L.A. Times: Romney Will Repeal Those Wall Street Reforms!!! Patterico: I Hope He Does!!!
The L.A. Times reports: Romney victory would probably weaken Wall Street reforms. The deck headline: “If elected president, Mitt Romney could appoint new leaders at several agencies who would take a less aggressive approach to financial regulation.”
If Republican Mitt Romney wins the presidency next week, enough Democrats probably would be left in Congress to block his promise to roll back the slew of Wall Street rules enacted in response to the financial crisis.
But when it comes to regulations, a president doesn’t have to change the laws.
He can simply change the people enforcing them.
Oh. My. God. Scary, huh? It sure would be awful to do away with those awesome reforms, wouldn’t it? Barack Obama made that clear in the first debate:
Obama has touted the financial regulatory overhaul as the “toughest reforms on Wall Street since the 1930s.”
“Does anybody out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?” Obama said during last month’s first debate. “Because if you do, then Gov. Romney is your candidate. But that’s not what I believe.”
Guess what? That’s very close to what I believe. I don’t think excessive regulation got us into this mess — but it sure is keeping us from getting out of it. Some of the regulations in Dodd-Frank, as well as similar regulations, are indeed currently at the root of many of our problems.
Stick with me for a second. We’re going to discuss monetary policy. It won’t hurt a bit, I promise.
Simply put: inflation occurs when money is “loose” — when there is a lot of money in the “money supply.” Deflation can occur when money is excessively “tight” — when the money supply contracts and banks aren’t lending. Econ 101, right?
This means that when you’re in a recession or depression, you don’t want to make things “tight.” The great Milton Friedman taught us that the likely cause of the Great Depression was the Fed’s action in contracting the money supply at our first economic downturn. The contraction of the money supply took what might have been a minor disaster, and ensured that it would be devastating for years to come.
Fed Chairman Ben Bernanke is a student of the Great Depression and completely agrees with Friedman’s thesis. So much so, in fact, that Bernanke told Friedman in 2002, on the occasion of Friedman’s 90th birthday:
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.
And yet . . . we are. Right now.
Bernanke’s singular goal in dealing with the financial crisis was to avoid repeating the mistake of the Great Depression, and Bernanke instituted a policy of slashing interest rates, and injecting money into the economy through “quantitative easing” (buying financial assets from banks, similar to printing money but no printing press is involved) to expand the money supply, with the goal of preventing us from going into a deflationary spiral.
Wonderful. Except, Dodd-Frank and other regulations are countering the Fed’s actions. Let’s have Steve Hanke explain. This passage is worth re-reading 2-3 times until it makes sense, because this is important:
[M]ost people believe that monetary policy has been ultra-loose since the collapse of Lehman Brothers in September 2008. Well, by standard accounts, it has been – the quantity of state money has almost tripled since September 2008. When looked at through the proper lens, however, the picture is quite different.
The policies that affect bank money – like the Basel III capital requirements and the Dodd-Frank financial regulatory legislation, for example – have forced banks to de-leverage and contract their lending. Indeed, monetary policy, as it affects bank money, has been tight, and the quantity of bank money in the U.S. has fallen by 9.54% since Lehman Brothers collapsed.
With bank money making up 94% of the total money supply at the onset of the crisis, it is easy to see why its decline has been difficult for the producers of state money (the Fed) to offset. Not surprisingly, the explosion in state money has failed to overcome the decline in bank money.
In consequence, and contrary to the conventional view, the overall monetary stance in the U.S. – thanks largely to draconian bank regulations – has been tight since the financial crisis began.
Got that? The quantity of bank money is waaaay bigger than the quantity of state money. You can be as loose as you like with state money, and quantitatively ease on down the road all you want — but if you have regulations in place that contract the supply of bank money, you’re not going to be able to expand the money supply properly. And the regulations Obama loves so much are have exactly this effect. The requirement that banks raise their capital asset ratios causes banks to stop lending. And so, whatever actions the Fed takes vis-a-vis state money are getting drowned out by excessive regulation of bank money.
In essence, we are repeating the mistake of the Great Depression.
And President Dumbo, who can’t help his kid do grade school math, doesn’t get it. The quote above proves it. Romney the businessman does get it.
For God’s sake, can we finally get somebody into office who understands this stuff?
UPDATE: Foo Bar convincingly argues in comments that Romney also favors the sort of regulations that this post decries. At the same time, he is looking to rewrite Dodd-Frank. I’d like to see more concreteness in his positions, and repealing Dodd-Frank is a positive step, but the reader should be aware that Romney in fact does not appear to be a subscriber to the Hanke analysis and solutions I set forth in this post.
UPDATE 6-16-14: Well, live and learn. Since beginning to study Austrian economics, I have encountered another theory for what caused the Great Depression which is pretty much the opposite of the Keynesian one advocated by Friedman. I think the Austrian one makes more sense. To explain why would require its own post, but I think it’s incumbent on me to append this footnote to register my disagreement with the Friedman/Bernanke perspective.
Ding.
Patterico (8b3905) — 11/3/2012 @ 2:21 amWill obama redistribute his stash to the victims of his policies?
mg (31009b) — 11/3/2012 @ 2:41 amOne of the things I don’t grok about politics is the need for new regulations in response to behavior that was already illegal and being prosecuted.
In all honestly, I didn’t realize that banks had capital asset ratio requirements or how this affected our money supply or lending (though it does seem pretty obvious how this would affect lending).
But then, I’m not running for president.
Dustin (73fead) — 11/3/2012 @ 2:52 amDustin;
New regulations were desperately necessary to distract people from the basic fact that the ‘housing bubble’ was a consequence of government mandated social engineering. Social engineering, BTW, which lots of people had said all along was a time-bomb waiting to go off.
If enough people had realized that, then their faith in the State’s capacity to be a loving mother might have been undermined, and that would be Really Dreadful.
C. S. P. Schofield (fdfc57) — 11/3/2012 @ 5:26 amthe important thing is china is still lending to us for so we can make sure everybody has food stamps for so they can have tasty pot pies and honeynutcheerios and peanut patch brand cajun style boiled peanuts
Yum!
plus we have an epidemic of disabled people bless their hearts
happyfeet (63b54a) — 11/3/2012 @ 5:45 amI don’t see how any President can reverse the current course of the country economically.
However, I’m not a guy who’s made MILLIONS in the field of finance and business.
So I figure I want someone WHO MIGHT KNOW HOW to become President. Not some government employed all his life community organizer and crypto communist with Muslim affections.
Since there is one who wants the job well then . .
MITT; YOU’RE HIRED!
Jcw46 (f23062) — 11/3/2012 @ 5:45 amEVERY time the government gets involved in a market it causes a distortion—period. I’m not saying that government shouldn’t play a role, but when it starts picking winners and losers, the legislation benefits those with friends in the legislature at that particular time.
Mayor Marathon (721840) — 11/3/2012 @ 6:11 amthis is similar to how governor fatwhore’s decision to disallow hurricane deductibles in new jersey will inevitably lead to higher insurance rates
happyfeet (63b54a) — 11/3/2012 @ 6:31 am“Does anybody out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?” Obama said during last month’s first debate. “Because if you do, then Gov. Romney is your candidate. But that’s not what I believe”
john b (f6ebf1) — 11/3/2012 @ 6:32 amSad, Barky, sad. What got us into this mess was assholes like you and your ACORN “folk” (oce word) and feckless bank officers who did not stand up against your bullying tactics. Barky, YOU caused the mortgage collapse.
Well the rejoinder, is why didn’t dodd Frank, stop MF Global, because it left out the basic rule that you can’t commingle client’s accounts, and ofcourse, Corzine is still an DNC bundler,
narciso (ee31f1) — 11/3/2012 @ 6:41 amDon’t you love how someone makes a claim about Romney meaning it to be a huge negative and it turns out to be a recommendation.
I’ve seen a few like that from liberal/Progressive Media. they’ve actually helped me rethink by attitude about Romney as a viable candidate and as mine.
Jcw46 (f23062) — 11/3/2012 @ 7:22 amgovernment by it’s nature and scope will always pick winners and losers.
The best that can be hoped for it that their winners are actual winners and the losers actual losers.
Obama and his government by HIS nature has picked losers.
Jcw46 (f23062) — 11/3/2012 @ 7:25 amI predict that if Obama carries Illinois it will be by 10,000 votes, found the day after the precincts had closed. 😉
nk (875f57) — 11/3/2012 @ 7:32 amCan’t wait to see the MSM define the classical meaning of sarcasm and synicism, when Obama loses.
nk (875f57) — 11/3/2012 @ 7:34 amPatterico, none of that matters. Most people don’t think; they react. And images are more important than substance. Most people react to topics in bumper sticker style.
You know me. What do you think would happen if I discussed what occurred in Libya at work, with these supposedly intelligent people? Now, a thought experiment. Same Libyan situation. Same campus. Republican President. What are the results now?
Bumper sticker thinking.
Heck, in my neighborhood, there is a woman—smart, successful, and pretty—who has a Biden 2008 sticker on her car. Really.
I’m worried. Look at what Bill Maher said, just to add fuel to a fire.
This entire administration has been a horrible mess, and yet I know smart people who insist that this President is one of the “greatest.” I’m staggered…because of the hypocritical partisanship involved—but it goes beyond partisanship to some kind of strange place I cannot fathom.
Fingers crossed for Tuesday.
Simon Jester (e9e500) — 11/3/2012 @ 7:51 am____________________________________________
assholes like you and your ACORN “folk” (oce word) and feckless bank officers who did not stand up against your bullying tactics
And keep in mind that if leftism were a race or ethnicity (or religion, or gender, or sexuality), the only race that nitwits like Obama and Holder would care about is the race (or “race”) of liberalism.
So-called crony capitalism — fueled by basic greed — is a phenomenon that can be all too easily triggered in many people regardless of their politics. But since the left generally operates on a sea of “feelings,” in which integrity and ethics are sacrificed at the altar of do-gooderism and kumbaya hugs and kisses, a lot more two-faced irony and hypocrisy (ie, “limousine liberalism” or “champagne socialism”) will come out of liberal-dominated hierarchies than those managed by people of the right.
Mark (66bba6) — 11/3/2012 @ 7:51 am__________________________________________
who has a Biden 2008 sticker on her car. Really.
I’d be more worried if it said “Biden 2012” or, worse yet, “Biden 2016.” Hopefully she’s a recovering centrist (or liberal) — who therefore is often vulnerable to losing a grasp on reality, and exhibited that trait 4 years ago — and has since been shocked out of her stupor. But I see societies like France, Argentina, Venezuela and Mexico, and observe their voting records, and the idiocy of humans regrettably can go straight to their very essence.
Mark (66bba6) — 11/3/2012 @ 7:59 amis it just me or did team romney bench sununu after he screwed up the push back on colin powell?
they should bring him back this barbara comstock sr. advisor to the romney campaign idiot on cnn can’t make an argument to save her empty-headed life and you can tell she’s trying her hardest
happyfeet (63b54a) — 11/3/2012 @ 8:26 amWell he took it back, which was the problem, what did Comstock say that was so weak?
narciso (ee31f1) — 11/3/2012 @ 8:31 amshe seems unable to ariculate the idea that every vehicle jeep decides to make in china is one less vehicle they will need to make in ohio
it’s a simple concept and yet it eludes her utterly
happyfeet (63b54a) — 11/3/2012 @ 8:44 amRegardless, it would be lost on the ‘rocket surgeons’ at CNN.
narciso (ee31f1) — 11/3/2012 @ 8:47 amBernanke’s singular goal in dealing with the financial crisis was to avoid repeating the mistake of the Great Depression, and Bernanke instituted a policy of slashing interest rates, and injecting money into the economy through “quantitative easing” (buying financial assets from banks, similar to printing money but no printing press is involved) to expand the money supply, with the goal of preventing us from going into a deflationary spiral.
Wonderful
Romney doesn’t seem to think this is so wonderful. He has said that he would not reappoint Bernanke. Romney said he wants more focus on a strong dollar, which is contrary to a policy of very low interest rates.
Romney said he thinks QE2 was not terribly effective and also said that QE3 and other Fed stimulus is not going to help the economy.
Foo Bar (c1726e) — 11/3/2012 @ 8:50 amFoo Bar,
Patterico’s post clearly says it’s not Bernanke’s policies that are causing the mistakes of the Great Depression to be repeated, it’s the oppressive federal regulations. Plus, the Fed’s current composition shows that even if Romney were to replace Bernanke with a fiscal hawk, it would be unlikely to change the Fed’s general direction.
DRJ (a83b8b) — 11/3/2012 @ 9:09 amBut it would be a start.
DRJ (a83b8b) — 11/3/2012 @ 9:10 amI’m not impressed with Bernanke. Arguably the worst Fed chair in decades. Romney can toss him out as far as I’m concerned.
Btw “wonderful” in context in this post means, “all well and good, as far as it goes.” It’s pretty obvious from context.
Patterico (8b3905) — 11/3/2012 @ 9:12 amRomney doesn’t seem to think this is so wonderful. He has said that he would not reappoint Bernanke. Romney said he wants more focus on a strong dollar, which is contrary to a policy of very low interest rates.
Romney is anticipating the inflation that will hit when the economy takes off. The present depression is all that is keeping it from hyper- territory.
I would also like to see Romney start to break up the huge banks as they are the next crisis waiting for the next Congress to screw up.
Dodd and Frank are the last people I want to see writing laws about finance. When we get that done, we should start on Sarbanes-Oxley. Then we might see some IPOs.
Mike K (326cba) — 11/3/2012 @ 9:13 amPatterico’s post clearly says it’s not Bernanke’s policies that are causing the mistakes of the Great Depression to be repeated, it’s the oppressive federal regulations
??? True, but irrelevant to my point. Patterico’s post clearly suggests that Bernanke has been doing the right thing by slashing rates, quantitative easing and that Romney understands these issues. So why does Romney think Bernanke has been wrong to do what he’s been doing?
even if Romney were to replace Bernanke with a fiscal hawk, it would be unlikely to change the Fed’s general direction
That may or may not be true, but regardless, if the Fed’s general direction has been correct but Romney doesn’t think it has been correct, why am I supposed to feel good about Romney’s understanding of these issues?
Foo Bar (c1726e) — 11/3/2012 @ 9:16 am“all well and good, as far as it goes.”
OK, so you think Bernanke’s policy of slashing interest rates and quantitative easing has been all well and good (as far as it goes), or you think it’s been the wrong policy?
Foo Bar (c1726e) — 11/3/2012 @ 9:19 amFDR established the SEC to regulate the stock exchanges and public corporations to prevent another 1929 crash.
How did that work out?
The answer to failure of government regulation (to progressives) is always…more government regulation.
I hope and pray Mitt will unwind the whole sorry mess.
Patricia (e1d89d) — 11/3/2012 @ 9:20 amPatterico asked, For God’s sake, can we finally get somebody into office who understands this stuff?
Current office holders understand it quite well, and they’re working hard to make sure the private sector continues to be strangled with government red tape and other forms of enterprise killing over-regulation even as they ridicule commercial success and demonize the profit motive.
Only an economically exhausted and disillusioned citizenry will allow an ever expanding federal government to usurp the right of independent men to build a future for themselves and their families. Obama et al intend to impose collectivist policies from the top down, every bit of his record in office proves it, and his reelection is the final step toward that dark night from which there will be no morning sun.
Incidentally, among the several obvious reasons so many polls over-sample Democrats is so they can continue to report close results so when they stuff the ballot boxes on election day they can claim the undecideds and independents almost all broke for Obama. Get ready, be prepared. The fix is in.
ropelight (7a675e) — 11/3/2012 @ 9:20 amR.I.P. Bill Dees, songwriter that co-wrote “Oh, Pretty Woman” and “It’s Over” with Roy Orbison
Icy (fcf8ec) — 11/3/2012 @ 9:24 amI posted this on the older unemployement thread with a longer comment but am cross-posting here to make sure people see it. Romney’s 30 second closer. “Love of Country”.
http://www.youtube.com/watch?v=ShdiYQ1EHvA&feature=youtu.be
elissa (3f3e6e) — 11/3/2012 @ 9:35 amHere’s a snippet from a Romney campaign on regulator y policy. I added the bold:
Also, in the preceding paragraph, it says the financial crisis was “driven by the over-leveraging of our financial institutions and
Foo Bar (c1726e) — 11/3/2012 @ 9:45 amour homeowners”.
This ad is a good one too, taken from the Romney Ryan rally speeches in Defiance Ohio. Here’s a Mitt quote: “It’s time we have leaders who care more about the people than the politics.” It’s time we have leaders who care more about the people than the politics. Gee, I’m trying to remember where else I heard this same sentiment somewhere earlier this week. Um. Oh wait!!! Now I remember! Why, it was the Governor of New Jersey while he was being a leader.
http://www.youtube.com/watch?NR=1&v=EP6Q5nNAgrI&feature=endscreen
elissa (3f3e6e) — 11/3/2012 @ 9:46 amBernanke is saved by that dubious honor, by Governor Strong, but only because the latter was dead by ’29,
narciso (ee31f1) — 11/3/2012 @ 10:02 am“??? True, but irrelevant to my point. Patterico’s post clearly suggests that Bernanke has been doing the right thing by slashing rates, quantitative easing and that Romney understands these issues.”
Foo Bar – If you take the time to digest Patterico’s post, it actually suggests that Bernanke has been repeating the mistakes that led to the Great Depression, the references to Friedman were intended to reinforce those points. They were sort of hard to miss.
The added burden of regulation imposed by Congress is icing on the cake. Regulation has made Fed policy more ineffective than usual. It is all right there for the interested reader.
daleyrocks (bf33e9) — 11/3/2012 @ 10:03 am_____________________________________________
Romney’s 30 second closer. “Love of Country”.
Meanwhile, the mobster currently in the White House expresses what he wants people to be motivated by…
That someone as twisted, coarse, immature and emotionally cruddy as Obama should have more than a fair chance of being reelected illustrates that America truly is doing to itself what Obama’s pal Jeremiah Wright has been pining for.
Mark (66bba6) — 11/3/2012 @ 10:05 am“Also, in the preceding paragraph, it says the financial crisis was “driven by the over-leveraging of our financial institutions and
our homeowners”.”
Foo Bar – Do you disagree with that statement?
daleyrocks (bf33e9) — 11/3/2012 @ 10:06 amIf the GOP doesn’t take control of the Senate he may have trouble doing so.
Great post. Too bad this type a thing doesn’t get any play with the MSM and sound bite campaign rhetoric.
Mattsky (4ef377) — 11/3/2012 @ 10:07 amMoney makes me dizzy. Is “overleverging” a way of saying “loans to folks that cannot pay it back”?
nk (875f57) — 11/3/2012 @ 10:09 amFoo Bar – If you take the time to digest Patterico’s post, it actually suggests that Bernanke has been repeating the mistakes that led to the Great Depression
DRJ:
It’s all so very clear!
Foo Bar (c1726e) — 11/3/2012 @ 10:09 am“It’s all so very clear!”
Foo Bar – It is to me. Sorry you are having so much trouble with the plain english.
daleyrocks (bf33e9) — 11/3/2012 @ 10:11 amGov. Christie threatens unions over allegations they are turning away out of state work crews.
“I’ve been on the phone with PSE&G [Public Service Electric and Gas Company], JCP&L [Jersey Central Power & Light] and the union, and they’ve all absolutely promised me they would never turn away a single worker whether they were union or nonunion, and I wouldn’t allow it,” Christie told reporters shortly after 3:30 p.m. Friday afternoon.
“I would invoke my powers under the Disaster Control Act to prevent that from happening, but they’ve assured me we don’t have to.”
elissa (3f3e6e) — 11/3/2012 @ 10:13 amBarack 0bama
Colonel Haiku (0ffd38) — 11/3/2012 @ 10:17 ambroken idol and you know
he’s rollin’ snake eyes
Foo Bar – Do you disagree with that statement?
I know enough to know what I don’t know for sure. I think that characterization of the cause of the financial crisis probably has some truth to it, but I am not an expert on the topic.
My point was that capital requirements can serve to prevent financial institutions from over-leveraging, so the fact that Romney says over-leveraging of financial institutions was part of the problem suggests that Romney probably sees merit in enhanced capital requirements, which indeed he goes on to say explicitly in the next paragraph.
Sorry you are having so much trouble with the plain english.
Are you not sorry that DRJ is (according to you) having trouble with it? Maybe I am not worthy of having this all spelled out to me, but if DRJ is (supposedly) confused on this point, maybe you could explain in this comment section, for her benefit, how Patterico’s post says that Bernanke is repeating the mistakes of the Great Depression.
Foo Bar (c1726e) — 11/3/2012 @ 10:28 am0bama voters
Colonel Haiku (0ffd38) — 11/3/2012 @ 10:29 amyer own Personal Jesus
reach out touch manque
Jake Tapper at Political Punch this morning:
Asked about the revenge kerfuffle, Obama campaign spokeswoman Jen Psaki said, “Mitt Romney is ending this campaign with scare tactics in Ohio with a fake ad about the auto industry,” she said,…….. “The President was simply suggesting if you think the American people deserve better and if you believe the President is offering a better deal for the middle class you have the power to cast your vote.”
elissa (3f3e6e) — 11/3/2012 @ 10:39 amGee, wouldn’t it be better if the Feds had less power?
If you are complaining about just how terrible the other guy would make things for everyone, you really don’t need to answer that. There was a time in living memory when most people rarely interacted with the Feds, and got on just fine no matter who was in office.
So, rather than complain that Romney would decrease Federal power, both sides should be hoping he does.
Kevin M (bf8ad7) — 11/3/2012 @ 10:42 am“Does anybody out there think that the big problem we had is that there was too much oversight and regulation of Wall Street?”
Yup.
“Because if you do, then Gov. Romney is your candidate.”
Yup.
“But that’s not what I believe”
Well, that’s because you’re a socialist moron.
Dave Surls (46b08c) — 11/3/2012 @ 10:46 amHe clearly doesn’t understand his own talking point,
narciso (ee31f1) — 11/3/2012 @ 10:56 amThe whole notion, that Geithner is aa tough regulatory enforcer, when at the NY Fed, he didn’t employ existing regulations is laughable, along with anything else, Geithner has said,
narciso (ee31f1) — 11/3/2012 @ 11:06 amSearch terms:
“Republicans Quantitative Easing” and “The London Whale”
Try doing a search for the first one on this site alone…
sleeeepy (b5f718) — 11/3/2012 @ 11:42 amc’mon sleeeeeepy put
Colonel Haiku (0ffd38) — 11/3/2012 @ 11:47 ama dollar in teh kitty
perfection and grace
Sure, fight Wall Street, re-elect President Goldman Sachs Obama …
SPQR (ca3829) — 11/3/2012 @ 11:48 amthe “Scrooge Mc Duck. ‘store called,they want their jerk back
pdbuttons (631b6d) — 11/3/2012 @ 12:05 pmUh, it doesn’t.
Literate much?
Patterico (8b3905) — 11/3/2012 @ 12:38 pmFoo Bar,
My reading of Patterico’s post is that Bernanke’s and the Fed’s policies make money more available, but they have been undermined by federal regulations that cause banks to restrict access to money. In my view, continuing the Fed’s policies is problematic because, even if the policies are correct in theory, they won’t work when they are undermined by countervailing mechanisms.
Thus, one can be in favor of what Bernanke and the Fed are doing and believe they are right, but nevertheless oppose continuing those policies in the existing regulatory environment.
DRJ (a83b8b) — 11/3/2012 @ 12:44 pmOf course, the better view is to fix the regulatory environment.
DRJ (a83b8b) — 11/3/2012 @ 12:46 pmhow Patterico’s post says that Bernanke is repeating the mistakes of the Great Depression.
This is not *my* interpretation of your post. This is the interpretation of daleyrocks.
Your post is so crystal clear that 2 of your star commenters (DRJ and daleyrocks) came to the opposite conclusion.
Foo Bar (c1726e) — 11/3/2012 @ 12:54 pmI thought legislative acts tying Bernanke’s hands were the point of this post.
But I’m told that I’m not thinking all that good lately.
nk (875f57) — 11/3/2012 @ 12:56 pmPeople disagree and that often leads to interesting discussions. Fortunately, this isn’t a website where groupthink is required.
DRJ (a83b8b) — 11/3/2012 @ 1:01 pmIf I could just only be a flower by a stream.
nk (875f57) — 11/3/2012 @ 1:06 pmDRJ:
That’s a reasonably coherent view, but that doesn’t seem to be what Romney believes. It’s not that he thinks the easy money Bernanke policy was futile because of the misguided increased capital requirements from Dodd-Frank. As I showed by linking to Romney’s campaign doc, enhanced capital requirements are one of the provisions in Dodd-Frank that Romney seems to agree with. Furthermore, Romney has said that he prefers a strong dollar policy, which implies tighter money and higher interest rates. It’s not that higher rates would have made sense only in the past in the environment of tighter capital requirements- he wants it pursued going forward, even after he presumably could modify Dodd-Frank.
If Romney believed what you are saying, then maybe he’d criticize Bernanke for pursuing pointless easy money policies in an environment of misguided stricter capital requirements for banks, but his plan going forward would be to scale back or get rid of the capital requirements so that Bernanke’s easy money policy can do its magic. That’s not what he’s said, though. To the extent that Romney’s been specific, he seems to be in favor of enhanced capital requirements and in favor of higher rates.
Foo Bar (c1726e) — 11/3/2012 @ 1:08 pmFoo bar, I have some reading material for you. You could start with Nicole Gelinas’ book “After the Fall. Then you could read Amity Schlaes’ “The Forgotten Man.”
I have some others but those will get you started. If you want another, try “Lords of Finance” about the three men who tried to control the world’s financial health until one of them (Benjamin Strong ) died. Then it fell apart.
Let me know if you want more titles.
Mike K (326cba) — 11/3/2012 @ 1:09 pmI think Romney has always said he will work with Congress to implement the best policies he can get. For the most part, that strikes me as a pragmatic rather than a principled approach. As a result, I suspect Romney will view the policies in the bigger picture — in other words, in how they mesh together — rather than drawing a line in the sand on each issue. I can see the benefits of both but in the current environment, I support the pragmatic approach that might actually get something good done.
DRJ (a83b8b) — 11/3/2012 @ 1:11 pmOne and one half hours to daughter and then I’ll be the nicest commenter here. Except to daleyrocks and his offspring Elephant Stone.
nk (875f57) — 11/3/2012 @ 1:16 pm“My reading of Patterico’s post is that Bernanke’s and the Fed’s policies make money more available, but they have been undermined by federal regulations that cause banks to restrict access to money.”
Foo Bar and DRJ – I believe this is what I indicated in #36. Bernanke’s policies have lowered effective interest rates to essentially zero, giving the Fed basically no room to maneuver with it usual box of tools.
Foo Bar – You may also want to examine how much of each Treasury auction the Fed is snapping up these days.
As another commenter pointed out earlier, these concepts do not take rocket surgeons to understand them.
daleyrocks (bf33e9) — 11/3/2012 @ 1:20 pmnk – Go back to making knuckle babies with your favorite fist or dream of your sheep and goats, pig.
daleyrocks (bf33e9) — 11/3/2012 @ 1:22 pmFoo Bar,
It’s true that Romney supports some provisions of Dodd-Franks (such as capital buffers and liquidation provisions), but he also thinks it should be repealed and replaced. It’s my impression that his support for capital buffers is primarily aimed at the largest “too-big-to-fail” banks, because he doesn’t want to force taxpayers to continually bail them out.
DRJ (a83b8b) — 11/3/2012 @ 1:24 pmI am concerned about endless quantitative easing, but unlike some “conservatives” I am convinced that when you are looking at a potential depression, expanding the money supply is the obvious solution of a monetarist. My point in this post has less to do with QE and more to do with advancing the arguments by Hanke, which I find compelling: — that Bernanke, by failing to freeze the Basel III capital requirements (which he has control over, as I understand it) and failing to oppose the Dodd-Frank requirements (which he had a soapbox for), Bernanke has failed to deal with the problem of contraction of the bank money supply.
I think you’re confusing two things: Bernanke’s quantitative easing policy, and his failure to take on burdensome regulation that contracts the bank money supply.
I don’t criticize the first, and although I am open to persuasion to the contrary, my understanding of monetary policy persuades me that it was a necessary policy given that we needed to expand the money supply.
I do criticize the second.
However, the second issue is not really within Bernanke’s purview, so it would not be a fair representation of the post to say Bernanke is repeating the mistakes of the Great Depression. That would be Congress and Obama. Bernanke just hasn’t done enough to jawbone against the contraction of bank money.
There is no question that irresponsible actions by banks contributed to the crisis. But that doesn’t mean that the cure is to suddenly impose on them burdensome requirements that freeze the money supply. Did you ever wonder why, with all the QE and taking interest rates almost to zero, somehow there isn’t massive lending, and it’s still impossible to get a loan? Look at those wonderful regulations that Obama is touting in this post, Hanke says, and you just might find the answer.
By the way, if Romney is all for the Dodd-Frank requirements that Hanke finds counterproductive, then I guess Obama is lying about Romney being the candidate of deregulation and lack of oversight. And the L.A. Times is lying too. Right?
But if that’s the case, as you suggest, I would like to hear Romney’s argument. To me I thought it was fairly well accepted that you fight deflation by expanding the money supply, and I think Hanke’s argument is insightful and provocative with respect to the effect that capital asset requirements have on the money supply. But I am always a student in this area and don’t pretend to know everything. Nor do I claim Romney does. He seems to have a better grasp on this stuff than Obama does, though, in my opinion.
Patterico (8b3905) — 11/3/2012 @ 1:24 pmA kidney stone is for sure one hard thing to pass, but an elephant stone has to be a ibtch.
nk (875f57) — 11/3/2012 @ 1:25 pmI don’t agree with this. Once you hit bottom with interest rates, you can buy assets from the banks — quantitative easing. Friedman made this point in connection with the Japanese recession, I believe.
In fact, I think the obsession with interest rates is losing sight of the real issue. Money supply is key, not interest rates.
Patterico (8b3905) — 11/3/2012 @ 1:26 pmdaleyrocks:
I agree.
DRJ (a83b8b) — 11/3/2012 @ 1:27 pmBut you can’t buy assets in this regulatory environment, because people don’t have access to the money. The only way zero interest rates help is if people have money to buy assets … or if a politician wants to avoid inflation until the end of the current term.
DRJ (a83b8b) — 11/3/2012 @ 1:29 pmbest of luck nk
Colonel Haiku (0ffd38) — 11/3/2012 @ 1:29 pmhope you find a sassy ewe
to pull w00l with you
daleyrocks, I told you where you could find me and we’re not all that far away. I have met you and you have met me, you know. We are not internet, you and me, we are real.
nk (875f57) — 11/3/2012 @ 1:29 pmWhen I say “you” can buy assets I mean the Fed can. Sorry, I wasn’t clear. This injects money straight into the financial system.
Patterico (8b3905) — 11/3/2012 @ 1:30 pmI guess my last comment supports Patterico’s argument that money supply is what matters, not interest rates. But IMO they work together. People need access to money but they also need it to be available at a cheap rate.
DRJ (a83b8b) — 11/3/2012 @ 1:31 pm“For God’s sake, can we finally get somebody into office who understands this stuff?”
You do know that Mitt wants tighter money, right?
andy (dcc9f1) — 11/3/2012 @ 1:33 pmHaiku, go f*** your mother.
nk (875f57) — 11/3/2012 @ 1:34 pmi’m so excited
Colonel Haiku (0ffd38) — 11/3/2012 @ 1:34 pmyou know i just can’t hide it
and it’s been four hours
Okay, then we aren’t disagreeing, but I think the regulatory environment would still undermine investment and growth. People are afraid to borrow and/or spend what they already have because of the regulatory and tax burdens. I think one thing we’ve learned from 2008-on is that loose monetary policy doesn’t work in a vacuum.
DRJ (a83b8b) — 11/3/2012 @ 1:35 pmHere are some thoughts from Ramesh Ponnuru on quantitative easing that I found helpful.
But I think Hanke’s insights are largely overlooked but perhaps very important. It’s a complex subject, however, and not subject to sound bites.
Patterico (8b3905) — 11/3/2012 @ 1:35 pmc’mon now nk
Colonel Haiku (0ffd38) — 11/3/2012 @ 1:36 pmmy mom is dead you sick f*ck
wouldn’t be prudent
Clearly the biggest thing we could do for the economy would be to do away with regulations, corporate taxes, minimum wage requirements, etc. Basically a lot of stuff that we’ll never get the 47% to agree to. But if we did it, we could start humming along like Germany.
Patterico (8b3905) — 11/3/2012 @ 1:37 pmI think the insight of the Great Depression is that there was a downturn and along came the Fed, which said: “Hey, we know what we’ll do! Let’s contract the money supply!” And you got years of 25% unemployment, and FDR remaking American society in a manner that helped nothing, but was the first grand application of the principle of not letting a good crisis go to waste.
Patterico (8b3905) — 11/3/2012 @ 1:39 pmEven in the short run, I think things will improve significantly if Romney eases the restrictions on coal, offshore oil and gas drilling and mining on federal lands. The price of energy will decrease and, coupled (hopefully) with an extension of the Bush tax cuts, it will free up money for investment and growth.
DRJ (a83b8b) — 11/3/2012 @ 1:44 pmBy the way, if Romney is all for the Dodd-Frank requirements that Hanke finds counterproductive, then I guess Obama is lying about Romney being the candidate of deregulation and lack of oversight. And the L.A. Times is lying too. Right?
No, of course not. Tighter capital requirements are not the only regulation in Dodd-Frank. For instance, Romney is unhappy with the Consumer Financial Protection Bureau (and I’m sure most posters here agree with Romney on that point). So there is a basis for characterizing Romney as being for lack of oversight, regardless of his views on capital requirements, leverage ratios, etc.
Foo Bar (c1726e) — 11/3/2012 @ 1:44 pm“I think that characterization of the cause of the financial crisis probably has some truth to it, but I am not an expert on the topic.”
Foo Bar – I think your statement above is clearly true and I’m not certain that DRJ are really disagreeing but approaching the subject from different angles.
The Fed has attempted to lower interest rates and make money more easily available, although because of the lower rates, not at sufficient enough returns to lure many risk takers back into the market.
At the same time regulations are acting at cross purposes to the Fed’s actions, making money more expensive and inhibiting risk taking.
The capital standards to which you keep alluding also encompass GSEs, which were and remain a major part of the financial meltdown, which parts of Washington had been warning about for years.
daleyrocks (bf33e9) — 11/3/2012 @ 1:45 pmClinton never had a Consumer Financial Protection Bureau. Does that mean he was against oversight?
DRJ (a83b8b) — 11/3/2012 @ 1:46 pmdaleyrocks,
At this point, I’m not sure what I think. I’m so glad I’m not an economist!
DRJ (a83b8b) — 11/3/2012 @ 1:49 pm“For instance, Romney is unhappy with the Consumer Financial Protection Bureau (and I’m sure most posters here agree with Romney on that point). So there is a basis for characterizing Romney as being for lack of oversight, regardless of his views on capital requirements, leverage ratios, etc.”
Foo Bar – I am virtually certain that everybody here who has completed the paperwork related to a mortgage or a mortgage refinancing can agree that the answer to solving the problems in the mortgage market is more consumer disclosure and that the CFPB will be a Godsend in this area.
daleyrocks (bf33e9) — 11/3/2012 @ 1:50 pmThe CFPB is making disclosure shorter.
andy (dcc9f1) — 11/3/2012 @ 1:52 pm“At this point, I’m not sure what I think. I’m so glad I’m not an economist!”
DRJ – If you put all the economists in the world end to end they wouldn’t reach a conclusion. Except Paul Krugman, perhaps.
I’m not sure we disagree the way Foo Bar claims. Bernanke has kept rates low. Non-state money supply has contracted. Banks don’t want to lend money because they get dinged by regulators and the returns aren’t there. They can make money by arbitraging customer deposits against treasuries. Obama’s war on business is succeeding.
daleyrocks (bf33e9) — 11/3/2012 @ 1:55 pm“The CFPB is making disclosure shorter.”
andy – Really?
daleyrocks (bf33e9) — 11/3/2012 @ 1:56 pmThe CFPB is making disclosure shorter.
Nonsense.
JD (13299a) — 11/3/2012 @ 2:05 pmI think this is right. We don’t know exactly how Romney would rewrite Dodd-Frank, but I think being in favor of repealing it is a good start. Maybe he is paying lip service to certain concepts and maybe not, but ultimately deregulation of bank money means more than a desire for “tight money” at the Fed — just like the current “loose money” policy at the Fed is more than outweighed by burdensome regulation.
To me the housing crisis wasn’t simply a matter of insufficient regulation. It was partially caused by the Fed, partially caused by a wave of insanity spreading through the nation, and partially caused by greed and people committing fraud. We set up a deal to fall apart, profit on it when it’s made, plan to profit on it when it falls apart, and lie to the pension funds to whom we sell slices of the pie. Nobody of significance has gone to prison for this stuff — why not?
Patterico (8b3905) — 11/3/2012 @ 2:07 pmNobody of significance has gone to prison for this stuff — why not?
You have to be joking.
JD (13299a) — 11/3/2012 @ 2:09 pmandy — Here are comparisons of before and after disclosures, as proposed by the Consumer Financial Protection Bureau. The loan estimate seems a little shorter, but the closing documents don’t look much different. I’d call it a wash.
daleyrocks — I agree regarding the impact of Obama’s policies. As for the Fed, I’m not sure what I think anymore. I understand the theory but I doubt Washington politicians of either Party will be willing to let the theory work instead of tinkering with it to the point of disaster.
DRJ (a83b8b) — 11/3/2012 @ 2:10 pmI also think banks can go to a President Romney and explain the problem, and he’ll listen.
Patterico (8b3905) — 11/3/2012 @ 2:10 pmNot at all. I think there was a ton of securities fraud involved in the mortgage backed securities and credit default swaps schemes. Do you disagree? Show me who was prosecuted and got significant time.
Patterico (8b3905) — 11/3/2012 @ 2:11 pm______________________________________
And you got years of 25% unemployment, and FDR remaking American society in a manner that helped nothing,
What is surprising to me is seeing statistics not too long ago that showed certain years in the middle of the Great Depression witnessed a fairly good decrease in unemployment and a seemingly healthy bloom of recovery. But such trends were short-lived, or didn’t last much beyond 12 months.
If anyone browses a typical Costco and sees the dynamics of mass consumerism, he or she will observe a part of human nature that is analogous to ants at a picnic. Namely, that no matter what happens or is attempted to deal with that — including the policies of even the dumbest of presidents — people will have an insatiable appetite to buy, buy, buy, and play, play, play.
Mark (66bba6) — 11/3/2012 @ 2:12 pmI put together CDOs knowing that the major underwriter is betting big on the failure of the CDO through credit default swaps. I also know that the underwriter is pressuring the lender to substitute questionable properties to increase the chance of failure. I tell none of this to the local carpenter’s union that just bought a big slice of the CDO. I go by a second house in the Hamptons when the deal goes through, and when it all comes crashing down I escape a prison term for failing to disclose all this?
Patterico (8b3905) — 11/3/2012 @ 2:14 pmI was joking. There were a plethora of reasons, some legal. Some not. Many of the players Goldman Sachs, Corzine, Fannie, Freddie, CRA, etc are traditional Dem constituents and fundraisers. That is why we haven’t seen prosecutions, IMNSHO.
JD (13299a) — 11/3/2012 @ 2:14 pm“The CFPB is making disclosure shorter.
Nonsense.”
Post #99 has a link to the shorter notice. Also changing is the fact that you’re not getting two sets — one from Truth in Lending Act and the GFE. But besides the form itself there’s also rules about how lenders can treat what is on the disclosure, and how things can change.
andy (dcc9f1) — 11/3/2012 @ 2:15 pmI see.
That’s all on Obama, by the way. Where is the outrage?
Patterico (8b3905) — 11/3/2012 @ 2:15 pmSorry I missed the snark, JD. It seems obvious now that I read it over again.
Patterico (8b3905) — 11/3/2012 @ 2:16 pmObama can’t possibly argue that we are not NOW aware of what happened. Where are the prosecutions?
I think I saw ONE that resulted in probation or some tiny amount of time at a fenceless country club prison.
Patterico (8b3905) — 11/3/2012 @ 2:17 pm100. regarding the genesis of all the market woes and housing debacle, I found the following book very enlightening and damning: The Big Short: Inside the Doomsday machine by Michael Lewis.
Bankers who belonged in jail were instead rewarded and kept their jobs. So nice that they profit regardless as their mistakes and losses are covered by taxpayers.
Calypso Louis Farrakhan (e799d8) — 11/3/2012 @ 2:17 pmI remember one other failed prosecution where the government twisted a bunch of emails to make the defendants sound like they were saying stuff they hadn’t said.
It’s not like there weren’t more obvious cases around. When the size of your credit default swap “hedge” dwarfs your potential profit from the deal succeeding, and you are trying to put weak properties in to back the mortgages, it’s pretty clear what’s going on. Journalists have reported on this, like ProPublica. Where is the DoJ?
Patterico (8b3905) — 11/3/2012 @ 2:20 pm“Obama can’t possibly argue that we are not NOW aware of what happened. Where are the prosecutions?”
Perhaps the banks went to President Obama and explained the problem and he listened.
andy (dcc9f1) — 11/3/2012 @ 2:20 pmObama can’t possibly argue that we are not NOW aware of what happened. Where are the prosecutions?
They cannot even honestly characterize the nature of the crisis.
JD (13299a) — 11/3/2012 @ 2:21 pmTo me the housing crisis wasn’t simply a matter of insufficient regulation. It was partially caused by the Fed, partially caused by a wave of insanity spreading through the nation, and partially caused by greed and people committing fraud.
Nicole Gelinas’ book is really worth reading on this. There was constant pressure on banks to lend to poor risks. Fannie/Freddie started buying loans that were shaky. Nobody had ever seen a failure of repayment. The last big crisis was when interest rates dropped after Reagan took office. This is my review from 2009.
The rating agencies “loaned” their reputations and banks were too greedy for returns. It turned into a bazaar with no controls.
Alan Greenspan bears a lot of blame for keeping rates too low, the same thing that happened in 1929.
Now, if we can just get rid of Obama, we can avoid the second Great Depression.
Mike K (326cba) — 11/3/2012 @ 2:22 pm“Andy” is kinda cute.
JD (13299a) — 11/3/2012 @ 2:23 pmandy,
The “before” forms included the two forms being downsized to one, and frankly they don’t look that much different to me.
Also, there’s no doubt the Obama White House has been receptive to big bankers and their concerns.
DRJ (a83b8b) — 11/3/2012 @ 2:26 pmThe Gelinas’ book is good, Mike K.
DRJ (a83b8b) — 11/3/2012 @ 2:27 pmHere is Freddie Mac’s 19 page step-by-step closing guide. The guide explains the process but does not include the actual forms. As andy notes, thanks to the Consumer Financial Protection Bureau, two of those forms are 2 pages shorter.
DRJ (a83b8b) — 11/3/2012 @ 2:48 pm“The policies that affect bank money — like the Basel III capital requirements and the Dodd-Frank financial regulatory legislation, for example — have forced banks to deleverage and contract their lending.”
Where’s the data on that?
here’s some
“What Downturn? Bank Profits Hit $34.5 Billion”
http://www.forbes.com/sites/halahtouryalai/2012/08/28/what-downturn-bank-profits-hit-34-5-billion/
http://www.reuters.com/article/2012/09/20/us-usa-economy-households-idUSBRE88J0X520120920
Sept 20 2012
sleeeepy (b5f718) — 11/3/2012 @ 3:01 pmU.S. household debt posts largest rise since 2008
Hey, Dud-Fwank was supposed to prevent too big to fail…oh, wait!
Mayor Marathon (721840) — 11/3/2012 @ 3:04 pmSept 20 2012
U.S. household debt posts largest rise since 2008
Slurpy has no clue why this might be.
JD (13299a) — 11/3/2012 @ 3:06 pmDon’t know much about economy, but I agree that:
To me the housing crisis wasn’t simply a matter of insufficient regulation.
Comment by Patterico — 11/3/2012 @ 2:07 pm
As I understand it,
MD in Philly (3d3f72) — 11/3/2012 @ 3:29 pm1) governmental policies forced lending institutions into lending to bad credit risk
2) lending institutions, not wanting to get stuck with a loss, found a way to lump the things and sell them as a speculative investment, without making clear what the real risks were
3) people bought them thinking they would get a good return/yield/whatever the term without appreciating the risk
4) at some point in time the fundamental fact that at the foundation of it all were risky loans that would default had the impact it had to eventually have
MD in Philly – It was a game of pass the trash between the originators of the trash and the buyers of the trash. Eventually the losses on the trash began impeding the ability of the originators of the trash to continue passing it along and the music stopped.
daleyrocks (bf33e9) — 11/3/2012 @ 3:38 pmPerhaps the banks went to President Obama and explained the problem and he listened.
Comment by andy — 11/3/2012 @ 2:20 pm
You see Mr. President, if you will just overlook these minor peccadilloes and bookkeeping errors, we will gladly donate every year the max amount we are allowed to your re-election campaign in 3 years. We will also be glad to donate generously to PAC’s that support you also, errr how does $20,000 sound? Not enough? Okay, we’ll make it $50,000 each year for the next three years. Oh by the way, here is $50,000 from each of us for your Presidential Library.
They explained and he listened alright!
peedoffamerican (1563b7) — 11/3/2012 @ 5:16 pmI had to cut short my earlier comment-
It seems some always want to pass new regulations when the problem wasn’t that there were not enough regulations, but that people were not doing the right things under the previous regulations.
So new regulations without a commitment for more responsible behavior just ends up, at best, with a new set of mess-ups.
MD in Philly (3d3f72) — 11/3/2012 @ 7:46 pmLike I was pointing out earlier, Geithner at the NY Fed, had all the right tools, yet didn’t use them,
narciso (ee31f1) — 11/3/2012 @ 7:57 pmDon’t know much about economy, but I agree that:
To me the housing crisis wasn’t simply a matter of insufficient regulation.
Comment by Patterico — 11/3/2012 @ 2:07 pm
Texas didn’t have a real estate crash because it didn’t have a real estate bubble…
sleeeepy (b5f718) — 11/3/2012 @ 8:03 pmbecause it had strict regulation.
The fact Obama-bundler Corzine is still walking around free is proof they still don’t want to use them. Except against their enemies who Obama famously has expressed his desire to punish and exact revenge.
Tell me again what Corzine did that was so different from what Bernie Madoff did. Madoff illegally used his customer’s money and instead of investing it ran a ponzi scheme.
Corzine illegally used his customer’s money for risky investments that would benefit his company but not their accounts without their knowledge.
They both scammed their customers and appropriated other people’s money for their own financial gain.
And we need more regulations, criminalizing behavior that wasn’t previously illegal, while this is going on?
Steve57 (320590) — 11/3/2012 @ 8:06 pmNo, comatose, Texas didn’t have a real estate bubble because in Texas supply met demand. You can build all the new houses you need in Texas because they don’t block construction. Regulatory compliance added only about $3k per house in 2000.
Kali had a real estate bubble because supply never could meet demand. Environmental and other regulatory burdens kept supply artificially low, jacking up prices. It took nearly a decade for builders to run the gauntlet from proposing a development to breaking ground in Kali, assuming they got permission. That’s why a converted garage on the SF peninsula would run you over $500k. There simply wasn’t enough new construction to meet demand. So existing homes shot up in value way beyond what it was actually worth.
For what inadequate new construction there was Back the cost of regulatory compliance added $60k per house back in 2000.
We can finally agree on something, cooomatose. You’ve just proved that right.
Steve57 (320590) — 11/3/2012 @ 8:16 pm____________________________________________
Texas didn’t have a real estate crash because it didn’t have a real estate bubble…
I don’t know about Texas, but when dumpy little houses even in south-central LA were starting to fetch prices up to $500,000 around 2006, I knew something was seriously wrong. That it was like a repeat of the Dutch Tulip Bubble of the 17th century, except the phenomenon in the US in the 21st century was fueled by all the “liar loans” handed out by Freddie Mac and Fannie Mae, or the darlings of the left.
Hardly surprising that the genius who is our current Attorney General (and his boss) wants a repeat of this debacle. But a big heart means never having to say you’re sorry (or dumb).
Mark (66bba6) — 11/3/2012 @ 8:25 pmIt’s true that Texas has special borrowing limits/rules that helped protect Texans from some (but not all) of the worst excesses that led to the housing bubble. But rules limiting the amount of borrowing are set forth in the Texas Constitution, not statutory regulations. In addition, we joined the home equity movement later than most states.
DRJ (a83b8b) — 11/3/2012 @ 8:39 pmBless your sweet hearts down there in Texas.
mg (31009b) — 11/3/2012 @ 9:08 pmI miss the Lake Travis area.
Sorry, but that is all completely wrong. What caused the Great Depression was increasing the money supply PRIOR to the Great Depression. The GD was just the necessary correction to the distortion caused by the Fed’s loose money supply. That the Fed later contracted it actually saved it from being worse.
You don’t hear about the Great Depression of 1919 right? That’s because the Fed and the Government didn’t do anything- and the market corrected itself in 18 months and everything was good again. Which led to the Roaring 20’s.
Now, the Fed continuing to expand the money supply is part of what’s keeping us in a depression. It needs to drastically cut back- which will lead to some pain. But it needs to be done to correct the expansion before the start of and during our depression.
Peter Schiff has some great stuff on it. Here’s his article about the GD.
Patrick H (095766) — 11/3/2012 @ 9:26 pmsleeeepy, the housing bubble was in large part because of “regulation”. The government has subsidized housing via tax policy and the subsidy of GSE’s like Fannie Mae and Freddie Mac.
Your ignorance is astounding. And your refrain that “regulation” == good policy is stupidity writ large.
SPQR (768505) — 11/3/2012 @ 9:35 pmDRJ, I know I didn’t address the credit aspect of the crash. But let’s face it. When an artificially limited supply of homes drives the cost of what would be a $150K home anywhere else into the $800k range you are by definition going to have more unqualified buyers.
If the only way people can afford a house is with a no doc interest only ARM because of an artificiallly depressed supply you’re heading for a crash.
Steve57 (320590) — 11/3/2012 @ 9:40 pmYou miss a key point that I think Patterico also missed, which is relevant to his question about prosecutions. Yes, on paper you could make a case for fraud, but really it was simply the way business was done, the way they were being told to do it.
Here’s what happened, as I understand it: Yes, there was political and regulatory pressure on banks to make bad loans; not officially, oh no! Officially nobody would sanction lending to bad prospects. They should only increase their lending to good minority prospects. And surely they’re not suggesting that blacks and hispanics tend on average to be worse prospects than whites. But of course everyone knows that that is the case, so really they were being unofficially expected to make bad loans. But this had been going on for years. The CRA is Carter era legislation. What changed in the mid-’00s?
The answer is that until then, when bankers came under pressure to make bad loans, they had one out: “If I did as you suggest I’d immediately be sued by my shareholders.” And the bureaucrats and politicians had no good answer for that. Then Freddie and Fannie started buying these loans, and there went that excuse. Now the politicians and bureaucrats and ACORN types could tell the bankers, “What are you talking about? Make the loan, and sell it immediately to Fannie or Freddie or one of their private sector competitors (who were forced to follow Fannie & Freddie’s lead or close their doors, see Gresham’s law), and your shareholders will have no claim against you.” And that opened the floodgates.
Milhouse (15b6fd) — 11/3/2012 @ 9:47 pmPatrick H, Peter Schiff is something of a crank, is he not? Irwin’s son, after all. And of course as an Austrian he rejects monetarism entirely. Go read some Friedman.
Milhouse (15b6fd) — 11/3/2012 @ 9:58 pm___________________________________________
The great Milton Friedman taught us that the likely cause of the Great Depression was the Fed’s action in contracting the money supply at our first economic downturn
I don’t think that put as much of a chill on or created as much distortion in the economy than the ratcheting up of income taxes, on all groups, but most certainly on the investor class. Their taxes went from around the mid-20-percent range up to the high 70s. I believe Roosevelt wanted to increase taxes on upper-income Americans — or outdo his predecessor, Republican Herbert Hoover — to as high as the upper 80s. After the Great Stock Market Crash of 1929, that really was a case of adding insult to injury.
A good part of the economy is tied to human nature and people’s sense of whether investing their time and money is going to be worth it. So throwing cold water at both the consumer and investor by lobbing big taxes at them (good job, Obama & Company!) is pretty much the opposite of what’s needed during almost any natural down cycle.
Mark (66bba6) — 11/3/2012 @ 10:12 pmMilhouse, I know without a doubt you understand the concept. The rest of your comment demonstrates you do. At the risk of coming across as hypercritical, the only quibble I have with your earlier post is that you don’t state the problem in the same explicit language I would have used.
Lending institutions hadn’t “found a way” to make bad loans. They had been forced to accept a way to make bad loans.
It was the carrot/stick approach the feds deliberately used. You don’t do what we want we’ll rake you through the court system. Do what we want, we’ll make it worth your while.
Essentially it’s the same deal the drug cartels make with a Mexican cop when they show up with a wad of cash in one hand, a picture of his kids in another, and then they ask him to choose.
Minor quibble, I admit. Given the overall thrust of your comment. But I just thought it could have been expressed in more explicit language.
Steve57 (320590) — 11/3/2012 @ 10:21 pmThe Bogus Boston Fed study was used as a rationale for the CRA revisions, and the Justice Department nudge.
narciso (ee31f1) — 11/3/2012 @ 10:29 pmThere’s a wonderful post over at Pajamas Media, listing all of Barack’s sins, topped off by an equally wonderful comment:
Remember, remember, the Sixth of November
The radicals’ treasonous plot.
I know of no reason the radicals’ treason
Should e’er be forgiv’n or forgot….
It seems to refer to Barack Obama. RtWT.
Kevin M (bf8ad7) — 11/3/2012 @ 10:58 pmWow, Kevin, that was brilliant. I forwarded it to Buzzsawmonkey, just in case he hadn’t seen it. Sandy stranded him in Chicago, so he needs cheering up.
Milhouse (15b6fd) — 11/3/2012 @ 11:20 pmAy yai yai. You sound like a 1930s central banker. Why, we would have had 40% unemployment but for that brilliant decision to contract the money supply!
Patterico (8b3905) — 11/3/2012 @ 11:35 pmWarren Harding and the Forgotten Depression of 1920
To be sure, while the Fed did not increase the money supply, neither did it decrease the money supply.
Michael Ejercito (2e0217) — 11/4/2012 @ 1:38 amIn the last four years, I’ve been astonished at how many twit leftist wannabes can rip off “Glass Steagall repeal” but call me a liar when I point out that it was Clinton’s Treasury secretary who pushed for Gramm-Leach-Bliley, the bipartisan legislation that repealed much of Glass-Steagall.
SPQR (675c8e) — 11/4/2012 @ 8:23 am“I’ve been astonished at how many twit leftist wannabes can rip off “Glass Steagall repeal” but call me a liar when I point out that it was Clinton’s Treasury secretary who pushed for Gramm-Leach-Bliley, the bipartisan legislation that repealed much of Glass-Steagall.”
You lie like rug. People you refer to as “twit leftist wannabes” are more than happy to blame Rubin and the rest.
Ever hear of Christina Romer?
Have you ever hear of Sheila Bair? A Bush appointee!!
http://www.amazon.com/Bull-Horns-Fighting-Street-Itself/dp/1451672489
“twit leftist wannabes” know she was right. They know Volcker was right. They’re all Communisss!
sleeeepy (b5f718) — 11/4/2012 @ 9:01 amhttp://sunlightfoundation.com/blog/2012/11/02/dark-money-tallies/
Latest Dark Money Tallies: $213 million in the general election and counting, 81% on behalf of Republicans; 34 races with $1 million or more
So where’s if from? What subsidiaries of what companies? How much of it comes from foreign sources?
You don’t really care, any more than you really care about the debt.
sleeeepy (b5f718) — 11/4/2012 @ 9:14 am‘Missed it by that much’ the nutroots are nothing but predictable,
narciso (ee31f1) — 11/4/2012 @ 9:14 amOne imagines him literally flailing his arms about as he types his drivel.
Icy (89c2c8) — 11/4/2012 @ 9:17 amBOOOOOOSH!!!!!!
daleyrocks (bf33e9) — 11/4/2012 @ 9:25 amgood grief.
Milhouse (15b6fd) — 11/4/2012 @ 9:31 amSleeeeeeeeeeeepy, it’s like dark matter and dark energy. It comes from the black hole at the centre of our galaxy. Satisfied?
Milhouse (15b6fd) — 11/4/2012 @ 9:32 amChristina Romer would be Obama’s economic advisor who predicted 5.2 percent unemployment by now due to Obama’s tillion dollar pork.
Twit.
SPQR (eb56db) — 11/4/2012 @ 9:42 amSlurpy is playing SQUIRREL again. Shocka
JD (8e5a8c) — 11/4/2012 @ 9:46 amWe need to get used to it. Of all the reasons Democrats will use to explain why Obama lost, I think dirty Republican money will be at the top of the list.
DRJ (a83b8b) — 11/4/2012 @ 9:53 amSlurpy is playing SQUIRREL again. Shocka
Comment by JD — 11/4/2012 @ 9:46 am
He can’t help himself JD. Squirrels just have to be squirrelly.
peedoffamerican (1563b7) — 11/4/2012 @ 10:31 amI hope for his sake that he stays away from parks and other forested areas. He is so big a nut, that he will be in mortal danger from all of the other squirrels.
peedoffamerican (1563b7) — 11/4/2012 @ 10:34 amSo, sleeeeeeepy aspires to be a leftist twit?
Kevin M (bf8ad7) — 11/4/2012 @ 10:37 am@ DRJ,
The left screams Koch Bros, the right screams Soros. It’s a wash.
Ultimately, if Obama loses, at the heart of the matter it speaks loudly and clearly that he – and he alone – was unable to convince enough voters that he deserved another four years.
The list at your link is so pathetic. It blames everything and everyone – and refuses to acknowledge that maybe, just maybe smart and informed voters weren’t sold on the bill goods being pushed. Why must the reason for Obama losing be something nefarious or suspect? He hasn’t even lost – yet – and they’re already whining.
My favorite reason on the list:
6. Racism. Angry whites gave Obama a shot and he failed, and they just couldn’t bear the thought of another term. Republican obstructionists made it impossible for Obama to do anything in Congress.
Why assume it was angry whites? I know a number happy whites thrilled to be able to cast their vote for the first African-American president.
Perhaps they couldn’t bear the thought of another term because they can clearly observe and have personally experienced that they are no better off than they were four years ago.
It’s been repeated ad nauseum, but who controlled Congress the first two years? And, perhaps it was the Democrats who were obstructionists in trying to get bills passed??
Dana (292dcf) — 11/4/2012 @ 11:11 am@123
phunctor (a24163) — 11/4/2012 @ 11:13 amGeeze peedoff, you surely do know how to take the fun out of a sly implication.
Dana – According to a graphic David Letterman used on his show this week, 51% of Romney supporters are voting for him because they want to see Chris Matthews cry like a baby.
daleyrocks (bf33e9) — 11/4/2012 @ 11:39 amDana- this outing of the real obstructionists is long overdue and and seems to be a strong theme coming out of the House Republicans recently.
Bob Dold (R) Illinois 10th district congressman is quoted in the Chicago Tribune this morning:
elissa (4703f9) — 11/4/2012 @ 11:45 am“Everybody associates a do-nothing congress with the House of Representatives. But we’ve passed bill after bill, passed jobs bill after jobs bill-over 30 of them are sitting on Harry Reid’s doorstep stacking up like cordwood. It requires the Senate to pick them up, debate them, amend them, tell us what’s wrong with them, and send them back. That’s when we can move forward.”
Have you ever hear…
have you ever been mellow
Colonel Haiku (bd2ca3) — 11/4/2012 @ 11:59 amhave you ever tri-i-i-ied
to keep the sleeeeepiness
insi-i-i-IIIII-ide
Loretta “Hot Lips” Swit Turns 75…
R.I.P.
Colonel Haiku (bd2ca3) — 11/4/2012 @ 12:04 pmRomney in July:
Foo Bar (c1726e) — 11/4/2012 @ 1:24 pmFoo Bar, that doesn’t quite support your position, though it certainly sounds that way. Romney could mean that though he would repeal Dodd-Frank and its capital requirements one shouldn’t think he was a doctrinaire libertarian and was against any capital requirements at all (as Ryan probably is, in his heart of hearts); rather he’d support lower requirements, such as those that were in place before Dodd-Frank.
Milhouse (15b6fd) — 11/4/2012 @ 1:41 pmMilhouse, I think Foo Bar is trying to discourage the libertarians by claiming that in essence, Romney is Obama-Lite.
Gee, what an original attack …
SPQR (291af7) — 11/4/2012 @ 2:01 pmIf you look at the transcript of the first debate, you’ll see that Romney says there are some parts of Dodd-Frank that make all the sense in the world, and then he cites leverage limits as one of the parts he approves of.
Foo Bar (c1726e) — 11/4/2012 @ 2:06 pmBush appointee and hero to commies everywhere:
http://video.foxbusiness.com/v/1695777451001/sheila-bair-on-the-volcker-rule-glass-steagall/
http://video.cnbc.com/gallery/?video=3000105317
Foo Bar, Milhouse and the rest. Answer her not me.
sleeeepy (b5f718) — 11/4/2012 @ 2:06 pmsleeeepy is still incompetent.
SPQR (291af7) — 11/4/2012 @ 2:08 pmI would provide a link, but my comments that include links seem to be getting caught in some sort of spam filter.
If you Google “some parts of Dodd-Frank that make all the sense in the world” it should be easy to find the quote, though.
Foo Bar (c1726e) — 11/4/2012 @ 2:09 pmFoo bar, have you read those books yet?
Mike K (326cba) — 11/4/2012 @ 2:11 pmslinky, has dud-fwank bill eliminated too big to fail or not? Answer that twink, or stfu!
Mayor Marathon (721840) — 11/4/2012 @ 2:45 pmSPQR, do you have any reason to believe Foo Bar is not arguing in good faith? I think he has the better of this argument. I’ve already said I expect Romney to be a bad president. Since I’m not in a swing state, I wouldn’t even be voting for him if Ryan weren’t on the ticket with him. But a bad president, or even a very bad one, will be a blessed relief after the catastrophe of the last four years.
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Buy TVSmart TVBuy iPadBuy Surround SoundDiscount TVsGalaxy TabletBuy LaptopBuy NotebookBuy PrintersSamsungPanasonicSonyLG (0109aa) — 11/9/2012 @ 4:04 pm