In the year 2000, to counteract the deflationary and recessionary pressures on the economy as a result of the tech bubble bursting, the federal open
market committee began lowering the federal funds target rate from 6.5%. Now whether or not you agree with this action, it was performed transparently
and in accordance with the dominant economic school of though at the time.
This chart is a screenshot taken from the New York Fed's website and is probably fair use.
As a result of the lower interest rates, home ownership began to rise, and subprime lending as a proportion of other sorts of mortgages gradually
began to rise. Was real estate overpriced at the time? Most likely yes, however asset prices can rise and fall in a fashion that is relatively
harmless. The gradual decline of real estate prices should have been triggered on June 30th 2004 when the federal open market committee began to raise
the federal funds target rate, and expressed that it intended to continue to do so going forward.
That didn't happen, because in 2004 everything changed.
This chart was published by Farcaster
under the Creative Commons Attribution-ShareAlike 3.0
The main stream media has pointed fingers every which way at a great number of people, however there are three men who have somehow managed to stay
out of the eye of the main stream media, despite undertaking actions that lead directly to the financial crises. These three men in no particular
*Harold McGraw III
*Maurice R. Greenberg
*William H. Donaldson
We have heard a lot about what happened in 2007, 2008 and 2009. This thread will start earlier, in 2004 when the seeds of the economy's destruction
Harold McGraw III
Chan, Sewell. "Documents Show Internal Qualms at Rating Agencies." New York
Times 22 Apr 2010
In 2004, well before the risks embedded in Wall Street’s bets on subprime mortgages became widely known, employees at Standard & Poor’s,
the credit rating agency, were feeling pressure to expand the business. One employee warned in internal e-mail that the company would lose business
if it failed to give high enough ratings to collateralized debt obligations, the investments that later emerged at the heart of the financial
So in 2004, rank and file employees at Standard and Poor wanted to honestly rate the credit of collateralized debt obligations. However there was
pressure from management to rate them extraordinarily favorably, and the rank and file had no choice but the yield. Who was the management of Standard
and Poor in 2004? The answer is Harold McGraw III. Harold served as president, chairman of the board, and CEO of McGraw-Hill companies during the
period, a position he continues to hold. In addition to this, he is the chairman of the extremely powerful business roundtable, and chairman of the
globalist Emergency Committee for American Trade.
Now the question is, why were employees of Standard and Poor pressured to dishonestly rate collateralized debt obligations? The job of the a rating
agency is to gauge the risk of securities, and their reputation is their greatest asset. In the long term, accurately rating securities is better for
business than giving ratings which are either misleading or out right fraudulent
The misrating of collateralized debt obligations directly lead to the financial crisis by both fueling the speculative bubble, and by causing the
correction of institutional balance sheets to be sudden and jarring.