Posted on 02/06/2009 7:27:06 AM PST by reaganaut1
Two narratives seem to be forming to describe the underlying causes of the financial crisis. One, as outlined in a New York Times front-page story on Sunday, December 21, is that President Bush excessively promoted growth in home ownership without sufficiently regulating the banks and other mortgage lenders that made the bad loans. The result was a banking system suffused with junk mortgages, the continuing losses on which are dragging down the banks and the economy. The other narrative is that government policy over many years--particularly the use of the Community Reinvestment Act and Fannie Mae and Freddie Mac to distort the housing credit system-- underlies the current crisis. The stakes in the competing narratives are high. The diagnosis determines the prescription. If the Times diagnosis prevails, the prescription is more regulation of the financial system; if instead government policy is to blame, the prescription is to terminate those government policies that distort mortgage lending.
There really isn’t any question of approach is factually correct: right on the front page of the Times edition of December 21 is a chart that shows the growth of home ownership in the United States since 1990. In 1993 it was 63 percent; by the end of the Clinton administration it was 68 percent. The growth in the Bush administration was about 1 percent. The Times itself reported in 1999 that Fannie Mae and Freddie Mac were under pressure from the Clinton administration to increase lending to minorities and low-income home buyers--a policy that necessarily entailed higher risks. Can there really be a question, other than in the fevered imagination of the Times, where the push to reduce lending standards and boost home ownership came from?
(Excerpt) Read more at spectator.org ...
And Mccains campaign manager got $15,000.00 a month from Fannie and Freddie to lobby against more over-site.
Yeah, I forgot about the oil manipulations...you are correct.
Bert, this is a very good question, ‘Why did W choose to make the calamity public a month before the election? Why did he not wait? What was his strategy?’. If you hear any realistic answers, please let me know. thx
Mining , manufacturing, power generation, and the petroleum industry are all wealth creators.They have been discouraged for the last 30 years and along with the now defunct building industry were what made this country wealthy, along with agriculture ,forestry ,and fishing. Selling burgers ,TVs, and credit default swaps created no real wealth. This only spreads and concentrates the true wealth around.
The article seems balanced to me. The major omission is the role of credit swaps. Although credit swaps are a large problem, they are the tail not the dog in this scenario. Please elaborate on your BS comment.
I agree with the basic premise that government policy over a number of years and governments created the conditions for looser lending practices. The actions of the private sector, individuals, GSEs, and politicians are a logical result of bad government policies.
McCain, for all his faults, fought to limit the excesses at Fannie Mae and sponsored a bill which would have helped to correct the problem. Dodd refused to let that bill out of Committee. Barney Frank in the House also fought against any reform.
“you could have bought all of the bad arms for about 10% of the tarp funds”
Ten percent of the $350 billion of TARP funds authorized is about $35 billion. There are between $1 and $2 trillion in mortgages that have either defaulted or are at risk of defaulting.
Link!
Actually expenditures by paulson and the Fed was about 3.7 trillion. The last figure I saw some time in December.
I see, you are one of those that thinks a butter fly flapping its wings at the improper time could cause an earthquake. The tail is a few bad mortgages, the dog is 550 trillion in bad derivatives, and billions in unsold homes resulting in a price contraction and taking the floor out of the run up fake valuation.
$3.7 trillion was not the TARP. $350 billion of the TARP was what was authorized in October. Some of that went to the auto industry and other projects that were added on to the original proposal. Some of the money was used for loans, Congressional pet projects, giveaways to special interest groups etc that were not related to the original mortgage buyback proposal.
The Emergency Economic Stabilization Act of 2008, commonly referred to as a bailout of the U.S. financial system, is a law enacted in response to the global financial crisis of 2008 authorizing the United States Secretary of the Treasury to spend up to US$700 billion to purchase distressed assets, especially mortgage-backed securities, and make capital injections into banks.[1][2] The bailed-out banks are mostly U.S. or foreign banks, though the Federal Reserve extended help to American Express, whose bank-holding application it recently approved.[3] The Act was proposed by Treasury Secretary Henry Paulson during the global financial crisis of 2008. From: http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008
Forgot to add that the fed authorization was also in the tarp funds bill.
Oh, great ... now I’m going to have to look at that post until it scrolls away. Ewwwwwwwwwwww, Banking Queen.
With your request for realism aside.....
The rule was "never misunderestimate W"
The Rats would start on defense and the truth about Barney Frank, Freddie mac and Fannie may would be known. The rotteness in the financial system which he warned about and was seriously rebuffed would be exposed for all to see and there wold be pain that ultimately would be blamed on the corruption of the Rats who caused and maintained the rottenness.
The O team pre game plan so carefully honed would have to be trashed and the agenda tossed aside in the face of crisis
America's enemies in Iran, Russia, and Venezuela would be immediately in trouble. The war is economic, not military
Perhaps there was some payback. The Rats made him start late with no transition and what there was was piss poor. He made a strong point of being ever so nice in assisting at all levels with the transition. He knew he left a monster economic land mine and others at places yet to be discovered.
He was made to seem an ignorant trifle, the worst of the bad Presidents. He, unlike the narcissistic Obama is a man of actions, not vainglorious words. His final actions will wreak havoc all over at home and abroad. He was smart enough to set the trap and catch his prey.
He will save America and our liberty by having the vision and power to destroy the socialist foes among us.
I have never heard about $550 trillion in derivates. I have heard figures in the $6 to $10 trillion range.
I think you are mischaracterizing the idea of a few bad mortgages. I understand that the number of unconventional mortgages was quite high and the default rates were high.
Regardless of the level of derivatives, I still think that government policy was the disturbance that facilitated the tsunami of bad decisions. I agree that derivatives should be closely regulated. Perhaps derivatives by themselves would have led an economic crisis even without government policies that encouraged risky lending practices.
In response to the economic crisis, the role of bad government policy will not be acknowledged by the current regime. The current regime still wants a housing entitlement. Government policiy looks worse now with the current regime advocating mortgage cram downs and low cost mortgages for all. I do not think there is any danger that derivatives will not be heavily regulated however. We would still have a crisis even if a single derivative insurance contract had never been written. With the new housing entitlement, we are headed for a meltdown of future housing markets even after this mess has ended.
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