Preventable crisis
First came playwright David Mamet’s brilliant springtime essay, “Why I Am No Longer a Brain-Dead Liberal.” Now novelist Orson Scott Card is blowing spring breezes into the autumn of our discontent with his recent column, “Would the Last Honest Reporter Please Turn On the Lights?” Some of you will remember Card’s brilliant Ender’s Game (1985) and its also award-winning sequel Speaker for the Dead (1986). Some will have noted his regular columns, which combine a novelist’s eye for detail with journalistic savvy. Card has described himself as a Democrat but now takes on both journalists and Democrats, noting: “These are facts. This financial crisis was completely preventable.”
The “facts,” he said, don’t point to John McCain or the GOP, but to “Sen. Christopher Dodd and Congressman Barney Frank, both Democrats, who denied that there were any problems, who refused Bush administration requests to set up a regulatory agency to watch over Fannie Mae and Freddie Mac, and who were still pushing for these agencies to go even further in promoting subprime mortgage loans almost up to the minute they failed.” Card doesn’t stop there, blasting Obama for hiring as his housing consultant disgraced Fannie Mae chief Fred Raines. “If you who produce our local daily paper actually had any principles, you would be pounding this story, because the prosperity of all Americans was put at risk by the foolish, short-sighted, politically selfish and possibly corrupt actions of leading Democrats, including Obama,” Read on.
And if you missed it the first time (or doubt Card) read these and other related clips from a House Financial Services Committee hearing in 2003.














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back to top114 Comments to “Preventable crisis”
“Would the Last Honest Reporter Please Turn On the Lights?”
The lights are already out… and no one is home.
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I’ve said this befroe. Nobody wants to determine the cause of the crisis. They only want to place blame.
Rush correctly said, “If there was really a Republican they could pin this on there would have been congressional hearings months ago.”
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Cue the ad hom arguments from the liberals on this board who would like to pin this on the Republicans. In their minds they have tried, found guilty, and already hung GWB and the Republican led congress, despite the Democrats culpability.
They’ll be saying that Card is not a true Democrat, or that he isn’t really a journalist, and is just a stupid poop head.
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If the crisis was completely preventable, then why did the Bush Administration form 2000 to the presetn and a Republican dominated congress from 2000 – 2006 not prevent it?
Yes we are seeing a lack of honesty here and indeed a lack of accountability: on the part of Republicans and conservatives.
Now they are playing the blame game rather than trying to fix the problem.
And it is showing up in the public’s increasing impatience with McCain and Republicans in general.
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As for Barney Frank, he is running nicely in Massachusetts campaiging against the Republicans who brought us this mess.
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To make the argument that this is a Democratically driven problem, one needs to establish a chronolgy which simply is not supported by the record. The key date appears to have been 2005 and the Republ;icans controlled all the levers of power.
Until the conservatvies and Republicans can manufacture out of whole cloth an alternate chronoly, the argument of a Democratic failure here simply does not stand up to scrutiny.
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But arguing this way will probably cost the Republicans the elections!
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4,5,6,. Typical liberal defense. You were suppose to stop me.
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Keep trying Musing. You haven’t accused anyone of using bad grammar or being gay yet.
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#8,
Typical is right. They don’t want to grow up and be responsible. They want the government to be their nanny.
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BIG NEWS!
Barney Frank is running nicely in Massachusetts.
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Kbells post 9,
I doubt you will ever find me accusing anyone of bad grammer or being gay!
I may accuse a person of not presenting the facts.
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MIM post 10,
but of course it is the conservatives and Republicans who do not want to accept responsiblity for thier actions here and further have shown incredibly weak leadership in cleaning up their own mess.
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Okay, Musing, give me some facts.
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What is interesting is that even at this late date McCain could win this election. The Republicans will not win by trying to assert that the Democrats caused the economic crisis: it simply is not a credible argument.
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Kbells posy 14,
certainly:
Bush administration 2000 – present
Republican congress 2000 – 2006
As I said, chronology is the imperative here.
Now if you like we can explore the attempts at regulation in perhaps 2003 and 2005. But the Republicans dominated all portions of the Federal government and a failure to regulate is a Republican failure.
One person has referenced a 1999 failure to regulate, but I am awaiting references on this point.
Chas has argued that the 1976 anti-discrimination in lending led to the crisis. Again there is a chronology problem: it took 22+ years to yield the crisis?
So at root kbells, the primary critical fact is the chronology: when things go srong, holding all the levers of power does make it difficult to dodge responsibility.
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#15 – No, of course facts are never credible when they get in the way of ideology. By the way, why do you suppose it’s Dodd and Frank who are screaming the loudest. To cover their hides.
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kbells post 14,
now a more interesting question and one perhaps worthy of much work is why did it go wrong.
I have posted a link to a Princeton University lecture on this topic which appears to be quite informative.
And if you so choose we can explore this path of discussion.
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Musing has a chronology crisis with the 22+ years for it to come to a head.
Wait till the 80+ years of Social Security and 60+ years of Medicare comes to a head. It won’t be pretty.
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Paulr post 17,
to cover their hides for actions they were in no position to take?
When we look back on this I suggest that the evidence is that Barney Frank provided the leadership during the bailout deliberations which the Bush administration failed to take and which the Republican study committee attempted to sabotage. The Republican Study committee arguably cost the U.S. $1T, or more than the entire bailout bill.
And the lack of Republican leadership in this crisis is precisely why the polls are going as they are going, and why McCain is desparatley trying to project an economic perspective on his campaign, even though it is now late in the game.
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chas post 19,
but of course social security and medicare are cumulative obligation problems. The anti-discrimination rules have no such cumulative obligation behavior.
Good try though!
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Again, the only counter-argument I have seen is that the Republicans had control of congress and could have done something in spite of the Democrats.
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So we are seeing the same old rehashing which has been in this blog on this topic before.
Shall we try something new?
Why were the collatalized Debt Obligations and default swaps so toxic to the financial system?
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kbells post 22,
whihc is a very cogent and potent argument indeed. When you have the leadership you also have the accountability.
And conservatives and Republicans usually argue this point forcefully, until it seems that they are in leadership and accountable.
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so to lead off of post 23,
I suggest collateralized debt obligations an default swaps were so toxic because:
1) they were not regulated
2) they were not transparent
Any comments on these points?
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And the argument that the American people are still following the MSM blindly down the path to destruction.
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“The Republicans will not win by trying to assert that the Democrats caused the economic crisis: it simply is not a credible argument.”
Simply stating it’s not a credible argument is not proof that it’s not a credible argument. You must actually make an argument for it to be credible.
So I ask you, why is Card wrong? He asserts that Bush tried to get regulations set up but these fellows prevented him. Why is that not a credible argument?
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kbells post 26,
first you have to show that it is the path to destruction.
Second, you need to show that there is a coherent main stream media. The recent Pew materials are suggestvie that such doesn’t exist (look at Obama’s coverage from the Republican convention to 10/16 or so). Further the media is now highly diffuse, despite efforts by certain organizations to consolidate control over medis (clear channel comes to mind for example).
What we are apparently seeing is an interesting aspect of Democracy: at times the people do get uppity and over turn their leaders.
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MIM post 27,
how many times do you have to not refute the chronolgy before you are willing to adit that it provides a potent argument for Republican responsiblity?
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And in this observation (post 29) it strikes a deep blow to the apparent assumptions of the discussion leading up to this thread.
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“Chas has argued that the 1976 anti-discrimination in lending led to the crisis. Again there is a chronology problem: it took 22+ years to yield the crisis?”
This is one of your problems Musing. Your shortsighted on the issue. Its the same reason we are in this slide.
Chas makes a good point, and yes this has built up pressure to explode over I would go as far back as 30 years when credit began to move more freely.
What has continually happened across administrations over the last 3 decades is the assumption that the economy must continually grow a certain rate to be “healthy”. So the government forces any sign of downturn toward another demand in order to create another bubble. Case in point, the tech bubble is later funneled into the housing market.
The economy hasnt learned a thing, thanks to the bailout. We are still seeing slides, because investors are still trying to recoup losses over the shortterm and are increasing their risk once again to do so. Jubak was discussing that on MSN today.
The further problem you see is that the government keeps trying to free up credit, but the problem is is that theres no demand, especially in the housing market. You will not recover to 14k in the Dow without another free pipe equivilant to the housing market. However, even finding one will only lead to another big crash later.
The reason this is all shortsighted is because the market has continually tried to correct the issue on its own, when it “bursts” a bubble. Instead of letting that happen, the govenment continually forces it elsewhere, rather than letting it grow on its own over time regardless of slower growth to 0 growth periods which I believe is more healthy. The goal should always be long term growth, not the short term.
If you really think this is an 8 year old case of lack of regulation, your shortsighted. However, I will easily agree that Bush could have done much more to change this practice, that is if your willing to agree that Dodd and Frank have their faults as well in this, as well as Greenspan. Saying Bush is responsible for everyone elses greed is like saying he made Katrina hit New Orleans. Could he have done a better job in some areas in response, yes, but hes not the CAUSE of the devastation.
Further, I’ll make the point that, if I remember correctly, despite the Congress being held by Republicans for 6 years, it was not enough to disuade any filabusters by Dems.
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The guys on Wall Street (and insurance companies, for crying out loud) were allowed to create $70 trillion in unregulated CDO’s and other derivatives whom nobody understood, and this bozo wants to blame a couple of Congressmen.
The Bush administration had the job of regulating these markets and banks and insurance companies and utterly completely failed. They did not need any congressional authorization to require reasonable levels of leverage and at least that the organizations understand the securities they were issuing and purchasing.
It has cost this country terribly.
Fannie and Freddie were contributing factors, but they didn’t create this huge house of card of completely unregulated dangerous and toxic securities. And Fannie and Freddie were always bi-partisan dumping grounds.
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thorn post 31,
so I believe you are left with demonstrating that an anti-discrimination statute from 1976 led to the creation of collateralized debt obligations and credit default swaps in the early 21st century!
I don’t believe you have done this!
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arcadia post 32,
actually in terms of total contribution to the problem Freddie Mac and Fannie Mae are, as your numbers show, small potatos.
But the conservatives are watching the total unravelling of the free market ethos which has dominated the American political scene from about 1980 to the present. A Republican administration has nationalized the banks in this country. A Republican administration is choosing winners and losers in the financial industry.
Rather than try to understand what went wrong, conservatvies and Republicans are desparate for someone to blame.
And of course this does not help the problem nor does it improve their political position.
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NOw if conservative disike my characterizaton of the issue, the fact based response is simple:
Either show that my chronolgy of Republican control is in error.
Or show that the Republican control in this period was immaterial to the problem.
I suggest that the conservative posters on this blog have so far done neither.
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To pile on, it should also be pointed out that most of the bad mortgages were written by non-regulated brokers, not by Fannie. When we look at only one side of the problem, that of an agent, it can seem as if that one entity were responsible for the whole. This is a common political tactic.
But as to policy, the reality was that there were plenty of other players on the field, players who made the bulk of the loans. Moreover Washington kept pushing for these loans — this was a bi-partisan effort (remember the Ownership Society?). In any case, the dread MSM has the story, here
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NOw if conservatives and Republicans wanted to present some positive news on the campaign they would note that Obama’s lead is shringing:
http://www.realclearpolitics.com/
They perhaps are not raising this issue because Obama’s poll numbers continue to stand at above 50% and while McCain’s number are increasing they are increasing slowly and do nto appear to be eating into Obama’s support. Meanwhile the battleground states continue to increase their leaning towards Obama.
It is going to be a brutal battle until the end (see http://election.princeton.edu/ for an interesting perspective on this point: look at the NH Power of your vote numbers) but to truly turn the tide McCain would seem to need to seriously change the dynamic of the election
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Harris post 36,
yes a key insight!!
and of course there was no regulation of mortgage originators AND most of them sold the mortagges and were making their money off the origination fees.
And yes – you are right it was bipartisan since it was the only fig leaf holding together an economy which was withering from within and both the Republicans and Democrats found it useful to argue that the economy was stable.
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“how many times do you have to not refute the chronolgy before you are willing to adit that it provides a potent argument for Republican responsiblity?”
Once again you fail to provide any useful information that shows why Card is wrong. Sure the Republicans were “in control” during your precious chronology. But that still doesn’t explain why Card is wrong does it?
I can turn your argument back on you if you like. During the past two years which is when the crisis appeared, and thats when the Democrats were in control. Why didn’t they prevent it?
That’s not useful argumentation is it?
Answer my original question. It’s not a trick question. I’m genuinely trying to listen to your explanation of why Card is wrong. Just explain why Christopher Dodd and Barney Frank are not to blame for the crisis. And did Bush NOT try to get a regulatory agency set up? Did the Democrats not block that effort?
Why is Card wrong?
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“The guys on Wall Street (and insurance companies, for crying out loud) were allowed to create $70 trillion in unregulated CDO’s and other derivatives whom nobody understood, and this bozo wants to blame a couple of Congressmen.
The Bush administration had the job of regulating these markets and banks and insurance companies and utterly completely failed. They did not need any congressional authorization to require reasonable levels of leverage and at least that the organizations understand the securities they were issuing and purchasing.”
Okay, now thats just silly…you wanna claim you cant put blame on a couple of congress men, and then deflect it to A Bush?? If nobody understood, then how do you expect Bush to have regulated???? ??? ????????????????????????????? How do you expect him to be any smarter than Greenspan?
Be consistant. I didnt say it was solely their fault. I said I’m easily willing to concede Bush has responsiblities he failed at, just as much as those Congressmen, as well as wall street, as well as the borrower and lender. As well as past administrations.
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MIM post 39,
so if Republicans were in control, I suggest that it needs to be affirmatively demonstrated that they were not derelict in their leadership as we went into the crisis.
Certainly you can indeed validly reverse the question: what about the last two years. We are, however, left with the Bush administration still with primary responsiblity for overseeing our financial markets (and last I checked Bush was a Republican).
What proposals has Bush made since the Democratic control to try to control the economic behavior?
The last major regulatory push that I can trace was in 2005.
Now we can explore the response to the crisis: the Bush administration proposed what they argued was a critical response to the crisis. the Democrats provided bipartisan support for the president in an attempt to address the crisis, with Barney Frank providing key leadership here.
By contrast the Republican Study committe and McCain acted as spoilers. The result was a loss of $1T of investment value as a result of their spoiler effort.
So yes you can reverse it: and it still does not come out pretty for Republicans and conservatives.
It is pesky that there is a Republican president. Just think, if Bush had had the grace to lose in 2004, then you could perhaps blame the Democrats for the problem.
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thorn post 40,
what I think your post brings out is a critical interpaly of forces:
1) the financial industry became creative with new exotic forms of securities
2) a Republican administration was predisposed not to regulate them
3) there was so much fictitious profit being made that the free market abandoned any pretense of providing self-control
we had a major free market failure and the free market actually is primarily culpable.
As I have noted, however, the market exists at the pleasure of the Federal government, and the Federal government was the only disinterested player who could have intervened to instill rational behavior (we do this in bakknks and with the SEC, why not for these other securities? ).
And we are back to a failure of conservatvie and Republican leadership.
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So arcadia has givine a number of $70T as the amount in these exotic and now toxic securities.
Note that no one seems to know the real number.
Question: why were exotic unregulated securities allowed to grow until they exceeded the GDP of the world? Simple logic suggests that this would put the world economy at risk.
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“…who refused Bush administration requests to set up a regulatory agency to watch over Fannie Mae and Freddie Mac…”
What is Card talking about here if it wasn’t a Bush proposal to regulate?
Stop being cute Musing, I’m not trying to prove anyone wrong or “win the argument”. I’m trying to learn something. If you continue to be “cute” I’ll quit listening to you.
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Bush’s greatest fault was in not vetoing a single bill during his first four years.
Whatever your political leanings, remember this.
Every exponential curve has to fail at some time.
Every Ponzi scheme has to fail.
The larger the Ponzi scheme, the longer it takes to fail, but the greater the crash.
Ain’t nothing free, even if it comes from the government.
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Well, I listened to Mr. Greenspan last week, and he admitted that the one thing he hadn’t counted on was that the Wall Street people and the mortgage brokers, etc. would act against their own best interests. He hadn’t counted on greed, on human nature. That’s why we are really here. Add the way we use credit cards in the country, and the truth is EVERYONE is to blame.
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“so I believe you are left with demonstrating that an anti-discrimination statute from 1976 led to the creation of collateralized debt obligations and credit default swaps in the early 21st century!”
I think its pretty obvious the more you lend out, the more you lend out to less credible parties, the higher risk you take.
Whenever the lending practices lower their requirements your increasing your risk. Loose lending practices, that began then, escalated when you dumped your whole economy into the housing market. So if you want chronology, then yes, you have to look back to where things began. The economy isnt an 8 year outlook, policies 30 years ago can have an affect on today.
Please realize, I’m not saying its the sole reason, or the sole act that lead to all of this.
The core of the issue is that the borrower has been unable to pay back the lender, who has for awhile obscured what he was in default on, thus masking the reality, all in the name of greed.
To fix the issue, 2 things must occur. 1. The greedy should be left alone to fend for themselves. 2. If the government wants to do something that wont compound the problem, then they need to hand out money to the borrower, so he can pay the lender, so the defaults will begin to ease.
There is not a quick fix, but dumping money down the same clogged drain helps no one and only compounds the clog. This is why the bailout as I said before it was enacted, has done ZERO to help anything. All youve done is left the greedy around and ignored the core of the issue.
So regardless of how you got here, your here now, and what do you do? You find a way to help the borrower make good on his debts. You do NOT try to force another fake bubble.
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MIM post 44,
I am not being cute, although I am amused at the attempts by conservatives to duck and weave.
Quite simply the financial communuity found an unregulated way of creating paper wealth and the Republicans chose not to regulate it.
That is clealry documented in the record and by the chronology. and no one has provided any refuting evidence for this.
What is perhaps more interesting is that this paper wealth was allowed to grow until it exceeded the worlds GDP. That any sane financiial person would go down this path is a fascinating statement. That is shows that the free market is unable to control itself is arguably beyond dispute.
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I agree with Chas with respect to the veto — another reason to vote for McCain. We will have the same problem with the Dems that we had with the Repubs if McCain is not there to veto the spending bills. Divided government is best.
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thorn post 47,
but indeed that is the point! the anti-discrimination regulations did not require lending at increased risk and for at least 14 of the 22 years it did not increase the risk profile. Arguing that it had effects of the last 8 then is not credible given the historical record.
I believe that puts a wooden stake through this argument.
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Discussions like the comments above sadden me, because they’re more about which side can be blamed than what went wrong and how it might be addressed.
Into this vacuum comes government, wielding the only weapon it knows how to wield: our money, and lots of it. We’ve now thrown $700B at a “crisis” we do not fully understand. Oh sure, we know a bunch of mortgages are in default, and that something to do with mortgage-backed securities was a contributing factor. And we know it’s bad, and that we’ve got to do something. Yet in the few short weeks since we threw a virtually uncountable sum at the problem, some supposedly ailing banks have announced they’re going to use our money to buy each other, and AIG, whose downfall would supposedly be bad for everyone, has sent its execs to a luxury spa. What else will not go according to plan? How many weeks will it be before the next once-in-a-lifetime crisis looms, requiring unprecedented government involvement?
But never mind me. Just go on with your chronologies.
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Thorn post 47,
actually the core of the argument is that the lenders made loans which they knew were shakey for being paid back (and the lender here is the sophisticated member of the transaction). The argument by the lenders appears ot have been:
1) only a few of the loans would go bad
2) default swaps would provide protection
3) the borrower could always sell the house at a profit and repay the loan
There was the additinal problem that the financial industry was arbitraging short term cheap credit to provide long term expensive loans. When the short term cheap credit dried up, they were left hanging.
When these assumptions were shown to be flawed, the whole house of cards fell.
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RR post 51,
my point exactly:
“Discussions like the comments above sadden me, because they’re more about which side can be blamed than what went wrong and how it might be addressed. ”
And this point follows:
“Into this vacuum comes government, wielding the only weapon it knows how to wield: our money, and lots of it. We’ve now thrown $700B at a “crisis” we do not fully understand.”
But there is a stronger statement than this: so long as conservatvies and Republicans (and it is primarily conservatives and Republicans) attempt to shift balme we will never learn.
I have provided some of what I understand is at root of the crisis. Would you care to comment on my observatons in posts 52, 43, 38, Harris’s post 36, 34, 25, and 23.
So far no conservative has been willing to address the issues and observations I have raised. By contrast acadia and Harris have responded to these points and raised other interesting points.
Are we ready for a deep consideration of how this problem occurred and what we are to do about it?
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“we had a major free market failure and the free market actually is primarily culpable.”
Its not a free market failure, when your consistantly switching the the flow to sustain the greedy.
The free market would gladly handle the greed its own way, but instead, the government continually bails them out. So its not a free market when the government sticks its nose in.
We failed the free market, it didnt fail us. As NJ rightly points out, GREED was the name of the game, and the free market has attempted several times to get rid of it on its own. Its escalated into such a large crash because the housing market is a huge lending industry. Its affected the world, because the world does heavy business and investment in the US. When we suffer, they suffer at their own risk.
“And we are back to a failure of conservatvie and Republican leadership.”
The Dems are just as much a failure. Theres plenty that have been sitting around that coulda stepped foward on the issue. DID THEY? NO? In fact, you had several Dems, encouraging the practices.
“3) there was so much fictitious profit being made that the free market abandoned any pretense of providing self-control”
It didnt abandon it self control, the free market crashed the fictious profit, leaving all the greedy out in the cold. Whatd the government do? It abandoned the free market, and bailed out the morons.
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“But there is a stronger statement than this: so long as conservatvies and Republicans (and it is primarily conservatives and Republicans) attempt to shift balme we will never learn.”
From where I sit that is an ironic and hypcritical statement of monumental proportions.
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Musing, no liberal ever addresses the points I make either, so don’t be so disappointed.
The core of this problem isn’t caused by a political party, it is caused by a society that embraces greed, consumerism, and a lack of personal responsibility. That’s something the leftys won’t ever discuss because that brings the problem of a lack of morality to the fore. Leftys don’t believe in morality, they’d rather tear it down.
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In re 52:
Yes, but the fix isnt to help the lender. The fix is to help the borrower first, because that is who PAYS THE LOANS.
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thorn post 54,
but of course the root problem as agreed to by most economists, politicians, and indeed conservatvies, was lack of regulation. Indeed this is Greenspan’s poit.
So if the market was unregulated and failed, it had only itself to blame.
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Too many people did not keep their contracts, many of which were foolishly offered and foolishly signed.
After that, the blame game is mostly partisan political posturing–especially in the Obama-mania media.
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NJLawyer post 56,
hmm all societies seem to have been consumed by greed and a desire to shift responsiblity. it is in fact dubbed the tragedy of the commons problem and is noticeably present in the desertification of the Sahel.
The question is indeed how does one control this greed and attempt to shift responsiblity. In general, this is left to society to structure, which in the case of the U.S. is the Federal government primarily.
And a party which is congneitally disinclined to regulate is unlikely to take the steps necessary to prevent the issue.
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Joel Mark post 59,
too many people could not keep their contracts because, as the lenders constructed the contracts, they could not be met in a contracting market.
Right now Lehman is a primary cuplprit in not honoring its contracts: it appears to have owned a great deal of default swap responsiblity which it now can no longer honor. AIG was also apparenlty another culprit.
When the debt structure exceeds the worlds GDP, it is unlikely that the ocntracts can be honored in the event of a crisis.
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thorn post 57,
actually this is a valid point for consideration. The issue, however, as I understood it was not to help the borrower per se but to get the credit markets working again.
For example, AIG was not bailed out, it was bought at fire sale prices by the government. Lehman brothers went bankrupt. The only possible “winner” here was the purchaser of Bear Sterns.
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Someone. like most lefties, needs to see a psychiatrist.
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Musing, the control of greed is built primarily from the bottom up (parents teaching their children how to live) not from the top down (gov’t intervention into problems it scarcely understands but wants to “solve” in time to influence the next election).
So long as we continue to view this problem as merely a failure of regulation we will get nowhere.
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MIM post 55,
look at the posts. Who has not raised any fundamental issues regarding the nature of the problem?
See my post 53, third paragraph from the end.
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rr post 64,
and amusingly greed is required for free market capitalism to work!
So I perhaps agree with you that free market capitalism indeed has shown its root failure and now we perhaps will construct an alternative model.
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llama post 63,
ah you are back!
I thought you had sworn off until after the election!
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I have not tried to “bring up” the issues. I’ve asked you repeatedly to explain why Card is wrong. You keep harping on your precious Chronology. I practically begged you to take Card apart, line by line, but you only played the blame game yourself, at the very moment you were accusing the Republicans of it!
That’s hypocrisy at it’s height.
I’m going to give it one last try. I don’t understand how we got here. I’m the ignorant student, and you are the school teacher. Why should I not listen to Card? Why is Card wrong when he says it’s obviously the Democrat’s fault?
So far, you’ve only countered with your own version of the blame game, by saying that it all happened on the Republican’s watch.
I’m after more than that. You can, if you try, sum up a brief history and the failings of each party involved- Republicans and Democrats alike. I’m confident that you can. Tell the truth.
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“the anti-discrimination regulations did not require lending at increased risk and for at least 14 of the 22 years it did not increase the risk profile.”
No it doesnt require it. Nor does the lack of regulation, excuse the lender. Regulation is needed on the government, to not bail out morons. Its that simple. To not encourage lower standards in lending practices. Bush didnt require they do it either, nor did Clinton.
But the Clinton administration encouraged these types of lending practices as well as other Dems in the last 32 years, just as much as Bush failed to regulate. Dodd and Frank would have filabustered it to death if he had even tried. Greenspan diverts this flow of greed to the housing market. Borrowers accepted loans they couldnt afford, lenders lent out to borrowers that couldnt pay. This would not have occured, had you simply not lowered your lending practice standards. That began in 76, and no one did anything about it since then. Politicians across the board have encouraged it instead. They all need to go. They ALL failed to lead.
Instead we think the Dems can do a better job? They didnt do a good job last time, which was why Reagan got elected by landslides, and its why Bush got elected in the first place. Cause the Dems failed. Its why Clinton got elected when Bush senior failed. Its a constant cycle, because we fail to actually elect responsible people to the office. The Dems may just ge tanother shot here, but in 4 years, when things arent better, but worse. Dont go crying that its Bush’s fault. They are obviously going to fail to address this. It will be ignored like every past administration.
I have no problem Musing, with blaming Reps, I do have a problem with you continually saying its mostly their fault. It’s not. There’s plenty to go around.
Its time for a 3rd party, one that actually is resonsponsible. The blame lies on both sides of these Dems and Reps, and putting either one back in a seat only encourages them to keep up the poor work.
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“actually this is a valid point for consideration. The issue, however, as I understood it was not to help the borrower per se but to get the credit markets working again.
For example, AIG was not bailed out, it was bought at fire sale prices by the government. Lehman brothers went bankrupt. The only possible “winner” here was the purchaser of Bear Sterns.”
The credit markets were lending where primarily? The housing market. The housing market has crashed. THERE IS NO DEMAND. Freeing up the credit to reestablish the housing market isnt going to happen. At least Greenspan knew you had to funnel money elsewhere. He didnt funnel it back to the tech industry.
If you want to stabilize these industries, you need to address the borrower, who is continually going to be foreclosing, because I gurantee you, every lender will still hold them responsible, regardless of government bailouts to them. The housing market isnt going to grow again anytime soon. It has to first absorb the over production of houses, the loss in borrowers who didnt need one in the first place, and then increase the number of people who can responsibly afford one.
Now because your keep feeding these greedy people money, they are doubling down trying to recoup on the short term, which is why you still see panic and large losses for the past couple of weeks. The market will stabilize at reality, if you let it get rid of these morons on its own. Then growth can begin again.
I really dont call us in a depression or recession, technically we still arent in either. (Might go into one) I call us back down to reality. We are where we started at before Greenspan funneled all the greed into the housing market.
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#64, RR wrote brilliantly; “So long as we continue to view this problem as merely a failure of regulation we will get nowhere.”
So true.
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“but of course the root problem as agreed to by most economists, politicians, and indeed conservatvies, was lack of regulation. Indeed this is Greenspan’s poit.
So if the market was unregulated and failed, it had only itself to blame.”
The root of the problem is failure to pay your loans. Lack of regulation doesnt require lending to bad credit borrowers. However, I do agree, the government also failed to step in and deter the poor lending practices, it on the other hand encouraged it over the last 3 decades.
The bigger failure, is to bail out these practices. Your still encouraging it, and not bringing the proper regulation. Good regulation is detering the criminal, fraudlent practices, while NOT bailing them out.
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MIM post 68,
there are at elast two approaches to arguments:
1) pick apart the argument line by line on a logical basis
- this is a slow process
2) show that the assumptions are false
I typically prefer the latter because it is faster and amusingly enough a more thorough refutation.
Since Crad’s assumptions are so clearly false, why follow the flawed logic from false assumptions?
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Thorn post 72,
no actually it was creating loans which in a down economic envuironment could not be repaid.
and with such a large amount of debt, small perturbations can and as we see di make the loans impossible to repay.
If you disagree then tell me where, with house prices falling and interest rates rising, many of these sub-priome loans could ever be repaid?
Continuing on, with exotic unregulated securities as a ajor part of the market, when the market quickly dried up, how were these securities to be repaid?
Unless you can show where the financial wherewithall existed to repay th eobligations, your argument is fallaciaous on it face.
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Thorn post 70,
no actually the lending markets were primarily lending to the financial markets themselves which were apparenlty leveraged at about 30:1 on short term credit which needed to be renewed daily.
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arcaidia has positied the default swaps etc at abouy $70T, perhaps the best guess around.
The housing market is roughly 2X Freedie mac and GFannie Mae of perhaps $10T.
So the overall credit markets appear to dwarf the housing loan market.
And this is the intersting point of instability: a small perturbation in the housing market (initially estimated by llama at perhaps 2.5%) seems to have caused the remaining creidt market to stagger.
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#12 Musing
“I may accuse a person of not presenting the facts.”
#16 Musing
“…but I am awaiting references on this point.”
It is interesting that Musing gets all the way down to post #37 before giving a reference. I seem to remember the constant refrain of needing a reference to back up assertions by people opposing Musing’s statements.
I choose to take it that Musing is Special and doesn’t need to play by the rules put in place by Musing.
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Bob Buckles post 77,
actually first fact based reference on my part was post 16.
Do we need references to dmeonstrate when the Republicans were in office and held congress?
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#67using,
Your thinking. if you can call it that, is always wrong isn’t it ?
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Stanley Kurtz has been investigating and reporting on the connections between CRA – ACORN – Fannie & Freddie – financial institutions.
This for example.
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Musing – since, evidently, you didn’t go to the 60 Minutes website to look up the info I gave you yesterday, I did it for you.
http://www.cbsnews.com/stories/2008/10/26/60minutes/main4546199.shtml
Bush was not president in 2000 – Clinton was. Therefore, the GOP did not have control of Congress yet, either. Here is an exerpt of the story you will see at the link above:
“Well, it was a felony when a law came into effect because it had brought down the market in 1907. And they said, ‘We’re not gonna let this happen again.’ And then 100 years later in 2000, we rolled them all back.”
The vehicle for doing this was an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy.
It not only removed derivatives and credit default swaps from the purview of federal oversight, on page 262 of the legislation, Congress pre-empted the states from enforcing existing gambling and bucket shop laws against Wall Street.
“It makes it sound like they knew it was illegal,” Kroft remarks.
“I would agree,” Dinallo says. “They did know it was illegal. Or at least prosecutable.”
In retrospect, giving Wall Street immunity from state gambling laws and legalizing activity that had been banned for most of the 20th century should have given lawmakers pause, but on the last day and the last vote of the lame duck 106th Congress, Wall Street got what it wanted when the Senate passed the bill unanimously.
…the bill was passed at the height of Wall Street and Washington’s love affair with deregulation, an infatuation that was endorsed by President Clinton at the White House…”
So, it appears, that this was not caused by things done on the Republican watch, rather the Democrats’ watch. But, I guess if you scream something loud enough and long enough people start to believe it.
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Designergirl post 81,
well I will grant you the precision here if yo like:
Bush was president inaugurated in 2001 until now.
The Repbublican congress was in power form 2001 to 2007.
I can acept this precision if you like.
So the missing piece here is the “Commodities Futures Modernization act of 2000″. I will go review this and get back to you. Thanks for the reference.
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Designergirl post 81,
so my first stop was:
Commodities futures Modernization Act
from which I extract:
“Legislative history
The “Commodity Futures Modernization Act of 2000″ (H.R. 5660) was introduced in the House on Dec. 14, 2000 by Rep. Thomas W. Ewing (R-IL) and cosponsored by Rep. Thomas J. Bliley, Jr. (R-VA) Rep. Larry Combest (R-TX) Rep. John J. LaFalce (D-NY) Rep. Jim Leach (R-IA) and never debated in the House.[2]
The companion bill (S.3283) was introduced in the Senate on Dec. 15th, 2000 (The last day before Christmas holiday) by Sen. Richard Lugar (R-IN) and cosponsored by Sen. Peter Fitzgerald (R-IL) Sen. Phil Gramm (R-TX) Sen. Chuck Hagel (R-NE) Sen. Thomas Harkin (D-IA) Sen. Tim Johnson (D-SD) and never debated in the Senate.
Given the above-stated chronology, it would appear that the House and Senate versions of the bill were introduced just prior to the Christmas holiday in December of 2000, following George W Bush’s (first) election (in November of 2000), while then-President Clinton was serving out his final days as President. The bill was never debated by the House or Senate. The bill by-passed the substantive policy committees in both the House and the Senate so that there were neither hearings nor opportunities for recorded committee votes. In substance, it appears that the leadership of the Republican-controlled Senate and House incorporated the deregulation of credit default swaps into an omnibus budget bill (without hearings or recorded votes)at a time when the outgoing president was in no position to veto anything. The following article suggests that Bill Clinton and Alan Greenspan endorsed this law The Bet That Blew Up Wall Street though Clinton’s position in 2000 is only suggested, not confirmed or made clear in the report.
The Republican leadership of the House incorporated”The Commodity Futures Modernization Act of 2000(H.R. 5660)” by reference, as Section 1(a)(7), in a long and complex conference report to the 11,000 page long “2000 omnibus budget bill” formally known as “The Consolidated Appropriations Act for FY2001(Labor, Health and Human Services, and Education Appropriations Bill) (H.R. 4577).” 157 Democrats and 133 Republicans voted for the appropriations bill. 51 Republicans and 9 Democrats opposed the appropriations bill vote results in the house. The Senate version passed by “Unanimous Consent.” President Clinton signed it into Public Law (106-554) on December 21, 2000.”
This law indeed apparenlty has a lovely hsitory which appears to be peppered by efforts of the Republican controlled congress at the time and passed in the dieing days of the Clinton administration.
I will work more on this but thanks for the reference: this is a fascinating insight into the machinatons of congress! Attaching it to the omnibus 2000 budget bill is indeed a touch of legislative legerdemain!
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Oh this oughta be interesting…
Musing do you just pretend to know stuff you don’t? Even I’ve heard of that act.
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Ok, this is the results from Thomas:
http://thomas.loc.gov/cgi-bin/bdquery/z?d106:HR05660:@@@C
I hope the search remains valid.
Interesting obsrervation matching the Wikipedia resuls: it was attached to a conference committee report totally bypassing the varous committees.
The following appears to define the conference committee process:
Conference Committee process
of which the operative issue seesm to be:
“Once a bill has been passed by a conference committee, it goes directly to the floor of both houses for a vote, and is not open to further amendment. In the first House to consider the conference, a Member may move to recommit the bill to the conference committee. But once the first House has passed the conference report, the conference committee is dissolved, and the second House to act can no longer recommit the bill to conference.”
which effectively forces an up down vote o the entire committe report.
Now since this was attached to an omnibus spending bill which I believe had to be passed …
Me thinks Designergirl that one still has the Republican fingerprints on this activity. but thanks for driving me to explore this and close down this hole as well.
It has been educational. Thanks for the reference!
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MIM post 84,
naw I look it up and then publish with references if possible.
I am reasonably sure I have the etiology of the “Commodities Futures Modernization Act” worked out reasonably well.
Did I miss a key point in the development of this bill?
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Designergirl post 81,
So I must thank you for the reference.
You are correct, this bill seems to have been a key cornerstone of what latter ensued. Thank you for the reference.
Now to run down the story of Rep. Thomas W. Ewing (R-IL), Rep. Thomas J. Bliley, Jr. (R-VA), Rep. Larry Combest (R-TX), Rep. John J. LaFalce (D-NY), and Rep. Jim Leach (R-IA) involvement in the process!
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It looks like Ewing was the Republican whip at the time. He then retireed in 2001.
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I never said Republicans weren’t involved. I simply stated that Dems were in control at the time – and they were. Clearly, they could have stopped this bill from passing, but chose not to. Isn’t this your argument for the reason Republicans SHOULD be blamed? They could have stopped the Dems and didn’t? And, therefore, this cannot be solely blamed on W or the Republicans. Nice try, though.
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Designergirl post 89,
my real issue is to understand the etiology of how we got here and what should be fixed.
This thread started out blaming Democrats. This is clearly not the case. What became clear in the short study of the bill is that the Republicans manipulated the conference committeee process to attach this to a must pass bill. If you look carefully this was manipulated by the senior Republican congressional members noting that Repuiblican appear to have controlled both the house and the senate at the time (the Democrats took control of the senate for 17 days immediatley after the 2000 election before chenye became a Republican tie breaking vote). But it is a wonderfully complex exercise which demonstrates excellent mastery of the congressional process by the Republicans.
As I walk through the chronology, this bill seems to be the 1999 bill which was posted once but for which references were not provided. Looking further it ap[pears that it did not become fully effective until 2003 which matches one of Peter Leavitt’s dates. And we are left with the 2005 effort by Bush and McCain to adopt regulation but which was stalled by the Republican conrgressional majority.
And what we are left with is, as I described at the beginning, a lack of regulation on the key securities instruments. The impact was indeed widespread, since it appears that Gramm put in what is sometimes referred to as the Enron Loophole which appears to have been at root of some of the Enron issues.
But we are left with the realization that the regulation was not adequate.
Now we will have to regulate AND the government is bailing out the financial industry for its mistakes, since the alternative appears to be a total melt down of the economy.
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Designergirl post 90,
and of course if the Republicans had understood that this was a serious issue, they could easily have passed the required regulation anytime between 2001 and 2007 (to use the more precise dates).
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Designergirl post 91,
but if you insist, you can indeed perhaps place some blame on Clinton for effectively giving up on his last days as president, although in attaching it to the spending bill, the Republicans effectively ensured that it must pass.
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thorn: The free market would gladly handle the greed its own way, but instead, the government continually bails them out.
This totally overlooks the problem that some institutions in a free market inevitably become so big that when they go down, they take an unacceptably large share of the economy and the people with them. Allowing the numerous banks and insurers to fail in this kind of situation would have destroyed much of our national economy.
arcaidia has positied the default swaps etc at abouy $70T, perhaps the best guess around.
The housing market is roughly 2X Freedie mac and GFannie Mae of perhaps $10T.
So the overall credit markets appear to dwarf the housing loan market.
And this is the intersting point of instability: a small perturbation in the housing market (initially estimated by llama at perhaps 2.5%) seems to have caused the remaining creidt market to stagger.
Exactly. You had a bunch of loans which were questionable to begin with. Not too bad. But then the financial houses “collateralized” these loans and essentially cross-insured the obligations multiple times. The bond and commercial paper markets, both larger than the housing market underwent a similar process, using CDO’s. AIG for instance repeatedly guaranteed repayment on individual commercial paper and bonds. When the paper or bond failed, they were on the hook for many times the amount of the obligation.
Of course, every time they sold insurance on the same bond, they got a premium which went to their bottom line and to their executives paychecks. Now technically, they did not call what they did “insurance”; they were allowed to treat it as outside of their regular insurance business.
One other simple truth is that Hank Paulson and the guy before him, whose name I can’t recall, knew that all of this was going on, and did NOTHING to stop it. Even after the first bunch of bailouts in 2007, they just kept whistling in the dark, no doubt hoping that the disaster they saw coming would wait until after the election. Or, maybe, Paulson did blow the whistle and got orders to stand down until after the election.
In any event, Republicans controlled every regulatory agency for 7 years and they simply failed to control the greed-motivated shenanigans that all the major players were engaged in. They stood by and watched all of them build this huge edifice of leveraged debt knowing that it was shaky and HAD to crash sometime.
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Sorry, the second quoted part of the post above was from Musing, not Thorn.
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Musing writes:
“The question is indeed how does one control this greed and attempt to shift responsiblity. In general, this is left to society to structure, which in the case of the U.S. is the Federal government primarily.”
Sorry, Musing, but greed has been with the human race a lot longer than the U.S. government. There is nothing in the Constitution about greed. The answer which you leftys have been trying to eliminate from our society is… yes, you guessed it… following God’s word. When the country followed biblical principles, the country grew and enjoyed the good view of the world. Governments can’t make people be moral, deal justly, act properly. That comes from within. That comes from the fear of God.
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NJLawyer post 95,
indeed as was noted in my post: see the comments about the tragedy of the commons which is a very very old problem.
My argument is that the tool to manage greed and the shifting of blame is society. Indeed there is effectively no other tool out there (there is a wonderful semantic trap here, do you want to go there?
).
And in the U.S. the societal tool which has been put in place to control greed and the shifting of responsiblity is predominantly the Federal government with a series of actions of which the establishment of the SEC is but an example.
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This history is interesting and amusing. It only matters if it will tell us where we’ve gone wrong and what to do right. I would just as soon go to what we know to do as god fearing Christians. Yes, God fearing.
God has told us many times how to act with money. We (corporately as Americans) have ignored how to behave. We will now pay the price.
What should we, as individuals, do?
The thing that excited me about Palin was that she had gone against entrenched Republicans; people in her own party (My party!) who were just piggies at the trough. We Republicans need to do the same. We need to “Throw the bums out!”
It seems that we also need to change a whole bunch of laws and get rid of a whole passel of Government “functions” before they come due. We can’t afford Social Security or MediCare. We can’t afford our national debt. Democrats won’t help stop those three, so we Republicans need to step up to the plate.
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Bob Buckles: The thing that excited me about Palin was that she had gone against entrenched Republicans; people in her own party (My party!) who were just piggies at the trough.
Yes indeed. That’s why she declined to call for Senator Stephens to resign until the McCain campaign told her to do so. Yep, she’s a real hard-charging corruption fighting fool, our Sarah. Or corrupt (excuse me, ethically challenged fool, take your pick.
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NJL: There is nothing in the Constitution about greed.
Try the commerce clause. And isn’t regulating bankruptcy laws in there somewhere?
Amazing!
Of course I shouldn’t be surprised. I bet you are of the school that speech “rights” depend upon how much money you have.
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Bob Buckles post 97,
forgive my confusion perhaps, but had not Clinton started running budget surpluses before Bush and the Republicans took over?
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So a point worth noting: the U.S. is not a theocracy. it is not even an evangelical Christian majority.
Therefore if we have societal issues to resolve calling on the church I suggest, while prhaps an interesting starting point for some, is not going to address the issues.
For controlling our economy and our markets, the U.S. has chosen th eFederal government. As has been amply documented in this discussion (Designergirl in particular addidng to the texture of the discussion), the failure was in regulation.
And the fix will include at least in part regulation, as is in fact agreed to by nearly all parties.
We can probably go further: we will need to regulate essentially all portions of the financial system. As designergirl’s material shows it was allowing some of the market to operate outside the regulation which was in part the cause of the difficulty.
That would seem to be the starting point for the long term “cure, based on how the disucssions in this session have gone so far.
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No, the commerce clause does not deal with the sin of greed, not at all. The Constitution doesn’t deal in sin.
I don’t have a lot of money, either, and I don’t plan to shut up or be intimidated by those who have nothing to ground them morally.
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And in the US, the “tool” used to be a good grounding in the Bible which teaches a distinct right and wrong rather than the blurred relativity that the left expounds. The real problem, the core of the problem is the sin of greed. Even Greenspan said it.
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NJLawyer post 101,
the constitution doesn’t speak of sin at all.
the constitution establishes the framework in which we run our government. The commerce clause has been found to justify regulation of our economnic systems, and in fact without such regulation the systems would not exist at all.
And this regulation has been used to manage the behaviors of greed and of attempting to shift blame.
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NJLawyer post 102,
well perhaps, but the society was established as a non-sectarian society. As such one can not depend on the other being of the same religion as you.
And hence depending on the Bible as you put it would appear to be a thin and inappropriate reed to hang ones hope on.
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Bottom line is that our conservative and Republican friends are trying to say that none of this is their responsibility and they are completely without fault.
The American people aren’t buying it.
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It is not a question of hanging my hopes on anything. It is just a fact that when the populace, society as you call it, followed biblical principles in their daily lives, the country was better off. Now they follow celebrities. The government is secular, but now the people are, too. They’ve lost their way. The people who founded this country presumed that those who came after would understand the necessity of following biblical principle in their daily lives. But you know what happens when you assume…
As a Christian, I can accept that that my country will ultimately tank. It’s not as if there’s a reference to it in the Revelation. There isn’t. If that’s what it takes for the Lord to return, so be it. But this isn’t about religion. This is about knowing the difference between right and wrong and choosing to do the right thing. Our society doesn’t know how to do that anymore because it has adopted the relativism, the anything goes worldview of the left which is slowly but surely slitting the throat of the golden goose.
Keep your head in the sand all you want, Musing, but the greed manifested in this country with the mortgages, has affected the whole world, and the stage is now set for the Anti-Christ to appear. It is not Obama, but Obama is lefty enough and not well-versed in biblical principle enough (having sat at the feet of Wright and the liberation theology nonsense) that he’ll commit the US to the road to its ultimate destruction.
I can accept that as a Christian. As an American, I’m appalled at what is happening. Just saying.
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NJLawyer post 107,
so tell me about the “era of good stealings”?
How about the gilded age?
I suggest your apparent model of a past Biblical utopia in the U.S. is simply not grounded in fact.
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NJLawyer post 107,
MATTHEW 24:36 [niv]:
36″No one knows about that day or hour, not even the angels in heaven, nor the Son,[a] but only the Father.
I suggest that arguing that anti-Christ is about to appear in un-Biblical.
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Musing:
It is not un-Biblical to look for the revealing of the man of sin.
II Thessalonians 2:3 “Let no man deceive you by any means; for that day shall not come except there be a falling away first, and that man of sin be revealed, the son of perdition.”
The chief admonition of Matt. 24 and especially ch. 25 is to “Watch”.
As I said before, I expect the anti-Christ will be smarter than this empty suit.
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Chas post 109,
I suggest that I disagree with you. But this is a matter of belief and unprovable per se.
For example I don’t accdept the Epistles as canonical, so an Epistle based argument has little standing from my perspective.
I was hoping that NJLawyer would respond, since it would then help clarify the lack of religious homogeneity in this country even between different versions of Christianity.
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Musing, all that means is that we can’t communicate. I don’t know how NJL would respond but even though Jesus prayed “that they all may be one…” Jn. 17:21, it is not necessary that religion be homogeneous. That doesn’t mean that we aren’t brothers in Christ.
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Chas post 111,
actually we can most certainly communicate and we are.
What one must always understand, however, is that ones beliefs may not be shared by others. This forces one to look for the commonalities and communicate with these rather than focusing on the differences and arguing that commuication is impossible.
And indeed even if we are not Christians, I suggest we are still all brothers in Christ.
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Alan Greenspan doesn’t agree with Mamet’s story. Greenspan blames capitalism. The culprits were “aggressive demand” for mortgage paper (read: greed), the failure of counterparty surveilance, and the failure of banks to price risk in their own interest. These are failures in the market. Greenspan puts very little importance upon government promotion of subprime mortgages, which account for only a third of all subprime mortgages, and not especially the ones that went bad. In fact, Greenspan wants the government to re-establish a market for subprime mortages because of the importance of homeownership to society, to small business, and to the economy. chairman Cox took his own swing at capitalism when he faulted the deregulation resulting from the securities exchange modernization act.
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