Lest anyone should forget:: The Tightening Credit Market: A Chronology of Warnings Ignored

[PA Democrat]

Perhaps the American public needs to be reminded that Alan Greenspan and the rest of the Bush administration had PLENTY of warnings of the impending mortgage market meltdown. And they chose time and time again to cave to industry pressure and backed off regulating the credit industry.

Please, do yourself a favor and read this excellent NYT synopsis of all of the warnings that were willfully ignored.

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A few tidbits from the time line:

2000 Edward M. Gramlich, a Fed governor, warns Chairman Alan Greenspan about dubious practices of subprime lenders. Mr. Greenspan rejects the idea of examining books of bank affiliates.

June 2002 Wrangling between industry and consumer groups forces Ms. Bair (a top Treasury official) to cancel a "best practices" code for subprime lenders.

Aug. 2003 Comptroller of the Currency seeks to block states from imposing tougher lending rules by nationally chartered banks. States say federal rules are weak, but the comptroller wins after a court fight.

June 2004 Officials from Greenlining Institute warn Mr. Greenspan of widespread deceptive lending practices but he declines to criticize lenders.

[gasperc]

1. they weren't spefic enough with the banks and borrowers involved

he needed an excel spreadsheet the size of the fucking phone book with the name of every bank, the borrower, their credit score, their true income, the fake income used on the loan documents and the potential effect that the "teaser" payment switching to it's "adjusted" rate would have on the economy. See, because without ALL of this data at his disposal, the "warnings" were just too fucking vague for a "genius" like Greenspan to figure out.

[Lasher]

2. We had better warning than that.

One thing I have learned from history is that we do not learn from history. Not even recent history.

Savings and Loan Crisis

The US Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. More than 1,000 savings and loan institutions (S&Ls) failed in "the largest and costliest venture in public misfeasance, malfeasance and larceny of all time." The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government -- that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts--, which contributed to the large budget deficits of the early 1990s. The resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse-selection incentives compounded the system’s losses.

A taxpayer-funded government bailout related to mortgages during the S&L crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher-risk loans during the 2007 subprime mortgage financial crisis.

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession. Between 1986 and 1991, the number of new homes constructed dropped from 1.8 million to 1 million, the lowest rate since World War II.

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

[PA Democrat]

3. I guess the lesson that was learned for the movers and shakers was

to make money while the getting was good, and that the US government would step in and bail you out in the end.


Of course the Bush administration and way too many people in congress (including some Democrats) are too interested in helping out their corporate buddies to consider the long-term implications. It's all about quick money, isn't it?

[sinkingfeeling]

4. Is this the problem Bush & Co. saw 'comin' and took actions to avoid'?

[PA Democrat]

5. Yes. Kind of like seeing a train coming from a distance of 2 miles away and waiting

until it runs you over to try to get off the tracks.