Are the Democrats responsible for the U.S. financial crisis?

[Theben]

Originally posted by Naked Gents Rut
While correct on a simplistic level, this is a maddeningly vague analysis of the crisis and of no use in fixing the American financial system to make sure this doesn't happen in the future.

It wasn't meant to be a critical analysis. Many and myriad points have already been made in this thread and there's little to add, other than the fact that no one has mentioned the original deregulatory acts of the early 80s as the beginning of this mess.

Both the dems and the republicans are at fault and I don't see the OP or it's writer doing anything that resembles "fixing the American financial system to make sure this doesn't happen in the future"... more like finger pointing. We're all good at that.

You want to fix it, sorry to say but it'll need to be re-regulated. Wall Street can't be trusted to regulate itself.

[Kidlicious]

Originally posted by Naked Gents Rut
Keeping Glass-Steagall around wouldn't have required them to have a large enough capital base. In fact, it probably would've led to there being even more under-capitalized stand-alone investment banks around to fail. That's why pointing to the repeal of Glass-Steagall as a source of the current financial crisis is stupid.

ARgh!! You're being obtuse. The repeal of the Glass-Steagall resulted in more money being invested in derivatives. That made the overall system less stable. Just because Chase didn't collapse yet doesn't mean they wouldn't have. In fact, the experts are all telling us that they probably would have.

[fed1943]

Ubi commoda ibi incommoda.
Isn't that the cornerstone of liberalism, free enterprise and justice?

Best regards,

[Naked Gents Rut]

CHRIS CUOMO, ABC NEWS: A little surprising for you to hear the Democrats saying, "This came out of nowhere, this is all about the Republicans. We had nothing to do with this." Nancy Pelosi saying it. She signed the '99 Gramm Bill. She knew what was going on with the SEC. They're all sophisticated people. Is that playing politics in this situation?

BILL CLINTON: Well, maybe everybody does that a little bit. I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.

http://blogs.abcnews.com/politicalradar/2008/09/bill-clinton-do.html

Honesty.

[Kidlicious]

If he were honest, he'd be blaming himself. Personally he's probably in the top 10 for people to blame.

[Ramo]

Originally posted by PLATO

Originally posted by Ramo

Actually Freddie and Fannie were the largest purchasers of subprime mortgage MBS.

Given that they're easily the largest players in the market, that's a rather deceptive figure.

It is still $338 billion no matter how you slice it.

The areas they were avoiding were areas that had people with poor credit profiles and low incomes. Race and marital status had little impact as lenders could really care less about these things.

I don't know why that matters any more than race or marital status. Prohibiting discrimination against people coming from areas with poor credit scores and low incomes is absolutely no excuse to recklessly lend to people with poor credit scores and low incomes.

Except that they were threatened to be sued by the government if they didn't.

Fannie and Freddie do have a lot of culpability here...they just don't have as much as a lot of other entities.

I totally agree with you here. That was my point.

We are closer to agreement than we are to disagreement.

Do you have a source on the overeagerness to sue (preferably not an opinion piece)?

[Arrian]

They don't call him Slick Willie for nuthin'

Anyway, it does seem that the Dems were connected up with Fannie and Freddie and get a bunch of blame for what happened there. It seems to me that the Republicans "deregulate everything!" mantra is also part of the problem. There's your shared blame.

Solution: tighten regulations and get rid of Fannie and Freddie (and don't simply create copies to replace them).

-Arrian

[Dinner]

Originally posted by Patroklos
Out of curiousity, what specific regulation governing sub-prime loans, specifically the one leading to this crisis, was removed? Oerdin?

My understanding is it is more the way the mortgages were turned into securities which was the problem. Yes, banks made bad decisions in extending subprime loans but in the past it would have just been that single bank which would have suffered if loans went bad but the way securities were sold now means lots of people get to share in the pain. Lots of bad choices were made all around.

[Dinner]

Originally posted by Naked Gents Rut
Bush is a moron. Hopefully McCain will perform a serious makeover on the flawed Paulson plan.

It doesn't appear so. The only notable difference between the new agreement and Paulson's plan is a cap on executive pay for companies receiving a bailout. That's a joke. I was really hoping for the Fed to insist on an equity stack as it would mean the Fed could later sell the stock to recover some of the taxpayers money plus it would punish inattentive stock holders (who would then punish executives) by watering down their stock thus reducing moral hazard.

[Dinner]

Originally posted by Naked Gents Rut
Oerdin doesn't know anything about the crisis beyond what he reads on left-wing blogs.

Since the mods don't seem to be doing their jobs I will point out that the site rules require you to talk about the issues and not other posters. So stop with your personal attacks.

[Dinner]

Originally posted by Naked Gents Rut
I have no faith in Chris Dodd doing the right thing. Harry Reid is ready to roll over for Paulson as soon as he has enough GOP support to cover his ass. America needs the Maverick right now.

I'm glad you're a foreigner who can't vote.

[Imran Siddiqui]

Originally posted by Oerdin
Since the mods don't seem to be doing their jobs I will point out that the site rules require you to talk about the issues and not other posters. So stop with your personal attacks.

Aren't you the guy who started a thread asking if Naked Gents Rut is the new UR?

[Dinner]

Yes, but that was yesterday and this is today. Each day starts fresh and new.

[Ramo]

Some interesting stuff on the CRA from Ezra Klein:

It's got to be a scary moment if you're a conservative. The economy is in a meltdown that can be directly traced to insufficient regulation. In other words, it's in meltdown because you suck at running it, and refused to listen to warnings that subprime loans required more oversight, Glass-Steagall made sense, and somebody should really be keeping an eye on these increasingly odd financial instruments and the obvious housing bubble that was feeding them. There's only one thing to do: Blame liberals.

The new line we're hearing is that the financial meltdown was really the product of the Community Reinvestment Act, a piece of legislation from the late-70s that required federally-insured banks to lend throughout the areas from which they take deposits, including poor neighborhoods, which were being systematically excluded from credit. The legislation, by all accounts, worked. Now, however, conservatives are trying to argue that it's behind the crisis: If the CRA hadn't been pushing these banks to make all these unsafe loans, then the birds would still sing and Alan Greenspan could still start each morning by being anointed with the oil of the purest, youngest, olives.

As Robert Gordon shows, however, this is crap. First, there's the timing. CRA came in 1977. The crisis came in 2007. Indeed, by 2004, the Bush administration had weakened the CRA -- and after that (though not, presumably, because of it), bubble lending really took off. Further, CRA only governs a certain class of federally insured banks. Problem is, half of the subprime loans came from mortgage companies with no CRA involvement at all. Another 25%-30% came from companies with very little CRA exposure. For those who left their abacus at home, that's 80% of the loans which were fully or largely outside CRA jurisdiction. More than that, the non-CRA mortgage firms made subprime loans at twice the rate of CRA-covered firms. Which basically leaves a stake in the heart of this particular theory. Indeed, until now, some conservatives have been moaning that no one is talking about the CRA part because it's so racially charged. Poppycock. It's just a false charge that's not worth talking about. As Gordon says, in one of my favorite kickers in some time, this "is not political correctness. It is correctness."

http://www.prospect.org/csnc/blogs/ezraklein_archive?month=04&year=2008&base_name=liberals_and_the_shtpile

[Kidlicious]

Originally posted by Arrian
Solution: tighten regulations and get rid of Fannie and Freddie (and don't simply create copies to replace them).

What about economic growth? Will the economy grow now without growth in credit?