Obama's Regulatory Tsunami

[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 The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton.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.

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.

Sub-prime mortgages caused the meltdown, not "gambling" (investing) by investment bankers. No sub-prime mortgages, no meltdown. It's as simple as that.

 

[Toro]

The OCC was not enforcing regulations against abusive mortgage practices. The OCC oversaw banks that lent across state lines, and they were told specifically to back off enforcement by the government - i believe by Greenspan - around 2004. This was a big bone of contention by the regulators at the time.

 

[Toro]

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 The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton.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.

There's no evidence that the CRA caused the meltdown either, but it doesn't stop ideologues from saying so.

 

[Toro]

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 The principle piece of it, the Gramm-Leach-Biley Act that repealed the Glass-Steagall Act, was passed in 1999 and signed by President Clinton.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

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

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

 

[flacaltenn]

The OCC was not enforcing regulations against abusive mortgage practices. The OCC oversaw banks that lent across state lines, and they were told specifically to back off enforcement by the government - i believe by Greenspan - around 2004. This was a big bone of contention by the regulators at the time.

Well there's that Toro and then there's Barney Frank intimidating the Fan/Fred regulators.

From all of that -- you've got to take away from it that we HAVE enough regulators and regulations.. We just need better politicians and admins...

 

[Raoul_Duke]

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.

Sub-prime mortgages caused the meltdown, not "gambling" (investing) by investment bankers. No sub-prime mortgages, no meltdown. It's as simple as that.

Subprime mortgages defaulting did trigger the meltdown. But Glass-sdteagall repeal allowed banks like Citi and BOA to lose a lot of depositors' money. Now you even have the ex-chairman of Citibank calling to reinstate G-S :

Former Chair of Citigroup: Restore Glass-Steagall | The Big Picture

along with Reagan Fed chairman Paul Volcker who says effectively the same thing. He wants banks' depository operations walled off from their investment operations:

Glass-Steagall vs. the Volcker Rule - NYTimes.com

And the Brits are doing the same thing. They recently announced that they're going to do basically the same thing with their banks.

Vickers report: Q&A - Telegraph

 

[Raoul_Duke]

The OCC was not enforcing regulations against abusive mortgage practices. The OCC oversaw banks that lent across state lines, and they were told specifically to back off enforcement by the government - i believe by Greenspan - around 2004. This was a big bone of contention by the regulators at the time.

Well there's that Toro and then there's Barney Frank intimidating the Fan/Fred regulators.

From all of that -- you've got to take away from it that we HAVE enough regulators and regulations.. We just need better politicians and admins...

Bring back G-S and enforce the regulations that are already on the books and actually fund the regulators so they can hire enough staff to do their job properly, don't appoint ex-banking lobbyists to run the various regulatory bodies and you're right.

Blaming Barney Frank though. How did Barney intimidate anybody when he's a short gay guy in the minority on the banking committee when the bubble was in full swing. With his lisp?

 

[Toro]

The OCC was not enforcing regulations against abusive mortgage practices. The OCC oversaw banks that lent across state lines, and they were told specifically to back off enforcement by the government - i believe by Greenspan - around 2004. This was a big bone of contention by the regulators at the time.

Well there's that Toro and then there's Barney Frank intimidating the Fan/Fred regulators.

From all of that -- you've got to take away from it that we HAVE enough regulators and regulations.. We just need better politicians and admins...

Yeah, I'm not excusing Frank of the GSEs of anything.

Here is a link on Greenspan and the OCC. Of course, it wasn't just Greenspan. However ...

A former colleague says Mr. Greenspan blocked a proposal to increase scrutiny of subprime lenders under the Fed’s broad authority. That added scrutiny might have helped curtail questionable lending practices now blamed for soaring defaults by mostly low-income borrowers. Democrats in Congress are now turning up the heat on regulators, especially the Fed, for failing to do more to stamp out those practices, and the Fed appears increasingly likely to overhaul its approach.

Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.

“I would have liked the Fed to be a leader” in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.

“He was opposed to it, so I didn’t really pursue it,” says Mr. Gramlich, a Democrat who was one of seven Fed governors.

EconoMonitor : Nouriel Roubini's Global EconoMonitor » WSJ: Greenspan Added to Subprime Woes by Blocking Crackdown on Predatory Lending and Preventing Further Supervision of Lenders

 

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

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

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.

And it would have helped if Bush had appointed actual regulators to run the various regulatory bodies instead of ex-banking lobbyists, people who'd spent their careers lobbying Washington to cut banking regulations. This is what happens when you do appoint a banking lobbyist to run a regulatory body. He's the one with the chainsaw :

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 that the excess leverage allowed and the huge losses that followed.

 

[Raoul_Duke]

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.

Sub-prime mortgages caused the meltdown, not "gambling" (investing) by investment bankers. No sub-prime mortgages, no meltdown. It's as simple as that.

I'm not disagreeing with you. I would say that they triggered the meltdown. Prime and Alt-A loan defaults are actually a far bigger amount than the subprime losses and would have eventually triggered the same meltdown but the subprime defaults beat them to it.

 

[Raoul_Duke]

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".

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

 

[boedicca]

You are so busy looking at a leaf that you do not see the forest.

 

[Raoul_Duke]

You are so busy looking at a leaf that you do not see the forest.

What's the forest?

 

[Toro]

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

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

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

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.

And it would have helped if Bush had appointed actual regulators to run the various regulatory bodies instead of ex-banking lobbyists, people who'd spent their careers lobbying Washington to cut banking regulations. This is what happens when you do appoint a banking lobbyist to run a regulatory body. He's the one with the chainsaw :

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 that the excess leverage allowed and the huge losses that followed.

Though I generally agree with your points, legislation to deregulate G-S and take derivatives out of regulatory oversight came under Clinton, not Bush. That doesn't absolve Bush of all responsibility, but much of this occurred before he came to power, and under areas in which the White House had little or any jurisdiction.

For example, there wasn't much Bush could do about Fannie and Freddie because of the opposition to any reform in Congress. Though the GSEs are not the primary cause of the meltdown, you can't plausibly argue that the GSEs had no effect on the Financial Crisis. It is true that they lost share and played a small part in the subprime debacle, but they were massively overleveraged and were systemic risks to the general economy. Bear, Lehman, et. al. went from leverage of 12:1-15:1 to 30:1-40:1 under the ruling that you cite, but the GSEs were leveraged at 50:1 or higher.

All bubbles are a result of excess creation of credit. So you have to find the sources of credit creation to find the sources of the bubble. The single biggest influence on credit creation in this country is the Federal Reserve. It is they who set the baseline prices for credit in this country. Thus, it is the Federal Reserve which bears most of the responsibility for this debacle by keeping credit too cheap for too long. If you want to blame Bush for reappointing Greenspan, fair enough. But so did Clinton, and his approval sailed through Congress no matter what the party.

So no, Bush and the Republicans do not deserve the majority of the blame for the Financial Crisis. They, like the Democrats, are culpable, but look beyond the political arena and you will see where the true culprits lie.

 

[Raoul_Duke]

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

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

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.

And it would have helped if Bush had appointed actual regulators to run the various regulatory bodies instead of ex-banking lobbyists, people who'd spent their careers lobbying Washington to cut banking regulations. This is what happens when you do appoint a banking lobbyist to run a regulatory body. He's the one with the chainsaw :

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 that the excess leverage allowed and the huge losses that followed.

Though I generally agree with your points, legislation to deregulate G-S and take derivatives out of regulatory oversight came under Clinton, not Bush. That doesn't absolve Bush of all responsibility, but much of this occurred before he came to power, and under areas in which the White House had little or any jurisdiction.

For example, there wasn't much Bush could do about Fannie and Freddie because of the opposition to any reform in Congress. Though the GSEs are not the primary cause of the meltdown, you can't plausibly argue that the GSEs had no effect on the Financial Crisis. It is true that they lost share and played a small part in the subprime debacle, but they were massively overleveraged and were systemic risks to the general economy. Bear, Lehman, et. al. went from leverage of 12:1-15:1 to 30:1-40:1 under the ruling that you cite, but the GSEs were leveraged at 50:1 or higher.

All bubbles are a result of excess creation of credit. So you have to find the sources of credit creation to find the sources of the bubble. The single biggest influence on credit creation in this country is the Federal Reserve. It is they who set the baseline prices for credit in this country. Thus, it is the Federal Reserve which bears most of the responsibility for this debacle by keeping credit too cheap for too long. If you want to blame Bush for reappointing Greenspan, fair enough. But so did Clinton, and his approval sailed through Congress no matter what the party.

So no, Bush and the Republicans do not deserve the majority of the blame for the Financial Crisis. They, like the Democrats, are culpable, but look beyond the political arena and you will see where the true culprits lie.

There was a huge amount of bad mortgage paper written between 2002-8. When these mortgages started to default they set off a series of events that led to the economic meltdown in 2008. The mortgages were written because the Fed and other regulators like the chainsaw guy basically stopped effective regulation of the mortgage market. Bush appointed the regulators who did this and who allowed the increased leverage in the financial sector and the Bush administration used the power of the federal government to prevent states stopping the bad lending. Mortgage lending standards had been gradually relaxed over the previous decades but were basically abdicated altogether from 2002 onwards which led to the massive bubble.

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

 

[boedicca]

You are so busy looking at a leaf that you do not see the forest.

What's the forest?

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

 

[Toro]

There was a huge amount of bad mortgage paper written between 2002-8. When these mortgages started to default they set off a series of events that led to the economic meltdown in 2008. The mortgages were written because the Fed and other regulators like the chainsaw guy basically stopped effective regulation of the mortgage market. Bush appointed the regulators who did this and who allowed the increased leverage in the financial sector and the Bush administration used the power of the federal government to prevent states stopping the bad lending. Mortgage lending standards had been gradually relaxed over the previous decades but were basically abdicated altogether from 2002 onwards which led to the massive bubble.

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

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

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

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

 

[Raoul_Duke]

There was a huge amount of bad mortgage paper written between 2002-8. When these mortgages started to default they set off a series of events that led to the economic meltdown in 2008. The mortgages were written because the Fed and other regulators like the chainsaw guy basically stopped effective regulation of the mortgage market. Bush appointed the regulators who did this and who allowed the increased leverage in the financial sector and the Bush administration used the power of the federal government to prevent states stopping the bad lending. Mortgage lending standards had been gradually relaxed over the previous decades but were basically abdicated altogether from 2002 onwards which led to the massive bubble.

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

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

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

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

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

 

[Raoul_Duke]

You are so busy looking at a leaf that you do not see the forest.

What's the forest?

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

Entitlement recipients collude with corporations?

 

[boedicca]

There was a huge amount of bad mortgage paper written between 2002-8. When these mortgages started to default they set off a series of events that led to the economic meltdown in 2008. The mortgages were written because the Fed and other regulators like the chainsaw guy basically stopped effective regulation of the mortgage market. Bush appointed the regulators who did this and who allowed the increased leverage in the financial sector and the Bush administration used the power of the federal government to prevent states stopping the bad lending. Mortgage lending standards had been gradually relaxed over the previous decades but were basically abdicated altogether from 2002 onwards which led to the massive bubble.

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

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

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

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

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

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

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