Monday, February 20, 2017

The banks in general

I am still answering the poster on my previous post about my mortgage mess. You may or may not be interested, but I am locking replies to that post.

The banks were not required to loan to the poor. That is a talking point that was written to make the banks look like the victims and not the architects of the mortgage loan bubble. If there is no dispute, can you point to any evidence that this ever happened? Or is it pure conjecture?

The fact is that Phil Gram was key in passing the Commodity Futures modernization Act of 2000, which PROHIBITED the government from interfering in those transactions.

The root of the banking bubble was the Gram Leach Bliley act of 1999. It was sponsored by three Republican Congressmen, and enabled banks to invest in real estate, something that had been illegal since the great depression, when banks losing gobs of cash in the real estate market triggered the depression. The architect of the Gram Leech Bliley act was Clinton's Treasury Secretary, who left the administration after the act passed, and became an executive at Citigroup, being paid over $17 million. Gram left Congress and wound up as an executive at UBS.

 Before these two laws were passed, all of these loans were regulated and the trading of mortgages was public record, as they were required to be recorded at the county courthouse. The banks had a plan for that, too. They created a private records database called MERS that was out of the view of the public and government regulators. This allowed the banks to trade in mortgages without those pesky laws covering public records allowing the citizens to see what was really going on.

Once the safeguards were eliminated, this allowed the main part of the plan to come together: Banks were able to make high risk loans to people who could not afford to repay them, and securing those with mortgages on property that was worth far less than what the loans were worth, in effect making them unsecured. They did this by using appraisers who would say the homes were worth whatever they needed to be for the loan to look legitimate.

Then the banks bundled those loans into mortgage backed securities that were rated as AAA investments, and sold off to institutional investors- the retirement and pension funds of the American workers. When those loans began to fail, the funds crashed and the banks, through their Republican and TEA party friends, blamed the pensions of the workers, and screamed that they (the banks) were about to fail, and collected nearly $2 trillion in taxpayer funded bailout cash. Over $1.6 billion of that bailout cash was used to paid bonuses to bank executives for pulling off the largest transfer of wealth in human history.

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