georgephillip
Diamond Member
- Thread starter
- #41
Are you talking about sub-prime loans?Government meddling(Liberals and Conservatives) in the housing market played a small role in our current economic crisis which stemmed from households and financial enterprises running up excessive debts that their incomes and wealth could not pay off.Leftwingers laying the blame for their failed policies on capitalism is the oldest gamut they have, and it's been amazingly successful for them, most recently when the lib media got their boy obama elected by ascribing the blame for the financial collapse, a consequence of government meddling in the housing market, on "capitalism".
The key to that crisis was real wage stagnation since the mid-'70s.
Professor Richard Wolff explains it much better than I:
"Since the 1970s, banks, insurance companies and hedge funds invented new speculations on the rising debts of US households (asset-backed securities, credit default swaps etc.).
"Those financial speculations were even more profitable than the soaring profits of non-financial corporations that could keep their workers' real wages flat even as rising productivity delivered ever more product per worker to those corporations.
"Huge speculative profits prompted financiers to borrow in a self-reinforcing spiral ever further removed from the household debts on which it was based. When that base collapsed as millions of US workers could not longer sustain their debts, so, too, did the financial speculations built upon it."
Deficits, Debts and Deepening Crisis | Truthout
No actually, it was a lot of minority clients took out loans they couldn't service because of Fanny Mae offering a secondary market for such loans.
As for the stagnation of wages, that has to do with the disappearance of a golden era in th 1950s and 60s, when europe and japan were ruined from WWII, and india and china were still shooting themselves in the foot with backward socialism. At that time, america had an absolute majority of world manufacturing. Those times, now correctly seen as a very unusual fluke in history, are long gone, with many international competitors who will do the same work as american workers for a tenth the salary or less.
"According to a recent investigation by Barron's, Fannie's biggest problem was not the subprime mortgages they bought -- it was the better quality Alt A mortgages that caused their demise:
"As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a '100-year storm' in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.
"The latter contention is more than disingenuous.
"A substantial portion of Fannie's and Freddie's credit losses comes from $337 billion and $237 billion, respectively, of Alt-A mortgages that the agencies imprudently bought or guaranteed in recent years to boost their market share."
The Big Picture
GSEs plunged into loans they should not have because they were losing market share to Wall Street banks.
How did the fact of Germany's and Japan's rebuilding in the 1970s affect the distribution of rising productivity gains in this country?
In Germany the richest 1% of the population received the same share of total income in the late 70s that they pocket today.(11%)
In this country the richest 1% earned about 8% of total annual income in the 70s while earning over 20% today.