Streams

Financial Crisis Fallout

Thursday, August 25, 2011

Bethany McLean, contributing editor at Vanity Fair and co-author with Joe Nocera of All the Devils Are Here: The Hidden History of the Financial Crisis, discusses the book, Wall Street, the S&P and the continuing financial woes in the U.S.

Guests:

Bethany McLean

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Comments [18]

Friendly Dobbs Ferry from Bangkok, TH

This program explains things pretty clearly. Over the past few years, I've seen a similar situation possibly brewing in Thailand. A number of major housing projects seem to be springing up everywhere in the suburban areas of Bangkok and other major cities. I don't know what's happening behind the scenes of all these projects, but I have witnessed many people with questionable financial qualifications being given loans for houses or condos out of their range. Their salaries often do not seem to justify the size of the loans which they are receiving. <a href="http://www.thailawforum.com/">Thailand lawyers</a> have sometimes referenced the banks in Thailand as a key contributor to the onset of the 1997 Asian Economic Crisis. It will be interesting to see if history repeats itself. That doesn't mean we can assume that lenders or other banking institutions are totally responsible for financial meltdowns, in either the Asia or US cases.

Aug. 31 2011 11:46 AM
Eugenia Renskoff from Brooklyn

Hi, I can't help it. Every time I hear the words foreclosure or financial crisis or mortgage fraud, they bring it all back to me. I mean, the horror of losing my condo in GA. Yes, there should be accountability by the top guys. I am sure they knew what the loan officers were doing when they did things they shouldn't have. Eugenia Renskoff

Aug. 25 2011 03:18 PM

... 400 super rich Americans control more wealth in the country than 150 million other Americans, and yet are effectively taxed at a rate of just over 16% while the rest of spay up to 35% plus higher levels of sales, property, and other taxes. To put that in perspective These 400 rich oligarchs effective tax rate has dropped by more than 2/3 since Dwight Eisenhower's administration – while the rate for working people has nearly doubled.

DO THE MATH!!

Aug. 25 2011 11:53 AM

We live in a country of unbridled capitalism not any kind of democracy. Free market capitalism is out of control and undermining any attempt at democratic process.

Marx may have been wrong about communism but, he was clearly correct about capitalism.

It is time to look to a better solution!!

Unfettered greed is not working!!!

Aug. 25 2011 11:53 AM

In this, the great United Korporations of America®, there is no right of left, no Democrats, no Republicans... there is only the Party of the Korporation® and the Holy $$.

Don't be deceived, the corporate superstructure is protected regardless of the so-called "party" in office.

Where did all the money go?? To the people without jobs, to struggling homeowners?? to students who can not afford outrageous tuition??? to people who can not afford basic health care???

NO!! It goes to the bankers and corporations and insurance companies!!

Record profits, bailouts, fewer jobs, higher premiums and tuition...

Where does the money go...??

The Super Wealthy are still so!!

In an economy like what we have now you can only get ahead and protect your assets with the collusion of a sympathetic government.

Do the math!!

Aug. 25 2011 11:52 AM
Nick Lento from NJ

From "too big to fail" to "too big to prosecute".

So long as money legally bribes the people who make laws...the people profiting from the corrupt status quo will remain above the law...and will continue to financially RAPE the rest of us.

This is a toxic parasitic cancerous way of running a country/society/civilization and it is not sustainable indefinitely.

The psychopaths at the top, of course, don't care about the long term as they know they will all be dead in the long term......it's all about satisfying their own unquenchable lust for money and power while they still breathe......and the most perverse element is that they generate political support by convincing the people that they are screwing that they too might someday become filthy rich enough to benefit from the lack of any real criminal accountability for the financial crimes of the super rich......which wind up being "perfectly legal".

The fact that NO ONE in the financial "services" industry has gone to jail for raping the world's economy speaks volumes....but still, there is little political will for a real revolution as the discontent has been channeled into the "Tea Party" folk who identify with their rapists.

On one level this is almost funny........if we humans don't wake up we just may find ourselves eventually extinct.

The laws of biology and physics can't be conned.

Aug. 25 2011 10:53 AM
Joyce from Manhattan

The guest's point of view does not seem to include the culture of the financial business that condoned "whatever you can get away with as long as we make money" and "masters of the universe" mentalities. I remember conversations with bankers and brokers before the crash, but when the mortgage on the horizon where they could only be seen as delusional, like talking to the emperor about his new clothes. They were scary conversations, the fear they inspired in me turned out to be well founded. Maintaining the right to prosecute criminal activity and negligence at the highest levels, and actually prosecuting, is vital to changing and reigning in that culture.

Aug. 25 2011 10:43 AM
gary from queens

@HughSansom

It is not conservatives who are giving Wall Street insiders a pass. It's Obama, through his DoJ. He hasn't prosecuted anyone. He simply demagogues the issue for political gain.

But WHY? Maybe because, as I write below, government itself is more indictable for the crisis than Wall street investors.

Aug. 25 2011 10:42 AM

Angelo Mozilo of Countrywide did no time and kept something like 75% of his ill-gotten gains.

Aug. 25 2011 10:39 AM
Sophie from Poughkeepsie, NY

I know of two families who lost their homes after tangling with Country Wide. They recently received settlements from a class action lawsuit checks one for $480 and the other for $4000. Of course their credit is still ruined.

Aug. 25 2011 10:38 AM
Billy Gray from Greenpoint

In fact, let's hear from Taibbi on the subject of whether this is just a matter of bad paperwork like your guest is alleging:

* * * * *

The issue goes beyond fraudulent paperwork to an intentional, far-reaching theft scheme designed to take junk subprime loans and disguise them as AAA-rated investments. The banks lent money to corrupt companies like Countrywide, who made masses of bad loans and immediately sold them back to the banks.

The banks in turn hid the crappiness of these loans via certain poorly-understood nuances in the securitization process – this is almost certainly where Scheniderman’s investigators are doing their digging – before hawking the resultant securities as AAA-rated gold to fools in places like the Florida state pension fund.

They did this for years, systematically, working hand in hand in a wink-nudge arrangement with clearly criminal enterprises like Countrywide and New Century. The victims were millions of investors worldwide (like the pensioners who saw their funds drop in value) and hundreds of thousands of individual homeowners, who were often sold trick loans and hustled into foreclosure when unexpected rate hikes kicked in.

In a larger sense, even the (often irresponsible) people who simply bought more house than they could afford were victims of this scam. That's because in many of these cases, credit simply would not have been available to those people had the banks not first discovered a way to raise vast sums of money dumping crap loans on an unsuspecting market.

In other words: if Bank of America hadn’t found a way to sell worthless subprime loans as AAA paper to the Chinese and the Scandavians in May, you can be sure that it wouldn’t be going back to Countrywide in June to lend out more money for more subprime loans.

And Countrywide, in turn, wouldn’t then have been sending masses of reps out into the ghettoes to offer juicy home loans to undocumented immigrants and refis to confused old ladies on social security.

Aug. 25 2011 10:37 AM
Accra from Queens

I cannot believe that your guest believes that criminality with respect to the 2008 crash does not exist at the upper levels of the banking world. After all the evidence that has been offered by no less than Oscar nominated documentaries seems to indicate otherwise.

Aug. 25 2011 10:36 AM
Billy Gray from Greenpoint

I cannot BELIEVE your guest's mendacity, Brian! "Unethical behavior is not the same as illegal behavior," it's just such nonsense, there was massive, pervasive, systemic fraud here that AG Schneiderman is investigating, who is she shilling for? What she's saying is simply not credible, get a real advocate for people on the air about this, where's Matt Taibbi?

http://www.rollingstone.com/politics/blogs/taibblog/obama-goes-all-out-for-dirty-banker-deal-20110824

Aug. 25 2011 10:34 AM

People are intent on holding bartenders accountable for the behavior of patrons. They want to hold parents and teachers accountable for the behavior of children.

But when it comes to corporate executives, the people in authority get a pass from conservatives and 'moderates'.

Aug. 25 2011 10:34 AM
gary from queens

The True Story of the Financial Crisis
By Peter J. Wallison from the May 2011 issue
http://spectator.org/archives/2011/05/13/the-true-story-of-the-financia

opening:
As many readers of The American Spectator will know, I was a member of the Financial Crisis Inquiry Commission, a 10-member body appointed by Congress to investigate the causes of the financial crisis of 2008. The Commission issued its report in late January 2011, with a majority concluding that the crisis could have been avoided if the private sector had not taken so many risks and government regulators had not been asleep at the switch. I dissented from the majority's view, arguing in my dissent that the financial crisis would not have occurred if government housing policies had not fostered the creation of an unprecedented number of subprime and otherwise risky loans immediately before the financial crisis began.

After the majority's report was published, many people lamented that it was not possible to achieve a bipartisan agreement even on the facts. But the way the Commission was organized and run made this impossible. One glaring example will illustrate the problem. In March 2010, Edward Pinto, a resident fellow (and my colleague) at the American Enterprise Institute who had served as chief credit officer at Fannie Mae, sent the Commission a 70-page, fully sourced memorandum on the number of subprime and other high-risk mortgages in the financial system in 2008. Pinto's research showed that he had found more than 25 million such mortgages (his later work showed that there were approximately 27 million). Since there are about 55 million mortgages in the U.S., Pinto's research indicated that, as the financial crisis began, half of all U.S. mortgages were of inferior quality and liable to default when housing prices were no longer rising. In August, Pinto supplemented his initial research with a paper documenting the efforts of the Department of Housing and Urban Development (HUD), over two decades and through two administrations, to increase home ownership by reducing mortgage-underwriting standards.

Aug. 25 2011 09:45 AM
gary from queens

The largest thing responsible for the crisis was Fannie Mae:

"Reckless Endangerment"
By Gretchen Morgenson and Joshua Rosner
(Times Books, 331 pages, $30)

June 3 Book review:
http://online.wsj.com/article/SB10001424052702303745304576361531730887312.html

Aug. 25 2011 09:42 AM
gary from queens

It's complicated, but we actually can blame government, if anyone entity is to blame. Specifically, bad regulation or intervention, as opposed to good or necessary regulation. How did bad gov regs cause the crash? Follow the logic.

1. Federal Reserve policy created the housing bubble (bad gov regulation)

2. that caused people to continue to invest, thinking housing prices will always rise (personal greed)

3. credit default swaps were not novel investment vehicles. Bundling mortgages to stabilize risk were used for years without a problem. the problem with them was that they were not accurately rated based on their real risk. Government knew they were using an inaccurate rating, and did nothing about it. (bad gov regulation).

4. Community reinvestment Act was enforced under clinton to force the sale of homes to people who couldnt afford them. If not for this, the crash would not have occurred. (bad gov regulation)

5. Fanny and Freddy removing moral hazard for private investors on the make, by backing bad mortgages. (bad gov regulation + private greed)

6. In 2005, Mostly Dems----like Frank and Dodd----resisted mostly republican and Bush efforts to reign in Fanny & Freddie abuses. (bad gov regulation---or failure to act.)

Aug. 25 2011 09:39 AM
Martin Chuzzlewit from Manhattan

I won't risk being accused of going "off topic" and ask why Brian isn't doing a call-in on what callers would do with the $10 miliion that British papers(sadly, only there) say Michelle Obama spent ONLY on her own vacations in one year. Build a school...a clinic .......

Instead, let's annoy the WNYC audience by asking Ms. McClean her thoughts about co-author Joe Nocera's Tuesday column entitled "How Democrats Hurt Jobs."
Mr. Nocera described the Obama administration's anti-job growth maneuvers as "mind boggling".

Amen, Mr. Nocera.

Aug. 25 2011 08:42 AM

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