A Look At Wall Street's Shadow Market

60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis

(CBS)  On Friday Congress finally passed - and President Bush signed into law - a financial rescue package in which the taxpayers will buy up Wall Street's bad investments.

The numbers are staggering, but they don't begin to explain the greed and incompetence that created this mess.

It began with a terrible bet that was magnified by reckless borrowing, complex securities, and a vast, unregulated shadow market worth nearly $60 trillion that hid the risks until it was too late to do anything about them.

And as correspondent Steve Kroft reports, it's far from being over.

---

It started out 16 months ago as a mortgage crisis, and then slowly evolved into a credit crisis. Now it's something entirely different and much more serious.

What kind of crisis it is today?

"This is a full-blown financial storm and one that comes around perhaps once every 50 or 100 years. This is the real thing," says Jim Grant, the editor of "Grant's Interest Rate Observer."

Grant is one of the country’s foremost experts on credit markets. He says it didn't have to happen, that this disaster was created entirely by Wall Street itself, during a time of relative prosperity. And they did it by placing a trillion dollar bet, with mostly borrowed money, that the riskiest mortgages in the country could be turned into gold-plated investments.

"If you look at how this started with the subprime crisis, it doesn't seem to be a good bet to put your money behind the idea that people with the lowest income and the poorest credit ratings are gonna be able to pay off their mortgages," Kroft points out.

"The idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right. However, it seemed to fly with people who were making $10 million a year," Grant says.

With its clients clamoring for safe investments with above average return, the big Wall Street investment houses bought up millions of the least dependable mortgages, chopped them up into tiny bits and pieces, and repackaged them as exotic investment securities that hardly anyone could understand.

60 Minutes looked at one of the selling documents of such a security with Frank Partnoy, a former derivatives broker and corporate securities attorney, who now teaches law at the University of San Diego.

"It's hundreds and hundreds of pages of very small print, a lot of detail here," Partnoy explains.

Asked if he thinks anyone ever reads all this fine-print, Partnoy says, "I doubt many people read it."

These complex financial instruments were actually designed by mathematicians and physicists, who used algorithms and computer models to reconstitute the unreliable loans in a way that was supposed to eliminate most of the risk.

"Obviously they turned out to be wrong," Partnoy says.

Asked why, he says, "Because you can't model human behavior with math."

"How much of this catastrophe had to do with the instruments that Wall Street created and chose to buy…and sell?" Kroft asks Jim Grant.

"The instruments themselves are at the heart of this mess," Grant says. "They are complex, in effect, mortgage science projects devised by these Nobel-tracked physicists who came to work on Wall Street for the very purpose of creating complex instruments with all manner of detailed protocols, and who gets paid when and how much. And the complexity of the structures is at the very center of the crisis of credit today."

"People don't know what they're made up of, how they're gonna behave," Kroft remarks.

"Right," Grant replies.

But it didn't stop ratings agencies, like Standard & Poor's and Moody's, from certifying the dodgy securities investment grade, and it didn't stop Wall Street from making billions of dollars selling them to banks, pension funds, and other institutional investors all over the world. But that was just the beginning of the crisis.

What most people outside of Wall Street and Washington don't know is that a lot of people who bought these risky mortgage securities also went out and bought even more arcane investments that Wall Street was peddling called "credit default swaps." And they have turned out to be a much bigger problem.

[slb863]

Why has no one discussed that the repeal of the Glass-Stegall Act back in 1999 set the stage for all of this? From 1933 - 1999 banks did banking, brokerages did stock brokering, and insurance companies sold insurance. When that act lifted the separation between the three, it created a greedy corporate free-for-all.

[jmborders3]

60 minutes, thank you, thank you, thank you for exposing the real cause of the this economic melt-down. I knew the shadow market was at the root of the worste credit market catastrophe in my lifetime. With such an important and revealing story, I wonder if you were pressured by powers and authorities high up in Washington DC not to run it last week. If this story had been run last Sunday, the President''s 700 billion bail out fiasco would have gone down in flames. I must believe that you will valiently fight for the first amendment and never allow anyone to coherse you to delay a story - this one or any other.

Just wondering....

[lwhobbs]

It seems to me that you start in the middle of the story. Wall Street packaged and sold bad loans which is so wrong. Those who made the bad loans to begin with are just as guilty. Why are these people not investigated or talked about in your story?

[nokeepingup]

I don''t understand why the Community Reinvestment Act of 1977 was not mentioned. The root cause of the current fiasco is this legislation which forced mortgage lenders to give loans to low income minorities irregardless of their ability to repay them.

I would like to see the rightful blame placed at the feet of Congress. I contacted several members of Congress and suggested that they should work without pay for 10 to 15 years as well as the President to cover the bailout instead of the American taxpayer.

[nokeepingup]

I don''t understand why the Community Reinvestment Act (CRA) of 1977 was not mentioned. It is a large part of the root cause of the current fiasco, this legislation forced mortgage lenders to give loans to low income persons irregardless of their ability to repay them.

I would like to see some rightful blame placed at the feet of Congress. I contacted several members of Congress and suggested that they should work without pay for 10 to 15 years as well as the President to cover the bailout instead of the American taxpayer.

[rlovatt2]

Dear 60 Minutes: Regarding the financial crisis, the person interviewed who said that "no one could have anticipated" what happened in the sub-prime mortages and the resulting effect upon the housing market, that it far from the truth. All they had to do was look outside their ivory towers of greed. People like my wife, who is a real estate appraiser, and I saw both the blatant fraud perpetrated each day in the mortgage transactions, by all parties. And we also saw the wild imbalance in the economics, where there was no way that many borrowers could carry their homes if prices stalled & refinancing was not an option. If it was clearly evident to us at the front lines, all Wall Street had to do was visit the front lines and it would have been clearly apparent to them as well. What gross misconduct, criminal misconduct as was stated on your show, conduct that has put our country & its citizens at risk! They should all burn in hell, and certainly not deserve a bailout to reward such greed & arrogance. Thank you for continuing to expose the truth. Ron & Jill Lovatt

[fulcher60]

I find it interesting that you only blamed Wall Street for this meltdown. While Wall Street shares the blame. Chris Dodd and Barney Frank are major contributors to the problem and they were never mentioned. I suggest you watch the David Asman special that aired opposite 60 minutes to get a true picture of the cause of the problem

[nokeepingup]

I don''t understand why the Community Reinvestment Act (CRA) of 1977 was not mentioned. It is a large part of the root cause of the current fiasco, this legislation forced mortgage lenders to give loans to low income persons irregardless of their ability to repay them.

I would like to see some rightful blame placed at the feet of Congress. I contacted several members of Congress and suggested that they should work without pay for 10 to 15 years as well as the President to cover the bailout instead of the American taxpayer.

[agec90]

Media keeps rationalizing foreclosures with the idea that low income people borrowed mortgages. This is misleading, and it suggests that such borrowers should not be approved for loans in future. What the media does not address is the fact that when low income people went for mortgages, they were tricked into the worst of mortgages instead of being matched with what would work for them. I am not sure what was in it for the lenders, but they would give partial information about mortgages, for example they would convince a person that the rate would be 4%-5% but then fail to reveal that they were puting the borrowers into "interest only, and adjustable mortgages". I am borrowing heavily from a particular case that I know personally, where a senior citizen was swayed into abandoning a 6.5% 30 yr fixed mortage for a 4% - 5% mortage (the senior citizen would not take my advice, because the mortgage extender was very convincing). The borrower would then be left to realize in a month or two that the principle was on the rise even though they are making the payments they were told they would need to make.

The truth is that poor people have proven the ability to pay mortgages when terms are understandable before hand. In poor economies, poor households are known to pay back within a year even twice the amounts borrowed. It is shamefule of the media to be so irresponsible, as to make a case to sideline credit-worthy low income earners from future credit.

[dj_wy]

This was a very informational program. This is the most unbelievable crime against the people of our country. Who is going to prosecute those responsible?

[jjjj3230]

It is easy to understand that the cds problem is much greater than the actual foreclosure rate on the underlying mortgage problem is, but what we all need to know is who made the money that was(and is) being lost. Someone is making the money that is being lost in this mess. Who are they, and where is the money. I do not understand this part of the equation!

[jjjj3230]

It is easy to understand that the cds problem is much greater than the actual foreclosure rate on the underlying mortgage problem is, but what we all need to know is who made the money that was(and is) being lost. Someone is making the money that is being lost in this mess. Who are they, and where is the money. I do not understand this part of the equation!

[jjjj3230]

I WOULD ALSO LIKE TO APOLOGIZE FOR THE MULTIPLE POSTS!

[tiberiis]

Cancelling the $11 billion Super Collider in Texas seemed at the time a victory of common
sense over an ill defined fanciful scientific journey.
However, discovering that those unemployed physicists played a major role in development of
the derivatives and other complex financial instruments that have led us to the abbess of the
present financial black hole gives pause for second thoughts. Perhaps the $8 billion tab of the
Large Hadron Collider is a small price to pay to keep that mischievous army of physicists playing
with their nonsensical toys and away from our real world financial markets.

[chapin015]

well done.
Now pls do the rest of the story and expose the peopl and events that lead to the issuing of the orginal sub prime loans. The issue of loans to people who did not have the ability to repay them.
Pls talk about Johnson , Raynes and the millions they got for cooking the books at FNMA and Freddie. The Eron people are in jail; these guys are invovled with a presidential canidate, get the failure they helped cause is far greater than ERON.
Pls expose those in congress who have used FNMA & Freddie to gain votes, power, and money. I believe you will find this group is still in charge of the hen house.
This problem started with the idea private industry- the banking system should provide loans to the poor. Congress continued to expand this mandate. Since FNMA , et. al. provided a prime credit, Wall Street jumped on. They all need to be exposed and taken to task.
thank,
jboyce

[tiberiis]

Cancelling the $11 billion Super Collider in Texas seemed at the time a victory of common
sense over an ill defined fanciful scientific journey.
However, discovering that those unemployed physicists played a major role in development of
the derivatives and other complex financial instruments that have led us to the abbess of the
present financial black hole gives pause for second thoughts. Perhaps the $8 billion tab of the
Large Hadron Collider is a small price to pay to keep that mischievous army of physicists playing
with their nonsensical toys and away from our real world financial markets.

[hpinson]

Another example of the "best government money can buy." If lobbyists were able to secure the word "swaps" instead of the real word "insurance" to avoid the need for adequate reserves, then let''s look at what officials got the lobbyist money and press charges. It''s also going to be interesting to see who makes the big money as a result of the $700 billion bill that was just past. It won''t be main street.

[hpinson]

Another example of the "best government money can buy." If lobbyists were able to secure the word "swaps" instead of the real word "insurance" to avoid the need for adequate reserves, then let''s look at what officials got the lobbyist money and press charges. It''s also going to be interesting to see who makes the big money as a result of the $700 billion bill that was just past. It won''t be main street.

[prpl555]

PLEASE "leak" the e-mail addresses or phone numbers of Robert Pickel and others who got us into this mess. His continual smirk as Steve Kroft talked with him upset and disgusted me. I would like to contact him to let him know just what we all learned about him from his jabberwocky spin - he didn''t even make sense as he tried to explain his way out of Steve''s questions. And he projected a "smugness" that was unbelievably outrageous. He and the CEOs of the financial institutions should be brought up on criminal charges and if our idiots in govt had any balls they''d be looking to save their own skins by rolling over on them now. Wait till the elections in the next few years and they will learn that we''re not going to take it anymore. Find a way to hang them, put them in cells for a few years (5 ought to do it), but do SOMETHING before our entire way of life disappears thanks to their unholy alliances to enrich themselves at our expense. SHAME ON THEM!!! And thank you for continuing to expose what you can.

[godot27]

Two questions on credit default swaps.

1) Is it a coincidence that the Federal Reserve and US
Treasury have an urgent need for $700B and the fact
that the International Swaps and Derivatives
Association (ISDA) is scheduled to auction off credit
default obligations for Fannie Mae, Freddie Mac, and
Lehman Brothers on Oct 6 and Oct 10? See -
http://www.isda.org/index.html

2) What portion of the $700B requested by the FED and
US Treasury, will be devoted to covering credit
default obligations? and how much will be used to
cover "naked" default obligations. See discussion of
naked default speculation Gretchen Morgenson -
http://www.nytimes.com/2008/08/10/business/10gret.html

[j864286]

Shame on 60 minutes. While I enjoy watching dorks in suits sweat as much as the next guy, this report was a lazy attempt at explaining a complex problem. To blame derivative contracts as the root of this problem is to ignore much more relevant factors. Low interest rates, loose credit, lax regulation, inept rating agency models, poor mortgage underwriting, dishonest borrowers, and strong government special interests all play much more direct roles in this disaster than the use of derivatives.

Why not work a little harder and give people some honest reporting.

[leshopper]

The finanical problem in the US:
The heard of the finanical problem is created from the high oil prices. The average person would buy gas to get to work before paying a monthly morgage.
THANKS

[jjjj3230]

To j864286. Yes everyone knows that there was alot of down right dangerous and possibly fraudulent lending practices going on. The real question is who is profiting from this meltdown in the derivative market? Any insight on where the money is would be a great help to me.

[hpinson]

Another example of the "best government money can buy." If lobbyists were able to secure the word "swaps" instead of the real word "insurance" to avoid the need for adequate reserves, then let''s look at what officials got the lobbyist money and press charges. It''s also going to be interesting to see who makes the big money as a result of the $700 billion bill that was just past. It won''t be main street.

[validconcern]

Steve,

Although the top fiancial executives declined to comment, why didn''t you simply post the names and photos of those who caused and profited from these "Shadow Markets"? You only told half the story and required no accountability in support of your findings.
Journalism is for the meek and mild it seems!

[jjjj3230]

The actual amount of money lost by mainstreet(401 K''s) is staggering. Where is this money? It is not just in the hands of the top financial executives. Someone has profited from this mess, but who could it be???

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[deanhix]

This crisis we are in is the result of social engineering and Law of Unintended Consequences .
%u201CThe Community Reinvestment Act%u201D forced banks to issue $1 trillion in sub-prime mortgages by introducing a federal requirement that banks make the loans or face penalties.
These subprime mortgages were insured/%u201Dcontrolled by Fannie Mae and Freddie Mac and efforts to tightly regulate those agencies might diminish their ability to finance loans for lower-income families. In 2005 John McCain, seeing the danger of what was happening co=sponsored the %u201CFederal Housing Enterprise Regulatory Reform Act%u201D which among other things provided for more oversight of Freddie & Fannie and would have prevented this crisis. Barney Frank, Chris Dodd and the Democrats blocked these efforts. Acorn (and Obama) was in the middle of this.

More detail can be found in a video on youtube.com/themouthpeace

[smogdog4]

Long term capital managament,orange county derivatives, currency swaps , savings and loan lincoln finacial and the list goes on and on and its the same tag line on each. Its complex , its exotic it derives its value though multilayered underlying assets and they are so complex that the people who sell them probably don''t fully understand their valuations. So once again the working class taxpayer such as myself and millions of others must bear the brunt of wall streets greed driven incompetence and do what is needed to keep our credit and cash flow economy from a credit lockdown by buying up their toxic assets and saving their failed institutions. WILL THEY EVER LEARN?

[qigirl]

First, Thank You for reporting what''s real regarding the credit default swaps. The implication by the media for the past 2 weeks has been that the financial crisis has been caused solely by the sub-prime market. The deeper implication has been that this financial crisis is because of low-income people getting loans they couldn''t afford which equates to minorities.

What''s real is that Wall Street is filled with folks that are by any 12-Step program definition, gambling addicts. This won''t go away until there is a serious over haul and regulation of these markets. The problem is, I seriously doubt there is anyone in Washington currently who understands how to unravel this extremely serious situation. And, it certainly is not going to be a GOP executive team of an aging Arizona senator and a coquettish Alaskan governer.

[oilfix]

rescue? bailout? What are you talking about? We''ve seen this before. The economy is working perfectly.
You''ll know something''s wrong when JP Morgan or
Goldman Sachs fail.

[topoftrees18]

Had President Bush & Secretary Paulson watched Steve Krofts story House Of Cards: The Mortgage Mess last January they could have anticipated the current crisis and proactively headed off the current crisis instead of waiting for the house of cards to collapse

[shnuk]

The correct word is felonies committed by felons.
A scam is the same as any snake oil salesman. This was well thought out,and orchastrated.
My brother had to pass 7 ethics exams, that were 2 to 3 hours in length to get his stockbrocker seat in 2001.
After the web com collapse he never used his seat.

[magenta33]

Wall Street did not set the stage that allowed the financial recklessness to occur. To implicate Wall St. for the current financial debacle would be like saying soldiers started the Iraq invasion (if one considers Iraq a fiasco; not taking sides, just presenting a popular example).

The chain of causality for the current financial mess starts at Congress and its puppet conspirators, the Fascist Reserve and FMae/Mac, whose interest and money supply manipulations created the cheap-money environment that enabled the recklessness, thus getting the financial tarball rolling.

Assertions about a "lack of controls" or accusations against the "free market" are anti-intellectual. The U.S. banking industry is among the most heavily government-controlled; it is the antithesis of a "free market," and commensurately unaccountable.

Value cannot be defined or added in a coercive environment endemic to government. Banking''s government-centric lack of a market essence pits legislated "value" against choice-based factors that would otherwise allow real valuations to competitively manifest; market forces would have established the cost of money at levels of risk averting reckless behavior.

Wall St. no doubt threw gasoline on the fire, but the blaze was premeditated and orchestrated by the arsons in Congress. Without fabricated low interest rates in conjunction with manipulations of currency valuations via money-supply tampering, the financial vortex could not have begun its spiral.

[shnuk]

Entering a contract in bad faith, not telling the truth the whole truth and nothing but the truth,is a crime of omission. Shame on Congess, Bush, and the Mortgage companies.

[d39902]

You''re nuts. Fannie and Freddie are the root cause

[wbishop140]

Breathtaking is the only word to describe Steve Kroft''s end run around a serious issue such as this. While he aptly goes after Wall Street for mishandling the sub-prime crisis, he omits dealing with. the motivation. And what is the motivation? Sub prime loans themselves. And why were the standards lowered? One only has to go to the politicians who demanded a lowering of the standards. While I may be a fan of Senator O''Bama, I am not a fan of deceptions, and, sadly, democrats are responsible for this mess. When O''Bama admitted to Charlie Gibson that he didn''t care if lowering taxes brought more more into the treasury ("it isn''t fair" O''Bama said) it is no wonder this crisis festered and grew. Perhaps Kroft knew better but was ordered not to go after Fannie Mae and Franklin Raines and those liberal democrats who said "there is no problem" when confronting a regulator. Shame on you 60 Minutes for giving us half truths.

[bjrosa-2009]

How can there be 60 trillion bad debts? When the total household mortgage in US only equal 14 Trillion, what makes up the difference?

[smogdog4]

To say that the Democrats or Republicans are to blame for this crisis is a popular thing to do but is it accurate to do so. I see the McCain supporters claiming that the dems killed legislation that would have provided tightening restrictions on Freddie Mac and Fannie Mae through the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005. While some of the dems did oppose this bill is not all the story as I read it. The bill made it out of committee in the senate but was never brought up for vote in a republican controlled senate.By the time McCain added his name onto the bill it was May 26 06 well into the housing bubble and 2 months before the housing decline , too little too late.Now the dems place blame on the rep''s for deregulation and Gramm-Leach-Bliley Act passed in 1999.The bill passed with bipartisan compromise in the house 362-57 with 155 dems voting yes the senate passed it 90-8 and was signed into law by President Clinton. The bill was a retreat from parts of Glass-steagall act passed I think in the 1930''s. Some economist say that it may have actually helped this crisis out by helping the commercial banks positions in the mergers going on now.No one political party is any more to blame than the other and that is part of the problem.
This is too complex of a problem to think that any one bill any one person or any one party is to blame.

[jaysscee]

archives.cnn.com/2002/ALLPOLITICS/06/17/bush.minority.homes/index.html

Bush aims to boost minority home ownership

June 17, 2002 Posted: 2:21 PM EDT (1821 GMT)

ATLANTA (CNN) -- President Bush touted his goal Monday of boosting minority home ownership by 5.5 million before the end of the decade through grants to low-income families and credits to developers.

"Too many American families, too many minorities, do not own a home. There is a home ownership gap in America. The difference between African-American and Hispanic home ownership is too big," Bush told a crowd at St. Paul AME Church in Atlanta.

He urged Congress to expand the American Dream Down-Payment Fund, which would provide $200 million in grants over five years to low-income families who are first-time home buyers.

The money would be used for down payments, one of the major obstacles to home ownership, Bush said.

It is anticipated that 40,000 low-income families -- receiving about $5,000 each -- would benefit from those grants, he added.

To encourage the construction of single-family homes in neighborhoods where affordable housing is scarce, developers would receive $2.4 billion in tax credits to build lower-cost housing in distressed areas.

The fund also would offer financial education and counseling to protect home buyers from abuses and help them get the best loan terms possible, Bush said.

[ubrew12]

WBishop140 said: "what is the motivation? Sub prime loans themselves....democrats are responsible for this mess. "

You moron. Gibson describes a $60 trillion unregulated insurance market created among wall street bankers to themselves, totally unsecured, to inflate the mortgage market into an unregulated derivatives super-bubble, and YOU blame it on the underlying loans and the politicians that just wanted the ''American dream'' to be available to even low-income Americans?

NOt only did you not watch this piece, you haven''t been reading ANYTHING having to do with this latest bailout (hint: its to Wall Street, NOT main street: does THAT suggest anything to you?)

The GOP seems to hatch morons faster than unsecured mortgage derivatives...

[ubrew12]

WBishop140 said: "what is the motivation? Sub prime loans themselves....democrats are responsible for this mess. "

Honestly, I feel bad, having to repost excerpts from the ARTICLE WE ARE ALL COMMENTING ON, for the benefit of the willfully ignorant American right, but here goes:

"As bad as the mortgage crisis has been, 94 percent of all Americans are still paying off their loans. The problem is Wall Street placed its huge bets and side bets with all of those fancy securities on the 6 percent who are not.

"We wouldn''t be in any of this trouble right now if we had just had underlying investments in mortgages. We wouldn''t be in any trouble right now," says Partnoy.

He says it%u2019s the side bets.

"You got Wall Street firms, Bear Stearns, Lehman Brothers. You got insurance companies like AIG. Merrill lost a ton of money on this," Kroft says. "Everybody''s lost a ton of money. They''re supposed to be the smartest investors in the world. And they did it themselves." "

Are we all on the same page now, at last??

I know it takes the GOP a little time to catch up...

[bptr]

America is full of fat, stupid, lazy people living in carboard houses. We have greedy corporations making fast money and contributing nothing to society. Hmmm... I wonder why we have a paper-thin flimsy economy based on nothing but funny money and speculative greed.

[bptr]

America is full of fat, stupid, lazy people living in carboard houses. We have greedy corporations making fast money and contributing nothing to society. Hmmm... I wonder why we have a paper-thin flimsy economy based on nothing but funny money and speculative greed.