While reviewing this post from 2002, foreshadowing a derivatives crisis like the current one, I found the following:
“At the end of 2002’s first quarter, the notional value of derivatives contracts involving U.S. commercial banks and trust companies was $45.9 trillion, according to the Office of the Comptroller of the Currency’s bank derivatives report. ”
The bulk of the exposure is in interest rate swaps, which are fairly well understood and seem to pose only modest risks in themselves. But there’s still around $1 trillion in more recent derivatives involving securitisation of various kinds of debts. This securitisation is sound only if the credit rating agencies have got their risk assessments right, which in turn requires that the accounts on which those assessments are based should be valid. A few years ago, when the market in debt derivatives was starting up, this assumption seemed safe enough, but now it looks a lot more dubious. The big danger is that defaults in the debt derivatives market could spread to the much larger interest rate derivatives markets.
As an update, the $1 trillion in credit derivatives has exploded to around $50 trillion. While less dramatic in proportional terms, the growth in interest rate swaps is actually more alarming, having reached around $300 trillion in notional values.[1]
It now seems pretty well certain that, as the quote above suggests, the chaos in debt derivatives will shortly spread to interest rate swaps.
Update Unless that is, all normal calculations are rendered irrelevant by a US government asset purchase on a scale that will make all past nationalizations look puny. How that will play out I have no idea. For example, will US-based ratings agencies take the step (automatic if it were anyone else) of downgrading US government debt? End Update
There are two reasons for this. First, swaps are essentially bets on interest rate spreads and these have gone wild in the last week, with interest rates on Treasury notes dropping to zero while commercial paper is just about unsaleable at any price. Imperfectly hedged players in the market must be sitting on losses of several percentage points. Depending on how much of this there is, the implied losses could be anywhere from tens of billions to trillions. Crowdsourcing plea: anyone who has a better estimate is welcome to offer it.
Second, hedging only works if you can collect from your counterparties. This Economist story indicates that Lehmans was a big player, but no-one really knows who is owed money by them. And it seems certain that there will be large-scale failures among hedge funds in coming months.
It’s hard to see this crisis being resolved by normal commercial or regulatory means. The hundreds of billions tipped into the market by central banks yesterday is just a drop in the bucket compared to the sums at risk here.
fn1. Under normal conditions, the exposure associated with a swap is of the order of 1 per cent of the notional value. But (a) 1 per cent of 300 trillion is 3 trillion (b) conditions are not exactly normal right now.
John Quiggin 
I must say it is bizarre to put up a post saying, in essence, that financial markets are irrational and corrupt, and then to be told that, if I really believed this, I should go long in financial market futures on irrationality and corruption (presumably, if I’m really serious, taking on debt to finance this).
My financial policy, which I think is consistent with my position on likely outcomes is to get as far away from risky financial products as possible.
What does GWB’s announcement on the news that the US Govt was taking over the bad debt mean? Everyone’s mortgage belongs to the US?
re 50, I was interested in your comment, and it seems to me looking and Russia, China ect that the new cold war, or the new ideological debate is now between state capitalism and liberal capitalism.
Mind you, words are one thing and deeds are another, if Soros believes his own views about open society and capitalist fundamentalism he would not decamp to Singapore would he?
re, BBB what has public spaces and amenities got to do with Socialism?
In the city I live in, Sheffield UK, my local park was built by the local gentry as too the library with in it, the school opposite was also financed by him.
The reservoirs and water systems, city hall, and the first roads where all built by private money in the late Victorian period, and not to forget the local hospitals, and the railway, and most of the pubs I go into was built by private capital, as well as the first street lighting system, the first gas supply system, and the large national parks, in fact the UKs National Trust (which is not a state body) runs and opens to the public most of our heritage sites.
In fact what did Private capital ever do for us hey :0)
Some “socialists” will attack the religious fervor that people will defend free markets but will generally do so by invoking the “evilsâ€? of capitalism.
Am I being too ridiculous suggesting that sometimes and in some areas it is better to leave economic agents to make their own choices at other times and in other areas it is better for government involvement/regulation.
You have to wonder when the US govt is going to take responsibility for the corrupting of financial markets and what actions they will take to clean it up;
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626_pf.html
“Am I being too ridiculous suggesting that sometimes and in some areas it is better to leave economic agents to make their own choices at other times and in other areas it is better for government involvement/regulation.”
No, you’re being a social democrat.
Welcome to the club.
@52
It means the US is essentially acting as lender of last resort.
It’s offering to buy something like $800 billion worse of mortgages (residential mortgages in the US are worth around $10 trillion but the Feds may also be buying some commercial mortgages.)
The fundamental current problems is with house prices falling and banks going bust no-one is really certain what mortgages are worth – what percentage will go into default and what proportion of the loaned amount will be recovered.
Consequently no-one wants to buy mortgages.
Because banks, insurers and other financial companies bought hundreds of billions of dollars worth of mortgages (or loaned money against mortgages or insured mortgages against default), they have much of their total cpaital tied up in these assets of questionable value.
That means they can’t lend, (many of them also can’t borrow because their own balance sheets look shaky). Seem of them, like the money market funds are having trouble coming up with cash as investors withdraw their money.
The mortgages the US government is buying will most likely be held for a couple of years then progressively sold off.
If past bail-outs are anything to go by, the government might even make a profit.
All capitalism is state capitalism, at least since the 30s.
Anglo-American “New Right” economic philosophy pretends otherwise. But this week is the climax of their grand experiment, when the mask falls off and we see it for the perverted mockery of ‘redistributive’ socialism that it is:
http://www.dailykos.com/storyonly/2008/9/20/153952/268/395/603713
Here are some excerpts from the bill.
(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
…
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
One last hurrah from the Republicans – a final orgy of looting on their way out.
http://krugman.blogs.nytimes.com/2008/09/20/no-deal/
Krugman:
The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.
Ian (#56),
Whether he is being a communist, socialist, social democrat, libertarian or something else cannot be determined by the statement he has made of his beliefs. The only thing that can be determined is that he is not being an absolute centralist or a complete anarchist.
Any other political beliefs can be encompassed within that statement. The question is just down to degrees within the very wide spectrum given.
I refer to Gerard’s post #58. If that bill is not unconstitutional and/or rejected by the representative house it simply demonstrates once again the seriously deficient nature of the US Constitution and system of government.
Ikonoclast,
While I do not disagree with you for the most part, the first and last paragraphs of #58 are simply wrong. The House and Senate are controlled not by republicans, but by Democrats. This bill, if presented, can only be passed on their say-so.
if the senate can condone the war on iraq, the house must surely be capable of liquidating the fig-leaf of viable capitalism. a nation that has a dubya must be presumed capable of any irrational act you wish to nominate.
just as they call america’s political system ‘democracy’, they will call state management ‘capitalism’, with rather more justification. the pirates will have to find new financial seas to plunder, but they came back from the s&l setback with the even more creative sub-prime gambit, so there’s no reason to imagine that they will suddenly change their spots.
incidentally, socialism is not quite dead, the swedes enjoy a very high standard of living, and democracy still exists in switzerland, and they live even better.
Fiat currency is a social construction, its is based on a system of trust, The government under this system is really acting as the underwriter of that trust, thus we have choose one option, print lots of cash to restore trust (in the short term and hope to deal with the problem in the long term) or let lack of trust destroy the system.
Conservative ideology (if there is one) is alive and well (here defending the customs of the financial industry) And make no mistake this is no socialism in this intervention.
So sean, nationalising businesses is not “socialism”? What, pray tell, is it then?
it’s not socialism if it redistributes upward.
right?
trust that government bonds are backed by the government is one thing. trust that monster speculative bubbles will be backed by the government is quite different.
congress had better reject that ‘blank check’ bill but they probably won’t – short of a massive public outcry. reports are that congressional leaders were suitably ‘shocked’ following a presentation by Bush’s economic team claiming that the world was coming to an end. taking advantage when everybody is in a shocked daze is the modus operandi of the looting class.
I can see them guffawing to themselves, as they make their getaway in a car stuffed full of dollar-sign sacks. “let the black boy clean up the mess!”
This bailout plan is just beyond belief.
This is the greatest act of theft in history.
Pelosi and Reid should be guillotined for even considering it.
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html
“Fiat currency is a social construction,”
So is gold-backed currency based as it is on the socially-determined value of gold and trust in the capacity and willingness of the issuer(s) to redeem their specie.
“So sean, nationalising businesses is not “socialismâ€?? What, pray tell, is it then?”
Sean ios GOOD. Socialism is BAD.
Sean approves of the bail-out, therefore it must be GOOD.
GOOD and BAD are opposites, therefore logically the bail-out can’t be socialism.
Next, why Achilles can never catch the turtle.
Gerard, feel free to propose your preferred alternative.
gerard,
In that case full socialism itself has never existed on the planet and, to paraphrase PrQ on libertarianism – “socialism is unsullied by any real experience”. What everyone calls socialism has, whereever tried, resulted in the enrichment of a ruling class and the beggarment (or death) of everyone else.
Social democracy has, on occasions, managed to do better.
AR are you going to become a social democrat now that your philosophy has been consigned to the dustbin of history?
Ian, what’s my preferred alternative? Surely you’re not saying that there is no alternative to this bill. What could be worse, seriously, than giving the B*sh Administration, in its final months, a blank cheque to throw as much as they want at the financial industry? After the last 8 years of the worst government imaginable!!! Could there be a more terrible idea than that??
My preferred alternative isn’t the point. But for what it’s worth I say destroy the whole thing and start from scratch.
It’s going to be a wash, gerard. The massive government interventions, many championed by the left, that helped cause this crisis (massive monetary expansions, the CRA, the GSEs, the U.S. Department of Housing and Urban Development’s forcing of the GSEs to take on subprime home loans, the way that Basel II treats home loans generally, etc.) will be done away with, and the risk-management practices of key financial intermediaries will change, both voluntarily and through a new round of fairly light-touch regulation. The upshot: neoliberalism unscathed, both in theory, reality and within the minds of the reality-based community of liberals. Socialists and social democrats will, once again, be sorely disappointed. I can’t wait!
As for starting from scratch, can I assume that you’ve got in mind a fantastic government body that will determine who gets what? LOL.
BBB
Yep, a fantastic government body could, I’m sure, do better than the cocaine snorting psychopaths who created this monster.
First priority of this fantastic government body will be the world food crisis – remember that one? I didn’t hear much talk of a trillion dollar bailout from mass starvation, so let’s get our priorities right here!
As for neoliberalism emerging unscathed – we’ve already established that you don’t even know what that word means, you think it is the same thing as ‘capitalism’. This is the full stop – a TRILLION DOLLAR GOVERNMENT BAILOUT. The grand finale of the New Right, in the decade when it has taken Corpo-Right policy to the utter extremes, and you’re prepostrously trying to blame this on the left! What bloody left???
“As for neoliberalism emerging unscathed – we’ve already established that you don’t even know what that word means…”
Ha ha. Sigh, no. Only in your deranged mind. Do I need to go get you the Washington Consensus paper (again) (the left has got it right that the set of tenets now called the Washington Consensus is useful shorthand for neoliberalism in a global context, but it remains unsatisfactory in relation to domestic policies that have economic liberalism at their heart). Aren’t you the one who thought neoliberalism and libertarianism were the same thing, and then after I set you straight said that libertarians ought to find neoliberals abhorrent? And I haven’t forgotten your absurd charge that I believed China to be a neoliberal place (!) just because I pointed out that economically liberal ideas had reduced poverty on a massive scale there (this might be a useful point at which to tell you, again, that ‘neo’ means ‘new’, ‘liberalism’ means ‘liberalism’).
“…and you’re prepostrously trying to blame this on the left! What bloody left???”
Not all the blame. Just a decent chunk. We can’t deny that poor risk management and greed on the part of Wall Street-types was a very significant contributing factor. As for who ‘the left’ are, how about the left that created and maintained the GSEs, the left that championed the CRA, the left that forced the GSEs to take on subprime debt, thereby expanding the market for such lending… and on it goes. Just to give you a flavour for the negligence of the American left on this:
——
“Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.�
Proposed by the Bush administration in 2003, opposed by Congressional Democrats: “These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis,â€? said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.â€?
——
But we can’t be biased about this. Check out the Bush administration’s incompetence:
——
“In 2004, as regulators warned that subprime lenders were saddling borrowers with mortgages they could not afford, the U.S. Department of Housing and Urban Development helped fuel more of that risky lending.
Eager to put more low-income and minority families into their own homes, the agency required that two government-chartered mortgage finance firms purchase far more “affordableâ€? loans made to these borrowers. HUD stuck with an outdated policy that allowed Freddie Mac and Fannie Mae to count billions of dollars they invested in subprime loans as a public good that would foster affordable housing.”
——
Final question: why does the left never take responsibility for its actions?
BBB
https://johnquiggin.com/index.php/archives/2008/09/08/the-end-of-neoliberalism/#comments
I believe I answered everything you have to say about neoliberalism in relation to ‘libertarianism’, the ‘Washington Consensus’ and China on the other thread. Anyone who wants to can read it and decide for themselves who is deranged.
So now you are calling the Wall-Street owned Congressional Democrats ‘the left’? If that’s ‘the left’ then God help us all. They’d be laughed out of any other developed country. America doesn’t have a left, its political spectrum has been shifted so far right it’s fallen off the edge – that’s why its government is trillions in debt, pouring money into foreign wars while millions of Americans are one illness away from penury (thanks to the Bankruptcy Bill that the ‘left’ democrats helped pass). Remember it was Clinton to was praised to the neoliberal heavens for his ‘Welfare Reform’ by the same people who are now praising the biggest act of Corporate Welfare in world history.
At any rate, the Democrats were totally out of power in every branch between 2002 and 2006, which makes trying to blame them for this mess pretty lame even by your standards.
“Ian, what’s my preferred alternative? Surely you’re not saying that there is no alternative to this bill. What could be worse, seriously, than giving the B*sh Administration, in its final months, a blank cheque to throw as much as they want at the financial industry?”
Gerard, I’m not defending he status quo – as anyone who reads this blog should know I’ve been a bitter critic of Bush’s economic policies pretty much from Day One.
Where we differ is that you apparently think the alternative is “socialism” – a term you won;t (or can’t) define in this context.
I don’t want to define “socialism” because I agree with you that the term has largely become devoid of meaning over the last hundred years. I mean, if we mean that socialism means trillion-dollar government interventions in the economy, then socialism is what we have already – socialism for the rich. I would just like to see some of the same generosity directed at those truly in need – even a tiny fraction of this type of money could make an enormous difference to millions of people’s lives. Yet nobody would even consider it, even as they chuck hundreds of billions at planet Earth’s least deserving inhabitants. What type of upside-down world is this?
gerard
“At any rate, the Democrats were totally out of power in every branch between 2002 and 2006, which makes trying to blame them for this mess pretty lame even by your standards.”
I thought as much. 80 solid years of government intervention since FDR’s state monopolisation of the secondary mortgage market (hey, do you think it’s OK to call FDR ‘left’?), but because the Republican’s didn’t unwind it all in four short years between 2002 and 2006, they are at fault. This is precisely what I mean about not taking responsibility. You need to understand that the industry structures that contributed to this mess were proposed, implemented and maintained by the American left, both in Congress and in executive administrations, mainly in the name of affordable housing for disadvantaged minority groups / low income earners. Yet another set of misguided and counterproductive social policy from the left… Actually I think you do understand this, but are pretending not to.
And you’re not fooling anyone with this ‘the left doesn’t exist in the US’ stuff. It’s amusing: you rail against others for resisting your definitions of certain political philosophies, and then simply (and bizarrely) define the left out of existence in America. It’s heroic stuff, even for you.
BBB
And Christ, how hard is it to define socialism? It is state ownership (in substantial majority or in full), and state control of, the means of production and distribution. Simple.
In this context the term has limited application because of course under socialism there is no need to borrow money to buy a house – one would be assigned to you – and therefore no need for anyone to buy the mortgage, package it into a guaranteed security and onsell it. There would be little to no ‘finance industry’.
I think your problem, gerard, is that you think socialism is about redistribution to the poor. To some extent it is: usually there is an initial notional re-distribution (because of course the poor go from owning very little to owning absolutely nothing as private property is outlawed) but in the long run it is just equality in poverty. However the main game is a different kind of redistribution: straight up to the Party leadership and its mates. The kicker is that any real-world implementation of socialism necessarily involves totalitarianism.
The term ‘socialism’ has become devoid of meaning only for those who want to pretend it hasn’t been a monumental failure, which has brought misery and death to millions.
BBB
To repeat a very recent comment, the reason I use “social democratic” to describe my position is because it covers a reasonably well-defined range of policies actually adopted in developed democracies, as does “neoliberalism”. On any reasonable interpretation of the terms, the US follows neoliberal policies while most EU countries are predominantly social democratic. In this sense, recent events represent a failure of neoliberalism.
If you want to use terms in such a way that no developed country satisfies them, feel free, but be aware that your discussion is irrelevant to reality.
jquggin, in what sense does the maintenance of the GSEs and their forced absorption of higher-risk mortgages represent neoliberalism?
Your comment seems the one not quite in touch with reality: any country will have a mix of policies, some corresponding to economically liberal thinking, some corresponding to social democratic thinking. The ‘predominance’ of one or the other in an economy is neither here nor there if the problems at hand arise in a particular industry or sector. I mean, in Australia we have an economically liberal food market, but largely socialised health care. I presume that you wouldn’t blame liberalism for a systemic breakdown in our hospital system. Similarly, the problems confronting the American finance industry are in part a product of a highly regulated housing market, with substantial levels of government interference that encouraged risky behaviour. These effects are a direct result of social democratic thinking: using the state to shape the market so that disadvantaged is ameliorated.
BBB
how come I can’t post anything?
“I thought as much. 80 solid years of government intervention since FDR’s state monopolisation of the secondary mortgage market (hey, do you think it’s OK to call FDR ‘left’?), but because the Republican’s didn’t unwind it all in four short years between 2002 and 2006, they are at fault.”
yes, I could call FDR ‘left’. So that’s how you’re managing to blame the left now – 2008 Wall Street Crash, and it’s FDR’s fault!!!
Look at yourself.
Anyway, if chucking a trillion dollars of government money at the financial industry isn’t socialism what is it? just plain old theft? I guess it’s not socialism if the government doesn’t take over all the companies that it’s bailing out. Maybe it should, then taxpayers would have something to show for all this money. As it is, it’s just plain income redistribution from the many to the big-time g*mbling few.
ah, worked it out, this blog doesn’t like the G word.
It used to ban the S-word too (remove the first two and last letters and see what you get).
BBB, if you want to keep “neoliberalism” pure and unsullied by actual experience, let’s just call it “the US model, early C21”. Whatever name you call it, it’s failed badly here, and those who made triumphalist claims about its capacity for financial innovation have been proved wrong.
gerard, you are now making a terrible fool of yourself.
I said 80 years of government intervention since FDR, not by FDR (although he did create Fannie Mae, so I suppose at least some blame must rest with him). Did you know that FDR died in 1945? No, it is the long-term championing (i.e. maintenance, as I said) of these structures by the left (in the name of re-distribution) that is the problem, coupled with a non-liberal political structure in which the government reserves the right to meddle in everything, creating an environment in which particular corporate interests (e.g. the management and shareholders of the GSEs) unduly influence the regulatory framework.
Once again you have been caught out trying on a desperate debating trick… puff puff.
BBB
jquiggin, we already know what a social democratic financial crisis looks like: Sweden in the early 1990s. By the logic of your ‘predominance’ theory, you ought to concede that those events represented a massive failure of social democracy. Do you?
BBB
PrQ,
I would agree that the model used in the US is causing real problems. I would just not agree that, particularly in the financial markets area, that it is in any material way, “neo-liberal”. For example, which neo-liberal do you know that has argued that the largest buyers and sellers of mortgages should be Government Sponsored Enterprises? That there should be multiple regulators with often conflicting priorities? That those regulators should be actively fighting amongst themselves as to what the framework of regulation should be? That all commercial banks must purchase deposit insurance from a single, government supplier? That the government should have a strong role in directing credit?
In short, can you name a single “neo-liberal” that has ever argued that the US banking system is a paragon of regulatory virtue? Ever? Anywhere?
I know FDR died in ’45 which makes blaming him for this crisis so ludicrous. Yes, he created Fannie Mae and presided over the greatest improvement in American’s standards of housing every. there were never any problems with financial speculation while Fannie Mae was a government agency (before ’68). this sort of thing never happened between 1929 (the last time Republicans were in charge of everything) and NOW (although there were hints of it under Reagan and S&L, another grand act of theft, but nothing on this scale).
Since the 1980s, unless you’ve been living on the moon, the “New Right” has been stripping away at the regulations that were brought in during the New Deal, precisely to avert this type of thing from happening. Now we’re back at square one, with the same type of financial crisis that made the New Deal necessary in the first place. You want to blame everybody except the people who were in charge. It’s a textbook example of cognitive dissonance.
I noticed you mentioned ‘redistribution’. Wouldn’t you agree that this bail-out is an act of ‘redistribution’? But upwards redistribution is the type that you guys can’t get enough of! Veto healthcare for poor kids – but bring on the Welfare Flood for Investment Banks. It’s sick!
BBB, I take it you’re support the Plane Crash/Trailer Trash ticket this year (apologies to residents of trailers). God forbid those radical democrats take control – if the last 8 years has taught us anything, it’s that only Republicans can clean up this mess that FDR made 80 years ago.
gerard, wrong again (you’re making a habit of this)!
I don’t like the Republicans anymore than you do. They are: pro-life, pro-religion, prone to accepting corporate welfare, incompetent in the extreme when it comes to foreign policy, etc. So I am opposed to their programme on a number of fronts. And your intellectual deficiencies are shining through again: “liberalism = conservatism = Republicans!” Wait, don’t tell me: “There’s no difference between modern liberalism and modern conservatism, BBB!” LOL. I blame Naomi Klein for this shallowness.
Listen to Andrew R, gerard. You might learn a thing or two beyond your sad grand narratives which are bereft of nuance, and therefore accuracy.
BBB
Interesting to point out that B*sh came to power with a program to dismantle what was left of the New Deal by privatising Social Security. He has always claimed it to be long-term unaffordable, and the only way to guarentee retirement funds was to have them casinoed on the stock market. The same stock market that has just wiped itself out. All part of the plan? Taking on another trillion in debt to bail these folk out will have serious consequences. They can’t destroy Social Security by openly, they’re just going to engineer as big a fiscal crisis as they can, just so that they can argue that it’s unaffordable, while “making permanent” a huge swathe of tax cuts to the very same gamblers. Who knows what will happen next, I don’t understand what’s going on but I know it could get much worse. People who were talking about this sort of financial crisis were being mocked quite recently. It’s gotten this bad, but how much worse can it get? You thought the stock market was a house of cards but when you look at it, does a dollar crisis sound that far-fetched?
gerard,
How about trying to restrict your tendencies to grandstand and actually trying to answer a few points? Who knows, you may actually come to understand a few of the points you are making. OTOH, you may be able to convince us you have a clue. It’s possible, but with comments like the above, I doubt it.
You’re not even making a point AR, so how can I answer it?
BBB says this teh Left needs to accept its fair share of the blame because teh Left was was doing too much to encourage risky lending practices in the name of increasing home ownership.
He must have been talking about this flaming Leftie:
The Left is everywhere! Even managing Senator McCain’s campaign.
At the time that Fannie Mae and Freddie Mac recruited Mr. Davis to run the Homeownership Alliance in 2000, they were under new pressure from private industry rivals and deregulation-minded Republicans who argued that the two companies’ federal sponsorship gave them an unfair advantage and put taxpayers at risk. Critics of the companies had formed their own Washington-based advocacy group, FM Watch. They were pushing for regulations that would deter the companies from expanding into new areas, including riskier and more profitable mortgages.
Why doesn’t the Left ever take responsibility for its actions?
http://www.dailykos.com/storyonly/2008/9/22/53515/8256/945/606198
http://tpmelectioncentral.talkingpointsmemo.com/2008/09/home_ownership_rick_davis_and.php
gerard,
Your comment did not answer any of the points the BBB or I had made – so there seemed little point in making any more points. Rather than grandstanding (yet) again, please try to actually read any of the comments, think about what we are saying and either expressing agreement or bringing up points that actually address any of the points we have made. You know, make an argument.
I thought I had addressed all your points, except for the blatant straw-men. which ones didn’t I address?
“At the time that Fannie Mae and Freddie Mac recruited Mr. Davis to run the Homeownership Alliance in 2000, they were under new pressure from private industry rivals and deregulation-minded Republicans who argued that the two companies’ federal sponsorship gave them an unfair advantage and put taxpayers at risk.”
Yeah, idiots! Oh, wait…
Amusingly, your link demonstrates a few things that are opposed to your thesis, for example:
(1) Republicans were opposed to the GSEs abusing their position to crowd out private interests;
(2) Republicans correctly identified that the GSEs’ size and funding arrangements (proposed and championed by Democracts (also known as the American left in the reality-based community)), coupled with the implicit government guarantee that attended such size, endangered taxpayers;
(3) Republicans correctly identified that the GSE’s government-mandated expansion into higher-risk mortgages would expand the market for such lending downstream, threatening the broader financial system; and
(4) in a system in which particular corporate interests within the financial industry (like the massive left-created GSEs) are able to lobby for regulations that benefit them, rather than one which allows the market to freely operate (in short, a system in which government control is routine), will inevitably damage the the system and the interests of the community as a whole.
The upshot for geard (quite strangely, yet predictably): a free market has caused this.
Sadly, Republicans’ efforts here respect were unsuccessful and the GSEs did in fact take on literally hundreds of billions of dollars of loans in these riskier lending classes, encouraging (as the left wanted) lending to relatively disadvantaged home buyers downstream. The results are there for all to see…
Do you even think about these pieces before you link to them?
BBB