- H.L. Mencken
If you spend more than five minutes listening to radio shows or watching the news, you will eventually hear about the economic crisis we're facing. Continuing to listen, you will most likely hear one side pointing the finger of blame at the other while ignoring where the other three are pointing at.
So, who is to blame for the current economic crisis we're in now? Is it the democrats? Is it the republicans? Was it Barney Frank and Christopher Dodd? Alan Greenspan?
The answer is everyone, including those that took out loans that were well above their means. In other words, YOU, if you were on of those consumers that took out loans that were way out of your means.
Did some politicians raise the alarm about Fannie Mae and Freddie Mac? Most certainly as will be noted in the time line.
I have been working on this off and on for over six months to get the information I needed to piece together this time line and those politicians and financial executives that were chiefly involved in creating this mess. I'm sure that there is more to what I am writing here, but, sufficient enough to give a clear picture of what occurred. I'll do my best to cite references, which I'm sure many will dispute. But, remember this: If you dispute it by name calling, I'll kick your account and possibly ban you.
Away we go.
Before we begin, we must go over some 20th Century history. However, let's take a look at the Constitution first.
Article 1 Section 8 (Article 1 refers to the Legislative Branch and Section 8 refers to the powers of Congress)
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
To establish Post Offices and Post Roads;
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;
To constitute Tribunals inferior to the supreme Court;
To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;
To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;
To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;
To provide and maintain a Navy;
To make Rules for the Government and Regulation of the land and naval Forces;
To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;
To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;
To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And
To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.
Nowhere in the Constitution does it give powers to Congress to delegate the coining of Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Yet, they did it anyway when the Fed was created in 1910 on Jekyll Island and fully implemented in 1913. Whether you like it or not, the Federal Reserve is unconstitutional.
Done with the brief history and moving on.
1914: Federal Trade Commission Act was signed into law that prohibits unfair or deceptive business practices.
1933: Glass-Steagall Act was signed into law that separates commercial banks focusing on consumer activities from investment banks, which deal with speculative trading and mergers.
1968: Truth in Lending Act was signed into law that required banks to disclose loan terms & fees.
1970: Bank Holding Company Act Amendments allowed commercial banks, via holding companies, to both accept deposits and make commercial loans.
1978: SCOTUS's Marquette decision gives banks the right to make loans in states other than where they are headquartered.
1980: Interest rates rise 13 percentage points in two years, President Carter signs law gutting Glass-Steagall. The measure, pushed through by Sen. Jake Garn (R-Utah), destroys usury caps for mortgages and raises standards for prosecuting lenders.
January 1981: Sen. Garn becomes chair of Senate Banking, Housing, and Urban Affairs Committee with M. Danny Wall as majority staff director.
1982: Sen. Garn coauthors Garn-St. Germain Depository Institutions Act, which deregulates savings and loan industry.
And here, in my opinion, is where our economy started to take a nose dive.
1984: Savings and Loans start crashing in Texas as oil boom wanes. More than 1,000 thrifts nationwide will fail between 1986 and 1995, that costs $500 billion, to include $124 billion in taxpayer money.
April 2, 1987: Sen. John McCain meets with federal regulators to discuss investigation of Lincoln Savings and Loan. The owner, Charles Keating, was the McCain business partner and campaign contributor.
September 1987: Drexel Burnham Lambert creates "collateralized debt obligations" (CDOS); securities made up of myriad loans and bonds with different risk levels.
December 9, 1988: Silverado S&L collapses, leaving taxpayers a $1.3 billion liability. Board members included Neil Bush, who engineered loans to friends in what federal Office of Thrift Supervision will call "multiple conflicts of interest." Bush later tells Congress a few of his deals may have looked "a little fishy."
February 6, 1989: President George H.W. Bush bails out S&L industry; among those helped is his son, Jeb, as government takes over most of a $5 million second mortgage on his Miami office building.
September 30, 1995: Congress enacts Truth in Lending Act reform, easing regulations on creditors. This bill was pushed through by Rep. Bill McCollum (D-Fla.), a key recipient of finance, insurance, and real estate (FIRE) donations to the tune of $136,000 between 1993-94.
December 22: As part of Newt Gingrich's Contract With America, Congress enacts a measure making it more difficult to sue companies for securities fraud.
August 2, 1996: Office of Thrift Supervision issues rule preempting almost all state laws regulating S&L credit activities.
March 4, 1998: First Union acquires The Money Store, nation's 5th-largest subprime lender.
April 1998: Citicorp and Travelers announce biggest ever corporate merger ($70 billion). This transaction would have been illegal under the Glass-Steagall Act. It's noteworthy to mention that CEO Sandy Weill launches $12 million campaign to repeal law.
June 1998: Conseco purchases mobile home lender Green Tree in $6 billion deal.
July 1999: North Carolina General Assembly throws aside the deregulation trend, passing a landmark measure to curb predatory lending.
November 1999: Gramm-Leach-Bliley Act dooms Glass-Steagall, setting off a tsunami of mergers among banks and insurance and securities companies. The chief proponent was Sen. Phil Gramm (R-Texas), who received $4.6 million from FIRE sector over previous decade.
June 20, 2000: Treasury and HUD urge the Fed to investigate subprime units of major banks. No action by the Fed was taken.
June 26: First Union closes The Money Store, takes $2.8 billion write down.
December 14: Just prior to Congress taking its obligatory Christmas recess, Sen. Gramm attaches a 262-page amendment to an omnibus appropriations bill. Commodity Futures Modernization Act will deregulate derivatives trading, which caused the Enron disaster, which in turn started a tidal wave of new, unregulated securities.
December 27: American Homeownership and Economic Opportunity Act makes it harder for consumers to get out of lender required insurance. National Association of Realtors lobbied for it, spending $9 million and making $4 million in contributions.
March 6, 2001: The Federal Trade Commission sues Citigroup and its subsidiaries, the nation's second largest subprime lender. They charged that Citigroup used "systematic abusive lending practices" (ie. predatory lending) involving 2 million borrowers. A year and half year later Citigroup settles for $215 million.
April 6: Fed chairman, Alan Greenspan signals concern with "abusive lending practices that target vulnerable segments of the population and can result in unaffordable payments, equity stripping, and foreclosure."
July 27: Ameriquest chairman Stephen W. Prough tells Congress, urging rollback of subprime regulations. Because, "'Predatory' is really a high-profile word with no definition,"
April 22, 2002: Georgia's new anti-predatory law signed; Ameriquest helps lead campaign against it and announces that it won't do business in Georgia until law is changed. Standard & Poor's refuses to rate Georgia mortgage securities, choking credit supply to state's home buyers; law gutted within a year.
October 7: Swiss investment bank UBS announces that Sen. Gramm is joining it to "advise clients on corporate finance issues and strategy"; he will also lobby Congress, Treasury, and Fed on banking and mortgage issues as industry pushes to eliminate predatory-lending rules.
December 18: Conseco files for bankruptcy, primarily due to its purchase of subprime lender Green Tree.
Continued...
March 2003: HSBC acquires Household Finance, the nation's fourth largest subprime lender.
May 1: New Jersey's anti-predatory lending law signed. Ameriquest and other lenders launch campaign to kill it and Standard & Poor's says it won't rate certain New Jersey securities. The law was gutted within a year.
September 10, 2003: Treasury Secretary, John Snow tells Congress that "We need a strong world class regulatory agency, to oversee the prudential operations of the GSE's..." Later in the hearings, Barney Frank responds, "Fannie Mae and Freddie Mac are not in a crisis..."
January 7, 2004: Federal Office of the Comptroller of the Currency issues final rule to preempt states from applying most of their credit laws to national banks and their subsidiaries.
February 17, 2005: During a hearing in Congress, Fed Chairman, Alan Greenspan states, "Enabling these institutions to increase in size, and they will once the crisis in their judgment passes, we are placing the total financial system of the future at a substantial risk."
March 2005: Rep. Robert Ney (R-Ohio) introduces Responsible Lending Act. Supporters of the bill included New Century Financial, the nation's second largest subprime lender. Consumer advocates call it "Loan Shark Protection Act."
April 6, 2005: At another hearing, Alan Greenspan states, "If we fail to strengthen GSE regulation, we increase the possibility of insolvency and crisis."
April 6, 2005 : Senator Charles Schumer (D-NY), a staunch defender of Fannie Mae and Freddie Mac states, "I think Fannie and Freddie over the years have done a incredibly good job and are an intrinsic part of making America the best housed people in the world. If you look over the last 20 or whatever years they've done a very, very good job."
April 2005: Bankruptcy Abuse Prevention and Consumer Protection Act makes it far harder for consumers, but not businesses, to discharge debts. Chief sponsor, Sen. Charles Grassley (R-Iowa).
September 1: As housing bubble begins to deflate, administration economist Patrick Lawler announces, "There is no evidence here of prices topping out. On the contrary, house price inflation continues to accelerate."
September 22: Illinois Supreme Court hands mortgage lenders a victory, blowing away a 3% cap on fees for loans with more than 8% interest.
January 23, 2006: Ameriquest settles 49 state investigation into deceptive subprime practices for $325 million.
April 27: Fed chairman Ben Bernanke acknowledges "signs of softening" in housing market, but says a "sharp slowdown" unlikely.
May 25, 2006: John McCain (R-AZ) raises the alarm in regards to Fannie Mae and Freddie Mac. He cosponsors a bill that would further push regulations, "For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac, and the sheer magnitude of the companies and the role they play in the housing market. The GSE's need to be reformed without delay." It never made it to the floor because all democrats would have voted against it.
July 10: Henry M. Paulson Jr. sworn in as Treasury secretary, leaving job as Goldman Sachs chairman and CEO.
Here's where the economy went into free fall and got us where we are today.
Jan 2, 2007: Rep. Barney Frank (D-Mass.) assumes chairmanship of House Financial Services Committee.
January 29: Paulson tells Congress, "One of the pleasant surprises I had coming to government has been the strong economy we have today."
February 22: HSBC's head of mortgage lending business resigns. Its losses reach $10.5 billion.
February 28: Bernanke tells House Budget Committee the housing sector "is a concern, but at this point we don't see it as being a broad financial concern or a major factor in assessing the course of the economy."
February 28: New home sales reported down 20.1% from previous year.
March 12: Sen. John McCain's presidential campaign announces that Sen. Gramm will join it as cochair and economic policy adviser.
April 2: Subprime giant New Century Financial files for Chapter 11 after being forced to repurchase billions of dollars of bad loans.
May 3: UBS shuts down Dillon Read Capital Management, its US subprime arm. GM's finance unit announces deep losses on subprime mortgages. SEC task force begins meeting to examine Wall Street's handling of subprime loans.
June 9: In Wall Street Journal interview, former Fed governor Edward Gramlich accuses Greenspan of blocking a 2000 proposal to increase scrutiny of subprime lenders. Greenspan responds there are "a very large number of small institutions, some on the margin of scrupulousness and very hard to detect when they are doing something wrong."
July 19-20: In congressional testimony, Bernanke cuts growth forecasts for 2007 and 2008, blaming problems in housing market. He then warns that a subprime crisis could cost up to $100 billion.
August 6: American Home Mortgage, one of the largest US independent home-loan providers, files for Chapter 11.
August 16: Countrywide, biggest US mortgage lender, narrowly avoids bankruptcy by taking out emergency $11.5 billion loan.
August 31: Ameriquest goes out of business.
September 14: Sen. Barney Frank in Boston Globe: Mortgage crisis "was in large part a natural experiment on the role of regulation."
September 20: Treasury secretary Paulson tells House Financial Services Committee that "fundamental reappraisals in the pricing and appetite of risk have taken place numerous times...We are in the process of another such reappraisal."
September 30: UBS announces 3rd-quarter losses of $690 million.
January 2008: Number of homes facing foreclosure up 57% compared to same month of previous year. US unemployment rises sharply.
January 10: Cleveland files lawsuit against numerous financial institutions alleging that their activities in connection with securitization of subprime mortgages created a "public nuisance." Currently, litigation still pending.
January 15: Citigroup reports $9.8 billion loss for 4th quarter and writes down $18 billion in subprime losses.
January 22 & 30: Fed makes biggest rate cut in 25 years; 1.25 percentage points, to 3%.
February 6: Longest period of decline in nationwide house prices since 1990.
March 7: Former bosses of Merrill Lynch, Countrywide, and Citigroup questioned by a congressional panel about the $460 million in compensation they received between them during 5 years of subprime boom.
March 16: Bear Stearns announces takeover by JPMorgan Chase in Fed-engineered bailout; measure approved by Fed Board of Governors with fewer votes than required by law, under a post-9/11 "national security emergency" exception.
March 25: In speech on housing market, Sen. McCain states, “In financial institutions, there is no substitute for adequate capital to serve as a buffer against losses. Our financial market approach should include encouraging increased capital and financial institutions by removing regulatory, accounting and tax impediments to raising capital.”
April 18: Jerry Bowyer, chief economist for financial services firm Benchmark, says in New York Sun op-ed that fault for subprime crisis "lies with the small army of hard-left political hustlers who spent the early 1990s pushing risky mortgages on home lenders. And the fault lies especially with the legislators that gave them the power to do it."
April 29: Foreclosure activity reported up 112% from first quarter of 2007.
May 6: Bush announces he will veto legislation directing $15 billion to neighborhoods ransacked by foreclosures. Also threatens to veto legislation to provide $300 billion for struggling homeowners (and force lenders to renegotiate some mortgages) because it would be a "burdensome bailout" that "opens taxpayers to too much risk."
September 15, 2008: Lehman Brothers files for bankruptcy. Lehman borrowed significant amounts to fund its investing in the years leading to its bankruptcy, a process known as leveraging or gearing.
Despite the fact that MANY of our politicians and lending companies are responsible for our current economic mess, it becomes even more clearer that democrats made every attempt to thwart legislation for more regulation, hide the fact that Fannie Mae and Freddie Mac were getting out of control, force legislation that allowed consumers to take out loans that lenders knew they couldn't pay back and some outright lying.
On the following page there are several videos that don't lie. What they will show is a clear message that democrats were the chief instigators of this entire mess.
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