Bush explaining his plan for failing mortgages

I'm glad to see this administration recognize a problem that is all too real for a growing group of middle class Americans. As is typical, however, this is a band-aid for a flesh wound.
There are something like 2 million mortgages at risk for foreclosure; this FHA insurance program *may* help 80,000, according to McClatchey News Service. And a large part of this effort is jawboning: this initiative will "bring together homeowners and counseling groups, financial professionals, and the FHA and government-sponsored enterprises like Fannie Mae and Freddie Mac to help American families find the mortgage product that works best for them." That's just talk.

A truly significant part of the program is changing the tax code, so the forgiven debt is not counted as income. Debbie Stabenow (D-Michigan) has already submitted this legislation. Thanks for noticing that the Democrats have ideas, W.

Athena,

Who would the people that entered into these mortgages? Shouldn't they be held accountable? Why should they get a bailout and not say someone who made a bad investment on margin?

The underlying issue here is the ignorance of the American public when it comes to economics and finance and that falls back to our pathetic public education system.

Mark does an excellent job of framing the reason for the "bailout." This is to save the Bush administration from further embarrassment. Up until now, the economy has been this administration's saving grace. But now the curtain has fallen and we see that the whole thing has been held together by the Feds low interest rates that could not be sustained any more than, say, a "surge" of troops in Iraq could be sustained.

But I give the Bush administration credit for being political savy lo these 6 years - enough, anyway, to win re-election. Now everyone's pretty much packing bags and leaving the scene of the crime of this young century.

Time to leave "WASHINGTON" (notice how they all blame "WASHINGTON") and cash in those chips in the private market.

Why should they get a bailout and not say someone who made a bad investment on margin?
Posted by: Terry | September 1, 2007 11:26 AM

You can blame these people if you want, but it doesn't change the fact that it has affected every aspect of our economy. By doing nothing, eventually it will affect many things in "your" life.

Thanks for this important post, Mark.

Now we can dissect it.

1. "I'm working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt."

That will be good if enough lenders are willing to forgive enough mortgage debt to enough homowners in trouble. But who "pays" for this debt forgiveness? And how do lenders decide who to forgive and who NOT to forgive?

I'm all for President Bush giving away money to the people, so long as he admits that he is a socialist at heart. I have no problem with that.

2. "I've sent Congress important legislation that would help more Americans qualify for this insurance by lowering down-payment requirements, increasing loan limits, and providing more flexibility in pricing."

Is this for new homebuyers or current homeowners? If it's for the former, it's only going to exacerbate the problem by making more unqualified homebuyers eligible to buy homes on which they will eventually default.

3. "This initiative will help some people who have good credit..."

From what I've heard and read, the people that need the most help are the people with BAD credit.

4. "Foreclosure Avoidance Initiative to help homeowners learn more about their refinancing options."

Option one: Sell your home for less than you owe on it and pay the bank the difference over time.

Option two: Eat less, exercise and count your pennies. No new shopping.

Option three: Drop the keys off in the bank's deposit box on a Sunday.

5. "Finally, the Federal government is working to make the mortgage industry more transparent..."

Translation: Leave no adult behind.

Tell the people exactly what they can expect to pay and no more ARMs for those who cannot afford to pay the maximum mortgage payment - even if that payment won't take effect for another 3 or 5 years.

Bud McFarlin:

Why would we, or should we, view the sub-prime market debacle as an “embarrassment” to the White House? The problem arose because private lending institutions entered into private lending agreements with too many private citizens who did not have the means to pay the high end of variable mortgage rates. This has much to do with the fact the sub-prime market is largely aimed at providing credit to people with bad credit records/ ratings. How is this a government problem?

The government does not have direct control over the economy. It has only regulatory control over portions of it. Furthermore, there are natural cycles in the economy over which neither the government nor the market players have much control. All too often, the bad parts of the cycles have been attributed to the government, or a particular administration, when the government had no hand in creating the problem, and no real means of averting it. The converse is also true. Sometimes, the good parts of the cycles are attributed to administrations that did nothing to favorably effect the market.

Consequently, it is error to claim that the economy is really Duh’bya’s albatross. Market forces are largely responsible for driving the market to where it is – with one major exception: cheap money from the Fed.

It is dangerous for the government to keep pumping cheap money into the consumer credit market. It is exactly the kind of inflationary and irresponsible monetary policy that led us into the stock market crash and bank failures that heralded the great depression. Those same policies keep the market from correcting itself to liquidate bad debts. These were parts of the bad Fed policies in the 20’s and 30’s that kept the depression going for so long. We are fooling ourselves if we think it can’t happen again. The S&L bailouts of the 80’s told us the FSLIC and FDIC support systems weren’t as sound as we hoped.

We have to let people learn their own lessons, instead of propping them up with more cheap money. That will only help them go deeper in debt, and encourage others to do the same. In the long run, we will end up harming them more than helping them.

Bud McFarlin,

Got to hand it to you. You make a lot of good points.

"And a large part of this effort is jawboning"

Just like back in 2004, when Bush said he'd jawbone the Saudis into lowering the price of crude so that the price of gas here in the US would drop - right before election time. How well did that work out?

Right. In 2004 Bush didn't accomplish a damn thing for the American consumer.

Bill R.

99%+ of mortgages are not in default. Those that are in default can be worked out between the lender and borrower. Both are in a losing situation. Foreclosure is a last option for mortgage companies since the alst asset they want on their books is a house. they want receivables. Both parties can negotiate new terms to the mortgage to alleviate the mortgage mess without gov't interference.

What's the message that is sent to those of us that don't leverage ourselves beyond our means? The message being sent with a bailout is go ahead and take risks because the gov't has your back and won't let you fail.

Should the same rules apply if you decide to take your 401K earning to the roulette wheel and put it all on green?

What's going on;

Due to lax regulation and a desire to allow
financial institutions huge profits, we are now facing ruin.

And who do we have to calm the waters?

A grade C idiot.(Bush)

Hey Cons, lets blame the the stupid borrowers and hope it all goes away. Right?

Good luck. This mess will gaslight all our finances for a decade. Car purchases are at a 10 year low. Why? Credit crunch.

Bud is making sense. The Cons seem to think the borrowers and a few greedy institutions are the only ones that will have to pay for this monumental screw up.

Make More War & Death Because It Means More Money For Me aka Terry,

You better zip up that fat GOP wallet of yours, the "house of cards" that the Wingnuts have been falsely calling a "strong economy" is tumblin' down.

Time for the wifey to start job hunting, huh?

The blame for this mess falls squarely on the shoulders of the a$$hole Bush administration that you voted for....twice.

C Morris:

Do you make this stuff up yourself, or do get paid by someone else to spew it on their behalf? Either way, it is false in the following respects:

1. You start off with the premise that the President had regulatory power over the offending lending institutions and, therefore, could have done something to prevent or ameliorate the problem. As is true of most simplistic views, yours is wrong. Many, if not most, of the offending lenders did not take consumer deposits and were not federally insured. As such, they were not subject to the jurisdiction of federal bank and S&L regulations and regulators. At best, they were subject only to State laws and regulations concerning fraud, consumer protection and lending.

The power of the Executive Branch to regulate begins with a law passed by Congress which gives the Executive Branch that power. If there is no enabling legislation, then the Executive Branch is limited to the powers it has under existing laws. Since current laws do not cover a large part of the sub-prime lenders (for the reasons stated above), then the President had precious little he could do. So don’t blame the President. At least, certainly, not for all of it.

I might also add that even the Fed has the power to curb the abuses of sub-prime lenders. It is now only getting around to holding hearings on how it should use that power.

2. No one ever suggested that it was simply a bunch of bumpkin borrowers that are to blame for the whole mess. And I mean no one. The rightful blame ought to be, and has been, placed on the greedy, predatory and deceitful sub-prime lenders. They had no business lending money to people who were obviously not financially sound enough to shoulder the loans as they had structured them. The only thing those loans guaranteed was that the borrower would be out of money and his/her home in a short order. That is why they are now being investigated for their practices. [Although I suspect some borrowers are, or probably will be, under investigation for lying on their loan applications too.]

Another group to blame are those on Wall Street who put together the real estate mortgage backed securities. They are the ones who are largely responsible for funding and setting up these fraudulent and predatory lending institutions. I believe the SEC is now sniffing around their nether regions too; and,

3. No one is suggesting that only a few lenders and borrowers are going to suffer. That is certainly not the case, because the source, again, came from Wall Street and the securities market. The toppling of the sub-prime market is now causing ripples in the stock market – which means it has an economy-wide impact. But, again, nobody is denying this is the case.

If that were the case, one would expect Bush and Co. to do nothing and let bad lenders and borrowers stew in the juice of their own folly. But that's not the case either is it? There are measures being taken up to ease the problems caused by the surge in foreclosures and to provide alternate means of refinancing for sound borrowers. More measures are in the works by the Fed, the federal government, as well as State regulators and legislatures.

I don't trust this guy and the "legislation" he wrote and sent to the congress. Why is he writing bills anyway? I thought that was the job of the congress.

History ALWAYS repeats......especially if it is a good crime and effective scam. This is the exact scam that was perpetrated under GHWBush in the 80's early 90's. Even the same people have been currently working behind the scenes with this administration for the past 7 years. Explaination: 1st: "Sub-prime" is an advertising slogan that was created to give the impression that the people taking on the loans were somehow almost prime to begin with....similar to a steak or piece of meat. The second Bush took office in jan. 2001 he eliminated ALL standards for lending basing the lending on the "future value of the property" rather than the ability of the borrower to pay. Remember all those ads for...."Zero down, Zero credit check, zero job verification, almost zero interest for a few years to afford the payment(thanx Greenspan), and almost zero qualifications of any kind" for years. (This is why and how sooooo many drug dealers bought properties for grow-houses and could hide and launder money nationwide. It also allowed "illegals" to purchase homes as well). That was the essence of the S&L scandal under his father GHWBush in the 80's. Lenders gave loans on the property never on the borrower...and especially on inflated appraisals and "future market values". Then when the S*** hit the fan the "banks, lenders, FHA, government, and mortgage companies" simply filed for bankruptcy and closed shop.....like what is happening now and in the coming years. If anything it was predatory BORROWING not lending that became the crime. So called investors KNEW that they were borrowing with nothing needed for verification....only a contract in hand and that was it.

2nd: After the fall-out from the S&L scandals Bush and Clinton passed a law that said only "rich, well-connected, authorities and organizations could now buy and borrow money to pick-up all these so-called distressed properties". We are beginning to see that happen now once the crimes are being uncovered. The first thing you do is use more government money to float the scam under Bush's "new" premeditated FHA rules for continuing the scam. (Congress and especially Hillary Clinton are suggesting a $40 Billion "infusion" to maintain the scam). Next you pass bogus laws that say only his richest buddies and organizations (equity investors) will be allowed to buy distressed properties like was done in the early 90's once the S&L scam was finally brought to light. Stop wasting your time talking about the mortgage companies themselves. This is a false flag and shell game that the administration wants you to follow to distract from the truth which was KNOWING that the properties would be defaulted on and that the "new investors" would come in and clean things up when everything went to poop. (Watch for it.....it's a beutiful scam except this administration has done it on a National AND International scale involving Trillions of US dollars.) Remember the biggest criminal in the past S&L crime scandal was Neil Bush.....George's brother and GHWBush's son. He "lost" $1,000,000,000 in real estate with this scam and never paid it back. (watch something funny.....back in Feb? 2001 during the FIRST meeting between Greenspan and President Bush there is video of the 2 after the meeting. If you look close enough you can see a shot-gun imprint on Greenspan's cheek where he was ordered to get rid of all qualifications and interest rates for lending, borrowing, and homeownership. Greenspan knew from day ONE what was going to happen in the future regarding the US housing market and did NOTHING about it because of Bush's physical threats. It is now readily appearant that Bush has done this to 1000's of individuals in his administration who dissented or questioned his decisions.)

All of Bush's friends and buddies got out of the real estate market at least 1-2 years ago.....also known as equity and hedge fund investors themselves. They knew the crash was coming because too many "investors" had entered the game and it was about to crash.......similar to a pyramid scheme. Private billionaires sold out to companies who will now be bailed out by the government themselves to some extent while Bush is still in office. Bush will use every last dime to help bail-out these selected mortgage companies, including Fannie Mae, so as to never cause a huge panic until he is out of office. That is precisely what his father did in the early 90's before leaving office. ( Did anyone know why David Gregory from NBC news always seemed to be able to ask the "tough questions" of current Bush without ending up like Helen Thomas? David Gregory's wife is none other than the HEAD LEGAL COUNCIL FOR FANNIE MAE!!!!!!! She is in charge of hiding the Trillions in lost dollars and legally advising the agency on what to do. Talk about a conflict of media intergrity??!?!!!)

What I have have just written above is the tip of the iceburg. Remember......look for the shot-gun imprint on Greenspans face.......ala Cheney style?

History ALWAYS repeats......especially if it is a good crime and effective scam. This is the exact scam that was perpetrated under GHWBush in the 80's early 90's. Even the same people have been currently working behind the scenes with this administration for the past 7 years. Explaination: 1st: "Sub-prime" is an advertising slogan that was created to give the impression that the people taking on the loans were somehow almost prime to begin with....similar to a steak or piece of meat. The second Bush took office in jan. 2001 he eliminated ALL standards for lending basing the lending on the "future value of the property" rather than the ability of the borrower to pay. Remember all those ads for...."Zero down, Zero credit check, zero job verification, almost zero interest for a few years to afford the payment(thanx Greenspan), and almost zero qualifications of any kind" for years. (This is why and how sooooo many drug dealers bought properties for grow-houses and could hide and launder money nationwide. It also allowed "illegals" to purchase homes as well). That was the essence of the S&L scandal under his father GHWBush in the 80's. Lenders gave loans on the property never on the borrower...and especially on inflated appraisals and "future market values". Then when the S*** hit the fan the "banks, lenders, FHA, government, and mortgage companies" simply filed for bankruptcy and closed shop.....like what is happening now and in the coming years. If anything it was predatory BORROWING not lending that became the crime. So called investors KNEW that they were borrowing with nothing needed for verification....only a contract in hand and that was it.

2nd: After the fall-out from the S&L scandals Bush and Clinton passed a law that said only "rich, well-connected, authorities and organizations could now buy and borrow money to pick-up all these so-called distressed properties". We are beginning to see that happen now once the crimes are being uncovered. The first thing you do is use more government money to float the scam under Bush's "new" premeditated FHA rules for continuing the scam. (Congress and especially Hillary Clinton are suggesting a $40 Billion "infusion" to maintain the scam). Next you pass bogus laws that say only his richest buddies and organizations (equity investors) will be allowed to buy distressed properties like was done in the early 90's once the S&L scam was finally brought to light. Stop wasting your time talking about the mortgage companies themselves. This is a false flag and shell game that the administration wants you to follow to distract from the truth which was KNOWING that the properties would be defaulted on and that the "new investors" would come in and clean things up when everything went to poop. (Watch for it.....it's a beutiful scam except this administration has done it on a National AND International scale involving Trillions of US dollars.) Remember the biggest criminal in the past S&L crime scandal was Neil Bush.....George's brother and GHWBush's son. He "lost" $1,000,000,000 in real estate with this scam and never paid it back. (watch something funny.....back in Feb? 2001 during the FIRST meeting between Greenspan and President Bush there is video of the 2 after the meeting. If you look close enough you can see a shot-gun imprint on Greenspan's cheek where he was ordered to get rid of all qualifications and interest rates for lending, borrowing, and homeownership. Greenspan knew from day ONE what was going to happen in the future regarding the US housing market and did NOTHING about it because of Bush's physical threats. It is now readily appearant that Bush has done this to 1000's of individuals in his administration who dissented or questioned his decisions.)

All of Bush's friends and buddies got out of the real estate market at least 1-2 years ago.....also known as equity and hedge fund investors themselves. They knew the crash was coming because too many "investors" had entered the game and it was about to crash.......similar to a pyramid scheme. Private billionaires sold out to companies who will now be bailed out by the government themselves to some extent while Bush is still in office. Bush will use every last dime to help bail-out these selected mortgage companies, including Fannie Mae, so as to never cause a huge panic until he is out of office. That is precisely what his father did in the early 90's before leaving office. ( Did anyone know why David Gregory from NBC news always seemed to be able to ask the "tough questions" of current Bush without ending up like Helen Thomas? David Gregory's wife is none other than the HEAD LEGAL COUNCIL FOR FANNIE MAE!!!!!!! She is in charge of hiding the Trillions in lost dollars and legally advising the agency on what to do. Talk about a conflict of media intergrity??!?!!!)

What I have have just written above is the tip of the iceburg. Remember......look for the shot-gun imprint on Greenspans face.......ala Cheney style?

John W,

Do you make it up?

In answer to point 1;

"Bush to help hurt homeowners avoid foreclosure
Posted at 2:43 PM
by William Neikirk"

My point was this, if Bush is the solution we are in trouble. And of course regulation was lax. That's why the disaster is unfolding now.

Point 2 and 3;

Others have all said on these pages that the stupid borrowers and the lenders should be allowed to fail as if they would be the only ones to suffer.
They could barely contain their glee.

On an emotional level, yeah, I would let the lending houses come tumbling down, but in the real world we, and the regulators, have allowed all these entities to become 'too big to fail'.

If the government is going to throw money at a problem, why can't it be at healthcare?

"It is dangerous for the government to keep pumping cheap money into the consumer credit market. It is exactly the kind of inflationary and irresponsible monetary policy that led us into the stock market crash and bank failures that heralded the great depression."

Thank you John, for laying this out. Artificially cheap credit has been the elixir of the Bush years, and eventually the bill comes due. It will become increasingly clear that much of the growth of the last 6 years has been a direct result of the cheap credit boom the Fed had unleashed.

This is why you simply cannot just run enormous deficits year after year without even attempting to control the imbalance. Yes, the Chinese and others have kept us afloat by taking on more and more of our debt. But that debt becomes more and more onerous due to the magic of compound interest.

You asked why Clinton deserves credit for his economy, and the answer is because he treated it responsibly. He made the people who earn the most pay the most, and pay a fair share. He didn't pretend that we as a nationn can borrow ourselved to prosperity. This in turn helped to balance the books, without damaging the mythical creative power of the ultra-wealthy. A top tax rate of 39.1% did not hurt the work or innovation motives of our best and brightest, but by balancing the economy progressively, more people experienced more growth and more people were raised out of poverty than ever before.

Compare that with W's economy where the rich have gotten disproportionally richer (due to regressive tax policies that favor wealth over work) and the rising tide has predictably not lifter most boats. My feeling has always been, and I'm a "have" in case you feel the need to talk about "class warfare," is that the growth from 2002-6 was good enough, not earth-shattering but not bad. Yet that was being funded with TRILLIONS of dollars of stimulus, from the tax cuts to the war.

With all that stimulus, more people fell into poverty, the middle class treaded water, and the haves become the have mores and the have mores ("the base") became have even mores. Now that the hosue of cards has started to fall, and it was obvious that it would have to when you consider how much of the economy is dependent on the cheap credit and rising values of residential real estate, the strong middle class base that sustains strong nations has eroded.

Now that a recession (or at least a significant correction) is in sight, people are far less prepared to deal with it then they were at the end of the Clinton years, because the growth of the Bush years has been specifically designed to stay at the top (or trickle-down, if you prefer to believe in fairy tales). I fear that we are heading into a period of significant potential economic peril.

And none of the solutions, as illustrated by this headline, are good.

I should add, that had George W Bush's economic policies been enacted in the early 1990's versus the Democrats, that decade would have looked much like this one: exploding pocketbooks at the top with everyone else clinging for dear life.

Sorry, John W, among the many things that were proven in the 90's, one of the most crucial is that tax and spend is far superior to borrow and spend. Its time for this country to get a grip and stop pretending there can be a free ride.

C Mo,

On some level, I too would love to see the greedy investors who helped fuel the sub-prime loan business take their medicine.

I watched in amazement the last dozen years at how my co-workers seemed to be drowning in affluence. They had $500,000 dollar homes, $40,000 cars. What gives, I thought? I didn't like to ask people about their finances, considering it bad form. But I had to wonder, did all these people have trust funds, did their spouses have well-paying jobs, were wealthy parent's buoying things up?

When ever someone would volunteer, it was the same old story. These folks were paying an inordinate amount of their disposable income on housing, often with "creative" loans. Cars were bought with refinance money from homes. Home improvements were purchased on questionable appraisals of homes. Like John E. said, it was all a "house of cards".

While Terry, John D. et al. were bragging about the "robust" economy, and record home "ownership", the reality was that the middle class was losing ground to stagnant wages, increased health cost, etc. The only thing going up..home prices (which cuts both ways).

In the late 70's when credit was tight, interest rates on homes got up to 17%, prohibitive. But responsible folks, depression-era people like my father who knew the value of saving, parleyed the high interest rates into college funds for all the grand-children. A mere $1000 fund yielded $10,000 dollars when the kids were of college age.

I'm in a similar situation to my father's, being in a position to save, but I'm hardly insulated from the volatility of the economy. Virtually all my 401 K is tied up in the stock market. The Fed, allowing the irresponsible lending practices that led to this crisis, is culpable. We've let the institutions that drive our economy mortgage long-term sustainability for short-term gains. Greed wins again.

http://www.slate.com/id/2172872/fr/flyout

C Morris:

I was in my bank the other day and asked the manager (a V.P.) how the sub-prime market was going. He told me it was pretty much flat, as no one was doing it any more.

A good number of the sub-prime lending houses have already fallen. About 80 sub-prime lending institutions have already closed their doors - or had their doors closed for them by the State and federal governments. More closures are on the way. Most, if not all, of these lending institutions were largely designed to target the sub-prime market. They were not standard or traditional lending institutions like banks or S&Ls. In fact, I believe many structured their businesses so they wouldn’t be subject to federal or state banking regulations. So, unlike you, I'm not sure that they have become too big to let them fall.

Continuing on (in reverse order), I don't see where prior posters blame sub-prime borrowers for anything except their own foolishness. Most of these comments arose in the context of whether the federal government should bail out the sub-prime borrowers, and not whether the sub-prime borrowers were to “blame.” So, I don’t see how that translates into blaming them for the current housing finance crisis. They were enticed into the market by offers that were too good to be true. I don’t know how much blame can be assigned to that. Some borrowers bear some blame for lying on loan applications regarding their ability to pay the loans. Then again, the sub-prime lenders are more to blame because they rarely questioned or investigated any of the false statements.

Finally, “the disaster is unfolding now” because of the actions of the sub-prime lenders and vendors of mortgage backed securities, and not because of the government’s inaction. The federal government didn’t have jurisdiction over many, if not most, of those lenders because they were/are non-standard lending institutions. It’s not that the administration simply failed to act; it’s that it couldn’t do anything. Only now are a few people in Congress, like Chuckie Schumer, trying to expand the “truth in lending laws” to cover such nonstandard institutions as those engaged in the sub-prime market.

Assign blame where blame is due. The president can’t make regulations on the spot. He and his cabinet members need enabling legislation from Congress to give them the power to regulate. Without that power he can do nothing. So, if you want to blame someone for the lack of regulation, then blame those who made regulation impossible. Blame the Federal Reserve Board, Congress and the State legislatures.

"I watched in amazement the last dozen years at how my co-workers seemed to be drowning in affluence. They had $500,000 dollar homes, $40,000 cars."

dt,
I laboured at the old Illinois Central for many years in the 90's and 00's and noticed that many of the '50 somethings' sold their old 70's paid for tri-levels and bought into huge trophy homes! These were people close to retirement that were assuming 30 year mortgages of huge proportions.

Suddenly, the old IC was gobbled up by the CN!! In early 2002 most of those folks that bought those McMansions were fired.

A hard lesson. I'm glad Mrs. Mo and I held on to our small, paid for 50's ranch. It looked like Windsor Castle at the time.

John W,

Ya know, I agree with much of what you write, but feel like your conclusions are wanting.

Terry, John D, Paulo, others, all were doing the victory dance on the financial graves of the borrowers, as I recall.

I may be wrong about Terry. How about it Juanito??

You may be right, I may be crazy, but it just might be a lunatic you're looking for.

The Federal government DOES have control over lending. After all, the Office of Thrift Supervision reports to them, and the OTS audits banks and SnL's regularly. They had all the data they needed to point out that people were getting loans by merely stating their income, rather than proving it. The Fed missed the warning signs, again and again, so that large institutions (donors) could make a bunch of money. Now earboy thinks he needs to save these folks? Sounds like socialism to me. All the connies are against the nanny state, unless it means taking care of businesses that have totally screwed up due to simple greed. Earboy finally has his first chance to act like a Republican, and he drops the ball again. Is there anything this moron can get right? I guess his string of failed businesses he ran into the ground makes him appreciate the idiots in charge of Ameriquest, etc. Oh yeah, he'll do retirement well, I am sure.

CM,

You are wrong about me. I don't want to see anybody lose their home nor do I want to see a financial institution lose their business ( I have a few friends that have lost their jobs due to this). However, if the gov't bails people out, there will be no lessons learned.

Do you think your buddies from the IC/CN should have the gov't bail them out so they can keep living in their McMansions?

snitramc:

The federal government doesn't have control over all lending. The feds regulate certain lenders. Many, if not most of the lenders involved in this debacle were neither banks nor S&Ls - and structured their businesses to avoid federal regulation. Now see if your point sticks as well.

Second, Duh'bya isn't making noises like he plans to bail out predatory lenders. All his noise is aimed at helping borrowers who are creditworthy. So, your accusations about socialism and propping up big business don't wash.

C Morris:

You said:

"Terry, John D, Paulo, others, all were doing the victory dance on the financial graves of the borrowers, as I recall."

That is what I was talking about when I said they were blaming the borrowers for their own foolishness. They were all saying, to a person, that those borrowers should not be bailed out because they made bad choices in taking on loans they should have known they couldn't afford. That is blaming them for their own folly, but not for the trouble now in the market.

The trouble now in the market was caused because the lenders made bad loans for amounts far in excess of the value of the homes. Now the borrowers can't even recoup their losses through foreclosure. That results in more homes back on the market at cheaper prices. That, in turn, drives down the cost of housing; which, in turn, makes it difficult for existing homeowners to refinance their home loans for the amounts they have outstanding; which, in turn, leads to more foreclosures, and more houses on the market at even cheaper prices; and the downward spiral goes on and on.

THAT's the problem.

Friendly note to all Swampies;

Do a net worth statement twice a year.
Keep it simple.

Add up all assets, then subtract all liabilities.

Then, calculate a 'debt ratio' figure.

It's just a percentage of assets consumed by debt.

Divide liabilites by assets then multiply by 100 to arrive at a readable percentage.

Terry, John W.,
Acknowledged.

Distrust and Verify:

In answer to all three of your posts (here and in the other thread):

1. Do not confuse me with a neo-con or other Bush loyalist. I do not agree with either his voodoo economic or financial policies, much less his foreign adventurism. None of these are good conservative policies (because Duh’bya really isn’t a conservative).

I am especially steamed at his policy of deficit spending to avoid taxation. A conservative policy would be to spend within one’s means – that is, to spend no more than one takes in taxes. I believe (and have always believed) that borrowing and spending (or, more accurately, spending and then borrowing to cover it) is irresponsible in the extreme – because it just guarantees a larger tax bill later, and it compromises our ability to set foreign policy. Any cretin – except Bush, I suppose – would have known this.

Furthermore, deficit spending isn’t bad just because the Fed is engaged in inflationary monetary policies. Deficit spending is bad all of the time under all conditions. Under all conditions it makes taxes higher because taxpayers will inevitably have to pay for the debt service too. It is shameful since it is only done to maintain the illusion of lower taxation.

I do not believe it is improper for the government to tax and spend on what it is supposed to accomplish as a government. Where I and other conservatives disagree with the Democrats is on the definition of what the government is “supposed” to accomplish and, sometimes, how best to accomplish what is needed. I also believe that more must be done to make government more responsible and accountable for what the tax dollars it collects because, right now, it is so irresponsible that paying taxes is like shoveling fleas.

In other words, you’ll have to sell that bridge to someone else.

2. Your claim about Clinton essentially comes down to the point that Clinton deserves credit for not abusing the economy. I agree with this only to a point. I would rather expect that any competent administrator shouldn’t screw things up. Thus, Clinton’s failure to screw up the economy isn’t a plus in his scorecard; it is a neutral mark. It is Duh’bya who gets the negative mark on his scorecard for failing to do likewise.

I also agree that Clinton was wise not to base his taxation policies on “voodoo” economics (read supply side economics) which benefit the rich more than anyone. That, again, is a neutral on Clinton’s scorecard, and a negative mark against Duh’bya – because doing so is also screwing up. Even Reagan dumped supply side economics when he saw that it wasn’t working. [Reagan also raised taxes several years in a row when he saw that it was prudent.]

That Clinton was better than Duh’bya on a number of points related to government finance and the economy doesn’t mean that he was great, or deserved a lot of credit for what good was going on in the economy. Clinton DID push NAFTA through. That one cost us hundreds of thousands of jobs and benefited only the rich. Corporate welfare didn’t suffer much under his administration either. I don’t consider that a plus; that’s another negative mark for him. If corporate America expects everyone else to live by Darwinian standards, then they should too. I Give Clinton a negative mark for all of his efforts at wealth redistribution – for the wealthy or the poor – because it harmed the economy more than it helped (that’s especially true because they never spent any of that money on job training and placement programs).

You also suggest that Clinton did us and the economy a big favor by not “overheating” it by taking us into a foreign war. But, he did. He got us into Serbia and Kosovo and kept us in Somalia. True, these endeavors probably didn’t “overheat” the economy too much.

Still, this again is a neutral for Clinton and a negative for Duh’bya. Before Reagan sent troops to Grenada (which wasn’t an economy-draining endeavor), one had to go back to 1896 for the last time a Republican President got us into an international shooting war. Realpolitik – i.e., the policy of maintaining and protecting a specific and limited number of American interests abroad, but otherwise staying out of foreign conflicts – was the standard policy of Republican administrations before Duh’bya showed up with his perverted Wilsonian notion of exporting democracy by force.

I return, then to my original point, that the economy did as well less because of Bill Clinton and more because of its own energy. Telling us that more jobs were created on Bill Clinton’s watch (or more than on Duh’bya’s watch) fails to acknowledge that the market players were solely responsible for job creation. In Bill Clinton’s case, it also fails to acknowledge all the jobs that were lost due to NAFTA. Saying the economy expanded during Clinton’s watch – suggesting he was responsible for the upturn – fails to acknowledge that businesses were largely responsible for laying out money for expanding or improving their own businesses. Bill Clinton wasn’t bad, and he didn’t screw it up as much, but I believe he gets way too much credit and the market gets way too little.

3. I agree with your theory of gridlock. But that is only because I believe the federal government would do us all a big favor if they tried to do less, and then do those fewer tasks better. The gridlock under Clinton only proves this.

Trying to help the average Joe with a big, wasteful, un-accounted for, clunky government has gotten us into trouble. For example, we still haven’t figured out how to fix Social Security because nobody wants to meddle with this sacred cow. Any attempts to do so are rebuffed as harmful. But we had better do something, or lots of baby boomers and GenX folks are going to get cheated out of their pitiful retirement benefits because of governmental abuse and mismanagement. It’s the stuff like this that puts me off of the federal government, and makes me think that private or local or state government solutions are generally better (or can’t be worse).

CM,

To the lefties in the room, you might as well be speaking ancient Greek to them.

The underlying issue here is the ignorance of the American public when it comes to economics and finance and that falls back to our pathetic public education system.

Posted by: Terry | September 1, 2007 11:26 AM

Should teachers spend more time on economics or ethics?

"Should teachers spend more time on economics or ethics?"

Posted by: Catherine | September 3, 2007 6:49 AM

Is that a trick question?

Think.

John W,

A few points on your thoughtful post. First, I know you're not a NeoCon and more in line with old school conservatives. And you truly are not a partisan, showing readiness to break from the many disastrous policies of this Administration (you did vote for GWB in '04, right?)

You seemed to take from my post that the only reason Clinton was good was because Bush is worse, which was not my intention. We clearly do not agree on the Clinton legacy and that's fine. But I want to make clear, Mr. Clinton's record was a success, of course even more so when compared with his predecessor.

If your theory is correct that president's need to simply set the framework and then get out of the way, Clinton set a wiser framework and got out of the way. You can spin that as neutral, but in light of how often presidents fail at that, I'm going to consider it a pure positive.

And that, in essence, is our disagreement on that subject.

You brought up Grenada which I found interesting. I was a little too young to remember that scenario at the time, but I do think it should be noted that President Reagan invaded Grenada the VERY DAY after pulling out of Lebanon after the barracks bombings. It was the original bait-and-switch, and should have served as inspiration to the Al Qaeda= Saddam crowd. Shameful, but proof that nothing rallies local political support like a ginned up foreign conflict.

We are all sheep.

Cath,

Ethics should be woven into classes and is taught more by action than in "book" learning. It can be taught in every-day life. Too bad more people are more concerned about taking shoertcuts to get ahead than in doing things right.

Economics - a full year should be mandatory. High school kids should know how compound interest works, balance a checkbook, understand how credit cards works, how a loan amortization schedule works, be able to complete a simple IRS form, understand our real estate taxes - in other words how the biggest bills they will pay in their lives.

Terry,

"The Supply side economics has been tried three times by JFK, Reagan and Bush 43, three times the economy has boomed."

JFK cut the top marginal rate from nearly 90% to 77% which is pretty hard to argue with. Nonetheless, its also pretty hard to argue that the economy did not boom in the period before that (and JFK took over after 8 years of a Republican Administration) when the top rate ranged from 82-92%. Regardless of cause and effect, the higher tax rates over the last 50 years have coincided with periods of higher growth.
http://www.truthandpolitics.org/top-rates.php

Terry, quite simply, the economy performed better between 1992 and 2000 than it did between 1980-1988 or 2001-2007. So, supply-side economics did not outperform progressive economics. You can spin that any way you want.

The progressive economy also REVERSED the exponential debt trajectory that this nation's treasury has been on since Reagan first started with his tax cuts, and that it is now on again under the GOP.

And as for this "booming economy," the one built on a foundation of $2.5-3 trillion of debt to be passed on to MY generation, I'd be willing to bet if a Democratic president borrowed that much cash, the economy would be humming at least as well as it is now.

Of course, with an expected nationwide decline in home prices for the first time in 60 years, I wouldn't argue that this economy is "booming," but as we know Terry much prefers to see the world the way he wishes it is, rather than the way evidence suggests that it is.

"Look at the extremes, which economy would perform better, one with a max tax rate of 10% or one qith a tax rate of 90%. The only way you will say 90% is if you believe the gov't spends its citizens money better than its citizens."

Terry, this is a red herring. NO ONE is arguing whether the rate should be 10% or 90% but, to play your rhetorical game, 10% would clearly be better. But does that mean that 20-30% is better than 35-45%, which is essentially the argument in this country? I know you think it does, but evidence overwhelmingly suggests that a top rate of 35-45% has few if any ill effects, and has the added benefit of PAYING FOR WHAT WE ARE DOING NOW.

I'm so pleased that you and your ilk think "deficits don't matter." How about this Terry, do you have kids? Is it "responsible" of you to support grand expensive adventuring like the war in Iraq while still waving the "no new taxes" banner. It is simply shamefully irresponsible to charge today's government to tomorrow's generation. But since you'll be gone by then, I guess who cares, right?

"Therefore, when it comes "expliaing the ways of the world"

If you are going to "quote" things that I say, especially within the same post, please take the time to spell it and write it the way I wrote it.

DV,

Are you sure you are not unemployed Tony?

Remember the 90's had the technology boom - 2nd greatest economic engine in the 20th century only to the automobile.

Don't forget, the Chicago Bulls won three titles while Bill CLinton was in office.

The debt being passsed on tou generation is call social security - sorry you won't see any of it, but my generation thanks you for your contribution.

As far as the spending in Iraq, remember the spending in the 80's (forgot, you weren't there)on the cold war and fall of the Soviet Union. I'll spend money now, short-term expenditures, to assure the freedom of my children's generation.

20-30% is better than 35% - 45%. I guess you do like George Bush's tax ciuts since the highest incremnetal income tax rate is 35%. Jsut so you know, Tax Freedom day this year was April 30. This is the day the avg American family is done paying taxes. As long as you think the AVERAGE American family should pay about 1/3 of their income in taxes, I guess it must be fair.

If you are still young enough to be in school, take an econ class. If you have taken an econ class - go seek a refund.

As far as my mispelling, in this case bad typing, I was busy taking econ courses not typing class.

Distrust and Verify:

No, I didn't vote for GWB in 2004. 2000 was enough, and that was once too many. I saw the 2004 presidential election as a battle between turkeys and refused to participate. I limited my voting in 2004 to local, state and congressional contests.

That, I believe, underscores our difference in perspectives. In my view, presidential contests in the last few decades have been waged between candidates who turn out to be anywhere from little better than mediocre to downright bad Presidents. Our expectations have been so lowered that we view a President as "good" simply because he hasn't screwed everything up. There's something fundamentally wrong with a political system that keeps pushing such candidates into our faces.

Bill Clinton wasn't a bad president. In fact, he was substantially more fiscally conservative than Duh'bya. That's a rather amazing reversal of the perception of Democrats as being "tax and spend artists." And, honestly, I appreciate that kind of fiscal conservatism regardless of party affiliation.

And, no, I did not intend to suggest that a President simply needs to set a framework and get out of the way. A bad president does such a thing. A president is supposed to be a leader who can make careful decisions in tough or unanticipated situations. It’s only a bad president who would let his framework govern in his stead while he watched a good or mediocre policy morph into a bad one and then do nothing about it.

You want to know who a good president would be right now? I’ll tell you. A good President would be someone who had the nerve to tell everyone that: 1) we must pay more in taxes to pay down the more than 8 trillion in debt we have, 2) we will have to tighten our belts for a while when it comes to government gimmes; 3) government has to be more responsible and held accountable for spending, losing and stealing our tax dollars; 4) we have to solve the lapses in the way we deal with immigration; and 5) we must quickly become free from dependence on foreign oil. A good President might also try to convince people that conservation and fighting pollution are conservative causes too. A good conservative President might also advocate letting the States do more of the governing in this country. Anyone who does anything else is not realistically addressing the problems we face.

P.S. I don’t bleat for anyone.

John W,

I'll take 4 out of 5. Raising taxes will not solve our debt issue since it would slow the economy and thus lessen gov't revenues. Perform the last four items, the debt could be eliminated in a generation.

Beside $8 trillion debt is not that big when you have a $12 trillion economy.

Ahhhhhhhhhh..AMERICA. This is what's all about.