Democrats versus Republicans

[SailKing1]

Originally Posted by sck5

you guys miss my point. the point wasnt that people should have "picked the top". It was that it was very clear that an unsustainable bubble was in progress and that when it popped it would be unpleasant. In other words, it WAS foreseen by many though apparently not by anyone in a position to do something about it. At it was foreseen not a week or two ahead of time, but YEARS ahead of time. You dont have to pick the top to know that unsustainable trends are happening. Just look at the graph posted above. The system was way out of historical ranges years before it all melted down.

As for "putting things under government control" that is EXACTLY what too much deregulation has brought us. It is NOT A GOOD THING that the government now owns the mortgage market, the largest insurance company, and large parts of the banking system. Better regulation is preferable to government ownership. Most people would agree with that, and would not agree with the deregulation fanatics who say "let them all fail" because that would ruin too many lives.

THAT is the choice, - better regulation or another crash that results in government ownership of large parts of the economy. We can probably all agree that the latter isnt a very good outcome.

Just curious Sck5, you say it was seen by many but apparently not by anyone who could have done anything about it.

In your opinion, what could have been done to prevent it?

[danjarch]

Sck5, Don't mistake my argument against more regulation for agreement with the current round of government bailouts. Government isn't nor should it be in the business of creating jobs or wealth. A little depression would do us a world of good in my opinion. 5 to 10 years of even or negative growth would remind us all that life not just about money.

Of course, I'm aware of the fact that I'm in a very small minority in holding this opinion. So I'm resinged to watch as America continues it's slide. I only hope it doesn't get too nasty as the battle for the scraps of the empire intensifies.

[wind_magic]

Originally Posted by sck5

you guys miss my point. the point wasnt that people should have "picked the top". It was that it was very clear that an unsustainable bubble was in progress and that when it popped it would be unpleasant. In other words, it WAS foreseen by many though apparently not by anyone in a position to do something about it. At it was foreseen not a week or two ahead of time, but YEARS ahead of time.

Well I agree with you there, Sck5. Yes, plenty of people knew what was going on, a lot of folks have been talking about it for a decade or two. Certainly the FED knew what was going on.

[Sailormon6]

Originally Posted by sck5

As for "putting things under government control" that is EXACTLY what too much deregulation has brought us. It is NOT A GOOD THING that the government now owns the mortgage market, the largest insurance company, and large parts of the banking system. Better regulation is preferable to government ownership. Most people would agree with that, and would not agree with the deregulation fanatics who say "let them all fail" because that would ruin too many lives.

THAT is the choice, - better regulation or another crash that results in government ownership of large parts of the economy. We can probably all agree that the latter isnt a very good outcome.

sck5, there are two ways in which the government can regulate an industry. Government can enact laws and regulations that prohibit industry from doing unethical things that it wants to do, or it can enact laws and regulations that encourage industry to do things that would otherwise be foolish. With regard to the current situation, the government regulated the home mortgage industry in the latter way. The government enacted regulations that encouraged lenders to loan money to home buyers, without regard to whether the buyer could afford the home. If the government hadn't done so, then lenders would have had to use their sound business judgment to decide whether a prospective borrower represented a good credit risk. If the lenders had done so, there wouldn't have been so many failing mortgage loans out there. The primary responsibility for this mess is Congress.

In short, government should not have adopted regulations that encouraged lenders to make bad loans. Government should have allowed the industry to rely on its sound business judgment in making such decisions.

[wind_magic]

I agree completely that people knew what was going on, I just don't see the point in talking about it. You and I knew what was going on - if your house appraisal went up 50% or more and you didn't know what was going on then you must have some kind of brain damage or something. We all knew. How could stock prices go up double digit percentages for a decade and you NOT KNOW there was something going on ??

And we all know about the next crisis NOW. The government is spending billions upon billions for bailouts, we paid for a war with debt, Obama is going to KEEP spending TRILLIONS on top of the debt we already have - when all of that eventually results in currency devaluation and interest rates go to 20% ... who's fault is that going to be ? Sck5, are you on the telephone calling your congressman today telling them not to do any more bailouts ? Republicans, are you on the telephone with your congressman telling them not to fund the Iraq effort ? I mean who are we kidding here ... WE ALL KNOW. SO WHAT, what does knowing help ?

Yeah, we've had negative savings rates a bunch of quarters, people have been spending money like it's going out of style for TWO DECADES, house prices were in a MONSTER bubble .. Sck5, are you claiming YOU didn't know ? I KNEW, and I think EVERYBODY knew. You'd have to be completely blind not to know.

When interest rates end up going to 20% some day down the road, are we going to have to sit around listening to another round of blame game complaining about how "THEY" should have known it was going to happen ? I mean come on ... we keep electing these people, hell, we ARE these people, every single one of us, because we ALL support this crap. There's NO THEM, only US!

[xort]

CP
excellent post.
GWB called for increased regulation of fanny & freddy in one of his state of the union addresses back around the same timeframe.

those who blame everything on bush are COWARDS

[sailaway21]

sck5,
Read the Atlantic article and then tell me when everybody knew it was an unsustainable bubble.

The author thought it was a bubble but then saw a house he thought he might buy go up in value the next two years in a row after he didn't buy. He didn't buy a house the following year and, the one he didn't buy went up the next year. Investors thought the same thing. Those who were bearish for the longest period of time either lost their jobs or lost their investors. It's kind of tough to be bearish when the guy at the desk next to yours is still providing his clients 30% returns on investment two years after you turned bearish. Everybody did not know. And, as far as the market itself goes, there's damn little that increased regulation would have done about it. The one obvious area where increased government oversight was needed, in Freddie and Fannie, where outright fraud did occur, increased oversight was rejected by the Congress (see CP's tape above).

Meanwhile, we're now throwing everything at it but the kitchen sink. We've already spent enough tax dollars that we could have bought every mortgage backed security out there at whatever price you cared to assign them. And it doesn't look like things are getting better in the financial markets.

Mr. George Will's latest column is instructive. RealClearPolitics - Articles - Markets, Not Economists, Will Help the Economy
Some of Mr. Will's points. Retail sales for Black Friday are up from last year. On-line sales are up as well, with more people buying as well. 93 per cent. of the people have a job and 93 per cent of home owners are paying their mortgage on time. Gasoline prices have fallen 66% since July, putting a tremendous amount of new discretionary income into the pockets of the American consumer. And what has come of the government throwing money at the "problem"?

It can be, and it eventually will be, argued that the government should have done NOTHING to stabilize the financial markets, as many who resisted the carte blanche bailout originally thought. But, as Mr. Will states, the professional economists all stated that something must be done. There is an unpopular theory out there that, if you get a majority of economists to agree on something, it's probably wrong.

If we're to see a depression and "stag-deflation" it is more than likely that it will be longer, and more severe, due to the government's actions and not the economy's condition. AIG, Citi, and all the rest should have been allowed to fail and let the market deal with them. Yes, it would have been traumatic but then we could have gotten around to fixing the problem. Instead we're still trying to soften the blow. Of course, the real irony is that, just as in the Great Depression, the real economy is fine for the most part. We're going to let the unwillingness of the government to allow the pigs to take their medicine bring down the mostly successful portions of the economy. And why should the pigs and the piglets do anything other than protect their asses when there's a very likely possibility that the government will bail them out?

[sailaway21]

I should add, in response to Windy's great post on what has come to be known as "irrational exuberance" that while that was in fact the condition and smart home owners knew it, there was little they or anyone else could have done. Other than refinance at a lower rate or sell if the offer was just too good to pass up. The point being, and the thrust of the article in The Atlantic, is that bubbles happen--they'll happen again, that's the nature of markets. Where Windy and I are inseparable is in our disbelief at the foolishness of the government response.

[US27inKS]

Originally Posted by Sailormon6

sck5, there are two ways in which the government can regulate an industry. Government can enact laws and regulations that prohibit industry from doing unethical things that it wants to do, or it can enact laws and regulations that encourage industry to do things that would otherwise be foolish. With regard to the current situation, the government regulated the home mortgage industry in the latter way. The government enacted regulations that encouraged lenders to loan money to home buyers, without regard to whether the buyer could afford the home. If the government hadn't done so, then lenders would have had to use their sound business judgment to decide whether a prospective borrower represented a good credit risk. If the lenders had done so, there wouldn't have been so many failing mortgage loans out there. The primary responsibility for this mess is Congress.

In short, government should not have adopted regulations that encouraged lenders to make bad loans. Government should have allowed the industry to rely on its sound business judgment in making such decisions.

This is exactly right. The problem was not with the deregulation of wall street, it was with the govt encouraging or even requiring banks to make bad loans. Deregulation allowed the securitzation of bundles of mortgages. If the mortgages were good in the first place, there would be no problem with the way they get traded. The part of this that wall street is responsible for is the greed that had them not doing their due diligence. Any fund manager who did his due, and didn't buy those crap mortgages, was fired for under performing those managers who turned a blind eye. How could they turn a blind eye? Because the risk was low. Everyone knew that the govt was going to bail out fannie and freddie, so how much risk did they really have?

So I guess we should pass a law that says no one on wall street is allowed to be greedy, and they should go to jail if they don't do their due, and that any stock or security they buy will have to me standards x y and z. Then we can all expect investment account returns similar to passbook savings.

[SailKing1]

Originally Posted by wind_magic

I agree completely that people knew what was going on, I just don't see the point in talking about it. You and I knew what was going on - if your house appraisal went up 50% or more and you didn't know what was going on then you must have some kind of brain damage or something. We all knew. How could stock prices go up double digit percentages for a decade and you NOT KNOW there was something going on ??

And we all know about the next crisis NOW. The government is spending billions upon billions for bailouts, we paid for a war with debt, Obama is going to KEEP spending TRILLIONS on top of the debt we already have - when all of that eventually results in currency devaluation and interest rates go to 20% ... who's fault is that going to be ? Sck5, are you on the telephone calling your congressman today telling them not to do any more bailouts ? Republicans, are you on the telephone with your congressman telling them not to fund the Iraq effort ? I mean who are we kidding here ... WE ALL KNOW. SO WHAT, what does knowing help ?

Yeah, we've had negative savings rates a bunch of quarters, people have been spending money like it's going out of style for TWO DECADES, house prices were in a MONSTER bubble .. Sck5, are you claiming YOU didn't know ? I KNEW, and I think EVERYBODY knew. You'd have to be completely blind not to know.

When interest rates end up going to 20% some day down the road, are we going to have to sit around listening to another round of blame game complaining about how "THEY" should have known it was going to happen ? I mean come on ... we keep electing these people, hell, we ARE these people, every single one of us, because we ALL support this crap. There's NO THEM, only US!

Very well put Windy.