Real economics

[editec]

I don't totally disagree but the government bailing out banks that screwed up is not the answer.

No agument there. I have repeatedly outlined the way I'd have structured this fix and it does NOT bail out the banks.

What's going on here is that I find myself agreeing with the Austrian school about the basics of economics, but disagreeing with them about their VERY FIRST PREMISE.

Now I read that entire article, and it is chalk full of profoundly RIGHT ideas.

Sadly they START out with a lie...that the GOVERNMENT is running things.

It isn't!

The government is the handmaiden of the banks, and this FIX is prooof positive of that fact.

Why the Mises institute overlooks that obvious fact I cannot say.

But they do over and over again.

They continue blaming government (the FED) by pretending that goverment is run by people who have NOTHING to do with the banking community itself. The FED is a creature of the banks, folks. It was created for bankers BY bankers and it is run BY bankers for BANKERS,.


So...what that Misis piece is, despite how right it is on so many issues, is really is is a WHITEWASH of the REAL CUPRITS....the privately owned banking community.

tyhese BANKS fucked up, folks.

True they did it with the help of the FED, but the banks dominate the thinking AT the Fed.

 

[Skull Pilot]

No agument there. I have repeatedly outlined the way I'd have structured this fix and it does NOT bail out the banks.

What's going on here is that I find myself agreeing with the Austrian school about the basics of economics, but disagreeing with them about their VERY FIRST PREMISE.

Now I read that entire article, and it is chalk full of profoundly RIGHT ideas.

Sadly they START out with a lie...that the GOVERNMENT is running things.

It isn't!

I think you mean this article http://http://www.independent.org/pdf/policy_reports/2008-10-03-trainwreck.pdf

I don't see where it states the government is running things. What it does elaborate on is that government has injected itself into banking and mortgages in particular. Whether government has done this historically at the express request of banks is not explored.

Home mortgages have been a political piñata for many decades.

in 1934 the federal government created the Federal Housing Administration(FHA), which guaranteed mortgages against default, thus removing the risk from the bank. This was the first major intrusion in the mortgage market. In 1938 Fannie Mae was created to purchase FHA mortgages.

Whether or not the FHA was created as a request by the banks is not addressed. You may be right but again the motivation of the government at least with the FHA seemed to be to prop up home ownership rather than as a favor to the banks.

The government became heavily involved in the mortgage market in a new way after concerns about mortgage discrimination arose in the 1970s. The
government passed the Community Reinvestment Act (CRA) in 1977, requiring banks to conduct business across the entirety of the geographic areas
in which they operated, thus preventing them from doing business in a suburb, say, while neglecting a downtown area. Congress also passed the Home Mortgage Disclosure Act (HMDA) in 1975, which required that mortgage lenders provide detailed information about mortgage applications. Every year
banks receive a score on their CRA compliance

The CRA certainly does not read as a favor to the banks. If anything it is a control placed on banks by the government.

In 1991 the HMDA data was expanded, allowing for comparison of rejection rates by race. Various news organizations started publicizing simple
examinations of HMDA data, showing that minorities were denied home mortgages at a rate far higher than that for whites. It was and still is common
for newspapers in large cities, shortly after the yearly HMDA data are made public, to do exposés examining the differences by race in rejection rates
on mortgage applications. There are even turnkey kits for newspaper reporters aspiring to demonstrate such results. Although such comparisons are completely unable to distinguish between the possibility of discrimination or differences in credit worthiness as explanations and are therefore fairly meaningless, these results were and are trumpeted far and wide in the media.

The last defense of banks trying to defend themselves against charges of engaging in biased mortgage lending appeared to fall when the Federal Reserve Bank of Boston (Boston Fed) conducted an apparently
careful statistical analysis in 1992, which purported to demonstrate that even after controlling for important variables associated with creditworthiness, minorities were found to be denied mortgages at higher rates than whites.


Again this does not seem to be a favor to the banks by the government.

The government is the handmaiden of the banks, and this FIX is prooof positive of that fact

.

It definitely is a money grab and it is definitely more government interference by the government even if it is "well intentioned" but isn't more that the government has declared that bank failures are a bad thing and that's why we have the bail out? The reason why is up for debate and maybe we should look into it more. If you are a pro government type, you may see the banks coercing the feds, if you are an anti government type, you may see the bail out as government meddling in the market. The latter is how i see it I don't know with any certainty that this bail out was conceived by the banks and then pressure was put on the government by the banks to pass it.

Why the Mises institute overlooks that obvious fact I cannot say.

But they do over and over again.

They continue blaming government (the FED) by pretending that goverment is run by people who have NOTHING to do with the banking community itself. The FED is a creature of the banks, folks. It was created for bankers BY bankers and it is run BY bankers for BANKERS,.

I think the premise of a lot of the articles you see on Mises.org is that the government should stay out of the market period. So any intrusion by government into the market is criticized harshly. They are of the mind that government should NOT be coerced by the private market and the fact that they even can be so coerced is the fault of the government and not private banking or any other private entity.

So...what that Misis piece is, despite how right it is on so many issues, is really is is a WHITEWASH of the REAL CUPRITS....the privately owned banking community.

tyhese BANKS fucked up, folks.

True they did it with the help of the FED, but the banks dominate the thinking AT the Fed.

Yes the banks screwed up. We agree here and they should have been left to twist in the wind. And again the mere fact that the government meddled in the process is reason to criticize, even blame, the government for adding to the damage.

 

[Zoomie1980]

While I have read the above, I cannot help but notice this anti-governance attitude continues despite all the evidence to support the argument that this was NOT merely a government screwup.

As in this comment:



We have ALSO seen what happened when badly regulated capitialism is run at the whim of bankers, have we not?

Can we really afford to ignore the fact that the government was doing the bidding of the banking community, and not the other way around?


The Misis institute is right as rain about describing this problem, and the probable outcomes of this disasterous SNAFU.

But it ALSO seems to entirely gloss over the fact that the BANKS were thrilled to lend money foolishly, too.

They seem not to notice that the FED isn't dominating those poor bankers, folks.

They seem not to notice that the bankers are dominating the FED. (hell, they own the damned thing, don't they?)

The bankers COULDN'T WAIT to create and them lend out NINA loans. They've been doing these foolish loans since at least 1989!

They were falling all over themselves to lend money foolishly and collect their outrageous salaries and bonuses.

I know this for a fact because I was one of those people originating those NINA mortgages..as far back as in 1989.

The FED is a PRIVATE CLUB, folks, one that is not dominated by the government, but quite the other way round.

Presidential appointees are drawn from the very BANKING AND ACADEMIC ECONOMICS COMMUNITY.

Banks weren't forced to lend money, they did so willingly and with reckless disregard for the aggregate effect of a real estate market going south.

Now, how do we know that?

Because those banks DID pressure the RATINGS COMAPNIES to bullshit everyone about the REAL RISKS associated with these dubious bonds created from dubious real estate mortgages that were ORIGINATED BY THE BANKS THEMSELVES.

Hence, seince mortgage-originating BANKS could get that risk OFF their books when they sold that paper to organizations which foisted off that RISK to the bond buyers.

So laying the blame ENTIRELY at the feet of government is sort of silly, don't you think?

It took an acquiesent government entity, (the FED) doing the bidding of the industry (the BANKS) it was supposed to regulate in order to get to this state of affairs to BEGIN WITH.

Banks aren't the victims of this mess, folks. Put that foolish notion out of your minds

The banking community is puppetmaster pulling the FED's strings, not the other way around.

No, in many cases, those bankers were being coerced into making loans to low income minorities and other "protected" classes of LOSERS because of some social agenda to expand home ownership as if that was a silver bullet for societal ills. The problem was TOO MUCH regulation. Had these lenders been allowed to offer mortgages at the interests commanded by the risk, we would be in a lot less trouble than we are now.