Can't remember the last Dem president that didn't inherit a downturned economy from his Rep predecessor. This recession is going to make the others look like a walk in the park, particularly when America realizes the plug nickel they have left over after Bush leaves town is more than he left in the Treasury. Stirling Newberry had a good piece along the lines of yours Mary.
http://agonist.org/stirling_newberry/20080112/recessions_stimulus_and_broken_politics
Posted by mainsailset at January 13, 2008 01:31 PMExcellent article, Mary. One of the things that still disturbs me about the subprime meltdown is that many of these institutions are STILL pushing these dicey loans on people, even as the debacle topples the rest of the economy. I still get telemarketing calls on almost a daily basis from Countrywide Mortgage trying to get me to refinance my home loan with one of these "variable rate/no income check/no appraisal" loans. (Which would be crazy, considering my home was financed 5 or 6 years ago when fixed rate loans were at their rock bottom lowest ever). Countrywide, as we all know, was on the verge of bankruptcy for their stupidity and just bought out by Bank of America. And yet, they are still pushing these kinds of loans on people. I find that unbelievable!
The real estate bubble didn't start in 2004, that is when it was peaking.
The bubble started when capital gains taxes for personal residence sales was eliminated in 1997. It was fueled by low interst rates to deal with the 2000-2002 economic downturn.
Posted by at January 13, 2008 03:36 PMDidnt Greenspan's lack of competent policy allow for the same conditions that essentially destroyed the economy in 1929?
Werent the market regulations put in effect then to insure this type of unregulated bubble wouldnt occur, again?
My father was born during the Depression, I remember him telling of having no food to eat, for days, the long term effects were so devastating to him. I also remember him telling me about FDIC, and the run on the banks.
The Depression haunted him far more than World War two, people really dont understand how bad it could be...
Revolutions are predicated on empty stomachs, I always get the feeling the neocons think a white knight will come to solve their problems, giving them hope for another day, like the woman who thinks her life would be OK if only the right man came along...
Posted by anonymous at January 13, 2008 03:41 PM"Revolutions are predicated on empty stomachs."
and those in power would do well to remember that.
Posted by at January 13, 2008 04:26 PMdamn fine, link, mainsail. I haven't read Newberry in months since he folded his own blog up.
Posted by idiosynchronic at January 13, 2008 06:06 PMThis analysis is unassailable---this is where we're headed.
One of the crucial mistakes here was the repeal in 1999 of New Deal legislation which precluded federally regulated banks from selling "investments" and securities. This was called the Glass-Steagall Act.
Big Capital enabler Bill Clinton signed the law repealing this New Deal regulation on federally chartered banks, working with the Repub Congress to free the divine holy "free market" for our Can't Miss capitalists. As a result, banks got quickly and heavily into creating and selling these mortgage-backed securities and are now losing billions of dollars and flirting with failure.
All because of conservative demands that the banking industry, which led us into the Crash of '29 and the Great Depression, be permitted to have the "freedom" to do the exact same thing again. And here we are, not even 10 years later, on the brink of another disaster caused by conservative financial deregulation. Thanks, Bill!
But there's more. The rich of course make out like bandits from deregulation---that's why they advocate for it. But when the inevitable "excesses" (ie fraud) result in bank failures on on the horizon, then of course Big Guv'mint will be called on to come in to bail the mess out and save the wealthy from their crimes.
Just as McCain led the charge on bailing out the savings and loans when they abused their demanded deregulation in the 80s, so he and the Repubs will lead the charge to bail out this even more enormous mess caused by bank entry into the securities market.
And Dems will of course go along and not even require that the old regulation be put back in place in order to receive federal backing and lender of last resort status.
Fools (like us) never learn.
Posted by euzoius at January 13, 2008 06:42 PMIf one wants to try to get their head around where those who are running this country have brought us financially, please take few minutes and watch this MSM interview with the GAO's Comptroller General, David Walker. hopelessly insolvent
I'm generally not fan of Glenn Beck or his show, but this segment reveals how it's hard to imagine the United States doing anything but crashing and burning as a free and prosperous country.
Unless something drastic happens with our leadership (something like instituting Ron Paul fiscal policies), in the next few short years, the money owed by the taxpayors of this country will exceed what they cumulatively earn.
Any solutions from Hillary?....Obama?....Edwards?....Any of the Rupulican presidential hopefuls except Paul?
Uh...no.
Posted by brisa at January 13, 2008 07:41 PMI have the perfect title for Bush's autobiography:
"Bush Legacy: The Looting of America."
...with a subtitle:
"How Neo-Con Republicans Stole Lady Liberty Blind And Then Blamed It All On The Democrats."
Of course, after destroying the U.S. economy (as well as what Bush and Cheney have done to Iraq) no one in the United States will have the money to buy Bush's autobiography. Such a pity.
Posted by The Oracle at January 13, 2008 07:47 PMWell, the basic gist is this - when we say "homeowner" and the person took out a mortgage to "buy" the home - they are actually not an owner of the home. They borrowed the money from a bank and are paying the bank back. The bank is the true owner of the home.
If we as a society started getting real about debt and didn't say "I own xxx" if the truth is, money was borrowed to pay for it - people would understand that there is a huge difference between owning something and borrowing money to own something. This goes for cars and anything "bought" via a credit card.
The only solution is to educate people about the benefits and dangers of taking on too much debt and this starts by understanding exactly what debt is. I fear much of the American public has no idea what is debt and what is true ownership.
Posted by Webomatica at January 13, 2008 08:18 PM"In February 2004, Alan Greenspan urged people to take advantage of the low interest rates and refinance their mortgages with adjustable rate mortgages."
Is English your second language? What he said is more choices is preferable to less. Let me use a similar example that usually gets through to democrats...
Americans MIGHT benefit if given an alternative to the traditional heterosexual unions. To the degree that some people prefer partners of the same sex, the traditional heterosexual unions MAY be a sub-optional lifestyle.
Did I just URGE people to engage in homosexual relations?
The problem is financial competency. You can graduate from our government indoctrination centers knowing jack shit about budgeting, the definition of money, how to do basic cost/benefit analysis, the effects inflation, equity, debt, etc.
Of course a politician's utopia is a society where everyone goes through life in a state of blissful ignorance, thinking they can rely on the government to protect themselves from their sheer incompetence. In such a world politicians maximize their power over their subjects.
And Brisa is dead on. Listen to Peter Schiff, there are plenty of youtube videos with him speaking. The inflation caused by our politicians in tandem with the federal reserve over the past 30 years has been a crime worthy of 100 life sentences to every accomplice. Right now my investment portfolio is overweight U.S. exposure at 10% USD denominated assets. Last tip, U.S. treasuries are not risk free, and neither is real estate.
Posted by Jay at January 14, 2008 01:22 AMIn February 2004, Alan Greenspan urged people to take advantage of the low interest rates and refinance their mortgages with adjustable rate mortgages.
Unscrupulous real estate agents picked up on Greenspan's statements and started selling 'arm's like it was the second coming. Leading many homeowners with large debt to believe this would save them.
Unfortunately, this hit's close to home. My wife's sister and her husband are being foreclosed on. Bad financial decision's by them, yes, but the mantra started by Greenspan (now he is denying it), the predatory tactics by real estate agents and the unrealistic stance mortgage lenders took have forced countless from their homes. I doubt they will be able to buy another home in their lifetime. So much for the high home ownership statistics in this country.
As usual, conservative jay can't even understand the point of the post---is english your second language, jay?
The leading derivatives expert quoted here makes crystal clear his interpretation of the reasons for housing bubble:
"defaulting homeowners are blamed, but they are merely the pawn in the game.....Those loans were invented so that hedge funds would have high yield debt to buy" (i.e. to further leverage their positions. And that's why Allan G was approving and hawking the dubious loan "products"---this was his phony "expansion" vehicle.
So yapping about the "financial incompetence" of ordinary schmoes whose trusted advisors told them it would all work out is so not the main point of this financial scandal---this is much more a scandal manufactured by the nation's high flying financial experts, not by millions of greedy "financially incompetent" wage slaves looking to buy a home.
The financial industry misleads "consumers" and "investors", that's why we decided to regulate it after the Crash of '29 and why this derivatives expert is obviously calling for it to be regulated again. But no matter how clear the abuse and scandal engaged in by an industry, conservatives never see a reason for placing restrictions on it.
Posted by euzoius at January 14, 2008 06:44 AMAnd of course, then there's the collateral benefit for Republicans: the crash and real pain escalation will happen on the next, probably Democratic, president's watch -- a twofer! Rob the poor and middle class, then be able to blame it on the Democrats. But our guys never saw it coming, did they? Funny, I did.
Posted by dalloway at January 14, 2008 06:55 AMJay sounds like your typical dumbass Republican who thinks that policies that favor mega-millionaires will also benefit them
useful idiots
Posted by Gay Veteran at January 14, 2008 11:06 AMMary - excellent piece! What needs to be stressed is that all the Wall St. shenanigans fueled the housing bubble that resulted in home prices increasing 100% or more since 2000 while average wages stagnated. If the problem were simply one of predatory lending, federal legislation could correct the situation and save the "homeowners." There are no easy fixes for this and the bankers and Alan Greenspan are doing nothing but keeping their fingers crossed the housing property values don't drop more than ten percent to fifteen percent.
Posted by Marie at January 14, 2008 02:02 PMPlease point me to one situation when a lender pointed a gun at a person's head and told them if they don't sign the dotted line they were going to die? Or how about the clause in the Constitution that empowers the federal government to protect individuals from themselves? You are free to let the electricity Nazi's take control of your A/C units, but don't force your dogmatic beliefs on others (another major sticking point in the Constitution).
"wage slaves"
Wow you actually said something correct. You realize that anyone that earns taxable income in this country is a slave of the State.
Posted by Jay at January 14, 2008 04:26 PMAlso I should send you a copy of my capital gains tax forms from this decade. This has to have been the easiest run of years to make money, so long as you understand Austrian Economics.
The only annoying part was having to wait well over a year for my ABK short to pay off. Then again, no sense complaining over a 400% annual return.
I'll be happy to look over your capital gains schedules for the past decade, jay. Just send them to the owner of TLC and he'll forward them on....
BTW, who was the first person in your life to call you an embarrassing, childish braggart?
Posted by euzoius at January 15, 2008 09:18 AMDon't know, don't care. Ad hominens are used by those that don't have a valid argument.
Posted by Jay at January 15, 2008 05:20 PM