define “working” lol


mkaney

So all you got to prove that Somalia was a failure under anarchy was that it depends on how you define “working.” I know you can do better than that. What was wrong with the Islamic Courts, if that is the way the people wanted to run things?


JonnyB

Sorry, IF you’re saying Somalia is you idea of a success, what are you doing here?


Sorry, I can’t by into your premises, since you can’t be honest or at least try!


mkaney

In fact, if you actually read what I wrote, there are compromises including the tax rate spelled out right in there.. you just saw the point about the money supply and the regulations and went RIGHT into the anti-libertarian response you have been preprogrammed to give.


JonnyB

I read what you wrote Bbb. Did I attack your tax stance, even though it was simplistic? As taxes are at less than 15% of GDP, a 60+ year low, even Ronnie had 18%-19% when he tripled the debt!


I know you prefer taxes near 5% right?


I love the attack me without being able to defend YOUR positions on libertarian paradises Bbb! And I’M the ideologue? lol


mkaney

Seriously WHAT are you talking about? What is my tax stance exactly? Did you actually read what what I wrote? You’re babbling on about things. What I said, summarized, was that the primary source of the problem is the manipulation of the money supply. I didn’t talk about libertarian paradises, so WHY should I defined things I never said. How about, if you disagree with me, you explain why you think that the monetary supply had nothing to do with the problem? You are the one that never addressed what I said.


JonnyB

Bbb, I read what you wrote, that cap gains shouldn’t be so much drastically lower than income taxes!


I think the monetary supply was a RESULT of the mindset, not a driving force behind it Bubba! It was the libertarian mindset of the current (past 30+ years) of the Repuglithan party that has hijacked REAL Conservative which turned it into CONservative Bbb!


Monetary policy without Dubya taking regulators AND regulations off the book (as well as ignoring the same) wouldn’t have created anywhere near the bubble created between 2003-2008!


IMO, You “believe” in free markets” and yet they NEVER work as advertised and YOUR types ALWAYS make excuses about why it didn’t go as advertised (see Chile)…


A real “free market” needs strong oversight of government and rules of law. It will always be a pendulum swinging back and forth! But to the “true believers” in libertarian politics they ALWAYS forget past failures and just move the goal posts.


HOW IS THAT?


mkaney

Funny, I find that for however imperfect they are, free markets work a hell of a lot more advertised than government intervention does!


JonnyB

Yet for some reason EVERY government sets the rules to an economy. Go figure.


mkaney

Setting the rules and manipulating the outcome are two different things. I would have much less of a problem with the former.


JonnyB

And you are deluding yourself if you think the bubble was created in the housing market by the feds rates. It was created, like the 1929 and 1980’s S&L crashes by those that don’t want regulations/government!


Dubya and comp engineered the entire thing, it just collapsed a few years earlier than thought!


REAL CAUSES OF FIN CRISIS:


Free market absolutism becomes the dominant intellectual thought.


Deregulation of markets, investment houses, and banks becomes a broad goal: This led to Glass Steagall repeal, unfettering of Derivatives, Investing house leverage exemptions, and a new breed of unregulated non bank lenders.


-Legislative actions reduce or eliminate much of the regulatory oversight; SEC funding is weakened.


-Rates come down to absurd levels.


-Bond managers madly scramble for yield.


Derivatives, non-bank lending, leverage, bank size, compensation levels all run away from prior levels.


-Wall Street securitizes whatever it can to satisfy the demand for higher yields.


-”Lend to securitize” nonbank mortgage writers sell enormous amounts of subprime loans to Wall Street for this purpose.


-To meet this huge demand, non bank lenders collapse lending standards (banks eventually follow), leading to a credit bubble.


-The Fed approves of this “innovation,” ignores risks.


-Housing booms … then busts


-Credit freezes, the markets collapse, a new recession begins.


http://www.ritholtz.com/blog/2010/05/rewriting-the-causes-of-the-credit-crisis/


How we hot here?


DEREGULATION AND CONSERVATIVE MINDSET!


Bush White House Philosophy Stoked Mortgage Bonfire


“We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.”


– President George W. Bush, Oct. 15, 2002]


Bush drive for home ownership fueled housing bubble

http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html


White House Philosophy Stoked Mortgage Bonfire

http://www.nytimes.com/2008/12/21/business/21admin.html


The Reckoning


Agency’s ’04 Rule CHANGE Let Banks Pile Up New Debt


From 12-1 to 33 to 1. In other words, for every dollar in equity, it had $33 of debt.


http://www.nytimes.com/2008/10/03/business/03sec.html


FBI saw threat of loan crisis


A top official warned of widening mortgage fraud in 2004, but the agency focused its resources elsewhere.


It has the potential to be an epidemic,” … “We think we can prevent a problem that could have as much impact as the S&L crisis,”


http://articles.latimes.com/2008/aug/25/business/fi-mortgagefraud25


Predatory Lenders’ Partner in Crime


Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html


NEED MORE? LET ME KNOW!!!


mkaney

You know what? Here’s how I can show that you’re just a partisan hack. I don’t care, put ALL the regulations you want back in.. But end the central bank and government control of the money supply. Let’s see how you respond to that one.


JonnyB

Got it Bbb. ZERO critical thinking OR honesty from you. Of course we can put all the regs back in, but as long as we keep electing those who don’t believe in government, and especially those as Prez who have CONTROL over the regulators, like Dubya and Ronnie, we will keep getting the same response.


They put those in charge who go on the floor of wall street and cut up the regulations and turn a blind eye to the regulations that remain!


Sorry Bbb, ending the central bank, although I’m no big fan and government control of the money supply will just put US back to the 1800’s-1917 when there were HUGE ups and downs ever couple years!


THERE WAS A REASON TEDDY THE TRUST BUSTER AND THE PROGRESSIVE MOVEMENT CAME INTO BEING BBB!


BUT KEEP BURYING YOUR HEAD IN THE SAND AS YOU ATTACK ME AS AN IDEOLOGUE! LOL


I JUST UNDERSTAND HISTORY AND USE CRITICAL THINKING, WHY DON’T YOU TRY IT?


mkaney

How is conceding to allow you to put all the regulations you want into place zero critical thinking or honesty? What I offered you was a compromise, what you responded with was more of the same.


In fact, it’s hilarious that you’ll sit here and criticize Bush and Reagan, who I would criticize too, but then don’t mention Clinton as a facilitator or Obama as someone who happily just bailed them out. Partisan hack, through and through.


JonnyB

Bbb, we had regulations in place (although less than needed) but the PRESIDENT (EXECUTIVE BRANCH) is in charge and oversight of most of those regulations!


Why do I bash Ronnie and Dubya and not Clinton and Obama?


Although Clinton was the best Conservative Prez in the past 5)+ years (and Obama the second), he recognized that there is a balance. He was wrong to overturn Glass Steagal, he’s acknowledged it, but even then the subprime issues were keot in check. Along came Dubya, BAM


THAT’S WHY I BELIEVE YOU’RE DISHONEST AND NOT USING CRITICAL THOUGHT!


And Obama “happily” bailed them out? You mean he continued Dubya’s bailouts and I don’t think he did it happily!


Funny how the Dems have a long history of fixing Repug failures Bbb. Be it tax cuts that starve US of revenues or getting Bin Laden!


moderator

your points are valid your arguments are fine but if you don’t stop referring to mkaney as anyone other than mkaney I will start deleting your commentary .


Fedup

This is the biggest crock of crap I have ever laid eyes on. If one reads between the lines it is straight out of the Communist Manifesto. “Pay for the bailouts” indeed. How about letting those companies who need a bailout go BK. There is enough corruption in the system without trying to introduce another layer of government corruption. It is also time to stop bailing out the corrupt and lazy in our society that are using the rest of us by way of the welfare system and government housing. Both of these kinds of bailouts have ruined this country and need to be stopped. This is the only way that honesty, self pride, and prosperity can be restored to this country.


SewerHeightsRez

While I appreciate your intentions and the thought you have obviously put into this subject, I think you would find that the only thing worse then a bank run by bankers is a bank run by bureaucrats. As to your 6 points I personally don’t see any of those things happening with the possible exception cap gains vs. personal income.


My only advice is: Do not vote for Politicians who borrow money in your name if you are not prepared to pay back that debt. Do not expect money unless you have earned it and it rightfully belongs to you. Arrange your own finances and exploit the loopholes open to you. Realize that Politicians only have power over your lives because you allow them to. Develop your own individual ways to avoid the system and pretty soon, you won’t have to protest because the actions of banks and politicians will no longer be relevant to your life. And then, like the Church, like the State, like every dictator or tyrant who insists you do it their way, they’ll hate you because you simply don’t need them.


Then you win.


Cindy

Here is an example of how dirty our banks are. In 2007, I was traveling a great deal so I arranged automatic payments on all my financial obligations and that included my credit card payment with B of A They would automatically withdraw the funds from my checking account each month on the 16th. I made these arrangements so that I would never be late on my payment because I had two very sick elderly parents back east and other travel commitments for work and sometimes I was away from home as much as a couple of months at a time and my good credit was important to me. Initially there was no problem with the automatic payment plan.


Then one day I got a call from B of A on my cell phone informing me that I was considerably late and owed them over $1300 in late payments. I was astounded because a standard $175.00 payment had be coming out of my checking account every month and I hadn’t charged anything new on that account.


When I examined the statements that had been put aside, I discovered that B of A had changed my payment due date from the 16th to the 15th! Consequently they had charged me a $35.00 late fee every month and since they were withdrawing the funds a day late, they had increased my interest rate to 21.9%. Then because the authorization for the monthly withdrawal was no longer enough to meet the new payment (from 6.2% interest to 21.9%), they had reported me as paying 90 day’s late because the payment they were deducting was now being credited to for fill the obligation due on previous short payments and this had been going on for several months.


I was furious with them and stated my case in no uncertain terms. The bank told me that they understood that I was upset but that they had sent me mail so as far as they were concerned, they had informed me. I pointed out that they had my cell phone number and never had a problem reaching me and why had they waited to contact me? I also pointed out that all of this was their fault to begin with and there certainly was no mail asking permission to deduct the payment a day late every month. They told me, no it was my fault for not paying closer attention and opening my mail because if I had, I would have seen that my payment date had been changed !


They never fixed a thing including all the extra interest they charged me or my credit report.


The banks can go take a flying hike. They deserve to go down in flames. THOSE THIEVES.


mkaney

Bank of America is nothing more than a giant criminal organization. This is the tip of the proverbial Iceberg Cindy. They are notorious for doing this sort of thing. They have made HUNDREDS of BILLIONS of dollars just by switching the order of transactions around so that the biggest one causes an overdraw on the account and there is a fee on the remainder of the transactions. EVEN when there is a deposit pending simultaneously.


pasoparent5

I dumped B of A in ’07 when they started issuing credit cards (and, in some cases, mortgages) to illegals. No social security#? No hay problema. No credit history? No hay problema.


pasoparent5

Unfortunately, I had a similar situation occur w/Heritage Oaks in ’08. They, too, had my phone number but waited to contact me in the midst of a week of them wrongly racking up a bunch of extra charges… I had no idea anything was wrong & finally a teller called because “things didn’t seem right” with my account (duh!!) & I protested the unfair & exorbinant charges. A manager at Heritage Oaks reluctantly reversed half of the fees but I’ve never, ever trusted them again.


I wonder if anyone out there can recommend an honest bank–preferrably local–that doesn’t try to screw its customers. Hiding cash under the mattresses just isn’t practical! ;0


GKB

I’d have said to check into your local credit union, except I had a similar experience as Cindy (albeit a smaller scale) when an automatic payment was taken out before my direct deposited paycheck hit, because of the timing of a weekend. They transferred from another account to cover it, and charged me for the convenience of using my own money. What upset me was that in the past, they had “pre-deposited” my paycheck then “withdrew” it when the actual check arrived.

They did credit me for the charge, but suggested I change the automatic payment date. Now, I’ll be worried about a late charge there.


mkaney

I have somewhat of a bias but I would recommend Coast National. Since you’re in North County, and you probably need a branch reasonably close, I also have an account at Santa Lucia National Bank, and although they have had some troubles, I have to say that it has been a pleasure banking with them. They have a branch in Atascadero.


GKB

I quit B of A in the mid ’80’s, when they called in an operating loan, because they didn’t like where the price of grain was going (down). I already had the crop in the ground so it wasn’t like I could get that money back. So, I had to sell off part of the herd of cows I had. The cows, by the way, produce another “crop,” of calves, which would be sold or kept to build the herd. To me, it made about as much sense as plowing up a growing crop. You could at least get cow feed out of the crop.


Cindy

How can they just call in a loan? Didn’t you have terms on it or were you in default at the time and they refused to work with you?


JonnyB

Many loans have those terms when it comes to farming/ranching or Biz


rogerfreberg

Let’s see…


Could it be that some county’s have a lot of cash on hand from certain ‘crops’… and they need certain ‘friendly’ municipalities to store it for them. I am sure that these new muni banks would be exempt from all those oversight regulations…


No, this could never happen. ;)


justme

The guy’s explaining what happens to a country when run over by big banks and Wall st. He offers up a way to defang the bass turds and you insinuate he may be looking to hide dope money?


mkaney

So what if they do? What’s wrong with that, really? You should support your local business people in their battle against the federal government.


abigchocoholic

What are you talking about?


And while we’re busy telling the big banks to take a hike, let’s just tell Walmart to leave too and we’ll all go back to spending our money at the local mom and pop shops ,right? Support our local businesses?


Better yet, why don’t you fund raise and start you own “do gooder” local municipal bank. After you lose everything and go bankrupt and get sued, then come on back here and write a piece about what it takes to run a competitive bank in this day and age and why your muni bank couldn’t compete.


Now, on to the real topic:

You say “Does “people’s needs, not corporate greed” explain it?”


No, it does not. The “people’s needs” is what got us into this mess. Face fact. Millions and millions of Americans took out liar loans. A liar loan is a loan where the borrower represents or states to the lender that he/she has the ability to pay back the loan rather than the extensive background verification process along with 20% down. The banks, through over generous policy and greed as you call it, loaned the money to the liars. When the real estate market tanked, the borrowing liars either could not or refused to continue making their loan payments. It was the borrowers fault. 100%. Why? Because this is American and when you borrow something and promise to pay it back you don’t point the finger at the lender and argue “well, er, ah, you shood a knowed I was a low down liar who coont a been trusted to borrow nothing and pay it back so accordin to my logic I should just get ta keep that thar money you lent me”. Life doesn’t work like that in America.


Now for the reality check for all you protesters. Did all those liars pay back their loans and that’s what everyone is so mad about? Did the banks make out like bandits and the borrowers got screwed? No. That’s not what happened. It’s the opposite. The borrowers stiffed the banks. The banks lost everything. The banks went bankrupt because millions of liars walked away from their contractual obligations and never paid back the money they borrowed from the banks. Without the federal government re-supplying all those banks with enough money to be solvent. we’d all be trading chickens and living in homes without running water and utilities right now. Re-supplying the banks to become solvent was a no-brainer.


Now, what did all those people who got foreclosed on lose? Their house, right? But what did they pay for that house? Nothing! Because they walked away from making their payments on the house they never paid for it. And before walking away, most of them lived in the house for 1-3 years mortgage and tax free so they actually made out like thieves. Add up a mortgage of $2,500 a month times 24 months and see what the borrowers kept in their pocket before they got the eviction notice.


So enough with the evil banks and Wallstreet folk and angelic innocent American homeowner pitch. The unsustainable greed and immorality falls squarely on the millions of American home-owners who, after borrowing and losing the money, are now trying to pretend they were too stupid and incompetent to be lent money in the first place If you want to get mad at a group of people get mad at all your neighbors who walked away from their contractual obligations leaving our banks bankrupt.


Disgusted

You make some good points. The exception I see right away would be the Buyer whose circumstances changed beyond their control, ie loss of job, medical issues, etc.

What makes my blood boil are the homeowners that walked away from their obligation, have plenty of assets to keep paying the mortgage and have either lived for free or have rented it out and get to keep the rent, probably unclaimed on their taxes. That’s pure greed, and it’s rampant.


justme

You explain your view in your first five words, “What are yiou talking about”? In other words you don’t get it.

You should have stopped the blathering right there. You DID miss his explanation and went on to blaming the general pop. of your fellow Americans.

Banks don’t ‘ lose anything on a default, Genius. because they don’t put up anything. A bank’s collateral is simply the loan contract (and/or the Fed’s printed funny money.0 But they can end up with your house somehow. Fair? I guess you think so.

You are pissed because your heros, Banks/Wall st. didn’t keep your properties and equitities going up, up and away…on what basis? They owe it to you? What did you really contribute? You ain’t pushing the cart.

Wall st. is manipulated, why else would it go up in a crashing economy?? On BS. Banks are an international counterfeiting nest of theives. Did they get hurt recently? Impossible, where do you think all the money is, Einstein? In banks, and more than ever since the Fed is printing it frantically while now refusing to disclose how much they print?

Does your (made up to suit your belief system) mind really believe that Mr. & Mrs. Plumber/Teacher here in the U.S. were supposed to go house hunting, find that new house the banks financed for const. most likely, fall in love with it but then the husband is supposed to look at his wife and kids and say something like, ” I know all our friends and neighbors are moving up and into better houses but I think we should stay here in this crappy neighborhood on the chance the media, Wall st., our loan officer, Mr. Greenspan, and all the rest may be over stating the truth?? And the 10 yrs. of risng home prices may not be sustainable? Hell no, He’s gonna get on the train and keep Mama and little Billy and little Jane happy and safe. He looked to Dan Rather, Greenspan, and others who “know what’s going on much more than he” to guide his decision. Silly him.

People lost their equity because it was never really there. And your heros (Banks and Wall streeters knew it all along.

And what about the 10 years we paid almost pure interest to banks on these inflated prices that they created. Ten yrs of the average CA. home/family paying at least a grand in interest, and that’s the last decade’s dollar. value. Trillions, Mr. All knowing, many trillions. Get out your calculator.

If Banks/Wall st. are good and Americans are liars you belong to a very short list of the deluded


mkaney

Wall Street goes up in a crashing economy because the Fed is printing money and the first at the trough happen to be the investment banks. That is HOW they manipulate Wall Street.


The Gimlet Eye

Yes, they are called “first receivers,” i.e., the first in line to get the “funny money.”


Everybody else loses because their money is worth less.


Kinda neat!


pasoparent5

justme–we’re those neighbors you’re talking about & we’ve done OK–not great, but OK.


We’re just like the frugal Mrs. Plumber/Mr. Teacher who lived in an old, small home–bursting at the seams w/a bunch of kids. In ’03-’05, our friends and co-workers were ALL moving up to bigger, nicer homes. But we did not and I’m SO glad we waited to buy when prices were $150K lower than in ’04. And yes, we did fall in love with homes that were increasing in price literally $10K a month but we waited. And my husband DID look at us and say, ”I know all our friends and neighbors are moving up into better houses but we can’t afford it and we’re staying here.”


justme, y0ou make some valid points but something to remember is that it wasn’t just the big banks who got greedy. MANY families–I can name 4 of our friends off the top of my head–got greedy, too. They wanted more, more, more. Their homes were worth $100K more than they paid, they cashed in w/home equity lines to buy boats, new cars, pools… then the market tanked and you know the rest… Nobody forced them to upgrade. No banks made them sign any papers.


My point is just that we all need to live within our means. We can blame congress, Wall St., the banks, the past president, the current president, whoever… But honestly, Americans need to save more and spend less. Period.


The Gimlet Eye

Quite right, but our whole economy is based on the OPPOSITE; more spending and less saving.


NOT to do them this way is practically “revolutionary,” if not to say “treasonous,” to the elites who run this country.


Cindy

Hold on there because the simplicity of you’re argument works both way’s here. First the banks knew better than the mortgagors that these loans were not sustainable. No one purchased homes without the ability to meet the initial payments. The banks saw to this by arranging creative variable low interest loans. They also arranged interest only payments, reverse amortization and 5 year balloon payments while writing low interest loans and recommending that at the 5 year termination the home could be refinanced or sold at a profit. The banks knew full well that many of these citizens who were seeking to participate in the American Dream (ie: home ownership) could not meet the financial monthly obligation if/when the market took a turn or “WHEN” prime interest rates (which were artificially low) increased.


It was all about writing loans, bundling those loans into securities and then unloading them on unsuspecting investors. This was exactly why they issued loans based on stated income and pulled out the stop on creative financing. It was an orchestrated game of musical chairs with the last man out.


Many people didn’t understand the difference a point could make if/”when” the amortization on their mortgage payment was recalculated. Many people didn’t understand what could happen if the market took a down turn by 30%. How were they supposed to refinance when their balloon payment came up in 5 years when they were upside down? The home buyers didn’t come up with all these idea’s to finance their American Dream Home, the banks did.


During 2003-2006 I probably received 3 calls a day from lending institution (that is not an exaggeration) trying to get me to refinance my home and of course, they would encourage me the pull out some equity and go for a variable loan. Bank loans were big business and everybody knows that unless you need money it’s never a good idea to pull your equity out of your property for no good reason. They were so arrogant they would actually argue with me, I finally started hanging up on everyone one of them. What A$$holes, bugging people to do the wrong thing so they could line their pockets.


pasoparent5

cindy, don’t forget congress who pressured Freddie Mac & Fannie Mae to approve loans for folks who simply couldn’t afford the payments. Those loans were doomed to begin with.


Too bad more people didn’t hang up on the pushy mortage lenders like you did. (smart move on your part!) I remember quite a few banks offering us “creative financing” during our home buying process. They could care less if the payments were huge. They just wanted our signature but thankfully we did our research and stuck to our budget.


JonnyB

MORE BS. Fannie and Freddie were NOT pressured by Congress to approve loans for “folks who simply couldn’t afford the payments”


A BUNCH OF BS


Private sector loans, not Fannie or Freddie, triggered crisis


Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.


Federal Reserve Board data show that:


More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.


The “turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007,” the President’s Working Group on Financial Markets


http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1UC8M7o1g


Spin and ‘outright lies’ on cause of economic crisis


The cause of this crisis is clear. Subprime lenders made irresponsible loans that they knew most families could never pay back and would need to refinance, generating more fee income for brokers and mortgage companies. Now-bankrupt mortgage lenders and Wall Street investment banks put large fees ahead of prudence, and instead of demanding sound lending practices, chose to look the other way. If the refinance loans promised to borrowers were not available in the future — well, that wasn’t the mortgage lender’s problem.


Wall Street was the engine; lax supervision from government regulators — particularly the Alan Greenspan-led Federal Reserve — greased the wheels. Most subprime lenders were subject to far less regulation and oversight than traditional banks and credit unions.


http://www.responsiblelending.org/media-center/press-releases/archives/spin-and-outright-lies-on-cause-of-economic-crisis.html


Let’s clarify the causes of current circumstances. Ask yourself the following questions about the impact of the Community Reinvestment Act and/or the role of Fannie & Freddie:


• Did the 1977 legislation, or any other legislation since, require banks to not verify income or payment history of mortgage applicants?


• 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision; another 30% were made by banks or thrifts which are not subject to routine supervision or examinations. How was this caused by either CRA or GSEs ?


• What about “No Money Down” Mortgages (0% down payments)? Were they required by the CRA? Fannie? Freddie?


• Explain the shift in Loan to value from 80% to 120%: What was it in the Act that changed this traditional lending requirement?


• Did any Federal legislation require real estate agents and mortgage writers to use the same corrupt appraisers again and again? How did they manage to always come in at exactly the purchase price, no matter what?


• Did the CRA require banks to develop automated underwriting (AU) systems that emphasized speed rather than accuracy in order to process the greatest number of mortgage apps as quickly as possible?


• How exactly did legislation force Moody’s, S&Ps and Fitch to rate junk paper as Triple AAA?


• What about piggy back loans? Were banks required by Congress to lend the first mortgage and do a HELOC for the down payment — at the same time?


Did the GSEs require banks to not check credit scores? Assets? Income?


• What was it about the CRA or GSEs that mandated fund managers load up on an investment product that was hard to value, thinly traded, and poorly understood


• What was it in the Act that forced banks to make “interest only” loans? Were “Neg Am loans” also part of the legislative requirements also?


• Consider this February 2003 speech by Countrywide CEO Angelo Mozlilo at the American Bankers National Real Estate Conference. He advocated zero down payment mortgages — was that a CRA requirement too, or just a grab for more market share, and bad banking?


The answer to all of the above questions is NO, NONE AND NOTHING AT ALL!


http://bigpicture.typepad.com/comments/2008/10/misunderstandin.html


Cindy

I hope people are paying attention here. JonnyB is 100% accurate. By the way, it is the Federal Reserve Bank that regulates the commercial banks. They were in this up to their eyebrows.


mkaney

Fannie Mae and Freddie Mac guarantee 90% of the loans in this country. You think without that, that many of these loans would exist? Nonsense


JonnyB

NO,


REFUTE THIS:


Private sector loans, not Fannie or Freddie, triggered crisis


Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent,


HMM


During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages


DOUBLE HMM


http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1berEuqFI


mkaney

That is not an argument against what I said. I said they GUARANTEE 90% of mortgages.. see below…


http://topics.nytimes.com/top/news/business/companies/fannie_mae/index.html


“The portfolio of Fannie Mae and Freddie Mac is worth roughly $1.5 trillion. The collapse of the market for mortgage-backed securities has made them even more crucial to the current functioning of the housing market. The pair and the Federal Housing Administration together now guarantee about 90 percent of all new mortgages, far above their historic level.”


mkaney

I’ve got a question for you JonnyB, it is an answer to many of your questions above.. How did Freddie Mac and Fannie Mae guaranteeing these mortgages effect how they were made, who they were made to and how the derivatives were rated?


JonnyB

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent,


http://www.mcclatchydc.com/2008/10/12/53802/private-sector-loans-not-fannie.html#ixzz1bercgnmH


In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.


HONESTY TIME FOR YOU, WHO DROVE THE BAD SUBPRIMES AND HOUSING MESS HERE?


WHO TRIED TO STOP DUBYA FROM THIS MESS? WHY ALL 50 STATES AND THE AG’S OF THOSE STATES:


Predatory Lenders’ Partner in Crime


But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.


http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.htm


WHO IS IN CHARGE MATTERS. DUBYA AND COMP HOSED US!


mkaney

ANSWER THE QUESTION.. Do you not understand the difference between HOLDING a loan and GUARANTEEING A loan?


JonnyB

Why answer the question Pal when the premise is false? It takes critical thinking and honesty, both that you appear to lack to see what got US here, but just the score of the endgame!


FROM YOUR LINK


“But during the housing boom, they misused the government’s support to enrich shareholders and executives by backing millions of shoddy loans.”:


HMM


“The collapse of the market for mortgage-backed securities has made them even more crucial to the current functioning of the housing market.”


http://topics.nytimes.com/top/news/business/companies/fannie_mae/index.html


LIKE I SAID, FREE MARKETS DON’T WORK, AND PUTTING THOSE IN CHARGE WHO DON’T BELIEVE IN GOVERNMENT, TEND TO SCR*W IT UP EVERY CHANCE THEY GET, JUST LOOK TO RECENT HISTORY OF THE REPUGS!


Typoqueen

” When the real estate market tanked, the borrowing liars either could not or refused to continue making their loan payments. It was the borrowers fault. 100%. Why? Because this is American and when you borrow something and promise to pay it back you don’t point the finger at the lender and argue “well, er, ah, you shood a knowed I was a low down liar who coont a been trusted to borrow nothing and pay it back so accordin to my logic I should just get ta keep that thar money you lent me”. Life doesn’t work like that in America.”


Yeah, in America it works like this, people like you kick others when they’re down. The people that I know that lost their homes were teachers that either had their hours cut or were laid off all together. I just read an ad for Ira from Ira’s Bike Shop in AG. They are having a fund raiser for him because the poor man has had a catastrophic illness and needs help to pay his medical bills. One illness can and it does cause many people to lose their homes. Do you read the unemployment figures and the poverty rates? They are at an all time low (in my lifetime). Many people and I’d venture to say that the majority of people that bought homes could afford them when they bought them. How could one predict that after working at a good job for 15 years that they’d get laid off? If you’re not retired I’m wondering how long you would last if you lost your job and had to make a house payment, med insurance payments, kids in collage, and if you’re like me sky high medical payments on top of that, how long would your savings last? Perhaps you’re one of the few lucky that could pay off your home, not work and live out your life in comfort. I haven’t lost my home but it scares me every day. Our business brings in half of what it did 6 years ago and we’ve been in business for over 20 years. We make less than we did the first year that we went in business. Our medical bills are 70% higher than they were 10 years ago. Like everyone else here, I know people that have had their homes and not one of them had their home taken because they bit off more than they could chew or they were lazy bums. In every case it’s either because of medical bills or because they were laid off, had hours cut, lost their businesses or all of the above.


You represent all that’s wrong with this country. Poor ole Wall street, Blue Cross, BofA they are the greedy pigs. The people that tried to have a small slice of the American dream are victims of Wall Street an all of its corruption. How dare you blame 100% of this mess on us, the middle and lower class.


Typed fast and pissed, excuse typos.


Cindy

Typo, You’re describing a different sector of homeowners. Yes, there was a backlash that effected existing homeowners who bought responsibly, they probably had 30 year fixed loans and then became victims due to a crashed market, loss of work and no jobs to be had.


abigchocoholic is talking about the people who purchased new homes that they couldn’t afford. To an extent he is correct about the people who lied about their income, I know people who went out and purchased homes that they lost because they were greedy to begin with and wanted a bigger better home! Frankly, they were just plain NUTS in my opinion. A business associate of mine racked a $6,500 a month mortgage payment! Even I knew she couldn’t afford it and she couldn’t. Then there are the people who were victims of predatory loans like the first time home buyers. In the end it is the banks who are guilty of creating this crisis. They are guilty as hell, they were like the crossing guard that encouraged the kids to step in front of the bus and in the end, it’s the bank’s that I blame. If I loan someone money knowing they can’t pay it back , then it’s my own fault when they can’t pay me back.


In the end it does come down to the fact that the “banksters” took advantage of American GREED and many innocents (like the people you describe) got caught in the backlash.


Typoqueen

Cindy, I agree with you, I understand there were people that bought homes that shouldn’t have and I agree with all of your points on this topic (can you believe that). But when I read chocoholic’s post it looks to me as if he’s blaming ALL of the people that have lost their homes for this mess. I really believe that when you look at statistics regarding unemployment and the huge increase in the poverty level that a majority of people lost their homes more due to changes of income and the fast rise of inflation. I’m not saying that there weren’t those that bit off more than they could handle or that didn’t understand the loans that they were getting themselves into but I don’t believe that’s the case for most of the people that lost their homes. It also seems as if choco is taking all the blame off the banks and that’s a whole diff. issue IMO. The banks screwed things up terribly. But I won’t get into that right now as you and others have done a great job discussing the predatory greed of the banks. Personally don’t know how these bank execs sleep at night.


Cindy

Actually I can’t agree that the majority of homes were lost due to job loss. Perhaps currently that is the case along with the homes that were sold with a 5 year balloon payment attached. Those homes are upside down so job or no job, it’s unlikely that those homes can be refinanced and it’s also unlikely that the bank will do a short sale loan to the homeowners despite the fact that they (the lenders) will end up with a short sale property after they foreclose. The majority of the foreclosures occurred when the market began to correct itself and the people with variable interest rates found that they couldn’t meet the mortgage payment with a higher point value (interest rate) attached to it. Even with the current refinancing and low interest loans that are currently available, many people are upside down because they purchased when the market was inflated. Many who can actually afford the payments and qualify for refinancing have chose to walk away rather than pay off a $600K loan for a property worth $400K.


Disgusted

“Many who can actually afford the payments and qualify for refinancing have chose to walk away rather than pay off a $600K loan for a property worth $400K.”


Exactly. THESE are the people that frustrate me. Many bought on the market upswing planning on making a huge profit in a short time. Now that this plan has disappeared, they walk. Anyone who is capable of meeting their obligation, but walks away, hurts us all and is as guilty and the lending institutions.


JonnyB

We should have nationalized the banks!


BUT it’s refreshing you’re giving the banks a pass since THEY did the NINJA loans, 120% LTV, AAA rated CDO’s, etc without a single government regulation saying to do it!


A long-time cheerleader for deregulation, Alan Greenspan admitted to a congressional committee yesterday that he had been “partially wrong” in his hands-off approach towards the banking industry and that the credit crunch had left him in a state of shocked disbelief. “I have found a flaw,” said Greenspan, referring to his economic philosophy. “I don’t know how significant or permanent it is. But I have been very distressed by that fact.”


“I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms,” said Greenspan.


http://www.guardian.co.uk/business/2008/oct/24/economics-creditcrunch-federal-reserve-greenspan


Cindy

and there it is…………….THE FEDERAL RESERVE BANK.


The FRB is independent, privately owned, locally controlled and tax exempt! Don’t let them tell you otherwise.They are great spin doctors but the 9th district Supreme Court put the fact’s out there for us and made it clear several years ago. AGAIN…..The FRB is independent, privately owned, locally controlled and tax exempt!


END the FED and end the debt, it’s easier than we think. Of course a few more presidents might end up assassinated in the process. Kennedy tried it on 6/4/1963 with his executive order 11110.

5 months later he was dead and the order was rescinded by LBJ (who rots in hell). All the notes (4 billion $ worth of notes issued by the treasury and backed by silver were taken out of circulation and destroyed. Look it up…


ccnewsreeder

I read your wikipedia link to the executive order 11110 and it seems you have the facts (per the wiki) wrong. It said Reagan rescinded the order (“E.O. 11110 was not reversed by President Lyndon B. Johnson and the section added to E.O. 10289 remained on the books until President Ronald Reagan issued Executive Order 12608 on September 9, 1987 as part of a general clean-up of executive orders”). However, I would not doubt that the “Federal” Reserve is complicit in much of our world’s troubles, based on the privately owned funny money system we have. Oh, well, time to go eat some food with that special Fukushima spice on it and forget all my problems.


The Gimlet Eye

Nationalizing the banks won’t do any good at all. Same problem. The government, in which you misplace so much of your faith, is a cesspool of corruption.


The only way to inject the proper discipline is capitalism. Let the banks be independently owned and make them compete with each other for your business. They must please you or lose your business. If they do this too much, they will go OUT OF BUSINESS, and that’s exactly where the bad banks belong.


MaryMalone

Good for San Francisco. I agree, it appears to be an attractive alternative to big banks and credit unions.


BTW, the link you posted is inactive.