The US Economy in the crapper starting Monday?

[japangreg]

Yes. Republicans have always wanted to deregulate Fannie and Freddie. You know; less government meddling, market motivations work. Had they been deregulated we wouldn't be in this mess.

Whoa - that was such a 180 in logic, you bring me back to the coin-flip. If we had less regulation, we wouldn't be in this mess - and since the Repubs were presumably calling for more regulation, they were what... right?

Are you saying that creating the new regulatory agency would not have helped increase regulation of Fannie and Freddie?

Yes, I am. Why? Because I read the actual bill the Repubs introduced that went no where in the senate, dispite being sent to a Repub dominated committee. From S.190, the Federal Housing Enterprise Regulatory Reform Act of 2005:

Sec. 205. Exclusion from certain securities reporting requirements

There's plenty more in that bill, obviously, but to claim that this was somehow a magic-bullet, pro-regulation piece of legislation that wouls have saved us all is laughable.

Are you saying that the Democrats were justified in resisting increased regulation that would have helped because they were scared of Fannie and Freddie being deregulated?

What? Am I saying Dems feared more regulation because they were scared of less regulation? The Repubs weren't offering any additional regulations. That what you're missing here.

Why would the Democrats be afraid of a deregulated Fannie and Freddie? Could the millions of dollars in political contributions have anything to do with it (Republicans aren't clean in that regard either, btw)?

Of course it could - it could also have to do with exactly the same problems we're seeing right now.

[FlashLackey]

Well, I think it doesn't matter really, it's not 'who', it's 'what'.

I have included "what" I believe is responsible and why.

I can definitely understand not caring for partisan battles. But, I think that the "who" matters in this case precisely for the reason that you allude to. This failure does indeed reflect on a flawed economic philosophy. Only, we have multiple economic philosophies being pursued here. It's important to distinguish which is the flawed one in this case. And that is the Democrat one that won votes by running on the loans-should-be-easy-for-anyone-to-get and lending-institutions-are-violating-peoples-rights-by-denying-credit platform.

[gerbick]

What do you expect when the media and most of the people around or involved will never own up to anything wrong, despite things being very wrong.

Accountability is no longer an option.

[david petley]

It's important to distinguish which is the flawed one in this case.

Why is that important? Neither 'side' really tried to control it, that is not popular (and even, perhaps, anti-american).

Both 'sides' need to work out how to fix it.

...and what do they do instead ...ha, they go on holiday - "have a nice break congressmen (and women)".

Obviously their houses are not mortgaged, and they got out of real estate some time ago.

davidp

[FlashLackey]

Whoa - that was such a 180 in logic, you bring me back to the coin-flip. If we had less regulation, we wouldn't be in this mess - and since the Repubs were presumably calling for more regulation, they were what... right?

I think that the misunderstanding here is in thinking that "regulation" in this case refers only to fixing a broken Freddie and Fannie. The regulation that Republicans objected to is the requirement that lending institutions adhere to practices designed to make mortgages more accessible to low-income people (a product of CRA expansion during the Clinton years). The new regulations proposed by Republicans were designed to prevent the exact crisis that we are in now.

Do you see the difference?

There's plenty more in that bill, obviously, but to claim that this was somehow a magic-bullet, pro-regulation piece of legislation that wouls have saved us all is laughable.

Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.

Sounds to me like it was designed to address the exact problem we now have. What basis do you have for suggesting that it didn't?

What? Am I saying Dems feared more regulation because they were scared of less regulation? The Repubs weren't offering any additional regulations. That what you're missing here.

Yes they were!

In the year since it was passed by the Senate Banking Committee, legislation to reform the regulation of Fannie Mae and Freddie Mac has languished in the Senate.

The problem, we’re told, is that Senate Democrats do not like the provision of the bill that would severely restrict Fannie and Freddie's accumulation of portfolios of mortgages and mortgage-backed securities.

These portfolios now amount to almost $1.5 trillion and are carried with debt almost equal to that amount, requiring Fannie and Freddie to assume enormous interest rate risk. Those who favor restrictions on the size of the portfolios argue that this risk, if not well managed, could adversely affect the financial condition of one or both of these organizations, with a resulting big hit to the economy and an enormous taxpayer bailout.

Instead, proponents of portfolio limitations note that Fannie and Freddie can carry out all their secondary-market activities simply by creating and issuing mortgage-backed securities, a process that does not require them to take interest rate risk.

Until recently, the Democrats on the Banking Committee had never made clear why they opposed restrictions on the size of the portfolios. But now, in a recent statement of "Additional Views," they have finally declared their reasons for holding up the committee bill.

The Democratic senators reported, "The retained portfolios of Fannie Mae and Freddie Mac help keep interest rates low; they have helped markets function effectively, even when other sectors experienced severe credit crunch problems; and they attract funds from all over the world to be invested in the U.S. mortgage markets." Perhaps not surprisingly, this is exactly what Fannie and Freddie have been saying in their intensive lobbying campaign to fight restrictions on their highly profitable mortgage portfolios.

Trouble is, none of it's true. In a paper posted this week on the Federal Reserve Board's Web site, and in a slide presentation used at a conference at the Chicago Federal Reserve Bank in May, three Fed economists demolished the first two of these reasons; the third was demolished a year ago.

http://www.aei.org/publications/pubI...pub_detail.asp

[FlashLackey]

Why is that important? Neither 'side' really tried to control it, that is not popular (and even, perhaps, anti-american).

This simply is not true. One side did object to the problem when it was first set in motion. One side did try to control it once it escalated.

It's important to recognize which side was right on the issue so that we don't foolishly continue to pursue the policies of the side that was wrong.

Both 'sides' need to work out how to fix it.

That's true. However, there are currently two sides regarding how best to fix it. Also, there is always the problem that some policies, no matter how broken they are, can still be sold to the benefit of the salesman.

[Stoke Laurie]

That's true. However, there are currently two sides regarding how best to fix it.

2 sides? perhaps you could spare a thought for all the folks worldwide that these policies have crapped on. As much as I sympathise that your domestic situation is very bad as a result of these activities, the rest of us are furious that we are sucked down into the pit with you, and instead of seeing serious, decisive action, we witness posturing and excusses. Frankly I don't give a stuff about your teflon politics where no one will allow any **** to stick to themselves, what ever happend to accountability. Get it sorted, because you have no way of comming out of this with any face so don't bother.

[FlashLackey]

Your country decides to enter business with us for mutual benefit. Now you are complaining because it also affects you when things don't go well?

I'm pretty sure that, despite whining and playing blame the Americans, your country will continue to do a ton of business with us at a net plus. Get over it.

[Stoke Laurie]

You arrogant fool, we are not complaining, your indecisive lack of action has showed you as political cowards.
For your information, Englishmen do not Whine, we act like men and face our responsibilities.
Our Government has stepped in to prop up our economy by nationalising 2 ailing banks, and wavered monopolies legislation to allow other protective mergers to go ahead. The result of this public expendature is at the expense of the ordinary taxpayer
We acted, now it's your turn.
"Get over it" - you are far bigger a man than that childish comment.

[FlashLackey]

I think you need to take a good look in a mirror before you start calling people names.

"furious that we are sucked down into the pit"? It's all good when business with us pays. But, we have to do something the way you want if it costs. lol. Yes. I'm arrogant and you are the wise, understanding Englishman.

We will follow our process to determine what our course of action is on this whether you think it's the right thing to do or not. I'll say it again. Get over it.

[FlashLackey]

For the record, I was being critical of your comments. Not characterizing your entire country with your perspective. I'm sure that many more moderate sentiments are represented there.

[Stoke Laurie]

I think you need to take a good look in a mirror before you start calling people names.

"furious that we are sucked down into the pit"? It's all good when business with us pays. But, we have to do something the way you want if it costs. lol. Yes. I'm arrogant and you are the wise, understanding Englishman.

We will follow our process to determine what our course of action is on this whether you think it's the right thing to do or not. I'll say it again. Get over it.

Put down your flag, and realise that you are defending the indefencable. You are condoning very sharp practice, and then saying it wasn't us, it was Clinton's fault. I will say again don't busy your head on blame culture, we are not interested, simply do the decent thing and put your money where your mouth is and repair the damage you have caused.

[FlashLackey]

What is it that you think I am defending and condoning?

You sound like you think that the US works for you. Frankly, I don't give a crap what you are interested in or what you think is decent in regard to how we fix this problem. We have more at stake in fixing this than you do. So, it's insulting that you would even suggest that us not making a decision fast enough for you is us not being accountable. There is nothing about this that we need to be accountable for in your regard. So, again, get over yourself and your unbelievable arrogance and hypocrisy.

[FlashLackey]

Another thing. I know I go on about politics a lot here. But, what makes you feel justified in chastising me for the economic fall out? Because I am discussing the issue on a forum? Do you think that I'm a US senator with a direct say or vote in "repairing the damage we have caused?"

Your interjection into this discussion seems ill-conceived.

[Stoke Laurie]

I'll say what I want, when I want.
Your pseudo intellegent babble is thinly disguised bullying, for whenever anyone dissagrees with you, you resort to this level of poor quality, immature back-chat.
I gave you the benefit of the doubt earlier by suggesting you were above such comments, but clearly I was mistaken.

I am merely reminding you that there is a fall out world wide from your actions, and that it is your Country's reponsibility to clean up this mess that it has made,as quickly as possible.

[japangreg]

I think that the misunderstanding here is in thinking that "regulation" in this case refers only to fixing a broken Freddie and Fannie. The regulation that Republicans objected to is the requirement that lending institutions adhere to practices designed to make mortgages more accessible to low-income people (a product of CRA expansion during the Clinton years). The new regulations proposed by Republicans were designed to prevent the exact crisis that we are in now.

Do you see the difference?

No, actually - and I'd like to see which regs you are referring to in the CRA expansions. I'm planning on looking them up a little later, but if you have the info handy I'd appreciate a link.

Sounds to me like it was designed to address the exact problem we now have. What basis do you have for suggesting that it didn't?

I don't think you quite understand the nature of the problem: accessability to loans for risky borrowers was only the beginning of the problem. The recombination, resale and mixing of complex financial instrucments to hide the risky investments is what puts us where we are today. That's why it's spread so far and so deep. The SEC and others who were supposed to oversee the situation were both ill equiped to deal with it and actively encouraged to let the market do its thing. If the bad debt hadn't been hidden so well in order to make the biggest bucks in the quickest time, it couldn't have seeped so far into the economic system worldwide.

Yes they were!

Then why did it die in a Republican dominated committee?

[japangreg]

Not my intention to start a quote-war, but I found this article that relates to an earlier one FL posted from Yahoo! on the Community Reinvestment Act and its relevance to the current problems:
Community Reinvestment Act had nothing to do with subprime crisis

...The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations...

...Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans. CRA loans carried lower rates than other subprime loans and were less likely to end up securitized into the mortgage-backed securities that have caused so many losses, according to a recent study by the law firm Traiger & Hinckley (PDF file here)...

Finally, keep in mind that the Bush administration has been weakening CRA enforcement and the law’s reach since the day it took office. The CRA was at its strongest in the 1990s, under the Clinton administration, a period when subprime loans performed quite well. It was only after the Bush administration cut back on CRA enforcement that problems arose, a timing issue which should stop those blaming the law dead in their tracks. The Federal Reserve, too, did nothing but encourage the wild west of lending in recent years. It wasn’t until the middle of 2007 that the Fed decided it was time to crack down on abusive pratices in the subprime lending market. Oops.

Better targets for blame in government circles might be the 2000 law which ensured that credit default swaps would remain unregulated, the SEC’s puzzling 2004 decision to allow the largest brokerage firms to borrow upwards of 30 times their capital and that same agency’s failure to oversee those brokerage firms in subsequent years as many gorged on subprime debt...

Emphasis mine - that's most of the article, actually. Guess I should have just copied the entire thing...

Notice the running theme - CRA: supervision, scrutinized; Bush admin: cut back on enforcement, encourage, unregulated, gorged.

The quotation the article ends with makes a good point:

It’s telling that, amid all the recent recriminations, even lenders have not fingered CRA. That’s because CRA didn’t bring about the reckless lending at the heart of the crisis. Just as sub-prime lending was exploding, CRA was losing force and relevance. And the worst offenders, the independent mortgage companies, were never subject to CRA — or any federal regulator. Law didn’t make them lend. The profit motive did. And that is not political correctness. It is correctness.

The links on that page are of interest as well - working through them now...

[jAQUAN]

wait, wth?

[FlashLackey]

I'll say what I want, when I want.

lol. Seriously. Just about everything you are saying completely contradicts what you have said to me.

I never told you to not say what you want. Go ahead! I don't care.

It is you that came into the discussion talking about how you don't want to hear this or that type of talk. Try thinking of the principle you are alluding to in this statement when you are addressing others.

you have no way of comming out of this with any face so don't bother.

I will say again don't busy your head on blame culture, we are not interested

Your pseudo intellegent babble is thinly disguised bullying, for whenever anyone dissagrees with you, you resort to this level of poor quality, immature back-chat.

Again, let's look at what you have said and who is the one attempting to bully:

Frankly I don't give a stuff about your teflon politics where no one will allow any **** to stick to themselves, what ever happend to accountability. Get it sorted, because you have no way of comming out of this with any face so don't bother.

your indecisive lack of action has showed you as political cowards.

We acted, now it's your turn.

put your money where your mouth is and repair the damage you have caused.

If you are going to make an accusation, you should at least make sure that it doesn't describe your own actions.

You are mistaken in regard to how I respond to people. I am happy to have a civil discussion with anyone whether they agree with me or not. However, I will respond in kind if someone comes at me in an uncivil way.

I gave you the benefit of the doubt earlier by suggesting you were above such comments, but clearly I was mistaken.

Sorry if my response is harsh. But, it's beyond me how you could possibly have expected that I would have welcomed the comments you made.

I am merely reminding you that there is a fall out world wide from your actions, and that it is your Country's reponsibility to clean up this mess that it has made,as quickly as possible.

If that was "merely" what you did, I wouldn't have taken issue with it. However, what you really did was chastise me for discussing the political aspect of this subject and demand that we fix the problem faster for your sake. Your comment was insulting and presumptuous. As if the process was taking more time out of disregard for your needs. Do other people in your country really buy in to that?

[gerbick]

Seriously dude. Do you even have a point other than counter everything said while really saying absolutely nothing?

His country is actually helping the US. Can't say that about the elected republicans in the House. No plan, no comments, nothing other than idle banter.

Sounds just like you. Go ahead, counterpoint that to death, I seriously don't care what people like you think. You've finally completed my understanding of your position. And I was 100% right.

And that's sad. Enjoy. I'll address you no longer in this thread since you seem hellbent on picking fights and spreading vitriol better than even I tend to do. Which... is amazing.