howdidthishappen.org/facts -> howdidthishappen.org/facts/
Donate Get the Facts: The Story of the Financial Crisis These crises were caused by calculated deregulation and the gross negligence of the Bush administration and congressional conservatives. We are in this mess today because of the deregulatory policies and negligent leadership of President George W Bush, his financial regulatory officials, and congressional conservatives such as Phil Gramm. The Bush solution: cut regulations (AP) The Bush solution: cut regulations First, Bush and the conservative mantra of deregulation encouraged the explosion of risky new financial products, and blocked them from common-sense oversight and regulation. Second, they turned a blind eye to dire warnings that risky lending practices were spiraling out of control. Their failure to act allowed Wall Street CEOs to recklessly gamble with other people's money. Now, the bubble has popped and the markets have crashed, and conservatives are desperately casting about for someone else to blame for the consequences of their failed policies. Their efforts to pass the buck are an insult to our intelligence. Conservatives policies dominated the past eight years while this crisis grew out of control. This is the legacy of their failed policies--it is time for them to own it. Measures of Prosperity - Then and Now Beginning in 2000, free-market ideologues led by President Bush, Phil Gramm, and Alan Greenspan encouraged the explosion of risky new financial products and blocked the products from regulation. Under their watch, there was an explosion in subprime mortgage lending accompanied by exponential growth in new financial derivatives such as credit-default swaps that encouraged banks and lenders to take huge risks and gamble on products that no one really understood.
quietly slipped his Commodities Futures Modernization Act into a must-pass budget bill in 2000 to ensure the highly risky derivatives market would not be regulated. As the housing bubble grew out of this risky marketplace, common-sense regulations were blocked by conservatives in Congress. Predatory lending exploded as commercial and investment banks competed fiercely to originate more and more home mortgages by dropping their lending standards lower and lower. The more mortgages originated, the more could be bundled together as mortgage-backed securities--bonds consisting of mortgages or pools of mortgages that are sliced and diced in different ways and then sold as bonds to institutional investors around the world. The development and sale of these mortgage-backed securities was turbocharged by the completely unregulated credit-default swaps market, which was expressly enabled by Gramm's Commodity Futures Modernization Act. The credit-default swaps market acted as a kind of insurance on mortgage-backed securities and collaterized debt obligations, another type of bond that included slices of mortgages and other types of debt comingled with credit-default swaps. These swaps gave these risky new bonds a blue-chip patina even though they actually were very risky securities. Bills trying to institute common-sense regulation to discourage banks from engaging in some of the risky lending practices that led to the current crisis were frequently introduced.
As risky lending exploded, the Bush administration and conservatives in Congress ignored and enabled Wall Street's reckless behavior. All this time, the Bush administration and conservatives in Congress turned a blind eye to warnings that predatory lending was getting out of control, and that the markets of new financial products such as credit-default swaps and collaterized debt obligations were getting too hot, too risky, and too big. Under conservative leadership, the Securities and Exchange Commission turned a blind eye as the credit-default swaps market ballooned under its nose, going from essentially zero in 2000 to $17 trillion in 2005 to over $60 trillion in 2007.
In fact, in 2004, the SEC actively abetted greater risk-taking on the part of the big Wall Street investment banks by allowing them to more than triple their so-called "leverage ratio" to 40-to-1 debt-to-equity levels, up from 12-to-1 levels.
At the beginning of the decade, subprime mortgages accounted for only 6 percent of total residential mortgage originations. By 2006, subprime mortgages accounted for 25 percent of mortgage originations.
While the Bush administration and conservatives ignored the warnings and continued to promote deregulation, Wall Street CEOs gambled with other people's money. In a few short years, this toxic combination of risky new products and no regulation transformed the financial market from a place that traded in known quantities like stocks and bonds into a market where exotic new products that no one really understood were being traded at breakneck speed. Now the bubble has burst, the stock market is crashing, credit markets are frozen, and conservatives are looking for someone to blame. Photo of a distraught man walking in front of a Bear Stearns office For the past decade, the Bush administration and conservatives aided and abetted wild risk-taking on Wall Street while CEOs raked in huge profits. Now that the bubble has burst and the market has come crashing down, they are desperately casting about for someone else to blame.
weakened significantly by the Bush administration before the housing bubble started inflating. Conservatives' desperate attempts to pass the buck are an insult to our intelligence. This is their legacy of failed policies and failed leadership.
According to the Bureau of Labor Statistics, the US non-farm unemployment rate was 39% in September of 2000. By September of 2008, the unemployment rate had risen to 61%.
According to the Bureau of Labor Statistics, the US city average Consumer Price Index (CPI) adjusted price for one pound of ground beef was measured as 1483 in January of 2000 and 2419 in September of 2008.
According to the Bureau of Labor Statistics, the US city average Consumer Price Index (CPI) adjusted price for a one dozen large grade A eggs was measured as 092 in September 2000 and 1978 in September 2008.
According to the Bureau of Labor Statistics, the US city average Consumer Price Index (CPI) adjusted price for a one pound loaf of white bread was measured as 090 in 2000 and 138 in 2008.
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