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Posted at 12:00 AM ET, 01/27/2011

Rumble seat

By Tom Toles

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***

Jail still seems about right

When I started blogging last spring I launched right into trying to lock somebody up for the financial collapse. So far, not so many Titans to be found rattling their cell bars with their water cups. But when I read about the new report saying the whole collapse was avoidable, I still feel like justice sits unserved.

The report apparently places much blame on the lack of proper government oversight. Big surprise after 30 years of emasculating the very idea that financial institutions need regulating. Yes, yes, BOTH political parties. But the casual references to "toxic mortgages" still rankles. To my eye, "toxic mortgages" = "mortgages that the lenders knew were garbage" = "fraud" = "jail." Or should. Tell me which is the weak link in that logic chain, other than "justice works differently for the BIG people".

It's not like this was a victimless crime. EVERYBODY suffered from this one. A LOT. Everybody except the perpetrators. --Tom Toles

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By Tom Toles  | January 27, 2011; 12:00 AM ET
Categories:  Congress, GOP, Obama White House, Polarization  
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Comments

Tom, u r absolutely one of the best socio-political writers in the world. Really, the way you summarize leaving propagandists of falsehoods without recourse is un-matched by any writer save the satirists like Bill Mahr &John Stewart.

Posted by: whitehousetv | January 31, 2011 8:15 AM | Report abuse

It's been said that this could not possibly have been foreseen but, if that was really the case, why was the Glass-Steagall banking reform act passed in the first place... and in 1933? Because, of course, this possibility WAS foreseen.

Ah, but those pesky regulations... unfairly tying the hands of business, stifling profits, not trusting the conscience of the market. Oh, no, nobody could possibly have seen this coming.

We can't really jail 'em, though, because Glass-Steagall was REPEALED by Gramm-Leach-Bliley. See? So, nobody did anything illegal.

Posted by: jonroesler | January 28, 2011 10:45 AM | Report abuse


To Tom Toles...
Colonel Haughty, "Had a plan, all the time,” for our nation that has lost its way, that is! Whisper, whisper, whisper; we will all split up and go in a different direction and if we spot our lost nation we will billow with our mighty trunks and all of the bad things that have happened will go away. Big business will grow a heart, politicians will get courage and the Tea Party People will get a brain.
The U.S. Treasury will have such fun; it will print all the money we need to support life, liberty and the pursuit of happiness.
Dave

Posted by: OchamsRazor | January 28, 2011 1:18 AM | Report abuse

oh and Toles...rumble seats are actually quite cool (especially this time of year) to ride on...guess your rumble seat is different. : )

Posted by: bertzel | January 27, 2011 6:25 PM | Report abuse

~~ptgrunner
So you are not holding your breath on any prosecution then, nor am I. Mail your reps!!
Posted by: dalyplanet~~~

I suggest you call them but that really won't don't much in this case, will it.

Posted by: bertzel | January 27, 2011 6:22 PM | Report abuse

ptgrunner

So you are not holding your breath on any prosecution then, nor am I. Mail your reps!!

Posted by: dalyplanet | January 27, 2011 5:18 PM | Report abuse

~~~Largely ignored to this day is the role that the major ratings agencies---Standard and Poore, Moodys, and Fitch played in giving AAA ratings to garbage.~~~

Yep...the 'junkbonds' hit the fan.

Posted by: bertzel | January 27, 2011 5:07 PM | Report abuse

...

"The only hope for justice is likely in Tea Party hands."

...

Posted by: dalyplanet | January 27, 2011 3:16 PM | Report abuse
---------------------------------------------
That's a good one. I'll be laughing all night. The Tea Party has been calling for less regulation, less "government interference" with business. Yeah, I know, the Tea Party has no platform. But this only gives them plausible deniability when things go to the devil if they ever get enough influence to do anything. We already have the Tea Party saying that deficits were not a campaign issue, don't we?!?!?!?

Posted by: ptgrunner | January 27, 2011 4:38 PM | Report abuse

~~~~The thing that is hardest to understand, but is the most important, is that most of those real investment dollars just went to money heaven. ~~~

Money Heaven....hmmm. boy that is insightful, even for you daly!

Posted by: bertzel | January 27, 2011 4:27 PM | Report abuse

The Tea Partyers have been saying for some time that the government needs to get out of the way of business. This most recent financial mess was not the first reminder of why businesses need to be regulated. This certainly goes back to a period before the 1980s, but we deregulated Savings & Loans in the 1980s (those wonderful Reagan years). Very shortly thereafter, the S&Ls were in very deep trouble, and the U.S. government had to spend $100 of billions to bail them out. What did conservatives learn from that? They learned that the people of the U.S. could be taken. So the GOP allowed corporate lobbyists to write bills in the 1990s (GOP Congressman actually left the table and let *lobbyists* write legislation), the GOP fought for deregulation, which the Democrats allowed them to have. It didn't take long to see the results of that sort of irresponsible behavior.

The problem is that the wealthy and the corporations have picked only the low-hanging fruit. With the help of the GOP and the Tea Party, they will come back for the rest.

Posted by: ptgrunner | January 27, 2011 4:26 PM | Report abuse

rightspokeBlas

You are right that some of the money actually went to people and bankers and all those in the chain, but only a piece of it.

The thing that is hardest to understand, but is the most important, is that most of those real investment dollars just went to money heaven. The money evaporated, it became gone, lost, kaput. It was not stolen but lost down a well or hole where it will not come out. So the US money and real estate markets lost a half a trillion dollars in a week or two. The real estate losses are still being tallied. This makes for fear and then there are less jobs NO loans, etc.

Posted by: dalyplanet | January 27, 2011 3:41 PM | Report abuse

So right now it is only hand wringing all around from our elected Bubbas and their Minions. Time, perhaps to send email or mail to our respective reps? Maybe a few of them may want to hang a couple of these smart guys out to dry.

Presently, the powers that be just want to sweep everything under the rug, No bailout and some short term pain would have some of these guys waiting for sentencing by now. Enron was a speck compared to this mess. My opinion: If the Democrats hands were clean they could be making huge hay right now. The only hope for justice is likely in Tea Party hands.

This has been a regular issue here for me (although not my main repeat topic lol). Hedges or derivatives are largely unregulated and untaxed. This largely invisible and poorly understood arm of the money industry is likely the largest source of disappearing capital in the US economy.

Posted by: dalyplanet | January 27, 2011 3:16 PM | Report abuse

A substantial number of these bad mortgages resulted from refinancing properties at inflated prices. Those homeowners who refinanced, took the money, and walked out on the mortgages when they went upside down are just as crooked, if not more so, than anyone else. The government, the lenders, the mortgage insurers (AIG), the rating agencies, the bundlers, the traders, are all culpable to some degree. But the reality is that the bulk of the lost money ended in the pockets of the borrowers, who walked away from the loans they incurred. Why they should be treated as poor, innocent, ignorant dupes who knew not what they were getting into is beyond logical comprehension. The reality is that most of the money generated by the mortgage scams went to buy cars, vacations and HD flat-screen TVs for a lot folks, who left it for the taxpayers to foot the bill.

Posted by: rightspokeBlas | January 27, 2011 2:38 PM | Report abuse

This is almost like my metaphor for the current situation: Everybody in the car is fighting for the wheel, nobody has more than momentary control, and they are all blaming the hood onament for the car not taking them where they want to go.

Posted by: Capn0ok1 | January 27, 2011 2:32 PM | Report abuse

Tom:

I agree -- can we banish the term "toxic mortgages" from the discussion of the financial swindle ? The phrase was an effort by someone in the media to wax metaphoric, and its imprecision now only serves to muddle thinking and thereby let the thieves escape.

Posted by: rebel4 | January 27, 2011 1:22 PM | Report abuse

RIGHT ON THE MONEY! OR SHOULD WE ALL AGREE: THE LACK OF IT!

Posted by: watzknew | January 27, 2011 12:18 PM | Report abuse

Toles omits some critical information in his post (shocker!)
There were powerful interests inside and outside of Congress who were pushing lenders to write ever more "toxic loans". Loans to those who would normally not qualify. With the lenders having the backstop of fannie and freddie they bowed to the pressure and simply passed them on up the chain.
And let's not put too much of the blame only on the lenders. A substantial portion falls on the borrowers. So called "liar loans" were prevalent. Borrowers and lenders both played the government-mandated game and it became a giant casino.

Posted by: spamsux1 | January 27, 2011 12:10 PM | Report abuse

Largely ignored to this day is the role that the major ratings agencies---Standard and Poore, Moodys, and Fitch played in giving AAA ratings to garbage. I saw and heard former employees of these firms admit their culpability, so where is the follow up. Had they not given these felonious ratings, the whole chaos might have been avoided.

Posted by: merhoff | January 27, 2011 11:40 AM | Report abuse

Largely ignored to this day is the role that the major ratings agencies---Standard and Poore, Moodys, and Fitch played in giving AAA ratings to garbage. I saw and heard former employees of these firms admit their culpability, so where is the follow up. Had they not given these felonious ratings, the whole chaos might have been avoided.

Posted by: merhoff | January 27, 2011 11:38 AM | Report abuse

It's a travesty of our American justice system and an affront to every honest American that these people aren't being sent to prison. That the bankers and mortgage titans who perpetrated this disgrace and the regulators who knowingly facilitated it aren't being held accountable is repulsive. This makes Bernie Madoff look like an impotent school yard bully compared to these subhuman idiots! The WHOLE WORLD was affected by this -- what more does it take for the rule of law to work?

Posted by: stevekrotz | January 27, 2011 11:38 AM | Report abuse

Amazing!
The most non-partisan post for months, and the right-wing-nuts still can't admit that the bankers should be in jail and leave the discusson at that!
What will it take?

Posted by: GeneTouchet | January 27, 2011 11:15 AM | Report abuse

The simple answer is one word; greed.

Those who were fighting against the regulation of derivatives, those in favor of repealing Glass-Steagel, those stock rating organizations giving "A" ratings to stuff they knew was junk, those organizations loaning money to people they knew likely weren't financially ready for a mortgage...all of them were after one thing; more money.

Greed is what our economic system is all about. We can hide it in the shadows and call it "the American Dream" or some other such jingoistic nonsense, but this idea that everyone can be, should be, has a right to be, filthy rich, has got to stop. The boom and bust of out-of-control markets will continue, until we put all the controls in place necessary to check human greed.

We live on a planet with limited resources and limited wealth. When wealth is concentrated in the hands of a few, it means it is denied to others, and often times it means even bare essentials are denied to others. And when global population keeps increasing, that concentration causes an even greater disparity between rich and poor, which is exactly what's happening here, and globally.

Conservatives (and Clinton-type Dems) may be all in favor of "free markets" and "the American Way (meaning we can pretty much do whatever we want), but these things lead to disparity and destruction of resources. It's time to grow up as a nation, and realize there is only so much to go around and the planet only has so much to give. Nor can we continue to allow a very small segment of society to have increasingly more than everyone else. This is not equitible, it's not moral, it's not ethical, it's not fair, and for a nation that Conservatives love to call a "Christian" nation, it's far from that too.

Posted by: PrairieDog60 | January 27, 2011 11:12 AM | Report abuse

The left versus right is more like the players in their roles as Good Cop versus Bad Cop. The Democrats are perhaps less complicit, but they are not innocent. The problem is the Democrats are moving more to the right and adapting corporate interest agendas to keep up with their more mercenary counterparts.

As for toxic mortgages, yes that is FRAUD. The FBI recently released a report that financial institutions are responsible for 80% of the mortgage fraud in this country. Most people wrongly assume that borrowers are the perpetrators of fraudulent activity, but the lenders are. How is it that as a society we've allowed our regulatory standards to be watered down to the point where banks can offer and sell bad mortgages and not be held accountable for it? How is it that they can sell bad mortgage backed securities and them as low risk? Yes people should be in jail. Why aren't they being prosecuted by the US DOJ?

Posted by: alexnyc8 | January 27, 2011 11:02 AM | Report abuse

The first objection to blaming both parties for the financial meltdown comes from a conservative. The same poster blames the Democrats for the past two years. It takes a long time to turn the government--and this country--around. I figured 5 to 10 years back when Obama was elected...if DEmocrats did the right things (they have) and i GOP helped (they've hindered).

Forget about deficits. They are the political tool that the GOP uses to bash Democrats. Short term deficits mean little anyway. Still...we should look at them. Deficits during the first two years of the Obama administration were pretty big...a gift from the Bush 43 administration. But since the GOP demanded tax cuts for the wealthy, as well as other tax cuts, the CBO estimated deficits for FY 2011 are now a record $1.48 trillion. Good work, GOP. For you, it's business as usual. Of course, the "temporary" payroll tax cuts are a backdoor attack on SS. The GOP keeps cutting taxes, never cuts spending, points to the ever-increasing deficits and debt, and says "see, we can't afford these things." It works because conservatives keep voting against their own self-interests. I don't mind that so much, but do they have to vote and act against the interests of the country and everyone in it.

Posted by: ptgrunner | January 27, 2011 10:45 AM | Report abuse

For a good understanding of the sub-prime mortgage mess read "All The Devils Are Here." Names, dates and facts. Just don't read it at bedtime or without a good supply of Tums to settle your stomach. The people who got us into this mess simply must be brought to justice. If they are not then there is no trust in or hope for our collective future.

Posted by: caseyb1 | January 27, 2011 10:38 AM | Report abuse

Mr. Toles, you stated, "To my eye, "toxic mortgages" = "mortgages that the lenders knew were garbage" = "fraud" = "jail." Or should. Tell me which is the weak link in that logic chain,..."
You left out "buyer beware" = "get out of jail free."

Posted by: DirtFarmer1 | January 27, 2011 10:34 AM | Report abuse

Toles, if you are looking for someone to put in jail why not try Barney Frank, Chris Dodd, Jimmuh Carter and Bill Clinton? These clowns engineered the so-called "affordable housing" push that leaned heavily on lenders to put people in houses they had no business being put into. A back door "reparations" scheme that finally came crashing down around everyones ears with those responsible crying self-righteously that it was the banks predatory actions that caused it. Then, in typically liberal fashion, they start investigations to fix the blame on anyone but themselves. The "Banking Queen", of course, being the most indignant of the lot. What a crock!

Posted by: Timanddori | January 27, 2011 10:27 AM | Report abuse


TT hit this one on the head.

As you travel from Left-Right, toward Rich-Poor, you close in on the real power structure. Left-Right is a theatrical distraction.

jpost1 said, "Tommy conveniently omits that it takes two to tango. There are no recorded incidents in which mortgage lenders held a gun to the head of a borrower and forced them to sign a mortgage document. Toxic mortgages=stupid borrowers=bankruptcy."

Two to tango: Correct. So why are the lenders the only ones who get bailed out?

Gun to head: Correct. No borrowers held guns to bankers' heads and forced them to lend.

Toxic mortgages=stupid lenders=bankruptcy . . . er . . . uh . . . I mean bailouts.



Posted by: HumanistPatriot | January 27, 2011 10:24 AM | Report abuse

billybeer6, driving backwards away from the precipice of a cliff is exactly the right thing to do.

You seem incapable of remembering what the economy was like BEFORE Obama took office. After 8 years of Republican rule and destruction you now blame the Democrats for not having it all fixed in 2 years?

Please go back and drink your beer and leave us adults alone.
-----------------------
You can't fix it in 2 years or 20 years when you spend money like there is no tomorrow. Do you know how much money and debt the 111th congress put on the US? You are not an adult...you are a diseased liberal fool!

Posted by: steelers01 | January 27, 2011 8:56 AM | Report abuse

Tommy conveniently omits that it takes two to tango. There are no recorded incidents in which mortgage lenders held a gun to the head of a borrower and forced them to sign a mortgage document. Toxic mortgages=stupid borrowers=bankruptcy. Perhaps potential mortgagees should be required to pass a financial literacy test before they're allowed to sign a mortgage document. If you failed to read your mortgage documents and disclosures IN THEIR ENTIRETY and UNDERSTAND THEM FULLY, then it's a lick on you and you have no one to blame but yourself.

Posted by: jpost1 | January 27, 2011 8:02 AM | Report abuse

billybeer6, driving backwards away from the precipice of a cliff is exactly the right thing to do.

You seem incapable of remembering what the economy was like BEFORE Obama took office. After 8 years of Republican rule and destruction you now blame the Democrats for not having it all fixed in 2 years?

Please go back and drink your beer and leave us adults alone.

Posted by: egc52556 | January 27, 2011 6:57 AM | Report abuse

No, I'm not misrepresenting the facts. The issue of Fannie and Freddie's culpability is exactly what I've studied in an effort to be fair in understanding the roots of the crisis, since this is the contention of the Republicans. I looked at reports from the American Enterprise Institute and reporting from the Wall Street Journal, both of which adhere to the Fannie and Freddie are to blame to school. I also reviewed reports that at least seemed to come from economists and financial experts who have no particular axe to grind. From these studies I concluded basically the same as set forth in the Democratic majority report, which is that although F&F eventually came to play a role they were not the major the cause. And similarly, although federal housing policy played a role, it was not the major cause either. The principal cause was lack of regulation and the actions of financial companies (motivated by greed, not government policy) with respect to derivatives and sub-prime mortgages. The facts aren't that hard to find for anyone really interested in learning. I think AEI in particular should be ashamed for the piece of so-called "scholarship" they put out to defend the Republican thesis. It is laughable. But the bottom line is, I really wanted to find out what happened and I made an effort to do so, and I was open minded to the idea that the causes were other than Wall Street. That's just not what I found, nor what the majority report says.

Posted by: moore_te | January 27, 2011 3:55 AM | Report abuse

The Republicans refused to endorse it and wrote their own report which operates from a completely different set of "facts,"

Posted by: moore_te


I believe you are not representing the facts correctly, the Republicans were dissenting mainly over the role that Freddy and Fannie contributed to this crisis. There is evidence that the Democrats were overlooking the role of these entities involvement in creating this bubble. The Democrats may have an agenda in soft pedaling this point.

Posted by: dalyplanet | January 27, 2011 1:39 AM | Report abuse

The problem with the report you cite is that it was written by the Democratic majority of the committee. The Republicans refused to endorse it and wrote their own report which operates from a completely different set of "facts," i.e. as you've noted before they don't actually pay any attention to the facts, they make up their own to suit their interests. So we're stuck again (just like with the science deniers) with a noisy and influential group of people who are simply unwilling to try to learn from experience. Hard to see how we can be a great country with leadership like that.

Posted by: moore_te | January 27, 2011 12:38 AM | Report abuse

Tom, do you think Biden came up with the Sputnik throwback at the SOTU since Joe has a history of innovative plagiarizing?

Posted by: jornolibist | January 26, 2011 9:43 PM | Report abuse

“To my eye, "toxic mortgages" = "mortgages that the lenders knew were garbage" = "fraud" = "jail." Or should. Tell me which is the weak link in that logic chain,”

The mortgage brokers who originated the loans were mostly unregulated and didn’t verify the income of the buyers in many cases. The loans were then packaged and sold then resold as derivatives.

The mortgage brokers didn’t know the loans were bad because they didn’t check. The bankers didn’t care because they could easily sell the loans. The Wall Street titans were impressed by the massive profits coming from their derivatives trading so they didn’t question the underlying assets.


Sub-prime mortgages are by definition suspect on their face and known to carry a greater risk so in that sense everyone knew.

As far as the laws being broken, because of deregulation, lots of the particulars were legal but rest assured, every law was bent to the max and broken every which way aggressively and creatively.

For example, banks illegally falsified documents saying that the income had been verified for loans it sold to Fannie and Freddie.

The weakest link is that the lenders knew the mortgages were garbage. They did know that incomes weren’t being verified and We the People can still get some money back for that.

Posted by: EarlyBird1 | January 26, 2011 8:38 PM | Report abuse

fbrewer Repost from yesterdays thread


One finger point

Timothy F. Geithner Treasury secretary may know something about mortgage derivatives. It is no wonder reform is NOT going to happen anytime soon. This problem is much bigger than partisan politics. The truly rich do not have incomes, they MAKE money. When it blows up we little people carry the burden, share the load.

There is no one who can, that will, pursue remedies.

Posted by: dalyplanet | January 26, 2011 8:31 PM | Report abuse

Jail is much easier when the law-breaker resides in this country. And the guile must be diagrammed well, as well.

Posted by: Tony-KS | January 26, 2011 8:13 PM | Report abuse

Look the Democrats are still driving backwards trying to run over somebody to blame besides themselves for the failure of the past two years as real unemployment is at double digits. A sputnik moment? Do real innovators have to recycle a 50 year old moment already used by another leader as their big theme? Talk about driving backwards.

Posted by: billybeer6 | January 26, 2011 7:03 PM | Report abuse

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