Obama's Regulatory Tsunami

[boedicca]

What's the forest?

The entire Big-Government Cronyism system in which Politicians, Public Employee Unions, Lobbyist, Corporations, Entitlement Recipients etc. collude to transfer money from the people who earned it to themselves.

Entitlement recipients collude with corporations?

You have poor reading comprehension and cognitive abilities. Try again.

 

[Raoul_Duke]

I'm not saying that deregulation didn't contribute to the Financial Crisis. It did. What I'm saying is that it is not the primary reason for it. The deregulation of the financial industry had been going on since Carter, so you can't pin it just on Bush and the Republicans.

Wall Street shares a big portion of the blame because they packaged all this shit and sold it off. But understand, investors wanted this shit. As interest rates fell - and actuarial targets did not, or at least not as much - investors began reaching for yield, and began to demand higher returns that couldn't be had in the market. So Wall Street fed it to them. They needed inventory, so the demand for subprime and other mortgages from Wall Street soared because invested demanded structured product.

Now, certainly, Wall Street flogged this garbage, and also share a fair amount of blame, but the demand from investors occurred because they couldn't generate the yield required to meet their obligations. As interest rates went lower and lower - as the Fed pushed yields lower and lower - demand for alternative products that produced higher returns went up and up. Had interest rates been higher, we wouldn't have had the Housing Bubble, or at least it wouldn't have been as bad.

I agree with all that. But the whole thing couldn't have got started if the mortgage industry had been supervised even to 2001 standards during 2002-8. You've got to give a fair chunk of the blame to the people who allowed all the bad debt to be created.

It's too bad Barney Frank and his minions in Congress thwarted the attempts to tighten regulations over Fannie Mae and Freddie Mac in 2003.

Bush adviser warns of Fannie Mae, Freddie Mac risks - MarketWatch

Fannie and Freddie didn't write one single bad loan.

 

[boedicca]

You clearly don't know what function they perform, bub.

 

[Raoul_Duke]

The entire Big-Government Cronyism system in which Politicians, Public Employee Unions, Lobbyist, Corporations, Entitlement Recipients etc. collude to transfer money from the people who earned it to themselves.

Entitlement recipients collude with corporations?

You have poor reading comprehension and cognitive abilities. Try again.

I'm afraid you'll have to explain what you mean to me. It looks to me like you're saying that corporations and retirees collude together.

 

[Raoul_Duke]

You clearly don't know what function they perform, bub.

I know exactly what they do. Can you explain how Fannie and Freddie caused all the bad debt to be written?

 

[boedicca]

No you don't.

 

[Care4all]

You clearly don't know what function they perform, bub.

regulations to curb fannie and freddie never made it to a vote BECAUSE Freddie Mac paid a Republican Lobbyist firm 2 million to lobby the Republicans in congress/senate...to vote against it.

sure the Dems in the committee were against it, but THAT is NOT why regulations were not strengthened on Fannie and Freddie.....the bill made it to the senate reading of the bill, but it never made it to the floor for an actual vote because republicans that were lobbied by freddie Mac would not vote for it.

read:

Report: Mortgage firm arranged stealth campaign - USATODAY.com

ya gotta blame the republicans for that.....

 

[boedicca]

That's historically inaccurate. From the New York Times in 2003:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

(snip)

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - Page 3 - New York Times

 

[Mustang]

One aspect of Obamanomics that has been overshadowed by the spending and tax discussions is the vast increase in regulations which are suffocating the recovery.

219 regulations costing a minimum of $100M/year each are in the queue for implementation. When the private sector is forced to absorb more than $200B of increased over ten years, jobs are Not Created.

And Obama these are on top of the estimated $380B that Obama has already been enacted.

The report by the House Oversight and Government Reform Committee headed by Rep. Darrell Issa, R-Calif., took aim at Obama's "regulatory tsunami" and concluded that the pace and scale of new regulations threatens the ability of the government to fulfill even its most basic regulatory functions. Here's how the congressional panel summarized its conclusions:

"The Obama Administration has created a regulatory environment that is suffocating America's entrepreneurs' ability to create jobs and grow businesses, ... This regulatory tsunami has caused job creators to lock down at a time when we need them to expand. The committee has found that the problems created by this regulatory tsunami goes far beyond the cost of the regulations themselves, but also include breakdowns in the regulatory process itself that is having a severe impact on large and small businesses alike."

Specifically, the panel found at least 219 "economically significant regulations in the pipeline, which if finalized, will impose costs of $100 million or more annually on the economy." That's a minimum of $219 billion in added costs to do business in this country over the next decade. Even worse, the panel found the Obama bureaucrats have already imposed 75 major new regulations that are projected to add another $380 billion in costs.

The Issa panel concluded that, as a result of this flood of new rules, "the regulatory process is broken" and that it is "being manipulated and exploited in an effort to reward allies of the Obama administration such as environmental groups, trial lawyers and unions."

Why the U.S. economy is headed for a double dip | Examiner Editorial | Opinion | Washington Examiner

What a joke. Supposedly, there are 219 regulations what will cost $100 million or more each a year, but there isn't ONE regulation specified?

Here's another problem. 219 times $100 Million does NOT equal $219 Billion.

 

[Care4all]

That's historically inaccurate. From the New York Times in 2003:

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.

(snip)

Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.

''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - Page 3 - New York Times

yeah, so what? THEY NEVER BROUGHT the bill up for a vote....
bill Frist refused to bring it up for a vote....you can't blame that on Democrats.....

the republicans that were lobbied by Freddie Mac, made certain that Hagel's regulatory overhaul bill would not come up for a vote on the floor.

WASHINGTON (AP) — Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse.
In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.
Freddie Mac's payments to DCI began shortly after the Senate Banking, Housing and Urban Affairs Committee sent Hagel's bill to the then GOP-run Senate on July 28, 2005. All GOP members of the committee supported it; all Democrats opposed it.
In the midst of DCI's year-long effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.

Obama's wanted a bunch of things done, just like Bush, but they never got through congress....is that Bush's fault? or the fault of congress? or both?

 

[Toddsterpatriot]

I'm satisfied that I made the case here that Bush deregulated the financial system. people can look at my version of the facts and your version and decide which ones they like best.

Made your case?
OMFG!
STFU!
Still waiting for your proof that Bush allowed banks, for the first time, to sell mortgages instead of holding them until maturity.

Still waiting for you to tell me what part of the explanation you didn't understand.

I don't understand which part of your explanation proves your claim that before Bush, banks held their mortgages until maturity.

After Bush changed some regulation, banks could suddenly sell their mortgages at anytime.

Or, instead of proving your claim, you could admit you lied.
Or admit you were wrong.

 

[Toddsterpatriot]

QW is right about this. The deregulation that led to the financial crisis did not occur under President Bush. The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton. But the trend towards deregulation had been in effect to some extent since the Carter Administration and in full swing since the Reagan Administration. To place all of the blame on Bush doesn't make any sense.

There is no evidence that the Glass-Steagall Act caused the sub-prime mortgage debacle. That's just a desperate attempt by liberals to pin the blame on Republicans. There isn't a shred of credible evidence to support i.

It's not that Glass-Steagall caused the mortgage meltdown, it's that its repeal allowed banks like Citi and Bank of America to use depositors' money to gamble on the markets. G-S had previously walled this money (deposits) and prevented banks from betting on the markets with it.

Citi and BOA got in trouble because they gambled in the markets? Prove it.

Or run away again.

 

[Toddsterpatriot]

It's not that Glass-Steagall caused the mortgage meltdown, it's that its repeal allowed banks like Citi and Bank of America to use depositors' money to gamble on the markets. G-S had previously walled this money (deposits) and prevented banks from betting on the markets with it.

Wrong. The problem is that banks were allowed to gamble in a way in which profits were privatized and risks were socialized.

The reasons why are complex. A good history can be found in "Reckless Endangerment".

Did it help that the banks could use depositors' money to make risky investments? It certainly added to the socialised losses, didn't it?

Which risky investments do you think they lost money on?

The only socialized losses so far are Fanny and Freddie.

 

[Quantum Windbag]

I didn't say Bush eliminated regulations. I said he deregulated the system. That can be scrapping existing regulations, choosing not to enforce them or relaxing them. Anything like this is usually just shorthanded as deregulation.

Eliminate, cut, deregulate. I still want to know what regulations he cut. So far all you have pointed out is Congress rewriting the the FHA down payment requirements and a long winded rant about an agency he had no control over doing something you do not like.



In order to back it up with facts you have to show that the regulations that existed were ignored, weakened, or unenforced by something Bush did. You have not even shown that there were any regulations involved in what the fed did or did not do.

Here's another example of Bush's deregulation. Here he's preventing individual states from using existing laws to prevent all the predatory lending that was going on in the early 2000s. Now he didn't eliminate any regulation here but he used the federal government to prevent state government from using FDR-era laws that were brought in to prevent any more 1920s-style predatory lending:

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation............


Eliot Spitzer - Predatory Lenders' Partner in Crime

This is more like it. Not sure it lives up to what you are claiming it does since it uses an existing federal regulation to usurp state authority, but at least we can say this was something Bush had control over.

Unfortunately, it seems that the OCC was actually enforcing existing federal regulations and laws, and claiming that those laws preempted state laws and regulations.

OCC issues predatory lending guidelines

I hate to say it, but if we follow current legal precedent, they are right. Still don't see any real evidence of Bush deregulating anything.

I'm satisfied that I made the case here that Bush deregulated the financial system. people can look at my version of the facts and your version and decide which ones they like best.

You provided one actual link to someone under Bush enforcing an existing regulation and that somehow proves that Bush deregulated an entire industry? You have no version of the facts, you have wild accusations and a massive conspiracy, the only thing you are missing is a trail of dead bodies to hide the evidence.

 

[Raoul_Duke]

Made your case?
OMFG!
STFU!
Still waiting for your proof that Bush allowed banks, for the first time, to sell mortgages instead of holding them until maturity.

Still waiting for you to tell me what part of the explanation you didn't understand.

I don't understand which part of your explanation proves your claim that before Bush, banks held their mortgages until maturity.

After Bush changed some regulation, banks could suddenly sell their mortgages at anytime.

Or, instead of proving your claim, you could admit you lied.
Or admit you were wrong.

I can't make my explanation any clearer than I already did. I'm sorry you couldn't understand it.

 

[Raoul_Duke]

Wrong. The problem is that banks were allowed to gamble in a way in which profits were privatized and risks were socialized.

The reasons why are complex. A good history can be found in "Reckless Endangerment".

Did it help that the banks could use depositors' money to make risky investments? It certainly added to the socialised losses, didn't it?

Which risky investments do you think they lost money on?

The only socialized losses so far are Fanny and Freddie.

Banking giant Citigroup could collapse under a wave of sub-prime losses totalling £13.3billion, financial experts warned today.

[...]

Citigroup has been one of those hardest hit by the financial crisis, losing at least £13billion in the last year alone from its failed bets on 'toxic' U.S. mortgages.


Citibank could collapse due to £13.3billion losses, warn financial experts | Mail Online


Citi Reports $8.3B Loss, Will Break Into Two Companies | Fox Business Archives - FOXBusiness.com

and so on.

 

[FA_Q2]

If the Bush administration had simply regulated the mortgage industry to 2001 standards how could the rest of the process -- securitisation of the bad loans etc. -- have happened?

As I get into below, no government takeover of risk would have also prevented the same thing. I would prefer the lower regulation with the loaning agencies assuming the risk.

You clearly don't know what function they perform, bub.

I know exactly what they do. Can you explain how Fannie and Freddie caused all the bad debt to be written?

You cite the fact that the market was deregulated that caused the bad loans but in reality those loans would not have been written had the actual companies writing them been exposed to the risk. That was the underlying problem. They deregulated the market while conveniently forgetting that the government was taking the risks. If the government simply got out of the way to include NOT TAKING THE RISK then the deregulation would not have been a problem as the companies would create their own standards so they would not be defaulted on themselves.

Certainly - this is a rather simplified version but the core of the point still stands - companies do not need to be over regulated if they are exposed to the risk of their decisions. If we take that risk upon the public and remove it from the company creating the loans in the first place, deregulation is disastrous. So obviously disastrous that I have no idea how our government fell for it...

ZZZZZZ... Going back 30 years to "redefine" predatory lending.. ZZZZZZZZ... Still exists. Still neccessary. Because folks are not served by the mainstream banks when they need to pay their utility bills on time.. ZZZZZ... No different than ZZZZZZ.... overdrawing your checking account by .14Cents and gettinng billed for $60...

Ring me when we're back in this century..

This is predatory lending by mortgage lenders, and it happened in the early 2000s. You need to read more than the first few words of the article.

Predatory lending is bullshit. Those people seeking the loans knew what was happening and played along because they wanted something for nothing. You can't tell me that a person making 50K a year was somehow tricked into thinking that he could afford a 700K house. Even with infinite refinancing, the principal debt would raise continually. It was a case of all around greed. Lenders with no culpability because the loan would be sold to the people and borrowers thinking they could game the system for hundreds of thousands of dollars. I can tell you that I never ran into someone on the street trying to sell me a bad loan, I had to go looking for my loan.

QW is right about this. The deregulation that led to the financial crisis did not occur under President Bush. The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton. But the trend towards deregulation had been in effect to some extent since the Carter Administration and in full swing since the Reagan Administration. To place all of the blame on Bush doesn't make any sense.

I agree with that. Most of this is not on Bush.

However, there is substantial evidence from around the world that financial deregulation leads to excess credit creation and asset bubbles. That doesn't mean deregulation is necessarily bad, but to say it is always good under all circumstances is just ideology.

True, and deserves repeating. I believe in far less regulation BUT regulations are required. Not all regulations need to be removed and there are many places where newer and more effective regulations need to be implemented.

 

[Toddsterpatriot]

Still waiting for you to tell me what part of the explanation you didn't understand.

I don't understand which part of your explanation proves your claim that before Bush, banks held their mortgages until maturity.

After Bush changed some regulation, banks could suddenly sell their mortgages at anytime.

Or, instead of proving your claim, you could admit you lied.
Or admit you were wrong.

I can't make my explanation any clearer than I already did. I'm sorry you couldn't understand it.

I understand you made a claim and won't, or can't, prove it.

 

[Quantum Windbag]

QW is right about this. The deregulation that led to the financial crisis did not occur under President Bush. The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton. But the trend towards deregulation had been in effect to some extent since the Carter Administration and in full swing since the Reagan Administration. To place all of the blame on Bush doesn't make any sense.

I agree with that. Most of this is not on Bush.

However, there is substantial evidence from around the world that financial deregulation leads to excess credit creation and asset bubbles. That doesn't mean deregulation is necessarily bad, but to say it is always good under all circumstances is just ideology.

It really wasn't deregulation. Congress rewrote laws to allow banks to do things that were previously illegal. If we were debating the merits of those laws I can see making a case for either side. Mostly I have been trying to get Duke to show me specifically what regulations Bush ignored or changed that led to the housing bubble, which actually started before he was in office.

In other words, I am here being a jerk because I can.

 

[FA_Q2]

Still waiting for you to tell me what part of the explanation you didn't understand.

I don't understand which part of your explanation proves your claim that before Bush, banks held their mortgages until maturity.

After Bush changed some regulation, banks could suddenly sell their mortgages at anytime.

Or, instead of proving your claim, you could admit you lied.
Or admit you were wrong.

I can't make my explanation any clearer than I already did. I'm sorry you couldn't understand it.

Much of what you wrote was clear BUT one point remains unproven and that is Bush somehow changed when the loans were resold (and hence the risk moved) to another entity. THAT combined with the deregulation would put far more blame on Bush's shoulders.