This was too rich to pass up. I saw this posted on the Open thread last night:
That got me burned up. That’s because I’d wager real money that if the same question was asked of the general populace, 87% of ALL Americans would say that the crisis was caused by executive bankers. Greedy executive bankers who gave shitty loans to anyone who wanted them, including billions upon billions to other stupid wealthy assholes who gladly took that money and gambled it on highly speculative deals.
We can argue about which laws were passed enabling these bankers to act so recklessly and allowed them to believe that they could act that way without any repercussions. But the reality is they were reckless. There is simply no denying that. As there is no denying that the Bush Admin and those in charge of our banks back then simply didn’t do their jobs and allowed the greed to go unchecked. Elizabeth Warren eviscerated one such asshole in a hearing the other day.
Mr. Chanin, as Sen. Brown mentioned from 2005 to 2011 you held top positions in the Federal Reserve's division of consumer and community affairs, and in those positions you had both the legal authority and the legal responsibility to regulate deceptive mortgages, including dangerous subprime lending that sparked the 2008 financial crisis. But you didn't do it, despite years of calls and even begging from consumer advocates and others asking you to act. Instead, you did essentially nothing.
Now, your failure had devastating consequences. […] According to the Dallas Fed, that crisis cost the American economy an estimated $14 trillion. It cost millions of families their homes, their jobs, their savings. It devastated communities across America.
So when you talk now about how certain regulations are too costly or too difficult to comply with, you sound a lot like you did before the 2008 crisis when you failed to act. So my question is, given your track record at the Fed, why should anyone take you seriously now.
It’s ironic that today the same assholes who allowed our economy to collapse are now complaining how the new regulations are strangling banks and costing them a ton of money. Well what about all the people who are being choked to death with debt and all the money it’s cost them, their families and the economy as a whole? 14 trillion according to the Dallas Fed.
These bankers like to blame the poor people for the financial collapse but the reality is there were a lot of bankers, Hedge Fund assholes and other idiots involved in the FIRE industries flush with cash who gambled hundreds of billions of dollars on shitty investments. Yet they blame Po’ Ma and Pa Smith in Mayberry, who got pushed into shitty $100,000 loans and $50,000 HELOC loans, for causing the financial collapse. They forget that while the subprime collapse played a part, it was the big investment firms who bought those shitty loans packaged up in shitty investments that played a bigger part. If they hadn’t bought those shitty investments full of shitty loans in the first place, there wouldn’t have been a demand for them and banks wouldn’t have been so eager to give everything with a pulse (and sometimes without) a loan. Banks eased their lending standards to meet the demand for these types of investments. Banks then pushed these loans through, often bullying anyone who stood in their way (including appraisers and other real estate professionals).
But the problem went beyond that. If giant ratings agencies hadn’t given out AAA ratings to these shitty investments, like candy on Halloween, then investors would have demanded a higher rate on their returns or not invested in them at all. This would have resulted in less demand for these shitty investments masquerading as good deals. If insurance companies like AIG hadn’t then insured these shitty investments then they wouldn’t need bailing out when those shitty investments blew up. Hedge Funds, banks, ratings agencies, real estate investors and insurance companies ALL had a much bigger impact than Ma and Pa Smith with their piddly $100,000 loan.
From an article in CNN Money dated March 17, 2008
The roots of the current crisis lie in the euphoria of the real estate boom. With housing prices soaring and the economy solid, financial firms dove into the lucrative mortgage market. To meet the insatiable desire for mortgage-backed securities, firms loosened their lending standards and extended credit to people with weaker financial backgrounds.
But the lenders didn't put in place the necessary controls to handle the risk of a downturn in the housing market, said Amiyatosh Purnanandam, assistant professor of finance at the University of Michigan. The financial firms weren't ready to cope with a downturn in the value of the housing market or of these securities.
The signs were there: The rates paid on risky securities, such as junk bonds, moved closer to those of super-safe Treasuries, an indication that investors didn't feel the need to pay a premium to take on more risk.
It wasn’t the poor who decided to make ridiculous amounts of money in the “lucrative” mortgage market. It was financial firms ie bankers. They needed to issue loans and lots of them to make more and more money but they didn’t account for the risk. These idiots really believed that the housing markets would continue to go up 6%, 8% or 10% a year over year. They gave out money to landscapers and hairdressers and anyone else, to not only buy new houses, but also build new houses to meet the demand for new housing which was being artificially propped up by their loans. They never considered the fact that housing markets are cyclical and also tend to fall.
Compounding that was other factors like this:
The crisis reached new heights last Thursday when Bear Stearns suffered a classic run-on-the-bank after questions about the investment bank's finances surfaced. The bank, one of largest underwriters of mortgage-backed bonds, had suffered greatly in the meltdown and didn't have the diversity of revenues that cushioned its rivals.
Bear Stearns basically put all their eggs in one basket and when that basket fell they were fucked.
On a local level here in CT there was a Hedge Fund in Greenwich/Stamford CT with up to $6 billion in real estate assets at the height which all went up in smoke. $6 billion dollars equals 60,000 loans to poor people equaling $100,000 each. That was ONE Hedge Fund.
But Antares Investment Partners had a darker side. The same alpha male executives who loved the trappings of superwealth also risked hundreds of millions in investors' money on overleveraged, underperforming deals and tapped financiers who lined up to provide cash, never looking closely enough to see the cracks in the high-flying company's facade.
"I said to myself, This is going to end badly,'" said Matthew Allen, 37, an asset manager who worked for Antares from September 2006 until he was laid off in October 2007.
Poster child for success, failure
The bricks and mortar of the Antares real estate empire came from sources such as Ivy League endowments, pension funds, family trusts, moneyed Arabs and a Wall Street institution now infamously associated with two words, Chapter 11, but the blue chip blueprint was flawed.
Antares is now a shell of its former self, when it controlled what company literature touted as $6 billion in real estate assets, including a 35,000-square-foot spec house, a pair of garden apartment complexes in Greenwich known as Putnam Green and Weaver's Hill, 82 acres of land it planned to develop in Stamford's South End and a stake in the swank Delamar Greenwich Harbor hotel.
These idiots were paying way above market value for their assets and expecting huge returns on them and they were leveraging themselves up to their eyeballs to do it. The money they borrowed to buy up this real estate was packaged up and sold off to some other investors who were promised great returns on their AAA rated investments. In one case Antares paid millions for a swanky office in downtown Greenwich and then rented it for over $100/sf to two other hedge funds, who ended up breaking their leases leaving Antares with nothing and their investors with less than nothing. They eventually lost that office. Antares also bought up a ton of prime real estate in the priciest part of Greenwich with plans to build giant mansions which they were retailing for $36+ million. Well they were taken back and recently sold for about a third of that leaving alot of lawyers full of work but alot of other people out their money. Yet Ma and Pa Smith are to blame according to the same bankers who likely enabled Hedge Funds like Antares to gamble like crazy.
You want to get to the root of the problem? Well it’s not the poorest 50% but rather the richest 1% who thought they ruled the world and were assholes about it and now are blaming the poor people for their fuckups.
"Oh, these people in Antares, they're an example of the worst that's happened with new-money types. No class whatsoever," said Robert Tuthill, a former Putnam Green tenant who contracted to buy a condominium at the complex from Antares during an ill-fated conversion project.
BTW those 82 acres of real estate in the Stamford South End is now being developed by BLT, another Hedge Fund that came in and scooped up all of Antares stuff. Putnam Green was a high rise apartment complex in downtown Greenwich and Weaver’s Hill was an apartment complex in the Glenville section of Greenwich. Both apartment complexes were bought by Antares and they planned on converting them to condos and selling them off. They lost both and the bank had to take them over and planned complete those projects before that bank went under too. The bank that financed those deals?
Lehman Bros.