Crash Tax: Wall Street Should Pay Reparations to the 99%

[xchrom]

http://www.alternet.org/economy/153065/crash_tax%3A_wall_street_should_pay_reparations_to_the_99

Wall Street waged war on the American economy and middle class with its reckless gambling.

It wasn’t Fannie Mae or Freddie Mac that crashed the economy. It wasn’t the federal government. It wasn’t hapless homeowners who were sold mortgages they couldn’t afford. It was Wall Street financiers that aggressively sought and bought mortgages to package and sell as derivatives, which the banks could wager on.


Americans bailed out Wall Street, handing it a Marshall Plan for reconstruction after its bad bets blew up the world economy. Now, three years later, happy days are here again for the Wall Street banksters. They’re hauling in big profits and paying outrageous bonuses. But the American middle class continues to suffer high unemployment, record foreclosures and rising poverty.

So it’s time for Wall Street to pay reparations. It’s time for a crash tax, a tiny sales tax on Wall Street transactions, the revenues from which would pay for Main Street restoration. It’s time for the 1 percent to repay the 99 percent, for Wall Street to share in the sacrifices necessitated by its rogue behavior.

[ParkieDem]

1. Maybe.

"It wasn’t Fannie Mae or Freddie Mac that crashed the economy."

"It was Wall Street financiers that aggressively sought and bought mortgages to package and sell as derivatives"

These two statements are a bit contradictory. Fannie and Freddie were more than complicity in the packaging and sale of mortgages and their derivatives. Wall Street had a huge role to play in the crash, but you can't separate Wall Street's actions from those of Fannie and Freddie.

[DCBob]

2. Blaming Fannie and Freddie is a RW talking point..

I suppose next you will say Bill Clinton and Barney Frank are also to blame.

[ParkieDem]

4. They share part of the blame, yes.

Look, the housing bubble was sustained, if not created by, people of all political persuasions. Wall Street loved it because the bankers could make millions bundling and selling crappy mortgages. Realtors loved it because people were buying houses left and right with cheap credit, which combined with ever-rising prices, lined the realtors' pockets. State & local governments loved it because it inflated property values, causing tax revenues to rise.

Does Wall Street deserve most of the blame? Of course. But to make a hasty generalization and isolating other complicit parties from blame is intellectually lazy and doesn't do anything to solve the problem.

How, may I ask, can you separate Fannie and Freddie from the blame? They were largely owned by Wall Street speculators, and their CEOs got massive payouts and bonuses just like the banks. They packaged and re-sold mortgages with an implicit taxpayer guarantee. They got bailed out, just like the banks.

Why are they immune?

[DCBob]

7. There are quite a few to blame.. here is a decent list..

From Time..

•Angelo Mozilo
•Phil Gramm
•Alan Greenspan
•Chris Cox
•American Consumers
•Hank Paulson
•Joe Cassano
•Ian McCarthy
•Frank Raines
•Kathleen Corbet
•Dick Fuld
•Marion and Herb Sandler
•Bill Clinton
•George W. Bush
•Stan O'Neal
•Wen Jiabao
•David Lereah
•John Devaney
•Bernie Madoff
•Lew Ranieri
•Burton Jablin
•Fred Goodwin
•Sandy Weill
•David Oddsson
•Jimmy Cayne

Read more: http://www.time.com/time/specials/packages/completelist/0,29569,1877351,00.html#ixzz1dnY861en

[Philosopher King]

6. Who began the trend of lowering the standards for mortgage lending?

With a mandate from your Congress to increase home ownership, lenders, including Fannie and Freddie, made fewer and fewer conventional, fixed-interest loans with 20% down. And then, your Congress essentially repealed Glass-Steagal when they enacted the Gramm?Leach?Bliley Act.

If anyone should be paying reparations, it is your Congress.

[DCBob]

8. Oh please... allowing a few poor people to buy homes did not cause the crisis..

The crisis was caused by wall street, banking industry, real estate industry, housing industry and rich & middle class individuals wanting to make a quick buck... commonly known as greed. And allowing it all to happen were Bush administration officials who were supposed to be monitoring things like this.

[Philosopher King]

13. Nevertheless, prior to the enactment of the CRA,

lending standards were set by lending institutions. However, your Congress thought the high standards were discriminatory and threatened lenders with legal action, unless they were lowered. The rest is history.

[Vincardog]

16. The history is that the crisis was brought about by unscrupulous business practices. Using bad loans

to manufacture 100s of times more 'good' Derivatives and then betting that they would blow up. That is not and has never been sound business practice.
I will be happier when everyone quits blaming the victims.

[Philosopher King]

17. Blame the victims...?

I blame the Congress, and by extension, the electorate; some of whom are taxpayers, who, by extension, are the victims.

[Vincardog]

9. If anyone should be paying reparations, it is the economic royalists who bought your Congress and .

got them to legalize their illegal immoral activities.

[Philosopher King]

15. The buying of your Congress was facilitated by ex-members of your Congress.

[jeff47]

12. No. What made a mortgage "subprime" is Fannie and Freddie would not do them.

Fannie and Freddie lobbied to change the rules during the bubble, and succeeded just in time for the bubble to collapse. By definition, the "subprime" loans that blew up could not be done by Fannie and Freddie until 2006.

[ParkieDem]

18. Wrong.

Frannie and Freddie entered into the subprime market in 1995. In addition, the continual increase of the maximum "conforming loan" contributed greatly to the run-up in home prices.

[jeff47]

19. Lending standards were not relaxed by the 1995 bill to the point where they could offer offer those

Fannie and Freddie only had a tiny fraction of the subprime loans when the bubble burst. The vast majority were held by private banks and investment houses. One of the large parts of the bank bail out was to have Fannie and Freddie take over many of these bad loans.

But that was the free 'do-over' the banks got, not Fannie and Freddie originating the loans.

[offmybrain]

3. Who is to blame? We are all to blame.

So who is to blame? There’s plenty of blame to go around, and it doesn’t fasten only on one party or even mainly on what Washington did or didn’t do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility … with hard-working homeowners and billionaire villains each playing a role." Here’s a partial list of those alleged to be at fault:

* The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
* Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
* Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
* Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
* The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
* Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
* Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
* Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
* The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
* An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
* Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

[ParkieDem]

5. Absolutely.

We should obviously punish and restrict Wall Streeters, as they have profited the most from this debacle. But let's not try to pretend that there's a huge consort of blameless people out there.

[Desertrose]

10. Not sure I agree about the homebuyers.

They were sold the "American Dream...you can own your own home" and the financiers pushed that to the hilt, convincing people they could afford something that in reality they couldn't.

[THobbes]

11. yes

:applause:

[Lance_Boyle]

14. No. Don't make them angry.

We'll be eating the fuckers soon enough and angry pigs make bad bacon.