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Poll: Financial Downturn Ahead?

Answer our poll question, then debate the topic below.


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I think that we should pull back are troops from the war in Afganistan.

I think that we should pull back are troops from the war in Afganistan.

Thanks for this extraordinarily amazing editorial.

To get a better understanding of the causes of our economic demise go to WHYY archives and listen to Terry Gross's April 3, 2008 interview with Prof,. Greenberger, a former commodities regulator. He shows how the wealthy insiders are gambling with our money, and pocketing most of it through unregulated derivatives. Do it: It's for your own good.

I "retired" early at age 58 with a large part of my savings in IRA funds. Now I am wondering if my institutional savings (which by rule I cannot withdraw and hide under the mattress)will even be there when I need it.

This is in reply to Pamela:
In March I was in India @ a utopian community, Auroville. I went to a lecture there given by a Belgian economist. He said that China would call in it's debt and that the US would be unable to pay. He predicted the dollar would fall in 2008. That really worries me b/c I have no idea how to protect myself and my children.

This is in reply to Pamela:
In March I was in India @ a utopian community, Auroville. I went to a lecture there given by a Belgian economist. He said that China would call in it's dept and that the US would be unable to pay. He predicted the dollar would fall in 2008. That really worries me b/c I have no idea how to protect myself and my children.

The state of teh dollar is considerably more worrisome. If it loses its status as lead currency or if foreigners stop buying treasuries America will be bankrupt.

As I read the posts on my way to this little box I was initially focused on the comment that Ms. Morgensen made when you asked her, Brother Moyers, are not there LAWS that are intended to prevent the current and past recklessness and lack of accountability in the lending industry? Her answer was a simple 'yes' followed by a bold 'but they find ways to work around them.' Why isn't a good follow up question 'Who should be enforcing those laws?"

Then I read Dimitri's comment about Russia's precipitous decline from fledgling democracy to government by crime, and I noted an alarming similarity between Putin's government and ours. It is the new criminal element. Crime was once the domain of socially outre people, uneducated and unethical people, until so many 'nice guys' committed crimes, we were forced to come up with the term 'white collar' crime, as if somehow, the color of your shirt made breaking the law more acceptable, or anyway less bad somehow than guys in t-shirts or no shirts.

Criminality, scofflaws like our sports stars, movie stars, and current (p)resident and veep, not to mention our (he is no) Attorney General have infected our government. If they do not like a rule, regulation, or law they simply ignore it and let the lawyers sort it out. What happened to the rule of law, please? May we have order in the courts? Now let's move out to the countryside. But wait, there is no order in our courts, either. Uh-oh.

I don't believe our public school students or even our college students are receiving the type of consumer education that would enable them to compare mortgages, analyze the housing market or estimate the type of housing they can afford. More privileged people seem to have "wealth managers" to keep them out of suspect deals.And then our financial and environmental future is so much more uncertain than it has been before. As a career (40yrs.)carpenter and cabinetmaker I am appalled at what these transient new structures cost. Many will be no more before the mortgage is paid. American lenders continue to find new ways of convincing the actual renter that s/he is really a "homeowner" so they can pass on the reselling, insurance, maintenance and taxation costs.

I think Dmitriy, in his post, is on to something interesting. In fact, there are two stories there:

1. How did Russia move from Gobachev to Putin?

2. Compare the oppression of the Putin and the Cheney regimes.

The interview was awesome. I think we, ordinary citizens, don't get, is the fact that this real estate crisis would not have happened without our personal contribution. It is not fair to blame the real estate agents only or the mortgage brokers for the situation. They only tried to make some money. The ones putting the money in their pockets are the people wanting to buy the house they cannot afford. Let's be honest, you don't need a real estate broker or a mortgage agent to tell you whether you can afford to buy a house or not. Nobody knows better than yourself that you are playing a game hoping to win and they are only letting you in. I don't own a house myself even though I'd love to. The reason I don't is because I don't want to take the risk buying something I cannot afford, hoping that I would sell in a few years and make some money on the equity. It is a risk some take and I don't feel sorry for them. I hope they learn a lesson, rent an apartment, save some money , buy something affordable and live happy !!!

Great interview. Unfortunately, although Ms. Morgenson covered a lot of important ground, she skirted a key question. Mr. Moyers asked "whether it is conceivable...that Bear Stearns and some of these other firms could trigger, in fact, a meltdown, a falling domino all the way through the economic cycle that everybody would be affected by this?"

In truth, the answer is yes. Many knowledgeable experts, including individuals associated with the Federal Reserve Bank, the Bank of England, the European Central Bank, the International Monetary Fund, and the Bank for International Settlements (BIS), have raised the alarm about the "systemic risks" stemming from a confluence of modern developments, several of which Ms. Morgenson referred to in her answers. Just this week, in fact, the BIS, " the world's most prestigious financial body,...warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than [is] generally understood," according to a report in the UK's Daily Telegraph.

As I note in my new book, Financial Armageddon, there are numerous threats, including the massive credit bubble and the explosive growth of the derivatives market, that have set the stage for disaster in the years ahead. It is conceivable that any number of events, including the failure of a Wall Street firm, could be the proverbial match that lights the fuse.

Dear Mr. Moyers,

I am originally from Russia, so, naturally, I compare my experiences in the USA with those I had lived through before I immigrated to this country.

When I heard your quick remark about financial engineering in your conversation with Ms. Morgensen, I immediately though about those Russian “financial engineers” (a.k.a. “new Russians” or “oligarchs”) who made their millions and billions by using all kinds of cunning schemas in the banking, real estate, natural resources, etc., areas. Of course, all their money came at the expense of so-called “ordinary citizens”.

I see now many similarities between what is going on in the USA and Russia (and even back in the Soviet Union). I believe that despite obvious differences, Mr. Bush and Mr. Putin learn a lot from each other and that Mr. Putin’s past and current experience shows in many aspects of our life in the United States. To name just a few: Mr. Bush’s surveillance program, attacks on journalists and American’s liberties, crushing opposition, using terrorism in their own political interests. Both Presidents’ strongholds are very much the same too: the oil and weaponry money.

I could continue this list, but I would be honored and thrilled if you find an interest in this topic and dedicate some air time for it in your Journal.

Sincerely,

Dmitriy

I may have missed mention of realtors in Ms. Morgansen's interview. Most real estate agents are in very large part responsible for the mortgage crisis we now face. They are the ones who convince people that the their dream home is within their financial reach and then deliver them into the waiting arms of unscrupulous mortgate lenders who perpetuate the situation by getting them into a loan that they will eventually not be able to pay. Realtors and lenders see dollar signs rolling in their eyes; it is really all about their commission, and they skip all the way to the bank. There is no accountability for either profession. Where, or where, do we find honest realtors and lenders?

And home buyers should not get off easily. Above all, they should know their financial situation and not get sucked in by realtors and bankers, but in order to keep up with friends and family, live above their means. We are supposed to feel sorry for you because you lost everything? I don't think so!

While I agree with most of Ms. Morgensons commentary, she is misinformed on the oversight of real property appraisers. Appraisers are licensed state by state and regulated by the National Appraisal Board, this board is not a self regulating entity, but, an entity created by the Federal Government. Appraisers must follow the federal ethical and procedural guidlines (USPAP)or risk losing their licenses and their livelyhoods. The licensing and oversight of appraisers was a result of the Texas Savings and Loan crisis in the late 1980's.

interesting, that no mention of banks being forced to issue loans to minoritys or face the charge of racism.

Posted by: larry | June 30, 2007 12:07 PM


Larry,

Are you saying that this only affects "minority loans"? I'd be surprised if the relatively small number of minority loans have been causing this kind of meltdown.

To "helicoper bernehke's" point, Ms. Morgensen does answer Bill's question. The fed cares about banks, the SEC worries about investors. Once the banks pass the loans off, they're no longer a fed concern.

The real question is: Will Washington bail out investors like they did banks in the '80s? Answer: It will if the politicians know what is good for them.

Ride the bubble while it lasts, baby.

First, I found this interview to be useful, a Table Of Contents for what I learned in a challenging elder abuse/financial fraud case where most folks thought that Freddie Mac was a 'federal agency', when it is not: this interview well explained the Investor Pool concept, and why 'bad loans' are not kicked back upstairs to the Assignor(s).

Second, in addition to remedies for everyone else (including ordinary homeowners), I want to hear about remedies for those elders whose equity-rich homes are may become subject of a mortgage by a computer-savvy person, but without the knowledge of the elder: with small monthly payments being made, the loan does not go into foreclosure until after illness or death. And the elder may never know about it. This problem results in a complicated multi-party case that challenges law enforcement who may see it as a Civil Matter instead of a Crime or Fraud (where the Statute of Limitations does not begin until the Date of Discovery). Too often after Discovery, families try to work it out on their own, and then wait, while the statute is running, and then blame law enforcement for not being able to do their investigation before the S/L runs.

Finally, I found Chris' post to be compelling. I would very much like to speak with him/her to learn more about what remedies s/he sees as being possible, in the current landscape.
What Journalism routes need to be followed to rectify this situation? Where do we start to unravel this ball of yarn? To deconstruct what isn't working and re-design something better? Much of this landscape involves Honesty, doesn't it, and yet we don't value that quality as much as Money. Can we bring back Honesty without becoming a Theocracy?
I'm reminded of the the differences between Success and Excellence, in a speech at the Pasadena Civic Auditorium by Justice Grignon to inspire new Admittees/Attorneys. We need to strive for Excellence, and re-discover what that looks like, for Journalists and Attorneys. Thank you, Mr. Moyers, for creating a way.

Ms. Morgensen, like way too many Democrats and Republicans, said she was not a fan of Regulation. A former member of the Wall Street crowd who is now affiliated with the corporate controlled main stream media, can we be surprised that she favors continued trust of the fox who is guarding the hen house!

I do have to give her credit for bursting the bubble of many believers who thought the Federal Reserve was looking out for their best interest. When there are as many large corporate banks on every corner as fast food restaurants, it's obvious that they are well protected by a government sanctioned organization and allowed to operate with little financial risk and total impunity.

interesting, that no mention of banks being forced to issue loans to minoritys or face the charge of racism.

Ms. Morgensen avoided Bill's question "What role does the Fed play in all this easy credit bubble?" She hem hawed and avoided answering the question, and if Bill had pressed her harder, it would have made for good entertainment. The answer is The Fed is the sole party responsible for the fiasco, but a Time's dilitannte is going to pull the party line to death.

I keep wondering what happened to George Baily?
It might be wise to know where your money is going each month and to care what it is supporting. Including your biggest payment...your mortgage.
Instead of staying in your community seems like Mr. Potter is banking it all out of state. Potterville is happening.
How many times do we need to watch "Its a Wonderful Life" before we realize what is happening here!
Wake up and take control of your money and what it is supporting. We still have that power....don't we?
All about choices.
Thank you for your honest insights into the realities around us.

Even those who were fiscally conservative and have "old-fashioned" loans (like 5% fixed/30 year) will suffer from the greed that has created this crisis if they should need to sell their house. That's because the glut of houses on the market, due to the foreclosures resulting from of the greedy lending practices, had diminished the value of all average houses.

My kids who did it right by planning and saving to buy their first home are now looking at a tough time selling as they leave town for new jobs.

Loved Ms. Morgensen's suggestion that those who've profited so lavishly from irresponsible lending and financializing the result should pick up the tab for their party.

Some chance. It shows every sign of having been a setup all along -- and part of a much bigger picture. A rather shadowy pro-globalization outfit called the OECD (to which our government and 29 others belong) projects on its website a 16 percent decline in American residential real estate values this year (following a 4.2 percent decline last year and anticipating another 3.4 percent next year). They also project a very serious worldwide water crisis over the next 20 years. Funny how the same people who'll wind up owning Americans' foreclosed houses are already buying up water systems like crazy. And the agrofuels boondoggle they've got taxpayers financing now will make sure vast swathes of arable land end up in the right hands, too, while the food prices skyrocket.

There really are going to be some deadly consequences, I fear, unless we find a way to rein in the monsters of greed pronto.

Wow! What a wonderful show tonight. Listening to you and your guests I can almost believe that I'm not the only person in America who feels the same way about America and what's happening to it...... Thank you for the depth and breadth of your coverage......and for your 'guts' in segments as the 'Murdoch' one.

Dear. Mr. Moyer & Ms. Morgensen,

As an honest mortgage loan officer, and as a former small mortgage broker that has lost his business due to over regulation and the crisis that is plaguing the mortgage industry, I found Gretchen Morgensen’s comments on the mortgage crisis, to be limited.

Ms. Morgensen only touched on some of the issues but she pointed fingers at the wrong parties. Mortgage brokers & lenders selling loans via mortgage backed securities, sub prime loans and too few regulations on independent mortgage brokers did not bring on this mortgage crisis. Gluttonous unthinking builders, greedy shortsighted builder’s sales agents demanding to control the lending process and the government turning a blind eye to the corruption in the industry brought on this mortgage crisis.

When I started into this industry over a decade ago, Mortgage brokers were unregulated. The closing agents, appraisers, lenders and brokers acted independently of builders and their selling real estate agents. Today, mortgage brokers are heavily regulated, and the builders and their selling agents control the lending process. When I started into the industry, lenders received referrals based on their knowledge and their service. Today loans are dolled out based on what the lenders company is paying to the builder. When I started into the industry builders paid closing costs to independent lenders based on the buyers choice. Now builders entice the buyers to use their preferred lender by only paying closing costs with the builders preferred lenders, regardless of whether an independent lender pre approved the borrower for a loan or not. Today you cannot walk into a subdivision without being greeted by “we pay closing costs with our preferred lender or lenders”. Now when you walk into a large real-estate office, you will find yourself greeted by the “in-house lender”. The title company and the appraisers are also often affiliated with the builder, or real-estate company, so the consumer has no independent control, and no protection.

So how do these brokers, or lenders get on the Builder’s approved list? The process closely resembles paying protection money, sometimes involves a breach of the consumer’s trust. Here are some of the verbal proposals we and other broker’s like us have received... hand over loan applications, credit ratings, and other financial documents so that we know we have a good buyer, and how much more we can charge… pay for 12 months worth of advertising for us and we’ll add you to the list... set up a points pool to buy down rates for consumers who can’t qualify (accomplished by overcharging consumers who do qualify)... join us in an affiliated business arrangement where you sell us a piece of your business and we take dividends... rent office space from us (at an exorbitant rate) and we’ll add you to the list..

Today Beazer Homes is under investigation for a 13% higher than national average foreclosure rate, and consumer groups in class action suits are suing several large national homebuilders.

Many of these builders instructed their preferred lenders to “get them into the house”. The builders played on the consumer’s greed and lured consumers who could not afford a home on a traditional fixed rate loan - with interest only, fixed payment, or payment option smart loans (interest only, fixed deferred interest payment, adjustable rate). These consumers with good and bad credit alike are now being foreclosed on because they cannot afford the adjusting payments. Had they been able to choose and had their lenders educated the consumers they would have been happy in smaller homes, and we would not be facing this melt down.

Here is something to think about if you investigate; you will find a real juicy story. Why did our government not act on this? Were the government officials unaware? No, it was all about campaign contributions.

Chris

I have hidden my name for fear of financial retaliation…. Do you have a job? My degree is in Broadcasting.

I was hoping you and your guest would bring up when and how this mortgage 'free for all' started, with Pres. Bush's desire for an 'Ownership' society, while pushing for his privitization of Social Security. That's when he had the Federal Bank lower the interest rates below 1%, nad that kicked off the mortgage madness!

I'll remain interested to see what technique is used next to "free up" the cash that facilitates an ever-expanding economy. We've had mortgages (ever bigger), credit cards (why spend tomorrow what you can spend today). We've had the marvelous invention of the mutual fund (to inflate what must have been historically undervalued stocks). Most recently, the television has made the successful leap from a $200 commodity to a $2000 commodity. Keep that demand curve pointing ever higher. Keep the money circulating as fast as possible.

Crisis? What crisis?


How can a society protect individuals from their own lack of good judgment? Should it be expected to? Why would anyone go beyond the edge of financial reason to move into a monster home (either monster-sized or monster-mortgaged or both)?

The mortgage crisis is very troubling. But what bothers me more is the US indebtness to China. Now that it has become clear that there are potential and real dangers from many Chinese exports the FDA wants to impose import restrictions. Now the Chinese want to ban US imports. What happens if China decides to call in a loan or two?

The chickens are coming home to roost on Wall Street.

Moodys S& P ratings, FASB were all are in on this big money grab with the Hedge funds.

The big banks will be too big to fail?

What about the poor home owner?

Mortgage crisis? We Americans have been over leveraging our assets for years. Greenspan had to get us to "re-finance" "free up" billions pouring into the economy, using our assets to 'pay down' and now to owe even more.
Greedy developer's building ugly McMansions at break neck speed and Mortgage Co's tempting to finance us with 0 down interest only loans to the max.
It's all about leveraging, futures and good 'ol fashion GREED.

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