Finally, the bill doesn't even address the two major contributors to the housing loan failures that dragged down our economy: Fannie Mae and Freddie Mac. These two taxpayer-supported entities became the backstops for reckless loans. They actually encouraged and offered the government's consent to the irresponsible lending practices that were the root cause of the crisis.
I have no problem getting on the government for being a disaster, but Fannie/Freddie's shareholders were as much or more responsible for the race to the bottom in lending standards as the government was.
The very idea of a GSE was absurd because it is a walking conflict of interest because you can't have private shareholders running a company with an implicit government guarantee. Conceptually it was a flawed idea from the start as it was ultimately bound to be abused.
Around the turn of the century, F & F's shareholders, not the government, put the gun to management's head to buy anything and everything in site mortgage wise because the Wallstreet Investment banks were stealing market share in the mortgage market, and making money hand over fist operating in sub-prime.
The standard fallback to everything is "blame fannie/freddie." They aren't the problem though, it is the securitization practices of our banking sector. Were it not for all the various financial vehicles created that bring no real value to anyone but the people passing paper around, we could have isolated the bad mortgages and the world economy wouldn't have been on the brink.
By allowing Wallstreet to package horseshit together, buy a AAA rating for it, and then create derivitive products 3 and 4 times removed from the underlying assets the bets were being made on and then litter the world with worthless paper is what turned the economy into a big clusterfuck.
This bill is a joke, it doesn't address leverage, it doesn't address underwriting standards, it doesn't eliminate "Too Big to Fail", and it doesn't do anything to take away the vehicles banks use to hide losses from investors while they base compensation on the fraudulent numbers.
The government doesn't want people to know this, but most of our banks are technically insolvent, regardless of how well capitalized they appear.
If they actually took the write-downs that they should be some of them would go belly up.
The banks are using mark to myth accounting gimmicks to carry homes Heloc's and 2nd liens at full value on the balance sheet at a multiple of what they are really worth. Those are worth nothing theoretically if the house goes underwater. There are hundreds of billions of dollars off these things the banks refuse to write down or recognize losses on because it would wipe them out.
What is Zimbabwe Ben's answer, another round of quantitative easing (I.E fire up the printing presses) where we buy the shit off the banks balance sheets again to socialize the losses and privatize gains. The Feds buys worthless paper from the banks with tax payer money ultimately, and the bank rids itself of shitty assets and then hands out billions of dollars in bonuses based on the appearance the banks are healthy and thriving. If the American people realized the scope of the back door bailout these firms got there would be rioting in the streets. TARP was nothing but a diversion to take the attention away from the real giveaway.
If you haven't figured it out yet I am very cynical about this bill as it does nothing to address the fact our financial system is corrupt and designed to continue to saddle taxpayers with future losses and decreased purchasing power because of the inflation we have to create rather than having the banking overlords ever realize losses. It is criminal the lengths to which the government will go to protect the profit streams of the major financial institutions. No loss is too great for the taxpayer to bear if it means protecting profits and bonuses.
