105 replies to this topic

[biknut]

This is why the Democrats are so quite on the subject of investigations into the financial crisis.

This is also inportant for you Obama supporters to remember, Franklin Raines served as White House budget director under President Bill Clinton. Now he advises the Barack Obama presidential campaign on economic matters.

Disgraced Fannie Mae chief Franklin Raines was a Clinton appointee.


How the Democrats Created the Financial Crisis: Kevin Hassett

Commentary by Kevin Hassett

Sept. 22 (Bloomberg) -- The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

http://www.bloomberg...id=aSKSoiNbnQY0

[RighteousReason]

This is why the Democrats are so quite on the subject of investigations into the financial crisis.

This is also inportant for you Obama supporters to remember, Franklin Raines served as White House budget director under President Bill Clinton. Now he advises the Barack Obama presidential campaign on economic matters.

Disgraced Fannie Mae chief Franklin Raines was a Clinton appointee.


How the Democrats Created the Financial Crisis: Kevin Hassett

Commentary by Kevin Hassett

Sept. 22 (Bloomberg) -- The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.
Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''
Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

http://www.bloomberg...id=aSKSoiNbnQY0

Yep.

This really pisses me off. The cause of this huge economic crisis is a direct result of Democrats.

[david ellis]

This is why the Democrats are so quite on the subject of investigations into the financial crisis.

This really pisses me off. The cause of this huge economic crisis is a direct result of Democrats.

Hold on guys, cool off. This doesn't pass the smell test. First, who is screaming deregulate, regulation is bad? Republicans, so this story is strange because its Democrats saying deregulation is good, and regulation is bad. Doesn't that smell a little rotten to your snifter? Do you have an explanation beyond everybody knows democrats are stupid.

Second, in 2005 the Democrats were the minority. That means when it comes time to vote, they don't have the horsepower to change anything the Republican machine wants. Doesn't that smell fishy?

Third, you guys probably don't know it but AEI is well known for lying. I smelled that, I don't expect you did.

So, on the off chance that AEI might not be lying again, I found a quote that Rep Oxley, a republican from Ohio, said about who was responsible. Surprise, surprise, he said it was the White House in no uncertain terms.

" [Oxley] fumes about the criticism of his House colleagues. “All the handwringing and bedwetting is going on without remembering how the House stepped up on this,” he says. “What did we get from the White House? We got a one-finger salute.”

The House bill, the 2005 Federal Housing Finance Reform Act, 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.

...

“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."


The fourth reason I knew it was a lie, is that Fannie and Freddie are guilty of minor sins, but they are not the biggest causes of this catasphrophe, which is the shadow banking system, brokeraqe firms, and hedge funds. Those folks expanded the money supply to insane heights.

Bottom line- eight years in power, 6 years absolutely unchallenged, this whole ball of wax belongs to folks who think unregulated markets are good. And those folks are certainly almost all republican. You have no fig leaf to cover your nakedness.

Cheers

Edited by david ellis, 22 September 2008 - 09:26 PM.

[Connor MacLeod]

So, on the off chance that AEI might not be lying again, I found a quote that Rep Oxley, a republican from Ohio, said about who was responsible. Surprise, surprise, he said it was the White House in no uncertain terms.

" [Oxley] fumes about the criticism of his House colleagues. "All the handwringing and bedwetting is going on without remembering how the House stepped up on this," he says. "What did we get from the White House? We got a one-finger salute."

How one quote, taken without any context, provides evidence of anything whatsoever is beyond me. Perhaps you should read the rest of the article at the link you provided; it is in fact largely supportive of the position of the White House and questions the reasoning and motivations behind Oxley's criticism. Here's an interesting quote from the link you provided:

In hindsight, the list of reforms the White House was requesting seems just about exactly the ones that might have actually worked. One more item of note that might shed some light on this flawed legislative effort at "reform"-- Oxley had been a recipient of the largesse of the GSEs in the past:

Robert Mitchell Delk, Freddie Mac's chief Washington lobbyist, hosted a dinner fundraiser for Rep. Michael Oxley at the upscale DC restaurant Galileo.

Perhaps Oxley was making a good faith effort at reform, perhaps not; when you're accepting these kind of favors from institutions you are charged with reforming, it has to call into question your loyalites. So if Oxley wants to put himself up on a pedestal and point fingers, perhaps he'd like to answer to some criticism of his own actions while he's at it.

You wrote:

You have no fig leaf to cover your nakedness.

I think this NYT article from 2003 provides more than a few fig leafs:

http://query.nytimes...xprod=permalink

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

From the same article, a couple of examples of Democrats reacting to the Bush administrations calls for regulation, expressing their concerns about how regulation might impact poor families:

"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

"I don't see much other than a shell game gonig on there, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.

God bless their hearts...we'll just all go over the cliff together.

Now, let's take a look at what John McCain was saying about Fannie Mae and Freddie Mac in 2006:

http://www.govtrack....lElementm0m0m0m

Sen. John McCain [R-AZ]: Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal. The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.

I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Sounds pretty prescient to me.

[niner]

Now, let's take a look at what John McCain was saying about Fannie Mae and Freddie Mac in 2006:
[...]
Sounds pretty prescient to me.

Unfortunately, Mr. Prescient didn't do squat to fix the GSE problem. The Democrats offered a fix, the Republicans offered a fix, and although the Republicans held both Congress and the White House, nothing happened.

But this misses the real point. The GSEs are a side show. Phil Gramm's Dec. 2000 Commodity Futures Modernization Act, spirited into an omnibus spending bill at the 11th hour so Clinton would be unable to veto it, forbade the SEC and the CFTC from regulating Credit Default Swaps. The CDS's enabled the very mortgage backed securities that are at the heart of the problem. It was these securities that brought everyone down. Fannie and Freddie were playing the same games as the investment banks because there was easy money to be made, until it blew up in everyone's face.

Another pressure point that could have averted the problem was the State Attorneys General, a number of whom were taking steps against predatory lending practices that were induced by the lucrative MBS market. The Bush White House actively prevented the states from taking these steps.

The "Fault" for this costly mess is primarily at the feet of the Republican Deregulators. You know, Deregulators like McCain, who's been taking his financial advice from... Phil Gramm, his "Financial Advisor".

Note that the Kevin Hassett article in Bloomberg that was the original post is labeled "commentary". It's not "reporting" which is supposed to be factual, it's opinion.

Edited by niner, 23 September 2008 - 03:03 AM.

[Connor MacLeod]

I didn't post the Bloomberg article, nor did I read it. I found the 2003 NYT article to be much more enlightening:

"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

"I don't see much other than a shell game gonig on there, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.

Contrast this with:

If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

Where was Obama?

[niner]

I didn't post the Bloomberg article, nor did I read it. I found the 2003 NYT article to be much more enlightening:

"These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

"I don't see much other than a shell game gonig on there, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.

In 2003, they were not facing a "financial crisis". I'm not a fan of GSE's, but I'd like everyone to be intellectually honest about the source of our current financial crisis, which wasn't Fannie and Freddie.

Contrast this with:

If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

Uh, yeah... Three Years Later.

Where was Obama?

In the Illinois Senate? Moving into his new office? John McCain was just talking. Talk is cheap. What did the Republicans DO?

[Connor MacLeod]

John McCain was just talking. Talk is cheap.

Well that's what senators do - talk - Obama being particularly skilled in this regard. The fact is that in 2006 John McCain was speaking up on the issue while Obama, with 1.5 years already under his belt as a U.S. senator and with his party in majority in both houses of congress, didn't do or say anything as far as I can tell.

[niner]

John McCain was just talking. Talk is cheap.

Well that's what senators do - talk - Obama being particularly skilled in this regard. The fact is that in 2006 John McCain was speaking up on the issue while Obama, with 1.5 years already under his belt as a U.S. senator and with his party in majority in both houses of congress, didn't do or say anything as far as I can tell.

Are you trying to say that McCain, despite his party and his economic philosophy's role in the crisis, is now blameless because he talked about a minor aspect of it in 2006? And that Obama, whose economic philosophy would encompass the sort of prudent regulation that would have prevented the problem, is somehow guilty because no one has bothered to dredge up a quote from him about it? Seems like a stretch.

[david ellis]

I quote again Representative Oxley-" [Oxley] fumes about the criticism of his House colleagues. "All the handwringing and bedwetting is going on without remembering how the House stepped up on this," he says. "What did we get from the White House? We got a one-finger salute."

You missed the point of my quote, the AEI lie blamed the democrats for derailing regulation. The quote is proof that republicans en masse approved the legislation. "All the handwringing and bedwetting is going on without remembering how the House stepped up on this," That means Oxley and many other republicans along with a few democrats were thwarted by the president. Oxley and most republicans voted for it, so democrats AND republicans should be blamed. This is why AEI has such a slimy reputation.

Plus the ridiculousness of minority democrats outsmarting a foolish, stupid republican majority is something you need to explain. I noticed that was an issue left untouched.

So the score still is -

Republicans - a small fig leaf for believing the AEI lies.

Republicans - an olympic sized fig leaf for the fact that this disaster happened on the republican watch. The executive branch did nothing, the legislative branch did nothing, all branches rigidly controlled by the republicans for 6 out of 8 years. The fuse for this bomb was not lit one year ago. A disaster this big started a long time ago. I think that time was when the Eisenhower republicans became unfashionable. And market ideology became the Republican belief. And facts irrelevant. "Deregulate, deregulate" was the mantra.

Perhaps the republican ideology/blinders was why they didn't have foresight to recognize the danger of the "shadow banking system". Hedge fund managers went wild. The secret to their success? Low cost money as a result of Greenspan's lower interest rates. With Greenspan's easy money they borrowed $2900 for every $100 invested. A very successful business approach. If they made only 1% on the $3000 they had $30 to give their $100 investor. Sounds too good to be true doesn't it? It is the same thing banks do, except they are regulated and only allowed to lend $1000 on a $100 depositor. Still banks are also very profitable. The reason for the limit, is bank runs. The money is all invested and when people want their money out they have to wait in line. Brokerage firms have been doing the same kind of magic. Did you every wonder where somebody got the money to buy Chrysler and GMAC? That's easy. They borrowed it. Short term money - invested long term. That is the bomb. The fuse is lit. People want their money back and at fire sale prices there isn't going to be enough money to pay people back.

A simple scheme, easy to recognize, the danger is obvious, but no action on the part of the republicans. Don't they feel a chill breeze without clothes on?

On top of this problem is the problem of toxic loans. The market has frozen. Nobody wants to buy because nobody knows which funds are toxic. If they were identifiable the market could start to move. Who was in charge while this deceitful practice began? The deregulate guys instinct was not to regulate. Even though this stuff plainly looks like crime to me. Looks like fraud, smells like fraud. Where was the FBI and the Justice department? Oh yeah, deregulating.

"We have a strong economy" repeated many times by both Pres Bush and Senator McCain. The fact is our economy was slowly rotting during their watch.

This whole fiasco will be a republican mark of dishonor for many years.

[biknut]

Obama, whose economic philosophy would encompass the sort of prudent regulation that would have prevented the problem, is somehow guilty because no one has bothered to dredge up a quote from him about it? Seems like a stretch.

What prudent regulation niner? Obama helped block the prudent regulation because he was the number one recipient of contributions from Fannie Mae. Why would he want to add any regulations? He was bought off. Yeah I know you'll say Dodd got more, but Dodd got his over many years. Obama got a lot more in a very short time than anyone else. Why? Because he's a crook.

Edited by biknut, 23 September 2008 - 05:39 AM.

[Prometheus]

Easy solution:

Elect a fossil who has admitted not knowing how to use a computer and his moose hunting sidekick that believes creationism and evolution should be on equal academic footing in schools. Then the economy is sure to flourish.

[Connor MacLeod]

But this misses the real point. The GSEs are a side show. Phil Gramm's Dec. 2000 Commodity Futures Modernization Act, spirited into an omnibus spending bill at the 11th hour so Clinton would be unable to veto it, forbade the SEC and the CFTC from regulating Credit Default Swaps.

You are just making excuses for Clinton. The president can always veto. I suspect if you went back to 2000 you'd likely find news articles in which Clinton administrations officials were praising Clinton's signing of the bill. In any case, even without a spending bill attached, the fact is that the vast majority of House Democrats and Republicans voted in favor of the Commodity Futures Modernization Act. Hell, even Dennis Kucinich, Cynthia McKinney and Bernie Sanders voted in favor of it...Bernie Sanders - an admitted, no-holds bar, socialist!!! The fact is that this bill was signed into law under a Democrat president with the board support of Democratic lawmakers.

[Shannon Vyff]

Congress dropped the ball on this one, both parties. Yet little outside of sloven partisanism could blind one to the fact that Republicans have controlled the legislative branch from 1994 through 2006. This would be the branch that makes laws, thus regulation.

Also, while Frannie and Freddie made poor investments (and minorities make awesome scapegoats when you don't want to blame the people making the decisions), the deregulation of other banks greatly increased the damage. So can we just spread the blame to everyone?

Well, except Obama who wasn't in Congress. Feel free to complain about experience, but it saves him from being part of this mess. Savings and Loan Scandal McCain and his record of deregulation speak for itself.

I'm an irritated Progressive Liberal, and I approve this message.

[biknut]

Hold on guys, cool off. This doesn't pass the smell test. First, who is screaming deregulate, regulation is bad? Republicans, so this story is strange because its Democrats saying deregulation is good, and regulation is bad. Doesn't that smell a little rotten to your snifter? Do you have an explanation beyond everybody knows democrats are stupid.

Second, in 2005 the Democrats were the minority. That means when it comes time to vote, they don't have the horsepower to change anything the Republican machine wants. Doesn't that smell fishy?

Third, you guys probably don't know it but AEI is well known for lying. I smelled that, I don't expect you did.

You're obviously ignorant about how the committee system works. Democrats are up to their necks in this mess. Try as much as you want to show otherwise, and I'll keep proving you wrong.



As Alan Greenspan described in 2004, the result was rapid growth, high concentrations of risk and insulation from the discipline the market applied to ordinary companies.

"Unlike many well-capitalized savings and loans and commercial banks, Fannie and Freddie have chosen not to manage that risk by holding greater capital," Greenspan, then chairman of the Federal Reserve, told lawmakers in 2004. To keep them from undermining the financial system, "preventive actions are required sooner rather than later," he added.

As of March, when the government provided its most recent snapshot, the companies had $81 billion of capital to absorb potential losses -- a big number, but only a fraction of their $5.1 trillion of investments and loan guarantees.

Fannie Mae argued that housing was such a safe investment that it didn't need as much capital as banks, which make a wide variety of loans. But having all their eggs in one basket left Fannie Mae and Freddie Mac all the more vulnerable to a downturn in the housing sector. As home prices have plunged and defaults and foreclosures have soared, the companies have lost billions of dollars and face the prospect of losing billions more.

The political battle lines were drawn by 2000, when a senior Clinton administration official called on Congress to take steps that might have diminished the companies' special status. Treasury Undersecretary Gary Gensler also urged that regulators be given more power to set capital requirements for Fannie Mae and Freddie Mac.

The companies fought back.

Even after Freddie Mac was shown to have manipulated earnings, Congress remained deadlocked over legislation to create a stronger regulator. Opposing one such bill in 2004, Sen. Charles E. Schumer (D-N.Y.) argued that a hostile regulator could use the proposed powers to choke the companies.

When a federal regulator accused Fannie Mae of cooking its books to increase bonuses, lawmakers lined up to denounce the regulator. Rep. William L. Clay Jr. (D-Mo.) said a House panel had no business holding a hearing on the matter -- "unless this is truly a witch hunt." Fannie Mae was later found to have overstated profits by $6.3 billion.

Former representative Richard H. Baker (R-La.), who chaired a subcommittee that oversaw the companies, struggled for years to rein them in and tried to show they were being managed for the enrichment of their executives. When Baker obtained data on Fannie Mae pay, a lawyer for the company threatened him with personal liability if he made it public, Baker recounted last week.

Critics of the two firms included former Reagan administration official Peter Wallison, who crusaded against them at the American Enterprise Institute, and a coalition of financial companies whose interests often conflicted with those of Fannie Mae and Freddie Mac. The Bush administration pushed a similar agenda

http://www.washingto...1301462_pf.html

[mike250]

the tendency for governments to "save the world" on these occasions is only increasing the frequency at which it will need to happen, and the cost to be met in later years.

[david ellis]

Hold on guys, cool off. This doesn't pass the smell test. First, who is screaming deregulate, regulation is bad? Republicans, so this story is strange because its Democrats saying deregulation is good, and regulation is bad. Doesn't that smell a little rotten to your snifter? Do you have an explanation beyond everybody knows democrats are stupid.

Second, in 2005 the Democrats were the minority. That means when it comes time to vote, they don't have the horsepower to change anything the Republican machine wants. Doesn't that smell fishy?

Third, you guys probably don't know it but AEI is well known for lying. I smelled that, I don't expect you did.

You're obviously ignorant about how the committee system works. Democrats are up to their necks in this mess. Try as much as you want to show otherwise, and I'll keep proving you wrong.

Point out the place where you proved me wrong. Just saying I am stupid is not proof.

[luv2increase]

Congress dropped the ball on this one, both parties. Yet little outside of sloven partisanism could blind one to the fact that Republicans have controlled the legislative branch from 1994 through 2006.

Well, what have the Democratic party done since 2006 to prevent this from happening or doing anything they promised to do for that matter? One word, nothing.

I'm an irritated Progressive Liberal, and I approve this message.

Obviously. You can't even admit your parties lack of doing nothing since their taking over the Congress in 2006. Shannon, there has to be accountability in our nation today. There has to be accountability in our politicians and the American people, or even all individuals of this world be live in.

[Healthy Skeptic]

Both parties are at fault. Obviously, the democrats didn't pass any legislation to prevent this during the last two years. On the other hand, multiple bills calling for increased regulation were proposed while the Republicans had a majority, and they all died in sub-committee even though the Republicans absolutely had enough votes to force them through. Neither party had the foresight to prevent this mess. The contention that democrats "tied up" the Republican majority is absurd. A filibuster was never threatened let alone carried out.

Edited by Healthy Skeptic, 24 September 2008 - 07:50 PM.

[Iam Empathy]

Al Gore Had a Plan to Avoid this Economic Crisis 8 Years Ago

http://www.alternet....is_8_years_ago/

In the middle of the night last night, I awoke from a dream about Al Gore. It wasn't really a dream in the traditional sense, so much as it was a memory. I was recalling, from somewhere deep in my subconscious, one of his debates against Bush in 2000, during which Gore was talking about how he was going to take the budgetary surplus created during the Clinton presidency and put it in a lockbox to protect our social safety net.

And Bush was sneering at him.

When I woke up, I remembered how Al Gore was viciously mocked for his "lockbox" campaign theme, everywhere from SNL skits to mainstream debate coverage: "He must have used the word 'lockbox' about 20 times." Even after he'd lost, the media harangued him about his lockbox: "Well, maybe the beard should go into the lockbox!"

Al Gore's lockbox was routinely treated like the butt of a joke. Silly, nerdy, wonky Al Gore with his dorky lockbox!

Edited by Iam Empathy, 26 September 2008 - 11:35 PM.

[biknut]

Both parties are at fault. Obviously, the democrats didn't pass any legislation to prevent this during the last two years. On the other hand, multiple bills calling for increased regulation were proposed while the Republicans had a majority, and they all died in sub-committee even though the Republicans absolutely had enough votes to force them through. Neither party had the foresight to prevent this mess. The contention that democrats "tied up" the Republican majority is absurd. A filibuster was never threatened let alone carried out.

One voice of reason.

[niner]

But this misses the real point. The GSEs are a side show. Phil Gramm's Dec. 2000 Commodity Futures Modernization Act, spirited into an omnibus spending bill at the 11th hour so Clinton would be unable to veto it, forbade the SEC and the CFTC from regulating Credit Default Swaps.

You are just making excuses for Clinton. The president can always veto. I suspect if you went back to 2000 you'd likely find news articles in which Clinton administrations officials were praising Clinton's signing of the bill. In any case, even without a spending bill attached, the fact is that the vast majority of House Democrats and Republicans voted in favor of the Commodity Futures Modernization Act. Hell, even Dennis Kucinich, Cynthia McKinney and Bernie Sanders voted in favor of it...Bernie Sanders - an admitted, no-holds bar, socialist!!! The fact is that this bill was signed into law under a Democrat president with the board support of Democratic lawmakers.

You don't get it, do you? There was no vote on the CFMA, there was a vote on a spending bill that had to go through. There was no debate on the bill in either house, so most people probably didn't even know it was there. Unless Clinton had a line item veto, there wasn't much he could do, so don't tell me I'm "making excuses for Clinton". That's just crap. The toxic legislation was snuck in by Republicans. Clinton had nothing to do with it.

[luv2increase]

Clinton had nothing to do with it.

With what? Clinton's Presidency is widely known for its so-called accomplishment of increasing the housing market (through ill lending practices -- which we are now finding out). Are you denying that Clinton was credited with this? Do you know much about the political so-called achievements throughout the 90's?


niner, you never want to face facts. You continue to back up your preconceived beliefs regardless if new information refutes them. This is most evidenced when you thought the Obama "my Muslim faith" Freudian slip wasn't true as well as Obama's wanting to cut world poverty in half by 2015 which would cost upwards of 850 Billion $'s. Once the proof was right in front of your face, you still denied it. I think something is wrong with this picture. It is similar to the way atheists call Christian's belief in God ---> "blind faith". Comprendes amigo?

Edited by luv2increase, 27 September 2008 - 12:05 AM.

[niner]

Both parties are at fault. Obviously, the democrats didn't pass any legislation to prevent this during the last two years. On the other hand, multiple bills calling for increased regulation were proposed while the Republicans had a majority, and they all died in sub-committee even though the Republicans absolutely had enough votes to force them through. Neither party had the foresight to prevent this mess. The contention that democrats "tied up" the Republican majority is absurd. A filibuster was never threatened let alone carried out.

One voice of reason.

Biknut, do you seriously think that the Democrats could have done ANYTHING by the time they took congress in late 2006? Be serious! By that time, the damage was done. The garbage loans had been made, packaged, and sold. The idea that Republicans create messes with their deregulating fervor, then the Democrats are blamed because they don't clean up the mess is pretty disgusting.

[niner]

Clinton had nothing to do with it.

With what? Clinton's Presidency is widely known for its so-called accomplishment of increasing the housing market (through ill lending practices -- which we are now finding out). Are you denying that Clinton was credited with this? Do you know much about the political so-called achievements throughout the 90's?

"Increasing the housing market", by which I presume you mean home ownership, has NOTHING to do with this crisis.

niner, you never want to face facts. You continue to back up your preconceived beliefs regardless if new information refutes them. This is most evidenced when you thought the Obama "my Muslim faith" Freudian slip wasn't true as well as Obama's wanting to cut world poverty in half by 2015 which would cost upwards of 850 Billion $'s. Once the proof was right in front of your face, you still denied it. I think something is wrong with this picture. It is similar to the way atheists call Christian's belief in God ---> "blind faith". Comprendes amigo?

I just don't want to face made up "facts". You think Obama is a Muslim. After he is elected, if all our wives and girlfriends are wearing abayas and we've implemented Sharia throughout the land, I will freely admit that I'm wrong. And if that doesn't come to pass? Let's revisit this in a year and see how it works out. As for world poverty, yes, Obama "wants to" cut poverty in half by 2015, that's the Millennium Development Goal, I believe. It's the $850B number that I don't believe. He certainly isn't going to spend that kind of money; it was all spent by your free market Neocon warboys.

[Connor MacLeod]

But this misses the real point. The GSEs are a side show. Phil Gramm's Dec. 2000 Commodity Futures Modernization Act, spirited into an omnibus spending bill at the 11th hour so Clinton would be unable to veto it, forbade the SEC and the CFTC from regulating Credit Default Swaps.

You are just making excuses for Clinton. The president can always veto. I suspect if you went back to 2000 you'd likely find news articles in which Clinton administrations officials were praising Clinton's signing of the bill. In any case, even without a spending bill attached, the fact is that the vast majority of House Democrats and Republicans voted in favor of the Commodity Futures Modernization Act. Hell, even Dennis Kucinich, Cynthia McKinney and Bernie Sanders voted in favor of it...Bernie Sanders - an admitted, no-holds bar, socialist!!! The fact is that this bill was signed into law under a Democrat president with the board support of Democratic lawmakers.

You don't get it, do you? There was no vote on the CFMA, there was a vote on a spending bill that had to go through. There was no debate on the bill in either house, so most people probably didn't even know it was there. Unless Clinton had a line item veto, there wasn't much he could do, so don't tell me I'm "making excuses for Clinton". That's just crap. The toxic legislation was snuck in by Republicans. Clinton had nothing to do with it.

Niner, you are wrong. The CFMA legislation was initiated and nurtured by the Clinton White House, with the overwhelming support of congressional Democrats. There was nothing hidden, or furtive about and it doesn't appear to be something that was particularly contraversial. Also, the passage the CFMA legislation by year-end (2000) was a goal actually set forth explicitly by the Clinton White House. And yes, it was voted on and received nearly unanimous support from both parties. You are propagating politically motivated conspiracy theories that have nothing to do with any commonsense interpretation of what actually transpired at the time. I think it might benefit you to take a little time away from Huffington Post and DailyKOS to do some of your own independent research on the matter.

The toxic legislation was snuck in by Republicans.

Snuck in by Republicans? Absolute and utter nonsense.

Edited by Connor MacLeod, 27 September 2008 - 12:34 AM.

[biknut]

Both parties are at fault. Obviously, the democrats didn't pass any legislation to prevent this during the last two years. On the other hand, multiple bills calling for increased regulation were proposed while the Republicans had a majority, and they all died in sub-committee even though the Republicans absolutely had enough votes to force them through. Neither party had the foresight to prevent this mess. The contention that democrats "tied up" the Republican majority is absurd. A filibuster was never threatened let alone carried out.

One voice of reason.

Biknut, do you seriously think that the Democrats could have done ANYTHING by the time they took congress in late 2006? Be serious! By that time, the damage was done. The garbage loans had been made, packaged, and sold. The idea that Republicans create messes with their deregulating fervor, then the Democrats are blamed because they don't clean up the mess is pretty disgusting.

niner, republicans weren't making garbage loans. The people making these garbage loans are the ones to blame. The men in charge of Fannie Mae and Freddie Mac were all Democrats. They're the ones making the garbage loans, correct?

[luv2increase]

"Increasing the housing market"

Yes it was. Money was lent out to people whom wouldn't be able to pay their mortgages. The Democrats aloud this to happen, and McCain wanted to put a stop to it in 2006 because he foresaw this inevitably going to happen. It got out of control.

I just don't want to face made up "facts". You think Obama is a Muslim.

You never know. I mean, he is a politician. Politicians are notorious for their dishonesty, right? If he isn't a Muslim anymore, then he is until recently a member of an anti-American, anti-White so-called Christian church. I don't know which is worse, do you?

I will freely admit that I'm wrong.

Doubtful. You are just like your buddy Obama there. He won't even admit that he was wrong about the surge when it is clear to every American that he was wrong.

It's the $850B number that I don't believe.

Ok, then how much do you think it will be? The experts have come up with this number. Do you think a task such as this is supposed to cost only a couple million or something? Are you an expert in the world poverty situation? I think it's silly of you to try and pass yourself off as an expert in an area which you and I both know you clearly are not.


If you really want to prove me wrong, then do the obvious and show me a recent number which contradicts the $850 Billion $ number. Instead of calling me wrong, prove it.

Edited by luv2increase, 27 September 2008 - 03:24 AM.

[niner]

Both parties are at fault. Obviously, the democrats didn't pass any legislation to prevent this during the last two years. On the other hand, multiple bills calling for increased regulation were proposed while the Republicans had a majority, and they all died in sub-committee even though the Republicans absolutely had enough votes to force them through. Neither party had the foresight to prevent this mess. The contention that democrats "tied up" the Republican majority is absurd. A filibuster was never threatened let alone carried out.

One voice of reason.

Biknut, do you seriously think that the Democrats could have done ANYTHING by the time they took congress in late 2006? Be serious! By that time, the damage was done. The garbage loans had been made, packaged, and sold. The idea that Republicans create messes with their deregulating fervor, then the Democrats are blamed because they don't clean up the mess is pretty disgusting.

niner, republicans weren't making garbage loans. The people making these garbage loans are the ones to blame. The men in charge of Fannie Mae and Freddie Mac were all Democrats. They're the ones making the garbage loans, correct?

No, I don't think so. The garbage loans were mostly made by smaller institutions that sold them quickly. These loans were consolidated into CDOs and sold into the debt market. This sort of thing came out of the investment houses, but I'm sure the GSEs were involved in the CDO trade to some extent. A lot of companies were. Making garbage loans was not a partisan thing. The lack of regulation that enabled the garbage loans was a partisan thing. Republicans were responsible for the CFMA that prevented regulation of CDSs, and the Bush administration prevented State Attorneys General from regulating predatory lenders. Those two things are about as close as you can come to political perps in this crisis. Another problem was the Free Marketeer Alan Greenspan and his recklessly loose monetary policy.

[niner]

But this misses the real point. The GSEs are a side show. Phil Gramm's Dec. 2000 Commodity Futures Modernization Act, spirited into an omnibus spending bill at the 11th hour so Clinton would be unable to veto it, forbade the SEC and the CFTC from regulating Credit Default Swaps.

You are just making excuses for Clinton. The president can always veto. I suspect if you went back to 2000 you'd likely find news articles in which Clinton administrations officials were praising Clinton's signing of the bill. In any case, even without a spending bill attached, the fact is that the vast majority of House Democrats and Republicans voted in favor of the Commodity Futures Modernization Act. Hell, even Dennis Kucinich, Cynthia McKinney and Bernie Sanders voted in favor of it...Bernie Sanders - an admitted, no-holds bar, socialist!!! The fact is that this bill was signed into law under a Democrat president with the board support of Democratic lawmakers.

You don't get it, do you? There was no vote on the CFMA, there was a vote on a spending bill that had to go through. There was no debate on the bill in either house, so most people probably didn't even know it was there. Unless Clinton had a line item veto, there wasn't much he could do, so don't tell me I'm "making excuses for Clinton". That's just crap. The toxic legislation was snuck in by Republicans. Clinton had nothing to do with it.

Niner, you are wrong. The CFMA legislation was initiated and nurtured by the Clinton White House, with the overwhelming support of congressional Democrats. There was nothing hidden, or furtive about and it doesn't appear to be something that was particularly contraversial. Also, the passage the CFMA legislation by year-end (2000) was a goal actually set forth explicitly by the Clinton White House. And yes, it was voted on and received nearly unanimous support from both parties. You are propagating politically motivated conspiracy theories that have nothing to do with any commonsense interpretation of what actually transpired at the time. I think it might benefit you to take a little time away from Huffington Post and DailyKOS to do some of your own independent research on the matter.

Connor, I've done some looking, and I can't find any evidence that Clinton was involved in the CFMA. If the Democrats were so gung ho on it, why was it authored by Republicans? Anyway, if you can provide some evidence that the CFMA was somehow a Clinton initiative, I'll be happy to look at it. I have looked, and honestly haven't found a thing. Is this something you saw on a Right Wing blog? Free Republic?