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An even better suprimer primer

It's about 10 minutes, but stick with it. Pity John McCain didn't watch it before last night's debate. It's pathetic how the Democrats are being allowed to frame the narrative on this debacle.

(HT: Patterico)


Now THAT'S a far better (more accurate) primer on the current debacle.

I vehemently disagree with the idea that the original Carter idea of "helping/incentivizing banks to lend mortgage money to more low-income borrowers" as a "good" or as O'Reilly inanely called it, "a noble idea."

You know why banks initially set up those numerical credit-scores and barred borrowers from borrowing, at MAX, anything beyond 2 1/2 times their annual incomes?

Because those lending standards WORK.

Under the best of circumstances no one can afford to payback more than 2 1/2 times their annual income.

When Brney Frank said, "The more people exaggerate these problems, the more pressure there is on these companies (Countrywide, etc.) the less we'll see in terms of affordable housing," he proved he was unfit to hold public office, as if having a sex-slave run a bordello out of the basement of a dwelling he owned wasn't enough.

Barney Frank, Jim Johnson, Jamie Gorelick and Frank Raines should all wind up in prison for supporting this form of credit socialism that resulted in this disaster.

Wow, who could have guessed that after 6 years of absolute power and two more with full veto power on every piece of legislation that, well, it is STILL WAH WAH CLINTONS FAULT WAH WAH WAH!!!

LOL! What a bunch of hypocritical dolts.

nobody said it was clinton's fault. The vid argues that it was carter's fault, clinton's fault, Dodd's fault, Jim Johnson's fault, Raines' fault...

you *can* do your own homework and tell us what you found

If you actually do as the video says and google the Community Reinvestment Act, you will get a far more balanced discourse than what is provided here which is pretty much a Michael Moore style agit prop hit piece.

There certainly are people like Jim Johnson in the Democrat Party who participate in the revolving door of power, moving from public to private to public just like there are people like Dick Cheney who do the same in the Republican Party. It is a problem in our democracy and it certainly was a contributing factor in this mess, although I'd say the documentarian here picks and chooses his/her villains in order to press his/her agenda.

>...I'd say the documentarian here picks and chooses his/her villains in order to press his/her agenda.

No doubt, and like I said there is plenty of blame to go around. But I think this video did contain some salient points that McCain should've cited in response to Obama's thoroughly absurd attempts to lay the blame 100% at the feet of the GOP.

It's one thing to lapse into such hyperpartisan nonsense if you're Michael Moore or an anonymous YouTube poster, but quite another if you're the Democratic nominee for the White House.

"There certainly are people like Jim Johnson in the Democrat Party who participate in the revolving door of power, moving from public to private to public just like there are people like Dick Cheney who do the same in the Republican Party. " (PE)

That's NOT the problem - people moving from the private to the public sector and back....there's absolutely nothing wrong with that. Government actually benefits from private sector people, like Mike Bloomberg and others who come in seeking to "run government like a business."

There is something very wrong...very possibly feloniously wrong with the likes of Jim Johnson, Franklin Raines and Jamie Gorelick engaging publically traded companies (Fannie Mae and Freddie Mac) in malfeasance - making high risk loans that were designed (ostensibly) to "help poor Americans get loans they would otherwise not be able to get," INSTEAD of doing what they, as officers of a publcially traded company, were charged with doing - solely focusing on making a profit for their shareholders.

Let's say that as much as 15% of the American people are deluded enough to think that things like "credit socialism" (government via the taxpayers guaranteeing "bad" or high-risk loans) and mandatory transfers of wealth from productive people to deliberately non-productive people are "good ideas." I think that's a somewhat high estimate, but, for the sake of discussion, let's go with that...unless someone can find some indication of a higher or lower number.

What percentage of investors do you think hold to that kind of view?

I'd suppose appx 0%.

There are very few, if any naive people among investors. That group tends to be, largely without sentiment and driven primarily by personal gain...and that goes for both the "sharkish" individual investor and the mere holder of 401-Ks, 457s and pension funds - when it comes to THOSE various "retirment funds" ALL those 401-K, 457 and pension fund investors care about is securing their own futures and retirments. There are NONE who indicate that they'd be willing to take less return, if it meant helping others get a piece of the economic pie their efforts/labors don't warrant.

The original problem/sin here was "credit socialism" - a misguided attempt by "bleeding hearts" like "Barney the Liberal dinosaur" and Chris "Dood" to grant access to credit and capital markets to people too poor to access them on their own.

The explosion came when those engaged in malfeasance at two major GSEs (Fannie & Freddie) packaged appx. a TRILLION DOLLARS worth of "bad paper" (high-risk loans) as "government-backed mortgage securities" despite knowing that the government COULDN'T back that amount of "bad paper."

In that way the dimwits at Fannie and Freddie unwittingly brought down Wall Street. When they (criminally?) repackaged those bad loans as "government-backed mortgage securities" and sold them under false pretenses to Wall Street (some companies, like AIG, didn't even KNOW their exposure, as they were merely "insuring loans" that they had every reason to believe were sound).

When the "subprime bubble" broke, smart investors like Hedge Fund portfolio managers saw a golden opportunity to make money for their fund investors by "short-selling" (betting on the price of various stocks, for instance, that of various financial institutions, to plummet) the stock of companies like Merril, Bear Stearns, AIG, etc.

When the price of these stocks dropped precipitously, those companies could no longer get credit (loans) that they needed and companies that appeared sound and with little exposure to the subprime mess subsequently collapsed.

All the short-sellers did was take advantage of an investment opportunity, they did nothing illegal nor immoral. What was done at Fannie and Freddie appears to be malfeasance.

There was no failure of Wall Street, there was a massive failure of government. A failure of those who couldn’t STOP the over-regulators.

Bush and McCain are on record for trying to rein in Fannie Mae and Freddie Mac(the source of this entire mess) back in 2003;


AND AGAIN in 2005...


...but were apparently unable to get that passed Barney Frank and Chris Dodd.

Barack Obama also got involved in looking to solve this mess, but he took the opposite tack, he worked for a law firm (Miner Barnhill & Galland) associated with indicted slumlord, Tony Rezko to help Calvin Roberson sue Citibank in the Buycks-Roberson v. Citibank Fed. Sav. Bank for NOT offering ENOUGH subprime loans to unqualified minority applicants!


It's important that EVERYONE understand how the current calamity happened.

I should've said that the revolving door from public to private can be, but not always is, a problem.

As far as for the blame going to the CRA, there are a couple of questions. First, did lenders approve bad loans to comply with CRA, or to make money? Second, how much of a factor is the CRA or was it just one piece of the bubble? My feeling right now is that the CRA is just one factor and that deregulation and lack of oversight was a factor as well.

I have read a lot about the Savings & Loan Crisis and what I took from that is that, while both Democrats and Republicans turned a blind eye as the crisis grew, it all began with the deregulation act of 1983.

"I should've said that the revolving door from public to private can be, but not always is, a problem." (PE)

Fair point, though in this case I don't think it was Johnson's ties to the private sector that were necessarily the problem, it was (probably) well-intentioned (I don't know that it was REALLY well-intentioned, at all) over-regulation that forced banks to make subprime loans to people whose incomes didn't warrant that.

The fact that Obama, while working for Miner Barnhill & Galland, on behalf of ACORN member Calvin Roberson, helped him sue Citibank in 1994 because they didn't offer enough subprime loans to minorities indicates that the CRA mandated those bad laws'

I look at it like this, ANY time any statute or any government official seeks to help poor/low income borrowers loans at rates that people like myself (I have a credit score of 820) worked hard to get, directly and deliberately HARMS people like us.

Look, even IF someone said, "Would you pay an extra 0.2% to 0.5% ($30 to $50 per month on a thirty-year mortgage) so that poorer (high-risk)Americans can get more high-risk mortgages to help them become part of the homeowner class, I'd OPPOSE that on the grounds that it places an undue and overwhelmingly unwanted hardship on hard-working higher income Americans others.

There's absolutely NOTHING in such a plan that benfits folks like you and I.

The CRA which was RE-INTERPRETED back in 1994 by the likes of Reps Frank and Dodd mandated that banks "expand their lending to poorer Aemricans." That, in effect, mandated malfeasance.

Does that regulation mandating malfeasance rise to the level of a felony for Frank, Dodd and all those who supported those changes?

I believe it does.

As to the current crisis, much of that seems due to the abuses at two major GSEs (Fannie Mae and Freddie Mac) which wrote as much as ) $1 TRILLION in high-risk loans and then (almost certainly ILLEGALLY) packaged them as "government-backed mortgage securities" for sale to Wall Street.

That gross mis-representation by Fannie and Freddie should also rise to the level of felonious action as well.

The end result, the "crash" part, resulted when all that "bad paper" came to be seen for what it was, spurring savvy investors, including many Hedge Fund managers (no wonder those guys get a 25% to 30% return on investment each year....they're REALLY smart) saw the opportunity to short-sell the stocks of many of our leading financial institutions. The plummeting stock prices kept those companies from getting the loans they needed and many, otherwise healthy companies went south.

No, it appears that (1) the CRA (especially AFTER 1994) mandated "subprime" loans to the poor and that (2) two GSE's wrote an ocean of incredibly "bad debt" and misrepresented to private sector bankers.

It's "loans" not "laws" - The fact that Obama, while working for Miner Barnhill & Galland, on behalf of ACORN member Calvin Roberson, helped him sue Citibank in 1994 because they didn't offer enough subprime loans to minorities indicates that the CRA mandated those bad loans.

Boo hoo, absolute power for six years WASN'T ENOUGH for the honest and stalwart Supply Side Republicans to do anything other than turn a historic surplus into a historic deficit, strip us of our Constitutional rights, start two wars, start torturing prisoners, bankrupt the country, devastate the stock market, get 4,000+ soldiers killed after lying about Iraq ... it's CLINTON'S FAULT, WAH WAH WAH!!!

OK, I’ve read a little on the S&L scandal of the 1980s and but it seems as though it was primarily a Democratic scandal.


I’m asking...

After all, FOUR of the “Keating FIVE” were Democrats (Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), and Donald W. Riegle (D-MI) were all Dems) and there was one lone Republican - John McCain (R-AZ). They were ALL accused of improperly aiding Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, which was the target of an investigation by the Federal Home Loan Bank Board (FHLBB).

After a lengthy investigation, the Senate Ethics Committee determined in 1991 that Alan Cranston, Dennis DeConcini, and Donald Riegle had substantially and improperly interfered with the FHLBB in its investigation of Lincoln Savings. Senators John Glenn and John McCain were cleared of having acted improperly but were criticized for having exercised "poor judgment". So the only three Senators who were charged with “substantially and improperly interfering with the FHLBB” were all Democrats.

It seems that the initial impetus for all this was earlier than 1982, as it seems the “Depository Institutions Deregulation and Monetary Control Act of 1980” which was enacted by a Democratic Congress, during Jimmy Carter’s administration began the banking deregulation.

In March of 1980, the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) was enacted. That law was an initiative aimed at eliminating many of the distinctions among different types of depository institutions and ultimately removing interest rate ceiling on deposit accounts. Authority for federal S&Ls to make ADC (acquisition, development, construction) loans was expanded. Deposit insurance limit raised to $100,000 from $40,000. This last provision is added without debate.

IN December, of 1982, the Garn-St Germain Depository Institutions Act of 1982, an extension of that earlier initiative (the DIDMCA), was enacted.

This initiative, which was passed by a Democratic House, agreed to by a Republican Senate and approved or signed onto by Reagan, was said to have been “designed to complete the process of giving expanded powers to federally chartered S&Ls and enables them to diversify their activities with the view of increasing profits. Major provisions include: elimination of deposit interest rate ceilings; elimination of the previous statutory limit on loan to value ratio; and expansion of the asset powers of federal S&Ls by permitting up to 40% of assets in commercial mortgages, up to 30% of assets in consumer loans, up to 10% of assets in commercial loans, and up to 10% of assets in commercial leases.”

Charles Keating initially increased Lincoln Savings and Loan’s assets from $1.1 billion to $5.5 billion during his initial tenure.

No one complained UNTIL some of those riskier investments lost money.

Keating was subsequently sentenced to five years in federal prison for his actions.

It would seem not only fair, but critical that we all look at the current crisis in the same dispassionate way!

It SEEMS that the CRA was re-tooled in 1993-1994 and that re-tooling mandated that banks make more loans to poorer Americans and thus take on more risk.

That seems OUTSIDE the scope of the government’s regulatory abilities to me.

I mean, as I understand it, no government law, nor action could force a store to sell their products BELOW their own costs, as that would be both ILLEGAL and BOTH civilly and criminally actionable even if the entire Congress passed such a law and 90% of the American people (including the store owners, who’d been promised huge bailouts in advance for the coming catastrophe) supported it.

At least, that is my understanding of how the Constitution restricts such reckless governmental action.

So, if the CRA forced these bad/high-risk loans, and then 2 GSE (Fannie and Freddie) both backed over $1 TRILLION of these kinds of loans, and then packaged them and misrepresented them as “government-backed mortgage securities” that too seems to smack of deliberate malfeasance.

The financial institutions who bought these so-called/misnamed “government-backed mortgage securities” would seem to be the victims of a pernicious government scam and the investors (those Hedge Fund fellows - who then engaged in short-selling the stock of those financial institutions were merely taking advantage of a prime investment opportunity.

The malfeasance and the blame seems to fall entirely on the likes of Frank, Dodd, Johnson and others at Fannie and Freddie.

"Boo hoo, absolute power for six years WASN'T ENOUGH" (anony-mouse)

Mouse (mind if I call you that) those first six years were fine, weren't they.

2006: 2.2% average annual inflation rate, 4.7% average annual unemployment rate, interest rates still under 6%, record income tax revenues from 2002 - 2005 to that point....they's halved the deficit in three years. Gas prices $2.28 in Jan '06 - $2.34/gallon in Dec of '06.

Since the Keynesian Pelosi-Reid Congress took over, unemployment has skyrocketed (now over 6%), inflation is way up, interest rates are not only "through the roof," it's hard for people with 20% down and great credit to get mortgages!

Turns out that two Liberal Dems (Dood and Frank) retooled the CRA to engineer (purposely or not) the current credit crisis.

And gasoline?

The national average at the pump was $4.17/gallon in July of '08 and now it's all the way down to 3.74/gallon!

$1.40/gallon MORE than in 2006!!!

I thought the Pelosi-Reid Congress was "gonna fix that."

I guess not.

"...other than turn a historic surplus into a historic deficit..." (mouse)

Wait a minute!

Wasn't it the Gingrich Congress that reined in government spending, creating those surpluses?

I think it was.

Are you arguing that it's best to have a solidly Republican/Conservative House and Senate and a pliable ("go along to get along") Democratic President?

It has to be noted that Bill Clinton was a rare Democrat. He helped create the DNC, to move that Party to the Right and back toward the Center and he actually ran to the Right of both Bush Sr and Bob Dole. Oh yeah, and Bill Clinton was an ardent Supply-Sider and a Free Trade advocate. If I remember correctly, and I believe I do, there were those 1 MILLION H-1B visas that were given out between 1993 and 2001.

If it wasn't Gingrich's lead that created those surpluses, could you please find me a link to where Clinton forced his will on an overwhelmingly Conservative/Republican Congress at the time and even though he willingly went along with massive welfare reforms, a Cap Gains cut, lots of federal spending cuts and four other plancks of Gingrich's "Contract With America?"

It really would be much appreciated.

In fact, the current occupant of the WH could possibly take a lesson from that!

Congress has pretty much run roughshod over this guy (G W Bush) over the last 21 months...

...And I, for one, don't much like the results.

Tard (mind if I call you that?), Bush vetoed almost all legislation for the last two years, and with slim control of both House and Senate, the Dems had no chance of override.

Sorry, but Boy George's policies are responsible for everything we see now.

Feel free to gush out more of whatever Rush Limbaugh says. I bet you support the bailout just like your fat daddy Rush.

"Bush vetoed almost all legislation for the last two years, and with slim control of both House and Senate, the Dems had no chance of override." (Mouse)

Actually and this is easily looked up Bush and John McCain BOTH sought to rein in Fannie Mae and Freddie Mac in 2003 and AGAIN in 2005 and they were overwhelmed by the lobbying efforts of Fannie Mae and Freddie Mac, with Barney Frank and Chris Dodd as their point-men.

I know there are actually people who are so cynical as to believe that the likes of G W Bush and John McCain "didn't want those controls in place and merely wanted to remove their fingerprints from the abuses," BUT, their fingers were NEVER ON the abuses.

You know whose were?

Barney Frank's, Chris Dodd's and all the other Liberals who took Fannie Mae and Freddie Mac money in exchange for scuttling those reforms.

Bush never vetoed ANY Bill that sought to rein in Fannie and Freddie.

But if you can find one, or even make one up, I'd be happy to consider it!

Sorry JMK, but having "privatized" corporations like Fannie Mae and Freddie Mac are pure SUPPLY SIDER ideas, keeping with the failed policies of Ronald Reagan.

Privatized, with no oversight or regulation, just like Supply Siders wanted.

This is why Supply Side economics, like Communism, can be concluded to be a failure once and for all.


Fannie Mae was "privatized" back in 1968....during the very Keynesian LBJ administration!

Just as the CRA, which was later re-tooled (in 1994) to mandate more loans to more high-risk borrowers AND the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 (which began the banking deregulation) where both enacted by the very LAST Keynesian administration - via a Democratic Congress, during Jimmy Carter’s administration.

So, Fannie Mae was "privatized" waaaay back in 1968 by a Democratic Congress along with a Democratic President...


...BOTH the CRA and the DIDMCA (which began ALL the banking dergulation and which Frank Keating used to explode the S&L scandal) were passed by yet ANOTHER Democratic Congress under yet ANOTHER Keynesian Democratic President (Carter)...

...And Barely comes to the conclusion that Supply-Side policies caused all this.

There are ONLY three possible economies; (1) the unregulated Free Market, (2) the Command (government-run) economy and (3) Corporatism or the highly-government regulated economy.

The Command economy not only "DOESN'T work," it has resulted in mass murder EVERYWHERE it's been tried.

The Free Market built America UNTIL around 1912 or so (prior to WW I). It delivered tremendous economic growth and incredible innovation, but along with a lot of instability and insecurity for both established enterprises and the workers who depended on those entities for their jobs. J. P. Morgan and Bernard Baruch brought in the highly-regulated (Corporatist) economy and that has become the standard economy of the industrialized world.

In FACT, modern Corporatism is now so well established that people now ONLY speak of "socialism" and "free markets" WITHIN the Corporatist framework. Keynesian economic policies WITHIN a Corporatist framework are often misnamed "socialism," while more market-based or Supply-Side policies WITHIN a Corporatist framework are often misnamed "free market" economies.

Mis-educated people often talk about Sweden, France and Germany as "socialist" economies, but NONE of those are "socialist" in ANY real way.

They are all modern Corporatist economies with the private ownership of property, including businesses. They merely differ from Supply Side economies in the size of their welfare states and other "freebies" provided by the government.

The U.S., Norway and Hong Kong are often wrongly referred to as "free market" economies because they all adhere to more Supply-Side, or market-based policies and seek to reduce the size of their welfare states and limit government provided goods and services ("freebies") as much as possible.

What the 1968 "privatization" of Fannie Mae and the 1977 CRA, followed by the 1980 DIDMCA shows is that even Keynesians acknowledge the severe limits of the Keynesian (over-regulated) economy.

One of the most disastrous things about the current credit crisis (brought on by "credit socialism" - extending MORE credit to MORE low-income to high debt ratio borrowers) is that's already resulted in a severe contraction of the country's banking - WaMu, Wachovia have been bought out and merged into larger banks....and that's bad for the people (especially small businesses), in that it limits their banking options.

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