"John R. Carroll" wrote in message
...
Wes wrote:
"John R. Carroll" wrote:

I think you'll find that the de-regulation started under Slick
Willie Clintdud.


You need to think a little harder then jimbo.
was before Clinton and when Ronnie allowed mortgage backed securities
he kicked of this nightmare.

Okay, assuming this is right, why didn't Billy Clinton do anything to
fix it? I think he had control of things up to 1994. Now if you
said GWB did this blaming Republicans would be in order.

What you seem to miss is that money buys congress. Sometimes both
sides take the money but one side sits back and lets the other side
take the rap. There is a lot of bipartisanism in Congress.


The Employee Retirement Income Security Act of 1974 (ERISA) was what ended
the era of defined benefit pension plans and ushered in the defined
contribution system you know today.

IRA's were the first outgrowth and you could only open an IRA at a bank in
the beginning. 401K's, Roth IRA's, Keogh's and the rest followed as the
defined benefit era ended.
We now are so far along that these things can even be self directed.
In the end there was a lot of new money. A LOT.
Just sitting there.
Waiting.
But not until the 90's.

Inflation was a real issue in the 70's as well. Richard Nixon imposed wage
and price controls for a while.
There were a couple of recessions but they were relatively brief and had
triggering events. As 1979 rolled around things came to a head. Inflation
hit double digits and when that happened the nations originators of
mortgages were in real trouble. Savings and loans were operating in a way
that required them to borrow money at nearly twice the rate they had lent
it
out at in the form of long term mortgages and they were going broke. Paul
Volker had determined that inflation was the most dangerous threat to our
economy and had raised interest rates to the point that Prime plus one was
twenty percent. Usury laws had to be rewritten but until they were,
lending
effectively stopped except in certain commercial transactions. Mortgages
were at 14 percent.

It was at this point that the Congress passed a piece of legislation that
allowed Savings and Loans to apply their current losses against the years
of
taxes they'd paid over the previous ten years. They would get checks back
from the IRS. The losses, however had to be monetized before they could be
useful in this scheme and it was hard to do.
Then came Salomon Brothers Inc. and a short, fat little Italian who was
dying to get out of the back room. IIRC we are up to 1984.
His idea, and what he did, was to take bundles of mortgages that S&L's
were
desperate to unload and package them for sale as bonds. Salomon Brothers
would generate a fee, the S&L's would reap their tax benefit in huge
chunks
and money would then flow back into the new mortgage market. He and a
small
team hit the road to promote their new product and after nearly running
out
of gas, they sold the first $25 million of bands to Bank of America. Half
way through the champagne and caviar one of the lawyers piped in that what
had been done might not be legal. He was right. Laws had been written to
protect the baking industry and these sorts of securities couldn't be sold
to federally insured institutions without having first been "franked" by
either Freddie Mac or Fannie Mae. Fannie was the lighted touch due to
competitive reasons - they were the junior GSE at the time and were
suffering a big case of penis envy.

The S&L's went wild selling every mortgage they had at steep discounts all
the while refilling their coffers with the tax rebates they received as
they
reported huge losses on paper. This was how the Reagan administration
"saved" the mortgage banking industry. They used our tax dollars as a gift
to the industry.
M&A BOOMED. All of the money flowing into S&L's had to go somewhere so
they
all started buying the debt used to fund mergers and acquisitions. That
debt
is was called "High Yield" bonds and what came to be known as Junk bonds
in
the end.

The years between 1990 and today have been years of laws being modified or
just plain thrown out in order to give the people who create these sorts
of
debt instruments the greatest possible access to the tremendous wealth
Americans have stored in the savings and investment plans created as the
result of The Employee Retirement Income Security Act of 1974 (ERISA).

Our pockets have been picked nearly clean at this point and by the publics
own demand for earnings, not it's consent.
We'll see another Pecora Commission in eighteen months and we need it.

Charlie Rose had four of Wall Streets top players on yesterday and if you
think for a minute that I am pessimistic or that George is being harsh you
should have heard them. None of the four thought we were going to have
anything less than complete collapse over the next year.

They made a convincing case and I'm afraid - really afraid - they are
correct.


Is that supposed to be a surprise? I guess it is but only to supply siders
and Neocons. Anyone besides those foolish idealists knows from our past
history that whenever business gets too powerful and gains the ability to
make the government jump to it's commands we get the same scenario. Control
of business comes off, a period of prosperity ensues, a boom if you like,
and then the inevitable collapse follows. The worst example of this scenario
was the Great Depression. You would have though we would have learned our
lesson from that experience once and for all but that's clearly not the
case. Business has it's republican flunky in the White House and with a
compliant congress everything that kept the system in check was chucked out
the window. How long will it take to fix things and how bad will it get is
hard to say but it's going to be the worst financial crisis since the 1930s.
My only question is whether the country has had enough of this stuff and
will elect a government that will put the brakes on an out of control
business community. We'll see in November if it would prefer some more of
the same or do they recognize a change has to be made and I don't mean from
one pro business republican to another one.

Hawke