Who Inflated the Bubble?

Discussion in 'Politics' started by str8up8x6, Jan 2, 2009.

  1. str8up8x6

    str8up8x6 New Member

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  2. BiItalianBro

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    Good clip...I am a big reason.tv fan too =)

    I think Wallison does a good job at outlining the short-term (30 year) microeconomics behind this crisis in an unbiased presentation. The larger picture, however, that remains unaddressed is that the entire U.S. economy (and perhaps free-market global) is based on debt. It is ironic that debt that gives the Dollar its 'value'...since the abandonment of the Bretton-Woods system in 1971. It is debt that fuels economic growth, on both micro and macro levels. It is the chartered banks willingness to extend credit to corporations and individuals, via fractional-reserve lending, and those institutions tolerance for debt that keep the wheels turning.

    IMHO this 'bubble' dates back to the early 1980s and has been passed along via different instraments. First it was commerical real estate, then telephony, then .com/tech and finally repackaged mortgages. Sadly, the central banks attempts to keep the 'bubble' from bursting and move this fiat debt along causes it to grow exponentially and, when the eneviatable "bust" happens, only increase the pain. That is the postion we are in today.
     
  3. faceking

    faceking Well-Known Member

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    The government artificially (which is often fine) created a housing opportunity incorrectly via:

    Community Reinvestment Act of 1977
    Freddie/Fannie Charters circa 1992-1993
     
  4. faceking

    faceking Well-Known Member

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    The government artificially (which is often fine) created a housing opportunity incorrectly via:

    Community Reinvestment Act of 1977
    Freddie/Fannie Charters circa 1992-1993
     
  5. faceking

    faceking Well-Known Member

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    echo.
     
  6. Notaguru2

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    Don't leave out the mortgage-backed securities that took down wall street.
     
  7. B_starinvestor

    B_starinvestor New Member

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    This guy's assessment is absolutely precise. Market forces had set appropriate underwriting standards through decades of lending/mortgage lending...risk assessment in lending was very, very effective.

    Gov't went in there and reduced those underwriting standards, circumvented prudent risk assessment and that created this bubble. And then it fucked everybody...possibly the worst financial crisis in our nation's history.

    This is an example of the dangers of government intervention into healthy markets.
     
  8. sargon20

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    Who is the author Peter Wallison?
    A codirector of AEI's program on financial markets deregulation, Wallison studies banking, insurance, and Wall Street regulation. As general counsel of the U.S. Treasury department, he had a significant role in the development of the Reagan administration's proposals for the deregulation of the financial services industry.

    AEI - Scholars & Fellows - Peter J. Wallison


    In other words part of the problem. :frown1:
     
  9. Notaguru2

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    I'm not big into WHO or WHAT caused it. I do know what thing, <obamaroboticvoice> O B A M A is gonna fix it! :cool:
     
  10. sargon20

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    One big HUGE reason why flying is so safe is the NTSB relentlessly investigates every plane crash and ruthlessly seeks the truth to what brought that airliner down and then it draws up regulations to make sure it never happens again. And so it should be done for every disaster. So that in 30 years when another generation of greedy cocksure mother fuckers come along we know NOT to listen to them.
     
  11. D_Brecock Evileye

    D_Brecock Evileye New Member

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    I dont pretend to understand all of the economic stuff but, I wonder if any of you have ideas on how it can be fixed?
     
  12. B_starinvestor

    B_starinvestor New Member

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    If you are referring to the bubble, it is already fixed. The mortgage products that caused the bubble no longer exist. Once again borrowers need to be suitable candidates for loans.

    The banks will never lend again to unqualified borrowers unless the gov't forces them to do so.

    Those that have foreclosed will unfortunately be unable to purchase a home for several years, even if their financial circumstances improve.
     
  13. Elmer Gantry

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    In which case, at least he's big enough to see that he was wrong.

    Being wrong isn't such a negative thing as long as you learn from it.
     
  14. Elmer Gantry

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    Which, under the current monetary system, will stifle, if not prevent, economic growth for years.

    That was a nice piece, but I think it only scratched the surface. There is a much larger, nastier genie about to leave it's bottle called inflation. And it is a direct product of the current monetary system. This event has been forestalled by various pump priming motions by various administrations. However, it is becoming apparent that it was an inevitability under a central banking system with a speculative currency.

    The mortgage/credit crisis was merely the catalyst.
     
  15. faceking

    faceking Well-Known Member

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    We can only wish... however, under the auspices of helping the poor, the "underrepresented", the whatever... they'll be right back there again within 10-15 years.

    You see Star,... homeownership is a right. And it's the gov't responsibility to provide for such.
     
  16. sargon20

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    As long as he is in any way associated with American Enterprise Institute he hasn't learned anything.
     
  17. Elmer Gantry

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    I think that presentation is proof that he's learnt something from it.
     
  18. Phil Ayesho

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    Bullshit.
    You right wing apologists would track the CAUSE of a Murder all the way back to the Union worker who dug the lead ore out of the ground.


    The ACTUAL collapse of the Financial sector had ONE cause.

    In 2004, Investment bankers from the largest financial institutions met in a basement room in a Government building with the SEC.
    They asked the SEC to lift a regulation specifying Debt Limits and Capital Reserves that lender must hold to minimize risk.

    The Bush admin SEC agreed to lift these regulations, and that freed Billions of dollars to be invested in the NEW mortgage backed securities and derivatives that were made legal in 2001 via mortgage deregulation.


    Right there.... at that moment, the 2001 republican idiocy that resulted in tremendously risky loan "products" receiving triple A bond ratings, MERGED with the 2004 republican idiocy of no longer requiring financial institutions to HEDGE their bets with reserve cash.

    The result? The slightest hickup in the housing market would result in losses the banks could no longer cover with reserves, because they not only had no reserves, but had had their debt ceilings removed.

    The SEC ABANDONED its regulatory role and allowed the financial sector to "police itself".


    WITHOUT THESE TWO REPUBLICAN SPONSORED EVENTS, the collapse of the financial sector would NOT have occurred ( just a huge housing recession) and NO BAILOUT would have been necessary.
    The cause of an event is the most proximate action, without which, the event would not have taken place.

    It doesn't matter that lead was mined and a bullet made and sold and put into a gun that was in the house. IF the person holding the gun had not pointed it and pulled the trigger... NONE of the prior events would have lead to THAT death.

    In fact- the US has been cruising down the DEBT based economy highway for a while- Ever since the revival of FREE MARKET THEORY...
    And that has ALWAYS been a republican agenda.


    Everything the Republicans have done has tunred out disasterously... for the country and for the citizens.

    But it has done WONDERFULLY for the ultra rich. But then, the Republican agenda is that Government is evil...

    Technically... that makes them all traitors.
     
  19. B_starinvestor

    B_starinvestor New Member

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    You push for regulation, but the fact is the only reason we needed regulation was to fix the titanic shitmobile that was set in motion by the government. Even if they had regulated the default swaps, the real estate market and mortgage industry would still have collapsed. A few Wall Street giants and AIG would have possibly survived, but not much else would have changed.

    Regulation doesn't fix payment defaults. Look at those that have had their mortgages restructured/modified....they are right back in default.

    People couldn't afford their loans. Too many loans were given out...and the snowball affect ensued. Your 'regulation' would have been trying to stop a trillion pound snowball with a bamboo fence.
     
  20. B_Nick4444

    B_Nick4444 New Member

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    not that I agree, but no-one has mentioned this consideration (of which I'm beginning to see expressed more frequently these days):


    THOMAS KOSTIGEN'S ETHICS MONITOR
    Reinstate the Glass-Steagall Act

    Commentary: Ending ban on bank-brokerage marriages was misguided

    We have the answer now.
    "Time was when banks and brokerages were separate entities, banned from uniting for fear of conflicts of interest, a financial meltdown, a monopoly on the markets, all of these things," I wrote.
    We should go back to that time and reenact the Glass-Steagall Act, or a something similar to it.
    The nebulous and vague talk of "fixing'" the problems on Wall Street by taking caring of "greed" or by better defining "fundamental strengths" sidestep specific plans on how to solve the crisis at hand. The new financial services authority and regulations that will merge functions of the Treasury Department, the Securities and Exchange Commission and banking regulators also will fail in correcting the underlying problems that we are seeing in the credit and equity markets today.
    Troubled banks and securities firms are being snatched up by any taker; this isn't sound economics. It's a version of "a drowning man will grab a sharp sword." More thought ought to be put into which entity can buy what troubled investment business. We need to straighten things out cogently with a plan, a steady hand and leadership. Yet, President Bush is apparently planning to nap through this crisis as well.
    So in the absence of any strategy at all, here's what I think needs to be done: We need to separate the securities business from the savings and loan business. The economies of scale and "vertical" business models designed around the lending, packaging and trading of debt instruments for greater profit are big moneymakers for companies in good times, but we now see what happens when things turn bad.
    The lawmakers who passed Glass-Steagall in 1933 were determined to prohibit investment businesses from receiving deposits. And they were wise to insist upon such prohibitions. They had seen the fallout from the stock market collapse just a few years earlier and were facing the Great Depression. They sought safety.
    We now may be seeing the oncoming of our own version of the Great Depression. We aren't seeing it closer than it may appear in the rearview mirror. We are seeing it splattered on our windshield.
    The government needs to put up protections in the form of regulation. Such regulation was bashed for years by free-market capitalists until they finally got their way in 1999 and the Glass-Steagall Act was repealed.
    What say you today?
    They government is providing capital to AIG and other financial services companies that need assistance. This is welfare, no different than a government check to a person (or family) in need. Except welfare for rich people and corporations is more benignly called a "bailout." That's kinda like an "oopsie" don't you think?
    As the poet Donald Trump once said (or something like it): "You owe the bank a million dollars, and the bank owns you. You owe it a billion, and you own the bank."
    Because the Treasury now owns banks, we as taxpayers own the banks. We need regulation to get it off our hands. Lawmakers should reinstate Glass-Steagall.
     
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