Bruce Bartlett — yes THAT Bruce Bartlett — takes the usual suspects to school. He immolates the phony deficit hawks on the actual causes of the Federal shortfall (hint: Do unfunded tax cuts ring any bells?):

According to the Congressional Budget Office’s January 2009 estimate for fiscal year 2009, outlays were projected to be $3,543 billion and revenues were projected to be $2,357 billion, leaving a deficit of $1,186 billion. Keep in mind that these estimates were made before Obama took office, based on existing law and policy, and did not take into account any actions that Obama might implement.

Therefore, unless one thinks that McCain would have somehow or other raised taxes and cut spending (with a Democratic Congress), rather than enacting a stimulus of his own, then a deficit of $1.2 trillion was baked in the cake the day Obama took office. Any suggestion that McCain would have brought in a lower deficit is simply fanciful.

Now let’s fast forward to the end of fiscal year 2009, which ended on September 30. According to CBO, it ended with spending at $3,515 billion and revenues of $2,106 billion for a deficit of $1,409 billion.

To recap, the deficit came in $223 billion higher than projected, but spending was $28 billion and revenues were $251 billion less than expected. Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending.

Wow, when this guy burns bridges, he sure doesn’t fuck around!

>

Hat tip Scotta!

>

Source:
Why the Economy Needs Spending, Not Tax Cuts
Bruce Bartlett
Oct 24, 2009

http://capitalgainsandgames.com/blog/bruce-bartlett/1200/why-economy-needs-spending-not-tax-cuts

Category: Politics, Taxes and Policy

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.

64 Responses to “What Caused the $1.2 Federal Trillion Deficit ?”

  1. Steve Barry says:

    OT: This just in…Jeffry Picower found dead…had taken massive profit in Madoff scandal.

    http://news.yahoo.com/s/ap/20091025/ap_on_bi_ge/us_madoff_associate_death

  2. madman130 says:

    This guy is again picking the low hangin’ fruits. Pubies are nothing but opportunists, we all know that. So are rats btw. It’s just politics.

    The argument from Barry and Co seems to be that BushCo fucked the country for 8 years, so we get to fuck it for next 8 years at least.

    If that’s the argument being presented here, this country is even more trouble than I thought.

    cut spending (with a Democratic Congress)

    Even Bartlett knows who the real obstacle is in cutting deficits.

  3. ironman says:

    Quick note on Bruce’s numbers – the $1.409 trillion he identifies is partially the result of an accounting change implemented this year, which affects how the government lists the bailouts of AIG, GM, etc. which are now classified as” investments” rather than as deficit-increasing expenditures. Without that accounting rule change, the deficit for fiscal year 2009 (October 2008-September 2009) would be $1.9 trillion.

  4. Patrick Neid says:

    Obama and crew are going to suffer the DT’s when there’s no one left to blame. However I’m sure Krugman will figure out some situational ethics to get them through it.

  5. AlexInNC says:

    Nice catch.

  6. Mannwich says:

    @Steve Barry: Interesting. Suicide or something else?

  7. bsneath says:

    The investments we should be making are things like 1) eliminating bottlenecks in our transportation system (highways and airports), improving infrastructure to and within our national parks (foreign tourists love them), grants to cities for urban developments (e.g. Inner Harbor, Baltimore – tourist attraction), tax incentives for new technology development (alt energy, health care, etc. and development of domestic energy resources – yes that includes offshore and ANWAR.

    As an example, the Feds could bond out a 10 cent gasoline/motor fuel tax increase – implemented over 4 years – and build $150 billion in new highway capacity. It would pay for itself (over 30 years), would be paid for by those who use roads in the future, create a load of jobs and reduce time and fuel costs for motorists, truckers and commercial service workers.

  8. RW says:

    Bartlett is certainly aware of who the real obstacle is in cutting deficits because it is the same as it has been for the past three decades: The Republican party aided and abetted by ‘conservative’ Democrats (check the deficit numbers under each administration beginning with Reagan if you doubt this).

    His project just as clearly is to prod the Republicans away from fiscally irresponsible, neoconservative radicalism and towards real small-government conservatism; he is burning some bridges in an attempt to encourage rebuilding and fend off the growing know-nothingness and crazy.

    I doubt he will succeed but wish him luck; the United States needs a strong (and sane) opposition party.

  9. hue says:

    “If that’s the argument being presented here, this country is even more trouble than I thought.”

    we’re f__ked, and have been for a long time. the stealth Great Recession started after the Nasdaq crashed and 9/11, and was masked by low interest rates and the housing bubble. all that’s left is finger pointing.

  10. scepticus says:

    The defici cannot be cut while the private sector is de-leveragnig and increasing its saving rate. By definition all such saving must show up in an increased deficit ifsevere deflation and the collapse resulting from it is to be avoided.

    Accordinly the debate should be about what to spend these revenues on, not whether they should be spent. IMO they should be spent on projects which leaves the government as the owner of an asset like a power station that can be sold to the private sector when the time is right. This both generates productive new assets and employment for the economy now, while at the same time providing for reduction of the national debt when the private sector demonstrates an appetite for re-leveraging.

  11. PithyDog says:

    ironman,

    Thanks for the true figures.

    Mr. Bartlett~

    “Big man, pig man, ha ha charade you are.”

    Pigs (Three Different Ones). (Waters).
    Pink Floyd, Animals

  12. bsneath says:

    scepticus Says:
    October 25th, 2009 at 5:37 pm

    “The deficit cannot be cut while the private sector is de-leveraging and increasing its saving rate. By definition all such saving must show up in an increased deficit if severe deflation and the collapse resulting from it is to be avoided.”

    Alas – these are the times we are in.

  13. olephart says:

    These deficit numbers are roasted, cooked, sautéed, flame broiled and deep fried. The 2008 deficit wasn’t a mere 400 billion; it was a cool 1 trillion. Likewise 2009 was 1.8 trillion. How could Bush show a series of 200 to 400 billion dollar deficits for 8 years and increase the National Debt by 4.8 trillion? Half of all Federal spending is done with borrowed money.

  14. clawback says:

    Senator Obama voted for every single war funding bill, pimped for the TARP like nobody’s business, and stumped for the stimulus [sic] bill. Clearly he has no responsibility for the budget deficits whatsoever. Never mind the health care boondoggle he’s promoting. (How many times can he get away with saying “We don’t want a crisis to turn into a catastrophe” without someone asking what’s the friggin’ difference and how much is it gonna cost us?)

  15. DL says:

    madman130 $ 4:54

    “The argument …[is] that BushCo fucked the country for 8 years, so we get to fuck it for next 8 years”

    That’s the essence of the argument that many of Obama’s supporters put forth to justify Obama’s programs. Certainly that’s the justification for Obama’s $787B “pork” bill.

  16. hue says:

    the Bush budget numbers were low because they didn’t include the cost of the Iraq war. that was supplemental spending, off budget. my car note is supplemental spending, so i have a 30% more in cash flow every month in Quicken. strangely my bank statement is different.

  17. bsneath says:

    One does wonder for how long everything that is not good will be “Bush’s fault”. Peggy Noonan wrote a good article. It now is Obama’s pile of rubble. Stop blaming are start governing.

    http://online.wsj.com/article/SB20001424052748704224004574489530713762884.html

  18. DL says:

    hue @ 6:03

    No doubt the government will be doing a lot of Enron-style (off-budget) accounting, and a lot of subprime-style financing (i.e., long-term liabilities, short-term financing).

  19. bobmitchell says:

    left, we need more spending or it won’t work

    right, we need less taxes or it won’t work

    It is in no ones interest(left or right) if what we currently have worked. There is a lot more money (read votes on the margin) made by the politicians when nothing works.

  20. The Window Washer says:

    I know it just came out but has anyone read Bruces book yet?
    Considering what I’ve seen him saying it looks like it might be a good.

  21. scepticus says:

    “left, we need more spending or it won’t work

    right, we need less taxes or it won’t work”

    Both are valid approaches to accomodating private sector de-leveraging. However when it comes time to pay that deficit back, tax cuts leave the gov with no way of raising the required revenue. SPending on public sector assets which can be sold back to the private sector and which in the meantime generate income does provide a means to pay the debt back when/if recovery arrives.

  22. rktbrkr says:

    Bush has done more to ruin the country than anyone in history. 2 wasteful wars, both inept, one unnecessary. Eight consecutive years of record deficits with the ninth blockbuster deficit put on O’Bama’s plate by a batch of incredible, undocumented buddy deals by Paulson.

    In hindsight maybe O’B and the Dems should have stood back, stopped the Bush bailouts, let the big banks fail, sued to recover the Paulson approved AIG payouts to GS and the foreign banks as criminal conspiracies and take this depression head on rather than Chinese water torture with a succession of toxic assets and TBTF bank bailouts over the next decade being paid for by taxpayers over the next century

  23. hue says:

    we really have just one party, Dems tax and spend, Repubs cut taxes and spend.

  24. nemo says:

    “One does wonder for how long everything that is not good will be “Bush’s fault”. Peggy Noonan wrote a good article. It now is Obama’s pile of rubble. Stop blaming are start governing.”

    Ha, Peggy Noonan. The Republicans were still blaming Jimmy Carter for the recession late in the Bush Senior administration, 11 or 12 years after Carter was out of office. And a lot of Republicans were already shifting blame for the 2008 recession to the incoming Democratic administration 6 months before the election, 8 months before Junior was out of office.

    That said, Obama’s deference to Summers, Geithner, and Wall Street is abysmal.

  25. clawback says:

    nemo,

    A lot of Republicans are blaming Carter for THIS recession, too (i.e. the CRA)!

  26. lw says:

    IMHO Republicans and Democrats are all pretty much the same. Find me any group of 535 people. Now say you need 60% of them to get something done, so I need 321 folks in the group to go in one direction.

    Now offer those 535 people unbelievable amounts of power and prestige if they spend gobs of free money on whatever their hearts desire. No real downside, massive upside for them and their friends/family. Now a few will understand the end result (Ron ahem Paul), but getting 321 to say “SURE!” isn’t hard.

    The game doesn’t stop until the free money runs out.

  27. hue says:

    the CRA is a time bomb, passed in 1977, it took about 2 decades to cause the house bubble.
    the Cheney admin spent 8 years blaming everything on Bubba, but Obama, how dare he blame everything on Bush?

    9/11 was 19 months into W’s admin, and it was all Clinton’s fault. in 10 months, Obama owns the economic problems.

    what does the basket bunch say? http://bit.ly/3vVaQ9

  28. DL says:

    scepticus @ 7:00

    “Spending on public sector assets … …does provide a means to pay the debt back when/if recovery arrives”

    And how much of Obama’s $787B “pork” bill would qualify as such? I’d say about 10%.

  29. hue says:

    9/11 was 9 months into W’s admin. i’m a math wizz

  30. Kort says:

    http://projects.washingtonpost.com/congress/110/senate/1/votes/172/

    Democrats took over Congress in 2006.
    Obama was in Congress in 2006.
    Congress changes and approves the Budget proposed by the President.
    Starting in 2006, these budgets belong to the Democrats (see the link for the 2006 vote…all D voted FOR, only 2 R voted FOR)
    Obama didn’t inherit Bush’s budgets—he inherited HIS OWN, the budgets he’s been voting FOR for the past 3 years while his party controlled Congress.

    Disclaimer: Ds and Rs are both criminal organizations.

  31. “…Thus we can conclude that more than 100 percent of the increase in the deficit since January is accounted for by lower revenues. Not one penny is due to higher spending…”–BBartlett, as quoted, above

    ironman Says: October 25th, 2009 at 5:00 pm
    Quick note on Bruce’s numbers – the $1.409 trillion he identifies is partially the result of an accounting change implemented this year, which affects how the government lists the bailouts of AIG, GM, etc. which are now classified as” investments” rather than as deficit-increasing expenditures. Without that accounting rule change, the deficit for fiscal year 2009 (October 2008-September 2009) would be $1.9 trillion.

    is Bartlett burning bridges, his own credibility, or both?
    ~~
    and, as lw Says: October 25th, 2009 at 7:46 pm
    IMHO Republicans and Democrats are all pretty much the same. Find me any group of 535 people. Now say you need 60% of them to get something done, so I need 321 folks in the group to go in one direction.

    Now offer those 535 people unbelievable amounts of power and prestige if they spend gobs of free money on whatever their hearts desire. No real downside, massive upside for them and their friends/family. Now a few will understand the end result (Ron ahem Paul), but getting 321 to say “SURE!” isn’t hard.

    The game doesn’t stop until the free money runs out.”

    to me, the Left/Right blame game, only, furthers our misapprehension of the current schema..
    http://www.thefreedictionary.com/misapprehension

  32. TakBak04 says:

    http://www.washingtonsblog.com/

    Sunday, October 25, 2009

  33. hue says:

    you only need 60% in the Senate, so the number is actually lower, 278 including 60 senators. so it’s a smaller elite. and the filibuster was only employed in the past on major issues like Civil Rights and judicial appointments. Repubs started to filibuster everything of late.

    you need 60 of them for $1 trillion in health care. but the bigger trillions in various bank bailout programs, you can squeeze that through in a week.

  34. rktbrkr says:

    Bush will be blamed for this depression just as surely as people blame Hoover for the first great depression.

    However Hoover was cut from different cloth than Bush…The ambassador to Great Britain during the First World War, Walter Hines Page, called Hoover a simple, modest, energetic little man who began his career in California and will end it in heaven. Bush could land a bit south of heaven.

  35. EAR says:

    Thanks for this, BR.

    His taking Zuckerman to task is a bonus.

    Wanna talk about Bruce Bartlett Burning Bridges…

    http://www.nytimes.com/2009/10/07/business/07leonhardt.html?_r=1

  36. TakBak04 says:

    A Capitalist Pyramid…Where Nobody Moves?

    It would seem that “some have moved”….but others?

    ————————
    DAVID SIMON: It’s almost — he’s describing a capitalist pyramid. Where nobody moves. Where there is no improvement in anyone’s station. And we were basically setting out a preamble for what the next five seasons would show, with regard to the city. You know, in second season there was a character who said, almost prescient of the of the Wall Street debacle. He said, “We used to make stuff in this country. Build stuff.” He didn’t say ‘stuff’ but it’s HBO.

    But he said, “Now, we just put our hands in the next guy’s pocket.” And ultimately, some things are serendipitous and you find themes and, you react and the story changes. And, you know, I’m not suggesting we have everything planned to the nth degree. But we knew, for example when we wrote that scene in the beginning of the first season, that by the end of the run those three characters would have been treated as pawns in a chess game.

    And we knew that character that cited what was ailing post-industrial America, he happened to be a union captain and one of the longshoreman. That he would be speaking to, at the time, what we were reacting to with Enron and things like– and WorldCom and the first sort of– first shots across our bow, economically. That people were trading crap and calling it gold. And that’s what THE WIRE was about. It was about that which is– has no value, being emphasized as being meaningful. And that which is– has genuine meaning, being given low regard.

    BILL MOYERS: I haven’t forgotten that moment in Season Two when the F.B.I. comes to the longshoreman, whose union is suspected of illegal activity and tries to make a deal with him. The answer he gives goes right to the heart of what you are saying about our economic system. Watch this.

    To watch the entirety of the Moyers interview of Simon: http://www.pbs.org/moyers/journal/04172009/profile.html

    Or, just watch the first two minutes of this clip from YouTube, which shows the arrest of Sobatka, and the dialogue where Sobatka spurns the FBI offer.

    Much More at……….
    http://www.economicpopulist.org/content/yes-poverty-wor
    http://www.economicpopulist.org/content/yes-poverty-worse-they-ever-admitted

  37. toddie.g says:

    Oh, the spectre of all these hypocritical Republicans decrying the massive deficits projected under Obama when they were dead silent during the accumulation of $4.8 trillion in defbt during the Bush/Cheney fiasco (more appropriate than the word ”administration”).

    So, the Republicans wanna blame it all on Carter. I say Reagan gets all the blame. Prior to 1980, this country had imperceptible budget deficits and accumulated national debt. It was Reaganomics that ushered in the era of high budget deficits and accumulating debt. The fact that nothing horrific happened with the accumulation of that debt over the course of time inured the country to irresponsible annual deficits and led some to believe that ”Reagan proved deficits don’t matter (Secretary of the Treasury Paul O’Neill attributed that comment to Dick Cheney in his book). I’ve heard Lawrence Kudlow say he “loves deficits’ on his show. Well Dick and Lawrence, we found out they matter bigtime. It’s about time that Ronald Reagan’s legacy gets to wear this monstrous accumulated national debt around it’s neck.

    The plain truth is Republicans really don’t give a rat’s ass about deficits – unless they can use them to their political advantage. Then they pretend to care about them.

  38. RW says:

    The rather superficial notion that the two political parties are essentially equivalent, just different faces of the same coin, ignores evidence that one of those parties, the Republicans, has become a battleground between social and fiscal conservatives and something else, something febrile and possibly sick yet oddly familiar, and it is the latter that currently possesses the upper hand. Read Republican Gomorrah by Max Blumenthal (e.g., http://tinyurl.com/yzgb7q9 ) and learn one of the reasons Bruce Bartlett probably wants his party back …and why we all should.

  39. Marcus Aurelius says:

    Why do people keep pulling the CRA out of their asses? BR has, if I’m not mistaken, laid that lie to rest several times. If you want to know who is responsible for our current dilemma, follow the money. I’d be surprised if all of the tax cuts and deficit spending since Reagan didn’t equal the increase in the incomes/wealth of the top 1%, to the penny. Then ask yourself who among our political classes is hanging with the beneficiaries of all of this government largess.

    This nightmare was brought to life by “conservatives” (who are anything but conservative) and their voodoo economics.

    Bartlett told us who is responsible, and he should know, ’cause he’s one of the gang.

    Old men laying waste to their legacies before they kick, so that posterity will not judge them too harshly.

  40. hue says:

    the CRA references here are just jokes Caesar Aurelius. but I’ve run into people personally, people with MBAs, who swears that that is the cause of the housing bubble. having an education doesn’t necessarily make you any smarter.

  41. TakBak04 says:

    @Marcus

    “Old men laying waste to their legacies before they kick, so that posterity will not judge them too harshly.”

    ————

    I suspect we will see much more of this in the coming years. )-:

    And, some like Cheney who will go to their grave NEVER GIVING UP the FIGHT…

  42. Kort says:

    Green shoots. Mini-boom. Buy, buy, buy…

    http://finance.yahoo.com/news/Capmark-Financial-files-for-apf-2710240959.html?x=0&sec=topStories&pos=main&asset=&ccode=

    Capmark Financial Group, one of the largest U.S. commercial real estate lenders, has filed for bankruptcy protection amid mounting bad debt, becoming the latest casualty in the still turbulent U.S. real estate market.Capmark has been hurt by rising losses on mortgage loans, and has had to foreclose on properties such as the Equitable Building in Atlanta because borrowers were not able to make loan payments

  43. catman says:

    Jake, it’s Chinatown…

  44. Pat G. says:

    “What Caused the $1.2 Federal Trillion Deficit?”

    Greed on the part of Greenspan for remaining too accomodative for too long.

    Greed on the part of many Americans for taking out mortgage loans that they knew they couldn’t afford to begin with; to buy a house, then refinance and/or flip it.

    Greed on the part of the realtors for approving NINJA loans to anyone who could fog a mirror, then offering HELOCs.

    Greed on the part of Wall Street, to repackage than resell these mortgages as legitimate investments.

    Greed on the part of the rating agencies in blessing these investments as AAA.

    Greed on the part of several Federal agencies or politicians, who turned blindeyes to potential problems brought to their attention.

    Now I ask you, besides being more in debt, what’s changed?

  45. Marcus Aurelius says:

    Kort:

    And something to go along with that:

    http://globaleconomicanalysis.blogspot.com/2009/10/will-stimulus-take-hold.html

    OT: Cards and Giants playing. Very good game. Larry Fitzgerald is is a great receiver, and by reputation, an all around good guy — the anti-T.O.

  46. hue says:

    i live in Hotlanta. Capmark, which financed 90% of Equastone’s purchase in 2007, took a bath. building was bought for $57 million. sold this june for $29.5 million. capmark is GMAC’s commercial finance arm. GM. Atlanta is all about suburban sprawl, only dummies would buy a downtown building.

  47. WaveCatcher says:

    Can’t figure why some many here are invested in defending the CRA. While it may not be the prime culprit, the CRA certainly didn’t help matters!

    Any time lenders are originating laiar loans, no-doc loans, sub-prime loans, you are cranking up the risk.

    Securitization was just a fraudulent way to pawn the added risk off on unsuspecting investors. Fannie and Freddie provided taxpayer money to buy these fraudulent loans, some of which were encouraged by government policy (CRA).

    What’s there to like about the CRA? I just don’t get it.

  48. Marcus Aurelius says:

    hue Says:

    “. . . having an education doesn’t necessarily make you any smarter.”
    ________

    Our universities will sell a MBA to anyone who can pay for it.

  49. hue says:

    nothing to like about CRA, but it’s not a major deal and didn’t cause the bubble. CRA has nothing to do with no doc or sub-prime loans, the 3-27, 2-28 arms that proliferated during this boom. it’s like blaming affirmative action for failing of businesses.

    Marcus, one person got an MBA from Notre Dame. Another person told me it was all Bubba’s fault because Franklin Raines was the WH budget director from 96 to 98. Raines also worked 11 years at Lazard Freres, but apparently it’s not Lazard’s fault.

  50. hue says:

    i was a mortgage broker for 4 years starting in 2003. investors (our jargon for lenders) didn’t care if you were white black or green. sub-prime was about your credit score. and there were buyers, the institutional money willing to buy those mortgage pools, CDOs etc., at the end of the chain.

    and not all no doc loans were liar’s loans. for instance, if you are a business owner and had a good accountant, you wrote off everything and report person income of less than $10K. you can’t qualify for a mortgage that way. so you have loan programs that only uses your score, (often above 700) and required that you have a business license or a letter from a CPA saying that you have been a business owner more than 2 years. you will not find that many CPA that will lie for you. some investors, such as Countrywide, i.e. BofA now, that had stated W2 income programs. meaning that you can be a wage earner and still lie about your income.

    but the main problem is that housing values rose too much, and even if you have a 800 score and bought a house with a Fannie Mae loan in 2007, you and the lender are both upside down now. the housing problems are not solely because of subprime or no doc loans.

  51. Marcus Aurelius says:

    WaveCatcher:

    I can’t see why you bother to attack the CRA. Your comment goes all over the causes of the mortgage/RE melt down (liar loans, no-doc loans, sub-prime loans, securitization, fraud, Fannie and Freddie) but these things are not part of or related to the CRA. You say that some of this was encouraged by the CRA. here’s a link to the legislation, please support your assertion as to what it says:

    http://www.fdic.gov/regulations/laws/rules/6500-2515.html#6500hcda1977

    There is nothing in the CRA that suggests, encourages, implies, or requires any lender to lend to anyone who is unqualified. Period. You might want to believe it does, but it doesn’t.

    Liar loans and no docs were used by many people and offered by many institutions, but they were no confined to, centered on, or concentrated in the lower (dark) classes/neighborhoods. Fact is, prime loans are as large (or larger) a problem as (than) sub-prime. Middle class and better white folks had more of a hand in this shit than any CRA-covered community.

    What IS to like about the CRA is that it makes large financial corporations serve all sectors of the community in which they are chartered (it’s in the best interests of society to keep ghettos to a minimum – otherwise, we should start walling them in). The CRA ends discrimination by banning the practice of redlining.

    From the ACT:
    _____________

    § 2901. Congressional findings and statement of purpose

    How Current is This?
    (a) The Congress finds that—
    (1) regulated financial institutions are required by law to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are chartered to do business;
    (2) the convenience and needs of communities include the need for credit services as well as deposit services; and
    (3) regulated financial institutions have continuing and affirmative obligation to help meet the credit needs of the local communities in which they are chartered.
    (b) It is the purpose of this chapter to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.
    ____________

    Why wouldn’t any citizen support these things?

  52. Marcus Aurelius says:

    good stuff, hue.

  53. hue says:

    thanks Marcus, it’s the tail wagging the dog, blaming no docs, cra. if there were no giant pools of money willing to buy the CDOs and mortgage pools, then there would be no loans. and the pools existed because the Fed flooded the system with cheap money.

    plus, borrowers wanted those bad loans. you tell them that they can’t get a loan at some ridiculous low rate, they will go to another broker who will lie to them and bump them at closing. they don’t walk away when the rate is 7% instead of 6% (or 9% instead of 8%) at closing because it had been a 3-week process, and they already planned to use the cash out to buy a car or start a business or something frivolous.

  54. tawm says:

    I am very disappointed in BR throwing a partisan hand grenade with his initial post, and with the resultant Right/Left / Repub/Dem bickering. We are really divided and conquered — and f**ked as a country.

  55. Trainwreck says:

    “Can’t figure why some many here are invested in defending the CRA. While it may not be the prime culprit, the CRA certainly didn’t help matters!

    Any time lenders are originating laiar loans, no-doc loans, sub-prime loans, you are cranking up the risk.

    Securitization was just a fraudulent way to pawn the added risk off on unsuspecting investors. Fannie and Freddie provided taxpayer money to buy these fraudulent loans, some of which were encouraged by government policy (CRA).

    What’s there to like about the CRA? I just don’t get it.”

    Good lord one last attempt to blame the CRA?

    The CRA did not promote liar loans, NINA loans, or anything related to what you are insinuating. The CRA did not create the completely unregulated shadow banking industry that marketed derivatives that have been referred to as financial weapons of mass destruction.

    Countrywide was the biggest mortgage provider in the US and they innovated the use of those above mentioned mortgage products to defraud the US of billions of dollars. Countrywide was the model that all the other private mortgage providers copied.

    The number of problem loans that were generated by CRA loans is minuscule compared with the absolute pool of problem loans.

    You want to point your ire at anyone, start with Andrew Mozilo. Throw in David Lereah, the former NAR chief economist, since he did nothing but cheerlead the housing sector despite all the facts that proved him wrong. That man was talking with shit coming off the fan smacking him in the face.

  56. drey says:

    “You want to point your ire at anyone, start with Andrew Mozilo.”

    Sorry, you can’t get around the fact that this is fundamentally a political problem. There will always be Mozilos, Skillings, etc. Unethical individuals or corporations will always push or exceed the limits, no? The challenge is to find the right regulatory balance…

  57. Graphite says:

    One wonders where the bond market and interest rates would be if we had the extra spending Bartlett and BR seem to desire. But of course, it’s the M.O. of all Keynesian clowns to never connect that particular dot ….

  58. Ponchovilla says:

    Why Wall Street is Smarter than the Russians

    No here’s a situation that needs to be discussed at “Show n Tell”.
    It’s seems that Russian bankers are accepting pigs as collateral for non-performing loans. Of course they are they laughing stock of the international community because every one else knows pigs are dirty. Really dirty.

    Bloomberg: http://www.bloomberg.com/apps/news?pid=20601109&sid=aTBiDsqJtOTI

    Now the really smart guys who graduated from Harvard, Sloan, Princeton and other elite kinderCEOCFO institutions…. know that bringing a pig into the office will get you kicked out of the club. So it’s much better just to have a piece of paper that says you own the pig(s). However, since you’re soooooooo smart you can’t call the paper “pig paper”. Looks bad on the resume. Hgvcx Oh no no no no….Let’s go to marketing and see if something “securitization” works better. From wickyourpedia: http://en.wikipedia.org/wiki/Securitization

    Those Russians sure don’t get capitalism or free market thinking.

    Ponchovilla wants to let you gringos know that he laughs so loud from those Red Neck “sayings” that he has been temporarily disabled due to severe fart attacks. That Beano stuff does not help. But Ponchovilla also wants you to know he believes in full disclosure and transparency.

    For example when Ponchovilla visit Debank and makes the deofficers get full disclothesure things can get pretty ugly. But in the spirit of innovation Ponchovilla takes demoney and makes decurrency into “transparency”.

  59. flipspiceland says:

    What Caused it?

    Does this question really need asked and answered, followed by 60 comments?

    My deficits usually come about when I don’t have enough money coming in to pay for what I owe.

    Whatawaste of bandwidth.

  60. Bruce in Tn says:

    No, neither Bush nor Obama nor the congress gets the blame in my book. This is the way YOU let them govern. Without a change in the constitution, they are free to spend more than they take in. Germany this year changed that for that country.

    The government in our system does what we allow them to do.

  61. danm says:

    SPending on public sector assets which can be sold back to the private sector and which in the meantime generate income does provide a means to pay the debt back when/if recovery arrives.
    ———–
    Good in theory but in practice government usually sells public assets at bargain prices and the acquireres become filthy rich.

  62. Moss says:

    Good post. This is the type of information that needs to see the light of day. Policy needs to be made based on the merits and the current situation NOT rigid ideology wrapped in social economic slogans.

  63. James says:

    He immolates the phony deficit hawks on the actual causes of the Federal shortfall (hint: Do unfunded tax cuts ring any bells?):

    ———–

    Just a reminder: the current administration will continue those unfunded cuts for the middle class. And let’s focus on what we can change – the immense deficits year after year for the next decade and beyond. Debating the past won’t change this.

  64. Rikky says:

    the root of this financial disaster is leverage. leverage by wall street to create money out of thin air. leverage by consumers to borrow more money for a house than they could ever afford. leverage by using derivatives and counter party risk measures to ‘protect’ yourself. rachet down the leverage to more supportable levels and expose financial instruments to the sunlight and much of the problems would not of been able to build up into the destructive force its become.