Bush played a more than full part in inflating the biggest asset bubble in history. The Fed didn’t slash rates until we had a quarter of zero growth and it was becoming apparent the Bush tax cuts had failed to create a lot of economic growth. But Greenspan was only doing what Bush wanted by cutting rates…
Of the major economys the Fed has always been judged to be the least independent from political interference. This belief has gained a lot of currency over the years due to various incidents like Arthur Burns being caught on the Nixon tapes agreeing to keep interest rates low until after the 1972 election. Greenspan recieved the most criticism for being open to persuasion and the longer he remained Fed chair the worse he got. When Clinton was in power his main aim was to cut the deficit and create a surplus to fund the future increase in Mediucare/Social Security costs, so those were Greenspan’s priorities. When Bush took office Greenspan then believed that the surplus was actually a great danger to the US economy* and that it was imperative to immediately enact massive tax cuts to end the surplus. When they failed to produce economic growth and Bush suddenly became a minority housing advocate
Bush seeks to increase minority homeownershipBy Thomas A. Fogarty, USA TODAY
In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.
In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the “most significant FHA initiative in more than a decade.”
I agree we shouldn’t bail the banks out when they screw up. The financial system yes, but not the banks.
*yep, believe it or not back in early 2001 when we had a couple of hundred billion dollars a year surplus Greenspan actually argued that if we kept accruing all that money every year we’d eventually have to invest it in something until we got round to spending it on increased Medicare/SS costs and that would mean the creation of a sovereign wealth fund like Singapore or Norway or Saudi have and that would be a little bit socialist so much better to slash income tax and capital gains and redistribute all that surplus upwards. And it’s a good job he did it because imagine how bad things would be right now if we’d had no deficits during the Bush years and a trillion saved-up dollars to spend on economic recovery.
If only there was some way of checking that what was put down was accurate. Maybe someone could invent one, we’d call it a credit reporting agency.
And we have plenty of evidence of mortgage brokers encouraging prospective borrowers to submit loans without documentation or to lie.
One difference. In this case, those who sold subprime mortgages, which got higher interest rates, got bigger commissions than normal, conforming loans.
Lots of smaller banks got shut down and sold off. But the only way to accomplish what you want is strong and dynamic regulation. Blaming borrowers, or even flippers, for the problem is not going to help that happen.
From his testimony before Congress, Jan. 25, 2001. I warn you however, when I was reading it, I almost cried. He talked about paying off the deficit by the end of the decade. Bush really, really screwed the pooch.
I hear you but Bush was doing almost everything under the sun to keep people from focusing on the war in Iraq and trying to prove that Republicans were good for the economy and he had a ready accomplice in Alan Greenspan.
As far as bailing out the banks, if history has taught us ANY lesson about recessions and depressions its that you MUST save the financial system. Even tariffs are better than letting the financial system collapse even for a very very short period of time. You can always reverse tariffs and there is a t least a chance that your trading aprtners won’t erect retaliatory tariffs in response (see US/China), but a collapsed financial system marks the beginning of the end.
What I am saying is that we will ALWAYS bail out the banks because we MUST bail out the banks, so we MUST regulate them, they don’t get to choose: regulation+bailouts OR deregulation+accountability.
They will ALWAYS get bailed out, no matter how much we hate ourselves for bailign them out, the alternative is MAD MAX world.
This concern with not enough debt was all bullshit. We could have responsibly generated 50 trillion dollars of debt overnight by fully funding social security and medicare/medicaid. Stuff like modernizing our infrastructure (perhaps reinforcing the levees in new Orleans) could account for 3 trillion dolalrs. But noooo, tax cuts for the rich, THATS the ticket.
This does highlight one point. The tax cuts for the rich didn’t mean we didn’t get their money, it just meant we got it in the form of a loan rather than taxes.
And look at the date of the testimony. A week after Bush took office. Eight days previously to testifying Greenspan was still fully on board the Clinton hoard-the-surplus-to-pay-for-increased-entitlements-down-the-road bandwagon. He wanted to keep his job and all its trappings, his place in Washington society so he did a 180 and agreed to everything the idiot Bush wanted.
I would agree with this. However we must also separate between banks that are temporarily illiquid and ones that are insolvant so that we don’t endlessly prop up zombie banks.
But they knew they would get bailed out because they are “Too big to fail” and martial law would have been declared. They’ll use the same excuse again. Bail us out or else.
What should have happened in the interest of the majority of Americans is, sure bail them out, and then break them up into smaller companies with new leadership so that they don’t bring down the whole house with them again.
Then reinstate the regulations that were dispelled.
At this point, nothing has changed so I expect things to only get worse.
In your opinion, at what point in a society would there be a moral hazard for the collective whole, if greed and everyone for themselves, and get it while you can was practiced by everyone in the country?
Sure, greed has always existed, but so has murder.
The number of murders in this country is pretty small, but if everyone engaged in it, it would eventually effect everyone.
I half agree with that. If half the banks in America were insolvent after the market dried up for mortgage backed securities (and caused their mark to market value drop in half or something like that), we would have to prop them up until we could liquidate them in an orderly fashion and with enough of a transition period for other financial institutions to step into their place.
Sort of. It’s really more like people are having trouble proving who owns a given mortgage.
I have serious doubts that this will result in a bunch of people who would otherwise be foreclosed on keeping their houses, for a few reasons.
Even if the bank can’t track down the paperwork they need to foreclose, it’s pretty clear that there was a mortgage, and that the current inhabitants still owe it to somebody.
If the title to the house is really so screwed up that we can’t figure out who owns it, no one, including the current inhabitants, is going to be able to sell it either.
I’d expect that some foreclosures will take longer, and there will be some legislative solutions. A few people and a few banks will get screwed, but the vast majority are going to end up about the same. People will probably get to stay in “their” houses rent-free for a bit longer. I seriously doubt that many people who would otherwise get foreclosed on are going to magically win the house lottery because the banks screwed up some of their paperwork.
That’s all we need to do. We can stop the financial system from collapse without having to keep the insolvent banks in business. When the meltdown happened the Fed should simply have flooded the system with unlimited liquidity, guaranteed all the toxic stuff, then put all insolvent banks/securities firms including Goldman, Citibank etc. through the FDIC process. Anybody who wouldn’t have survived without the bailout (all the big firms) would have been liquidated, the bondholders and shareholders wiped out and at least some of the debt converted into new equity in whatever newly-capitalised institutions emerged from the FDIC process and the Fed/taxpayer with a chance of upside on the remaining debt as the markets recovered. Then you have no zombie banks, new firms that new investors capitalise and the economy can get going again. We didn’t do that as politically connected firms, their bondholders and shareholders got bailed out at 100 cents on the dollar and allowed to hide their bad debt.
Well, I read an article stating that (at least) one attorney down in Florida has cases in which the foreclosure process has been stalled for 5+ years and has started filing quiet title lawsuits to dismiss the banks claim to the title. I know the statute for liens is 5 years. I’m not sure if the attorney is filing because the statute is up, if they just started filing them because it’s a valid tactic no matter the time frame.
I have a 6 year old sub-prime mortgage that was sold shortly after the mortgage was issued. I’m likely in the same boat as these other people. I fully expect the government to issue some kind of remedy for the situation. The banks just can’t be held accountable for all these losses. It’s just too much money. Although I don’t expect anything to be done until after the mid-term and depending on congress make-up, it could be a fight there as well.
In the mean-time, I’m checking the counties public record, requesting documentation from my mortgage company and consulting a RE attorney once I find out the state of things. I will fully use this situation to the best of my advantage while I can.
The bankers announced that the system can not survive if a bunch of people get their homes for free because the bankers can not prove they own the house. The problem can not be with the big shot financial pros. It has to be the little people who might catch a break. These people keep thinking they have rights and contracts that matter. But that stuff is not important like the wealthy bankers getting full money for the messes they made. They are big important people after all.
