Some Clarity in Financial Reform - easy to understand

[zipman]

The Bush program were small dollars, less than $1B, administered locally, and designed to encourage responsible lending.

The problem wasn't Clinton or Bush, it was Fannie / Freddie, who decided to back $trillions of dollars of suspect mortgages, including triple-no loans: no down payment, no income validation, no principal payments. Bush wanted to get this under control, the Democratic congress blocked it. That's just a fact, whether or not any other form of encouragement was going on.

It's also a "fact" that he tried to do it multiple times since 2001 and the republican congress blocked it.

Both sides caused this mess. Trying to portray it in as a partisan problem is just intellectually disingenuous as well as revisionist history regardless of which side you are trying to paint as the demon.

 

[firespin]

It's also a "fact" that he tried to do it multiple times since 2001 and the republican congress blocked it.

Both sides caused this mess. Trying to portray it in as a partisan problem is just intellectually disingenuous as well as revisionist history regardless of which side you are trying to paint as the demon.

It wasn't the Republicans who blocked it, it was the Democrats in the Senate. They Republicans always needed some Democratic support in the Senate during the Bush years.

 

[zipman]

It wasn't the Republicans who blocked it, it was the Democrats in the Senate. They Republicans always needed some Democratic support in the Senate during the Bush years.

So it was the democrats fault when the republicans had the majority and the democrats fault when the democrats had the majority.

That's a fair objective viewpoint.

 

[firespin]

So it was the democrats fault when the republicans had the majority and the democrats fault when the democrats had the majority.

That's a fair objective viewpoint.

If you don't want to understand, you don't have to.

The way the Senate is set up, one party can block something once it has 40 votes. The nominal "majority" designation means nothing.

 

[zipman]

If you don't want to understand, you don't have to.

The way the Senate is set up, one party can block something once it has 40 votes. The nominal "majority" designation means nothing.

I understand it fine, I simply disagree with your blame game.

Have fun with that whole demonization thing.

 

[firespin]

I understand it fine, I simply disagree with your blame game.

Have fun with that whole demonization thing.

I could as equally say have fun ignoring obvious indicators of huge structural problems.

In this case, a trillion dollar enterprise was set down an unsustainable path because of political considerations. You don't have to be a rocket scientist to have seen that that wasn't going to end well.

Your efforts to equate encouraging home ownership with maintaining status quo at a set of incompetent and corrupt GSE is, frankly, alarming. Either you're trying to score political points, or you really don't understand.

 

[zipman]

I could as equally say have fun ignoring obvious indicators of huge structural problems.

In this case, a trillion dollar enterprise was set down an unsustainable path because of political considerations. You don't have to be a rocket scientist to have seen that that wasn't going to end well.

Your efforts to equate encouraging home ownership with maintaining status quo at a set of incompetent and corrupt GSE is, frankly, alarming. Either you're trying to score political points, or you really don't understand.

Then we're even as I find your attempt to deflect blame from the republicans when they clearly played a role in this fiasco as both alarming and revisionist.

From deregulation during the Clinton administration through both of Bush's terms this was a bipartisan effort.

 

[firespin]

Then we're even as I find your attempt to deflect blame from the republicans when they clearly played a role in this fiasco as both alarming and revisionist.

From deregulation during the Clinton administration through both of Bush's terms this was a bipartisan effort.

I realize it's fashionable to say this is all about deregulation...Glass-Steagall and all that. But none of that changed near the time that everything went to hell.

What DID change was Fannie / Freddie's lending standards, and that made it possible to continue writing bad mortgages long past the point when common sense said to stop. And we as taxpayers are left holding the bag. How big is the bag, I hear you ask? Keep in mind that essentially all the other bailouts, for big banks, even the automakers are being paid back...

For Fannie / Freddie, here's the initial estimate of $25B:

http://www.huffingtonpost.com/2008/07/22/fannie-freddie-bailout-co_n_114331.html

But, a year later, in 2009, we were into them for a cool $85B:

http://money.cnn.com/2009/07/22/news/companies/fannie_freddie_bailout/index.htm

And just where are we now?

http://www.huffingtonpost.com/garrett-johnson/the-biggest-financial-bai_b_488394.html

""The Congressional Budget Office estimates that Fannie and Freddie added $291 billion to the federal deficit in 2009 and will cost an additional $389 billion to run over the next ten years. However, Fannie and Freddie are currently considered "off budget" meaning the actual cost to run these agencies is not considered by the Office of Management and Budget.""

Yikes. Fannie and Freddie really screwed the pooch on this one, and they're never paying us back. Dodd, Frank and Reid (to name three principal enablers) did indeed give taxpayers the shaft on this one. Sorry if that's not the story line you want to hear.

 

[zipman]

I realize it's fashionable to say this is all about deregulation...Glass-Steagall and all that. But none of that changed near the time that everything went to hell.

What DID change was Fannie / Freddie's lending standards, and that made it possible to continue writing bad mortgages long past the point when common sense said to stop. And we as taxpayers are left holding the bag. How big is the bag, I hear you ask? Keep in mind that essentially all the other bailouts, for big banks, even the automakers are being paid back...

For Fannie / Freddie, here's the initial estimate of $25B:

http://www.huffingtonpost.com/2008/07/22/fannie-freddie-bailout-co_n_114331.html

But, a year later, in 2009, we were into them for a cool $85B:

http://money.cnn.com/2009/07/22/news/companies/fannie_freddie_bailout/index.htm

And just where are we now?

http://www.huffingtonpost.com/garrett-johnson/the-biggest-financial-bai_b_488394.html

""The Congressional Budget Office estimates that Fannie and Freddie added $291 billion to the federal deficit in 2009 and will cost an additional $389 billion to run over the next ten years. However, Fannie and Freddie are currently considered "off budget" meaning the actual cost to run these agencies is not considered by the Office of Management and Budget.""

Yikes. Fannie and Freddie really screwed the pooch on this one, and they're never paying us back. Dodd, Frank and Reid (to name three principal enablers) did indeed give taxpayers the shaft on this one. Sorry if that's not the story line you want to hear.

Just because it wasn't repealed right around the time of the collapse doesn't mean it wasn't a contributing factor in it. The same could be said for legislation passed that reduced the amount of leverage that financial institutions were supposed to have. And in no way, shape or form am I excusing the behavior of Dodd, Frank and Reid.

I'm merely saying that there was little to no difference between the Clinton and Bush efforts to promote minority home ownership and that both of their actions contributed to the housing bubble.

 

[Ishmael]

Your argument is highly flawed. Of course no president is going to be anti-home ownership. But that isn't what I said.

Bush was highly pro-home ownership and made it a priority for his presidency and he did so before the bubble began. Bush not only advocated that anyone who wanted to own a home should have a chance to get one, he specifically targeted minorities as needing help and put in place programs to help them.

Let's take a stroll down memory lane here Zip. And there's plenty of blame to go around.

In Dec. of 2002 the New York Times ran an editorial cautioning then president elect Clinton NOT to use loose credit standards to stimulate the housing market to stimulate the economy. This editorial was in response to Clintons stated intentions to make doing so a priority of his administration. (I provided a link to the editorial in one of the threads on the subject back in 2008.)

Fannie and Freddie were to be the means to achieve this stimulus. The obstacle to achieving the goal of making housing "more affordable" was the fact that the lowering of the credit requirements had to be accomplished as well. Fannie and Freddie came under pressure to do so as soon as Clinton took office. However they were still under certain regulations in place that restricted their ability to really accelerate the mortgages underwritten. But part of the problem was already solved in that in 1992 congress created a bureau within HUD whose sole purpose was to spur Freddie and Fannie on.

In 1995 Clinton lobbied for, and got, changes to the CRA that gave organizations outside the government (ACORN being one) more leverage in forcing these loans. Note that the 1995 congress was a Republican congress so this is the year that the Republicans started getting their hands dirty in the mess.

As a personal observation it would have been a difficult 'Sirens Song' to ignore. The upside was a booming housing market and the downside would have been to be vilified as being 'racist' and wanting to keep minorities down.

Freddie and Fannie gave in to the 'greenmail' demands of the various community groups deeming it a small price to pay considering the outrageous profits they were reaping. (1990-1994 show that Freddie and Fannie were clocking along at an amazing 40.3% and 31.6% rate of return respectively. Nothing but blue skies ahead.)

Oddly enough Fannie and Freddie were late adoptors in the sub-prime market, not really getting into it until 1998-99. But when they did they went all out. Once they entered the market approx. 50% of their biz. was in sub-primes and they actually hit 71% in 2002. The percentage of holdings in sub-primes went from 7% to almost 48% in 2008. They are now holding approx. 33% in sub-prime paper.

The Bush administration started raising red flags in 2003, but to no avial. Frank and Dodd would have none of it. They demonized Bush for bringing the subject up. And as we all remember, Bush had bigger political issues to deal with. He continued to raise warning flags though. (You can find those warnings if you research back far enough Fire.)

Everyone that held sub-prime paper was trying to lay it off in bundled offerings. The creative ways in which these offerings were packaged insured that ALL of the offerings were poisoned to one extent or another.

The whole affair was, and still is, a housing crisis. It was fueled by good intentions, the concept that every American should own their own home. And that's still a good concept. The fatal flaw was that giving mortgages to those that can't afford the payments is a prescription for disaster, at some point in time the piper must be paid.

We can point our fingers at the banks, the investment houses, anyone that made a penny off those deals, but the fact remains that the entire collapse was brought about by the fact that a lot of people quit making their payments. And once that snowball started rolling people that could make their payments lost their jobs and stopped making payments as well. The entire financial sector was set up for a fall by government policy that, in effect, rewarded institutions for making risky loans. Or maybe it would be better to state that those institutions that didn't make risky loans found themselves having all sorts of legal problems.

And that brings us to the nut of Zuckermans article. While there are more than a few good ideas in the financial reform bill in the senate, there is NOT one word in the bill that would do anything to rein in Freddie, Fannie, or the CRA groups. The bill gives all the appearance of addressing the symptoms of the problem without addressing the source of the problem.

I fully understand the democrats reluctance to deal with any of those institutions in that they represent a big chunk of their core constituency. But that is politics and has nothing to do with the good of the nation. And I equally condemn those republicans who are answering the same 'Sirens Song.'

Ishmael

 

[zipman]

Let's take a stroll down memory lane here Zip. And there's plenty of blame to go around.

In Dec. of 2002 the New York Times ran an editorial cautioning then president elect Clinton NOT to use loose credit standards to stimulate the housing market to stimulate the economy. This editorial was in response to Clintons stated intentions to make doing so a priority of his administration. (I provided a link to the editorial in one of the threads on the subject back in 2008.)

Fannie and Freddie were to be the means to achieve this stimulus. The obstacle to achieving the goal of making housing "more affordable" was the fact that the lowering of the credit requirements had to be accomplished as well. Fannie and Freddie came under pressure to do so as soon as Clinton took office. However they were still under certain regulations in place that restricted their ability to really accelerate the mortgages underwritten. But part of the problem was already solved in that in 1992 congress created a bureau within HUD whose sole purpose was to spur Freddie and Fannie on.

In 1995 Clinton lobbied for, and got, changes to the CRA that gave organizations outside the government (ACORN being one) more leverage in forcing these loans. Note that the 1995 congress was a Republican congress so this is the year that the Republicans started getting their hands dirty in the mess.

As a personal observation it would have been a difficult 'Sirens Song' to ignore. The upside was a booming housing market and the downside would have been to be vilified as being 'racist' and wanting to keep minorities down.

Freddie and Fannie gave in to the 'greenmail' demands of the various community groups deeming it a small price to pay considering the outrageous profits they were reaping. (1990-1994 show that Freddie and Fannie were clocking along at an amazing 40.3% and 31.6% rate of return respectively. Nothing but blue skies ahead.)

Oddly enough Fannie and Freddie were late adoptors in the sub-prime market, not really getting into it until 1998-99. But when they did they went all out. Once they entered the market approx. 50% of their biz. was in sub-primes and they actually hit 71% in 2002. The percentage of holdings in sub-primes went from 7% to almost 48% in 2008. They are now holding approx. 33% in sub-prime paper.

The Bush administration started raising red flags in 2003, but to no avial. Frank and Dodd would have none of it. They demonized Bush for bringing the subject up. And as we all remember, Bush had bigger political issues to deal with. He continued to raise warning flags though. (You can find those warnings if you research back far enough Fire.)

Everyone that held sub-prime paper was trying to lay it off in bundled offerings. The creative ways in which these offerings were packaged insured that ALL of the offerings were poisoned to one extent or another.

The whole affair was, and still is, a housing crisis. It was fueled by good intentions, the concept that every American should own their own home. And that's still a good concept. The fatal flaw was that giving mortgages to those that can't afford the payments is a prescription for disaster, at some point in time the piper must be paid.

We can point our fingers at the banks, the investment houses, anyone that made a penny off those deals, but the fact remains that the entire collapse was brought about by the fact that a lot of people quit making their payments. And once that snowball started rolling people that could make their payments lost their jobs and stopped making payments as well. The entire financial sector was set up for a fall by government policy that, in effect, rewarded institutions for making risky loans. Or maybe it would be better to state that those institutions that didn't make risky loans found themselves having all sorts of legal problems.

And that brings us to the nut of Zuckermans article. While there are more than a few good ideas in the financial reform bill in the senate, there is NOT one word in the bill that would do anything to rein in Freddie, Fannie, or the CRA groups. The bill gives all the appearance of addressing the symptoms of the problem without addressing the source of the problem.

I fully understand the democrats reluctance to deal with any of those institutions in that they represent a big chunk of their core constituency. But that is politics and has nothing to do with the good of the nation. And I equally condemn those republicans who are answering the same 'Sirens Song.'

Ishmael

I don't disagree with the main points although I do take issue with giving the banks, investment houses and rating agencies a free pass. Cutting up mortgages and repackaging them did have a tremendous impact on the meltdown as banks mistakenly thought they were limiting their risk.

Again, I am not giving democrats anything remotely resembling a free pass for their role in this mess. Nor would I minimize the impact of Freddie and Fannie on this mess. This was a collosal fuck up by both parties.

 

[Sean]

the fact remains that the entire collapse was brought about by the fact that a lot of people quit making their payments.

Bullshit.

 

[Ishmael]

I don't disagree with the main points although I do take issue with giving the banks, investment houses and rating agencies a free pass. Cutting up mortgages and repackaging them did have a tremendous impact on the meltdown as banks mistakenly thought they were limiting their risk.

Again, I am not giving democrats anything remotely resembling a free pass for their role in this mess. Nor would I minimize the impact of Freddie and Fannie on this mess. This was a collosal fuck up by both parties.

Did I not say that there were some good points to the Financial Reform legislation? I'm not giving anyone a 'free pass.' It appears that the democrats in congress want to give Freddie, Fannie, and the CRA's a 'free pass.' My point is merely that they should be made to take the medicine as well.

Ishmael

 

[unregistered]

 

[zipman]

Did I not say that there were some good points to the Financial Reform legislation? I'm not giving anyone a 'free pass.' It appears that the democrats in congress want to give Freddie, Fannie, and the CRA's a 'free pass.' My point is merely that they should be made to take the medicine as well.

Ishmael

This sentence did make it sound like you were giving out a free pass:

We can point our fingers at the banks, the investment houses, anyone that made a penny off those deals, but the fact remains that the entire collapse was brought about by the fact that a lot of people quit making their payments.

Having said that, I wouldn't pass the current reforms as they stand either and Freddie, Fannie certainly deserve to "take their medicine as well."

 

[Ishmael]

This sentence did make it sound like you were giving out a free pass:



Having said that, I wouldn't pass the current reforms as they stand either and Freddie, Fannie certainly deserve to "take their medicine as well."

Nope. Just identifying the immediate initiator.

The fact remains that the entire collapse was engineered by two administrations and congresses made up of both parties. They never seem to learn that you can't engineer a boom without having to suffer a subsequent bust.

If congress and the adminstration(s) are unwilling to control themselves then there is little hope that their exercising control over others is going to fix anything for very long at all.

Ishmael

 

[RightField]

I disagree. I think it's a liberal policy that the Republicans tried to reverse, but they didn't try hard enough. As you mentioned above Ish, Bush was distracted by the war, but he should have still pushed harder to get some of the regulations that he was advocating passed. I don't think that "not trying hard enough" to repeal the law counts as being part of the cause.

 

[RightField]

I don't know that you'd find any president come out as ANTI-home ownership, right? But Bush was on record as not a big fan of how Fannie and Freddie operated:

2004:

" * February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital and calls for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore … should be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)


* February: Then-CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)


* April: Rep. Frank ignores the warnings, accusing the Administration of creating an "artificial issue." At a speech to the Mortgage Bankers Association conference, Rep. Frank said "people tend to pay their mortgages. I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there." ("Frank: GSE Failure A Phony Issue," American Banker, 4/21/04)


* June: Then-Treasury Deputy Secretary Samuel Bodman spotlights the risk posed by the GSEs and calls for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)
"

2007:

" * August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, the White House, 8/9/07)


* August: Senate Committee on Banking, Housing and Urban Affairs Chairman Christopher Dodd ignores the President's warnings and calls on him to "immediately reconsider his ill-advised" position. (Eric Dash, "Fannie Mae's Offer To Help Ease Credit Squeeze Is Rejected, As Critics Complain Of Opportunism," The New York Times, 8/11/07)


* December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs – and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, the White House, 12/6/07)
"

http://georgewbush-whitehouse.archives.gov/news/releases/2008/10/20081009-10.html

This also helps clarify the situation. Libs resisted new restrictions to keep the bubble from growing.

 

[Frisco_Slug_Esq]

Does it make anyone nervous that the Student Loan program is now cast in the same mold as the Fannie and Freddie model?




How do you know the Democrats had the biggest hand in the mess? when the Republicans can be blamed, they do, vociferously, when the Democrats can be blamed, it takes two to Tango...

With a central government, so big, so rich, so powerful that it is worth fighting over, there can be no real reform, only political victory.
__________________
When the government gets powerful enough to fight over, the people will fight over it, and to the victors go the spoils, thus setting up the next fight.
A_J, the Stupid

 

[Ishmael]

I disagree. I think it's a liberal policy that the Republicans tried to reverse, but they didn't try hard enough. As you mentioned above Ish, Bush was distracted by the war, but he should have still pushed harder to get some of the regulations that he was advocating passed. I don't think that "not trying hard enough" to repeal the law counts as being part of the cause.

My point was that Bush not only didn't have any support from the democrats, he didn't have enough support from the republicans either. Bush first raised the issue in 2003 and made it official in 2004, and that was an election year.

There were as many republicans benefiting from a booming housing market than there were democrats. No one was going to be in any hurry to hinder the gutting of the golden goose.

Ishmael

 

[MeeMie]

Wall Street reform?

Or just another bill to pad with pork and bills that cannot pass on their own.


This so called Wall Street regulation overhaul gives FTC authority over the Internet.

also...

Congressman Waxman sneaks anti-vitamin amendment into Wall Street reform bill that would expand the powers of the FTC (not the FDA, but the FTC) to terrorize nutritional supplement companies by greatly expanding the power of the FTC to make its own laws that target dietary supplement companies.

 

[RightField]

Wall Street reform?

Or just another bill to pad with pork and bills that cannot pass on their own.


This so called Wall Street regulation overhaul gives FTC authority over the Internet.

also...

Congressman Waxman sneaks anti-vitamin amendment into Wall Street reform bill that would expand the powers of the FTC (not the FDA, but the FTC) to terrorize nutritional supplement companies by greatly expanding the power of the FTC to make its own laws that target dietary supplement companies.

Yes, that's typical. I wish they'd stick to one topic at a time. Less chance for corruption that way.

 

[mercury14]

I disagree. I think it's a liberal policy that the Republicans tried to reverse, but they didn't try hard enough. As you mentioned above Ish, Bush was distracted by the war, but he should have still pushed harder to get some of the regulations that he was advocating passed. I don't think that "not trying hard enough" to repeal the law counts as being part of the cause.

BS excuse. Presidents can multitask. And Bush was the better part of a decade to find the time.

 

[RightField]

BS excuse. Presidents can multitask. And Bush was the better part of a decade to find the time.

Yes, Obama has found many ways to screw the country simultaneously. If he'd just have stuck to one thing, maybe fixing the economy, maybe there'd be a few more jobs out there. Instead, he's come up with a dozen crazy schemes that all combine to suppress job creation. Jobs will start to slowly come back, but his programs have delayed the recovery by months and months and has our country bleeding red all over the place.

 

[Frisco_Slug_Esq]

Obama is just a walking speech of hope tossed about in the winds of "change..."





No substance to keep him grounded because Marxism has no substance.


Just "Dreams."