Obama May Hold 'Kenyan, Anti-Colonial' Worldview

[SS-18 ICBM]

What sort of opposite definition of "growth" are you using here?

What he probably meant to say was that the policies that reduced job losses started during Bush's term. I doubt the economy responds very quickly to government intervention.

 

[Ziggy Stardust]

What he probably meant to say was that the policies that reduced job losses started during Bush's term. I doubt the economy responds very quickly to government intervention.

Policies like the bailouts?

 

[Traitorfish]

Which would not have been necessary if Republicans hadn't brought global capitalism to its knees.

When we're talking about the Republicans and capitalism, I'm not sure who's on who's knees.

 

[SS-18 ICBM]

Policies like the bailouts?

Possibly, yes.

 

[El_Machinae]

Which would not have been necessary if Republicans hadn't brought global capitalism to its knees.

The more I learn about the financial crisis, the more I realise that any partisan interpretation of 'cause' is very likely egregiously wrong. The politicians had very little to do with it, because the crisis was caused despite policy, not due to policy.

There was very little that the Republicans actively 'did' that contributed to the mess: and that's even including Bush's overspending, Greenspan's housing bubble, and the lack of regulation (because we know that putting new - proper - regulations is hard).

Everyone knew there was a housing bubble going on, but the problem was that all the banks were acting like there wasn't one. Not even cooling a housing bubble can help prevent a crisis when enough banks are pretending there isn't a housing bubble. It looks like they literally couldn't handle any retraction of housing prices

 

[Formaldehyde]

When you start allowing people to purchase property with no down payment, mediocre salaries, and dubious credit history to try to help shore up a weak economy that is exactly what happens. And I think who to blame for allowing it to occur is pretty clear. These safeguards used to be in place, but they were deliberately removed so the speculators could make yet another fortune.

And the same holds true for banks and insurance companies. The financial activities of these institutions used to be highly regulated to assure that they would remain financially viable under any circumstances. It is no suprise at all to me what eventually happened as a result.

These were quite deliberate acts committed by people who are still being elected into the House and the Senate even today. And many of them even have the temerity to whine about how expensive it is to try to fix the mess they helped create.

 

[warpus]

What he probably meant to say was that the policies that reduced job losses started during Bush's term. I doubt the economy responds very quickly to government intervention.

Quit putting all those intelligent words in his mouth

 

[Arakhor]

Unbelievably, not everything Christian in the USA is far-right. I occasionally leaf through the CS Monitor when I want local US news and I'm the last person to read far-right screed

 

[Cutlass]

The more I learn about the financial crisis, the more I realise that any partisan interpretation of 'cause' is very likely egregiously wrong. The politicians had very little to do with it, because the crisis was caused despite policy, not due to policy.

There was very little that the Republicans actively 'did' that contributed to the mess: and that's even including Bush's overspending, Greenspan's housing bubble, and the lack of regulation (because we know that putting new - proper - regulations is hard).

Everyone knew there was a housing bubble going on, but the problem was that all the banks were acting like there wasn't one. Not even cooling a housing bubble can help prevent a crisis when enough banks are pretending there isn't a housing bubble. It looks like they literally couldn't handle any retraction of housing prices

As I've said elsewhere, and just in recent days, the foundations of this mess go back decades. And does include a number of Democrats as well as Republicans.

But I think that you are basically wrong in saying that the politicians had very little to do with it. And understanding that is both about understanding what happened with the crisis, and why it happened.

You are focusing too much on the bubble, and not enough on what was going on behind the bubble. Our current long term problems were not caused by the housing bubble. And neither was the 2008 collapse. But rather, by the fuel that caused the bubble. Bubbles have come and gone many times. And they are painful. But not like this. What made this different is the credit default swaps, the derivatives, the incentive to fraud at all levels, the fraudulent risk ratings, the outstanding complexity that was deliberately built into the system.

And all of those things are regulatable, and had been regulated in the past.

Yes, regulation is hard. But you have to be willing to do it. And Bush and Greenspan (the 2 people who, while not by a longshot entirely responsible, but rather the 2 that bear the greatest portion of the blame) both made a solid point that they would not regulate.

 

[El_Machinae]

We're agreeing, but my opinion is that it would have been incredibly hard to begin to "properly" regulate those specific instruments after they were created, and that bankers would avoid any achievable regulations in their efforts to create a deleterious endgame. The partisan attacks are just not appropriate, because I don't think that any combination of Congress/Executive really could have succeeded. Wall street was just too devoted to destabilising the entire system in the pursuit of playing hot potato with risk (for profit).

This was why the housing bubble was actually so important: for some reason, too much of Wall Street was arranged around the idea that housing prices would continue to rise (WTH?). What's been realised is that the tools available to 'normal governance' were quite insufficient. We can ask government to try to deflate a bubble gently, but that wouldn't have worked (or ... it didn't work, whatever) due to the fact that it was a house of cards.

In sum, I don't think that the government could have headed this one off. It's just not smart enough, and the partisan aspect of the criticism is ... well ... wrong.

 

[Formaldehyde]

The economy didn't create the conditions. The fed did by artificially lowering interest rates to absurd levels to try to artifically prop up the economy. They then took no steps to police the industry when it was even obvious there was grave difficulty.

But you do have a point. Both Republicans and Democrats are to blame. However, far more Republicans belong in that list than Democrats, and it did occur during a Republican presidency when they had control of both legislatures.

 

[El_Machinae]

I think that overemphasising interest rates is a good way of missing out on what happened. As far as I can tell, the house-of-cards could have been built with nearly any (reasonable) interest rate. While the low rate helped fuel the bubble, it didn't create the asset imbalance in bank assets.

The low interest rates were bad policy, yes, and many people recognised that. But the crisis was much, much worse than that, and was much more deeply rooted. It wasn't even over-purchasing of houses that caused the problem (though the current overvaluation of homes continues to be part of the mess, it's a part of the mess that was can use government efforts to mitigate)

 

[Formaldehyde]

I think it is really the completely absurd notion that if you leave greedy and corrupt people to their own devices that nothing bad will happen as a result, which was essentially Greenspan's excuse. And no, I don't think it would have happened if interest rates were at a reasonable level. It certainly never happened before, but there were also laws in effect which regulated the industry so those sorts of abuses of the system couldn't happen. It took the willful acts of hundreds of people who are supposed to know better. I'm sure most of them are far richer now than they were before, unless they got caught up in their own greed and didn't get out soon enough.

 

[Traitorfish]

The more I learn about the financial crisis, the more I realise that any partisan interpretation of 'cause' is very likely egregiously wrong.

Not least because the whole thing is the result of free market capitalism going arse over tit- as it is prone to do- so neither of two parties as deeply in bed with the system as either of the mainstream US ones can be held entirely innocent.

I think it is really the completely absurd notion that if you leave greedy and corrupt people to their own devices that nothing bad will happen as a result, which was essentially Greenspan's excuse.

What was it Keynes said? "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." Seems appropriate.

 

[Cutlass]

We're agreeing, but my opinion is that it would have been incredibly hard to begin to "properly" regulate those specific instruments after they were created, and that bankers would avoid any achievable regulations in their efforts to create a deleterious endgame. The partisan attacks are just not appropriate, because I don't think that any combination of Congress/Executive really could have succeeded. Wall street was just too devoted to destabilising the entire system in the pursuit of playing hot potato with risk (for profit).

This was why the housing bubble was actually so important: for some reason, too much of Wall Street was arranged around the idea that housing prices would continue to rise (WTH?). What's been realised is that the tools available to 'normal governance' were quite insufficient. We can ask government to try to deflate a bubble gently, but that wouldn't have worked (or ... it didn't work, whatever) due to the fact that it was a house of cards.

In sum, I don't think that the government could have headed this one off. It's just not smart enough, and the partisan aspect of the criticism is ... well ... wrong.

But this did not happen in a vacuum, but rather in a climate of deregulation. That is, the reductions in regulations that already existed, and not solely in the failure to make new regulations.

Gaming the existing regulatory order and evasion of regulations was certainly a major factor. But how much easier is it to do that under an administration and a Fed that has made it plain that they have no interest or willingness to even enforce existing rules, not to mention not make new ones?

It is not simply the failure to make new regulations, it was the push to remove old one and the deliberate act to prevent new ones that matters. The Gramm–Leach–Bliley Act, created by 3 prominent Republicans, and that Clinton was fool enough to sign, was very large part of the cause of the ultimate crisis.

Criticism

President Barack Obama believes that the Act directly helped cause the 2007 subprime mortgage financial crisis.[23] Economists Robert Ekelund and Mark Thornton have also criticized the Act as contributing to the crisis. They state that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, but under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly."[24]

Nobel Prize-winning economist Paul Krugman has called Senator Phil Gramm "the father of the financial crisis" due to his sponsorship of the Act.[25] Nobel Prize-winning economist Joseph Stiglitz has also argued that the Act helped to create the crisis.[26] An article in The Nation has made the same argument.[27]

Contrary to Phil Gramm's claim that "GLB didn't deregulate anything" (see Defense), the GLB Act that he co-authored explicitly exempted security-based swap agreements (a derivative financial product based on another security's value or performance) from regulation by the SEC by amending the Securities Act of 1933, Section 2A, and similarly the Securities Exchange Act of 1934, Section 3A, to read, in part:[28] [29]

1. The definition of "security" in section 2(a)(1) does not include any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act [15 USCS § 78c note]).
2. The Commission is prohibited from registering, or requiring, recommending, or suggesting, the registration under this title of any security-based swap agreement[.] ...
3. The Commission is prohibited from ... promulgating, interpreting, or enforcing rules; or ... issuing orders of general applicability; ... as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement[.]

On April 29, 2010, a conference entitled "Gramm-Leach-Bliley at Ten: Financial Reform or Fuel for the Crisis?" was held at Suffolk University Law School. A panel of legal scholars and economists discussed the first ten years of the Gramm–Leach–Bliley Act and debated its role in the Financial crisis of 2007–2010.[30]

And who created and pushed this culture of deregulation in the first place? Who has been, for decades now, touting the value of getting the government off the backs of business? Isn't there a culpability to the people who have spent their careers trying to create the environment in which all this took place?

But further, what turned a problem into a crisis was really the fraud which overcame the system in really only the years Bush was in office and refusing to regulate.

Yes, previous administrations pushed too hard on home ownership, but Bush increased that. Yes, previous administrations appointed Greenspan, but Bush did it again. Yes, previous administrations had low taxes, but Bush reduced them further. But it was Bush that made it clear that existing regulations would not be enforced. And in doing so, opened the door wide to unchecked fraud at every level.

So while all of the factors were in place before Bush, it was Bush who maximized them, and then opened the door to the widespread fraud that really tipped the balance between a problem and a crisis.

And yes, the Democrats who participated in this bear responsibility as well. Particularly Bill Clinton. But Clinton and other Democrats were moved to the right, to deregulation, to the "pro-business" stance, by Republicans driving hard on that issue year after year, and succeeding at the polls doing so. So to the extent that many Democrats bought into the koolaid, it was Republicans pushing it.

So I honestly do not think that you can legitimately make the claim that Republicans and Bush were not critical factors in the overall cause of the situation.

***

Further, it's actually a bit off topic. My argument with storical was in response to his claims that the deficits and unemployment currently were all Obama's fault. And my responses were aimed at that. At the fact that Obama hasn't really got all that much to do with the total deficit situation.

So if I'm guilty of anything, it's using a shorthand in response to a partisan attack. But my shorthand, while incomplete, is not, I beleive, in this situation, unjustified.

The economy didn't create the conditions. The fed did by artificially lowering interest rates to absurd levels to try to artifically prop up the economy. They then took no steps to police the industry when it was even obvious there was grave difficulty.

But you do have a point. Both Republicans and Democrats are to blame. However, far more Republicans belong in that list than Democrats, and it did occur during a Republican presidency when they had control of both legislatures.

To be fair, and I don't know with certainty how to deal with this, when there is no inflation, how do you justify raising interest rates? Monetary policy is a crap tool to use to deflate a bubble. But if you do do so, it isn't the bubble that will be deflated, but rather the rest of the economy. So to create a recession to deflate a bubble, and probably fail to deflate the bubble while making many innocent people suffer the recession, is hard to justify.

 

[Cheezy the Wiz]

That's funny because being "the person he needed to be in order to achieve the position he needed to achieve" is exactly what Gingrich did in his career.

This was my immediate reaction upon reading this. Pot calling the kettle black.