Democrats & Liberals Archives

Having a hard time

Other than a couple of courses “many moons” ago in Economic Geography for the industrialized and developing world, I am sorely lacking in economics background. Fortunately, one of my closest friends is a university degreed economist from a family with business interests in Africa and the Middle East. He can be relied upon to give an explanation of economic events.

He often cites the fact that classical study of economics does not include the impact of greed on the success or failure of economic systems. So, I can't help wondering if the machinations of the home construction and mortgage finance market place, the attempt to drive up oil prices through control of the futures market, the practice of gambling on the short term rather than investing on the long term are not symptomatic of not only greed but a pathological problem called Affluenza.

Affluenza: An unsustainable addiction to economic growth.

I first came across the term 10 years ago when PBS did a documentary on the subject. For an economic neophyte like myself, Affluenza seems a great fit in explaining a bigger problem. Affluenza causes commodity brokers, investment bankers, mortgage managers, and supposedly shrewed businessmen to distraction and unsustainable decision making. This results in thousands if not hundreds of thousands and even millions of people being affected by the resulting failure of a rapid wealth accumulation strategy that became accepted practice over less risky and more worthy long term investment. This gamble every day form of investment is reinforced daily on the nightly news with stock market results reported as if it was a sports result...Dow up 200. Dow down 200. Dow sets record. Dow suffers decline. Day in Day out.

That needs to be controlled. Over the years I have had debate after debate with Libertarian, Free Market Capitalists, and Professional friends and family over this issue. They have always said, let the market do its thing. It will correct itself.

I, more so now than ever in the past, am convinced that "The Market," who and what ever "The Market" is, will never correct itself. "The Market" never learns a lesson. There is no reason to learn. The players know Washington will always jump in to save their sorry butts.

After a time they reorganize and restart the cycle one again. In the late 80s we saw the Savings and Loan Scandals, headed by the Silverado Bank failure, which caused banks nationwide to get gobbled up by other institutions. Twenty years later is is happening again. The father screws up and gets saved. The son grows up know that he can screw up and will be saved.

The Administration's plan for this debacle?

According to Treasury Secretary Hank Paulson: "These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans' personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment, and job creation has been disrupted,"

Translation. If we weren't in so much economic difficulty caused by poor decision making, we'd be actually be in great financial shape.

That's a lot like the owner of a last place sports team telling his angry season ticket holders, "We are burdened with a lousy coach and players. Other than that, we have a great franchise." Way to sell tickets and instill confidence in the program.

Posted by Mike Wrona at September 19, 2008 11:45 AM
Comments
Comment #263507

Who Gets Fannie Freddie Campaign $


Who are the top 5 recipients of Fannie Mae and Freddie Mac Campaign Contributions from 1998 to 2008? According to public records reported in the press, of the top 5 candidates, its as follows:
1. Christopher Dodd, Democrat, US Senator
2. John Kerry, Democrat
3. Barack Obama, Democrat
4. Hillary Clinton, Democrat
5. Paul E. Kanjorski, Democrat.
Of the top 25 politicians countrywide Mr. Obama’s Presidential Opponent does not appear on the list. So who is really in the pocket of lobbyists? Who was Fannie and Freddie counting on to keep the regulators away as the mess was underway?

Posted by: smokey at September 19, 2008 1:15 PM
Comment #263518

Typical. A Democrat writes an article complaining about the economy while blatantly ignoring the cause and refusing to offer a solution. Must be an election year. But you can’t really write, “I’m sorry but my party just got caught with it’s hands in the till,” can you? The truth hurts too much.

As Smokey pointed out, Some of the looted money from Freddie and Fannie found it’s way to the Dems, who refused for years to allow the responsible regulation of the housing market. And since Obama knows little about the economy, who does he go to for advice? Franklin Raines and Jim Johnson, former Fannie Mae CEO’s! Of course, they are starting to deny it now that McCain has been talking about it, but Raines has been previously quoted that Obama asked him for advice.

Posted by: Republicwin at September 19, 2008 2:26 PM
Comment #263520

Yo, Smokey….
The guys who make these contributions actually have a clue which way the wind is blowing, and are acting accordingly. Do you think they would give money to the corrupt ***holes who ruined our economy with rampant free market shenanigans?? Reward the people who F——-d up? Or do you think they would contribute to those who pose a solution?

Republicwin, (not gonna happen, this year anyway)
Raines is not , nor has he ever been, employed by the Obama campaign. So please stop that b.s. right now. On the other hand, isn’t it wonderful how mr. “reform” ya know, the “maverick” has so completely surrounded himself with high powered, long time insider LOBBYISTS!

What a joke.

Posted by: steve miller at September 19, 2008 2:46 PM
Comment #263525

Smokey,
In the previous thread, you posted as ‘pom pom girl’. I’m guessing you are also the same person who posted the same crap about Freddie and Fannie in the previous thread. Normally I am a polite person, but ignoring the discussion and reposting debunked assertions is simply rude and distracting. Of course, distraction is the point, isn’t it? Multiple organizations have already failed. Some gave to the Democrats, others to the GOP. No single organization is responbible for the subprime crisis. Suggesting otherwise is both ignorant and contemptible.

I realize this disinformation is being spread by conservatives such as Rush Limbaugh, who counts on his listeners ignorance and lack of curiousity.
Until I see conservatives discussing CDS markets, there is no need to even bother being respectful of the pathetic attempts to lay blame anywhere other than their own philosophy of deregulation, as if government were the problem, rather than the solution.


Posted by: phx8 at September 19, 2008 3:19 PM
Comment #263526

Mike, I liked the post except…It really describes Government “Affluenza” in many ways.

Posted by: Jim M at September 19, 2008 3:22 PM
Comment #263528

Sub prime loans are loans that do not meet Fannie Mae and Freddy Mac guidelines. It’s the impact from foreclosures of sub prime purchased houses, that popped the housing bubble and lead to a decrease in demand for Fannie and Freddy guaranteed mortgage backed securities. Fannie and Freddy were just a symptom, not the cause of the problem.

The CRA is also not the culprit since it has been around since 1977 and it only affects banks and thrifts that are federally insured, and not the businesses that engaged in the risky sub prime market.

This crisis can be blamed primarily on the Greenspan headed Fed that held interest rates ridiculously low after 9/11 in order to create a new economic bubble in housing to replace the old dot-com bubble that burst. The Fed also dropped the ball by not using their full power to regulate alot of the risky lending that was going on under their watch. Greenspan even said at the time it was a good idea to get ARM’s. The rest of the blame would be on Republican lawmakers who have begged for deregulation of the financial markets and have had their way since 1980, especially with the repeal of Glass-Steagall in 1999 with the help of a few Democrats.

Many people want to blame the borrowers and the brokers for this mess, but we have to realize like they did in the 1930’s that people are greedy and stupid, and it is the governments job to put rules in place to prevent the actions of the greedy and the stupid from hurting everyone else. Shame on you Greenspan, shame on you Republican politicians, you should know better.

Posted by: pops mcgee at September 19, 2008 3:58 PM
Comment #263531

pops wrote, “it is the governments job to put rules in place to prevent the actions of the greedy and the stupid from hurting everyone else.”

pops, that hasn’t worked very well with Social Security has it? Enacted to prevent the stupid from becoming a burden on everyone else has grown to such proportions that the projected unfunded liability has encumbered everyone with trillions of dollars of debt.

This is just another example of liberals wanting to be “fair” and finding new “rights” in our founding documents to the detriment of all.

Posted by: Jim M at September 19, 2008 4:26 PM
Comment #263532

the Dems, who refused for years to allow the responsible regulation of the housing market.

Is this for real? This reminds me of Mitt Romney saying that Republicans have to take back “liberal” Washington.


Posted by: Max at September 19, 2008 4:29 PM
Comment #263534

Jim M,

SS would be just fine if Republicans kept their greedy little hands off the supluses like Al Gore pledged to with his proposed “lock box.” But you guys just laughed at that idea, while Bush was using the surpluses to make the annual deficits appear less than what they really were. Your guys wrecked our economy, so you are in no position to lecture the rest of us now.

Posted by: pops mcgee at September 19, 2008 4:39 PM
Comment #263536

Mike, good article.

smokey wrote:

Who are the top 5 recipients of Fannie Mae and Freddie Mac Campaign Contributions

Allow me to nip this lying Republican bullshit in the bud.

The total listed for Obama is $126,349 — a tiny fraction of the approximately $390 million his campaign has raised, according to the Center for Responsive Politics. The list shows McCain has received a total of $21,550 from Fannie and Freddie employees. The list includes donations of at least $200 from those who receive paychecks from Fannie and Freddie. It also includes donations from political action committees — pooled contributions from employees. Obama decided early in his presidential run not to accept PAC contributions, but the Center for Responsive Politics’ list includes all contributions for members of Congress dating back to 1989 — including Obama and McCain’s Senate campaigns.

The New York Times has published a separate list looking at contributions from “directors, officers, and lobbyists for Fannie Mae and Freddie Mac” for the 2008 campaign cycle. That list — using figures from the Federal Election Commission — shows McCain receiving $169,000, while Obama received only $16,000.

Let’s add it up:

Obama: $142,349
McCain: $190,550
Top recipient of Fannie Mae and Freddie Mac Campaign Contributions: John Sidney McCain.

So who is really in the pocket of lobbyists?

One look at McCain’s campaign advisors and the answer becomes more than clear: John Sidney McCain is most definitely the pocket of all kinds of lobbyists.

Posted by: Veritas Vincit at September 19, 2008 4:52 PM
Comment #263538

VV,
Great rebuttal! What’s really unfortunate is that posters like “Smokey” are just Republican drive-by’s. They’ll spew some GOP lie, repeat it a few times under different names, and disappear. It’s a shame that Republicans do themselves such a discredit. There are good Republican conservatives, such as Paulsen at Treasury, but there are way too many others like Limbaugh, Hannity, and so on, who bring shame on their party and their beliefs. “Smokey” is just another example- someone who takes up bandwidth and distracts…

Posted by: phx8 at September 19, 2008 4:58 PM
Comment #263539

pops

SS was in a lock box at one time. it was the dems under johnson that took it out, so it could be spent in the general fund.

Posted by: dbs at September 19, 2008 5:00 PM
Comment #263540

phx8:

Great rebuttal!

Thanks!

What’s really unfortunate is that posters like “Smokey” are just Republican drive-by’s. They’ll spew some GOP lie, repeat it a few times under different names, and disappear.

Yeah. They probably get paid X amount for each Lying Post they manage to spew on multiple blogs.

It’s a shame that Republicans do themselves such a discredit. There are good Republican conservatives, such as Paulsen at Treasury, but there are way too many others like Limbaugh, Hannity, and so on, who bring shame on their party and their beliefs.

Unfortunately McCain has to be included among that Shameful and Bad Republican Crowd, since he has been repeating this lie over and over on the campaign trail.

Posted by: Veritas Vincit at September 19, 2008 5:14 PM
Comment #263541

dbs,

And Republicans have done nothing on the issue while Democrats wanted to put it back in the lock box 8 years ago. Over the last 7 years nearly $1.2 trillion in SS surpluses has been squandered by Bush and the Republicans.

Posted by: pops mcgee at September 19, 2008 5:15 PM
Comment #263543

“Yeah. They probably get paid X amount for each Lying Post they manage to spew on multiple blogs”

Probably just half X amount in this case though. Its partially true and misleading, not a lie. Kind of like Obama’s “Dos Caras” and “Sold Us Out” ads.
Does this mean Obama is also part of that “Shameful and Bad Republican Crowd?”

Just curious, these two sets of rules you all play by get confusing at times.

Posted by: kctim at September 19, 2008 5:25 PM
Comment #263544

pops

i’m not trying to defend this mess. only point out that they’re many on both sides are responsible. the problem is more systemic than partisan IMO. we have career politicians on both sides of the aisle who have put thier personal aspirations above the best interests of this country.

Posted by: dbs at September 19, 2008 5:27 PM
Comment #263550
Its partially true and misleading, not a lie.

Nah. That’s just the way CNN decided to put it in that article. They’re attempting to come off like they’re not trying to play favorites in the ongoing presidential race.
I, on the other hand, don’t have to be so fearful of calling a spade a spade: McCain is lying his ass off on the campaign trail — on this issue and on many, many others.

It’s really a shame how McCain morphed into such a dishonest and shameful old fart — after claiming he wanted to run a “clean campaign.” Nothing mavericky about him being so damn desperate to win, he’d become willing to spew lies daily and say practically anything in order to smear his opponent.

Posted by: Veritas Vincit at September 19, 2008 5:54 PM
Comment #263553

“SS would be just fine if Republicans kept their greedy little hands off the supluses like Al Gore pledged to with his proposed “lock box.” But you guys just laughed at that idea, while Bush was using the surpluses to make the annual deficits appear less than what they really were. Your guys wrecked our economy, so you are in no position to lecture the rest of us now.”
Posted by: pops mcgee at September 19, 2008 04:39 PM

pops, please explain to me how actual money in the SS fund is any different than government IOU’s as far as the solvency of the fund goes. What you imply is that the full faith and trust of the federal government securing those IOU’s are worthless.

Your comments do not address the underlying problem, the fund never consisted of cash lying in a lock box.

That the assets within the fund consists of government IOU’s doesn’t change the fact that this Ponzi scheme is going to explode in a few years. The nature of the asset in the fund is not what will cause it’s failure.

Posted by: Jim M at September 19, 2008 6:29 PM
Comment #263563

Jim M,

As long as the national debt is kept below the GDP, the government should have no problems paying out for matured treasury bonds. The possible future insolvency of SS, which won’t be a problem until about 2040-2050, will only happen if we explode the national debt above the GDP and can no longer pay for those t-bonds.

When our government runs a deficit it makes up the difference by selling t-bonds. The SS surplus is also used to buy these bonds. If the public debt (total debt minus intragovernmental debt) explodes, then that increases the number of bonds that have to be repaid on top of the SS surplus purchased bonds. When Bush and the Republicans decided to cut taxes and triple the military budget to fight a war, they exploded the public debt, increasing the number of privately held t-bonds that will compete with the SS purchased t-bonds for future repayment.

The solution is to reduce the public debt so that the total debt is kept below the GDP. As long as we can keep the total debt below that level SS should remain solvent indefinitely. However, the current financial crisis will require us to increase the public and total debt in order to pay for the greed and stupidity of Wall Street, so the entire global economy doesn’t sink into a depression.

Posted by: pops mcgee at September 19, 2008 8:12 PM
Comment #263564

Jim M-

I agree. Affleunza is endemic to our society.

Posted by: Mike Wrona at September 19, 2008 8:23 PM
Comment #263565

Well, at least we now no that the Market place is not the Holy Grail.

A real patriot believes in national welfare before personal profit.

Posted by: Mike Wrona at September 19, 2008 8:47 PM
Comment #263569

“Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.”
John McCain, Sep/Oct 2008, “Contingencies”

Oh. This is good. McCain’s quote comes from an article on health care in a magazine for actuaries. Nice.

I guess the horrible realization is starting to sink in for everybody. The RTC approach seems like the best way out of the mess, even though it means taxpayers will be on the hook for an enormous sum. No one knows for sure how much. Hundreds of billions, $1 trillion, up to $4 trillion.

It’s being done because it is in our best interest. It’s worth doing if it means avoiding a depression. It’s worth doing, even though it means bailing out Wall Street, because it is in the interest of most people.

I’m positive liberals and conservatives alike are extremely unhappy about this bail out. For once, I’m sure everyone is on the same page. It rankles just about every way imaginable. That is a huge amount of money going to greedy people who do not deserve it.

The deal is being done fast. Congress will pass it by the middle of next week. This is the right choice to make, I think.

Hey, McCain. Thanks for the “innovative products less burdened by the worst excesses of state-based regulation” in the banking industry.
You jerk.

Posted by: phx8 at September 19, 2008 10:27 PM
Comment #263572

phx8:

there are way too many others like Limbaugh, Hannity, and so on, who bring shame on their party and their beliefs.

My husband and I were just watching The McLaughlin Group tonight, and I noticed that the Lie that “smokey” posted earlier here today must be the new GOP Talking Point/Lie that they’ll all be pushing very heavily. As might be expected, first out of the gate with this Lie was Bleached Republican Barbie Doll, Monica Crowley, who repeated “smokey’s” claim almost verbatim that Obama received more money from Fannie and Freddie. Then odious billionaire and Israel Lobbyist, Mort Zuckerman chimed in, claiming Obama and the Democrats are totally responsible for Fannie and Freddie because they “did nothing”, and then he reiterated this GOP Talking Point/Lie that Obama received more money. Finally Pat Comb-over Buchanan entered the argument to agree that Democrats are entirely responsible for our whole financial meltdown.
Bloody Amazing.

Too bad Eleanor Clift didn’t have the facts to hand that I put up earlier in order to push back hard on this new GOP Lie that is being systematically repeated to America (in order to make it the accepted wisdom among the legions of our uninformed). Eleanor did however, manage to inform McLaughlin’s panel of Rabid Righties that rampant deregulation and the repeatedly demonstrable idiocy of “trickle down economics” all began with Ronnie Reagan.

And here we are with the net result of Republican Illogic, Shortsightedness, and Greed almost thirty years after Reagan was elected. Another Great Depression.
Once again, it comes to us courtesy of the GOP.
I think it’s definitely Bedtime for these BONZO’s, yes?

Posted by: Veritas Vincit at September 19, 2008 11:03 PM
Comment #263575

phx8:

I’m positive liberals and conservatives alike are extremely unhappy about this bail out. For once, I’m sure everyone is on the same page. It rankles just about every way imaginable. That is a huge amount of money going to greedy people who do not deserve it.

Personally, I’d like to know why some people shouldn’t land in jail over this meltdown? What about seizing the assets of those most responsible for putting us in our current situation? And by this I mean Wall Streeters AND government officials who allowed it to happen.

The deal is being done fast.

Which practically guarantees it’ll be a real piece of shite.

Congress will pass it by the middle of next week.

Yeah, kind of like the Patriot Act…

This is the right choice to make, I think.

I’m not at all certain that what they’ll be doing will be the right choice. Not a real good track record here, you know what I’m sayin’?

Posted by: Veritas Vincit at September 19, 2008 11:14 PM
Comment #263581

VV,
I’m not sure anything could be worse than the Patriot Act. That was a disgrace. Personally, I’m willing to give Paulsen and Bernancke the nod. It’s probably just a reflection of my personality, but I would rather aggressively attack a problem rather than wait to be taken down piece by piece. Then again, I secretly hope my end comes in a fight to the death with a crocodile on an ill-fated expedition up the Zambezi, so my take on things may not be the soundest, ya know.

Anyway, here are a few thoughts on where this thing is going…

If 2.7% of mortgages are in default, and the mortgage market is $7 trillion, that represents $189 billion.

If the CSD market is $45 trillion, and the relationship of contracts is 1:1 with failed mortgages, that represents $1.21 trillion.

$1.21 + .189 = 1.399 trillion
Say $1.4 trillion. What’s a billion dollars among friends, eh?

Presumably some of the failed mortgages and corresponding CDS’s have already been written off. To date, somewhere around $900 billion has already been lost.

If an RTC entity is created, and funded by issuing bonds (there is not enough money in the Treasury to cover the cost), and the bonds pay a mere 3% interest, that would be an additional cost of $40 billion.

That gives a cocktail napkin estimate of somewhere between $540 billion and $2.44 trillion.

The only way to pay for this will be to print money. Hellooo inflation!

However, no foreign government is going to buy US debt knowing we intend to inflate our way out of our debts. It will take a high interest rate to attract foreign investments… which risks recession yet again…

Who knows? Some awesomely difficult choices will have to be made in the next few days.

Posted by: phx8 at September 19, 2008 11:52 PM
Comment #263590
Personally, I’d like to know why some people shouldn’t land in jail over this meltdown? What about seizing the assets of those most responsible for putting us in our current situation? And by this I mean Wall Streeters AND government officials who allowed it to happen.

Now, that I can agree with.

The fact is, though, that it’s incredibly unlikely that we’re going to have anything resembling accountability because to a large degree, those responsible are either the exact same people who have authority to take such action or are politicians who are almost literally bed with those who do. And no, it’s not a Democrat or Republican thing—it’s a bunch of elite Wall Street and Washington power-brokers in entrenched positions of undeserved and unaccountable authority.

Posted by: Loyal Opposition at September 20, 2008 1:32 AM
Comment #263606

Republicwin-

It takes a Republican to look at a problem where all the players - Banker, Investor, Hedge Fund Manager, Insurer, CEO, etc - all are part and parcel members of the Republican constituency. Your writing “while blatantly ignoring the cause and refusing to offer a solution” is a typical attempt to distract attention from your own elitist attitude towards the general public.

You and your philosophy are the problem. The solution to the problem is to keep people like you from governing anything - ever.

The Great Depression, the Saving and Loan debacle, the current Bank/Insurance failures, all happened on the Republican watch. Those Republican administrations followed a philosophy that stupidly believes that the Market prevents greed.
And then when greed becomes public knowledge through economic failure you arrogantly fight extremely hard to pass the buck as to where the fault lay.

You guys are not only incompetent, you are cowards who avoid personal responsibility at all costs.

Posted by: Mike Wrona at September 20, 2008 9:47 AM
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