EESA and the Transformation of American Economic Values.
Once again we are being told that the Wall Street bailout (I mean "rescue"... or is it "stabilization"?) was on the verge of accumulating enough votes to pass. The terms of the deal (now titled the "EMERGENCY ECONOMIC STABILIZATION ACT OF 2008") are available in complete and summary form on many sites throughout the Web. The fact that the breakdown of the bill was not presented in bullet form is a bit disconcerting. It's as if Congress wants the reader to work in order to understand it. The obfuscation written into all pieces of legislation inhibits most people from truly engaging proposed bills. If there is a truly "elitist" bent in modern-day American politics, it is most evident in this bipartisan approach to "transparency".
Make no mistake about it... the Democrats will own whatever bill eventually gets passed. Some will point out that the president can veto the bill, but it appears unlikely that any version will be voted on if that possibility exists. So the extent to which the EESA protects the interests of the taxpayer is determined by whatever concessions the Dems can wrangle from George W. Bush and Henry Paulson. Certainly House Republicans will try to take credit for introducing their own version of the legislation, but these claims will be mostly disingenuous. The fact is that the only addition they have contributed is a government-run insurance company for bad private investments (which seems like a function similar to that of AIG).
It's not like the small cabal of House Republicans* that were ushered into the White House by John McCain last Thursday didn't have a lengthy wishlist. But first and foremost, they wanted to test their economic theories of the "free market". At the heart of the matter, they are resolutely against any government intervention. In other words, they'd let the situation play itself out if it were left up to them- stability of the nation be damned. It doesn't really matter that the vast majority of national and international economists (from all points along the political spectrum) have warned that action is necessary to avert a major worldwide crisis. To give you a sense of where House Republicans are coming from, keep in mind that their main objective was to push for corporate and investor tax cuts to be included in the bill.
Despite what the disciples of pure economic theories believe, we are witnessing a major transformation in the way that global markets are managed. It is no longer possible to convince the majority that deregulation is an ultimate good. Those policies have allowed certain banking corporations to get so large that they can effectively hold the health of the country for ransom. This is effectively extortion by the very players that got us into this mess with their advocacy of completely unfettered markets. What I find particularly galling is that John McCain continues to enable those with this philosophy while simultaneously proclaiming himself the contemporary Teddy Roosevelt. This is a mortal insult to that great former president's legacy of trust-busting.
Now I'm not saying that I wholly support the bill that Congress turned down today. I would have preferred that the government simply offered loans at moderate interest rates, instead of offering to buy highly dubious assets at a reduced price. If these turn out to be worthless, the taxpayer would lose big under such a plan. I also appreciate the lip service devoted to regulation and oversight. We've heard that before, and for it to be effective government must attempt to be incorruptible. Still I am thankful that we don't have the Congress that presided over the economy for the first six years of Bush's presidency without confronting the impending collapse of Wall Street. If we've learned anything from the last ten years, it's that laissez faire capitalism is a potentially fatal strategy as it essentially rewards unlimited greed, borderline-criminal short cuts, and a dangerous degree of deception.
*The reponsible parties for inaction include John McCain, Eric Cantor (VA), Paul Ryan (WI), Jeb Hensarling (TX), John Carter (TX)... and ?
Make no mistake about it... the Democrats will own whatever bill eventually gets passed. Some will point out that the president can veto the bill, but it appears unlikely that any version will be voted on if that possibility exists. So the extent to which the EESA protects the interests of the taxpayer is determined by whatever concessions the Dems can wrangle from George W. Bush and Henry Paulson. Certainly House Republicans will try to take credit for introducing their own version of the legislation, but these claims will be mostly disingenuous. The fact is that the only addition they have contributed is a government-run insurance company for bad private investments (which seems like a function similar to that of AIG).
It's not like the small cabal of House Republicans* that were ushered into the White House by John McCain last Thursday didn't have a lengthy wishlist. But first and foremost, they wanted to test their economic theories of the "free market". At the heart of the matter, they are resolutely against any government intervention. In other words, they'd let the situation play itself out if it were left up to them- stability of the nation be damned. It doesn't really matter that the vast majority of national and international economists (from all points along the political spectrum) have warned that action is necessary to avert a major worldwide crisis. To give you a sense of where House Republicans are coming from, keep in mind that their main objective was to push for corporate and investor tax cuts to be included in the bill.
Despite what the disciples of pure economic theories believe, we are witnessing a major transformation in the way that global markets are managed. It is no longer possible to convince the majority that deregulation is an ultimate good. Those policies have allowed certain banking corporations to get so large that they can effectively hold the health of the country for ransom. This is effectively extortion by the very players that got us into this mess with their advocacy of completely unfettered markets. What I find particularly galling is that John McCain continues to enable those with this philosophy while simultaneously proclaiming himself the contemporary Teddy Roosevelt. This is a mortal insult to that great former president's legacy of trust-busting.
Now I'm not saying that I wholly support the bill that Congress turned down today. I would have preferred that the government simply offered loans at moderate interest rates, instead of offering to buy highly dubious assets at a reduced price. If these turn out to be worthless, the taxpayer would lose big under such a plan. I also appreciate the lip service devoted to regulation and oversight. We've heard that before, and for it to be effective government must attempt to be incorruptible. Still I am thankful that we don't have the Congress that presided over the economy for the first six years of Bush's presidency without confronting the impending collapse of Wall Street. If we've learned anything from the last ten years, it's that laissez faire capitalism is a potentially fatal strategy as it essentially rewards unlimited greed, borderline-criminal short cuts, and a dangerous degree of deception.
*The reponsible parties for inaction include John McCain, Eric Cantor (VA), Paul Ryan (WI), Jeb Hensarling (TX), John Carter (TX)... and ?
Labels: Corporate Excess, Democrats, Economics, EESA, Free Market, John McCain, Politics, Republicans, Shenanigans
posted by Merge Divide at 4:17 PM
21 Comments:
I love your stuff man, but you truly have no idea what led to this crisis.
You can watch the whole debacle play out at the following two links.
Go here: http://www.treygarrison.com/2008/09/uh-oh-guess-whats-really-behind-the-financial-crunch/
And here:
http://www.treygarrison.com/2008/09/whos-behind-the-financial-crunch-part-ii/
Deregulation is not the culprit. The government mandate that mortgages be given to people with bad credit in an effort to make more poor people and minorities homeowners is what caused this crash. This is what happens when you involve liberal, P.C. bullshit in the financial system of our country. It's not discriminatory to not loan money to someone who has no personal assets.
You can talk all around it, involve as many Republicans as you want, use as many big words as you'd like, but it all comes down to one thing: loaning money to the poor is a bad idea.
For years I've heard people say that political correctness is going to be the downfall of our nation. Well, we're off to a pretty good start.
Steve,
Repeat the mantras: "deregulation is always good", "the markets will fix themselves", "free markets exist"...
Keep saying it. Obviously we disagree. Research the average home value among outstanding subprime loans. There are many folks facing disclosure that don't fit in your category. A lot of people borrowed more than they could really afford because they believed the myth of "Perpetual Growth" in unregulated markets. You'll soon learn that it's not just "poor people" that got involved in this.
Again, we have a fundamental agreement, and neither of us are going to budge on it.
The financial crisis facing our nation has nothing to do with "political correctness".
Did you even read the NY Times article from 1999 that was in the first link I provided?
It was the government who told the financial services industry that they had to provide loans to low and moderate income people. Before this mandate came down, the Free Market determined that only people of with a sound financial background could borrow such large sums of money. Remember the days when you had to have 20% down to buy a house no matter what? That was the market at work.
Government caused this mess with regulation and now they're blaming it on the free market. And obviously you've bought into their rhetoric.
Add me to the list. The Republicans and I agree no bill. I'll stand in a soup line before I become a socalist.
Ummm... Rainywalker,
Soup lines ARE "socialist". (Just saying.)
Steve,
Yeah I read it. I understand that Clinton pressured Fannie Mae to offer more subprime loans, and when Franklin Raines balked, Clinton-adviser Andrew Cuomo talked him into it (By the way, John McCain has already mentioned that he wants Cuomo in his cabinet).
If you haven't noticed, I don't do a lot of defending of Clinton on this blog.
Still I've asked people to point out the executive order or piece of legislation that required private lending institutions to offer subprime loans. Nobody has yet. Maybe you can?
But what you are talking about is just one piece of the picture. The deregulation I'm talking about involved McCain adviser and friend Phil Gramm, who deregulated the "credit default swap" in 1999.
Believe me, I'm not advocating "socialism". I don't wan the government setting "quotas" for private industry. But I do want regulation and oversight to curb the mass abuses engendered by a "free market system".
"Still I've asked people to point out the executive order or piece of legislation that required private lending institutions to offer subprime loans. Nobody has yet. Maybe you can?"
Ask and ye shall receive...
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
Steve,
I gotta tell you... after reading the entire entry, I'm not convinced that this was a large cause of the current crisis. It may be a part of Fannie Mae's undoing, but the big picture has been much more influenced by deregulation.
This is a section of the Wiki entry that you have never mentioned:
"A Luci Ellis working paper has concluded that "Contrary to some media commentary, there is no evidence that the Community Reinvestment Act was responsible for encouraging the subprime lending boom and subsequent housing bust."[18] Center for American Progress fellow Robert Gordon[19] noted that approximately half of the subprime loans were made by independent mortgage companies that were not regulated by the CRA and thus had no government obligation to offer credit to minorities. In the later part of the crisis, these mortgage companies made subprime loans at twice the rate of CRA banks. Another third of the major subprime lenders were regulated but had very little CRA involvement.[20] Gordon also makes the argument that the weakening of the CRA in 2004 was followed by intensified subprime lending.[20] Austrian economist Thomas DiLorenzo counters Gordon's statistic by arguing that even if half of the subprime loans were made by non-CRA companies, the CRA had still caused tens of billions in defaults on mortgages by unqualified borrowers. He further states that Gordon's statistic ignores that independent mortgage companies are middlemen who sell subprime loans to banks that are in turn regulated by the CRA.[21]
Ellen Seidman, former director of the US Office of Thrift Supervision during the Clinton administration, who also works at the New America Foundation,[22] has stated her belief that the CRA did not have an effect on the United States housing bubble.[23] She observes that CRA banks were particularly warned to make responsible investments, citing one of her own speeches as an example. She noted that if unregulated independent mortgage companies make subprime loans, affiliated CRA banks should not be able to count them for CRA purposes although she did not indicate whether this practice currently occurs.[24] An analysis by the law firm of Traiger & Hinckley, LLP, which counsels financial services entities on fair lending and Community Reinvestment Act compliance, concluded that CRA banks were less likely than other lenders to make high cost loans or to foreclose in certain metropolitan areas; they also were more likely to retain their original loans.[25]"
Pretty much dispels your claims.
Merge Divide,
Soup lines are only socialist when you put a fence around them and read from a book by Marx. Groucho on the other hand made a deal with flies, "He wouldn't crawl on the wall and they agreed not to practice law."
"Soup lines are only socialist when you put a fence around them and read from a book by Marx."
And apparently welfare isn't socialist either... as long as the money goes to corporations.
Welfare for corporations is sink, swim or drown, not up stream or down. Regular welfare for those deserving, should be a hand up and not a handout.
rainywalker,
That's pretty general, but I'm likely aligned with the core sentiment.
Thanks for the kind comments about Sarah Palin. :) Appreciate it. I will check out your blog too. And I snagged that article and posted it too - on her parents interview.
Sure Bevy...
Hey readers... check out her page and the comment she's referencing:
Go Sarah GO!
How about personal responsibility ... IF the American people HAD some regarding borrowing money - it would help. In early '79 my hubby and I were applying for a home loan - we had to supply 2 years of tax returns, check stubs for a year or 6 mos, and a detailed listing of our credit card debt. And they looked at the utility bills of the house were were looking at.
It was because the bank was REALLY interested in us being able to make our payments. Unusual these days - they also wanted us within 25% of our NET pay. What a concept. Now a days - how high can you go?? How about that these same people can have 3 or more credit cards with $10k or more on them - what are the minimum payments for such?
I blame the people first ... the banks second and the legislators third ... But that's just me.
Bevy,
Yes indeed. Personal responsibility is crucial. Always "blame the people first". If they make a mistake because they were misled (whether in buying a house, or supporting a political candidate), then they should have simply been smarter than they were!
When I was in college, a friend of mine and I would pick someone out at a party and see how long we could make fun of them to their face before they realized what we were doing. Merge, you would have been a great addition to our efforts. Job well done, sir.
(I can't stop laughing. Seriously)
Steve,
I feel a little bit bad about it actually (not too much, though), but I have to find some way to release a bit of tension. Baby E.'s been pretty much sick constantly since he started daycare.
Anyway, I can't see going into the woods and reciting poetry to the trees, and all that primal wail crap... (thanks again Steve, for that imagery, damn you. I still cringe just a bit whenever I think about it)...
Readers: Visit Steve's Blog to share my pain.
WARNING: Warning... this video may or may not be safe in your workplace, but it will definitely cause a disruption in productivity.
Looked at the tree-hugger video. I wanted to laugh, but found it more sad than laughable. I do wonder how they heat their homes, but it doesn't worry me that much. On the other hand, that Syndee or whatever her name is (the blonde) is kinda cute, not so much Sarah P of course....I'm just sayin.
jg
I won't tell your wife how low your standards are.
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