References?  Why do you need references from me?  Your own links already point out the flaws in your view just fine.

The Community Reinvestment Act was passed in 1977 under Carter.  The Democrats had 61 seats in the Senate and 292 in the House.  The act forced banks to make a wider variety of loans because making racial discrimination illegal didn't make monetary reality go away.  It was impossible for Republicans to even modify this one.

The Depository Institutions Deregulation and Monetary Control Act was passed in 1980 under Carter.  The Democrats had 58 seats in the Senate and  277 in the House, nearly bullet proof, but at least possible for Republicans to block in the Senate.  Perhaps it's there fault because they didn't?  It stripped the Federal Reserve of it's powers in setting interest rates, legalized a wide variety of more risky investments,  and expanded insurance to make all those new high risk savings accounts safe for the idiots using them.

The Garn St. Germain Depository Institutions Act was passed in 1982 inder Reagan.  The Democrats had the House with 242 and the Republicans had the Senate with 53, the act was sponsored and passed with broad Democratic support, Steny Hoyer and Chuck Schumer would remember, they were big proponents of it.  This and the previous get most of the credit for the S&L crisis.

Now the reality check.  The Savings and Loans industry was already going under before hand.  Of course, if you read the link you posted, you know that already.  Nearly all of them were losing money during the Carter administration, it even says how many lost money during 1980.  That's why the two acts were passed.

If, and you have to prove time travel to refute this, the deregulation was not at fault for the failure of the S&L's, what was?

Here's where you lose.  The GSE's destroyed them.

As they were failing they were given a way out, Congress passed a law allowing them to sell their mortgages.  This was in 1981, split power, either side could lock up congress just fine.  But of course you blame deregulation so it doesn't matter since most of the deregulation was by Democrats.  With their new found power, they sold the risky mortgages and started buying securities that had better returns.

You should know this.  It's in the S&L wiki entry after all.  They sold the mortgages through the GSE's.  The GSE's then repackaged and sold them back to the S&L's as guaranteed securities.  I assume you know what they were guaranteed by, yes?  It's definitely cost us enough this time around.

The economy cooled off, and real estate did what it always does.  It stopped booming.  Inflated housing prices started falling instead, inventories rose.  The HUD dumped massive amounts of low income housing onto the market, the brilliance of government.  Poof, the securities became worthless.

The only thing different this time around is that enterprising assholes have been using the same tactics our own government set up, knowing full well that those assfuckers in congress would do it again.  They just used insurance companies to guarantee the securities the GSE's weren't handling themselves.  That and we had several times as much sub prime lending going on this time around thanks to President Blowjob and the idiots that let his CRA amendments through congress.

It's so obvious it hurts.

re: The World War stuff: Maybe, just maybe, we were right to be supporting the enemies of Japan in WWII. After all, they had taken over a good chunk of China and a few other nations. This whole idea that they were just innocents doing absolutely nothing is IMHO a vast mischaracterization of the situation.

re: Taxes: Taxes do create a deadweight loss if I remember correctly - since they go to the government, they reduce the amount of profit a business can make, and the amount of money a worker can make on their paychecks. It's basically money that neither the consumer nor the business nor the worker will ever see again. It's money that completely leaves the economy. That's basically the reasoning behind the Republicans wanting low taxes.

re: Housing: Not much to say, plenty of blame to go around. I'm still not really buying the "social inertia" argument presented earlier. One thing that did change during Bush's last year is that congress became heavily deocratic - and recently is becoming almost veto proof. Bush has almost no power now. If it weren't for the people demanding that something be done about our financial situation, he'd be a complete lame duck.

You know, you guys shouldn't be referencing Wikipedia; no school would let you use it as a source.

Alright I guess I'll go in to it.  And so we're clear, I don't watch Fox News, I'm neither Republican nor Democrat, and I supported neither Obama nor McCain.  So let's not categorize people without even knowing them.

Essentially, the greatest tragedy of the Bush administration has not been its destructive big government spending policy and idiotic pre emptive strikes overseas, but the fact that it did all of this under the guise of conservatism, and with a republican or slightly democratic congress throughout the duration.  Let's be clear:  Republicans are NOT conservative in their current incarnation.  There are segments of the party, which, God willing, will someday soon have some clout again, that still carry these ideals, but Republicans haven't really elected a conservative since Reagan. 

However, as they do each time we hit the latest recession, statists and socialists will come out firing on capitalism, saying it's dead and the like.  Unfortunately, to those less well read in economics, this seems to make some sense.  In fact, the debacles they point to always prove the opposing viewpoint.  The problem is that we're not running a pure form a capitalism, much like the republicans are not really conservative, and just like you can't blame capitalism for something resulting from a mixed economy (and therefore ambiguous as to what really caused the latest recession), you can't blame conservatism where it isn't to be found.  But unfortunately for those of us who love liberty, this time they can blame conservatism and get many people to listen because the statists in office have continually shouted out 'conservatism... we're still conservative' even as their plane goes down in flames.

What's really unfortunate is that the obvious economic viewpoint for those who don't understand economics is a leftist one.  It's really easy to agree with the viewpoint that simply states "Americans are having a tough time, and we think the government should help them out."  It is consistently people who read economics for laughs who end up on the right.  Because the idea that the government has little to no role in helping people out economically is counter intuitive for those outside a book.  Of course the government should help those of need, right?  Here it is important to remember that the government really helps no one.  All they can do is force you and your fellow Americans to be 'decent' to each other.  They have to take money to give it somewhere else.

And it is, in fact, this very same mentality which has caused this so called 'financial crisis.'  Put another way, it is the mixed economy, not capitalism, which is responsible.  Government is again the culprit, but since capitalism is another part of our system they'd much rather blame that.  Here is, in a word, what has happened, and what those in government either don't know or won't say...

The federal reserve bank has three main tools to regulate economic activity in our country.  They can buy and sell government and company bonds, they can raise and lower the discount rate (this is the rate at which banks can borrow from the Fed to increase their reserve ratio back to the minimum), or they can raise or lower that required reserve ratio.  Since the early nineties the Fed has been decreasing or holding steady on the discount rate, and they often 'monetize' the government's debt by buying Federal bonds with printed money.  Essentially, this allows the government to spend as much money, and go in to as much debt, as they like.  The existence of the Fed is precisely the cause of our government's runaway debt problem.

Note that in a purely free economy the treasury could lend money to banks, but, having a finite amount of money, the discount rate would increase the more federal loans were under demand.  Essentially, the less funds the treasury had, the more risk they would have to take on for further loans and thus they would demand higher interest rates.  By decreasing the discount rate below this equilibrium rate and not allowing it to rise as it should, they print more money to meet this demand.  Now if banks can get loans at artificially low rates, they essentially no longer have a required reserve ratio.  If they drop below it, it's still very cheap to borrow money.  All they have to do is loan out money at higher rates than they're borrowing it, and they have infinite funds.  -- Keep in mind that for much of the last fifteen years the discount rate, adjusting for inflation, has been negative.  The effect on banks' lending is that they loan out more money at cheaper rates... and to individuals with bad credit or for riskier investments than they otherwise would.

The government and the fed have been using this scheme to artificially boost the economy.  Ever since Clinton the Federal Government has used publicly funded, private companies like Freddie and Fannie to give loans to those who wouldn't be able to get them in a private market.. under the belief that 'every American should be able to purchase a home.'  They've also been giving handouts to banks who loan to those with bad credit. 

Back to the story of the Average American.. Joe Schmo, having bad credit, buys a house under the delusion that the housing market can never falter again.  After a few years, he takes the new market value of his house and uses that as collateral for an equity loan.  But the problem is that the value of his house is only percieved value.  It's like any other commodity.  Eventually, in any market, the demand dwindles.  There are only so many people to buy houses.  So the demand starts to top out, and prices stop rising, even fall a bit.  And all those people who bought houses as investment (since the housing market 'can never falter again') put their houses on the market.  The price falls.  Enough so that Joe's equity loan is worth more than his house.  So he defaults of course.  And banks, which actually have negative reserves at this point, being in debt to the Fed, start going belly up.  And despite the government's and Fed's attempt to hand them as much money as they can, in the form of bailouts and more Fed loans, at some point there's just nothing there.  Even a business with free money eventually goes under when they're on the verge of having decidely negative assets.

The same thing happens to Freddie and Fannie.  Had they been private they long ago would have gone under.  It cannot be overstated just how many Americans received loans from these pseudo public companies they wouldn't have gotten otherwise.  A publicly funded, privately operated, company is spending taxpayers' money to engage in private activity.  There is no incentive for them to do business properly.  They look good if they just give out as many bad loans as possible, forgoing the future entirely.  If they turn a profit short term, they give themselves huge bonuses.  If they operate at a loss later on, uncle sam just throws more money at them.  They win at the taxpayers' expense every time. And the same goes for companies getting bailed out.  What incentive do they have to operate at a profit if when they don't they just get handed free money?  In fact they might have a larger incentive to fail.

The problem with this system is that the government isn't creating wealth.  All they are doing is inflating the supply of dollars, devaluing each American's savings and income, and giving new dollars to corporations, banks, and the government itself.  The whole system is built on false wealth.  And the government is currently trying to solve the crisis by printing more money and handing it out again.  This only distorts incentives, further hurts every American, and further inflates the bubble so that when it pops assets are even more overvalued and have further to fall.  And the stated purpose of the bailouts, to 'get credit flowing again,' is ludicrous.  Why would a failing business given new money immediately continue loaning it to those with bad credit or for risky investments when that is what got them there in first place?  They wouldn't.  They'd keep the money and only loan it to those who would otherwise get loans anyway.

The point is that government is responsible for this mess, and would that anyone in power understood what's going on... because they're only continually making the crisis worse by trying to fix it.  They cannot prop up false wealth by making more. 

And once again it becomes clear that capitalism is not the problem.  The system works on mutual incentives for two individuals to do business together.  And what government has done is distort these incentives, causing individuals to make unwise investments and shaking the very foundations of the system.

Instead, we should blame the mixed economy, and those redistributing wealth.  The very same hiding under the wreck of their fallacious system and pointing accusingly at capitalism as if this system were the very same.  Further, blaming conservatism carries the same foolishness.  For wealth redistribution and government control runs opposite what any true conservative believes.  There are, in fact, no conservatives in power to blame.  Blaming conservatism is like blaming dinosaurs for humans' environmental destruction.  Hasn't been a dino 'round here for ages.

Now, to be fair, this does occasionally happen - a change in the economic climate reveals some difference between the original idea and the actual wording that a clever monkey can use in a different way than intended that never occured to anyone before then. Generally this ends up with a bunch of Democrats saying "We need to close that loophole" while a bunch of Republicans go "Quit stifling INNOVATION!", until it blows up and they blame Democrats for not knowing it would be abused - see Enron.

Occasionally we actually have someone do something that *is* unforeseen, but basically good and cool - the 401K was *not* intended for the purpose it is almost universally used for today - it was intended as a tax loophole the wealthy to defer a tax obligation from high income years over to years they were short (It actually costs the government tax revenue, but it also evens out tax revenue over expansions/recessions, which helps both the taxpayer and the government. Better in the long term, since recessions are when the government *needs* tax revenues for kick starting the economy. It's Long Term thinking - Obviously done in 1978, under Carter - {G}) periods taxes for the wealthy, and was brought to the mainstream literally by a specific accountant (I don't recall his name, but yeah, actually one guy!) that noticed "You know, this actually works at any income level".

And very rarely, you have an actual implementation of the law of unforeseen consequences, where there is a logical but unforeseen result of the law as written that blows up in everyones face after a generation, which you're trying to say is what happened here - that the Community Reinvestment Act has been both ineffective and actually caused damage by encouraging predatory lending.

The problem here is two-fold. First, studies have shown it has had a positive effect, but Second, and more importantly, there's an obvious thing to check if the CRA was the culprit - did institutions regulated by the CRA create more sub-prime loans?

Science - if a theory makes no predictions, it's doesn't qualify as a real theory, it's a guess. This theory "CRA regulation forced financial institution to make unreasonable loans" makes a prediction - that unreasonable sub-prime loans would tend to originate from CRA backed institutions.

They don't - More than half of the sub-prime loans originated from institutions that were unaffected by the CRA, and an additional 25%-30% were only partially regualated. CRA banks did make sub-prime loans, but at a lower rate than the industry average, the loans they did make were more stable and less risky.

The correlation is not positive, and it is not zero - the correlation is actually negative - CRA not only did not contibute to the issue, but analysis confirms the CRA helped.

Another beautiful libertarian theory gunned down in cold blood by an uncaring merciless fact.

[/quote]Lets be clear here - - you're blaming Democrats for deregulating banks? I'm not sure I disagree - most democrat mistakes happen when they get the mistaken impression conservatives and libertarians could, theoretically, be right about deregulating something, but in all honesty, I think you just saw this referenced and assumed it must be blaming the Democrats for this somehow.

First of all, what you have posted have posted here is like vaguely, sorta, but not really what this act does, and on searching the the web the first five articles I've seen mention this act in reference to the subprime crisis, but don't actually blame any of it on this (I might, but I don't really try to blame current crises on 25 year old laws.).

So sure - I keep hoping they'll learn that Libertarians, Republicans, and Ayn Rand afficianados are never, ever right, but, much as it would delight me to blame them for this, these are only kinda vaguely related in form (Deregulation allowing for 'creative accounting' in the financial packages).

Okay - I guess I have to admit, that wasn't the response I was expecting in the second part - but the way I'm reading you on this is that the fundamental flaw is that Democrats were dumb enough in the late 80's to allow the conservative/libertarian wing of the GOP to (along with financial conservative Democrats) try deregulating financial institutions? I'd love to find the actual Republican/Democrat vote counts on both of these and see just how 'bipartisan' they actually were (Sometimes Bipartisan means 30 republicas, 30 Democrats in the Senate and the equivalent in the House. Sometimes Bipartisan means 49 Republicans, and just enough Dems to stop a filibuster, or to be fair, the reverse - {G})

Any way, Sure Psychoak, if you want to say that Democrats should remember to not deregulate things, what the hell, I'll agree with you.

That still doesn't have all that much to do with fannie/freddie or the CRA, I don't see where you're getting that HUD flooded the housing market, nor why, since it's doing so would tend to deflate any real-estate bubble, it would be a bad thing rather than a good thing if that was the case, but although I'm not sure if you're right on purpose or just threw so much unrelated stufff into the post that you hit it accidently there is certainly a parallel between the GSE's and the mortgage backed securities.

And hey - our agreeing on anything has to unseal at least one of the seven seals of the apocalpyse. The difference this time is that most Democrats this time around were publically saying there were problems coming, while the GOP for some reason expected different results.

Jonnan

Sorry vxt22 - I don't buy that theory of economics, and I somehow fooled my college professors into giving me A's in economics (My professor was a professional stockbroker and had made his money during the heydey of Reaganomics, just to forestall the inevitable 'college liberals' comments. We argued a lot, but I learned a lot from him too.) with aminor in business (Major in Computer Science, minors in Business and Mathematics).

Saying that it's never the fault of capitalism, just that we're not deregulating enough is kind of a faith-healing approach to economics in which the problem is always that you just didn'r have enough faith in the market to regulate itself. Since there's no way to disprove that theory ("What, you're enforcing contracts! Well, see, there's your problem - in a real free market you would let people break contracts and let the market decide whether to trust them with new contracts . . . ")

There is a criticism of Relativity that goes the same way, based on the concept that, in an absolute vacuum, the speed of light could be infinite. Well - sure, it could be that the problem is that we're assuming that the speed of light is affected in the point between almost absolute vacuum and absolute vaccum in a way completely different from the way it is affected in the various other meaasurment of vacuum before that - but since there's no way to test that, it's kind of a useless theory isn't it.

Too many people like to use the words republican and conervative as if they are the same thing. It drives me nuts.  Since, as a whole I would say most the upper level republicans are liberals. 

Only thing better is when I hear about Georgie Porgie pudding pie (BUSH) being a conservative. 

How come conservatives always discover how unconservative the people they elected are after their policies have failed for years?

Bush's Policies are virtually identical to the policies Reagan tried to implement. Fortunately for Reagan the Democrats were in control of Congress, so it turns out that, since Reagan couldn't get it all passed, he's still conservative. It's the successful conservatives that always get reclassified as liberal after the fact.

"Stewardess - I need a vomit bag please!"

Jonnan

The problem here is no one that gets into office is really a conservative to begin with.  So it comes down to vote for some one that is liberal or someone that is pretty liberal but not as liberal as the other guy since he has some veiws that are not really all the liberal. 

I should have used MCCAIN rather then BUSH.  Bush was never very conservative to begin with. But hes what the republican party rallied behind, and since the republican party is more conservative then the democrats its must make them conservative.  At least thats the logic that is tossed around.  I think its safe to say Bush and others like them are neoconservatives. 

Personally I would have liked to see Ron Paul get in. Hes views much better line up with what I view.  And a lot of them seem to go agaist the neoconservative republicans we have in our goverment. 

I just don't understand that, conceptually - yeah, Ron Paul is conservative, literally. He wants to run an economy like it was the 1800's again.

Longer, deeper recessions, but on the good side you had more of them too. Yay.

Quick rundown: recessions of the 20th century; before the Great Depression and the advent of Keynesian economics, from 1900 to 1929 there were 8 recessions in 29 years - 11.25 years spent in recessions, only one of which was under a year.

Take every year and subract 4.5 months from it - that the time spent in recessions.

Afterwards there were 12 in the next 65 or so, 3 of which were over a year in length - 125 months in recession - literally, less time in recession in the next 67 years than in the 29 years before the Depression.

I will be the first to concede that this is a simplistic analysis, but it's worth considering the possibility that the correlation is in fact that direct because these theories are a better model of economics than the friedman/chicago school throwbacks to pre-Keynes thinking 'trickle down' theories of economics.

At least consider the possibility folks.

Jonnan

You completely ignore relevant material, focus on a single aspect of a time period, and pretend you're right because it fits.

First, industrialization hurts.  A lot.  It's an explosion of growth that turns the economy upside down.  You've already acknowledged the whole boom and bust cycle that follows new markets, do you need the why explained here anyway?

Second, your period of recessions is the period of progressivism, twat.  Socialism didn't start taking root after the Great Depression, it helped cause it.  Teddy Roosevelt was a progressive, remember?  Labor unions were formed, minimum wage laws were enacted, a bunch of bullshit spending on idiocy like national parks took place.  They even made booze illegal, that went over real well.  Lets wipe out one of the main cash crops!  It's no wonder we kept having recessions.  Every time the economy stabilized, they went and fucked something else up for the good of humanity.  Right or wrong, every change they made had an effect on the economy.  Most of them were devestating.

When a factory is competatively operating in the green paying a given wage, and you double it, that factory shuts down.  When you require eight hour shifts and they have to find half again as many workers to produce the same amount of goods when there aren't that many workers in existence, they make two thirds the goods.  When you make child labor illegal, all the families that depended on the income of their children to make ends meet, and all the people that used those child workers, no longer can.  When you take away their booze, all the stressed out people now living on the edge of poverty go nutty.  Stagflation and a drop in GDP?  Who could have guessed...

Never mind that they'd just gotten through butchering their industry by destroying all of those evil monopolies that paid better and made goods more affordable...

Reagan didn't expand social programs, increase subsidies, and put more controls on the market.  His education bill is about the only thing he's done on the social front that didn't piss me off.  His expansion of medicare was a fuckup, his idiotic ideas on monetary policy are about to give us stagflation.  He created the biggest pile of shit beaurocracy since FDR when he created that monolith of idiocy, Homeland Security.  Having three shots at someone competent running something just isn't good enough, lets merge them all so the one poor bastard that is in charge hasn't a shot in hell of keeping track of them even if he is competent.  Reagan didn't fuck the country over by doubling the price of corn pissing it away in fuel tanks so we can pollute twice as much and feel better while we starve a bunch of people off in other countries that can't afford their staple food anymore.

Bush is exactly what he says he is, a compassionate conservative.  It's a buzzword for a fucking idiot that at least likes the ideas of conservatism on paper, but doesn't actually think while feeling his way through life.

This sums you up nicely.  Stupid.  The S&L industry was already failing three years after it was passed.  You didn't even argue that point, you apparently agreed with the wall of text you quoted it with, even though you comprehended it not.

There is no generational gap between cause and effect.  Every time housing prices have dropped, massive numbers of banks have failed.  The only reason it's been thirty years since the last failure is that housing prices have only dropped twice since the CRA was passed in 1977.  We just ended a thirty year climb.

You see that I state blatently progressive democrats were the ones doing most of the deregulation you've been blaming on conservatives, but pretend the banks weren't already failing before they deregulated.  You are willfully blind because reality does not fit your view.  Deregulation came because the banks were failing.  They saw the fuckup they had created in an over regulated, failing industry, and tried to fix it by deregulating.  They missed the bigger problem, probably intentionally.  Call me an optimist, but I just don't believe any of you are really this stupid.

The bank failures are caused by lying.  The guaranteed securities were never guaranteed, are not guaranteed now, and never will be guaranteed.  They have never had money to pay for them, do not have the money to pay for them now, and will never have the money to pay for them in the future.  It would take several trillion dollars of cash on hand to pay for the catastrophic worst case scenario.  It's only several hundred billion to fix the minor hiccup they face right now.  AIG doesn't have it, the GSE's don't have it, the federal government doesn't have it, they're printing it and making the economy worse.  The securities were sold as guaranteed securities, safe investments.  They are not and never have been either of those things.

Anyone with a brain has already figured this out, it's been common knowledge since it was set up.  The implicit guarantee that the government will save them when they go bust is the reason those securities have a market.  If that guarantee weren't there, the loans would never be made to start with and their dream of a house for every bum that can't afford one would never come about.  It's socialism, use the financial industry to give people houses they can't really afford, and tax all the people that can afford them to pay for the mistakes that get made along the way.  It's also socialism with a fringe benefit, the democrats that set it up get to retire into nice cushy board memberships.

Oh for gods sake Psychoak, put away whatever self-published piece of shit histories you read, go to school, take a class so you have some concept of what the hell you're talking about.

Your desire to eat at the grown-ups table without educating yourself, checking your information, and simply asserting these speculative theories you throw out without a single reference except some vague claim that it is 'obvious' from other peoples references when those references make no claims that more than vaguely resemble what you might, if called on it later, claim is what you really meant, has passed the point of being amusing, taken a left turn at pitiable, and is fast approaching "God, I'd like to post a bug report" levels.

You don't know logic, math, history, you lack the reading skills that should have had any competent school system holding you back in the sixth grade for your own benefit, and worst of all you're so damn pathetic that you can't go two posts in a row without using language that would make any unkept fool posting from their parents basement embarrassed.

Your mom needs help folding laundry. Go do something useful.

With apologies to everyone else - Jonnan

@Jonnan

It's not that we "always discover" blah blah blah... it's that even though Bush was no Conservative, he was still slightly better than Kerry and that other douche bag... oh yeah global warming Gore. Never once did I consider Bush on my side, but I was not about to cast a vote for the others. It's all sides, them vs. us and we all will lose eventually. Maybe we should just rewrite that whole Bill of Rights thing anyways?

(that was sarcasm)

edit: by we I mean Americans and them it's politicians (collectively)

At least you're finally stooping to personal attacks instead of pretending to take the high road while posting bullshit.

Logic I get, your warped view of the world has to make sense to you or you wouldn't hold to it, I hope...

Math?  You're the one that's blaming deregulation for a financial mess that started before the regulations were removed and claiming it took decades for something to come of the CRA when they had already started bleeding money on those bad investments before Carter even finished his term.

History you perhaps have more breathing room on, but since you're the one who's claims are being refuted, as opposed to dismissed, perhaps you could read up on actual history yourself instead?

Reading, you might have me there.  Graduates of West High in Anchorage aren't supposed to be able to read, would that then negate the post college reading level I had before getting to the sixth grade?

Definitely got me on the language though.  What can I say.  It's not like I called you a stupid cunt though.  Oh, right, I guess I did huh?  Also, my shorts are worn out because they're just too damn comfortable to throw out before they fall off, but yes I do qualify as unkept.

That's a good idea.  It's going to be a few weeks till I fly up there for Christmas, but I'll try to remember that.  Thanks.

If we kill all the lawyers we wont need to rewrite anything.  It's just those damned idiots that can't avoid reading between the lines for the mythical bullshit that's not really there.

Alright, I think this has gone on long enough. If you guys want to continue this, take it to the Joe User or Politicial Machine forums.