How did we get into this situation in the first place?

[corplinx]

I think that was a bit unnecessary near the end.

 

[Tailgater]

Meanwhile, there's another thread of thought in BAC's post, which I hear passed around the water coolers at work. It's the whole idea that the various laws and policies encouraging low income loans caused the crisis. Like every BIG LIE, there's some truth to it, but is it really true?

If you look at where the foreclosures are, I'm willing to bet that they aren't primarily in low income neighborhoods. The bubble really didn't happen within the City of Detroit. It was more in the suburbs. You had two income families with two professionals buying homes for $300,000. One of them loses that professional income when the economy slows down, and they suddenly can't make payments. Do that a few times, and there are plenty of foreclosures on some very expensive properties, and then the property values start plummeting. So, sure, there are some foreclosures in poor neighborhoods, but no more so than in rich neighborhoods. Which one causes the bank to lose more money?

However, it makes a much better story around the water cooler to say, "This all happened because them darned libruls made the banks loan money to a bunch of

Edited by Darat: 

Breach of Rule 10 removed.

."

This is the perfect storm of failures on all sides. Great for blind partisan blabbering everywhere.

 

[boloboffin]

Sigh.

Oh, no.

Yeah, Mead. You forgot to include "and illegulls" at the end of that sentence.

 

[Meadmaker]

Yeah, Mead. You forgot to include "and illegulls" at the end of that sentence.

My mistake.

And was it "a bit unnecessary"? It's a quote. I must admit I embellished it slightly. I added "them darned".

 

[Dymanic]

So I assume you aren't even going to try and challenge any of the facts I noted above. Does that mean you admit they are right?

Not necessarily, but a more thorough consideration of the points you've made is going to have to wait until I have a little more time available than I do now, because I'm just on my way out the door. Just seemed like a rather glaring omission, if a comprehensive discussion of the issue was your intent. This is a pretty complex affair, and I'm still in the process of forming my conclusions.

Tentatively, it looks as though there is plenty of blame to go around.

 

[Meadmaker]

Oh, and one more thing. Who really killed McCain's bill? It didn't make it out of a GOP controlled committee. I'll let BAC do the research on this one. He seems pretty motivated. He has asserted it was Democrats with a few Republican defectors. OK. Let's see the evidence for that. Was it ever voted on? Why not? Who made public statements of support for it?

 

[dudalb]

I like how the word "liberal" is used as an insult. i don't know who will win in November, but either way I know I'll enjoy watching a lot of people frothing at the mouth for 4 years.

People on the left use the word "Conservative" as an insult so it evens out.

 

[dudalb]

This is the perfect storm of failures on all sides. Great for blind partisan blabbering everywhere.

And we are getting plenty of it here.

 

[Giggywig]

People on the left use the word "Conservative" as an insult so it evens out.

Oh, you're absolutely right. Which is why people like me, who have no say on the matter and are not aligned to either side, get entertainment either way. I must say though, after 8 years of the left frothing over Bush, I'd like to see the right frothing over Obama. Makes for a nice change of pace. Plus the added entertainment of the racists going batguano crazy over Obama being in the White House.

 

[chipmunk stew]

People on the left use the word "Conservative" as an insult so it evens out.

It doesn't even out. There was barely a mention of "conservatives" at the Dem convention, while the Repubs continuously railed against "liberals" as though "liberals" ran Washington. There are still plenty of proud conservatives. It's only recently that liberals have started proudly referring to themselves as such again, rather than "progressives" or "moderates" or whatever.

Conservative has never been a dirty word in the mainstream. (At least, not since Goldwater...)

 

[BenBurch]

On the OP; What a pack of absolute lies.

 

[Upchurch]

It doesn't even out. There was barely a mention of "conservatives" at the Dem convention, while the Repubs continuously railed against "liberals" as though "liberals" ran Washington. There are still plenty of proud conservatives. It's only recently that liberals have started proudly referring to themselves as such again, rather than "progressives" or "moderates" or whatever.

Conservative has never been a dirty word in the mainstream. (At least, not since Goldwater...)

Just as a fun experiment, search Amazon.com for the following words:

Conservative & Liberal

How many items do you find that use the term in a derogatory fashion?

 

[gdnp]

So I assume you aren't even going to try and challenge any of the facts I noted above. Does that mean you admit they are right?

Challenge them? I'm not going to even attempt to read them.

Carry on.

 

[BeAChooser]

However, this train wreck was easy to see coming, and no one blew the whistle until one day some guy came to Congress and said, "WE NEED 700 BILLION TODAY!"

That's not true and I proved it above. Many people, including Bush and McCain (but not Obama or Reid or Pelosi), did indeed blow the whistle, starting back in the 90s. But hardly a democrat would listen to those warnings. They were too busy giving unsound mortgages to begging constituencies.

I'll even give McCain credit where credit is due. He did indeed introduce legislation to the (GOP controlled) Congress about Fannie and Freddie, and if it had passed, we would be better off than we are today.

Good for you.

However, it didn't pass, and the executive branch should have been blowing the whistle a lot harder.

It didn't pass because democrats were overwhelmingly against it, all spinning aside. You act like Bush and the republicans didn't give speeches. They did. Then democrats got up and gave speeches saying everything was fine while calling republicans racist and uncaring. Then the liberal media focused on the latter.

I will be voting against the GOP, because they were in charge when they could have done something about it, and they didn't.

What a load of garbage. For the record, all it took to scuttle the legislation that Bush and the republicans proposed was a few RINOs (those are democrats pretending to be republicans in order to get elected in the districts they *represent*) to say no. Meanwhile almost every democrat voted no. Now whose fault was it really? The party that got 99% of its members to vote yes or the part that had 99% of its members vote no?

 

[Tricky]

Everyone knows that lifting regulations that let normal banks take on riskier investments to compete with foreign banks is what caused the crisis. That and the whole spirit of de-regulation. The actual idea of de-regulation made banks fail. It wasn't even necessary to de-regulate

This suggests that the root of the problem is that US banks cannot compete with foreign banks. Considering how the US has fallen behind the rest of the world in so many other endeavors, I don't find this to be unlikely at all.

Though I know it is not the same thing exactly, the "bailout" could also be viewed as a form of protectionism. I'm guessing they would not bail out any foreign banks, regardless of their woes.

And the next question would be, what do US banks have to do to compete successfully with foreign banks? Cut their profit margin? Shave some executive salaries. Reduce dividends?

 

[Dymanic]

The problem wasn't letting financial and banking institutions merge, but making bad loans to people who shouldn't have been given loans for bogus liberal reasons in the first place.

This seems to be the central thrust of your argument, and the point I see as most in need of better support is the assumption that those loans were made for any other reason than a desire on the part of the lending institutions to make money in the process. How do you respond to the argument that approximately half of the subprime loans were made by independent mortgage companies that were not regulated by the CRA and thus had no government obligation to offer credit to minorities -- or that a third of the major subprime lenders were regulated but had very little CRA involvement?

I also question this:

The problem was democrats in government organizations (like Congress) not properly monitoring what lending organizations were doing from a financial soundness point of view.

Is it really the job of Congress to do that? How much "monitoring" would you consider appropriate?

 

[dudalb]

Let's cut to the chase: The GOP loved Deregulation because it fit in with their free market ideology, and the Dems bought in because they loved the idea of cheap home loans for their consituents. People in both parties bought into a really,really,bad idea for different reason. More then enough blame for everybody..although you will never get the blind partisans on both sides to admit it.

 

[Cleon]

Let's cut to the chase: The GOP loved Deregulation because it fit in with their free market ideology, and the Dems bought in because they loved the idea of cheap home loans for their consituents. People in both parties bought into a really,really,bad idea for different reason. More then enough blame for everybody..although you will never get the blind partisans on both sides to admit it.

QFT

 

[dudalb]

QFT?

 

[chipmunk stew]

Let's cut to the chase: The GOP loved Deregulation because it fit in with their free market ideology, and the Dems bought in because they loved the idea of cheap home loans for their consituents. People in both parties bought into a really,really,bad idea for different reason. More then enough blame for everybody..although you will never get the blind partisans on both sides to admit it.

Incentivizing bad home loans without oversight falls on both parties' shoulders, for sure (although you could argue that the GOP was in a much better position to fix it, given their twelve-year dominance in Congress, with six years of it overlapping with a GOP president) but that's only part of the problem. (A crucial part, to be sure. But the bursting of the housing bubble didn't have to threaten the entire financial system.) When investment banks started leveraging the bad loans at thirty and forty times their actual value and investing in all sorts of bizarre derivatives and exotic products that no one really understood, that's when things started to get really hairy. The SEC was hamstrung from regulating these weird transactions by a dogmatic resistance, led mainly by the dominant GOP, to any limits on free trade.