I'm sure Liz Warren is accustomed to boorish behavior on the part of government officials owned by the banks who do their best to stymie her efforts at reform. But yesterday's exchange with Oversight and Government Reform Committee chairman Patrick McHenry (R-NC) was utterly beyond the pale. McHenry excoriates her for having the audacity to schedule other meetings around his planned hearing and goes so far as to call her a liar when she explains that it was his people who dictated the schedule. (video after the jump)
Not only did McHenry look like an ass, but he was called out by fellow committee member Elijah Cummings (D-MD) and told to apologize. It gets even better. Once video of the exchange hit YouTube, McHenry's Facebook page was inundated with hate mail. Some of it is pretty funny.
The thing that I find most curious is how much Elizabeth Warren scares these guys. She's made Tim Geithner look like a fool on TV, and it seems like these (mostly Republican, if we're being fair) Congressmen will do anything to discredit her. Meanwhile, she preaches the gospel of common sense reform, and it scares the shit out of these congressional bozos and their Wall Street paymasters.
I'd love to hear someone intelligently defend McHenry's behavior in the following clip. Seriously. You guys know I'm a big fan of Warren's, so I admit that I'm biased. But there is no excuse for this bullshit:
Let me know if you think I'm way off base here. And feel free to share your thoughts on McHenry's Facebook page as well.
Oh? A congressmen verbally abused someone in a hearing? Call the papers.
Elizabeth Warren is actually a pretty reasonable-sounding lady. She supports financial innovation to the extent the consumer understands what's going on with their financial products.
My one main concern is that the agency she is going to be the head of (whenever she gets confirmed) has the authority to rewrite contracts ex-post-facto without the judicial branch getting involved. It would be like me getting into a contract to buy some Oranges from Happy, Liz Warren comes along and says, "no, Happy just thought he was selling you fruit. We're changing the contract to allow delivery of Apples, Pears, or Peaches in addition to oranges; Happy just gets to give you the cheapest to deliver option."
Under the constitution, that constitutes a seizure under due process of law. That is what I think many Republicans and Libertarians are largely concerned about. Adding an extra regulator in the wake of a financial crash is annoying but tolerable; allowing that regulator to extrajudicially modify contracts, however, is what seems to be so intolerable.
IMHO, Warren is a much better politician than most of the folks in Washington. Give her enough time and she will win this- and ultimately have a lot of appeal with the conservative/libertarian-leaning populists in middle America. Short of rewriting existing contracts, she represents sensible capitalist reform for sensible capitalists.
As someone heavily involved in the consumer credit market, I can tell you with absolute certainty that the kinds of things that have been going on for the last 15-20 years have been totally beyond the pale. Products made intentionally over-complicated and designed to profit from people not fully understanding them. Call me whatever kind of "ist" you want, but I don't think it should be legal to have a business model predicated on getting people to sign a contract that allows you to cheat them. I don't care if both people in the transaction are "sophisticated," if you are willfully attempting to screw your customer with the product you are selling I hope Warren guts you. This country needs a whole lot more wickedly smart people with a strong conviction to stick up for the little guy. If that means people like me make a little less money, I'm fine with it.
The thing is, there are many legal precedents at all levels of the judicial branch that say effectively that intent doesn't matter in the contract. Even if it did, no one is stupid enough to admit that they purposefully did it with the intention to cause harm or mislead the other party; there's no way that would hold up in court.
It's as though these fucking assholes (like McHenry) were born yesterday and the financial crisis didn't happen. On what planet were these guys living in 2008? How fucking desperate is this asshole for campaign contributions?
I'm pretty impressed by the comments on his wall. This guy is like a WSO troll...except he's in Congress.
Pieces of shit like this that will do anything for campaign contributions are the reason we're so fucked.
I'm a Republican-leaning guy, but I can't see how you justify McHenry's behavior. The lobbyists have taken over the Republican party and the Tea Party.
It is time for a third party filled with sane libertarians.
PREACH IT, BROTHER!
Haha, that would make too much sense!
I've thought about this a lot, but come to the conclusion that all that does is split up the republican party into two groups, making this "third party" really the death of fiscal conservatism. Works out great for the Democrats, though.
A politician does something stupid.... Yawn.
Warren seems like a nice lady, but the crisis was NOT caused by retail products, or Bernie Madoff.
Warren has failed to persuade me that a magical regulator will better compensate and protect investors and consumers than the court system. Products liability is an established body of law with many nimble features.
Remember, O Bureaucrat, that thou art useless!
Really?
I feel like the underwriting of residential mortgages gets some of the blame as does the underwriting, ridiculous fees and repricing mechanisms built into a great many consumer debt products (cards, installment and home equity loans). I agree that the risk evaluations of all these types of loans were wrong at the time of securitization due to at best idiocy and at worst massive fraud gets a lot of blame as well. The fact of the matter still remains those consumer products were created by design to have much higher ROA than you could attain if you had to reasonably believe a customer could meet their debt service without getting additional loans.
I understand the argument of "if people are too irresponsible or ignorant to know what kind of deal they agreed to, they get what they deserve," and there was a moment where I thought this as well. Maybe I've just softened in my old(er) age but I don't think the place of the strong (knowledgeable) is to exploit the weak (ignorant), unless they aren't white of course.
Perhaps my brevity caused the confusion... I'll clarify: the crisis was not caused by faulty retail products abusing innocent consumers.
Simply because a homeowner was on the wrong side of an ARM reset does not mean they were deceived or ignorant. They took a calculated risk and they lost. Caveat emptor.
How can you say that with a straight face? Predatory lending and shoddy financial engineering was the cause of the damn crisis, I work in structured products and no one with a brain and a ounce of integrity would deny this.
Faulty Lending was an EFFECT, not a cause.
Retail investors weren't the ones holding billions in structured products. It was the institutional money.
I think "caveat emptor" epitomizes my point. For these products I would like to see an effort made at the marketing/sales stage, there should be a greater attempt to explain how products work. Based on customer research I have sat on the other side of the glass for, I can tell you that the vast majority of people do not understand how anything works and in a lot of cases strongly believe something that simply isn't true. You can give people 4 offers and ask them to rank order them in terms of value/cost to the bank and they are always wrong, usually wildly wrong.
My guess is the average ARM holder in 2007 would have been hard pressed to tell you what the sentence:
"Simply because a homeowner was on the wrong side of an ARM reset does not mean they were deceived or ignorant"
even meant. That to me is a problem and regulation should be developed to make the bar to acquire a product like that high enough that it will hopefully discourage ignorant customers and discourage institutions from marketing it to ignorant customers. Plus a lot of decent banks would benefit from having unassailable lending and fee practices coincide with the law, leveling the playing field for all.
There exist COUNTLESS free and cheap guides and experts on how to purchase a home, how to manage a mortgage negotiations, how to handle your personal finances.
I have zero sympathy for consumers who spend more time watching American Idol than they do studying a major property purchase.
Buyer beware. Unlike health insurance under Obama, no one is forced to purchase a home.
(although the gov't did force lenders to generate more minority ownership)
@Veritas:
I suggest you read the WaMu chapter of the Levin-Coburn Report on the Financial Crisis. Really eye opening stuff with regards to the off-the-wall batshit insane crap the mortgage lenders were doing.
Agreed. It is good reading. And I still choose freedom of exchange, unencumbered by Elizabeth Warren or any other useless gov't 3rd party. (ignoring the fact that eventually Warren's regulatory body will be subject to "regulatory capture" by the finance industry, just like every other bureaucracy)
The court system is well equipped to deal with these issues when actual damages are incurred.
I'm getting really sick of people blaming the people who took out the shitty loans MORE than the lenders who gave them. In brief, here is why the mortgage lenders, such as New Century, WaMu, and Countrywide, are more to blame than the people who took liar loans:
--These companies made strategic shifts in their business to sell high risk, high margin products (subprime, teaser rate deals, stated income loans, etc.)
--They rewarded volume, not loan quality. The number one goal, stated year after year, was to push as many high-margin (high risk) loans out the door as possible.
--All of their internal risk functions were marginalized and ignored for sake of short term profit. There were people who knew that they were creating a ticking nuclear time bomb, but they were completely ignored and shoved aside.
--There are internal sales documents showing that sales people were pressed to push higher risk loans even on people who came in wanting traditional 30 year fixed rate mortgages. While it's easy to blame the consumer for taking risky loans because it's a simple answer to who caused the mess, it's simply not true. Sales reps were trained to push everyone towards higher margin, higher risk products.
--It was a big game of hot potato. Guys like WaMu didn't give a fuck if they were selling loans that they knew would blow up because they sold the loans down the line to banks for securitization or they securitized the loans themselves and pushed them on to investors. Oh, and a bunch of the crap was rated AAA when put into complex CDO products which enabled investment trusts to hold them since a AAA rating implies it's as safe as gov't treasuries but with a higher rate of return (in this case). We can thank the rating agencies for that shit. That said, it was a game of hot potato.
--Literally, the lenders made billions of dollars (with some in management pocketing millions upon millions for themselves) with no regard for the long-term health of their own company or the economy at large. Why? Because it didn't matter to them. They figured they'd either pass the time bomb off to the next group, and if they couldn't, oh well, they'd already made more money than God anyway, so who gives a fuck.
--Last but not least, by lending at such fucking insane rates, they took the bubble into a complete frenzy. So, even if you bought your loan the responsible way (via a fixed rate mortgage), you are probably STILL fucked because the housing market cratered. So, you're left with a home that's greatly depreciated in value, you hopefully have your job, and assholes that ran companies like WaMu pocketed millions.
And for people that don't believe that the lenders are more to blame, here's a sad and funny example of how irresponsible they were. WaMu at one point gave a stated income loan (a liar loan) to a guy who claimed he made $400K a year. His stated occupation? Sign maker. Would you personally even lend $10 to this guy? This sort of shit was RAMPANT throughout the system.
I'm just so sick of hearing people who are intelligent, at least in terms of being book smart, defend this sort of shit. "But, but, I'm a first year analyst, I know how to do comps. Finance good, u just jelly!" Suck a dick, get the fuck out of here.
Where did I absolve the originators/banks of any blame?
We're discussing the justification for an onerous new regulatory body (with some suspect extra-legislative, extra-judicial authority)
The court system can arbitrate actual damages.
I reserve the bulk of my anger for the government pressures that created the incentives for the mortgage mess.
Why does that signmaker get the loan? Because he's from a minority locale. Deny the loan, and Jesse Jackson/Barney Frank will be bending you over on CNN.
The lenders' and intermediaries' behavior was an effect, not a cause.
This is just blindly following an ideology and not looking at what actually happened, stop passing off the blame to the government because it is convenient. You are specifically referring to the Community Reinvestment Act which after about 10 min of research (if you bothered to do any) you would find that over 80% of the mortgages that were underwater during the financial crisis were not issued by CRA regulated lenders.
Yeah so basically you have no idea what the fuck you are talking about.
@redninja:
Very well put. Nice and succinct. My rage about this shit usually prevents me from being so brief. That was very effective.
SB for you.
Veritas, you are wrong about the signmaker (and others like him) getting the loans because they were minorities. That's just a conservative white wash on what actually happened. You are pushing a false premise when you blame the government. The government did not force the lenders to blow themselves (and the economy) up, they did that as part of a strategy for high margin growth while rewarding shoddy sales practces and volume over quality. You cannot be serious when you blame the government. And, if you do, please defend your
Also, the more derogatory comments I made were directed at the little shithead first year analyst who posted earlier. Sorry for any confusion there.
Last but not least, you put way too much faith in the court system. Further, with regard to regulatory capture, it is not a sure thing as you state it to be. Second, one of the biggest problems during the lead-up to the crisis was that regulators were neutered and the banks were essentially left to regulate themselves. This is partially due to 'capture,' I'm sure, but also due to changes in rules and laws. No regulation is not the answer, intelligent and reasonable regulation is. You can't leave these bums to regulate themselves alone, or else we'll end up with another round of bailouts.
You must not understand that we aren't addressing the cause of the crisis here. What we're debating is Elizabeth Warren's extra-legislative and extra-judicial authority to broadly regulate financial firms based on some nebulous mandate to "protect consumers."
As a supporter of free exchange, free association, and freedom of contract, I am disgusted by this.
The court system addresses ACTUAL DAMAGES. No damage, no case. This is how a free society should function. We don't need to layer regulation on top of regulation to socially engineer potential outcomes.
The greatest regulator: profit and loss. Let them fail. First time, Every time.
(BTW, you offered no support for your denial of government encouragement of minority homeownership. You simply shouted: THATS RACIST! Ad hominem. Logic fail)
No point in arguing this if you're going to make the claim that the government is most at fault, not defend it with facts, and then tell ME that I need to prove your claim wrong, even after I have presented evidence (in this thread and in countless others) proving that your assertion is bullshit.
But, I guess I'm just afraid that Barney Frank is gonna fuck me in the ass on television.
Holy shi*t. I think Uncle Barney already has.
Government causes of the persistent financial crisis:
Long term: -mortgage market manipulation (which extends MUCH further back than the CRA, esp. Fannie/Freddie with 44% of the subprime market) -Greenspan monetary policy (low and negative real rates) -moral hazard of bail outs established in 1980s -moral hazard of increased FDIC insurance
Near term: -misdiagnosis of Aug 9-10, 2007 money market rate spike -rash reduction in the target federal-funds rate in Apr 2008 -Stimulus of 2008
The actions by banks were EFFECTS of these causes. These actions might have been INCORRECT in the way that I can make a bad trade, but spare me the moralizing. If we don't bail them out, then they experience the painful regulatory system of profit-loss.
The rate at which we are exporting inflation to emerging and commodity markets suggests another bubble building.
Ah haha. HA ha. Ha. Thanks for the laff.
And again, the government did not put a gun to the heads of the mortgage houses saying "lend recklessly and dangerously and as frequently as possible." That's just not true. The demand for these products was enabled not by the government, but by the banks securitizing them into RMBS, CDOs, and CDO^2s.
And all of the total free market libertarian crap went out the window when TARP, TALF, and numerous other programs were put in place by the government to bail out the banks.
Oh wait, I take it all back. Check out this video I found of Barney Frank meeting with the CEO of Countrywide back in 2005 telling him he needed to lend to as many illegal immigrant Mexican signmakers as possible or else he'd throw him in jail.
Veritas,
I've got to disagree with you here. I don't think government was the cause of the crisis. Think about it honestly for a second. Which motivates a bank executive more? The prospect of earning millions of dollars in bonuses, or the light slap of a government regulator and a little bit of tarnished media coverage? When push comes to shove, these executives engaged in this behavior because they knew if they could get away with it, they could make big money. They bought loans from mortgage brokers (check out this paper http://www.fhfa.gov/webfiles/15049/website_jiang.pdf), repackaged them, and found a way to sell to pension funds and other funds which could only buy highly rated securities. They took a fee for their "hard work", and kicked back. Its just the way the system worked, and they got away with it for a while. To blame government (which I love to do) is unfair in this case, because with the army of lobbyists and lawyers these banks have, they could have gotten out of any legal predicament they came across when it came to Community Reinvestment or anything of the like.
Everyone here sounds like they just KNEW the housing bubble was coming and that all the banks were simply hiding the impending crisis. I want to see your portfolios in February 2008.
Doesn't anyone recall the internal McKinsey advisory recommendation DEMANING that UBS increase their MBS exposure?
It is possible to pursue an INCORRECT action without such being an IMMORAL action.
You are misunderstanding the pricing system and how signals are transmitted in a market economy.
When the government perverts incentives, everyone loses except special interest groups protected by the political class.
You mean the banks who got billions of dollars of interest free loans from the government...
Oh, here we go again. Another one of these, oh how I cant resist.
Moron walks into WaMu/Wachovia/Whatever-idiot-financial-institution and says, "Hi, I would like a loan for a home."
Bank says,"What's your income? Assets? Credit history?"
Moron says,"$0, $0 assets, and what's credit history?"
Bank says,"Great! Sign here, we will handle the rest."
^^^Mutliply by a million and there you have the financial crisis of 2008-2010 in a nutshell. Feel free to talk in circles about "who is to blame." But who's the real moron in that situation?
BTW, it wasn't just morons who got screwed. Any hard-working middle-class guy/gal who bought a house between 2006 and 2010 got royally fucked, even if they were financially prudent. There is a big problem with that.
Back on topic: I dont think another regulatory agency is going to do jack-shit. Its a good concept and I like how Warren is trying to stick up for the little guy. But the SEC didnt stop Madoff and gov't regulators were totally and completely blind-sided by the financil crisis. Congress and the President have made it crystal clear that they are not interested in punishing idiot bank execs in any way, nor are they interested in any real reform (like bringing back Glass-Steagal).
On the other hand, we haven't had another Enron or Worldcom since Sarbanes-Oxley.
Is another gov't body really going to stop the next crisis? Maybe, I dont think so.
I wonder if Mchenry complains and talks as much shit when he's sucking on his boyfriend's cock.
mr1234 just coming in dropping elbows off the top rope macho man style. Nicely done.
Kudos to LIBOR as well.
The problem with libertarians organizing (myself included) is that we don't do "groups" well. The whole "rugged individual" thing doesn't translate to a stable voting bloc. The most successful political parties manage to rally the mob against the opposing group. Libertarians just want to be left alone, and don't give a shit about imposing their will on any other groups.
That's exaclty right.
After watching the rodeo-clown shit-show that is modern American politics, I dont think I am even going to vote in the next election cycle.
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