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Sunday, October 26, 2008

Then and Now - The Great Depression, Act II

"Those who cannot remember the past, are condemned to repeat it"

Meaning: We didn't learn our lesson yet so that lesson will now be repeated.
"If expansion of the brokers loan account gets to the place where it is dangerous and borders on unwarranted speculation, the American banking fraternity itself would correct the situation." Former Governor Roy A. Young of the federal reserve system, quoted in 1928. He said he could recommend no legislation to that end.

Meaning: What me worry? The banks don't need to be regulated! They will self-regulate and everything will be hunky-dory!
Event: 1929 Stock market crash, the Great Depression, Misery, Poverty and a distinct absence of Hunky Doriness.

Event: Glass-Steagall Act Of 1933 - set up a regulatory firewall between commercial and investment bank activities, both of which were curbed and controlled. See Source

Meaning: By 1933, people were not so happy with the results of banks regulating themselves so they decided to help out - (Hunger tends to make folks grumpy)

... Hunky Doriness ...

Event: Gramm-Leach-Bliley Act 1999 - to the delight of many in the banking industry (not everyone, however, was happy), in November of 1999 Congress repealed the Glass-Steagall Act with the establishment of the Gramm-Leach-Bliley Act, which eliminated the Glass-Steagall Act restrictions against affiliations between commercial and investment banks. Furthermore, the Gramm-Leach-Bliley Act allows banking institutions to provide a broader range of services, including underwriting and other dealing activities.

Meaning: Representative Jim Leach (R-Iowa) and Senator Phil Gramm (R-Tex.) owe us some money.

I would also like to see money paid back from the following people:
  1. Daniel Mudd - Fannie Mae, the biggest U.S. mortgage finance company, said that it paid its chief executive, Daniel Mudd, salary, bonuses and stock valued at $14.25 million in 2006, an increase of 25 percent.
  2. Richard F. Syron - 5-Year Compensation Total $29.06 mil - Richard F Syron has been CEO of Freddie Mac ( FRE) for 4 years. Mr. Syron has been with the company for 4 years. The 64 year old executive ranks 34 within Diversified Financials
  3. Kerry Killinger - Washington Mutual lost $3.3 billion in the second quarter, on top of more than $1 billion of losses in the first quarter, as it scrambled to raise reserves for loan losses. Killinger received no 2007 bonus amid huge losses and a 70% stock price drop. That cut his pay to a mere $4.9 million. His board decided in March to exclude the financial damage from WaMu's subprime lending from the operating profit figure used to calculate his bonus. Directors backed off in April after shareholders forced former finance committee head Mary Pugh to resign.
  4. TBD

If you care that we taxpayers are being asked to foot the bill for this bailout, then join me in getting our money back from the people who stole it. And yes I mean stole it. Since when does one deserve bonus pay for driving a company into the ground? I want that money back - These people had no business taking on a job that they were so obviously not qualified for. I want consequences!!!


PS Consider this a lesson in Home Economics. - My list will continue to grow and if you know of somebody who should be on this list, by all means nominate him/her!


Liz B. said...

I nominate every single bank, credit union, or other lending institution who granted loans to people who could not afford them. When my husband and I first started shopping for a home, we were approved for a huge sum of money that we KNEW we could not actually afford, that we are educated enough to know was ridiculous, and yet the temptation was there to up the limit we had set for ourselves. (Thankfully we didn't; we were approved for 200,000, and bought our house for 130,000, the absolute upper end of the limit we set ourselves.) The banks should be ashamed of themselves for allowing people to believe they could live beyond their means, and then go bankrupt.

Of course, I also think that as educated consumers we should have known better than to believe we could afford what the bank said we could afford. So the people who have defaulted on loans because they overextended themselves (not because of things like economic crises causing job layoffs, etc.) are partially to blame.

Retro Housewife said...

You're not kidding! What with buying our house and cabin, plus various refinancings, we probably went through the loan process 4 or 5 times. Not once did we ever show proof of income. I liked this very much because it is much easier - less paper - but we were careful to stay within our budget.

More than one realtor an even the Countrywide loan guy essentially told us we should just put down whatever income we needed to to get the loan.

That was back in 2003. I remember thinking to myself that they were going to run into trouble with that sort of money lending.

However, I can see how some people would be easily mislead because at the end of the day the terms can get quite complicated, and the brokers are the fast talking sort.

I think things are a little backwards when we expect the laymen to audit the professionals to make sure they are getting a loan that makes sense for them. That is what the loan officer gets paid for.

Those people at the top make insane amounts of money - with the rationale that they carry the responsibility. They should be held to the standard of pay for performance so you and I don't have to foot the bill.