Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, 1% Went to Wages

[Care4all]

I am tired of lefties keep blaming Bush for everything.

I agree, that's irrational. The rot in our system goes all the way back to 1980 at least. Bush played a part in it but certainly wasn't responsible for everything.



True about the tax cuts, false about the housing crisis. Bush's tax cuts were a primary cause of the ballooning of the federal deficit, but that's the deficit, not the economy.

What caused the meltdown? Step back a moment and recognize what the meltdown was, how it proceeded. Let's be clear what we're talking about.

1) Banks and insurance companies developed an investment vehicle called "mortgage backed securities" and a practice called "credit default swaps." Credit default swap - Wikipedia, the free encyclopedia This allowed certain mortgages (mostly for business properties) to be at the bottom of a whole chain of financial instruments whose total value far exceeded the amount of the original mortgage.

2) A bubble in the housing market (again, primarily involving business properties) burst, property values dropped, and a large number of mortgages went into default. This triggered payoff of credit default swaps (often in huge amounts whose total far exceeded the value of the defaulted mortgages), and the failure of mortgage-backed securities, which resulted in the impending failure of a number of large banks and insurance companies.

3) This in turn triggered a tightening of credit, as these large banks were not lending the way they had in the past. Since consumption in our underpaid economy was dependent on consumer credit, this caused sales to slump and many businesses to fail or to lay off workers. The economy went into recession.

4) Between banks and consumers, the recession created a new, more frugal mindset that does not allow the same degree of borrowing as in the past, so that the economy, although in recovery, remains depressed.

So -- what caused the meltdown? Bad mortgages? But without the mushrooming of credit-default swaps and mortgage-backed securities, the damage from the bad mortgages would have been minimal. Those ill-advised financial instruments, or the lack of regulation that permitted them? A much bigger factor than the mortgages, but without the reliance on credit in the consumer economy, the financial meltdown would have been much less destructive.

How about this. The collapse of our economy was caused by low wages and stagnating incomes that made the economy dependent on consumer spending financed by credit, so that the first serious hiccup in the financial industry could send the whole economy into a tailspin; coupled with deregulation of the financial industry that encouraged and enabled irresponsible financial investments making such hiccups more likely.

And of course, very little of that was George W. Bush's fault. (And none of it was Barack Obama's.)



Hardly any of the mortgages that failed were made by Fannie or Freddie. You can blame Bush for this if you want, but it had very little if anything to do with the economic crash.



While moral outrage on this point is understandable, the damage would have been far worse if the banks had been allowed to fail.

If you pay attention on Bush's tax cuts, they cost us approximately $70 billion a year for total of $560 billion since they were in force. That's over $400 billion less then cost of stimulus that was spend in less then two years with almost no results. So which one screwed us more?

The tax cuts, because your statement that the stimulus had "almost no results" is inaccurate. However, the tax cuts were not responsible for the economic crash.

"This allowed certain mortgages (mostly for business properties) to be at the bottom of a whole chain of financial instruments whose total value far exceeded the amount of the original mortgage"

So what? Each mortgage is owned precisely once.

"Hardly any of the mortgages that failed were made by Fannie or Freddie. You can blame Bush for this if you want, but it had very little if anything to do with the economic crash"

The mortgages owned by Fannie and Freddie are the ones where the taxpayer is currently on the hook. Not the ones owned by Citi or BOA or JPM.

the banks securitized these mortgages, even the high risk ones, as mortgaged backed securities rated AAA, (which is suppose to mean extremely safe and secured) and sold them, throughout the world, including to Fannie and Freddie in the latter years of the boom.

 

[Ame®icano]

the banks securitized these mortgages, even the high risk ones, as mortgaged backed securities rated AAA, (which is suppose to mean extremely safe and secured) and sold them, throughout the world, including to Fannie and Freddie in the latter years of the boom.

And who exactly issue those mortgage backed securities with AAA rating?

 

[Toddsterpatriot]

I agree, that's irrational. The rot in our system goes all the way back to 1980 at least. Bush played a part in it but certainly wasn't responsible for everything.



True about the tax cuts, false about the housing crisis. Bush's tax cuts were a primary cause of the ballooning of the federal deficit, but that's the deficit, not the economy.

What caused the meltdown? Step back a moment and recognize what the meltdown was, how it proceeded. Let's be clear what we're talking about.

1) Banks and insurance companies developed an investment vehicle called "mortgage backed securities" and a practice called "credit default swaps." Credit default swap - Wikipedia, the free encyclopedia This allowed certain mortgages (mostly for business properties) to be at the bottom of a whole chain of financial instruments whose total value far exceeded the amount of the original mortgage.

2) A bubble in the housing market (again, primarily involving business properties) burst, property values dropped, and a large number of mortgages went into default. This triggered payoff of credit default swaps (often in huge amounts whose total far exceeded the value of the defaulted mortgages), and the failure of mortgage-backed securities, which resulted in the impending failure of a number of large banks and insurance companies.

3) This in turn triggered a tightening of credit, as these large banks were not lending the way they had in the past. Since consumption in our underpaid economy was dependent on consumer credit, this caused sales to slump and many businesses to fail or to lay off workers. The economy went into recession.

4) Between banks and consumers, the recession created a new, more frugal mindset that does not allow the same degree of borrowing as in the past, so that the economy, although in recovery, remains depressed.

So -- what caused the meltdown? Bad mortgages? But without the mushrooming of credit-default swaps and mortgage-backed securities, the damage from the bad mortgages would have been minimal. Those ill-advised financial instruments, or the lack of regulation that permitted them? A much bigger factor than the mortgages, but without the reliance on credit in the consumer economy, the financial meltdown would have been much less destructive.

How about this. The collapse of our economy was caused by low wages and stagnating incomes that made the economy dependent on consumer spending financed by credit, so that the first serious hiccup in the financial industry could send the whole economy into a tailspin; coupled with deregulation of the financial industry that encouraged and enabled irresponsible financial investments making such hiccups more likely.

And of course, very little of that was George W. Bush's fault. (And none of it was Barack Obama's.)



Hardly any of the mortgages that failed were made by Fannie or Freddie. You can blame Bush for this if you want, but it had very little if anything to do with the economic crash.



While moral outrage on this point is understandable, the damage would have been far worse if the banks had been allowed to fail.

The tax cuts, because your statement that the stimulus had "almost no results" is inaccurate. However, the tax cuts were not responsible for the economic crash.

"This allowed certain mortgages (mostly for business properties) to be at the bottom of a whole chain of financial instruments whose total value far exceeded the amount of the original mortgage"

So what? Each mortgage is owned precisely once.

"Hardly any of the mortgages that failed were made by Fannie or Freddie. You can blame Bush for this if you want, but it had very little if anything to do with the economic crash"

The mortgages owned by Fannie and Freddie are the ones where the taxpayer is currently on the hook. Not the ones owned by Citi or BOA or JPM.

the banks securitized these mortgages, even the high risk ones, as mortgaged backed securities rated AAA, (which is suppose to mean extremely safe and secured) and sold them, throughout the world, including to Fannie and Freddie in the latter years of the boom.

Yes, banks securitized mortgages, so did Fannie and Freddie.

We're on the hook for the losses of Fannie and Freddie, not the losses of Citi, BOA or JPM.