By Phyllis Groner
Westporter Arthur Levitt Jr., former chairman of the Securities and Exchange Commission (SEC), told an overflow Westport Public Library audience tonight the sub-prime “mortgage meltdown” has caused a crisis of confidence in the banking industry whose consequences are still unknown.
Westporter Arthur Levitt Jr. addressed an overflow audience at the Westport Public Library McManus Room tonight. (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“The mortgage meltdown has contaminated the entire industry,” he said. “No one knows how far the contagion will spread.”
Describing the U.S. economy as “on the brink or already in recession,” he said the credit crunch was brought about by greed, conflicts of interests and excess.
Levitt, who was appointed SEC commissioner in 1993 by President Clinton and served until 2001, called for a thorough investigation of what led to the financial crisis, just as he said was done after the 1987 stock market crash.
“I believe the only way the credit crunch will be solved is if the people of the U.S. can have their trust in the government restored,” he said. “Trust is the lifeblood of this market.”
He added, “We have weathered storms before. With the right leadership we can clean up this mess.”
Asked by a questioner if the presidential candidates understand the sub-prime crisis and the economic repercussions, he replied: “I don’t think any of the candidates have the vaguest idea of what is going on.”
He added that he believes in “Fair Disclosure”—the name of his boat—and in that spirit reported that in May he had endorsed Sen. Barack Obama for president.
Levitt, 77, who was widely known as a pro-investor advocate during his years at the SEC, was critical of the Federal Reserve Bank in the period leading up to the sub-prime crisis.
“The Federal Reserve instead of being a watchdog was a bank protective service,” he said.
Levitt offered a list of suggestions for the nation to get through its current economic troubles.
The country must get “to the bottom” of mortgage problems, he said, and it must ensure that credit agencies work for investors—not banks. He said investors must have all the information about companies they invest in.
Describing the mortgage lending industry as in need of “serious attention,” Levitt said “regulators need to have the resources and jurisdiction to keep an eye on the industry.”
Regulators and Congress are “often too late to the party,” he said.
“There are too few cops on the beat to shine a light on these dangers,” Levitt said.
So the “so called experts” had no idea that, interest only, no money down, no income verification loans might not work out so well. Now that they have proved themselves to be a very bad investment, I notice they aren’t so readily available any longer. Did they really have to prove themselves worthless or did everyone involved just think the “other” guy would get holding the bag?
I have no mercy on these banks, lenders and others who are taking a beating now that the inevitable has happened. When they were rolling in the clover with record profits I don’t recall them wanting to share the wealth, fair enough. However, now that their quarterly profits are in the tank don’t expect the taxpayers to bail you out. The same for anyone who bought more than they could afford or those who sucked the equity out for whatever car, vacation, plasma TV, etc. and now complain that they don’t have any equity. I just don’t believe everyone was “duped”, I would love to see all of these “victims” closing papers with the truth in lending statement clearly showing them their loan rates.
Lets not punish the prudent and reward the irresponsible.
Besides, wasn’t everyone bemoaning a year or two ago how there wasn’t enough affordable housing. Why would those same people want to artificially prop it up, who says what a house is worth, let the market decide.