Bailout didn't pass...Follow

Yes. Because the solution to a financial crisis in which banks owe more money on the loans they've given out then they're getting in interest rates on those loans is to allow everyone who has a loan from them to renegotiate better terms...


That was sarcasm just in case you missed it. What part of "that's the exact wrong thing to do" did you not get when I said it earlier?



The correct response is to allow those who took out loans they couldn't afford to default on them and be foreclosed (yes. Losing their homes). You have the government back the foreclosure value of the properties, perhaps even to the extent of buying the properties (but not the banks or lenders themselves) at a normal market rate. That way the lenders don't suffer further costs resulting from holding a ton of properties that they can't sell and can't get payments on. As property values recover, the government can sell back its stake in the mortgages it owns, possibly even at an overall profit (almost certainly at one in fact), and then use that to pay back the initial cost of the whole thing.

The financiers didn't cause this though. They aren't some monolithic structure. They are a group of individuals each seeking to make the best deal they can at any given time. They acted in a normal free market way.

The problem was that the government rigged the system in such a way that those decisions would ultimately result in a negative result for everyone. It's like the red/green game example I've mentioned in the past. The fault isn't people's greed, but the fact that the rules ensure that each individual, acting on his own best interest, will take actions that ultimately result in everyone losing.


The government's inclusion of CRA requirements in the lending system effectively ensured this outcome. They required that those financiers you want to blame *had* to lend money to people who couldn't pay it back. Not only that, but it created incentives for them to do it. The result should have been predictable, but sadly no one stopped it in time.


What were they supposed to do? Not give loans to poor and minority buyers on the grounds that they didn't agree with the government's goal of helping those people own homes? First off, that would have been illegal, since the merger rules in effect required that they do so as part of the conditions to allow them to do so in the first place. Secondly, they could have been sued for some form of discrimination (since the relevant conforming loan programs did exist).


Blaming the players of the game when it was the rules that were broken is absurd. The fault is that the government wanted to help poor people who couldn't afford homes to buy them anyway. But instead of just subsidizing those purchases and being upfront and honest about the cost, they hid it inside the financial system via regulations requiring private enterprise to pick up sub-prime loans. And when the GSE portion of the system fell apart (Fanny and Freddy) it left the investment portion high and dry and holding a whole bunch of paper that cost them more than it was worth.


I'll use my business analogy again. Imagine if the government passed a law saying that your business had to sell its product for a loss under certain conditions as a requirement of getting a business license. Then imagine that years later those conditions became so common that it meant you could no longer make a profit and you were in danger of going bankrupt. Would it be wrong for the government to have to pay you for that? I don't think so. It put the unreasonable requirements on your business in the first place. It should have to pay you for that loss.


That's more or less exactly the situation these banks are in. They did nothing more than follow the rules that the government created.



They work on a modified plan. The GOP is currently trying to get the bailout changed to an insurance plan. So the government would basically back the bad loans (as they really should have in the first place). That way you don't actually hand money to the lenders, nor to we socialize them. We just turn the bad debt into good debt and let the system correct itself.


The Dems wanted to go for a full buyout basically, with the government simply taking control of a whole slew of lenders, with all the attendant socialist problems that incurs. The GOP's actions of the last week have been to attempt to get that shifted into one that fixes the problem but doesn't result in the government effectively owning large portions of most of the countries lending organizations.


You may not think that's important, but many of us do. If the government wants to pay for its mistake, let it. But to use it as effectively an opportunity to buy out the very businesses the government cause to fail looks an awful lot like opportunistic socialism at work. Use government regulation to cause an industry to fail, and then "bail it out" by buying it up cheap. End result is the government controlling another industry. IMO, that's the wrong direction to go and rewards those who caused the problem in the first place.



Yup. So what's the hurry?




I would much rather that the wealthiest 5% of private citizens own those businesses than the government. It's about a free-market versus controlled market ideological argument. What we're seeing is a negative effect from government intrusion into the private market. To "fix" that by having the government take yet more control of that market is not only unfair but simply "wrong".




Yup. But that's because in this case, they are absolutely to blame. It was their economic policies and agenda that caused this. If the CRA had not been injected into the private lending markets, we would not be having this discussion.

All I could envision when I read this was a ten-year-old going "WELL TIMMY TRIPPED ME, SO IT'S NOT MY FAULT THAT I BROKE YOUR VASE WHILE RUNNING AROUND THE HOUSE WITH IT."

Maybe rather than think of some bill to help the economy, we should send all the banks letters that read "You did it! We didn't! Your fault! Fix it! If you don't I'm telling mommy! Neener neener!"

Yup, if those useless fekking Democrats hadn't been in the WH for the last 8 years, invading Iraq and spending all that money promoting democracy and freedom in the oil rich nations of the world, (including another nearly trillion dollars aproved only LAST week for chrissakes on the latest defense offense Bill!! What you mean, you didnt hear about that??? Well thats the liberal press for you!) and on weapons and wars for ALL their friends around the world, then they would've had their eye on the ball.Then they could have done something useful at home to anticipate this sort of event and at least have a plan, or a even a coherent thought.

No. Rather, they have done ABSOLUTELY FUCK ALL of any use domestically, except for stupid paranoia driven **** like the Patriot act and spent most of their time making up excuses as to why its ok for Americans to torture and invade foreigners, but its not ok for others to do so.!

Oh! what?

This just in....

Holy Crap!!

Apparently it wasn't the Democrats who have been in the WH for the last 8 years!!

Who'd a thunk it!?

It has nothing to do with who was in the White House Paulsol. That's a complete Red Herring argument and you know it...


The significant events are as follows:

1970s (various years): Fanny Mae is "privatized". Freddy Mac is created. The deal allows for privatization of the lending system, but is a "Government sponsored Enterprise", meaning they have to comply with government lending programs. Republicans like this because it's privatized. Democrats like it because it gets their lending programs out of the US budget.

1977. Community Reinvestment Act is created as a program to help low income folks buy homes they can't afford (among other things). This act basically sets up requirements that banks much reach when lending money locally. Hence, the banks are "investing" in the community. Get it?! Haha... Of course they don't have a choice in the matter. The good news is that Freddy and Fanny are used to back those loans, so that the local banks don't take too much of a beating from all this government enforced good-will...

1995: The Clinton Administration (along with Dems in Congress obviously) push for and achieve changes to the CRA. These essentially expand the programs and greatly increase the number of loans that qualify under the Act and therefore must be granted and would be backed by Fanny and Freddy.

1999. Republicans want to pass a bill to allow commercial and investment banks to merge. This has been disallowed since the Great Depression. However, most other countries don't have this restriction, putting US banking systems at a competitive disadvantage. Democrats want yet more expansion of the CRA (or want to hide the cost more, hard to say), so they push for language that will require merged banking groups to buy up CRA loans (some of which are sub-prime of course). President Clinton again gets involved, threatening to veto the bill if the changes are not introduced. Republicans have a majority, but not a veto-proof majority, so the changes are introduced. Ooops! Shouldn't have done that...

1999-2003ish: As a result of the last change, the housing market, now traded as a commodity, increases in value. The result increases housing costs, meaning that more of the CRA loans have to be sub-prime. The percentage of home loans that are sub-prime rises from about 8% to about 20%. Also, these bad loans are now distributed throughout the investment banks instead of just the lending banks. This presumably allows the problem to get much much bigger before it becomes an obvious problem. Double ooops!

2002: There's a series of corruption allegations involving Freddy and Fanny. Not going to repeat details, but basically they revolve around faked profit reports. Hmmmm...

2003: Bush administration attempts an overhaul of the CRA. They believe that it's putting too much bad debt into the system and want to first do an evaluation of how much sub-prime debt is really out there, and then apply some regulatory changes to fix any problems that are found. It's blocked by Democrats. Loudly. With the usual "the evil Republican's just want to ***** over poor people" rhetoric of course. Barney Frank makes a now famous statement insisting that there's nothing to hide and nothing at all wrong with Freddy and Fanny, so any call for investigation and regulation is just unnecessary. Yeah. He's a freaking corrupt idiot.

2005: Republicans attempt again to pass legislation to reign in Freddy and Fanny. This time, John McCain joins in and cosponsors a bill proposal. It's killed by Democrats in Committee...



2007-2008: Housing market collapses. Everyone blames the Bush administration and Republicans.


Do you see the irony here?

At what point in any thread here have I taken a stance or said anything similar to any of this? I haven't even posted around here for a few years, and I honestly don't know enough about this situation to even attempt to claim that either side is to blame - thus why I'm not really posting about this. Apparently unlike you, I don't want to have to pull information or statements out my *** to try to defend what I say, or try to deeply search three sentence posts to try to find stuff to say.



Thanks for the info!

Edited, Sep 29th 2008 11:14pm by CBD

Because there's about jack all he can do about it other than pointedly suggest things?

I'm pretty sure this is one thing that, as much as he'd like to, he can't just issue Executive Order #whatever the hell they're up to and thereby solve the problem.

Its a big stock market correction, the financial market has been bloated over the last decade by selling cats in bags. I think the republicans made the right decision for the wrong reasons, i also think that the 700 bil is going to mainly "save the rich", ***** them.



I had to comment on this, how far do you have your head up your a**? In a financial market collapse institutions like that are the first to fall of course, that doesnt make them the sole cause only bc they are first to feel the effect.
The cause was allowing financial products that werent directly traceable to their source and "corrupt" credit raters completly ******** up the loan market. Putting aside the most basic principles of loaning, to make a quick buck. By cutting up and selling those bad loans time and time again they constructed the biggest pyramid scheme ever.

So deregulation is bad m'kay? People are greedy and do ANYTHING to make a fast buck, thats not ever going to change.

BTW im not defending democrats, theyve had HoR majority and were passively counting their money like anyone else, nobody did anything while everyone saw this coming since last January, i agree with Pikko thats its a stupid time to focus on the blame game.

Edited, Sep 30th 2008 10:12am by Sjans

ETA Text is NSFW

The British Online Media had this observation regarding Mr Obama and Ms Palin.

Well we do need some counterpoint to the Fox News version of events.


Edited, Sep 30th 2008 1:03pm by Nobby

We would need to kill all the politicians and replace them with honest, morally sound people to make sure this doesn't happen in the future.

Unfortunately that choice is not on the ballot...

Well I'd like to do the reverse but unfortunately that just isn't possible due to those meddlesome laws of nature.