Sunday, October 12, 2008
McCain's warning
It will not matter, but it does seem that the Republicans have the better case that the mortgage bubble in its various forms was pushed along in the political realm by the Democrats. John McCain led the charge against Fannie and Freddie back when we might have girded our collective loins, but the Democrats stopped him.
In fairness, though, monetary policy was another important cause of the housing bubble and the attendant mortgage catastrophe (not to mention the subsequent commodities bubble, only now bursting). The Fed kept interest rates too low for too long, and all that liquidity had to go somewhere. I do not recall Republican politicians complaining about that.
The truth is, no politician wants to stop a party.
9 Comments:
By 
, at
Sun Oct 12, 01:27:00 PM:
but the Democrats stopped him.
So the Democrats who couldn't get the local dog catcher elected before 2006 stopped the Republicans from trying to reform Fannie Mae in 2003 and 2005? I'm sorry who controlled the House and Senate in in 2003? And who controlled the House and Senate in in 2005?
Which party blocked antipredatory legislation, arguing it would interfere with legitimate lending? "Don't apologize when you make a loan above the prime rate to someone that has a marginal credit rating," Texas Republican Phil Gramm, then chairman of the Senate Banking Committee, told a group of bankers in 2000.
Who sponsored the Home of Your Own" initiative calling for 5.5million new homeowners?
Which President decried the fact that the lack of a down payment shouldn't be a hinderance to homeownership?
Which administration began criticizing Freddie Mac and Fannie Mae (in 2002) claiming they were "trailing" the rest of the mortgage market in terms of their financing of homes for low-income people and minorities?
Which Administration declared that Bush's agenda "will help tear down the barriers to homeownership that stand in the way of our nation's African-American, Hispanic and other minority families?
Which administration urged lenders to come up with creative loan products to make that happen?
Under which administration did the percentage of subprime borrowers who didn't fully document their income and assets grow from about 17% in early 2000 to 44% in 2006?
To lay this at the feet of the democrats is laugable, and more than a little bit disingenuous.
By 
Elijah, at
Sun Oct 12, 01:45:00 PM:
By , at
Sun Oct 12, 02:28:00 PM:
Wow.
So in the last two years Republicans have managed to stop every Democratic attempt at "reform", and thats why its not the Democrats fault.
But before that, Democrats were in the minority and therefore powerless to stop McCain, and thats why its not the Democrats fault.
That sharp pain you feel in your head right now is from the logic whiplash.
By smitty1e, at
Sun Oct 12, 02:45:00 PM:
I speculate wildly that the subprime debacle was the political price the Bush administration had to pay for the free hand in Iraq.
Those on the take pocket a lot of money, tank the market, blame Bush, and increase their hold on power.
IOW, Iraq was a faustian bargain.
By , at
Sun Oct 12, 02:56:00 PM:
Elijah, for every link Malkin posts in support of her position, I can find two that'll shoot it down.
Here's one to start you off:
The 2005 Federal Housing Finance Reform Act, a House Bill sponsored by Senator Oxley AND Barney Frank (yes, that Barney Frank) that would have created a stronger regulator with new powers to increase capital at Fannie and Freddie, to limit their portfolios and to deal with the possibility of receivership.
What happened to the bill? Well. let's ask Senator Oxley:
“All the handwringing and bedwetting is going on without remembering how the White House stepped up on this,” he says.
“What did we get from the White House? We got a one-finger salute”
Mr Oxley reached out to Barney Frank, then the ranking Democrat on the committee and now its chairman, to secure support on the other side of the aisle. But after winning bipartisan support in the House, where the bill passed by 331 to 90 votes, the legislation lacked a champion in the Senate and faced hostility from the Bush administration.
Adamant that the only solution to the problems posed by Fannie and Freddie was their privatisation, the White House attacked the bill. Mr Greenspan also weighed in, saying that the House legislation was worse than no bill at all.“
We missed a golden opportunity that would have avoided a lot of the problems we’re facing now, if we hadn’t had such a firm ideological position at the White House and the Treasury and the Fed,” Mr Oxley says.
By Elijah, at
Sun Oct 12, 03:26:00 PM:
"The truth is, no politician wants to stop a party."
Subsidizing (whichever party) home ownership for individuals who are not qualified to own a home is a bad idea.
Money for nothing...
By , at
Sun Oct 12, 08:16:00 PM:
There is a good argument to be made that the subprime "party" was fuelled largely by investor appetite for higher-yield "safe" asset-based securities.
The origination side followed -- didn't lead.
All of the CRA hysteria is yet another racist red herring.
By , at
Sun Oct 12, 09:54:00 PM:
Anonymous at 8:16,
Nice throw of the racist card. Pity all it does is illustrate you don't have any substantive points to make.
CRA forced banks to loan money to poor credit risks.
I'm sure that was one of the drivers for finding ways to help manage the risk that entailed.
Which led to securitization and the development of credit default swaps and other financial instruments which blew up a bunch of financial institutions in the past month.
Add to this the fact the the government supported entities (fannie and freddie) held around half of the bad paper one thing becomes perfectly clear.
If the government had not tampered with the financial system the problem would have been around half as big as it is.
Government actions acted as a catalyst and root cause for the failure cascade that is currently unwinding.
TJIT
By Dawnfire82, at
Sun Oct 12, 10:10:00 PM:
Syd: That's an impressive list of rhetorical questions. Unfortunately, if you think about them, they are not persuasive or even logical. For example, listing events from 2002 doesn't erase reform attempts in later years. For another example isn't, "Don't apologize when you make a loan above the prime rate to someone that has a marginal credit rating," the EXACT OPPOSITE of the *sub-prime* loans to people who couldn't afford terms that got us into this mess?
Additionally... you guys are actually pointing out that the Republicans not doing a party line vote on the issue was a bad thing? Really? What happened to the 'death of compromise' and 'Rethuglicans ramrodding things through Congress?' that I got used to hearing Democrats bitch about for, oh, years.
Anonymous: Claiming that a bill didn't pass the Senate because the President didn't like it is... kind of a lame excuse. Sounds like a Senator is trying to pawn off blame. But as it is, no one seems to know (or admit) to why that bill didn't go anywhere. Equally valid speculation suspects a Democratic filibuster threat.
http://uspolitics.about.com/b/2008/09/18/republican-congress-talked-about-financial-reform-but-did-nothing.htm
It's interesting, though, that no one seems interested in digging back into earlier administrations and seeing what originated back then that we are paying for now.
Such as: http://en.wikipedia.org/wiki/Community_Reinvestment_Act
But I'm sure that both sides will just squawk and bitch and blame the other side and no one will learn anything.
