Is Bush the Worst President of the Past 50 Years?Follow

I don't know. Even though Tricky D*ck had his ethics problems, he also had alot of redeeming qualities, particularly if you know about the history of social policy development. If he wasn't so undone by his corruption, we could appreciate what he really did domestically and internationally. Bush, on the other hand, was both unethical and a total f*ck up.

Also, the anti-redlining bill that Carter signed in 1977 has very little to do with the current housing meltdown as a previous poster ascribes. It has a lot more to do with more recently passed bills (90s and 2000s) supported by both parties and having to do with supporting competition and the free market.

Also, we were idiots to go back to the conspicuous consumption in the 80s--not to defend gas rationing but during Carter people explored alternative fuels and sources of energy. They switched to smaller cars. Then we entered 25 more years of back sliding. I can only imagine where we would be if we had continued to explore the environmental measures starting in the late 70s.

Carter had issues, especially internationally and in @#%^ing up the Iranian hostage crisis but I'd hardly blame him for the current economic crisis.




Edited, Dec 22nd 2008 7:58pm by Annabella

No, instead, the free market created credit default swaps and sold a ******** of them that they couldn't back. Mortgage-backed securities are not no-risk. Buyers of those securities ran the risk of losing their investment just like any other type of investment. Had the investment banks been responsible with the selling of credit default swaps this mess would not have been nearly as bad.

And don't forget that, in true symbolic form, Reagan had the solar panels that Carter had installed on the White House taken down.

It looks like you're focusing solely on mortgage backed securities. This is only a part of the bigger picture but is getting most of the focus in the media. Mortgage backed securities are just a flavor of an investment vehicle. As such, there is always the risk that the investment will tank. The appeal of these mortgage backed securities is that they are low-risk and, in general, provide a steady income. When the underlying investment tanks because of foreclosures, the only party affected (notwithstanding homeowners) are the investors. This is obviously a problem but it's only part of it.

When you couple the above with the runaway, unregulated use of credit default swaps is where the real problems are. Last year, the credit default swaps market was estimated to be at $45 trillion, close to double the size of the US stock market. The credit problems that the investment banks are having are because they cannot cover the swaps. They bet, and they lost. These credit default swaps are not regulated; they are a free market mechanism and they have brought our economy to its knees.

Nixon still makes the "Worst President" lists, often in the Top 5 and nearly always in the Top 10. And he's generally the only president from the past 50 years to be there, keeping company with Buchanan, Harding and Pierce (or he shares the honor with Carter).

If Bush is viewed as well 30 years from now and Nixon is viewed today, Bush will still be considered one of the worst presidents in our union's history.

At the time though, Nixon was viewed far worse than Bush is today.

Sure. Less competent? Never.

Ok... There's a difference between having the opportunity to do something, and having the government pay for you to do it.

Your statement's inaccuracy hasn't changed by changing that word.



At the risk of linking to a wiki: The CRA

That's actually not a bad overview of the subject. Do your own research if you want more details or prevailing opinions on it.

The point is that the CRA essentially came to be used by local political groups to pressure banks into handing out more home loans to low income borrowers than the banks would normally loan. While that's not ultimately where the problem occurred, it's indicative of the mindset involved.

The second major component was the involvement of Freddie and Fannie. Basically, they were the institutions backing the loans. But they became so politically tied over time (for reasons similar to that in the paragraph above), that their responsibility to make sure that high risk CRA loans didn't become a problem somehow morphed into a political agenda to provide as many of them to as many low income potential Dem voters as possible. They began essentially cooking the books in order to provide more and more of these loans out in the market.

The final nail in the coffin was the 1999 Act involving the mergers of commercial and investment banks. Once again (presumably because it was a bigger pool from which to draw), the Dems insisted that CRA loans not be redlined by the investment banking system. The problem is that while a local commercial bank could manage it's own loans and make sure it didn't hand out more than it could handle financially, the investment banking system assumes that everything is traded around. This requires accurate risk assessment of the things being traded. But if the risks were accurately measured, then CRA loans would be a low-traded security and those with a political desire to see more of them in the market (Again, to meet political promises to poor voters and those who represented them politically) wanted them to be traded equally with other loans.

This lead to the bizarre situation where the markets were effectively forced to pretend that the mortgage securities were all the same. A CRA loan couldn't be "discriminated against" in the investment market.

I hope you can see how that is pretty much a guaranteed disaster just waiting to happen. It was just a matter of time before the whole thing collapsed. It took almost a decade, but it was pretty much inevitable.


All that other stuff is irrelevant. The system wasn't broken. The specific mis-valuation of loans under this program were. Period. At the end of the day, that is the single one solitary cause of the entire financial mess we're in. Obviously, it's now rippling into other areas, but that's exactly because the credit markets work based on an assumption that the goods they're trading around, buying, selling, and lending, are all worth within some range of what they estimated. A sudden large drop in any sector will cause problems everywhere else.

It was the housing loans that caused that first ripple though.



Yes, you can. Because the laws change how the market works and how it reacts. You can't blame the market for that. If the rules say that doing X benefits you but hurts the rest of the market, you can't blame folks for doing X. Normally, the market adjusts for this pretty well. Sometimes it needs some help (I'm not a libertarian or a complete "hands off" market guy). But what happened here is that the government regulation actually created a problem of this nature. It created a situation where it was profitable for individuals within the market to take advantage of the gap between the real value of those loans and their "official" value.


It's similar my gold example above. If the government artificially overvalues gold, you can cry and whine about how those holding gold shouldn't act to profit on that, knowing that it's not "really" worth that much, but if they can sell it for that much, they will. In this case, the brokers could sell their high risk loans on the investment market at the same valuation as normal risk loans. That presented them with a "free money" situation. Trying to convince "the market" not to capitalize on that is like trying to hold back the ocean with a spatula. The correct thing is to not create such a stupid condition in the first place...

Edited, Dec 23rd 2008 4:59pm by gbaji

Elinda. I know you don't want to believe this, but that is exactly what the CRA does. It forces banks to accept loans for people who would not normally qualify for them. And I agree that they should not have been allowed to do that. Sadly, too many people vote Democrat...




You can't blame the lender. You blame the people who deliberately created the rules that way. The lenders did *exactly* what the Dems wanted them to do. They handed out loans to poor people who couldn't afford them.



Yes. Because when Republicans brought up the problem in 2003 and 2005, they were attacked viciously by the Dems. They were specifically trying to get some oversight over Freddie Mac and Fannie Mae so as to get an accurate idea of how many actual CRA loans were in the system. Here's the response:




Not only did the Dems create this problem, but continued to hide it within Freddie and Fannie by cooking the books, and attacking Republicans for daring to risk the goal of providing "affordable housing". I don't see how you can read this and not realize that it was entirely about helping people who couldn't qualify for home loans get them anyway. The entire scheme, from the CRA itself, to the inclusion of anti-redlining code in 1999, to the cooking of the books at Freddie and Fannie all occurred out of the Dem political agenda of selling affordable housing to their constituents.

They got the votes. We got the bill. Typical of Democrats really...




Wait! What happened to "if they don't qualify for a loan, they shouldn't get it"?

Which is it? Only people who qualify should get loans? Or we should artificially cook the market to let people who can't get them anyway? You can't have both...



Um... How exactly do you think that would work? You make it illegal for lenders to sign up poor people for loans that would be approved under CRA guidelines by Freddie and Fannie? Get back to me on how that's going to fly in the media...

Why not just not create the problem in the first place?



Or, say... more oversight over the two lending organizations who were supposed to be keeping an eye on those loans to make sure they didn't cause problems? That's what I was talking about when I said that the political agenda took control. Freddie and Fannie were supposed to be private "for profit" government sponsored enterprises, specifically in charge of managing the number and type of loans in the market. They were supposed to be the watchdogs who would put the breaks on lending programs if they created too much risk. But over time, they became politicized. The Dems stacked these supposedly private organizations with stooges who would use them as a clearing house for their political promises to help poor people own homes.

The result is that the organizations which were supposed to keep an eye on things had a vested interest in not doing so. That's what the Republicans were trying to fix back in 2003. They weren't able to. That's a failing on their part, but at least they were trying. They failed because the Dems pulled the "OMG! Those evil Republicans want to prevent poor people from owning homes" card. And it worked...



The loans were written from the private sector. But the programs they were qualifying these loans under were created by the CRA, and approved by Freddie and Fannie. Again. You can't blame the independent broker for increasing his volume of business by finding people who shouldn't qualify for a loan, but do because the federal agencies involved allow it. You blame the creation of those loan programs. You blame the creation of legislation which allows for a profit condition where one shouldn't exist.


If I'm the government, and I require that banks treat a rock with the words "100 dollars" on it as the same as a real 100 dollar bill, you can't blame all the people who'll run around with markers writing "100 dollars" on rocks in order to cash them in at the bank. And you can't blame the bank, because they've been required to accept them as though they're worth 100 dollars. You have to blame the government imposed changes which created this condition.

Those imposed changes consisted of a whole series of things. The CRA created the loan programs in the first place. The inclusion of CRA requirements in the 1999 Act concealed the risks of those loans from the financial markets who would be trading their securities (ie: forced the "trade a rock for a hundred bucks" situation). And the corruption at Freddie and Fannie ensured that those who should have sounded the warning either didn't, or were prevented from being able to.



A lot of good. Because this is the fault of a Democrat political agenda, and if we refuse to acknowledge that and correct the core problem, we're just throwing good money after bad. Until and unless we fix the CRA loan situation with relation to the investment banking system, we can't really correct the markets.

To me, refusal to recognize this as the core problem is "refusing to deal with the problem at hand" out of some kind of political need not to have your own party of preference to blame for anything. IMO, it's childish and foolish.

Edited, Dec 29th 2008 9:30pm by gbaji

True.


False. The Equal Credit Opportunity Act (1974) ensures that banks can't discriminate against people based on their sex, color, etc. Those protections were already in place.

What the CRA does is effectively apply Affirmative Action type processes to lending, not on a per-person basis, but on communities. At it's most basic level it acts to apply pressure to banks to hand out a quota of loans to people in low income neighborhoods. Now, if there happen to be enough people in those areas who might otherwise qualify for those loans, then this isn't much of a burden (but they'd likely have gotten those loans anyway, so the CRA didn't do anything). But in many areas, the result is exactly that the banks have to hand out loans to people who would not otherwise qualify for them.


So yes. That's *exactly* what the CRA does. It exists for no purpose other than to force banks to give loans to people who would not otherwise qualify for them. Banks are going to act to make money. If someone qualifies for a loan via their normal risk criteria, they will lend to that person. Where they live is irrelevant to the bank. It is, however, relevant to politicians who want to gain voter appeal in specific districts, which is exactly why this Act was written this way.

Want to try again?

Um... Yes Smash. But the CRA wasn't passed purely because people living in poor neighborhoods had their home loans assessed with a higher risk than those living in wealthy ones. That's normal banking risk assessment and there's nothing illegal about it. If property values are going down in an area, you're going to have to calculate that into your risk assessment for a home loan. Because a default is going to cost you more than in an area where property values are stable or increasing. Again. There's absolutely nothing illegal or unfair about that.

The concern was that these practices were being targeted more at predominantly black neighborhoods than white. So a poor white neighborhood got loans at a higher rate than a poor black neighborhood. That's where the Act I mentioned came in (as well as the earlier Fair Housing Act (1968).


It's absurd to discuss the CRA without discussing race as well, since that is the entire objective of the Act. It may not mention it directly, but without the issue of racial discrimination between otherwise similar poor neighborhoods, the CRA would have no reason to have ever been written.



Beyond that aspect of the issue Smash, obviously the Act itself doesn't say it forces banks to lend to people with bad credit. But it sets no specific criteria at all. It requires that reports be generated for banks to determine if they are meeting their requirements in terms of handing out loans. This is pretty subjective and has become incredibly political in terms of how it's applied.

The result is that banks are graded, not on whether they're applying "fair" risk assessments when handing out loans, but based on whether or not some third party organizations think they're doing enough to help poor and minority borrowers get loans. If banks can find ways to hand out more loans, they get better ratings. If they can't, they get bad ratings and may lose their FDIC status (among other things). It's an almost mafia-like process given the lack of any hard standards involved.


In the broader context of the credit crunch, this created a situation where there was huge pressure on banks to find ways to increase the number of loans they could hand out in these neighborhoods. Prior to the removal of restrictions for mergers between commercial and investment banks, this was self-correcting. Banks couldn't hand out more bad loans then they could afford, so the CRA more or less worked since the banks would work hard to find the best candidates in order to meet their quotas in a given area. But when those restrictions were removed and CRA requirements were included in the mergers between commercial and investment banks, that check was removed as well. The banks still had huge pressure to hand out those loans, but now could hand them out to anyone and then sell the loans on the open market. Since they were qualifying loans as far as Fannie and Freddie were concerned, they were rated the same as any other loan.


What this did was create a condition in which something that banks struggled to avoid (handing out riskier loans in low income neighborhoods), but were required to do to some degree under the CRA, suddenly became profitable to do without any limit. Since the CRA conditions rewarded banks for handing out loans in these areas, there was obviously no reason not to. But more significantly, since loans in those areas were treated as equivalent to other loans by legislative fiat, they could sell them on the investment market. There's a limit to how many people will qualify for a given loan at a given risk. But there's pretty much no limit to how many people can be qualified for CRA loans if they live in a poor neighborhood. So there was no check. Lenders handed out loans on behalf of merged banks. Those banks sold them on the market. The market got flooded with bad loans and eventually crashed.


How many times do I have to explain in step by step detail how this happened. I've already said several times. It wasn't the CRA by itself, but primarily the inclusion of CRA qualification requirements in the Gramm-Leach-Bliley Act (1999) that caused the whole thing to collapse. But that inclusion was at the insistence of the Dems and president Clinton. By applying the same political pressures and loan programs to those merged banks, it "broke" the financial markets.