Posted on 12/10/2013 11:18:58 AM PST by oblomov
Edited on 12/10/2013 11:20:11 AM PST by Admin Moderator. [history]
Nope- I am done. Your kind of deeply thought out wisdom, and historical perspective is just too brilliant to be fixed.
Homebuilders. How is it that the size of the average family has gone down and the size of the average house has gone up?
I say follow the money. More money paid to heat, maintain and pay prop taxes. I remember when you had a living room. Now its a family room, a dining room that is used twice a year, a recreation room, rooms rooms rooms and nobody is using them.......well with this new odumbiconomy.....maybe its a good thing since kids and grandkids are gonna be coming home to live lol.
I would guess that with today's housing materials and more efficient environmental controls, energy bills aren't the major consideration they once were. Plus, I think everybody in the housing industry pushes bigger is better. The bigger the house, the bigger the commissions..
“Nothing the banks were doing before or after the crash interferes with the rights of the citizenry.”
I felt pretty interfered with when we had an international monetary crisis that cost us how much money(more than a trillion) and put my country and most of the rest of the world into an economic tailspin.
“Without the implicit government backing of Fannie/Ferddie mortgages, AIG would never have been able to issue CDOs as they did.”
Why not? They were free to be as stupid as they wanted. And there was big money being made if you ignored the risks. So what if your bank fails if you’ve been making 10 million a year. Not to mention that most of the supposed security was not from the government, but from the big wall street banks, the financial geniuses who bundled up mixed bags of mortgages, took them to their pals at Standard and Poor, got them rated AAA, and thus gave the credibility for people like AIG to issue the CDO’s. All involved made fortunes until the ballon burst and we were left holding the bag.
Reagan and Volcker, as chairman of the Fed, worked together to bring the US out of a decade of economic malaise. I think we should have the same confidence in Volcker that Reagan did.
So the banks had to give loans to anyone? What was the specific provision you are referring to?
Banks traditionally did not give mortgages to people with bad credit histories. Congress ordered them to make the loans available and end economic discrimination, because it supposedly wasn’t “fair”. So, they made them stop discriminating against historically poor people.
You have no right for your money or property to be worth X amount in a given market.
For the record, the term for what the banks was doing is called Redlining. Economically based redlining should be allowed, as people from poorer neighborhoods are less likely to pay back their loans on time. Congress tried to wipe it out and it ultimately backfired.
“The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations. As former Fed Governor Ned Gramlich said in an August, 2007, speech shortly before he passed away: “In the subprime market where we badly need supervision, a majority of loans are made with very little supervision. It is like a city with a murder law, but no cops on the beat.”
“...The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.
“Better targets for blame in government circles might be the 2000 law which ensured that credit default swaps would remain unregulated, the SEC’s puzzling 2004 decision to allow the largest brokerage firms to borrow upwards of 30 times their capital and that same agency’s failure to oversee those brokerage firms in subsequent years as many gorged on subprime debt. (Barry Ritholtz had an excellent and more comprehensive survey of how Washington contributed to the crisis in this week’s Barron’s.)
“There’s plenty more good reading on the CRA and the subprime crisis out in the blogosphere. Ellen Seidman, who headed the Office of Thrift Supervision in the late 90s, has written several fact-filled posts about the CRA controversey, including one just last week. University of Oregon professor and economist Mark Thoma has also defended the CRA on his blog. I also learned something from a post back in April by Robert Gordon, a senior fellow at the Center for American Progress, which ends with this ditty:
“It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did.”
Bloomberg Businessweek, Sept 29,2008
>>All involved made fortunes until the ballon burst and we were left holding the bag.
What do you mean “we”?
There was no reason to bail out AIG or any of its counterparties.
The only crisis was that Paulson’s buddies were about to lose their nut...they should have.
Awww, the good old days.
They were an awesome team. The current group of ‘leaders’ didn’t learn a thing from them, did they? Only from their commie buddies on how to destroy a country.
“There was no reason to bail out AIG or any of its counterparties.”
Ever heard of the Great Depression?
>>Ever heard of the Great Depression?
The Great Depression was “great” because of government intervention in the economy, not despite it.
Few Americans had stock investments in 1929. The market had many similar panics before (e.g. in 1920-21), most of which did not translate into long-term economic collapse.
In the post-WW I bust, Harding did not intervene and allowed deflation to realign the economy to a post-war equilibrium. The result was a short, sharp recession that is seldom discussed in economic literature, mainly because it does not help tyrants make the case for more power.
Hoover was a technocrat, and believed that he could engineer the economy much as he engineered food aid to Europe. His programs were expanded by FDR to become an elaborate system of price controls (NRA) and destruction of millions of bushels of grain and a similar scale of livestock (AAA) in the name of restoring pre-bust prices.
Although the SCOTUS later overturned the NRA, the FDR administration continued its program of direct intervention in the economy. The executive branch, under the aegis of “emergency”, stole the power to make law from Congress, and began promulgating thousands of regulations.
One regulation in particular hastened bank failures: the Treasury forbade banks from crossing state lines in ownership. This made banks unable to manage risk across geographies, destabilizing the banking system and ultimately the economy.
The Great Depression is a fine example of how our criminal class of rulers destroys wealth while blaming their handiwork on “market failure”. And yet you trust them when they tell you that it’s in your interest to bail out AIG, Fannie/Freddie, Goldman Sachs and Morgan Stanley? LOL.
“I just know it was Congress who ordered the banks to make bad decisions at the figurative point of a gun.”
That would be a good point if it were true but it’s not. CRA applied only to retail banks, not investment banks and other non-depository firms. The vast majority of bad paper was written by firms that wrote mortgages without any compulsion at all.
“The Great Depression was “great” because of government intervention in the economy, not despite it.”
That’s hardly accurate. The Great Depression occurred because of the collapse of the credit portion of the money supply. A full one third of the American money supply vanished over the three years 1930-33.
This collapse happened because at that time there was no FDIC and when a bank failed its depositors were wiped out and their savings simply vanished. Milton Friedman and Anna Schwartz wrote that the single greatest improvement to come out if the Depression was the creation of FDIC, you can find this in their Monetary History of the United States.
Although I admire Friedman and agree with him on many (if not most) points, I disagree sharply with the monetarist interpretation of the depression, as well as with the contention that the FDIC is net beneficial.
The problem was not the collapse of the money supply. The money supply was artificially inflated by the Fed to begin with (much like our present situation), and because the government had artificially lowered the cost of credit, many uneconomic investments were made. The best course of action is to allow these malinvestments to liquidate.
Friedman would use state action to keep asset prices artificially high, further distorting asset values. The illusion of “prosperity” would continue on for a bit, with the ultimate correction only postponed. The problem was the malinvestments, not the collapse in asset prices that correctly reflected the true value of the investments. Monetarism is just Keynesianism for people with money. It reinforces the worst caricatures of the rats-ass capitalist.
The FDIC is another example of state action reinforcing irresponsibility. It’s a welfare program for the middle class. A better role for government would be to rate banks on safety, or simply shut down banks with less than stellar balance sheets. There is no reason to be saddled with a 1930s regulatory model when the capital position of a bank could be ascertained instantaneously.
It distorts the money market for the Fed to mandate overnight interbank lending rates. Price is a signal only in a functioning market. If overnight lending rates were allowed to reflect the opinions of market participants (in this case, other banks), the bad banks would be slowly shut down through market discipline.
The so-called financial crisis did not require bailouts. The system being what it is, any bailouts should have been made on the condition that the shareholders and bondholders be wiped out. That this was not done discredits capitalism.
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