The Sunday New York Times has a front page article more or less blaming Bush for the housing and credit crisis. Its part of their “The Reckoning” series, and it is in some ways, off base. The long article (written by 3 people) comes close to some real truths, but it veers off, focusing on some minor and irrelevant elements.

One side note: Critics of newspapers never seem to understand that headlines are not by the article’s author(s), but by an editor.  Hence, why the headline focus is sometimes misplaced or emphasizes the wrong issue.

This discussion is very nuanced, so if you get most of your news and information from talk radio or any of the Faux channels, well, you shouldn’t bother reading any further. Pursuing this will only hurt make your brain hurt, or make you angry, or both.

Let’s start out with a brief excerpt from Bailout Nation:

From Reagan to George W. Bush, each President of the past 25 years bears some responsibility for contributing to the belief that we can let markets govern themselves.

Of the four Presidents over that period of time, President George W. Bush is the one with the seemingly greatest culpability. Not just because this crisis happened on his watch — although that is reason enough to give him a fair share of responsibility. More significantly, the basis of his culpability is that he shared Greenspan’s and Gramm’s radical belief system — that markets could police themselves, and that all regulation was inherently bad. This philosophy colored all of the President’s appointments to key supervisory positions, as well as his legislative agenda.

That philosophy, and the executive, administrative and legislative acts, including political appointments, is where we should focus our ire at the soon the be former-President Bush. The belief system that leads to the conclusion that really bad behavior in the corporate world needs no proscribing is where you should look to place blame.

That Bush had as a goal increased home ownership is, quite bluntly, irrelevant. It is a worthy goal, and certainly one that could be achieved without forcing the collapse of the financial system.

Indeed, as the chart at right shows (source: NYT), home ownership has increased every year since 1994. Funny, from that year and for each of the next 10 years, there was no collapse. You have to ask yourself why. No, the 1997 Tax Break, did not, as the NYT implied yesterday, Help Cause Housing Bubble. Home ownership was rising years before that went into effect.

What Bush did differently than prior Presidents was that he genuinely believed that regulations proscribing bad corporate behavior were unnecessary. It was that ruinous belief system, one he shared with other key players, that led to the crisis.

In fairness to Bush, many of the really bad policies that led to the boom and bust of Housing, and the collapse of credit, were in place before he was sworn into office. In particular, the repeal of Glass Steagall (Gramm-Biley-Leach Act), and the Commodities Future Modernization Act (CFMA), were both heavily lobbied for by the industry, sponsored by Phil Gramm, and passed by a Congress that didn’t bother to read them. They were both signed into law by Bill Clinton. That set of legislation is where you begin to find answers to The Reckoning.

Consider:

“Former Presidents Clinton, George H.W. Bush, and Reagan all have some responsibility, but far less. Bush Senior is probably the least culpable. Reagan did not reappoint Fed Chair Paul Volcker, and replaced him with Alan Greenspan. Regardless of other actions, this alone haunts his legacy, and gives the Gipper some degree of responsibility.

While some partisans have tried to paint the crisis a purely Republican debacle, history informs us otherwise. Yes, the GOP did control Congress from 1994 to 2006. However, President Clinton, a Democrat, bears a significant amount of responsibility too. He and his Treasury Secretaries, Robert Rubin and Lawrence Summers, each supported very limited regulation of free markets. Clinton, Rubin and Summers are one step behind W. in the hierarchy of proximate causes of the debacle.” (Bailout Nation)

The requisite Fannie Mae/Freddie Mac discussion in the article is simply silly. Yes, FNM/FRE were cogs in the housing machinery, yes, they were corrupt organizations. No, they were not a proximate cause of the boom/bust/collapse. For those of you who keep asking why I emphasize this, this article is why.

Increasing home ownership in America is a legitimate political goal. Waiving down-payments requirements, dropping lending standards, allowing predatory lenders to flourish — that is what is the underlying cause of boom bust and collapse.

Once again, we relearn that worthy ends do not justify foolish means.

>

Previously:
Pricing in a Bush Presidency (July 08, 2008)

http://www.ritholtz.com/blog/2008/07/pricing-in-a-bush-presidency/

Source:
White House Philosophy Stoked Mortgage Bonfire
JO BECKER, SHERYL GAY STOLBERG and STEPHEN LABATON
NYT, December 20, 2008

http://www.nytimes.com/2008/12/21/business/21admin.html

Category: Bailouts, Credit, Derivatives, Economy, Financial Press, Politics, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

86 Responses to “NYT: Blaming Bush for the Wrong Things”

  1. grumpyoldvet says:

    Barry, my boy, you are tilting at windmills. You know that incoming fire will be terrific. Just hunker down in the foxhole and pucker your ass.

  2. constantnormal says:

    @BR – “What Bush did differently than prior Presidents was that he genuinely believed that regulations proscribing bad corporate behavior were necessary.” — ????

    You didn’t mean to write that, did you? Or have I awakened in the Bizarro universe?

    ~~~

    BR: Doh!

    UNnecessary

    I’ll fix above

  3. larster says:

    The Fannie/Freddie meme must be a staple of talk radio and Fox News, as every Repub that I know states it like the gospel truth. Everyone wants a simple explanation, which is why this propoganda works. Watch and see if they are successful in touting the Bush record of job growth. During the legacy tour Bush relentlessly touts his record of job growth, which you have consistently shown is simply not true.

  4. Tony says:

    As Constantnormal has pointed out: “What Bush did differently than prior Presidents was that he genuinely believed that regulations proscribing bad corporate behavior were necessary.”

    I think BR forgot a “not” in there somewhere. (OK to delete this comment.)

  5. km4 says:

    Bush has created a new hypertext linkage definition of kleptocracy* and massive US financial ponzi scheme to keep the bullshit US economy going where credit must flow like a raging river or America’s house of cards goes bust trumps everything else.

    Mission accomplished and BOL to 98 or 99% of Americans for next ? years.

    *government by those who seek chiefly status and personal gain at the expense of the governed.

  6. Marcus says:

    Barry,

    Your editor needs addressing. Some sentence structures are confusing; “What Bush did differently than prior Presidents was that he genuinely believed that regulations proscribing bad corporate behavior were necessary.”

    Proscribe means forbid (e.g., by law), or denounce/condemn (like denouncing polygamy). Besides being long and strung together, the word proscribe in this sentence alters the meaning away what I believe you meant. I think the sentence intended to say Bush thought regulating bad corporate behavior was unnecessary. It came out saying the opposite, Bush wanted more regulation.

    Your editor tried to use a 50-cent word when a dime word would work a lot better.

    Many of us are waiting for your book. Thanks for a great blog experience.

    ~~~

    BR: See fix above — the missing word is the “UN” in UNnecessary. (Proscribe is more of 15 cent than 50 cent word).

    Incidentally, there are no editors here — what you see here is my unvarnished, first draft. My idea of a blog has always been that speed, rather than a long, slow process. Spelling and Grammar get sacrificed and hopefully accuracy does not. (The book is a lot more polished).

  7. KJ Foehr says:

    exceprt from a comment I posted yesterday that fits here even better.

    As for Clinton, I never saw him as moral, and not even a true progressive. He was/is pure ego with few principles, IMO. As for the rest of the Democrats, many are in the same class as Clinton. In addition, many have been co-opted (like Schumer) by the 28 year long dominance of free-market philosophy; they and Clinton were too weak and too concerned with their own re-elections to stand firmly against that trend.

    And this refers to the current post:
    Barry, in addition to the typo mentioned above there is another, I believe.
    “That Bush had as a goal increased home ownership is, quite bluntly, irrelevant. It is a worthy goal, and certainly one that could be achieved with forcing the collapse of the financial system.”

    ~~~

    BR: Damn, that Freud guy is hard at work today. (Fixed!)

    That will teach me to do a post before coffee . . .

  8. debreuil says:

    What this really really is, is the end result of 25 years of “voodoo economics”. Bush senior was always pretty sharp, and he nailed it on that one. Doesn’t say much for Barbra’s DNA that he could produce such a dim and incurious spawn.

  9. dead hobo says:

    Deregulation is good if the right regulations are restructured or removed.

    The Republicans failed miserably because they chose the trickle down method of deregulation Deregulation at the top doesn’t mean that, for example, dark hole commodities exchanges will make more efficient markets and bring lower prices. This approach to deregulation was the root cause of their failure.

    Deregulation can still be the root cause of their return and resurgence, but only if it is the right kind of deregulation. They need to take the bottom up approach and paint it in populist colors.

    For example, in some areas building codes are still based on 50 year old technologies that favor stick built high labor cost union construction. Modern day building construction methods can lower costs by putting more modern methods on the ‘approved’ list. While this has been an ongoing process for years, a little more haste can lower costs for housing. Granted that building codes are local, but a populist push from the top down might make a difference if sold with the same fervor as ‘drill baby drill’.

  10. km4 says:

    George W. Bush legacy will be ‘destroyer extraordinaire’ of American middle class

    Biden to oversee efforts aimed at middle class
    http://news.yahoo.com/s/ap/20081221/ap_on_go_pr_wh/biden_middle_class

  11. Patrick Neid says:

    Thank god I read the article in question as opposed to your preamble. [BR: I assume people read things prior to discussing them] Had I not I would have been left with a completely different picture. Unlike your spin the article seems to treat the mess with a refreshing matter of factness.

    Oh look, there’s those silly Fannie and Freddie again.

    ~~~

    BR: Like a said upfront, the nuance will upset some people. Its a function of emphasis, causation, context and relevancy. I can string together a whole bunch of irrelevant facts, and lead you to the incorrect conclusion. Parts of the NYT article does that.

    The Fannie/Freddie issue they discuss is true — bad regulatory oversight, corrupt execs, lots of grease, accounting fraud, misplaced bonus structure — but none of that was the cause of the crisis. The Bush emphasis on increased home ownership by minorities — like Clinton’s emphasis before him — is true, but again, not the cause of the problem.

    They are facts. but they serve only to confuse simple minds.

    Facts are important. But so is Context, Causation, Relevancy and Emphasis.

  12. Chief Tomahawk says:

    I wonder whether and how much future Republican conventions will trot out Bush Jr. to speak? He and Cheney (aka “Deficits don’t matter”) sure bagged on McCain’s campaign fast after McCain ran a commercial saying “Washington is broken” and that the economy is bad. And where’s Phil “It’s all in your head” Gramm? Off counting his loot from the crazy legislation he sponsored???

  13. DaveM says:

    The social acrimony that is persistent lately is perfectly willing to skip attaining a wider awareness of the housing bubble relative to historic events. The idea that you can buy a house and expect it to go up and not go down is something much fewer people in Europe believed. They’ve seen many famous real estate busts over several centuries.

    Blame wastes time. Try this: Eliminate the walk-away clauses from mortgage origination and attach liability to a person and not the property. Then we will find the real values of houses and those who are willing going forward will tell us a lot about what a fair estimation of the market really is. Who says this has to be a long process other than politicians wanting to avoid the needed unwind. That this happened so many times in history should tell us all something.

    ~~~

    BR: On the contrary, blame is the first step in holding the people resposbile to account for their misdeeds, and seeking some justice. I’m in favor of clawbacks on stock options and bonuses. Start with Stan O’Neal, then go to Angelo Mozilla and keep going.

  14. dead hobo says:

    I just said:

    While this has been an ongoing process for years, a little more haste can lower costs for housing. Granted that building codes are local, but a populist push from the top down might make a difference if sold with the same fervor as ‘drill baby drill’.

    To Amplify:
    —————————–
    While the housing bubble deflation is killing home prices in relative terms, and making them appear more affordable, this is an illusion. If something that used to cost $100 increased in price to $400 due to factors that were not intrinsic to it’s value, then it is not deflation if the bubble bursts and the price recovers to $125. Waiting for the bubble to burst only reinforces costly building methods, These will re-emerge in a few months when home prices finally stabilize and start to rise again. In a few years, given the oceans of money being issued now, the bubble will be back. Guaranteed.

    Figuring out how to build homes better at lower cost will require new materials and methods. Building codes and labor unions are an impediment to home affordability over the long run. For example, using flexible insulated tubing instead of sheet metal for hot air ducts that are exposed in basements and not likely to be damaged accidentally if behind sheet rock are ‘fire hazards’ and illegal in some places. Even nailing in a plywood guard piece can prevent damage behind sheet rock. Pex is said to be a suitable replacement for copper pipes and much easier to work with.

    If the Republicans want to remake themselves a populists, impotently attempting to kill the UAW won’t do it. Projects such as home building efficiency might help.

  15. Winston Munn says:

    The Invisible Hand turned out to be a thief – a pickpocket ignored by the SEC, enriched by the Fed, licensed by the state of Florida, and sponsored by Phil Gramm.

  16. dead hobo says:

    Winston Munn said
    December 21st, 2008 at 11:46 am

    The Invisible Hand turned out to be a thief – a pickpocket ignored by the SEC, enriched by the Fed, licensed by the state of Florida, and sponsored by Phil Gramm.

    observation:
    —————————–
    At least the Invisible Hand didn’t go up any skirts. That might have created a scandal.

  17. VennData says:

    With so much on the line for both parties, this even-handedness is a great service to investors and the citizenry.

    The post-tech bubble and 9/11 era of government policy set us up for the loans, open market operations, tax cuts for the investor class, and equity investments we currently call the “Bailout.” Bush and the GOP Congress added trillions to the debt prior to the Democrats returning to legislative power. The “party of limited government” had us in full-on Keynesian mode for this entire decade. The current bailout is just the “logical” next step of the bailout decade. The upcoming third round will merely be of be a slightly different nature, but a continuation of Corporatist two-party system.

    You will have to pay back this debt. Inflating it away doesn’t make it “go away” but is simply a re-characterization of cashflows and relative asset values. The “Bailouts” and their debt creation are unsustainable. Therefore they will end. Allocate your portfolio accordingly.

  18. VennData says:

    I second BR’s call for blame. Let’s get it out there, let’s get it right. This is how the American Constitutional democracy self-corrects, by finding the blame. We’re flexible. We get rid of things that don’t work and keep the things that do.

    The Bush apologists of the last few years “you may not agree with him on everything, but you’ve got to admit that he’s done a good job with the economy” are not going to get away with the “…let’s not play the blame game…” meme. Anyone who kept too high an asset allocation to equities and high yield debt because of this marketing pitch – parroted out for them over and over by the GOP media machine – are realizing they were lied to.

    Their wealth losses are the power that will agree to affix the blame to the two-party Corporatist, lobbyist-driven, gerrymandered permanent political class …where it lies.

  19. danm says:

    On the contrary, blame is the first step in holding the people resposbile to account for their misdeeds, and seeking some justice
    ————-
    If you could actually pinpoint the true culprits. At this point it’s the chicken and the egg dilemma, nearly everyone is part of the problem. So what’s going to happen? We’re going to find a couple of scapegoats, and all systemic problems will be swept under the carpet?

    You know, they’ve been cutting off hands for centuries in the Middle East, and they still get unwanted behavior!

    Americans have always been good at playing the blame game. They are the ones who actually pushed for having all WW1 war reparations fully paid by Germany. Look at where it led us.

    Justice is understanding what went wrong and fixing the problem so it does not happen again. It’s not punishing a couple and letting everyone else off the hook. That just creates even more friction and retaliation.

  20. DaveM says:

    Barry, I agree with your blame and claw backs idea. It seems very reasonable in the “now” time horizon. My perspective is more concerned with the workout of this mess and no matter how many jail cells are filled, and how many bonuses taken back on the fictitious quarterly 30:1 leveraged gains, supply and demand will remain horribly out of balance in the housing market until we either ruin the dollar or allow the market to correct. The choice to me seems easy. Let’s be responsible for a change as a nation and think about the next American’s. Who really remembers how President Hoover was viewed….(besides you), it’s what we do now that matters. Throw em all in jail but, what do we do next?

  21. VoiceFromTheWilderness says:

    Blaming George Bush has always been one of the single best ways not to understand what is going on in this country.

    In general, blaming individuals depends on the idea that they are independent actors that arise out of nowhere. This might be true of Einstein, it isn’t true of chimpy. The general pattern in this country — egged on by Republicans and Free Marketers — of blaming government, depends for it’s internal consistency on the belief that government is an independent actor, free from influence — it isn’t.

    There is no surprise whatsoever to the presidency in 2000 being a ‘free market’ anti-government presidency. George Bush was *selected* (by the republican party before the election this isn’t a conspiracy thesis) precisely because he was an electable face who would execute faithfully the goals of the Republican party, the goals of those who control the republican party.

    The idea that businesses can freely spend billions of dollars, even government ‘backstopped’ (artificial government creations) like Phoney and Fraudey, directly influencing government, directly intervening in the legislative process for their own benefit, while simultaneously spending money to influence, or outright control the media message making it one of ‘government is evil, government is the problem’. Only to turn around when the grand and glorious march to perfection turns into the ugly reality that they were full of crap from start to finish, and allow their lap dog media to start ‘blaming’ their puppets — thus extremely effectively hiding their own cuplability, would be hilarious if it weren’t so completely twisted.

    The reality — obviously — is that large scale belief systems are not the work of one man, or even one group of men, but rather a collective phenomena, slowly gaining steam over time. In this case however that collective phenomena, the belief that markets are the one and only truth, and that government and regulation are ‘evil’ being fundamentally a self-serving belief system that actually only works for those very few who are able to profit from it before it collapses, is (by virtue of the foregoing) either a duplicitous con or a sucker bet. In other words, since this belief structure does not work for the benefit of society, and since it wasn’t in place back in the bad old days of a cohesive and functioning democracy with a stable economy, propounding, working to bring this belief into widespread currency, actively promoting is a duplicitous con, or the work of a fool.

    George Bush has neither the intellectual acumen, or aggresive tactical long term strategizing necessary to create this cultural phenomena. He didn’t bring it into being, rather he was the pretty face on to which the hopes and dreams of most of a generation of greedy, power mad people were placed. That these same people now turn around and blame him doesn’t make it true, just as their intense religious fervor about free markets wasn’t and isn’t true.

    As long as we keep looking at scapegoats we will continue not to heal, because we still will not have learned to tell the truth from lies, and will still be listening to the quietly whispered lie that created the mess we are in.

    ~~~

    BR: Here’s my list of Blamees:

    * Fed Chair Alan Greenspan

    * Federal Reserve (in their role of setting monetary policy)

    * Sen. Phil Gramm

    * Securities and Exchange Commission (for allowing 30X leverage and letting the rating agencies run rampant)

    * Congress

    * Mortgage originators and lending banks

    * Moodys, S&P, and Fitch (Ratings Agencies)

    * The Federal Reserve again (in their role as bank regulators)

    * Borrowers and Home Buyers

    * 5 biggest Wall Street firms (Bear, Lehman, Merrill, Morgan & Goldman) and their CEOs

    * President George W. Bush

    * President Clinton, Treasury Secretaries Robert Rubin and Lawrence Summers

    * Treasury Secretary Paulson

    * Mortgage brokers (even the non criminals)

    * Appraisers (dishonest ones)

    * CDO Managers (for producing the junk)

    * Ben Bernanke

    * Fannie Mae, Freddie Mac

    * Office of the Comptroller of the Currency (OCC)

    * State Regulatory Agencies

    * SIV/Hedge funds (for buying the junk)

    * Institutional Investors (pensions, insurance firms, banks, etc.)

  22. BR,

    I couldn’t get past this: “From Reagan to George W. Bush, each President of the past 25 years bears some responsibility for contributing to the belief that we can let markets govern themselves.”

    Isn’t that the hoariest of revisionism? along the line of ‘Keynesians’, willfully, repeating the lie that: “Hoover did Nothing–in the face of the Economic turmoil that broke loose on his watch.”

    Wasn’t it James Earl Carter (D-TriLatComm), the 39th, that kicked-off the push of ‘de-regulation’? or, is that, yet, another Fact, that’ll get buried by the Ministry of Truth?

    ~~~

    BR: Can’t say I am all that familiar with the works of James Earl Carter — did he fire Volcker or appoint him? Did he appoint (or reappoint) Greenspan, or sign CFMA or BDL into law ?

    In the book, in the the section of dereg, one of the early drafts mentions Carter:

    Deregulation was minor under President Carter, but found an enthusiastic advocate in President Reagan. At first, expensive, onerous provisions were targeted. But it wasn’t long before all regulation became viewed as inherently evil. In this view, Government was the source of all problems, not the solution. Adherents of free market philosophy wanted to remove the decision-making oversight from the bureaucracy, and replace it with the “relentless efficiency” of the markets. This was a hopelessly idealistic view of markets, naively premised on false assumptions of efficiency and human rationality.

    I do not recall of that made it into the final version . . .

  23. 10 cc says:

    This still doesn’t really go to the heart of the matter. A truly genuine and sincere belief that “self-regulation” is best that then turned out to be “mistaken” would, in a sense, be almost forgiveable. I do not believe that has ever been the case. What they really want is a license to steal. The professed ideology is just an attempt to create a “respectable” front; rather like John Gotti trying to pass himself off as a plumbing supply salesman.

    The late, great Carlin had a funny bit about American businessmen sitting down at the table to “negotiate” with each other with big smiles on their faces as they’re thinking only about how to try and fuck over the other guy and how the other guy is going to try and fuck them.

    That sort of illustrates why I don’t really buy the sincerity of the self-regulation crowd. Those, like Gramm , who champion it know full well from personal experience what greedy, corrupt pricks their own cohorts actually are.

    So the question the average American has to ask is are these guys (and gals) really “idealogues” or just plain, old “respectable” criminals.

  24. mark mchugh says:

    One of the things I blame the W. administration for is making no effort to make wages follow home prices (and yes I know that’s not how it’s supposed to work). With low interest rates, many Americans started supplementing their incomes by constantly re-financing the house at unrealistic valuations. So when it hit the fan, it was not just Joe Subprime in trouble, it was the neighborhood that financed itself to the teeth at the ridiculous price Joe agreed to.

    You didn’t need an degree in finance to see the storm coming. You just needed to notice that mortgage companies were springing up faster than Starbucks stores. A thinking administration (which this wasn’t) would have understood that it needed to assert some wage inflation pressure to prevent the situation we have now. Instead, they did everything they could to keep wages low including the failure to secure our borders from illegals. Earn less? – Borrow more. And we fell for it. It wasn’t until the very rich started to feel the impact that anyone was concerned.

    In my opinion, the Fed’s ZIRP is nothing more than an extension of that policy. I wonder how it will work this time around?

  25. danm says:

    What they really want is a license to steal
    ————–
    But our whole system is based on stealing! The UK was exploiting its domisions to icrease their welath.

    In the western world we’ve been doing the same thing. We abolished slavery on our soil and found cheap labor to exploit abroad.

    All of us westerners are culprits. We have all collectively been exploiting th rest of the world to enhance our lifestyle.

    How many out there actually see it this way? Not many.

  26. Pete from CA says:

    “increased home ownership is [..] a worthy goal”

    Slightly off topic but I’ve been wondering about this ever since I realized that owning a house feels like a big burden to me: are we sure that this is really a worthy goal? Wouldn’t a society of renters be more agile and flexible?

    Could it be that the “American dream” of owning a home (and by that, it seems, many people mean a single family house) a passing fad? What’s the inherent advantage of having the life of 70% of the population tied to a piece of real estate?

  27. trainreq says:

    Let’s draw and quarter the correct people Barry. Mozilla is a browser making org., Mozilo is an unscrupulous bastard deserving of the most creative retribution that can be dreamt up.

    ~~~

    BR: heh heh You didn’t realize that Firefox is the reason the housing market collapsed?
    (damn spellchecker!)

  28. Winston Munn says:

    danm wrote, “All of us westerners are culprits. We have all collectively been exploiting th(e) rest of the world to enhance our lifestyle”

    Let me set you straight, Bub. We are Entitled to our enhanced lifestyle because we live in a City On A Hill and as a Shining Light we spread Democracy around the globe (at least to oil producers) and that makes us Exceptional – as Intelligent Design meant us to be – and the only people who disagree with this assessment are Anti-American, whacko liberal-media types who pal around with terrorists.

  29. trainreq says:

    I naturally apportioned the blame for housing collapse at about 70% to IE, only 20% to Mozilla :o

  30. danm says:

    My ultimate point is could we really expect anything else but corruption when our system itself is based on exploitation?

    It was just a matter of time.

  31. KJ Foehr says:

    “Wasn’t it James Earl Carter(D-TriLatComm), the 39th, that kicked-off the push of ‘de-regulation’? or, is that, yet, another Fact, that’ll get buried by the Ministry of Truth?”

    They don’t call it the Reagan Revolution for nothing; his election was a watershed in terms of political and economic philosophy. And Jimmy Carter certainly would not have supported the extent to which “government is the problem”, laissez faire attitudes have been increasingly promoted and implemented since he left office.

    If you want to blame Carter for deregulating the airline industry, so be it. But it doesn’t not follow that he is somehow responsible for or the cause of all that has followed since.

    In my mind, it is the merit of specific regulations that is critical. Those that provide valuable controls on business and some protection of people should be maintained, and those that are counterproductive should be changed or eliminated.

    excerpt
    Carter said in a crowded signing ceremony in the White House Cabinet Room that the legislation would achieve two critical objective. “One is to help our fight against inflation and the other is to assure American citizens of an opportunity for low priced air transportation,” he said.

    Thanks to recent actions of the CAB under the leadership of Chairman Alfred E. Kahn, the nation already has seen the beginning of real competition among domestic airlines, Carter said. “Competition has already helped both consumers and the industry,” he said. “It brought lower fares, more passengers and higher profits.”

    http://www.washingtonpost.com/wp-dyn/content/article/2007/07/13/AR2007071300851.html

  32. drmalaka says:

    All these clowns we have elected President are responsible, but we need to lay a large portion on the blame where it really belongs, the uneducated American public. At the end of the day it was Americans buying stuff they had no possibility of paying for. Taking out loans on 120% of the value of a home that was already priced 50% higher than it was worth. Buying new cars every three years. Upgrading to the new iPod every year. Getting a new laptop when the screen size increased. A flat screen television in every room of their over-sized six room houses.

    Who on this discussion board went and did these things? Did you need someone to tell you that you can’t buy stuff you can’t afford? At what point do those who allowed this to happen to them take blame?

    This of course all boils down to our union controlled public schools, which spend more time teaching children about “My Two Daddies” and global warming, than math and home economics. We can of course thank Democrats for this aspect of our demise, as in order to increase control over your population you must first brainwash them and dumb them down.

    As for regulation, I don’t know what this means. We already have full regulations that would have stopped this from happening. These regulations are called criminal laws against theft. Stealing is illegal. What has occurred here is nothing but outright theft. Bankers, homebuilders, mortgage brokers, real estate agents, rating agencies, credit card companies and the rest were all involved in an organized crime syndicate. Getting paid upfront for long term contracts is an incentive to steal. Right on down the line, every single person knew that they had no reason to care about the quality of the products they were selling or the ability of the borrow to pay it back. When a real estate broker gets paid a commission for selling a house that he knows the buyer can not afford what would you call this? He gets his money up front and knows that he is stealing that money from the person who is eventually going to hold that mortgage. The mortgage broker does not care, he only initiates the mortgage, takes his ill gotten gains and then passes the bad note to someone else…..and so on down the line.

    Take these people’s money away, send them to jail, see if this ever happens again when they know that there is no reward for this kind of behavior. Regulation? The problem is not the lack of regulation, the problem is that there was no enforcement and even when this house of cards has collapsed we still do nothing about it. What regulation could have stopped Madoff? The SEC was on full warning about him for almost ten years!

    This is nothing but our scumbag politicians ruining capitalism. We don’t and have never had free markets. Free markets require the rule of law so that you can trust your counter party. We trusted our counter parties but there was no rule of law to hold them to their contractual obligations.

    Listening to morons take political sides, trying to blame Bush for this just proves how dumb our population is. Our entire political system is premised on ALL politicians stealing our money and consolidating power. It is sad to hear these fools talk about Obama and what he is going to do. He has already given us Change As Usual. Look at his entire economic team, what are they, nothing but retreads who helped create this entire mess. We live in a tyranny now, each party wants us to hate the other party so that we don’t wake up and realize that there is only one party in reality and the system needs to be destroyed.

  33. Patrick Neid says:

    “They are facts. but they serve only to confuse simple minds.”

    Well said!

  34. mark mchugh says:

    Ouch, drmalaka, the truth hurts. But can’t we just pretend for the holidays?

  35. jessica says:

    Barry,
    Thank you for the nuance. And for keeping the responsibility focused on the big players, all the relevant big players, not on folks who were pulled along for the ride.
    And for defending home ownership as a worthy goal for society. It also makes me wonder if we don’t need to find some way to support increased education/training at all levels of the work force.

  36. KJ Foehr says:

    “Ouch, drmalaka, the truth hurts.”

    Truth like beauty lies in the eye of the beholder, for it is mostly based on subjective attitudes and opinion rather than objective facts.

    “We already have full regulations that would have stopped this from happening. These regulations are called criminal laws against theft. Stealing is illegal. What has occurred here is nothing but outright theft.”

    I agree the problem is not the absence of regulation; instead it is anti-regulation attitude that led to its being ignored, circumvented, and neglected.

    That is why the dominant economic philosophy is so important, and the philosophy dominant over the past 28 years has been free-market, laissez-faire capitalism as promoted primarily by conservatives and libertarians.

    The fact that we never had a completely free market is irrelevant. It is the desire to create one that led to dismantling of the protections built into the laws and regulations. The current collapse is not a failure of a 100% free-market, but of the philosophy itself.

    Now perhaps we know why we have never had a completely free-market economy: it collapses before we can ever get there.

    Is it our fault we elected W? Yes, and I previously said that the culture and our uninformed and apathetic electorate are to blame. But if ever we are to restore the rule of law then we must hold those accountable who violated the laws and who betrayed our trust in them to uphold the laws.

  37. James says:

    In particular, the repeal of Glass Steagall (Gramm-Biley-Leach Act), and the Commodities Future Modernization Act (CFMA), were both heavily lobbied for by the industry, sponsored by Phil Gramm, and passed by a Congress that didn’t bother to read them.

    ———————————-

    GBL was not only passed by Congress, it was passed by Congress overwhelming. In the Senate the vote was 90 yes, 8 no, 1 no vote (John McCain). The Democrats voted 34 to 6 in favor including: Biden, Daschle, Dodd, Kennedy, Kerry, Reid and Schumer. See: http://www.govtrack.us/congress/vote.xpd?vote=s1999-354&sort=party

    In the House, the legislation received similar strong bipartisan support with 362 yes, 57 no, 15 no votes. The Democrates voted 151 yes, 50 no, 4 no votes. See: http://www.govtrack.us/congress/vote.xpd?vote=h1999-570.

    In addition, as has been written about many times elsewhere, former Clinton Treasury Secretaries Larry Summers and Robert Rubin were big supporters of financial deregulation, including GBL. See:

    “Citigroup Saw No Red Flags Even as It Made Bolder Bets”

    http://www.nytimes.com/2008/11/23/business/23citi.html?scp=18&sq=rubin&st=cse and

    “Deregulator Looks Back, Unswayed”

    http://www.nytimes.com/2008/11/17/business/economy/17gramm.html?scp=4&sq=larry%20summers%20gramm&st=cse

    for example.

  38. DL says:

    Up until recently, I favored a free-market, deregulatory approach. But up until a few months ago, I could not have imagined the lengths that politicians would go to pile on government debt for the purpose of bailing out everyone who had made bad financial decisions.

    It is the propensity of politicians towards bailouts, much more than the financial crisis itself, that has caused me to distance myself from my previous pro- free market, anti-regulation stance.

    An unfortunate state of affairs.

  39. DL says:

    From BR’s list of “blamees” (posted @ 12:30), the person at the top of my list would be President Bush. Number 2 on my list would be Greenspan.

    As for assigning blame to Bush versus Congress, it is true, in retrospect, that Congress deserves a lot of blame. But at the same time, it is not reasonable to expect a politician to adopt a public policy stance that would undermine his (or her) chance of re-election. For example, if any of Schumer or Frank or Dodd had called a press conference back in 2003 or 2004 and announced that he was going to “rein in” Fannie/Freddie, and would make mortgages more difficult to get, wouldn’t this have reduced his chances for re-election? But as a second-term President, Bush could afford to take the long term view. A second term president SHOULD take the long term view. Bush had the “bully pulpit”, he had the means, the opportunity, and very little price to pay for doing what was necessary to head off the housing bubble. No other prominent politician was in this position.

  40. more accurately, James Earl Carter was the Father of the 39th President, Jr..

    who’s accomplishments include:
    “He dealt with the energy shortage by establishing a national energy policy and by decontrolling domestic petroleum prices to stimulate production. He prompted Government efficiency through civil service reform and proceeded with deregulation of the trucking and airline industries. ”
    http://www.whitehouse.gov/history/presidents/jc39.html

    and, though, differently, another fore-runner found on his watch:

    “Carter Administration set up a $30,000 million coordinated market intervention facility in cooperation with three other countries.” (pre-Reagan’s PWG, a.k.a. PPT)
    http://odur.let.rug.nl/~usa/H/1990/ch8_p21.htm

  41. Andy Tabbo says:

    Pretty interesting discussions here. As a true blue Libertarian, I’ll throw out a few comments and then get harangued for them:

    The problem is the American people. We fail to accept responsibility and accountability for the mistakes we make. We choose to blame everyone else for our problems. Then, we create all sorts of regulations and governmental agencies to “solve” the problems: See SarBox, FEMA, Homeland security, Dept of education, Dept. of Labor, Dept of Energy…etc…etc..

    What if there was no SEC? What if there was just a law that said: “If you attempt to defraud or actually defraud someone, then we will prosecute you and send you to jail as well as hold you financially accountable for your misdeeds.” Period. Set up an FBI tipline for fraudsters…let the DOJ/FBI respond to tips and let the judicial system work.

    But who would protect the the poor public in the first place? Well….I would suggest that an industry of real due diligence experts/analsysts would rise up to meet the investor demands of “knowing” who is naughty or nice. Investors, without the phony “protection” of the SEC, would be forced to pay attention to all the red flags that abound and be more vigilant. Over-reliance on governmental bodies to “protect” us has made us all lazier and less self-reliant.

    A similar theme plays out with folks like FEMA and the Dept. of Education in particular. What if there was no FEMA? Who could possibly help out all these unlucky individuals who live areas highly prone to: Hurricanes, Floods, Landslides, Earthquakes? I would suggest that if these people knew there was no “big government” help coming they would be more prepared for these eventualities and may even prepare their own local response agencies to deal with the inevitable.

    Sorry to rant….

  42. KJ,

    with this: “That is why the dominant economic philosophy is so important, and the philosophy dominant over the past 28 years has been free-market, laissez-faire capitalism as promoted primarily by conservatives and libertarians.”

    see: December 21st, 2008 at 3:19 pm

    but, don’t let it worry you none, keep repeating the lie, one day, we’ll all believe it..

    riight~ this thing was kicked-off by the 39th President, do the Math, start calling it 32 years, at the minimum..

    ~~~

    BR: Deregulation was minor under President Carter. It was one of 100 secondary policies. The deification of deregulation began under President Reagan.

  43. Over-reliance on governmental bodies to “protect” us has made us all lazier and less self-reliant.

    Do you have evidence supporting this supposition?

  44. mark mchugh says:

    KJ,

    Just to clarify, I don’t disagree with you either. Where I think the democrat culpability surfaced in the last year was in their “we can fix this” attitude. Paulson’s call for rescue was not well recieved by republicans. I have respect for that “live by the sword, die by the sword” attitude. When we reached the absolutely inescapable moment of truth, we completely changed our philosophy (or our elected officials changed it for us).

    It just reminds me of a “far side” cartoon: With the soldiers trying to put Humpty Dumpty back together and their leader says “OK guys, the horses want another shot at it.”

  45. drmalaka says:

    Right on KJ, keep up the partisan blame game. It got us into this mess but you are right, the Democrats would have done nothing like this. Frank was not dating a high ranking executive at Fannie while overseeing the company. Dodd was not bribed by Countrywide. Robert Rubin made not one cent off this fiasco.

    This is exactly what I mean that free markets never get a chance. The concept does not work because criminals are running the system. It is not the theory, it is the criminals. Criminals that play to your desires. Criminals that fix the political system so that it is legal for them to be bribed and almost impossible for someone not a member of the two parties to win an election.

    There is no such thing as free markets without the rule of law. Period. Individuals can not transact business with each other if they can not be sure that the government will take care of the only thing they need to, enforcing laws. To say that it was the desire to create a free market that caused laws not to be enforced is a joke. So if we did not try to create free markets these criminals would have been law abiding citizens? Our politicians would not steal from us if we don’t try to create free markets?

    You just keep your blinders on and stand your ground that this is all Bush’s fault. In your world was Clinton not at fault for keeping Greenspan on? What about his creation of the internet bubble that Bush compounded with the housing bubble. Wake up and stop being a tool of the criminal politicians that have done this to us.

  46. KJ Foehr says:

    I stand by my statements.

    As I said earlier our “truths” lie in perception, and we see things differently. So your truth is not mine; we must leave it at that.

  47. Winston Munn says:

    @Andy Taboo,

    Myself, I am simply of the opinion that ideological extremism in any form is dangerous. So I am simply trying to be objective when I ask:

    When you say, “What if there was just a law that said: “If you attempt to defraud or actually defraud someone, then we will prosecute you and send you to jail…” are you not simply implying a border on an activity – and is not an enforced border on an activity nothing more than a regulation?

    Pure, laissez-faire capitalism is not unlike anarchy – when you place societal norms (prosecute and send you to jail) you are attempting to restrict activities that in theory should be surpressed over time by the market itself. There is very much a dog-eat-dog, law-of-the-jungle aspect to laissez-faire. Regulation is meant to contain the radical swings of capitalism and thus allow restoration of orderliness more quickly and with less bloodshed. Correctly used, regulation seems to be able to actually speed the process of growth.

    I think Keynes understood the time factor of laissez-faire market self-correction when he uttered his famous statement that “in the long run we are all dead”. In other words, the self-correcting market may be right in theory, but the pragmatist may not want to wait that long.

  48. whatever_6170 says:

    “Increasing home ownership in America is a legitimate political goal. Waiving down-payments requirements, dropping lending standards, allowing predatory lenders to flourish — that is what is the underlying cause of boom bust and collapse.”

    I think you are letting Fannie and Freddy (and hence congress) off the hook a bit easy. There were so many guilty parties here that I think trying to assign blame for “proximate cause” is folly. And while it was in fact those ridiculous lending practices that are an important cause, those ridiculous loans would have stopped early had their not been a market for them. From what I have read, Fannie thought it was “losing market share” by being so careful in the types of loans it bought so it started buying this garbage with gusto. “Presto!” You have a market for these garbage loans and an unwitting money launderer (who might has well have been in Bishop’s clothing) who helped fob this crap on the rest of the globe.

  49. DP says:

    Friends,

    The problem is that the system really is broken, but not in the way everyone suspects. Why the f**k did they put these optimistic kids in the game that don’t understand the rules? They don’t understand the how the system works and now they ruined the game for all of us.

    I ask you, what sense is there in allowing the vote of a 21 year old with no life experience and no net worth to have as much value as the vote of a 55 year old hedge fund manager holding an 8 figure bank account?

    The smarter people will have more money and the vote of a smart person should simply count for more. Who would argue against that?

    The new game allocated 1 vote point for each $100k of net worth (leverage is ok) and deducted points for unpatriotic acts such as living with in your means, asking for evidence of weapons of mass destruction and not loving Jesus. All we needed was a few more votes for McCain.

    We’d have gotten away with it if it wasn’t for those pesky kids….

    Yours Regretfully,

    The Republican Party.

  50. rww says:

    Let’s by all means beat the shit out of the responsible parties; but let’s not mistake that for dealing with the underlying problem. Any economy requiring the ever-more-frenetic consumption of crap will necessarily end more or less as ours has.

  51. danm says:

    Andy Tabbo Says:

    The problem is the American people. We fail to accept responsibility and accountability for the mistakes we make. We choose to blame everyone else for our problems. Then, we create all sorts of regulations and governmental agencies to “solve” the problems: See SarBox, FEMA, Homeland security, Dept of education, Dept. of Labor, Dept of Energy…etc…etc..
    ————
    I see the logic as circular. As a Canadian, I find Americans have too much faith in their powers to control their lives. Luck is not part of the American language. The system is built around group think and dissent is squashed. For example, just take the stigma attached to renters. In a social context where everyone is expected to take risk but marked with a Scarlet Letter and marginalized when they fail, it’s no wonder that so few want to take responsibility for their actions.

  52. Andy Tabbo says:

    @danm:

    I’m don’t see my argument as circular. Other that, I actually agree with your sentiments that people have a tendency to want to follow the larger group (herd). Herding behavior (group think) is not something that’s rational. It is pre-rational. It comes from our earliest instincts as animals. If you weren’t part of the herd, you were exposed to all sorts of dangers. So, it “feels” good to be a part of the herd.

  53. Andy Tabbo says:

    Douglas Watts Says:
    December 21st, 2008 at 3:45 pm
    Over-reliance on governmental bodies to “protect” us has made us all lazier and less self-reliant.

    Do you have evidence supporting this supposition?

    Douglass:

    Alongside my assertion in that post, I listed the SEC/Investors and FEMA/Helpless homeowners as examples of people becoming overly reliant on the implied “protection” of a governmental agency.

    I would also add the most obvious example: We don’t save nearly enough as individuals because we actually believe in “social safety nets.”

    I could actually go on and on and on….but I don’t want to get involved in ticky tack arguments about everything I might list…If you can’t see the fact that we’ve become lazier and more self-reliant on governmental involvement over the years, then you’re not paying attention.

  54. danm says:

    @ Andy:

    I probably didn’t express myself properly. By circular I meant that Americans don’t take responsibility because too much is asked of them and too much is asked of them because there is a belief that they can be responsible for everything in their lives.

  55. danm says:

    I would also add the most obvious example: We don’t save nearly enough as individuals because we actually believe in “social safety nets.”

    ————-
    US social safety nets are crap. Americans don’t save enough because credit has been too easily accessible.

    In Canada, our safety nets are better, yet our savings rate has been better… not as much available credit.

  56. AGG says:

    In the 21st century, pleasure is equated to consumption, and consumption has become an imperative that has all but replaced the moral imperative issued by teachers from Abraham to 18th-century philosopher Immanuel Kant and 20th-century liberators Gandhi and the Rev. Dr. Martin Luther King Jr.

    The old moral tradition gave birth to our grandparents’ credo, the so-called Protestant work ethic – work hard, sacrifice, and invest wisely in the future.

    Today, the country’s economic health is measured more according to how much we are willing to spend, our consumer confidence, and less in how much we produce, the gross national product, or even how we invest.

    If previous leaders preached self-sacrifice and service, our commander in chief tells us that our duty is to consume. Since Sept. 11, he has consistently told Americans that if we want to help the country, we must . . . buy.

    To be American once meant having the right to pursue happiness, where the emphasis is on the road taken toward a goal that is difficult, if not impossible, to reach – at least in one lifetime. Today our right is to be happy. (Enjoy . . . enjoy . . . enjoy.)

    Consumerism infantilizes us, alienates us from one another, and makes us apathetic as citizens. What’s ironic is that even if you base human worth not on social responsibility but on individual happiness, consumerism still fails us.

    So what does that have to do with Bush?
    He is a symptom, not the disease. Imprisoning him and his buddies will help but will not bring catharsis. We need to move from planned obsolecense for profit and the waste product be damned to full cycle production and responsibility. If we don’t, some other country will and we’ll be history.

  57. rexl says:

    to have a ‘free market’ work, i must be allowed to be free to shoot the bastard if he steals my money. shoot him right there on the spot in the head. or drag him out in the street first. the one freedom necessitates the other.

  58. AGG says:

    By the way, one of the key people who could finger Rove on elction rigging and who publicly claimed he had been threatened by Cheney was killed friday when his Piper Saratoga (single engine light aircraft) crashed. And Cheney says “referring to torture methods?” that anything is licit in war. This is blatant talk for a reason. They think they can get away with it.
    I suspect but do not approve of the way “these things” are handled when a principled government replaces a corrupt one; A huge rug to put things under, muzzle some with sum, retire others and hasten the expiration (through natural causes, of course) of the greatest offenders. This method of “sending signals” among the elite won’t work this time. Trust is gone. Obama doesn’t get that. I hope he does when he sees or reads about all the “stuff” that will come out that happened in the last eight years after the whistle blowers transfer the data to Seymore Hersch (not sure of the spelling) after january 20. With the momentum this corruption has in our country AND populace, if radical and brutal reforms don’t take place, it’s over. And don’t think China isn’t salivating to see us totally tank. Friends in Europe? Forget it.

  59. Winston Munn says:

    @AGG,

    One point of contention that is only a personal sore point – The President is not “our” Commander-in-chief; he is only Commander-in-chief of the military and then only during times of war.

    Oddly enough, the Constitution holds no provisions for a Decider-in-chief.

  60. debreuil says:

    I sort of agree, but there is also the ‘as the leaders go the people go’. If they are all about pillaging for personal enrichment, it does have a corrupting effect, so I’d up the Bush admin a bit (and Clinton a bit).

    FIFTY-THREE

    If I have even just a little sense, I will walk on the main road and my only fear will I be of straying from it.
    Keeping to the main road is easy, But people love to be sidetracked.
    When the court is arrayed in splendor, The fields are full of weeds, And the granaries are bare.
    Some wear gorgeous clothes, Carry sharp swords, And indulge themselves with food and drink; They have more possessions than they can use.
    They are robber barons.
    This is certainly not the way of Tao.

    Lao Tsu

  61. debreuil says:

    Nice quote from Krugman on his blog about this post:

    http://krugman.blogs.nytimes.com/2008/12/21/the-bushies-and-the-bubble/

  62. Andy Tabbo says:

    @debreuil

    Lao Tsu…..LOVE IT.

    I read passages from the Tao every month over and over again….one of the more enlightening documents ever written.

    Some of my fave snippets applicable to this blog:

    “If you overesteem great men,
    people become powerless.
    If you overvalue possessions,
    people begin to steal.”

    “If you don’t trust the people,
    you make them untrustworthy.”

    “When the country falls into chaos,
    patriotism is born.”

    “If you realize that you have enough,
    you are truly rich.”

    ‘Those who know don’t talk.
    Those who talk don’t know.”

    “If a country is governed with tolerance,
    the people are comfortable and honest.
    If a country is governed with repression,
    the people are depressed and crafty.”

    And the Money Quote from thousands of years ago:

    “The more prohibitions you have,
    the less virtuous people will be.
    The more weapons you have,
    the less secure people will be.
    The more subsidies you have,
    the less self-reliant people will be.”

    AT

  63. DL says:

    Andy Tabbo @ 3:25

    “The problem is the American people. We fail to accept responsibility and accountability for the mistakes we make. We choose to blame everyone else for our problems”.

    I agree that government policies are a reflection of the collective will of the voters (in combination with the will of various special interest groups, some of which are very well-funded).

    However, I also believe that there exists a substantial minority within the U.S. population, powerless though it may be, which has the insight to understand the shortcomings of government policies, and the foresight to understand their consequences.

  64. DL says:

    Andy Tabbo @ 9:34

    I’ll comment on two of these:

    1 ) “Those who know don’t say; those who say don’t know.”

    What does that say about all of the comments posted here?

    …………………………………………………

    2 ) “The more subsidies you have, the less self-reliant people will be.”

    A good argument against bailouts.

  65. Steve Barry says:

    I think this is all a waste of pixels…the fact is by 2001, when Bush took over, we were already doomed to a depression by way too much debt. Oddly, it all got out of control during the exact term of Greenspan. The depression would have happened after the Nasdaq crash of 2001-3, except Greenspan delayed it with a housing bubble and China built up for the Olympics. Bush should hold little blame in any of this. He should be blamed for everything else from Iraq, to not finding Bin Laden, to destroying our standing in the world, etc.

  66. Andy Tabbo says:

    @DL

    “What does that say of all the comments posted here?”

    Ha. Exactly the point of the message “applicable to this blog”….we’re all guilty of “not knowing.”

    Well done.

  67. Andy Tabbo says:

    Steve Barry:

    Agree Completely. I think Bush has been an embarrassment to anyone with an MBA, unfortunately. But some of what he’s been dealt has been long in the making.

    ~~~

    BR: (heh heh) I have a friend who would unfortunately say, “he reminds me of too many MBAs I know . . .”

  68. DL says:

    Steve Barry @ 9:52

    I don’t know exactly what’s contained in that “credit market debt” parameter.

    But it’s apparent that the government is in the process of converting private debt into public debt.

  69. Steve Barry says:

    @DL:

    Yes…and they will also try to emulate the New Deal…only this time a New Deal would send total credit so high the whole system could collapse…it’s all a big experiment now.

  70. DL says:

    Definitely a big experiment.

  71. “Deregulation was minor under President Carter, but found an enthusiastic advocate in President Reagan.”–BR

    BR,

    that’s the Real of it, the seeds of the Programme were germinated during Carter’s administration. the HeadlineNews version of the events would have us believe that St. Ronbo invented ‘de-regulation’.

    this is another example where Historical Fact substantively differs from the soothing melodies drummed-up by The Mighty Wurlitzer..
    ~~

    AT,

    w/this: ‘Those who know don’t talk.
    Those who talk don’t know.”

    while I, largely, concur, I’ve long wondered how this fits to ‘Whistleblowers’ (e.g. Sibel Edmonds, or, more recently, Harry Markopolos–from nearby thread)
    http://www.amconmag.com/article/2008/jan/28/00012/
    http://www.aclu.org/safefree/general/18828res20050126.html

  72. debreuil says:

    ‘Those who know don’t talk.
    Those who talk don’t know.”

    Yes indeed bad for us commenters : ). Then again I feel he must have been thinking of people like Kudlow with that one. Maybe the full quote was more like:

    Those who know don’t talk and jump around,
    Those who talk and jump around don’t know.

    ~~~

    BR: Actually, I used to think that quote was about the market — but it was Larry M. Speakes spokesman for the White House under President Ronald Reagan — about some scandal or another.

  73. Steve Barry says:

    The key avenue that caused debt to explode was securitization…allowing every type of loan to be packaged and sold. They thought risk was being spread out…actually is just allowed total risk in the system to multiply and multiply, until we are in cardiac arrest.

    I have heard it said that securitization, Fannie and Freddie are required to allow banks to make loans and have new capital to make more loans. This has stopped making any sense at all to me…if you need a mortgage, you should go to a bank that has the money to lend you and you should pay them back with interest. Securitization is to make Wall Street rich…it serves no purpose in a non-debt driven economy.

  74. Steve Barry says:

    I like BR’s list of blamees…I would move Wall Street up to the top 5, move up Hedge Funds, add Ronald Reagan for hiring Greenspan, and maybe add Madoff and his ilk. This list should be a perpetual top 25 power ranking that changes as developments warrant. BR you should have a permanent link to it on your page and update every Friday.

    Fed Chair Alan Greenspan

    * Federal Reserve (in their role of setting monetary policy)

    * Sen. Phil Gramm

    * Securities and Exchange Commission (for allowing 30X leverage and letting the rating agencies run rampant)

    * Congress

    * Mortgage originators and lending banks

    * Moodys, S&P, and Fitch (Ratings Agencies)

    * The Federal Reserve again (in their role as bank regulators)

    * Borrowers and Home Buyers

    * 5 biggest Wall Street firms (Bear, Lehman, Merrill, Morgan & Goldman) and their CEOs

    * President George W. Bush

    * President Clinton, Treasury Secretaries Robert Rubin and Lawrence Summers

    * Treasury Secretary Paulson

    * Mortgage brokers (even the non criminals)

    * Appraisers (dishonest ones)

    * CDO Managers (for producing the junk)

    * Ben Bernanke

    * Fannie Mae, Freddie Mac

    * Office of the Comptroller of the Currency (OCC)

    * State Regulatory Agencies

    * SIV/Hedge funds (for buying the junk)

    * Institutional Investors (pensions, insurance firms, banks, etc.)

  75. SB,

    it’s a tough one, on this: Institutional Investors (pensions, insurance firms, banks, etc.)

    we need to remember: If the Boar never ate the Corn, he wouldn’t have been penned..

  76. danm says:

    1 ) “Those who know don’t say; those who say don’t know.”

    What does that say about all of the comments posted here?
    ————
    We all have pieces of the puzzle but we can’t seem to put it together!

  77. danm says:

    But it’s apparent that the government is in the process of converting private debt into public debt
    ———————-
    Yes. Rught now they’re taking the crap but soon they’ll be taking in all kinds of assets. And in a few years they’ll be IPOing them at under book, without the debt of course, or selling them privately to some of their chums.

    Watch out for those who get access to those assets, they’ll be the nouveau riche in the next cycle.

  78. victorberry says:

    Has anyone determined for sure that Bush was the decider who let Lehman Brothers fail? I can’t imagine Bernanke, Paulson, Geithner, et al recommending that course of action. Perhaps, a Senator will ask Geithner this question during his confirmation hearings.

  79. imahippi says:

    Hi Barry
    After the unfair attack I got for my very first post to your sight I promised I’d never write again.
    Here I go breaking my own promise!

    I appreciated this post of yours.

    I think some of your readers fail to realize that there are less knowledgable people out there that are trying to figure this whole finance/investment/political/economic scene out. Maybe younger folk fresh out of university or whatever that have a genuine interest in getting to know what’s going on.
    Obviously the road to understanding has to start somewhere and there is usually an evolution type process in the gaining of it.
    As a newbie to the markets (2-3yrs) with absolutely a pittance of knowledge ore politics/economics/financial markets I started reading. As a rookie sites like the Motley Fool were not only entertaining but they helped me learn the basics of the market. With a bit of a foundation I started to actually understand sites like Bloomberg blah blah blah. I must say that my next step on a jouney completely of my own making was the IBD. So obviously as a newbie who was finally making some real money in the markets on my own I became attached to what I considered to be the first real financial paper I could read and get information from that actually helped me. So I sort of became an IBDer. Isn’t it common to go through phases in growth and grow some sort of affection for different pieces of the puzzle along the way.
    So I obviously have chuckled at the extreme right wing views the paper holds, but as a newbie to all this it is more reading that widens my understanding.
    I’ve navigated through this jungle and now read your blog everyday along with just a few others. I enjoy your point of view but don’t take it as inspired or infallible. Just well read and attempting to get to the bottom of things. That’s what I want to be and do.
    The point is: there is a process that goes from being uneducated to educated and it sure doesn’t help when you speak out and are slammed by someone who completely reads you wrong.
    Your reader that bashed my first post made all these retarded insinuations and was rude and insulting. I was shocked and my initial reaction was to actually feel negative towards your whole community for a bit. (human nature i suppose lol—throw out the baby with the bath water!!)
    Happily I just couldn’t help sliding back over to see what you had to say!!!
    I really appreciated this post that helps me —as a greenhorn—piece together the roles of many in this credit/market debaucle.
    Thanks Barry
    signed some young chick in the middle of nowhere Canada!!!

  80. imahippi ,

    remember, don’t internalize others’ problems..

    as you alluded to, consider the source,

    let, not, the weak, buck you from your ride..

    past that, don’t apologize for ‘being an IBDer’, that sheet has much for many..

    the one message, ‘cut your losses’, by itself, is invaluable..

  81. danm says:

    imahippi:

    When I posted my first comment ever on this blog, I got a response form the host himself telling me I was a Monday Morning Quarterback, yet I’m still here.

    Rule number 1 in finance: let the insults slide like water off a duck’s back. Grow some tougher skin.

    This is the finance world. Life’s not fair and the squeaky wheel gets the grease.

    And by the way, Americans are quite touchy on the left or right subject. Expect a few compact snowballs when you show any color… or even any shade of gray.

  82. debreuil says:

    “signed some young chick in the middle of nowhere Canada!!!”

    Hey, is that another Manitoban then? : )

    I wouldn’t take anything said to your moniker in a comment section of a blog too personally. Besides, having the tag ‘imahippi’ on a financial blog is already stirring the pot a little eh?

  83. debreuil says:

    “If you overesteem great men,
    people become powerless.
    If you overvalue possessions,
    people begin to steal.”

    Thank you Andy, nothing like a wet smack of pure truth to start the day.

  84. bramsay says:

    The following post from above is hilarious

    “From what I have read, Fannie thought it was “losing market share” by being so careful in the types of loans it bought so it started buying this garbage with gusto. “Presto!” You have a market for these garbage loans…”

    How could they be afraid of losing market share to a market that didn’t exist until they started participating? One or the other points is clearly wrong, guess which one…… (hint: its right after Presto!)

  85. ottovbvs says:

    “BR: Deregulation was minor under President Carter. It was one of 100 secondary policies. The deification of deregulation began under President Reagan”

    Barry, you are as usual pretty much on the mark. I think the most significant thing Carter deregulated was the airlines, the rest was minor.

    The embrace of deregulation, supply side, the whole extreme free market mindset was really a phenomenon that took off during the presidency of Reagan and represented a flowering of conservative ideas that had been germinating in conservative think tanks funded by people like Coors and Scaife since the sixties. Outside of the economic world who the hell had heard of Friedman and Schumpeter before the 80′s. They were not totally wrong of course, monetarism is an entirely defensible theory while supply side is not except at its most extreme expression. The problem is that as usually happens when an economic theory gains uncritical ascendency, the pendulum can swing too far in one direction as Keynesianism did in Britain in the sixties and seventies. That’s what’s happened in this country which seems particularly attached to a variety of social, political and economic myths that have long been seen through elsewhere. We’ve been able to get away with it for so long because of the size of the US economy and the dollar’s reserve currency status.

    There’s no doubt the Clinton economic team bought into some of the free market tenets most notably on international trade but they by and large applied them intelligently. Free trade between nations is after all basically good, it along with technological advances is what is responsible for much of human progress. Unfortunately, Bush and co didn’t apply it intelligently. And we mustn’t forget all these things are moving constantly. You don’t just arrive at a set of principles and say that’s it, never adjusting course for changing cirmcumstances.

    You can’t pin it all on Bush but that’s the way it works. You break you own it. As BR they created the climate. I’ve no doubt if they’d had Clinton’s record which was pretty good overall they’d be singing it from the roof tops. Instead they are distorting the facts. For example the whole CRA and Fannie/Freddie bs alibi they came up with. As recently as this morning I see one of Bush’s flacks Gillespie was claiming that a Bush entered office during a recession. He didn’t but he’s as sure as hell leaving in the middle of one.

  86. mark mchugh says:

    imahippi,

    I always remember that worst thing that can happen to me on a blog is still infinitely better than a sharp stick in the eye, so don’t lose any sleep over it. Better yet, laugh it off. Don’t apologize for being a newbie either, because some of the dumb-ass moves I’ve made recently were mistakes that no newbie would make. I went insane and forgot simple principles I learned years ago. So that uneducated to educated process sometimes goes into remission.

    And don’t worry your ideas might be stupid. I know this one guy, who thought it was a good idea to let investment banks use 40 to 1 leverage, and instead of getting beaten with the idiot stick, he became the US Secretary of the Treasury and got a $700B expense account.

    If 2008 proved one thing, it’s that the financial universe is populated primarily by thieves or dunces (take your pick). They’ve set the bar so low, you couldn’t trip over it if you tried.