Comments on: Senate passes “sweetened” rescue package

By: musing

musing — Fri, 03 Oct 2008 20:15:48 +0000

Peter Leavitt post 46,

Peter my version of the statement is that the Republican party is trying to duck its accountability as the party in leadership roles during the critical period.

You have yet to show that Republicans did not control the congress from 2000 – 2006 and the administration from 2000 – present.

(all right if you like we can switch form the election years to the inaugral years,but it does not change the story).

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By: musing

musing — Fri, 03 Oct 2008 20:13:41 +0000

Peter leavitt post 46,

excellnet compendium of the various actions. Nice research.

NOte the last proposed action from the administraion was apparently 2005.

the bush administration has been in power from 2000 – present

The Republican totally controlled congress from 2000 – 2006 with a brief period of loss of control i the Senate during the Jeffords change to independent between 2001 and 2002.

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By: Peter Leavitt

Peter Leavitt — Thu, 02 Oct 2008 23:54:13 +0000

Charles is quite right. An excellent discussion of the role of Congress and Fan/Fred Fan and Fed in the lowering of credit market standards is in an IBD article, Saddest Thing About This Mess: Congress Had Chance To Stop It: Could the crisis at Fannie Mae-Freddie Mac and the subprime meltdown have been avoided? The answer is yes. including:

In November 2000, Clinton’s HUD hailed “new regulations to provide $2.4 trillion in mortgages for affordable housing for 28.1 million families.” It made Fannie and Freddie take part in the biggest federal expansion of housing aid ever.

Soon after taking office, Bush had his hands full with the Clinton recession and 9/11. But by 2003, he proposed what the New York Times called “the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.”

The plan included a new regulator for Fannie and Freddie, one that could boost capital mandates and look at how they managed risk.

Even after regulators in 2003 uncovered a scheme by Fannie and Freddie executives to overstate earnings by $10.6 billion to boost bonuses, Democrats killed reform.

“Fannie Mae and Freddie Mac are not facing any kind of financial crisis,” said Rep. Frank, then-ranking Democrat on the Financial Services Committee.

North Carolina Democrat Melvin Watt accused the White House of “weakening the bargaining power of poorer families and their ability to get affordable housing.”

In 2005, then-Fed Chairman Alan Greenspan told Congress: “We are placing the total financial system of the future at substantial risk.”

That year, Sen. John McCain, one of three sponsors of a Fannie-Freddie reform bill, said: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”

Sen. Harry Reid — now Majority Leader — accused the GOP of trying to “cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership.”

The bill went nowhere.

I wouldn’t bring this up, as what is necessary just now is bi-partisanship; however, Musing’s trying to pin the blame for the crisis mainly on some unspecified allegations of Republican regulatory looseness needs to be countered with the main truth of the matter.

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By: momof5

momof5 — Thu, 02 Oct 2008 23:04:32 +0000

#37
My biggest problem with Pres. Bush is that he didn’t veto more (or maybe any). He tried to work in a bipartisan way, and he signed off on a lot of garbage in the process, and still doesn’t have any clout to show for it.

He hasn’t been a fiscal conservative, that is true. I’m incredibly disappointed about that. Rather than leading the charge against socialism, he helped it along.

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By: musing

musing — Thu, 02 Oct 2008 21:19:28 +0000

Chas post 43,

yes but basing a problem whcih first arises in aobut 2000 on a law past in 1976 is more than a bit of a stretch.

I have had conversations regarding whether the repeal of the Glass-Steagll act in 1999 impacted this problem. I believe they did peripherallly but not centrally.

if you look at the Princeton lecture which I posted, they aregue that what really happened is that a set of credit instruments and business practices were adopted after the dot com bust for which the reulations were totally inadeqaute. it is arguable that no one knew enough to create good regulations, but there were no regulations to protect us form the risks of short money funding long securities, over leveraging, and imporper rating.

And the result is the perhaps as much as $10T by my count of toxic paper.

The actual default rate based on llama’s comments is about 2.5%. It might be as high as 20% but I suspect that in these times 10% is more likley.

Without these economic inventions, we wuold have foreclosed on these houoses (perhaos $200B to $1t) and gotten it over with.

With these inventions, our entire financial system is now at risk.

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By: Chas

Chas — Thu, 02 Oct 2008 20:49:03 +0000

I think the foundations of my perspectives are well known.

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By: musing

musing — Thu, 02 Oct 2008 20:43:05 +0000

Chas post 41,

no congress passed fair housing regulaton so that you couldn’t discriminate.

they did not reaquire you to give loans to those who were unqualified, and if we are to believe your model this law was on the books for 24 years before the present bubble began.

I suggest that you are having a causality problem with your analysis.

And for the record even McCain finally admitted that Frank Raines is not an economic advisor to Obama.

Good try though AND it perhaps provides an insight into the foundations of your perspectives here.

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By: Chas

Chas — Thu, 02 Oct 2008 20:34:13 +0000

Musing, Congress passed “Fair Housing” legislation that provided loans to people who couldn’t repay them.

I see in the October American Spectator that some Republicans objected to the appointment of Henry Paulson as Sec Treas. Seems he and his wife have strong ties to the Democratic party. Spectator reports that inside sources say that Paulson briefed Obama on Fannie and Freddie before offering to brief McCain. Democrats tried to tie the problem to Republicans, but “As it stands, Obama was the leading receiver of lobbyins/fundraiser dollars from both quasi-governmental agencies….”
“You look at Obama’s economic advisers, the guys he has counted on from day one and who have raised him a ton of money: Franklin Raines and Jim Johnson, both of them are waist-to neck- deep in the mortgage debacle.”
Both of these guys have served as CEO of Fannie Mae.

Another close political advisor to Obama, Rahm Emanuel served on the board of directors of Freddie Mac. “Emanuel during his time on the board opposed every reform proposed by the Bush administration that would hae impacted Freddie and Fannie Mae.”

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By: musing

musing — Thu, 02 Oct 2008 19:55:42 +0000

Chas post 38,

well at one level possibly that is true.

but there was a lovely graph in the Princeton lecture which shows the take off of the housing bubble in the early 21st century. boefore that it was amazingly stable in general.

So since the proxmiate cuase is the buble, I suspect you are left with how 1976 cause a bubble to start in say 2000.

so what happened in 1976 which started this buble then?

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By: Chas

Chas — Thu, 02 Oct 2008 19:48:30 +0000

I read somewhere that one quarter of the bills passed by congress concerned the naming of post offices. That means that their destructive work is reduced that much.

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