2008 Crash & Cover Up — Both By Government, Glass-Steagall Irrelevant
The short version is that is that government was pressuring banks to make subprime loans to unqualified minorities, and also buying up those through Fannie Mae and Freddie Mac as fast as everyone could make them. Then government and the mainstream media perpetrated a cover up to blame the free-market — as if we have anything close to a free-market.
“Greed” is the primary mantra used by the mainstream media, OWS, and assorted progressives to explain the crash of 2008. This works well among their own, but of course, greed has been around forever, and thus is not unique to the crash of 2008.
When independent thinkers press for details, progressives fall back on a second mantra: “the repeal of Glass-Steagall,” which is intended to sound smart and bluff skeptics into silence by using a claim that is easy to repeat, but which would take significant knowledge to disprove, so they try to transfer the burden of proof onto skeptics.
Glass-Steagall is a regulation from the 1930’s, and thus, the claims of progressives are intended to justify greater government regulation (power) over our financial activity, which just happens to also be exactly what is desired by those who have perpetrated the whole economic scam against us — so they can use that power. For example, after Obama took office, his party passed sweeping new financial regulation (Dodd-Frank), whose effect was to thwart competition and consolidate power and wealth in the big established firms. Now Progressives want to double down and pass more sweeping financial regulation. Progressives are thus useful idiots for those who have perpetrated the whole economic scam against us.
Whenever I have asked for compelling evidence of the degree to which the repeal of Glass-Steagall has caused any problems thus far, I am met with every imaginable form of logical fallacy, obfuscation, denial, evasiveness, unsubstantiated claims, and insult. It is very similar to the reaction I get when I ask progressives for compelling evidence of just how exactly Bill Clinton created a great economy, which they can never provide.
By now, many of us know that Glass-Steagall forbade the comingling of depositors’ capital with investment capital, and thus deposit institutions can now invest deposits far more foolishly than would have been allowed under Glass-Steagall, but:
- Did deposit institutions actually and significantly begin to comingle depositors’ capital with investment capital? This economist says that’s not what happened.
- Bar Stearns, Lehman Brothers were only investment banks and were not also depositor banks, and AIG was neither.
- It would not have been necessary for deposit institutions to comingle depositors’ capital with investment capital in order to cause the personal harm we have experienced thus far.
- Government could have simply bailed out the depositors instead of the banks.
The Glass-Steagall regulation did not forbid any of these actual causes of the crash and subsequent economic problems:
- ending the gold standard (money is created out of thin air now).
- ridiculously fractional reserve banking (banks creating potentially infinite money out of thin air and loaning it out), which created all that money to loan to subprime borrowers.
- perpetual inflation.
- excessive government spending.
- excessive government debt.
- artificially low interest rates, which cause many problems, such as making subprime loans seem artificially attractive to borrowers.
- government discouraging success, such as innovation, by taxing profit and income.
- government giving money and advantages to it’s friends at the expense of everyone else — especially at the expense of those competing with their friends. This is known as Cronyism, which is at the heart of what is wrong with the people.
- government using Fannie May, Freddie Mac, and a variety of punishments and rewards to force banks to increase the number of subprime loans to those poor or minority individuals less likely to repay.
- This was done as part of The Community Reinvestment Act and similar programs created and/or expanded under Bill Clinton.
- Barack Obama was training ACORN volunteers to bully banks and employees of banks to give more of these loans.
- subprime CDO’s (bundles of subprime mortgages) being rated AAA — as if they were risk free.
- banks (and others) investing in AAA rated subprime CDO’s.
- Fannie Mae and Freddie Mac investing in AAA rated subprime CDO’s.
- Government institutions Fannie Mae and Freddie Mac buying an unlimited number of subprime CDO’s.
- Their willingness to buy all subprime CDO’s, which removed all risk from lenders who were then willing to loan multiple mortgages to all individuals.
- Lenders knowing they could quickly sell those loans to those institutions bundling them into CDO’s, who knew they could be sold to Fannie Mae and Freddie Mac.
- This explosion in subprime lending temporarily covering up the idiocy of the CRA and similar programs.
- the Democrats blocking President Bush when he tried to limit the number of subprime CDO’s Fannie and Freddie could buy.
- borrowers taking loans they knew they couldn’t pay back (liar loans).
- the government borrowing money from our kids and giving it to Fannie Mae and Freddie Mac so they could buy all the remaining subprime CDO’s that were in the pipeline on their way to Fannie and Freddie when the crash occurred.
- fractional reserves, low interest rates, and government spending creating pressure on money managers to take bigger risks for shorter term gains.
- the regulatory switch in November 2007 from forcing mark-to-model to forcing mark-to-market, which precipitated the crash of 2008 by making CDOs temporarily worthless, so that purchasers of credit default swaps would all win their long shot 30-1 bets. (Obama then forced banks back to mark-to-model in March 2009.)
- Obama’s future Treasury Secretary (Tim Geithner) deciding to crash Lehman weeks before Obama’s election, which was an “October Surprise” ensuring Obama’s victory.
- the government borrowing hundreds of billions from our children to pay 30-1 to all those insiders who bet that CDOs would temporarily lose most of their value – many of whom were foreign banks.
- trillions of dollars in Quantitative Easing, which is where the Federal Reserve creates money out of thin air and loans it to the government.
- a government cover up to scapegoat the free market — as if we have a free-market
- the progressive media telling us:
- buy stocks
- the economy is great
- the government’s got your back
- suppression of all of this by the progressive media
If those who shout “Glass-Steagall”, including Nobel winning economists, are so well informed, then how is it they don’t mention these critical points? How is it that every one of them I have spoken with (as of February 2012) are certain that Glass-Steagall was repealed by George Bush, when in fact, the repeal was signed by Bill Clinton! Yeah … progressives are sooo well informed.
I do agree that it seems like the repeal of Glass-Steagall may have been signed by Bill Clinton at the end of his second term in order to make it easier to perpetrate the whole scam, but then it turned out to have been completely unnecessary.
The most one could say about the harm of repealing of Glass-Steagall is that it may have made it slightly easier for large banks to extort politicians by claiming that if the bank goes under, they will take the depositors with them. So what? If the government were going to take unconstitutional action to bailout banks, then it could have given that money directly to depositors instead. Also, depositors would not have had their money in those banks anyway if the progressive media hadn’t been misleading them.
In a free-market, those who perpetrated the whole economic scam couldn’t rob depositors like me unless I played their game, but even though my money is in a credit union, and even though I never took out loans I could not easily pay back, and even though I never voted for politicians who would give the fruits of our labor and our children’s labor to pay foreigners 30-1 who bet against CDOs (purchased credit default swaps); government still taxes me through inflation and taxes my kids through government debt and then gives the fruits of our labor to the perpetrators. If Glass-Steagall were restored, I would not feel one iota safer.
Blaming the repeal of Glass-Steagall is an attempt to build support for the larger goal of “progressives” which is “enforced regulations on the nature of any and all transactions,” but let’s assume that in spite of their lack of respect for individuals, they really do want to help us all. Then how is it that their goal of controlling our transactions is also the goal of those who perpetrated this whole scam? At best, progressives are useful idiots for the perpetrators of the whole economic scam.
Attention, Progressives … It’s never too late to become the person you want to be.