The Savings and Loan scandal of the 80's was very similar to this latest financial rape of America. Why has it happened again, and under a Republican administration again? It seems that the main thrust of Republican policy is alway focused on plundering large pockets of capital to no good end, only to enrich the bastards that make up the backbone of their party. If it is true that the federal government, the Bush administration, interfered with State's Rights to protect their people and financial institutions from the subprime scheme, why isn't this being shouted from the rooftops? If a serial sexual predator had struck again, the way the Republican mishandling of financial regulation continues to strike over and over, the country would be up in arms. And said predator would be at least tarred and feathered and ridden out of town on the thinnest most uncomfortable rail that could be found. I want to hear more about this. I dare you, Slate, to push this story farther.

Yes. Next we'll learn that the comptroller was a Bush Ranger or Pioneer.

The fact that they justified this affront to state's rights to the Federalist Society makes me giggle.

-T.W.

Because, despite all claims to the contrary, the press is not liberal. All of the press (newspapers, radio, TV; with the exception of PBS and NPR) are in the control of a handful of giant media corporations. And those corporations are controlled by rich bastards. And rich bastards are, almost invariably, Republican. So while they sometimes champion really minor, inconsequential "leftist" causes to appear liberal or neutral or something, when it comes to the big issues, like calling out this administration, they are very very much friends of Bush and enemies of regular (i.e.: non-rich) Americans.

My guess is that this didn't get much play before probably for two big reasons.

1) While the housing bubble was starting to inflate, it was (or appeared to be) providing a push to get the economy out of the dotcom (a similar bubble in a different asset class which happened under a Democrat) bubble and 9/11 aftermath.

2) At the time (at least in CA), the main story on subprime loans, although they were never mentioned specifically, was how great it was that home ownership was now a possibility for more and more people.

One thing that seemed to be missing from the list of the states which attempted to do something about this lending is the inclusion of any of the states where the bigger real estate bubbles formed (CA, NV, AZ, FL).

The rich Republican bastards are bringing the whole economic system down on our heads. After the damage has caused immeasurable human misery, voters will rediscover that progressives really do best represent their economic interests. Democratic administrations will put the pieces back together and a generation later prosperity will be restored. The lessons will be forgotten. The rich Republican bastards will claw their way back into power. And the cycle will be repeated.

I agree, this should definitely get more play.

What really burns me up is that I knew the subprime mortgage market was headed for disaster. I knew it years ago, and I don't even work in finance--I'm a computer programmer. All my information comes from public news sites. If somebody like me can grasp that there's a major problem coming down the pike, the Feds had to be deliberately looking the other way in order to not see it.

Four of the five infamous "Keating 5" of the Savings and Loan scandals were Democrats.

I had the exact same reaction to this piece. What's more, it seems as though the author presciently sounded the warning even earlier:

<link>

bmgreene:

1) While the housing bubble was starting to inflate, it was (or appeared to be) providing a push to get the economy out of the dotcom (a similar bubble in a different asset class which happened under a Democrat) bubble and 9/11 aftermath.

I disagree. The housing bubble really went nuclear in 2004-2005, well after the economy had recovered from the aftermath of 9/11 and from the tech bubble. I would compare the late 90s dotcom bubble with the housing bubble of '02-'03, but it just does not compare in scope OR damage (much of it still hidden...) with the extraordinary bubble heights of '04-'07.

By the way, I agree with the other poster. I'm a layperson; I don't have anything to do with real estate or the economy, but I knew that something baaaaaad was happening in bubble-inflated areas from regular news reports. I was more alive to it then because I was in the process of buying a house (20% down, 30 year fixed mortgage, less than 25% debt-to-income ratio - and I am NOT rich - , less than an equivalent rental, thank you very much) in a non-bubble market at the time, but had friends out in California and Florida. Still, I knew that 80% (EIGHTY PER CENT) of mortgages in some of these markets required creative (100%, ARM, or I/O) mortgages, and knew that something was wrong, and that that was not sustainable.

For the record, the Comtroller in question was John D. Hawke, Jr., a Democrat and a recess appointment of Bill Clinton. This was an omission from the Slate article, probably because the story is less sexy with it included.

Not surprisingly, as a Democrat, Hawke saw no inherent philosophical conflict with interfering with "states' rights."

So are we going to blame Bill Clinton now?

Carrick:

For the record, the Comtroller in question was John D. Hawke, Jr., a Democrat and a recess appointment of Bill Clinton. This was an omission from the Slate article, probably because the story is less sexy with it included. Not surprisingly, as a Democrat, Hawke saw no inherent philosophical conflict with interfering with "states' rights." So are we going to blame Bill Clinton now?

For the record, Hawke was responsible to the Bush White House after January 20, 2000. Even Bill Clinton lacks the power that kids on the interwebs attribute to Chuck Norris - and certainly had no oversight or influence in the executive branch since 2000.

Also: for the record, the Republicans are STILL claiming that our economy is weak because we have TOO MUCH REGULATION, not because we have too little oversight, and as such they are constitutionally worse than the Democrats ever will be on such issues. They don't even seem to understand that certain regulations (say, cafe standards) or government programs (say, universal health care, just ask GM) can be better for the long-term (rather than short-term, short-sighted) health of American business and the American economy than the party's knee-jerk CUT TAXES! CUT REGULATION! party line.

You mention that 4 of 5 palyers involved were Dems, yet you forget to mention where the original and overwhelming impetus to have the regulations changed (forbidding S+L's from being real estate players) came from...the 'Free Market' Texican Conservatives, INCLUDING BUSH Sr. Any coincidence that the state of Texas had, BY FAR, the greatest number of S+L failures??? And yet, the GAO estimated that while this was one of the top 5 expenditures in American taxpayer history (at least to that point), Texas actually ended up GAINING wealth from this event, while the other states were all losers (not my opinion..this is from the GAO report and Congress' own stats..see also comments made by Greenspan) Go ahead, spin that.

"For the record, Hawke was responsible to the Bush White House after January 20, 2000."

Maybe you shouldn't put this on record. Bush was inaugurated on January 20, 2001.

wow, it's amazing that rich bastards that own corporations are invariably Republican yet Hillary has so many of them in her pocket

mgee:

I disagree. The housing bubble really went nuclear in 2004-2005, well after the economy had recovered from the aftermath of 9/11 and from the tech bubble. I would compare the late 90s dotcom bubble with the housing bubble of '02-'03, but it just does not compare in scope OR damage (much of it still hidden...) with the extraordinary bubble heights of '04-'07.

By the way, I agree with the other poster. I'm a layperson; I don't have anything to do with real estate or the economy, but I knew that something baaaaaad was happening in bubble-inflated areas from regular news reports. I was more alive to it then because I was in the process of buying a house (20% down, 30 year fixed mortgage, less than 25% debt-to-income ratio - and I am NOT rich - , less than an equivalent rental, thank you very much) in a non-bubble market at the time, but had friends out in California and Florida. Still, I knew that 80% (EIGHTY PER CENT) of mortgages in some of these markets required creative (100%, ARM, or I/O) mortgages, and knew that something was wrong, and that that was not sustainable.

It probably did hit critical mass sometime in the first half of '05, but it was inflating starting in '02-03 (recovery really set in in early or mid '03). I've been living in L.A. the whole time, and have thought that real estate was due for correction/collapse in pricing since '04, since by then most actual homeowners, and virtually all first-time buyers had been priced out of the market in much of L.A. (this in turn helped drive, bubbles in Phoenix, AZ and Las Vegas, NV since potential investors/speculators in CA began looking to adjacent states).

The boom market drew in lots of greed in the form of speculators (aka "flippers"), unscrupulous lenders & agents, and some buyers who got so caught up in being told that they could get a mortgage to buy a house that they assumed would double in value in 3 years that they often didn't bother reading the contracts they were signing (or paying a few hundred bucks to have an attorney review it for them), and didn't consider that they couldn't actually pay off the loan by any stretch of imagination. Also many of the shadier mortgage brokers were pressing prime borrowers into sub-prime loans because the broker commisions were bigger.

At some point though, anyone who signs a contract that they can't live up to (on either side of the deal) has to assume their share of responsibility for that. The predatory lenders are getting clobbered financially without any legal action since they ignored any sort of underwriting standards thinking that they would still come out ahead on foreclosures thanks to continued appreciation (in many of these cases, they were even lending 110-125% of the property values), and additionally, often had to provide guarantees to those who they sold the loans off to (this is what happened to American Home Mortgage, and may still happen to Countrywide, as their entire business model was a house of cards dependent on the natural cycle of the market never reverting to its course). I'd even venture a guess that at least half of the defaults/foreclosures will not result in the eviction of homeowners as the last few years in the bubble markets were largely flippers and speculators trading properties around (much like tech stocks in 1999).

I'm personally looking forward to it, as I make around $100k per year with no credit card debt (just $4k left on my car loan), and I can't afford even a 1 bedroom condo in areas of L.A. where it would make sense for me to live due to where I work. Of course, I'm one of those freaks who believes that anyone who can't afford the payment on a 30-year fixed with at least 10% (preferably 20%) down then you really can't afford the house.

At the time that the current subprime mess was being built up, all the papers and the pols could talk about around here was how great it was that home ownership was becoming more and more accessible to those who might think they couldn't afford it (and who, it turns out were probably right after all).