From who did Obama "inherit" the economic mess?

[Jim in CT]

On MSNBC tonight, both Chris Matthews and President Obama stated that Obama "inherited" the economic mess from the Republicans. Of course, since this was MSNBC, that statement goes completely unchallenged.

Can one of the liberals here explain how the Democrats inherited this mess from Republicans? Here are some irrefutable facts...

The United States is a democracy, not a dictatorship. The legislative branch has more influence on the legislative agenda than the executive branch.

Since January 2006, the Democrats have controlled the legislative branch. When they took over the legislature from the GOP in January 2006 , the Dow was at 12,600, and unemployment was at 4.6%.

The president (Obama), vice president (Biden) and Secstate (Clinton) were all prominent, influential senators in the majority party. As such, it seems to me that they have a great deal of ownership of economic performance since their party took control.

The financial de-regulation that allowed things like derivitives, credit default swaps, and collaterized debt obligations, was passed by a republican legislature in the late 1990's, and signed into law by President Clinton.

Before the economy collapsed, the GOP introduced a bill that would have prevented Fannie Mae and Freddie Mac from writing so many subprime mortgages. That bill was fillibustered by 2 senators named Chris Dodd and Barack Obama, 2 senators who got more campaign contributions from Fannie and Freddie than anyone else.

The GOP, when they controlled the legislature for the 1st 6 years of the Bush presidency, allowed Bush to rack up a ton of debt. My point is, the GOP is not without fault here.

OK, what am I missing? How were the Democrats innocent bystanders to all this?

Look at liberal policies of taxing, spending, borrowing, and saying "yes" to every demand ever made by a labor union. What has that gotten us?

I don't get it, I just don't get where guys like Spence are coming from...

[stcroixman]

I consider myself a Clinton Democrat which is moderate. Full Disclosure - I did NOT vote for Obama. He was not ready

As someone in the financial sector I really think the deficit is mostly a result of 10 years of fighting 2 wars and rebuilding 2 countries and not because of the Bush tax cuts.

I also believe the financial mess is strictly from poorly regulated greedy sob's who probably bribed their accountants to look the other way. Shame on those CPA firms too.

I understand small business should not be regulated, but Financial Institutions should be. Lehman Bros, Madoff, etc. were allowed to do their thing also because of shoddy work by the SEC. No one approved the SEC to cut corners.

We invest our money with them, there should be a higher level of trust which van only result from regulation by the letter of the law.

Bottom line is Obama wanted to be president, he knew the state of the economy. By pointing a finger now he is waving the white flag.

[Jim in CT]

stcroixman, the subprime mortgages contributed nothing?

Those wars started in 2002 and 2003, I believe. The economy did just fine until October 2008, when the subprime mortgages rocked Lehman Brothers and Bear Sterns, and the rest fell like dominoes.

I agree with you 100% that we need some smart regulation of these banks and financial instututions. I also feel that Sarbanes Oxley goes way too far, we spend a lot of time on meaningless compliance with that law.

P.S. I'm a moderare Republican who voted for Clinton and I think he was a pretty good president...

[stcroixman]

Originally Posted by Jim in CT

stcroixman, the subprime mortgages contributed nothing?

Those wars started in 2002 and 2003, I believe. The economy did just fine until October 2008, when the subprime mortgages rocked Lehman Brothers and Bear Sterns, and the rest fell like dominoes.

I agree with you 100% that we need some smart regulation of these banks and financial instututions. I also feel that Sarbanes Oxley goes way too far, we spend a lot of time on meaningless compliance with that law.

P.S. I'm a moderare Republican who voted for Clinton and I think he was a pretty good president...

My firm does Sarbanes Oxley work. The word is it is on the chopping block. It is needless BS to the businesses. The best thing that could happen is a flat corporate tax (10% ) like in Ireland, but only for the portion of goods/services made or performed in USA. That will bring back jobs.

I am tired of every politician saying he/she will create 5 million good paying jobs. Exactly how? By giving out tax credits? Cut the tax and cut out the stupid credits.

There are millions out there who would accept 30K($15/hour)- 40K($20/hour) to work in a blue collar job I mean that respectfully too as my day did it for 40+ years, but not everyone is a President or CFO. With the economy hurting, any job is a good job.

[mosholu]

I think the blame for the economic mess we are in goes to both parties. As far back as the Clinton administration Rubin and Summer were pushing for less regulation over the financial markets. Under then HUD Secretary Cuomo the regulations regarding qualifying mortgages for Fannie and Freddie and the FHA were greatly relaxed to included sub-prime and other things which we now regret. The Republicans were no better. Phil Gramm pushed through regulations exempting the electronic trading of off exchange energy derivatives form the review of the CFTC. Even after Enron these transactions were not subject to reporting or review. Under Bush, the light or no touch continued at the SEC and other regulatory agencies. The investment banks were able to lobby the SEC to have credit default swaps deemed not to be insurance and removing any review from state insurance administrators. Unregulated credit default swaps are what brought AIG down.
Bottom line: Wall Street has both parties in their back pocket and we as an electorate need to curb their power. I am all for capitalism and innovation but time and time again we have found that left to their own devices greedy participants will hurt the economy and the average taxpayer gets the bill.

[Fishpart]

You can also trace a significant amount of economic decline to both NAFTA and China Free Trade which took away a significant amount of jobs in the manufacturing sector. Those jobs paid well compared to service industry jobs and also kept a significant amount of professionals employed in manufacturing companies.

The second hit from both of these policies is downward pricing pressure put on manufacturers "but I can get it for XXX cheaper from China" which in turn forces wages even lower. I'm happy to be working, but back to what I earned in 2006 with a significant increase in healthcare cost, more responsibility and longer hours.

[scottw]

I don't know why Obama can't just tax his "inheritance" at a confiscatory rate and then redistribute it.....

[Jim in CT]

Originally Posted by scottw

I don't know why Obama can't just tax his "inheritance" at a confiscatory rate and then redistribute it.....

LMAO...

[spence]

Originally Posted by Jim in CT

On MSNBC tonight, both Chris Matthews and President Obama stated that Obama "inherited" the economic mess from the Republicans. Of course, since this was MSNBC, that statement goes completely unchallenged.

What were you doing watching MSNBC?

The United States is a democracy, not a dictatorship. The legislative branch has more influence on the legislative agenda than the executive branch.

Depends...Quite often the Executive branch is quite assertive to ensure the Congressional agenda is in alignment with the President's objectives.

Since January 2006, the Democrats have controlled the legislative branch. When they took over the legislature from the GOP in January 2006 , the Dow was at 12,600, and unemployment was at 4.6%.

Hmmm, if things were so good why did the Democrats take over the legislature?

The president (Obama), vice president (Biden) and Secstate (Clinton) were all prominent, influential senators in the majority party. As such, it seems to me that they have a great deal of ownership of economic performance since their party took control.

You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy.

The financial de-regulation that allowed things like derivitives, credit default swaps, and collaterized debt obligations, was passed by a republican legislature in the late 1990's, and signed into law by President Clinton.

I recall reading some time ago "The legislative branch has more influence on the legislative agenda than the executive branch." If you subscribe to this they it sounds like the GOP should be the target of your wagging finger.

Before the economy collapsed, the GOP introduced a bill that would have prevented Fannie Mae and Freddie Mac from writing so many subprime mortgages. That bill was fillibustered by 2 senators named Chris Dodd and Barack Obama, 2 senators who got more campaign contributions from Fannie and Freddie than anyone else.

I'm not aware of any Dem filibuster just before the economy tanked. Most of this story is from 2003-2005 and when looked at in detail reveals mistakes by both sides of the leadership. This has been discussed in detail in older threads.

The GOP, when they controlled the legislature for the 1st 6 years of the Bush presidency, allowed Bush to rack up a ton of debt. My point is, the GOP is not without fault here.

That's because despite what they pretend to aspire to, the GOP has a really chronic debt problem. Google up the rate of debt change as a percentage of GDP for the past 60 years and look at the parties in charge.

OK, what am I missing? How were the Democrats innocent bystanders to all this?

Nobody has said they were innocent bystanders...but the economy was under Bush's watch for 8 years and he left Obama with a massive recession. I'm not sure this is really in dispute.

Generally speaking, in the media Presidents get to take credit for success and blame for failures regardless of the trends or systemic actions that actually drive them. Examples of this may be the tech boom, 9/11, lack of terrorism after 9/11, the 2009 recession etc...

I work in Sales and I'll tell you the best factor that determines the success or failure of a salesperson is the TIMING of when they take their job given the product and market needs.

Look at liberal policies of taxing, spending, borrowing, and saying "yes" to every demand ever made by a labor union. What has that gotten us?

I think you confuse the word "liberal" with "irresponsible". Borrowing beyond your means isn't a Liberal tendency, it's an irresponsible tendency that both parties too often suffer from.

I don't get it, I just don't get where guys like Spence are coming from...

I come from the pragmatic center where we try to balance ideology with observation.

-spence

[scottw]

Originally Posted by spence

I come from the pragmatic center where we try to balance ideology with observation.

-spence

"The proper bafflers are the ambiguists. Their flashes of insights are frequent enough; but in the end the fog closes down. They are great ones for the facts, against the fundamentalists, and great ones of "conscience," against the cynics. They insist on the values of pragmatism against the absolutists; but they resent the suggestion that they push pragmatism to the point of relativism of moral values."
"For the pragmatists there are, properly speaking, no truths; there are only results."
-- John Courtney Murray, S.J. (September 12, 1904-August 16, 1967)

[spence]

Neat quote but it doesn't make a lot of sense.

Originally Posted by scottw

"The proper bafflers are the ambiguists. Their flashes of insights are frequent enough; but in the end the fog closes down. They are great ones for the facts, against the fundamentalists, and great ones of "conscience," against the cynics. They insist on the values of pragmatism against the absolutists; but they resent the suggestion that they push pragmatism to the point of relativism of moral values."
"For the pragmatists there are, properly speaking, no truths; there are only results."
-- John Courtney Murray, S.J. (September 12, 1904-August 16, 1967)

Posted from my iPhone/Mobile device

[scottw]

Originally Posted by spence

Neat quote but it doesn't make a lot of sense.


Posted from my iPhone/Mobile device

to one who claims....

I come from the pragmatic center where we try to balance ideology with observation.
-spence

it wouldn't.....

[spence]

Originally Posted by scottw

to one who claims....

I come from the pragmatic center where we try to balance ideology with observation.
-spence

it wouldn't.....

Not in the context you used it.

-spence

[Jim in CT]

Originally Posted by spence

What were you doing watching MSNBC?


Depends...Quite often the Executive branch is quite assertive to ensure the Congressional agenda is in alignment with the President's objectives.


Hmmm, if things were so good why did the Democrats take over the legislature?


You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy.


I recall reading some time ago "The legislative branch has more influence on the legislative agenda than the executive branch." If you subscribe to this they it sounds like the GOP should be the target of your wagging finger.


I'm not aware of any Dem filibuster just before the economy tanked. Most of this story is from 2003-2005 and when looked at in detail reveals mistakes by both sides of the leadership. This has been discussed in detail in older threads.


That's because despite what they pretend to aspire to, the GOP has a really chronic debt problem. Google up the rate of debt change as a percentage of GDP for the past 60 years and look at the parties in charge.



Nobody has said they were innocent bystanders...but the economy was under Bush's watch for 8 years and he left Obama with a massive recession. I'm not sure this is really in dispute.

Generally speaking, in the media Presidents get to take credit for success and blame for failures regardless of the trends or systemic actions that actually drive them. Examples of this may be the tech boom, 9/11, lack of terrorism after 9/11, the 2009 recession etc...

I work in Sales and I'll tell you the best factor that determines the success or failure of a salesperson is the TIMING of when they take their job given the product and market needs.


I think you confuse the word "liberal" with "irresponsible". Borrowing beyond your means isn't a Liberal tendency, it's an irresponsible tendency that both parties too often suffer from.


I come from the pragmatic center where we try to balance ideology with observation.

-spence

Spence -

"if things were so good why did the Democrats take over the legislature?"

Read a history book. It wasn't because of the economy, it was because of the Iraq war.

"You're talking about 3% of the Senate...and not any of them sat on committees with direct impact to the economy."

Spence, please put down the Kool Aid and think straight for 2 seconds. The chairman of the house banking committee was Barney Frank, the chairman of the Senate Banking committee was Chris Dodd, both Democrats. My point was (which you carefully avoided),is that the Democrats inherited a robust, thriving economy in 2006.

"I'm not aware of any Dem filibuster just before the economy tanked. "

None of us know everyihtng. In 2006, the GOp introduced legislation to regulate Fannie and Freddie, Senators Obama and Dodd fillibustered. I doubt it would have saved the economy anyway...

"Nobody has said they were innocent bystanders..."

Please Spence. Please. Obama blames EVERYTHING on the previous administration, and has said REPEATEDLY that the previous administration (NOT THE PREVIOUS CONGRESS) drove the car into the ditch.

Spence, you're going to say with a straight face that Obama and the Dems haven't placed all of the economic blame on the GOP?

"I come from the pragmatic center where we try to balance ideology with observation. "

Thanks, I needed a good laugh. Spence, every post you have ever written can be summed up thusly:

liberal = good
conservative = bad.

The only "middle" you occupy is the middle between Ted Kennedy and Mao Tse Tung.

[Piscator]

I believe it starts from the top down. That being said, Bush left Obama an economy problem. Instead of fixing the problem, Obama made that problem a whole lot worse.
Posted from my iPhone/Mobile device

[Jim in CT]

Originally Posted by Piscator

I believe it starts from the top down. That being said, Bush left Obama an economy problem. Instead of fixing the problem, Obama made that problem a whole lot worse.
Posted from my iPhone/Mobile device

It starts from the top down, but we have a republic, not a dictatorship, which means the legislature has more say in deciding the agenda than the president.

When the Democrats took control of congress in January 2006, unemployment was at 4.6%, the Dow was at 12,600, and the GDP had been growing like crazy since Clinton balanced the budget. In other words, what the democrats "inherited" in 2006 was a thriving, robust economy. Since 2006, the Democrats had control of all the committees.

It was Democrats who pushed subprime mortgages. In my opinion, the worst you can say about the GOP was that they proposed the de-regulation of financial markets in 1999 (I think it was 99) that Clinton signed. However, no one knew what was going on with those crazy mortgage-backed securities. If it was so clear that Wall Street was abusing the de-regulation, why didn't the Democrats propose to re-regulate Wall Street when they took control in 2006? Answer? No one had a clue what Wall Street was doing. But everyone knew that banks were being reckless by writing so many subprime mortgages, which was based on liberal doctrine that everyone is entitled to a home, even if they can't afford one.

Spence is 100% right when he says there is blame on both sides. I'd love to know what Spence thinks when he sees Obama, time and time again, putting all the blame on the Republicans, who had been out of power for almost 3 years when the economy collapsed. If Spence is right (and he is), then Obama is either an idiot or a liar, and there simply isn't another option. (In my opinion, Obama is BOTH an idiot and a liar).

[spence]

Originally Posted by Jim in CT

When the Democrats took control of congress in January 2006, unemployment was at 4.6%, the Dow was at 12,600, and the GDP had been growing like crazy since Clinton balanced the budget. In other words, what the democrats "inherited" in 2006 was a thriving, robust economy. Since 2006, the Democrats had control of all the committees.

Ummm, I think that's why they called it a "bubble" as it had yet to burst.

It was Democrats who pushed subprime mortgages. In my opinion, the worst you can say about the GOP was that they proposed the de-regulation of financial markets in 1999 (I think it was 99) that Clinton signed. However, no one knew what was going on with those crazy mortgage-backed securities. If it was so clear that Wall Street was abusing the de-regulation, why didn't the Democrats propose to re-regulate Wall Street when they took control in 2006? Answer? No one had a clue what Wall Street was doing. But everyone knew that banks were being reckless by writing so many subprime mortgages, which was based on liberal doctrine that everyone is entitled to a home, even if they can't afford one.

I love it, so the GOP is responsible for de-regulation "the reason why nobody knew what was happening" but it's the insane liberals that really must be under it all...

Think of a big reason why the economy in the mid 2000's was doing well to begin with. A rise in International investment combined with low rates made credit easy to obtain and plenty of investors wanting to cash in on mortgage backed securities which seemed magical considering the housing market which continued to grow. Everybody was in on this, not just the minorities or poor, in fact they represented a fraction of the market.

This drove the bubble that eventually got as big as it could and housing prices -- across the board -- started to decline rapidly for everyone, which resulted in the sub-prime ARM's to ratchet up their rates. Many of which were a result of predatory lending and people not knowing what they were really getting into.

If properly regulated perhaps this could have been controlled (there still would have been a lot of sub-prime foreclosures) but considering the risky loans had been bundled with good loans (and sold off as AAA) nobody knew where the risk really was...and everybody pulled out.

Crash...

When the Dem's took Congress in 2006 they inherited this time bomb waiting to go off.

Not a lot of liberal ideology here, unless you think the entire house of cards was build to satisfy some government mandate, largely during a period where the GOP held both the Executive and Legislative branches of our government.

Oh wait, didn't President Bush push hard for more sub-prime lending because he felt that home "ownership" was good for America? Wasn't this conservative thinking? That the people owning their own home is more stable and responsible than looking for a government handout?

"Fannie Mae, Freddie Mac and the federal Home Loan Banks -- the government-sponsored corporations that handle home mortgages -- will increase their commitment to minority markets by more than $440 billion, Bush said."

Source: Bush aims to boost minority home ownership - CNN

And shortly after the rate of sub prime lending goes through the roof.

The primary Dem opposition to reform (in 2003 and 2006) was driven more by the accounting scandals rather than concerns over sub-prime lending. Some of their issue were valid, some not...but I don't believe much of this reform would have had an impact on the derivatives market and mortgage backed securities.

And when Dems took over in 2007 they immediately pushed for more regulation to help ensure the same issues wouldn't arise again. Bush, focused on the present, was pushing taxpayer funded subsidies to help mortgage holders in over their head! What a RINO

The net is you're basing opinion off of a portion of the story...only a crazy person (i.e. mental disorder) would do this in good faith.

Spence is 100% right when he says there is blame on both sides.

First thing in 3 weeks you've said that's made any sense.

I'd love to know what Spence thinks when he sees Obama, time and time again, putting all the blame on the Republicans, who had been out of power for almost 3 years when the economy collapsed.

I don't believe Obama was sworn in until Jan 2009. By your reconing that would make today January 2nd 2012!

If Spence is right (and he is), then Obama is either an idiot or a liar, and there simply isn't another option. (In my opinion, Obama is BOTH an idiot and a liar).

It's called politics.

If you want someone to blame for this mess blame your neighbor for pulling equity from his house to buy a boat he can't afford, the short-term'ism of our markets, shady lenders out to make a quick buck, politicians trying to hold their power, Wall Street, a lack of personal responsibility etc... etc... etc...

Like I've said, there's plenty of blame to go around...

-spence

[Jim in CT]

[Spence -

"didn't President Bush push hard for more sub-prime lending "

No, he did not. He pushed banks to make loans to minorities that could be paid back, based on traditional qualifying criteria. Spence, let's put it out there, OK? If you have evidence to suggest that Bush was a fan of reckless mortgages (subprime), either post it, or admit that you made it up. For the 10th time, Bush was so alarmed by the recklessness of subprime mortgages, that he wanted to regulate Fannie and Freddie, with rules that they couldn't buy those crappy pieces of paper. The Democrats blocked that legislation. I'm sorry, Spence, if that fact doesn't support your personal agenda, but it's a fact nonetheless.

"And when Dems took over in 2007 they immediately pushed for more regulation to help ensure the same issues wouldn't arise again. "

Can you support that please? You may well be right, I have no knowledge. But you seem to take great liberties, at times, in creating your own realities which promote your agenda. If you can't back that up, please admit you made it up.

"I don't believe Obama was sworn in until Jan 2009. By your reconing that would make today January 2nd 2012!"

Do you ever, ever get tired of being 100% wrong? When I say the "Republicans" were out of power, I mean because they LOST CONTROL OF CONGRESS IN JANUARY 2006.

You see, Spence, this country is not a totalitarian dictatorship. It's a democracy with seperation of powers and checks and balances. In our system of government, the LEGISLATURE, not the executive branch, writes legislation.

I also see that once again, you cowardly dodged my other question, which was this. If you say there's blame on both sides (although you go on and on and on about the GOP, I haven't seen you post anything you think the libs did wrong), what do you think of Obama repeatedly saying it was all the Republican's fault?

[spence]

Originally Posted by Jim in CT

No, he did not. He pushed banks to make loans to minorities that could be paid back, based on traditional qualifying criteria. Spence, let's put it out there, OK? If you have evidence to suggest that Bush was a fan of reckless mortgages (subprime), either post it, or admit that you made it up.

Nobody is going to propose lending to people who "can't" pay it back. What the politicians on both sides did was encourage lending into the poorer and minority communities to expand home ownership. This is where the sub-primes exploded as people refinanced into ARMs.

For the 10th time, Bush was so alarmed by the recklessness of subprime mortgages, that he wanted to regulate Fannie and Freddie, with rules that they couldn't buy those crappy pieces of paper. The Democrats blocked that legislation. I'm sorry, Spence, if that fact doesn't support your personal agenda, but it's a fact nonetheless.

If it's a fact then it should be easy to find a link to a Bush proposal to ban Freddie and Fannie from taking sub-prime loans. Please help me out here because I can't find one...

Can you support that please? You may well be right, I have no knowledge. But you seem to take great liberties, at times, in creating your own realities which promote your agenda. If you can't back that up, please admit you made it up.

H.R. 1427, 313-104

Do you ever, ever get tired of being 100% wrong? When I say the "Republicans" were out of power, I mean because they LOST CONTROL OF CONGRESS IN JANUARY 2006.

Earlier you said I was 100% right. I can't be both...

You see, Spence, this country is not a totalitarian dictatorship. It's a democracy with seperation of powers and checks and balances. In our system of government, the LEGISLATURE, not the executive branch, writes legislation.

Yes, I did see School House Rock. Loosing Congress didn't mean that Bush was out of power, just as the GOP taking the House doesn't mean that Obama is not still ultimately in charge. i.e. the buck stops there.

I also see that once again, you cowardly dodged my other question, which was this. If you say there's blame on both sides (although you go on and on and on about the GOP, I haven't seen you post anything you think the libs did wrong), what do you think of Obama repeatedly saying it was all the Republican's fault?

It's always funny when people throw words like "cowardly" around in an Internet discussion without knowing much about the other people.

The fact is (search able in old threads) that I've mentioned mistakes by Democrats many times. And have pretty much described this as a systemic problem in every instance, counter to the assertion that liberal ideology and (gasp) Barney Frank are the root cause of the financial meltdown. This simple isn't founded in the reality you claim is the basis for a clean bill of mental health.

Obama gets to point the finger at the Republicans because he's the President and they're doing it to him. Hell, Obama wasn't even sworn in yet before the GOP was branding it his recession, and has blamed Obama for not being able to magically fix it every since.

Do we really think that a hallmark of Republican party -- lower regulation -- is the answer to preventing a similar calamity with our economy? I'm not sure I know anyone who seriously thinks so.

-spence

[Jim in CT]

Spence -

I read that CNN link that you posted. If you had read that link before assuming that it supported your inane conclusion that Bush pushed subprime mortgages, you'd see that the bill called for the feds helping minorities come up with down payments. The bill would have subsidized down poayments for folks that could afford the monthly payment, but who didn't yet have a large enough down payment.

You see Spence, the notion that sufficient down payments be part of a mortgage is NOT what the subprime mortgages were about. That's traditional financial underwriting.

[Jim in CT]

Spence, when the GOP proposed the bill to regulate Fannie and Freddie, here is what senator John Mccain said in support of the bill...

"If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”

Here is the link...

The Squeaky Wheel: S. 190 - “Federal Housing Enterprise Regulatory Reform Act of 2005”

Here was Barney Frank's response to the proposed bill:

""These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Here is a link...

Barney Frank's Fannie and Freddie Muddle - Sam Dealey (usnews.com)

And Barney Frank gets re-elected over a brilliant patriotic hero like Sean Bielat!! Kudos to the voters in Frank's district...

[Jim in CT]

Spence, you also say it's just "politics" that Obama puts all the blame on the GOP, even though you think there is blame on both sides. I agree, it's just politics, and most politicians do stuff like that.

But remember, Obama campaigned on some vague notion called "change". He had no accomplishments he could point to, so he promised that HE would be the one to bring change to Washington, HE would be the one to put "politics as usual" aside, He, and only HE, could do things differently.

So I really, really love it when Obama defenders say things like "all politicians do that". Because that should NOT be an acceptable excuse from someone whose entire campaign was based on the promise of "change".

Your response???

[RIJIMMY]

I've posted this link before - excellent read

Angelo Mozilo - 25 People to Blame for the Financial Crisis - TIME

[spence]

All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis.

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies.

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas nor did they suffer higher default rates.

Here's yet another analysis from someone with far better credentials than myself

Federal Reserve governor Randall Kroszner, a conservative economist on leave from a teaching post at the University of Chicago Booth Graduate School of Business, says the Community Reinvestment Act isn’t to blame for the subprime mess, despite some accusations to the contrary.

“First, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA- related loans appear to perform comparably to other types of subprime loans. Taken together… we believe that the available evidence runs counter to the contention that the CRA contributed in any substantive way to the current mortgage crisis,” he said in a speech today in Washington.

The Community Reinvestment Act, which dates to the 1970s, was crafted to combat discrimination and red-lining. It requires regulators to press banks to lend to low-income and minority neighborhoods. Kroszner’s speech summarized research the Fed has been doing on two basic questions: (1) What share of subprime loans were related to CRA? Answer: “Loans that are the focus of the CRA represent a very small portion of the subprime lending market, casting considerable doubt on the potential contribution that the law could have made to the subprime mortgage crisis.” (2) How have CRA-related subprime loans performed relative to other loans. Answer: “[D]elinquency rates were high in all neighborhood income groups, and that CRA-related subprime loans performed in a comparable manner to other subprime loans.”

Fed economists found that about 60% of higher-priced loan originations — the technical definition of subrpime — went to middle- or higher-income borrowers or neighborhoods who aren’t targeted by CRA. More than 20% of the higher-priced loans were extended to lower-income borrowers or borrowers in lower-income areas by institutions that aren’t banks — and aren’t covered by CRA.

The “striking result,” Kroszner said: “Only 6% of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.”

“This result undermines the assertion by critics of the potential for a substantial role for the CRA in the subprime crisis. In other words, the very small share of all higher-priced loan originations that can reasonably be attributed to the CRA makes it hard to imagine how this law could have contributed in any meaningful way to the current subprime crisis.” Banks can also meet CRA obligations by buying loans from mortgage brokers, he noted. But less than 2% of the higher-priced loans (those would help banks meet CRA requirements) sold by independent mortgage companies were purchased by CRA-covered institutions.

Source: Fed’s Kroszner: Don’t Blame CRA - Real Time Economics - WSJ

-spence

[scottw]

for the thousandth time Spence, it was not the CRA loans themselves but the culture created and fueled by the pracitces forced by government mandates and requirements....and threats....

There was another major change that has gotten little attention. Back in 1992, a Boston Federal Reserve study claimed to find evidence of racial discrimination -- claiming that minorities got denied mortgages at higher rates than whites even after important factors such as creditworthiness were accounted for. The data used in the study were riddled with typos and other serious errors. For example, of the 3,000 mortgages studied, 50 of the loans supposedly had the banks paying interest to the borrowers, 500 of the mortgages were not even in the data set from which the data was supposedly obtained, and some mortgages were supposedly approved for individuals who had negative net worth in the millions of dollars. When those mistakes were corrected, no evidence of discrimination remained.

Professor Liebowitz noted that Lawrence Lindsey, then a member of the Federal Reserve’s Board of Governors, "was warned about these errors in this study but the Fed ignored them."

The Boston Fed still used the study to produce a manual for mortgage lenders that said: "discrimination may be observed when a lender’s underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants."

So what were some of the "outdated" criteria?

Credit History: Lack of credit history should not be seen as a negative factor.... In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts....

Down Payment and Closing Costs: Accumulating enough savings to cover the various costs associated with a mortgage loan is often a significant barrier to homeownership by lower-income applicants. Lenders may wish to allow gifts, grants, or loans from relatives, nonprofit organizations, or municipal agencies to cover part of these costs. . . .

Sources of Income: In addition to primary employment income, Fannie Mae and Freddie Mac will accept the following as valid income sources: overtime and part–time work, second jobs (including seasonal work), retirement and Social Security income, alimony, child support, Veterans Administration (VA) benefits, welfare payments, and unemployment benefits.Accepting these new criteria was hardly voluntary. The Fed warned the banks:

"Did You Know? Failure to comply with the Equal Credit Opportunity Act or Regulation B can subject a financial institution to civil liability for actual and punitive damages in individual or class actions. Liability for punitive damages can be as much as $10,000 in individual actions and the lesser of $500,000 or 1 percent of the creditor’s net worth in class actions."

And mortgage lenders followed these rules. Liebowitz explained that these changing financial standards "encouraged speculation -- potential homeowners could gamble on the price of homes going up without using any of their own money. Remember, 25 percent of homes being purchased were purchased for speculation."

Others dispute Liebowitz's claim that these changes in rules mattered. For example, James Carr notes that it "may seem on paper that these are a curious thing to count [welfare and unemployment benefits] as income, but they simply didn’t matter."

One lender singled out by Fannie Mae for special praise for following these new criteria was Countrywide:

Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. When necessary — in cases where applicants have no established credit history, for example — Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

Or take a 1998 sales pitch from Bear Stearns, which also followed the Boston Fed manual:

Credit scores. While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with [Community Reinvestment Act] loans. Unfortunately, [Community Reinvestment Act] loans do not fit neatly into the standard credit score framework… Do we automatically exclude or severely discount … loans [with poor credit scores]? Absolutely not.

Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.

Liebowitz said "such reckless behavior by [Fannie Mae and Freddie Mac] has lead to their financial meltdown and to the financial problems for the whole country. During Franklin Raines' chairmanship of Fannie Mae, they were a major proponent of relaxing standards."

[spence]

Originally Posted by scottw

for the thousandth time Spence, it was not the CRA loans themselves but the culture created and fueled by the pracitces forced by government mandates and requirements....and threats....

Priceless. You should really read this a few more times

Next you're going to assert that interest rates didn't really go down, but rather Alan Greenspan was just moving backwards

-spence

[scottw]

[QUOTE=spence;829812]All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis. it was what eventually caused the crap to hit the fan

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies. yes, LIBERAL POLICIES...giving people money with the approval and backing or threat of goverment reprisal with no accountability!

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas no kidding??? nor did they suffer higher default rates

[spence]

Originally Posted by scottw

All the data you posted seems to validate is that a sub-prime explosion fueled by cheap money was a primary driver of the mortgage crisis. it was what eventually caused the crap to hit the fan

And still, there's nothing that indicates the CRA was behind this, which is the context for this discussion, that the recession was caused by Liberal policies. yes, LIBERAL POLICIES...giving people money with the approval and backing or threat of goverment reprisal with no accountability!

In fact, as I've mentioned several times now, conservative economists like David John have reported that the bulk of sub-prime loans didn't originate from CRA influenced areas no kidding??? nor did they suffer higher default rates

Good god man get a grip on yourself.

-spence

[scottw]

Originally Posted by spence

Good god man get a grip on yourself.

-spence

I guess I'm "all wee wee'd up"

[spence]

Full of crap is more like it.

-spence