The Case against Greenspan and Bernanke

[FourScore]

The Case against Greenspan and Bernanke
Economic Policy | The Fed
by Mike Whitney | February 27, 2010 - 11:44am

EXCERPT:
...Bernanke and Greenspan had a birds-eye view of everything that was going on in the market, that is, mortgage origination, off-balance sheet operations and securitization. They knew that homes were being sold to applicants who had no way of servicing the debt. They knew that hybrid mortgages were developed with the clear intention of increasing the quantity of mortgages without regard for the creditworthiness of the borrower. They knew that the lenders didn't care whether the loans blew up or not since they made their profits on upfront fees. They knew it all, and refused to act.

As it happens, many other people knew what was going on, too, but either kept quiet or were ignored by the media. Even now, when we have a much better understanding of what really took place, the media still presents the crisis as if it was a natural disaster--like an earthquake--that no one could have anticipated or prevented. This is nonsense. The housing bubble was 100% man-made. The Fed could have taken action at any time to stop the bubble from getting bigger but, instead, became the biggest cheerleader for dodgy loans and garbage mortgage-backed securities.

The media has succeeded in concealing the facts and deflecting the blame. As former bank regulator Bill Black said in a recent interview with Paul Solman on PBS News Hour, what is shocking about this particular crisis is the appalling lack of accountability.

ZERO INDICTMENTS, ZERO CONVICTIONS

William Black: "In the savings and loan crisis... we had over 1,000 convictions of senior insiders.... At this stage among the subprime lending specialists, we have zero convictions. We have zero indictments."..."In September 2004, the FBI began publicly warning that there was an "epidemic" of mortgage fraud, and it predicted that it would produce an economic crisis, if it were not dealt with. The FBI has also said that 80 percent of the mortgage fraud losses occur when lender personnel are involved. So, Fitch looks at a small sample of these loans, finally, in November 2007....And what did they find? They said...that there was the appearance of fraud in nearly every file we examined. And they said that normal underwriting would have detected all of those frauds.

So, this is coming from the lenders overwhelmingly. They created incentive systems for the loan brokers and the loan officers that were based overwhelmingly on volume, and nothing on quality. We know that they gutted their underwriting standards. We know that you got in trouble if you were moral and tried to be a good officer and protect the organization from loss." (PBS News Hour)

Repeat: The FBI KNEW there was an "epidemic" of mortgage fraud as early as 2004. Ergo: The Fed knew. Greenspan knew. Bernanke knew. And both chose not to perform their regulatory duties to stop the swindle from continuing.

And the FBI wasn't the only one who knew either. In testimony just last month before the Financial Crisis Inquiry Commission (Jan 14, 2010) FDIC chairman Sheila Bair confirmed that she not only warned the Fed of what was going on, but cited particular regulations under which the Fed could stop the "unfair, abusive and deceptive practices" by the banks. Here is a excerpt from her damning testimony...:

SNIP

...So, the FBI knew, the FDIC knew, Fitch ratings knew, the Fed and Treasury knew. Was their anyone else who warned Greenspan and Bernanke about what was going on?...

http://www.smirkingchimp.com/thread/27045

[RKP5637]

1. IMO Greenspan = Bernanke, both bad news for the majority of citizens. n/t

[cbdo2007]

2. At the very least, the Fed needs a big shake-up to teach these guys that they

are being watched and will be held accountable when the economy collapses and they didn't spot it.

That would be like Toyota saying, "we know there's a problem with the cars but we think if we just keep doing things this exact same way that eventually the problems will correct themselves."

[upi402]

3. Greenspan was warned by Brooksley Burn

http://www.pbs.org/wgbh/pages/frontline/warning/view/
And Obama installed the same crooks.

[RKP5637]

4. And a major mistake IMO. Or was that just exactly what the DLC wanted... n/t

[upi402]

6. The appointments extinguished my last hope

that Obama might not be a corporatist. Really frustrating after so much... everything. I'm still furious but only because I love what this country was.

[girl gone mad]

5. k & r