Then, there was the bundling, securitization and resale of those shady loans worldwide with phony assessments of their "asset" values by ratings agencies that were on the payroll.
And, finally, there were insurance scams by companies like AIG that guaranteed payments to those that knew there would be massive defaults and foreclosures. The insurance boys and the bankers leveraged their investments into pyramids of trillions with bogus algorithms that even they couldn't understand.
Phony Products
This created a system staffed by tens of thousands of "professionals" who pumped out phony products on an assembly line, legitimating them with the imprimaturs of financial institutions that practiced voodoo accounting. As James Kwak explained on Baseline Scenario, for banks,
"There is no contradiction between fleecing customers and making lots of profits (which is what makes you safe and sound).
"(a) Originate bad loans; (b) Pocket fees; (c) Sell bad loans to an investment bank for distribution; (d) Repeat."
Inside the industry, the term of art was "extraction," another way of saying looting. A risky super-leveraged capital structure was built with no objections from politicians who took their cut and regulators who seem to have been hired to look the other way.
My learning curve on these issues took off back in 2005 with research for the film "In Debt We Trust," somewhat prophetically subtitled "America Before The Bubble Bursts." It warned of what could happen to our economy citing far more enlightened seers than myself.
We examined the growing wall of debt encouraged by massive predatory lending and mindless consumption.
We worried about the financialization of the commanding heights of the economy, a concentration of wealth and power in a Wild-West-like financial services industry that came to dominate the economy with 40 percent of all corporate profits.
The wall I later ran up against was more than a Street; it was a tower of indifference and denial, even on the Left.
I was asked: How can you be so negative about what was then an economic boom enriching so many? Was I a doom and gloomer, or an alarmist? "Hasn't your apartment has gone up in value? Relax!"
I soon felt ignored and marginalized when other, perhaps more "sexy" issues, (mostly partisan and political and often personality driven) drove the public discourse. No wonder, most progressive activists got turned off.
What Went Wrong?
As analysts finally got around to explaining the crisis, their lists of what went wrong ignored predatory lending and white-collar crime.
Challenging this view were professor/authors like Michael Hudson, a former chief economist at Chase Bank (and, as it turns out, a cousin of the late Leon Trotsky, a relationship of which Chase was probably unaware).
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