Obama's Regulatory Tsunami

[Mr. Shaman]

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.

Yeah....let's hear it for less government-interference.....just like the good ol' days....


[ame=http://www.youtube.com/watch?v=w6whSWn1RRM&feature=player_embedded]Great Depression - YouTube[/ame]​

 

[flacaltenn]

Which specific regulations do you not like?

I suspect you won't answer because you don't know. You're just parroting what others have said, and if they don't give specifics, neither will you.

We can start with the regulations noted in my footer. The entire custom crafted kids toys and good industry is under threat. THOUSANDS of SMALL bizs affected.

And Mattel gets a waiver to the regulation.. Go figure..

 

[Quantum Windbag]

That's the first time I've heard anybody claim that the housing bubble started in the 1980s. Here are some more facts to add to our discussion, the Case Shiller hosue price index :

PRetty graph.

I am just a little confused. If we use your date the bubble started in 2002, but the general consensus is it peaked in early 2006. Are you saying the bubble only lasted 4 years? The problem with that position is people were writing about the bubble in 2000. In fact, Griffin actually mentioned it in 1994 in his book "The Creature from Jekyll Island."

I think that adequately dates the bubble to the early 90s, and proves that the only reason you never heard about anyone dating ot to before 2002 is you were not paying attention.

So clearly your first argument is rubbish. Let me explain, again with a graph, the particular bubble that initiated the meltdown. And this was the subprime and general bad lending bubble that started in 2002. What happened was that hundreds of thousands of bad loans were written. These loans had cheap teaser rates for an initial two or three years so anybody could afford the monthly payment on a mortgage. But after two or three years the rate reset and people could no longer afford to pay them. A guge amount of bad loans were written in the years before the meltdown as there were no effective lending standards and a ready market on Wall Street for the mortgages. So in the runup to the meltdown there was a vast amount of subprime loans resetting to their higher rates. here, more facts and evidence for you :

And when all those loans reset and people stopped paying their mortgages the securities constructed out of those mortgages started to turn toxic and led to the meltdown. So that's the bad loan bubble and meltdown we're talking about, one that started after Bush took office.

It was extremely bad policy, no argument there. Nor do we have an argument that that particular bad policy started after Bush took office.

For more facts and evidence here's Wall Street fund manager Barry Ritholtz to explain how deregulation by the Bush administration fuelled the bubble and the meltdown. Barry called the bubble and meltdown years before they happened and you can go through the archives on his site and read everything detailed here in exhaustive detail in real time :


During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

The final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

~~~

To show the impact of deregulation, consider the underlying premise of all credit transactions – loans, mortgages, and all debt instruments. Over the entire history of human finance, the borrower's ability to repay the loan has been the paramount factor in all lending. With mortgage, this included elements such as employment history, income, down payment, credit rating, other assets, loan-to-value ratio of the property, debt servicing ability, etc.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

This represented an enormous change from the past.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

~~~

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

In business, the profit incentive leads to similar behavior. We push the envelope, tap dance close to that line, and then blow past it.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession.

The Big Picture

http://bigpicture.typepad.com/comments/2008/10/regulate-or-not.html#more

All very pertinent observations. The fed made some really stupid decisions at the time, something I totally agree with.

I would like to point out that the fed is actually designed to be independent of political control, and that the decisions being attributed to Greenspan were actually approved by the board of governors of the fed, not unilaterally imposed by one man.

I will also point out that, since the fed is not under the control of anyone, Bush did not actually make those decisions, and, in theory, had no role in influencing them.

And in general; how can you look at a pictue of a Bush-appointee regulator taking a chainsaw to a stack of banking regulations against a background that says "cutting red tape" and claim the Bush administration didn't deregulate? What the **** was he doing then? Deregulation is one of the main GOP policies along with tax cuts. The GOP's answer to the financial crisis has been to claim even more deregulation is needed and to try and prevent any re-regulation. We're constantly told by the GOP that regulation is strangling the economy and needs to be reversed. So given all this how can you seriously claim that Bush didn't deregulate?

Because I am specifically challenging you to back up your specific claim that Bush eliminated regulations. That was your claim, and all you have presented to defend it is the fact that Congress voted to rewrite the FHA guidelines, and then a long winded and specious argument that Greenspan acted unilaterally in his decision not to monitor certain loans.

You provided no evidence that he eliminated any regulations in doing so, nor did you provide any evidence that Bush had a hand in eliminating those regulations even if Greenspan did eliminate them. Greenspan was first appointed to the fed in 1987, and by the time Bush was in office it was almost inconceivable that he would ever be replaced. If Bush had done so you might actually have something to point to if the new fed chairman had made the same decisions, and been able to lay some blame for those decisions at Bush's feet. As it is, I do not see it.

So I ask again, what regulations did Bush eliminate? All you have is a wild conspiracy theory and a bunch of rants against your perception of events.

 

[Dragon]

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.

 

[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.

How did eliminating Glass-Steagall lead to the crisis?
Be as specific as you can.
Thanks.

 

[francoHFW]

If you don't know Bush cut regulations and, worse, put the Foxes in charge of the hen house, you are brainwashed idiots (about 30% of the population now!). But thanks for the BS OP direct from Rev. Moon's rag...Obama is holding off on new regulations and taxes until the recovery is complete, if lying cheating power crazy pubs ever allow that....brainwashed morons tyvm.

 

[Raoul_Duke]

That's the first time I've heard anybody claim that the housing bubble started in the 1980s. Here are some more facts to add to our discussion, the Case Shiller hosue price index :

PRetty graph.

I am just a little confused. If we use your date the bubble started in 2002, but the general consensus is it peaked in early 2006. Are you saying the bubble only lasted 4 years? The problem with that position is people were writing about the bubble in 2000. In fact, Griffin actually mentioned it in 1994 in his book "The Creature from Jekyll Island."

I think that adequately dates the bubble to the early 90s, and proves that the only reason you never heard about anyone dating ot to before 2002 is you were not paying attention.

So clearly your first argument is rubbish. Let me explain, again with a graph, the particular bubble that initiated the meltdown. And this was the subprime and general bad lending bubble that started in 2002. What happened was that hundreds of thousands of bad loans were written. These loans had cheap teaser rates for an initial two or three years so anybody could afford the monthly payment on a mortgage. But after two or three years the rate reset and people could no longer afford to pay them. A guge amount of bad loans were written in the years before the meltdown as there were no effective lending standards and a ready market on Wall Street for the mortgages. So in the runup to the meltdown there was a vast amount of subprime loans resetting to their higher rates. here, more facts and evidence for you :

And when all those loans reset and people stopped paying their mortgages the securities constructed out of those mortgages started to turn toxic and led to the meltdown. So that's the bad loan bubble and meltdown we're talking about, one that started after Bush took office.

It was extremely bad policy, no argument there. Nor do we have an argument that that particular bad policy started after Bush took office.

For more facts and evidence here's Wall Street fund manager Barry Ritholtz to explain how deregulation by the Bush administration fuelled the bubble and the meltdown. Barry called the bubble and meltdown years before they happened and you can go through the archives on his site and read everything detailed here in exhaustive detail in real time :


During the early 2000s, the Federal Reserve, under Alan Greenspan Fed elected against supervising new mortgage lending firms. This act of nonfeasance, based upon Mr. Greenspan’s free market philosophy, had enormous repercussions.

The final act of deregulatory zeal were the net capitalizations exemptions granted by the SEC to five firms. This exemption allowed firms to exceed rules limiting debt-to-net capital ratio to a modest 12-to-1 ratio. After the 2004 exemption, firms levered up as much as 40 to 1. Not surprising, the five brokers that received this exemption – Goldman Sachs, Merrill, Lehman Brothers, Bear Stearns, and Morgan Stanley – are no longer in existence; they either failed, merged, or changed into depository banks.

~~~

To show the impact of deregulation, consider the underlying premise of all credit transactions – loans, mortgages, and all debt instruments. Over the entire history of human finance, the borrower's ability to repay the loan has been the paramount factor in all lending. With mortgage, this included elements such as employment history, income, down payment, credit rating, other assets, loan-to-value ratio of the property, debt servicing ability, etc.

Greenspan’s decision to not supervise mortgage lenders led to a brand new lending standard. During a five year period (2002-07), the basis for making mortgages was NOT the borrowers ability to pay – rather, it was the lender's ability to sell a mortgage to firms that securitized them.

This represented an enormous change from the past.

These new unregulated mortgage brokers no longer cared about a standard 30 year mortgage being repaid over time. In the new world of repackaged loans, all that mattered was that the loan did not come back to the originator. By contract, this was typically 90 or 180 days. As long as the borrower did not default in that period of time, it could not be put back to the originator.

It turned out that the best way to do that – to put people in houses that would not default in 90 days – were 2/28 ARM mortgages. Cheap teaser rates for 24 months, with an eventual large reset.

This monumental, unprecedented change in lending standards led directly to the key to the current crisis. It also shows what happens when we remove supervision from the financial sector. Most of these mortgage originators – nearly 300 – have since filed for bankruptcy.

~~~

Why do we have referees in professional sports? All intense competition leads to rules of the game getting tested. Refs are on the field to prevent the game from spiraling into something unrecognizable to fans.

In business, the profit incentive leads to similar behavior. We push the envelope, tap dance close to that line, and then blow past it.

Deregulation took the referees off of the field, allowed speculative excesses to flourish, and reckless short-term incentives to distort behavior.

That is Human Nature – we are competitive creatures, and we require reasonable boundaries to protect ourselves from our own worst instincts. When left to our own devices, we push the envelope, cut corners, even work against our own best interests in the pursuit of profits. Every financial scandal over the past decade – corrupt analysts, fraudulent accounting, over-stating profits, predatory lending, conflicts of interests, option backdating – are the result of a legitimate business operation pushed up to the legal boundaries, and then going far beyond them.

That is the risk deregulation brings: It encourages behavior that leads to systemic risk. In the present case, the global credit markets have frozen, threatening a worldwide recession.

The Big Picture

http://bigpicture.typepad.com/comments/2008/10/regulate-or-not.html#more

All very pertinent observations. The fed made some really stupid decisions at the time, something I totally agree with.

I would like to point out that the fed is actually designed to be independent of political control, and that the decisions being attributed to Greenspan were actually approved by the board of governors of the fed, not unilaterally imposed by one man.

I will also point out that, since the fed is not under the control of anyone, Bush did not actually make those decisions, and, in theory, had no role in influencing them.

And in general; how can you look at a pictue of a Bush-appointee regulator taking a chainsaw to a stack of banking regulations against a background that says "cutting red tape" and claim the Bush administration didn't deregulate? What the **** was he doing then? Deregulation is one of the main GOP policies along with tax cuts. The GOP's answer to the financial crisis has been to claim even more deregulation is needed and to try and prevent any re-regulation. We're constantly told by the GOP that regulation is strangling the economy and needs to be reversed. So given all this how can you seriously claim that Bush didn't deregulate?

Because I am specifically challenging you to back up your specific claim that Bush eliminated regulations. That was your claim, and all you have presented to defend it is the fact that Congress voted to rewrite the FHA guidelines, and then a long winded and specious argument that Greenspan acted unilaterally in his decision not to monitor certain loans.

You provided no evidence that he eliminated any regulations in doing so, nor did you provide any evidence that Bush had a hand in eliminating those regulations even if Greenspan did eliminate them. Greenspan was first appointed to the fed in 1987, and by the time Bush was in office it was almost inconceivable that he would ever be replaced. If Bush had done so you might actually have something to point to if the new fed chairman had made the same decisions, and been able to lay some blame for those decisions at Bush's feet. As it is, I do not see it.

So I ask again, what regulations did Bush eliminate? All you have is a wild conspiracy theory and a bunch of rants against your perception of events.

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.

And I didn't back this up with rants, I backed it up with facts and evidence from people like the fund manager who called and documented the whole thing in real time. I'm happy to let people judge for themselves whether I used facts and evidence orwhether I'm ranting about conspiracy theories, none of which you've even attempted to refute by the way.


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

 

[flacaltenn]

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..

 

[Wicked Jester]

That's good to know. Can we rule out the idea that companies are just suddenly sitting on lots of cash because of the current government then?

No, we can't. It's clear companies are sitting on larger cash balances because they are not investing. A rational business would prefer to put the capital to use if there are reasonable investment alternatives in a favorable economic climate. As Obamanomics has created an unfavorable economic climate, businesses see that the begtter choice is to sit on that cash (or buy back stock).

They were sitting on that cash under the Bush administration too. They've been sitting on increasing levels of cash from the reagan administration through to Obama. And if, for obvious reasons, you don't count housing then investment has actually recovered to get back on the same trajectory it was before the recession:

So the actual evidence shows that Obama isn't discouraging investment any more than Bush was.

Think Progress?

Now that's fuckin' funny shit!

 

[Raoul_Duke]

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'm not putting all the blame on Bush. But a lot of decisions by the Bush administration were crucial in causing the meltdown.

If the Bush administration hadn't abdicated basically all lending standards from 2002 onwards there wouldn't have been the vast amount of bad loans written that were written.

If they'd let individual states tackle predatory lenders instead of using the power of the federal government to prevent it, actually using regulatory bodies to prevent regulation, then there wouldn't have been so many bad loans written.

If the SEC hadn't let the five biggest securities firms lever up their debt: assets ratio from 10:1 to as much as 30:1 then maybe all five would still exist and wouldn't have racked up such enormous losses.

The government basically just got the hell out of the way in the early 2000s and set the markets free to bring us peeance and freeance and unrivalled prosperity. The Bush administration had pro-growth business-friendly policies which as far as the financial industry went amounted to letting them do what they wanted and even using the power of the government to prevent any action that might slow down the booming mortgage sector.

Take a lot of those bad loans out of the system, specifically all the ones written between 2002-8, and take all the added leverage out of the system then although you have a completely unregulated derivatives market you don't have the raw material to construct those toxic derivatives out of and you don't have the huge risk-taking with those derivatives that the excess leverage allowed and the huge losses that followed.

 

[Raoul_Duke]

No, we can't. It's clear companies are sitting on larger cash balances because they are not investing. A rational business would prefer to put the capital to use if there are reasonable investment alternatives in a favorable economic climate. As Obamanomics has created an unfavorable economic climate, businesses see that the begtter choice is to sit on that cash (or buy back stock).

They were sitting on that cash under the Bush administration too. They've been sitting on increasing levels of cash from the reagan administration through to Obama. And if, for obvious reasons, you don't count housing then investment has actually recovered to get back on the same trajectory it was before the recession:

So the actual evidence shows that Obama isn't discouraging investment any more than Bush was.

Think Progress?

Now that's fuckin' funny shit!

It's a graph from the Federal Reserve that I got via google images. If you want to go to the FRED site you can construct the same graph yourself. If you get a different result with the same inputs you can post it and show that this one is bs. I'm betting this one is dead-on accurate.

 

[Raoul_Duke]

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.

 

[Raoul_Duke]

And here's what I get when I add the same inputs :

Looks pretty similar to me. That's some funny shit.

 

[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.

And I didn't back this up with rants, I backed it up with facts and evidence from people like the fund manager who called and documented the whole thing in real time. I'm happy to let people judge for themselves whether I used facts and evidence orwhether I'm ranting about conspiracy theories, none of which you've even attempted to refute by the way.

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.

 

[Raoul_Duke]

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.

And I didn't back this up with rants, I backed it up with facts and evidence from people like the fund manager who called and documented the whole thing in real time. I'm happy to let people judge for themselves whether I used facts and evidence orwhether I'm ranting about conspiracy theories, none of which you've even attempted to refute by the way.

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.

 

[Toddsterpatriot]

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.

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.

 

[bripat9643]

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.

 

[Raoul_Duke]

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.



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.

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.

 

[Raoul_Duke]

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.

 

[boedicca]

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.

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".