Maybe I'm reading this wrong--and if so I apologize beforehand--but even if there are nonetheless one or two points to be made in the below.
Michael wrote in what appears to be an outright dismissal of the writer's argument _against_ bourgeois economic propagandists: "What caused the financial crisis was the fundamental lack of soundness and the insurmountable contradictions of US capitalism/colonialism. "Not just the lack of regulation.Not just cheap money and easy credit. Not just the housing bubble..."Etc. . I believe that what Michael wrote--in the just above--is exactly what the writer in his article said: "...crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility." "To be clear, no single issue was the cause. Our economy is a complex and intricate system." There is in addition to this a mistake in what Michael wrote: "_there is no_ truth within the logic of capitalism, no _"intelligent" investing decisions_ in the sense that they are socially beneficial or _capable of helping resolve the crises." _ This is not the first time--and may not be the last time unless working class solidarity comes into being arrayed against and victorious over capitalism--that the system has crashed. Witness the Panic of 1907 <http://en.wikipedia.org/wiki/Panic_of_1907> (which prompted the creation of the Federal Reserve--to take the place of J P Morgan as 'lender of last resort'--this time with a 'bazooka' of the unlimited ability to create, i.e. 'print', money and thereby transfer purchasing power); or the Great Depression ('solved' by the mass production and the massive deficit spending of World War 2. Marx wrote of capitalism ability to make such "intelligent" (sic) investing decisions in the sense...of helping resolve the crises" in Vol 3 , Chap XV of Capital: <http://marxists.org/archive/marx/works/1894-c3/ch15.htm> "There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, /i.e./, appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; // "_How is this conflict settled and the conditions restored which correspond to the "sound" operation of capitalist production? The mode of settlement is already indicated in the very emergence of the conflict whose settlement is under discussion. It implies the withdrawal and even the partial destruction of capital _amounting to the full value of additional capital ?C, or at least a part of it. Although, as the description of this conflict shows, the loss is by no means equally distributed among individual capitals, its distribution being rather decided through a competitive struggle in which the loss is distributed in very different proportions and forms, depending on special advantages or previously captured positions, so that one capital is left unused, another is destroyed, and a third suffers but a relative loss, or is just temporarily depreciated, etc. But the _equilibrium would be restored under all circumstances through the withdrawal or even the destruction of more or less capita_l. "Destruction of more or less capital." Keynes in his "General Theory of Employment, Interest and Money" wrote the same thing: "When involuntary unemployment exists, the marginal disutility of labour is necessarily less than the utility of the marginal product. Indeed it may be much less. For a man who has been long unemployed some measure of labour, instead of involving disutility, may have a positive utility. If this is accepted, the above reasoning shows how_"wasteful" loan expenditure may nevertheless enrich the community on balance. Pyramid-building, earthquakes, even *wars may serve to increase wealth*,_ if the education of our statesmen on the principles of the classical economics stands in the way of anything better. "Ancient Egypt was doubly fortunate, and doubtless owed to this its fabled wealth, in that it possessed two activities, namely, pyramid-building as well as the search for the precious metals, the fruits of which, since they could not serve the needs of man by being consumed, did not stale with abundance. The Middle Ages built cathedrals and sang dirges. Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York." Somewhat away from the point (destruction of capital) but to the point that capitalism has means by which to repair itself, here is his opinion on 'make-work' schemes: "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of /laissez-faire /to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment." http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch10.htm Henry Grossman also wrote the same thing--among many other things (methods of the capitalist system to repair itself)--in Chapter 3 of "Modifying Tendencies" in his magnificent ":The Law of the Accumulaton and Breakdown of the Capitalist System" in reference to how the capitalist system is able to repair and resurrect itself. I will quote only one method (in continuing with the ideas expressed in the above citations from Marx and Keynes): "In the pages that follow I shall not go into a detailed description of all the several countertendencies that hinder the complete working out of the breakdown... "At a certain level of the accumulation of capital there is an overproduction of capital or a shortage of surplus value. Overproduction does not mean that there is not enough purchasing power to buy up commodities, but that it does not pay to buy commodities for programmes of expansion because it is not profitable to extend the scale of production... "Fr_om the Marxist theory of accumulation it follows that war and the destruction of capital values bound up with it weaken the breakdown and necessarily provide a new impetus to the accumulation of capital... _ "... however much devaluation of capital may devastate the individual capitalist in periods of crisis, they are a safety valve for the capitalist class as a whole... "The devaluation of accumulated capital takes various forms. Initially Marx deals with the case of periodic devaluation due to technological changes..._The same effect however, is produced when the apparatus of reproduction is used up or destroyed in terms of value as well as use value through wars, _ For a given economy the effect of capital devaluation is the same as if the accumulation of capital were to find itself at a lower stage of development. In this sense it creates a greater scope for the accumulation of capital." http://www.marxists.org/archive/grossman/1929/breakdown/ch03.htm "The specific function of wars in the capitalist mechanism is only explicable in these terms. Far from being an obstacle to the development of capitalism or a factor which accelerates the breakdown, as Kautsky and other Marxists have supposed,_the destructions and devaluations of war are a means of warding off the imminent collapse, of creating a breathing space for the accumulation of capital."_ I could go on with cites from Grossmann and Keynes as to the fact that capitalism can establish itself anequilibrium <http://en.wikipedia.org/wiki/Economic_equilibrium>--meaning all goods are sold at their value and supply meets demand--at a point on theproduction possibilities curv <http://en.wikipedia.org/wiki/Production%E2%80%93possibility_frontier>e below that of full employment, leaving to rust and wither, as Marx called it "Excess Capital and Excess Population"--the very condition of American capitalism since the '70's with factories closing and more and more workers being put out of work and thus unwillingly joining the "Reserve Army of Labor" <http://en.wikipedia.org/wiki/Reserve_army_of_labour> barred outside the factory gates unemployed, miserable while all the while unwittingly exercising downward pressure on the wages of those fearfully still employed--but I have spent too much time on this already. Capitalism can indeed 'save' itself--of course the measures taken only serve to increase the contradictions such that these create the foundation for the next--and more serious--crisis. The system will not fall by itself. Though it will shake and quake destroying the lives of millions. But left to its own devices capitalism will not crumble on its own. We, the working class must slay this beast. And dismissal and 'straw man' attacks upon our own economic champions serve no real beneficial purpose. This type of "gotcha" arguments--and not discussions--within ourselves has got to stop. Such is the sorry state of our political and economic debates. The article would prove to be enlightening for the many who know that shit is fucked up but can't put their finger on the cause of their miseries, capitalism. We ought to encourage the reading of articles such as this and not stoop to trying to pick points here and there. If you have something add it. Add it. I'm sick of this subtractive method of denigrating the efforts of comrades brave enough and knowledgeable enough to point their finger at, to counteract and counter attack bourgeois 'talking heads' spreading 'The Big Lies'. Lies woven of von Mises, Hayek, Freedman and Ann Rand. We ought argue with the bourgeoisie. And waste no time by making myths made of straw or dismissing out of hand other comrades and friends who make intellectual assaults upon the ruling class' ideological and politically-economical foundations. JAI RAC-LA -------- Original Message -------- Subject: Re: [DopeXResistance-L.A.] What caused the financial crisis? The Big Lie Date: Sat, 17 Dec 2011 00:54:12 -0800 From: Michael Novick <antiracistaction...@yahoo.com> To: johnaim...@earthlink.net CC: r...@riseup.net <r...@riseup.net>, dope_x_resistanc...@yahoogroups.com <dope_x_resistanc...@yahoogroups.com>, actio...@lists.riseup.net <actio...@lists.riseup.net>, LAAMN <laamn@yahoogroups.com>, copwatc...@lists.riseup.net <copwatc...@lists.riseup.net> What caused the financial crisis was the fundamental lack of soundness and the insurmountable contradictions of US capitalism/colonialism. Not just the lack of regulation. Not just cheap money and easy credit. Not just the housing bubble. But capital flight, super-exploitation of the workers in China and elsewhere, de-industrialization and mass incarceration in the US, the fiscal crisis of the state. the falling rate of profit. global overproduction crisis. Beneath one "big lie" of imperialism is always another "big lie" like the layers of an onion. there is no truth within the logic of capitalism, no "intelligent" investing decisions in the sense that they are socially beneficial or capable of helping resolve the crises. At 08:06 PM 12/16/2011, johnaimani wrote: > >What caused the financial crisis? The Big Lie goes viral. > > > > > >By ><http://www.washingtonpost.com/barry-ritholtz/2011/03/31/AFWBwIBC_page.html>Barry >Ritholtz, Published: November 5 > > > > > ><http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html>http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html > > > > > > > > > >I have a fairly simple approach to investing: >Start with data and objective evidence to >determine the dominant elements driving the >market action right now. Figure out what >objective reality is beneath all of the noise. >Use that information to try to make intelligent investing decisions. > >But then, I'm an investor focused on preserving >capital and managing risk. I'm not out to win >the ><http://www.washingtonpost.com/politics/campaigns>next >election or drive the debate. For those who are, >facts and data matter much less than a narrative that supports their interests. > >One group has been especially vocal about >shaping a new narrative of the credit crisis and >economic collapse: those whose bad judgment and >failed philosophy helped cause the crisis. > >Rather than admit the error of their ways >Repent! these people are engaged in an active >campaign to rewrite history. They are not, of >course, exonerated in doing so. And beyond that, >they damage the process of repairing what was >broken. They muddy the waters when it comes to >holding guilty parties responsible. They prevent >measures from being put into place to prevent another crisis. > >Here is the surprising takeaway: They are >winning. Thanks to the endless repetition of the Big Lie. > >A Big Lie is so colossal that no one would >believe that someone could have the impudence to >distort the truth so infamously. There are many >examples: Claims that Earth is not warming, or >that evolution is not the best thesis we have >for how humans developed. Those opposed to >stimulus spending have gone so far as to claim >that the infrastructure of the United States is >just fine, Grade A (not D, as the we discussed >last month), and needs little repair. > >Wall Street has its own version: Its Big Lie is >that banks and investment houses are merely >victims of ><http://www.washingtonpost.com/wp-srv/business/risk/index.html>the >crash. You see, the entire boom and bust was >caused by misguided government policies. It was >not irresponsible lending or derivative or >excess leverage or misguided compensation >packages, but rather long-standing housing policies that were at fault. > >Indeed, the arguments these folks make fail to >withstand even casual scrutiny. But that has not >stopped people who should know better from repeating them. > >The Big Lie made a surprise appearance Tuesday >when New York Mayor Michael Bloomberg, >responding to a question about ><http://www.washingtonpost.com/local/occupy-wall-street-hits-dc/2011/10/06/gIQAOe4RRL_gallery.html>Occupy >Wall Street, stunned observers by exonerating >Wall Street: "It was not the banks that created >the mortgage crisis. It was, plain and simple, >Congress who forced everybody to go and give >mortgages to people who were on the cusp." > >What made his comments so stunning is that he >built Bloomberg Data Services on the notion that >data are what matter most to investors. The >terminals are found on nearly 400,000 trading >desks around the world, at a cost of $1,500 a >month. (Do the math that's over half a billion >dollars a month.) Perhaps the fact that Wall >Street was the source of his vast wealth biased >him. But the key principle of the business that >made the mayor a billionaire is that fund >managers, economists, researchers and traders >should ignore the squishy narrative and, >instead, focus on facts. Yet he ignored his own >principles to repeat statements he should have known were false. >Why are people trying to rewrite the history of >the crisis? Some are simply trying to save face. >Interest groups who advocate for deregulation of >the finance sector would prefer that >deregulation not receive any blame for the crisis. > >Some stand to profit from the status quo: Banks >present a systemic risk to the economy, and >reducing that risk by lowering their leverage >and increasing capital requirements also lowers >profitability. Others are hired guns, doing the >bidding of bosses on Wall Street. > ><http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> ><http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> >[] > > > > > >They all suffer cognitive dissonance the >intellectual crisis that occurs when a failed >belief system or philosophy is confronted with proof of its implausibility. > >And what about those facts? To be clear, no >single issue was the cause. Our economy is a >complex and intricate system. What caused the crisis? Look: > >Fed Chair Alan Greenspan dropped rates to 1 >percent levels not seen for half a century >and kept them there for an unprecedentedly long >period. This caused a spiral in anything priced >in dollars (i.e., oil, gold) or credit (i.e., >housing) or liquidity driven (i.e., stocks). > >Low rates meant asset managers could no longer >get decent yields from municipal bonds or >Treasurys. Instead, they turned to high-yield >mortgage-backed securities. Nearly all of them >failed to do adequate due diligence before >buying them, did not understand these >instruments or the risk involved. They violated >one of the most important rules of investing: Know what you own. > >Fund managers made this error because they >relied on the credit ratings agencies Moody's, >S&P and Fitch. They had placed an AAA rating on >these junk securities, claiming they were as safe as U.S. Treasurys. > >. Derivatives had become ><http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html>a >uniquely unregulated financial instrument. They >are exempt from all oversight, counter-party >disclosure, exchange listing requirements, state >insurance supervision and, most important, >reserve requirements. This allowed AIG to write >$3 trillion in derivatives while reserving >precisely zero dollars against future claims. > >. The Securities and Exchange Commission changed >the leverage rules for just five Wall Street >banks in 2004. The "Bear Stearns exemption" >replaced the 1977 net capitalization rule's >12-to-1 leverage limit. In its place, it allowed >unlimited leverage for Goldman Sachs, Morgan >Stanley, Merrill Lynch, Lehman Brothers and Bear >Stearns. These banks ramped leverage to 20-, >30-, even 40-to-1. Extreme leverage leaves very little room for error. > >.Wall Street's compensation system was skewed >toward short-term performance. It gives traders >lots of upside and none of the downside. This >creates incentives to take excessive risks. > >. The demand for higher-yielding paper led Wall >Street to begin ><http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121503561.html>bundling >mortgages. The highest yielding were subprime >mortgages. This market was dominated by non-bank >originators exempt from most regulations. The >Fed could have supervised them, but Greenspan did not. > >. These mortgage originators' >lend-to-sell-to-securitizers model had them >holding mortgages for a very short period. This >allowed them to get creative with underwriting >standards, abdicating traditional lending >metrics such as income, credit rating, debt-service history and loan-to-value. > >. "Innovative" mortgage products were developed >to reach more subprime borrowers. These include >2/28 adjustable-rate mortgages, interest-only >loans, piggy-bank mortgages (simultaneous >underlying mortgage and home-equity lines) and >the notorious negative amortization loans >(borrower's indebtedness goes up each month). >These mortgages defaulted in vastly >disproportionate numbers to traditional 30-year fixed mortgages. > >To keep up with these newfangled originators, >traditional banks developed automated >underwriting systems. The software was gamed by >employees paid on loan volume, not quality. > >Glass-Steagall legislation, which kept Wall >Street and Main Street banks walled off from >each other, was repealed in 1998. This allowed >FDIC-insured banks, whose deposits were >guaranteed by the government, to engage in >highly risky business. It also allowed the banks >to bulk up, becoming bigger, more complex and unwieldy. > >Many states had anti-predatory lending laws on >their books (along with lower defaults and >foreclosure rates). In 2004, the Office of the >Comptroller of the Currency federally preempted >state laws regulating mortgage credit and >national banks. Following this change, national >lenders sold increasingly risky loan products in >those states. Shortly after, their default and foreclosure rates skyrocketed. > >Bloomberg was partially correct: Congress did >radically deregulate the financial sector, doing >away with many of the protections that had >worked for decades. Congress allowed Wall Street >to self-regulate, and the Fed the turned a blind eye to bank abuses. > >The previous Big Lie the discredited belief >that free markets require no adult supervision >is the reason people have created a new false narrative. > >Now it's time for the Big Truth. > > > ni -------- Original Message -------- Subject: Re: [DopeXResistance-L.A.] What caused the financial crisis? The Big Lie Date: Sat, 17 Dec 2011 00:54:12 -0800 From: Michael Novick <antiracistaction...@yahoo.com> To: johnaim...@earthlink.net CC: r...@riseup.net <r...@riseup.net>, dope_x_resistanc...@yahoogroups.com <dope_x_resistanc...@yahoogroups.com>, actio...@lists.riseup.net <actio...@lists.riseup.net>, LAAMN <laamn@yahoogroups.com>, copwatc...@lists.riseup.net <copwatc...@lists.riseup.net> What caused the financial crisis was the fundamental lack of soundness and the insurmountable contradictions of US capitalism/colonialism. Not just the lack of regulation. Not just cheap money and easy credit. Not just the housing bubble. But capital flight, super-exploitation of the workers in China and elsewhere, de-industrialization and mass incarceration in the US, the fiscal crisis of the state. the falling rate of profit. global overproduction crisis. Beneath one "big lie" of imperialism is always another "big lie" like the layers of an onion. there is no truth within the logic of capitalism, no "intelligent" investing decisions in the sense that they are socially beneficial or capable of helping resolve the crises. At 08:06 PM 12/16/2011, johnaimani wrote: > >What caused the financial crisis? The Big Lie goes viral. > > > > > >By ><http://www.washingtonpost.com/barry-ritholtz/2011/03/31/AFWBwIBC_page.html>Barry >Ritholtz, Published: November 5 > > > > > ><http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html>http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html > > > > > > > > > >I have a fairly simple approach to investing: >Start with data and objective evidence to >determine the dominant elements driving the >market action right now. Figure out what >objective reality is beneath all of the noise. >Use that information to try to make intelligent investing decisions. > >But then, I'm an investor focused on preserving >capital and managing risk. I'm not out to win >the ><http://www.washingtonpost.com/politics/campaigns>next >election or drive the debate. For those who are, >facts and data matter much less than a narrative that supports their interests. > >One group has been especially vocal about >shaping a new narrative of the credit crisis and >economic collapse: those whose bad judgment and >failed philosophy helped cause the crisis. > >Rather than admit the error of their ways >Repent! these people are engaged in an active >campaign to rewrite history. They are not, of >course, exonerated in doing so. And beyond that, >they damage the process of repairing what was >broken. They muddy the waters when it comes to >holding guilty parties responsible. They prevent >measures from being put into place to prevent another crisis. > >Here is the surprising takeaway: They are >winning. Thanks to the endless repetition of the Big Lie. > >A Big Lie is so colossal that no one would >believe that someone could have the impudence to >distort the truth so infamously. There are many >examples: Claims that Earth is not warming, or >that evolution is not the best thesis we have >for how humans developed. Those opposed to >stimulus spending have gone so far as to claim >that the infrastructure of the United States is >just fine, Grade A (not D, as the we discussed >last month), and needs little repair. > >Wall Street has its own version: Its Big Lie is >that banks and investment houses are merely >victims of ><http://www.washingtonpost.com/wp-srv/business/risk/index.html>the >crash. You see, the entire boom and bust was >caused by misguided government policies. It was >not irresponsible lending or derivative or >excess leverage or misguided compensation >packages, but rather long-standing housing policies that were at fault. > >Indeed, the arguments these folks make fail to >withstand even casual scrutiny. But that has not >stopped people who should know better from repeating them. > >The Big Lie made a surprise appearance Tuesday >when New York Mayor Michael Bloomberg, >responding to a question about ><http://www.washingtonpost.com/local/occupy-wall-street-hits-dc/2011/10/06/gIQAOe4RRL_gallery.html>Occupy >Wall Street, stunned observers by exonerating >Wall Street: "It was not the banks that created >the mortgage crisis. It was, plain and simple, >Congress who forced everybody to go and give >mortgages to people who were on the cusp." > >What made his comments so stunning is that he >built Bloomberg Data Services on the notion that >data are what matter most to investors. The >terminals are found on nearly 400,000 trading >desks around the world, at a cost of $1,500 a >month. (Do the math that's over half a billion >dollars a month.) Perhaps the fact that Wall >Street was the source of his vast wealth biased >him. But the key principle of the business that >made the mayor a billionaire is that fund >managers, economists, researchers and traders >should ignore the squishy narrative and, >instead, focus on facts. Yet he ignored his own >principles to repeat statements he should have known were false. >Why are people trying to rewrite the history of >the crisis? Some are simply trying to save face. >Interest groups who advocate for deregulation of >the finance sector would prefer that >deregulation not receive any blame for the crisis. > >Some stand to profit from the status quo: Banks >present a systemic risk to the economy, and >reducing that risk by lowering their leverage >and increasing capital requirements also lowers >profitability. Others are hired guns, doing the >bidding of bosses on Wall Street. > ><http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> ><http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> >[] > > > > > >They all suffer cognitive dissonance the >intellectual crisis that occurs when a failed >belief system or philosophy is confronted with proof of its implausibility. > >And what about those facts? To be clear, no >single issue was the cause. Our economy is a >complex and intricate system. What caused the crisis? Look: > >Fed Chair Alan Greenspan dropped rates to 1 >percent levels not seen for half a century >and kept them there for an unprecedentedly long >period. This caused a spiral in anything priced >in dollars (i.e., oil, gold) or credit (i.e., >housing) or liquidity driven (i.e., stocks). > >Low rates meant asset managers could no longer >get decent yields from municipal bonds or >Treasurys. Instead, they turned to high-yield >mortgage-backed securities. Nearly all of them >failed to do adequate due diligence before >buying them, did not understand these >instruments or the risk involved. They violated >one of the most important rules of investing: Know what you own. > >Fund managers made this error because they >relied on the credit ratings agencies Moody's, >S&P and Fitch. They had placed an AAA rating on >these junk securities, claiming they were as safe as U.S. Treasurys. > >. Derivatives had become ><http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html>a >uniquely unregulated financial instrument. They >are exempt from all oversight, counter-party >disclosure, exchange listing requirements, state >insurance supervision and, most important, >reserve requirements. This allowed AIG to write >$3 trillion in derivatives while reserving >precisely zero dollars against future claims. > >. The Securities and Exchange Commission changed >the leverage rules for just five Wall Street >banks in 2004. The "Bear Stearns exemption" >replaced the 1977 net capitalization rule's >12-to-1 leverage limit. In its place, it allowed >unlimited leverage for Goldman Sachs, Morgan >Stanley, Merrill Lynch, Lehman Brothers and Bear >Stearns. These banks ramped leverage to 20-, >30-, even 40-to-1. Extreme leverage leaves very little room for error. > >.Wall Street's compensation system was skewed >toward short-term performance. It gives traders >lots of upside and none of the downside. This >creates incentives to take excessive risks. > >. The demand for higher-yielding paper led Wall >Street to begin ><http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121503561.html>bundling >mortgages. The highest yielding were subprime >mortgages. This market was dominated by non-bank >originators exempt from most regulations. The >Fed could have supervised them, but Greenspan did not. > >. These mortgage originators' >lend-to-sell-to-securitizers model had them >holding mortgages for a very short period. This >allowed them to get creative with underwriting >standards, abdicating traditional lending >metrics such as income, credit rating, debt-service history and loan-to-value. > >. "Innovative" mortgage products were developed >to reach more subprime borrowers. These include >2/28 adjustable-rate mortgages, interest-only >loans, piggy-bank mortgages (simultaneous >underlying mortgage and home-equity lines) and >the notorious negative amortization loans >(borrower's indebtedness goes up each month). >These mortgages defaulted in vastly >disproportionate numbers to traditional 30-year fixed mortgages. > >To keep up with these newfangled originators, >traditional banks developed automated >underwriting systems. The software was gamed by >employees paid on loan volume, not quality. > >Glass-Steagall legislation, which kept Wall >Street and Main Street banks walled off from >each other, was repealed in 1998. This allowed >FDIC-insured banks, whose deposits were >guaranteed by the government, to engage in >highly risky business. It also allowed the banks >to bulk up, becoming bigger, more complex and unwieldy. > >Many states had anti-predatory lending laws on >their books (along with lower defaults and >foreclosure rates). In 2004, the Office of the >Comptroller of the Currency federally preempted >state laws regulating mortgage credit and >national banks. Following this change, national >lenders sold increasingly risky loan products in >those states. Shortly after, their default and foreclosure rates skyrocketed. > >Bloomberg was partially correct: Congress did >radically deregulate the financial sector, doing >away with many of the protections that had >worked for decades. Congress allowed Wall Street >to self-regulate, and the Fed the turned a blind eye to bank abuses. > >The previous Big Lie the discredited belief >that free markets require no adult supervision >is the reason people have created a new false narrative. > >Now it's time for the Big Truth. > > > >-- >JAI >RAC-LA > ><https://lists.riseup.net/www/admin/newplanet-newlives>https://lists.riseup.net/www/admin/newplanet-newlives > >http://revolutionaryautonomouscommunities.blogspot.com/ > ><http://www.pmpress.org/content/article.php?story=JohnAImani>http://www.pmpress.org/content/article.php?story=JohnAImani > JAI RAC-LA https://lists.riseup.net/www/admin/newplanet-newlives http://revolutionaryautonomouscommunities.blogspot.com/ http://www.pmpress.org/content/article.php?story=JohnAImani On 12/17/2011 12:54 AM, Michael Novick wrote: > What caused the financial crisis was the fundamental lack of soundness > and the insurmountable contradictions of US capitalism/colonialism. > Not just the lack of regulation. Not just cheap money and easy credit. > Not just the housing bubble. But capital flight, super-exploitation of > the workers in China and elsewhere, de-industrialization and mass > incarceration in the US, the fiscal crisis of the state. the falling > rate of profit. global overproduction crisis. Beneath one "big lie" of > imperialism is always another "big lie" like the layers of an onion. > there is no truth within the logic of capitalism, no "intelligent" > investing decisions in the sense that they are socially beneficial or > capable of helping resolve the crises. > > > At 08:06 PM 12/16/2011, johnaimani wrote: > >> >> What caused the financial crisis? The Big Lie goes viral. >> >> >> >> >> >> By >> <http://www.washingtonpost.com/barry-ritholtz/2011/03/31/AFWBwIBC_page.html>Barry >> >> Ritholtz, Published: November 5 >> >> >> >> >> >> <http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html>http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story.html >> >> >> >> >> >> >> >> >> >> >> >> I have a fairly simple approach to investing: Start with data and >> objective evidence to determine the dominant elements driving the >> market action right now. Figure out what objective reality is beneath >> all of the noise. Use that information to try to make intelligent >> investing decisions. >> >> But then, I'm an investor focused on preserving capital and managing >> risk. I'm not out to win the >> <http://www.washingtonpost.com/politics/campaigns>next election or >> drive the debate. For those who are, facts and data matter much less >> than a narrative that supports their interests. >> >> One group has been especially vocal about shaping a new narrative of >> the credit crisis and economic collapse: those whose bad judgment and >> failed philosophy helped cause the crisis. >> >> Rather than admit the error of their ways Repent! these people >> are engaged in an active campaign to rewrite history. They are not, >> of course, exonerated in doing so. And beyond that, they damage the >> process of repairing what was broken. They muddy the waters when it >> comes to holding guilty parties responsible. They prevent measures >> from being put into place to prevent another crisis. >> >> Here is the surprising takeaway: They are winning. Thanks to the >> endless repetition of the Big Lie. >> >> A Big Lie is so colossal that no one would believe that someone could >> have the impudence to distort the truth so infamously. There are many >> examples: Claims that Earth is not warming, or that evolution is not >> the best thesis we have for how humans developed. Those opposed to >> stimulus spending have gone so far as to claim that the >> infrastructure of the United States is just fine, Grade A (not D, as >> the we discussed last month), and needs little repair. >> >> Wall Street has its own version: Its Big Lie is that banks and >> investment houses are merely victims of >> <http://www.washingtonpost.com/wp-srv/business/risk/index.html>the >> crash. You see, the entire boom and bust was caused by misguided >> government policies. It was not irresponsible lending or derivative >> or excess leverage or misguided compensation packages, but rather >> long-standing housing policies that were at fault. >> >> Indeed, the arguments these folks make fail to withstand even casual >> scrutiny. But that has not stopped people who should know better from >> repeating them. >> >> The Big Lie made a surprise appearance Tuesday when New York Mayor >> Michael Bloomberg, responding to a question about >> <http://www.washingtonpost.com/local/occupy-wall-street-hits-dc/2011/10/06/gIQAOe4RRL_gallery.html>Occupy >> >> Wall Street, stunned observers by exonerating Wall Street: "It was >> not the banks that created the mortgage crisis. It was, plain and >> simple, Congress who forced everybody to go and give mortgages to >> people who were on the cusp." >> >> What made his comments so stunning is that he built Bloomberg Data >> Services on the notion that data are what matter most to investors. >> The terminals are found on nearly 400,000 trading desks around the >> world, at a cost of $1,500 a month. (Do the math that's over half a >> billion dollars a month.) Perhaps the fact that Wall Street was the >> source of his vast wealth biased him. But the key principle of the >> business that made the mayor a billionaire is that fund managers, >> economists, researchers and traders should ignore the squishy >> narrative and, instead, focus on facts. Yet he ignored his own >> principles to repeat statements he should have known were false. >> Why are people trying to rewrite the history of the crisis? Some are >> simply trying to save face. Interest groups who advocate for >> deregulation of the finance sector would prefer that deregulation not >> receive any blame for the crisis. >> >> Some stand to profit from the status quo: Banks present a systemic >> risk to the economy, and reducing that risk by lowering their >> leverage and increasing capital requirements also lowers >> profitability. Others are hired guns, doing the bidding of bosses on >> Wall Street. >> >> <http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> >> >> <http://www.washingtonpost.com/business/economy/the-dows-5-best-and-worst-days/2011/09/09/gIQAoE5yMK_gallery.html> >> >> >> [] >> >> >> >> >> >> They all suffer cognitive dissonance the intellectual crisis that >> occurs when a failed belief system or philosophy is confronted with >> proof of its implausibility. >> >> And what about those facts? To be clear, no single issue was the >> cause. Our economy is a complex and intricate system. What caused the >> crisis? Look: >> >> Fed Chair Alan Greenspan dropped rates to 1 percent levels not seen >> for half a century and kept them there for an unprecedentedly long >> period. This caused a spiral in anything priced in dollars (i.e., >> oil, gold) or credit (i.e., housing) or liquidity driven (i.e., stocks). >> >> Low rates meant asset managers could no longer get decent yields from >> municipal bonds or Treasurys. Instead, they turned to high-yield >> mortgage-backed securities. Nearly all of them failed to do adequate >> due diligence before buying them, did not understand these >> instruments or the risk involved. They violated one of the most >> important rules of investing: Know what you own. >> >> Fund managers made this error because they relied on the credit >> ratings agencies Moody's, S&P and Fitch. They had placed an AAA >> rating on these junk securities, claiming they were as safe as U.S. >> Treasurys. >> >> . Derivatives had become >> <http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html>a >> >> uniquely unregulated financial instrument. They are exempt from all >> oversight, counter-party disclosure, exchange listing requirements, >> state insurance supervision and, most important, reserve >> requirements. This allowed AIG to write $3 trillion in derivatives >> while reserving precisely zero dollars against future claims. >> >> . The Securities and Exchange Commission changed the leverage rules >> for just five Wall Street banks in 2004. The "Bear Stearns exemption" >> replaced the 1977 net capitalization rule's 12-to-1 leverage limit. >> In its place, it allowed unlimited leverage for Goldman Sachs, Morgan >> Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. These banks >> ramped leverage to 20-, 30-, even 40-to-1. Extreme leverage leaves >> very little room for error. >> >> .Wall Street's compensation system was skewed toward short-term >> performance. It gives traders lots of upside and none of the >> downside. This creates incentives to take excessive risks. >> >> . The demand for higher-yielding paper led Wall Street to begin >> <http://www.washingtonpost.com/wp-dyn/content/article/2008/12/15/AR2008121503561.html>bundling >> >> mortgages. The highest yielding were subprime mortgages. This market >> was dominated by non-bank originators exempt from most regulations. >> The Fed could have supervised them, but Greenspan did not. >> >> . These mortgage originators' lend-to-sell-to-securitizers model had >> them holding mortgages for a very short period. This allowed them to >> get creative with underwriting standards, abdicating traditional >> lending metrics such as income, credit rating, debt-service history >> and loan-to-value. >> >> . "Innovative" mortgage products were developed to reach more >> subprime borrowers. These include 2/28 adjustable-rate mortgages, >> interest-only loans, piggy-bank mortgages (simultaneous underlying >> mortgage and home-equity lines) and the notorious negative >> amortization loans (borrower's indebtedness goes up each month). >> These mortgages defaulted in vastly disproportionate numbers to >> traditional 30-year fixed mortgages. >> >> To keep up with these newfangled originators, traditional banks >> developed automated underwriting systems. The software was gamed by >> employees paid on loan volume, not quality. >> >> Glass-Steagall legislation, which kept Wall Street and Main Street >> banks walled off from each other, was repealed in 1998. This allowed >> FDIC-insured banks, whose deposits were guaranteed by the government, >> to engage in highly risky business. It also allowed the banks to bulk >> up, becoming bigger, more complex and unwieldy. >> >> Many states had anti-predatory lending laws on their books (along >> with lower defaults and foreclosure rates). In 2004, the Office of >> the Comptroller of the Currency federally preempted state laws >> regulating mortgage credit and national banks. Following this change, >> national lenders sold increasingly risky loan products in those >> states. Shortly after, their default and foreclosure rates skyrocketed. >> >> Bloomberg was partially correct: Congress did radically deregulate >> the financial sector, doing away with many of the protections that >> had worked for decades. Congress allowed Wall Street to >> self-regulate, and the Fed the turned a blind eye to bank abuses. >> >> The previous Big Lie the discredited belief that free markets >> require no adult supervision is the reason people have created a >> new false narrative. >> >> Now it's time for the Big Truth. >> >> >> >> -- >> JAI >> RAC-LA >> >> <https://lists.riseup.net/www/admin/newplanet-newlives>https://lists.riseup.net/www/admin/newplanet-newlives >> >> >> >> http://revolutionaryautonomouscommunities.blogspot.com/ >> >> <http://www.pmpress.org/content/article.php?story=JohnAImani>http://www.pmpress.org/content/article.php?story=JohnAImani >> >> >> -- JAI RAC-LA https://lists.riseup.net/www/admin/newplanet-newlives http://revolutionaryautonomouscommunities.blogspot.com/ http://www.pmpress.org/content/article.php?story=JohnAImani [Non-text portions of this message have been removed] ------------------------------------ --------------------------------------------------------------------------- LAAMN: Los Angeles Alternative Media Network --------------------------------------------------------------------------- Unsubscribe: <mailto:laamn-unsubscr...@egroups.com> --------------------------------------------------------------------------- Subscribe: <mailto:laamn-subscr...@egroups.com> --------------------------------------------------------------------------- Digest: <mailto:laamn-dig...@egroups.com> --------------------------------------------------------------------------- Help: <mailto:laamn-ow...@egroups.com?subject=laamn> --------------------------------------------------------------------------- Post: <mailto:la...@egroups.com> --------------------------------------------------------------------------- Archive1: <http://www.egroups.com/messages/laamn> --------------------------------------------------------------------------- Archive2: <http://www.mail-archive.com/laamn@egroups.com> --------------------------------------------------------------------------- Yahoo! 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