Wednesday, February 25, 2009
What regulations were gutted?
Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn’t afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day.
What regulations were gutted? He keeps asserting this as if it were well understood, but it is not. While I do not claim to be an expert, I know a lot more about this sort of thing than most Americans. What regulations is he talking about?!?
56 Comments:
By 
Counter Trey, at
Wed Feb 25, 01:04:00 AM:
TH
He used that line in every debate and I kept wishing and hoping that McCain would just once say:
"Name one. Name one regulation that was cut."
It would have ended that nonsense dead in its tracks.
By Count Grecula, at
Wed Feb 25, 01:23:00 AM:
Really wondering what you would think of this Barry Ritholtz piece in Barrons (and what you might think about Ritholtz)
A Memo Found in the Street
A sample:
1999: The Financial Services Modernization Act repealed Glass-Steagall, a law that had separated the commercial-banking industry from Wall Street, and the two industries, plus insurance, came together again. Banks became bigger, clumsier, and hard to manage. Apparently, risk-management became all but impossible, even as banks had greater access to larger pools of capital.
2000: The Commodities Futures Modernization Act defined financial commodities such as "interest rates, currency prices, and stock indexes" as "excluded commodities." They could trade off the futures exchanges, with minimal oversight by the Commodity Futures Trading Commission. Neither the Securities and Exchange Commission, nor the Federal Reserve, nor any state insurance regulators had the ability to supervise or regulate the writing of credit-default swaps by hedge funds, investment banks or insurance companies.
2001-'03: Alan Greenspan's Fed dropped federal-fund rates to 1%. Lulled into a false belief that inflation was not a problem, the Fed then kept rates at 1% for more than a year. This set off an inflationary spiral in housing, and a desperate hunt for yield by fixed-income managers.
2003-'07: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability. The borrower's ability to repay these mortgages was replaced with the lender's ability to securitize and repackage them.
2004: The SEC waived its leverage rules. Previously, broker/dealer net-capital rules limited firms to a maximum debt-to-net-capital ratio of 12 to 1. This 2004 exemption allowed them to exceed this leverage rule. Only five firms -- Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley -- were granted this exemption; they promptly levered up 20, 30 and even 40 to 1.
I'm still trying to make heads or tails of it all.
BTW, you're my favorite rich guy TH. I read you every dang day!
By giantslor, at
Wed Feb 25, 01:34:00 AM:
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/30/AR2008103004749.html?hpid=topnews
"The White House is working to enact a wide array of federal regulations, many of which would weaken government rules aimed at protecting consumers and the environment, before President Bush leaves office in January.
The new rules would be among the most controversial deregulatory steps of the Bush era and could be difficult for his successor to undo. Some would ease or lift constraints on private industry, including power plants, mines and farms."
By 
, at
Wed Feb 25, 01:54:00 AM:
>>>>What regulations were gutted? He keeps asserting this as if it were well understood, but it is not. While I do not claim to be an expert, I know a lot more about this sort of thing than most Americans. What regulations is he talking about?!?
Just don't think about it too much and you'll make a fine Obama supporter/enabler. Ahh...the first black President. We're so awesome. Housing crisis? It'll just blow over like it always does. We're so cool for electing a black guy....
By , at
Wed Feb 25, 03:08:00 AM:
Please let us know when you find out. Given that he has a few days to write a speech, you would think he would just name the regulation that was gutted. That way we could un-gut it. Keeping that point so vague is a little like voting "present". It is hard to figure out if you should support him or not.
And actually, as a Republican I must say it is cool we elected a black guy. Those Democrats tried for decades to keep them down, but we persevered and now we have been victorious. Take that, George Wallace.
By , at
Wed Feb 25, 03:44:00 AM:
>>>And actually, as a Republican I must say it is cool we elected a black guy. Those Democrats tried for decades to keep them down, but we persevered and now we have been victorious. Take that, George Wallace.
Victory? We elected a black guy because of his race. That's not victory, my friend. That's racism. And when Obama fails, feel-good Republicans like you will likely blame his race for the failure.
By JPMcT, at
Wed Feb 25, 06:52:00 AM:
I think The Obamateur's comment was a nod to the Kooks who lay the blame for the economic decline at the feet of Ronald Reagan for "deregulating" the mortgage industry.
That, of course, requires it's own set of explanations...and ignores the past 20 years of willful fiscal incompetence on the part of Congress in it's oversight capacity of an industry purpopusly out of control. Indeed, Obama has HIRED some of the most grevious offenders to his own staff.
I'm so happy we have a cool black guy whose president....here's an idea: Let's make him KING, give him some cool robes and a crown and a big fat gold chain and a 10 pound watch and let him rule ceremoniously....and then elect a COMPETENT president to run the executive branch of our government. The color of the new president should not be an issue, since we will always have the King.
By , at
Wed Feb 25, 07:41:00 AM:
If he blames deregulation during the Bush years, and repeats that charge often enough, it will be "true" regardless of facts. That seems to be the approach this Administration is taking.
Never mind what Chris Dodd, Barney Frank, and other sitting fat and happy on the Hill may have done to contribute to the problem! Move along people, nothing to see here ....
There's plenty of blame to go around. But you wouldn't know that from the statements this President is making -- and our press laps it up and prints it uncritically.
And then they wonder why the markets continue to go down, down, down.
By , at
Wed Feb 25, 07:46:00 AM:
"2003-'07: The Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability. The borrower's ability to repay these mortgages was replaced with the lender's ability to securitize and repackage them.
2004: The SEC waived its leverage rules. Previously, broker/dealer net-capital rules limited firms to a maximum debt-to-net-capital ratio of 12 to 1. This 2004 exemption allowed them to exceed this leverage rule. Only five firms -- Goldman Sachs, Merrill Lynch, Lehman Brothers, Bear Stearns and Morgan Stanley -- were granted this exemption; they promptly levered up 20, 30 and even 40 to 1.
Bravo to Count for linking to the Barron's article.
No comment TH? The rest of you?
By smitty1e, at
Wed Feb 25, 08:40:00 AM:
The gutted regulation was the one about not employing "The Big Lie" on the American people.
By , at
Wed Feb 25, 09:17:00 AM:
As usual, the Un's word's are chosen to mislead: the regulations were NOT scrapped. The origin of the "housing/bank" crisis was caused by Congress. They deliberately altered "the regulations" to create a new political constituency, the HOME OWNING POOR.
From there, the financial engineers, knowing what a mess had been born, took over and levered and obfuscated these bad decisions many times over, to a gullible world securities market, in order to dilute and mitigate the effects of the original erors.
But, instead, the "banks" are on now the hook for 40-60 trillion dollars, instead of just a couple of trillion. But hey, that's progress.
No wonder Geithner is speechless.
By , at
Wed Feb 25, 09:26:00 AM:
Good Lord, meta-4, get a clue, or better yet open a dictionary. The word "gutted" that Obama used is far different than the word "scraped" that you injected.
TRANSITIVE VERB:
gut·ted , gut·ting , guts
2. To extract essential or major parts of: gut a manuscript.
3. To destroy the interior of: Fire gutted the house.
4. To reduce or destroy the effectiveness of: A stipulation added at the last minute gutted the ordinance.
By , at
Wed Feb 25, 09:27:00 AM:
To anonymous: yes, these things are true. Many U.S. GOVERNMENT agencies must share the blame, both republican and democrat. It is simplistic to single out one political entity. The current problem represents a colossal failure of our elected representatives to know and do "the right thing".
And are we now expecting these same people to "do the right thing" and fix the problem?
I don't.
By , at
Wed Feb 25, 09:29:00 AM:
To anon: Excuse me. I thought for a moment you were being objective
By Christopher Chambers, at
Wed Feb 25, 09:39:00 AM:
TH: the reactions of wingnuts, and the GOP in general, appears to be that of people in Japan and Germany in waning days of WWII who committed suicide. It's telling that they did so much not b/c they feared reprisal or hardship, but merely b/c their minds couldn't take the fact that they'd lost, and they needed to endure and help rebuild a new world with new ideas. As I've told you, TH, in person, my dad calls it extreme cognitive dissonace...like founding the KKK during Reconstruction. (and I know many of your disciples look at this era starting 11/4 in the same light). I call it cowardice. Maybe being "downtrodden" and eating sh*t will build character in the Right. Frankly I really thought that would happen. Then there'd be a bloom of finding common ground, turning away from jackasses. self-righteous pols and blowhards in politics, on TV, on radio.
Nope. Now I just see a bunch of gotcha cowards who are preaching to an ever smaller choir--even pushing up silly figureheads. Still not too late to turn away from being yella, though.
By smitty1e, at
Wed Feb 25, 10:09:00 AM:
@Christopher Chambers:
Let me tell you how correct you are. You are indeed so right that the Tea Party protests, like the one in DC this Friday, are not happening at all.
They are, in fact, simple figments of Rush Limbaugh's imagination.
Nope, we're all happy in BHO's Brave New Socialist World, modulo these occasional Constitutional dreams.
Just need to up the dosage, that's all.
By , at
Wed Feb 25, 10:21:00 AM:
Christopher Chambers, I am tired of being called a racist by racists. I am tired of being called a coward by cowards. Please remember that the visitors to this blog are individuals, not members of a herd and I strongly object to be treated like I have certain particularities because I am a Republican.
You are so also wrong about the Japan and Germany comparison. The Republicans are upset because President Obama has already revealed himself to be a bigger liar than the left thought George Bush was. Remember when President Obama said he would support fiscal responsibility? So many who paraded President Bush Pinocchio puppets think Obama's lies are okay, that doesn't bother you?
In my case, my father came from the deep south, and he left the Democratic Party in part because of it's racism and support for Jim Crow segregation. You take care of the hate mongers on the left before you come over here and start to lecture us. Glass houses and all of that.
By , at
Wed Feb 25, 10:38:00 AM:
The piece from Barrons is spot on. A lot of the blame for the fiscal crisis is on Bush and the Republicans, not just Barney Frank. The two parties try to shift blame when it's on them both. If you don't regulate Wall Street well, competitive pressures force bankers to go to the edge and over.
We let the average downpayment for all mortgages to drop to 3%! This was the root of all evil in the mortgage industry. The Bush administration wanted increased home ownership, not just Barney Frank.
We let a multi-trillion dollar derivatives market develop with no oversight. CDSs are insurance that should have been regulated as such, for example. We let investment banks triple their leverage -- Jamie Dimon at JP Morgan made an issue of this, but no one listened. When a regulatee is complaining, we should have known there was a problem.
I've ranted here that if the Republicans don't get their act together, Obama & Co will run riot. To do so, the Republicans have to acknowledge that in eight years with Bush they were total f*ck-ups. They killed the Republican brand.
Reagan was once a registered Democrat -- "I dind't leave the Democrats ... they left me." I can say the same about the Republican party. I bet I speak for a potential third of America.
Just because a guy like Rush is sometimes right doesn't mean that he's not a divisive nasty asshole. Keep kowtowing to folks like him and Republicans will stay lost in the wilderness.
Link
By , at
Wed Feb 25, 10:49:00 AM:
Bush & Co ruined the Republican brand!
The Republicans used to stand for:
~ Smaller federal government
~ Fiscal responsibility
~ Shrewd foreign policy
~ Restraint in foreign entanglements ... especially militarily
~ Managerial competency
... after Bush, Republicans would score woefully low on the things that used to be their strengths.
Just being anti-Obama won't cut it.
The Republicans need independents and small "l" libertarians to win. These groups came to hate Bush, many with a passion. This will still be a factor in 2010 and 2012 and even later.
Republicans could become a permanent minority party of just the religious right and Rush's ditto heads. Even some of this base can be picked off by Obama's promises of checks in the mail.
Ordinarily in American politics, you don't want to look backward. But here Republicans have to deal with this, else the Democrats will use it to their advantage. The Soviet Communists got good at blaming prior leaders, so they could move on. Why not the Republicans. To restore their brand, the Republicans need to allow fair criticism of Bush. If the "base" only listen to themselves, and won't allow criticism of Bush, they won't be able to win the votes of independents and small "l" libertarians to win.
Link
By , at
Wed Feb 25, 10:54:00 AM:
FYI: Apparently, Mr. Just Words, Just Speeches didn't impress Wall Street; -160 DOW, 1 and 1/2 hrs into todays trading.
Perhaps words DO mean things, like THE Un may be a national financial disaster in the making......
OK libs, prove me wrong.
By , at
Wed Feb 25, 11:03:00 AM:
The link the Barrons article is nice, but the "guttings" that are listed are the symptoms of the problem, and not the cause.
If those "reforms" were really the problem, you would expect that mainly the US financial system would be the one in trouble. Did the EU "gut" their regulations due to the nefarious Republicans? No siree. But, the EU is in even worse straits financially, because of their version of subprime lending to emerging markets and eastern europe.
Their banks are even more insanely leveraged than AIG,CITI, and the other failed US banks.
Hell, they seem like such bad bets that foreign money is flowing into the US - despite the hosed financial system - because the EU, or other national financial systems seem like an even worse bet.
No, the real problem are the computer risk models that proliferated in the financial industry over the last 15 years.
These models gave the illusion that many of these financial risks were handled, and that it was safe to make the reforms listed in the Barrons article. The same shift in risk perception caused the EU to make similar choices about leverage for their banking system.
Now of course, these computer risk models have been revealed to be catastrophically wrong a small percentage of the time, and we are stuck with the consequences.
By , at
Wed Feb 25, 11:09:00 AM:
I agree with the basic point - it's a lie to say regulations were gutted.
However, the SEC abdicated responsibility in letting banks get leverage up to 30x. That by itself ought not to be a problem in a capitalist system; some fail, new ones come along.
But there was a correlated failure, an inconsistency in the regulation -- allowing firms to get "too big to fail."
The proper role of government is to enforce the premises of capitalism and then get out of the way -- many independent agents, free to trade, no monopolies, and none "TBTF." We use the Herfindahl index to define market concentration for monopolies. We must use the same principle to prevent "TBTF."
Do that, then Darwin can do the rest.
By , at
Wed Feb 25, 11:14:00 AM:
It's curious that someone would cite the Barrons article as evidence that GOP administrations lessened regulation, when each of the points raised in the article led to increased oversight and regulation. Glass-Steagall was changed to actually improve the oversight of Bank holding companies, who were engaging in businesses not permitted to banks themselves. The bill was passed in the Senate 90-8 and in the House 362-57, with bipartisan support. The 2000 change in commododites regualtion occurred to catch up with London markets, where US regulation and oversight was nill. The FED Funds rate change isn't even remotely related to regulation. The decline in credit standards was as a result of regulation put in place by the Clinton administration and later significantly expanded by the Democrat Congress elected in 2006, that required such changes by law.
Instead of arguing that regulation was "gutted" as the Democrats are arguing, which is wrong, I think they should argue that regulation was lax and the regulators were incompetent. They could further argue that Congress failed to keep up with innovation with new regulations, and failed utterly and completely in their oversight efforts. I would wholeheartedly agree with those arguments, should they get made.
By , at
Wed Feb 25, 11:26:00 AM:
Obama's rhetoric is intentionally inaccurate and a set-up for new regulations -- which will likely only make things worse -- but it will feel "correct" to most Americans. Things went horribly wrong under Bush, didn't they.
Making arguments that Bush and the GOP did a good job, and that it was the fault of Clinton and Congressional democrats won't fly. To an average American, they're laughable.
Link
By , at
Wed Feb 25, 11:28:00 AM:
Meta writes:
FYI: Apparently, Mr. Just Words, Just Speeches didn't impress Wall Street; -160 DOW, 1 and 1/2 hrs into todays trading
Little wonder when he's promising Wall Street that the days of "fancy drapes" and "private jets" is over. OTOH, his main street approavl rating after last night's speech spiked to 80%.
By , at
Wed Feb 25, 11:28:00 AM:
Instead of hoping that Congress gets with the program and becomes better regulators, i would much prefer idiot-proofing the regulatory system.
Cap total leverage for banks. This is easy to quantify, track, and regulate.
Keep the banks and financial services companies from getting too big to fail. If they grow to large, force them to split or spin off their operations into separate companies.
That would build in a cushion for regulatory and banker incompetence - one that would allow a certain level of problems going forward, but nothing particularly disasterous.
By , at
Wed Feb 25, 11:44:00 AM:
FYI: Apparently, Mr. Just Words, Just Speeches didn't impress Wall Street; -160 DOW, 1 and 1/2 hrs into todays trading
Gee, Mr. Meta, could it possibly be that traders are skittiish after today's news that housing sales dropped another--gulp--5.3%? Or maybe it has something to with Bernanke's testimony on the Hill today?
I dare say that banking on President's Obama's failure as a mesure of your "success" is remarkably short-sighted much less a policy to hang your hat on.
By , at
Wed Feb 25, 11:57:00 AM:
Good discussion. What say you TH?
I am suspicious of the Ritholtz piece. I can't say way... I have a sense it conflates and confuses as much as it informs. All this financial stuff is way over my head.
I will say this: for the President to say "regulations were gutted" and then go off on "banks and lenders who pushed those bad loans anyway" is an appalling act of dishonesty, a complete non-sequitir especially from the Democratic point of view. It's an argument against CRA and Fannie/Freddie at least as much as the failure to regulate derivatives etc.
Obama will seek only to regulate/punish wall street, which obviously needs some kind of guard against this foolishness in the future- not that it can be eliminated. By the same token, he will not lift a finger against Barney Frank and co. for their egregious mishandling of Fannie and Freddie resulting in their failure. There will be no consequences on that end.
Moreover, there will be great sums of money expended making sure those people who bought homes they couldn't afford from banks and lenders who pushed those loans get to stay at their homes at a good rate. I, who bought a house I can afford, will pick up the tab.
How to battle this brazen dishonesty when it will "feel"so right to a majority of Americans??
By Elise, at
Wed Feb 25, 11:59:00 AM:
To me this is simply evidence of Obama's lack of curiosity about his own world view. I'd be willing to bet it has never occurred to him to ask exactly what regulations were "gutted". The idea that some were and that's what got us into this mess - like the ideas that reining in greedy CEOs and raising taxes on rich people will fix things - are simply givens for him. It would no more occur to Obama to question those "facts" than it would occur to him to question the sun rising in the East.
By , at
Wed Feb 25, 12:05:00 PM:
It would no more occur...to question those "facts" than it would occur to him to question the sun rising in the East.
Earth to Elise: Bush is no longer in office:~)
By , at
Wed Feb 25, 12:07:00 PM:
ANON: And WHY do you think that is?.......Could it be that the current government now has the housing market bound tighter than a mosquito's ass stretched over a rain barrel.....?
You seem to have the media talking points down pat. The real reason for todays decline is the market has discovered what a pompous poseur Obama is.
By , at
Wed Feb 25, 12:16:00 PM:
"Making arguments that Bush and the GOP did a good job, and that it was the fault of Clinton and Congressional democrats won't fly. To an average American, they're laughable.
No one is making those sorts of arguments on this thread, that I see anyway. In my own post, reviewing the Barrons points raised in a previous post, I talked about the lack of any evidence of "gutting of regulation" in the article.
By , at
Wed Feb 25, 12:25:00 PM:
Let me make one further point: lots of Americans seem to think more regulation would have prevented this crisis. Is there any evidence at all this is true? Does anyone here know of any evidence, because I don't believe more regulation would have prevented any of this. After all the regulations we have are poorly enforced, witness the Madoff case, and the government agencies involved don't seem competent to regulate financial businesses. Increasing the power and budgets of government regulatory authorities will just spend more money without improving outcomes.
By , at
Wed Feb 25, 12:33:00 PM:
FYI: Apparently, Mr. Just Words, Just Speeches didn't impress Wall Street; -160 DOW, 1 and 1/2 hrs into todays trading
Hey meta, did you ever think that the today's market decline has something to do with Bobbie Jindal's dismal performance last night? Holy smokes. Is that the best you guys got?
As David Brooks told Jim Lehrer: "it's nihilism."
LEHRER: How well did he do?
BROOKS: Not so well. You know, I think Bobby Jindal is a very promising politician, and I opposed the stimulus package - I thought it was poorly drafted - but to come up at this moment in history with a stale, "government is the problem...we can't trust the government"...it's just a disaster for the Republican Party. The country is in a panic, now. They may not like the way the Congress passed the stimulus bill. The idea that government is going to have no role in this...in a moment where only the Federal government is big enough to do stuff...to just ignore all that and say government's the problem...corruption, earmarks, wasteful spending - it's just a form of nihilism. It's just not where the country is, it's not where the future of the country is... I think it's insane. I think it's a disaster for the party. I just think it's unfortunate right now.
See you 2016. Maybe.
By , at
Wed Feb 25, 12:41:00 PM:
1999: The Financial Services Modernization Act
2000: The Commodities Futures Modernization Act
2001-'03: Alan Greenspan's Fed dropped federal-fund rates to 1%.
2003-'07: The Federal Reserve failed to use its supervisory and regulatory authority over banks,
2004: The SEC waived its leverage rules.
So, Count, help me understand this. The first two items were bills signed into law by president Clinton, and the last three were changes in policy, not changes in regulation, right?
Again, please tell me which regulations were gutted by the Bush administration.
By Escort81, at
Wed Feb 25, 12:42:00 PM:
I am not sure that playing the blame game benefits anyone except politicians seeking to score points. We should all be smart enough to know that Democrats and Republicans both share responsibilty for the underlying causes of the credit crisis, which, as THTV has talked about previously can be looked at in the context of the last several decades of the explosion of capital availability worldwide, especially debt capital. Then we get down to a question of degree, but so what? Let's analyze the problem and fix the fuc**r.
Half of the mortgages in default are subprimes, which has at least something to do with the CRA, and something to do with poor lending practices / inadequate due diligence, and something to do with some borrowers not being truthful at origination and having a mindset the house is just another investment, really just a call option if you're highly highly levered, no big deal to walk away from and go on to the next deal. Let's change all that. How about max loan to value ratios of 75% or 80%? Better auditing procedures for origination, or have the originators be required to keep some of their paper (picked at random by a third party so no cherry picking happens) so that they have skin in the game and don't look at it soley as a fee generating exercise.
I am not sure any of the Barron's history is on point to the original question posed at NRO (to which TH links), except perhaps the second to last one, which is somewhat vague. I think there is a difference between a regualtion being gutted and an existing regulatory structure not being strictly enforced, but no government entity can look at every transaction under its auspices. Nobody wanted to be the turd in the punchbowl and call BS on the boom in housing prices.
Also, we have to get past this old perception that "Wall Street" is some giant Republican enclave. I am nearly positive that Obama raised more money from employees of major Wall St. firms than did McCain (many live in Manhattan, after all). If Wall St. misbehaved or over leveraged, that does not fall much more on one political party or the other. We're trying to distinguish the hookers from the johns at that point.
By , at
Wed Feb 25, 01:32:00 PM:
I'm surprised that no one has linked to this Barron's article instead of just the other one.
By Viking Kaj, at
Wed Feb 25, 01:37:00 PM:
Interesting to note that the repeal of Glass Steagall and the enactment of the Commodity Futures Modernization Act occured on Clinton's watch.
Democrats should probably exercise more caution in fingerpointing on this stuff, since they are equally responsible.
Of course they are also really good at reinventing history, like who invented the automobile.
I can't help but feel that this is the beginning of the end.
By Viking Kaj, at
Wed Feb 25, 01:38:00 PM:
Interesting to note that the repeal of Glass Steagall and the enactment of the Commodity Futures Modernization Act occured on Clinton's watch.
Democrats should probably exercise more caution in fingerpointing on this stuff, since they are equally responsible.
Of course they are also really good at reinventing history, like who invented the automobile.
I can't help but feel that this is the beginning of the end.
By , at
Wed Feb 25, 01:46:00 PM:
Anon- Look at all my comments. I'm in partial agreement with you. Obama's vauge "regulations gutted" leaves one reaching for specifics. I think it could cut against Democrats as least as much as Republicans if we had an honest press.
Kaj- I will note that the Commodities Futures Act I think passed at the very, very end of the Clinton administration and really had little to to with him. A courtesy, much like Bush's bailout.
The fuzzy thinking on Obama's part makes me very nervous as to his ability to understand and fix the mess we're in.
I've got more thoughts on my site or check out Richard Fernandez at Belmont Club today.
By , at
Wed Feb 25, 01:46:00 PM:
Viking, i agree. Once we chose socialism, I was convinced Americans no longer possessed the critical thinking skills required to be world leaders... at anything. I forsee decades of struggles for world power, what once was the domain of the USSR and USA, then just the USA, will probably be shared by 4 or 5 entities, with China emerging, around 2050, as the clear world leader economically and militarily. IF they can steer clear of the nuclear hot zones.
By Cardinalpark, at
Wed Feb 25, 01:50:00 PM:
Regulations weren't gutted. Lending standards were. Its Orwellian absurdity if you think about it because regulations were oriented towards proliferating, not preventing, lending. Whether its FANNIE or FREDDIE unerwriitng atandards or CRA icentives to drive lending into underserved communities -- it was well intentioned stuff.
The problem is the hand of government is always underestimated in its enormity and individuals are supremely ingenious at figuring out how to exploit rules. Mortgage brokers, lenders and borrowers all benefitted in the extreme until the music stopped. But as with all credit bubbles, the mania was driven by a relaxation of lending standards. Borrowers weren't exploited. Lenders weren't exploited. Brokers weren't exploited. The rules and standards were. And we all now collectively pay an economic price.
Every economic cycle works like this. Always. This ones bigger than any other because it involved our single largest asset class - real estate.
By , at
Wed Feb 25, 02:03:00 PM:
Cardinalpark- Regulatons werent'gutted. Lending standards were"
What a great formulation! I agree completely, but wasn't the bundling of these mortgages- which Fannie and Freddie also heavily engaged in, despite warnings from Bush and McCain (among others) the thing that spread the pain so widely? Not that the US or conservatives we're alone or primarily responsible for these things?
I thought the Orwellian phase was coming to an end. Silly me.
By Viking Kaj, at
Wed Feb 25, 02:07:00 PM:
JSF
Interesting question since the Chinese are still nominally Communist and certainly socialist.
Does your analysis imply that their brand of socialism is better than ours?
I tend to think that the problems in America are caused by a deficit in leadership.
My personal belief is that we need to be truer to libertarian principals since I believe that all Americans fundamentally agree that freedom is our most cherished virtue.
After all, it's not called the Statute of Equality...
By Viking Kaj, at
Wed Feb 25, 02:12:00 PM:
Wasn't the biggest source of the problem all that cheap money that the Fed made available after the .com and 9/11 crashes?
Sometimes the party has to come to an end, even if it hurts.
We have a government and a country who are addicted to debt.
It's time to go cold turkey.
By , at
Wed Feb 25, 02:18:00 PM:
CardinalPark- turn that statement into an email and send it off to Michael Steele. It perfectly captures the cause of the real estate bubble.
By , at
Wed Feb 25, 02:21:00 PM:
Viking, valid point. The reason I think a socialist China will EVENTUALLY prevail, is because by then there will be little or no capitalism left in the world. China's sheer numbers will dominate. But make no mistake, while they will be dominant, by no means will they be as affluent as we 'were'.
By , at
Wed Feb 25, 02:37:00 PM:
After thinking about the original question some more, the only gutted regulations I can recall are those regulations governing payment of taxes by our Democrat overlords. Speaking of Democrats not paying taxes, I wonder if Ted Kennedy is now a resident of Florida? I'll bet you a beer he is by the time he dies: Why pay Virginia or Massachusetts estate taxes, if you're an aristocrat?
By , at
Wed Feb 25, 04:42:00 PM:
lots of Americans seem to think more regulation would have prevented this crisis. Is there any evidence at all this is true?
A liberal friend of mine says the very same thing, citing the example of Madoff. When pressed on what regulation he would promote, seeing as what Madoff did was already illegal, he is maddeningly silent. "More regulation" seems to be a reflexive mantra among liberals, without a thought as to what that might actually mean.
By Viking Kaj, at
Wed Feb 25, 05:04:00 PM:
Re Madoff:
Isn't common law fraud still on the books in NY State?
By , at
Wed Feb 25, 09:33:00 PM:
Anon: re kennedy. You are finally making some sense. Otherwise, no.
But it's good to know you have no sense of humor what-so-ever. Great nations are made of the angry.
By , at
Wed Feb 25, 11:04:00 PM:
check the Barron's time line. Most of the regulatory changes came before Bush was even elected.
Now that junkets, private jets, etc. are passe, only the elites in DC will have access to them. Productive corporate types need not apply
By , at
Thu Feb 26, 09:13:00 AM:
My sense of humor is absent from that particular post, no question, but I do in fact have one, it's just a little quirky. Maybe a lot quirky. But my point is that rich Democrats seem to be the people wo believe they should pay taxes, and moving to Florida to finesse the estate tax in Massachusetts would by a predictable move.
By , at
Thu Feb 26, 11:57:00 AM:
That was meant to read: "should not pay taxes"
By Viking Kaj, at
Thu Feb 26, 01:43:00 PM:
So if only the elites in DC will have access to the perks of power, how are we going to be different from Putin's Russia?
By , at
Mon Mar 02, 07:48:00 PM:
How about the the illusion of regulatory capital AIG promoted with its credit default swaps?
http://www.nytimes.com/2009/02/28/business/28nocera.html?_r=1&ref=business
Read it and weep. Truly.
