@blankfist, since you seem to want my thoughts on this (but for some reason, wanted to edit the comment to look like you were just clearing your throat), I'll give you my rebuttal.

I'll take his three points in reverse order.

#3 about regulatory uncertainty is one of these universal conservative economic fantasies. There's no evidence that this really has any kind of macroeconomic effect. Certainly the usual conservative and business advocacy groups always get a laundry list of businessmen to all line up and say how they won't be able to function if they have to pay compensation to workers injured on the job, have to check to see if the products they produce are poisonous or otherwise unsafe, can't dump toxic chemicals into lakes and rivers, can't use slave labor, etc, etc. They always fight against efforts to stop them from being able to leverage negative market externalities for extra profit.

#2 The Yahoo Finance link itself debunks this, because what Schiff says is a flat-out lie. Here's what that link says:

In contrast to Schiff's warning, the law does the following, according to Reuters:

“The bill would set up an "orderly liquidation" process that the government could use in emergencies, instead of bankruptcy or bailouts, to dismantle firms on the verge of collapse.

“The goal is to end the idea that some firms are 'too big to fail' and avoid a repeat of 2008, when the Bush administration bailed out AIG and other firms but not Lehman Brothers. Lehman's subsequent bankruptcy froze capital markets.

“Under the new rule, firms would have to have 'funeral plans' that describe how they could be shut down quickly.”

Liberal critics also question whether the bill addresses "Too Big to Fail", but they're talking about limits on the overall size of banks.

#1 I've covered this fantasy of Schiff's about the nature of the crisis before. Here are two quick points I always make, which you never respond to: low interest rates don't create moral hazard, and Fannie and Freddie weren't even remotely the biggest players in the subprime mortgage-backed security space, much less the chief source of moral hazard.

All the moral hazard was created by the financial industry thinking it had found a way to insulate itself from the risks involved in bad mortgages using CDO's and CDS's -- without relying on government backing of any kind.

I'm happy to go into much more depth on #1 if you like, but you've never really demonstrated that you have any interest in listening to what I have to say on the topic with anything like an open mind.

Oh, and liberals agree that this bill doesn't really do enough in addressing the underlying problems that led to the crisis (the real ones). Basically, they say there's not enough rating agency reform, no leverage caps on investment banks, no Glass-Steagall separation of traditional and investment banks, no commitment to break up banks that grow beyond a certain size, etc.

In fact, from what I've read, the strongest part of this bill is exactly the part Schiff lied about -- it should prevent future Congresses from being forced to do taxpayer-funded bailouts. Instead, it'll be like the standard FDIC process for failed banks, only scaled up to deal with corporations of this size and complexity. Under that process, the bank shareholders, owners, and management get wiped out and fired, but the bank's creditors and depositors are made whole. The bank fails, but it doesn't take a huge chunk of the economy with it when it goes.

>> ^Winstonfield_Pennypacker:
I think that is a foolish & myopic approach that ignores the most important player (government) and gives a free pass to #3 (consumers).
Wasn't my point that some regulation is necessary and deregulation (while generally beneficial) can be harmful? You stated yourself that repeal of the Glass-Steagall act triggered a slow fuse.


Subprime mortgages are one thing - and by their very nature would be acknowledged as poor risks and treated as such. The problem could not have escalated to its eventual outcome had it not been possible for banks to rebrand (and obfuscate) these things into more innocuous packages.

(Wow, we went from healthcare to the mortgage crisis in a hurry, didn't we?)

Yeah, of course that's the real reason, but the overt pretext is a ridiculous exaggeration of #1 and #2.

McCain made up a few more lies to slander ACORN. He blamed ACORN for the subprime mortgage crisis. That couldn't be further from the truth, considering ACORN counseled poor people on how to avoid predatory lending and obtain cheap housing (and THAT operation of ACORN in particular is the one that got federal funding).

No that's not correct. Let's put the data on the table: what are the absolute numbers of subprime mortgages broken down by race?

>> ^gtjwkq:
Wow Nithern, your reply is a mess. I guess I should have explained to you that I'm not an anarchist, since that's what you understood by "free society", my fault for using such a loose term.
I meant a society free from government intervention in the economy, free market, preferably with a small government. Being mostly a libertarian, I don't like to be confused with an anarchist, the same way a social liberal might feel offended when called a socialist.
Well, one could argue that government of any sort is government intervention in the economy. That's why anarchists and libertarians so often get confused. Think about it. There's a market for murder. There's a market for "protection". There's a market for "waste disposal". So really, the question always boils down to 'what specific government interventions into the marketplace are you for?'

The problems with that line of reasoning are all those pesky externalities. Exploiting the commons for personal gain is the oldest trick in the book. It's also, unfortunately, the reason we need to regulate the marketplace. In our most recent episode, we removed long standing regulation on securities trading. They existed because in the 20's people had already figured out how to privatize gains and socialize losses. Without a government to overcome the transaction costs of collective bargaining, it would never be possible for people to prevent this sort of exploitation. To me, while anarchy seems like the end result of libertarian ideals... really it's rule by corporate oligarchy, with rampant exploitation of the commons. At least anarchy often does away with currency, and with it the power structure.


Ah I feel better already. Bureaucracies sure seem very efficient when you explain it like that.

How about like this: Medicare operates with 3% overhead, non-profit insurance 16% overhead, and private (for-profit) insurance 26% overhead. Source: Journal of American Medicine 2007

We're currently in a financial crisis because our government is broke, the world has been lending us money, but that will end when other countries realize we're never going to pay them back. Our government is currently spending money it doesn't even have.

I would disagree. We are currently in a financial crisis because an unbridled, short-term incentive laden banking industry leveraged itself into oblivion. Afterwards, they put a gun to our head and handed us the tab. In other words, print the dough, or the pitchforks and torches tear the whole joint down. The only reason their hustle didn't work indefinitely is because too many of US were spending money we didn't have. Changing that is going to take a cultural shift that is already beginning.

As for China, whom I presume you're referring to. I don't think they want to start selling their position. Ever hear of buy low, sell high? No, I think China is more likely to just borrow against it, and start picking up their part of the consumption. They're already pulling the world out of this recession.


Socialized healthcare as an option , doesn't make the idea any better, because it's still wasting money and it's unfair competition that will further distort the healthcare insurance market. Any reform in healthcare should involve reducing government intervention not increasing it.
I disagree. Also, can we call it a "public option" please? Our good friends in the public relations office spent a while coming up with that one. Listen, the bottom line is we already pay for everyone's health insurance. It's just that it's cheaper to pay for antibiotics than it is to pay for abscess removals on ER beds.


If people are having trouble understanding the rationale behind the Tea Party movement against socialized healthcare, it's mostly about excessive government spending and taxation. Was that too hard?

Yes. Define excessive.


I don't think social liberals will ever take the issue of spending seriously, even after the value of the dollar is destroyed and our economy collapses.

Spending is serious business, it's inflation you all gotta relax about. Is it worth having the "why inflation is good for the economy" argument with you? Or would you rather go back to your non-mathematical Austrian school BS, and we can just agree to disagree?

I think you need to educate yourself out of lies about the insurance business, on the government's major role in causing the housing bubble and subprime mortgage crisis, and on the utter uselessness and injustice of anti-trust laws.

I agree, it's difficult to write laws without unintended consequences. That is, you can always game the rules. One should not conclude from this, however, that you shouldn't try and write rules. Instead, you should just write them faster than the douche bags can game them. You always need more rules. Every time there is an advance in technology, you need more rules. Why? Technology makes it easier to game the rules, and exploit the commons, just like it makes it easier to do everything else.

Wow Nithern, your reply is a mess. I guess I should have explained to you that I'm not an anarchist, since that's what you understood by "free society", my fault for using such a loose term.

I meant a society free from government intervention in the economy, free market, preferably with a small government. Being mostly a libertarian, I don't like to be confused with an anarchist, the same way a social liberal might feel offended when called a socialist.

>> ^Nithern:
Sounds like a generalization, and not fact. There is structure within the goverment (local, state, and federal) to over see, and keep an accurate report of funds being spent (...)

Ah I feel better already. Bureaucracies sure seem very efficient when you explain it like that.

The concept of Health Care for all Americans is a good one. We can easily pay for it. If we can pay for Iraq ($3 trillion and climbing now...), we can pay for Health Care for 330 million people. Now, if an individual has better, or they like their health coverage, that's fine. This concept only gives people an option.

We're currently in a financial crisis because our government is broke, the world has been lending us money, but that will end when other countries realize we're never going to pay them back. Our government is currently spending money it doesn't even have.

Socialized healthcare as an *option*, doesn't make the idea any better, because it's still wasting money and it's unfair competition that will further distort the healthcare insurance market. Any reform in healthcare should involve reducing government intervention not increasing it.

>> ^NordlichReiter:
And that is why they are marginalized. Rational thought, and rational means they do not have.

If people are having trouble understanding the rationale behind the Tea Party movement against socialized healthcare, it's mostly about excessive government spending and taxation. Was that too hard?

I don't think social liberals will ever take the issue of spending seriously, even after the value of the dollar is destroyed and our economy collapses.

But for-profit health care companies are just that....the least effort for the most buck. They are not there, for the betterment of mankind, only their kind. I think we saw what happens when we go easy on financial rules during the Bush Administration and Wall Street companies. Do we really need this sort of crap with Health Care?

I think you need to educate yourself out of lies about the insurance business, on the government's major role in causing the housing bubble and subprime mortgage crisis, and on the utter uselessness and injustice of anti-trust laws.

>> ^TangledThorns:
Either way, the government option is dead thanks to the Tea Parties.

That would be a major achievement.

^ You're not making much sense to me either. The banking industry is one of the most highly regulated markets in existence. Regulate it an inch more and you might as well nationalize the whole thing.

If you want to find the biggest culprits behind our "collapse in credit" and the subprime mortgage crisis, look no further than the Fed, Fannie Mae and Freddie Mac.

It's not reasonable to ignore how distorted the financial and banking markets are, and blame only the market itself, instead of the government created agencies which are causing massive distortions, for any problems that arise.

Tags for this video have been changed from 'finance, economics, subprime, credit crisis, bankrupt, banks' to 'finance, financial, economics, subprime, mortgage, credit crisis, bankrupt, banks' - edited by calvados

AND ANOTHER DAMNED THING!! This doesn't cover ARMs or the interest only loans or the minimum payment loans. The videos "cute" little graphic makes it seem as if it was only the unwashed, working class purchasers of subprime mortgages (cigarette smokers, parents of multiple children; gee, why didn't they just shade them in to make them Black and/or Mexican??) who caused the problem, not the yuppie flippers or the innumerate (numbers equivalent of illiterate) middle class home-aspirants. Plenty of middle class folks have gone down the shitter through this arrangement, not just the "poor."

"This housing crisis didn't come out of nowhere. It was not a vague emanation of the evil Bush administration.

"It was a direct result of the political decision, back in the late 1990s, to loosen the rules of lending so that home loans would be more accessible to poor people. Fannie Mae and Freddie Mac were authorized to approve risky loans.

"What is a risky loan? It's a loan that the recipient is likely not to be able to repay.

"The goal of this rule change was to help the poor -- which especially would help members of minority groups. But how does it help these people to give them a loan that they can't repay? They get into a house, yes, but when they can't make the payments, they lose the house -- along with their credit rating.

They end up worse off than before.

"This was completely foreseeable and in fact many people did foresee it. One political party, in Congress and in the executive branch, tried repeatedly to tighten up the rules. The other party blocked every such attempt and tried to loosen them.

"Furthermore, Freddie Mac and Fannie Mae were making political contributions to the very members of Congress who were allowing them to make irresponsible loans. (Though why quasi-federal agencies were allowed to do so baffles me. It's as if the Pentagon were allowed to contribute to the political campaigns of congressmen who support increasing their budget.)

"Isn't there a story here? Doesn't journalism require that you who produce our daily paper tell the truth about who brought us to a position where the only way to keep confidence in our economy was a $700 billion bailout? Aren't you supposed to follow the money and see which politicians were benefiting personally from the deregulation of mortgage lending?

"I have no doubt that if these facts had pointed to the Republican Party or to John McCain as the guilty parties, you would be treating it as a vast scandal. "Housing-gate," no doubt. Or "Fannie-gate."

"Instead, it was Sen. Christopher Dodd and Congressman Barney Frank, both Democrats, who denied that there were any problems, who refused Bush administration requests to set up a regulatory agency to watch over Fannie Mae and Freddie Mac, and who were still pushing for these agencies to go even further in promoting subprime mortgage loans almost up to the minute they failed."

--Orson Scott Card

http://www.linearpublishing.com/orsonscottcard.html

The free market was upended by monopolies, creating shortfalls in the markets. Deregulation allowed this monopolization to continue unhindered, and the result was subprime mortgages that should be blamed on desirous homeowners who can't afford their mortgages, mortgage companies for approving low-rate plans, and banks for approving the loans for such ill-advised actions.

The fallout in a free market should have been the destruction of the mortgage companies and some banks. Instead, the fallout would destroy the entire financial system, starting with the mortgage companies, furthering itself with the banks, and ending with the collapse of the dollar and another Great Depression.

Unfortunately, the only way to save us from this calamity is to force the debt upon the taxpayers. Though, it's not as if George W. Bush has had a problem with this since the beginning of his dictatorship. He's just enacted a War on Capitalism by use of fiscal socialism. And we all suffer for it.

The problem with the buyout is the creation of new money from outside the gold standard, thus weakening our currency further. Also, there is no proof that the 700B dollars will do more than plug a hole in the Hoover Dam. Other cracks could be just around the corner.

I would say "Be Prepared," but there is nothing we can do. We could scream at the top of our lungs, "Don't spend our taxes on this!," but our screams will fall on deaf ears.

There is widespread agreement that the primary cause of the current crisis is the bursting of the housing bubble followed by delinquencies and defaults by homeowners on subprime mortgages. Because of historically low interest rates during the first half of the decade, the extension of credit grew dramatically. So-called "predatory lenders" devised subprime mortgages to lure those unable to qualify for a conventional mortgage into the housing market.

Predatory lenders offered prospective home buyers with low incomes or poor credit histories loans structured appealingly in the short term but whose adjustable rates caused a sharp increase in payments after a couple of years. As long as housing prices continued to rise, home buyers were told, they could seek advantageous refinancing before the higher rates took effect.

Instead of maintaining a relationship with their borrowers, lenders then sold the mortgages—which were then packaged into residential mortgage-backed securities, in which investors collect on interest rates and principal payments—and kept the loan origination fee. Thus freed of risk for writing subprime loans, predatory lenders continued to find ways to entice new home buyers into the market.

Source

I've made bad decisions regarding loans, and now I'm paying dearly for them. But I don't blame anybody but myself. I certainly wouldn't blame the loan officers for preying on white, lower class lazy fucks who should know better but still act on impulse anyway.

It's too bad lead balloons can't fly.

>> ^muddro:
>> ^thinker247:
I had a hard time listening to the audience member talk about how the subprime mortgages were intentionally focused upon the black community.
Yeah, points for Obama on that. He sounded a little flustered when I originally heard the sound bites (on the radio), but seeing the video and the larger context makes it pretty clear that he's contending with his own supporters as he tries to respond.
Given that accusation especially, I would have said something to the effect of "if the ignorant would read their promissory notes before signing for a loan then maybe we wouldn't have a problem, and if 'the ignorant' includes blacks, then so be it." and obviously, that would have flown like a lead balloon, but it's the truth.
Obama manages to avoid calling him out and instead basically just takes his primary argument away from him politely. Nicely done.

>> ^thinker247:
I had a hard time listening to the audience member talk about how the subprime mortgages were intentionally focused upon the black community.

Yeah, points for Obama on that. He sounded a little flustered when I originally heard the sound bites (on the radio), but seeing the video and the larger context makes it pretty clear that he's contending with his own supporters as he tries to respond.

Given that accusation especially, I would have said something to the effect of "if the ignorant would read their promissory notes before signing for a loan then maybe we wouldn't have a problem, and if 'the ignorant' includes blacks, then so be it." and obviously, that would have flown like a lead balloon, but it's the truth.

Obama manages to avoid calling him out and instead basically just takes his primary argument away from him politely. Nicely done.

I had a hard time listening to the audience member talk about how the subprime mortgages were intentionally focused upon the black community. If you want to buy a house, but you and your wife both work at McDonald's, you don't get a home. And if someone offers you a low-rate mortgage on a nice house, even though you both have minimal pay, you don't take that offer. And if you do take that offer, and now your home is being taken away...too bad for you. Another life lesson learned, perhaps?

BUYER BEWARE.