get ready to be flamed. Reality is a lot less popular than bonkers conspiracy theories.

and go on offense, not defense.

Since the repeal of Glass-Steagal, Democrats and Republicans have worked together to specialize in all kinds of Wealth Management:

http://financialservicesinc.ubs.com/revitalizingamerica/SenatorPhilGramm.html

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

It is the same pathetic tactic Rove and Foxnews uses on their braindead audience. I guess even after YEARS of concern trollin here in GD, they still never give up with the big lie for Wall Street.

I give them credit, not a one of them has an ounce of shame in their body...that must be hard to do for normal people imo.

Not one ounce.

You're late...

http://www.democraticunderground.com/10141173578

so yea maybe you could say I'm late in calling out the Glass-Steagall conventional non-wisdom.

But if you're implying that I'm late because I dissent from the far-left, I don't wanna be early then.

You're welcome!

otherwise it would have never come about in the first place

doesn't mean the parts that were repealed cause any crisis. Show some proof, maybe.

and are you willing to fight to keep it that way?

Or better yet, if Glass-Steagall were the law of the land, would you choose the candidate who promised to get rid of it?

I just think it was a bad move to get rid of it, but I am trying to figure out if you think we should never have had it in the first place.

I would prefer to weight a lot less but if I get hit by a bus tomorrow and die that doesn't mean the fact I weight too much caused my death.

From the correspondence between FDR and two of his friends, bankers James Perkins, chairman of National City Bank (now Citigroup) and Winthrop Aldrich, chairman of Chase (now JP Morgan Chase). More than any other Washington insider or progressive, it was Wall Street financier Winthrop Aldrich who helped FDR reform banking. In the process, Aldrich and Perkins saw a way for their banks to overtake a chief competitor, the immensely influential Morgan Bank (whose leaders were also friends of FDR), by robbing them of their ability to both underwrite securities and take deposits.

"Ironically, Glass-Steagall itself arose in the 1930's from commercial bankers' efforts to divert regulators' attention from other remedies. Small-town bankers throughout the country wanted government-guaranteed deposit insurance, while stronger big-city banks feared that government deposit insurance would put them at a competitive disadvantage. After all, deposits from the small-town banks were running off to big banks in money centers like New York, Chicago, and Los Angeles. Two decades ago, Donald Langevoort, now a law professor at Georgetown, showed that major bankers -- indeed, the leaders of First National City, the predecessor to Weill's Citibank -- proposed Glass-Steagall in lieu of deposit insurance. No big bank was at risk from trading securities then, but the big banks' investment-banking affiliates were not making money trading and underwriting securities during the Depression, so the banks were willing to surrender that part of their business. The irony is that Congress took up the big banks' offer to separate commercial and investment banking, but then enacted deposit insurance anyway."

Sorry, but mortgage derivatives couldn't have existed under Glass-Steagall. I'd say "nice try," but this canard has been passed around too much in the past.

but who cares for facts, right

Ever heard of the Black-Scholes Formula? Been around since the 1970s.

But what does Black-Scholes have to do with the origins of MDs? BS is just math derivatives of various degrees that simple tell you, among other info, the probability a derivative will be in-the-money before expy.

Side note. One of the Noble Laureates that invented the formula had their Hedge Fund go down because they relied on it too much, and the bond arbitrage they were playing incurred billions of losses after the Russian default. It almost brought others along with it.

Not Glass Steagall alone, no. Both those laws, yes.

As far as veto proof, that was a signature Bill Clinton move. When you have a bill Republicans want and a Democratic White House lobbies Congressional and Senate Democrats hard for a "veto-proof bill, guess what happens?

http://www.democraticunderground.com/12778045

http://www.democraticunderground.com/?com=view_post&forum=1277&pid=9158

The CFMA is what took down AIG. "Just an insurance company" that peddled credit default swaps. What a load of BS there. If not for the CFMA, what Wall St. was doing would have been illegal under New York's bucket shop laws. People were taking out insurance policies on stock they didn't own.

Glass Steagall gets more publicity.

As a member of the House, Bernie Sanders voted against Glass Steagall. He voted for CFMA, but the amendment that made it toxic was added in the Senate after the House voted.

Right, blame the people who got mortgages. Glass Steagall kept investment money from being comingled with commercial (your savings) money. Removing it made risky bets riskier and made them fall harder. I'm in the Real Estate business. When shit hit the fan, I wanted to know who ruined my business. I studied this for a long time. I didn't merely post an article I found on a bank-friendly, business opinion page. If you've got an hour, I can go over the whole thing.

which are rather elementary on how so many people defaulted. If a million credit non-worthy people default, derivatives or none, problems happen.

Gee, maybe if we shouldn't trust the financial economic experts on the economy, we shouldn't trust the scientists on global warming.

Very ignorant statement. To get a no doc, you had to have a very high credit score. No docs were not the majority of default loans. Neither were adjustable mortgages. You have to remember who made all the money from selling the loans. Lenders were allowed to lower the minimum credit scores down to 580 and increase the ratios of debt to income. No one (including Barney Frank) forced them to do that. They made a ton of money. So, borrowers that could make the payments based on their income were ok as long as that income didn't go down. Yeah, they were on shaky ground. When employers started saying "Hey, you're not worth $25 an hour, we're going to pay you $15 an hour" they took peoples' house and car payment away. When millions of people had their jobs taken away, that further fueled the meltdown.

Investment houses like Goldman Sachs were bundling the bad mortgages and selling them as investments. Then they got AIG to sell them insurance policies (credit default swaps) on the investments because they knew there was a good chance they would fail. They would win either way. They were telling their investors "Moody's gave us a 100% rating on these."

Reader's Digest version, but a lot more complicated than "the banks didn't run credit checks."

Because allowing the kind of subprime borrowers AND also on other customers, not even running check s, were both actions that caused what happened.

Nothing both to do with Glass Steagall. Bundling mortgages (securitization), started wayy before 1999. Once again, nothing to do with Glass Steagall.

Well, only if you focus solely on the no credit checks. That's like only blaming burglary victims for not having enough security. Not the burglar's fault! Nothing to do with the burglar. The sole problem was NOT having a security system.

Even 'no doc' loans had credit checks and you had to have high score, it was the income that wasn't verified. And you had to put a large down payment, and the interest was high.

Where did you get the idea that no one was running credit checks? I don't know what you mean by "also on other customers". They lowered the minimum score from 640 to about 580 and allowed debt to income ratios of up to 50% from 38%. That increased the risk if someone had something go wrong, a health problem, a drop in income. This would not have been much of a problem if not for half the country getting the chair kicked out because of bush economic policy.

When you had $0 down mortgages, people were more likely to just walk away if they lost their job or had their pay cut. It was like they had been renting. No skin in the game. Usually, those houses weren't trashed when people walked away. Sometimes, the owner had taken the HELOC money they were given at closing and put roofs, furnaces, windows, etc but hadn't spent much of their own money.

Selling mortgages as securities was done before but not at the level that it was done in the 2000s. And not sub prime bundles that investment houses knew would fail.

Getting rid of Glass Steagall made sure there was trillions more available to invest in risky deals. It made the crash more severe.

Your perception that 'all these people got loans that shouldn't have and didn't make their payments and that caused the crash' is overly simplistic. It was a house of cards scenario, the perfect storm, the sinking of the Titanic. A perfectly calm sea, moonless night, no binoculars, ice warning the captain never got, bergs further south than ever, and a disastrous decision to reverse engines and try to steer at the same time.

Oh, and AIG failed because they had to pay off the credit default swaps when the securities lost all their value.

Lenders were allowed to lower the minimum credit scores down to 580 and increase the ratios of debt to income. No one....forced them to do that.

No one prohibited them from doing it.

Gee, maybe if we shouldn't trust the financial economic experts on the economy, we shouldn't trust the scientists on global warming.

Massive false equivalency.

it seems like Greenspan was in favor of repealing it.

and honest because greed. He wrote a book.

them? Wasn't it their job to make sure the loans were secure? If a million non-trustworthy people had loans the bankers were not doing their jobs. Years ago the bankers had no trouble realizing I did not have enough money to afford a home. They had not problem turning me down. What happened between 1975 and now?

So, in this case, according to Elizabeth Warren

This is the lie those wed to Wall Street keep telling us.

that the best way to rob a bank blind is to own one. Essential viewing.

But I can tell you this. By the time he left office, I was happy to see him go. I would have been happier if his good buddy Bush wasn't moving in, but regardless, by that time a lot of us on what you term the "fringe left" (actual Democrats) had figured Clinton out, and as time goes by, our assessment of him has proven correct.

I don't want his miserable ass anywhere near the white house anytime in the future.

And BTW, your carefully constructed quotes don't contradict the contention that Glass Steagall repeal led to the 2008 crash.

A slick, two-faced lying crook who could lie far better and more convincingly than Nixon ever could. We got snookered, son.

But I don't like Bill Clinton.

Except I wasn't defending him stupidly... I was doing it reluctantly.

and caused the huge TARP bank bailout. The banks, where depositors hope their money is being kept safely, could not stay in business once the last batch of derivatives, the ones based on bum mortgages in Florida and California, collapsed.

Banks and casinos should always be separate.

That they no longer are is Bill Clinton's lasting legacy.

The Gramm connection

March 29, 2008 9:04 amMarch 29, 2008 9:04 am

Aha: the Politico notices that Phil Gramm, McCain’s economic guru, can also be viewed as the father of the financial crisis.

The general co-chairman of John McCain’s presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today’s economic turmoil.
http://krugman.blogs.nytimes.com/2008/03/29/the-gramm-connection/?_r=0


Repeal of Glass-Steagall Caused the Financial Crisis
In fact, the financial crisis might not have happened at all but for the 1999 repeal of the Glass-Steagall law that separated commercial and investment banking for seven decades. If there is any hope of avoiding another meltdown, it's critical to understand why Glass-Steagall repeal helped to cause the crisis. Without a return to something like Glass-Steagall, another greater catastrophe is just a matter of time....

...Yet, the fact that there were so many parties to blame should not be used to deflect blame from the most responsible parties of all—the big banks. Without the banks providing financing to the mortgage brokers and Wall Street while underwriting their own issues of toxic securities, the entire pyramid scheme would never have got off the ground.

It was Glass-Steagall that prevented the banks from using insured depositories to underwrite private securities and dump them on their own customers. This ability along with financing provided to all the other players was what kept the bubble-machine going for so long.

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis


Sorkin’s Glass-Steagall straw man
Of course its repeal contributed, directly and indirectly, to the financial crisis

But this column is even more wrongheaded than that. Here’s Sorkin (emphasis mine):

But here’s the key: Glass-Steagall wouldn’t have prevented the last financial crisis. And it probably wouldn’t have prevented JPMorgan’s $2 billion-plus trading loss. The loss occurred on the commercial side of the bank, not at the investment bank.

That’s just not right. The whole purpose of Glass-Steagall, as David Dayen notes, was to prevent commercial banks from engaging in Wall Street-style speculation.

In other words, Glass-Steagall would have prevented JPMorgan from owning Chase, but it would have also prevented Chase from making those bets. We all know now that the bank wasn’t hedging its portfolio of loans. It was using its taxpayer-insured deposits to make $100 billion bets for profit—on synthetic credit-default-swap indexes no less.

http://www.cjr.org/the_audit/sorkins_glass-steagall_straw_m.php

Phil Gramm, the former Republican Senator from Texas who co-wrote the act that undid Glass-Steagall, said:

“I’ve never seen any evidence to substantiate any claim that this current financial crisis had anything to do with Gramm-Leach-Bliley. In fact, you couldn’t have had the assisted takeovers you had. More institutions would have failed.”

SOURCE.

My take from September 2008:

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

Ah, it is so rewarding to see Buy Partisanship.

In that article.

Since the repeal of Glass-Steagal, they've specialized in all kinds of Wealth Management:

http://financialservicesinc.ubs.com/revitalizingamerica/SenatorPhilGramm.html

Elizabeth Warren Champions Bill to Restore Glass-Steagall Act and Rein in Wall Street

http://www.truth-out.org/buzzflash/commentary/elizabeth-warren-champions-bill-to-restore-glass-steagall-act-and-rein-in-wall-street/18726-elizabeth-warren-champions-bill-to-restore-glass-steagall-act-and-rein-in-wall-street

I don't see anything there about that.

I'm still looking for her thoughts and quotes on that. In the meantime, I thought you'd appreciate learning her position in favor of reinstating Glass-Steagall.

prevented the 2008 crisis.

And because the investors were not insuring their own risks FDIC did not have enough money to cover the crash and we ended up bailing them out.

Risky investment was obviously the cause. I also wonder if banks would have been making risky housing loans if the money was their own money instead of OUR money.

Glass-Steagall allowed those of us who could not afford to gamble on Wall Street to have a safe haven for OUR money and OUR pensions.

It also allowed the investment bankers to use their own money as they wanted. But they were not covered by FDIC which worked to limit the risk they were willing to take. By removing Glass-Steagall the bankers were allowed to take huge risks with the combined money of both commercial and investment depositors insured by taxpayers.

And because the investors were not insuring their own risks FDIC did not have enough money to cover the crash and we ended up bailing them out.

None of the failed banks were FDIC insured to begin with (except Citi, which failed later from its own problems, and its retail deposits weren't affected). FDIC insurance comes with pretty strict capital requirements that the repeal of Glass-Steagall didn't touch.

Also, the bailout made money for the government; it didn't cost money.

true of all banks and most of us do not use those banks we use the ordinary banks like US Bank. And Citi bank was big enough to effect a lot of people. Yes, FDIC has rules but not regarding risky loans. At the time I remember bearing them say that FDIC was not big enough to pay for the whole mess.

Maybe the government made money but the people did not. How many people lost everything because of the actions of those banks? And in the end got nothing back. My grandson and his wife lost their home and never got anything but bad credit ratings. All of us knew they were unable to make payments - he was unemployed at the time they bought it. But somehow the crooks at the bank did not see that. They were kids. The lenders took them for everything they had. After all this time they are finally getting the mess straightened out. There were no protections in place for the people. just for the banks. Frank-Dodd did not fix that.

Not the sole culprit but part of a long pattern of sins of omission and commission that created a monopolistic economy with highly concertrated wealth and power.

All along there were red flags as we deregulated and allowed the chain of mergers, mega mergers, and mega-mega mergers to the pount we are today.

All along the way, they were warned by many -- including real economists -- of the folly. But they ignored and dismissed them in the same imperious tones as your post.

The failure (refusal) of the Third Way Democrats to take steps to prevent the series of bad policies -- and undoing of good polucies -- allowed the Corporate/Wall St. Oligarchs to become "too big to fail" and ultimatley tank the economy with their greedy recklessness and outsized power.

They fucked up at a thousand steps along the way, and they joined the GOP in promoting the big Supply side con job.

I'll listen to people like Elizabeth Warren over the cabal who aided and abetted this along the way -- and their apologists.

... and bullshit of the highest order.

At the very least, with glass-stegall we could have let the phony-money banks FAIL and kept the real actual depository banks alive.

This reminds me of when Nixon was made over to be a cool guy.

If I hadn't seen it myself, I wouldn't have believed people were ignorant enough to buy it, but yes they are.

Next thing, we'll be haring that George W. didn't start the Iraq war.

That's a straw man argument. It's not the point either Warren or Sanders are making. No one has said Glass-Steagall was the primary cause of the market bubble and the collapse. But it wasn't irrelevant either. The primary cause was widespread de-regulation and consolidation, combined with the utter lack of concern on the part of the financial houses as to what would happen when they inflated yet another speculative bubble and allowed it to explode all over the world's economy.

This is rather silly:

Talk about half-truths and peddling myths. The gigantic, world-destroying market bubble didn't happen because people just suddenly couldn't remember how to pay off loans. The banks and financial houses, free of regulation and oversight after decades of whining that the bad old government was holding them back, and with full confidence the American taxpayers would bail their sorry behinds out when they blew it, CREATED THEIR OWN MYTHS, deciding that "real estate prices never go down everywhere at once" and that therefore any mortgage, good, bad, or otherwise, could be chopped up and sold as a highly-rated mortgage-backed security.

The lenders had ZERO CONCERN as to the quality of the loans, and yet they were the ones in the best position to ensure the loans they were making weren't imaginary.

When even the crappy loans ran thin, JP Morgan Chase sent around its infamous "Zippy Cheats & Tricks" memo, helpfully advising its underwriters as to how to circumvent Chase's own underwriting software by falsifying personal income until the loan got through.



http://www.oregonlive.com/business/index.ssf/2008/03/chase_mortgage_memo_pushes_che.html

The result of all this deliberate self-deceit was that real estate prices skyrocketed. Anyone could get any loan, for any amount, because the lenders ceased caring about anything but shoving them out the door. The result was that even the most careful, considerate home borrowers imaginable were presented with a market based entirely on the theory that prices would continue to go up and up and up. People making far too little to afford a given property were being given gigantic loans and told they could re-finance, so who cares?

Borrowers weren't in a position to tell people making $20k a year they couldn't afford a $400,000 house. The lenders created the reality for everyone, and then took the profits and left, billing tax payers for whatever damage they did to themselves in the process.

It's a bit rich for the lenders to be blaming the borrowers they lured and snookered and lied to and about for the disaster they foisted on everyone.

A hedge-fund manager, writing on Forbes:


http://www.usnews.com/opinion/blogs/economic-intelligence/2012/08/27/repeal-of-glass-steagall-caused-the-financial-crisis

The Washington Post allowing that the repeal was not "the proxmimate cause" but was a factor:



http://www.washingtonpost.com/repeal-of-glass-steagall-not-a-cause-but-a-multiplier/2012/08/02/gJQAuvvRXX_story.html

There is nothing even remotely "fringe left" about the rather unassailable observation that BANKING DE-REGULATION CAUSED THE MARKET CRASH. Glass-Steagall, the failure to regulate derivatives, giant mergers, and on and on and on.

No one in the world honestly thinks it was just some kind of $4 trillion fluke of irresponsible borrowers, descending on the poor banks and forcing them to create a gajillion bad loans and selling them as B-rated securities when everyone knew they weren't. That is not a thing that "business and financial experts" think. It is a really weak lie they tell, because they want to go and on, sucking the country dry with one greedy scheme after the other, because so far, no one has stopped them.

The failure of these pure investment banks and the securitization of mortgages was the trigger of the financial crisis, but it wasn't the actual crisis. The crisis was the latticework of credit default swaps that was constructed on top of these institutions and instruments. The value of these CDS and derivatives were valued at $1,144 trillion, which was twenty-two times larger than the GDP of the entire planet.

Why was the entire banking system infected with these bad investments? Because of deregulation and specifically because of the repeal of Glass-Steagall, a new market was created where formerly savings and loan banks could purchase these derivatives. Glass-Steagall would not have prevented investment banks from creating and selling these derivatives, but it would have prevented the enormous market for their sale. It would also have prevented your local bank from being exposed to the catastrophe when these derivatives unwound and became worthless.

The crisis wasn't the failure of a handful of investment banks, it was that every bank and investor was sold bad paper, and prior to Glass-Steagall, your local bank wasn't allowed to buy them. Glass-Steagall wouldn't have prevented the trigger, but it would have stopped or put a serious dent in the size of the derivatives bubble.

Is Mr. Clinton telling the truth? Technically, about the trigger, but he's a damned liar about the crisis. Considering how many people were harmed by his actions, he has no shame.

Banks with the help of politicians like Mr. Clinton tore down regulations that protect the people. They gambled with our money, sold us bad investments, and created the largest pile of bad paper in human history. Then, when the house of cards came tumbling down, rather than bail out the people who got ripped off, we printed more money and handed it to the criminals that caused the crisis in the first place.

Banks got bailed out, we got sold out.

If you want to stand with the bankers, that's your business, but don't tell us that we're delusional to call out criminality and demand we put back the rules that protect the 99%.

I have read from financial experts, questioned financial experts, and researched papers from professors of finance--none of which are liberal in politics. You say:

Business? That is a strange word for this.

Let me ask what you know.

What is a collateral debt obligation?
What is a credit default swap?
How do banks leverage money? How does leverage effect markets?
Were there any increase in leverage ratios?
How does the end of Glass-steagall increase leveraging in markets, or does it?
How were mortgagees bundled in the mid-00? Did this change as the bubble grew?
What effect did the Russian Bond default in the 1990s have on the housing bubble?
How were banks effected by the 2008 crash as well as brokerage houses?
Subpar lending, how does that work?
What is the agency problem?
What effect did the 9/11, the dot.com bubble and the FED policies afterward have on the housing bubble?
What effect did hard selling and fraud have on the crash?
What effect if any does income inequality have in this event?

Finally, discern the difference between businessperson and financial expert?

Learning what CDOs and CDSs are and how leverage works was a big take away from all your research and interviews with financial experts? That is some hard hitting reporting...

Not great with reading comprehension are you?

To repeat, I've done reseach and understand how the colapse happened, and from the research the OP is wrong. His attitude that he knows more than others from one article is exposed with me. So I ask the OP some questions to see what his knowledge level is. It doesn't seem like much!

When I see ANYONE post about banks making mortgage loans in reference to the subprime crisis, I know that person is ignorant of the actual story. That includes over-hyped spear-carriers for finance and politicians.

The crisis was in two stages. The first stage was when the subprime market locked up in late summer of 2007; the second stage was the securities based on subprime became worthless as collateral. That almost came to a head in March of the next year when Bear fell apart. Bear had problems because nobody was willing to accept its collateral or massively increased the haircut, so they weren't able to get the overnight funding to stay solvent. They were leveraged as hell and absolutely had to have cash rolling in everyday just to keep afloat. This would be exactly the same thing that killed Lehman a few months later.

When Lehman went, through the absolute stupidity of Paulson and co., it all hit the fan. Lehman was dialed into EVERYBODY. No pun intended, but bear in mind that Bear wasn't the only financial firm that was massively leveraged AND relied on the repo market to keep itself funded. That was a select group called everybody. Nobody would take their MBS as collateral anymore, or only at ridiculously discounted rates (also know as the actual market value), so all the investment banks began to collapse. This isn't in dispute.

The issue for the commercial banks was twofold: 1) they held a large amount of MBS on their books both because they couldn't move them and they'd held some back as an investment and 2) they were tied to the collapsing investment banks because they provided part of the financing for them. Oh, some of them, like BofA, had bought the originators who had actually made the loans that started everything. Those originators, Countrywide being most notable, failed in part because they had a ton of loans on their books that they couldn't move (also because of many bad loans shifted back to them under the reps and warranties). That, plus leverage, put multiple stresses on those banks.

Whenever I read about the subprime crisis on DU, I see people talking about the actual loans made and CDS. While that's cool and all, I almost never see anyone mention the actual securities (MBS or mortgage backed securities) or the collateralized debt obligations (CDO). The loans themselves are useful to discuss only in the sense that it's necessary to know the composition of the securities and the pools shed light on the actual value of those securities. CDS, or credit default swaps, are useful to understand in their role in allowing unregulated casino gambling in regard to the secondary market for mortgage loans. Neither explain the crisis adequately without looking at the securities.

Everybody securitized loans through MBS or recycled terrible tranches through CDOs. That's just a fact. It's completely ignorant to talk about "the banks making loans" because the loans weren't the issue. Those loans wouldn't have been made without the securities. Every last investment and commercial bank of size bought up loan pools, securitized those loans into MBS, and then sold the MBS to investors, usually institutional investors. The MBS were divided into slices, called tranches, based on the rating given to a sampling of a particular pool (we'll leave aside the fact that the ratings agencies were paid by the securitizers to do those ratings). Institutional investors tend to need very highly rated securities, so those sold well. The lower tranches usually didn't sell at all. With all that crap piling up, first the investment banks and then the commercial banks repackaged those terrible tranches into new securities, called collateralized debt obligations or CDOs. The CDOs, consisting of loan pools already rated as bad by the agencies, were then re-rated by those same agencies. Miraculously, many of them magically got AAA ratings, or the equivalent, in their new form! They were then eligible to be sold to the institutional investors who had to avoid them on the first go-round.

So, we've got everybody making and selling crap, while egging on the originators to keep making the raw materials. As well, we have those originators leaning on appraisers to falsely value homes in order to inflate the size of the loans. The originators make the loans then move them to the banks, both investment AND commercial, who then package them into securities and sell them to investors. We also have the banks not doing due diligence, ignoring the results of that due diligence, or doing extremely poor diligence by design. Additionally, the banks are busy lying to the investors about the quality of the pools that make up their MBS. Not a pretty picture, is it?

So, what does all this have to do with Glass-Steagall? It should be blindingly obvious by now. Had Glass-Steagall not been repeatedly undermined by the Clinton administration handing out waivers left and right before joining with Phil Gramm to finally kill it, the commercial banks couldn't have done ANY of this. Guess what? You'd have had a much smaller MBS market. You'd have had a lot less CDOs. In short, there would have been far, far less risk of a total catastrophic meltdown because the amounts would have been smaller. That's the damage Clinton, Rubin, and Summers did. You can, pardon the pun, take it to the bank.

When Lehman went, through the absolute stupidity of Paulson and co., it all hit the fan.

Bingo. Ironically, "let them fail" being sort of a mantra here, letting Lehman fail was exactly the wrong thing to do.

the commercial banks couldn't have done ANY of this.

The commercial banks didn't do any of "this". That's why they're still standing and four of the Big Five IBs fell.

Thanks for agreeing on Lehman. You're wrong on the commercial banks. They were fully part of the crisis because they added garbage to it. Here's just one example:

http://www.bloomberg.com/news/articles/2011-07-07/wells-fargo-to-pay-125-million-to-settle-mortgage-backed-securities-case

They created the crap and then sold it to the swinging d***s on Wall Street, who ate the garbage like it was caviar and ended up having to be bought out by the CBs a year later. Kind of clever, in a way... every bad BoA security that Merril Lynch bought made ML that much cheaper for BoA to buy later.

I was just saying that the retail banks insulated themselves from the consequences of their bad actions, not the IBs or the economy as a whole.

Both investment AND commercial banks securitized mortgages. Both packaged them into MBS and CDOs. The difference was that the commercial banks were less leveraged and not dependent on the repo market like the investment banks. The problems for the commercial banks were that they were functionally insolvent because a huge chunk of their assets weren't worth squat, their legal liabilities were immense, and they lost access to quite a bit of revenue when the investment banks fell apart. Everybody we call a bank securitized those mortgages. The commercial banks just weren't as close to the edge, except for Citi.

I don't think they insulated themselves by design. It was dumb luck and differing models. As for things like buying ML, I don't know if that was a good move. Until that sweetheart deal Holder gave them a few months ago, their potential liability between ML, Countrywide, and their own actions was estimated at $80B. They were in litigation with both governments and private entities for years over the fallout from those purchases. Morgan is another example. Between 2009 and 2013, they spent $16B in legal fees. Jamie Dimon was celebrating a bit last month when earnings came out because Morgan had pared their legal fees down to $2B a year instead of 4. They didn't collapse, but they paid a gigantic price. Unfortunately, they didn't pay the price we needed them to pay, radical downsizing, and they continue to be a systemic risk (all the big banks, not just those two).

Commercial banks at least in theory have a more conservative (with a small "c&quot mindset and don't attract the people who watch Boiler Room and cheer.

their potential liability between ML, Countrywide, and their own actions was estimated at $80B

Yeah, I've always wondered if that settlement was implicit in somebody's mind from the beginnnig, because I can't see an upside for BoA otherwise.

I think you're right about the mindset.

From the statements of Holder and Breuer, I'd say you're right. They were obsessed with putting out the little fire, giving no mind to the giant amount of deadwood just waiting to feed the next blaze. It's pretty clear, at a minimum, that they just wanted to tide everything over so they'd be safely out of office when it all came apart again.

"Whenever I read about the subprime crisis on DU, I see people talking about the actual loans made and CDS. While that's cool and all, I almost never see anyone mention the actual securities (MBS or mortgage backed securities) or the collateralized debt obligations (CDO)."

I noticed this a while back, also. I've always thought it was odd.

That was a great post sweetened with lots of knowledge. Until you alluded to it, i'd forgotten about mark-to-model accounting and how that can be manipulated to gain higher ratings, better position, and the such.

We could learn much from you.

A big crisis never has a single cause, which is why it needs more than one solution.

If the partial repeal of Glass-Steagall did not cause the crisis, it certainly exacerbated it for giving bankers the chance to effectively print their won currency (CDOs).

and while it may have exacerbated it, thats a HUGE difference than being a cause. Derivatives also exacerbated it, but at the end of the day, the root cause was the subprime lending, no doubt about it. All the little things that exacerbated it were each results of things several presidents of several parties, and many MANY, if not nearly all members of Congress voted for, be it amendments in bills, appropriations things tucked in, etc. In other words, this is not a situation where its OK to blame Bill Clinton, unlike Iraq where because George W Bush made the case and pushed the case for war, it is OK to blame Bush for that.

And 65 years of USA domination of world economic and finance affairs. And the existence of a Kondatriev cruve which was blatantly ignored by Paulson and Bush.

The subprime lending was contributing as much as everything else. There was no single cause, but a lot of things that together created a big cluster of f*ck-ups.

That's ever so much better!

nm. No doubt you will never understand what people are telling you since you cannot fathom why you are mostly wrong.

Seems your bumper-sticker wisdom is receiving the relevant amount of disdain it earned.

Then another post defending the repeal of Glass Steagall ...

Somewhere, within the intersection of those two disparate threads, lies one person ....

You've been here about 3 weeks ... Jam packed full of information, ready to defend banking interests ...

I think it's obvious you have a specific agenda and you're armed for bear ... I am guessing this is your work: Being in forums like this to present the opinions of one specific contender...

Nuff said ... All campaign operatives get shitcanned to my ignore list ...

not everyone who likes the Clintons is a "campaign operative." That smear is commonly seen on other forums, too, usually coming from Republicans...