Annoyed again at the talking heads on TV who don't know what they are talking about
OK guys, yet again, the Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999 got rid of the Glass-Steagall Act of 1933 and that prohibited a bank from offering investment, commercial banking, and insurance services. This act allowed both savings and investment in one company. Thus lending companies used investments to lend rather than deposits. When you have lots of money lent out, and then your investors take away their money, you can no longer cover for the money you have lent out if those loans go bad. Then, if you can't get a loan or investment from another bank, YOU GO OUT OF BUSINESS. That is where we are today. It's actually rather simple. This act was a DEREGULATION.
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
On TV, and what is seeming to become "common knowledge" is that the above act made banks lend to poor people who could not afford their homes. THAT IS NOTHING TO DO WITH THE GRAMM-LEACH-BLILEY ACT. Also, THE VOTE FOR THIS ACT WAS STRICTLY PARTISAN WITH REPUBLICANS VOTING FOR IT AND DEMOCRATS VOTING AGAINST IT! Yep, Clinton signed it, thanks there Bill. In his defense, when obvious problems became clear the next couple of years, new regulations could have protected us all from this crash but instead only more deregulations were passed for the banking industry.
The talking heads are also confusing the above act with the Community Reinvestment Act of 1977. The Community Reinvestment Act required that if someone wanted a loan and they were in a banks geographic area, banks could not turn down a loan FOR AN APPLICANT WHO WAS A GOOD CREDIT RISK! You see, before this law banks would turn down mortgage loans because an applicant was a minority rather than because they were a bad credit risk. This law did not make banks lend money to poor people who could not afford their loan, LENDERS WHO DID THIS LIED TO GET IMMEDIATE COMMISSIONS. Further, lenders who loan out money from investments ARE IN NO WAY REGULATED BY THE CRA BECAUSE THE CRA ONLY MONITORS BANKS WHO USE DEPOSITS TO LEND. The vast majority of home lending today is NOT REGULATED BY THE CRA BECAUSE OF THE GRAMM-LEACH-BLILEY ACT.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
As you can tell, I am very annoyed at the lack of information out there and how the news is allowed to just talk out of their asses with no connection or verification of any facts. The CRA is blamed for doing something it does not do, and although it is acknowledged that these lenders have used fraudulent accounting practices, for some reason everyone is assuming these lenders did not defraud the customers who purchased home loans through them.
http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act
On TV, and what is seeming to become "common knowledge" is that the above act made banks lend to poor people who could not afford their homes. THAT IS NOTHING TO DO WITH THE GRAMM-LEACH-BLILEY ACT. Also, THE VOTE FOR THIS ACT WAS STRICTLY PARTISAN WITH REPUBLICANS VOTING FOR IT AND DEMOCRATS VOTING AGAINST IT! Yep, Clinton signed it, thanks there Bill. In his defense, when obvious problems became clear the next couple of years, new regulations could have protected us all from this crash but instead only more deregulations were passed for the banking industry.
The talking heads are also confusing the above act with the Community Reinvestment Act of 1977. The Community Reinvestment Act required that if someone wanted a loan and they were in a banks geographic area, banks could not turn down a loan FOR AN APPLICANT WHO WAS A GOOD CREDIT RISK! You see, before this law banks would turn down mortgage loans because an applicant was a minority rather than because they were a bad credit risk. This law did not make banks lend money to poor people who could not afford their loan, LENDERS WHO DID THIS LIED TO GET IMMEDIATE COMMISSIONS. Further, lenders who loan out money from investments ARE IN NO WAY REGULATED BY THE CRA BECAUSE THE CRA ONLY MONITORS BANKS WHO USE DEPOSITS TO LEND. The vast majority of home lending today is NOT REGULATED BY THE CRA BECAUSE OF THE GRAMM-LEACH-BLILEY ACT.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
As you can tell, I am very annoyed at the lack of information out there and how the news is allowed to just talk out of their asses with no connection or verification of any facts. The CRA is blamed for doing something it does not do, and although it is acknowledged that these lenders have used fraudulent accounting practices, for some reason everyone is assuming these lenders did not defraud the customers who purchased home loans through them.