Sunday, December 28, 2008

Why We're In A World of Hurt

Thumbing through a new tome by John C. Bogle, I came across this:

While attending a party at the Shelter Island estate of a billionaire hedge fund manager, novelist Kurt Vonnegut pointed out to Joseph Heller, the author of Catch 22, that their host had made more money in one day than Heller's phenomenal best-seller had earned during all the years it had been out.

Heller smiled at Vonnegut and said: "Yes. But I've got something he'll never have. Enough."

Which crystallizes for me what's been wrong with the country (and world?) over the past several years.

We were driven over a tall cliff by folks who could never, no matter how rich they became, have enough.

22 comments:

Anonymous said...

Amen.

Anonymous said...

Well, but there's a bit more to it than that. Government mismanagement - courtesy of that Elmer Fudd of Democratic Finance, Barney Frank, and his cohorts - is what precipitated the housing crash. And now there's more of them in power (Frank hasn't even been punished for his incompetence) and one of them in the White House. You think we're hurting now? There's more pain to come.

Anonymous said...

Good God, people. Stop making this a partisan issue. There is more than enough blame to go around on both sides of the aisle, and parroting Rush's talking points doesn't get us anywhere.

Steve Hulett said...

Well, but there's a bit more to it than that. Government mismanagement - courtesy of that Elmer Fudd of Democratic Finance, Barney Frank, and his cohorts - is what precipitated the housing crash.

Anon,

All you're showing is your partisan hackery.

1) Frank had little to do with this, beyond 2005 defense of Fannie and Fred, relatively minor players in the debacle.

Frank, despite all the wingnut finger-pointing, was a MINORITY member in '05, when Republicans controlled house and Senate.

2) Who to blame?

Investment banks, private ratings agencies that rated all the toxic debt AAA, Phil Gramm, Bob Rubin, Bill Clinton, George Bush, Chuck Schumer, all of the Republican congressional delegation and a good bit of the Democratic.

And the University of Chicago's Economics department, which believed that unregulated, unfettered markets were magical, totally good, and self-correcting.

But that's America in 2008: there's always a troll that pops up to spew Republican bile.

As Anon #3 says: it ain't a partisan issue.

But if you want to give the lion's share of credit to a member of Congress, choose ex-Senator Gramm, not congressman Frank.

Anonymous said...

The real problem, and everyone knows it, is idiot boy bush and his malcontent cronies. When we talk about leadership, no one would mention him. The bush economic meltdown is thanks to his lack of leadership, and his insistance on the fallacy that deregulation or re-defining the Constitution is a GOOD thing. It ain't. Hence the worst "presidency" in U.S. History.

Anonymous said...

No Kidding! 8 years of this shmuck in the White House has brought a once great America down to it's knees. And what's he done to help ANYTHING? Oh yeah....NOTHING.

He came into office with a SURPLUS, and then allowed terrorists to attack America on 9/11 as he was completely asleep at the wheel. Then he started an illegal war based on trumped up info about wmd. 4200 U.S. Soldiers dead in Iraq, more dead in Afghanistan, and 28,000 wounded and FIGHTING for care.

Yeah--I'd say he was the worst president in history. There is a special place in hell for bush and dick.

Anonymous said...

Anonymous December 29, 2008 7:54:00 AM

Okay lets straighten you and everyone else out about the cause of our lovely econ crisis. You will see that everyone is to blame for this Dems, Repubs, Banks and people who took on loans that they should have.

This will be a slightly longer post than you folks are used to but I think you will all learn something.

Lets go back to 1977 during the Carter Administration and the Community Reinvestment Act (CRA) which was designed to encourage commercial banks and s&l's to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. The Act was intended to reduce discriminatory credit practices against such neighborhoods, a practice known as redlining. The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation. To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance.

There were some changes to the CRA over the years. In 1989 under Pres G. H. Bush (Bush 41) there was increased public oversight of the process of issuing CRA ratings to banks.

Also Bush 41 passed the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 which required Fannie Mae and Freddie Mac to devote a percentage of their lending to support affordable housing.

President Clinton passed more changes to the CRA like The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which repealed restrictions on interstate banking, listed the CRA ratings received by the out-of-state bank as a consideration when determining whether to allow interstate branches - in other words if banks did not lend to lower income folks they could not expand by opening interstate branches. A surge in bank merger and acquisition activities followed the passing of the act, and advocacy groups increasingly used the public comment process to protest bank applications on CRA grounds. When applications were highly contested, federal agencies held public hearings to allow public comment on the bank's lending record. In response many institutions established separate business units and subsidiary corporations to facilitate CRA-related lending.


In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the Glass-Steagall Act, which prohibited a bank from offering a full range of investment, commercial banking, and insurance services.

So with the CRA which forced banks to lend or not be allowed to expand branches and the repeal of the glass-steagall act which allowed bank to sell investment products and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 which required Fannie Mae and Freddie Mac to devote a percentage of their lending to support affordable housing you can see where this is all heading at.

But one thing was missing - low interest rates. Fed Chair Alan Greenspan lowered the fed funds rate to 1% and holding it there or too long which created low interest rate for bank to lend money.

Don't forget alot of people took out loans they could not afford to buy their McMansions, Boob Jobs, Big Screen TV's, Big Bad Ass Suv's , used their home's as an ATM, no one saves money etc. etc. etc.

So as you can see the blame is not due to a single political party or one person but bad legislation from both political parties. Don't forget Bush 41, Clinton, Alan Greenspan and folks who could not afford loans who took loans.

Remember the banks did not hold guns to people's heads to get into exotic loans - subprime, alt-a, option arms, heloc's etc. You are responsible for your finances not your govt not your bank or investment adviser. Its up to you to educate yourself. Its up to you to save money live within your means etc. etc. etc.

Let me know if I can clarify anything further for you.

Happy Holidays








So banks had to lend to folks


According to Fed Chair Ben Bernanke this law greatly increased the ability of advocacy groups, researchers, and other analysts to "perform more-sophisticated, quantitative analyses of banks' records," thereby influencing the lending policies of banks.

Anonymous said...

^
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what he said.

Anonymous said...

Which is pretty much what I said. Barney Frank is a criminal, an incompetent, and a tool. And giving loans to people who can't pay them back is a classic Dem tactic for buying votes. As for His Holiness, Obama...well, we know he's a tool, and incompetence *might* explain his alliance with a terrorist, his cop-killer wife, and a hatemongering preacher. As for criminal...we'll see how his attachment to Blago turns out...still, he's not even in sworn in as President yet, and he's already attached to a scandal...that's GOTTA be a world's record. And FTR, I don't listen to Rush Limbaugh. I just have ears and eyes attached to brains.

Anonymous said...

Sure, people were stupid to accept loans that were beyond their means to actually pay for.
But let's be realistic here. Most people have trouble understanding simple mathematics (and I do mean MOST people)much less understand loan papers that are close to 5 inches thick. We've also lived in a society where getting a loan has usually been so dificult to obtain that if the bank or loan company tells you that this is a doable loan then the consumer will most likely assume the bank is smart enough to know who can or can't handle which loan.
I doubt any consumer thought the banks would purposely put them into a bad loan. Why would a bank want someone to not be able to pay off a loan after all - it doesn't add up to the average person.
The balance of the blame lies wityh coporate greed that was only concerned with showing a profit today with no consideration given to long term problems...and to their political allies that loosened enough of the regulations to allow these bastards to get away with it.
And of all the political allies that deserve blame the Repubs deserve the most. If the Dems loosened regulations it was to help low-income consumers whereas the Repubs did it all out of greed and cared little or nothing about who would get hurt when it all crashed around them.
maybe the Dems were stupid, but the Repubs were greedy and that deserves more scorn.

Peanut said...

And FTR, I don't listen to Rush Limbaugh. I just have ears and eyes attached to brains.

They're attached to something, but it can't be brains.

After being thoroughly taken to the woodshed, your typical GOP talking points trashed by a comprehensive history that fairly lays blame on all parties, you still can't stop drinking your Kool-Aid.

The fact is, the economic theory upon which your party has rested its entire fiscal philosophy has revealed itself to be a smoldering cesspool of ruin and bankruptcy. Just as you folks have been wrong time and time again on social issues, now your failure with economic issues has been laid bare for all to see, dank and festering.

In addition to all the mistakes that both sides have made over the last 30 years, the conservative element has done all it could in the last 8 to destroy America, whether through torture, illegal wars of aggression, neglect for natural disasters, outting undercover CIA operatives, neglecting warnings for 9/11, no oversight over financial markets, rampant spending, and a host of other egregious damages to the nation.

Anonymous said...

Bush must be held accountable:

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.
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Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

Anonymous said...

Anon 2 you are amazing. Even after a sensible non-partisan read of history it all comes back to Barney Frank, Barney Frank, Barney Frank. Maybe something about Mr. Frank's personal life bothers you so much...

Rest easy though. The super rich, super powerful and super ruthless (i.e. conservatives) will maintain their death-grip on the course of history, no matter how many gay senators get elected. They'll mow you down in the process, but at least you voted for them. Pop a Rush-brand "pain killer", crank up FOX NEWS and bow twice daily toward Wasilla, 2012 is right around the corner.

Floyd Norman said...

I feel like I live in an alternate universe. When I bought my Pasadena town home I had a well paying job at Disney, a down payment, and loads of cash in the bank.

And, they still had me "jumping through hoops" before they finally approved my loan. A few years later, anybody with a pulse could get a loan.

Right or left -- the whole system is wacky.

Anonymous said...

Well, we have 22 days left until the corrupt, morally bankrupt, and yes, evil g.w. bush and dick cheney pack up and crawl back into the hell holes they came from. bush created this mess, but unlike before, daddy's not around to fix it.

Anonymous said...

To Anon 12:55,

FYI, just to go on record, Ayres was not a "terrorist"- he was a radical. (Never mind that Obama met him years after his radical activities).

This will probably fall on deaf ears given your mind-set, but terrorists commit acts of violence against the public to spread terror. The Weathermen, on the other hand, were protesting the government, not attacking the public. The Republicans used the term incorrectly to scare the public, (what they do best), into voting for McCain by trying to turn Obama into a bogey man. McCain, to his credit, finally put a stop to it when voters started telling him they were scared of his opponent. The ploy worked a little bit too well. It worked on you so well you are still buying it.

As for Michelle, this is the first time I've heard the "Cop Killer" contention. I can't wait to hear the details!

Anonymous said...

Steve, once again you have veered into the delusional and ridiculously partisan. The Bush administration askjed for oversight of Fannie Mae and Freddie Mac SEVENTEEN TIMES in 2008 alone. But don't take my word for it, read the facts:

http://www.whitehouse.gov/news/releases/2008/09/20080919-15.html

(rather than the NYTimes alone)

Steve Hulett said...

ANon,

I read all the self-serving tripe at the link, and I'm delusional how?

Most of the warning and pleading that Bush claims to have been doing from 2001 to January 2007 was aimed at a Republican congress.

Just so you know, George W. was ... a Republican.

And despite all the yelling and screaming about oncoming disaster by a Republican Prez to a Republican congress, nothing got done.

Did Harry Reid conduct a filibuster? Uh ... no. Did Maxine Waters and evil old Barney Frank scare the Republican majority into inaction?

Nope again.

They just ... didn't do anything for a wide variety of reasons. But mostly they didn't see it coming.

And I know you're brain just won't wrap around this reality, but Fannie and Freddie weren't the reasons everything melted down.

The principle causes were: Loan brokers pushing sub-prime crap loans on all comers, investment banks selling the crap and ratings agencies labeling the crap AAA.

But thanks for calling me delusional and partisan. Especially when I write, over and over, that Democrats Schumer, Rubin and Clinton, also house and Senate Dems, were complicit in the disaster.

Anonymous said...

Steve:
"The Bush administration asked for oversight of Fannie Mae and Freddie Mac SEVENTEEN TIMES in 2008 alone."

But since you are stuck on talking about bundled mortgages that were aggressively sold then you must be intimately aware of Herb Sandler and his wife. You aren't? They are responsible for selling that "crap" to Wachovia and putting them out of business. Google his name and then read the Wikipedia page.

It should be illuminating for you when you scroll down to the political alliances and you'll see that they are allied with Soros and the democratic party. It might make your head spin since you have been hammering the republicans being at fault when the biggest scoundrels (bar none) of the issue you raise are democrats and fund democratic causes.

Steve Hulett said...

It might make your head spin since you have been hammering the republicans being at fault when the biggest scoundrels (bar none) of the issue you raise are democrats and fund democratic causes.

You win.

Totally agree, it's the Democrats fault completely.

The Republicans were just innocent bystanders, trying to no avail to steer the ship of finance into safe harbor.

If only the Democrat controlled media, led by those commies Murdoch, Redstone and Iger, hadn't pulled the wool over the gullible public's naive eyes, they would have seen the truth.

So now we are plunged into a financial catastrophe, and if only our poor nation had the eyes to see. But the socialists are all around us, led by the supreme socialist, Barrack Hussein Obama.

Happily, there are good people at the RNC, even now accusing Bush and the Republicans in congress of being communists and collectivists for the $700 billion bailout.

To which I say, Amen and Bravo!

Steve Hulett said...

And still more evidence of the Democrat fustercluck. Just look what those commie symps are doing now:

A short while back the Fed announced a new program to buy up to $600 billion worth of mortgage backed securities. Remember, this was what the TARP was originally supposed to do. But then Paulson decided to invest money directly into the banks to recapitalize them. And then the Fed decided on its own to do basically the same thing on its own. They've already bought up $100 billion worth and they've now hired BlackRock, Goldman Sachs, PIMCO and Wellington Management Company to purchase and manage $500 billion more worth of the stuff.

Why did these four companies get the contract? That's none of your business. The Fed just decided. Says the Fed, "The selection criteria were based on the institution's operational capacity, size, overall experience in the MBS (mortgage-backed securities) market and a competitive fee structure." In other words, these guys are the ones who know how to do it. But no public process, criteria or anything else.

Their purported knowledge, which I'm sure is true in a sense of technical experience, is somewhat belied by the fact that these were the firms that helped build up the mess in the first place.

-- Josh Marshall, Talking Points Memo


I knew when Barack Obama was elected, the long, dark night of Socialism would fall heavily upon us.

And look at what that Muslim-Commie has done NOW!

Oh, wait ...

Anonymous said...

Hulett's right. The GOP sees things the way they are.

At its meeting next month, the Republican National Committee is set to vote on a resolution formally opposing the bailouts, accusing Bush of helping nationalize the banks and taking "another dangerous step closer toward socialism," the Washington Times reports Tuesday.

"We can't be a party of small government, free markets and low taxes while supporting bailouts and nationalizing industries, which lead to big government, socialism and high taxes at the expense of individual liberty and freedoms," Solomon Yue, an Oregon member and co-sponsor of the resolution told the Times.

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