SALON: "Toxic bankers, captive regulators: Everything you think about the housing market is wrong"

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"Toxic bankers, captive regulators: Everything you think about the housing market is wrong"




Excerpted from "Other People’s Houses: How Decades of Bailouts, Captive Regulators, and Toxic Bankers Made Home Mortgages a Thrilling Business"


The news cameras kept recording after the power failed. Complete darkness. Then a heavy red curtain was swept aside, allowing a bit of sunlight to stream into the woodpaneled hearing room. This natural illumination had a strange effect on Alan Greenspan, the day’s first witness. He was seated before the Financial Crisis Inquiry Commission (FCIC), a ten-member panel of private citizens appointed by Congress to examine the causes of the financial and economic crisis. By that day, in April 2010, the FCIC had already conducted several hearings and public meetings. Greenspan had spent much of the morning before the power outage in a defensive mode, denying that, as chairman of the Fed for nearly two decades, he had the tools to predict or prevent the subprime mortgage meltdown and the connected global financial crisis.

Yet he had admitted to the panel: “I was right 70 percent of the time, but I was wrong 30 percent of the time. And there are an awful lot of mistakes” over the years. Now, in the semidarkness, Greenspan retreated a bit. He responded to a question about whether he believed there still was excessive debt in the banking system with a nod, a gesture not captured on the official record. The commissioner who posed the question remarked that he saw Greenspan nod. An audience member said he had not nodded. Greenspan sat silently, not offering to clarify. Minutes later, the hearing adjourned and the witness departed.

That was classic Greenspan: bright moments of clarity followed by obfuscation and retreat. Eighteen months earlier in October 2008, in his most candid moment, he told a congressional subcommittee that he had found “a flaw” in his entire system of thought. He had adhered for decades to a particular view of how markets operated, only to discover several decades later he’d been very wrong. Yet the question for the panel that April morning was whether the crisis could have been avoided.



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Notwithstanding this pay negotiator’s assertion that Wall Street was not to blame, when put under oath, bankers do not concur. Bank of America CEO Brian Moynihan told the FCIC: “Over the course of the crisis, we, as an industry, caused a lot of damage. Never has it been clearer how poor business judgments we have made have affected Main Street.” At an FCIC hearing in January 2010, JPMorgan Chase CEO Jamie Dimon told the Commission, “I blame the management teams 100% . . . and no one else.”




MORE Most xlnt, many myths debunked:
http://www.salon.com/2014/05/25/toxic_bankers_captive_regulators_everything_you_think_about_the_housing_market_is_wrong/