Patterico's Pontifications


Who is to Blame for the Financial Crisis?

Filed under: Current Events,Economics,Media Bias — Jack Dunphy @ 12:21 am

[Guest post by Jack Dunphy]

This week Time magazine published its list of the “25 People to Blame for the Financial Crisis.” It’s an interesting list, as much for who is included as for who is not. George W. Bush is there, as one might expect, as are Phil Gramm, Christopher Cox, and Alan Greenspan. Bernard Madoff is there, too, and there was even a spot reserved for “the American consumer,” who for 40 years, in Time’s view, spent too much and saved too little.

In placing President Bush on the list, Time allows that he “did push early on for tighter controls over Fannie Mae and Freddie Mac,” but notes that he “failed to move Congress.” Conspicuously absent from the list, though, are Barney Frank, chairman of the House Financial Services Committee, and Christopher Dodd, chairman of the Senate Banking Committee. Recall that in 2003 Mr. Frank, at that time the ranking Democrat on the committee, claimed that Fannie Mae and Freddie Mac were “not facing any kind of financial crisis.” Recall also that as late as the summer of 2008, Mr. Dodd assessed these institutions as being “fundamentally strong.” Subsequent events would seem to have proved otherwise, and you know the rest.

I marvel at the intellectual contortions required to exclude these men from the list. In Time’s view, President Bush is more worthy of blame for his failure to “move” Messrs. Frank and Dodd than they are for “moving” themselves. I was a Time subscriber for more than twenty years, and every so often, as in this instance, I am reminded of why I am no longer.

–Jack Dunphy

127 Responses to “Who is to Blame for the Financial Crisis?”

  1. I suspect that the list of the 25 people to blame for the Financial Crisis was compiled by the same people responsible for the list of 25 ‘best’ blogs.

    They seem to really like lists.
    Is Time the new Cosmo?

    Apogee (f4320c)

  2. Where did they place those expert journalists at Time who listened to Dodd and Frank and believed them?

    Longwalker (4e0dda)

  3. I stopped buying any of (and I say this laughingly) ‘news’ magazines a decade ago.

    Aside from leaving out Messrs Dodd and Frank, they also left out themselves and the MSM, who I believe knowingly covered for Frank, Dodd, Waters,
    Raines, etc.

    Just as they are covering for Obama now.

    And I want to know why we do not know Obama’s college and law school grades.

    Considering what he has done so far, isn’t it possible that Obama can’t (ie:is incapable) of understanding basic economics?

    Hard to believe, but for Gods sake, the man can’t even hold a press conference without a teleprompter. Maybe we should have elected the man running the teleprompter.

    Jack (d9cbc5)

  4. Obama’s grades were not released when he ran for any public office. They can’t possibly be good. And all that says to me is that he is ashamed of them.

    And the mainstream media doesn’t want to know. If a republican wouldn’t release his grades….oh, why bother.

    Jack (d9cbc5)

  5. Un-freaking-believable. But, again, what do you expect from the MSM? I too gave up on “news” rags along time ago.

    PatriotRider (37b91c)

  6. In that all of this collusion ,disinformation ,and obsfuscation ,by msrs Dodd,Frank ,Conrad ,et al, and the MSM, has had a devastating effect on the economy; Effect approaching treasonous levels. I believe that they should all be treated as the cowardly Quislings that they most certainly all are. Their punishments should be fast tracked as well.

    Edward Lunny (331570)

  7. The American consumer, eh? So the government (and the “news”papers) tell us to spend and spend in order to drive us to prosperity – and we do that but regularly pay off our credit cards and mortgages – and somehow we’re to blame for the crisis? I’d like to see that explained.

    Gesundheit (47b0b8)

  8. Sorry, just keep repeating the Big Lie. Fannie Mae, and “predatory borrowers’ (a favorite republican mime) didn’t cause this crisis. It was income inequality, leverage, and predatory CEOs that doomed the US.

    For one, Fannie Mae only reluctantly followed the corrupt lending practices of private lenders such as Countrywide after shareholders demanded that they do it. Of course, the Republicans in control then saw no wrong that Private Lenders were selling toxic goods and they didn’t requlate the Private Lenders that caused this fiasco. Instead GW Bush Bragged about how much his administration was increasing home ownership (even while undercutting wages to pay for those homes).

    For two; the affordability of housing was undercut by the terrible losses that working americans suffered even during the good years of Republican reign. Incomes going down during Bush’s regime, foreclosures going up!

    Major banks indulging in Financial innovation such as leverages of hundred to one have more to do with the current financial crisis than just housing.

    Blaming the victim arguments don’t work: In the long run, FDR was so popular due to his actually trying to solve the problem while Hoover tried to sweep it under the rug (despite the fact that Hoover was a good guy and he inherited a problem from coolidge and a terrible Sec of Treasury Andrew Mellon who advocated starvation and the ‘liquidation’ of American workers.) Go ahead and make up more lies in history but ask why again did FDR become a ‘savior’ of America in the eyes of people who actually lived then (despite an overwhelmingly pro-Republican Press at the time)(?).

    I am not optimistic about Obama’s economic team as one miscreant involved in this mess is Larry Summers who with Phil Gramm advocated the deregulatoin of major banks and he himself became a hedge fund owner after his debacle at Harvard. Obama is far too conservative to pull of a New new Deal.

    Knowing once again that you’re not thinking outside of the Rush Limbaugh kind of Box i doubt any of this will make sense to the typical reader here.

    datadave (c87d2a)

  9. datadave, you work hard to rewrite historical facts, but fail. It is amusing how hard Democrats wish to defend the myths of FDR regardless of how much they have to make up to do so.

    FDR’s skill was as a con man. His ability was to brazenly lie to the American people and not be caught out at it. It culminated in the 1940 election campaign.

    SPQR (26be8b)

  10. Typical revisionist history. The introductory text in the print version was worthless drivel.

    Power Line Forum has some good comments.

    jeff (cbe1ae)

  11. Why the hell is Madoff on that list? He didn’t “cause” the crisis, he was an asshole scammer. This list must have been compiled by an intern.

    Jono (dbfcb4)

  12. oh. But the only way TIME gets discussed anymore is when they really push the envelope on their usual propaganda. They understand this I think.

    happyfeet (71f55e)

  13. Time should have placed itself and the MSM on the list for constantly repeating the absurdity that people must spend, spend, spend, to keep the economy strong. An MSM more concerned with facts and less with lists and fluffy trivia could have helped educate the public about the dangers of debt and the dangers of the housing/credit bubble. But that might have offended advertisers, and required challenging conventional wisdom.

    Here’s how the self-congratulating MSM really works:

    First the WSJ, the rest of the MSM, and even parts of the blogosphere basically pretend that the blogs never had this story first — and then the WSJ asks the very same blogs to bend over backwards to cooperate with them.

    Bradley J. Fikes, C.O.R. (0ea407)

  14. I too have given up on “news” magazines and papers. Don’t even turn on the TV news unless I hear of something big taking place. Like a southern California car chase. At least there is a little excitement and we know who the bad guy is.

    PatAZ (9d1bb3)

  15. It was income inequality, leverage,

    Hey Datadave… Care to take a guess as to who allowed the liquidity and over-leveraging?

    Scott Jacobs (a1c284)

  16. “Intellectual contortions” and Time magazine……

    EricPWJohnson (b3e55d)

  17. The revolving door between the finance industry and the top positions in our government is a major cause.

    These players were always going to get their losses covered by the taxpayer, so they could take any risk – and risk nothing. Sure, blame it on the CRA or irresponsible homeowners, or Bernie Madoff if that makes you feel better.

    But the simple fact is this wouldn’t have happened if the guys at the top of the food chain had to eat their losses.

    As a side note: I don’t recall the tech companies getting bailed out after the tech bust in 2001 yet a tech industry still exists. But the airlines got a bailout after 9/11 and they’re still dancing with BK.

    TakeFive (011ec1)

  18. Remember .. Time is written by 4th graders for 4th graders

    Neo (cba5df)

  19. dataless never disappoints.

    JD (e08aec)

  20. TIME’s list is worth about as much as its list of the 25 Best Blogs, two of which (HuffPo and Sully) thought John Gibson had compared Obama to a monkey with a bright blue scrotum.

    Patterico (cc3b34)

  21. Dateless Dave crawls out from his rock, sees his shadow, and predicts another 8 weeks of teh stupid.

    Dmac (49b16c)

  22. Not buying magazines is a simple thing you can do to help the environment I think. Also, newspapers. It’s cause of polar bears. I’ll see if I can find a link.

    happyfeet (71f55e)

  23. A comprehensive list would be a very long one indeed and would include just about everyone who believed in the phony wealth created by borrowing (domestically and internationally).

    Three main characters, however, played particularly prominent roles: Greenspan, who mistook economics for religion and followed the dogma of self-correcting markets with such zeal as to make a suicide bomber blush, AIG, which undertook the insurance of complex financial contracts they did not seem to understand, and, perhaps most prominently, GW Bush, who saddled the country with a 3 to 4 trillion effective expenditure in Iraq and made it very hard for his successor to bring the situation under control.

    Besides these three characters, two main factors contributed to the collapse: Fannie and Freddie’s hybrid status, and lack of market transparency.

    Add to the mix a prosperous China, which, swimming in an ocean of cash generated by exports to the US, was more than happy to finance the orgy of spending by buying a trillion in Treasury Securities and you have the current meltdown.

    Domingo Tavella (fc2380)

  24. a 3 to 4 trillion effective expenditure in Iraq

    That’s retarded. I mean like eating lead paint chips stupid.

    happyfeet (71f55e)

  25. Time = bankrupt = priceless.

    J. Raymond Wright (e8d0ca)

  26. Socialists are always so eager to own the culpability narrative. I find that to be one of the most tedious things about socialists. That and they steal shit.

    happyfeet (71f55e)

  27. Sad thing is, most people believe exactly what Time believes. My liberal friends and family have never heard about the CRA, the infamous hearing where they destroyed the oversight guy, nothing.

    Patricia (89cb84)

  28. Deregulation and the Financial Panic: Loose money and politicized mortgages


    “I believe that a strong case can be made that the financial crisis stemmed from a confluence of two factors. The first was the unintended consequences of a monetary policy, developed to combat inventory cycle recessions in the last half of the 20th century, that was not well suited to the speculative bubble recession of 2001. The second was the politicization of mortgage lending.”

    TakeFive (011ec1)

  29. Domingo – Could I subscribe to your newsletter?

    JD (4a1b82)

  30. “Thinking” like Domingo’s always makes me chuckle. It rails against Bush’s spending, which we almost all think was excessive, but its solution is to spend even more?

    JD (4a1b82)

  31. TakeFive, I am unable to decipher the underlying statement you are making with your above post.

    I do know mortgage lending was severely politicized over the years, since William Jefferson Blythe (rape isn’t rape if you’re governor) Clinton, or even prior. The Fannie and Freddie “you don’t need to follow government oversight rules so long as you fund Democrats” fiasco with the obviously heavy Democrat support pre-collapse is, well, redundantly obvious to anyone with three brain cells that actually talk to each other.

    Fannie and Freddie should never have been formed. Fannie and Freddie should never have been made a pseudo-government entity. Fannie and Freddie should never have been specifically absolved from regulations. Fannie and Freddie should never have been bailed out.

    Remember, McCain (who should never under any circumstances be considered right-leaning) warned several years early that Fannie and Freddie were going to collapse due to their unethical and irresponsible practices, only to be called a racist by the likes of Barney Franks, et al. Remember the big guns at Fannie and Freddie super-funded re-election campaigns of Democrats. Remember at least one big gun of Fannie/Freddie is now a big gun in the BHO administration. Remember Barney and his ilk are trying to convict loads of CEOs of heinous crimes while insulationg themselves from review.

    Note that a 10-year span that had BHO only available for 3 of those years also had BHO number 3 in total contribution dollars by Fannie and Freddie. Note that those above BHO were also Democrats. Note that the leaders of Fannie and Freddie got multi-million-dollar bonuses, more than 10 times their salaries, for fornicating under consent of the king the rest of us. And none of them were called for it.

    The whole thing has been a liberal political “power to me” agenda from the start, and the ‘little people’ are the ones with the (dis)honor of paying for it all.

    John Hitchcock (fb941d)

  32. As many cut back in the face of economic adversity, I find this an opportune time to expand my portfolio.
    I’m very big right now on acquisitions of AR, and XD.
    I think they will be strong in the future.

    AD - RtR/OS (0a424a)

  33. Domingo – You forget Darth Cheney, KKKarl Rove, and Hallibrton. And, Kyoto.

    JD (4a1b82)

  34. Dunno what you mean, AD, but my own financial position is that of thanking my mother for 50 bucks and thanking my sis for food. I got no money and no job and no welfare, but my credit rating is falling through the floor and I’m still surviving my hard times so far. If I had any money to spare 6 months ago, I’d have bought gold. Heck, a year and a half ago, my daughter told me USD was worthless. I would’ve switched over to other money had I had any. 😉

    John Hitchcock (fb941d)

  35. I am so sick of people rewriting reality/history.

    This is an interesting video/read.

    Karen (4e0dda)

  36. A bet on CA….
    Just went on-line for a quote from Penske Trucks for a one-way rental….
    L.A. – Colorado Springs….$1322.00
    Colorado Springs – L.A…..$ 548.00

    I think they anticipate a large demand for one-ways from CA.

    AD - RtR/OS (0a424a)

  37. Comment by John Hitchcock — 2/21/2009 @ 10:38 am

    I know the feeling.
    After a long period of self-employment, I went back into the 9-5 routine for the new millenium.
    Last spring it ended, and I’ve been scraping along with a couple of different self-employment things which have kept the dogs at bay.
    Just have to run the string out as long as it will last.
    As long as there is life, their is hope.
    Good Luck to you.

    AD - RtR/OS (0a424a)

  38. ________________________________________

    The fact that the following person is not included on that list — and that his boss (ie, Bill meaning-of-is-is Clinton) therefore isn’t higher up on it — tells you what a piece of “progressive” crappola it truly is:

    Village Voice:

    There are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go, but one decisive point of departure is the final years of the Clinton administration, when a kid from Queens without any real banking or real-estate experience was the only man in Washington with the power to regulate the giants of home finance, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), better known as Fannie Mae and Freddie Mac.

    Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why.


    Mark (411533)

  39. there was even a spot reserved for “the American consumer,” who for 40 years, in Time’s view, spent too much and saved too little.

    Is this the same Time magazine that takes in ad revenue from commercial companies encouraging Americans to buy stuff they don’t need? A strategy that Dear Leader and the rest of the Kleptocrat Party are now saying is necessary to “stimulate” the economy?

    Another Chris (a3bb8f)

  40. there was even a spot reserved for “the American consumer,” who for 40 years, in Time’s view, spent too much and saved too little.

    Is this the same Time magazine that takes in ad revenue from commercial companies encouraging Americans to buy stuff they don’t need? A strategy that Dear Leader and the rest of the Kleptocrat Party are now saying is necessary to “stimulate” the economy?

    Another Chris (a3bb8f)

  41. The top culprits, in my humble opinion, are 1) Christopher Cox for changing the net capital rule, and 2) Alan Greenspan, for keeping interest rates way too low for too long.

    Official Internet Data Office (b5b7c2)

  42. Time magazine lost its reason for being with the appearance of Cable TV and the internet. Newsweek has acknowledged this and announced that it will become a niche publication. Time just hasn’t decided what it will be so, in the meantime, it tries to join the political left. It doesn’t seem to understand that most of those who agree with its policy theories don’t read much.

    If I were to name a few culprits, I would include Greenspan who stayed around too long. Bush could have told them to shut down the money supply gusher earlier but he has tended to defer to experts, just as he did with the military.

    Congress got involved as they do with any spending policy and made things worse.

    Finally, the financial people have been riding high for decades; look at what they have done to Ford. They will now be brought back to earth but the cost will be huge. A lot of this began, as I keep writing, with the Mexican bailout under Clinton. There is when moral hazard could have been controlled and wasn’t.

    Mike K (90939b)

  43. Didn’t the Dems and the media (I know, redundant) mercilessly mock President Bush for telling people to go shopping? I now understand why they did that. They want the government to go shooping for them.

    JD (4a1b82)

  44. […] link to it, since it is a joke; find it yourself). But Jack Dunphy, a frequent guest-contributer at Patterico’s Pontifications, has. Read that post, and while you are there, bookmark the site. Good stuff on a regular […]

    Off The Wire: More Reasons To Vote Dodd Out - CTVoter2010’s blog - RedState (796605)

  45. Another Chris: Is this the same Time magazine that takes in ad revenue from commercial companies encouraging Americans to buy stuff they don’t need?

    Time regularly advertises $12,000+ watches and $1,000+ handbags on its back cover. I expect that sort of thing in a yachting magazine I might read while waiting at the dentist…but I’ve always seen it as kinda strange for a ‘news’ magazine.

    KB (f11584)

  46. Billy, no I mean Jimmy Carter, Bill Clinton, Barney Frank and Chris Dodd, there I cut it down to only four.

    J. Raymond Wright (e8d0ca)

  47. Here are some selected wordings from the covers of about the last year’s worth of Time Magazine.

    How to save your newspaper
    What Lincoln would do about the economy

    Why banks are broke – and what to do

    Why Israel can’t win
    How Obama can forge a Middle East peace

    The Gaza Crisis – and what Obama can do about it

    The Case for saving Detroit – why we have to
    Mumbai terror – Why Pakistan must respond

    How to fix America’s schools

    The sorry state of American health – how to reverse the trend before its too late

    The new new deal – what Barak Obama can learn from FDR – and what the Democrats need to do

    7 things that could go wrong on election day – and what you can do if you’re worried your vote won’t count

    How to stop a new cold war

    Afghanistan – the right war – why the west is failing and what to do about it

    What (Mark Twain’s writings) can teach America today

    Patriotism – why both parties get it wrong and how to fix it

    Our supersized kids – the juvenile obesity epidemic and the scoop on how to cure it

    Why the Clinton dynasty is over
    Why politics will never be the same
    Why Hillary didn’t win
    Why Iraq is a trap for Barak

    How the quake disaster will change China
    Surviving the lean economy – how the next president can make America grow again

    How to keep your memory sharp
    The food crisis – why high prices are here to stay

    How to win the war on global warming

    Raising Obama – how his mother made him who he is

    Why the Pope loves America
    Why Iraq hasn’t healed

    How Al Gore could save the democrats
    Why Hilary Clinton won’t quit

    10 ideas that are changing the world – here’s what you need to know

    As a long time subscriber (hey, my wife likes it and inertia is a powerful force) I’ve noticed what I’d call an increasing arrogance on the cover of the magazine. Why, if we just followed the advice of the Time editorial board not only would we know the reasons behind everything important, but we know how to solve all our (and other’s) problems. Why are so many people ignoring the brilliance of this publication?

    I’m not surprised when some self-assured pundit proclaims to have all the answers within the space of their column. But all this cocky hubris screaming so often from the cover of a news magazine?

    I hope Obama read the 1/19/09 issue on how he can forge a Middle East peace. How nice of Time to have figured it all out for him.

    KB (f11584)

  48. I remember my senior year of HS, back in Dec ’83, when I took a semester-long course on ‘current events.’ I was required to subscribe to either Time or Newsweek. I chose Newsweek because it was less obviously leftist. Of course, I held my nose while choosing Newsweek.

    Of course, I had a 6-month subscription because I didn’t want anything to do with the thing once the course was over. No need reading obvious leftist propaganda.

    John Hitchcock (fb941d)

  49. The amazing thing about right wing blogs is that no matter how many times an argument has been shown to be factually incorrect, a month or so later, the spurious argument reappears.

    Fannie and Freddie did not cause the crisis. They were not at the center of the crisis.

    -More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
    -Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
    -Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

    At this point you can’t reasonably claim ignorance.
    You’re lying. It’s that simple.

    P. Favor (a273a1)

  50. Do enough people still need heavy duty bird cage liner to keep Time in business? I forgot, liberals only bite into Media which lies 99 44/100% of the time. I’m surprised they have time to publish between the hourly heads up, tongue colon cleaning they do on Hussein O.

    Scrapiron (996c34)

  51. Domingo – You forget Darth Cheney, KKKarl Rove, and Hallibrton. And, Kyoto.

    JD, Don’t forget ChimpyMcHalliburton.

    Or can I still say “Chimpy”?

    Patricia (89cb84)

  52. At this point you can’t reasonably claim ignorance.
    You’re lying. It’s that simple.


    And do you know why those private institutions made those loans to low- and moderate-income borrowers?

    It’s because the FM’s had be expressly positioned by that time to buy up and guarantee just those sorts of loans. Add in the blatant mis-handling of the FM’s (seriously, the books were so cooked they should have been a Food Network special) and you have two semi-private institutions that upon their collapse started taking everyone else down with them, as people started to realize the folks backing the mortgages (that had been spun and re-spun and re-re-spun into AAA securities) were in exceedingly dire straights, and started to pull out.

    Had the FMs not been basically ordered to buy up exceedingly crappy loans, we’d not be in this mess. Banks would have made loans based on merits, not short-term gains.

    Scott Jacobs (a1c284)

  53. Or can I still say “Chimpy”?

    Sorry, no you can’t; it’s probably racist and/or cowardly.

    Old Coot (7721b8)

  54. -More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
    -Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
    -Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critics.

    Guess what: after the CRA mandated that banks MUST lend good money to bad credit risks, it didn’t even take a decade for the financial industry to understand that if the pobrecitos were to be given such default-inviting terms, then all other Americans being equal, they should be given the same opportunities. All those ‘no down’, ‘interest only’, ‘PickAPay’ gimmicks were exactly in line with the CRA, and couldn’t have happened without it. For topping, add the lavish purchases by Fannie and Freddie of those bomb-in-the-file mortgages PLUS their obscene conversion of them into mortgage-backed ‘securities’ which were sold to overtrusting investors with the bombs’ fuses already lit. And for the cherry on top, add the obscene salaries, bonuses and campaign contributions enjoyed from Fannie and Freddie by Democratic insiders named Barney Frank, Chris Dodds, Joe Johnson, Barak Obama, Franklin Raines and Jamie Gorelick.

    At this point you can’t reasonably claim ignorance.
    You’re lying. It’s that simple.

    Insufficiently Sensitive (673620)

  55. But even the Economist articles states, “The fraction of outstanding home mortgage debt that was either held or guaranteed by the GSEs (known as their “total book of business”) rose from 6% in 1971 to 51% in 2003.”

    That’s the significant number, because now we the taxpayers are on the hook for more than half the mortgages in the country. After 2003, I’m sure that percentage rose; that’s when Raines really pushed banks to make loans he could purchase so they could make their bonuses ($90 million for him at least count). So it’s not only subprime borrowers that are under water–why would you not default if everybody else is and the government will refi for you?

    Patricia (89cb84)

  56. P favor is a good foot soldier. It is just servicing Teh Narrative.

    JD (4a1b82)

  57. At this point you can’t reasonably claim ignorance.
    You’re lying. It’s that simple.

    I love it when drive – by Trolls come on here, cite a few “facts,” then immediately twist them into their narrative, then declare victory. Must be an impotence problem for them, I think.

    Dmac (49b16c)

  58. JD, you beat me to it. Damn.

    Dmac (49b16c)

  59. Everyone from President Bush to Nancy Pelosi was surprised by the crisis. Folks like Larry Kudlow, National Review’s economics editor, extolled the economy even as it was unraveling.

    The Bush-Pelosi-Reid answer to a debt-caused recession was to incur even more debt, which House Republicans waged a brave but futile fight to stop. And Obama has proven even worse than Bush.

    This guy called the bursting of the housing bubble. He’s no fan of the fiscal policies of either major party, and he’s worth heeding.

    Bradley J. Fikes, C.O.R. (0ea407)

  60. So it’s not only subprime borrowers that are under water – why would you not default if everybody else is and the government will refi for you?

    So true. We are learning the hard way the meaning of “moral hazard.”

    Bradley J. Fikes, C.O.R. (0ea407)

  61. P. Favor. The numbers you cite are 2006 only. By then the damage was done. What were the numbers in 1998-2004? Fannie and Freddie got the fire going and were the fuel for a long time. If in 2006 some of the underbrush started burning — big deal.

    Mark_0454 (48edfc)

  62. Shortly after the end of the Vietnam War, Times admitted that they had falsely reported events in order to meet their goals, i.e., end of war defeat of USA….how is this not the same?

    Judith (76ca0a)

  63. Judith, integrity only matters when catching conservatives in a falsehood. After all, it’s the right who claims the moral high ground. The left prefers to wallow in the quagmire and bring everyone else down into it.

    John Hitchcock (fb941d)

  64. “Fannie and Freddie did not cause the crisis. They were not at the center of the crisis.”

    P. Favor – Where are Fannie and Freddie’s huge losses coming from genius? Without their presence in the secondary market do you think the primary subprime market would have continued to develop as it did?

    No matter how thoroughly a lefty myth is debunked, every few weeks it pops up fresh again. Saying it again doesn’t make it true.

    daleyrocks (5d22c0)

  65. We are learning the hard way the meaning of “moral hazard.”

    Meaning what moral hazard?

    Dmac (49b16c)

  66. They have to deny the culpability of FM2 for this mess since Rahm Emanuel had his fingerprints on one of the FM’s between his leaving the Clinton WH and running for Congress.
    He, along with Raines, Gorelick and the others made mucho bucks off of this scandal, but it’s all Bush’s fault.

    AD - RtR/OS (0a424a)

  67. At this point you can’t reasonably claim ignorance.
    You’re lying. It’s that simple.

    Comment by P. Favor

    Your first link does not support your statement. You might try reading it before you post it. The DeLong blog is full of lefty moonbat types although he is an economist. The fact remains that Fannie and Freddie set off the bubble by lowering standards and providing a secondary market for these liar loans. Sure the aggressive loan brokers and bundlers followed like lemmings but F&F set the tone back in the 90s.

    The lefties are desperate to exonerate the left for the disaster. Hence these seminar types who zip around posting stuff someone else gave them.

    It’s OK though because Obama is now planning to raise taxes to balance the budget. Sounds like 1937 even though he’s only been in office a month. FDR took four years to get this f**ked up.

    Even some non-partisan observers question the wisdom of announcing a plan to raise taxes in the midst of a recession. But senior White House adviser David Axelrod said in an interview that the tax proposals reflect the ideas that won the election last fall.

    “This is consistent with what the president talked about throughout the campaign,” and “restores some balance to the tax code in a way that protects the middle class,” Axelrod said. “Most Americans will come out very well here.”

    Good thing we have these masterminds in charge.

    I also expressed my concern that about half the people in the country now pay no income taxes, so there is overwhelming incentive for them to keep voting for democrats and therefore higher taxes for the rest of us. He[Congressman Jerry McNerney (D-Pleasanton) ] told me that he thought tax rates should go up for the very rich and that the top marginal tax rate should be 90%. I couldn’t believe what I was hearing, so I asked in a voice that many in the room could hear if he really meant 90%, and he said yes. Several people asked me after my turn was over if they heard correctly what he said, and were amazed when I said yes.

    Mike K (90939b)

  68. And rest assured, folks, that if Bush forced them to move, the hue and cry from the left wing media and blogosphere would have been enormous.

    Frank and Dodds should both sleep uneasily at night — they know full well they are most responsible. And as for Time, I canceled my subscription long ago.

    Richard Romano (b96fd9)

  69. The top marginal tax rate should be exactly what the bottom rate is. Any plan outside that is wealth-redistribution. For those of you who don’t live in Rio Linda, that means socialism.

    And, no, I have never in my entire lifetime ever earned as much as 40k. And, yes, I have been receiving w-2s since 1984.

    John Hitchcock (fb941d)

  70. “Lefty Myth”
    Did you even look at the numbers?
    Everyone has a right to his own opinions, not his own facts.
    “Without their presence in the secondary market do you think the primary subprime market would have continued to develop as it did?”
    You didn’t read a thing, did you? You’re trying to find any scapegoat you can to let your favorites off the hook. And no I’m not defending F and F I’m saying along with all the other adults that they were neither the cause nor the center of the collapse.
    But to you it’s THEM! It’s THEIR FAULT! Bush and the republicans were stabbed in the back, by “THEM”

    The market is speaking. It’s not their fault it’s yours:

    Lectures on prudence from the Bush supporter. What planet are you on? Yes I know: a planet where FDR was responsible for the depression and the government has never created a single job, and where the banks have actual assets; a planet where facts don’t matter, where up is down, where you create your own reality; where Saddam Hussein was a month away from being able to nuke Palm Springs, where Sarah Palin is an expert (at something), and where president McCain is in the white house.
    Oh yes and where the Obama chimp cartoon in the NY Post was not clearly and simply racist.

    On the CRA try these

    Please try to learn.

    P. Favor (bec964)

  71. Give Mr. Favor some credit – two of his “facts” links don’t contain the word “typepad” in the title.

    Mr. Favor – if “the market is speaking,” why do you suppose the NASDAQ, Dow and S&P have tanked since the “stimulus” was announced, and that the market is at a 14-year low upon hearing of Obama’s mortgage bailout?

    carlitos (6128f3)

  72. P. Favor – From your lefty N.Y. Times 10/05/08. Check it out.

    Pressured to Take More Risk, Fannie Reached Tipping Point

    ……But by the time Mr. Mudd became Fannie’s chief executive in 2004, his company was under siege. Competitors were snatching lucrative parts of its business. Congress was demanding that Mr. Mudd help steer more loans to low-income borrowers. Lenders were threatening to sell directly to Wall Street unless Fannie bought a bigger chunk of their riskiest loans.

    So Mr. Mudd made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives.

    For a time, that decision proved profitable. In the end, it nearly destroyed the company and threatened to drag down the housing market and the economy.

    Dozens of interviews, most from people who requested anonymity to avoid legal repercussions, offer an inside account of the critical juncture when Fannie Mae’s new chief executive, under pressure from Wall Street firms, Congress and company shareholders, took additional risks that pushed his company, and, in turn, a large part of the nation’s financial health, to the brink.

    Between 2005 and 2008, Fannie purchased or guaranteed at least $270 billion in loans to risky borrowers — more than three times as much as in all its earlier years combined, according to company filings and industry data.

    “We didn’t really know what we were buying,” said Marc Gott, a former director in Fannie’s loan servicing department. “This system was designed for plain vanilla loans, and we were trying to push chocolate sundaes through the gears.”

    “…………Fannie never actually made loans. It was essentially a mortgage insurance company, buying mortgages, keeping some but reselling most to investors and, for a fee, promising to pay off a loan if the borrower defaulted. The only real danger was that the company might guarantee questionable mortgages and lose out when large numbers of borrowers walked away from their obligations.

    So Fannie constructed a vast network of computer programs and mathematical formulas that analyzed its millions of daily transactions and ranked borrowers according to their risk.

    Those computer programs seemingly turned Fannie into a divining rod, capable of separating pools of similar-seeming borrowers into safe and risky bets. The riskier the loan, the more Fannie charged to handle it. In theory, those high fees would offset any losses.

    With that self-assurance, the company announced in 2000 that it would buy $2 trillion in loans from low-income, minority and risky borrowers by 2010.

    All this helped supercharge Fannie’s stock price and rewarded top executives with tens of millions of dollars. Mr. Raines received about $90 million between 1998 and 2004, while Mr. Howard was paid about $30.8 million, according to regulators. Mr. Mudd collected more than $10 million in his first four years at Fannie.

    Whenever competitors asked Congress to rein in the company, lawmakers were besieged with letters and phone calls from angry constituents, some orchestrated by Fannie itself. One automated phone call warned voters: “Your congressman is trying to make mortgages more expensive. Ask him why he opposes the American dream of home ownership.”

    The ripple effect of Fannie’s plunge into riskier lending was profound. Fannie’s stamp of approval made shunned borrowers and complex loans more acceptable to other lenders, particularly small and less sophisticated banks.

    Between 2001 and 2004, the overall subprime mortgage market — loans to the riskiest borrowers — grew from $160 billion to $540 billion, according to Inside Mortgage Finance, a trade publication. Communities were inundated with billboards and fliers from subprime companies offering to help almost anyone buy a home.”

    daleyrocks (5d22c0)

  73. a planet where FDR was responsible for the depression

    Other than his winning smile, he apparently sure as hell didn’t help matters as much as historians (and those easily fooled by used-car salemanship dressed up in the finery of do-gooderism) want the public to believe:, August 2004:

    Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

    After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

    “Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”

    In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

    “The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

    Mark (411533)

  74. Care to take a guess as to who allowed the liquidity and over-leveraging?

    Goldman CEO Henry Paulson?

    pc (22501b)

  75. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”

    As it will be demonstrated again in the Obama-Pelosi-Reid Depression.

    AD - RtR/OS (80f3aa)

  76. Comment by pc — 2/21/2009 @ 5:10 pm

    That was testimony by Paulson during the Clinton Administration advocating transperancy in the financial marketplace.
    Where were the regulators while Paulson was at Goldman-Sachs?
    And he became Treasury Secretary when?

    It doesn’t matter how desperately you try to spin this away from the FM2 mafia, this problem gestated out of CRA, and has major Democratic Party fingerprints all over it.

    AD - RtR/OS (80f3aa)

  77. Mark, you don’t quote the paper you quote a journalist.
    Here’s an actual economist discussing the issues, including those raised by Cole and Ohanian

    And again, it’s not a defense of F. and F. to say they weren’t the cause or at the center. I supplied comparisons: numbers and graphs. You ignore them. And on more recent articles by Cole and Ohanian look here

    “That means, everyone who got a job during the Great Depression via the Works Progress Administration (WPA) or Civilian Conservation Corps (CCC), or any other of Roosevelt’s popular New Deal workfare programs, doesn’t get counted as employed in the statistics used by Cole, Ohanian and Shlaes.”

    “Give Mr. Favor some credit – two of his “facts” links don’t contain the word “typepad” in the title.”
    By that logic I should be able to ignore Greg Mankiew. The former Chairman of the Council of Economic Advisors is on and at Harvard.
    DeLong a former undersecretary is only at Berkeley.

    P. Favor (5e116b)

  78. That was testimony by Paulson during the Clinton Administration advocating transperancy in the financial marketplace.

    I’ll let Karl Denninger explain Paulson’s involvement in the leverage department.

    Where were the regulators while Paulson was at Goldman-Sachs?

    I’m not sure, but they apparently didn’t notice that Madoff hadn’t bought a security in 13 years and they certainly didn’t notice Stanford’s little game (and by “little” I mean potentially larger than Madoff’s $50 billion scam).

    And he became Treasury Secretary when?

    In 2006, two years after he successfully lobbied for the removal of the net capital rule.

    this problem gestated out of CRA

    I know this is a favorite talking point, but it has been debunked many times. The CRA had nothing to do with cesspools like Countrywide.

    Of course, if you can point to the part of the Community Reinvestment Act that forced ibanks to leverage over 30:1, or to write $1 trillion in CDSs on a company that has a $10 billion dollar market cap, or inflated the derivatives market to between $600 trillion to $1 quadrillion, then maybe you can convince me that the CRA caused this crisis.

    pc (22501b)

  79. I automatically think “radical left socialist” when I see Berkely. And Hahhvahd is only living on it’s heritage, as far as I am concerned.

    John Hitchcock (fb941d)

  80. I’d also like to see the part of the CRA that forced non-depository banks (Lehman, Bear) to create mortgage backed securities and collateralized debt obligations. Maybe it’s right next to the part where the CRA made the ratings agencies rate garbage assets as prime?

    pc (22501b)

  81. You can spin this anyway you want, but the facts are that the Gov’t in the 90’s (Bubba) pushed down the standards for lending under CRA, while FM2 were buying all of this crap, so the loan-originators had no down-side. FM2 then packaged all of this crap into securitized mortgage instruments peddling it far and wide throughout the investment community.
    Without the push to put unqualified lenders into homes they could not afford, there would have been no bad paper to put lipstick on.
    Bush in 2003, and McCain in 2005, warned everyone that FM2 was a problem, and the usual suspects cried “racist”, and the party continued.
    Madoff….as I recall, the SEC was first warned about Madoff in the early 90’s, and the career staff ignored all of the warnings, and never gave the Commission any type of heads-up on this problem. Something they continued to do right up to when the SHTF last summer.
    And now, the markets have fallen, fallen, fallen, with every pronouncement of “brilliant” fixes coming out of the Obama whiz-kids. As everyone says, the market looks forward, not backwards. Their vote of confidence on the economic plans of this administration is not comforting.

    AD - RtR/OS (80f3aa)

  82. You can spin this anyway you want

    There is certainly some spin here, but it isn’t from me. You are trying to say that the tumor caused the cancer. I’m not going to defend FNM and FRE — because they were always enormous moral hazards — but people keep confusing cause and effect.

    Madoff….as I recall, the SEC was first warned about Madoff in the early 90’s, and the career staff ignored all of the warnings, and never gave the Commission any type of heads-up on this problem.

    Yes, the watchdogs at the SEC (more like puppies) failed. So did the free market watchdogs at FINRA. When Markopolos testified about his pursuit of Madoff, he said the SEC was incompetent, but FINRA was corrupt. Not to mention an SEC employee was literally in bed with the Madoff family.

    And now, the markets have fallen, fallen, fallen, with every pronouncement of “brilliant” fixes coming out of the Obama whiz-kids. As everyone says, the market looks forward, not backwards. Their vote of confidence on the economic plans of this administration is not comforting.

    This I can agree with. Geithner is clueless (and a tax cheat).

    pc (22501b)

  83. The SEC and the Fed did nothing to prevent this disaster; in fact, they may have been instrumental in causing it.

    If their purpose is to cushion the blow of the business cycle, they have failed. Time to disband.

    Patricia (89cb84)

  84. And on more recent articles by Cole and Ohanian look here

    And I’m supposed to have a lot of faith in a writer from Salon (from Berkeley, no less) who probably spent no more than a short chunk of his afternoon doing a webzine column on those who debunk the record of Roosevelt? A writer who asks that if FDR was such a dud in the category of economics, then why did the electorate keep voting for him?

    By the same token, I’ll say that if inner-city Detroit, Cleveland, New York, LA, St Louis, Newark, Compton, etc, are such economic wastelands — not to mention wastelands that are always stuck with rather high crime rates — why do their residents keep voting for Democrat/liberal mayors, alderman, council members and other politicians in general?

    Mark (411533)

  85. The trolls are gathering.

    What planet are you on? Yes I know: a planet where FDR was responsible for the depression and the government has never created a single job, and where the banks have actual assets; a planet where facts don’t matter, where up is down, where you create your own reality; where Saddam Hussein was a month away from being able to nuke Palm Springs, where Sarah Palin is an expert (at something), and where president McCain is in the white house.
    Oh yes and where the Obama chimp cartoon in the NY Post was not clearly and simply racist.

    Where to start with a troll ?

    FDR made the Depression last 10 years by foolish measures that prolonged it. Have you read any economics ? Why not read Ron Chernow’s House of Morgan or something about the Panic of 1907 ?

    The WPA gave jobs to unemployed young men and the war soaked up 12 million unemployed. That’s a success ?

    The rest of what you write is not worthy of a reply.

    MIke K (90939b)

  86. Keep up the sanddigging with your knucklehead, chuckleheads. Ol Bill Clinton and Barney Frank did this crisis all by themselves and it’s all because some colored folks bought homes they couldn’t afford.

    My Numerio Uno culprit is of course Ronald Reagan who led the mafia into Bank Ownership and then with his Ayn Randista Alan Greenspan said that Govt. is the problem and it should get out of the way and let private mortgage officers and former criminals run the brokeages and fake the numbers on unemployment (really double digit now but Reagan et al removed part timers and self employeds from the calculations) and fake the CPI numbers and then Raise Taxes on the poor.

    Now as you’ve admitted you’re all losers and unable to work or work at insurance agencies denying claims like JD does for a living in the middle of most conservative Indiana, let me add Rush Limbaugh will keep blaming the govt. but your local businessman knows where his bread is buttered and will be listening more to Obama now than Rush.

    Except Obama is too conservative as was Clinton (who I’ll admit is a ‘culprit’ but that’s what he learned from Reagan. Reagan also influenced Obama and the sooner the myths of Reagan are purged from our system the better.)

    datadave (c87d2a)

  87. at insurance agencies denying claims like JD does for a living in the middle of most conservative Indiana

    That’s not what he does for a living, asshat. Unlike your job as Head Fluffer, he actually does something worthwhile.

    then with his Ayn Randista Alan Greenspan

    The same guy who Clinton thought was just awesome. Keep bringing teh stupid, DoucheyDave.

    Dmac (49b16c)

  88. Dataless – why do you insist on overtly lying about me? You unjustly impugn my character, and get your facts wrong. SHOCKA

    JD (4a1b82)

  89. JD,

    Are you a claims adjuster?

    Obama über alles!!!!! (da3d2f)

  90. JD, for something funny, you should read the “Palestinian Children” thread.

    John Hitchcock was teasing me that I needed to believe in “ID” or else, and the first time I read it, I thought he had written “JD.”

    Not only are you a racist, but clearly you are a Christianist besides!

    Eric Blair (57b266)

  91. No. I used to negotiate litigated claims, but I took a different job in a different industry.

    JD (4a1b82)

  92. Now i know what level of idiots I’m dealing with. Mankiew is the closest thing to a defender of your position that I know.
    He links approvingly to Cole and Ohanian.
    But you don’t even know who he is.

    p. Favor (63f90e)

  93. I saw that, Eric. I got a chuckle out of that. I also got a chuckle out of the lying liar Hacks attributing the STD comment to me, when I said no such thing.

    JD (4a1b82)

  94. Consistency is the hobgoblin of little minds, I guess. Of course, Emerson always was a transcendentalist prat.

    Eric Blair (57b266)

  95. Por favor is an asshat.

    JD (4a1b82)

  96. JD,

    Good for you. That seems a bit like an icky job.

    Hope you still have it, with the way Messiah is going we are all going to be displaced from our current jobs and be working on a farm planting rice or something.

    Only 40K max?

    Obama über alles!!!!! (da3d2f)

  97. What is Por Favor’s position if I may?

    Obama über alles!!!!! (da3d2f)

  98. The “data” part of the name is ironic, right?

    steve miller (f65f01)

  99. datadave – Aren’t you supposed to be barebacking some sugar maples right about now and then having your dog chew out the splinters?

    daleyrocks (5d22c0)

  100. “Mankiew is the closest thing to a defender of your position that I know.”

    P. Favor – You are obviously a sooper genyus who splits atoms with his mind and has read everything there is to know on this topic as opposed to the rubes on the site.

    We are not worthy.

    daleyrocks (5d22c0)

  101. Actually Por Favor,

    The people who borrowed money who are refusing now to pay it back caused the crisis.

    The rest of the “actors” in the novelle are lubricants for the anal action with our current POTUS and Congress only worsening the implosion.

    The minute in 2007 the Gov.t started talking “mortgage relief” was the minute default rates started going upwards.

    Now with the Court cram downs you have essentially changed the rules of Mortgage Investors so …. even less mortgages and at a higher price.

    Cast of morons at the Treasury, Congress and the POTUS really are missing the critical link between using all means necessary to force people into paying their mortgage and saving our economy and financial system.

    Obama über alles!!!!! (da3d2f)

  102. Why would it be icky?

    Por favor’s position is that it is an enlightened Leftist, holder of the received wisdom, and anyone that does not agree with it is a mouth-breathing knuckle-dragging rube.

    JD (4a1b82)

  103. P. Favor – Some of the rubes here may also not have worked with companies directly involved in the mortgage fiasco or lobbied Congress on the very issues being discussed and therefore love it when ignorant pissants drop by to spout left cult talking points direct from the community based reality.

    daleyrocks (5d22c0)

  104. Assets = Liabilities + Owner’s Equity

    Asset Value = Cash Flow / Cost of Capital

    When Gov.t allows people to simply not pay mortages …..

    Cash flow goes down.

    When Gov.t then starts borrowing money it increasing the cost of capital …..

    Cash flow’s future value goes down.

    Now you have an entire financial system going belly up.

    No financial system, and certainly not a levered one like ours, can survive if debtors feet are not held to fire by all means necessary.

    Obama über alles!!!!! (da3d2f)

  105. JD,

    Seems like a very agitating job. Too much confrontation.

    Constantly negotiating contracts is like pulling teeth only to have them put back in your mouth minutes later so they can be pulled again.

    Obama über alles!!!!! (da3d2f)

  106. It was a challenge. But it was also very rewarding, both in resolving claims for those that had legitimate claims and in defending our policyholders.

    JD (4a1b82)

  107. Well, I hope they paid more than $40k per year.

    Frankly, I learned all I wanted to learn of the process living through a few hurricanes and I found it a bit distasteful.

    Obama über alles!!!!! (da3d2f)

  108. Well, that was not so bad JD. Cordial. Quite pleasing.

    Obama über alles!!!!! (da3d2f)

  109. Getting back to this …

    Did anyone see the 60 Minutes Report last week killing the CA Mortgage Company?

    They brought in a “poor black” women with poor verbal skills to lament her 4 ReFi’s and how she could not pay her mortgage now and was going to lose her home!

    Oh the humanity!!!!!!!!

    While we learned she pocketed $80,000 via the ReFi’s no one bothered asking what she did with the $80,000 she pocketed.

    Victim indeed. Racism too. Predatory Lending. Now I need to pay for her $80,000 loan, err income that she needs to pay taxes on.

    Obama über alles!!!!! (da3d2f)

  110. Also, with all the loan forgiveness going on will Obama waive the Federal Income Taxes that these individuals should pay?????

    Obama über alles!!!!! (da3d2f)

  111. I read “Time” magazine for 10 years and watching it’s slow leftward death spiral has been painful They used to do some journalism and print it in that magazine, but those days a long gone, along with their profits.

    I had some respect for Barney Frank when he went after that CNN idiot who lied at Davos about the American military targeting journalists. It too bad his integrity only went that far.

    tyree (5624c2)

  112. Sunday links from our blogroll…

    I would break that surveillance camera if I were a Brit today. Government monitoring my wine? If I recall, that government was not at Cana.
    American Idle. Money! The more irresponsible you are, the more the gummint works for you. Related: Wh…

    Maggie's Farm (1db130)

  113. “Time” hasn’t been allowed inside a house my father owned since they airbrushed “the finger” out of a photo back during Vietnam.

    Scott Jacobs (a1c284)

  114. I’m reading George Friedman’s book, The Next 100 Years, which is interesting futurist stuff but I wonder how he reconciles his optimistic view of America’s future with what is going on now. Fiedman is CEO of They are an excellent private intelligence company but Obama seems about to upend all predictions about American power. It’s almost as though our enemies managed to get a mole into the presidency.

    MIke K (90939b)

  115. Time is edited and written by a long lost of seditious scoundrels who continue to dig their graves by providing written confirmation of their irrelevancy. The truth isn’t in Time. Both Dodd and Frank are up to their necks in the destruction of our economy. If news magazines can’t provide truth, what are they for?

    Yhalpy (1556bc)

  116. datadave, you really need to learn some real history and some real economics, rather than the left-wing fantasy version you seem to have absorbed.

    SPQR (26be8b)

  117. talkingpointdave is a bot, I’m convinced. He posts the same drivel at other supposedly “right-wing” blogs.

    Spiny Norman (16fcc2)

  118. Currently, takers of TARP money have to surrender bonds to the federal government, in effect giving partial ownership to the federal government of their business.

    Will those who receive help with their mortgages be surrendering any part of the ownership of their homes to the federal government ?

    Neo (cba5df)

  119. The defaults on the subprime loans are not what caused the the huge financial crisis we now have. The subprime defaults where manageable and could have been corrected without much damage to the economy. What caused the finacial crisis to spiral out of control was a derivative-Credit Default Swaps which where invented in the mid to late 1990’s and then where deregulated by Congress in 2000. The Credit Default Swaps have been described as “instruments of financial mass destructon”. The CDS are responsible for the HUGE crsis we now face.

    Mike (c58ce9)

  120. Comment by Mike — 2/23/2009 @ 6:42 pm

    You need to try and keep up.
    The CDS segment of the financial markets are what are still functioning, and are the only reliable indicator of risk in the market-place.

    The problem was, and is, in securitized mortgages, where the actual risks, and valuations, are unknown.

    Please go back and pick-up the new talking-points on Glass-Steagall, those are a real laugher – even better than the old ones.

    AD - RtR/OS (9ed43c)

  121. Meanwhile, the sorry performance of the Obama administration is driving the market to ever lower closes.

    SPQR (26be8b)

  122. CDS is effect, not cause.

    Cause is the Asset values of the banks which is linked to default rates and underlying collateral values.

    Problem with CDS is that it is used by financial dudes to take take out companies when combined with shorting while acquiring senior debt.

    Essentially you buy Senior Debt, short stock and get a CDS. Do it enuff and if the company hit a cash flow bump you can take over the company for nothing while still making money.

    Obama über alles!!!!! (da3d2f)

  123. On Sept 8, 2008 when McCain was leading the polls by his widest margin, the Dow was at 11,510.74.

    On Nov 5, the market closed 9139.

    Today it closed at 7,114.

    The market is a discounting mechanism and it is discounting worse times yet with The Messiah.

    Obama über alles!!!!! (da3d2f)

  124. The Republicans controlled the U S House of Representatives from January 1995 to January 2007. The unsustainable run-up in housing values began in the mid to late 1990’s and continued until July of 2006, when housing values peaked and started their down spiral. The Democrats took control of the House in January 2007 and Barney Frank became Chairman of the House Financial Sevices Committee. Exactly how was Barney Frank responsible(to blame) for the financial crisis?

    James (c58ce9)

  125. Commentor 121. Is Absolutely Correct: The huge historic finanial crisis we now face is the direct result of the deregulation of the Credit Default Swap derivative by the 2000 Commodity Futures Modernization Act. The crisis caused by the securitized subprime mortgage defaults of which Fannie and Freddie were a part, was entirely manageable. Credit Default Swaps turned a manageable crisis into a financial crisis of monumental proportions. Credit Default Swaps destroyed Lehman Brothers, bankrupted AIG and CitiBank, caused other insolvencies and frozen the credit system! RESEARCH IT YOURSELF!

    Carlson (c58ce9)


    – Solve the loan problem.
    – Solve the derivative problem.
    – Reassemble whole loan mortgages

    The U.S. economy is shrinking fast, because businesses cannot get loans that they need to operate normally. Banks and lenders already own $ billions in bad loans, and they are afraid to make new loans. The government gave $ billions in bailout money for banks to start lending, but banks hoard the money to save themselves.

    Our financial system became untrustworthy, because it mixed $ billions in bad loans in with the good loans. Now, banks do not trust any of the loans, and the entire credit market stopped working.

    The U.S. economy will continue to shrink until we untangle the loans. Once the bad loans are isolated, they can be fixed one at a time. Then trust will be restored. Credit will flow, and the economy will grow.

    So far, our government is spending $ trillions on bailouts and pork projects, out of ignorance and political ideology. The real solution is much less expensive than that.

    The USA has fixed this problem before, and it is not hard to fix again. This is how:

    A) Start with the Resolution Trust Corporation (RTC), which the federal government setup to solve a Savings and Loan problem in the 1980s.

    B) RTC buys up securitized mortgages and derivatives to reassemble whole mortgage loans.
    1. “Securitized mortgages” are home loans that have been bundled into large groups and sold to investors. A group of about 4,000 mortgages can be “securitized” and sold just like a stock or bond. Investors like to buy groups of mortgages because they receive all the monthly house payments.
    2. Some groups of securitized mortgages were subdivided into smaller pieces, called “derivatives.” However, both of the fancy names refer to mortgage loans.
    3. The problem is that many bad loans (with no payments) got mixed in with good loans. That turned the all the securitized mortgages into bad investments, which are ruining our banks. It is a huge problem, and the government has to fix it, before our economy will recover.
    4. Total securitized mortgage and derivative market is estimated at $1.3 Trillion by a Professor of Economics at Ohio State University. (Also see the graph from Deutsche Bank at “The Death of Securitized Mortgages” )
    5. Government should buy up securitized mortgages and derivatives at the lowest market price, which is set via a reverse auction. (Google on “reverse auction”.)
    6. Squatters, who sit on their mortgage derivatives, in order to extort big $ from the rest of the system, can be forced to sell. (Law is analogous to eminent domain, or sales forced on cybersquatters that registered the domain names of well-established companies.)
    7. Government pays mortgage derivative squatters at market price set by previous reverse auctions, perhaps with a penalty to the squatters.
    8. Sellers give up all rights. No new law there.
    9. Banks, investors, and insurers now have cash instead of questionable mortgage loans and derivatives. So, the banking system is healthy with cash to lend.
    10. Credit will flow, and the economy will grow.

    C) Government reassembles whole loans from securitized mortgage components and derivatives.

    D) Government sorts the newly reassembled whole loans (mortgages) into groups according to risk/quality.
    1. Government uses traditional mortgage experts and guidelines to sort the home loans into quality groups, for example, a high quality group would include homeowners with 20% (or more) equity in their house at today’s market price; and house payments that are 25% (or less) of homeowners monthly income.

    E) Government (RTC) sells the reassembled whole loans to traditional mortgage banks.
    1. This solves the problem of renegotiating home loans with homeowners. Read on.
    2. Law must be changed so that reassembled whole loan mortgages cannot be securitized into derivatives, again.
    3. An important purpose is to reconnect each homeowner with his lender, and vice versa.
    4. It eliminates incentive for mortgage lenders to make predatory and junk loans. If the loan fails, the lender is stuck with a bad loan.
    5. Government recovers much of the $1.3 Trillion purchase cost, because government auctions off the reassembled mortgages.
    6. The lower quality, more risky mortgages would fetch a lower price at auction.
    7. Mortgage companies, that buy the risky loans, will have more room to negotiate with the homeowners.
    8. Some homeowner negotiations will not succeed. Those homeowners will move into affordable rentals. (The government does not owe everyone a free house.)
    9. Other renters would like to buy those empty homes at reduced market prices.
    10. If the government gets stuck with some homes, the government could profit by selling the homes when the housing market recovers.

    F) Insurers like AIG may be reorganized through bankruptcy.
    1. Securitized mortgage pools never made business sense, unless they were protected by various insurance schemes.
    2. Those insurance schemes always were a scam.
    3. Insurance only works when most of the insured assets are never hit with a disaster. That is why flood insurance does not work very well. A major flood ruins all the buildings in a large area, all at the same time. So, the insurance company goes broke, and people that bought the insurance are not protected. That is the problem with securitized mortgage insurance. In an economic downturn, the “disaster” hits all the houses at the same time. Securitized mortgage insurance was doomed to fail, and the insurance companies went broke in 2009.
    4. Companies that ran the insurance scam may have to go through bankruptcy.
    5. Never ending government bailouts for insurers like AIG are just throwing good money after bad. So, stop the bailouts.

    This plan is inexpensive, tried and true. It leaves the banks healthy, with cash to lend. It restores trust in the credit markets, so loans will be made. It reassembles mortgage derivatives into whole loans, and restarts traditional mortgage lending. People can get loans to buy homes. Credit will flow, and the economy will grow.*


    *The economy will grow if President Obama’s massive tax, borrow, and spending plans can be stopped, before he creates another Great Depression. Presidents Hoover and Roosevelt already tried to tax, borrow and spend their way out of a recession in the 1930s. Instead, they created the Great Depression, which lasted 12 years. Straight as he goes, President Obama is doing it, again. Nevertheless, cleaning up the securitized mortgage mess is a necessary first step.

    If President Obama announced Steps 1 and 2, today, the stock market would go up within hours. Investors love a real business plan, instead of a political pork plan. Millions of people will be wealthier, feel wealthier, and have more money to spend. That will jump start the economic recovery within days.

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