In the late '80s and early '90, more than 1,000 savings & loans failed in a financial crisis that cost the government $220 billion to resolve. By contrast, it looks like TARP will only cost the government $105 billion. So is the current financial crisis only half as bad? Not bloody likely.
One of the most disturbing aspects of the home foreclosure crisis is how much damage it has caused in minority communities. Activist group Committee for Responsible Lending finds black and Hispanic borrowers are twice as likely to have lost their homes.
Goldman Sachs is facing another SEC inquiry into its handling of a collateralized debt obligation, this time involving a security called Hudson Mezzanine, which was based on low-quality subprime mortgages. Goldman sold the CDOs to investors, then bet against them.
Bank of America has agreed to repay $108 million to 200,000 struggling homeowners who were overcharged fees by Countrywide mortgage services companies prior to 2008.
The New York Times recently looked at the plight of Cortney Munna, a graduate of New York University struggling with nearly $100,000 in student loans, and asked: Should schools abet students in the process of financial self destruction, or should they follow a higher purpose?
As laid out by the SEC, Goldman Sachs's CDO sale appears to be textbook securities fraud. The two keys are whether Goldman and VP Fabrice Tourre made material misstatements or omissions, and whether they had sufficient intent to deceive or defraud.
"I accept responsibility for everything that happened on my watch," Daniel Mudd, former CEO of Fannie Mae said Friday. The need to support affordable housing and home ownership ultimately made it impossible for it to succeed in its other mission: making a profit.
Sure, Lehman's accounting gimmicks played a role in its downfall, but the star of the show was a business strategy the left prudence behind in an all-out pursuit of risk and reward. Too bad risk won out.
Let's not forget that unprecedented government intervention is the only thing keeping the the housing and mortgage markets afloat. This level of support is so massive that many are wondering what will happen when the government finally pulls the plug.
