Verdict in on Obamanomics

[Annie]

You would think trillions of dollars, extensive regulations and record low interest rates would make a strong recovery, right? Well, the verdict is in: Keynesianism sucks. Like anyone reasonable had any doubts.

Review & Outlook: The Keynesian Growth Discount - WSJ.com

Are we in for Summer of Recovery '11? Is it going to be an annual thing now?

Nope the policies broke it, long ago. While Bush didn't help, the blame is at the feet of Obama.

Guest Post: The Housing Bubble Broke The Middle Class | zero hedge

Guest Post: The Housing Bubble Broke The Middle Class
Tyler Durden's picture
Submitted by Tyler Durden on 04/27/2011

 

[Trajan]

You just don't listen good, do you?

I'm sorry, I thought the post I was responding to said something about driving up inflation rates...so I responded to that...clearly my bad...

Printing (and borrowing) money to put into the hands of people doesn't create a healthy demand-supply cycle - it just creates inflation

Oh my, will you look at that.

It turns out I can listen just fine but you can't read.

You believe the official inflation rate?

It understates food and excludes energy inflation. It overweights housing, which is depressed right now. And it does an deflationary adjustment for "technological improvements".

Using the 1980 method, inflation is actually running closer to 10%.

Alternate Inflation Charts

well done and it also needs to be said AND acknowledge that this is what they wanted.

THEY- Bernanke and Giethner set out to boost inflation so as to in their minds cure short term monetary ills.....if it is now 'out of control' then hey they miscalculated and they must own that add in the energy policy that Obama himself embraces, well? here we are.

Oh and as far as food and fuel not being part of the inflation index, look, I am no economist but what is the average person to think? other than how that is so fundamentally divorced from reality, just like the unemployment number they choose to use.

 

[Toro]

It still seems to me the best thing you can give an ailing economy is more jobs. Any policy that threatens that, such as raising taxes, oughta be ignored, at least until the economy recovers and unemployment gets back down below 7%. Spending more money just doesn't work.

I bet you all 1000 Bucks right now that if instead of spending 800 Billion on failed stimulus. The government had instead given 800 Billion dollars in small business tax breaks/Credits. The Economy would be in much better shape today. Not to mention the government would be taking in more tax dollars for it.

I'm not betting against that. We'd be humming along at 5%+ GDP growth if that had happened...as long as ObamaCare didn't exist.

No we wouldn't.

The fundamental problem is that we have too much capacity. Though maybe growth would be a half point higher, the US economy is following a trajectory similar to other recoveries following a balance sheet recession induced by an excess build up of debt and subsequent collapse in asset prices.

 

[Toro]

I bet you all 1000 Bucks right now that if instead of spending 800 Billion on failed stimulus. The government had instead given 800 Billion dollars in small business tax breaks/Credits. The Economy would be in much better shape today. Not to mention the government would be taking in more tax dollars for it.

The money went to save jobs......union jobs, private and public. Pension funds. The American people were robbed to pay off the ones who carried BO to President. It's sick.

Well I didn't want to get into Detail, but if you want to go there.

Basically half the so called stimulus was actually simply given to states to prop up their failing Medicaid Funds.

And as you said, the other half was spent mostly on large Construction projects which were mostly union, and even the ones that were not were by law paid Prevailing Union Wage.(that last part I know from personal Experience, for 4 weeks I was paid 28.46 an hour to clean up a job site funded by the Stimulus as non union)

Some of the right wing talk show hosts like to call it money laundering, and they are not completely wrong. Much of that money that went to Unions, I am sure ended up, or will end up, in Democrat campaign funds by way of Union contributions.

Even calling that package "stimulus" is a joke. Unless you meant stimulate the Democrat Party coffers that is.

I can't remember exactly what the final break down was but the composition of the stimulus bill was 30-40% tax cuts, extension of social programs and infrastructure spending each.

 

[Toro]

That is obviously false. That was the whole premise behind the big stimulus bills. It didnt work. You didn't read the link, did you?

No, it's true. The GOP did try to end unemployment benefits, they did hold the middle class hostage to funnel more of our nation capital to the already wealthy, they did increase the wealth gap to never before seen levels, they did attack labor directly and it just goes on and on and on.


If the stimulus didn't work, why is the economy stable? What would be a sign to you that the stimulus DID work?

The economy is stable?.........Are you fucking kidding?

S&P just downgraded this country for the first time in history, due to the fact that our economy is not stable, spending is outta control, we can't pay our bills, we are a serious credit risk, we are not worth investing in, and this president is as clueless as it gets.....Christ man, Obama didn't even have a clue as to the reprecussions of S&P's downgrade.

We are screwed!

I just love listening to the damn Obamabots trying to claim the economy is fuckin' stable.

S&P did not downgrade US debt. It put US debt on negative watch.

 

[xsited1]

The money went to save jobs......union jobs, private and public. Pension funds. The American people were robbed to pay off the ones who carried BO to President. It's sick.

Well I didn't want to get into Detail, but if you want to go there.

Basically half the so called stimulus was actually simply given to states to prop up their failing Medicaid Funds.

And as you said, the other half was spent mostly on large Construction projects which were mostly union, and even the ones that were not were by law paid Prevailing Union Wage.(that last part I know from personal Experience, for 4 weeks I was paid 28.46 an hour to clean up a job site funded by the Stimulus as non union)

Some of the right wing talk show hosts like to call it money laundering, and they are not completely wrong. Much of that money that went to Unions, I am sure ended up, or will end up, in Democrat campaign funds by way of Union contributions.

Even calling that package "stimulus" is a joke. Unless you meant stimulate the Democrat Party coffers that is.

I can't remember exactly what the final break down was but the composition of the stimulus bill was 30-40% tax cuts, extension of social programs and infrastructure spending each.

The tax cut percentage was 22%. About $100 billion went to people who don't pay taxes so they cannot be counted.

 

[Toro]

You would think trillions of dollars, extensive regulations and record low interest rates would make a strong recovery, right? Well, the verdict is in: Keynesianism sucks. Like anyone reasonable had any doubts.

Review & Outlook: The Keynesian Growth Discount - WSJ.com

Are we in for Summer of Recovery '11? Is it going to be an annual thing now?

Nope the policies broke it, long ago. While Bush didn't help, the blame is at the feet of Obama.

Guest Post: The Housing Bubble Broke The Middle Class | zero hedge

Guest Post: The Housing Bubble Broke The Middle Class
Tyler Durden's picture
Submitted by Tyler Durden on 04/27/2011

Obama didn't create the housing bubble.

By some estimates, the housing and mortgage finance industries accounted for 40% all jobs created from 2003 through 2008. IOW much of the recovery was due to the housing bubble. The housing bubble collapse is the reason why the economy is in such a mess today. Unemployment would have been much worse had the housing bubble never been induced, and unemployment would be better today had we taken our medicine 5-7 years ago instead of perpetually kicking the can down the road.

Ideologues want to blame either Bush or Obama, but most ideologues are clueless fools. In truth, the policies run by the US government since 2000 are essentially the same. The only differences are composition and size. And the policies of the Fed have been even worse and have been going on a lot longer.

The truth is that had Gore been elected followed by some hardline conservative, we would most likely be in the same situation today, except the partisan ideologues would have different characters to blame and would have done so at different times.

 

[Toro]

Well I didn't want to get into Detail, but if you want to go there.

Basically half the so called stimulus was actually simply given to states to prop up their failing Medicaid Funds.

And as you said, the other half was spent mostly on large Construction projects which were mostly union, and even the ones that were not were by law paid Prevailing Union Wage.(that last part I know from personal Experience, for 4 weeks I was paid 28.46 an hour to clean up a job site funded by the Stimulus as non union)

Some of the right wing talk show hosts like to call it money laundering, and they are not completely wrong. Much of that money that went to Unions, I am sure ended up, or will end up, in Democrat campaign funds by way of Union contributions.

Even calling that package "stimulus" is a joke. Unless you meant stimulate the Democrat Party coffers that is.

I can't remember exactly what the final break down was but the composition of the stimulus bill was 30-40% tax cuts, extension of social programs and infrastructure spending each.

The tax cut percentage was 22%. About $100 billion went to people who don't pay taxes so they cannot be counted.

What do you mean exactly? Everyone pays taxes. A big part of the stimulus was a payroll tax cut. Everyone pays payroll taxes.

 

[finebead]

While sitting on the sidelines watching, maybe some of our critical conservatives, who did NOT have to deal with a near meltdown in the economy induced by the Bush administration (worst recession since the great depression), maybe they would state the actions they would have taken since 2009 and what the expected consequences would have been to the economy.

Of course we'll never know, as the public correctly blamed the repubs for blowing up the economy and showed them the door after they had screwed the pooch.

 

[Wicked Jester]

No, it's true. The GOP did try to end unemployment benefits, they did hold the middle class hostage to funnel more of our nation capital to the already wealthy, they did increase the wealth gap to never before seen levels, they did attack labor directly and it just goes on and on and on.


If the stimulus didn't work, why is the economy stable? What would be a sign to you that the stimulus DID work?

The economy is stable?.........Are you fucking kidding?

S&P just downgraded this country for the first time in history, due to the fact that our economy is not stable, spending is outta control, we can't pay our bills, we are a serious credit risk, we are not worth investing in, and this president is as clueless as it gets.....Christ man, Obama didn't even have a clue as to the reprecussions of S&P's downgrade.

We are screwed!

I just love listening to the damn Obamabots trying to claim the economy is fuckin' stable.

S&P did not downgrade US debt. It put US debt on negative watch.

That's called a downgrade........Trying to do an Obamabot sugar coat doesn't change the facts.

 

[TheGutterMaster]

Well this verdict seems pretty 2 dimensional to me and it doesnt really explain why keynesian economics doesnt work.

Son, if you looked at the current spending levels, it just seems like the Bush administration on steroids. We are still giving tax breaks to the top 400 rich americans, and we are still squandering around trying to liquidate those at the top instead of at the bottom. The fed and is still using policies of credit expansion that the unemployed and middle class americans will never see...many private banks smaller than AIG and all those too big to fail banks are having trouble with debt and bad assets. Many businesses on main street are still struggling.

The payroll tax cuts and other tax credits in the stimulus seems more like tools of supply-side economics rather than Keynesian, although it did invest on exlanding education, theirs way more to the economy than just education.

I was expecting Obama to be more like FDR, who would create a wide range of job programs designed to aid unemployment. Proof of FDRs policies working was when unemployment went down by 8% between 1933 and 1938....it wasnt just World War 2 that brought us out of the depression. FDRs programs helped start a trend of falling unemployment.

We need to invest in more infrastructure and manufacturing. In order to create the amount of jobs equivalent to that of the 40s we would have to create 30 million jobs in todays economy. We have been practicing Reaganomics for 30 years in absense of Paul Volkers fed policies and it hasnt been working. I say it is time to turn the other cheek and start spending and taxing like we did in the 50s.

 

[editec]

Yes the MASTERS of the UNIVERSE plans to bankrupt of the nation and the middle class are moving along as well as can be expected.

 

[sparky]

The Fed Reserve's first every news confrence was this last week

Bernake , in Fedspeak, says........?

 

[The Rabbi]

While sitting on the sidelines watching, maybe some of our critical conservatives, who did NOT have to deal with a near meltdown in the economy induced by the Bush administration (worst recession since the great depression), maybe they would state the actions they would have taken since 2009 and what the expected consequences would have been to the economy.

Of course we'll never know, as the public correctly blamed the repubs for blowing up the economy and showed them the door after they had screwed the pooch.

Which policies of the Bush administration led to this recession?

What should they have done?
Backstopped the banks and sat back. Bush made a mistake extending TARP to the auto makers. They should have gone under. The recession would have been more severe but the recovery would have come much faster and the ensuing prosperity much greater.
James Grant wrote a book called "The trouble with prosperity" in which he showed that the more government meddles in a downturn, the weaker the recovery becomes. He demonstrated this so thoroughly it is a wonder anyone can doubt it.
The lack of recovery in the housing market is solely due to the actions of the Obama Administration with their threatening lenders, HAMP, and otehr stupid programs. Banks should have long ago foreclosed on those properties and sold them at pennies on the dollar. This woudl ahve cleared the market and made way for recovery, as was done in 1990-92.

 

[finebead]

While sitting on the sidelines watching, maybe some of our critical conservatives, who did NOT have to deal with a near meltdown in the economy induced by the Bush administration (worst recession since the great depression), maybe they would state the actions they would have taken since 2009 and what the expected consequences would have been to the economy.

Of course we'll never know, as the public correctly blamed the repubs for blowing up the economy and showed them the door after they had screwed the pooch.

Which policies of the Bush administration led to this recession?

1. Bush in 2002 address at HUD said the govt. was going to expand home ownership for minorities and outlined polices that would lead to such.
2. Failure to adequately regulate the mortgage industry which allowed them to use predatory practices targeting poor minorities to saddle them with terrible mortgage products.
3. SEC passed a new rule (called the "net capital rule") in 2003 specifically to allow the investment banks to expand their leverage from 15:1 to 45:1, so they could take on all the excess mortgage debt that directly lead to their insovlency. The rule stated the banks would monitor themselves with SEC oversight, but NO SEC OVERSIGHT OCCURRED. Thanks Chris Cox. At the time of their failures or sale for pennies on the dollar, Merrill, Bear Stearns, and Lehman were all leveraged over 30:1.
4. Loose money policy. M3 money supply was expanding to rapidly (treasury stopped reporting M3 during the Bush admin, they were so embarressed), and kept interest rates too low for too long (why was Fed Funds rate 1% in 03 and 04, fully two years after the recession of 2001 had ended?). Those low interest rates allowed the mortgage lenders to put people in homes with 2 year "teaser rates" of just 2%, and NO PLAN for what they would do in two years when the rates reset to reality, except to DEFAULT.
5. Republicans in the Senate blocked the final attempt to reform Fannie and Freddie in 2005. The house passed their reform bill 330-90, but the companion bill, S-190 was passed out of committee, but Bill Frist never allowed a vote on the bill by the full senate. This was because there was not adequate repub support for the bill, signalled by the failure of the author, Chuck Hagel R-Neb., to collect enough repub signatures on a letter asking for the senate vote (a secret ballot if you will).

These policies and actions lead to the housing bubble, the banking system failure, which in tandem lead us into the recession.

 

[The Rabbi]

While sitting on the sidelines watching, maybe some of our critical conservatives, who did NOT have to deal with a near meltdown in the economy induced by the Bush administration (worst recession since the great depression), maybe they would state the actions they would have taken since 2009 and what the expected consequences would have been to the economy.

Of course we'll never know, as the public correctly blamed the repubs for blowing up the economy and showed them the door after they had screwed the pooch.

Which policies of the Bush administration led to this recession?

1. Bush in 2002 address at HUD said the govt. was going to expand home ownership for minorities and outlined polices that would lead to such.
2. Failure to adequately regulate the mortgage industry which allowed them to use predatory practices targeting poor minorities to saddle them with terrible mortgage products.
3. SEC passed a new rule (called the "net capital rule") in 2003 specifically to allow the investment banks to expand their leverage from 15:1 to 45:1, so they could take on all the excess mortgage debt that directly lead to their insovlency. The rule stated the banks would monitor themselves with SEC oversight, but NO SEC OVERSIGHT OCCURRED. Thanks Chris Cox. At the time of their failures or sale for pennies on the dollar, Merrill, Bear Stearns, and Lehman were all leveraged over 30:1.
4. Loose money policy. M3 money supply was expanding to rapidly (treasury stopped reporting M3 during the Bush admin, they were so embarressed), and kept interest rates too low for too long (why was Fed Funds rate 1% in 03 and 04, fully two years after the recession of 2001 had ended?). Those low interest rates allowed the mortgage lenders to put people in homes with 2 year "teaser rates" of just 2%, and NO PLAN for what they would do in two years when the rates reset to reality, except to DEFAULT.
5. Republicans in the Senate blocked the final attempt to reform Fannie and Freddie in 2005. The house passed their reform bill 330-90, but the companion bill, S-190 was passed out of committee, but Bill Frist never allowed a vote on the bill by the full senate. This was because there was not adequate repub support for the bill, signalled by the failure of the author, Chuck Hagel R-Neb., to collect enough repub signatures on a letter asking for the senate vote (a secret ballot if you will).

These policies and actions lead to the housing bubble, the banking system failure, which in tandem lead us into the recession.

Nice try, Sparky.

1) \Barney Frank was far more a cheerleader for expanding mortgages for people who should have them. The GOP tried to head that off. Frank's response was to "roll the dice" on FNMA. In any case that program did not crash the economy.

2)The mortgage industry is one of the most highly regulated. There is no such thing as "predatory" lending. I worked in that business for 9 years. People with bad credit histories pay higher rates. The Democratic alternative is to deny them mortgages at all.

3)Bush was not head of the SEC. The SEC does not regulate banks.

4) Here you have something. Less than zero real rates produced a rush to make bad loans, which were sold to China, etc and then defaulted. This is the crux of the issue. Obama has done nothing to prevent the Fed from repeating that mistake.

5) The GOP was among the strongest to reform Fannie/Freddie. In any case the Dums controlled both houses after '06. Why didnt they act??

 

[Bfgrn]

Just waiting for the dumb ass collectivist/wealth re distributor to come in trying to say that higher taxes equates to prosperity... trying, in a feeble attempt, to say that since 'tax rates on the wealthiest' were at one time 70+% (without recognizing that deductions, determinations of income etc were NOT the same) and the economy did not tank, that it means that higher taxes cause a bolstered economy

The Bush tax cuts have been in place for a decade...WHERE ARE THE JOBS???

 

[finebead]

Which policies of the Bush administration led to this recession?

1. Bush in 2002 address at HUD said the govt. was going to expand home ownership for minorities and outlined polices that would lead to such.
2. Failure to adequately regulate the mortgage industry which allowed them to use predatory practices targeting poor minorities to saddle them with terrible mortgage products.
3. SEC passed a new rule (called the "net capital rule") in 2003 specifically to allow the investment banks to expand their leverage from 15:1 to 45:1, so they could take on all the excess mortgage debt that directly lead to their insovlency. The rule stated the banks would monitor themselves with SEC oversight, but NO SEC OVERSIGHT OCCURRED. Thanks Chris Cox. At the time of their failures or sale for pennies on the dollar, Merrill, Bear Stearns, and Lehman were all leveraged over 30:1.
4. Loose money policy. M3 money supply was expanding to rapidly (treasury stopped reporting M3 during the Bush admin, they were so embarressed), and kept interest rates too low for too long (why was Fed Funds rate 1% in 03 and 04, fully two years after the recession of 2001 had ended?). Those low interest rates allowed the mortgage lenders to put people in homes with 2 year "teaser rates" of just 2%, and NO PLAN for what they would do in two years when the rates reset to reality, except to DEFAULT.
5. Republicans in the Senate blocked the final attempt to reform Fannie and Freddie in 2005. The house passed their reform bill 330-90, but the companion bill, S-190 was passed out of committee, but Bill Frist never allowed a vote on the bill by the full senate. This was because there was not adequate repub support for the bill, signalled by the failure of the author, Chuck Hagel R-Neb., to collect enough repub signatures on a letter asking for the senate vote (a secret ballot if you will).

These policies and actions lead to the housing bubble, the banking system failure, which in tandem lead us into the recession.

Nice try, Sparky.

1) \Barney Frank was far more a cheerleader for expanding mortgages for people who should have them. The GOP tried to head that off. Frank's response was to "roll the dice" on FNMA. In any case that program did not crash the economy.

2)The mortgage industry is one of the most highly regulated. There is no such thing as "predatory" lending. I worked in that business for 9 years. People with bad credit histories pay higher rates. The Democratic alternative is to deny them mortgages at all.

3)Bush was not head of the SEC. The SEC does not regulate banks.

4) Here you have something. Less than zero real rates produced a rush to make bad loans, which were sold to China, etc and then defaulted. This is the crux of the issue. Obama has done nothing to prevent the Fed from repeating that mistake.

5) The GOP was among the strongest to reform Fannie/Freddie. In any case the Dums controlled both houses after '06. Why didnt they act??

1) \Barney Frank was far more a cheerleader for expanding mortgages for people who should have them. The GOP tried to head that off. Frank's response was to "roll the dice" on FNMA. In any case that program did not crash the economy.

Response: Barney Frank had NO POWER in 2001-2006, and the subprime mortgage lending spiralled out of control in 2004-2006. No committee head, no majority of dems in the house. Frank could cheerlead all he wanted, he HAD NO POWER. It was all held by the repubs, the house, the senate, and the white house. Cheerleading!!! PFFFFTTTT. You got nothing. Cheerleading... bwahahahaha!!!

2)The mortgage industry is one of the most highly regulated. There is no such thing as "predatory" lending. I worked in that business for 9 years. People with bad credit histories pay higher rates. The Democratic alternative is to deny them mortgages at all.

The tool in these deals is the "subprime" mortgage, a high-interest, high-fee loan increasingly popular with major financial institutions. In the past, meager incomes or shaky credit precluded low-income residents from securing home loans; subprime mortgages allow such borrowers to get the money they need to buy or fix up a house, or consolidate debt. But they come with a heavy burden -- not just the high interest and fees, critics of the practice contend, but hidden costs that bury unwary borrowers under mountains of debt.

In the last five years, subprime mortgages have flooded into Baltimore, with a concentration in poor, predominantly African-American neighborhoods. During the same period, defaults on home loans and foreclosures on homes have soared. No one has established a firm link between the two trends, but to many local bankers, borrowers, and community activists, it is not coincidental.

The redlining of yore was characterized by outright abandonment of black neighborhoods; widespread -- some say predatory -- subprime lending affects individual borrowers, trapping them in an inescapable cycle of debt and costing many their homes. But it may have a similarly deleterious and lasting impact on the long-term health of the neighborhoods in which it is prevalent. One practice kept capital from flowing in to poor black communities; the other keeps it flowing out

Swimming with Sharks: Subprime Lenders Put the Bite on Baltimore's Poorest Homeowners | Baltimore City Paper

3)Bush was not head of the SEC. The SEC does not regulate banks.

I didn't say SEC regulated banks, I said "investment banks". You are not reading closely enough.

SEC Deregulates 5 investment banks, relax net capital rule 2003 2004

One of the biggest problems out there, and nobody talks about it much, was the deregulation at the SEC that relaxed the capital requirements at the 5 biggest investment firms, and effectively outsourced the compliance to the 5 banks themselves.

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.

A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.

One commissioner, Harvey J. Goldschmid, questioned the staff about the consequences of the proposed exemption. It would only be available for the largest firms, he was reassuringly told — those with assets greater than $5 billion.

“We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.”

Mr. Goldschmid, an authority on securities law from Columbia, was a behind-the-scenes adviser in 2002 to Senator Paul S. Sarbanes when he rewrote the nation’s corporate laws after a wave of accounting scandals. “Do we feel secure if there are these drops in capital we really will have investor protection?” Mr. Goldschmid asked. A senior staff member said the commission would hire the best minds, including people with strong quantitative skills to parse the banks’ balance sheets.

Annette L. Nazareth, the head of market regulation, reassured the commission that under the new rules, the companies for the first time could be restricted by the commission from excessively risky activity. She was later appointed a commissioner and served until January 2008.

“I’m very happy to support it,” said Commissioner Roel C. Campos, a former federal prosecutor and owner of a small radio broadcasting company from Houston, who then deadpanned: “And I keep my fingers crossed for the future.”

The proceeding was sparsely attended. None of the major media outlets, including The New York Times, covered it.

After 55 minutes of discussion, which can now be heard on the Web sites of the agency and The Times, the chairman, William H. Donaldson, a veteran Wall Street executive, called for a vote. It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.

With that, the five big independent investment firms were unleashed.

In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms’ own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves.

Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.

The 2004 decision for the first time gave the S.E.C. a window on the banks’ increasingly risky investments in mortgage-related securities.

But the agency never took true advantage of that part of the bargain. The supervisory program under Mr. Cox, who arrived at the agency a year later, was a low priority.

http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1

5) The GOP was among the strongest to reform Fannie/Freddie. In any case the Dums controlled both houses after '06. Why didnt they act??

You are wrong. The Dems did NOT control both branches of congress in 2006, because I am pretty sure the election was in 2006, Nov. 2006, and the Dems did not get the majority until Jan. 2007. Yea, that's right...

And NO, the GOP was NOT among the strongest to reform Fannie / Freddie, the hypocrites just said so in public.

Freddie Mac arranged stealth lobbying in 2005

Associated Press ,Oct. 19, 2008

WASHINGTON — 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 yearlong effort, Hagel and 25 other Republican senators pleaded unsuccessfully with Senate Majority Leader Bill Frist, R-Tenn., to allow a vote.

"If effective regulatory reform legislation ... is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole," the senators wrote in a letter that proved prescient.

Unknown to the senators, DCI was undermining support for the bill in a campaign targeting 17 Republican senators in 13 states, according to documents obtained by The Associated Press. The states and the senators targeted changed over time, but always stayed on the Republican side.

In the end, there was not enough Republican support for Hagel's bill to warrant bringing it up for a vote because Democrats also opposed it and the votes of some would be needed for passage. The measure died at the end of the 109th Congress.

The Republican senators targeted by DCI began hearing from prominent constituents and financial contributors, all urging the defeat of Hagel's bill because it might harm the housing boom. The effort generated newspaper articles and radio and TV appearances by participants who spoke out against the measure.

Inside Freddie Mac headquarters in 2005, the few dozen people who knew what DCI was doing referred to the initiative as "the stealth lobbying campaign," according to three people familiar with the drive.
They spoke only on condition of anonymity, saying they fear retaliation if their names were disclosed.

Freddie Mac executive Hollis McLoughlin oversaw DCI's drive, according to the three people.

"Hollis's goal was not to have any Freddie Mac fingerprints on this project and DCI became the hidden hand behind the effort," one of the three people told the AP.

Before 2004, Fannie Mae and Freddie Mac were Democratic strongholds. After 2004, Republicans ran their political operations. McLoughlin, who joined Freddie Mac in 2004 as chief of staff, has given $32,250 to Republican candidates over the years, including $2,800 to McCain, and has given none to Democrats, according to the Center for Responsive Politics, a nonpartisan group that tracks money in politics.

On Friday night, Hagel's chief of staff, Mike Buttry, said Hagel's legislation "was the last best chance to bring greater oversight and tighter regulation to Freddie and Fannie, and they used every means they could to defeat Sen. Hagel's legislation every step of the way."

"It is outrageous that a congressionally chartered government-sponsored enterprise would lobby against a member of Congress's bill that would strengthen the regulation and oversight of that institution," Buttry said in a statement. "America has paid an extremely high price for the reckless, and possibly criminal, actions of the leadership at Freddie and Fannie."

Nine of the 17 targeted Republican senators did not sign Hagel's letter: Sens. Mitch McConnell of Kentucky, Christopher "Kit" Bond and Jim Talent of Missouri, Conrad Burns of Montana, Mike DeWine of Ohio, Lamar Alexander of Tennessee, Olympia Snowe of Maine, Lincoln Chafee of Rhode Island and George Allen of Virginia. Aside from the nine, 20 other Republican senators did not sign Hagel's letter.

Freddie Mac arranged stealth lobbying in 2005 | Business | Chron.com - Houston Chronicle

Sorry, every single one of your refutations has been demonstrated by my posts to be totally false, Sparky.

And I showed the proof to back it up.

 

[The Rabbi]

[ame=http://www.youtube.com/watch?v=6CgJq8OYEl0]YouTube - Barney Frank: Tip-Toeing Through the Tulips While the Housing Bubble Burst[/ame]



Looks like you're wrong. On all counts.

Best of luck next time.

 

[The Rabbi]

[ame=http://www.youtube.com/watch?v=o2g4xqrQ9Fg&feature=related]YouTube - The great Thomas Sowell talks about Obama-nomics[/ame]