Fanews, you mentioned several other people who were also to blame in your own post. From credit agencies to people who were being financially irresponsible to investors who weren't doing their own homework to banks that were engaged in some shady dealings. A lot of the country is to blame. I forgot to mention the home builders who started building thousands of homes in the hopes of selling them leading to an oversupply.
your a typical wall street ivy league fucking asshole blame homebuilders? Why don't you just fuck off with your bullshit lies! It's all wall street banks and investment banks fault.
I forgot that the TLC channel deserves some blame for producing a show called "Flip this house" where viewers saw some bozo buy a perfectly good home, add a granite countertop, Viking stoves, and paint some walls and then sell it for 50% more. They made it look so easy to make so much money.
Allow me to quote myself in full, instead of being misquoted as I was by you: The first sentence doesn't say the ib's, like Salomon (which of course became part of Citigroup so it didn't go bust; it was bailed out) went bust because of securitization; it says they went bust because "they were able to issue mortgages". That activity was directly prohibited by Glass-Steagall to ib's. What made the financial crisis truly breathtaking was that the same folks who could securitize the mortgages were also issuing them. That was true, after the repeal of Glass-Steagall, of the ib's and the cb's. It was like going from a propellor plane to flying an X-15. Pilots fly both, but the skills needed to fly the former are an order of magnitude less than the skills needed to fly the latter. To be clear: what it meant was that the banks could make a loan to some schlub with nothing but the clothes on his back, and then package it up, get the rating agencies to bless that package with a AAA rating, and then sell it off to some sap (disproportionately, the sap on the other side was a German bank, which explains why Germany keeps trying so desperately from letting any sovereigns go bust; it'd mean their banks, already shaky, would have to recognize still more losses, which might mean Germany might be revealed to be not much better than Ireland or Spain in its fiscal position) with more greed than common sense. It's not a coincidence at all that this happened less than a decade after Glass-Steagall was repealed.
while others were complicit... I see the question like this... the banks asked americans who wants free money? ... we will give you free money and we pretend we are giving you the free money at market rates but we are really just pissing away our future investors money and the tax payers money. Will sell it to you at 95 cents on the dollar since we have to pay mortgage brokers to pretend the borrowers can pay it back. then we will take our cut, pay warren buffets company to call it AAA and then sell a pile of IOUS and overvalued assets to our pension fund buddies and state employees at seriously inflated prices. We will also get the chinese to buy 1.5 trillion of it because the fed will just switch it out to bonds for the later. (we do after all own the FED) we will get others to buy the stuff by spending crazy cash on the buy side buyers and then promising then crazy jobs on the sell side once they screw their fund investors out of billions by buying this crap. and then when the house of cards collapses we help our buddies from harvard biz school fleece the few remaining idiots out of billions by pretending he did not hand pick the shit he was shorting. I am speculating here but Of course our brother in law has large positions in our buddies fund and his ventures just may have been funded by our bonuses. Then when we are just about toast. We will call our other buddy with the same last name as hedge fund buddy and ask him to get congress to bail us out so we can still get our bonuses.
I didn't know that you could get a mortgage from Goldman Sachs. I agree with your sentiment about the risk being cut up. I'm just saying that the banks weren't the only ones at fault. There were a lot of complicit people involved in that process. Starting with the homeowner who assumed he could pay back his mortgage on real estate appreciation (levered infinity to zero), to the mortgage underwriter who had no skin in the game because he knew he could flip the mortgage to the end user in Germany who was estatic that he could borrow at 1% and buy these mortgage backs that were yielding anywhere from 5% to 30% based on the tranche he bought and he levered up 50:1 (DB's leverage ratio in 2008 was 50:1, lehmans was 30:1). And the rating agencies allowed the German bank employees to justify the risk. Everywhere there was leverage on leverage on leverage. The banks while complicit weren't the only ones to blame. Securitization has been around for 30 years. Savings and Loans were securitzing loans as were Fannie and Freddie. Perhaps mortgages shouldn't be allowed to trade at all. Mortgage rates will be a lot higher and property prices a lot lower but maybe that is a desirable outcome.