# Challenge to Economic Conservatives **URL:** \ **Category:** Great Debates\ **Created:** [August 27, 2009, 10:38pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963 "2009-08-27T22:38:11Z")\ **Posts on this page:** 15\ **Page:** 6
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [August 30, 2009, 2:07pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/101 "2009-08-30T14:07:25Z")
Quickly, while I have much sympathy for Stone’s argument above about Gov pushing access to housing too far (although I have a sense he’s spun his rendition of party political blame to fit his world view, I’d guess from my Wider AngloSaxon experience that the both Tory and Left were wild about home ownership, although for different reasons), I found his attempt to pin this on the American community banking act irritating as I distinctly recalled reading an analytical article indicating said act had no real impact (positive or negative). Here is what I was thinking of: [http://www.dallasfed.org/ca/bcp/2009/bcp0901.cfm](http://www.dallasfed.org/ca/bcp/2009/bcp0901.cfm) > [@](#): > > ``` > * No major changes have been made to the CRA or its enforcement since 1995. The subprime crisis was triggered by poorly performing mortgage loans originated between 2004 and 2007. This chronological gap weakens the contention that the CRA is a major cause of the crisis. > * Contrary to the widely held perception that most higher-priced loans were made to lower-income groups targeted by the CRA, 55 percent of higher-priced loan originations went to middle- and upper-income borrowers or borrowers in middle- and upper-income neighborhoods in 2005 and 2006.[14] > * Only 6 percent of higher-priced loan originations made by banking institutions and their affiliates in 2005 and 2006 went to lower-income borrowers or borrowers in lower-income neighborhoods within CRA assessment areas (Table 2).[15] This was calculated by taking the number of higher-priced lower-income loans made by banks and affiliates in their assessment areas and dividing it by the total number of higher-priced loans made by these institutions. If the proportion were high, it would suggest that banks were trying to originate a large percentage of higher-priced lower-income loans in areas that would earn them CRA credit. The result suggests that banks were not trying to target these areas. > > ``` Also from here: [http://www.frbsf.org/publications/community/cra/cra\_lending\_during\_subprime\_meltdown.pdf](http://www.frbsf.org/publications/community/cra/cra_lending_during_subprime_meltdown.pdf) > [@](#): > > In addition, researchers at the Federal Reserve Board of Governors have reported that the majority of subprime loans were made by independent mortgage lending companies, which are not covered by the CRA and receive less regulatory scrutiny overall.5 In addition to being excluded from CRA obligations, independent mortgage companies are not regularly evaluated for “safety and soundness” (a key component of the regulatory oversight of banks) nor for their compliance with consumer protections such as the Truth in Lending Act and > the Equal Credit Opportunity Act.6 This has created what the late Federal Reserve Board Governor Ned Gramlich aptly termed, a “giant hole in the supervisory safety net.”7 So, please, let us stay on fact and data based arguments as to government impact on the markets. It annoys me to see market arguments diluted and undermined by stereotyped weak arguing. I am certain (certainly it is the case in markets I know better) there has been serious government distortion to over-invest in housing in the US. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [August 30, 2009, 2:15pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/102 "2009-08-30T14:15:44Z")
> [@Voyager](#): > > Was the social status gap smaller in the '90s along with the smaller wage gap? I don’t think so. Eh, this is entirely incoherent. Leaving aside the question of “wage gap” (you seem to be wrong empirically), my observation was about drivers for things like wage gaps. Social status seeking. > [@](#): > > Hell, I’ve seen big status gaps in graduate departments where all students make exactly the same amount of money. And my status as a PhD student in Louisiana made me a lot closer in status to some rich oil guys than my pitiful stipend could account for. So I still don’t understand what social status has to do with this issue. Social status is not uncorrelated with income (certainly not perfect correlation, some low income jobs get higher status, etc). Status seeking certainly has an impact on outcomes. I made the observation in connection with systems that presumed to “level” wages, as an illustration of the failure of wage levelling. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 30, 2009, 2:32pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/103 "2009-08-30T14:32:32Z")
Let me help you out there, **Wm**. ACORN and Barney Franks brought their massive power to bear on the helpless financial industry. Had there been an administration in place with appropriate sympathy for the trials and tribulations of bankers, this disaster might have been avoided. Alas, there was only the Republicans, who cravenly submitted to the massive liberal cabal’s minority power. If only the self-regulating magic of the Free Market (I pause that the reader may genuflect…) if only that magic had been unleashed, all of this might have been avoided, but it was not to be. Friendless and powerless, the financial industry could only submit to the nailed jack-boot of the liberal juggernaut, and take what meager solace they could from grabbing money with both hands. Cold comfort, indeed. You would do well to show some sympathy, some humanity, in regard to their plight. Cringing behind the walls of their gated communities, they dare not venture forth to the local bowling alleys for a line or two, they have only the Hamptons and the ski resorts of Aspen and Switzerland. Innocent lambs as they were, they fell prey to the socialist agenda of Greenspan and Phil Gramm (R, People’s Republic of Texas), and bitterly they rue the day. ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [August 30, 2009, 2:49pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/104 "2009-08-30T14:49:13Z")
That’s hardly helpful and worse than Stone. Leaving aside the idea of “forcing” banks to lower lending quality (or banks plus other types of mortgage lenders, queerly not actually regulated), which to me is a red herring, it seems to me that there is ample evidence of your Frank fellow and the politicians generally pushing for too liberal policy on housing via the subsidized Fannie - Freddie mechanisms, and ignoring warning signs. Forcing then, perhaps not, irresponsibly shoveling more fuel onto a blaze that was already ready to burn out of control, to win points with the Left constituencies, well, there we have an argument. Stone seems to have a command of this, he should go there, rather than the red herrings. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 30, 2009, 3:12pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/105 "2009-08-30T15:12:37Z")
Well, gee, Bill, when I was talking about the massive power of the liberal juggernaut? I was sorta kidding. Sorry, thought I made that plain. If it is your contention that this wasn’t done to make money, but in submission to the awful majesty of a minority, it buggers the question. Why, then, didn’t the financial institutions cry out for relief? Had they no sympathetic ears in a Republican administration? Is a pig’s ass pork? Refresh my memory, selective and partisan as it is. When there were grumblings about a ruinously expensive military adventure put on our national credit card, was it the Dems who rushed out to praise the wonderful, wonderful housing market? ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [August 30, 2009, 4:22pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/106 "2009-08-30T16:22:48Z")
> [@Sam\_Stone](#): > > Conveniently, choosing even decades happens to help the numbers significantly. Bush’s numbers go from 2000 to 2007. If you look at the numbers from 1990 to 1997, you see almost the same increase. If you go from 1980 to 1987, you see a significantly smaller increase. Much depends on where in the various business cycles you choose to pick your start and end dates. > > But in any event, you simply can’t wave away spending as if it’s irrelevant to the discussion, because spending was clearly much more responsible for Bush’s deficits than was lack of revenue. > > Using your same time spans, let’s look at government spending. > > Total outlays: > > 1980: 590.94 billion > 1990: 1.032 trillion. > 2000: 1.789 trillion. > 2008: 2.524 trillion. > > Spending increase between 1980 and 1990: 441 billion > Spending increase between 1990 and 2000: 757 billion > Spending increase in 8 years of Bush administration: 1.193 trillion > > Or looked at by yearly average: > > Average annual increase between 1980 and 1990: 44.1 billion dollars > Average annual increase between 1990 and 2000: 75.7 billion dollars > Average annual increase between 2000 and 2008: 149 billion dollars > > Spending increases under the Bush administration were more than 3 times greater than in the 1980’s, and about twice as great as in the 1990’s. And that doesn’t include TARP. > > The deficit is not a revenue problem. Spending is out of control in the U.S. And of course, under the current administration it’s absolutely exploding. In Canada, revenue went up by a similar ratio as it did in the United States between 2000 and 2007 (59% vs 55%). The difference is that we held spending increases to slightly lower than our GDP growth. The result is that we run budget surpluses and have been paying down our debt. We could have expected revenues to be around $4000 billion at the end of the decade without the Bush tax cuts. Obama isn’t going to change taxation policy at before then and we’re going to see a revenue shortfall of well over a trillion a year in 2010 due to the catastrophic drop in tax revenues caused by the Bush tax cuts. I’m happy to let the numbers make my case here, we can let our fellow forumers judge which of us is correct. And bringing spending up is irrelevant. Spending doubles every decade too more or less which is why you need revenue to increase by the same amount. ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [August 30, 2009, 4:32pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/107 "2009-08-30T16:32:02Z")
> [@Sam\_Stone](#): > > Yeah, I see that picture made the rounds of the lefty blogosphere. But exactly which mortgage regulations were watered down? Do you have a bill number so I can look it up? Because I can’t find it. Before we assign blame, we have to look at the details of the bill and actually analyze why it might have done damage. But I can’t find any details. > > I DID find [this](http://online.wsj.com/article/SB106851042414562400.html?mod=googlewsj) from the same year: > > Oh, come on. The Bush administration was raising the alarm on this stuff from almost day one. The major opposition came from Democrats. Barney Frank was willing to ‘roll the dice’ in the interests of selling as many homes as possible to poor people. The Democrats championed the Community Reinvestment Act, which pressured bankers into lowering lending standards. > > Look, I’m not trying to claim that private industry was blameless, and I will acknowledge that the U.S.'s regulatory standards may not have been up to snuff. But this wasn’t a ‘Bush Administration’ problem. The U.S. government has been on a mission to push as many people into home ownership as it could, dating from the time the mortgage interest deduction was introduced. Democrats were the ones leading the charge in the 1990’s and 2000’s, as they discovered that the GSE’s could be used as an instrument of social policy to move more people into home ownership. It was the Democrats who turned a blind eye to the need for financial regulation in the 2000’s - not the Bush administration. The administration repeatedly sent people to the hill to plead for reform of the GSE’s and to help rein in out-of-control mortgage lending. It was the Democrats who resisted. The Fed ended regulation of mortgage providers and allowed them to sell mortgages after 90-180 days instead of holding them to maturity. They just stopped enforcing regulations. Both Democrats and the GOP pushed home ownership. [http://www.usatoday.com/money/perfi/housing/2004-01-20-fha\_x.htm](http://www.usatoday.com/money/perfi/housing/2004-01-20-fha_x.htm) Only one party however scrapped mortgage regulations, allowed credit ratings agencies to self-regulate, and let the bnks lever up the debt:asset ratio to unsupportable levels. And when authorities around the country took legal action to stop the predatory lending they used the government to block any legal action and prevent anything being done to stop the unsafe lending. From the time the predatory lending/bubble/mushrooming derivatives action started to the meltdown itself the GOP controlled all three branches of government, so how did the Democrats block them from carrying out reform? And what do the GSEs have to do with this? They were a bit-part player. If they hadn’t have existed exactly the same thing would have happened. The GSEs, Jimmy Crter, the CRA, are all red herrings brought up by the right desperate to deflect blame from where it belongs. EDIT : another linky [http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html](http://www.nytimes.com/2008/12/21/business/worldbusiness/21iht-admin.4.18853088.html) ---
**Author:** ![Dick\_Dastardly](https://avatars.discourse-cdn.com/v4/letter/d/c4cdca/32.png) [@Dick\_Dastardly](https://boards.straightdope.com/u/Dick_Dastardly)\ **Post date:** [August 30, 2009, 4:44pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/108 "2009-08-30T16:44:47Z")
> [@wmfellows](#): > > That’s hardly helpful and worse than Stone. Leaving aside the idea of “forcing” banks to lower lending quality (or banks plus other types of mortgage lenders, queerly not actually regulated), which to me is a red herring, it seems to me that there is ample evidence of your Frank fellow and the politicians generally pushing for too liberal policy on housing via the subsidized Fannie - Freddie mechanisms, and ignoring warning signs. > > Forcing then, perhaps not, irresponsibly shoveling more fuel onto a blaze that was already ready to burn out of control, to win points with the Left constituencies, well, there we have an argument. Stone seems to have a command of this, he should go there, rather than the red herrings. Barney Frank pushed for reduced lending standards for F and F because he gets big campaign contributions from them and they’re competing with other mortgage buyers for mortgages. The other buyers (Goldman, Lehman, Citi etc.) had no restrictions allowing them to buy subprime debt or dodgy mortgages in general. F and F did and what was happening in 2003-7 when there was a lending free-for-all was that the mortgage originators were abandoning F and F and selling their mortgages to Wall Street. In 2006 alone Fannie lost 56% of her market share. So these private companies used their pet congressmen to lobby for market share just like Wall Street uses their pet congressmen to do their bidding. Of course Barney Frank was in a minority seat on a GOP-controlled committee and had little real say in policy direction. They controlled it up till the end of 2006 by which time the bubble was bursting and during the previous 14 or so years of control they’d been wholly owned subsidiary of Wall Street. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [August 31, 2009, 3:49am UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/109 "2009-08-31T03:49:14Z")
> [@wmfellows](#): > > Eh, this is entirely incoherent. Leaving aside the question of “wage gap” (you seem to be wrong empirically), my observation was about drivers for things like wage gaps. Social status seeking. If you are saying the wage gap (really, compensation gap) is not increasing, please give a cite. It is true that a big driver of the explosion in CEO salaries was their publication, which was supposed to shame them into not being greedy but had the opposite effect. However that gap was with other CEOs. I don’t suspect their relative social status versus the average worker changed very much even as their compensation increased. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 31, 2009, 4:21am UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/110 "2009-08-31T04:21:01Z")
“A man will do many things to be loved, but he’ll do anything to be envied.” - Mark Twain Wouldn’t it have been wonderful if it had worked?! “Yeah, Fred? Tom here. Yeah, they’re fine. Look I’m reading in the paper about our salaries, and you know, I’m pretty embarassed about it. You, too? Bill and Steve? Look, I been thinking, lets cut our salaries by about 75% and throw the money into the pension fund for our line workers, shit, we’d still have fucking piles! Yeah, right on, power to the people…” Me? Tequila and bongwater, want a snort? ---
**Author:** ![Blalron](https://avatars.discourse-cdn.com/v4/letter/b/35a633/32.png) [@Blalron](https://boards.straightdope.com/u/Blalron)\ **Post date:** [August 31, 2009, 4:59am UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/111 "2009-08-31T04:59:48Z")
> [@elucidator](#): > > “A man will do many things to be loved, but he’ll do anything to be envied.” > > - Mark Twain > > Wouldn’t it have been wonderful if it had worked?! > > “Yeah, Fred? Tom here. Yeah, they’re fine. Look I’m reading in the paper about our salaries, and you know, I’m pretty embarassed about it. You, too? Bill and Steve? Look, I been thinking, lets cut our salaries by about 75% and throw the money into the pension fund for our line workers, shit, we’d still have fucking piles! Yeah, right on, power to the people…” > > Me? Tequila and bongwater, want a snort? Some of the Native Americans of the Pacific Northwest showed off their social status by holding giant parties called [potlatches](http://en.wikipedia.org/wiki/Potlatch), and they were constantly trying to outdo each other in how much stuff they could give away. If only our modern day CEOs were like that! ---
**Author:** ![Sage\_Rat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/sage_rat/32/399_2.png) [@Sage\_Rat](https://boards.straightdope.com/u/Sage_Rat)\ **Post date:** [August 31, 2009, 9:31am UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/112 "2009-08-31T09:31:46Z")
> [@Blalron](#): > > Some of the Native Americans of the Pacific Northwest showed off their social status by holding giant parties called [potlatches](http://en.wikipedia.org/wiki/Potlatch), and they were constantly trying to outdo each other in how much stuff they could give away. If only our modern day CEOs were like that! I think you’ll notice that Native Americans lived in makeshift shelters and believed that it was divine to hang yourself by the nipples for a day.\* That they never advanced beyond that stage of technological development probably has a lot to do with the sort of mentality behind potlatches. - For some brands of Native Americans ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 31, 2009, 1:30pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/113 "2009-08-31T13:30:41Z")
What a fascinating conjecture! Based entirely upon your own prejudices, of course, but nonetheless fascinating! ---
**Author:** ![wmfellows](https://avatars.discourse-cdn.com/v4/letter/w/c2a13f/32.png) [@wmfellows](https://boards.straightdope.com/u/wmfellows)\ **Post date:** [August 31, 2009, 2:58pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/114 "2009-08-31T14:58:41Z")
> [@Blalron](#): > > Some of the Native Americans of the Pacific Northwest showed off their social status by holding giant parties called [potlatches](http://en.wikipedia.org/wiki/Potlatch), and they were constantly trying to outdo each other in how much stuff they could give away. If only our modern day CEOs were like that! I would suggest that this would be a very bad thing, insofar as the survival of such “gifting” customs in Africa seems to correlate strongly with corruption and nepotism, as the “Big Man” (or Men, or Women) extract rents that they can then hand out. Fine for a small tribal society, very bad all around for an urban civilisation, sets up nasty incentives. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 31, 2009, 6:07pm UTC](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963/115 "2009-08-31T18:07:20Z")
Heavens, **Wm** , I don’t think anyone is advancing generosity as a virtue appropriate to a modern civilization. We all recognize that property rights are the central core of human rights, the Crown Jewel. The other human rights are but grace notes, they provide the setting and reflect the glory of property. The mathematics that make a moon landing possible are founded on our discovery of the most correct method for calculating compound interest. It would be best to brush aside this aberration of anthropology, since we are assured that this is not an appropriate symbol for an advanced civilization, it pales compared to a three-year-old child seizing his playmate’s red fire truck and screaming “Mine!”. Snark aside, the _potlatch_ custom simply reflects the alternative form of compensation, respect and community regard. Even in America, it was common to have professions which were known to be modestly paid…the doctor, the cleric, the teacher…but were compensated by community respect and approval. I mention this only to suggest that such naive and primitive notions persist even to our enightened times, despite our best efforts. [Previous page](https://boards.straightdope.com/t/challenge-to-economic-conservatives/507963.md?page=5)