"Credit Crunch" -- Who's to blame?

Will history remember that Bush tried to fix it in 2003?

Via Jack Of All Trades blog, by Master Of None.

From the N.Y. Times Sept 2003:

“The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. ”

But, Democrats didn’t see the need:

‘’These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,'’ said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ‘’The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing. Representative Melvin L. Watt, Democrat of North Carolina, agreed. ‘’ ”

Anyone who asked for regulation that kept banks from lending to people who couldn't afford houses were accused (by Democrats -- look up the history of the "Community Reinvestment Act") of racism. As if a computer and a credit history could tell skin color or country of origin. Thus, these bad bets infected other good loans through "bundling" in an effort to limit risk.

This crisis has been brewing since the Carter administration, and was propelled by loosening reigns during the Clinton years.

The Democrats, for the most part ARE to blame for this mess.

BUT, why would anybody believe The President when he crys wolf? He has been wrong on practically everything else.

One last note, from poster "Paul" at Reason Mag.Blog:

"The only 'credit crunch' that exists- and even that is being generous to the 'credit crunchers' is interbank lending. Anyone with decent credit can still get a loan, just like you could yesterday, a month ago, two years ago. Banks are still lending-- and some bank managers have gone to the media saying as much. However, they have been drowned out by the din of "credit crunch!". In fact, I'm thinking that the words "Credit Crunch!" can now finally replace "9-11!".

There has been a slow-down in interbank lending-- tightening of terms, shortening of timelines, etc. This, however is probably a necessary correction, and allows the market to adjust to new lending mechanisms. The fact that the market is acting cautiously is precisely why the market is working like a well-oiled clock."

"... We should all look especially askance at the hurry-up offense coming out of the White House, the Congress, and the media. Bush is desperate for a legacy that doesn't involve quagmires and broken bodies; Congress is trying to give voters some goodies; both McCain and Obama want to show that they can lead, dammit, and please all the people all the time. And the press is desperate for copy and for change."

And so, we "mortgage" the future. Or, in reality, which DC doesn't deal in, we flush it....

Italy, circa: 1933....

(Update: Well, it went down BIG. Wonder what TPTBs will try next?)

Trying to handle the crisis, the Fascist government nationalized the holdings of large banks which had accrued significant industrial securities.

The government also issued new securities to provide a source of credit for the banks and began enlisting the help of various cartels that had been created by Italian business leaders since 1922.

The government offered recognition and support to these organizations in exchange for promises that they would manipulate prices in accordance with government priorities.

A number of mixed entities were formed, called instituti or enti nazionali, whose purpose it was to bring together representatives of the government and of the major businesses.

These representatives discussed economic policy and manipulated prices and wages so as to satisfy both the wishes of the government and the wishes of business.

The government considered this arrangement to be a success, and Italian Fascists soon began to pride themselves on this outcome, saying they had survived the Great Depression without infringing on private property.

Banking also came under extraordinary control. As Italy’s industrial and banking system sank under the weight of depression and regulation, and as unemployment rose, the government set up public works programs and took control over decisions about building and expanding factories.

The government created the Istituto Mobiliare in 1931 to control credit, and the IRI later acquired all shares held by banks in industrial, agricultural, and real estate enterprises.

Oh NO!!!! "Bush Confident Bailout Will Work"....

Talk about pounding nails in a coffin and spelling out doom.

This man has been so wrong about so many things, that this confidence spells the death-knell for something that I am sure won't work anyway....

"Ultimately, all the bad banks out there that are insolvent will not be saved. They will be taken under in one form or another. This "bailout" is really nothing more than a stalling tactic that puts the day of reckoning for some banks to the future by 1-24 months."

On this connected note: Bush has not only been wrong about most things, he has been flat caught-out on so many lies that the only credibility he has is with people who's world-life view rests on their ends justifying his means.

Dodd Screws the Taxpayers Again....

From The Volokh Conspiracy:

From Crony Capitalism to Crony Community Organizing: "Profit” Loophole in Bailout Bill Doesn’t Require Net Profits.

Much of the blogosphere is up in arms because of the provision in Senator Dodd’s financial bailout bill that might funnel profits from the bailout plan to ACORN Housing (related to the disreputable activist group ACORN), and other more reputable service organizations.

I have read Dodd’s proposed statute and in some respects, it is far worse than has been reported. Senator Dodd has placed a loophole in the bill that is explicitly designed to siphon off tens or hundreds of billions of dollars to the Housing Trust Fund and the Capital Magnet Fund even if there are no net profits in the $700 billion venture.

Here is the provision that has already been widely noted:

d) TRANSFER OF A PERCENTAGE OF PROFITS.-
(1) DEPOSITS.-Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).
(2) USE OF DEPOSITS.-Of the amount referred to in paragraph (1)-
(A) 65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and
(B) 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569).
(3) REMAINDER DEPOSITED IN THE TREASURY.-All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.

The biggest problem here is that the 20% is not taken from net profits, but rather from any profit in the sale of each and every individual troubled asset.

For example, assume that the new Agency buys three troubled assets for $1 million each. One is sold for $2 million, while the other two are sold for $300,000. Thus, $3 million in investments are sold for $2.6 million, representing a $400,000 loss.

But Senator Dodd’s bill does not provide for losses to offset gains: “Not less than 20 percent of any profit realized on the sale of each troubled asset” must be given to the two housing funds, so $200,000 of the $1 million profit on the one asset that made a profit must be siphoned off to the housing funds, despite the $400,000 net loss on the three deals taken together.

As an analogy, imagine a regular trader of stocks who takes lots of hedged positions and had net losses of 25% this year, but couldn’t offset his gains with his losses, instead having to pay 15% income taxes only on his gains.

How much might be siphoned off under the Dodd bill? It all depends on how long the new credit Agency is in force, how often it turns over its portfolio, and how variable its returns are.

If the agency is in force for 4 years and turns over its portfolio every two months, then it would generate about $15 trillion in sales overall (650 billion x 6 x 4 = 15.6 trillion).
Let’s assume that $7 trillion of sales generate a profit of $2 trillion and $8 trillion of sales generate a loss of $2.1 trillion, leaving a net loss of about $100 billion.

With a net loss, one might think that nothing would be funneled to the housing funds for service organizations, but that is not what the statute says or means. One looks only at the sales generating gains to determine the size of the payments to the housing funds. With $2 trillion in profits and $2.1 trillion in losses, the housing funds nonetheless get $400 billion dollars in “profits.” (This is over 40% of a typical year’s US total federal income tax receipts.) And that is the result if only 20% of "profits" are skimmed; the statute puts no upper limit on the skimming, so long as they come from profits (not net profits). Theoretically, the new Agency could potentially siphon off $2 trillion to the two housing funds, more than its $700 billion portfolio limit.

400 billion dollars may be a high estimate for the housing fund payments, but if they turn out to be only a tenth as large ($40 billion), they would still be huge. To reduce this massive skimming required by the Dodd statute, the new government Agency would have the incentive to engage in fewer transactions and do less to create a public market for troubled assets, thus significantly undercutting the chance that the bailout will work.

I was mildly in favor of the bailout until I read Dodd's proposed statute. The way that the statute is drafted is so tricky and its definition of profit is so unsophisticated and nonsensical that the statute smells more of graft than of an honest attempt to solve the financial crisis. We are moving from failed "crony capitalism" to failed "crony community organizing."
Other posts will deal with other provisions in the Dodd bill and whether ACORN Housing will actually apply for any funding.

Incentive Problems in the Dodd Bailout Bill.

Chasing Bad Money....

Talk about chasing a bet and throwing bad money after bad....

What caused it, you ask? Well, HERE you go.

The Dems want to add 56 Billion in add-ons to the Bailout, part of which is to "save" the US car industry.

Our whole economy is an empty movie set facade propped up by Monopoly money. We just can't be competitive, can we?

From "Capitalist Pig": You know how you can avoid systemic meltdown? Let the market break up into less centralised centres of organisation and capital as it wants to. The message from the free market is clear - it demands a more decentralised structure that can adapt and is more resilient to the rapid changes of the modern economy, where only parts suffer when a crisis/build up of mistakes hit and the whole system is never in threat. The idea of “Too big to fail” (bailouts and more regulations that concetrate power) would be turned into “Too big not to fail”, if we were really to heed the message of Mr Market.

"We Have Met the Enemy". Ron Paul on the "Bail-out"....

... and he is us.

I'm posting this in entirety. Sanity will not prevail, but the I Told You So needs to be on record.

Ron Paul: This man deserves to be President, BUT we get what we deserve; an ineffectual McCrazy or a drowning Obamamania.

So, without further ado: Congressman RON PAUL.

Many Americans today are asking themselves how the economy got to be in such a bad spot.

For years they thought the economy was booming, growth was up, job numbers and productivity were increasing. Yet now we find ourselves in what is shaping up to be one of the most severe economic downturns since the Great Depression.

Unfortunately, the government's preferred solution to the crisis is the very thing that got us into this mess in the first place: government intervention.

Ever since the 1930s, the federal government has involved itself deeply in housing policy and developed numerous programs to encourage homebuilding and homeownership.

Government-sponsored enterprises Fannie Mae and Freddie Mac were able to obtain a monopoly position in the mortgage market, especially the mortgage-backed securities market, because of the advantages bestowed upon them by the federal government.Laws passed by Congress such as the Community Reinvestment Act required banks to make loans to previously underserved segments of their communities, thus forcing banks to lend to people who normally would be rejected as bad credit risks.

These governmental measures, combined with the Federal Reserve's loose monetary policy, led to an unsustainable housing boom. The key measure by which the Fed caused this boom was through the manipulation of interest rates, and the open market operations that accompany this lowering.

When interest rates are lowered to below what the market rate would normally be, as the Federal Reserve has done numerous times throughout this decade, it becomes much cheaper to borrow money. Longer-term and more capital-intensive projects, projects that would be unprofitable at a high interest rate, suddenly become profitable.

Because the boom comes about from an increase in the supply of money and not from demand from consumers, the result is malinvestment, a misallocation of resources into sectors in which there is insufficient demand.

In this case, this manifested itself in overbuilding in real estate. When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their money as possible, even if it means lowering prices drastically.

This lowering of prices brings the economy back into balance, equalizing supply and demand. This economic adjustment means, however that there are some winners -- in this case, those who can again find affordable housing without the need for creative mortgage products, and some losers -- builders and other sectors connected to real estate that suffer setbacks.

The government doesn't like this, however, and undertakes measures to keep prices artificially inflated. This was why the Great Depression was as long and drawn out in this country as it was.

I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality. The bailout of Fannie and Freddie, the purchase of AIG, and the latest multi-hundred billion dollar Treasury scheme all have one thing in common: They seek to prevent the liquidation of bad debt and worthless assets at market prices, and instead try to prop up those markets and keep those assets trading at prices far in excess of what any buyer would be willing to pay.

Additionally, the government's actions encourage moral hazard of the worst sort. Now that the precedent has been set, the likelihood of financial institutions to engage in riskier investment schemes is increased, because they now know that an investment position so overextended as to threaten the stability of the financial system will result in a government bailout and purchase of worthless, illiquid assets.

Using trillions of dollars of taxpayer money to purchase illusory short-term security, the government is actually ensuring even greater instability in the financial system in the long term.

The solution to the problem is to end government meddling in the market. Government intervention leads to distortions in the market, and government reacts to each distortion by enacting new laws and regulations, which create their own distortions, and so on ad infinitum.

It is time this process is put to an end. But the government cannot just sit back idly and let the bust occur. It must actively roll back stifling laws and regulations that allowed the boom to form in the first place.

The government must divorce itself of the albatross of Fannie and Freddie, balance and drastically decrease the size of the federal budget, and reduce onerous regulations on banks and credit unions that lead to structural rigidity in the financial sector.
Until the big-government apologists realize the error of their ways, and until vocal free-market advocates act in a manner which buttresses their rhetoric, I am afraid we are headed for a rough ride.

The End of Empire is in sight....

The beginning of the middle of the end of Empire.

Rome is Burning. Wright was right.

I feel like Hari Seldon.

"Of course our financial systems being based on confidence and greed are doomed to fail at some point. The only question is, is that time now?" - buckblog


Now to the 2nd, and connected, part of this post:

We are failing on two major fronts, A war that we will lose long-term, and financial system crisis. All empires fall.

I am an American. I love my country. I just don't love her Imperial Ways.

"... Standing in the pulpit of his church, Dr. Jeremiah Wright spoke of his country and what he said shocked almost everyone who saw it. Wright described America as a nation where racism and exploitation run rampant. He claimed that ours is a ruthless, corrupt regime that oppresses at home and terrorizes abroad. Sermonizing just five days after the terrorist attacks of 9/11, Jeremiah Wright said:

"We bombed Hiroshima, we bombed Nagasaki, and we nuked far more than the thousands in New York and The Pentagon, and we never batted an eye... and now we are indignant, because the stuff we have done overseas is now brought back into our own front yards. America's chickens are coming home to roost."

In a sermon two years later, Wright said that our "government lied in its founding documents and the government is still lying today." He then concluded:

"God damn America! -- that's in the Bible -- for killing innocent people! God damn America, for treating our citizens as less than human! God damn America as long as she tries to act like she is God, and she is supreme!"

He then said of Barak Obama:

"Politicians say what they say and do what they do based on electability, based on sound bites, based on polls. Preachers say what they say because they're pastors. . . . I do what pastors do; he does what politicians do."

..." (End of quote. Source: Reason Magazine Online.)

So you tell me, where is this man lying? I guarantee you, both McCain and Obama are lying to you. This man, whether he meant it or not and for questionable reasons or not, is saying the truth.

We excuse almost everything our government does by exclaiming "This is the BEST nation on earth." "We are so blessed to live here." Well here's some news: Manifest Destiny don't get it! And you people who believe in that "destiny" don't get it. And believe you me, best on earth doesn't mean anything to a perfect and righteous God.

Who can say from Rev. Wright's reasons or goals, but what he literally said was accurate.

Recommended Reading

Here is a list of some books that I, in my not-so-infinite wisdom, think that YOU NEED TO READ.

Currently:

Shadow World: Resurgent Russia, The Global New Left, and Radical Islam", by Robert Chandler

The Limits of Power - The End of American Exceptionalism, by Andrew Bacevich

The Latino Education Crisis: The Consequences of Failed Social Policies

http://www.theodore-roosevelt.com/trsorbonnespeech.html

For ALL Time:

Anything and everything by C.S. Lewis

The Bible, particularly the NIV.

David Foster Wallace: February 21, 1962 – September 12, 2008

David Foster Wallace.

We only get a couple of these guys every generation.

What a shame.


The best commencement speech ever.

There Has Got To Be A Mourning After....

A note on Buckeye (Ohio State, remember them?) football:

If I did not have a wonderful family and a fairly interesting life, I would be speaking to you from a very dark place.

So... from a very dark place (Just kidding. Kinda.), here are the things, in no particular order (Does it really matter?), the OSU coaching staff needs to do to remain a national laughing stock:

10- Recruit more Large, Slow Guys.
9- Play at least five MAC teams every year (And, yes, I can count, but this includes the ones already in the "Big-10".).
8- Outlaw face-painting, except when using Max Factor.
7- Make very sure that our “kids” are polite, well-mannered, and scared to death to make any mistakes. (This assures the proper resulting game-day behavior of tentative fear.)
6- Give the coach a $3 million raise every year, as long as we beat Michigan.
5- Stay in the Bubble of the Mid-west forever by making sure that the next scheduled coast road game is Rutgers, in 2015.
4- If a play develops “way-too-slow”, practice to make it slower. (See #1 -- Ah, the old "Power-O".)
3- As a coach, never show any emotion other than disappointment, despair and disgust. That way the kids get used to it.
2- Practice your after-game speech. Seed it with various cliche that cancel each other out. This will prepare you for your next job. You’ll need it to handle the economy. Yes, that’s it: your next hopeless gig is head of the Federal Reserve.
1- Make sure you network with Charlie Weiss and Rich Rodriguez. You are going to need their advice.

Addendum:
"I don't know that we did the best we could do, but I think we fought extremely well," Tressel said. "USC has got a fine team and is going to obviously be a team to be reckoned with."

Hey, how about "We got our asses kicked way back to nowhere". Or, "I am so ** pissed. I am angry and I will make sure this doesn't happen again, or you can ** dock my pay.

Sadly, that isn't going to happen, but instead, platitudes will abound....

Palin is getting to the Left....

I thought that most people have already made up their minds, but the Left's over-reactionary sexest condemnation of Palin may actually cost them votes....

“Ms.” Cintra Wilson wrote a piece in Salon Magazine that is the so sexist and misogynistic that I choose to not link it.

But, I feel the need to mention it as the most despicable piece of political clap-trap and pseudo-psychological bullshit that I have ever read.

She makes Ann Coulter and Michelle Malkin look "reasonable".

She wins the "worst-human-being award". And I think she has a good chance to hold onto it for awhile....

Here's an excellent fisking of Wilson's attack from Neo-Neocon.

Here's a link to Michelle Malkin's blog entries on the Charlie Gibson "interview".

Regarding Wilson, one poster said:
"... Why is it I get the feeling little Trig Palin, not "feminism," is really at the heart of this rant? After all, Palin has managed to "have it all" and STILL have a "special needs" child instead of making the "politically correct" decision of having an abortion."

The "Polls" have no idea....

As an honest-to-goodness Libertarian, I can and have to say this:

To quote a really awful 80’s song, most ‘pubs are “fooling yourselves”.

As it stands right now, with all the new voters, I am betting an actual Demo lead of somewhere around 10 pts overall and 4-5 points in several key swing-states.

My contention is that the only hope ‘pubs have is that the Dems do not get their voters to the polls…. Of course, as it is Pew, and if you are a 'pub Faithful-Foxer, then you can do your normal thing and discount the messenger, but if the research is right, then there has been a -10 and +4 shift in swing states.

Apart from this whole swing-state shift, the race card will play a big part in the Independent turn-out, and I think it will generate more in both rural and urban areas, with urban winning the numbers battle.

The Demo turnout will be the highest in (recent) history. As it gets closer, they will actually USE the polling for certain states (KY, WVa., Alabama, etc…) to pump up the base and get ‘em up and move 'em out, wooahhhh doggies.

One of my points is that Demos will use the perceived (and in some cases obviously real — see Dem voters in KY and WVa who will never vote for a black man and either stay home or cross over - more likely staying home) racial bias in some areas to pump up the vote in their strongholds and the swing states.

I think that the current polls are inaccurate, and the reality is that Dems lead by a fairly large margin in the popular vote that will result in a smaller but almost insurmountable edge in the swing states and thus the E.C.

Whether it is “swift-boating” or real fact-finding, ‘pubs need some startling revelation that prompts a huge opinion swing -- and I don't see McCrazy doing that well in the debates.

Free cigs and beer will NOT be needed this time (not that there won't be any along with the free bus rides to the polls).

Unless things change radically (like really, man…), Obamaniacs will win big -- and tha's a fac' Jack, unless all you're a-listenin' to is Faux “News” — something that bothers me, until I remember that McCrazy is almost a Democrat, whether or not you don’t believe it….

The Hypocrisy Shotgun Rant... Palin-Obama-McCain. Updated.

Given the Sarah Palin/Obama/Rev.Wright/McCain/Special Interest topics in 'da News, I opted for the easy out on this one, with a redux:


The Hypocrisy Shotgun Rant (Where I take inaccurate aim at Society in general. This was originally written in response to a book review of "In Defense of Hypocrisy", by Jeremy Lott.)


Cliché = truth. Glass houses, two wrongs don’t, actions speak louder, etc....

You can spin anything, if you can afford a good writer and have an audience (check out any Faux News program) that wants or needs to believe you.

Hypocrisy is word thrown about a lot, with all the descretion of landmine explosions and accuracy of North Korean missles.

Actions do speak louder, which is why anyone who wants to lecture should be held to example. However, sometimes well-meaning folk with high morals who should be talking about the issues are afraid to speak up, simply because of the intense scrutiny anyone undergoes who takes any kind of public stand. If they have ever made any missteps, have even the skinniest skeleton in the closet, they will be accused of hypocrisy. So, relativism reigns, Jerry Springer becomes the (lack of) national conscience, the Carlyle Group runs the nation, Ann Coulter becomes the voice of reason (ok, reaching a bit there) and passing lies off as political spin becomes the norm. Something to fight and die for. But maybe only after lookin' at the alternatives.

There’s always room for another accusation of personal "hypocrisy", but few people want to talk about "sin nature", which is really where it all starts. But if the only people who can call us to account are those that have no visible or obvious faults, then there won’t be any call. At least not until it’s too late.

Is it hypocrisy to hold your Pastor, Priest, President, Rabbi, Imam, or even your favorite “talking head” (or candidates for President and Vice President) to standards you don't apply to your own life? Definitely. Is it hypocrisy on their part to dare to occupy positions where they expound or direct or lead in word but possibly not in practice? You betcha. Gonna market a t-shirt that says “Hypocrisy = Human”. Should sell. Won’t.

Is tolerating hypocrisy (whether it’s “little white lies” or big, fat, global-effecting whoppers) just the same as endorsing the back room, good ol' boy, business as usual, need to know practices that mark practically every “necessary evil”, end justifying use of power and human rights violation in the history of man?

Seems to me that there’s a humanity-wide referendum in favor of white lies -- and whoppers. So we get what we voted for. Either way.

Do I care whether Rush is tumescent (Them thar little blue pills are evidently a dirtier secret than "momma's little yeller pills".) as well as "right”? Not really. But I do care to know that Enron execs have been one of the largest group of contributors to our President over his political life, and that the past head of the DNC recieved and sold stocks worth who-knows-what from Global Crossing before their crash, which ended up hurting many more investors and causing much more long-term damage than the Enron collapse.

Do I care that John McCain has changed positions like he was editing a new version of The Karma Sutra? Or that Obama's speeches and declarations are filled with exaggerations and "little white lies"?

Sure, I do.

I care that the Mays family (Woo-Hoo, from Texas), who basically own Clear Channel Communications (where a lot of you lemmings get your talking head fix), run a successful deregulation PAC (to which all their employees must donate) and give huge amounts of money to elected officials who effectively decide how many sources of news you get.

When a man who preaches morals to the rest of the nation on a radio show loses hundreds of thousands of dollars gambling, should that not be public? Sure, and here's why: It wasn’t hypocrisy until he got paid to soap-box.

If pedophile priests are put on trial by a blowhard news reader (O'Reilly) who turns out to be an office predator, shouldn't you know about both? After all, they’re out lookin’ for little boys and he’s "lookin’ out for you".

Is hypocrisy a problem? Should you care? Is there a right way and a wrong way and not just expediency? Of course there is.

But it's too hard.

Anything it takes! -- McCain's Recent position changes....

Reason Magazine has the documentation.

As a Real Conservative, the more research I put into John McCain, the LESS I like this.

He has changed his position on so many important issues, and flat-out prevaricated on others, that I won't be surprised if he is chosen to edit the new version of The Karma Sutra.