The other day CM Emily Evans wrote her quick and dirty take on the mess in the mortgage market. The Nation's Mark Sumner gives a better, more through and historical account of the rise and fall of the banking deregulation (how can CM Evans refer to Bill Clinton but not to the father of banking deregulation and John McCain's economic adviser, Phil Gramm?) that brought us to the point where we are beyond the simple question of loans made to people that should never have been made.
Sumner describes how the vacuous market of "credit default swaps" between lenders surpassed the GDP of the entire world, and he maintains that once the bottom fell out the lenders had no safety net because they were the ones who kept multiplying more risk (blaming the poor and minorities for predatory lending in what George W. Bush promoted as a deregulated "ownership society" is ridiculous). All of the Great Depression regulations that would have stopped the madness had been stripped away by Gramm and signed into law by Clinton.
And the only solution taxpayers are told they have now is misnamed a "bail out" (CM Evans is correct about that). According to Sumner, the legislation will be more like a taxpayer funded "garbage pit" where lenders who deal in default risk can dump the bothersome remnants of their ill-fated swaps. The White House and the Congress will use our money to cover and bury those problems, venting gases when necessary. Maybe CM Evans and others are correct that passing this legislation is more about saving Main Street than it is about saving Wall Street. But passing it is also going to be extending Main Street through the lending industry's garbage pit. And who ultimately is going to be accountable for cleaning the toxins up?
Sorry to run counter but the Nation article is Horseshit. Little more complex then that.
ReplyDeletehttp://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html
I see why Mark Sumner got an award for his fantasy writing.
ReplyDeleteHe gets it all in there - Garn-St Germain,Keating 5, Enron, credit default swaps, Arthur Leavitt, John McCain. But, no mention of interest rate trends, securtitized mortgage pools and the various traunch levels, no mention of mark to market, FNMA, Freddie MAC and the relaxed lending standards and no mention of sub-prime trends?
-Emily
Well there is at least a connection between the Keating 5 and John McCain, given that he was one of the Keating 5.
ReplyDeleteAre you suggesting that these banking and investment events and the governance involved are disjointed and that a common thread doesn't exist?
And I'm still troubled that two figures to whom you've attributed blame so far are Democrats: Bill Clinton and Nancy Pelosi. What about Phil Gramm and John McCain? The Republicans controlled Congress for a decade. They bear no responsibility for the mess?
If we are assigning blame, lets not forget Franks and Dodd. Both should be under criminal investigation. Clinton, I don't really blame, that to me is a little shakier. Pelosi I just blame for being Pelosi. Gramm it'd be nice to blame him, just because, but again shaky and there is other stuff to blame him for.
ReplyDeleteMy idea is stop blaming parties and look at the individuals and again why are hearings not being held. The fact that Frannie and Freddie were able to buy themselves out of regulation is unbelievable and Franks is directly responsible for that. Now he's the one telling us the solution?!?
There most definitely is a connection between John McCain and the Keating 5. I think that is well documented.
ReplyDeleteCommon thread going back to 1982? No, probably not. More recently, sure.
I didn't blame Bill Clinton for anything except to note that he was a big proponent of expanding home ownership It was a policy of which he was quite proud and I said it was a worthy goal.(Bill Clinton and my father-in-law were friends and I thought he was a pretty good president notwithstanding his emotional issues).
I blamed nothing on Nancy Pelosi except her inability to rise to the occaison and deliver a speach that was a little more statesman-like. Harry Reid managed to pull it off quite well and I believe he is a Democrat.
Everyone bears responsibility for this mess. It started with a noble and admirable policy that was not perfectly compatible with free market principles but was executed as if it were.
I wasn't picking on Democrats. I think Jim Cooper (who I have long admired)has done an outstanding job with this issue. I think Marsha Blackburn (who I do not know) has not demonstrated the same solid grip on either micro or macro economic policies. This was probably the first vote she has faced where leadership in the face of constituent rebellion was important. I also think Bob Corker (who recently bought a house in my district)has done a very nice job.
Sorry to be so non-partisan but it really is a pretty non-partisan problem that deserves a non-partisan response.