Clean Up Wall Street & Reform Finance.

I have been studying the Wall Street crisis and have concluded that some of what our lefty friends worry about is valid. But they misidentify the causes and prescribe the wrong solutions. Regulations have not kept up with developments. But the reason for this has been cooperation between political and financial elites, among both Democrats and Republicans that has allowed big money managers to set themselves up at the choke points of finance where they have choked profits out of America. The Obama Administration, far from impeding this, has been among its biggest enablers.

Fat cats have long made pilgrimages to Washington to work with powerful politicians. But as Washington's reach into our economy has grown, so has the profitability of getting the political inside track. Massive spending on stimulus and health care changes have turbo charged this kind of influence/information seeking. The fat cats are looking for the money that they can cream off the top and the more money sloshing around the more they come and get.

Most of this is not illegal. Wall Street insiders and their lobbyists just talk to politicians. They figure out the likely direction of legislation and invest accordingly.
It is legal, but what is going on is market distorting and unfair. It allows those with greater access to political information to profit at the expense of those not so well connected.

There is a big difference between the societal values of gathering political versus economic information. Someone who gathers information about real-world improvements in technologies, method or management can use that information to advantage. But the use of this information has the effect of expanding the use of good technologies, methods etc. These are ongoing and evolving processes. Political information is fundamentally different. If you deploy political information to advantage, you are not creating wealth or encouraging the spread of good ideas. You are merely taking advantage of those with less access.

Political information can lead to quicker profits because it is less well known (if you find out how a Senator will vote, you may be the only one) and more difficult to observe. It is more akin to the process of profiting of "point shaving" in sports. This is when gamblers know that a player will not score as many point as he could. Gamblers "play the spread". The players taking part may not cause their team to lose. It may be nearly impossible to tell anything has happened just by looking at the results. The only way you can tell something is going in is that those with the inside knowledge make the big bucks consistently.

The Obama administration has been a major disappointment in reining in this kind of behavior among Wall Street elites. Obama talks a good game, but there is no effective follow up. It may be that Obama has the right intentions, but he doesn't understand the process he is trying to control. The Wall Street insiders he has appointed into his Administration understand better than he does, but they seem to think that the basic system is just fine. Their only problem is that the "wrong people" are winning too often.

They don't like Obama's rhetoric, but they Wall Street fat cats continue to support Obama because they know that his action will not match his tough words.

A simple fix, and a great first step is just transparency. One reason insiders can profit is that they are insiders. Others are not privileged with information to make the best choices. Many of the financial instruments and hedges should be put on open exchanges. This drained the power from stock brokers a generation ago. When firms like Charles Schwab started to do online trading, the money brokers could squeeze from the system went down dramatically. When people know what they are paying and what they are getting, they get better deals for themselves. Eliminate the choke points and the places where insiders can deploy their special information and you go a long way toward reform.

The American people are catching on. According to a new CBS poll, Americans think Obama's policies favor Wall Street over Main street by a plurality of 42% v 38%.

Some people used to say that "only Nixon can do to China". He could do what no liberal could do because he had the knowledge and the bona-fides to make it happen. The same might be said on the other side. Only Clinton could pass welfare reform.

We need someone who understands the economy to fix the serious imbalances that have grown up in the last few years. Obama is not the man for the job. It is simply not within his experience, skill level and temperament.

Obama gives wonderful speeches. He is a great campaigner. This is what he is good at doing. He is a man full of promise and full of promises. He just doesn't know how to govern and follow through - a different skill set. Now that we have seen what he can - and cannot - do. A second term would really be the triumph of hope over experience.

Posted by Christine & John at December 20, 2011 8:26 AM
Comments
Comment #333312

C&J, in relation to your post on ‘fact checking’ I would suggest you are spinning bigtime re political insiders in the financial sector. Money influence in politics/govt got underway with the discovery of oil in Pithole, Pa, ramped up bigtime when corporations gained personhood in 1886, spurred on further by the railroad barons leading up to, and through Gilded Age I, encouraged by the Tillman Act of 1907, Newberry vs US in 1921 and, more recently by the Gilded Age II, ‘money is free speech law of 1976 and Citizens United vs FEC.

The money influence goes well beyond insider information. It’s insidious within the capitalist system. Big business began ‘buying’ politicians to influence legislation, law, and the decision making process beginning in 1776. Doesn’t matter the size, small businesses pool their money to gain the desired effect in influence peddling. Gov’t has had over 200 years to implement real campaign finance reform but has been unwilling to do so as the money is just too appealing to legislators.

Relating to money as free speech: “The logic fails. If money is a representation of free speech, how do we justify laws and regulations limiting the amount of money that can be contributed? Limitations currently exist on amounts, Federal contractors and foreign nationals. There are limitations on how you can make a contribution. There are yearly limitations, limitations based on election cycles, earmarked candidates, limitations based on the various potential targets of contributions. And, of course, loopholes that allow those with privilege and access to accumulate and spend vast amounts of money and thus apply vast amounts of “free speech”.(usgovinfo.about.com/od/thepoliticalsystem/a/contriblaws.htm)
If money, as an accepted vehicle for free speech, is the law; logic demands that any limitations on money/speech should be deemed unconstitutional limits on free speech. Do contribution limitations and administrative restrictions limit free speech? We have a clear conflict between concept and application.”

Real CFR will remain illusive until we abolish corporate personhood law. Following that, real CFR can be achieved. I like the idea of ‘one person, one vote’ with the money factor neutralized. That can be done by using one account for all political donations. All parties/candidates would be funded from this account. Where public donations were insufficient then state and federal funds would be used to insure the integrity of the election process.

Looking to transparency and more judicial activism re campaign finance will get us nowhere, IMO.

Otherwise, we have the Corpocracy we deserve.

Posted by: Roy Ellis at December 20, 2011 12:39 PM
Comment #333352

“The Obama administration has been a major disappointment in reining in this kind of behavior among Wall Street elites. Obama talks a good game, but there is no effective follow up.”

“Many of the financial instruments and hedges should be put on open exchanges.”

C&J,

Well, where have you been?

One of the key elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was “Title VII, also called the Wall Street Transparency and Accountability Act of 2010,[117] concerns regulation of over the counter swaps markets.[118] Included in this section are the credit default swaps and credit derivative that were the subject of several bank failures c. 2007. Financial instruments have the meanings given the terms in section 1a of the Commodity Exchange Act (7 U.S.C. § 1a).[119] On a broader level, the Act requires that various derivatives known as swaps, which are traded over the counter be cleared through exchanges or clearinghouses.”

Title IV introduces significant regulation of hedge funds, and other similar investment intermediaries for the first time, and is known severally as the “Private Fund Investment Advisers Registration Act of 2010”.[87] In general, it increases the reporting requirements of investment advisors, and limits the ability of these advisors to exclude information in reporting to the various Federal government agencies.

http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act

Posted by: Rich at December 20, 2011 9:06 PM
Comment #333366

Rich

Dodd-Frank is largely unworkable. It regulates enough to cause inefficiencies but leaves the profitable system of choke points intact.

Of course Dodd and Frank were too of the biggest crooks whose actions helped provoke the crisis in the first place. Frank (of defending Freddie and Fannie fame) was probably the single biggest influence on the proliferation of sub-prime loans. This is not merely an ad hominem attack. If we assume that Dodd and Frank acted honorably and honestly in crafting their law it is even worse, since they clearly understood the financial system in the crony capitalist way they behaved themselves. Their regulations add additional reporting and additional government, but not effective regulation. Theirs is a complex solution to the wrong problem.

My complaint about Obama is in line with the above. There was lots of sound and fury accompanied by frenzied action, but not effective measures because Obama - the leader - doesn’t really understand what is going on.

What we have is a type of academic discussion that produces wonderfully sounding ideas, but fails to translate those ideas into effective policy.

Among the things Dodd Frank does is enshrine the “too big to fail” idea and essentially put government at the disposal of fat-cats who run them. This is very similar to the mess Frank personally helped create at Fannie and Freddie where we have private profit and government taking the risk while politicians (like Frank) get to expand their personal power and press their “good” agendas w/o having to make laws or go through the democratic process.

Posted by: C&J at December 21, 2011 5:00 AM
Comment #333387
Massive spending on stimulus and health care changes have turbo charged this kind of influence/information seeking

C&J do you have any proof of this or is this merely an opinion? I find it hard to believe that you use the stimulus and health care when it could be simply more repubs in Congress or the Citizens United decision or many other factors, if in fact it has become turbo charged this past 3 years.

Posted by: j2t2 at December 21, 2011 7:43 PM
Comment #333388


Obama is not the man to fix this and none of the Republican candidates are either. That is the problem the people have.

Posted by: jlw at December 21, 2011 7:45 PM
Comment #333391

C&J,

You say that “a simple fix, and a great first step is just transparency. One reason insiders can profit is that they are insiders. Others are not privileged with information to make the best choices. Many of the financial instruments and hedges should be put on open exchanges.”

When it is pointed out to you that the financial reform act does just that and requires increased transparency in hedge fund management, you simply ignore that fact. After all, how could two criminals and an ignorant president actually agree with you?


Posted by: Rich at December 21, 2011 8:28 PM
Comment #333393

j2t2

The favorite is Solyndra, where Obama money poured in and got ripped off. The firm misled and misstated its prospects. Private profits were made at taxpayer expense.

I mentioned the bonuses at AIG, Freddie, Fannie etc. Financial firms became quickly profitable again, using government money as discussed above.

The more money you spread around, the more people come to take it.

Rich

Obama talks pretty but doesn’t do the needful. Are these hedge translations now on open exchanges, like you can buy stocks? Are there plans that they soon will be?

Posted by: C&J at December 22, 2011 5:35 AM
Comment #333394

The lax regulations surrounding the misuse of GWB bailout money, or the first stimulus as you say that was so successful (again according to you), is not due to Obama as you would have us believe C&J. The Banksters were supposed to be self regulated, as we were all told by conservative propagandist for many years, and do the right thing for the American people. Seems that didn’t work out so well, but who is really surprised about that?

To think that the failure of Solyndra is the turbo charging you speak of is laughable C&J. It is as if you have been in a cocoon the past 30 years and woke up as Obama was being elected to office. You and most conservatives it seems. So it seems with this weak response you have told us it is opinion not fact, your comment that is, which kinda puts you whole “last 3 years” thing in the partisan BS category at best.
Your starting to sound like your delusional more conservative movement members with this kind of nonsense C&J. When more realistic conservatives, such as yourself, start down the road of extremist ideology it makes us wonder if there us any hope for the repub party.

Posted by: j2t2 at December 22, 2011 9:19 AM
Comment #333403

j2t2

Banksters and government collaborated to create the system we have. Obama left that intact and enhance it while talking like an Old Testament profit … sorry prophet.

Market corrupting para-statal enterprises, such as Fannie and Freddie wrote billions of dollars in liar loans and encouraged others to do similar things, which touched off the housing crisis. All these are left intact by Obama.

The crony capitalism of the finance industry was a bipartisan creation, but Obama had the chance to change it, the duty to take effective action.

Obama said a lot about it, but when all was said and done, a lot was said and not much done.

We need to reform how we do finance in the U.S. Obama doesn’t understand how. It is simply beyond his education, experience or his temperament.

We need a leader who understands finance and how the business works. Just as only a Democrat (like Clinton) could reform welfare, perhaps only a Republican (like Romney) can reform finance. Remember, only Nixon could go to China.

Posted by: C&J at December 22, 2011 5:44 PM
Comment #333405

This is the logic (cf AEI)

a) Big Government will always choose bailout over bankruptcy for Big Money—privatized profits with socialized risk;

b) Too Big To Fail increases financial fragility and the odds of further crises;

c) concentration of economic power should be avoided just like concentration of political power.

It was a mistake to let banks get too big to fail and a mistake to allow the mixing of fiduciary responsibility with investing for banks on their own behalf.

We need to overhaul the system. Systemic risk should mean for the system, not for firms.

The Obama folks failed utterly to reform the system. Obama just did not understand what he was doing. His advisers were mixed up. It was just an example of incompetence, a team in over its head.

Obama can promise change, but he cannot deliver because he lacks the capacity to understand how.

Fixing this will require more than self-righteous talk.

Obama is a great campaigner but not a good president.

This is what Huntsman says about banks. He actually understands the system.

1. Set a hard cap on bank size based on assets as a percentage of GDP. (This cap would be on total bank size, not using any of the illusory “risk-weights” currently central to thinking about bank accounting. The lowest risk assets for banks in Europe, supposedly, are sovereign debt—yet this very same debt is now at the heart of the current crisis.

2. We should have a similar cap on leverage—total borrowing—by any individual bank, relative to GDP.

3. Explore reforms now being considered by the U.K. to make the unwinding of its biggest banks less risky for the broader economy.

4. Impose a fee on banks whose size exceeds a certain percentage of GDP to cover the cost they would impose on taxpayers in a bailout, thus eliminating the implicit subsidy of their too-big-to-fail status. The fee would incentivize the major banks to slim themselves down; failure to do so would result in increasing the fee until the banks are systemically safe. Any fees collected would be used to reduce taxes for the broader non-financial corporate sector.

5. In addition, focus on establishing an FDIC insurance premium that better reflects the riskiness of banks’ portfolios. This would provide an incentive for banks to scale down, allowing the financial system to absorb them organically in the event of a collapse.

6. Strengthen capital requirements, moving far beyond what is envisaged in the current Basel Accord. The Accord is a mixture of regulatory oversight and political compromise. As a result, the U.S. has allowed its banking policy to be determined by the “least common denominator” among European and Asian countries, many with a long history of not being prudent.

Posted by: C&J at December 22, 2011 6:04 PM
Comment #333408


C&J, I agree with much, some exceptions, especially that part about perhaps it will take a Republican president. You were joking weren’t you? Don’t you think Republicans would have handed Bush the Welfare Reform Act if Clinton had not signed it?

The financial reforms that Obama signed were a bipartisan effort. Ones that Dodd said he would like to make stronger but his fellow Senators wouldn’t allow it. That came after Dodd had admitted his guilt in the decisions leading to the collapse with his, I won’t be running for office again. Shelby was just as responsible, for both the financial collapse and the weak reforms. as were others, but apparently they felt no guilt or remorse, at least not enough to give their constituents the opportunity to elect more ethical people.

It won’t take a Romney, a Huntsman, a Obama or any other D or R. It will take someone like a Nader, someone who isn’t a part of the current status quo and doesn’t want to be.

Posted by: jlw at December 22, 2011 7:48 PM
Comment #333409
Banksters and government collaborated to create the system we have. Obama left that intact and enhance it while talking like an Old Testament profit … sorry prophet.

So the logic is “we screwed it up but you didn’t stop us or change it so it is your fault”? The TARP was signed into law just days before Obama was sworn into office. The bonuses were a done deal. This blame the cops for the bank getting robbed mentality doesn’t work for me.

Market corrupting para-statal enterprises, such as Fannie and Freddie wrote billions of dollars in liar loans and encouraged others to do similar things, which touched off the housing crisis. All these are left intact by Obama.

Sure C&J Fannie and Freddie threw the world into a financial crisis. Good one. That is a line only conservatives would fall for. The damage was done by the time Obama was sworn into office. F&F were GSE’s until they were taken over in September of ‘08 C&J. Why didn’t the repubs, whom you believe have some sort of financial acumen, reform them then, before Obama was elected?

The crony capitalism of the finance industry was a bipartisan creation, but Obama had the chance to change it, the duty to take effective action.

You seem intent upon placing the blame for the financial collapse on “crony capitalism” which you seem to see as fat cat and government collusion, but what could more accurately be called deregulation of the markets. Lets face it the financial collapse was global, except for Canada which BTW had regulations in place that didn’t allow their banks to gamble,do you really believe the feds influenced the regulations of all these other countries? Only conservatives….

The fact is it was greed that caused the financial crisis C&J. It was the banks hunting for customers because the unregulated CDO’s etc. were so profitable. The banks borrowed to finance these things, they took risks on sub prime loans. They were not forced to by the government, they fed, as did the GSE’s, at the trough until the bottom fell out. It was greed not force. It amazes me in one statement you say it was crony capitalism yet in the next it is the force of government against the cronies that fed the feds, it just doesn’t add up to me.

Obama said a lot about it, but when all was said and done, a lot was said and not much done.

The cat was out of the bag, C&J, yuo act as if it is a dictatorship not a republic. The fact is Congress passes the laws the president signs them or veto’s them, With the conservatives in the loop little get done. This is, as we all know, the worst Congress ever. The most obstructionist congress ever. Why blame Obama when the conservative leaders state they will not comprise.

We need to reform how we do finance in the U.S. Obama doesn’t understand how. It is simply beyond his education, experience or his temperament.

Wow, from a conservative, I am impressed. I am in agreement that we need reform C&J and hearing you say it tickles me. But to think that Obama and his advisers don’t know how to reform financial regulations is just silly. Especially when you follow it up with:

We need a leader who understands finance and how the business works. Just as only a Democrat (like Clinton) could reform welfare, perhaps only a Republican (like Romney) can reform finance. Remember, only Nixon could go to China.

How many jobs did Romney create? How many did he get rid of? Remember Romney is the pick of the crony capitalist. The repubs were the main problem that led to the financial meltdown. They were the champions of deregulation. And of course the repub/conservatives were the ones that went to war on a credit card and cut taxes while doing so, They were the ones that passed unfunded medicare “reform”. To think the repubs have a leg up on financial issues is a sick joke IMHO.

To think they have come up with some sort of ideas to actually help the economy now is illogical C&J. Who would fall for something like that? Again. Not to mention a front runner for the repub nomination wants to go back to the gold standard. The other candidates want to privatize everything despite Freddie and Fannie. And Romney is to leadership like a fish is to sand. Flip flop this and flip flop that. Flip flop is not leading it is pandering.

Posted by: j2t2 at December 22, 2011 7:55 PM
Comment #333413

jlw

Re welfare reform -If a Republican president had tried to pass welfare reform alone, he would have been attacked mercilessly by the MSM. He would have not been able to make it work, just as a liberal president could not approach China.

I also am convinced that Obama just does not understand the financial market enough to make a meaningful reform.

J2t2

The bonuses didn’t need to be a done deal. Goldman did not need to get 100 cents on the dollar. Obama talked like Elijah but behaved like Ahab.

Back in 2005/6 when Republicans tried to reform Freddie and Fannie, Chris Dodd and Senator Obama threatened to filibuster in order to stop reform. It wasn’t a matter of “stop us”; it was active resistance to reform by Dodd, Obama and Frank, among others.

Re “How many jobs did Romney create?” The same as Obama created - none. Politicians do not create jobs. They can only create the stable conditions that allow others to create jobs. Obama is not good at this.

Re the crisis - the proximate cause of the financial collapse was the the subprime weakness. The biggest contributors to the subprime crisis were Fannie and Freddy. The biggest defenders of Fannie and Freddie were Dodd and Frank. Obama was a junior partner.

As the SEC is now investigating Freddie and Fannie, we will find more of what kinds of crooks they were.

Re crony capitalism - it was indeed the nexus of government and banks that provoked the crisis. Banks went after liar loans because they knew they could lay off their risky investments on Fannie and Freddie. We socialized risk for private profits.

BTW - I don’t feel the term “predatory lending” has any meaning. People who took out those liar loans intended to make money. They were not only complicit in their own future troubles; they were also perpetrators of the troubles good and honest borrowers like me and you suffered. So the deadbeats, the banks and the government all ripped us off. I dislike it when deadbeats are called “victims” and we strive to “keep them in their homes”.

Another thing Obama did wrong was to try to support a market that should have dropped more. It probably helped to keep unemployment down a little at expense of the recovery.

Re regulation in general - I think we have two broad types of regulation. The one that works is one that does not try to manage or pick winners or losers. It creates the system and lets participants alone as long as they follow the broad rules. It imposes fairness in that all are treated the same, but does not influence outcomes beyond that.

The wrong kind of regulation tries to be fair to all and ensure good or “fair” outcomes. Politicians, bureaucrats and confidence men tend to like this kind. It allows them to expand their power. They identify “under served” groups and try to make up for it. This is how we got subprime loans. It was the misguided attempt to increase homeownership and build wealth among populations in general unable to sustain these things.

Posted by: C&J at December 22, 2011 9:28 PM
Comment #333419
Re the crisis - the proximate cause of the financial collapse was the the subprime weakness. The biggest contributors to the subprime crisis were Fannie and Freddy. The biggest defenders of Fannie and Freddie were Dodd and Frank. Obama was a junior partner.

Although this is utter nonsense C&J let’s just for a minute assume it is true. Howe then did the rest of the world fall victim to Fannie and Freddie? Why did the banks have problems? Fannie and Freddie were part of the problem which, once again in a nutshell, was greed. The biggest problem with F&F was the lack of oversight by competent feds, a problem GWB should have dealt with but didn’t. But then again the whole securitization thing was unregulated.

The bonuses didn’t need to be a done deal. Goldman did not need to get 100 cents on the dollar. Obama talked like Elijah but behaved like Ahab.

True but then again it could have been done right to begin with, why no criticism of the repub leaders for getting it wrong from the get go. To think that during this time period Obama was supposed to build his team and solve the issue is partisan BS.

Back in 2005/6 when Republicans tried to reform Freddie and Fannie, Chris Dodd and Senator Obama threatened to filibuster in order to stop reform. It wasn’t a matter of “stop us”; it was active resistance to reform by Dodd, Obama and Frank, among others.

If they would have reformed Freddie and Fannie by stopping them from dealing in CDO’s then it would have been less of a burden to the taxpayer. But since the repub plan was to socialize the debt by bailing out the big banks instead of helping payoff the mortgages we would have been in essentially the same spot in 2008.

Re “How many jobs did Romney create?” The same as Obama created - none. Politicians do not create jobs. They can only create the stable conditions that allow others to create jobs. Obama is not good at this.

As a businessman, as Romney loyalist like to think him to be, all he did was lose jobs. Why would we think him to be better than Obama at creating jobs? Especially when the president doesn’t create jobs.

Re crony capitalism - it was indeed the nexus of government and banks that provoked the crisis. Banks went after liar loans because they knew they could lay off their risky investments on Fannie and Freddie. We socialized risk for private profits.

Once again blaming government for this is just wrong C&J. F&F were GSE’s. The securitization of loans was unregulated. The agencies that graded them were private as were the banks. Securitization was seen as the biggest financial innovation of the poast 50 years, remember. Banks went after the subprime loans because they made money doing so. The bankssters made them liar loans most of the time. They wanted these people and these loans because they were making so much money selling the CDO’s etc.


Another thing Obama did wrong was to try to support a market that should have dropped more. It probably helped to keep unemployment down a little at expense of the recovery.

AT least he did something, more than we can say for the do nothing Congress. The tea bags in Congress just compounded the problems with the lower of the credit rating, due to their inane ideology. They didn’t contribute, they sent no bills up to be signed they would have solved anything.

Posted by: j2t2 at December 22, 2011 10:33 PM
Comment #333434

j2t2

Many Banks, individuals and governments were over-leveraged. As you correctly mention, this was a worldwide problem, common in heavily regulated places as well as in less regulated ones - in other words, not a product of the “last couple of decades” of specific American policies.

The tinder was ready to burn, but the match that set it off was the sub-prime collapse. And the sub-prime collapse was greatly affected by the para-statals like Freddie and Fannie.

Of course, the ability to pass off risk was big problem. Many members of the Obama Administration were in on the systems that made that possible, but it goes back to bipartisan neglect or mistakes. But not only that.

Politicians like Barney Frank probably acted in good faith. They were just behind the times in developments. Officials like Larry Summers were smart and competent. They just made choices based on the information available.

Re helping pay off mortgages - I would be against that. People who took out mortgages they could not pay should not be rewarded. Would they have given money back had the housing market gone up? I did not like bailing out the banks, but we had to do that to maintain the financial system. And almost all the TARP money - with the big exception of GM - has been paid back.

Government’s duty and competence - such as it can - is to the system, not to back up individual in their bad choices or bad choices.

Re Romney - Romney is better qualified than Obama - who is essentially completely unqualified in finance - to work with politicians, regulators and business leaders to create a system that can be robust enough to adapt to changes that have happened and will continue to happen.

Obama and his team have shown themselves completely unable to do those things, although they have managed to talk a great game.

Re crony capitalism - it is based on greed and cooperation on all sides. Business people will try to make money. They will make money in the fastest and least risky way they can. Government can facilitate that in good or bad ways. In the bad way, government facilitated this by absorbing much of the risk of poor loans and in fact encouraging loans to buyers who were really unqualified.

Government also permitted systemic risk to develop and the “too big to fail” institutions. Our government’s task is not to protect those institutions that create systemic risk or are too big to fail, but rather to make sure that such systemic risk does not develop and that no firm is too big to fail.

Re Obama’s mistakes - running fast and furiously in the wrong direction is worse than standing still and “doing nothing”.

A big problem in politics is the incentive system that encourages activity, no matter if it is going in the right or the wrong direction. Politicians - in the fashion of Obama - then attack others and blame “terrible” fate.

When you find that you have dug yourself into a hole, the first thing you might consider is to stop digging. Obama dug in faster.

Posted by: C&J at December 23, 2011 5:33 AM
Comment #333435

”..Goldman did not need to get 100 cents on the dollar. Obama talked like Elijah but behaved like Ahab.”

C&J,

Just for the record, Goldman had already gotten 100% on the dollar for its AIG swaps well before Obama took office.

Posted by: Rich at December 23, 2011 7:48 AM
Comment #333436

C&J the banksters ran out of people to loan to so they initiated the search for subprimes to satisfy their greed. Because thew cops didn’t stop someone that wasn’t really breaking the laws doesn’t mean it was the cops fault. It started here and spread as the rush for profit. Because the GSE’s were involved we seem to forget they were in effect privatized and have the same incentives as the banksters to make money at any cost. If you actual believe it was some act of Congress forcing these guys into this situation you are wrong. They are, once again, the cronies of crony capitalist.

Government also permitted systemic risk to develop and the “too big to fail” institutions.

According to the rating agencies the CDO’s were not that bad, why not put responsibility on the rating agencies that screwed the pooch for profit? It was the call for deregulation the past 30 years that allowed this to happen as well. Do those on the right that preached the “free market” line not own some of the problem as well, they were running the ship of government during the time frame of the bubble.


Re Romney - Romney is better qualified than Obama - who is essentially completely unqualified in finance - to work with politicians, regulators and business leaders to create a system that can be robust enough to adapt to changes that have happened and will continue to happen.

Based on what C&J. Romney is rudderless and will flip flop as the cronies need. Certainly it is not the myth of repub financial superiority, that dog don’t hunt anymore. It hasn’t since they swallowed the voodoo economics cool aid. Romney has the dead weight of tea bags around his neck as well pulling the country down. At the least it seems Obama has gotten his head out of the bipartisan thinking that has caused many of these things you complain about. Either way it is once again the lesser of two evils we are voting for. Providing of course it is Romney not Gingrich or Paul. Then it becomes a no brainer as to who would do less damage to the country.

Posted by: j2t2 at December 23, 2011 9:36 AM
Comment #333437

j2t2

We know that Romney is a successful business person, a man who achieved success in business, government and NGO sector. You are right that we don’t know exactly what we will get. We know what we have had with Obama, however, and it was a failure.

Obama had hope and promise on his side in 2008. Now that we have seen Obama in action, we have experience with what he really can and cannot do. Reelecting him in 2008 would truly be the triumph of hope over experience.

Obama is just not up to the job. He is a great talker and a great campaigner. I am sure he a great professor and an inspiring community organizer, but he is not the leader we need.

I do not think that the next election need be a choice between the lesser of the two evils. It would be a lesser evil choice if we had Obama v Gingrich, for example. But if we get a choice between Obama and Romney or Huntsman, we have a good choice (as long as we don’t choose Obama again).


Rich

You are technically correct but it was still the Obama team - “the New York Fed, then led by current Treasury Secretary Timothy Geithner, directed AIG to pay its counterparties 100 cents on the dollar on their complex derivatives deals. More than $27 billion of taxpayer money went into the coffers of firms like Goldman Sachs and Deutsche Bank. The firms were also allowed to keep $35 billion in collateral previously posted by AIG.”

You can argue that the Fed is autonomous and that the president (Bush or Obama) is not responsible for the details. But knowing this, Obama chose him as Sec of Treasury and gave him the job of fixing the financial systems. Obama bought the problem, lock, stock and barrel.

So Obama assumed the responsibly and carried it further.

Failure to fix the financial system is an Obama failure and a big one. Obama screamed and carried on, but in the end gave the fat cats what they wanted.

Posted by: C&J at December 23, 2011 10:02 AM
Comment #333439
We know that Romney is a successful business person, a man who achieved success in business, government and NGO sector.

So once again we need to deal with the conservative myth that a business person is by definition a great leader. It is one thing to buy up businesses and then part them out and it is another thing to be a leader. Further it is one thing to run a business that is in essence a dictatorship and it is another thing to run a country that is a republic. The last business man we got ran the country off the edge of the cliff, why trust another one? I find it amazing that you guys repeat these same myths despite trying it and watching it go up in flames. When do you guys learn? GWB, GWB dispels this myth.

Posted by: j2t2 at December 23, 2011 10:37 AM
Comment #333441

j2t2

I don’t say that just because he has been a successful business leader, politician and NGO leader, he would necessarily make a good president. I am just saying that he - unlike Obama - has the necessary ingredients.

I would also say that Bush was not really much of a business man. He didn’t build a business; he mostly ran a sports team. I am sure you all would have attacked his record back then (and did)

We also know that Obama has been a poor leader, so we know that we have a chance of doing better because we know what Obama is not up to the job.

Posted by: C&J at December 23, 2011 11:02 AM
Comment #333443

j2 and rich — excellent points.
Roy, you too.

jlw:

It won’t take a Romney, a Huntsman, a Obama or any other D or R. It will take someone like a Nader, someone who isn’t a part of the current status quo and doesn’t want to be.

It would indeed be best if we had a president who would be willing to lead the charge on this. But Congress could lead on this too, and create a lot of very public political pressure on the president. Which is why America needs to vote out the status quo in Congress who have done nothing but aided and abetted the Wall Street Crooks, and hire a ton of new people who truly want the utterly rigged system to change.

Posted by: Adrienne at December 23, 2011 1:15 PM
Comment #333446

Adrienne & JLW

Next November, I will vote for against EVERY incumbent for every office that appears on my ballot. Furthermore. I promise to vote for nobody who held any Federal elected office since the economic downturn. Vote the bums out. For good measure, I won’t vote for anybody who was employed as a banker or financial consultant of any kind during that same period. That way we can get at all crooks who contributed to the crash.

Will you all agree to do the same or is this just talk?

Posted by: C&J at December 23, 2011 2:27 PM
Comment #333448

“I promise to vote for nobody who held any Federal elected office since the economic downturn.”

C&J,

I would be a bit more concerned about those that steered the ship into the crash.

Posted by: Rich at December 23, 2011 3:23 PM
Comment #333451

C&J, I can agree with your promise; but I fear the left is simply talking about voting out Republicans and not concerned about any Democrats or Independents who helped get us into this mess and debt. I doubt any liberals will support you.

Posted by: Steve at December 23, 2011 4:02 PM
Comment #333452

Rich

Presumably those that steered the ship are among those who held power in the last five years. Others who were in position to have oversight were also there. Vote against all incumbents in all Federal offices, if you all really believe in reform.

Steve

I don’t think our liberal friends will go for it either. Their “revolutionary” fever applies only in one direction. When they say reform and change they don’t mean the same thing you might guess from those words.

They are indeed voting out only Republicans. They talk about reform but don’t mean it.

Posted by: C&J at December 23, 2011 4:56 PM
Comment #333453

Really, C&J? Really Steve? So you guys claim to want reform by voting out the incumbent Obama, which happens to be what you would do anyway, regardless if the repub nominee is Paul Gingrich or Romney. Yet you make it sound like your brave reformist, what a joke. Try this one on instead, vow to vote for a third party candidate for president.

Posted by: j2t2 at December 23, 2011 5:12 PM
Comment #333454
I am just saying that he - unlike Obama - has the necessary ingredients.

Romney has previous experience at being a governor going for him, much like Obama was a Senator. Romney was a management consultant and investor of other people’s money just like those Wall street guys that brought us to the edge. More hair of the dog is not what we need IMHO C&J.

I would also say that Bush was not really much of a business man.

Yet back then you spoke of GWB just like you do now of Romney. Why should we believe it this time around? His hands will still be tied by the tea party and the uber conservatism that is intent upon ruining the country. He will flip flop as he always does and we will be converting to the gold standard and any other wish list item of the far right.

We also know that Obama has been a poor leader, so we know that we have a chance of doing better because we know what Obama is not up to the job.

All we know is that is the spin from the right wing C&J. They cannot back it up with any real facts just vague accusations. The fact is Obama has steered the ship from economic disaster when he got it to a new start. The business man is the one that got us into the mess yet conservatives say trust us, trust us this time, this guy is better. Why on earth would we do that?

The community organizer got Bin Laden, something the businessman was unable to do. The community organizer also alienated his core by capitulating to the repubs to long. Seems those days are gone now.

Obama has work at bipartisanship legislation which is what the people wanted. For not being a leader he did manage to get a health insurance reform bill signed into law, something other leaders were unable to do.

Posted by: j2t2 at December 23, 2011 5:16 PM
Comment #333456

C&J concerning the F&F myth:

“The problem was not Fannie and Freddie. The crisis was created by the highly risky mortgages bought and sold by the private sector between 2003 and 2006, when Fannie and Freddie were cutting back their activities. They became big buyers when the damage was already done. And even now, their mortgage defaults as a percentage of their portfolios, despite the devastation in the housing market, are much lower than defaults in the private sector. Those who want to blame the government for the crisis keep coming back to this stale and very misleading issue.”

http://www.newdeal20.org/2011/12/22/the-10-worst-economic-ideas-of-2011-67621/

Posted by: j2t2 at December 23, 2011 5:46 PM
Comment #333457

phx8 gave us a great example of an oxymoron:

“All we know is that is the spin from the right wing C&J. They cannot back it up with any real facts just vague accusations.”

And then he made an opinion, and called it a fact:

“The fact is Obama has steered the ship from economic disaster when he got it to a new start.”

Obama has steered us nowhere, we are sill in an economic mess, real unempoyment is still around 16% nationwide, and the national debt is going on $16 Trillion.

Posted by: Frank at December 23, 2011 5:54 PM
Comment #333460

“C&J concerning the F&F myth:”

j2t2,

Don’t waste your breathe! We know that it was actually all Barney Frank’s doing. He just forced all those investment banks to buy those sub-prime mortgages, bundle them up and sell them to innocent, naive, unsophisticated investors. Barney Frank even added fuel to the fire by misleading investors into thinking that they could actually hedge their investments with unregulated credit default swaps.

Posted by: Rich at December 23, 2011 6:25 PM
Comment #333461

Tom, It’s no oxy moron. Your guys dug us a big hole, it will take time to get out completely. Especially with the tea party crowd in Congress trying to stall and undermine everything. Obama has done what could be done especially with all intentional layoffs at the state and local government levels.

Posted by: j2t2 at December 23, 2011 6:49 PM
Comment #333462

j2t2

The SEC is prosecuting Fannie and Freddie executives. We will see what they knew and when they knew it, as well as what they did.

I did not say that Fannie and Freddie were the only cause, but they were the biggest owners of sub-prime AND the policies of government pushed home ownership into places and people who could not sustain them.

Re bin Laden - the SEALS got bin Laden. I am glad that Obama didn’t mess it up and I gave him credit at the time.

RE getting the economic ship in order - TARP did that. Obama piles on stimulus which did little good and probably made the recovery weaker. In addition, in administering TARP and the stimulus the Obama folks rewarded the fat cats.

Re Bush as a business man - I thought - and still think - he was a better choice than Gore or Kerry. He was not my optimal choice. It was not his business background that caused the trouble.

There is a significant difference between management in business and in government. Of course, there is an even bigger difference between the skills of a legislator and a community organizer and those of a president, as we are seeing with president Obama’s lack of ability.

Romney has more experience than business, BTW. He has worked successfully in business, government and the NGO sector.

Posted by: C&J at December 23, 2011 6:55 PM
Comment #333463

j2t2

Your hole metaphor and Obama’s too is just silly. The economy absolutely does not work like this.

It may indeed be the case that in that after a severe downturn it may take the economy a while to catch up to its previous level.

But after a big downturn, if the policies are healthy, we would expect robust growth, as we saw after the 1980s recession or even in 2003.

In fact, in the case of a deep downturn, with good policies, you should expect even stronger growth, as you get after a disastrous forest fire.

At the rate that the economy is growing during the Obama doldrums, we will never catch up. That is why we need new leadership.

Posted by: C&J at December 23, 2011 7:04 PM
Comment #333464

“But after a big downturn, if the policies are healthy, we would expect robust growth, as we saw after the 1980s recession or even in 2003.”

C&J,

Really? The mild recession of 2001 was followed by three years of a jobless recovery despite massive stimulus in the form of tax cuts and aggressive monetary easing by the Fed. As we now know, the eventual “recovery” was fueled by a massive housing bubble which collapsed in 2007.

Posted by: Rich at December 23, 2011 7:29 PM
Comment #333465

Rich

The farther it is pushed down, the better it should bounce back. That is how we has such robust growth in the 1980s. It would be great if we could have the growth we enjoyed even in 2003. Anyway, it has been a couple years since the end of the recession. Where is the robust growth?

Posted by: C&J at December 23, 2011 7:55 PM
Comment #333471
Re bin Laden - the SEALS got bin Laden. I am glad that Obama didn’t mess it up and I gave him credit at the time.
And who exactly was the Commander-In-Chief of these Seals C&J? Reagan gets the credit for Grenada and Obama gets the credit for putting Bin Laden to rest.


RE getting the economic ship in order - TARP did that. Obama piles on stimulus which did little good and probably made the recovery weaker. In addition, in administering TARP and the stimulus the Obama folks rewarded the fat cats.

The Stimulus was, as we recall, a mixture of tax cuts as well as projects to get people working, but in addition it was also unemployment insurance for those thrown out of jobs. It was money going to the states and counties to keep them going. It kept the recession from being a depression. kind of.

Your hole metaphor and Obama’s too is just silly. The economy absolutely does not work like this.

It sure did this time,C&J. Between the debt run up by GWB and the financial meltdown I would say it was a deep hole we were in.

It may indeed be the case that in that after a severe downturn it may take the economy a while to catch up to its previous level.

It was more than a mere business cycle recession C&J, comparing it to one is silly IMHO. This was a financial meltdown as well.

But after a big downturn, if the policies are healthy, we would expect robust growth, as we saw after the 1980s recession or even in 2003.

Ah yes the great Reagan,

“The fact of the matter is, there was no economic boom under Reagan. The average unemployment rate in 1980 was 7.2%. It went as high as 11% (yes, folks, higher than it’s been under Bush/Obama) in 1982 and the average unemployment rates for 1982 and 1983 (AFTER the huge tax cuts for the rich) were 9.7% and 9.6%, respectively. In fact, the unemployment rate when he was reelected in a landslide in 1984 was 7.6%, and it didn’t even go below 7% until AFTER (are you sitting down, right wingers?) he raised taxes for most people. The lowest unemployment rate of his presidency was 5.2% in January 1989, as he was leaving office. Not bad, but not exactly something to write home to mother about. The Republicans at the time even tried to suggest that 5% was as low as the rate could go, and that 5% constituted “full employment,” which flies in the face of every economic theory out there.

I know it’s popular to give Reagan the credit for getting a handle on inflation, but it was the high interest rates that Carter allowed to be implemented by Paul Volcker that finally took care of inflation, and Volcker was hired by Jimmy Carter, not Reagan. In fact, Reagan essentially “fired” Volcker, by denying him a third term, and put Alan Greenspan in charge. Ahem.

And when you talk about growth rates, Reagan’s don’t come close to even Obama’s during his short tenure, let alone Clinton’s. In fact, the GDP growth rate of 4.1% under Clinton in 1994, the year he lost Congress, was higher than any GDP growth rate during Ronald Reagan’s entire presidency.

When it comes to job creation, Reagan ranks as the third-worst among all post-war presidents, just ahead of the two Bushes. The number of jobs grew by 2.1% per year under Reagan; about half the job growth rate under Eisenhower, just over half the rate under Johnson and Clinton, and a full percentage point BELOW (yes, folks, this is true) Jimmy Carter.

Yes, folks, Jimmy Carter created more jobs than Ronald Reagan did during what he considered a “boom.” “

http://pleasecutthecrap.typepad.com/main/2011/02/debunking-myths-about-ronald-reagan-a-pctc-special-comment.html

Posted by: j2t2 at December 23, 2011 10:06 PM
Comment #333478

Jack,
Why are you Republicans always trying to wring a “pledge” from people? I find this very odd.
Me, I’m a Progressive, and know exactly how to draw a line in the sand for myself. Before voting, I go and look at the record of the candidates who are running for office, and if they’ve voted Progressively for the most part, they’re sure to get my vote. Many Democrats haven’t — and those that do they stand to lose my vote as a result. For me, it really is that easy.
I will never once voted for a Republican. I never have, and I likely never will. Because I do look at their records, and they are not AT ALL Progressive.

Romney is a corporatist who has very clearly stated that he thinks “corporations are people.” That’s horsesh*t, and thus, he could never get my vote. Both Romney and Obama have raised a ton of money from Wall Street. I’m an OWS supporter, and the writing is on the wall. Those who are clearly owned by Wall Street will never get my vote.

Hope that answers your question.

Posted by: Adrienne at December 23, 2011 11:32 PM
Comment #333479

Sorry, that should read: I HAVE never once voted for a Republican.

Posted by: Adrienne at December 23, 2011 11:33 PM
Comment #333480

j2t2, Explain to us how any president can create, except government, a job? No president ever created a job. They may have made things favorable for private sector to create jobs but never created one job that wasn’t a government job.

Posted by: KAP at December 23, 2011 11:49 PM
Comment #333482

KAP despite the conservative myth that tells us government cannot create jobs the fact is government creates jobs. The aerospace industry for an example used private contractors to do design and build work which created private sector jobs. But anytime the government builds a building, any building it creates private sector jobs in the construction industry which buys products to build the building from the building supply industries which creates more private sector jobs. When the military needs supplies that creates jobs in the specific industry. When the local school district orders food for school lunches they order it from private sector food suppliers which creates job in that industry as well as in the agriculture area. I could go on for quite a bit but you get the idea.

Posted by: j2t2 at December 24, 2011 12:19 AM
Comment #333502

J2t2

Re bin Laden – I give him credit as commander in chief. I have complimented him. He continued a program set up by his processor and it enjoyed success.
If we are to be consistent, however, if we are to blame Bush for the bad things that started and continued into the Obama presidency, We also need to credit Bush for all the good things. Please remember that.

Re the stimulus – The stimulus moved economic activity forward. It probably succeeded in preventing unemployment from rising to the levels it did in the 1980s. (Yes we know that unemployment was worse in the 1980s, but it came down faster) But by the same mechanism, it weakened the recovery and helps prevent the adjustments that would have put the economy on a healthier path. You have to pick up both ends of the stick on this.

Re the rest about Reagan – your source takes unemployment at the worst year (1982) of the downturn, which in Obama years would be 2010. We can do that, if you want, but if you are going to give Reagan the whole blame for what happened in the second year of his presidency, surely Obama gets the blame for events of 2010/11. So you can either hold you big hole theory or your Reagan mistake theory, but not both.

Like he did in so many other things, Obama took the praise and benefits up front and now we are paying off. He dug in an even debt hole, to use your metaphor.

Re economic bounce – there is even the so-called “dead cat bounce” that even something that is going nowhere will bounce when it hits bottom. It looks like Obama has achieved the dead cat bounce, but his policies, as mentioned above, drained the life out of the recovery, by moving economic activity forward and pushing it artificially into failing activities.

Re Volker – Read some of what Volker had to say about Obama’s handling of the financial industry. In fact, what I wrote in the initial post was to a great extent based on those sorts of ideas.

Re Jimmy Carter et all and jobs – As I have said many times, presidents don’t create jobs. At best they can create conditions that create jobs. But there is always a lag time. You seem to understand that but only to the benefit of Democrats. When you use the same figures re presidents, will you count the job losses from 2009-2012 as Obama’s? Most of the job losses came in his first year. If you are consistent, you need to either blame Obama or not blame Reagan for the first years’ losses. As you correctly point out, Volker choked off inflation. He did this at the cost of contracting the economy. This is also not Reagan.

So by your figuring, how many jobs has Obama lost so far? Is there any way, given only one year left, that he will be able to come up into the positive number?

Re government “creating jobs” – government takes resources from one place and puts them in others. It has the illusion of creating jobs and but the net number is lower. Government can move resources; it doesn’t create them directly.

Government CAN create conditions that help create jobs. But politicians tend to be less enthusiastic about this because they cannot take direct credit.

Politicians can more easily destroy jobs or prevent them from being created. A good example is the Keystone Pipeline. Obama’s decision to delay work is preventing the creation of jobs. All Obama would need is to say yes and thousands of new jobs would be created at no cost to the taxpayers. In fact, if he just let things happen like this, he would have “created” more jobs than all his other dubious programs.
Adrienne

You are the one who said that we should vote out the status quo in Congress. I understood that you really meant that you wanted to vote against Republicans but you implied a much wider goal. I am just calling that bluff.

Just to clarify your “choices” which of the current members of Congress are deserving of reelection? Your comments imply that you don’t just want to vote them all out, so which should stay?


So if we can rephrase what you wrote – you are advocating that everybody vote for left-wing candidates that support your positions. That is a valid thing for you to write, but don’t make it sound like a sweeping grass roots change supported by the great mass of people.

BTW – what does progressive mean to you? Many of us are grateful for the progressive legacy that did things like build parks, roads & dams and encouraged the expansion of the productive power of our country. For example, T. Roosevelt’s Forest Service boss, Gifford Pinchot more or less invented the idea of multiple use. The ideas was to conserve resources by using them wisely and productively, so National Forests were producers of timber, minerals etc. Today’s “progressives” often stand in the way of such big infrastructure improvements. Progressives were also in favor of a robust and sometimes even aggressive national defense.

Based on your general comments it seems to mean – in practice – significantly more central planning and Federal intrusion into the economy and practices of average Americans. Again, this is a valid argument, but you cannot claim this is a call for greater local or individual autonomy.

Posted by: C&J at December 24, 2011 7:46 AM
Comment #333504

j2, by your anology everyone on the planet is a job creater, because we all need something including government.

Posted by: KAP at December 24, 2011 11:45 AM
Comment #333506


The government can and does create jobs and more importantly it has created tremendous opportunities for the private sector.

The government didn’t have to tax the people to build the interstate highway system, subsidize the building of the railroads and the air transportation systems. Not only did the building of these infrastructures create jobs, they opened this country up, like a can opener, for the tremendous economic growth that created the wealth that made this country the richest on earth.

Now Wall Street would have us piss it all away in the name of profits, turn control over to them, turn America into a giant toll road.

At this time, the government is helping to finance the creation of a private space program, the economic highway of the future. Without the decades of taxpayer support for research in the aerospace industry, a private sector space industry would be inconceivable, at this time.

Despite the fact that we have not gone back to the Moon since the 70’s, government sponsored research into what and how we can exploit the tremendous wealth and opportunities the Moon represents has continued. Companies have been and are developing means for living, traveling, mining, and producing unlimited quantities of energy on the Moon. In all likelihood, the infrastructure necessary to make these things a reality is going to come from government, If not ours, the Chinese and their government owned businesses.

There is little doubt that the private sector wants to continue the taxpayer funded projects and research that has been so beneficial to it while limiting the taxpayers ability to regulate the sector for the benefit of all.

Posted by: jlw at December 24, 2011 5:55 PM
Comment #333507

jlw

“The government didn’t have to tax the people to build the interstate highway system…”

What they heck are you talking about? Do you think those things built themselves or that people just came out and did it voluntarily. Of course they were built with tax money.

I am with you, however, on infrastructure. I think that you would find that MOST conservatives would be happy to built infrastructure like the highway system and certainly happy to allow private firms to build infrastructure like the Keystone pipeline. These are examples of how government can facilitate the creation of wealth.

We worry about the crony capitalism of “investments” like Solyindra.

The government’s way to help create wealth is to build infrastructure and make investments in basic research. When they are far enough along, they let the people take over.

The government is not supposed to hold onto the enterprise forever.

To take your example of highways, government builds highways and sets general rules of the road, but beyond that does not decide who specifically drives on them. Government does not decide that my trip to Chicago is more important than your trip to Cincinnati.

The American people decide what they want and how they will use these things.

Posted by: C&J at December 24, 2011 6:17 PM
Comment #333509

Merry Christmas to all


Oh look a Christmas Day present under the tree.
“Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis.”

http://www.nytimes.com/2011/12/24/opinion/nocera-the-big-lie.html?_r=1

Posted by: j2t2 at December 25, 2011 9:13 AM
Comment #333510

j2t2

The article you mention is itself a big lie.

The “best case” scenario in the article is that Fannie and Freddie bought up sub-prime mortgages out of a sense of greed. Assume that they did that. We still have the case of a para-statal enterprise using taxpayer money to try to increase private profit while risking taxpayer money.

So we have two options. Either Fannie, Freddie and Frank foolishly invested taxpayer money in an attempt to further political goals.Or Freddie and Fannie (we leave out Frank here) foolishly invested taxpayer money in an attempt to increase private wealth at the expense of public risk.

Either way we got a rouge agency wasting taxpayer money to try to benefit individuals.

The latter case has an interesting permutation. Leadership at Fannie and Freddie, presumably smart guys. vigorously defended by liberal Democratic members of Congress, thought that the sub-prime loans were good investments, so not only are they greedy, but also stupid.

Posted by: C&J at December 25, 2011 9:34 AM
Comment #333513

You miss the point C&J. The myth that F&F caused the financial crisis is just that, a myth. Time to let go of it. It is not a lie. Common sense unclouded by the fog of conservative propaganda will tell you it is not a lie. In fact the myth creators have been named. Seems to me AEI has let conservatives down. At the least they have been exposed as an unreliable source of factual info. They have been exposed as a “stink tank”.

We still have the case of a para-statal enterprise using taxpayer money to try to increase private profit while risking taxpayer money.

C&J, “sense of greed” rings a bell. Yes the GSE’s played the same game as the big guys. They were after all rewarded for increasing profit just the same as private firms were. That doesn’t make them guilty of causing the financial crisis.

Either way we got a rouge agency wasting taxpayer money to try to benefit individuals.

But what we don’t have is a rogue agency causing the financial crisis as is falsely claimed by conservatives everywhere.


The latter case has an interesting permutation. Leadership at Fannie and Freddie, presumably smart guys. vigorously defended by liberal Democratic members of Congress, thought that the sub-prime loans were good investments, so not only are they greedy, but also stupid.

You keep forgetting the rating agencies and their involvement in this scandal. You also seem to forget that the big bankers, AIG, and most others thought these investments were good. For many they were great, as some made tons of money from them. Except of course conservatives right, they knew all along and warned everyone of these … oh wait stupid as well weren’t they?

Posted by: j2t2 at December 25, 2011 1:52 PM
Comment #333516

j2t2

The man who explains the link is not a “myth creator”. I remember hearing about the problems of Freddie and Fannie BEFORE the crash.

In fact, I recall that David Renner wrote about it.

Re GSEs being greedy - they should be less greedy and held to an even higher standard, since they are risking taxpayer money and have the backing of the USG.

Re the greedy bankers - yes, I agree that they greedy and that is why, as I wrote above, the Obama folks should not have rewarded them.

Posted by: C&J at December 25, 2011 5:49 PM
Comment #333578

There are lots of good points made in this post but to cut through the chase and to see who is on which side just look to the battle for Senate in Massachusetts.

A Wall Street buster Elizabeth Warren (appointed by Obama and blocked by the Republicans) versus Scott Brown a Tea Partier turned massive Wall Street funding recipient. Here is the battle defined. This false equivalence is so inaccurate. We have bills and voting records.

Also simply look at the tons of good democratic legislation on the issue put forward by the Pelosi congress that never saw the light of day due to one republican filibuster after another… then look for ONE significant piece of legislation the Republicans have put forward to address the issue… there are NONE. The lines in the sands are well drawn. The Democratic Party has many faults and Obama has failed plenty… but there is no pretending which side has a hope a making true change.

This is the same battle FDR fought and won… and it was clear then as now where the lines in the sand are drawn. I’m just glad to see you at least admit to the problem.

Posted by: muirgeo at December 26, 2011 11:48 PM
Comment #333598


“the Obama folks should not have rewarded them.”

That is a very true statement. Almost as true as the government should not have rewarded them. And, almost as true as Republicans would have rewarded them even more.

You have to hand it to Republican rhetoric, Obama rewards business that he hates.

It was the Bush Administration that saved the banking system from collapse. They knew full well what another Great Depression would do to conservative aspirations.

Posted by: jlw at December 27, 2011 4:28 PM
Comment #333603

jlw

It is a good thing if Bush saved the system from collapse and avoided another depression. I thought that he shared credit with Obama.

Re rewarding the fat-cats - this happened when Obama was in office and it was done by the man who became Obama’s Treasury Secretary.

Obama has strong rhetoric against these fat cats. His deeds do not match his words. I think we have the worst situation, where Obama dislikes the general idea of business free of onerous control, but likes to reward the particular practitioners, or at least fears not to.

Posted by: C&J at December 27, 2011 7:56 PM
Comment #333933


“It’s a good thing if Bush saved the system from collapse.”

C&J,is it a good thing that Bush and Congress had to use the middle class taxpayers to save the system from collapse? Is it a good thing that you scapegoat rather than face the facts about the conservative philosophy?

I did not vote for Obama or Bush. Can you say the same?

Posted by: jlw at December 31, 2011 4:27 PM
Comment #333937

Jlw

I voted for Bush in 2004. He was better than Kerry and I still think that he did a good job in second term with foreign policy. Kerry would have messed up.

I did not vote for Obama.

Posted by: C&J at December 31, 2011 5:28 PM
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