Itemized Response to the Dillard Report and It's Position on the Cause of the Financial Crisis

*Note The error concerning the links has been repaired all links are now functional. if you seek additional verification of the link terms please feel free to consult the financial dictionary at Investopedia.com

We can reject the socialist argument that deregulation of the private financial system was a contributing cause of the financial meltdown of 2008. In reality, government regulation of this market sector significantly increased over the seventeen years leading up to the crisis

of bundled loan packages (List the government regulations that were imposed during the period of 1999-2006 that curtailed the development of CDOs (Collateralized Debt Obligations), CDSs, (Credit Default Swaps) or those that specifically supervised and regulated the burgeoning home mortgage lenders or regulated the new securities, (stock) classes what were created and exploited also list the regulations that governed how banks and other financial institutions interacted with Wall Street with respect to this new securitization scheme developed during the corresponding period in question)

You have been led to believe the deregulation story through reporting that shows only one small and insignificant aspect of government influence. Please read more to get the truth.

(Glass Steagall was a regulation already in place since the depression era mind you which prevented the event of trading single stock options from even existing….meaning that w/ Glass Steagall in the law you could not create market or sell a bundled loan package as a stock…it’s repeal by the Gramm-Leach-Bliley Act is not a small insignificant aspect of government influence it is in fact the fundamental foundation of this crisis but for the repeal of Glass Steagall you could not have even created let alone sell the product of bundled loan packages which is undeniably at the root of the entire Home mortgage lending financial crisis)

Wikipedia, the online encyclopedia, defines regulation as "controlling human or societal behavior by rules or restrictions. Regulation “mandated by the state”

(These are the goals of any & all regulation even when a business self-regulates it does so to achieve the goals that you outlined & those goals)

are attempts to produce outcomes which might not otherwise occur, produce or prevent outcomes in different places to what might otherwise occur, or produce or prevent outcomes in different timescales than would otherwise occur.”

(those goals are not simply restricted to regulations authored by the state but are global to any and all types of regulations authored so why specifically infer that state mandated regulations are the only type of regulations that we need worry about when it is plainly obvious that your desired operating environment preference is too have no regulation on private enterprise at all.)

Banks working towards lower profitability, by making bad loans, is not an outcome that would occur naturally. A strategy for failure is not in the business plan of any bank.

(here is where we differ in your opinion “regulations” are the cause of Banks working a strategy toward lower profitability Specifically those imposed by government or state mandated agencies….I see it as their own greed predicated on the belief that these organizations believed that they had found a strategy toward unlimited profitability because they were insulated from the consequences of bad loans this is where CDOs +CDSs (Collateralized Debt Obligations & Credit Default Swaps) and there flawed concept impact the judgment of financial institutions and disrupt the foundations of our economy…These businessman actually believed that through the combination of CDSs and CDOs they could insulate and absolve themselves of all liability in the case of loan default distorting the basic fundamental operating logic and processes of the market to the point that they believed it was possible to create a perfect tool that posed no risk precisely because you were paid if the loan was paid and you were also paid when the loan was defaulted because you sold the loan and those whom you sold the loan too held the debt. (You further insured yourself against defaulted loans with the agencies that held these debts that knowingly used leveraged asset totals instead of actual asset totals in order to deliberately convolute and obscure the mark to market requirements….which simply states a lending institution cannot insure that which it does not have assets to insure. “You must be able to prove/guarantee that you have the assets required to pay your claims” All business have a survival instinct…and yet suicide exists only in human nature!)

It is clear that government, the Clinton administration with their allies in big media and leftist activist groups and later the Bush administration, imposed regulations on banks that produced the desired outcome of expanded minority and low income home ownership.

(It is true that democrats are generally in favor of more low income home ownership and also true that Republicans are generally in favor of less regulation of the private sector what occurred here was that politicians were told by Wall Street that the only way to achieve that goal was through less regulation)

To enable this outcome, federal banking regulators moved against safe lending practices in the name of “community reinvestment.”

(You mean the SEC under a republican administration allowed deregulation of specific home mortgage products and entities…to blame the federal banking regulators for moving against safe lending practices you have to explain which safe lending practices were specifically moved on by federal banking regulators and how they were moved. Also the concept of the government forcing the private sector to “move” against safe lending practices is an asinine observation & conclusion; those financial organizations chose to abandon and not to use safe lending practices precisely because they believe they could make a profit either way.)

Severe political pressure was applied to mortgage providers to increasingly lower their lending standards,

(What constitutes “Severe Political Pressure”, I thought businessman lobby congress not the other way around the only political pressure that congress can implement over private entities is regulation and certainly the regulatory environment created wasn’t an environment that kept mortgage lenders from operating in fact they over-produced in there functioning…they blew up the housing bubble)

eventually spawning the now infamous NINJA LOANS loans for borrowers with "No Income, no Job or Assets." Regulators measured bank performance,

(and they specifically by design and with rabid consent intended that they didn’t regulate mortgage lenders, bankers participating in mortgage lending, or their financial relationship with Wall Street and again but for the repeal of Glass Steagall and the CFMA they wouldn’t even be competing within the stock market)

and punishment/reward feedback mechanisms were (not) effectively utilized.

(Half of the problem which was the conduct and practices of the mortgage lenders and Wall Street never received regulation and in fact received stimulative deregulation which exacerbated the problem)

In nature, species adapt to new conditions in the environment or perish –natural selection. For the seventeen years prior the financial meltdown, banks adapted to a new regulatory environment,

(by actively creating a deregulated environment)

with new conditions for survival –political selection.

(If you deregulate I’ll help you with your upcoming election gee sounds like political selection too me banks asking what politician can I select in order to get this industry deregulated. * Note Republican fundraising totals and electoral dominance during this period)

Banks developed lending strategies, such as Subprime Mortgages loans to achieve the government/activist’s desired outcome.

(the banks were not operating in order to achieve the government/activist’s desired outcome they were operating to achieve their own profitable outcome…Even a business novice understands that businesses never operates to advance any other entities outcomes before they achieve their own desired outcome and that desired outcome is always more profit. To suggest that the banks developed unethical and self-destructive lending strategies such as Subprime Mortgages loans; simply to please the government/activist’s doesn’t pass the smell test)

When applications for new branches were declined due to poor performance, banks took action (The wrong action instead of fixing performance issues with sound financial principles they abandoned them for a supposed guaranteed profitability machine). When competitors, with more

(unstable ill-advised) low income loans, threatened lucrative government contracts, staff was mobilized.

(Providing more unstable ill-advised loans than their competitors did) When newspapers or activist broadcast racial discrimination claims (redlining is a proven fact)

, banks initiated new programs.

(The new programs did nothing to solve the fundamentals of Redlining, but instead; replaced the process with the now infamous NINJA LOANS loans because they feared no risk in giving those loans.) Banks adapted. (No, banks Terra-Formed instead of adapting to the environment that was around them they tried to create the environment that they would be most comfortable in irrespective of the destruction of the environment that we all have to live in)

Wall Street ‘greed’ as an explanation is pure pandering to the unthinking. The crisis was triggered by the failure of one segment of financial products

(through package bundling touched every aspect of our whole economic system and because they were also sold internationally affected global financial markets as well) – Subprime Mortgages and Alt-A mortgages, (Remember that in the beginning Alt-A mortgages were not credit worthy enough for the GSEs because of their higher probability for default due it was when GSE’s began deregulating their previous credit lending standards that GSE’s became linked with the dynamics of Subprime Mortgages Mortgage Crisis)

and mortgage backed securities. The driving force in this market, buying and selling, were the (Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.

The (GSEs) came late to this crisis they came in when they erroneously perceived that these loans were sound after the Gaussian Copula Model seemed to validate why CDOs and CDSs were profitable and you had by that time experienced 2-4 years of a bear housing market a decision was made by the GSEs to participate in this believed surefire mechanism advanced by both wall street and mortgage lenders)

since the GSEs are implicitly backed by the US government, the risk is very low,

The Bankers, Mortgage Lenders, and Wall Street utilized the high credit rating of the GSEs to market package and sell more securities this was pivotal in marketing to international investors since these securities had obtained AAA credit ratings and cross validation through their association with GSEs even though, all (meaning Bankers, Mortgage Lenders, and Wall Street knew

, know many of these mortgages will go into foreclosure. As we now know implicit equals reality.
Acceptance of the link between deregulation of private business and the financial crisis is more revealing of a socialist mentality than reality.

(I would modify this statement to say ‘Acceptance of the link between deregulation of private business and the financial crisis is the only reality’) Decades prior to the crisis, regulation increased dramatically. Also specific and targeted deregulation increased dramatically

Some point to the 1999 repeal of part of the Glass Steagall Act

(by the Gramm-Leach-Bliley Act)

legislation that regulated financial company ownership as a definite contributing factor. However, there is no empiric data to link the Subprime Mortgages problem and toxic assets to making our financial structure more competitive by allowing banks and securities companies and insurance companies to compete against each other.

(the whole point of repealing Glass Steagall was to make it possible to prove that banks and insurance companies can compete together, a practice by the way that had been banned by the act since1938 because then it was proven by the depression itself that the risks of allowing this type of competition outweighed the gains in our economic system. Competition leads to stronger individuals and systems. It is not Competition itself that leads to stronger individuals and systems, it is fair and regulated Competition that leads to stronger individuals and systems. Capitalism itself is a system and systems are governed by principles and rules (regulations) in order to function. Capitalism cannot function correctly in the absence of regulation.)

Finally, to suggest, as some have, that Glass Steagall would have compartmentalized the fire and therefore limited the scope of the crisis ignores a fundamental fact:

(The actual fundamental fact is that a fully intact Glass Steagall would have absolutely and 100% prevented this crisis…the crisis could not and did not happen until part of Glass Steagall was repealed there is no argument that can be made to hide this fact, your argument is illogical)

the number of bad loans would have been the same because government set goals and objectives would have been met. It did not matter whether the toxic assets were held by a few or the many; it was the scale of the problem that they overwhelmed the system.

(What? It seems that you are arguing that even with Glass Steagall some type of government quota system in which the government mandated an unspecified number of bad loans be given as an objective imposed on Banks, Mortgage Companies, and Wall Street would have existed any way… simply because the government sets a goal or objective that means that it will be met! The last time I heard Zero has no scale…and if you take off the condom don’t be surprised when she tells you your baby is coming especially when if you had left that condom on you would absolutely be sure that the baby that is coming didn’t come from you.)

Unfortunately, the fundamental forces that led to this unnatural business environment have not changed.

This statement is erroneous new corrective and preventative regulations have been implemented since approximately circa 2006 through to the present to prevent this crisis situation from happening again. Unfortunately, the fundamental mental forces and attitudes that led to this unnatural business environment have not changed there are still participants who even now don’t accept any responsibility for the crisis they had part in creating…you cannot solve problems if you refuse to realize there are problems especially within ones’ own conscience. But, in fact what made this business environment unnatural was not the application of fundamentals or regulations in fact it was the absence of fundamentals and regulations that allowed it to flourish. What made this business environment unnatural was the suspension of common sense supplanted by overwhelming greed in pursuit of the unnatural belief that what goes up never comes down….It seems the effects of gravity affect capitalism to or is it reality?