Third Party & Independents Archives

Politicizing Crisis

There is a feeling in this country that the Republicans are solely responsible for the failures of Fannie Mae and Freddie Mac, that their failure was a result of a lack of oversight and regulation that is indicative of Republican operating methods. But is that true or does it require ignoring sticky facts?

There is plenty of blame to go around for what happened to these two organizations, but for political reasons there has been a great attempt to lay this all at the feet of Republicans. I am not saying in any way that they aren't on the hook for this at all, but they are not alone.

On September 11, 2003, President Bush called for a new agency to be created to increased regulation and oversight of Fannie Mae and Freddie Mac. From the New York Times:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

Did they recognize a problem?

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

But what happened to that legislation? That is an interesting story. First we see what the leaders of congress at the time planned to do:

After the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal.

And what was the Democratic Response?

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

But, of course, the Democrats were not in a position to do anything about it, right? They were a minority in both houses of Congress and the President was a Republican, so this should have passed and been put into action. So, what happened to the legislation?

Well, in 2005, Charles Hagel introduced S.190: Federal Housing Enterprise Regulatory Reform Act of 2005. The bill was to address the regulation of secondary mortgage market enterprises, and for other purposes. The summary states:

Federal Housing Enterprise Regulatory Reform Act of 2005 - Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.

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

Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation.

Excludes the Federal Home Loan Banks from certain securities reporting requirements.

Abolishes the Federal Housing Finance Board.

The co-sponsors were: Elizabeth Dole, John Sununu and John McCain. This was John McCain's recorded text when he joined as a cosponsor:

Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Unfortunately, it was not allowed out of committee. It was again reintroduced in 2007 and still, to this day, languishes.

I, personally, think it takes a lot of ... chutzpah ... to assert that the people who were calling for more regulation of these entities were actually turning a blind eye to the problem and then in the same breath say that the people who were rejecting it are the ones who are the ones concerned.

Posted by Rhinehold at September 25, 2008 10:46 AM
Comments
Comment #264353

Yesterday I read a couple of good Kos diaries. One examined the root cause of the problem, and the other dealt with solutions.

Here is the first diary: dealing with fundamental cause.

I’ll follow up with the other link…

Posted by: Veritas Vincit at September 25, 2008 11:08 AM
Comment #264355

Here is the second diary: dealing with solutions.

Posted by: Veritas Vincit at September 25, 2008 11:10 AM
Comment #264356

The policies at these GSMs were bad, but though McCain talked the talk, he didn’t walk the walk you suggested he did. The GSMs were easy targets for Republicans because of their association with with the government, but he supported the deregulation that actually started this crisis.

The problem isn’t bad mortgages. The system has ways of dealing with bad mortgages, adjusting their worth downward. What happened was that to spread the risk, they turned collections of mortgages into securities, then traded these.

To make even more money, they did some derivative/hedge fund trickery with it. Doing that, they vastly inflated the value of many mortgages. The market thought it had far more money than it actually did.

Worse yet, though, the mortgage securities, the paper we’re supposed to buy here, are basically opaque on their contents. We don’t know the value of the paper being traded, which means people aren’t trading it, because that would be a blind gamble.

McCain and Gramm basically rewarded the people who try to get something for nothing by making their kind of behavior legal. They got so much money for nothing, that when reality hit on main street, and the value of homes went down, that the bubble burst, and Mortgage companies had a hell of a lot less money than they thought.

But worse, since many debts were packaged this way, other kinds of credit beyond the mortgage banks were affected.

The banks and mortgage companies not only failed to self regulate, they failed catastrophically. Drunk on a rise in part fueled by separate streams of securities and housing speculation, these companies failed to consider what would happen if the party ever ended, and somebody had to clean up.

And what were McCain and his good friend Phil Gramm doing? Cheering on the guys drinking from the beer bong. After decades of stripping this country of its financial safeguards in the name of greater profits, their conversion comes too little, too late, and with little sincerity. Even if yesterday’s stunt was necessary, it’s only necessary because of a careers worth of erroneous decisions.

Posted by: Stephen Daugherty at September 25, 2008 11:12 AM
Comment #264358

Stephen,

There are a lot of causes for what is going on now. The ‘deregulation that actually started the crisis’ is invalid to say the least, and shows that you are unwilling to look at the real causes, instead fixating on one act that has Graham’s name on it for political reasons.

What about Cuomo’s part in all of this? Or the Fair Value Accounting rules that are causing this to be more of a problem than it has to be in the first place?

That is my point, really, is that instead of trying to take in the whole picture and look at what is causing what is going on right now, there are those that would rather play politics, on both sides, to advance their parties.

There are many parts that play a role in what we are seeing today. By fixating on the one act that is not the cause by instead is a side player in the many reasons that, taken together, have us where we are now, you are just making yourself part of the problem, not the solution.

Posted by: Rhinehold at September 25, 2008 11:23 AM
Comment #264359

Interesting, thanks VV.

I gleaned this:

Yes, we have a problem. Others have written great diaries, but basically when Gramm’s Law of 2000, formally the Commodities Future Modernization Act, passed, all kinds of financial institutions placed bets on bets. Californians know that this is the law that permitted Enron to rip us off for $40 billion in energy costs. It’s also the bill that allows unregulated credit swaps and precipitated the current financial meltdown.

If you can create “value” just by hitting print, it’s no wonder that “value” can be created by just about anybody. It takes years to buy a home or build a business. It only took a few days to create millions of fictional dollars of value in “credit default swaps.”

Just to keep things in perspective, in 2006 our US taxpayer federal income tax receipts were $1.2 trillion. Bloomberg News reports that the now-worthless credit default swaps are/were worth $62 trillion. Pardon my skepticism, but how the heck would $700 billion put value back into $62 trillion?


Posted by: womanmarine at September 25, 2008 11:25 AM
Comment #264370

Yes, Rhinehold it is true. Other contributing factors are also true. They are not exclusive of each other. Nice try at defending the GOP though.

Posted by: David R. Remer at September 25, 2008 11:41 AM
Comment #264373
Nice try at defending the GOP though.
There is plenty of blame to go around for what happened to these two organizations, but for political reasons there has been a great attempt to lay this all at the feet of Republicans. I am not saying in any way that they aren’t on the hook for this at all, but they are not alone.

Yeah, that’s me, defending the GOP by saying that they are part of the problem we are experiencing today…

*rolls eyes*

Posted by: Rhinehold at September 25, 2008 11:48 AM
Comment #264377

Pretty much explains why Obama agrees this should not be used in an attempt for political gain.

And come on Rhinehold, you know you shouldn’t be giving facts when you could be giving us your partisan guess as to what McCain’s fearful motives are for going to DC.

Posted by: kctim at September 25, 2008 11:58 AM
Comment #264378

Rhinehold any bill from the Bush administration needs to be taken as a whole and investigated as the administration has proved themselves to be unworthy of trust by anyone. Moving the oversight from Congress and into the executive branch may be a good idea but with the imperial presidency suggesting it I am ok with the bill being stopped in commitee. Looking back at the timeframe the zeal to privatize everything was rampant in DC yet has since proven to be a bad solution to many problems. Iraq has since proven that.

Besides this isnt the real root cause of the problem and it appears to be served up in defense of the lazze-faire economics that has lead to the real problem. Moving regulatory oversight to the Bush administration is the same as doing nothing. The problem they were trying to fix is run amok lobbiest manipulating the system. I suggest we fix the lobbiest problem and the lazze-fair economics of the past 3 decades by dealing with them as seperate issues.

Posted by: j2t2 at September 25, 2008 12:04 PM
Comment #264380

Rhinehold,
So the $700 billion is going to Fannie and Freddie?

No?

I thought not.

Posted by: phx8 at September 25, 2008 12:09 PM
Comment #264384

Rhinehold-
We know the specific laws that enabled this kind of trading to occur, which allowed banks to “diversify” what kind of financial services they gave, despite the conflicts of interest that many of those interests had. One of the main reason we’re having to deal with banks “too big to fail” is the fact that the law let them merge like crazy.

As for making this partisan? No, I honestly believe the lack of regulation was a problem, whether it was a Democrat who signed it into law, or a Republican who drafted the bill, and later the amendment.

Even so, there is no use in being evenhanded where the balance of the evidence tilts in a certain direction. The policy of trying to get banks to lend mortgages to lower income folks goes three decades. The debacle only has come about now. Fannie Mae and Freddie Mac may be victims of their own behavior, and not properly privatized, but they are not at the root of the crisis. At the root of the crisis is a free-wheeling finance sector that drastically overinflated the wealth in the market, and whose regulation is so shoddy that people are having trouble determining what their investments are worth, or anybody elses for that matter.

In effect, we had a phantom boom followed by a real bust, the recovery from which has been complicated by uncertainty over the real value of the investments in question.

Going into denial is not the resolution to this problem. You folks confused a tactic (deregulation) with a policy, which can be a mix of different approaches. You have painted your policies into a corner, and you’re unwilling to come out.

Posted by: Stephen Daugherty at September 25, 2008 12:33 PM
Comment #264385

McCain admits that as of the day before his surprise announcement, he hadn’t read the Paulson proposal.

Let’s just all react from the gut and act like we know what we’re talking about, eh? Facts are for losers.

Posted by: Stephen Daugherty at September 25, 2008 12:36 PM
Comment #264387

RH

I agree completely with your post. I’ve been trying to say the same thing for days, but the hatred for Bush and the republicans has blinded the lefts ability to reason. All you have to do is look at the events that have taken place and you will know where the fault lies.

It’s the same old blame the republicans for the mess, when the facts are produced we see the opposite was happening. There are members of congress that should be going to prison for this, but they won’t. When push comes to shove, the republicans in congress will step up to the plate for the corrupt democrats. The will protect their own interest. Some low level nobody will take the blame for everything.

I say let the market correct itself, and dismantle freddie and fannie.

Posted by: Oldguy at September 25, 2008 12:38 PM
Comment #264395

No doubt about it - most (if not all) in Congress are to blame for the rampant greed, corruption, and incompetence.

However, voters are culpable too, by repeatedly rewarding corrupt incumbent politicians with 85%-to90% re-election rates.

And now, Congress is going to compound the rampant greed, and screw the tax-payers again with more of the same - like fighting fire with fire, eh?
There’s just one problem with that, there ain’t much left to burn.

At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

Posted by: d.a.n at September 25, 2008 1:04 PM
Comment #264397

Oldguy and Rhinehold,
You don’t even know what the $700 billion is for, do you?

You’re spouting GOP talkiong points. You don’t even know what the $700 billion is for.

Posted by: phx8 at September 25, 2008 1:09 PM
Comment #264401

phx8,

I know what the 700 billion is for, phx8. And I don’t want it to be put into place. It is an overreaction a much easier fixable problem, but that isn’t very good for an election year, is it?

Do you support the 1 trillion (it’s not just 700 Billion, you know) taxpayer funds being given to resolve this issue or do you want it not to be used? Why?

Posted by: Rhinehold at September 25, 2008 1:17 PM
Comment #264406

Is this post about the $700 billion?
No, it shows how BOTH sides play politics and how they have failed us.

Your refusal to even acknowledge that McCain seen a problem back in 05 and actually supported S. 190, is based on nothing but talking points designed to ensure no credit is given for anything.
Hell, I’m surprised you guys haven’t mentioned how Obama has known about this and has had a plan to fix this because he said the word “home” twenty freakin years ago.

Posted by: kctim at September 25, 2008 1:30 PM
Comment #264413

kctim,
When Bush gave his speech last night, he blamed this on “mortgage backed securities.” These are NOT the same as mortgages. Bush referred to mortgages and Freddie and Fannie because most people understand those, and it is a subtle form of class warfare, shifting the blame to bureaucrats and poor people who defaulted on the mortgages. However, “mortgage back securities” being referred to are more accurately known as credit default swaps. It was a market most people have never heard of, and even fewer need. That is why it was a complete surprise to nearly everyone. The market is unregulated and unsupervised. It was created to “manage risk,” but the market went against the holders, and now the holders- investment banks, commercial banks, insurers- have taken a bath. The CDS’s are “clogging the market” because everyone knows the other guy holds them in their inventory, and they represent mind boggling losses, so no one will extend credit to one another.

So we’re bailing out the financial sector because they created a market and failed to properly manage risk.

Rhinehold,
Yeah, we should probably go through with the bailout. It is one of the most disgusting things I have ever seen. But they’re holding a gun to our head.

Posted by: phx8 at September 25, 2008 1:51 PM
Comment #264414

Old guy says “All you have to do is look at the events that have taken place and you will know where the fault lies.”

Very true old guy yet why can’t you seem to grasp the fact that in the zeal to tear down FRD’s new deal regulations, that have seved us well the past 60+ years, the repubs are primarily at fault because they are the culprits that sponsored the deregulation movement and assoicated bills. Of course the actual fault lies with the investment banks, mortgage brokers, hedge funds and wall street types that took advantage of the lack of regulation for the short term profits. The corporations and their lobbiest that control the Congress pulled the strings of their particular bought and paid for elected representative.
However in true repub/conservative/libertarian fashion we find it necessary to blame others for the actions of corporations so that is where the repubs come in. The dems to a much lesser degree have managed to become involved in the corruption and must shoulder some of the blame but the ringleaders were the repubs and their failed conservative ideology.

To think the root cause of this problem is hatred for Bush and the repubs has to be the most ridiculous comment from a rightie to date. Do you also deny deregulation and free market frenzy was a repub issue? Do you also deny the political bribery the repubs call free speech, that allows lobbiest to corrupt our politicians, is not a major component of the problem?

Why should any of us Americans trust our financial institutions after the disgusting meltdown they have managed to bring about. The rampant greed and violation of the public trust displayed by these entities precludes any trust of them. Without trust the whole market disintergrates and that is what is happening. No trust in this administration to do the right thing, No trust in the corporations to do the right thing, No trust in the Congress to do the right thing and why should we have a lick of trust in any of them? Yet we are asked to trust this bail out as our fiscal salvation, yet this bailout will not bring about any trust in any of these institutions. We are just prolonging the agony.


Posted by: j2t2 at September 25, 2008 1:51 PM
Comment #264418

j2t2,

The issue is not that the this market is failing, it is that new regulations are now in place that ensure that the market failing makes the rest of the economy take a hit.

http://online.wsj.com/article/SB122178603685354943.html?mod=special_page_campaign2008_mostpop

If this regulation had been in place during the S&L crisis, for example, we would have had a depression 15 years ago. It wasn’t, thankfully, so we didn’t.

This time, however, mortgage values are now forced to be reported as having such a low value that they are causing this crisis. Not the fact that the market was created, not the fact that the government forced these private industries to make risky loans and not a lack of oversight, though they all play a hand. In the end, the reason this is extending beyond where it should be is because of the inability to these entities to accurately report the value of these securities.

I don’t see how the bailout will help and I don’t think we should use it. Repeal, or fix, this regulation and let the people who traded in risky loans to suck up the loss.

Posted by: Rhinehold at September 25, 2008 2:02 PM
Comment #264422

“The CDS’s are “clogging the market” because everyone knows the other guy holds them in their inventory, and they represent mind boggling losses, so no one will extend credit to one another.”

phx8 an excellent example of lack of trust. The pond scum that raked billions from the process while the market was collapsing don’t trust each other and rightfully so. Why should the American people trust them? Yet we are forced, not at the point of a gun but forced none the less, to give them what they want or face financial ruin and an economic depression. Yet this isn’t a criminal act? This bail out bill should make those that gained the billions (at 15% tax no less) in profits pay for this fix. This bail out bill should limit the size of the corporations that conduct business in these markets. This bail out bill should take stock from these companies much as we would do with any entity that threatened national security. This bail out bill should treat the corporate officers of these companies as the terrorist they are. Of course that is just my humble opinion. ;)

Posted by: j2t2 at September 25, 2008 2:19 PM
Comment #264426

Phx8
I understand your take on the situation and appreciate all the info you have provided the past few days.
But that in no way takes away from the fact that some people saw a coming problem, tried to act by calling for more regulation and were stopped from acting because some people would rather play politics.

This info shows that BOTH sides have screwed us, but since it isn’t negative of only the Republicans, you guys act as if it means nothing.

You guys are more concerned with blaming the other side and getting your candidate elected, then you are with fixing or changing anything.

Posted by: kctim at September 25, 2008 2:27 PM
Comment #264429

j2t2,

On trust, the problem with market economies is that no one really wants to be the one who finds he holds the worthless stuff. If people can figure a way to weasel out of the consequences of a bad bet they will.

Till the moment of truth passes everyone freezes up with fear.

Posted by: Lee Jamison at September 25, 2008 2:32 PM
Comment #264432

Comment I saw today:

“There was no free market in mortgages or finance—these markets were riddled with controls and distortions, courtesy of the Fed, Fannie and Freddie, the CRA, the FDC, and Sarbanes-Oxley. And that lack of a real market was precisely the problem; it induced irrational behavior through dictates, handouts, and bailouts. “Their attacks are part of a historical trend of blaming capitalism for the sins of government intervention—a trend that needs to stop if we are to prevent further economic damage.
Posted by: Rhinehold at September 25, 2008 2:41 PM
Comment #264436
‘One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary.’

“Is this not exactly what is happening?

The fact is we don’t need the bailout, it will only prolong the necessary market correction until a few years down the road, when we try another fix, which requires more government, which ends up taking away more freedom eventually. It’s not random, it’s the plan and has been for quite some time, only the left and right are both in on it…

Posted by: Rhinehold at September 25, 2008 2:51 PM
Comment #264437

And more:

According to Dr. Brook, the current level of government involvement in the economy is almost unprecedented in American history. As Dr. Brook noted, even though the current housing and financial crisis was brought about by government regulations, controls, and widespread interference with the markets, all we hear from the left and the right are calls for more government regulations, controls, and interference with the markets.

In Dr. Brook’s view, these calls for bigger and bigger government are due, not to any alleged failures of the market, but to a longtime cultural hostility to its moral basis: the selfish pursuit of profit.

Capitalism and markets, observed Dr. Brook, are all inherently about self-interest and the pursuit of profit. Capitalism encourages and enables selfishness, and as long as our culture looks at profit and self-interest as vices, he argued, big government will always be preferred to free markets.

Dr. Brook also made the point that capitalism has always been defended pragmatically, on the basis that it creates wealth and economic growth—which it does; but it’s time, he said, to defend capitalism on principle, on the basis of its morality, on the basis that it protects the rights of individuals to pursue their own values and allows them freedom to act in their own self-interest.

As Dr. Brook explained, the current crisis is indisputable evidence that we need a massive reduction in the size of government, in the number of regulations and in the level of taxation. But first, he said, we will have to reject the morality of altruism, which holds that self-sacrifice, not self-interest, is the good—and adopt a new morality of rational self-interest, one that says that pursuing our own personal values and goals under freedom is a good thing; and that only a morality compatible with capitalism and private markets will save us from this crisis and prevent an even worse one in the future.


Posted by: Rhinehold at September 25, 2008 2:53 PM
Comment #264440

Per Lou Dobbs:

The major Wall Street ratings firms played a big, and largely
overlooked, role in creating the current economic crisis.
Ratings companies are supposed accurately and impartially
analyze the books of financial institutions. But they failed to
do that. Instead these reckless firms signed off on the health
of companies like Fannie Mae, Freddie Mac, and Lehman Brothers
again and again, much the same way that Enron’s accountants
said everything was fine right up to its complete collapse.


Posted by: womanmarine at September 25, 2008 2:55 PM
Comment #264444

Please read this to understand how Republicans dealt with Fannie & Freddie versus Democrats:

http://uspolitics.about.com/b/2008/09/18/republican-congress-talked-about-financial-reform-but-did-nothing.htm

I’d like to point out that McCain signed on as a co-sponsor of that bill only after it died, 16 months after it was introduced.

Your post shows the Republican president and congress were perfectly aware of the dangers to the economy Fannie and Freddie posed, and that they did nothing.

It was not until 31 July 2007, after the Democrats obtained control of the Congress in the November 2006 election, House Speaker Nancy Pelosi introduced HR 3221, a “bill to provide needed housing reform and for other purposes.” Among other things, the bill granted the newly formed Federal Housing Finance Agency “supervisory and regulatory authority over Fannie Mae, Freddie Mac, and the federal home loan banks)”

Personally, I think it takes some … chutzpah … to post evidence that Republicans were aware of a grave threat to this nation while having the power to do something about it and didn’t while at the same time blaming Democrats.

Posted by: Max at September 25, 2008 3:07 PM
Comment #264451

Max,

The bill died because democrats, and some republicans, voted against it in committee. You know, obstructionist government…

They lined up behind Barney Frank who said:

“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis”

Seriously, Max, they were both at fault, as I detailed. What was done with the bill after it was re-introduced? Anything?

Take your partisan path all you want but at least the Republicans were talking about and attempting to do something, the Democrats were actively saying there was nothing wrong with Fannie Mae and Freddie Mac, claiming that any criticism was an attack on the poor that they were helping.

I agree, had they wanted to they could have rammed the necessary legislation through into law, just as the Democrats could have any number of times in the last two years but continue to blame the out of control party as the reason that the legislation fails…

Posted by: Rhinehold at September 25, 2008 3:27 PM
Comment #264453

Oh, and they were also raking in the bucks in contributions by the organizations as well, Dodd #1 and Obama #2…

Posted by: Rhinehold at September 25, 2008 3:29 PM
Comment #264460

“On trust, the problem with market economies is that no one really wants to be the one who finds he holds the worthless stuff.”

Of course Lee the “crisis” is a lack of trust on the part of the industry. They don’t trust each other and rightfully so. Why should we trust them. Our economy is based upon trust that is part of the problem, you can’t trust the banking industry because they couldn’t trust the mortgage brokers. The Insurance companies can’t trust the bankers and so on. The stuff is worth something but no one knows what it is worth. It could be worth $200b or well you pick a figure, it could be worth something. The facts remain that trust is the problem.

What is not being said is where and when will home prices go before they bottom out, that will determine what the stuff is really worth. Perhaps Lee you was like me back in ‘04 wondering how so many people could afford so much house when you couldn’t. Perhaps you could see that wages were stagnating and jobs were leaving the country and wondered how can this be. I was, and sure enough there was no magic and the whole thing eventually fell apart. Now that it’s payday and not play day those that played have absconded with the $30b in bonus money and have left the payday for me and you. Well I don’t want to pay I want to be an Owner with other taxpayers and I want trust restored to the marketplace so people can be put back to work.
But we are being asked by the free market lazze-faire deregulation types to trust them with $700b to fix the problem. Were I near them my hand would be on my wallet, why would I trust them from afar to do the right thing when they haven’t yet? Their words are worthless stuff to me too.

Posted by: j2t2 at September 25, 2008 3:57 PM
Comment #264461
Walll Street Journal

Barney Frank didn’t like our recent editorial taking him to task for his longtime defense of Fannie Mae and Freddie Mac, and the Congressional baron defends himself in his signature style here. We’d let him have his say without comment except that his “whole story” is, well, far from the whole truth.

Mr. Frank contends that he favored “very strong reform” of Fannie Mae and Freddie Mac, even before Democrats took over Congress after the 2006 elections. To adapt a famous phrase, this depends on what the meaning of “reform” is. Mr. Frank did support a bill that he and others on Capitol Hill described as reform. But on the threshold reform issue — limiting the size of the portfolios of mortgage-backed securities (MBS) that the two companies could hold — Mr. Frank was a stalwart opponent.

In fact, Mr. Frank was publicly arguing for an increase in the size of their combined $1.4 trillion portfolios right up to the day they were bailed out. Even now, after he’s been proven wrong about a taxpayer guarantee, he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010, according to a quote attributed to him in this newspaper last week. “Good luck on that,” he reportedly said. Mr. Frank’s spokeswoman hung up the phone when we sought confirmation Tuesday.

The MBS portfolios have long been both the chief source of the systemic risk posed by the two mortgage giants and of the profits that so handsomely enriched shareholders and officers alike for decades. Without the extreme leverage inherent in those portfolios — which the companies borrowed heavily, at taxpayer-subsidized rates, to accumulate — their federal takeover might never have become necessary.

For years, Mr. Frank and other friends of Fan and Fred opposed not only bills written to limit the size of their portfolios, but any bill that in their view gave an independent regulator too much discretion to order a reduction. This was true of the reform that his House committee passed last year. Only when the White House caved to Mr. Frank and dropped its earlier insistence that a reform bill rein in the portfolios did Mr. Frank move his bill.

In his letter, Mr. Frank also repeats his familiar claim that Fannie and Freddie are vital because they support “affordable housing.” This is political smoke. The awful irony of Fan and Fred is that they have done very little to assist affordable housing. Most of the taxpayer subsidy has gone to enrich shareholders and Fannie managers, as a 2003 study by the Federal Reserve shows.

Mr. Frank says he favored the disclosure of Fannie and Freddie compensation — which is nice, but beside the point. The source of the rich pay packages was the Fannie business model that Mr. Frank fought so hard to protect. Instead of helping the poor, Mr. Frank was enriching Jim Johnson, Frank Raines, Angelo Mozilo and Wall Street.

If Mr. Frank thinks his “affordable housing” goals are so popular, he can always ask Congress to appropriate money for any housing subsidy he desires. But he knows those votes are hard to come by. It’s much easier to have Fannie and Freddie take inordinate risks, even at taxpayer expense, so they can pay a political dividend called an “affordable housing trust fund” that politicians will disperse. In opposing genuine reform of Fan and Fred, Mr. Frank wasn’t acting like a principled liberal. He was protecting corporate giants while hiding their risks from taxpayers until the middle class got stuck with the bill.


Posted by: Rhinehold at September 25, 2008 4:00 PM
Comment #264465

Rhinehold,

Do you seriously think this is just a “valuation” problem?

Posted by: googlumpugus at September 25, 2008 4:32 PM
Comment #264469

I listened to a sound bite today of John Snow, 5 years ago, warning of Freddie and Fannie. Barney Frank answer was stated by RH. He denied anything was wrong and even said, “if there was, we would never bail them out”. How times change!

J2t2 said:

“To think the root cause of this problem is hatred for Bush and the repubs has to be the most ridiculous comment from a rightie to date.”

I actually said that hatred toward Bush and the republicans blinds your ability to see truth in evidence. Are you denying this?

Let me explain something, FDR’s new deal worked for the problems of that time, but it is outdated. It is a socialist program and the goal of the Democratic Party is to expand these programs. Social Security is failing and outdated and you will come back and say, “if our retirement was invested in the market, we would be loosing” and I would say, you’re correct, but the market is in this state because of congressional meddling.

The left will throw their own under the bus. The top managers of Freddie and Fannie, left with millions after cooking the books and now the Pelosie wants to control their salaries and bonuses. She has been in office 2 years, why has she waited until now?

There’s evidence all over the place showing the involvement of Dodd, Frank, Shumer, and other top dems and now the talking points of the left is “we don’t need to focus on the causes of the problems, we need to focus on how to help the people”. This is BS, if a republican was involved they would be screaming for investigations. If it is the dems fault, all is silent.

I disagree with the bailout. Let a free economy do its job. Amtrack is a perfect example of how the feds run a business. It is costing taxpayers millions to keep a railroad working that would fail without the help.

I just heard a judge say it could very well be unconstitutional to use taxpayer’s money for this bailout. Maybe there are some constitutional scholars who could input on this.

Posted by: Oldguy at September 25, 2008 5:05 PM
Comment #264471

Politics politics:

I think this is a great tipping point. “As Winston Churchill once said, there is nothing more invigurating than getting shot at without effect.”

By “without effect” I would define and no worse than a routine bear market and possible recession.

What is fantastic is the knowledge gained that change is coming. Instead of the rantings of economists on the fringe, there is a clear object lesson that America’s and actuallyt he worlds credit markets can stop functioning and bring the country to it’s knees.

A common an natural mistake people make is what I call the error of extrapolation. This error is that the current trend will continue until basically the end of the world, when in fact ecnommic curves usually turn.

This is probably exactly what we have now. We are going through an economic turn. What is “turning”? You know the big number of debt that is projected to be on the country 30 years from now? Watch that number turn and start to go down over time as the new knowledge from what we are living through gets passed on into budgets and policies.

You know the big number of how in debt consumers are? Watch that number change as well.

Correctly perceived this is one of the most fantastic events that could happen in our country. It is the much waited tipping point toward fiscal responsibility. All of us are going to be better off for it.

Posted by: Craig Holmes at September 25, 2008 5:24 PM
Comment #264485

Oldguy
I agree whole heartedly with what you said, lefties always want to blame the other side for something both sides created. Now both sides have got to come together to fix this problem but neither have a clue on how to do it.

Posted by: KAP at September 25, 2008 7:27 PM
Comment #264491
Craig Holmes wrote: What is fantastic is the knowledge gained that change is coming. Instead of the rantings of economists on the fringe, there is a clear object lesson that America’s and actuallyt he worlds credit markets can stop functioning and bring the country to it’s knees.
Really?

Not long ago you wrote:

  • Craig Holmes wrote: America as a whole has never been this rich, and it’s getting richer all the time. It’s a great time to be an American

  • Craig Holmes wrote: America as a whole has never been this rich, and it’s getting richer all the time. It’s a great time to be an American

  • Craig Holmes wrote: Which is normal in a good economy. Interest rates and inflation are both well below recent historical norms.

  • Craig Holmes wrote: Wealth for American households is increasing at a rate that is near historical norms.

  • Craig Holmes wrote: … and that the economy is within historical norms, and what is happening has happened before, and we have done just fine.

  • Craig Holmes wrote: You know all this talk of doomsday etc etc. I’m not buying it.

  • Craig Holmes wrote: … “fine” means that real GDP grow will continue at or near historical norms.

  • Craig Holmes wrote: What will the economy be like in 2008 and how will it effect the election? … It means that the economy is not going to collapse as you and David [Remer] fear.

  • Craig Holmes wrote: I think there are many many many answers to the demographic issues of the future, and the projected debt burden. Immigration is only one of many tools that can be used.

  • Craig Holmes wrote: I would love to “wager” with you. My “wager” would be that NO MATTER WHICH PARTY IS IN POWER, the debt to GDP ratio will start to decline soon.

  • Craig Holmes wrote: Two pluses of a fiat system are no depressions and no runs on banks!! Can’t say that about the good old days!!

  • Craig Holmes wrote: A lower dollar looks to me like a very good thing.

  • Craig Holmes wrote: The high dollar created a trade deficit. Now the lower dollar will correct that!!

  • Craig Holmes wrote: There is no concern of long term inflation out there.

  • Craig Holmes wrote: And they are liking what they see. American Treasuries are falling in yield as investors see low inflation and stability in our future for the next thirty years.

  • Craig Holmes wrote: As for debt, I would like you to compare our debt to the debt of the countries on that list you provided. I think you will see that we look “fine” in comparison.

  • Craig Holmes wrote: I have never seen you mention anything as a positive in the economy.

  • Craig Holmes wrote: I think Bernanke’s target of 1 to 2% is just fine. Small inflation is healthy.

  • Craig Holmes wrote: There is no economic collapse coming because of these demographic changes.

  • Craig Holmes wrote: Homeownership has increased during the time of the fed [Federal Reserve]. That is a GOOD THING.

  • Craig Holmes wrote: Think about this d.a.n, I have been saying for some time “we will be fine, GDP growth will continue at or near the mean”.

  • Craig Holmes wrote: I am right. How else can you read the US Treasury market?

  • Craig Holmes wrote: Most folks are doing just fine.

  • Craig Holmes wrote: It is a great time to be an American isn’t it.

Still got those rose-colored glasses on, eh?

Craig Holmes wrote: A common an natural mistake people make is what I call the error of extrapolation. This error is that the current trend will continue until basically the end of the world, when in fact ecnommic curves usually turn.
Yeah?

So where is it going to turn next, when no one can answer this question:

    Where will the money come from to merely pay the INTEREST on $53 Trillion -to- $66 Trillion of nation-wide debt , much less the money to reduce the current PRINCIPAL debt of $53 Trillion to- $66 Trillion , when that money does not already exist? Especially when now, 80% of the U.S. population owns only 17% (or less) of all wealth, and 1% owns 40% of all wealth (up by 20% from 20% in year 1976); a wealth disparity gap that has never been worse since the Great Depression.

Craig Holmes wrote: This is probably exactly what we have now. We are going through an economic turn. What is “turning”? You know the big number of debt that is projected to be on the country 30 years from now? Watch that number turn and start to go down over time as the new knowledge from what we are living through gets passed on into budgets and policies.
How will it go down, when it has been going up for 51 years (since year 1957):
  • YEAR _______ National Debt ________ Increase per year _____ Increase per day
  • 9/25/2008 ; $9,790,496,000,000.00 ; $782,842,600,000.00 ; $2,144,774,322.57
  • 9/30/2007 ; $9,007,653,372,262.48 ; $500,679,473,047.25 ; $1,370,785,689.38
  • 9/30/2006 ; $8,506,973,899,215.23 ; $574,264,237,491.73 ; $1,572,249,794.64
  • 9/30/2005 ; $7,932,709,661,723.50 ; $553,656,965,393.18 ; $1,515,830,158.50
  • 9/30/2004 ; $7,379,052,696,330.32 ; $595,821,633,586.70 ; $1,631,270,728.51
  • 9/30/2003 ; $6,783,231,062,743.62 ; $554,995,097,146.46 ; $1,519,493,763.58
  • 9/30/2002 ; $6,228,235,965,597.16 ; $420,772,553,397.10 ; $1,152,012,466.52
  • 9/30/2001 ; $5,807,463,412,200.06 ; $133,285,202,313.20 ; $364,914,996.07
  • 9/30/2000 ; $5,674,178,209,886.86 ; $17,907,308,271.43 ; $49,027,538.05
  • 9/30/1999 ; $5,656,270,901,615.43 ; $130,077,892,717.81 ; $356,133,860.97
  • 9/30/1998 ; $5,526,193,008,897.62 ; $113,046,997,500.28 ; $309,505,811.09
  • … … … … … … … … … … … . .
  • … … … … … … … … … … … . .
  • 6/30/1963 ; $305,859,632,996.41 ; $7,658,810,275.54 ; $20,968,679.74
  • 6/30/1962 ; $298,200,822,720.87 ; $9,229,884,110.82 ; $25,270,045.48
  • 6/30/1961 ; $288,970,938,610.05 ; $2,640,177,761.68 ; $7,228,412.76
  • 6/30/1960 ; $286,330,760,848.37 ; $1,624,853,770.15 ; $4,448,607.17
  • 6/30/1959 ; $284,705,907,078.22 ; $8,362,689,332.41 ; $22,895,795.57
  • 6/30/1958 ; $276,343,217,745.81 ; $5,816,045,849.38 ; $15,923,465.71
  • 6/30/1957 ; $270,527,171,896.43 ; -$2,223,641,752.89 ; -$6,087,999.32
  • 6/30/1956 ; $272,750,813,649.32 ; -$1,623,409,153.30 ; -$4,444,652.03

Debt may go down, but probably not in an orderly, painless fashion.
And probably not yet, because this bail-out will delay the inevitable erosion of the currency, and make the problem larger.
So, since when did more borrowing and creating more money out of thin air, and creating more massive debt become the solution for massive debt of nightmare proportions?

Craig Holmes wrote: You know the big number of how in debt consumers are? Watch that number change as well.
  • $53 Trillion has never been larger, both in size and as a percentage of the $13.86 Trillion GDP:
    • private domestic financial sector debt=$15.8 Trillion;
    • household debt= $13.88 Trillion;
    • bus iness debt=$10.16 Trillion;
    • federal government National Debt=$9,622,190,370,718
    • state and local government debt=$2.2 Trillion;
    • other private sector foreign debt=$1.8 Trillion;
    • _______________________________________________________
    • Total nation-wide debt = $53.2 Trillion (and that does not even include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay-as-you-go, with a 77 million baby boomer bubble approaching);
    • If the $12.8 Trillion borrowed and spent from Social Security is included:
    • Total nation-wide debt = $66.0 Trillion = $53.2 Trillion + $12.8 Trillion = 4.76 times the nation’s $13.86 Trillion GDP (year 2007) !
    • Total federal debt is = $22.2 Trillion = $9.4 Trillion + $12.8 Trillion = 1.60 times the nation’s $13.86 Trillion GDP (year 2007) !
    Craig Holmes wrote: Correctly perceived this is one of the most fantastic events that could happen in our country.
    Pain and misery is a fantastic?
    Craig Holmes wrote: It is the much waited tipping point toward fiscal responsibility. All of us are going to be better off for it.
    Think so?

    It’s a cycle.
    Fiscal and moral bankruptcy is a cycle with humans.
    Excessive selfisnness and greed finally recedes when it becomes too painful.
    This isn’t the first economic calamity and it won’t be the last.

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

  • Posted by: d.a.n at September 25, 2008 7:59 PM
    Comment #264496

    “I agree whole heartedly with what you said, lefties always want to blame the other side for something both sides created.”

    These crisis’s happened during the repub watch based upon repub ideology. Repub denial and spin doesnt make this truth any less true.
    When the shoe fits KAP.

    Posted by: j2t2 at September 25, 2008 8:38 PM
    Comment #264497

    j2t2
    This thing has been brewing for a long time now, even before the repub watch. LIKe I SAID LEFTIES WANT TO PUT THE BLAME ON THE OTHER SIDE WHEN BOTH SIDES WERE TO BLAME. YOU WERE TO BLAME AND SO WAS I. WHEN THE SHOPE FITS j2t2.

    Posted by: KAP at September 25, 2008 8:51 PM
    Comment #264503

    KAP

    They know what to do, but how to do it and still keep control is the question. With the availability to access info on the web, it’s becoming hard for the dems to continue their games. Nobody trusts the major media anymore, therefore the dems can’t get by with their lies and expect the media to back them up.

    The news channels are all picking up on the involvement of the dems in freddie and fannie and the obstruction they provided for changes. The only ones who deny is the fringe left on the blogs and they have become irrelevant.

    Posted by: Oldguy at September 25, 2008 9:05 PM
    Comment #264505
    Do you seriously think this is just a “valuation” problem?

    No, but it would contain itself and be able to correct itself without being a ‘crisis’ if those mortgages could be reported as having a value other than ‘current market value’ because right now the market is not happening at all. Those mortgages, even the toxic ones, are not worth $0. Yet they have to be reported as nearly that because of the laws.

    So, with no assets that these loans would represent, there is no movement of them and credit to keep operating is out of the window.

    Posted by: Rhinehold at September 25, 2008 9:10 PM
    Comment #264507

    Oldguy
    Well said. It’s a known fact that the repubs tried to push regulations through the finance committe when they had control but the dems squashed it. I guess the left just doesn’t want to fess up and say they were party to the problem.

    Posted by: KAP at September 25, 2008 9:16 PM
    Comment #264513

    Rhinehold,

    No, but it would contain itself and be able to correct itself without being a ‘crisis’ if those mortgages could be reported as having a value other than ‘current market value’ because right now the market is not happening at all. Those mortgages, even the toxic ones, are not worth $0. Yet they have to be reported as nearly that because of the laws.


    Well….not exactly…. these mortages are bound up in equities that are nearly impossible to evaluate…thus their value of nearly zero.

    Setting a fiat value would not make these anymore transparent. Frankly, I think your idea is a bit naive. Taking these equities off the market, and detangling them, then feeding them back into the market once it is more stable, is the only solution I see.

    I don’t agree with Paulson’s bill, because of the lack of oversight and the falsely small number being proposed, not the idea of it.

    Posted by: googlumpugus at September 25, 2008 9:41 PM
    Comment #264516

    Yell all you want KAP the facts don’t change “LIKe I SAID LEFTIES WANT TO PUT THE BLAME ON THE OTHER SIDE WHEN BOTH SIDES WERE TO BLAME. YOU WERE TO BLAME AND SO WAS I. WHEN THE SHOPE FITS j2t2.”

    Here is what I wrote previously in this thread, although I prefer liberal as opposed to dems as I am an independant voter than has seen through the Conservative lies years ago.

    “The dems to a much lesser degree have managed to become involved in the corruption and must shoulder some of the blame but the ringleaders were the repubs and their failed conservative ideology.”

    The fact remains this crisis is repub/conservative ideology induced and they should bear the lions share of the criticism for the wrongs perpetrated upon the people of this country. Old Guys mis-guided propaganda which tries to frame the issue as only a fannie & freddie issue in order to negate the real issues that are due to repub/conservative ideology doesnt work for me.

    Posted by: j2t2 at September 25, 2008 9:43 PM
    Comment #264518

    j2t2
    The fact remains that the top 2 fannie and freddie recipients are dems and one is running for potus.

    Posted by: KAP at September 25, 2008 9:51 PM
    Comment #264519

    The Republican politicians did what BOTH parties do when they are the IN-PARTY.
    The politicians in BOTH parties simply take turns screwing the voters, and that’s because the voters repeatedly reward the incumbent politicians for it with perpetual re-election.

    The are a few differences between the incumbent politicians in BOTH parties, but they are actually very minor:

    • (01) Both do it, but Republican politicians are more FOR-SALE, and much better at carrying the water for their big-money donors.

    • (02) Both do it, but Democrat politicians are worse at despicably pitting American citizens and illegal aliens against each other for votes, profits, and (supposedly) misplaced compassion. But hey, an estimated 3% of voters are illegal aliens, and most of them vote Democrat.
      (03) Both do it, but Republican politicians vote on a lot more corporate welfare and subsidies for the wealthy.
      (04) Both do it, but Democrat politicians vote on a lot more stupid pork-barrel and waste (see pork-barrel grades for all Congress persons at CAGW.ORG).
      (05) Both do it, but Republican politicians are better at creating more regressive and unfair taxes, despite “Read my lips” promises.
      (06) Both do it, but Democrat politicians are better at letting Republican politicians create more regressive and unfair taxes.
      (07) Both do it, but Republican politicians are better at telling huge whoppers. For example: No WMD ?
      (08) Both do it, but Democrat presidents are better at cheating on their wives.
      (09) Both do it, but Republican politicians are better at pretending to be moral, as evidenced by the religious right who the Republican politicians play like a fiddle. But then, perhaps they only have a wider stance?
      (10) Both do it, but Democrat politicians are better at fueling jealousy and envy disguised as demands of equality, yet let Republican politicians make the tax system regressive.
      (11) Both do it, but Republican politicians are better at abusing vast wealth and power, but that’s because they are wealthier. Duh!
      (12) Both do it, but Democrat politicians are better at fueling the myth that we can all live at the expense of everyone else.
      (13) Both do it, but Republican politicians are better at growing the National Debt to record levels, while tricking voters to believe they are fiscally conservative.
      (14) Both do it, but Democrat politicians are better at caving-in, doing mostly nothing, looking the other way, or going along to get along, which lets Republican politicians get away with all sorts of corruption.
      (15) Both do it, but Republican politicians are better (since 2000) at starting and perpetuating unnecessary wars. Again, as usual, many Democrat politicians went along.
      (16) Both do it, but Democrat politicians are better at double-talk, but that may depend on what the definition of “is” is.
      (17) Both do it, but Republican politicians are better at mangling words. Bush, almost singlehandedly wins that category for his team (politicalhumor.about.com/library/blbushisms.htm).
      (18) Both do it, but Democrat politicians are better at voting themselves cu$hy perks and benefits, but that’s only because most Republican politicians are already rich.
      (19) Both do it, but Republican politicians are better at pretending Homeland Security is important, as evidenced by near wide-open borders still today, despite perpetuating a war in Iraq that is supposedly making us safer.
      (20) Both do it, but Democrat politicians are better at pretending to care about unaffordable healthcare, education, despite giving themselves those perk$ and superior benefits at tax payers’ expense.
      (21) Both do it, but Republican politicians are better at filibustering, because Democrats are more likely to cave-in and go along.
      (22) Both do it, but Democrat politicians are better at voter fraud. But they need to be, because Democrat voters aren’t very good at getting out to vote at all. Especially the millions of illegal aliens they pander to.

    Here are the things they are BOTH about equally good at.

    Therefore, there’s not really any significant differences.
    That’s what we have selected to the country.
    And we must like a lot, since we repeatedly reward those incumbent politicians with 85%-to-90% re-election rates?
    But that doesn’t make any sense, because most voters polled give Congress dismal approval ratings (as low as 9%).
    So which is it?
    If I didn’t know better, I’d say the majority of voters are brainwashed.
    Or perhaps it’s something in the water?
    Or perhaps it is mass hypnosis?

    It’s all very confusing.
    So, let’s try this.
    Who can name 50, 100, 200, or even 268 (half of 535) in Congress that are responsible and accountable?
    What does it mean if no one can name at least 268 (half of 535) in Congress that are responsible and accountable?

    But whose worse?
    Those incumbent politicians, or the majority of voters that repeatedly reward the incumbent politicians with 85%-to-90% re-election rates?
    That’s certainly not very smart, is it?
    Sort of like crappin’ in your own nest, but worse for voters.
    So, how long can we crap in our own nest before the bough it all rests upon finally snaps?
    So, since when did more borrowing and creating more money out of thin air, and creating more massive debt become the solution for massive debt of nightmare proportions?

    At any rate, the voters have the government that the voters elect (and re-elect, and re-elect, and re-elect , … , at least until that finally becomes too painful).

    Posted by: d.a.n at September 25, 2008 9:52 PM
    Comment #264529

    Jeez KAP no wonder your so quick to blame others please look at VV’s comment from a previous post as shown below. Here are the highlights. Thanks and a tip of the hat to VV for putting fact to talk show misinformation.

    Comment #263536
    Allow me to nip this lying Republican bullshit in the bud.
    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 04:52 PM

    http://www.watchblog.com/democrats/archives/006196.html#comments

    Posted by: j2t2 at September 25, 2008 11:07 PM
    Comment #264538

    Wow! Is that true? Did McCain really get more?

    Posted by: d.a.n at September 26, 2008 12:14 AM
    Comment #264539

    If true, the lies coming out of the McCain camp are starting to outnumber the lies coming out of the Obama camp.

    Posted by: d.a.n at September 26, 2008 12:18 AM
    Comment #264556

    In the same way the partisans on the left like to blame everything from rainy days to hurricanes on Bush, the partisans on the right are laughable in their attempts to politicize the crisis by blaming it on Barney Frank.

    These days, he finds himself assailed by some conservative editorialists and commentators, who are trying to make him a principal financial crisis culprit, contending he has long been focused on blocking reform of Fannie Mae and Freddie Mac. There, his critics have a slight problem: reality. House Democrats were in the minority from 1995 to 2007, which left Frank in no position to hold up anything. Further, Mike Oxley, former Republican chairman of the Financial Services Committee, says Frank was a crucial ally in his own unsuccessful efforts to reform the mortgage giants.

    “I just don’t recognize that characterization of Barney,” Oxley says. What’s more, in May 2007, just months after Frank became committee chairman, the House passed a reform bill he put forward.

    http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/26/a_frank_look_at_the_market_meltdown/

    Posted by: Sam McD at September 26, 2008 7:13 AM
    Comment #264562
    House Democrats were in the minority from 1995 to 2007, which left Frank in no position to hold up anything.

    Great to hear all that whining from Democrats the past two years about not having a supermajority and the Republicans being obstructionist is a load of crap.

    The only real problem we have are the quotes he made about the FMs not being in any kind of financial trouble, even while they were being investigated for fraud over the past 8 years…

    Oh well, we’ll just forget about all of that since the Boston Globe wrote an opinion piece for him.

    Posted by: Rhinehold at September 26, 2008 8:47 AM
    Comment #264565

    Is the Financial Times acceptable as a source, or is it just Fox News that’s “fair and balanced”? And is Oxley a “liberal” now that he’s out of office?

    In the aftermath of the US Treasury’s decision to seize control of Fannie Mae and Freddie Mac, critics have hit at lax oversight of the mortgage companies.

    The dominant theme has been that Congress let the two government-sponsored enterprises morph into a creature that eventually threatened the US financial system. Mike Oxley will have none of it.

    Instead, the Ohio Republican who headed the House financial services committee until his retirement after mid-term elections last year, blames the mess on ideologues within the White House as well as Alan Greenspan, former chairman of the Federal Reserve.

    The critics have forgotten that the House passed a GSE reform bill in 2005 that could well have prevented the current crisis, says Mr Oxley, now vice-chairman of Nasdaq.

    He fumes about the criticism of his House colleagues. “All the handwringing and bedwetting is going on without remembering how the House stepped up on this,” he says. “What did we get from the White House? We got a one-finger salute.”

    The House bill, the 2005 Federal Housing Finance Reform Act, would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.

    Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.

    Adamant that the only solution to the problems posed by Fannie and Freddie was their privatisation, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.

    “We missed a golden opportunity that would have avoided a lot of the problems we’re facing now, if we hadn’t had such a firm ideological position at the White House and the Treasury and the Fed,” Mr Oxley says.

    When Hank Paulson joined the administration as Treasury secretary in 2006 he sent emissaries to Capitol Hill to explore the possibility of reaching a compromise, but to no avail.

    link text

    Since the original post was in the Third Party and Independents category, my response was not intended for those who are unequivocal in their bias for a particular side and, as a result, will push that side’s agenda no matter what the reality. It was instead targeted to those of us who truly are open to both sides of the argument and/or dissatisfied with both of the country’s dominant parties.

    Further, isn’t it disingenuous to say that both sides are to blame while condemning only one of those sides for the entirety of the piece?

    Posted by: Sam McD at September 26, 2008 9:27 AM
    Comment #264568
    Further, isn’t it disingenuous to say that both sides are to blame while condemning only one of those sides for the entirety of the piece?

    No. I guess your point is valid as I look at this blog and see no other articles anywhere on here pointing out the failures of the Republican congress and Bush administration. If only someone could step up and post one of those it would help diffuse the point. Oh well…

    But seriously, the article was more intended to point out how one group of partisans are politicizing an issue that they are part of helping create while trying to claim their hands are clean. I don’t see the Republicans, in this case, trying the same thing. Perhaps you could point me to something that would change my mind?

    Posted by: Rhinehold at September 26, 2008 9:46 AM
    Comment #264579

    “Further, isn’t it disingenuous to say that both sides are to blame while condemning only one of those sides for the entirety of the piece?”

    Of course it is but that doesn’t stop Rhinehold nor the rest of the repubs from automatically blaming the dems and liberals for everything. Revisionist history runs amok once again. They have forgotten who has championed deregulation as a solution to everything financial and even as we speak the house repubs are spewing a hair of the dog fix to the problem.

    Whenever the repubs and libertarians accuse someone of anything you can rest assured it is because they are doing the very same thing they accuse others of. Partisan politics is a prime example.


    Posted by: j2t2 at September 26, 2008 10:57 AM
    Comment #264586

    j2dt:

    In my experience, this type of thing surely runs both ways.

    I happen to be of the opinion that the Republican Party is better at influencing opinion in this way than the Democrats are, a fact that explains how they were able to win re-election for Bush in 2004. If the Republicans governed as well as they campaigned, this country would be a lot better off. The Democrats, on the other hand, would have much more success themselves if their constant public embarrassments and strategic missteps didn’t make the Republicans’ job so much easier.

    Posted by: Sam McD at September 26, 2008 11:26 AM
    Comment #264617
    There is plenty of blame to go around for what happened to these two organizations, but for political reasons there has been a great attempt to lay this all at the feet of Republicans. I am not saying in any way that they aren’t on the hook for this at all, but they are not alone.

    I still love that I am told I am defending Republicans for their part in all of this, even though I attempted to ensure that even though that wasn’t the point of the article I still addressed it.

    But it appears that there are those that see anyone who point the finger at them as being in the tank ‘for the other guy’, as if there are only two sides to these issues.

    However, if it makes them sleep better at night knowing that they are squeaky clean and ‘the other guy’ is evil incarnate, well, who am I to deprive anyone of a good night’s sleep?

    Posted by: Rhinehold at September 26, 2008 1:19 PM
    Comment #264662

    Dan:

    Yes correctly understood, the events of this past month might just be seen as the tipping point for a better future.

    You and I have been debating for quite a while now. I have agreed with you that there are many problems we much face. You are great at listing the problems.

    I have also argued with you that doomsday will not come because economics does not go is a straight line but curves to avoid going over a cliff.

    The world economy has shifted in a new and better direction recently. One of the creations are SWF’s that allow countries with trade surpluses to not just blindly buy US Treasuries, but rather to invest and buy stocks, corporate bonds, real estate etc etc. This is the much trumpeted world where foreigners will not hold our interest rates artificially low, allowing Americans to simply leverage them to make money. That era is gone.

    This new era, signaled by these recent events I really like. It looks to me that when all of the dust settles, we will probably go through a recession, that looks “normal” from a big picture point of view. We are in a “normal” stock market correction right now. If you take the drama out of it on TV and the Internet and looks at the large numbers that we usually look at in downturns, they are all well within normal range. Well maybe forclosures are a bit higher than normal for a downturn. But it is “normal” to have a few indicators out of whack.

    This appears to me to be our fiscal 9/11. Just as today 7 years later when we go to the airport we are “hassled” by long lines etc, 7 years from now we will probably still be “hassled” by longer lines to get credit as lenders will be required to document are ability to borrow. GOOD THING!!

    Also, you do a great job of tracking debt. My guess is that your graphs will within a few years show a definite pattern of change in personal finance away from credit. Also that very large number you quote often of trillions of dollars of “true debt” or whatever you call it, I think will change. The reason it will change is because of the clear object lesson from last thursday in the credit markets. The last time it got that scarey was WWII.

    So I think we are likely at a great tipping point. You and David should now be turning more optimistic. The events you and he have been predicting may be avoided because we are getting a wakeup call.
    Oh and in addition, I have never seen Americans so pissed. Wow!!! American voters are going to demand change across the board.

    This all looks to me like it plays a bit two ways. It looks good for Obama. I would like to see how it plays for the democratic congress. People hate this bail out bill. It is very likely that those who vote for it will be held accountable shortly. Actually I haven’t read anything on the congressional race. hmmm.

    Posted by: Craig Holmes at September 26, 2008 4:00 PM
    Comment #264682

    Please answer one question Reinehold: Who reintroduced the reform bill in 2007? Why is it still languishing?

    Posted by: Sam McD at September 26, 2008 5:57 PM
    Comment #264685

    I guess that’s two questions.

    Posted by: Sam McD at September 26, 2008 6:07 PM
    Comment #264707
    Craig Holmes wrote: d.a.n: Yes correctly understood, the events of this past month might just be seen as the tipping point for a better future.
    Still wearin’ those rose-colored glasses, eh? What a hoot !
    Craig Holmes wrote: You and I have been debating for quite a while now.
    Yes. For years now. And your batting average is not looking so good.
    Craig Holmes wrote: I have agreed with you that there are many problems we much face. You are great at listing the problems.
    I’m not happy about any of this. I’ve been saying for years that the debt was getting out of control.

    How it has. I could say “I told you so”, but it is an empty victory, because all of use are going to be affected by this economic melt-down.

    Craig Holmes wrote: I have also argued with you that doomsday will not come because economics does not go is a straight line but curves to avoid going over a cliff.
    That’s all relative.

    Tell that to the tens of millions of people foreclosed upon.
    Tell that to the millions of unemployed.
    Tell that to the American citizens despicably pitted against illegal aliens for profits, votes, and (supposeedly) compassion.

    Craig Holmes wrote: The world economy has shifted in a new and better direction recently.
    Well, maybe.

    You know the saying: “Things have to get worse before they can get better.”

    Craig Holmes wrote: One of the creations are SWF’s that allow countries with trade surpluses to not just blindly buy US Treasuries, but rather to invest and buy stocks, corporate bonds, real estate etc etc. This is the much trumpeted world where foreigners will not hold our interest rates artificially low, allowing Americans to simply leverage them to make money. That era is gone.
    Yes, foreigners investing in our debt will get an education too.
    Craig Holmes wrote: This new era, signaled by these recent events I really like.
    Really?

    Maybe. I guess some people could even revel in a massive stroke leaving one as a quadriplegic state?
    At least, until that becomes too painful, eh?
    Some people are either delusional or very wealthy.

    Craig Holmes wrote: It looks to me that when all of the dust settles, we will probably go through a recession, that looks “normal” from a big picture point of view.
    Normal? On what planet?
    Craig Holmes wrote: We are in a “normal” stock market correction right now.
    Really?
    Craig Holmes wrote: If you take the drama out of it on TV and the Internet and looks at the large numbers that we usually look at in downturns, they are all well within normal range. Well maybe forclosures are a bit higher than normal for a downturn.
    Really? Sure, except for that minor little detail - the root problem to the melt-down. Duh!
    Craig Holmes wrote: But it is “normal” to have a few indicators out of whack.
    Craig, your comments have no credibility. Keep calling me and David pessimists. Some people don’t get it.
    Craig Holmes wrote: This appears to me to be our fiscal 9/11. Just as today 7 years later when we go to the airport we are “hassled” by long lines etc, 7 years from now we will probably still be “hassled” by longer lines to get credit as lenders will be required to document are ability to borrow. GOOD THING!!
    The more I read your comments, the more I think they are delusional.
    Craig Holmes wrote: Also, you do a great job of tracking debt. My guess is that your graphs will within a few years show a definite pattern of change in personal finance away from credit.
    Duh! again. That’s because the U.S. Dollar may be defunct.
    Craig Holmes wrote: Also that very large number you quote often of trillions of dollars of “true debt” or whatever you call it, I think will change. The reason it will change is because of the clear object lesson from last thursday in the credit markets. The last time it got that scarey was WWII.
    You getcha !
    Craig Holmes wrote: So I think we are likely at a great tipping point.
    Yeah, thing are great!
    Craig Holmes wrote: You and David should now be turning more optimistic.
    If you had paid some attention, you would see that David and I are not in agreement on this bail-out.
    Craig Holmes wrote: The events you and he have been predicting may be avoided because we are getting a wakeup call. Oh and in addition, I have never seen Americans so pissed. Wow!!! American voters are going to demand change across the board.
    Craig, I’m not at all sure Americans are feeling enough pain yet.

    I truly believe it will take about a year of serious pain to get the voters’ attention, which will be too late.

    Posted by: d.a.n at September 26, 2008 9:12 PM
    Comment #264740

    CORRECTION: You getcha betcha !

    Craig Holmes wrote: The events you and he [David R. Remer] have been predicting may be avoided because we are getting a wakeup call.
    Not likely.

    Not with $53 Trillion (or $66 Trillion if you include the $12.8 Trillion borrowed and spent from Social Security, leaving it pay as you go with a 77 million baby-boomer bubble approaching) of nation-wide debt, which will not only still exist, but it will get bigger with the bail-outs.

    Speaking of tipping points, there is a point where the level of debt can become so large that it can never be repaid.
    We’ve most likely already passed that point.

    Craig Holmes wrote: Oh and in addition, I have never seen Americans so pissed. Wow!!! American voters are going to demand change across the board.
    Not nearly enough, which will probably be proven on election day (4-NOV-2008), but I’d love to be wrong about that.

    Voters have also been giving Congress dismal approval ratings for years, but Congress’ re-election rates are still very high (see below).

    If enough voters were truly sufficiently upset, then why would those voters repeatedly reward incumbent politicians with 85%-to-90% re-election rates?
    The voters apparently aren’t mad enough.

    I think that Re-election rates will fall a few percentage points (to about 81%-to-83% and Party-Seat-Retention rates will fall only to about 90%-to-92%).
    If so, those will be the lowest re-election and seat-retention rates since 1997, but it won’t be enough to encourage Congress to be more responsible and accountable.
    Republcans will probably lose 20-to-30 more seats in Congress.

    Start_ End _ Congress_ Re-Election_ Party Seat-Retention
    Year _ Year ___ # ____ Rate ______ Rate
    1989 _ 1991 _ 101 ___ 90.1% ______ 99.6%
    1991 _ 1993 _ 102 ___ 87.7% ______ 98.3%
    1993 _ 1995 _ 103 ___ 73.5% ______ 98.1%
    1995 _ 1997 _ 104 ___ 79.8% ______ 88.2%
    1997 _ 1999 _ 105 ___ 77.4% ______ 98.7%
    1999 _ 2001 _ 106 ___ 89.2% ______ 99.3%
    2001 _ 2003 _ 107 ___ 89.2% ______ 98.7%
    2003 _ 2005 _ 108 ___ 87.9% ______ 98.1%
    2005 _ 2007 _ 109 ___ 88.6% ______ 98.7% (re-election decreasing)
    2007 _ 2009 _ 110 ___ 84.9% ______ 93.1% (re-election decreasing)
    ________ AVERAGE = 84.8% ______ 97.1%

    But, even if the Re-election and Seat-Retention rates fell to 72% (which ain’t likely), that’s still not enough to get Congress’ attention.
    It may slow it a bit, but it still won’t stop the rampant pork-barrel, corporate welfare, subsidies for the wealthy, and waste.
    And that is because too many voters appear to love THEIR party more than their country … at least, until the finally becomes too painful, and that may still be years away.
    For example, is wasn’t until year 1933 (already over 3 years into the Great Depression) when enough unhappy voters finally ousted 206 members of Congress.
    Therefore, there is some historical precedent to support the theory that too few voters today are anrgy enough.
    Only then was there a large ousting of politicians in BOTH parties.

    In the Great Depression:
    Start_ End _ Congress_ Re-Election_ Party Seat-Retention
    Year _ Year ___ # ____ Rate ______ Rate
    1927 _ 1929 _ 70 ____ 68.9% ______ 96.4% (re-election decreasing)
    1929 _ 1931 _ 71 ____ 79.7% ______ 92.5% (re-election decreasing)
    1931 _ 1933 _ 72 ____ 76.8% ______ 88.5% (re-election decreasing)
    1933 _ 1935 _ 73 ____ 61.2% _____ 78.7% (re-election decreasing)

    Yes, some voters are angry - especially those that lost money over the $100K ($200K for joint accounts) FDIC insured limits.
    And while most voters are against a bail-out, that number is not as large as you’d think, because many are also fearful of no bail-out.

    9/21-24/08 Polling Report - re: aid to financial institutions:
    Approve _ Disapprove _ Unsure
    __ 42% ____46% ______12%

    Foreclosures for August-2008 jumped to over 303,000 (up 111% from August 2007).
    There will be more foreclosures.

  • FORECLOSURES (One-Simple-Idea.com/Foreclosures.gif)

  • 350K |———————————-

  • 325K |———————————-

  • 300K |———————8————

  • 275K |———————————-

  • 250K |———8-8-8-8—————

  • 225K |8-8-8—————-7-7—-7

  • 200K |———————7——-7—

  • 175K |————7-7-7—————

  • 150K |7-7-7-7————————

  • 125K |—6————————6-6-6

  • 100K |6—-6-6-6-6-6-6-6———

  • 075K |5-5-5-5-5-5-5-5-5-5-5-5

  • 050K |————————————

  • 020K |__________________________ Months of Year

  • 000K |J-F-M-A-M-J-J-A-S-O-N-D

    • Where Total Foreclosures per year are:
    • 8=Year 2008: 2.0 million thus far from 1-Jan-2008 to Aug-2008

    • 7=Year 2007: 2.0 million

    • 6=Year 2006: 1.2 million

    • 5=Year 2005: 846,000

    • _______________________________________
    • TOTAL FORECLOSURES = 6.26 Million

    A bail-out will not only delay the inevitable, but it will make it worse because the debt is too large and it isn’t finished growing.
    $700 Billion would not be enough, because foreclosures that started in year 2005 (see above), and may have peaked in August-2008, will most likely take years to decline, which could be 6 million more foreclosures, and no one with enough money to buy those properties, a situation exacerbated by the widening wealth disparity for the last 30+ years:

    • 40% of WEALTH OWNED by 1% of U.S. Population (up 20% since 1976):

    • 045% |—x——————-

    • 040% |x—x—————-x

    • 035% |——x—-x——x—

    • 030% |———x—x—x—-

    • 025% |—————x-x—-

    • 020% |—————-x——

    • 000% |—————+————YEAR

    • ____ 1 1 1 1 1 1 1 1 2 2

    • ____ 9 9 9 9 9 9 9 9 0 0

    • ____ 2 3 4 5 6 7 8 9 0 1

    • ____ 0 0 5 0 5 0 5 0 0 0

    The monetary system has turned into a debt-pyramid-scheme, and another $700 Billion will simply delay the inevitable a litte longer.
    Mortgage debt is not the only debt.
    There’s about a $1 Trillion in credit card debt, and defaults are increasing.
    The total debt is 3.81 times 2007’s GDP of $13.9 Trillon.

    • $52.5T |—————————————-D (Debt=$53 Trillion)
    • $50.0T |—————————————-D
    • $47.5T |—————————————-D
    • $45.0T |—————————————D-
    • $42.5T |—————————————D-
    • $40.0T |—————————————D-
    • $37.5T |————————————-D
    • $35.0T |————————————D—-
    • $32.5T |———————————-D——
    • $30.0T |———————————D——-
    • $27.5T |——————————-D———
    • $25.0T |——————————D———-
    • $22.5T |—————————-D————
    • $20.0T |—————————D————-
    • $17.5T |————————-D—————
    • $15.0T |————————D—————-
    • $12.5T |———————D——————G (GDP=$13.9T)
    • $10.0T |—————-D—————G
    • ——-
    • $07.5T |———-D————G
    • —————-
    • $05.0T |-D——-G
    • ——————————
    • $02.5T |-G
    • —————————————
    • $00.0T +(1956)————————- (2007)YEAR

    And the INTEREST on it is huge.
    INTEREST alone one the $9.7 Trillion National Debt is already costing $429.98 Billion per year:

    • 2007: $429,977,998,108 ($430.0 Billion in 2007 dollars)

    • 2006: $405,872,109,316 ($420.6 Billion in 2007 dollars)

    • 2005: $352,350,252,508 ($376.9 Billion in 2007 dollars)

    • 2004: $321,566,323,971 ($355.6 Billion in 2007 dollars)

    • 2003: $318,148,529,152 ($358.5 Billion in 2007 dollars)

    • 2002: $332,536,958,599 ($383.3 Billion in 2007 dollars)

    • 2001: $359,507,635,242 ($420.9 Billion in 2007 dollars)

    • 2000: $361,997,734,302 ($435.9 Billion in 2007 dollars)

    • 1999: $353,511,471,723 ($440.0 Billion in 2007 dollars)

    • 1998: $363,823,722,920 ($462.8 Billion in 2007 dollars)

    • 1997: $355,795,834,215 ($459.6 Billion in 2007 dollars)

    • ___________________________________________________________________
    • TOTAL INTEREST alone on $9.7 Trillion National Debt for 1997 to 2007 = $4.1 Trillion (in 2007 dollars) !

    We can’t even keep up with the INTEREST alone on the debt, which is why the federal government and Federal Reserve have been borrowing and creating money out of thin air to merely pay the INTEREST on the $9.7 Trillion National Debt.

    And all of that money printing is eroding the U.S. Dollar too.
    While the Federal Reserve reports current inflation at only 5.37% , it is really much higher based on pre-1998 and pre-1983 measurement methods (One-Simple-Idea.com/CPI1.jpg).
    Based on pre-1983 measurment methods, inflation is 15.6% .
    Based on pre-1983 measurment methods, inflation is 9.8% .
    Consider the following.

  • (1) A postage stamp in year 1950 was 3 cents; in year 2008, it costs 42 cents (1,400% inflation = 4.74% per year for 58 consecutive years).

  • (2) A gallon of 90 Octane full-service gasoline cost 25 cents in 1950; today it costs $3.84 (1,536% inflation = 4.91% per year for 58 consecutive years).

  • (3) A house in 1959 cost $14,100; today’s median home price is $213,000 (1,511% inflation = 4.88% per year for 58 consecutive years).

  • (4) A dental crown in year 1990 cost $200; today it costs $1,100 (550% inflation = 11.3% per year for 18 consecutive years).

  • (5) An ice cream cone in year 1950 cost 5 cents; today it costs $2.50 (5,000% inflation = 7.1% per year for 58 consecutive years);

  • (6) Monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $96.40 (1,819% inflation = 11.34% per year for 28 consecutive years; up 70% in the past 5 years);

  • (7) Several generations ago a person worked 1.4 months per year to pay for government; now the average person works 5 months per year to pay taxes;

  • (8) In the past, one wage-earner families lived well and built savings with minimal debt, many paying off their home and college, and educating children without loans. How about today?
  • So, there’s still a lot of trouble ahead of us, because of too much nation-wide debt that won’t dissappear easily (i.e. much of it will default and a lot of wealth will disappear as a result of it).

    However, if I’m wrong about the voters and those re-election percentages above, then I will be very pleasantly surprised and happy to be wrong.
    And if I’m wrong about the $700 Billion bail-out saving us from $53 Trillion -to- $66 Trillion of nation-wide debt, then I will be very happy to be wrong.
    But I don’t see how so much debt can be managed much longer.
    The math just doesn’t work, and it appears Henry Paulson and Ben Bernanke suddenly realized that (from the surprised look on their faces) we finally reached a critical point - one in which there are no easy solutions, and possily no solution at all. Very strange that all of this appears to come as a surprise to them. Either that, or they were misleading us all the way along? Lots of people made fun of David Walker, called him “Chicken Little”, “Doom’s Dayer”, etc., but he was right. And he should know, since he’s done the math.

    Those like Bush, Bernanke, McCain, Greenspan, and others telling us the economy is sound (Rosy in fact) are not only not looking very credible, but they are looking almost completely incompetent.

    Posted by: d.a.n at September 27, 2008 8:58 AM
    Comment #274123

    Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Many people’s finances have a gap in them that require applying for a payday loan. And we’re not the only ones with a gap. The gap in the screening process for the Federal Housing Authority has them saying that they need more employees in order to fill the void. The FDA has been saying that its resources are lacking, to the point that they can’t always tell the difference between who is and who isn’t a legitimate lender, which could lead to more foreclosures and predatory lending. A federal government job pays well enough that most government employees don’t need to worry about getting a payday loan very often, if ever.

    Posted by: Zachary U. at January 23, 2009 4:48 AM
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