Debjax wrote:when in fact, he tried to warn of this very situation a number of years ago, in 2002. Barney Franks and
congress pretty much told him not to worry, things were fine.
Why is Barney Franks' name so often weilded in this context? For MOST of Bush's term, Franks was part of the minority.
Regardless, I agree there's a lot that went into this current crisis, and I agree the subprime thing is a large part of it, BUT...
What paved the way ultimately for the banks misbehavior? The repeal of the Glass-Steagall act (the second one), which regulated banks and kept them from becoming these "too big to fail, so you can pretty much do whatever you want" monstrocities we have now.
It was repealed by the Gramm-Leach-Bliley act of 1999, put together by two Republicans and signed by Bill Clinton in one of those acts of bipartisanship you really only see when you have a strong opposing majority in Congress for the President to deal with.
The Gramm in Gramm-Leach-Bliley is Phil Gramm, who in spite of a long history of really poor decisions regarding banks' ability to play nicely with others if not forced to do so by regulation, was John McCain's lead financial advisor and the most likely candidate for SecTreas if McCain had been elected.
So again, it's not so much that I really loved Obama's policies as that I thought a McCain victory would have been disastrous, and there was only one truly viable alternative.
By the way, I believe McCain is now one of the Republicans calling for a spending freeze. Think about that. We have most major economics experts saying that in order to halt this economic downward trend, we need to infuse capital into the system (aka spend money) and we have the historical fact that the Great Depression was aided and strengthened when Herbert Hoover's response to a similar recession was to enact a spending freeze.
Of course, that's getting into politics, because I strongly doubt that Republicans would be suggesting such a thing if they were in the majority, it's obviously a political ploy: If Obama listens and follows their suggestion, the country falls into a Depression, and Republicans take back the White House and perhaps Congress in 2012. If he doesn't listen and it takes longer than the American people have stomach for to turn the economy around, then Republicans in 2012 run on the "He didn't listen to us, and look what happened" platform with potentially the same electoral results.
Still, we needed a change. We need to swing the pendulum back and forth in this country, so that we stay ultimately pretty true to the center, to a balance between social spending and defense spending, between excessive regulation strangulation and corporations so large and powerful, they become de facto above the law.
This current crisis was brought about in large part because of the sub-prime mortgage meltdown, where institutions such as AIG and others, through creative financing practices with Freddie and Fannie encouraged and pushed by Obama (yes, he was part of this) and other Democrats to get people who otherwise could not afford a mortgage into home ownership, leaving them with more bad debt than they could hold and stay solvent.
This argument may have some merit, but it wasn't just Democrats. Bush, early in his Presidency, was calling for policies that would make it easier for lower income Americans to "achieve the American dream of home ownership".
And by the way, you've been listening to too much Fox News. As far as I've seen, there was never any push to require banks to loan money to people who could not afford that money, the act most often pointed to as such was ACTUALLY to prevent banks from refusing to loan to
qualified lenders who happened to be buying properties in poorer neighborhoods or who happened to be of a "less desirable" (to them, not to me) ethnicity. The point of the act was to prevent the creation of permanent slums, in which no development or revitalization could happen because no one could obtain a mortgage in order to buy properties there to fix them up. It was never to require banks to lend money to people who couldn't afford to pay it back.
Meanwhile, the lack of regulation on banks (again created at least in part by the repeal of Glass-Steagall) paved the way for these giant mega-banks to create the credit default swap based financial instruments and allowed AIG to issue what were essentially insurance policies against those mortgages going bad, without having the resources to cover those insurance policies should they actually fail. It also allowed banks to start issuing new mortgage types that only made sense if, in contravention of all past history, the Real Estate never decreased in value again, such as the "interest only mortgage", and of course the ubiquitous "arm with a balloon payment".
Throw into all of that a culture in which the guys at the bottom, who take the applications and ultimately are responsible for deciding who gets a mortgage, make their money largely on commissions for the number of dollars of loans they write and you start getting predatory lending practices, mortgage brokers preying both on borrowers (by convincing them that they could afford more house than they could) and on the banks (by filling out the forms to indicate that the borrowers could afford more than they could). And since most of the banks were issuing mortgages, making their money on the loan origination fees and the like, and then selling those mortgages in bundles to the mega-banks, they also weren't really in any hurry to do any more stringent background checking than the regulations (which were nonexistant) required.
If I hire you as a security guard, and then tell you that your pay will be based on how many sales the store gets, and that sales will be counted based on inventory alone, how much incentive is there on you to be an effective security guard, since theft reduces inventory as well as a sale does, and both increase your income? You personally might have integrity, and I'm not suggesting that any specific "you" here doesn't, but if you hire enough such security guards, eventually you'll hire some with more greed than scruples. That's essentially the situation that we had, and the reason so many people got into mortgages they couldn't afford, or were tricked into these "interest only" type swindles.
And yes, I do say "tricked", because at one point we almost got one of those, after working with an extremely predatory mortgage agent who wrote one up and didn't tell us, after we'd expressly said we were interested in a traditional 30 year fixed mortgage. We only caught it because unlike a lot of people, I insist on reading every legal document I sign, which is why my mortgage closings tend to take hours when many people get through them in a fraction of that. So I know there were mortgage brokers out there lying to get people into financial instruments the borrowers didn't need and/or couldn't afford, but which made the broker a larger commission.
Liam, tired of politics.
