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Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
Discussion  Mortgage Debacle RevE
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Discussion Mortgage Debacle RevE

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One observer's view of the root causes, problem elements and lessons learned from the Great Morgage Debacle of 2008.

One observer's view of the root causes, problem elements and lessons learned from the Great Morgage Debacle of 2008.

Published in: Economy & Finance, Business
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  1. A. THE GREAT MORTGAGE MELTDOWN INTRODUCTION We seem today, October 2008, to be dealing with a “perfect storm” of financial instability. Some say the global financial market is in significant peril. So how did we get here? It’s not just an academic question. It’s important to analyze this so lessons can be drawn to avoid a similar, future event. Here’s my view, based on some well written analyses, from which I’ve drawn freely.
  2.  
  3.  
  4. TOPICS
  5. <ul><li>SOME REFERENCES DRAWN UPON FOR THIS SECTION: </li></ul><ul><li>“ A Professor and a Banker Bury Old Dogma on Markets ”, Peter Baker, The New York Times, Sept 20, 2008 </li></ul>B. A FINANCIAL CRISIS ERUPTS <ul><li>THE GREAT FINANCIAL MELTDOWN DIDN’T ORIGINATE OVERNIGHT. IN FACT, THE SEEDS WERE PLANTED 30 -70 YEARS AGO. BUT MORE ON THIS LATER, THE DISCUSSION IN THIS SECTION IS LIMITED TO THE MORE RECENT, “HEATING UP ” STAGE. </li></ul><ul><li>CONCERNS GREW RECENTLY OVER POSSIBLE PARALLELS WITH THE GREAT DEPRESSION. IN 2007 WORRIES INCREASED RELATING TO: </li></ul><ul><ul><li>SUBPRIME LOAN EXPLOSION AND POSSIBLE SYSTEM IMPLOSION </li></ul></ul><ul><ul><li>CREDIT SLOWDOWN AND POSSIBLE BROAD-BASED FREEZING OF </li></ul></ul><ul><ul><li>ALL CREDIT MARKETS </li></ul></ul><ul><ul><li>INDIVIDUAL FAILURES OF MULTIPLE MAJOR AMERICAN COMPANIES </li></ul></ul><ul><ul><li>TUMULTUOUS STOCK MARKET FLUCTUATIONS </li></ul></ul>
  6.  
  7. MELTDOWN IN SEPTEMBER ‘08
  8. <ul><li>SOME REFERENCES DRAWN UPON FOR THIS SECTION: </li></ul><ul><li>“ CONGRESS TRIES TO FIX WHAT IT BROKE”, EDITORIAL, INVESTOR'S BUSINESS DAILY, September 17, 2008 </li></ul><ul><li>“ THE REAL SCANDAL - - HOW FEDS INVITED THE MORTGAGE MESS” STAN LIEBOWITZ, THE NEW YORK POST, February 5, 2008 </li></ul><ul><li>“ THE FUEL THAT FED THE SUBPRIME MELTDOWN” , RYAN BARNES INVESTOPEDIA .COM, </li></ul><ul><li>“ ANATOMY OF THE CRISIS”, CALVERT MUTUAL FUNDS, CALVERT GROUP.COM/NEWS </li></ul>C. NOW, CRITICAL ANALYSIS IS NEEDED TO HELP PREVENT FUTURE OCCURENCES, IT IS IMPORTANT TO STUDY THE HISTORY AND CAUSES OF TH E CURRENT CRISIS. THIS SECTION DEVELOPS SOME GENERAL FACTS , A CHRONOLOGY OF EVENTS , SOME ROOT CAUSE THOUGHTS - - INCLUDING SOME OF THE LEGISLATION THAT SET THINGS IN MOTION.
  9. SOME ROOTS OF THE PROBLEM <ul><li>ROOTS OF THE PROBLEM GO BACK 30 OR MORE YEARS TO THE ISSUE OF “REDLINING” - - (CITY DISTRICT MAPPING) TO IDENTIFY HIGH-RISK MORTGAGE AREAS . BUT THIS PROCESS INADVERTENTLY IMPACTED ABILITY OF MINORITIES TO ACQUIRE HOMES. </li></ul><ul><li>POLITICAL PRESSURE GREW AND LEGISLATION WAS DEVELOPED FOR FEDERAL INTERVENTION TO REDUCE RESTRICTIONS INHIBITING MINORITY HOME OWNERSHIP. </li></ul><ul><li>BUT FUTURE DEVELOPMENTS DISTORTED THE ORIGINAL GOOD INTENTIONS: </li></ul><ul><ul><li>9/11 /2001 CAUSED A BIG HIT TO THE ECONOMY </li></ul></ul><ul><ul><li>INTEREST RATES WERE LOWERED TO RE-KINDLE ECONOMIC GROWTH . </li></ul></ul><ul><ul><li>A REAL ESTATE BOOM ENSUED AND MORTGAGES FLOURISHED. </li></ul></ul><ul><ul><li>NEW FINANCE INSTRUMENTS HELPED ASSURE LOTS OF MORTGAGE MONEY. </li></ul></ul><ul><li>A NEW SYSTEM REPLACED THE PRIOR PROCESS WHERE MORTGAGORS “KNEW” THE BORROWER WITH PRUDENT RULES TO SAFEGUARD EACH SIDE’S FUNDS. </li></ul><ul><li>BUT THE “NEW SYSTEM”, GEARED TO ENHANCE HOME OWNERSHIP, WEAKENED LENDING CRITERIA AND ADDED MANY INTERMEDIARIES AND NEW PROCESS STEPS TO THE “LOAN HOLDING “ SIDE OF THE BUSINESS. </li></ul><ul><li>THIS VASTLY DISTANCED THE ULTIMATE LOAN HOLDER FROM THE BORROWER. </li></ul><ul><li>THE DISCIPLINE OF “PRUDENCE” IN LENDING BECAME GREATLY DIFFUSED IN THE “HAND-OFF” OF RESPONSIBILITY UP THE CHAIN. ACCOUNTABILITY WENT ASTRAY. </li></ul><ul><li>THE ABOVE WERE THE ROOTS OF THE DEBACLE THAT CULMINATED IN SEPT 2008. </li></ul>
  10. <ul><li>CRISIS ELEMENTS: </li></ul><ul><ul><li>REDLINING </li></ul></ul><ul><ul><li>BAD SEEDS </li></ul></ul><ul><ul><ul><li>THE “dot.com” BUBBLE BUST </li></ul></ul></ul><ul><ul><ul><li>9/11 </li></ul></ul></ul><ul><ul><ul><li>PRIME RATE REDUCTION </li></ul></ul></ul><ul><ul><ul><li>HOUSING BOOM </li></ul></ul></ul><ul><ul><ul><li>EXOTIC MORTAGE TERMS </li></ul></ul></ul><ul><ul><ul><li>NEW SECURITY TOOLS & PRACTICES </li></ul></ul></ul><ul><ul><ul><li>THE MORTGAGE BOOM / FOREIGN $$ INFLOW </li></ul></ul></ul><ul><ul><li>CREDIT FREEZE </li></ul></ul>
  11. REDLINING AND GOVERNMENT REGULATORS The practice called “ Redlining &quot; began with the establishment of the Federal Housing Administration (FHA). In 1935 , the Home Owners' Loan Corporation (HOLC) was tasked to look at 239 cities and create maps to indicate real estate lending risk for each city. HOLC was established in 1933 under President Franklin Roosevelt, to refinance homes to prevent foreclosure. On the HOLC maps (see figure), areas considered most desirable for lending purposes were outlined in blue. Other colors depicted &quot;Type B&quot; neighborhoods (&quot;Still Desirable&quot;) and &quot;Type C&quot; (&quot;Declining&quot;). &quot;Type D&quot; neighborhoods were outlined in Red as the most risky. These neighborhoods tended to be older, urban districts, often black neighborhoods. In practice, “ Redlining ”, designed to make economic judgments about lending risk, soon became perceived as prejudice against ethnic minorities. REPRESENTATIVE HOLC “REDLINING” map for Philadelphia, 1936.
  12. REDLINING AND GOVERNMENT REGULATORS
  13. REDLINING AND GOVERNMENT REGULATORS <ul><li>A “landmark” 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic. No sooner had the ink dried on its discrimination study than the Boston Fed produced a manual for mortgage lenders stating that: “discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify lower-income minority applicants.” Some of these “outdated” criteria included: </li></ul><ul><ul><li>the size of the mortgage payment relative to income, </li></ul></ul><ul><ul><li>credit history, </li></ul></ul><ul><ul><li>savings history, and </li></ul></ul><ul><ul><li>income verification. </li></ul></ul><ul><li>Instead, the Boston Fed ruled that participation in a “credit-counseling” program should be taken as evidence of an applicant’s ability to manage debt. </li></ul>
  14. Amendments to the CRA in the mid-1990s dramatically raised home loans to otherwise unqualified, low-income, “Sub-Prime” borrowers, (see next figure). Artifices such as “Piggyback” loans ( a 2 nd loan originated with the 1 st , to achieve minimal down payment). The revisions also allowed for the first time the securitization of CRA-regulated loans containing subprime mortgages. The changes came as &quot;housing rights&quot; pressure groups led by ACORN lobbied for such loans. ACORN at the time was represented by a young public-interest lawyer in Chicago by the name of Barack Obama.
  15.  
  16. REDLINING AND GOVERNMENT REGULATORS
  17. D. THE CORE ISSUE – BAD SEEDS, BAD CROP <ul><li>TO ME, THIS IS A STORY WITH PLENTY OF BLAME TO GO AROUND. </li></ul><ul><li>WE’VE DISCUSSED THE EARLY SEEDS SOWN SINCE THE1980’s </li></ul><ul><li>UNFORTUNATELY THESE SEEDS GERMINATED UNDER A “PERFECT STORM” OF FINANCIAL EVENTS </li></ul><ul><li>IF I WERE A CONSPIRACY THEORIST, I’D WONDER IF SOMEONE HAD PLOTTED THIS ALL OUT. BUT I’M NOT A CONSPIRACY THEORIST. </li></ul><ul><li>RATHER THAN “BRILLIANT EVIL” BEING AT ROOT CAUSE, I SEE </li></ul><ul><li>INCOMPETENCE, GREED, AND APATHY. WHERE? </li></ul><ul><ul><li>INCOMPETENCE IN PARTS OF OUR GOVERNMENT </li></ul></ul><ul><ul><li>GREED IN SOME OF OUR FINANCIAL INSTITUTIONS </li></ul></ul><ul><ul><li>APATHY IN MANY OF OUR PEOPLE </li></ul></ul><ul><li>NOW, WE EXPECT 1. & 2. ; WE’VE SEEN THEM BEFORE. </li></ul><ul><li>BUT I BELIEVE 3. IS THE HEART OF THE PROBLEM. TO SEE WHY, LOOK AT THE NEXT SERIES OF CHARTS </li></ul>
  18. D.1 “ ROUND UP THE USUAL SUSPECTS ” FED RESERVE RATES 9/11 REAL ESTATE BOOM MORTGAGE COMPANIES FANNIE MAE; FREDDIE MAC TEASER ARM’s MOODY’S RATINGS ABS’s MBS’s CDO’s etc EXOTIC & SUB-PRIME LOANS CRA HOLC FHA MERRILL LYNCH GOLDMAN SACHS SO LET’S LOOK AT THE INGREDIENTS “ CREDIT FREEZE”
  19. D.2 BUILD UP OF THE “PERFECT STORM” THE SEEDS WERE SOWN LONG AGO, BUT DISASTER BUBBLED UP IN THE LAST DECADE
  20. D.3 9 / 11 PLAYED A ROLE REWIND BACK TO LATE 2001, WHEN FEAR OF GLOBAL TERROR ATTACKS AFTER SEPT. 11  ROILED AN ALREADY-STRUGGLING ECONOMY, JUST EMERGING FROM THE TECH BUBBLE RECESSION OF THE LATE 1990S. IN RESPONSE, DURING 2001, THE FEDERAL RESERVE BEGAN CUTTING INTEREST RATES DRAMATICALLY, ARRIVING AT 1% IN 2003. THE GOAL OF A LOW FEDERAL FUNDS RATE IS TO EXPAND THE MONEY SUPPLY, ENCOURAGE BORROWING, AND SPUR SPENDING AND INVESTING. THE IDEA THAT SPENDING WAS &quot;PATRIOTIC&quot; WAS WIDELY PROPAGATED AND EVERYONE - FROM THE WHITE HOUSE DOWN - ENCOURAGED “BUY, BUY, BUY”. IT WORKED, AND THE ECONOMY BEGAN TO STEADILY EXPAND IN 2002.
  21. D.4 FEDERAL PRIME RATE REDUCTION IN RESPONSE, DURING 2001, THE FEDERAL RESERVE BEGAN CUTTING INTEREST RATES DRAMATICALLY, ARRIVING AT 1% IN 2003. THE GOAL: EXPAND THE MONEY SUPPLY, ENCOURAGE BORROWING, AND SPUR SPENDING AND INVESTING
  22. D.5 REAL ESTATE BEGINS TO LOOK ATTRACTIVE AS LOWER INTEREST RATES MOVED DOWN INTO THE ECONOMY, THE NUMBER OF HOMES SOLD - AND THE PRICES THEY SOLD FOR - INCREASED DRAMATICALLY. AT THE TIME, THE RATE ON A 30-YEAR FIXED-RATE MORTGAGE WAS AT THE LOWEST LEVELS SEEN IN DECADES. UNFORTUNATELY THE BOOMING HOUSING MARKET TIMING WAS ALIGNED WITH NEW FINANCIAL PRODUCTS BEING SPUN ON WALL STREET. THESE NEW PRODUCTS ENDED UP BEING HIGHLY POPULAR AND WERE INCLUDED IN PENSION FUNDS, HEDGE FUNDS AND INTERNATIONAL GOVERNMENTS. S&P/Case-Shiller Composite 10 home price index
  23.  
  24.  
  25. D.8 THE ASSET-BACKED SECURITY THE ASSET-BACKED SECURITY (ABS) HAS BEEN AROUND FOR DECADES. IT’S BASED ON A SIMPLE INVESTMENT PRINCIPLE: TAKE A BUNDLE OF ASSETS THAT HAVE PREDICTABLE AND SIMILAR CASH FLOWS (LIKE A HOME MORTGAGE), BUNDLE THEM INTO ONE MANAGED PACKAGE THAT COLLECTS ALL OF THE INDIVIDUAL PAYMENTS, AND USE THE MONEY TO PAY INVESTORS A RETURN. ANOTHER BIG PLUS WAS THAT CREDIT RATING AGENCIES SUCH AS MOODY'S AND STANDARD & POOR'S WOULD OFTEN AUTHORIZE THEIR 'AAA' OR 'A+' I NVESTMENT SAFETY RATING .   THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GINNIE MAE) HAD BEEN BUNDLING AND SELLING SECURITIZED MORTGAGES AS ABS’s FOR YEARS; THEIR 'AAA' RATINGS HAD THE REASSURANCE OF GINNIE MAE'S GOVERNMENT BACKING. INVESTORS FOUND ACCEPTABLE YIELD AND GINNIE MAE WAS ABLE TO USE THE FUNDING TO OFFER NEW MORTGAGES. ALL IN ALL, A BENEFIT TO MARKET LIQUIDITY.
  26. D.9 THE ASSET-BACKED SECURITY - UPDATE STARTING IN 2003 AN UPDATED FORM OF THE ABS EVOLVED, BUT THESE NEW ABS’s WERE BUILT ON SUBPRIME MORTGAGE LOANS , OR LOANS TO BUYERS WITH LESS-THAN-STELLAR CREDIT. SUBPRIME LOANS, ALONG WITH THEIR MUCH HIGHER DEFAULT RISKS, WERE SORTED INTO DIFFERENT RISK CLASSES. LOWER RISK CLASSES WERE ABLE TO RECEIVE 'AAA' RATINGS - EVEN IF THEY CONTAINED SUBPRIME LOANS - BECAUSE THESE WERE PROMISED THE FIRST DOLLARS THAT CAME INTO THE SECURITY. HIGHER RISK CLASSES CARRIED HIGHER YIELDS TO COMPENSATE FOR THE INCREASED DEFAULT RISK. THE HIGHEST RISK CLASS, WAS A HIGHLY SPECULATIVE INVESTMENT, AS IT COULD HAVE ITS CASH FLOWS ESSENTIALLY WIPED OUT IF THE DEFAULT RATE ON THE ENTIRE ABS CREPT ABOVE A LOW LEVEL - IN THE RANGE OF 5 TO 7%.
  27. D.10
  28.  
  29. D.10
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  31.  
  32. THE “MARK-TO-MARKET” RULE SEARCHING FOR A “ROOT CAUSE” SOME EXPERTS ARE POINTING TO A LITTLE KNOWN ACCOUNTING RULE COOKED UP BY THE FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) AND TITLED FAS 157. THIS RULE STATES THAT COMPANIES HAVE TO “MARK-TO-MARKET”, OR PUT A MARKET PRICE ON ANY FINANCIAL INSTRUMENTS THEY HOLD AND TRADE. THIS IS RELATIVELY EASY IF THAT INSTRUMENT IS A STOCK, BUT WHAT IF IT'S A &quot;CREDIT DEFAULT SWAP?“ AND WHAT IF THE MARKET IS IN DISARRAY AND ACTUALLY DEFUNCT.
  33. E. STORM CLOUDS ON THE HORIZON <ul><li>B Y THE MIDDLE OF 2006, SOME CRACKS BEGAN TO APPEAR: </li></ul><ul><ul><li>NEW HOMES SALES AND UPWARD HOME PRICES STALLED. </li></ul></ul><ul><ul><li>INTEREST RATES - WHILE STILL LOW HISTORICALLY – ROSE. </li></ul></ul><ul><ul><li>ALL OF THE EASY-TO-UNDERWRITE MORTGAGES AND </li></ul></ul><ul><ul><li>REFINANCES HAD ALREADY BEEN DONE </li></ul></ul><ul><ul><li>THE FIRST OF THE SHAKY ARM’S, WRITTEN 12 TO 24 MONTHS </li></ul></ul><ul><ul><li>EARLIER, WERE BEGINNING TO RESET. </li></ul></ul><ul><ul><li>LOAN DEFAULT RATES BEGAN TO RISE SHARPLY. </li></ul></ul><ul><li>SUDDENLY, THE CDO’S DIDN'T LOOK SO ATTRACTIVE TO INVESTORS IN SEARCH OF YIELD. IT WASN'T LONG BEFORE NEWS OF PROBLEMS IN THE SECTOR WENT FROM BOARDROOM DISCUSSIONS TO HEADLINE-GRABBING NEWS. </li></ul>
  34. EARLY MANIFESTATIONS OF CRISIS ALTHOUGH THE FINANCIAL CRISIS ERUPTED BIG TIME IN MID-SEPTEMBER, 2008, SIGNS HAD BEEN GROWING OVER THE PAST YEAR OR TWO. FEDERAL RESERVE CHAIRMAN, BEN S. BERNANKE, A LONGTIME STUDENT OF THE GREAT DEPRESSION, WAS ACUTELY AWARE OF WHAT COULD HAPPEN TO THE NATIONAL ECONOMY WITHOUT A DECISIVE GOVERNMENT MOVE. BERNANKE HAD BEEN WARNING HENRY M. PAULSON JR., THE TREASURY SECRETARY, THAT A WORSENING SITUATION MIGHT ULTIMATELY FORCE A SWEEPING FEDERAL INTERVENTION. HE BROUGHT UP THE MISTAKES THE NATION MADE IN THE FACE OF THE DEPRESSION AND PROMISED NOT TO REPEAT THEM. “WE DID IT,” HE SAID. “WE WON’T DO IT AGAIN.”
  35. THE HOUSING MARKET STALLS NOTE THAT THE “HPI RATIO” VARIES INVERSELY WITH HOME PRICE HPI Ratio
  36. MORTGAGE FORECLOSURES RISE NO SURPRISE HERE - - WHEN THE GOING GETS TOUGH, THE RISKIER INVESTMENTS TAKE THE WORST HIT.
  37. THE DOW JONES ALSO SUCCUMBS TO THE PRESSURE SCORES OF MORTGAGE LENDERS - WITH THEIR MBS/CDO MARKETS DRYING UP - WERE FORCED TO SHUT DOWN OPERATIONS. AMID THIS FLIGHT TO QUALITY, 3-MONTH TREASURY BILLS BECAME THE NEW &quot;MUST-HAVE&quot; FIXED-INCOME PRODUCT AND YIELDS FELL A SHOCKING 1.5% IN A MATTER OF DAYS.   IN THE MODERN FIXED-INCOME MARKETS, A MOVE OF THAT MAGNITUDE CAN DO A LOT OF DAMAGE. THIS WAS ILLUSTRATED BY THE COLLAPSE OF SEVERAL HEDGE FUNDS. INSTITUTIONAL FUNDS WERE FACED WITH MARGIN CALLS FROM NERVOUS BANKS. THE FUNDS WERE FORCED TO SELL OTHER ASSETS, SUCH AS STOCKS AND BONDS, TO RAISE CASH. THIS INCREASED SELLING PRESSURE IMPACTED ALL MAJOR STOCK MARKETS, AND EFFECTIVELY LOWERED THE DOW JONES INDUSTRIAL AVERAGE FROM ITS ALL-TIME HIGHS IN JULY OF 2007 (SEE NEXT CHART).
  38.  
  39. F. LESSONS LEARNED - - PART 1 <ul><li>WE STARTED THIS PRESENTATION WITH THE THOUGHT THAT LESSONS LEARNED BY LOOKING AT THE ANATOMY OF THE CRISIS ARE CRITICAL TO AVOIDING FUTURE MISTAKES. SO HERE ARE THE PRINCIPAL LESSONS THAT I DRAW: </li></ul><ul><li>THERE’S PLENTY OF BLAME TO GO AROUND </li></ul><ul><ul><li>CONGRESS IS TO BLAME FOR TOO MUCH “DO-GOODISM” AND TOO MUCH ARROGANCE IN BELIEVING ITSELF TO BE SMART ENOUGH TO ACHIEVE EFFECTIVE “SOCIAL ENGINEERING”. </li></ul></ul><ul><ul><li>THE GOV’T REGULATORS SHARE BLAME FOR NOT MONITORING THEIR OWN RULES AND TAKING ACTION WHEN IT BECAME CLEAR THAT THEIR SYSTEM WAS BECOMING UNHINGED. </li></ul></ul><ul><ul><li>THE FINANCIAL INSTITUTIONS SHARE SOME BLAME FOR EXCESSIVE PROMOTION OF RISKY INVESTMENTS TO POOR RISK CLIENTS. THEIR LEGAL EFFORTS TO ACCUMULATE PROFIT ARE PART OF OUR SYSTEM AND SHOULD BE WELCOMED. BUT ETHICAL STANDARDS NEED TO BE HIGHER. AND ILLEGAL EFFORTS MUST BE PUNISHED. </li></ul></ul><ul><ul><li>(CONT’D NEXT PAGE) </li></ul></ul>
  40. LESSONS LEARNED -- PART 2 BUT THE BIGGEST SHARE OF BLAME GOES RIGHT TO OURSELVES, THE AMERICAN PEOPLE. WE GET THE GOVERNMENT WE DESERVE. IF WE ALLOW THE GOVERNMENT TO INTRUDE STUPIDLY INTO THE MARKET PLACE, IF WE ALLOW LAWS TO BE PASSED THAT WE DON’T UNDERSTAND, AND IF WE ALLOW ANY GOVERNMENT ACTIONS TO PASS BY WITHOUT CAREFUL SCRUTINY - - THEN WE THE PEOPLE ARE AT THE CORE OF THE PROBLEM:
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  42. THE END

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