The politicians thought they could trust wall street since wall street was suppose to be 'regulated'. Who regulate the regulators? What happens if the entire global financial system is corrupt? It's like hiring a wolf to guard the herd of sheep. They repealed the Glass-Steagall act because every country was repealing it or everybody was doing it. Why do you think they had the Glass-Steagall in the first place? Why do you think pot is illegal? Why do you think they have the uptick rule?
Trefoil, Solomon Brothers created the whole securitization market in the 80's and they were an investment bank then. As far as commercial banks selling off their mortgages, it probably created a moral hazard as it wasn't the bank's risk. That notion of the moral hazard is part of a larger debate as to the many factors that created the real estate bubble and the eventual pop. And that moral hazard was in place for many participants in the market from banks to hedge funds to greedy mortgage brokers to house owners and speculators. Another point to how the scale helps, most bank trading desks produced record earnings in 2008. However this was all offset by the losses in the mortgage desks. And for firms like JPMorgan the deposit base was so important. That's why investment banks like goldman, morgan, etc were offering CD's at 9%. They needed funding. I do not think that the repeal Glass-Stegal was one of the factors that created the financial crisis. I think the talk about it is political rhetoric to push blame onto one bad
the real fault is that wall street saw that in the short run put sellers could make a fortune in bonuses. When the banks changed from parthernships to corporations... they no longer had their semi retired partners looking over their shoulders at their assets. It all became a game of how big a bonus could you suck out. So they found a way to sell puts on a multi trillion dollar scale. Selling Mortgages in states with some non recourse loans are most definitely like selling puts. so wall street sold puts, thereby had short term profits and massive bonuses until in blew up. And the fact is they knew they would blow up so they got sort of fake insurance from aig and mgic.
It wasn't just Wall Street banks that are to blame. But I agree on the selling puts. People thought they were geniuses selling puts.
This is quite possible. The one thing government officials are good at is throwing and catching blame.
Bernie Madoff blamed his victims for losing money. His victims were greedy and deserve to lose money. Classic fraudsters response. Now wall street fraudster reasoned it was the government's fault? It was the fault of wall street fraudsters. Classic wall street fraud. Sold fraudulent mortgage CDO to global 'institutional clients to non-existent borrowers. Basically the paper was 'worthless' and the insurance company went bankrupt. It was easy money. Investment bankers were and wall street firms had a license to steal. Traders and investors are still being ripped off today just not in the wholesale fraud like the mortgage CDO that bankrupt banks and many investment funds.
I think blaming everything on the wall street banks is simplistic. There were many hands in the cookie jar. Are you saying Fannie and Freddie didn't do anything wrong using their ACTUAL government issued put? Are you saying that the government wasn't to blame for their lack of oversight on Fannie and Freddie? What about the individuals who used their houses at ATM machines to buy ipods and BMWs? What about the mortgage brokers and real estate agents who got their cut everytime a house was flipped? What about the growing wealth in other parts of the world who couldn't get enough of these mortgage bonds? What about Hank Paulson for arbitrarily protecting one bank and letting another one fail? What about the hedgefunds that were buying all these securities? Bank trading desks are like Proctor and Gamble. They create a product and try to get people to buy it. People then decide if they want to buy it. If people didn't want to buy houses and if investors didn't want mortgage backed bonds and if the government didn't have it's own social agenda to promote home ownership this wouldn't have happend.
And by the way, if an investor doesn't do his homework and then loses money, he can't complain to anyone else. No one was required to buy a house or a mortgage back security. They chose to because they thought they would make money. And if they had they wouldn't be complaining if in fact there was fraud. I am not saying there wasn't shady stuff going on in the banks, but it wasn't only their fault.
are you an goldman sachs agent? it's all wall street fraudsters fault. fuck man! wall street fraudsters know the streets. Goldman Sachs own the streets. you think the Goldman Sachs network isn't aware the scams that goes down every day. the frauds are still happening. non-existent borrowers there was NO COLLATERAL what so ever..don't you get it. Asset Backed Collateral bonds ...ABC bonds investment banks like bear sterns could find enough qaulified borrowers to sell so they sold fake worthless bonds. and buyers thought they were safe since credit agency rated them and had insurance on the bonds. why don't you fuck off and stop defending fucking fraudsters.
Wow. That's kind of immature. I'm not anyone's agent. I'm not saying the banks did no wrong. But they aren't the only ones at fault here. And it's not constructive to look at the world in black and white. It's much more complicated than that.