Who’s to blame for the financial crisis — and why does that matter?
posted at 3:40 pm on September 22, 2008 by Ed Morrissey
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The 109th Congress has become the focus of hindsight in the financial meltdown of the past few days. With perhaps as much as one trillion dollars in federal funds in play for bailouts under a Bush administration proposal, people want to know why no one saw this coming before now. As Kevin Hassett reports at Bloomberg, Congress had an opportunity to force better practices on Fannie Mae and Freddie Mac, but some familiar names failed to act:
It is easy to identify the historical turning point that marked the beginning of the end.
Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.
Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.
Alan Greenspan told Congress that they needed to act, and quickly:
If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”
What happened? Despite moves from Republicans such as Chuck Hagel, John Sununu, Elizabeth Dole, and John McCain to get more regulatory oversight on Fannie and Freddie, Congress took no action. Why? Fannie and Freddie had already co-opted Chris Dodd with over $130,000 in campaign contributions over 20 years, and over $120,000 to Barack Obama over less than four years. Hillary Clinton took tens of thousands in eight years, and Chuck Schumer also opposed any new regulation on markets that Congress had forced open.
We can play blame games for the next several months and years, but what would be the point? In this case, there is a point, and it couldn’t be more clear or important. We have two candidates running for President who would bring much different styles to executive authority over regulatory responsibility. Barack Obama and his allies took the money and stayed on the sidelines rather than take proactive action to resolve the credit crisis. McCain and his co-sponsors of this bill had the right idea and instincts, but could not get any cooperation from Clinton, Schumer, or Obama.
Does this mean that Obama gets the entire blame for the financial crisis? Of course not; it’s shared among many people who failed to act, and some who acted poorly to create the problem in the first place by mandating loans to ill-qualified lenders and then allowed those loans to form the basis of widely-traded securities. McCain doesn’t become the sole protagonist in this morality play, either. However, this demonstrates the qualities of both judgment and leadership of both men — and those two qualities are critical for determining which man should be running the executive branch for the next four years.
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Why is the McCain-Palin campaign not making this case?!?!?!?!!? Why is the RNC not making this case? Hello?
D0WNT0WN on September 22, 2008 at 3:45 PM
With any reasonable exposure at all, this should be the end of Senator Obama and, at the very least, Democrat control of the Senate. Pelosi along is reason enough to end Democrat control of the House.
CC
CapedConservative on September 22, 2008 at 3:46 PM
Amen, Ed.
JAM on September 22, 2008 at 3:46 PM
Problem is that this is a complex issue for people to understand. I’m a sophisticated follower of the news and a lawyer who does bankruptcy and restructuring work (i.e. I work with banks all the time) and I don’t even have my head around this fully. What people understand is:
“This blew up, fatcats got rich, and now I the taxpayer am stuck with the tab.”
I think there’s also a sense that a “lack” of government regulation of the markets caused this, and that points to Republican policies. Yes, I know that’s an unfair attack on Graham-Leach-Bliley, but that’s what’s going to “stick” unless McCain can get people focused on Fannie & Freddie.
This would work better if the media would do its job, educate itself, and do honest reporting, rather than simply repeat Obama’s daily talking points memo and throw in some quotes from Secy. Paulsen regarding doom and gloom and the great depression. But that would be asking for integrity and honesty from the MSM, and that won’t happen.
Outlander on September 22, 2008 at 3:48 PM
I need someone to explain something to me:
The finical problems are being caused by homewoners defaulting on loans?
What else is the American Tax payer being stuck with?
I there are 300M people in the United States there probably are about 200M homes max. If 25% of the people are in default, that equates to about 25M homes. If the average cost of a house in the United States were $1M, to pay off the default mortages would take 25M dollars. Yes, there would be fees, interest not paid etcetera, but all in all that number must still be way below 700M dollars.
Obviously the American Tax payer is being stuck with a lot more than just fail mortages. What gives?
Rockman44 on September 22, 2008 at 3:48 PM
The poster “Devilstower” (Three Times is Enemy Action ) at Kos:
http://www.dailykos.com/storyonly/2008/9/21/9322/74248/245/602838
tries to hang much of the current problem on McCain.
He’s long on detail, goes way back to 1981, but evades any mention of Dodd, Clinton, Chumer, Frank or Obama.
Naturally, Penny Pritzker snd Superior (and its failure) are not mentioned, not is McCain’s sponsoring of S-190 and the Democratic refusal to pass regulation (or even vote on it) in 205-2007 are never mentioned.
Arbalest on September 22, 2008 at 3:49 PM
And does anyone think that the MSM is going to report on this? You must be kidding, they won’t ask him about Ayers, Rezko, Wright, et al, why would they put him on the spot with this stuff?
johnsteele on September 22, 2008 at 3:49 PM
Obama embraced the men who led us down this path. Why is Dodd still in his position, why is Franks still a chairman…the “president” and others better get of their high horses and start stating the facts.
Fannie and Freddie is a disaster, and we knew about the day after it was a disaster…the whole oversight committee (barring any that actually warned and were shut out) should resign in disgrace. And resign from the senate in disgrace.
right2bright on September 22, 2008 at 3:49 PM
Because is doesn’t fit on a bumper sticker.
right2bright on September 22, 2008 at 3:50 PM
An investigation was attempted but never performed due to all members of the investigative committee resigning due to conflicts of interest.
No one’s saying it but I know at least I’m sure thinking it.
*eats*
Grue in the Attic on September 22, 2008 at 3:51 PM
And the worst of it is that the same idiots responsible for the Fannie/Freddie meltdown are in line to be the regulators to “lead us out of the crisis”.
db on September 22, 2008 at 3:51 PM
Except that in this case the lack of regulation was caused by the Democrats.
flenser on September 22, 2008 at 3:53 PM
It is absolutely essential that the McCain campaign rehearses a 30 second summation of this, that HAS to come out during the debate, this Friday. If McCain doesn’t get the message across, he isn’t smart enough to be president.
Star20 on September 22, 2008 at 3:54 PM
McCain could and should frame his appeal exactly this way. And of the two, he would win hands down. People should be leery of betting on an unknown quantity in wartime.
Obama might be glad that Iraq is off the front pages, but this could take him down. McCain needs to back a second surge. The economic cost of this is staggering. McCain needs to demand scalps for the public to swallow this bitter bitter pill.
JiangxiDad on September 22, 2008 at 3:54 PM
I’m reminded how very much Fannie and Freddie are straight out of Atlas Shrugged: A corporation, propped up by and propping up government, long on heart, short on profit, and holding both of those things, and the contradiction they present, as virtues…
And now their folly falls on the backs of the productive, the taxpayer — who pay taxes because they are short on heart and long on profit.
Spc Steve on September 22, 2008 at 3:54 PM
The McCain campaign needs to make an ad saying that McCain tried to reform Fannie in 2005, but was blocked by the Democrats, while Obama took money from those who ran Fannie into the ground, and who can voters trust to reform Fannie and Freddie?
Steve Z on September 22, 2008 at 3:55 PM
Hear hear. McCain needs to understand that this is akin to Iraq.
JiangxiDad on September 22, 2008 at 3:55 PM
I’m so tired of conservatives running for office who won’t call a spade a spade for fear of offending people. The truth is the truth. John McCain should slap that whiney little smirk off OBambi’s face with this. Sara-Cuda should use this stuff to kick OBambi’s and OBiden’s nuts up into their throats.
AubieJon on September 22, 2008 at 3:55 PM
I have thought about that book every day for the past few weeks.
JiangxiDad on September 22, 2008 at 3:56 PM
That’s why you need a series of ads combined with a series of speeches and media events all coordinated and orchestrated to convey the message, drive the discussion, and shape the debate. That’s what our campaign contributions should be going to instead of bumper stickers.
D0WNT0WN on September 22, 2008 at 3:56 PM
It isn’t just the Government … Good Freaking Lord!
It is the Government, the People who ran the banks who gave interest rated loans out to everyone especially those with crappy credit (3 times bankrupt) and the people who’s eyes are to big for their heads.
WHY am I bailing these rejects out? I had to work my butt off to get where I am at… why do these people who screwed up left and right (The Government, the Banks and the dumb people) all freaking get a handout?
Screw them! I have about had it.
upinak on September 22, 2008 at 3:57 PM
Sounds like something I need to read.
*eats*
Grue in the Attic on September 22, 2008 at 3:57 PM
That is one of the biggest problems there is regarding anything governemnt does. The MSM are not objective reporters of news people require to make informed decisions. They are Democrat partisans that actively help the Democrats avoid responsibility and lay the blame at the feet of the GOP and free markets. I want to see a politician honest enough to admit to making a mistake. We can all understand that, no one is incapable of making a mistake.
DerKrieger on September 22, 2008 at 3:57 PM
McCain’s camp needs to figure out a way to explain this in 2 or 3 sentences, and then McCain and Palin need to repeat the message over and over again in every speech and interview.
The MSM clearly are not going to do their job, so McCain and Palin will have to do it for them.
AZCoyote on September 22, 2008 at 3:57 PM
McCain’s pick for SEC Commisar? Andrew Cuomo. Yippie.
Akzed on September 22, 2008 at 3:57 PM
The banks wouldn’t have made bad loans if not forced to by the government CRA laws. They were forced to either make bad loans of be penalized with fines or the inability to grow their businesses.
DerKrieger on September 22, 2008 at 3:59 PM
McCain needs to make this an ad RIGHT NOW!
Beat Barry HO over the head with it.
Although it does show how incompetant Dodd is. Took him 20 years to do what Barry HO did in 4.
Iblis on September 22, 2008 at 3:59 PM
Hasset’s article at Bloomberg linked above is short and concise. I referenced it on another thread. I wish it were read in every home in America. Pass it on to your friends.
JiangxiDad on September 22, 2008 at 3:59 PM
Oh SHUT UP!
Why don’t you tell me WHO in the democratic left is SO DAMN good for the people? And then expect to get slapped with a sticker on your head for being ignorant!
upinak on September 22, 2008 at 3:59 PM
McCain is a stupid man. He thinks he’s cool being a “maverick” but some of his decisions just look foolish to me.
DerKrieger on September 22, 2008 at 3:59 PM
Under Clinton!
upinak on September 22, 2008 at 4:00 PM
We all need to get this word out and compel the MSM to take a closer look at the facts behind our current dilemma…
RocketmanBob on September 22, 2008 at 4:00 PM
And once they succumbed to the devil, they raped their own firms as they went down.
JiangxiDad on September 22, 2008 at 4:00 PM
There own firms, the people associated and working with the firms, the people whom invested in the frims…
I don’t think I need to go on.
upinak on September 22, 2008 at 4:02 PM
I think you have me confused with someone else. Where did I voice anything closely resembling support for the looney left?
AubieJon on September 22, 2008 at 4:02 PM
The Democrats were to busy, filibustering legislation, trying to win the 2006 election than worrying about fixing the problems..
When the Democrats won the 2006 elections they STILL Failed to fox ANY Problems.. (And were actually the problem, taking the money from Fannie Mae, and Freddy Mac, wanting this happen)
Kick the Democrats OUT!
Chakra Hammer on September 22, 2008 at 4:02 PM
Rush ripped Andy a new one today. As a NY resident, I can tell you that the Cuomos are our Kennedys.
JiangxiDad on September 22, 2008 at 4:02 PM
you’re right, of course, but I am so tired of hearing this Depressing Truth
Whatever ‘bradley effect’ there is, there is counter-balancing ‘media effect’: their ‘drumbeat’ constant Dem-Lib propaganda is worth as least five points in any national election.
All that billion-dollar scandal which affects EVERY ONE
Janos Hunyadi on September 22, 2008 at 4:03 PM
Chris Dodd says, “It wasn’t me.”
Congress never acts pre-emptively. If they were all standing on the railroad tracks together and someone told them a freight train was heading right for them, they would do nothing. After the massacre brought on by 100 tons of steel crashing down on them, the few surviving congressman would blame the catastrophe on the train engineer, faulty tracks or lack of oversight on the rail industry.
They’re all blowhard idiots when it comes right down to it. I doubt if they know how to balance a checkbook.
fogw on September 22, 2008 at 4:04 PM
Aubie my apologies. I misread your item, while also reading another. Too many windows up… opps.
upinak on September 22, 2008 at 4:04 PM
………which is virtually ignored while the media whores & pimps scour Wasilla for the dirt on a public park
Janos Hunyadi on September 22, 2008 at 4:04 PM
Hammer the dems on this … get the word out or sink with the ship.
The dems and their hacks are way ahead spreading lies and falsehoods on this.
Tell the American people the truth, and win the election.
darwin on September 22, 2008 at 4:05 PM
McCain has a wicked sense of humor, I’m wondering if it was a joke. >:D
Chakra Hammer on September 22, 2008 at 4:05 PM
This is exactly right. I am one of the folks that is in that camp myself. Though I am also looking deeper to see how it happened. You only have to look as far as companies like Rock Financial to see how the fatcats got rich. They got rich enough to sponsor a sports stadium and help to fund purchase of the Cleveland Cavaliers for their primary owner. They specialized in brokering sub-prime mortgages. They were smart enough though to act as only a broker and promptly sold the mortgages to banks.
Explain to me how the executives at Lehman Bros. get their massive bonuses after leading the company to bankruptcy? This happens over and over again where top executives get fat golden parachutes after doing a horrible job. There is NO accountability for them. Meanwhile many of the workers get to stand in the unemployment line and add to our national debt. The ones that are lucky enough to keep their jobs get reductions in salaries to make their already difficult finances even tighter.
The big problem with the Republicans, and I will be blunt here, is that they hardly ever do anything to remedy this kind of corporate abuse. Often they even participate in it. That makes them appear to be part of the problem.
I am not absolving the Democrats either. They are just as bad. But they have a past reputation that helps shield them. They are still perceived by the foolish and uninformed as the party of the common man.
The truth is that NEITHER party is serving the public interest. They both play games with our money and our futures and leave us holding the bag for their failures.
Hawthorne on September 22, 2008 at 4:05 PM
No worries. I did the same thing the other day to someone. You had me going back to check on myself though. :)
AubieJon on September 22, 2008 at 4:06 PM
Yes this is the problem. We have three people running from congress and which one gets the blame? The only one who ever tried to make it right.
I truly believe that the press hates this country. Maybe they feel they need to atone for not questioning the WMD information better? But they are doing exactly the same kind of thing by refusing to question the Democratic congress and looking into placing blame where it should be.
McCain should be hailed as a hero on this. But the President’s party will suffer and the crooks will be allowed to keep running the congress and have a President to boot.
In fact it is simply unthinkable that if at any other time in history the canidate for President took all that money from an industry that was sinking the economy… Well this is a travesty.
petunia on September 22, 2008 at 4:10 PM
I worked for a major customer of Fannie mae until recently. I can tell you that by 2005, we all expected something to be done about it. We also expected the market to cool off. But it didn’t. Instead of backing off the riskiest kinds of mortgages as the boom obviously was coming to a close, Fannie and Freddie and Wall Street went “all in” to keep those volumes up and keep the share prices high. There was a whole lot of “voodoo” after that which was a mystery to some of us down in the bowels of the mortgage lenders. Our management kept projecting lower volumes and lower revenues, but instead the market got hotter and hotter. Most of us knew it didn’t make any sense. Those last few years of higher volumes were almost exclusively so-called “exotic mortgages,” i.e. payment-option ARNs, interest-only, and stated-income loans. Fannie and Freddie could not buy these loans directly, but they hit on a loophole in their charters are started buying so-called “Alt-A” loans and buying subprime securities. Thier continued purchases DID send a signal to the rest of the market that it was OK for them to keep buying this increasingly toxic paper.
It’s also important to note that some companies did not drink the subprime Kool-Aid. Bank of America stopped making subprime loans in 2000 (in fact, I recall a hilarious speech to an affordable housing group by Sen. Paul Sarbanes in 2001 lamenting this and urging B of A to get back into that market!) Wells Fargo never made an option-ARM loan or an interest-only loan. Chase made very few subprime loans as well. These banks are all fine and dandy today. They were the tortoises while Fannie and Freddie and Countrywide and Ameriquest were the hares.
rockmom on September 22, 2008 at 4:13 PM
Actually, they are. A large number are. The kind of men who go in for that are largely blowhard idiots. Real people have to live lives as independent of these POS as possible.
If there was ever an event to remind people of why you need limited government, and kept as far away from you as possible, this is it. And the potential for vastly compounding the problem by allowing these same creeps to “solve” it is possibly the worst risk we can take.
We have to have heads roll, not just for the purifying effect, but for the real chance of getting someone qualified in who will stop using the economy to social engineer outcomes.
JiangxiDad on September 22, 2008 at 4:13 PM
upinak:
If the government does not deal with this, banks could close, businesses could shut down. There would be no paychecks or banks to cash them at. That is why the government is doing this.Today while people debated this and pointed fingers at each other the DOW dropped another 360 points and oil jumped up $20 a barrel. That is not good for any of us.
Terrye on September 22, 2008 at 4:16 PM
You are a wealth of information! I really wish you had a blog, just to expalin mortgage types, what to look for, what risks, what should and shouldn’t be allowed, etc.
I would LOVE to see that come to townhall or simular blog where you can start free and also expalin WTF is going on with the “bailing” of the banks.
I knew that the inflated banks were going to do a drop about 3 months ago when i was buying my house and went with Well Fargo. I am glad I did and i am happy that I made the right choice. But your information for research on mortgages would have been awesome!
upinak on September 22, 2008 at 4:19 PM
And the government did not force banks to give out money. I was a realtor until just a few years ago and I knew a lot of people who were denied financing from banks.
However, some mortgage brokers found ways to take advantage of of the situation and did loan money out to people with dubious credit and then banks bought the loans.
Terrye on September 22, 2008 at 4:19 PM
These institutions seem to have been played as patsys. By virtue of them having been more cautious and conservative than their brethren, they had the wherewithal to step in a act at the government’s behest and purchase failing companies, like Countrywide, and Merrill. Had they waited, and not “helped”, they could have had only the good assets on those companies’ books, and farmed all the shit off on the taxpayer, like the rest are about to do.
These companies, like the taxpayers, will survive, and we should be grateful for that, but they were played.
JiangxiDad on September 22, 2008 at 4:21 PM
McCain-Palin have a couple of adds on Obama’s ethically challenged advisers but they really need to hammer this link, just as Ed has posted. Especially with some of the recent shifts in the polls towards Obama on the economy issue. People need to realize and be informed of Obama’s involvement in this mess and provides a superb contrast in economic leadership.
batter on September 22, 2008 at 4:22 PM
25 million X 1 million is 25 TRILLION Dollars not 25M…
SaintOlaf on September 22, 2008 at 4:22 PM
The reason why oil is “jumping” is the morons who invested in the Banks are jumping out and now jumping into the oil and gas industry hoping to do the same things as what they did with the banking industry. So they do not go broke while the rest of us whom work our rears off, work harder and pay more for gasoline, heating.. etc.
I hate the stock market. But my opinion is worthless as I have stopped playing in it. I invest in real items now. Not liquid… as I know and have seen what happens when liquid dries or evaporates.
The banks are evaporating…. because of poor deals, illogical choices, bad planning and the fact they can’t keep their crap together. Anyone with common sense know you don’t give money to people who can’t manage it. And blaming it entirely on Government (Dems or Reps) is blind as well as they didn’t have to open it like they did.
upinak on September 22, 2008 at 4:24 PM
Not quite so simple. Many of the ‘best and brightest’ and top leaders of the nation’s leading investment banking and other financial institutions testified on Capital Hill to insist that subprime lending risk was properly diffused throughout the worldwide financial system. Yes, in hindsight the problems look obvious. But the lack of reform reflected an honest disagreement over the risks posed to the system, not a simple corporate buy out of politicians.
You also fail to mention that Bush wasn’t exactly pressing for this kind of reform himself. Bush’s lack of action is telling.
Also remember that the pain introduced into the system by this bailout is compounded many times over by the $5 trillion. added by Bush to the federal debt over the last 7 years. If Bush had managed to keep the deficit under control, another $1 to $2 trillion would be insignificant. But as the falling dollar and skyrocketing oil prices have indicated, the worldwide financial system isn’t convinced that the US can handle such a massive debt load without triggering inflation or other serious problems.
Then again, Greenspan warned the nation before leaving office that lowering the deficit was the first step to dealing with entitlement spending. Warren Buffet has made nearly the identical point. Our financial problems are much larger than the current crisis on Wall Street.
bayam on September 22, 2008 at 4:26 PM
I can understand your frustration. It’s hard to evaluate risk with this kind of turmoil, especially when risk surfaces in what should be some of the safest investments available. Certainly don’t invest in stock unless you have at least a multi-year time horizon.
bayam on September 22, 2008 at 4:29 PM
OK, 2000 census says 105.5 million homes in the US.
Median price, 215K per.
30% of US homeowners do not have any mortgage (2000 census).
So, without ANY equity, that 15,877,750,000,000 or bit less than 16 Trillion of possible debt (if NO ONE has ANY equity).
Fed is already up to about 1.3 Trillion for the bailouts it wants…. so,
Wait…. this http://www.propertywire.com/news/north-america/equity-in-us-property-falls-below-50-20080308645.html says we in America are at about 50% equity…
so, now we’re down to about 11.341 Trillion owed… so the Gov wants way over 10% of that TOTAL to bail out bad loans?
Romeo13 on September 22, 2008 at 4:31 PM
I see Cankles on Fox Business right now talking about the need for “oversight” of the capital markets. How come there’s no oversight for people like Hillary or Dodd or Byrd or Pelosi or Rangel?
And of course, she LOVES the idea of the government doing more.
Haunchie on September 22, 2008 at 4:31 PM
Should it matter? Absolutely. The Dems were so eager to push high-risk loans in the name of home ownership for lower income voters that they ignored a crisis that was predicted years ago and actively blocked a potential fix.
Will it matter? No. The MSM will largely give the Dems a pass, and will happily “balance” any mention of the role the Dems had by including talking points that reflexively blame Bush.
McCain should still point out his support for better regulation in 2005 though. He addressed the situation early, while Obama has floundered.
Hollowpoint on September 22, 2008 at 4:31 PM
bayam:
Back in September of 2003 Bush tried to send regulation for Fannie Mae and Freddie Mac over to the Treasury Department. Congressional Democrats blocked it. At least he tried. And so did McCain.
As for Greenspan, there are people out there who are blaming as well. They claim his easy money policies led to this.
I am sure there is enough blame to go around.
Terrye on September 22, 2008 at 4:32 PM
Sure he was. Back in 2003, in fact.
Del Dolemonte on September 22, 2008 at 4:32 PM
Hey not everybody burned with the NEG-AM mortgages…
I had a NEG-AM mortgage…it was great!
It was like $3,000 a month for a $1,000,000 house in the Hollywood Hills of L.A. right above the sunset strip.
If you bought smart and sell before your interest rate goes up..there’s no problem.
SaintOlaf on September 22, 2008 at 4:33 PM
I guess it may be political suicide to blame the people that defaulted on their home loans, but i’m not running for office. In order to get a real picture of what happened, we would need to investigate their financial history as well. How many “sub-prime” mortgagees went straight from the closing to the mall to charge up a housefull of furniture and accessories for their new home? And since that was interest free for a year…they thought they could take on that new car payment. As someone that proudly lives within his means, i’m going to be really pissed if they get rewarded for such stupidity. Instead of helping people that normally may not meet the strict guidelines of conventional mortgage lending, both the buyers, sellers and lenders used the system to sell or buy higher profit houses with gobs of amenities.
mike_NC9 on September 22, 2008 at 4:33 PM
upinak:
I know why oil is jumping. My point is that until there is some sense of resolution and stability in the market we will see spikes in commodities as well as a collapsing dollar. We can assign blame at our leisure, right now we need to stop the bleeding.
Terrye on September 22, 2008 at 4:34 PM
The only problem is, no lower to mid income people would want to sell something like that due to greed. Mid-Income would take it and try to keep it as long as they could…
You may have gotten out unscathed, but others whom have “bigger eyes then their wallets” are the ones who are bringing the rest down.
upinak on September 22, 2008 at 4:35 PM
True bandaids aren’t going to fix this problem this time.
upinak on September 22, 2008 at 4:35 PM
JIang:
Bank of America was not played, they will be the ones gobbling up other assets and companies at cheap prices.
Terrye on September 22, 2008 at 4:36 PM
Friday night lights!
I’d hammer Obambi every chance I got on friday with this, if I were McCain – just keep saying “while I was trying to force more sensible lending practices on Fannie and Freddie, you were taking their money and ignoring the problem”.
Lather, rinse, repeat. Lather, rinse, repeat.
Martin on September 22, 2008 at 4:37 PM
I was involved somewhat in the mortgage industry too. And in the early ’90s I was a real estate agent. I feel like the people who really are the victims of this… aside from the tax payers… are consumers who were led to believe that these loans were the best thing ever. And led to believe that banks wouldn’t offer this kind of loan if there was a real risk that the buyer wouldn’t either be able to pay or refinance.
I hate that the banks are getting the bail-out but there doesn’t seem to be anything being done to keep people in their houses.
It irritates the heck out of me to have people say they should have known better than to buy a house that was too expensive with a regular loan. I just don’t think most people buy enough houses in their life-time to know what is “regular” and what is risky. They depended on the loan officiers and banks to determine whether their income would make the payments.
There was a direct conflict of interest because for the loan officer the commision was higher on those ARMs because the loan amount was higher. Also, the probability of refinance in a year or two was going to keep the loan officers income coming. The loan officier was the person giving the homeowner advice that was probably against the homebuyer’s best interest.
I know a lot of bankrupt loan officiers. And ones who have lost their houses. So they have been punished for selling a product but the maker of the faulty product is getting a bail out.
The tax payers are paying the banks for messing up and the flood of foreclosure and unfinished subdivisions and so forth is driving the value of same taxpayer’s biggest assest (their house)down. So the taxpayer is getting it twice while the banks get off.
petunia on September 22, 2008 at 4:37 PM
You’re right, McCain should get credit for his action. But I don’t recall that Bush was personally involved in any way or made any serious attempt to push through change. After all, in 2003 the Republicans had a majority and could push through anything if Bush made an issue out of it.
bayam on September 22, 2008 at 4:39 PM
mike:
A lot of those people got those loans so that they buy houses and flip them. When things got rough, they bailed out. That just lead to more houses on the market and put more stress on other homeowners…which in turn led to more forclosures.
Terrye on September 22, 2008 at 4:39 PM
Maybe a phone call, or two or three thousand just might let these traitors to our country know how we really feel…..
Seven Percent Solution on September 22, 2008 at 4:40 PM
25% of 200M is 50M
1M times 50M is 50T
I thought it was only something like 5%? And, given that only about half of people own homes, and there are a lot of husband-wife pairs in that, its probably less than 1M homes.
Count to 10 on September 22, 2008 at 4:43 PM
bayam:
I have seen that article in the NYT linked here, look for it if you like. They had an article out on September 11, 2003 in which they stated that the Bush administration was trying to put through the most radical and far reaching change in regulation in years. For one thing they wanted to put Fannie Mae and Freddie Mac under the control of a new agency in the Treasury Department.
Why didn’t they? Well it seems that Barney Frank and his friends swore there was not crisis, no problem.
The Republicans may have had a majority, but it was not a huge one. Not a fillibuster proof one. And besides, it was not until the midterms in 2002 that the Democrats lost the Senate.
As far as that is concerned, the Democrats have had a majority for the last two years and other than harass George Bush just what have they done with it?
Unemployment has gone up since they took over. So has the price of gas and the deficit, and now this.
At least Bush did try even though his efforts were blocked, what has Nancy Pelosi and Harry Reid done?
That is the real ad…just compare the economy in November 2006 to the one today.
Terrye on September 22, 2008 at 4:45 PM
You know the one peson I really don’t want to get away with this?
How much more damage can one women do to our country……
……… and now Jamie Garilick has profited millions of dollars from Fanny Mae, placed thier by Bill Clinton.
Anyone else had enough of this crap?
Seven Percent Solution on September 22, 2008 at 4:46 PM
B of A bought a lot of crap from Countrywide but they got it for almost nothing. They also got a mortgage servicing platform and a fantastic core group of loan officers that is worth the price they paid for the entire company.
B of A also pretty much wrote the FHA mortgage bailout bill that Congress passed in August. If there are any further mechanisms for it to transfer its bad Countrywide and Merrill loans to the taxpayer, it will certainly do so. Meanwhile it has just become the biggest financial institution in the world while spending almost nothing.
rockmom on September 22, 2008 at 4:47 PM
It is absolutely essential that the McCain campaign rehearses a 30 second summation of this, that HAS to come out during the debate, this Friday. If McCain doesn’t get the message across, he isn’t smart enough to be president.
Star20 on September 22, 2008 at 3:54 PM
I agree with this 100%. McCain gets his shot this friday, the first debate. He’ll get his chance to talk directly to the American electorate and right over the heads of our glorious media. If he can pull it off, the media will have to report it. If he can’t pull this off, the election is lost.
I’ve lived through many elections and this is the most pressurized and important in my lifetime.
swami on September 22, 2008 at 4:47 PM
swami:
Friday will be about foreign policy, not the economy. I am not sure McCain will get the chance.
Terrye on September 22, 2008 at 4:48 PM
I just disagree. My above post is about this.
My experience in helping people buy houses (I was out before anything really weird started). Was that before anyone goes looking for a house they go to a loan officer and see how much they can afford.
For most people they really trust that loan officer. They give them their most personal financial information. That is the expert who is getting financing for lots of people–who has the finger on all the options. If the loan officer says “this ARM is the best thing going” a lot of people believed it.
The theory was that prices would go up forever and it was a solid investment to have a house that would appreciate. And there was little risk because they could just keep refinancing back to the low payment and the equity would keep growing and that was a great way to increase your net worth.
It was all very sophisticated and modern. And made sense to a lot of people because they could see the WWII generation’s wealth came from the house they lived in for 30 years…safer than the stock market. Tax deductible, government backed…(psuedo but that was the impression)
petunia on September 22, 2008 at 4:49 PM
upinak:
I am not talking about bandaids. I am talking about there being a functioning banking system. If we do not do this and if it does not work, get used to saying President Obama, because Republicans will be blamed. Right or wrong.
Terrye on September 22, 2008 at 4:52 PM
But it could fit in a one minute ad.
And be repeated over and over.
Right_of_Attila on September 22, 2008 at 4:53 PM
I saw B of A’s chairman speak on this. I’m also a stockholder, and like the company. But I was chagrined at Merrill closing at 17 on a Friday, and B of A offering 29 on Monday.
JiangxiDad on September 22, 2008 at 4:54 PM
petunia is absolutely correct. These people took the advice of people they believed to be professionals.
Terrye on September 22, 2008 at 4:54 PM
I’m sorry, but you sound like you also believed the garbage you just said. The blind leading the blind.
JiangxiDad on September 22, 2008 at 4:56 PM
You might try using the correct spelling when you google…Jamie Gorelick
mike_NC9 on September 22, 2008 at 4:56 PM
I have a bridge in Brooklyn I’d like you to take a look at.
JiangxiDad on September 22, 2008 at 4:57 PM
Hope she rots in jail.Good post at 4:33.
JiangxiDad on September 22, 2008 at 4:58 PM
You’ll be happy to know that MSNBC has published a timeline of “How the global financial crisis has unfolded.”
The timeline doesn’t go back to how it REALLY unfolded. The first item on the timeline is Chris Dodd warning Greenspan and the Federal Reserve that they have created the “perfect storm” in the sub-prime mortgage mess.
I guess that gets Dodd off the hook! More jedi mind tricks by the Left media whores!
Mr_Magoo on September 22, 2008 at 4:58 PM
Crude futures are up due to the expiration of October contracts. November contract is around 108, so don’t read too much into it.
Vashta.Nerada on September 22, 2008 at 5:00 PM
Bush asked Congress repeatedly to pass this legislation. It was included in his budget message every year since 2003. He included it in numerous speeches, especially last year and this year as the problems started to become clearer.
In the peak years of the housing boom, even some Republicans thought the Administration was crying wolf about Fannie and Freddie. Everyone was afraid of killing the goose that laid the golden egg. After the accounting scandals in 2003 and 2004, when both companies replaced their CEOs and senior managers, a lot of people thought the problems would be solved. The new CEOs did a masterful job of BSing everyone to believe their high-flying, risk-taking days were over.
Then there was a lot of bickering over whether the legislation should include an affordable housing fund paid for by Fannie/Freddie. Democrats saw this as a last chance to get some new money for low-income housing, while Republicans saw it as a slush fund for the ACORNs of the world and bad precedent of ordering a private company to cough up a portion of its profits every year for essentially a public purpose.
Mike Oxley, who chaired the House Financial Servoces Committee, was a maniac about getting consensus on his bills. He did not like party-line votes and prided himself on not having them. So Barney Frank essentially had a veto on this legislation and got the bill he wanted.
The Senate was much closer and Sen. Shelby also did not want a party-line vote on a GSE reform bill. He knew that Democrats could filbuster anything they didn’t like and was not going to waste his capital pushing a bill until Democrats were ready for it. Then Chris Dodd took over and of course he was toally bought and paid for by Fannie and did nothing. Then he decided to run for president and went AWOL for almost a year.
The fact is that despite President Bush’s constant prodding, Congress just did not see any urgency to regulating Fannie and Freddie until it was too late.
rockmom on September 22, 2008 at 5:00 PM
I think they just changed it to the economy last week.
Mr_Magoo on September 22, 2008 at 5:00 PM
If the traitors in the MSM succeed in deflecting the blame, and exacerbate the situation any further, I suspect they will end up one day swinging from a lamppost.
JiangxiDad on September 22, 2008 at 5:01 PM
Until term limits and lifetime bans on lobbying for foreign govenments and corporations are imposed upon those who serve in public office, nothing will change.
Ted Stevens was re-elected; William Jefferson was re-elected.
The fault lies with the voters.
Period.
mylegsareswollen on September 22, 2008 at 5:07 PM
Why doesn’t McCain point all of this out?
I wonder if years and years of “Senate collegiality” has dulled his brain. His first instinct is to avoid attacking his buddies.
For example, he says in his stump speech that he will veto all of these earmarks and the people who send him those bills, he’ll “make them famous, you’ll know their names!!”
Damn John, why wait? You don’t have to be President to make them famous, YOU’RE RUNNING FOR PRESIDENT NOW DAMMIT!!
PackerBronco on September 22, 2008 at 5:08 PM
This formula for disaster was not rocket science. With the Dems getting ginned up on perks, it was a failure from the start.
What I find as the most annoying statement has to do with these being predatory loans targeted towards Blacks and Hispanics. I’m sure their are some White folk in there too that took out loans that they never intended on paying back, nor had the means….but they are not being painted as victims.
Hening on September 22, 2008 at 5:09 PM
Okay, this is not the entire problem. But do you really think that most of the people that are in foreclosure were not planning on living in those houses? That they thought they were putting themselves out on the street when they took those loans?
There is very little training of loan officers and most of it is how to convince people to buy loans through them. Not how to protect the consumer. Not how to give solid advice. And people do look to them for advice.
Come on–your radio waves had to be flooded with loan officers prestenting this kind of thing openly. Mine sure were.
I have been living in my house for about 12 years so this isn’t personal in that part. But my husband was general counsel for a mortgage bank and did work for loan officers and other parts of the housing industry. I have observed this end pretty closely.
There were “investors”, “speculators”, and those folks need to take the loss…. but regular house buyers bought more house than they should have been able to afford. But it wasn’t obvious to many that they were doing that.
And if they’re loans were redone at a low fixed rate they could make the payments. But their credit is shot now and they owe back payments so they are going to end up paying that mortgage money–to some investor–in rent, instead of paying off their own house. Because they got lousy financial advice. Most people aren’t as sophisticated as you.
They are the victims.
petunia on September 22, 2008 at 5:10 PM
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