Wall Street Tanks, Investment Firms Shown to be Behind Crash of FM's

The mortgage crisis has devolved, as predicted by non-economists whose heads are not up their asses, into a worldwide financial panic. The $Trillion$ bail-out of the investor class (you know - the tax money that was supposed to prevent a panic and solve the problem?) failed utterly to allay anybody's fear and the Stock Exchange lost 370 points today, finishing below 2000 for the first time in 4 years.

The sell-off came despite the $700 billion U.S. government bailout package, which was signed into law Friday after two weeks in which traders had appeared to count on the rescue as their only hope to avoid a market meltdown.

At its worst point, the Dow was down more than 800 points, an intraday record. The stock market rallied during the final 90 minutes of the trading day, and the Dow finished down about 370 points at 9,955.50.

The average is down almost 30 percent from its all-time high of 14,164.53, set a year ago Thursday.

Speculation among traders late in the session that the market's pullback had been severe enough to force the Federal Reserve into taking other steps to soothe the markets helped stocks rebound from their lows.

The RWNM is very busy blaming poor people for the mess (via TMiss), which is generally being blamed (erroneously, of course) on mismanagement of the FM's and the resulting govt takeover.

So, far we have blacks, Mexicans and gays being blamed for the financial crisis. Surely, they can't mean to leave out environmentalists and feminists? What about atheists? The conservatives are in such disarray they haven't even managed to find a way to blame Hollywood? They really are losing their touch.

They'll get to it but one lie at a time: it wasn't us.

At Salon, Andrew Leonard males it quite clear it wasn't the FM's that caused this, nor were they badgered into doing it by liberals whining about giving the poor a chance to buy a house. No, the badgers turn out to be Bear Stearns, Lehman Brothers, and TreasSec Henry Paulson's old firm Goldman Sachs.

Henry Waxman, D.-Calif., is holding a congressional hearing investigating the collapse of Lehman Brothers. There is much grandstanding and anger on both sides. Dennis Kucinich, D-Ohio, is asking pointed questions about how Goldman Sachs, Treasury Secretary Henry Paulson's former firm, stood to benefit from the collapse of Lehman. Republicans, waving copies of the New York Times Sunday article on the role played by Fannie Mae in the current crisis, are pushing their last line of free-market defense: that government caused the bust by pushing Fannie and Freddie to make more risky loans.

But, to my mind, the most telling moment in the New York Times article comes in its depiction of how the private sector pressured Fannie. Angelo Mozilo, the former CEO of Countrywide, takes a star turn:

For example, Wall Street had recently jumped into the market for risky mortgages. Firms like Bear Stearns, Lehman Brothers and Goldman Sachs had started bundling home loans and selling them to investors -- bypassing Fannie and dealing with Countrywide directly.

"You're becoming irrelevant," Mr. Mozilo told [Fannie CEO] Mr. Mudd, according to two people with knowledge of the meeting who requested anonymity because the talks were confidential. In the previous year, Fannie had already lost 56 percent of its loan-reselling business to Wall Street and other competitors.

"You need us more than we need you," Mr. Mozilo said, "and if you don't take these loans, you'll find you can lose much more."

No matter how much the Republicans attempt to dub the current turmoil the Fannie Mae Financial Panic of 2008, they will have great difficulty in obscuring the fact that Wall Street investment banks and hedge funds were the prime players who loaded up on risk that could not be sustained and that put not only their own companies but the entire global economy in peril.

(emphasis added)

Not that this will come as a surprise to anyone not a BushIdiot.

Comments

[eRobin]

Thank you for writing this. I have to get Robbie to school but I'm looking forward to reading this. I keep trying to explain to people around here that it isn't the fault of the poor but they have latched on to that argument like a life preserver. A guy at work tortures my husband with this kind of crap all day. Last night my husband compared it to be sexually harassed.

[mick arran]

...they have latched on to that argument like a life preserver.

Yeah, I know. I get the same thing down here in PubLand. Any excuse blaming a despised and feared group, like "any port in a storm".

I should perhaps have added that at least part of the motivation for scamming the poor with sham mortgages was precisely the way it would undercut the FM's. Bankers have been furious since they were created (and I've said this before) because they believed - erroneously - that the govt had taken away a potentially lucrative market when in fact the FM's were founded because it wasn't a market the banks had ever shown an interest in.

I also have to keep reminding people that the CEO's of the FM's who did the dirty were Bush appointees and movement conservative hacks who were particularly susceptible to arguments like those made by the investment houses and ideologically in favor of destroying the FM's to make room for the "free market" through privatization.

IOW, not only were the financiers responsible for pushing the FM's into playing a game they would never have otherwise involved themselves with but they did it as a deliberate tactic to take the FM's down.

I also have to keep reminding people that the FM's worked beautifully for decades right up until this attack on them was launched by the Bushies and the investment class. They were an incredible success, which is why they had to be dismantled.m It was just one more Bush fox-running-the-henhouse move and for all the usual reasons.