It is generally accepted that the major components of 2008 Financial Failure were
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Banks Over leveraging high risk financial products
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Real Estate Brokers writing bogus loans falsifying unsustainable loans
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Credit Default Swaps writing bogus insurance contracts guaranteeing bad bank bonds
Key events that caused the crisis
Nov 12, 1999 - Clinton signed Grahm- Leach - Blily Bill - eliminating Glass Steagall Act (1933) which separated Insurance Companies, High Risk Investment Banks and Commercial (Deposit taking ) banks. It took the banking industry 8 years to bring the system down
Dec 21 2000 - Clinton signed into law the Commodity Futures Modernization Act which prohibited regulation of Over the counter Derivatives (Credit Default Swaps)
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Brooklsey Born was the CFTC director who tried to regulate the Credit Default Swaps and she was publicly smashed down by Greenspan, Rubin and Sommers. |
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Unsustainable CDS interconnected the banks |
Nov 2001 - Fed and fellow regulators ruled that regular banks could hold $5 for each $ 100 for securitized loans versus historical $10 for each $100.
April 28 2004 - SEC allows 5 Investment banks to increase leverage from 12:1 to 30:1
| Google "Net Capital Rule" to find general information and start with Wickopedia |
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The five banks were: |
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Note that 3 of the 5 no longer exist / collapsed. Goldman Sachs and Morgan Stanley were near days within bankruptcy in the financial collapse. |
Sep 2004 - FBI identifies massive fraud in sub prime loan origination - nothing was done
2004 - OCC said it was the only authority to crack down on Predatory Lenders, states had to terminate thier cases. The supreme court upheld that ruling. OCC did nothing on predatory lending