Gary Anderson Blog | Did Bethany McLean Misspeak When She Wrote About UK Banking And The GSE's? | Talkmarkets
Muckraker of the Financial System

The Fed knew about the housing bubble before it burst but lied and said they didn't: Bill HR 1424 to buy bad paper (eventually called TARP) was introduced in March 9, 2007, before there began to be bad commercial paper from private subprime RE loans, in August.

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Did Bethany McLean Misspeak When She Wrote About UK Banking And The GSE's?

Date: Monday, September 21, 2015 10:47 AM EDT

Bethany McLean's misstatements about UK banking and our GSE's is troubling. Now, it is possible that she is not aware of the information I have linked to and that she wrote her comments out of lack of knowledge. But she is in a position where she could have known more about the subject. After all, she is the author of 'The Smartest Guys In The Room, is a Reuters/Vanity Fair contributing editor,and has been an editor at large for Fortune Magazine and a contributor to Slate.  She should explain her reason for the misstatements.


It would be great if she would clear all that up for us.


In her recent Linkedin article,  I've written books about Enron and the financial crisis. But Fannie Mae is the scariest of them all, she quotes Bank of England Mervyn King:


“Most countries have socialized health care and a free market for mortgages. You in the United States do exactly the opposite.”

Of course, the UK did not have free markets for mortgages, they had a bubble based on manipulated liar loans just as we did. I wrote about it on Business Insider. I wrote:


The smoking gun is that the liar loans, which were central to the most intense part of the housing bubble, were imported from the UK, not just to the United States, but to PIIGS nations in Europe as well. The liar loans may have been different slightly in make up from country to country. For example in the UK you had to put money down. In the US you could have a no down, interest only, liar loan!


But, it is pretty clear that the financial system the world over was interested in liar loans for one reason. That reason was to get folks to buy investments in risky CDO's that made banks large profits through origination fees. This was all about the banks, thought up by the banks, and encouraged by the banks. The banks had an ulterior motive for this behavior. Main street had no clue. One banker said you just needed to fog a mirror to be eligible for a liar loan in the UK.


The truth is, the UK had been allowing these loans for years, in the early turn of the 21st century, before they were deliberately introduced to America in mid 2003. This was not just the behavior of rogue institutions in the UK. Most of the lenders, the brokers of the shadow banking system, encouraged liar loans. Only there they were called self certified mortgages.

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